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07.08.08

Raiffeisen International defies global financial market crisis with record results



  • Consolidated profit surges by 41 per cent to 566 million euros
  • Return on equity before tax amounts to 25.5 per cent <
  • Earnings per share rise from 2.82 euros to 3.68 euros
  • Strong capital base: Core capital ratio (credit risk) 9.6 per cent
  • Balance sheet total rises by 11 per cent to nearly 81 billion euros
  • CIS (plus 75 per cent) and Corporate Customers (plus 51 per cent) segments achieve highest increases in profit before tax
  • Regionally well-diversified profit contribution: Central Europe 30 per cent, Southeastern Europe 34 per cent, CIS 36 per cent
  • Cost/income ratio improves to 54.8 per cent
  • Customer base expanded to almost 14.4 million customers
  • 3,077 business outlets: Largest distribution network of all Western banks in CEE
  • Outlook 2008 unchanged: Consolidated profit of about 1 billion euros targeted

Raiffeisen International Bank-Holding AG, which is part of the Raiffeisen Zentralbank sterreich AG (RZB) Group, once again achieved a record result based on strong customer business. Consolidated profit (after tax and minorities) for the first half 2008 rose by 41 per cent to 566 million euros (HY 2007: 401 million euros). Profit before tax grew by 39 per cent to 843 million euros (HY 2007: 607 million euros). Earnings per share rose from 2.82 euros for the first half 2007 to 3.68 euros. All figures are based on International Financial Reporting Standards (IFRS).

Herbert Stepic, CEO of Raiffeisen International, commented on the results, It is a robust sign of the strength of our business model that we are presenting a record result again despite the turbulence on the global credit and capital markets. This record result is due to a dynamic development of our customer business. Our semi-annual result proves that we have a sound grip on the indirect consequences of the global financial crisis for our business. We stick to our targets.

The strong rise of consolidated profit compared with the first half of last year is mainly due to profit from operating activities. The main earnings driver was again net interest income with a plus of 
39 per cent, while net commission income increased by 23 per cent. General administrative expenses rose by 25 per cent, while new allocations to provisioning for impairment losses were raised by 31 per cent. Income tax (including deferred tax) increased by 52 per cent and reduced earnings by 196 million euros.

Central and Eastern Europe still shows real economic growth rates which are two to three times higher than in the Eurozone. This fact and the very positive development of our operating business combined with the continued growth of our customer base by almost 700,000 in the first six months of 2008 underline my conviction that we will be able to continue our sustained growth trend, said Stepic.

Balance sheet total above 80 billion euros for the first time

Raiffeisen International took advantage of the favourable growth environment prevailing in CEE once again in the first half of 2008 and considerably expanded its customer business. Loans and advances to customers grew by 15.8 per cent to 56.6 billion euros (year-end 2007: 48.9 billion euros), while deposits from customers increased by 7.8 per cent to 43.6 billion euros (year-end 2007: 40.5 billion euros). The balance sheet total advanced by 10.9 per cent to 80.7 billion euros on 30 June.

Strong earnings growth in customer business  Operating income plus 30 per cent

The operating result of Raiffeisen International continued to develop positively in the first six months of 2008. Operating income grew by 30 per cent to 2.28 billion euros compared to the first half of 2007 (HY 2007: 1.75 billion euros).

The very gratifying development of net interest income, which is the most important earnings component for Raiffeisen International, continued in the second quarter. Net interest income grew by 39 per cent on the comparable period last year from 1,079 million euros to 1,498 million euros. The increase was thus substantially above that of the average balance sheet total of 29 per cent. In the reporting period, there were no material effects due to changes in the scope of consolidation. Net interest income in the retail customer segment grew by 202 million euros, or 31 per cent, on the comparable period in 2007 to 860 million euros. The corporate customer segment registered a plus of 42 per cent to 512 million euros. Significant increases of net interest income were registered in all regional segments. Group units developed best in the CIS, where the increase amounted to 43 per cent, mainly due to higher interest margins in Russia. The plus came to 36 per cent in Central Europe, and 37 per cent in Southeastern Europe. The total interest margin improved by 27 basis points on the first half of 2007 to 3.93 per cent. It was also 7 basis points higher than the full-year figure for 2007 despite heightened funding costs due to the global financial crisis.

Net commission income rose by 23 per cent to 703 million euros. After the considerable pluses in the preceding periods, that growth was somewhat weaker due to lower income from securities transactions and other banking services. Significant increases were achieved in the main earnings components. Foreign exchange and notes/coins business contributed with a plus of 35 per cent to 221 million euros, and loan and guarantee business grew by 38 per cent to 92 million euros. A result of 305 million euros was achieved in the area of payment transfers, which represents a plus of 23 per cent. Growth of net commission income from corporate customers amounted to 25 per cent, and from personal customers to 24 per cent, with almost two-thirds of the total contributed by personal customers. Viewed regionally, growth of net commission income was strongest in Southeastern Europe with a plus of 28 per cent to 221 million euros, followed by Central Europe at 22 per cent to 270 million euros and the CIS at 19 per cent to 212 million euros.

