Raiffeisen Bank International's (RBI) 2014 loss could top its previous worst-case scenario of 500 million euros if it has to write down the value of its Russian business, Reuters cited its chief executive as saying on Wednesday. As a result RBI might exit one or more foreign markets, he added.
Exit might follow rise in costs
Karl Sevelda was also quoted in the Austrian bank's in-house publication as saying it was lifting its cost savings target to EUR 650-700 million by 2016 from a previous EUR 600 m and it might exit one or more foreign markets, without elaborating.
RBI said on Monday its Russian business, which in the past has been a major profit generator, might deteriorate and that it might review the unit's accounting value given the weakness in the rouble and Russia's economic problems.
“Due to the sharp devaluation and ongoing high volatility of the Russian Ruble, as well as the revised growth expectations for Russia, a review of the mid-term planning for the Russian unit of Raiffeisen Bank International (RBI) has become necessary," the bank said on Monday.
“The changed economic environment could lead to a reduction in the future results of the Russian unit and potentially to a review of the goodwill valuation," it added.
The goodwill arose through the acquisition of Impexbank in 2006 and would, subject to adjustment, amount to EUR 148 million as of 31 December 2014.
"The heavy drop in the Russian currency and the bad economic forecasts for Russia could make a write-down of the goodwill of Raiffeisenbank Russia necessary," in-house publication Raiffeisen-Zeitung quoted Sevelda as saying.
"If the existing goodwill of Raiffeisenbank Russia doesn't change, I expect that it (the 2014 loss) won't be more than 500 million (euros)," he added.
Sevelda said any goodwill writedown at the Russian business would not affect RBI's regulatory capital quotas.
A spokesman for RBI confirmed the comments.
RBI currently operates in Austria and 15 countries in central and eastern Europe, but also has branches in other countries. RBI's business in 2014 suffered particularly in Ukraine and Hungary.
Raiffeisen considers IPO of Polish unit to raise cash
Raiffeisen could list a large slice of Polbank, its Polish unit, in an initial public offering this year to raise cash, alongside the option of selling it outright to an investor, Reuters cited two sources familiar with the deliberations as saying on Wednesday.
Market sources told the news agency in December that RBI was looking to sell Raiffeisen Polbank to offset what is expected to be the group's first ever full-year loss in 2014.
Raiffeisen was already planning an IPO anyway because it is required by the Polish regulator to float at least 15% of its equity by mid-2016. However, the bank was now looking at an IPO this year as a way to raise funds, the two sources said.
"The package offered would be 30-40% rather than 15-20 to allow Vienna to get more cash since it is in need," said one of the sources familiar with the deliberations, who spoke on condition of anonymity.
"In Poland we are currently focusing on the preparation of the IPO. The size, structure and timing of the IPO are still open. The agreement with the Polish Regulator KNF foresees an IPO before middle of 2016. No decisions have been made," RBI spokesman said.
Both the sources said the option of an IPO to raise cash - rather than just to satisfy the regulator - was favoured by the Raiffeisen Polbank local management.
Raiffeisen Polbank book value is 5.5 billion zlotys (USD 1.51 bn). According to one banker who is following the possible transaction, Raiffeisen is looking at a total valuation of about EUR 2 bn.
The local KNF watchdog has said it does not favour big existing players in the Polish banking market taking over rivals, which could exclude the most likely buyers for Raiffeisen Polbank.
Polbank is Poland's eight biggest lender by assets. Raiffeisen, emerging Europe's second largest lender, bought Polbank from Greece's EFG Eurobank for EUR 460 million in 2012.
Polish banks are, on average, quoted at around 1.8 times their book value. The Raiffeisen unit is profitable, but its potential market value is dragged down by a return on equity lower than its peers.
Vienna-based Raiffeisen has said its 2014 loss will be EUR 500 m. Its results were hit by turbulence in Ukraine and by levies imposed by Hungary.
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