The Raiffeisen Bank International headquarters in Vienna. The RBI warned yesterday it may post a second straight year of losses in 2015 as it books restructuring costs for a major retrenchment after decades of expansion in central and eastern Europe.


Reuters/Vienna


Raiffeisen Bank International (RBI) warned yesterday it may post a second straight year of losses in 2015 as it books the cost of scaling back after decades of expansion in central and eastern Europe.
Emerging Europe’s second-biggest lender said last year it expected to earn hundreds of millions of euros in 2015, but that forecast was overtaken by the drastic restructuring steps it unveiled last month.
Vienna-based RBI was a pioneer in central and eastern Europe as communism crumbled in the former Habsburg empire but hits from Ukraine and Hungary pushed it to a loss of €493mn ($542mn) in 2014, its first on record.
Bankers say Austrian lenders have been perhaps been too slow to tackle some of the problems stored up during their rapid expansion eastwards and a series of shocks over the past couple of years has forced them to bite the bullet.
Raiffeisen plans to sell operations in Poland and Slovenia and its Zuno direct bank while cutting back in Russia to boost key capital targets. The restructuring costs likely to wipe out earnings this year stem from creating a division of non-core businesses in Poland, Slovenia, Asia and the US.
The overhaul is being driven by Karl Sevelda, the bank’s 65-year-old chief executive who was pressed into service in 2013 when predecessor Herbert Stepic abruptly resigned.
Sevelda’s contract runs until mid-2017 and he has said he plans to see it through. “Raiffeisen Bank International does not have an income problem,” said Sevelda. “The business model is intact.”
He said the bank should return to profit in 2016. RBI said its 2015 consolidated result “may be negative” as it expects to book most of its 550mn euros in revamp costs this year.
Thomson Reuters data shows that while Austrian, US and German investors have sold stock in RBI, Nordic and Polish funds have been buyers.
The stock, which hit an all-time low in January, trades at about 8 times 12-month forward earnings, a discount to Austrian peer Erste Group on 11.4 times and CEE market leader UniCredit on 13.2 times, according to StarMine, which ranks analyst estimates by their track record.
RBI said net provisions for bad loans at its core businesses were set to stay high but fall from the 1.72bn booked in 2014. It reiterated that it would put strengthening its balance sheet ahead of dividend payouts as it implements the revamp.
Raiffeisen said the downsizing campaign would release about €16bn worth of gross risk-weighted assets (RWAs) and cut costs by a fifth from 2014 levels.
It expressed confidence it would successfully complete the sale of its bank in Poland, where it became a top-eight player after acquiring Polbank in 2012.
The move never lived up to its billing and even though a condition of the purchase was that the bank would be listed in 2016 RBI is pressing ahead with the sale. It said yesterday it was in talks with regulators about how to resolve this.