With a plus of 16 per cent, trading profit was below the growth of other operating profit components. It rose by 13 million euros to 92 million euros. The main earnings component was net income from currency-related business, which more than doubled from 43 million euros last year to 89 million euros.

Other operating income amounted to minus 11 million euros after income of 21 million euros last year. This figure includes the effects of consolidating asset management companies in Slovakia, Hungary, and Croatia for the first time, which resulted in a gain of 13 million euros due to the related release of negative goodwill through the income statement.

Continued high capital expenditures for the expansion and improvement of distribution channels

Compared with the year-earlier period, general administrative expenses rose by 247 million euros, or 25 per cent, to 1,250 million euros. No noteworthy effects arose from changes in the scope of consolidation. Because of the relatively moderate increase of general administrative expenses despite continuing capital investment in distribution channel expansion, the cost/income ratio improved by 2.8 percentage points to 54.8 per cent.

Staff expenses accounted for 49 per cent, and hence the largest share, of general administrative expenses. They increased by 120 million euros, or 24 per cent, to 612 million euros. Wages and salaries were responsible for 77 per cent of staff expenses. The share of statutory social security costs amounted to 19 per cent, and voluntary staff expenses made up 3 per cent of the total. The increases in the regions varied. While staff expenses went up by 27 per cent in Central Europe, and by 25 per cent in Southeastern Europe, the rise in the CIS was the smallest at 20 per cent.

The average number of staff rose by 6,333, or 12 per cent, compared with the first half of 2007 to 60,236. With a plus of 3,320 employees, or 24 per cent, Southeastern Europe registered the largest increase in the average number. In Central Europe, the average number of staff grew by 1,699, or 15 per cent, while the figure for the CIS was 1,264, or 5 per cent, above that of the year-earlier period.

Other administrative expenses registered a higher percentage increase than that of staff expenses. They grew by 28 per cent, or 115 million euros, on the comparable period to 521 million euros. At 40 per cent, the strongest rise of other administrative expenses was in the CIS, particularly because of higher rental expenses, while the increase in Central Europe came to 23 per cent, and in Southeastern Europe to 19 per cent. The largest expense items were office space at 141 million euros (plus 34 per cent), IT expense at 67 million euros (plus 28 per cent), and advertising expense at 61 million euros (plus 21 per cent).

The number of business outlets came to 3,077 at the end of June 2008. That represents a net addition of 62 business outlets in the reporting period. New outlets were opened predominantly in Southeastern Europe (75), and there particularly in Romania (34) and Bulgaria (27). In the CIS, 29 branches were closed on balance in the course of further optimization measures, with many new branches currently in preparation especially in Russia.

Strong capitalization  Core capital ratio (credit risk) at 9.6 per cent

Equity shown on Raiffeisen International's balance sheet increased by 9 per cent, or 624 million euros, from the end of 2007 to 7,246 million euros. Set against that plus, resulting from the current year's profit of 646 million euros and capital contributions from minority shareholders to various Group units in the amount of 53 million euros, is a profit distribution of 182 million euros.

Set against own funds is a regulatory own funds requirement of 5,587 million euros, which results in excess cover of about 29 per cent. The requirement amounted to 4,317 million euros at the end of the year under the old regulation, and the increase of 1,270 million euros is largely due to the Basel II effect, and especially to the newly included own funds requirement for operational risk, which amounts to 441 million euros.

The ratio of core capital to credit risk fell accordingly by 1.8 percentage points to 9.6 per cent, and the own funds ratio decreased by 2.1 percentage points to 10.3 per cent. Our capital resources are among the best of all banks in the region. Together with our balanced refinancing mix, in particular including high customer deposits, this is a considerable competitive advantage especially in the light of a market environment which is characterised by uncertainty, said Martin Grll, CFO of Raiffeisen International.

Record result in second quarter 2008

With a consolidated profit of 311 million euros for the second quarter 2008, Raiffeisen International recorded the best quarterly result in its history (discounting the one-off effect from the sale of Raiffeisenbank Ukraine in the fourth quarter 2006). This represents an increase of 57 million euros or 22 per cent compared with the first quarter 2008. Net interest income after provisioning reached 678 million euros in the second quarter 2008, which is also a record and was 37 per cent above the same quarter of the previous year. Net commission income amounted to 372 million euros, with an increase of 25 per cent significantly higher than in the same quarter of 2007.

