Raiffeisen Bank International AG, Austria’s third-biggest lender, plans to complete a sale of as much as 2.25 billion euros ($3.1 billion) in new shares within a month, two people familiar with the bank’s plans said.
Raiffeisen said on Jan. 8 it may sell the new stock within six months in a transaction that may increase its share capital by more than 40 percent, diluting current shareholders. It’s targeting a quicker sale after shares pared some losses following the announcement, said the people who asked not to be identified because the plans aren’t public.
Chief Executive Officer Karl Sevelda is raising cash, selling assets and cutting costs to bolster capital buffers as the European Central Bank is set to scrutinize lenders’ assets to identify reserve shortfalls this year. The central bank’s Asset Quality Review may require banks to raise as much as $200 billion, Ernst & Young LLP said in a report earlier this month.
While Raiffeisen has dropped about 3 percent since its announcement, the shares are still up 4.2 percent this year. They gained 0.4 percent to 26.70 euros in Vienna today. The bank declined 19 percent in 2013.
Susanne Langer, a spokeswoman at Raiffeisen, reiterated that the Vienna-based bank plans to sell new shares within the next six months without elaborating.
Raiffeisen is also looking at scaling down or selling subsidiaries in countries where it is losing money or which it now considers too risky. That group includes Ukraine, Hungary and Slovenia, Sevelda has said.
While Raiffeisen last week halted the sale of its Hungarian business “under current circumstances,” it has received “indications of interest” for a sale of its Ukrainian business, Raiffeisen Bank Aval, Langer said. It allowed “certain potential bidders” access to some data for a due diligence, she added without giving details.
Raiffeisen Bank Aval is Ukraine’s fourth-biggest bank with 4.5 billion euros of assets. While a third of its loans are non-performing, the lender more than doubled profit after tax to 72 million euros in the first nine months of 2013.
Raiffeisen plans to bring its core equity Tier 1 ratio, a measure of financial strength under new European Union rules implementing the Basel III accord, to 10 percent in 18 months through the share sale, retained earnings and asset reductions. That capital ratio was 6.5 percent by end-September, it said.
Part of the bank’s plan is to replace state aid and linked capital totaling 2.5 billion euros, which is being phased out by regulators, with the funds raised in the share sale. Raiffeisen Zentralbank Oesterreich AG, which represents a group of cooperative banks and owns 79 percent of Raiffeisen Bank International, will allow its stake to be diluted in the deal.