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RBI will stick with IPO plan for Polish unit, CEO says

Raiffeisen Bank International AG will not veer off its plan to restructure and then list 15% of its Raiffeisen Bank Polska SA subsidiary, but there are still no guarantees that an IPO of the unit would succeed, RBI CEO Johann Strobl told analysts Aug. 10.

RBI committed to the partial IPO in 2012 to get the approval of Poland's KNF financial market watchdog to acquire what was then Polbank. The combined Polish unit was originally supposed to float on the Warsaw Stock Exchange by June 30, 2016, but the deadline was postponed to the end of the year as RBI was looking to sell the whole business to a listed Polish lender. After a sale to Alior Bank SA failed, the regulator set a new deadline for an IPO by June 30, 2017.

However, that IPO attempt failed because of low investor interest at the price RBI was hoping to get to limit its loss on the stake sale, and at the beginning of August, the KNF extended the deadline for the IPO until May 15, 2018.

It remains to be seen whether the new deadline will offer enough time to get Raiffeisen Bank Polska in shape for a successful listing, Strobl told analysts after RBI reported second-quarter consolidated profit of €367 million, up from €96 million in the year-ago period.

"What we can say is we will do our best to convince the market that the bank is improving," he said, adding in response to a question about a fresh sale attempt that RBI has no intention to change the current strategy.

Cost restructuring tough but achievable

He said, however, that to achieve a €50 million cost reduction target by the end of 2019 will require "really a big effort" at what is a relatively small entity and that shortening the timeline would be very difficult to expect.

"It is a rather difficult task, it's challenging, but I believe that the management can achieve it," he said, noting that the closure of 62 branches in the first half was a big achievement in the transformation of the Polish business.

General administrative expenses in Poland were down 7% year over year in the first half to €131 million, although moving the business into the Central European division — it had been classed as noncore at 2016-end — accounted for the bulk of a €72 million rise in Central Europe personnel costs, to €228 million.

Strobl said that in addition to cutting costs, Raiffeisen Bank Polska will also need to generate further loan growth, having boosted loans and advances to customers to €8.33 billion as of June-end, from €8.07 billion at the end of 2016. Net interest income from Poland was €131 million, up from €111 million in the first half of 2016.

"We are committed to invest in digital, in internet sales channels and in some other improvements of our sales channels. Again [there is] progress but it will not come overnight. Will this be enough for a successful IPO next year, we do not know. The one is what we will deliver and what will be visible, the other is how investors will see our progress," the CEO said, reiterating that RBI will not be willing to list the unit "at any cost."

Swiss mortgages

A key issue with the attractiveness of the Polish unit is its Swiss franc-denominated mortgage book, as the Polish government is looking to change legislation on foreign-currency loans in a push for them to be converted into zlotys. Banks are likely to suffer large losses as a result.

RBI hopes for clarity as soon as possible with more details expected in the middle to the end of September, Strobl told analysts.

"I hope that economically the outcome [would be] reasonable. Economically for me would mean it should encourage people to really move out of the Swiss franc and the costs for banks should be reasonable as of now," he said.

He said it remains difficult to convince customers to convert their Swiss franc loans, although in terms of foreign-currency rates, now would be a good point.

"Everything should direct the customers ... to now start conversion, but when there are some big ideas in the room they are not focused on the market," Strobl noted.