Bloomberg News

Raiffeisen Bank Rises on Analyst, S&P Reports: Vienna Mover

February 02, 2012

Jan. 25 (Bloomberg) -- Raiffeisen Bank International AG was among the best-performing European banks after it reported progress toward European capital targets, analysts kept “buy” ratings and Standard & Poor’s affirmed its creditworthiness.

Raiffeisen, eastern Europe’s third-largest lender, closed up 5.7 percent at 24.305 euros in Vienna, the highest level since Sept. 9. That made it the fourth-biggest gainer on the 43- member Bloomberg Europe Banks and Financial Services Index, which fell 0.2 percent. The stock has advanced 21 percent this year after losing half its value in 2011.

Raiffeisen and its parent, Raiffeisen Zentralbank Oesterreich AG, have created about half the capital needed for RZB to meet the European Banking Authority’s capital rules, having completed measures that are equivalent to increasing capital by 1.4 billion euros ($1.8 billion), RZB said in a presentation on its website today. They are targeting another 1.6 billion euros before the EBA’s June 30 deadline.

While it and parent Raiffeisen Zentralbank Oesterreich were told to raise 2.1 billion euros in capital by the EBA, they may need 500 million euros less after the Austrian regulator Finanzmarktaufsicht said yesterday it is backing the bank’s demand to count some hybrid securities toward the target.

Raiffeisen, which trails UniCredit SpA and Erste Group Bank AG in eastern Europe, is fighting losses in Hungary due to the country’s banking tax and mortgages in foreign currencies. It also faces slowing profit growth elsewhere in the region, which is increasingly suffering from the euro area’s debt crisis.

‘Buys’ Confirmed

Citigroup Inc. and ING Groep NV reiterated their “buy” ratings on Raiffeisen, saying the stock is attractive even if a share sale dilutes holders. Ratings company Standard & Poor’s, which stripped Austria of its AAA rating on Jan. 13, ended a review for a possible downgrade by affirming the A rating of Raiffeisen and RZB.

“We maintain our ‘buy’ rating with a revised target price of 29.30 euros, yielding potential upside of 23 percent,” ING analysts Timothy Crowley and Andrzej Nowaczek wrote in a note to clients dated yesterday. “The redemption of participation capital through a rights issue appears to be already priced in” because Raiffeisen’s price-to-earnings ratio, which compares profits to the share price, is below that of peers in eastern Europe, they said.

Stefan Nedialkov, a Citigroup analyst, also maintained his “buy” rating, raising his price target to 30 euros because he lowered his estimates for Raiffeisen’s capital needs.

--Editors: Steve Bailey, Keith Campbell

To contact the reporter on this story: Boris Groendahl in Vienna at bgroendahl@bloomberg.net

To contact the editor responsible for this story: Frank Connelly at fconnelly@bloomberg.net


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