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Banking: Raiffeisen merger raises more questions than answers

The saga of the Austrian Raiffeisen sector’s search for capital will continue this month when shareholders vote on whether to merge its international arm, RBI, with holding company RZB. The current proposal would relieve short-term regulatory pressures, but critics say it fails to address the structural weaknesses of the sector.

Karl Sevelda hand-600
Karl Sevelda, chief executive of RBI, makes little secret of the fact he will be glad
to bring his banking career to an end

On January 24, shareholders of Raiffeisen Bank International will vote on whether or not to merge the Austrian lender with its majority owner, Raiffeisen Zentralbank. 

In essence the transaction, first mooted six years ago, is a relatively simple one. It will combine RBI, a regional lender with assets of €114 billion and operations in 13 countries across central and eastern Europe, with a holding company that also owns a handful of much smaller businesses in Austria and beyond. 

Holders of the 39.2% of RBI that is publicly traded will receive around 35% of the combined bank, with the rest going to the current owners of RZB. If approved, the merger will be put through by the end of the first quarter.

The rationale for the deal is also fairly simple. The main driver is the urgent need to strengthen RZB’s capital base. In August, following the latest round of stress-testing by the European Central Bank, two of RZB’s largest shareholders revealed that its capital ratios were “close to the supervisory intervention trigger”.