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Raiffeisenbank has announced its IFRS financial results for 2016

AO Raiffeisenbank has announced its IFRS financial results for 2016. All figures are provided in accordance with International Financial Reporting Standards (IFRS) and may differ from the Russian data in Raiffeisen Bank International AG (RBI) financial report as a result of the difference arising from consolidation and translation to Euro.

Profit before tax is up 18.3% to RUB 29 573.5 million compared to profit in 2015 (excluding one-off effect from the sale of NPF Raiffeisen). This is record-breaking profit throughout the history of Raiffeisenbank.

Profitability ratios were high by the end of 2016: ROE before tax was 28.2%, while ROE after tax exceeded 22.1%.

Mortgage portfolio demonstrated solid growth: +38.1% compared to the end of 2015.

Quality of assets continued to improve: risk cost down to 1.9% vs. 2.7% in 2015; the share of loans individually determined to be impaired in 2016 was 6.7% (-1.5 percentage points compared to the end of 2015).

Raiffeisenbank historically maintains substantial liquidity cushion and high capital adequacy: the bank outperformed CBR requirements at year end.

Main financial results

Income statement

12 months 2015,
RUB million
12 months 2016,
RUB million
change, %
Net interest income before provisioning for impairment losses 43 372.4 42 483.6 -2.0%
Charge of provision for loan impairment (15 430.9) (10 306.4) -33.2%
Net fee and commission income 12 941.4 14 129.2 9.2%
Trading result 9 278.5 7 828.7 -15.6%
Administrative and other operating expenses (26 104.7) (24 935.8) -4.5%
Figures excluding one-off effect from the sale of NPF Raiffeisen1
Profit before tax 24 993.7 23 204.5 +16.4%
Net profit 19 937.0 20 082.7 15.1%
Cost/income ratio 39.3% 38.2% -1.1 p.p.
ROE before tax 25.6% 28.1% +2.5 p.p.
Figures including one-off effect from the sale of NPF Raiffeisen:
Profit before tax 31 156.8 29 677.2 -4.7%
Net profit 24 853.2 23 285.9 -6.3%
Cost/income ratio 36.0% 38.2% +2.2 p.p.
ROE before tax 31.9% 28.2% -3.7 p.p.
ROE after tax 25.4% 22.1% -3.3 p.p.

At the end of 2016 profit before tax reached RUB 29 677.2 million, down 4.7% from 2015. High profit in 2015 was due to the one-off effect from the sale of NPF Raiffeisen in amount of around RUB 6.2 billion. Without the one-off income, the Bank’s operating profit (before tax) rose 18.3% year-on-year, while net profit grew 16.4%.

At the end of 2016, the return on equity (ROE before and after tax) of the Bank remained high: 28.2% and 22.1%, respectively.

«Last year has been successful for Raiffeisenbank in many ways. Profit growth reached its record high since 2012 while the assets continued to improve, which is supported by the decrease in provisioning across all client segments, — said Sergei Monin, the CEO of Raiffeisenbank. — In 2016 one of our focus areas was mortgage loans, we managed to increase our mortgage portfolio up to almost 40% while expanding our market share in new loans issuance four-fold».

During 2016 the charge of provision for loan impairment amounted to RUB 10 306.4 million, 33.2% down from RUB 15 430.9 million in 2015, due to the lower provisioning in all segments: large corporates (down from RUB 7 347.4 million in 2015 to RUB 6 134.4 million in 2016), SME (down from RUB 1 363.1 million in 2015 to RUB 256.8 million in 2016), as well as in retail segment (down from RUB 6 933.8 million in 2015 to RUB 4 207.0 million in 2016). The larger volume of provisioning charges in the retail segment in the 4th quarter (compared to previous quarters) was due to the transition to the IRB (based on internal rating models) approach to risk assessment under IFRS. The risk cost 2 for 2016 amounted to 1.9% (-0.8 percentage points compared to 2015).

Net fee and commission income increased by 9.2% to RUB 14 129.2 million due to the higher fee and commission income from settlement transactions of SME business and the agency fees from the sale of insurance and pension products.

Net interest income before provisioning for impairment losses remained almost unchanged compared to 2015 (down 2.0%) reaching RUB 42 483.6 million. On the one hand, net interest income was negatively affected by the decrease of interest income from derivatives resulting from the lower market rates in 2016. On the other hand, in 2016 interest expense on customer and CBR funding reduced substantially producing a positive effect on the net interest income.

Trading result3 at the end of 2016 was RUB 7 828.7 million (down 15.6% from 2015), primarily due to lower income from the securities at fair value through consolidated profit or loss (down from RUB 1 088.0 million in 2015 to RUB 23.9 million in 2016). The high result from securities in 2015 was a one-off effect from the recovery of market prices after they collapsed at the end of 2014. The trading result was also affected by the result on items related to foreign exchange transactions and revaluation4, which reduced from RUB 8 045.0 million in 2015 to RUB 7 693.0 million in 2016 due to ruble appreciation.

The Bank’s operating income before provisioning for impairment losses5 at the end of 2016 was RUB 65 322.7 million, down 10.0% from the figure in 2015 which included the one-off income from the sale of the Pension Fund. Excluding the one-off effect, the Bank’s operating income was nearly unchanged compared to 2015 (down 1.8%).

