All figures are provided in conformity to International Financial Reporting Standards (IFRS) and may differ from those published by Raiffeisen International Bank_Holding AG for its Russia segment due to differences in the scope of consolidation.
«Raiffeisenbank’s strong results for the first six months of 2010 are the outcome of a well-chosen strategy that enables vigorous business growth in a recovering economy. Other factors contributing to our good performance were the efforts toward loan portfolio quality management, the modernisation of our regional network, and cost optimisation.» notes Pavel Gurin, Chairman of the Board of ZAO Raiffeisenbank.
For H1 2010, ZAO Raiffeisenbank, a subsidiary of Raiffeisen International Bank-Holding AG (Raiffeisen International), posted consolidated profits (after tax) of 3.75 billion roubles, a more than fourfold increase over the same period last year (the bank’s after-tax earnings for H1 2009 were 909 million roubles).
Stabilising portfolio quality had a significant beneficial effect on this year’s first-half profits (balance sheet reserves stood at 26 billion roubles, remaining virtually unchanged since the end of 2009), and enabling a reduction in provisioning for impairment losses costs, which fell by 82% year-on-year to 1.987 billion roubles as of 1 July 2010.
The drop in provisioning costs was attributable partly to bad debt levels stabilising in a generally improving macroeconomic situation; however, it also reflects the Bank’s optimal credit risk assessment practices, based on the international expertise of the Raiffeisen International Group.
«A balanced approach to risk management, systematic portfolio quality control, and good judgement in dealing with distressed assets have always been and remain among Raiffeisenbank’s highest priorities. This has helped us avoid substantial losses during the financial crisis, to meet the reserve requirements already in 2009, and thereby lay the groundwork for steady growth in 2010,» notes Pavel Gurin.
The bank’s cost/income ratio at the close of H1 2010 remained at a comfortable 53.14%, representing a year-on-year rise of 12.98 percentage points.
The primary reason for this increase is the drop in the Bank’s net interest income in H1 2010 (off 36.72% year-on-year) following the contraction in working assets for H2 2009, which was a result of measures directed partly to the Bank’s asset quality preservation, and partly to a reduced demand for credit.
A beneficial factor in this context was the increase in non-interest income (up 16.9% year-on-year). Operating expenses for the first half of 2010 amounted to 8.369 billion roubles and were thus virtually unchanged from their volume a year earlier. Operating expenses steadied following efforts to optimise the Bank’s regional network, streamline internal processes and procedures, and reduce operating costs and rent.
«Optimisation of our regional network, together with a transition to a single operating system, have allowed us not only to synergise for lower costs, but also to increase our overall business efficiency. Successfully harmonising regional network operations is our key mission,» comments Christoph Schoefboeck, ZAO Raiffeisenbank Board Member and Head of Operations & IT Directorate.
«The Bank has a sound operating costs structure, which, without resorting to radical measures, has allowed us to stabilise costs and increase predictability even in an uncertain market. As economic activity rebounds in the country, the measures we have implemented should benefit the bank’s profitability,» comments Arndt Roechling, ZAO Raiffeisenbank Board Member and Financial Director.
While the H1 2010 book value of assets at 501.9 billion roubles was virtually unchanged from the close of 2009, the Bank posted a substantial gain in risk-weighted assets (up 13.81% for the first six months of 2010). This growth was attributable mainly to changes in asset composition, with a larger corporate loan portfolio and heavier securities investment. The Bank’s securities portfolio value surged 64.3% year-on-year to 86.2 billion roubles at the close of H1, due partly to a brisk business in organising and underwriting bond issues.
This growth in working assets, coupled with a stabilised loan portfolio, have contributed to an improvement in the Bank’s pre-tax Return on Assets, which stood at 1.94% as of 1 July 2010 (up 1.48 percentage points over H1 2009).
«With rapidly declining interest rates, expanding our securities portfolio was the right decision and has benefitted the Bank’s financial performance.» notes Sergei Monin, Deputy Chairman of the Board, Head of Treasury Directorate of ZAO Raiffeisenbank.
Total loans and advances to clients increased 0.8% since the beginning of the year to over 272 billion roubles. Corporate segment portfolio growth was up more than 4.8% since close of 2009, offsetting a decline in consumer loans, which were down 6.3% since close of 2009, reflecting a drop in demand for loans among the general public.
«Our broad product line, which includes a number of interesting new offers, should satisfy a good part of the budding consumer demand for credit products. A noticeable growth in the number of clients in the first half of this year — we now service nearly 1.8 million customers — provides a solid basis for further growth in the Bank’s consumer banking business.» comments Andrey Stepanenko, Member of the Board, Head of Retail Private Individuals Directorate of ZAO Raiffeisenbank.
«The demand we have been seeing among corporate customers over the last few months shows a strengthening of favourable trends and attitudes in the business community,» Oxana Panchenko, ZAO Raiffeisenbank Board Member and Head of Corporate Banking&Corporate Finance Directorate, comments on the results.
Despite a slight drop in customer funds held in settlement accounts and deposits (258.8 billion roubles, -0.13% from close of 2009), these resources remain the Bank’s primary source of funding. The loan to deposit ratio at the close of the first half of 2010 was 105%.
The Bank’s 3.3% year-on-year increase in own funds (less 2009 year-end dividends paid) during the first six months of 2010 was attributable primarily to current year profits.
Raiffeisenbank’s capital adequacy ratio according to the Basel-1 methodology was over 22.7% as of 1 July 2010, while its excess cover ratio was 184.06%.
«Raiffeisenbank’s comparatively conservative loan-to-deposit ratio, coupled with the high capital adequacy level, reflect the Bank’s strategy of steady development, and represent a good foundation for further growth. If I were to list our current priorities, I would start with expanding a strong loan portfolio, successfully completing our business outlet network transformation, increasing sales via remote channels, and further strengthening our cost management. Our clients are the centre of our business, so improving service has always been and remains our primary goal,» comments Pavel Gurin.
ZAO Raiffeisenbank is a subsidiary of Raiffeisen International Bank-Holding AG. Raiffeisenbank ranks 9th in terms of assets among the Russian banks based on H1 2010 results (Interfax-CEA). According to Interfax-CEA, ZAO Raiffeisenbank ranks 6th in terms of private deposits and 9th in consumer lending based on H1 2010 results.
Raiffeisen International operates one of the largest banking networks in CEE, covering 17 markets across the region through subsidiary banks, leasing companies and a range of other financial service providers. The group’s 56,000 employees service more than 14.7 million customers through around 3,000 business outlets. Raiffeisen International is a fully-consolidated subsidiary of Raiffeisen Zentralbank Oesterreich AG (RZB), which indirectly owns 72.8 per cent of the common stock. The remainder is in free float, with the shares listed on the Vienna Stock Exchange. RZB is a leading corporate and investment bank in Austria and the central institution of the Austrian Raiffeisen Banking Group, the country’s largest banking group.