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Banking: RZB/Raiffeisen merger plans shock investors

Bank chiefs deny overwhelming problems; Merger aimed to create stronger institution


Herbet Stepic: confident of the strength of the business model 

Herbet Stepic: confident of the strength of the business model

After one of the most challenging years for the Austrian banking sector news that Raiffeisen Zentralbank (RZB) is merging with its central and eastern European banking arm, Raiffeisen International, has set off alarm bells.

Shares in Raiffeisen International, which is 70% owned by RZB and was spun out of the group in 2005, fell by as much as 20% in the space of a few days in late March on the back of fevered speculation about the underlying reasons for the merger and a marked deterioration in Raiffeisen International’s financial results in 2009.

On a provisional basis net profits at Raiffeisen International fell by almost 80% on 2008 to €212 million. A sharp rise in bad-debt provisioning was the primary cause of the slump in profitability, climbing 122% to €1.74 billion, compared with €780 million in 2008.

With sentiment towards the Austrian banking sector still shaky after the emergency nationalization of Hypo-Alpe-Adria Bank at the end of 2009 there are concerns that after years of plenty for the sector, far tougher times lie ahead.

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