Raiffeisenbank’s 2011 performance figures are collated in accordance with International Financial Reporting Standards (IFRS), and may differ from the «Russia» data segment in the financial report of Raiffeisen Bank International as a result of the difference arising during consolidation.
«In 2011 we achieved great results, the best in the history of Raiffeisenbank. The bank has built a sustainable business model that makes it possible to gain high profits and be self-sufficient in its refinancing. The loan-to-deposit ratio is below 100%, and assets and liabilities are well diversified. All this, as well as the experience and professionalism of our team give us hope that the bank will continue to successfully develop,» said Sergey Monin, CEO of ZAO Raiffeisenbank.
The profit after tax in 2011 amounted to RUB 13 855.4 million which was a 90.1% increase from the 2010 figure of RUB 7 287.7 million.
The operating income before deduction of provisions rose by 14.2% to RUB 37 027.1 million in 2011 from RUB 32 412.0 million in 2010.
The key driving factors of the growth in net profit were the release of provisions for loan impairment, and the increase in the trading result and the net interest income.
The release of provisions for loan impairment amounted to RUB 1 194.5 million (compared to the provisions charge of RUB 4 023.7 million in 2010) due to the improved credit quality of performing loans, as well as successful work with problem loans.
The trading result increased by 37.7% from RUB 3 032.8 million in 2010 to RUB 4 175.0 million in 2011 due to the significant improvement in the result of the revaluation of operations with derivative financial instruments related to both the trading and banking books (from RUB -3 572.0 million in 2010 to RUB -559 million in 2011) mainly due to the increase in the market rates of the rouble. In addition, the positive result from foreign currency translation significantly contributed to this increase (RUB 808.7 million) against the negative figures obtained in 2010 (-195.9 million). In Q4 2011 the bank earned a net income from trading operations with securities (excluding coupon income) which partially offset the losses incurred in previous quarters of 2011 due to volatility on the capital markets.
The interest income increased by 17.3% to RUB 37 660.6 million in 2011 from 2010 as a result of the interest on loans and advances to customers (which grew by 18.7% in 2011) and trading securities (which grew by 27.2% in 2011). The growth was attributed to following factors: the increased size of the loan portfolio and increased investment in corporate bonds, as well as to the upsurge in overall market interest rates in the second half of 2011.
The interest expense grew by 28.7% to RUB 13 306.7 million due to the increased volume of term deposits of legal entities and the increased share of deposits with longer maturities. In 2011 the interest expense on term deposits of individuals increased by 9.2%, while the volume of such deposits on the bank’s balance sheet grew by 32.4% to RUB 125 173.5 million. The reason for this development was the reduction in the share of expensive deposits in the total deposit base of the bank in 2011 compared to 2010.
Consequently the net interest income grew by 11.9% to RUB 24 353.8 million in 2011 as a result of the increase in the amount of interest-bearing assets and the widening of the net interest margin.
The net commission income grew by 4.6% to RUB 7 763.0 million in 2011 from 2010. Commissions on operations with plastic cards, settlement transactions and the documentary business and guarantees remain the key components of the bank’s commission income.
The cost-to-income ratio stayed at a stable level and experienced a slight decrease of 0.5 percentage points from 55.8% at the end of 2010 to 55.3% in 2011 on the backdrop of moderate growth of administrative and other operating expenses (+13.3%) to RUB 20 474.6 million. OPEX were mainly driven by costs related to business development: staff costs (+23.2%), IT services (+16.4%), deposit insurance fees (+22.2%), advertising and marketing services (+14.3%), communication expenses (+19.5%) and professional services (+68.5%).
The bank experienced a substantial increase in profitability ratios. The return on equity (ROE) after tax rose by 6.4 percentage points and amounted to 15.3% at the end of 2011. The ROE before tax increased by 8.7 percentage points from 11.4% in 2010 and amounted to 20.1% in 2011.
Total assets grew by 19.0% to RUB 605 086.4 million mainly due to the growth in cash and cash equivalents of 65.5% to RUB 139 519.8 million, loans and advances to customers (net of provisions) of 25.1% to RUB 354 743.1 million, derivative and other financial assets of 40.2% to RUB 8 885.7 million.
Despite the substantial growth in lending the loan-to-deposit ratio stood at 94.5% as of December 31, 2011, 13.8 percentage points lower than that at the end of 2010 supported by the strong growth of customer accounts.
This allowed the bank to maintain its sizable and stable liquidity cushion. Liquid assets4 grew by 10.1% to RUB 208 239.6 million making 34.4% of the total assets at YE 2011.
The gross loan portfolio increased by 21.6% from the end of 2010 and amounted to RUB 377 387.5 million due to the expansion of the credit portfolio in all business segments (corporate +17.9% to RUB 265 241.4 million, retail +32.5% to RUB 103 866.2 million, SME +54.8% to RUB 7 984.5 million).
The key drivers of growth of the corporate loan portfolio were mining (+67.7%), real estate (+17.9%), transport, storage and communication (+103.2%), hotels and restaurants (+75.3%). In 2011 the bank completed forming an industry expert team. This led to an increase in the sales of loan products to companies in key industries. Several large deals were structured with leaders in the transport infrastructure, logistics and mining industries. After the turmoil of
The retail loan portfolio grew not only as a result of unsecured consumer loans in line with market trends, but also due to the growth of mortgage and auto loans.
