March 18, 2020 / 7:08 AM / 17 days ago

UPDATE 1-RBI lowers outlook, sees euro zone falling into "severe" recession

(Adds details, background)

VIENNA, March 18 (Reuters) - Raiffeisen Bank International (RBI) on Wednesday said loan growth would be lower than initially expected and the provisioning ratio would rise this year due to the impact of the coronavirus outbreak.

"The associated constraints are likely to result in a severe recession in the euro area," RBI said with a view to the global pandemic that has so far killed more than 8,000 people and infected nearly 200,000.

The lender, which operates across central and eastern Europe, forecast gross domestic product would fall by around 4% in the euro zone and 6% in its markets this year.

The provisioning ratio for this year is expected to increase to between 50 and 75 basis points, depending on the length and severity of disruption, the Austrian lender said. Previously RBI expected the ratio to rise around 50 basis points.

The bank still aims to achieve a cost/income ratio of around 55% in the medium term but is evaluating how the current circumstances will impact the ratio next year, it said.

It is also sticking to its medium-term target of a consolidated return on equity of approximately 11%, but said it was evaluating the impact of the current environment on this year's profitability.

RBI confirmed its CET1 ratio target of around 13% and said it was sticking to its payout policy of distributing 20-50% of consolidated profit. (Reporting by Kirsti Knolle Editing by Michelle Martin)

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