UPDATE 2-Raiffeisen sees bad loans on the rise into 2013
* Q3 profit 141 mln eur vs 130 mln yr-ago, consensus 140 mln
* Provisioning charges fall to 224 mln eur from 377 mln
* Sees small rise in non-performing loans in months ahead
* Reiterates capital increase is an option
* Shares fall 5 pct (Adds comments from management, market reaction)
VIENNA, Nov 28 (Reuters) - Raiffeisen Bank International said it expected bad loans to keep rising into next year given tense conditions in its emerging European markets, knocking its shares after a mixed bag of quarterly results.
The Austrian bank, which vies with Erste Group to be central and eastern Europe's second-biggest bank after UniCredit, sees a slight increase in non-performing loans "in the next months" as the economic downturn lingers.
Chief Executive Herbert Stepic told reporters the slump looked set to continue into the first half of 2013, keeping pressure on hard-pressed borrowers in the region. Bad loans already account for a tenth of RBI's lending portfolio.
"The longer the crisis lasts, the smaller the probability that we have passed the peak," he said. "Resolving the state debt crisis in Europe is just taking a long time and that has a direct impact on the economy and of course impact on business in eastern Europe."
The bank cited Hungary and southeastern Europe as the main trouble spots, while business looked most promising in Russia, Poland, Romania, the Czech Republic, Slovakia and Austria.
"For us Hungary is still the main problem," Chief Risk Officer Johann Strobl said, noting the country hadn't recovered from problems it had even before the crisis erupted in 2008.
"Some companies have deteriorated continuously and we see no impetus from outside the country that could alleviate the problems of these public companies," he added.
Raiffeisen is also keeping a close eye on Hungary's plan to help relieve the burden on towns by taking over some municipal debt. The bank has around 750 million euros in such exposure.
Third-quarter profit at RBI rose 8.5 percent to 141 million euros ($182.3 million), in line with market expectations, as risk provisions fell. But profit retreated from 160 million in the second quarter as operating income weakened.
"Overall it looks like a miss on operating income offset by lower (loan loss provisions)," Nomura analysts said.
NO 2013 FORECAST
RBI's shares fell as much as 6.7 percent and traded down 5 percent at 31.53 euros by 1037 GMT, when the Stoxx Europe 600 banking sector index was off 0.9 percent.
RBI shares had been trading at nearly 9 times 12-month forward earnings, a discount to Erste's 9.6 times, according to Thomson Reuters StarMine, which ranks analysts' estimates according to their previous accuracy.
Markets have been wary about RBI's comments that a capital increase was an option should conditions permit, something it repeated on Wednesday although Stepic noted its core tier 1 ratio of 10.2 percent was more comfortable than in the past.
RBI said bank levies in Austria and central and Eastern Europe would probably have a negative effect on earnings of 160 million euros this year.
It saw the levy in Austria holding steady next year at 104 million euros but rising in Hungary to 40 million euros from 26 million in 2012 and to 35 million in Slovakia from 28 million.
Stepic declined to forecast 2013 results. Austrian peer Erste Group said last month it expected 2013 profit to rise as emerging European economies pick up, provisions for bad loans stay in check and revenues expand.
Austrian banks' role as leading lenders in eastern Europe has put them in the spotlight for debt ratings agencies concerned that a severe downturn in the region could require more state aid. ($1 = 0.7733 euros) (Additional reporting by Angelika Gruber; Editing by Helen Massy-Beresford)