AO Raiffeisenbank announces its financial results for the first six months of 2016. All figures are provided in accordance with International Financial Reporting Standards (IFRS) and may differ from the Russian data in Raiffeisen Bank International AG (RBI) financial report as a result of the difference arising from consolidation and translation to Euro.
Raiffeisenbank’s net profit for 6 months of 2016 increased by 5.7% compared to the same period in 2015 and reached RUB 12,435.5 million due to reduction in charge of provision for loan impairment and growth of the net fee and commission income.
Returns on equity (ROE before and after tax) of the Bank remained at a high level in the first six months, showing growth compared to the same period in 2015 by 2.4 percentage points to 31.6% and by 1.1 percentage points to 24.9%, respectively.
«Raiffeisenbank’s profit for six months of this year has exceeded the half-year figures of the recent years,» said Sergey Monin, CEO, AO Raiffeisenbank. «We’ve managed to achieve such a result in spite of declining interest rates and the planned reduction of the asset portfolio. The diversified business model of the bank enables us to increase the fee and commission income against the decline in trading result and interest income. In turn, our traditionally conservative lending policy has given us an opportunity to reduce the risk cost and provision charges in the first half of 2016.
The Bank historically maintains a considerable liquidity cushion. By the end of June 2016, the share of liquid assets was 28.7% (up 0.5 percentage point compared to the end of 2015). The Bank considerably outperformed CBR liquidity requirements: as of 01.07.2016, the H2 ratio was 92.8% (compared to the required minimum of 15%), H3 was 223.4% (compared to the required minimum of 50%), and H4 was 43.7% (compared to the required maximum of 120%).
Gross loan portfolio dropped by 7.4% for 6 months of 2016 reaching RUB 516,848.5 million. This dynamics is explained by negative currency revaluation effect due to ruble appreciation. In real terms the decrease of loan portfolio was around 2.2%, which comply with the RBI Group’s strategy to reduce risk-weighted assets.
Following the planned reduction in RWA the Bank decreased due from other banks and term borrowings from parent bank (down 79.2% and 32.2% respectively). Customer accounts decreased by 0.9% due to negative currency revaluation effect as a result of the rouble strengthening. In real terms customer accounts increased by around 5.1%.
The Bank enjoys considerable capital adequacy and fully meets the regulatory capital requirements. H 1.1 and H 1.21 capital adequacy ratios remain on the high level and as of 1 July 2016 were 9.9% and 10.7%, respectively (up 1.0 and 0.8 percentage points compared to 01.01.2016, the required minimums were 4.5% and 6.0%). H 1.0 ratio was 14.7% on the same date (compared to the required minimum of 8.0%).
In the first half of 2016 profit before tax reached RUB 15,775.8 million, having exceeded the six-month figures for the past few years. The increase relative to the first half of 2015 amounted to 9.1% due to lower charge of provision for loan impairment and a significant growth of the net fee and commission income.
Within 6 months of 2016 charge of provision for loan portfolio impairment was RUB 4,888.5 million, which is 35.0% lower than the provision charge over the same period in 2015 (RUB 7,516.6 million), mainly due to reduced provisioning in the retail segment (RUB 2,450.9 million in the first half of 2016 compared to RUB 4,822.4 million for the same period in 2015) as a result of the improved portfolio quality. At the same time, risk cost2 reduced to 1.8% (-1.2 percentage points compared to the 1st quarter of 2016 and −0.9 percentage points compared to the end of 2015).
Net fee and commission income rose by 18.1% to RUB 6,537.9 million due to the higher net commission income on settlement transactions (twofold increase to RUB 1,344.5 million) because of the higher income from service packages for small and micro businesses.
«The growth of the fees and commission income in small business is the result of our work during the past few years», commented Andrey Stepanenko, the head of the Retail Private Individuals and Small Enterprises Directorate of AO Raiffeisenbank. — «Our goal is to become the leader among the banks serving this segment. During this time we have increased the customer base by 40%, and we have significantly expanded the product line this year.»
Net interest income before provisioning for impairment losses dropped by 4.0% compared to the 1st half of 2015 reaching RUB 20,989.4 million. These dynamics are explained by the contracted loan portfolio and lower market rates in 2016.
Trading result3 for 6 months of 2016 amounted to RUB 4,312.0 million, which is 25.2% lower than in the first half of 2015. The decline is explained primarily by the lower result of income items related to foreign exchange transactions and revaluation4 (RUB 3,583.2 million in 1H2016 and RUB 4,597.1 million in 1H2015) caused by lower income from the revaluation of foreign exchange swaps. High unrealized gains on foreign exchange swaps in 1st half of 2015 represent positive one-off effect as a consequence of substantial interest rates decrease during the period.
Operating income before provisioning for impairment losses5 dropped by 4.2% and at the end of the 1st half of 2016 was RUB 32,184.1 million due to lower trading result and net interest income.
