Raiffeisen share price down, sees second annual loss in 2015

Austrias Raiffeisen Bank projected on Wednesday another full-year loss as the company intends to book the majority of its planned restructuring costs in the year ahead.

Europes second-largest bank confirmed a loss of €493 million for the past year as previously stated in its preliminary report issued on February 9. The figure compares with a profit of €557 million in 2013.

This is the first ever annual loss for the Vienna-based bank. Raiffeisen said that political unrest in Ukraine, changes in Hungarys banking laws and ballooned amount of bad loans in Asia contributed to the negative result. The bank also outlined problems in Russia, Poland and Albania, where the bank took a goodwill impairment charge of €306 million.

Overall the bank took a €1.7-billion hit due to impairment losses in 2014. Although Raiffeisen projected the metric to remain elevated in the year ahead, it said that the number is expected to be below €1.7 billion.

However, it warned that it might report a second full-year loss as it plans to take a large hit related to its restructuring efforts. Raiffeisen expanded its turnaround plan and said it would dispose of €16 billion of risk-weighted assets by 2017.

The bank estimated that it would cost it €550 million to execute the strategy, the majority of which will be booked in 2015. After the completion of the plan, Raiffeisen hopes its cost base to drop 20% compared to 2014. Additionally, the bank aims to deliver a return on equity before tax of around 14%, compared to 0.2% in 2014 and 7.8% in the year before that.

Raiffeisen said it already has started the sell off and is nearing a deal for its Slovenian operations and also its Zuno bank, which offers services over the internet and was launched in 2010 in the country.

Additionally, the bank intends to reduce its Russian RWA by 20% over the next three years and also limit its operations from 65 to 44 cities by the end of 2015.

“The conditions in which we operate have changed massively in the past year. Moreover, a new normality has developed in the banking industry and we will have to adapt to it,” said Chief Executive Karl Sevelda.

Raiffeisen gained 0.61% on Tuesday and closed at €12.28 in Vienna. On Wednesday the stock dropped 1.51% to €12.09 at 10:32 GMT, marking a one-year decrease of 47.00%. The company is valued at €3.57 billion.

According to the Financial Times, the 20 analysts offering 12-month price targets for Raiffeisen have a median target of €14.88, with a high estimate of €27.90 and a low estimate of €10.00. The median estimate represents a 21.18% increase from the last closing price.