• RZB-Raiffeisen Bank International merger likely to go ahead
  • Deal needed to avert risk of sliding capital ratios at RZB

Austria’s Raiffeisen cooperative, the nation’s biggest banking group, will have to reorganize further after members couldn’t agree on more than the planned merger of its two biggest lenders.

The group is pursuing a merger of publicly traded Raiffeisen Bank International AG and its 61 percent owner Raiffeisen Zentralbank Oesterreich AG after it couldn’t find consensus on broader combinations, RZB Chief Executive Officer Walter Rothensteiner, told journalists in Vienna on Thursday. A full combination with all eight regional banks that own RZB, a deal dubbed “R10,” was among the options considered, he said.

“We discussed everything from ‘R2,’ how we call what we’re doing now, to ‘R10’” Rothensteiner said. “Everybody has got to decide if he wants to join or not. I just don’t think that the whole issue is over with this, but that this is a first step that makes further ideas possible.”

Raiffeisen, which is co-owned by about 1.7 million Austrians through 477 local credit unions that have regional banks, is seeking ways to shore up capital buffers as regulators toughen scrutiny on banks’ balance sheets across the euro region. Merging the regional banks into a single organization like in Germany or the Netherlands would also allow costs and decision-making to be streamlined.

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RZB’s biggest shareholder, the regional bank for the capital Vienna and the province surrounding it, was originally meant to be part of a three-way merger with RZB and RBI, people familiar with the situation said in November. But the plan announced in May didn’t include Raiffeisenlandesbank Niederoesterreich-Wien AG.

RBI’s minority shareholders have given the deal a thumbs-down in the markets so far. Its shares have dropped 12 percent since the plan was announced May 10, while the Euro Stoxx Banks index rose 2 percent.

“We’re doing RZB/RBI now, there are obvious reasons for that, and from next year on, everybody will think again,” Rothensteiner said. “One or the other may consider joining in.”

The management of RZB and RBI, led by CEO Karl Sevelda, are set to decide about the merger and its terms by the end of September, Rothensteiner said. RZB’s shareholders will get RBI stock in exchange for their RZB shares under the planned structure. The exchange ratio is determined by auditors and must be approved by investors.

Deutsche Bank AG is advising RZB on the deal.

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