Raiffeisen profit down 25% but bank raises dividend

The Austrian bank active in Central and Eastern Europe raised its dividend from 2011, despite reporting a sharp drop in profit

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Raiffesen Bank International (RBI), which vies with Austrian co-national Erste Bank for the second place in Central and Eastern Europe after biggest lender UniCredit, said its pre-tax profit for last year was 1.03 billion euros ($1.37 billion), 25% lower than in 2011.

Consolidated profit was 725 million euros, also around 25% lower than in 2011, the bank said in a statement.

"Despite challenging conditions – alongside the muted macroeconomic environment, our focus lay on achieving the capital ratio set by the European Banking Authority – we have achieved a very respectable result,” Herbert Stepic, CEO of RBI, said in a statement.

“We have attained two important objectives: the clear increase in the core tier 1 ratio and the stabilization of our costs, excluding Polbank.”

For the 2012 financial year, the Management Board will propose to the Annual General Meeting the distribution of a dividend of 1.17 euros per share, up from the 1.05 euros per share in 2011, the bank said.

A RBI spokeswoman told Emerging Markets that, besides the “respectable” profit, an additional consideration behind the dividend increase was the desire to pass on part of 272 million euros in extraordinary gains in the first quarter directly to shareholders.

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In the first quarter, sales of the Group head office securities portfolio brought pre-tax earnings of 159 million euros and a profit before tax of 113 million euros was earned from the buyback of some hybrid bonds, according to the bank’s statement.

“We have a CT1 [core tier 1 capital] ratio of 10.7%, which is significantly above the 9% required by EBA - so we feel comfortably capitalized,” the spokeswoman added.

The ratio of non-performing loans increased by 1.2 percentage points to 9.8% at the end of last year from the end of 2011.

Customer loans increased by 2.2% to 83.3 billion euros, while customer deposits fell by 0.7% to 66.3 billion.

Net fee and commission income was approximately flat at 1.5 billion euros, while net trading income fell to 215 million euros from 363 million.