Raiffeisen Can Reach Capital Goal Even If It Keeps Polish Unit

  • Political environment, regulator demands don't make sale easy
  • Capital goal already `within striking distance,' CEO says

Raiffeisen Bank International AG can afford to keep its Polish unit rather than sell it at a fire-sale price because the Austrian lender is already “within striking distance” of its target to boost capital ratios, according to its chief executive officer.

Eastern Europe’s second-biggest lender still wants to dispose of the business but may not succeed in doing so, CEO Karl Sevelda told journalists in Vienna on Wednesday. Selling Raiffeisen Bank Polska SA, a cornerstone of a capital restoration plan presented a year ago, has been hampered by the complicated deal structure demanded by Polish regulators.

“The political and economic environment for banks was different” when the sale plan was announced, Sevelda said. Poland’s new banking levy “is ruinous for banks, has reduced their value massively, and didn’t improve the investment climate. In principle, we still want to sell the bank, but not under all circumstances and at any price, and we can’t rule out that we won’t sell it in the coming months and years.”

Sevelda put boosting capital ratios at the top of his agenda last year after the conflict in Ukraine led to the Vienna-based bank’s first annual loss in 2014. His original plan relied mostly on shrinking the lender by selling the Polish unit and cutting back in Russia.

Complex Sale

Polish regulators demanded Raiffeisen carve out a portfolio of Swiss-franc denominated mortgages and structure the deal as a combination of a stake sale and an initial public offering. While Raiffeisen negotiated with regulators, Polish bank stocks plummeted due to new taxes and legislation imposing losses on banks.

The Austrian bank repeated its pledge to sell at least 15 percent of the division via an IPO by June, but cautioned that plan was subject to market conditions. Sevelda said several parties were still looking at buying the Polish bank.

Raiffeisen has made progress with its goal to achieve a common equity Tier 1 ratio of 12 percent by the end of 2017. That ratio, a measure of financial strength, stood at 11.5 percent at the end of last year, “within striking distance” of the target, Sevelda said. Raiffeisen today released final 2015 earnings that broadly confirmed preliminary results released on Feb. 1.

Raiffeisen returned to profit last year with net income of 379 million euros ($420 million), helped by earnings in Russia and snapping years of losses in Hungary. Raiffeisen forecast that its loan-loss provisions and costs would fall this year, and will forgo a dividend to boost capital buffers instead.

Before it's here, it's on the Bloomberg Terminal.