Market gives thumbs-down to Raiffeisen merger plans

VIENNA (BestGrowthStock) – Investors dumped Raiffeisen International (RIBH.VI: ) shares on Tuesday after news that it was considering merging with its parent in a deal to create a slower-growing, less profitable bank.

Shares in emerging Europe’s second-biggest lender traded down 8 percent at 36.56 euros by 0847 GMT after dropping as much as 9.4 percent, the highest daily decline since March 2009 following Raiffeisen’s surprise statement late on Monday.

Raiffeisen’s 70 percent parent, cooperative bank RZB said it was considering merging with Raiffeisen International in a deal that would break with a long-cherished tradition and result in a listing of the mutually owned group.

It would add RZB’s mature Austrian business with the fast-growing franchise Raiffeisen International has built in 17 countries of the former Communist bloc, diluting the growth and profitability that investors thought they had been buying into.

RZB and Raiffeisen International provided only scant detail of how a deal would work, apart from saying that the combined entity would still be listed.

The most likely option would be an upstream merger under which RZB’s owners — eight regional cooperative banks — and Raiffeisen International’s free float would end up owning the combined group.

Raiffeisen International also released full-year earnings a month earlier than scheduled, saying 2009 net profit fell 78 percent to 212 million euros ($290 million), significantly ahead of the average analyst estimate of 165 million euros, according to Thomson Reuters I/B/E/S.

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($1 = 0.7314 euro)

(Reporting by Boris Groendahl and Fiona Flanagan; Editing by Will Waterman)

Market gives thumbs-down to Raiffeisen merger plans