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16.05.16

Raiffeisenbank announces its 1Q2016 financial results according to IFRS

AO Raiffeisenbank has announced its financial results for the first quarter of 2016. 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.

Raiffeisenbanks profit after tax for the first quarter of 2016 contracted by 29.3% compared to the same period of 2015 on the back of lower net interest income and trading result.

The Banks profitability ratios remain on the high level but have reduced on the back of lower profit: ROE before tax to 25.3% (-10.0 percentage points year-on-year), ROE after tax to 20.0% (-8.5 percentage points year-on-year).

«We continued to increase the share of risk-free business and this allowed us, to a great extent, to compensate the interest income decrease caused by lowering interest rates and planned reduction of the risk-weighted assets, — says Sergei Monin, CEO of Raiffeisenbank — As a result, Raiffeisenbank continues to demonstrate strong results, keeping a leading position in terms of business efficiency».

The Bank has a substantial liquidity cushion: the share of liquid assets remained nearly unchanged compared to the end of 2015 (down 1.1 percentage points) reaching 27.1% as of 31.03.2016. The Banks conservative approach to liquidity management makes it possible to considerably overfulfill the CBRs liquidity requirements: as of 01.04.2016, the H2 ratio was 72.0% (compared to the required minimum of 15%), H3 was 167.4% (compared to the required minimum of 50%), and H4 was 47.0% (compared to the required maximum of 120%).

Following the RBI Groups strategy to reduce the risk-weighted assets, the banks total loan portfolio before provisions dropped by 5.0% to RUB 530 347.1 million due to a decrease in loan portfolios in nearly all business segments: large corporates (down 6.6% to RUB 318 636.3 million), retail business (down 3.0% to RUB 176 430.7 million), small and micro business (down 1.8% to RUB 14 541.5 million).

Following the planned reduction in assets the Bank has contracted due to other banks and term borrowings from the Parent bank (down 39.5% and 23.2% respectively). Customer accounts fell by 3.9% primarily due to the foreign exchange revaluation effect.

The Bank enjoys considerable capital adequacy and fully meets the regulatory capital requirements. H 1.1 and H 1.21 capital ratios remain on the high level and as of 1 April 2016 were 9.9% and 10.8%, respectively (up 1.0 and 0.9 percentage points compared to 01.01.2016). The H 1.0 ratio as of the end of the 1st quarter of 2016 was 14.0%.

Main financial results:

Operating income before provisioning for impairment losses2 dropped by 9.0% and at the end of the 1st quarter of 2016 was RUB 16 276.9 million due to lower net interest income and trading result.

Net interest income before provisioning for impairment losses dropped by 11.4% compared to the 1st quarter of 2015 reaching RUB 10 532.8 million due to the lower market rates (compared to the same period of 2015) and contracted loan portfolio.

Trading result3 in the 1st quarter of 2016 was RUB 2 326.5 million (down 22.4% compared to RUB 2 997.1 million in the 1st quarter of 2015) due to the lower result from the items related to foreign exchange transactions and revaluation4 (down from RUB 2 638.9 million to RUB 1 891.6 million) as a result of the falling gains from revaluation of foreign exchange swaps due to the lower market rates. High unrealized gains on foreign exchange swaps in 1st quarter 2015 represent positive one-off effect as a consequence of substantial interest rates decrease during the quarter.

Net fee and commission income rose by 20.0% to RUB 3 219.7 million mainly due to the higher net commission income on settlement transactions (up 162.4% to RUB 584.5 million on the back of the higher income from service packages for small and micro businesses).

Operating expenses rose by 7.7% to RUB 6 079.1 million due to the growing staff expenses (up 30.4%), mainly resulting from low base effect in 1Q2015 because of the release of provisions for bonuses. The factors that prevented further growth in operating expenses were the decrease of rent expenses (down 25.6%), depreciation of premises and equipment (-14.3%) resulting from the lower number of business outlets.

As a result, cost-to-income ratio rose by 5.8 percentage points compared to the 1st quarter of 2015 and 1.4 percentage points compared to the end of 2015, and reached 37.4%.

During the first three months of 2016 the charge of provisions for loan impairment was at the level of the similar period of 2015 (RUB 4 051.7 million in the 1st quarter of 2016 vs. RUB 3 732.3 million in the 1st quarter of 2015) mainly due to tightening of internal Group requirements to provision calculation. The risk costs5 demonstrated a moderate growth primarily due to a gradual reduction in the average loan portfolio and at the end of the 1st quarter of 2016 reached 3.0% per annum.

Profit before tax at the end of the 1st quarter of 2016 was RUB 6 155.0 million, down 27.7% compared to the same period of 2015. The Bank’s profit after tax was RUB 4 867.1 million.

