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10.05.07

Raiffeisen International starts into 2007 with a record result.

  • Consolidated profit for the first quarter 2007 up by 55.0 per centto 192.6 million euros.
  • The best quarterly result ever achieved.
  • Balance sheet total rose to almost 60 billion euros.
  • Return on equity stands at 25.5 per cent.
  • Cost/income ratio improved to 57.2 per cent.
  • Profit of Retail Customers segment improved significantly; its ROEsurpassed the Corporate Customers segment for the first time.
  • Southeastern Europe recorded biggest profit growth.
  • Outlook remains unchanged.

Raiffeisen International Bank-Holding AG, which is part of theRaiffeisen Zentralbank Osterreich AG (RZB) Group, began the year 2007with a record result. For the first quarter 2007, consolidated profit(after taxes and minorities) rose by 55.0 per cent to 192.6 millioneuros (Q1/2006: 124.2 million euros). Profit before tax (292.5 millioneuros, plus 50.8 per cent) and profit after tax (230.8 million euros,plus 52.4 per cent) were also on a record level. Earnings per share forthe first quarter went up by 0.48 euros to 1.35 euros. All figures arebased on International Financial Reporting Standards (IFRS)

Herbert Stepic, CEO of Raiffeisen International, was satisfied with thestart into the new business year,With a consolidated profit of almost 193 million euros, we have achieved yet another record result and are fully in line with our plans. With more than 12.4 million customers to date, the base for our future business continues to expand vigorously.

One further record result achieved

With this result, Raiffeisen International has clearly surpassed itsprevious record for quarterly results. Profit before tax andconsolidated profit amounted to 240.6 million and 156.3 million euros,respectively, for the fourth quarter 2006 (discounting one-off effects).With amounts of 292.5 million euros (plus 17.4 per cent over theprevious quarter) and 192.6 million euros (plus 25.1 per cent over theprevious quarter), respectively, the results for the first quarter wereclearly higher.In the first quarter, we achieved distinct improvements in all result components. We are programmed to generate further growth, said Martin Groll, CFO of Raiffeisen International.

Distinct increase over first quarter of 2006

Raiffeisen Internationals operating income grew by 40.0 per cent or 238.1 million euros to 832.7 million euros during the first three months of 2007, as compared to the first quarter 2006. Net interest income, amounting to 505.0 million euros, increased by 33.5 per cent or 126.8 million from378.2 million euros in Q1/2006. In line with the budget, the biggest growth in net interest income came from the Retail Customers segment; its contribution to net interest income rose by 43.2 per cent to 306.7 million. The Groups entities in the Commonwealth of Independent States (CIS) produced the biggest increase in net interest income, namely 51.9 per cent (to 175.8 million euros), while net interest income of the other regions grew by one quarter each. The interest margin was 3.52 per cent; this is 13 basis points below the value of the same period of the previous year. Interest margins in Southeastern Europe and Central Europe were below the values recorded for the previous year.

Risk/earnings ratio at 15 per cent

Compared to the same quarter of the previous year new allocations toprovisions for impairment losses grew by 37.1 per cent or 20.5 millioneuros to 75.9 million euros. Of this increase, almost 6 million euroswere accounted for by changes in the scope of consolidation, thereforemainly in the CIS. Overall, more than half or 38.7 million euros of thenew allocations to provisions for impairment losses were allocated inthe CIS, more than half thereof were portfolio-based. New allocations toprovisions for impairment losses were almost unchanged compared to lastyear in Central Europe with 19.9 million euros and Southeastern Europewith 17.3 million euros. In total, 43 per cent of the provisions forimpairment losses were made for the CIS, 28 per cent for Central Europeand 29 per cent for Southeastern Europe. The resulting net interestincome after provisioning went up by 32.9 per cent to 429.1 millioneuros (Q1/2006: 322.8 million).

The risk/earnings ratio the relationship between loan-loss provisions and net interest income amounted to 15.0 per cent on the balance-sheet date. At year-end 2006 it had still amounted to 17.5 per cent. Nearly two thirds of all provisions were formed for Retail Customers and one third was formed for Corporate Customers.

