Raiffeisen says uncertainty still high in Ukraine

NEW YORK, USA -- Emerging Europe's No. 2 bank Raiffeisen International will cut more jobs in Ukraine, the bank's biggest "sore spot" in Eastern Europe, as political uncertainty runs high in the country, Chief Financial Officer Martin Gruell said.

However, Raiffeisen does not expect a country default or a further decline of the Ukrainian currency hryvnia anymore, and therefore sees a rather stable development of its business, Gruell told journalists at an investor conference.

"Ukraine is the sore spot," Gruell said about the country, where Raiffeisen owns the second-biggest lender, Raiffeisen Bank Aval. However, "the situation is rather stable now, even though uncertainty, especially politically, is high," he said.

Gruell said the rise of bad debt in Ukraine was now slowing down, provided that the currency did not depreciate further. "The big caveat is that if there is another big devaluation, nothing is going to be stable anymore," he said.

Raiffeisen owns banks in 17 countries across the former Communist part of Europe, a region hit hard by the financial crisis. In the third quarter, its units in Ukraine and Hungary were the main loss-makers for the bank.

"There will be more job cuts in Ukraine," Gruell said, declining to say how many. Raiffeisen said earlier this year it would slash its payroll of 18,000 by around 10 percent. Those job cuts are not concluded yet, Gruell said.

Ukraine's economy, one of the worst-performing in Europe, is expected to shrink by up to 15 percent this year after steel and chemical exports slumped. The currency lost more than 60 percent of its value in a year, which in turn shook the banking system.

The International Monetary Fund, keeping Ukraine afloat with emergency loans, last month said it would resume work with Ukraine only after presidential elections due Jan. 17, after a public wages hike pushed its $16.4 billion bailout "off-track."

UniCredit , BNP Paribas and OTP are the other key foreign bank owners in Ukraine. Under an IMF-sponsored deal, they pledged to stay in the country and keep their units capitalised and funded to avoid a banking crisis.

Gruell said visibility in Ukraine was now better for the bank's retail business, but that the bank could still be surprised at any time by sudden corporate defaults.

Gruell reiterated Raiffeisen had no need to raise capital after the bank received a 1.25 billion euro cash infusion from its parent RZB this summer, which left its core Tier 1 capital ratio at 8.7 percent at the end of September.

"Look at our numbers. We feel pretty comfortable with this level," Gruell said. "There is also no particularly dynamic (asset) growth" which would lead to higher capital needs, he added.

Austrian peer Erste Group Bank last month raised 1.74 billion euros in a rights issue.

Source: ForexYard