UPDATE 2-Profit jump for Austria’s Raiffeisen eases investors’ fears over Russia


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* Q1 net profit at 399 mln eur vs forecast of 244 mln

* NPL ratio declines to 5.4 percent

* Fully loaded CET1 ratio at 12.8 percent

* RBI shares gain as much as 6.7 percent (Recasts, adds details on Russia, loan provisions, costs, trader)

By Kirsti Knolle

VIENNA, May 15 (Reuters) – Austrian lender Raiffeisen Bank International posted a surprise 81 percent jump in quarterly profit, including strong growth in Russia, reassuring investors wary about the effect of additional sanctions on its key market.

Raiffeisen (RBI) shares on Tuesday jumped as much as 6.7 percent, making it lead gainer on the European sector index , after it reported a consolidated net profit of 399 million euros ($476 million) for the three months through March.

The lender also cut its exposure to non-performing loans and reported strict cost management.

The bank, which operates across eastern Europe from the Czech Republic to Russia and down to the Balkans, went through a radical restructuring in the wake of the financial crisis and is still vulnerable to political and economic uncertainties.

Net profit in Russia, the market where RBI generates the largest chunk of its profit, increased to 136 million euros in the first quarter from 86 million the previous quarter.

RBI’s shares briefly dropped 15 percent last month after the United States announced a ratcheting up of sanctions on Russia. They recouped part of their losses after the bank said only 0.1 percent of its total assets were linked to companies directly affected by the sanctions, but still trade roughly 2 euros lower.

“We remain committed to the Russian market and high quality customer service as well as further development of our physical presence and digital capabilities,” RBI said in an investor presentation.

Raiffeisen’s backlog of bad loans declined further. The non-performing loan (NPL) ratio improved 0.3 percentage points to 5.4 percent of total loans at the end of March. The bank said it will reduce the ratio further in the medium term.

It released loan loss provisions of 83 million euros, 21 million of which in Russia in the first quarter, it said.

RBI posted a fully loaded common equity tier 1 (CET 1) ratio, a measure of capital strength, of 12.8 percent and said it still aimed for the ratio to be around 13 percent in the medium term.

Staff expenses and other administration expenses were flat compared to last year’s period.

“The fact that Raiffeisen’s costs remained stable is very important,” said one trader. “It shows, that at a time when staff costs rise all over eastern Europe, Raiffeisen keeps costs under control.”

The lender’s shares traded 3.3 percent higher at 29.73 euros at 1033 GMT after temporarily reaching 30.70 euros in earlier trade. The European banking index was flat.

$1 = 0.8391 euros
Reporting by Kirsti Knolle; Editing by Mark Potter and
Alexandra Hudson


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