November 14, 2019 / 8:15 AM / a month ago

Impairment charges hit Raiffeisen Bank International third-quarter profit

FILE PHOTO: The logo of Swiss Raiffeisen bank is seen at an office branch in Zurich, Switzerland April 4, 2019. REUTERS/Arnd Wiegmann

VIENNA (Reuters) - Raiffeisen Bank International (RBI) (RBIV.VI) confirmed its medium-term targets on Thursday despite a 27% drop in third-quarter net profit, largely due to higher impairment charges.

The Austrian lender, which operates across eastern Europe from the Czech Republic to Russia and down to the Balkans, said consolidated profit fell to 303 million euros (£261 million) in the three months through September. That was in line with analyst expectations of 305 million, according to a poll published on its website.

RBI reported impairment losses on financial assets of 68 million euros in the quarter, which it said stemmed mainly from recognition of the European Banking Authority’s new default definition and higher provisioning in the Czech Republic and Hungary.

Net interest income — profit from loans minus funding costs — increased to 866 million euros from 856 million in last year’s period. The bank said loan growth in key markets Russia, Slovakia and the Czech Republic was strong.

However, it also said first signs of cooling down of the mortgage and retail lending dynamics were seen in the Czech Republic and Slovakia on the back of regulatory tightening.

In the Czech Republic, where RBI manages around 17 billion euros or around 11% of its assets, the countercyclical capital buffer for banks’ capital reserves rose to 1.5% in July, and will increase to 1.75% from January.

Slovakia, where RBI manages more than 9% of its assets, plans to increase a special banking sector tax to 0.4% from 0.2% and keeping it in effect indefinitely to help boost budget coffers.

RBI’s CET1 ratio stood at 13.7% at end-September after 13.4% at the end of 2018.

The bank confirmed its medium-term targets: 11% return on equity, mid-single-digit loan growth, 13& CET1 ratio, 20-50% dividend payout ratio.

Reporting by Kirsti Knolle; Editing by Muralikumar Anantharaman

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