Raiffeisen Bank International AG, the Austrian lender whose chief executive officer offered to resign last week, may offer shares directly to outside investors, preempting existing shareholders, as it tries to boost capital.
The bank is asking investors to allow it to sell almost 20 million new shares, equivalent to 10 percent of the company’s outstanding stock, to new investors, according to the agenda for Raiffeisen’s annual general meeting in Vienna on June 26.
“This is purely a reserve and there are no concrete plans” to tap outside investors, Susanne Langer, Raiffeisen’s investor relations chief, said in a telephone interview today. “We are trying to be as flexible as we can.” The lender is also seeking approval to sell stock in a rights offering.
Bolstering capital will be the biggest challenge facing the successor to Herbert Stepic, who offered to resign last week over a probe into offshore accounts. Raiffeisen has the weakest capital ratio of all major banks that operate in eastern Europe, according to Eleni Papoula, an analyst at Berenberg Bank. Raiffeisen Zentralbank Oesterreich AG, the bank’s parent company which is ultimately owned by 494 local cooperatives, opposed a rights offering last year saying the stock price was too low.
The bank says its core Tier 1 capital ratio, a measure of financial strength, stands at 10.6 percent. That’s inflated by 1.75 billion euros ($2.3 billion) of state aid and 750 million euros of non-voting capital that are being phased out by regulators. Under the stricter Basel III rules the measure falls to 7.5 percent, Berenberg’s Papoula wrote in a note to clients yesterday. By comparison, UniCredit SpA’s ratio is 9.6 percent and Erste Group Bank AG’s 9 percent, she wrote.
Raiffeisen’s “weakest point, and investors’ main concern, is capital,” Papoula, who recommends selling the stock, wrote in her note. “Organic capital generation will not suffice for Raiffeisen to build up its capital buffers. It must therefore raise equity, in our view.”