- Austrian cooperatives seek to simplify ownership structure
- Increasing regulatory pressure on lenders drives the plan
Raiffeisen Bank International AG is considering a merger in the next few months with two of its parent companies to simplify the ownership structure of the Austrian cooperative-banking group and to reduce capital pressure, according to three people with knowledge of the matter.
RBI, the group’s publicly traded arm, could be combined with its majority owner, Raiffeisen Zentralbank Oesterreich AG, or RZB, and with Raiffeisenlandesbank Niederoesterreich-Wien AG, RZB’s biggest shareholder, said the people, who asked not to be identified because the discussions are private.
No decision has been made yet, and the plan still faces significant opposition in parts of the wider Raiffeisen group, the people said. Spokeswomen for RBI, RZB and RLB NOe-Wien all declined to comment.
The debate about the future of the Raiffeisen group has been going on for years, but a decision is finally approaching, the people said. Alternative proposals discussed include selling some or all of Raiffeisen Bank International, merging with RZB or with RZB and RLB NOe-Wien and merging several or all Raiffeisen Landesbanks and others. Some of the proposals have been reported in Austrian media in recent months.
The merger would combine Raiffeisen Bank International’s mostly eastern European and large-corporate business with Austrian retail and small-corporate clients. RZB owns a building society, a fund managing company, a 31.5 percent stake in Uniqa Insurance Group AG and some specialist banks. RLB NOe-Wien has retail and corporate clients in Vienna and the Lower Austria province that surrounds the capital.
The combined group could sell Uniqa and adapt its eastern European presence in the process, for instance by canceling the sale of its Polish unit and instead selling the Russian business, one of the people said.
Rising capital requirements, new regulations for banks and the end of the pre-crisis era of easy profits in eastern Europe have created a dilemma for Raiffeisen. While the publicly traded arm can sell new shares to bolster capital, neither RZB nor the regional Raiffeisen Landesbanks have access to equity markets.
In Raiffeisen Bank International’s 2.8 billion-euro ($3 billion) rights issue last year, RZB didn’t participate in full and saw its stake diluted to 61 percent. Should another cash call be necessary, it might lose its majority. RBI plans to boost its capital ratios in the next two years by selling assets and retaining earnings, and has ruled out a share sale.
RZB and RLB NOe-Wien are also both vulnerable to regulatory measures. The ECB frowns upon complex and intertwined ownership structures, and is pushing banks to base their business models on their own revenue, rather than on dividend payments from other banks.
Losses at Raiffeisen Bank International due to the Ukraine conflict and to attempts by Hungary, Poland and Croatia to convert foreign-currency consumer loans at the expense of foreign lenders, make things worse. The losses prompted a dividend pause, depriving RZB and its owners from a crucial income source. That impact is worst for RZB and RLB NOe-Wien, and the merger would resolve that problem.
The biggest opposition to the deal is based in the management of some of the other regional RLBs, which together own RZB. Their preferred plan would be an outright sale of Raiffeisen Bank International to get rid of the emerging market risks it entails.
About 39 percent of Raiffeisen Bank International, whose market capitalization is around 4 billion euros, is widely held. RLB NOe-Wien is RZB’s biggest holder with 34.7 percent. RLB Steiermark owns 14.7 percent of RZB, and RLB Oberoesterreich 14.6 percent, according to RZB’s website. The five smaller RLBs own between 4.5 percent and 5.6 percent of RZB. 10 percent is held by other owners.