VIENNA, June 14 (Reuters) - Austrian lender Raiffeisen Bank International has boosted its savings target to help offset rising costs from its exposure in Ukraine, Chief Executive Karl Sevelda said in a newspaper interview.
RBI, the central and eastern European arm of unlisted Raiffeisen Zentralbank, had said last September that it aimed to save around 450 million euros ($613 million) by 2016, but it has now increased the goal.
“From today’s perspective we want to save nearly 600 million euros,” he told Der Standard without giving any details on how the extra savings were to be achieved.
Sevelda reiterated that Russia - its single most profitable market - remained core but RBI wanted to reduce its reliance on results there by increasing profits in other markets such as Poland.
“I expect a massive improvement in the earnings situation in Poland. In Romania and the Czech Republic - where we had to write down a misplaced IT investment in 2013 - it will be better this year (and) Croatia, Serbia and Bosnia are over budget so far,” he said.
“Austria too will be better, even if we are suffering from a big bankruptcy or two. We will surely have a loss in Ukraine this year after earning 100 million euros there in 2013.”
Ukraine’s economy has been hit hard by a crisis in its eastern regions where the government is battling an insurgency. Analysts polled by Reuters this month revised their 2014 gross domestic product forecast to a contraction of 5.0-4.8 percent - in line with the latest government forecast - from 4.3-4.4 percent in last month’s poll.
Aided by a 2.8 billion euros rights issue, RBI this month repaid 1.75 billion euros in Austrian state aid it got in 2009 to help it weather the financial crisis.
It has a 9.9 percent core tier one capital ratio under new Basel 3 standards, but Sevelda said this would ultimately rise.
“It is true that we will need higher ratios. The discussion with supervisors is going in the direction of 11, 12 percent,” he said, adding this was good for banks’ creditworthiness but posed “a mammoth task for profitability”.
Sevelda said he was not concerned about stress tests under way for top European banks even though they set tough standards, including an assumption the Russian economy would contract by 18 percent over three years.
“The good thing is that you are really safe if you pass the test. If not, you have to build more equity within nine months, but we would achieve even that,” he said.
Sevelda said he had met new Ukrainian President Petro Poroshenko and hoped to meet Russian President Vladimir Putin when he visits Austria this month.
“Of course Russian democracy is by our standards not comparable to that in the West. But one also has to note that Putin has brought order to the economic and political system,” he said.
“He created for business an environment that makes it possible for western companies to invest and in many areas is more liberal than in some EU countries,” he added, noting for instance Raiffeisen had never had problems repatriating profits.
“As far as politics go, the Russian have different expectations than we do. I think Putin would get elected there even if, for example, there was more media freedom. A politician like him would have little chance of getting elected in central Europe.”
$1 = 0.7345 Euros Reporting by Michael Shields; Editing by Pravin Char