trending Market Intelligence /marketintelligence/en/news-insights/trending/QLJt2TKAygTNLtD1ZV9GMw2 content esgSubNav
In This List

RBI ready for new acquisitions, may consider higher dividends, CEO says

Podcast

Street Talk Episode 87

Blog

A New Dawn for European Bank M&A Top 5 Trends

Blog

Insight Weekly: US banks' loan growth; record share buybacks; utility M&A outlook

Blog

Banking Essentials Newsletter 2021: December Edition


RBI ready for new acquisitions, may consider higher dividends, CEO says

Austria-based Raiffeisen Bank International AG would be interested in new acquisitions after it completes the sale of its Polish business towards the end of the year, and will keep some capital ready if "the right target comes at the right price," CEO Johann Strobl said Aug. 9.

Given its current strong loan growth, which came in at 6% over the first half of 2018, there is no pressure for RBI to rush into new purchases, the CEO told analysts during a presentation of the bank's second-quarter earnings. However, there are opportunities for consolidation here and there in RBI's markets of operation, Strobl said.

The bank is looking to close the sale of the core operations of Raiffeisen Bank Polska SA to the Polish arm of French group BNP Paribas SA, Bank BGZ BNP Paribas SA, sometime in the fourth quarter. The disposal will result in a €121 million loss, which was the main reason for the decline in RBI's second-quarter group consolidated profit to €357 million, from the prior year's €367 million.

"We have some ideas how to invest the capital which would be freed up after the sale," Strobl said.

Dividends

RBI is close to reaching its 13% medium-term common equity Tier 1 ratio target, with a fully loaded CET1 ratio of 12.8% booked as of June 30. This will give the bank scope to accrete extra capital soon. Asked whether RBI plans to distribute that additional amount to shareholders, Strobl reiterated the group's medium-term dividend policy which calls for the distribution of 20% to 50% of group income to shareholders.

The reason why the payout ratio is so broad is that the group is keeping in mind potential acquisitions, Strobl said.

"[We] want to pay a stable dividend in the next [few] years; [it] could be slightly higher," he said. After a three-year hiatus between 2014 and 2016, RBI paid a dividend of 65 cents per share for 2017. This was lower than the €1.02 per share paid in 2013.

Growth risks

Loan growth, which remained strong across RBI's regions over the second quarter and the first half of the year, may be impaired going forward, especially in key central European markets such as Slovakia and the Czech Republic, due to the tightening of lending rules by local regulators. Central banks across Central and Eastern Europe have become more cautious due to rapidly rising housing prices and are introducing new measures to curb mortgage lending in particular.

"In some markets, we see that the loan growth [...] is high still but we see the concerns of some of the central banks and they find ways to restrict [that growth]," Strobl said. This will surely reduce loan growth rates but it is difficult to estimate whether it would be by a third or more, he said.

"The other negative thing is that price competition will increase," he told analysts. "All of the banks are eager to lend, the capital is there and if the loan growth is restricted by the central banks, we will see more competition."

In some countries, especially in the mortgages, the margins are already very low which also reduces the banks' appetite to pursue strong growth in that segment in the future, Strobl said. Partly, the reduction in growth potential here will be compensated by a shift to the higher-margin, non-secured consumer loans segment, he said.

Over the first half of 2018, volume growth was the main driver for the increase of RBI's net interest income to €1.66 billion from €1.59 billion a year ago. In the medium term, the group is aiming at an average loan growth rate in the medium single-digit range, according to its statement.

Looking further east, Strobl reiterated RBI's commitment to the Russian market despite the depreciation of the ruble, and said there have been no additional provisions for further sanctions on Russia. The U.S. government announced Aug. 8 that it will impose new sanctions on the country in connection to U.K. government claims that Russia was involved in the assassination attempt against former Russian spy Sergei Skripal and his daughter earlier this year.