(Adds CFO on non-performing loans, more analysts, detail)
By Boris Groendahl
VIENNA, Aug 7 (Reuters) - Austria's Raiffeisen International
<RIBH.VI> bank beat forecasts with a 49 percent rise in
second-quarter net profit on Thursday, boosted by strong revenue
growth in Russia and flattered by a non-recurring gain on
interest rate swaps.
Net profit after minorities rose to 311 million euros ($483
million), way ahead of an average forecast of 283 million euros
in a Reuters poll of analysts, some of whom had not anticipated
the extent of the 44 million euro gain on the swaps.
Shares in Raiffeisen, emerging Europe's number three lender,
topped the list of gainers in the DJ Stoxx European bank index
<.SX7P>, up as much as 5 percent to a seven-week high of 88.50
euros.
"Every line of the P&L is above expectations," said Erste
Bank analyst Guenter Hohberger. "It's a very good result."
Banks in the former Communist bloc are enjoying rising
profits due to a rapid expansion of credit volumes and have so
far largely escaped the writedowns their western peers have been
forced to make.
Belgium's KBC <KBC.BR> on Thursday reported an 8 percent
rise in underlying net profit in eastern Europe that helped
partly offset a profit decline due to domestic writedowns.
Raiffeisen recorded a 37-percent rise in net interest
income, its main revenue source, which once more grew fastest in
the former Soviet Union, where it is the biggest foreign bank.
But investors monitor asset quality and cost expansion
closely. Austria's Erste Bank <ERST.VI>, the second biggest
eastern European lender, spooked investors last week when it
said risk provisions and costs would rise faster than thought.
While Raiffeisen's loan loss provisions were slightly lower
than expected, some risk-wary investors were concerned about an
increase of non-performing loans to 2.4 percent of total loans,
and by a coverage ratio that had dropped to 96 percent.
"The fly in the ointment clearly is the development of the
non-performing loans," said Robert Hoerberg of Landsbanki
Kepler. "Some say that they are setting aside too little for
risky loans."
Hoerberg also said Raiffeisen needed to do more to attract
deposits to underpin the loan growth as the gap between loan and
deposit growth widened further in the second quarter.
Chief Financial Officer Martin Gruell told journalists that
he felt comfortable with Raiffeisen's coverage ratio even if it
were to drop further, which he said he could not rule out. He
blamed part of the rise in bad loans to mere currency effects.
CAUTIOUS GOAL
Fee and commission income as well as trading income were
also higher than expected, and analysts said they therefore
could live with a 40-percent rise in administrative costs,
mainly caused by the group's aggressive branch expansion in
Russia.
Chief Executive Herbert Stepic reiterated his goal of 1
billion euros of net profit in the full year, seen as overly
cautious by some analysts after Raiffeisen reached 57 percent of
this already in the first half.
"Speculation on a potential increase in net profit guidance
at the Capital Markets Day in September should provide support
for a further share price appreciation," Sal. Oppenheim said in
a note to clients.
Investors are currently paying around 2.2 times book value
for Raiffeisen's shares, one of the highest values among large
European banks thanks to its exposure to the fast growing
banking market in emerging Europe.
CEO Stepic said he did not need acquisitions to grow, but
would always keep his eyes open. He said Raiffeisen was not
interested in the Slovak and Serb units put up for sale by
Hungary's OTP <OTPB.BU>.
(Editing by Louise Ireland and Rosalba O'Brien)
