Raiffeisen sees no big profit hit

By Boris Groendahl

VIENNA (Reuters) - Austria's Raiffeisen Zentralbank, which includes listed Raiffeisen International (RIBH.VI: Quote, Profile, Research, Stock Buzz), is on course to meet its forecasts this year despite a global credit crunch, finance chief Patrick Butler said on Monday.

Butler acknowledged some economic imbalances in the region which were a potential risk, but said parallels drawn to Asia before the 1997 crisis were "ill-conceived" because the transformational process in central Europe was different.

"We haven't changed our forecasts," Butler said at the Reuters Central European Investment Summit in Vienna. "We constantly review our strategy and our portfolio and certainly there are cases where we will need to mark to market."

"But certainly we have not experienced any massive setbacks through this. At the moment, we're well on course to perform as anticipated as a group," Butler said.

RZB's Raiffeisen International is eastern Europe's third-largest lender after UniCredit's (CRDI.MI: Quote, Profile, Research, Stock Buzz) Bank Austria BACA.VI and Erste Bank (ERST.VI: Quote, Profile, Research, Stock Buzz). It is active in 16 countries, its main growth assets are in Russia and Ukraine.

Raiffeisen International has forecast at least 750 million euros ($1.07 billion) in net profit this year, a number that most analysts view as conservative.

The bank raised 1.2 billion euros this month in a rights issue that started only days after the impact of the liquidity crisis hit Britain's Northern Rock NRK.L and shook Europe's banking sector.

Credit volumes are growing by more than 20 percent throughout the region, and Butler said Raiffeisen still saw big opportunities for credit growth in a region still enormously underbanked compared to western Europe.

"These are not in general assets banks should be concerned about taking on," Butler said. "This is good quality business and we have very tight lending standards."

"ILL-CONCEIVED COMPARISON"

Widening current account deficits on the Balkans and in the Baltics, together with large borrowing in foreign currencies in those countries have prompted comparisons to Thailand and Malaysia before those countries went into crisis in 1997.

Butler said differences included that central European current account deficits were covered by long-term foreign investment rather than short-term money flowing into the region as it did in pre-crisis Asia.

"I also think this is a more deep-seated transformational process that is going on here. I think a better comparison would be Ireland just having joined the EU, with major infrastructure projects that required a sudden influx of private investment."

Central and eastern Europe has largely escaped the crisis, apart from a liquidity crunch that could be seen at some Russian and Kazakh banks, Butler said. The crunch may have put a lid on acquisition prices there, he said.

"There was at one stage at the end of last year a kind of euphoria creeping in, which was leading to some very high multiples being paid... particular, frankly for banks," he said.  Continued...