VIENNA Raiffeisen Bank International (RBIV.VI) talked up its prospects for 2013 on Thursday as rising net interest income helped take the sting out of a profit miss in the second quarter.
Central and eastern Europe's second-biggest lender said it now expected a slight increase this year in its net interest margin, which rose 42 basis points to 3.06 percent in the first half. Net interest income is its main profit driver.
The Austrian bank had earlier forecast a steady interest margin, although new Chief Executive Karl Sevelda told shareholders in June it might be higher.
Second-quarter profit fell by a quarter to 120 million euros ($160 million), missing market estimates as costs rose more than expected and it took a one-off hit of 20 million euros for an upfront booking of Hungary's bank levy.
"Against the backdrop of a still challenging environment, we are not dissatisfied with our results," said Sevelda, who took over in June when veteran Herbert Stepic stepped down in a row over his personal investments.
"Particularly the positive signals, such as the improved net interest margin and the increased operating income in combination with signs of an economic recovery, make us confident for the second half of the year," Sevelda said.
Berenberg analyst Eleni Papoula called the results good. "The key positive surprise is stronger than expected net interest income that may lead to slight consensus upgrades. However, the capital overhang remains unresolved," she said.
Raiffeisen, which competes in central and eastern Europe against Austrian peers Bank Austria (CRDI.MI) and Erste Group Bank (ERST.VI), reiterated that a capital increase was an option depending on market conditions.
Prospects for a share sale to bolster its balance sheet have kept Raiffeisen stock trading at around eight times 12-month forward earnings, a discount to Erste's 12 times, according to StarMine, which weights analysts' estimates by their previous accuracy.
Raiffeisen shares, which touched a year-and-a-half low of 19.87 euros in July, rose 1.4 percent in early trading, while the Stoxx European bank sector index .SX7P rose 0.6 percent.
Raiffeisen stuck to its outlook that its net provisioning requirement this year would be similar to that in 2012 but now said loans and advances to customers would be steady rather than rise. First-half provisioning rose 17 percent to 469 million.
Analysts polled by Reuters had on average expected net profit after minorities to fall 10 percent to 144 million euros.
RBI said its core tier 1 capital ratio fell to 10.4 percent at the end of the first half from 10.7 percent at the end of 2012, while its leverage ratio - which measures equity against total assets - stood at 5.5 percent, above the 3 percent regulatory minimum.
($1 = 0.7476 euros)
(Reporting by Michael Shields; Editing by Georgina Prodhan and David Cowell)