RZB Group: 1st half-year’s focus on strengthening capital ratios

26.08.2016

• Successful implementation of several capital-strengthening measures
• Profit before tax decreases to € 300 million (HY/2015: € 549 million)
• Profit after tax decreases to € 123 million (HY/2015: € 381 million)
• Consolidated profit decreases to € 12 million (HY/2015: € 215 million)
• Net provisioning for impairment losses declined 33 per cent to € 403 million
• Total assets down 0.5 per cent to € 138 billion (compared to year-end 2015)
• Common equity tier 1 ratio (fully loaded) increases 0.7 percentage points to 10.6 per cent compared to year-end 2015
• Common equity tier 1 ratio (transitional) unchanged at 10.4 per cent

The Raiffeisen Zentralbank Österreich AG (RZB) Group - which comprises the central institution of Raiffeisen Banking Group Austria (RBG) and its participations, including subgroup Raiffeisen Bank International AG (RBI), UNIQA Insurance Group and the specialized subsidiaries - reported a positive result for the first half of 2016 but was strongly characterized by the challenging economic and regulatory environment. Profit before tax amounted to € 300 million. RZB's consolidated profit was € 12 million.

RZB CEO Walter Rothensteiner summed up the first six months of the year: 'Our half-year results were heavily impacted by the low interest rate environment and were distorted by the negative effect of € 126 million from the partial sale of our stake in UNIQA. Our focus continues to clearly center on improving our capital base.'

Strengthening of capital ratios

Numerous measures taken in the past - such as the successful start of RBI's transformation program or the sale of the Hilton Hotel at Vienna Stadtpark - are already having a positive impact. 'We significantly improved our capital base in the first half of 2016. With a common equity tier 1 ratio (fully loaded) of 10.6 per cent, we are moving in the right direction. In parallel to this, we are also working on further improving this ratio,' explains Rothensteiner. The closing of the partial sale of UNIQA shares planned for this autumn, as well as the merger of Raiffeisen-Landesbanken-Holding GmbH and R-Landesbanken-Beteiligung GmbH into RZB, will result in further earnings-accretive contributions. Before the end of this year, the planned UNIQA transaction is expected to have a positive impact of around 60 basis points on RZB's common equity tier 1 ratio (fully loaded) and of around 40 basis points on RZB's common equity tier 1 ratio (transitional). 'Considering the partial sale of the UNIQA stake, our common equity tier 1 ratio (fully loaded) would already stand at above 11 per cent,' explains Rothensteiner further.

Also within the framework of adapting the RZB Group as a whole to increasing regulatory requirements and simplifying the corporate structure, RZB and RBI are independently looking into a possible merger at this time. 'Regarding a potential merger, we plan to announce our decision in the second half of September. A merger of RZB and RBI would, among other things, have further positive effects on the RZB Group's capital ratio due to the discontinuation of minority interests,' continues Rothensteiner.

Decline in loan loss provisions

Net provisioning for impairment losses decreased 33 per cent overall, or € 203 million, to € 403 million compared to the same period of the previous year. This was the result of lower net provisioning for individual loan loss provisions, with the sharpest decline recorded in Ukraine, down € 107 million. Outside RBI, no new allocations to net provisioning for impairment losses were necessary in the RZB Group in the first half-year.

Operating income was down 6 per cent, or € 150 million, to € 2,488 million compared to the reference period and net interest income declined further - down 13 per cent to €1,586 million - owing to the low interest rate level. Net trading income improved € 94 million year-on-year to € 88 million as a result of lower currency devaluations and an improved open foreign exchange position in Ukraine. Net fee and commission income was down 1 per cent to € 773 million compared to the reference period, triggered among other things by FX effects, lower guarantee income at RBI and the withdrawal from the automobile financing business in Russia. RZB's total assets were generally stable and registered a moderate decline of minus 0.5 per cent to € 137,677 million.

Higher cost/income ratio

General administrative expenses rose 3 per cent to € 1,541 million compared to the first half of 2015, especially due to higher expenses for the bank resolution fund. The cost/income ratio increased 5 percentage points to 61.9 per cent due also to lower net interest income. The average number of staff was further reduced, down 2,751 persons to 53,234 year-on-year. The number of business outlets decreased 139, to 2,658.

The common equity tier 1 ratio (fully loaded) was 10.6 per cent as at reporting date. The common equity tier 1 ratio (transitional) stood at 10.4 per cent.

Satisfactory profit contributions from segments

RBI reported a consolidated profit of € 210 million. Capitalization improved perceptibly and the key economic indicators were satisfactory given the persistent low interest rate environment and reduced loan volume.

Stripping out the UNIQA one-off effect, other equity participations again made a very stable contribution - € 62 million in total - to RZB's consolidated profit. UNIQA's contribution (after deduction of minority interests, without considering valuation effects and not including the partial sale of its shares) amounted to € 24 million. The specialized subsidiaries (e.g. Raiffeisen Bausparkasse, Raiffeisen KAG, Raiffeisen-Leasing) as well as companies like Leipnik-Lundenburger Invest Beteiligungs-AG and Card Complete, also made a significantly positive contribution to the consolidated profit.

You can find a detailed Group management report and consolidated financial statements in the 2016 semi-annual report, which is available online at http://www.rzb.at/safr2016.

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Raiffeisen Zentralbank Österreich (RZB) is the central institution of the Austrian Raiffeisen Banking Group, the country's largest banking group, including Raiffeisen Bank International (RBI). It also acts as the steering holding for the whole RZB Group and operates as platform for the Raiffeisen Banking Group, especially within its home market Austria and Central and Eastern Europe (CEE).

RZB owns around 60.7 per cent of RBI's shares. RBI's shares are listed on the Vienna Stock Exchange. Via RBI RZB holds one of the largest banking networks in CEE. 14 markets of the region are covered by subsidiary banks. Additionally, the Group comprises numerous other financial service providers, for instance in the fields of leasing, asset management, as well as mergers and acquisitions. The RZB Group's more than 52,000 employees service around 14.2 million customers through more than 2,600 business outlets worldwide.

For further information please contact:

Ingrid Krenn-Ditz (+43-1-71707-6055, ingrid.krenn-ditz@rbinternational.com) or

Monika Riedel (+43-1-71707-8787, monika.riedel@rbinternational.com).

http://www.rzb.at, http://www.rbinternational.com