* Raiffeisen's Polish unit publishes IPO prospectus
* Decision on IPO taken under pressure from regulator
* Market sources are sceptical IPO can be a success
* Book-building starts Thursday, pricing due July 6 (Adds share price range)
By Agnieszka Barteczko and Pawel Sobczak
WARSAW, June 29 (Reuters) - Austria's Raiffeisen Bank International (RBI) faces a struggle to sell a 15 percent stake in its Polish business in an initial public offering (IPO) due to pressure on profitability at the lender, investors and banking sources said.
RBI set out plans on Thursday to sell the stake to meet a deadline set by Poland's financial market regulator, which wants to increase transparency and local ownership of banks.
But the IPO comes at a difficult time for Raiffeisen Bank Polska, also known as Raiffeisen Polbank, as the lender has a portfolio of troublesome Swiss franc mortgages and its net loss rose more than sevenfold in the first quarter.
Two fund managers said that Raiffeisen Polbank's IPO price range has been set at 25.5-28 zlotys per share, both adding that investors will find it too high.
Several fund managers and investment bankers contacted by Reuters earlier on Thursday said they were sceptical about the IPO's success, with some expressing doubts it could be completed at all.
"Raiffeisen does not want to sell the stake at a price lower than book value, while investors are unwilling to pay that much," said a Warsaw-based fund manager.
Another source said investors were unlikely to buy Raiffeisen Polbank's shares if they were priced at more than 0.4 times book value.
Earlier this year, RBI put the book value of its Polish business at about 1.4 billion euros ($1.6 billion), equivalent to 6.2 euros or about 26 zlotys per share.
The shares will be offered only to institutional investors. Book building will start on Thursday and last until July 6, when the share price is due to be published, according to the prospectus for the IPO. Trading on the Warsaw bourse is planned to start on about July 19.
The prospectus lists a number of reasons why the IPO could be scrapped, including insufficient demand for the shares or an unsatisfactory price.
It is not clear how Polish financial regulator KNF would respond to any cancellation of the IPO. The KNF was not immediately available to comment, while RBI and Raiffeisen Polbank both declined to comment on prospects for the IPO.
"If the IPO fails, I'd expect a kind of compromise between RBI and the regulator," said one Poland-based analyst.
RBI previously convinced KNF to allow the IPO to be postponed by a year until June 30, 2017. Earlier this year, RBI sought a further delay, but the KNF refused.
Since buying Polbank and merging it with its local operations, the profitability of Raiffeisen's Polish banking unit, now Poland's 10th lender by assets, has worsened, partly due to a bank asset tax introduced last year, analysts said.
A portfolio of Swiss franc denominated loans has also hurt the lender's profitability and is forcing it to put aside more capital as required by new regulations.
Seeking to make the IPO more attractive, Raiffeisen Polbank began a cost-cutting plan this year, including layoffs and branch closures.
The prospectus showed RBI plans to sign a deal with Citigroup Global Markets Limited that will oblige the latter under certain conditions to buy Raiffeisen Polbank shares that are not purchased by institutional investors.
($1 = 0.8760 euros)
1 Polish zloty = 0.2355 euros Additional reporting and writing by Marcin Goettig in WARSAW, and Francois Murphy and Alexandra Schwarz-Goerlich in VIENNA; Editing by Mark Potter and Adrian Croft