Result driven by major increase of commission business

Net commission income for the first quarter improved considerablycompared to the first three months 2006. It grew by 48.7 per cent to275.1 million euros, with 22.1 million euros derived from changes in thescope of consolidated companies (inclusion of Impexbank and eBanka anddeconsolidation of Raiffeisenbank Ukraine). Almost two thirds (58.5million euros) of the total increase of 90.1 million euros weregenerated by the Retail Customers segment, which is due to the largervolume of transactions, especially regarding private customers. Inregional terms, Southeastern Europe recorded the biggest increase,namely 62.6 per cent to 80.7 million euros. The main product segments ofthe net commission income are payment transactions with a share of 43.2per cent or 118.8 million euros as well as foreign-currency andprecious-metals business with a share of 28.2 per cent or 77.6 millioneuros. All other business sectors also grew considerably on account ofthe bigger number of customers.

Trading profit rose by 19.1 per cent or 5.7 million euros to 35.6million euros, which is primarily due to the clearly higher income frominterest-related transactions, while the currency-related businessslightly decreased, on account of exchange-rate volatilities affectingseveral CEE currencies.

Cost/income ratio improved to 57.2 per cent

During the first three months of 2007, administrative expenses rose by37.1 per cent to 476.5 million euros, as compared to the same periodlast year. The increase is thus below the rise in operating income whichamounted to 40.0 per cent. In view of the still high costs incurred forthe expansion of distribution channels, as well as system conversionsand integrations, this is very satisfactory. Since year-end 2006, thecost/income ratio improved by 1.9 percentage points to 57.2 per cent.

Quarterly operating profit amounted to 356.1 million euros for the firstquarter which reflects an increase of 59.3 million euros (plus 19.9 percent) compared to the previous quarter. In comparison to the firstquarter 2006, the increase amounted to 109.0 million euros (plus 44.1per cent).

Credit growth drives balance sheet total to almost 60 billion euros

With a growth of 6.7 per cent for the first quarter 2007, the balancesheet total at the end of March amounted to 59.6 billion euros (year-end2006: 55.9 billion euros). The main driver behind this growth was onceagain the expansion of loan volumes. Loans and advances to customersrose by 8.2 per cent or 2.9 billion euros to 37.9 billion euros sincethe beginning of the year. Deposits from customers went up by 5.3 percent to 34.9 billion euros.

Major increase of equity base

Equity shown on Raiffeisen International''s balance sheet rose by 5.4 percent, or 247 million euros, from the end of 2006 to 4,837 million euroson the reporting date. The increase resulted primarily from the firstquarters profit of 230.8 million euros. Furthermore, exchange rate movements of some CEE currencies and related capital hedges increased equity by 8.4 million euros. Return on equity (ROE) before taxes stood at 25.5 per cent, which is 1.8 percentage points above the 23.7 per centobtained for the first quarter 2006.

The Tier 1 ratio, banking book, which is of significance for assessingfinancial strength, amounted to 9.3 per cent (year-end 2006: 9.8 cent).The Tier 1 ratio, including market risk, amounted to 8.6 per cent(year-end 2006: 9.0 per cent) and was thus clearly above the amountrequired for banks by the Austrian Banking Act (4.0 per cent).

Largest distribution network of all western banks in CEE

During the period under review, the already quite extensive network ofbusiness outlets was consistently further developed. A total of 39 newbusiness outlets were opened during the first quarter. Moreover, threeoutlets were added by consolidating asset management companies for thefirst time. In consequence, the total distribution network of RaiffeisenInternational in CEE comprised 2,890 business outlets in 16 markets atthe reporting date. No other international bank in the region has asimilarly extensive and closely-knit distribution network.

Segment reporting

Raiffeisen International has structured its business activitiesaccording to business segments and regions.

Retail Customers showed biggest growth dynamics

When presenting the results according to business sectors, theoutstanding component is the growth of the quarterly profit before taxof the Retail Customers segment by as much as 118 per cent to 111.4million euros. This already clearly reflects the impact of economies ofscale, which were targeted by investments into new products and theextension of the market presence in recent years. This segment holds ashare of 38 per cent in the total result, which is an increase of 12percentage points over the same period last year. The return on equitybefore tax of this segment amounted to 29.5 per cent, after 20.0 percent for the first quarter 2006.

