Raiffeisen International, the Austrian group with an extensive Russian and Eastern Europe network, has bolstered its core capital by raising €1.25bn, as banks in the region get ready for the next wave of bad debt due to hit next month.
The group announced today itwill issue €600m in participation rights and €650m in hybrid Tier 1 capital.
Both of these issuances will be fully subscribed by its parent Raiffeisen Zentralbank Österreich AG (RZB), which owns about 70% of Raiffeisen’s common stock.
For both issuances, the repayment is limited to the nominal amount issued.
In a statement, the bank said the proceeds serve “above all to further strengthen the capital base of Raiffeisen International and its network banks.”
The move by the Austrian group comes as other banks with heavy exposure to Russia and Eastern Europe attempt to baten down the hatches against a second wave of bad debt, which is expected to peak in one month’s time.
Bad loan forecasts for the Russian banking sector by the end of this year range from the Central bank’s official estimate of about 12% to Standard and Poor’s who say it could soar as high as 35%.
Raiffeisen has the biggest foreign-owned bank in Russia and the second largest bank in Ukraine, along with a network across the former Soviet Union.