The Bonds Of The Third Largest Austrian Bank Are Crashing

Last year Austria's largest bank, Erste Bank, sent shudders of Credit Anstalt through the European Banking System. This year it is Austria's 3rd largest bank that is scaring investors senseless. On the heels of the Swiss National Bank's decision to un-peg from the Euro, Raiffeisen Bank's Swiss-Franc-Denominated mortgage worries have resurfaced (along with Russian/Ukraine writedowns) and nowhere is that more evident than the total collapse of the bank's bonds (from over 95c to 65c today). Even after the ECB Q€ (and some apparent intervention to weaken the Swissy) bonds kept free-falling. Perhaps, The Freedom Party's demands for a bailout will grow louder as the contagion concerns across Europe's banking system explode...


RAFI bonds are collapsing...


As Bloomberg reports, Raiffeisen had a total of 4.3 billion euros of Swiss franc loans outstanding as of September 2014, according to estimates by Moody’s Investors Service.

The largest part of these are in Poland, where the franc has appreciated 17 percent against the zloty since Jan. 14, threatening to push up defaults on the bank’s 2.9 billion euros of mortgages in the Swiss currency.


“There’s a lot of people worried about the bank’s Swiss-franc mortgages in eastern Europe,” said Gregory Turnbull Schwartz, who helps oversee the equivalent of about $82 billion at Kames Capital in Edinburgh and doesn’t hold Raiffeisen bonds.


Raiffeisen said Jan. 15 that it can’t yet forecast the effects of the appreciation of the franc on its asset quality.


The bank “will certainly take one measure or the other in the near future,” Chief Executive Officer Karl Sevelda told reporters on the sidelines of the Euromoney CEE conference in Vienna today. He declined to elaborate. Franc loans in eastern Europe are “not a big problem,” he said.

The plunge appears focused on the potential capital shortfalls and talk of the bank selling its Russian unit - both have been denied... (as Reuters reports),

Raiffeisen Bank International has no desire to exit the Russian market, Chief Executive Karl Sevelda told a newspaper in response to market rumours it could sell its lucrative Russian business.


The Austrian lender has "absolutely no intention to sell our Russian bank", he told Der Standard in a report printed on Tuesday. A bank spokeswoman confirmed his remarks.


He was responding to Russian media reports that Raiffeisen was in talks with Alfa Bank about a potential sale. Sevelda dismissed these "unfounded rumours" and said Raiffeisen had "absolutely no contact" with Alfa Group.


Raiffeisen, which is conducting a strategic review of its portfolio, said this month losses for 2014 could surpass 500 million euros ($561.5 million) if it had to write down goodwill in Russia, its single most profitable market.


The spokeswoman also confirmed the paper's report that Chief Financial Officer Martin Gruell had denied market talk Raiffeisen may need to raise capital. It raised about 2.8 billion euros a year ago via a rights issue.

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