Raiffeisen hit by merger talk

25/02/2010

Shares in Raiffeisen International plunged more than 12 percent after the Austrian lender said it was considering a merger with Raiffeisen Zentralbank Oesterreich (“RZB”), its unlisted mutually owned parent. Analysts suggest the potential move reflected RZB’s constraints in raising fresh capital, and threatened to undermine Raiffeisen International’s reputation as a lender focused purely on central and eastern Europe.

Raiffeisen International, a separately-listed 17-country network of non-Austrian banks and financial services, has published preliminary full-year results but failed to placate market fears about its future growth prospects. Its full-year net profit declined from €982 million to €212 million in 2009, as provisioning for bad loans jumped from €780 million to €1.74 billion. After rapid expansion in eastern Europe, including acquisitions in Ukraine and Russia, its market capitalisation shot up from €4.6 billion to €15 billion. When the financial crisis hit, these emerging European operations suffered badly, as currencies weakened and non-performing loans piled up. 

RZB, owned by a network of eight regional Austrian banks, has appointed external consultants to explore several strategic options, of which a merger of the two companies was one. Sources close to the banks denied that a merger would be to the detriment of Raiffeisen International, claiming the impact of the financial crisis on eastern Europe had shown the need to give the bank a broader footing.

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