Austria's Raiffeisen considers exits from some CEE banking markets

By bne IntelliNews October 28, 2014


Raiffeisen Bank International (RBI) could exit some markets, the head of Emerging Europe's second largest lender said on October 27. Hungary and Ukraine are the obvious candidates, if the Austrian lender can escape relatively unscathed.

RBI has put some markets "on trial," Karl Sevelda said in a conference call according to APA. The discussion came after parent RZB comfortably passed the European Central Bank's stress tests.

The CEO said the banking environment remains challenging, and that RBI will look to shed businesses that are struggling for profitability or tying up capital. While he offered little detail on which markets the bank could look to exit, he said earlier this month that the bank was operating healthily in every one of its markets except for Hungary and Ukraine.

Sevelda reiterated that those two markets are the main contributors to expectations of a loss in 2014 of up to €500m. While Ukraine is in chaos due to the fighting in the east of the country, banks in Hungary are facing huge costs under a government scheme to offer relief to forex loan borrowers. RBI will make a provision of €205m in the third quarter to cover the cost of refunds to customers due to unfair practices. That will take total provisioning connected to the scheme to €272m, Sevelda said.

Budapest has said it plans to phase out all loans in foreign currency next year, but the rate at which the loans will be converted has not yet been announced. Under pressure since the ruling Fidesz party came to power in 2010, RBI said in December that it was looking at offers for its Hungarian unit. However, it received just one bid - of €1 - from a tiny bank connected to the state.

Hungarian Prime Minister Viktor Orban has called for greater domestic ownership of the banks, and senior officials at the central bank regularly forecast an exodus. Yet with foreign banks reportedly holding up to €10bn in assets, non-performing loans high, and few bidders ready to jump into a sector hammered by the government, they have had little choice but to affirm their commitment to the market.

RBI said it was looking to sell its Ukrainian unit around the same time, and also suggested it could look at the Slovenian business. Problems in the mostly state-controlled bank sector in the small Adriatic country almost pushed it into needed an international emergency loan last year. Since, the government has pumped €4bn or so into the sector, split off toxic assets, and started efforts to privatize the largest banks. 

Meanwhile, the CEO insisted RBI remains committed to the Russian market. While he claimed Western sanctions are not having a significant impact on business, the plummeting ruble is chipping away at its capital ratios in the country.

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