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By Francois Murphy and Alexandra Schwarz-Goerlich
VIENNA, Oct 20 (Reuters) - Raiffeisen Bank International is not planning to pay a dividend for this year and will at most pay a small one for 2016 as it focuses on bolstering its capital ratio, its chief executive said on Tuesday.
The lender is implementing an overhaul aimed at reducing its balance sheet and increasing its fully loaded Common Equity Tier 1 capital ratio to 12 percent by the end of 2017 from 10.7 percent in the second quarter.
"As long as we have not reached this 12 percent our dividend proposal will remain limited," Chief Executive Karl Sevelda told reporters, adding that he was "not unhappy" with business this year, or with the implementation of the restructuring plan.
In Poland, where loans denominated in Swiss francs have become a political issue ahead of a parliamentary election on Sunday, Raiffeisen is seeking to sell its Polbank subsidiary, the country's eighth-biggest bank by assets.
Polbank's Swiss franc loan portfolio has become a burden, Sevelda said, adding that a Spanish and a French bank had expressed an interest in buying the Polish lender but pulled out because of the loans.
Raiffeisen was preparing to break out Polbank's portfolio of franc-denominated loans as a separate legal entity so that it could sell the bank without it, Sevelda said.
"We assume that if we break it out ... we will naturally get better prices," he said, adding that the tender process would have to start again. "I presume we would begin relatively soon after the election."
Although it is selling some assets as part of its restructuring plan, the bank is looking to expand in politically and economically stable countries such as Slovakia, the Czech Republic, Romania and Bulgaria, he said.
"(We are looking to) grow organically but we are also looking at portfolios because we see a certain clean-out operation in individual countries," he said.
In Croatia, a law passed last month that forces banks to convert their Swiss franc loans to euros would cost the bank 60 million euros ($68 million) net, which he called a "painful loss".
"An economy that deals with its banks this way is, we think, ill advised," he said. ($1 = 0.8803 euros) (Editing by Mark Potter and David Clarke)