RBI AT1/Deal Cancellations: Could Miss Jun-24 AT1 Call Now

Raiffeisen cancelled AT1 deal following US intervention over Strabag-Deripaska deal. RBI could miss Jun-24 AT1 call now. Some thoughts (RBI AV):

• In Dec-23, RBI agreed to sell its Russian business to Deripaska for around EUR1.5bn, in exchange for his stake in Strabag. RBI is also trying to sell its business in Belarus (ann. 14-Feb). The Russia deal would have improved CET1 by around 120bp, we estimated.
• The US, following a visit (early-March) from a US Treasury official over sanctions monitoring, is being reported as pressuring RBI to drop the deal, using the threat of “penalties” against RBI. The US DoJ and OFAC are both parties to the pressure, according to Reuters.
• The effects here are twofold: firstly, it calls into question the Belarus sale (to UAE-based “Soven 1 Holding”, which would have also helped cleanse RBI of sanctioned assets. Secondly, pulling the AT1 deal is obviously negative for RBI’s credit stack – it has AT1 calls at 15-Jun-24 (EUR650m) alongside another at Jun-25; these are trading down 1-2 points, the former streaming at 84.43. No European bank has missed a call since the CS event a year ago, but this must now be viewed as a real risk.