Raiffeisen International Bank-Holding AG, a part of the RZB Group,significantly improved its business results in 2006 and once againachieved a record profit. Adjusted for one-off effects, the consolidatedprofit (after tax and minorities) rose by 55 per cent to 594 millioneuros (2005: 382 million euros). Profit before tax (excluding one-offeffects) amounted to 891 million euros (2005: 569 million euros), whileprofit after tax (excluding one-off effects) was 686 million euros(2005: 460 million euros). Earnings per share (excluding one-offeffects) increased from 2.79 euros in 2005 to 4.17 euros. All dataaccording to International Financial Reporting Standards (IFRS).
Inthe course of 2006, Raiffeisen International sold two bank holdings: aminority participation in Bank TuranAlem of Kazakhstan (102 millioneuros) and the former Raiffeisenbank Ukraine (486 million euros). Thenet proceeds from these sales amounted to 588 million euros. Includingthese one-off effects, consolidated profit rose to 1,182 million euros,representing a 209 per cent increase compared to 2005.
HerbertStepic, CEO of Raiffeisen International, said,"2006 was another verysuccessful year for us. Our growth dynamics is best shown by thedevelopment of our profits, which grew six-fold in the past fours years.On top of that, we have taken a decisive step into the future with theacquisition of Impexbank. As the largest international banking group inRussia and in the entire CIS, we are excellently positioned in themarkets with the highest growth potential."
At the beginningof 2006, Raiffeisen International acquired OAO Impexbank, one of theleading universal banks with a primary focus on retail banking inRussia. With this transaction, the Group became the largest foreign bankin Russia, the largest banking market in Central and Eastern Europe(CEE) with 140 million inhabitants. By the end of 2007, Impexbank isscheduled to be legally merged with ZAO Raiffeisenbank Austria, whichwas founded in Russia in 1996. The merged bank will be namedRaiffeisenbank."Our good position in the high-growth markets of the CISand Southeastern Europe already pays off," said Stepic. Both regionsalready contribute about 65 per cent to profit before tax, excluding theone-off effects."By acquiring eBanka, we have also strongly reinforcedour market position in the Czech Republic," Stepic referred toRaiffeisen International''s acquisition of a bank also in Central Europelast year.
Strong growth in customer business– Balance sheet total increases by 37 per cent
In the year under review,Raiffeisen International continued to utilize the positive growthenvironment in CEE and notably extended its customer business. Loans andadvances to customers grew by 41.8 per cent to 35.0 billion euros, whiledeposits from customers increased by 33.2 per cent to 33.2 billioneuros."The corporate customers segment again grew substantially in 2006and remains our largest segment in terms of assets and profit. Theretail customers segment already contributed almost one third to theprofit before tax– tending upwards," said CFO Martin Gr?ll."In Russia,we already rank third in consumer deposits and fourth in consumerloans," he said, underlining the positive development of this segment.
Dueto its high service standards and products that are closely aligned withdemand in the marketplace, combined with further expansion in the salesnetwork, Raiffeisen International was again able to attract numerous newcustomers. With 9.7 million customers recorded at year-end 2005, theGroup increased this figure to 12.1 million customers at the end of2006."Every month, more than 150,000 new customers turn to Raiffeisen,"Stepic said. The remaining customers were added through the acquisitionsof Impexbank and eBanka.
The balance sheet total increased by37.3 per cent to 55.9 billion euros at the end of the year, almost 90per cent of the increase was accounted for by organic growth. Within thepast four years, Raiffeisen International''s balance sheet total hasalmost quadrupled.
Operating results and efficiency furtherimproved
Operating income improved across all components and grewby 52.0 per cent to 2,867.7 million euros.
General administrative expenses increased by 45.7 per cent to 1,693.7million euros because of significant investments. Due to tight costmanagement, the growth stayed below the increase in operating income. Asa result, profit from operating activities increased by 62.0 per cent to
1,174.1 million euros. The cost/income ratio, which represents generaladministrative expenses in relation to operating income, thus furtherimproved from 61.6 per cent to 59.1 per cent.