The result of the Corporate Customers segment improved by 21.4 per centand amounted to 142.7 million euros. It therefore contributed 49 percent to the total profit and continued to be the segment with thehighest result. This growth was achieved in spite of bigger loan-lossprovisions (plus 39 per cent). The ROE of this segment was 27.7 percent, after 30.6 per cent for the same period of the previous year, onaccount of the clearly higher attributable equity. As a result, theRetail Customers segment showed a higher profitability than theCorporate Customers segment for the first time.

The result of the Treasury segment declined slightly; its pre-tax resultwas lower by 2.0 million euros and amounted to 48.3 million euros. Thiswas due to higher administrative expenses, while operating incomeremained constant. ROE went down from 35.5 per cent last year to 29.7per cent. The cost/income ratio rose from 22.4 per cent for the sameperiod last year to 27.6 per cent.

The segment Participations and Other showed a deficit of 9.9 millioneuros for the first quarter 2007 (Q1/2006: minus 25.0 million euros).Besides non-banking business, this segment also encompasses themanagement of equity participations. In addition, this segment coversother cross-segment activities, including especially those in parentcompany Raiffeisen International Bank-Holding AG.

Southeastern Europe with largest profit hike

The region Southeastern Europe achieved the largest growth in its resultduring the first quarter 2007: The increase of 69.7 per cent to 97.6million euros translates into a hike in the total profit contribution ofthree percentage points to 33 per cent. This growth is primarily due tothe vigorous expansion of the operating income, especially of the netcommission income. Accordingly, ROE before tax of this segment also wentup by a solid 6.9 percentage points to 29.1 per cent. The cost/incomeratio of this segment improved from 59.7 per cent to 56.0 per cent.

Central Europe continued to be the largest geographical segment. Itearned a pre-tax profit of 114.5 million euros (Q1/2006: 78.9 millioneuros, plus 45 per cent) in the first quarter and thus had a share of 39per cent in the pre-tax result. Return on equity improved over the firstquarter 2006 by 1.4 percentage points to 23.7 per cent. The cost/incomeratio went up from 56.8 per cent to 59.6 per cent.

The Groups entities active in the CIS showed a profit before tax of 80.3 million euros. The figure for the same period last year was 57.4 million euros (plus 39.9 per cent). The respective cost/income ratio improved from 59.2 per cent to 55.7 per cent. ROE before taxes went downfrom 27.9 per cent to 24.7 per cent, on account of the clearly higher attributable equity.

Outlook remains unchanged

The corporate customer business is again expected to make the largestcontribution to overall profit in 2007. The focus on the mid-marketsegment will be intensified this year. The emphasis in the retailsegment, which is developing very well, will be on further expansion ofthe branch network and of alternative distribution channels, e.g. theinternet and call centres.

The management expects a consolidated profit of at least 700 millioneuros for 2007.

For the period to 2009, Raiffeisen International anticipates annualgrowth of the balance sheet total by at least 20 per cent. The largestincreases should continue to come from the CIS despite the absence ofRaiffeisenbank Ukraine.

Raiffeisen International forecasts an ROE before tax of more than 25 percent for the year 2009. The cost/income ratio is expected to be below 58per cent and the target for the risk/earnings ratio is set of about 15per cent.

You can download the report athttp://qr012007.ri.co.at.

Survey of key data

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Raiffeisen International operates one of the leading banking networks inCEE. 18 markets are covered by subsidiary banks, finance leasingcompanies and two representative offices. More than 12.4 millioncustomers are attended to through 2,890 business outlets. RaiffeisenInternational is a fully consolidated subsidiary of RaiffeisenZentralbank Osterreich AG (RZB), which owns 70 per cent of the commonstock. The remaining 30 per cent is free float; the shares are traded onthe Vienna Stock Exchange. RZB is a leading corporate and investmentbank in Austria and the central institution of the Austrian RaiffeisenBanking Group, the country''s largest banking group.

For further information please contact Michael Palzer (+43-1-71707-1504, michael.palzer@ri.co.at) or Lars D. Hofer (+43-1-71 707-1930,lars.hofer@ri.co.at).http://www.ri.co.at, http://www.rzb.at

 

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