RBI: Belarusian Sale Talks Ongoing, Failure Is Up To 70bp CET1 Hit

Raiffeisen (RBIAV: Baa2) Interfax in Minsk is reporting that RBI is continuing with the sale process of its Belarusian business, Priorbank, to UAE-based “Soven 1 Holding”. This deal failure could reduce CET1 by up to 70bp (before applying relevant provisioning). With spreads as wide as they are, we feel the market is already discounting much of this, even if the news would be short-term negative.

• This deal was first reported around 14-Feb and, a month later when adverse pressure on the Russian asset-swap deal became overt, we did indicate a failure on the latter would question the former.
• Priorbank reportedly has around EUR700m of loans, so this deal is only <1% of RBI’s balance sheet. At the time of the announcement, RBI indicated a “minimal” impact on CET1 from a c.EUR225m loss-on-sale. The last Priorbank annual report (Dec-22) showed equity of BYN1.3bn – around EUR360m, we calculate. This infers a purchase multiple of just under 0.4x book value.
• Assuming this deal fails, and a total write-off of the Belarusian stake, this is, happily, just 1.8% of book value, albeit there would be an additional EUR450m of FX losses to realise, bringing the total hit to CET1 of 4.1%, reducing CET1 by a gross 70bp (to 16.6%, based on Mar-24 figures).