Allocations to provisioning for impairment losses rose by 84.7 per cent,or 142 million euros, to 308.9 million euros in 2006. About 60 millioneuros of this increase derives from changes in the scope ofconsolidation.
Strong equity base
Raiffeisen Internationalincreased its equity, including consolidated profit and minorityinterests, by 40 per cent or 1,314 million euros in the year underreview. It amounted to 4,590 million euros at the balance sheet date(2005: 3,276 million euros). The return on equity before tax (excludingone-off effects) amounted to 27.3 per cent. The significant increase of5.5 percentage points resulted from the strong profit growth.
TheGroup''s Tier 1 ratio for the banking book, which reflects the financialstrength, amounted to 9.8 per cent (2005: 9.0 per cent). The Tier 1ratio including market risk was 9.0 per cent (2005: 8.0 per cent), whichis more than twice the amount required by Austrian law for banks (4.0per cent).
4th quarter 2006: Best result in the company''s history
In thefourth quarter of 2006, Raiffeisen International achieved a profitbefore tax of 727 million euros, which was essentially influenced by theproceeds booked in the amount of 486 million euros from the sale ofRaiffeisenbank Ukraine. Without this one-off effect, profit before taxamounted to 240.6 million euros (Q4 2005: 152.1 million euros)."Withoutthe one-off effects in the third and fourth quarter 2006, we haveachieved the best quarterly result in the history of RaiffeisenInternational due to the strong development of operating business in thefourth quarter 2006," Groll said.
Largest sales network ofall western banks in CEE
In the year under review, RaiffeisenInternational further extended its already wide-reaching network ofsales outlets. In total, 178 new branches were opened, more than in anyother year of the company''s history (2005: 145). Taking into account theacquisitions and the divestment of Raiffeisenbank Ukraine, the number ofbranches increased by 405. The sales network of Raiffeisen Internationalcomprised 2,848 business outlets in 16 CEE-markets at the balance-sheetdate."No other international bank in the region offers such afar-reaching and closely-knit sales network. We open three to fourbranches per week," Stepic said. At the end of 2000, the number ofbranches of Raiffeisen International in CEE amounted to only 185. Thiscorresponds to an increase by the factor 15 within six years.The numberof employees advanced by 21 per cent to 52,732 (2005: 43,614) in thereporting period, primarily due to the acquisitions of Impexbank andeBanka.
Best performing stock in the DJ Euro STOXX Banks
Thesuccessful trend of Raiffeisen International''s stock continued in 2006.The stock outperformed by far not only the ATX but also the sectoraverage. It stood at 55.55 euros at the end of 2005 and advanced to115.51 euros on the last trading day of 2006. The stock thus registereda plus of 108 per cent as of year-end and was the best performing stockin the European peer index DJ Euro STOXX Banks.
The ManagingBoard will propose a dividend per share of 0.71 euros (2005: 0.45 euros)to the annual general meeting.
Thebusiness activities of Raiffeisen International are portrayed bybusiness lines as well as regional segments.
TheRetail Customers segment encompasses all private individuals, theself-employed and small enterprises with annual revenues of less than 5million euros. This segment registered the highest profit growth with124.1 per cent in the year under review and contributed 263.5 millioneuros to the Group''s profit before tax (2005: 117.6 million euros). TheROE before tax improved significantly to 24.8 per cent (2005: 15.1 percent) and the cost/income ratio to 72.3 per cent (2005: 78.6 per cent).
TheCorporate Customers segment comprises business with large andmiddle-market companies from CEE as well as companies from othercountries that are active in the region, especially multinationalgroups. The segment reached a profit before tax of 467.2 million euros(2005: 336.8 million euros), representing an increase of 38.7 per cent.The ROE before tax improved to 31.7 per cent (2005: 26.9 per cent) andthe cost/income ratio to 36.7 per cent (2005: 40.2 per cent).
