Raiffeisen Bank International AG (RBI) posted a profit before tax of EUR 1,373 million for the financial year 2011, which represents a year-on-year increase of around 7 per cent. Despite a challenging economic environment, RBI thus managed to achieve its highest annual pre-tax profit since the start of the financial crisis in 2008. The bank’s return on equity before tax remained unchanged at 13.7 per cent.
«We were able to once again provide evidence of our earning power in this past year, which remained a very challenging one for banks. The fact that we’ve posted a profit in every quarter since the start of the financial crisis underscores the strength of our strategic orientation, with its regional focus on Central and Eastern Europe. The slightly improving macroeconomic perspectives for the region make me confident about the year 2012 as well,» said Herbert Stepic, CEO of RBI.
Higher net interest income, lower net provisioning for impairment losses
In 2011, RBI’s net interest income improved by 3 per cent, or EUR 89 million, to EUR 3,667 million. Net free and commission income remained stable year-on-year at EUR 1,490 million and thus contributed for 27 per cent of the bank’s operating income, which — excluding impairment of goodwill — rose by 1 per cent, or EUR 72 million, to EUR 5,475 million. Net trading income improved by 11 per cent, or EUR 35 million, to EUR 363 million. General administrative expenses rose by 4.7 per cent year-on-year to EUR 3,120 million.
In contrast, net provisioning for impairment losses dropped sharply — in total by 11 per cent, or EUR 131 million. The NPL ratio — the proportion of non-performing loans in the loan portfolio — also improved for the first time in several years, falling by 0.3 percentage points to 8.6 percent.
RBI’s 2011 results were impacted by special effects. For example, in the fourth quarter of 2011, a goodwill impairment of EUR 183 million was booked for RBI’s banking subsidiary in Ukraine.
The increased volatility on the financial markets caused by the European sovereign debt crisis is reflected in the valuation losses on securities and participations and the EUR 278 million drop in net income from financial investments to minus EUR 141 million.
Year-on-year, net income from derivatives and designated liabilities turned positive and came to EUR 413 million. This was partly due to a EUR 258 million rise in net income from revaluations of derivative instruments entered into for steering purposes, in particular because of the yield curve becoming flatter from the second quarter onwards. At the same time, the value of designated liabilities arising from own issues decreased as a result of the significant widening in RBI’s credit spread following the developments on the capital markets; this led to a valuation gain of EUR 184 million.
RBI’s consolidated profit of EUR 968 million was 11 per cent lower year-on-year. This decline was mainly attributable to the contrary development that occurred with regard to deferred taxes, which in 2010 had led to a disproportionately low tax burden on account of special effects.
The core tier 1 ratio (without taking hybrid capital into account) improved from 8.9 per cent to 9.0 per cent.
At the end of October, the European Banking Authority (EBA) presented a target core tier 1 ratio, according to the EBA’s definition, of 9 per cent for the systemically-relevant banks in Europe. In Austria, this group of banks includes Raiffeisen Zentralbank Österreich AG (RZB) as the superordinate financial institution of the RZB Group (Kreditinstitutsgruppe), of which RBI is the largest sub-group.
The new minimum capital ratio must be reached by 30 June 2012. Based on balance sheet data per 30 September 2011, the RZB Group’s calculatory EBA capital requirement amounted to around EUR 2.1 billion according to the EBA’s standards and methodology. To address this, RZB — with the inclusion of RBI — launched some 20 projects aimed at generating a total of around EUR 3 billion towards meeting the target ratio. At this point in time, the RZB Group has already implemented measures totalling EUR 1.9 billion, while an additional EUR 800 million are about to be implemented and measures with a targeted value of EUR 300 million have been prepared. Already at the end of 2011, the RZB Group’s core tier 1 ratio stood at 9.12 per cent according to Basel 2.5/CDR III.
Total assets gained 12 per cent or EUR 15.8 billion from the beginning of 2011, rising to EUR 147.0 billion. Loans and advances to customers after provisioning rose by EUR 5.6 billion. Deposits from customers increased by EUR 9.1 billion, which was mainly on account of institutional and corporate customers (EUR 6.3 billion) and private individuals (EUR 3.3 billion).
The loan/deposit ratio (loans and advances to customers divided by customer deposits) improved by 9 percentage points compared with the end of 2010 to 122 per cent.
The number of business outlets decreased by 33 to 2,928 at year-end. In total, RBI serviced around 13.8 million customers as per 31 December 2011. On the same reporting date, RBI had 59,261 employees, which represents as decline of 0.9 per cent compared to year-end 2010.
Raiffeisen Research’s current forecasts suggest that an easing of the economic situation and an improvement in the economic framework conditions are likely. Raiffeisen Research expects Central and Eastern Europe (CEE) to post GDP growth of 2.6 per cent in 2012. That rate of growth would be 3 percentage points higher than the forecast eurozone average. The current data also suggest that while a flattening is apparent in CEE’s loan volume growth, this growth still remains at a considerably higher level than that in the eurozone. Current forecasts for 2012 place loan volume growth at 5 to 10 per cent in Central Europe and the CIS region, and at 1 to 3 per cent in Southeastern Europe.
In 2012, RBI expects a stable business volume due to the economic environment and restrictive regulatory requirements. Despite the cautious economic growth forecast, RBI expects to see a stabilization of the net provisioning ratio along with only a marginal increase in non-performing loan volumes.
In the context of expected overall economic developments, particularly in CEE, RBI is aiming, with the inclusion of the acquisition of Polbank, for a return on equity before tax of around 15 per cent in the medium term. This is excluding future acquisitions, any capital increases, as well as unexpected regulatory requirements from today’s perspective.
You can access the web-version of the annual report at ar2011.rbinternational.com. The German version is available under gb2011.rbinternational.com. A printed English-language version can also be ordered via that webpage.
A short video statement by Herbert Stepic on the business results is available to view at www.rbinternational.com/videostepic
Raiffeisen Bank International AG (RBI) regards both Austria, where it is a leading corporate and investment bank, and Central and Eastern Europe (CEE) as its home market. In CEE, RBI operates an extensive network of subsidiary banks, leasing companies and a range of other specialised financial service providers in 17 markets.
RBI is the only Austrian bank with a presence in both the world’s financial centres and in Asia, the group’s further geographical area of focus.
In total, around 59,000 employees service about 13.8 million customers through around 2,900 business outlets, the great majority of which are located in CEE.
RBI is a fully-consolidated subsidiary of Raiffeisen Zentralbank Österreich AG (RZB). RZB indirectly owns around 78.5 per cent of the common stock, the remainder is in free float. RBI’s shares are listed on the Vienna Stock Exchange. RZB is the central institution of the Austrian Raiffeisen Banking Group, the country’s largest banking group, and serves as the head office of the entire RZB Group, including RBI.