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By Francois Murphy
VIENNA Oct 5 Austrian lender Raiffeisen Bank
International and its unlisted parent Raiffeisen
Zentralbank have decided to go ahead with their
proposed merger aimed primarily at boosting RZB's capital
buffer, the companies said on Wednesday.
Only Italy's Monte dei Paschi di Siena and Allied
Irish Banks fared worse than the two Raiffeisen banks
combined in a stress test of 51 major European lenders, results
of which were published in July, increasing pressure on
Raiffeisen to take action.
"The management and supervisory boards of Raiffeisen
Zentralbank Oesterreich AG (RZB) and Raiffeisen Bank
International AG (RBI) have passed in principle a resolution to
merge RZB and RBI," RBI said in a statement.
Under the plan agreed on Wednesday, which will be put to
shareholders for final approval in January, parent company RZB
will be merged into central and eastern Europe specialist RBI,
with RZB shareholders receiving RBI stock in exchange.
RBI will issue new stock with which to make that payment,
increasing its shares in issue by roughly 10-13 percent, meaning
many existing RBI shareholders' stakes will be diluted.
The exact number of shares that will change hands will not
be announced until December but the combined bank would have a
free float of between 34.6 percent and 35.7 percent, compared
with RBI's current 39.2 percent, the banks said.
The plan is in large part a response to pressure from
European regulators for RZB to increase its capital reserves and
simplify the group's complex structure.
RBI, which operates across central and eastern Europe, and
RZB announced in May that they were considering a merger, and
RZB has since said it plans to sell shares in insurer Uniqa
, a step also aimed at increasing its capital buffer.
RZB, part of the cooperative Raiffeisen group of banks, has
complained that those measures were not taken into account in
the European Banking Authority's stress test, which was based on
data from the end of last year.
The merged entity would have a fully loaded common equity
tier 1 (CET) capital ratio, a measure of financial strength, of
11.3 percent at the end of June this year, the banks said. That
is more than Raiffeisen's 10.6 percent and less than RBI's 12.2
percent at the same point.
RZB owns roughly 61 percent of RBI. It in turn is owned by
Raiffeisen's regional Landesbanken, which are owned by 1.7
million Austrians through hundreds of local credit unions. The
constellation forms Austria's most extensive banking network.
(Reporting by Francois Murphy; Editing by Adrian Croft and