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UPDATE 2-Raiffeisen Zentralbank core tier 1 ratio falls to 9.9 pct
April 11, 2014 / 6:51 AM / 4 years ago

UPDATE 2-Raiffeisen Zentralbank core tier 1 ratio falls to 9.9 pct

* Pretax profit rises 14.3 pct to 1.05 bln euros in 2013

* NPL ratio increases to 10.2 pct

* Proposes unchanged dividend of 36 euros per share (Adds details from annual report)

By Michael Shields

VIENNA, April 11 (Reuters) - Raiffeisen Zentralbank’s core tier 1 capital ratio fell 1 percentage point to 9.9 percent of risk-weighted assets at the end of 2013 under local accounting rules as weak eastern European currencies hit its balance sheet, the Austrian lender said on Friday.

The unlisted parent of Raiffeisen Bank International - the second-biggest lender in central and eastern Europe (CEE) - is one of six Austrian banks to come under direct supervision of the European Central Bank later this year.

Announcing its 2013 annual results, it proposed keeping its dividend unchanged at 36 euros per share.

“Core capital declined by 311 million euros ($432 million) to 9.695 billion due mainly to the negative exchange-rate trend of the Russian rouble, the Ukrainian hryvnia, the Czech koruna and the Polish zloty,” RZB said in its 2013 annual report.

The trend continued into 2014 as the political crisis in Ukraine - where Raiffeisen is a top-five bank - heaped pressure on the hryvnia and rouble, undermining the value of local assets when expressed in euros.

“At the time the year-end report was being finalised (in early 2014), the development of all currencies relevant to RZB resulted in a reduction in its tier 1 ratio (CET1) of roughly 25 basis points,” RZB’s annual report said.

Raiffeisen Bank International had already flagged the issue when it reported its 2013 results last month. 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.

The impact of eastern European currencies highlights risks the group faces in a region plunged into uncertainty by Russia’s annexation of the Crimean peninsula, triggering the worst East-West conflict since the Cold War.

Despite the threat of Western sanctions against Moscow, Raiffeisen remains committed to its highly profitable Russian business, RBI Chief Executive Karl Sevelda said last month. He sought to play down potential problems in Ukraine.

But it was so concerned about the crisis in Ukraine that it said previous targets for lending and risk provisioning now depended on how events in the region play out.

Parent RZB’s 2013 profit before tax rose 14.3 percent to 1.05 billion euros as its operating result rose 26 percent. Net provisioning for impairment losses rose 16 percent to 1.2 billion euros.

Its ratio of non-performing loans (NPL) rose to 10.2 percent of its loan book from 9.7 percent in 2012, while its NPL coverage ratio fell 3.8 percentage points to 63.1 percent.

$1 = 0.7204 Euros Reporting by Michael Shields; editing by Eric Auchard and Keiron Henderson

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