Raiffeisen Bank: Central Europe gloom could ease

Raiffeisen Bank International (RBI) of Austria reported on Tuesday that net profit slumped by 71.0 percent in the first quarter of the year because previous results had been boosted by special factors. But the bank, which has big interests in eastern and central Europe, also said that business conditions in several countries in that region remain "strained". Weak economic activity in the eurozone had weighed on markets in central Europe, the bank said, but also advised that it expected to see a "progressive recovery" in the second half of the year and consequently an increase in the demand for loans. The bank increased its provisions for bad loans in the region by about 44.0 percent to 220 million euros ($284 million). The bank said that it reserved the option of making a capital increase, depending on trends on financial markets. Net profit for the quarter was 157 million euros from 541 million euros in the first quarter of last year. Analysts had broadly expected the fall because the comparable figure last year had been boosted by exceptional gains from the sale of bonds. However, operating profit fell by 5.2 percent to 514 million euros. The bank said that it had reduced losses in Hungary, and that the integration of Polish bank Polbank, planned for the first half of next year, was on track. RBI intends to economise 50-60 million euros by 2015 by means of rationalising its cost base. For the whole of 2013, the bank said it expected risk provision to be little changed from the level last year. In the first quarter, the ratio of core shareholder funds fell slightly to 10.6 percent of weighted risks underwritten from 10.7 percent at the end of 2012.