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Does RBI Need a Partner?

Published: July 17, 2013; 22:21 · (Vindobona)

The Austrian “Wiener Zeitung” reports that RBI (Raiffeisenbank International), the second-biggest lender in the CESEE region, has a capital requirement of more than € 5.0bn.

Does RBI Need a Partner? / Picture: © Raiffeisen Bank International AG / S. Klimpt

In the last years, rating agencies often criticized the moderate equity base of Austrian banks. At the moment, the risk-adjusted capital ratio of Erste Group, RZB and UniCredit reaches about 5.5 %. S&P considers a ratio between 7 % and 10 % as adequate. Although the earnings situation is improving, it is not enough to build up the necessary capital, S&P states. As a result, big Austrian banks will have to access the capital market in the medium term, S&P argues. However, the figures published by S&P do not contain the participation capital held by the Austrian state.

At the beginning of July, governor of Austrian National Bank (OeNB) Ewald Nowotny emphasized that the Austrian banking sector needs to be recapitalized. At least, the situation is less tense than four years ago.

Above all, the Raiffeisen sector (whose top banks are RBI and its holding company RZB) needs to improve its equity. Compared to its competitors Erste Group and Bank Austria, RZB/RBI have to improve its equity base most. The equity base is significantly below the industry average. RBI only has a limited capacity to increase capital through new shares as RBI´s core shareholder RZB does not have enough resources at the moment.

One of the main problems is the low profit retention. Analysts often argue that RBI has to reduce its dividend payout ratio. In fact, RBI has paid generous dividends to RZB in the last years. RZB in turn has to pay a substantial part of its net income to its shareholders, the regionally operating “Raiffeisen Landesbanken”.

However, RZB does not want to increase RBI´s capital. In summer 2007, RBI´s share price was about EUR 105. Within six years, RBI´s share price fell to approximately 20% of its top level. Below a share price of at least EUR 40, RZB would be the major loser in case of a capital increase. Nevertheless, RBI´s shareholder urgently needs fresh funds. Thus, a capital increase is not completely excluded.

Moreover, RZB has to repay the state aid, which amounts to € 1.75bn. In 2009, the Austrian state provided about EUR 3.0bn to RZB (Raiffeisen Zentralbank) and Erste Group. Erste Group has decided to increase its capital by €660m in order to repay the participation capital. Until 2018, RZB wants to repay the public participation capital. However, as only Austrian banking group, RZB has no official repayment plan yet.

As a result, the equity situation of RZB/RBI is not satisfying at all. According to market rumors, RZB considers establishing a partnership with a strategic investor. German DZ Bank is said to be such a partner. RZB strictly denies such considerations, however. RBI´s supervisory board president Walter Rothensteiner explained that all reports on a potential partnership with a strategic investor are simply untrue.

Nevertheless, RZB and RBI still do not have a comprehensive strategy regarding the equity situation.