TheTreasury segment encompasses the treasury departments'' trading for theirown account as well as investment banking activities, which are onlycarried out by some Group units. The segment earned a profit before taxof 241.5 million euros (2005: 184.1 million euros), a plus of 31.1 percent. The ROE before tax was 44.7 per cent (2005: 43.8 per cent) and thecost/income ratio 22.8 per cent (2005: 18.1 per cent).
Participationsand Other recorded a profit before tax of 507.4 million euros due to theproceeds from divestments (2005: minus 70.0 million euros). Besidesnon-banking activities, this segment encompasses the refinancing as wellas the management of equity participations.
Excluding the one-offeffects the Corporate Customers segment remained the largest contributorto profit before tax with 52 per cent (2005: 59 per cent). The retailbusiness continued to grow rapidly which is reflected in the segment''ssubstantial increase of profit contribution to 30 per cent (2005: 21 percent). The combined contribution of the segments Treasury andParticipation and Other decreased slightly to 18 per cent (2005: 20 percent).
Central Europe encompasses theCzech Republic, Hungary, Poland, Slovakia and Slovenia. The segmentrecorded a profit before tax of 315.5 million euros (2005: 229.9 millioneuros), a growth of 37.2 per cent. The ROE before tax reached 23.4 percent (2004: 17.5 per cent), and the cost/income ratio improved to 61.0per cent (2005: 66.2 per cent).
Southeastern Europe containsAlbania, Bosnia and Herzegovina, Bulgaria, Croatia, Kosovo, Romania andSerbia. The segment contributed a profit before tax of 284.9 millioneuros (2005: 187.7 million euros), an increase of 51.8 per cent. The ROEbefore tax advanced to 28.2 per cent (2005: 22.6 per cent), and thecost/income ratio to 58.2 per cent (2005: 62.8 per cent).
The segment of the Commonwealth of Independent States comprises Belarus,Kazakhstan, Russia and Ukraine and includes the above-mentioned one-offeffects. Without these effects, the following figures would apply:profit before tax 290.7 million euros (2005: 151.0 million euros), astable ROE before tax of 32.3 per cent (2005: 32.3 per cent) and thecost/income ratio 57.9 per cent (2005: 50.9 per cent). Including theone-off effects, the profit before tax amounted to 879.1 million euros.The ROE before tax was 97.6 per cent and the cost/income ratio 57.9 percent.
Excluding the one-off effects, the profit contributions of the threeregional segments would be almost equal. The largest part of profitbefore tax would still arise from the Group units in Central Europe witha share of 35 per cent (minus 5 percentage points versus 2005). The CISwould be the second-largest supplier of earnings at 33 per cent (plus 6percentage points), and 32 per cent of earnings would derive fromSoutheastern Europe (minus 1 percentage point).
The management expects a consolidated profit of at least 700 millioneuros for 2007. The corporate customer business is again expected tomake the largest contribution to overall profit in 2007. The focus onthe mid-market segment will be intensified this year. The emphasis inthe retail segment, which is developing very well, will be on furtherexpansion of the branch network and of alternative distributionchannels, e.g. the internet and call centres.
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 at about 15per cent.
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Raiffeisen International operates one of the leading banking networks inCEE with subsidiary banks and leasing companies in 16 markets. More than12 million customers are served through more than 2,800 businessoutlets. Representative offices in Lithuania and Moldova complement theGroup''s presence in the region. Raiffeisen International is a fullyconsolidated subsidiary of Raiffeisen Zentralbank Osterreich AG (RZB),which owns 70 per cent of the common stock. The remaining 30 per cent isfree float, the shares are traded on the Vienna Stock Exchange. RZB is aleading corporate and investment bank in Austria and the centralinstitution of the Austrian Raiffeisen Banking Group, the country''slargest banking group.
You can access the web-version of Raiffeisen International''s annualreport onhttp://ar2006.ri.co.at.The English printed version can be subscribed to on that site.