Operating expenses remained almost unchanged and amounted to RUB 11,524.7 million (a decrease of 1.1% compared to the first half of 2015), thus maintaining the cost/income ratio (CIR) at a low level. For the 1st half of 2016, CIR was 35.8% (a decrease of 1.6 percentage points compared to the 1st quarter of 2016 and an increase of 1.1 percentage points compared to the same period of the previous year).
Loan portfolio before provisioning dropped by 7.4% within 6 months of 2016 and amounted to RUB 516,848.5 million. This dynamics is explained by the negative revaluation of foreign currency loans due to a decline in the rouble exchange rate (in real terms decrease was around 2.2%), as well as the RBI Group’s strategy to reduce risk-weighted assets. Loan portfolio decreased in all business segments: large corporates (down 10.8% to RUB 304,463.9 million), retail business (down 2.3% to RUB 177,702.1 million), small and micro businesses (down 1.4% to RUB 14,602.5 million), middle business (down 0.5% to RUB 20,079.9 million).
Retail loan portfolio decreases due to the amortisation of the car loans portfolio (-28.8% compared to the end of 2015). At the same time, the mortgage loan portfolio was actively growing during 6 months of 2016 (+5.8% compared to the end of 2015) and amounted to RUB 54,478.2 million as a results of strong demand for this product from customers.
The share of loans individually determined to be impaired in the total loan portfolio of the Bank was 8.5% for 6 months of 2016, having dropped by 0.8 percentage points compared to the 1st quarter of 2016.
Customer accounts remained almost unchanged compared to the end of 2015 (down 0.9%) and amounted to RUB 576,139.5 million due to the influence of negative revaluation of foreign currency accounts (in real terms customer accounts were up by around 5.1%) Retail accounts decreased by 4.2% in nominal terms, while in real terms they grew by around 2.5%. Corporate accounts increased by 4.9% to RUB 223,258.0 million resulting from the growing current accounts by 19.1%.
Loan-to-deposit ratio was 89.7% as of 30.06.2016.
Term borrowings from parent bank amounted to RUB 37,444.2 million, down 32.2% compared to RUB 55,241.4 million at the end of 2015 due to partial repayments and foreign currency revaluation effect. The share of the term funding from parent bank in total bank’s liabilities dropped to 5.5% for 6 months of 2016.
The bank’s equity rose by 10.9% or RUB 10,349.6 million compared to the end of 2015 reaching RUB 105,062.1 million primarily resulting from the net profit received in the 1st half of 2016.
Total Basel III capital adequacy ratio kept on growing and rose by 3.9 percentage points compared to the end of 2015 reaching 24.5% (regulatory minimum — 8.0%). The tier-1 capital adequacy ratio was 19.2% (+4.4 percentage points compared to 14.8% as of 31.12.2015, regulatory minimum — 4.5%).
|6 months 2015, |
|6 months 2016, |
|Net interest income before provisioning for impairment losses||21,862.1||20,989.4||-4.0%|
|Charge of provision for loan impairment||(7,516.6)||(4,888.5)||-35.0%|
|Net fee and commission income||5,537.6||6,537.9||18.1%|
|Administrative and other operating expenses||(11,653.5)||(11,524.7)||-1.1%|
|Profit before tax||14,458.3||15,775.8||9.1%|
|Cost/income ratio ratio||34.7%||35.8%||+1.1 p.p.|
|ROE before tax||29.2%||31.6%||+2.4 p.p.|
|ROE after tax||23.8%||24.9%||+1.1 p.p.|
|Liquid assets||242 316.4||225,591.4||-6.9%|
|Loans and advances to customers before provision:||558 071.4||516,848.5||-7.4%|
|Retail customers||181 915.5||177,702.1||-2.3%|
|Small and micro business||14 807.0||14,602.5||-1.4%|
|Middle business||20 183.0||20,079.9||-0.5%|
|Large corporates||341 165.2||304,463.9||-10.8%|
|Customer accounts||581 270.4||576,139.5||-0.9%|
|Term borrowing from Parent bank||55 241.4||37,444.2||-32.2%|
|Share of loans individually determined |
to be impaired in total loan portfolio
|Total Basel III capital adequacy ratio||20.6%||24.5%||+3.9 p.p.|
|H1.0 capital ratio (calculated in accordance |
with the CBR methodology)
1 Calculated on the basis of Basel III requirements in accordance with the methodology of the Central Bank of the Russian Federation.
2 Charge of provisions for loan impairment divided by the average loan portfolio for the period. Annualised.
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, unrealised gains less losses/(losses, net of gains) from derivative financial instruments, realised gains less losses from derivative financial instruments, 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; unrealised gains less losses/(losses, net of gains) from derivative financial instruments; realised 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 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».
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.