Raiffeisen Bank International (RBI), the struggling Austrian lender, will continue its programme of disposals and downsizing, despite its improving performance and the current low valuations for banks.

“The Polish sales process continues, and will continue despite the headwinds we are facing,” Karl Sevelda, chief executive, told a conference call to present the bank’s audited full-year results, which largely confirmed the preliminary figures. 

RBI announced plans to sell Polbank a year ago but suspended the process during the Polish election campaign at the end of 2015, during which political parties competed to promise to grab a bigger slice of the banking sector’s healthy profits. 

RBI officially relaunched the sale in March, but the environment has if anything worsened. The new Law and Justice government has already imposed a levy of 0.44% on bank assets, prompting warnings from the European Central Bank and questions from the European Commission.

President Andrzej Duda has also proposed a bill to compel banks to convert Swiss franc loans into zloty, a move that could cost banks up to PLN78bn (€18bn), according to the central bank. 

“Things have not become easier thanks to recent political developments,” Sevelda deadpanned. “Ongoing discussions do not help to accelerate the process,” he added. However, the bank does not expect the president’s proposal to be implemented in its current form.

RBI has already concluded it will not be able to sell Polbank with its €3bn of Swiss franc loans included. It is currently in negotiations with Polish banking regulators on how to carve them out, and whether to sell them or spin them off into a separate vehicle.

The new government’s moves appear to have encouraged RBI to slash Polbank’s costs, with an 11%  staff reduction reportedly being planned. An added complication is that RBI also has to fulfil a promise to regulators to float Polbank by the end of June, a plan Sevelda said was “fully on track” but would “depend on market conditions”.

“We will respect this commitment,” said CFO Martin Gruell. “This is not an easy environment to go public. This environment is very challenging because of the bank tax and the constitutional crisis,” he added, referring to the stand-off between the government and the constitutional tribunal. 

RBI’s other, much smaller, disposals have hardly been plain sailing either. Although the sale of its Slovenian unit to Apollo Global Management is expected to be completed in the first half of the year (forcing RBI into a €49mn write-off), Alfa Bank recently pulled out of buying internet bank Zuno. Sevelda said RBI has restarted that sales process, but was also considering simply transferring Zuno’s business to its respective local RBI units. 

Analysts are sanguine about the delays to the Polbank sale because of the improvements in RBI’s profitability and capital strength shown by the 2015 results, even though the bulk of the €550mn restructuring costs will be booked this year. RBI swung back into the black with a €379mn net profit last year, and hiked its fully-loaded CET 1 ratio by 1.5 percentage points to 11.5%, just shy of its 12% target for the end of 2017.

Sevelda guided that RBI expects its core capital ratio to be above 12% by that point, even without taking into account retained earnings from this year and next, or the Polbank sale.

“The Polbank sale would add 1 percentage point to the CET 1 ratio,” Thomas Unger of Erste wrote in a note.  “Nonetheless, it is becoming clearer that RBI would be able to achieve the 12% goal even without the sale of the Polish unit.”

On the conference call, RBI executives insisted that despite the improved performance they will still pursue the disposals – as well as the planned downsizing in Russia, Ukraine and Hungary – and for a second consecutive year will not pay a dividend on 2015's results. RBI reiterated its restructuring targets and left its outlook unchanged.

“While we produced a good result last year, it would be wrong for us to distribute the profit while regulators continue to raise the bar for capital ratios,” Sevelda – who was paid €1.95mn last year – wrote in the bank’s annual report.

Russia continues to be RBI’s most profitable market by far, helped by an net interest margin of over 5%, even though it has now been overtaken by Slovakia as the bank’s largest operation by assets. Net profits in Russia rose by 19% to €387mn, while assets fell 14.3% to €10.68bn as the bank focused on blue-chip companies and richer individuals. RBI closed 26 branches in Russia during 2015, leaving it with 186.

“The performance was again excellent,” Sevelda said, while adding that RBI will continue downsizing in Russia because of the ongoing recession and the ruble’s volatility. "We want to increase the [profit] share coming from more economically and politically stable countries," he said.

In Hungary, RBI returned to profit in 2015 and the bank said its restructuring has been completed, with the closure of 42 branches in the country in 2015, leaving it with a total of 72.

In Ukraine 93 branches were closed last year, but RBI still operates 578 outlets in the country, and 59% of loans are non-performing. The unit remains lossmaking, but the first few months of 2016 have been positive, Sevelda said. “There was a significant improvement but the situation is still quite fragile,” he warned.