Raiffeisen discusses merger with Volksbank in Austria

Raiffeisen Zentralbank (RZB), which indirectly controls Raiffeisen Bank Romania, is holding negotiations with loss-making Volksbank, in view of a merger between the two major Austrian banks, according to the Austrian press. Bank sources say Volksbank does not have liquidity problems, but problems have to do with the capital level, which can no longer keep up with the rise in loan-loss provisions. RZB already has 6.1% in Volksbank and both banks received support from the Austrian government in 2009. In September 2009, RZB had 156 billion euros in assets, and Volksbank had 54 billion euros. At the end of last year, rumours emerged in Austria about Volksbank being placed under special supervision by the central bank. Volksbank announced a 200 million-euro capital increase for its Romanian subsidiary, set to take place in February by conversion of subordinated loans. The prospective merger with RZB would strengthen the bank’s position on the Austrian retail banking market. In Romania, the entity would be in direct competition for the second position with BRD. Elisabeth Bleyleben, head of Erste Bank Austria, said that if RZB were to merge with Volksbank, the distance between the newly created entity and Erste would increase, without the latter abandoning its objective of becoming market leader over the next ten years.