Raiffeisen Shares Jump as Lower Provisions Lift 2015 Profit

  • Development in Russia and Ukraine better than bank expected
  • Core capital ratio nears target as risk-weighted assets fall

Raiffeisen Bank International AG rose the most in more than five months in Vienna trading after the bank reported a full-year profit on declining bad-loan provisions.

Net income was 383 million euros ($418 million) in 2015, compared with a restated loss of 617 million euros a year earlier, Raiffeisen said in a statement late Monday. The stock jumped as much as 10 percent, the most since Aug. 19, and was up 6.5 percent at 12.06 euros as of 1:11 p.m.

"The lower provisioning level was driven by better-than-expected developments in Russia and Ukraine, but also due to good conditions in other markets such as the Czech Republic," Raiffeisen Chief Executive Officer Karl Sevelda said on a conference call. Loan-loss provisions fell to 1.27 billion euros, less than the average estimate of about 1.38 billion euros collected from analysts by the bank.

Raiffeisen, co-owned by about 1.7 million Austrians in 473 local credit unions, has tried to shrink its presence in east European markets. In December, the International Monetary Fund urged Austrian regulators to carefully police capital ratios at Raiffeisen and other local lenders.

The bank said it restated its 2014 results after a “routine examination” by Austria’s reporting-enforcement panel. About 124 million euros of charges that were planned to be realized in 2015 had to be booked a year earlier, increasing the 2014 net loss, Raiffeisen said.

The company’s fully loaded Tier 1 capital ratio, a measure of financial strength, climbed to about 11.5 percent from 10 percent a year before, close to its target of 12 percent. The company still plans to sell its Polish unit and scale back other operations, Chief Financial Officer Martin Gruell said on the conference call.

The planned sale of Raiffeisen Bank Polska SA is being complicated by an "excessive" bank tax in Poland, Gruell said. Talks with the local regulator about extracting Swiss franc-denominated loans from the unit, meant to ease the sale, are also still continuing, he said.

While the preliminary result was better than expected, Raiffeisen’s slow progress in selling the Polish unit means its investment case remains "challenged," Credit Suisse analysts Hugo Swann and Victoria Cherevach said in a note to clients.

Raiffeisen doesn’t plan to pay a dividend for 2015.

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