Raiffeisen: ECB Taking Hard Line, Negative For AT1 Calls, Rest Of Curve More Sanguine

Raiffeisen indicated the ECB is set to take a hard line on its Russian business – calls into question the upcoming AT1 call, alongside the one in Jun-25, potentially. The AT1s are both widening fast, but the rest of the curve is more sanguine. Russia was not a “credit positive” for the group so its diminution shouldn’t be too negatively interpreted plus it seems the market was already ascribing little value for this business.

• Raiffeisen’s statement indicates it “expects” the ECB to demand a faster wind-down of its Russian business, with a target to reduce loans by 65% by 2026 (vs. 3Q23), alongside similar for international payments exiting Russia. RBI states this is “far beyond” its own plans.
• RBI has been trying to sell its Russian business for some time and announced a deal with Oleg Deripaska’s company in Dec-23. The situation has come to a head since a cancelled capital raise on 20-Mar, driven by pressure from the US, amongst others. Recent comments around the AGM (4-Apr) indicated it was still positive on the deal.
• Our political risk specialist, Tom Lake, recently indicated he felt that the US would only tolerate such a deal if the EU agreed to it, thereby giving the Biden administration “air cover”. Today’s announcement of the ECB’s hard line intentions appear to erase most hope of this deal going through, at least to its current buyer.
• RBIAV’s imminent AT1 call (15-Jun-24 for RBIAV 8.569 Perp) appears highly unlikely now and that bond’s price has already moved. There’s another AT1 call on 15-Jun-25 (RBIAV 4.5 Perp) and its spread has widened c.50bp already, per our screens. The rest of RBI’s curve is broadly unchanged.