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16.02.16

Raiffeisenbank: profit after tax more than 3 times up

AO Raiffeisenbank has announced its financial results for 2015. All figures are provided in accordance with International Financial Reporting Standards (IFRS) and may differ from the data on Russia in Raiffeisen Bank International AG (RBI) financial report as a result of the difference arising from consolidation and translation to Euro.

Raiffeisenbank’s profit after tax grew more than 3 times during 2015 and reached RUB 24 853.2 million. Positive dynamics is explained be the following factors: a one-off result from the sale of NPF Raiffeisen in the 4th quarter of 2015, the lower base effect in 2014 following the goodwill impairment, and increase of the trading result and net fee and commission income.

The operating efficiency has substantially increased: the cost-to-income ratio reduced by 9.5 p.p. compared to the same period of 2014 and reached 36.0% (39.3% excluding the result of NPF sale).

By the end of 2015, profitability ratios of the Bank reached the highest values in recent years: ROE before tax rose to 31.9% (up 11.6 p.p. year-on-year) or to 25.6% excluding the result of NPF sale; ROE after tax grew by 9.2 p.p. for the same period reaching 25.4%.

«Growing operating income allows us not only to absorb the risks, but boost our return on equity, — noted Sergei Monin, CEO of Raiffeisenbank. — In the meantime we increase our profit while sustaining our reliability and preserving substantial liquidity cushion, which gives us confidence even in these turbulent economic conditions».

The Bank has a substantial liquidity cushion: the share of liquid assets was up 2.4 p. p. compared to the end of 2014 reaching 28.2%. Raiffeisenbank has continuously outperformed CB’s liquidity requirements: as of 01.01.2016, the H2 ratio was 96.2% (compared to the required minimum of 15%), H3 was 144.5% (compared to the required minimum of 50%), and H4 was 50.1% (compared to the required maximum of 120%).

Following the RBI Group’s strategy to reduce the risk-weighted assets, the bank’s gross loan portfolio dropped by 6.9% to RUB 558 071.4 million. Decrease occurred in loan portfolios of all business segments: retail business (down 13.4% to RUB 181 915.5 million), corporate (down 1.8% to RUB 341 165.2 million), small and micro business (down 30.1% to RUB 14 807.0 million), and middle business (down 2.8% to RUB 20 183.0 million). The dynamics of retail loan portfolio was affected by the amortization of car loans and sale of Far East portfolio.

Customer accounts rose 9.3% compared to the end of 2014 and reached RUB 581 270.4 million due to the growing current accounts and deposits of individuals (up 15.1% and 20.5%, respectively).

H 1.1 and H 1.21 capital ratios remain on the high level and as of 1 January 2016 were 8.9% and 9.9%, respectively. The H 1.0 ratio increased by 1.8 percentage points compared to the end of 2014 reaching 13.9%.

Key financial results

The bank’s operating income before provisioning for loan impairment2 increased by 63.4% and at the end of 2015 reached RUB 72 592.4 million due to one-off effects from 2015 and 2014, and positive developments in the trading result and net fee and commission income.

Trading result3 in 2015 recovered and reached RUB 9 278.5 million (compared to the loss of RUB 303.4 million in 2014). The main contributors to this positive trend were the net income from operations in securities4 (RUB 1 233.5 million vs. the loss of RUB 3 628.6 million in 2014) due to the higher market value of the securities, and the growing result from items related to foreign exchange operations and revaluation5 (up from RUB 3 325.1 to 8 045.0 million) resulting from the higher number of client transactions and positive revaluation of derivatives.

Net fee and commission income increased 14.0% to RUB 12 941.4 million primarily due to the higher net commission from payment transactions (up more than 1.3 times reaching RUB 1 841.3 million driven by the income from maintenance of small and micro business clients accounts, as well as by decrease in commission on agencies fees (by 81.4% to RUB 120.7 million) resulting from the lower commission paid to car dealers. Moreover, net fee and commission income was boosted by commissions on documentary business and guarantees that rose 32.5% reaching RUB 1 561.0 million due to the higher volume of issued letters of credit.

Net interest income before provisioning for impairment losses remained nearly unchanged compared to 2014 (up 0.5%) due to the surpassing growth in interest expense (on customer accounts and interest rate swaps).

Administrative and other operating expenses demonstrated a conservative growth of 4.0% reaching RUB 26 104.7 million as a result of a slight increase in staff costs (+6.2%) and amortization of intangible assets (+58.7%) due to active investments in IT.

The faster growth of the operating income resulted in the reduction in the cost-to-income ratio by 9.5 percentage points compared to 2014 to 36.0%.

In 2015, charge of provisions for loan impairment amounted to RUB 15 430.9 million vs. RUB 7 334.1 million in 2014, which was the result of deterioration of operating environment and conservative approach to loan provisioning. At the same time, the risk cost demonstrated a moderate growth reaching 2.7% per annum at the end of 2015.

