* Q1 net falls 19 pct to 270 million euros vs poll 256 mln
* Risk provisions 208 mln vs Reuters poll average 278 mln
* Capital hike possible if business grows strongly - CEO
* Portugal, Spain, Greece, Ireland sovereign exposure 22 mln
* Shares rise 2.3 pct, outpace sector
(Adds quote on potential share sale, market reaction)
By Michael Shields
VIENNA, May 26 Raiffeisen Bank International (RBIV.VI) left the door open to selling more shares should business in central and eastern Europe accelerate out of the financial crisis as the region's economy picks up briskly.
The question whether emerging Europe's third-biggest lender would catch up with peers and bolster its balance sheet has weighed on the Austrian group's stock price for months, and Chief Executive Herbert Stepic kept investors guessing.
"We feel sufficiently capitalised and we are open to capital increase considerations in the future along with the development of the business," he told a conference call on first-quarter results that fell nearly a fifth but still beat expectations.
"If the business development is increasing in a substantial form it (a capital increase) will be earlier. If it continues as it is we will consider it further," he said on Thursday.
Its core tier one capital ratio held steady at 8.9 percent of risk-weighted assets.
Business should grow in Russia, the Czech Republic, Poland and Slovakia this year, he said, singling out Russia and Ukraine as particularly positive surprises so far. But Hungary remained "problematic" given its "huge restructuring problem", he added.
A big hit from deferred taxes on assets whose value RBI had marked up in the fourth quarter weighed on first-quarter net profit, which beat market expectations thanks to a 36 percent drop in loan-loss provisions and solid trading income.
It said it was hard to tell whether the drop in bad-debt charges was sustainable, noting problems with even one or two big clients could raise the pressure in southeastern Europe.
Group net profit fell 19.1 percent to 270 million euros ($379.7 million), ahead of the average estimate of 256 million in a Reuters poll of analysts.
RBI repeated its non-performing loan (NPL) ratio was set to peak later this year amid robust economic growth in the region.
The ratio fell 37 basis points in the quarter to 8.6 percent.
High margins have allowed Raiffeisen, Austrian peer Erste Group Bank (ERST.VI) and market leader UniCredit (CRDI.MI) to remain profitable in emerging Europe, but investors are looking for a clear reversal of the bad-debt cycle.
Special state taxes in Austria and Hungary totalled 34 millioneuros in the quarter and are set to cost the group 130 million this year.
RBI put its exposure to the sovereign debt of Greece and Ireland at zero, at a combined 22 million euros for Portugal and Spain, and at 467 million for Italy.
Its profit drop reversed a trend among Austrian peers.
UniCredit unit Bank Austria's net profit rose 41 percent, helped by lower provisioning costs. [ID:nLDE74C0A6]
Erste Group stuck to its forecast of higher 2011 profit, even though results missed analysts' forecasts as net interest income and commissions lagged expectations. [ID:nLDE73Q1HW]
Oesterreichische Volksbanken OTVVp.VI nearly doubled pretax profit as loss provisions fell sharply. [ID:nLDE74I127]
Raiffeisen shares rose 2.3 percent by 1415 GMT, while the Stoxx European banking index .SX7P fell 0.7 percent.
UniCredit analyst Thomas Neuhold said the results beat helped shares that have lagged the sector.
"However, we believe the shares will struggle to outperform in the medium term until the capital issue is resolved," he told clients in a research note.
Raiffeisen stock had been trading on a 12-month forward price/earnings ratio of just over 7 times, a discount to Erste Group on around 10 times, according to StarMine, which weights analysts' estimates by their track record for accuracy. (Editing by David Cowell)