August 9, 2018 / 6:42 AM / 6 days ago

UPDATE 2-Russia sanctions punish Raiffeisen shares despite strong Q2 profit

* Q2 net profit well above analysts’ forecasts

* Bank’s markets across eastern Europe show solid growth

* U.S. plans sanctions against Russia, its strongest market (Recasts with share price, sanctions)

VIENNA, Aug 9 (Reuters) - Washington’s announcement of new sanctions against Russia overshadowed better-than-expected net profit at Austria’s Raiffeisen Bank International on Thursday, sending its shares down as much as 6 percent despite its solid earnings.

The bank, which operates across eastern Europe, has said it is committed to staying in Russia, which remains its most profitable market by far despite the rouble’s continued slide.

Washington said on Wednesday it would impose fresh sanctions on sensitive Russian national-security controlled goods by the end of August after it determined that Moscow had used a nerve agent against a former Russian spy and his daughter in Britain. Details of the new sanctions remain unclear.

Despite strong second-quarter results published on Thursday, Raiffeisen’s shares took a beating, falling as much as 6.1 percent. By 0917 GMT they were down 4.6 percent at 26.79 euros.

“We do not want to comment on the share price. Those are decisions for our shareholders,” Raiffeisen Bank International (RBI) Chief Executive Johann Strobl told a news conference. “If you look at our results, they are very solid.”

Net interest income increased 5 percent in the three months from April to June compared with a year earlier, dividend income jumped by 30 million euros ($34.8 million) and impairment losses on financial assets reduced to zero.

Those all helped net profit to fall just 2.9 percent to 357 million euros, despite being weighed down by a previously announced one-off hit of 121 million euros linked to the sale of its Polish unit, Raiffeisen Bank Polska (IPO-RBP.WA).

That was well above the average estimate of 264 million euros in a Reuters poll of analysts.

The bank confirmed its outlook while improving one element of it — impairment losses on financial assets, or risk costs — which are now expected to be lower than last year’s rather than roughly the same.

That follows two quarters of good news on loan-loss provisioning, after a net release in the first quarter and zero impairment losses this quarter.

Sanctions on Russia have not had a significant direct effect on RBI, but it said the rouble’s slide has had a “limited impact” on its common equity tier 1 ratio, a measure of capital strength. That stood at 12.8 percent of risk-weighted assets, in line with its medium-term target of around 13 percent.

“It is too soon to say which companies or people could be affected by these sanctions. When that stage is reached we will deal with that and act accordingly,” Strobl said of the latest U.S. announcement. (Reporting by Francois Murphy and Alexandra Schwarz-Goerlich; Editing by Michael Shields and Adrian Croft)

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