Profit before tax amounted to RUB 31 156.8 million, up 153.1% compared to 2014. Profit before tax excluding one-off result from the NPF sale reached RUB 24 993.7 million. The Bank’s profit after tax was RUB 24 853.2 million.

Gross loan portfolio before provisioning dropped by 6.9% to RUB 558 071.4 million in accordance with RBI strategy to reduce risk-weighted assets. Decrease was observed in all business segments: retail business (down 13.4% to RUB 181 915.5 million), corporate (down 1.8% to RUB 341 165.2 million), small and micro business (down 30.1% to RUB 14 807.0 million), and middle business (down 2.8% to RUB 20 183.0 million). The dynamics of retail loan portfolio was affected by the amortization of car loans and sale of Far East portfolio.

The Bank’s conservative loan policy makes it possible to ensure good quality of assets. The share of loans individually determined to be impaired in total loan portfolio rose 2.4 percentage points compared to the end of 2014 reaching 8.2% but was down 0.2 percentage points compared to the 3rd quarter of 2015.

Customer accounts rose 9.3% compared to the end of 2014 and reached RUB 581 270.4 million as a result of growing current accounts and deposits of individuals (up 15.1% and 20.5%, respectively) resulting from the revaluation of foreign exchange accounts and higher demand for deposit products.

Loan-to-deposit ratio was 96.0% at the end of 2015.

Term borrowings from parent bank were RUB 55 241.4 million, down 10.9% compared to RUB 61 993.2 million at the end of 2014 due to scheduled repayments and partial prepayment. The share of the term funding from parent bank in total bank’s liabilities was 7.2% as of 31.12.2015.

The Bank’s equity contracted by 5.9% or RUB 5 945.8 million compared to the end of 2014 and reached RUB 94 712.5 million following the payment of dividends during 2015 in the amount of RUB 30.8 million.

Total Basel III capital adequacy ratio rose 2.3 percentage points compared to the end of 2014 reaching 20.6%. The tier-1 capital adequacy ratio was 14.8%.

Income statement

12 months 2014,
RUB million
12 months 2015,
RUB million
Change, %
Net interest income before provisioning for impairment losses 43 163.5 43 372.4 +0.5%
Charge of provision for loan impairment 7 334.1 15 430.9 +110.4%
Net fee and commission income 11 353.0 12 941.4 +14.0%
Trading result -303.4 9 278.5 -
Administrative and other operating expenses 25 109.8 26 104.7 +4.0%
Profit before tax 12 308.5 31 156.8 +153.1%
Profit after tax 7 670.9 24 853.2 +224.0%
Cost-to-income ratio 45.5% 36.0% -9.5 p.p.
ROE before tax 20.3% 31.9% +11.6 p.p.
ROE after tax 16.2% 25.4% +9.2 p.p.

Statement of financial position

31.12.2014,
RUB million
31.12.2015,
RUB million
Change, %
Assets 893 279.8 858 545.6 -3.9%
Liquid assets 230 784.9 242 316.4 +5.0%
Loans and advances to customers before provisions: 599 343.6 558 071.4 -6.9%
Retail customers 210 110.1 181 915.5 -13.4%
Small and micro businesses 21 172.9 14 807.0 -30.1%
Middle businesses 20 773.8 20 183.0 -2.8%
Corporate 347 282.5 341 165.2 -1.8%
Customer accounts 531 900.5 581 270.4 +9.3%
Term borrowings from the Parent bank 61 993.2 55 241.4 -10.9%
Equity 100 658.4 94 712.5 -5.9%
Share of loans individually determined
to be impaired in total loan portfolio
5.8% 8.2% +2.4 p.p.
Total Basel III capital adequacy ratio 18.3% 20.6% +2.3 p.p.
H1.0 capital ratio (calculated in accordance
with the CB RF methodology)
12.1% 13.9% +1.8 p.p.

1 Calculated on the basis of Basel III requirements in accordance with the methodology of the Central Bank of the Russian Federation.

2 Calculated by subtracting from «Operating income» the following items: «Provisions for loan impairment», «Provisions for credit related commitments», «Provisions for investment securities held to maturity».

3 Trading result includes: losses net of gains from trading securities, gains less losses from other securities at fair value through consolidated profit or loss, gains less losses/(losses, net of gains) from redemption of investment securities available for sale, gains less losses from trading in foreign currencies, unrealized gains less losses/(losses, net of gains) from derivative financial instruments, realized gains less losses from derivative financial instruments (excluding realized result from derivative financial instruments — cross-currency interest rate swaps, currency swaps, and interest rate swaps), foreign exchange translation (losses, net of gains)/gains, net of losses, ineffectiveness from the hedge accounting.

4 Total net income from transactions in trading securities and securities at fair value through consolidated profit or loss.

5 Includes the following items: gains less losses from trading in foreign currencies; realized gains less losses/(losses, net of gains) from derivative financial instruments; unrealized gains less losses/(losses, net of gains) from derivative financial instruments, foreign exchange translation (losses, net of gains)/gains, net of losses; ineffectiveness from the hedge accounting.

 

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