Operating expenses decreased by 4.5% reaching RUB 24 935.8 million. Cost control measures allow the Bank to maintain the cost/income ratio (CIR) at a low level: at the end of 2016, CIR was 38.2% (down 1.1 percentage points compared to CIR value in 2015 cleared from the one-off effect from the sale of NPF Raiffeisen).

Statement of financial position

RUB million
RUB million
Assets 858 545.6 753 800.0 -12.2%
Liquid assets 242 316.4 212 453.2 -12.3%
Gross loans and advances to customers: 558 071.4 499 286.1 -10.5%
Retail customers 181 915.5 187 116.3 2.9%
Small and micro businesses 14 807.0 14 052.5 -5.1%
Middle businesses 20 183.0 23 301.1 15.4%
Large corporates 341 165.2 274 816.2 -19.4%
Customer accounts 581 270.4 547 596.7 -5.8%
Funds obtained from the Parent bank 55 241.4 32 326.5 -41.5%
Equity 94 712.5 115 905.1 22.4%
Share of loans individually determined
to be impaired in total loan portfolio
8.2% 6.7% -1.5 p.p.
Total Basel III capital adequacy ratio 20.6% 26.5% +5.9 p.p.
H 1.0 capital adequacy ratio (calculated in accordance with the CBR methodology) 13.9% 16.3% +2.4 p.p.

The Bank has maintained consistently high liquidity cushion. At the end of December 2016, the share of liquid assets was 28.2% remaining nearly unchanged compared to the end of 2015. The Bank has also outperformed CBR liquidity ratios: as of 01.01.2017, the H2 ratio was 138.9% (compared to the required minimum of 15%), H3 was 271.7% (compared to the required minimum of 50%), and H4 was 46.6% (compared to the required maximum of 120%).

Gross loan portfolio at the end of 2016 decreased by 10.5% reaching RUB 499 286.1 million, primarily due to negative revaluation of corporate foreign currency loans on the back of falling rouble exchange rate (in real terms, total loan portfolio reduced approximately by 3%). Middle businesses and the retail segment demonstrated growth in loan portfolios (+15.4% to RUB 23 301.1 million and +2.9% to RUB 187 116.3 million, respectively). The main driver of growth in the retail loan portfolio was mortgage loans, which demonstrated the yearly growth of +38.1% to RUB 71 135.3 million.

The share of loans individually determined to be impaired in the total loan portfolio of the Bank at the end of 2016 was 6.7% (down 1.5 percentage points from 2015).

Customer accounts reached RUB 547 596.7 million having reduced by 5.8% due to negative revaluation of foreign currency accounts (in real terms, customer accounts grew by approximately 3%). Retail customer accounts dropped by 3.6% in nominal terms, while rising by about 7% in real terms. The share of retail current accounts (in liabilities of PIs) increased during 2016 from 43% to 56%.

Corporate accounts in nominal terms reduced by 9.5% to RUB 192 576.3 million due to lower term deposits (-25.2%) while demonstrating the process of partial replacement of term deposits with current accounts, which in real terms rose almost by 7%.

The loan-to-deposit ratio was 91.2% as of 31.12.2016, 4.8 percentage points down from the end of 2015.

The term borrowings from the Parent bank declined in 2016 due to partial repayments and currency revaluation effect, and reached RUB 32 326.5 million. The share of the term funding from parent bank in total bank’s liabilities reduced to 5.1% as of 31.12.2016.

The bank’s equity rose by 22.4% or RUB 21 192.6 million compared to the end of 2015 reaching RUB 115 905.1 million due to the net profit received in 2016.

H 1.1 and H 1.26 capital adequacy ratios as of 1 January 2017 were 10.2% and 11.1%, respectively (up 1.3 and 1.2 percentage points compared to 01.01.2016, with the required minimum of 4.5% and 6.0%). H 1.0 ratio was 16.3% as of the same date (compared to the required minimum of 8.0%). Total Basel III capital adequacy ratio continued to grow in 2016 and as of 31.12.2016 reached 26.5% compared to the required minimum of 8.0% (up 5.9 percentage points compared to the end of 2015).

1 One-off income (before tax) from the sale of NPF Raiffeisen amounted to RUB 6.2 bn in 2015 and RUB 0.1 bn in 2016.

2 A relation of charge of provision for loan impairment during the period to the average loan portfolio (gross) for the period.

3 Trading result includes: losses net of gains from trading securities; gains less losses from other securities at fair value through profit or loss; gains from redemption of investment securities available for sale; gains less losses from trading in foreign currencies; unrealized gains less losses/(losses, net of gains) from derivative financial instruments; realized gains less losses from derivative financial instruments; losses less gains from foreign exchange translation; amortization of the hedging adjustment and hedge ineffectiveness.

4 Includes the following items: gains less losses from trading in foreign currencies; unrealised gains less losses from derivative financial instruments; realised gains less losses from derivative financial instruments; losses less gains from foreign exchange translation; amortization of the hedging adjustment and hedge ineffectiveness.

5 Calculated by subtracting from «Operating income» the following items: «Provisions for loan impairment», «Provisions for credit related commitments», «Provisions for investment securities held to maturity».

6 Calculated on the basis of Basel III requirements in accordance with the methodology of the Central Bank of the Russian Federation.


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