Raiffeisen Bank International AG (RBI), eastern Europe’s second-biggest lender, had its first quarterly loss since going public in 2005 as bad-debt charges rose and wrote down its Ukraine unit. Shares plummeted.
Full-year net income declined to about 700 million euros ($950 million) in 2012, from 968 million euros a year earlier and after 842 million euros in the first nine months, the Vienna-based bank said in a statement yesterday, three weeks before it was scheduled to report results.
“It’s a bad result across the board, especially with regards to the non-performing loans,” said Matthias Siller, who helps manage $3 billion at Baring Asset Management in London. “NPLs are simply too high, the quality is rather shocking.”
Raiffeisen and its predecessor, Raiffeisen International Bank-Holding, which had its stock market debut in 2005, went through the 2008 and 2009 financial crises without a quarterly loss. Its broad geographic footprint in 15 eastern European nations, second only to that of UniCredit SpA (UCG), allowed the bank to balance losses in countries such as Ukraine and Hungary with profits in Russia and the Czech Republic.
The shares closed at 30.57 euros, down 7.5 percent, in Vienna. That’s the biggest decline since Dec. 12, 2011.
Pretax profit fell about 29 percent to “slightly above” 1 billion euros in 2012, Raiffeisen said, implying a loss of about 100 million euros in the final quarter. The estimate was for 1.28 billion euros of pretax profit, according to a Bloomberg survey of 13 analysts. The miss was caused by higher loan-loss charges, higher expenses and weaker revenues, Berenberg Bank analyst Eleni Papoula said in a note to clients.
Loan-loss provisions in 2012 were slightly below the 1.06 billion euros in 2011, Raiffeisen said, implying quarterly loan losses expanded to about 400 million euros in the final three months, compared with 224 million euros in the third quarter and 282 million euros in the year-earlier period.
One reason for the increase were large corporate loans in Austria, assets Raiffeisen acquired from its parent Raiffeisen Zentralbank Oesterreich AG in 2010, said Susanne Langer, a Raiffeisen spokeswoman in Vienna. Bad debt in Hungary, Poland, the Czech Republic and Slovenia also weighed on loan losses.
“It was always a blind spot that you didn’t really know what RZB assets were brought in,” Barings’ Siller said. “It’s very annoying that this is where the problems emerge now.”
Overdue loans are proving persistent in eastern Europe, where they make up more than a fifth of all lending in countries including Ukraine, Hungary and Romania. Policy makers warn they are choking off credit and hurt the economy. Raiffeisen Chief Executive Officer Herbert Stepic said last month that non- performing loans will continue to grow.
Raiffeisen, which bought Ukraine’s Bank Aval for $1 billion in 2005, said it wrote off the remaining goodwill of 29 million euros on the business. Ukraine is seeking its third bailout by the International Monetary Fund in four years as the economy contracts and officials grapple with a widening current-account gap, falling foreign reserves and $10 billion of debt payments scheduled for this year.
Goodwill is an accounting convention that represents the amount paid for an acquisition over and above the book value. Banks including Deutsche Bank AG and Credit Agricole SA (ACA) announced billions of euros in goodwill writedowns this week as European regulators tighten rules. Raiffeisen’s Austrian peer Erste Group Bank AG (EBS) on Jan. 15 announced a 300 million-euro goodwill writedown, mainly on its Romanian business.
CEO Stepic said on that day that he wasn’t aware of goodwill writedown needs at his company. Raiffeisen’s Langer said the need for the writedown only became apparent in discussions with auditors this week.
Raiffeisen said it will ask its shareholder meeting on June 26 to approve a dividend for 2012. While the Bloomberg dividend projection is for the payout to remain unchanged at 1.05 euros a share, Berenberg’s Papoula expects it to shrink.
“It can only afford to pay a token dividend given its priority to strengthen capital,” she said.
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