By Geoffrey Smith
Investing.com -- Raiffeisen Bank International (VIE:RBIV) (OTC:RAIFY) stock surged to its highest in four months after its central and eastern European banking business showed remarkable resilience in the second quarter.
The Austria-based bank, which had earned most of its money in Russia until the start of this year, raised its forecasts for the year substantially on Tuesday as higher interest rates and foreign exchange volatility across the rest of the region turbocharged the outlook for its core lending and commission-based businesses. Outside of Russia and Belarus, it now expects net interest income to rise by 20% and commission income to rise by 10% this year, a testimony to the sharp tightening of monetary policy by central banks across the region.
The bank also now expects consolidated return on equity of 15% this year, having earlier guided for a range of 8-10%. That suggests that it doesn't expect any more big non-cash charges from the war in Ukraine, which forced it to scrap its 2021 dividend, make substantial write-downs and heavily mark up its risk weightings three months ago.
The invasion had represented a disastrous start to the year for Raiffeisen, which has the largest retail and commercial operations of any foreign bank operating in Russia. It repeated that 'all options remain on the table' for its operations there. Societe Generale (OTC:SCGLY), one of its biggest European rivals in Russia, has already agreed to sell its business there, while UniCredit (BIT:CRDI) is looking for a buyer for its operations.
However, the remarkable performance of the ruble in the second quarter has allowed Raiffeisen to reverse some of the non-cash hits it booked three months earlier. The core tier 1 capital ratio, a measure of financial strength that had fallen dangerously in March, rebounded to 13.4% from 13.1%. RBI aims to keep the CET1 ratio over 13%, giving it a cushion of some 60 basis points over the regulatory minimum.
Raiffeisen stock in Vienna rose as much as 6% in Vienna on Tuesday before paring gains to trade up 5.0% at 6 AM ET (1000 GMT), still the best performing bank stock in Europe on the day. The stock is still trading at less than half its prewar value, however.