* Q4 consolidated profit of 146 mln euros beats estimates
* Qualifies 2014 outlook given upheaval in Ukraine
* Cuts dividend to 1.02 euros/share from 1.17
* Puts Ukraine exposure at 5.13 bln euros
(Adds comments from news conference)
By Michael Shields
VIENNA, March 27 Raiffeisen Bank International
(RBI) said it was committed to its Russian business
and played down potential problems in Ukraine that have cast a
shadow over central and eastern Europe's number two lender.
But it was so concerned about the crisis in Ukraine - which
is locked in a confrontation with Russia over Moscow's
annexation of Crimea - that it said previous targets for lending
and risk provisioning now depended on how those events play out.
"I don't want to sugarcoat the situation. Of course there
are risks for (Ukrainian unit) Aval and RBI, which is why we
qualified the outlook for 2014," Chief Executive Karl Sevelda
told the group's annual results news conference.
Raiffeisen's business in Russia, which includes investment
banking, capital markets and retail, accounted for most of its
profits last year, bringing in a pre-tax return on equity of
nearly 32 percent.
"If Raiffeisen remains committed to these countries, it will
be affected by higher credit and funding risk and negative
foreign currency translation," Berenberg Bank analyst Eleni
Papoula wrote in a research note.
Every 10 percent drop in the Russian rouble would undermine
estimates for 2015 pre-tax profit by around 4 percent, while
risk from the Ukrainian hryvnia was much lower, she added.
Currency devaluations in the two countries are already
having an impact. By the time its annual accounts were finished
on March 11, currency swings had cut RBI's common equity tier 1
ratio by around 25 basis points, its annual report showed.
Its pro-forma CET1 ratio under Basel III rules stood at 10.1
percent of risk-weighted assets including proceeds of a share
sale in January that raised 2.78 billion euros ($3.83 billion).
It had aimed to use some of the money to repay 2.5 billion
euros in non-voting capital that it raised to help weather the
financial crisis, but has not yet got a green light from
regulators given the Ukraine turmoil.
UPBEAT ON RUSSIA
The bank said it swung to a fourth-quarter group net profit
of 146 million euros, beating market estimates as net interest
income and risk provisions came in better than expected.
Analysts polled by Reuters had on average expected profit of
74 million, while consensus estimates compiled by Raiffeisen
itself saw profit of 102 million.
RBI stock gained more than 2 percent in early trade, but was
down 1.1 percent at 22.84 euros by 1145 GMT while a European
bank sector index was down 0.2 percent.
RBI shares trade at around 10 times 12-month forward
earnings per share, a discount to Austrian peer Erste Group
on nearly 15 times, according to StarMine, which
weights analyst estimates by previous forecasting accuracy.
Analysts cite Raiffeisen's heavy exposure to the crisis-hit
region. Erste sold its Ukraine business last year.
But RBI kept Russia atop its focus list of the six most
attractive countries in the CEE region, citing an underbanked
market, solid corporate banking and a growing retail segment.
Russia - where it is the 10th-largest lender with 2.6
million customers and a 10 billion euro loan book - accounted
for 615 million euros of the 835 million profit the group made
before tax in 2013.
"The growth prospects in Russia have clouded, but we are
convinced that it will remain an attractive banking market when
the crisis has passed," Sevelda said.
RBI had a grip on risks at its Ukraine business, he said,
and Raiffeisen was still deciding whether to sell it. It put any
deal on hold after letting a handful of suitors see its books.
The crisis was providing some upside as some big corporate
customers moved staff accounts to Raiffeisen, he said.
RBI put its total Ukraine exposure at 5.13 billion euros at
the end of February. Its government bond holdings amounted to
399 million euros as of March 13, while it described its
liquidity position there as "currently stable".
Raiffeisen made a profit of 101 million euros last year in
Ukraine, where it is the number five bank. Crimea contributes
less than 2 percent of its profit in Ukraine, it said.
The group reaffirmed a goal to boost lending slightly in
2014 and said net provisioning should hold steady, although that
guidance now depended on the impact of developments in Ukraine.
It said results may also be affected by an ECB-led review of
banks' balance sheets.
It proposed cutting its dividend to 1.02 euros per share
from 1.17, a smaller drop than expected.
($1 = 0.7254 euros)
(Reporting by Michael Shields; editing by Tom Pfeiffer)