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VIENNA-- Raiffeisen Bank International AG said Thursday that falling costs helped lift second-quarter net profit, allowing it to confirm its outlook despite mounting tensions in Russian and Ukraine.
Raiffeisen, Austria's third-largest bank by assets, is a key player in central and Eastern Europe and ranks among Russia's top-10 lenders.
The bank said it remains committed to its Russian business and that the impact from sanctions should be small, given the short-term nature of its activities there.
Second-quarter net profit increased to EUR183 million ($243.3 million) from EUR120 million a year earlier, against analysts forecasts that it would fall to EUR118 million.
The continuing turmoil in Ukraine, where currency losses reduced its trading income, prompted the bank to increase provisions against bad loans by 15% to EUR287 million from EUR249 million in the second quarter a year earlier.
Raffeisen ranks itself as Ukraine's fifth-largest bank, accounting for around 2.4% of the bank's total assets,
Chief Executive Karl Sevelda described the first half as "intense" and characterized by the conflict between Russia and Ukraine, as well as regulatory issues such as the European Central Bank's asset-quality review.
"Despite these difficult circumstances we managed to achieve a solid semi-annual result," he said, adding that the bank is "in principle well positioned."
"We still consider Russia to be an attractive banking market in the medium and long-term and therefore we will stay in this market," Mr. Sevelda added.
The chief executive said that the bank doesn't have any specific plans to sell its Ukrainian or Hungarian business at the moment, although both subsidiaries are under "constant review." It can't be excluded "that one day [the businesses in] these two countries will be put up for sale," Mr. Sevelda said.
Earlier this summer, the Hungarian parliament passed legislation that could force banks to repay customers certain fees and interest payments on foreign currency loans. Raiffeisen, similar to other Austrian banks, is heavily engaged in the Central European country.
While it is not yet possible to predict how much the legislation will cost Raiffeisen, its Chief Risk Officer Johann Strobl said that it could be between EUR120 million and EUR160 million.
"Following the discussion [in Hungary], we must assume that [the costs] will be in the upper end," Mr. Strobl said.
Several banks operating in Hungary, such as OTP Bank Nyrt., have reported heavy losses because of the new legislation. The ratings firm Moody's warned that the government's steps could hurt the banking system.
In the second quarter, administrative expenses fell 7.8% to EUR764 million from EUR829 million, Raiffeisen said, largely because of falling currency values in Russia and Ukraine. Net interest income increased slightly to EUR975 million up from EUR972 million a year earlier.
Raiffeisen expects overall costs to be lower this year than in 2013 and that loans and advances to customers will be unchanged from last year. Net provisions are forecast at between EUR1.30 billion and EUR1.40 billion. The ECB's asset quality review and a further deterioration of the situation in Ukraine and Russia could impact those figures, Raiffeisen said.
In recent years Raiffeisen has been battling to recover from the financial crisis, when it needed a state bailout of EUR1.75 billion and a EUR500 million cash injection from private investors. Most of that money has now been repaid.
However, Mr. Sevelda said that he had no doubt that Raiffeisen would pass the stress tests euro-zone banks are undergoing as part of the new ECB's bank supervision.
VIENNA-- Raiffeisen Bank International AG said Thursday that falling costs helped lift second-quarter net profit, allowing it to confirm its outlook despite mounting tensions in Russian and Ukraine.
Raiffeisen, Austria's third-largest bank by assets, is a key player in central and Eastern Europe and ranks among Russia's top-10 lenders.
The bank said it remains committed to its Russian business and that the impact from sanctions should be small, given the short-term nature of its activities there.
Second-quarter net profit increased to EUR183 million ($243.3 million) from EUR120 million a year earlier, against analysts forecasts that it would fall to EUR118 million.
The continuing turmoil in Ukraine, where currency losses reduced its trading income, prompted the bank to increase provisions against bad loans by 15% to EUR287 million from EUR249 million in the second quarter a year earlier.
Raffeisen ranks itself as Ukraine's fifth-largest bank, accounting for around 2.4% of the bank's total assets,
Chief Executive Karl Sevelda described the first half as "intense" and characterized by the conflict between Russia and Ukraine, as well as regulatory issues such as the European Central Bank's asset-quality review.
"Despite these difficult circumstances we managed to achieve a solid semi-annual result," he said, adding that the bank is "in principle well positioned."
"We still consider Russia to be an attractive banking market in the medium and long-term and therefore we will stay in this market," Mr. Sevelda added.
The chief executive said that the bank doesn't have any specific plans to sell its Ukrainian or Hungarian business at the moment, although both subsidiaries are under "constant review." It can't be excluded "that one day [the businesses in] these two countries will be put up for sale," Mr. Sevelda said.
Earlier this summer, the Hungarian parliament passed legislation that could force banks to repay customers certain fees and interest payments on foreign currency loans. Raiffeisen, similar to other Austrian banks, is heavily engaged in the Central European country.
While it is not yet possible to predict how much the legislation will cost Raiffeisen, its Chief Risk Officer Johann Strobl said that it could be between EUR120 million and EUR160 million.
"Following the discussion [in Hungary], we must assume that [the costs] will be in the upper end," Mr. Strobl said.
Several banks operating in Hungary, such as OTP Bank Nyrt., have reported heavy losses because of the new legislation. The ratings firm Moody's warned that the government's steps could hurt the banking system.
In the second quarter, administrative expenses fell 7.8% to EUR764 million from EUR829 million, Raiffeisen said, largely because of falling currency values in Russia and Ukraine. Net interest income increased slightly to EUR975 million up from EUR972 million a year earlier.
Raiffeisen expects overall costs to be lower this year than in 2013 and that loans and advances to customers will be unchanged from last year. Net provisions are forecast at between EUR1.30 billion and EUR1.40 billion. The ECB's asset quality review and a further deterioration of the situation in Ukraine and Russia could impact those figures, Raiffeisen said.
In recent years Raiffeisen has been battling to recover from the financial crisis, when it needed a state bailout of EUR1.75 billion and a EUR500 million cash injection from private investors. Most of that money has now been repaid.
However, Mr. Sevelda said that he had no doubt that Raiffeisen would pass the stress tests euro-zone banks are undergoing as part of the new ECB's bank supervision.