The quality of the loan portfolio continued to improve. The share of non-performing loans5 decreased by 3.0 percentage points to 5.8% at YE 2011 compared to 8.8% at YE 2010 mainly due to successful work with problem loans.
Consequently in 2011 the bank released provisions for loan impairment totaling RUB 1 194.5 million compared to the provisions charge of RUB 4 023.7 million in 2010. This resulted in a reduction of the balance sheet provisions by 15.8% to RUB 22 644.5 million at YE 2011 from RUB 26 890.0 million at YE 2010. The coverage ratio was over 100% as of YE 2011.
The securities portfolio decreased by 22.0% and amounted to RUB 65 230.8 million. This reduction was mainly caused by the redemption of CB RF bonds in other securities at fair value through profit or loss portfolio, along with redemption of corporate bonds in investment securities available for sale portfolio. Trading securities demonstrated a slight increase of 0.6% but the structure changed: the share of corporate bonds increased from 58.3% to 74.8%. The positions of Corporate Eurobonds and EBRD bonds in the trading portfolio reduced (to 53.9% and 64.6% respectively).
By the end of 2011 the share of term borrowings from the Parent bank in liabilities fell to 9.2% from 19.2% due to contractual repayments. The bank reduced its reliance on parent funding but this source remains important for the bank’s business.
Customer accounts continued to be an important source of funding for the bank in 2011. Their share was 78.4% at the end of 2011, which is 15.5 percentage points higher than at the end of 2010 (67.9%). Customer accounts experienced a growth of 39.3% and reached RUB 399 461.3 million mainly due to the term deposits of legal entities which increased by 88.0% to RUB 107 190.0 million. The term deposits of individuals also showed a significant growth (32.4%) and amounted to RUB 125 173.5 million as of 31.12.2011. The term deposits of state and public organizations grew by 16 times. Current account balances also showed a buoyant trend in all segments: legal entities +15.1%, individuals +31.8%, the public sector +130.2%.
Bank’s reputation as being reliable and stable allows to attract loyal customers, who are ready to open and extend accounts with the bank. Due to this fact the deposit base is characterized by high level of stickiness. This reputation is underpinned by the high long-term credit ratings issued by global rating agencies (BBB+ by Fitch, BBB by S&P, Baa3 by Moody’s).
In 2011 the bank’s balance sheet equity grew by 11.5% and amounted to RUB 95 763.7 million at the expense of Tier-1 capital driven by a 24.3% increase in retained earnings. The capital adequacy ratio (calculated according to the CBR, N-1) equaled 13.6% as of 01.01.2012, which is 3.5 percentage points lower than on 01.01.2011. This decline in N-1 is attributed to the increase in risk-weighted assets as a result of the increased number of operations and changes in the calculation methodology according to new regulatory requirements.
«The bank aims to find a reasonable balance between profitability and capital adequacy. We plan to maintain the N-1 ratio at a targeted level above the regulatory requirements of the Central Bank,» said Sergey Monin.
In 2011 the bank enhanced its investment banking services. The importance of IB business and readiness to develop in this area are underpinned by the appointment by Supervisory Board of the new management board member in December 2011 (Nikita Patrakhin, Head of Corporate Finance and Investment Banking Division).
In 2011 the bank extended its operations on the derivatives market and continued to extend its range of hedging instruments for corporate customers. Currently the bank can offer any instruments for hedging of currency, interest risks and hedging of metals’ prices volatility.
Since December 2011 ZAO Raiffeisenbank has participated in the capital of OOO Raiffeisen Investment by 49.9% jointly with Raiffeisen bank International. OOO Raiffeisen Investment provides a wide range of financial consulting services including mergers and acquisitions (M&A).
In 2011 the bank once again confirmed its status of one of the leading investment banks in the debt capital market. It became the 4th largest arranger in the corporate sector with 26 issues arranged for 17 issuers totaling RUB 57 667.0 million and the 3rd largest underwriter in the corporate sector, participating in 35 issues for 24 issuers totaling RUB 58 138.0 million6. Moreover, the bank’s IB team was awarded by Cbonds with «The best DCM Team in the Russian Market (2nd place)» and «The Best Bond Market Sales (3rd place)».
ZAO Raiffeisenbank is a subsidiary of Raiffeisen Bank International AG. Raiffeisenbank ranks 10th among the Russian banks in terms of assets, based on 2011 results (Interfax-CEA). According to the same Interfax-CEA data, ZAO Raiffeisenbank ranked 5th in terms of liabilities of individuals and 8th with regard to consumer lending.
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. 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. Raiffeisen Bank International is a fully-consolidated subsidiary of Raiffeisen Zentralbank Oesterreich 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 group head office of the entire RZB Group, including RBI.
1 Calculated by deducting from Operating income the following items: Release/ (charge) of provision for loan impairment, Release/(charge) of provisions for credit related commitments, Provision for investment securities held to maturity.