November 14, 2018 / 7:34 AM / a month ago

UPDATE 2-Austria's Raiffeisen lowers risk costs, on track to reach 2018 targets

* Q3 consolidated net profit up 29 percent

* Q3 risk costs down 69 percent

* Q3 net interest income up 5.2 percent

* Shares gain as much as 5.7 percent (Adds details, shares, background)

By Kirsti Knolle

VIENNA, Nov 14 (Reuters) - Austrian lender Raiffeisen Bank International (RBI) confirmed its full-year targets on Wednesday after posting a 29 percent jump in its quarterly profit thanks to significantly lower risk costs after the sale of its troublesome Polish unit.

RBI’s shares gained as much as 5.7 percent, as the lender reported 69 percent lower risk costs compared to last year’s period, a 5.2 percent quarterly increase in net interest income, and a further decrease in its non-performing loan ratio to 4.4 percent.

“The main driver for this very good result is the development of risk costs,” said Chief Executive Johann Strobl in a statement. “We are benefiting from a very good economic situation and from our restructuring strategy aimed at preserving the value of non-performing loans.”

RBI, which operates across eastern Europe from the Czech Republic to Russia and down to the Balkans, posted a fully loaded common equity tier 1 (CET 1) ratio of 12.8 percent, unchanged from the previous quarter.

The bank, which occupied a middle ranking in the European Banking Authority’s (EBA) latest stress test, aims for the ratio, the strictest measure of capital, to be at around 13 percent in the medium term.

It has said it expects to significantly exceed the 13 percent mark by year-end.

The sale of its Polish unit, which had struggled to grow because of its small scale, to BNP Paribas earlier this year largely contributed to the reduction in risk costs and will have a positive effect of 85 basis points on the CET 1 ratio in the fourth quarter, the lender said.

Third-quarter consolidated net profit jumped 29 percent to 417 million euros ($471 million), beating analysts forecasts. .

Profit at its Russian business rose 13 percent in the quarter, and its ratio of non-performing loans in the country improved to 4.1 percent from 4.7 percent a year ago.

Russia is an important market for RBI as it has 9 percent of its assets there and sanctions against Russia, which have been applied by the EU and the U.S. over the country’s actions in Ukraine, have affected RBI.

However, only 0.1 percent of its total assets were linked to companies directly affected by sanctions, according to the bank.

RBI said it was sticking to its full-year forecasts.

Its shares traded 4 percent higher at 25.76 euros at 0815 GMT while the European sector index was down 0.8 percent. ($1 = 0.8855 euros) (Reporting by Kirsti Knolle, Editing by Sherry Jacob-Phillips, Louise Heavens and Alexandra Hudson)

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