February 7, 2018 / 7:47 AM / 8 months ago

UPDATE 2-Raiffeisen expects economic upswing in eastern Europe to boost growth

* Q4 net profit at 206 mln eur vs forecast of 166 mln

* Will announce proposed dividend on March 14

* Shares gain 6 pct, bucking sector trend (Adds shares, Polish business)

VIENNA, Feb 7 (Reuters) - Raiffeisen Bank International said a strengthening economy in its core eastern European market should boost growth in 2018 and confirmed it would pay its first dividend in four years.

The Austrian bank also beat 2017 net profit forecasts on Wednesday, helped by a declining backlog of bad loans, pushing its shares to the top of the European banking index.

Raiffeisen (RBI) said it still plans to float its Polish operations or to sell a majority stake in its core banking operations and would give an update on its Polish business on March 14, the day it releases its annual report.

RBI shares gained as much as 6.4 percent and were up 5.3 percent at 1201 GMT, while the sector index traded 0.6 percent higher.

The Austrian lender’s 2017 net profit more than doubled to 1.12 billion euros ($1.38 billion) from 520 million on a pro-forma basis, topping the 1.08 billion expected by analysts.

The pro-forma figures took account of the performance of its parent Raiffeisen Zentralbank, which RBI merged with last year.

Raiffeisen, which operates across eastern Europe, from the Czech Republic to Russia and down to the Balkans, expects to benefit further from accelerating economic expansion in the region.

“As the economy will give us momentum again this year, we are optimistic about the 2018 fiscal year,” Chief Executive Johann Strobl said in a statement.

Economic growth across much of eastern Europe is helping lenders offset the impact of near-zero borrowing costs, regulatory curbs and damage from foreign-currency mortgages.

The amount of the proposed dividend, the first payout to shareholders since 2013, will be announced on March 14, along with the update on its Polish business, Raiffeisen said.

RBI attempted to sell the Polish unit in 2016 but an agreed deal with Alior Bank failed at the last minute, and an attempt to list the business in 2017 also failed due to lack of investor interest.

BNP Paribas has expressed interest in buying Raiffeisen Bank Polska, two sources told Reuters in November, but Poland’s financial market regulator raised a new obstacle last month by opposing Raiffeisen’s plan to carve out unwanted Swiss franc-denominated mortgages into a new bank.

“We still plan either an IPO or a sale to a majority shareholder, nothing has changed in this regard,” a Raiffeisen spokesman said on Wednesday.

Raiffeisen’s 2017 net interest income - the difference between interest earned and paid out - was nearly flat at 3.21 billion euros on a pro forma basis reflecting the merger with Raiffeisen Zentralbank.

Net provisioning for impairment losses fell to 287 million euros from a pro forma 758 million, while the ratio of non-performing loans fell to 5.7 percent from pro forma 8.7 percent.

Consolidated net profit for the three months to December 31 rose to 206 million euros ($255 million), topping the 166 million expected by analysts in a Reuters poll. ($1 = 0.8096 euros) (Reporting by Kirsti Knolle; editing by Jason Neely and Adrian Croft)

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