UPDATE 3-Raiffeisen eyes capital hike, Q2 beats

Thu Aug 25, 2011 5:14am EDT

Related Topics

* Q2 net profit 345 mln eur vs poll avg 273 mln

* Q2 net interest income 897 mln vs poll 918 mln

* Q2 provisioning for impairment losses 197 mln vs poll 251 mln

* Reiterates targets, says NPL ratio to peak in H2 (Adds comments from news conference, market reaction)

By Michael Shields

VIENNA, Aug 25 (Reuters) - Raiffeisen Bank International could raise its share capital within a year, emerging Europe's number three lender said on Thursday while reporting second-quarter net profit that blew past market expectations.

The decision on whether to sell new shares hinges on a variety of factors, not least how bank shares fare after a market rout and how regulatory requirements play out, Chief Executive Herbert Stepic told a news conference.

"I don't see any reason why a capital increase wouldn't succeed" over a 12-month span, he said, adding he could not state a floor price at which it would not make sense to tap the markets with a share sale.

The bank said in a statement it was examining whether a share sale made sense. "Depending on market developments, a capital increase may be a possible option within the next 12 months," it said.

Stepic said this marked little change in the bank's previous stance but it decided this time to put it in writing because reporters and analysts always asked about its plans.

RBI will hold a road show during the annual meetings of the World Bank and International Monetary Fund in Washington this autumn, he said, but added this was not directly linked to its share sale deliberations.

Second-quarter net profit of 345 million euros ($497 million), up from 138 million a year earlier, beat even the highest estimate in a Reuters poll of analysts as risk provisions fell more sharply than expected.

Raiffeisen reiterated its medium-term target of generating a pretax return on equity of 15-20 percent and stuck to its view that its non-performing loan ratio would peak in the second half of this year.

The question of whether RBI would issue new shares to catch up with peers and bolster its balance sheet has weighed on the Austrian group's stock price for months.

Its shares halved from a 2011 high at 45.40 euros in February to 24.36 euros this month. They bounced 4.3 percent on Thursday to 28 euros thanks to bumper quarterly profits.

"RBI reported very strong results, clearly beating consensus and our estimates due to significantly higher trading income and lower provisions," UniCredit's Thomas Neuhold said in a research note.

Raiffeisen easily passed European bank stress tests this year, but said on Thursday its core tier one capital ratio slipped to 8.5 percent at the end of the first half from 8.9 percent of risk-weighted assets at the end of March.

Raiffeisen stock has been trading on a 12-month forward price/earnings ratio of around 5 times, a discount to Austrian peer Erste Group on nearly 7 times, according to Thomson Reuters StarMine, which weights analysts' estimates by their track record for accuracy.

Special state taxes in Austria and Hungary totalled 68 million euros in the half and will cost 130 million in 2011.

RBI kept its exposure to the sovereign debt of Greece and Ireland at zero as of the end of June. It reduced its combined sovereign exposure to Portugal and Spain to 7 million euros, while exposure to Italy edged up to 474 million.

High margins have allowed Raiffeisen, Erste Group Bank and market leader UniCredit to remain profitable in emerging Europe, a region they think will outgrow sluggish western European markets.

UniCredit unit Bank Austria's first-half net profit rose more than half, helped by lower provisioning costs.

Erste Group lowered its full-year outlook last month as bad loans remained high in Hungary and Romania and as lending growth stagnated.

Oesterreichische Volksbanken's (OTVVp.VI) first-half net profit was nearly wiped out by writedowns on Greek assets, it said, adding a dividend was now unlikely. It was one of eight banks to fail this year's European stress tests.

($1 = 0.694 Euros) (Additional reporting by Sylvia Westall and Angelika Gruber; Editing by David Cowell)

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