Raiffeisen Bank International AG fell for the first time in a week after Berenberg Bank AG told clients to sell the stock because of an “imminent” dilutive share sale equivalent to half its market capitalization.
Raiffeisen, the Austrian bank that’s eastern Europe’s second-biggest lender, declined as much as 1.7 percent, trading down 1 percent at 21.28 euros by 11:30 a.m. in Vienna. It was the worst performer in the Bloomberg Europe Banks and Financial Services Index, which was little changed. The decline took the share’s drop this year to 32 percent and its market capitalization to 4.15 billion euros ($5.4 billion).
Raiffeisen’s Austrian competitor Erste Group Bank AG today completed a 661 million-euro share sale to help repay state aid and to lift its core Tier 1 ratio according to the new Basel III rules beyond 10 percent. That deal increases the pressure on Raiffeisen to follow suit, Berenberg said.
“We lower our price target from 22 euros to 12 euros to factor in an imminent equity issue at a material discount,” London-based analysts Eleni Papoula and Iro Papadopoulou said in the note. “The equity raise by Erste in July and regulator pressure will force Raiffeisen also to raise 1.7 billion euros to 2 billion euros of equity.”
Berenberg expects Raiffeisen to sell new shares at 10 euros apiece, applying a discount to the share sale because of its size and the fact that it expects the largest shareholder, Raiffeisen Zentralbank Oesterreich AG, to be unable to participate. Retained earnings and asset sales, including of its biggest unit in Russia, won’t yield enough to plug the capital hole, Berenberg said.
Bolstering capital is the biggest challenge facing Raiffeisen’s new Chief Executive Officer Karl Sevelda. While investors and regulators push for a share sale, he has to overcome opposition by RZB, the bank’s parent company that is ultimately owned by 494 local cooperatives. RZB opposed a rights offering last year, saying the stock price was too low.