Outlook and targets unchanged

Building on Raiffeisen Internationals successful mid-market strategy, the corporate customers segment will make the largest contribution to profit before tax again in 2008. In the retail business, the company continues to emphasize expansion of the branch network to support the broadening of the customer base. Moreover, it will further develop its product range in the areas of asset management and insurance in the current year.

Raiffeisen Internationals goal for consolidated profit in 2008 is about 1 billion euros.

The group aims to grow the balance sheet total by at least 20 per cent per year in the period to 2010, with the strongest increases targeted in the retail customer segment.

Raiffeisen International has set a return on equity (ROE) before tax of more than 25 per cent as a goal for 2010. That does not take account of any acquisitions or capital increases. The cost/income ratio should come to about 56 per cent, and the target risk/earnings ratio is about 15 per cent.


Raiffeisen International operates one of the largest banking networks in CEE. 17 markets in Europes growth region are covered by subsidiary banks, leasing companies and a range of other financial service providers. 14.4 million customers are served in more than 3,000 business outlets. Raiffeisen International is a fully consolidated subsidiary of Raiffeisen Zentralbank sterreich AG (RZB), which owns 68.5 per cent of the common stock. The remainder is in free float, the shares are 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 countrys largest banking group.

Raiffeisen Internationals semi-annual report can be accessed under http://qr022008.ri.co.at/. You can also order a printed copy there.

For further information please contact Michael Palzer (+43-1-71 707-2828, michael.palzer@ri.co.at) or Lars D. Hofer (+43-1-71 707-1930, lars.hofer@ri.co.at).

www.ri.co.at,
www.rzb.at

Survey of Key Data


Raiffeisen International Group
Monetary values in  mn

2008

2007

Change

Income statement

1/1-30/6

1/1-30/6


Net interest income after provisioning

1,296.2

925.5

40.1%

Net commission income

702.9

572.2

22.8%

Trading profit

92.2

79.3

16.2%

General administrative expenses

(1,249.9)

(1,002.7)

24.6%

Profit before tax

842.7

606.6

38.9%

Profit after tax

646.4

477.0

35.5%

Consolidated profit (after minorities)

565.7

401.4

40.9%

Balance sheet

30/6

31/12


Loans and advances to banks

10,835

11,053

(2.0)%

Loans and advances to customers

56,627

48,880

15.8%

Deposits from banks

22,547

19,927

13.2%

Deposits from customers

43,608

40,457

7.8%

Equity (including minorities and profit)

7,246

6,622

9.4%

Balance sheet total

80,699

72,743

10.9%

Key ratios

1/1-30/6

1/1-31/12


Return on equity before tax

25.5%

25.7%

(0.2) PP

Return on equity after tax

19.6%

20.2%

(0.6) PP

Consolidated return on equity (after minorities)

19.6%

20.1%

(0.5) PP

Cost/income ratio

54.8%

57.6%

(2.8) PP

Return on assets before tax

2.21%

1.98%

0.23 PP

Net provisioning ratio (risk-weighted assets credit risk)

0.72%

0.84%

(0.12) PP

Risk/earnings ratio

13.4%

14.8%

(1.4) PP

Bank-specific information*

30/6

31/12


Risk-weighted assets (credit risk)

59,394

49,802

19.3%

Total own funds

7,192

6,684

7.6%

Total own funds requirement

5,587

4,317

29.4%

Excess cover

28.7%

54.8%

(26.1) PP

Core capital ratio (Tier 1), credit risk

9.6%

11.4%

(1.8) PP

Core capital ratio (Tier 1), incl. market and operational risk

8.2%

10.5%

(2.3) PP

Own funds ratio

10.3%

12.4%

(2.1) PP

Stock data

30/6

30/6


Earnings per share in 

3.68

2.82

0.86 

Price in 

81.17

117.70

(31.0)%

High in HY1 (closing price) in 

110.20

122.01

(9.7)%

Low in HY1 (closing price) in 

81.17

98.91

(17.9)%

Number of shares in mn

154.67

142.77

8.3%

Market capitalization

12,554

16,804

(25.3)%

Resources

30/6

31/12


Number of staff on balance sheet date

61,844

58,365

6.0%

Number of business outlets

3,077

3,015

2.1%


* Calculated according to the Austrian Banking Act (Bankwesengesetz, BWG). As part of the RZB Group, Raiffeisen International is not subject to the provisions of the Austrian Banking Act. The figures from 2007 accord with the provisions of Basel I; from 2008 onward, the own funds requirement is calculated according to Basel II.
 

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Tel.: +7 495 721-36-17

E-mail: pr@raiffeisen.ru

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E-mail: marketing@raiffeisen.ru

Information center

Tel.: +7 495 721-91-00

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