Gross loan portfolio contracted by 5.0% to RUB 530 347.1 million as a result of the RBI groups strategy to reduce the risk-weighted assets.
The reduction of loan portfolio was nearly in all business segments: large corporates (down 6.6% to RUB 318 636.3 million), retail business (down 3.0% to RUB 176 430.7 million), small and micro business (down 1.8% to RUB 14 541.5 million). The appreciation of rouble compared to the end of 2015 resulted in negative revaluation of the gross loan portfolio, which contributed to its reduction.

The Banks conservative credit policy makes it possible to ensure high quality of assets. The share of loans individually determined to be impaired in the total loan portfolio was 9.3% at the end of the 1st quarter of 2016.

Customer accounts decreased by 3.9% compared to the end of 2015 to RUB 558 753.4 million resulting from the revaluation of foreign exchange current accounts and deposits.

Loan-to-deposit ratio was 94.9% as of 31.03.2016.

Term borrowings from the Parent bank were RUB 42 409.3 million, down by 23.2% compared to RUB 55 241.4 million at the end of 2015 due to scheduled and partial prepayments. The share of the term funding from Parent bank in total banks liabilities was 6.1% as of 31.03.2016.

The banks equity rose by 5.2% or RUB 4 890.4 million compared to the end of 2015 reaching RUB 99 602.9 million primarily as a result of the banks profit after tax earned in the 1st quarter of 2016.

Total Basel III capital adequacy ratio rose 2.5 percentage points compared to the end of 2015 reaching 23.1%. The tier-1 capital adequacy ratio was 17.2% (up 2.4 percentage points compared to the 14.8% as of 31.12.2105).

Income statement

1st quarter 2015,
RUB million
1st quarter 2016,
RUB million
Change, %
Net interest income before provisioning for impairment losses 11 890.5 10 532.8 -11.4%
Charge of provision for loan impairment 3 732.3 4 051.7 +8.6%
Net fee and commission income 2 682.9 3 219.7 +20.0%
Trading result 2 997.1 2 326.5 -22.4%
Administrative and other operating expenses 5 646.1 6 079.1 +7.7%
Profit before tax 8 518.6 6 155.0 -27.7%
Profit after tax 6 887.1 4 867.1 -29.3%
Cost-to-income ratio 31.6% 37.4% +5.8 p.p.
ROE before tax 35.3% 25.3% -10.0 p.p.
ROE after tax 28.5% 20.0% -8.5 p.p.

Statement of financial position

31.12.2015,
RUB million
31.03.2016,
RUB million
Change, %
Assets 858 545.6 791 496.1 -7.8%
Liquid assets 242 316.4 214 871.9 -11.3%
Loans and advances to customers before provision: 558 071.4 530 347.1 -5.0%
Retail customers 181 915.5 1176 430.7 -3.0%
Small and micro business14 807.0 14 541.5 -1.8%
Middle business 20 183.0 20 738.0 +2.8%
Large corporates 341 165.2 318 636.3 -6.6%
Customer accounts 581 270.4 558 753.4 -3.9%
Term borrowing from Parent bank 55 241.4 42 409.3 -23.2%
Equity 94 712.5 99 602.9 +5.2%
Share of loans individually determined
to be impaired in total loan portfolio
8.2% 9.3% +1.1 p.p.
Total Basel III capital adequacy ratio 20.6% 23.1% +2.5 p.p.
H1.0 capital ratio (calculated in accordance
with the CBR methodology)
13.9% 14.0% +0.1 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 Includes the following items: gains less losses from trading in foreign currencies; realized 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.

5 A relation of additional provisions to the average loan portfolio for the period. Annualized.

AO Raiffeisenbank is a subsidiary of Raiffeisen Bank International AG. Raiffeisenbank ranks 13th among the Russian banks in terms of assets, based on Q1 2016 results (Interfax-CEA). According to the same Interfax-CEA data, AO Raiffeisenbank ranked 7th in terms of liabilities of individuals and 8th with regard to consumer lending.

Raiffeisen Bank International AG (RBI) regards both Austria, where it is a leading corporate and investment bank, as well as Central and Eastern Europe (CEE) as its home market. In CEE, RBI operates an extensive network of subsidiary banks, leasing companies and a range of other specialised financial service providers in 15 markets. In total, around 51,700 employees service 14.9 million customers through more than 2,600 business outlets, the great majority of which are located in CEE. Raiffeisen Bank International is a fully-consolidated subsidiary of Raiffeisen Zentralbank Oesterreich AG (RZB). RZB indirectly owns around 60.7 per cent of the shares, the remainder is in free float. RBI’s shares are listed on the Vienna Stock Exchange. RZB is the central institution of the Austrian Raiffeisen Banking Group, the country’s largest banking group, and serves as the group head office of the entire RZB Group, including RBI.

 

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