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09.11.06

Raiffeisen International continues on record path.

Consolidated profit amounts to 539.3 million euros. Balance-sheet totalexceeds 50 billion euros. Return on equity is 30.6 per cent (26.5 percent without one-off effect). Retail customers provide strongest growthdynamics. The CIS contributes one third to pre-tax result.

Raiffeisen International Bank-Holding AG, which is part of theRaiffeisen Zentralbank Osterreich AG (RZB) Group, once again achieved arecord result for the first three quarters of 2006, with a consolidatedprofit (after tax and minorities) of 539.3 million euros. This result ishigher by 93.3 per cent, compared to the figure for the previous year.Even when discounting the one-off effect of selling the share of almosteight per cent in Kazakh JSC Bank TuranAlem (BTA), the amount of 437.3million euros would still exceed the respective figure for the sameperiod of 2005 by nearly 57 per cent. As in the previous quarters,profit before tax (752.6 million euros, plus 80.7 per cent) and profitafter tax (611.3 million euros) are also on a record level. Earnings pershare went up by 1.72 euros to 3.78 euros. All figures are based onInternational Financial Reporting Standards (IFRS).

In the third quarter, Raiffeisen International achieved a consolidatedquarterly profit (after tax and minorities) of 250.1 million euros. Thisamount includes the sale of the minority share in BTA, with a net gainof 102.0 million euros, as a one-off effect. Without this factor, theresult for the quarter would be in the range of the second quarter.

For Herbert Stepic, CEO of Raiffeisen International, this confirmsRaiffeisen International''s strategy:"Orienting our business policy tothe retail business and continuing our regional expansion in the CISboth pay off. We currently have more than 11.7 million customers andcontinue to grow by 100,000 customers per month. The CIS alreadycontributes one third to the consolidated result, when leaving asideextraordinary effects."

Balance-sheet total exceeds 50 billion euros

With the strong growth of the balance-sheet total during the thirdquarter, the mark of 50 billion euros was exceeded in September 2006.Since year-end 2005, the balance-sheet total of Raiffeisen Internationalhas expanded by 23.7 per cent or 9.6 billion euros to 50.33 billioneuros. Loans and advances to customers make up the lion''s share of thisgrowth (plus 31.6 per cent or 7.8 billion euros to 32.5 billion euros).Almost 60 per cent of the increase comes from retail customers. Depositsfrom customers went up by 20.9 per cent and amounted to 30.1 billioneuros.

A comparison to the third quarter 2005 shows the following main changesin the consolidated group: Ukrainian JSPP Bank Aval (re-branded to OJSCRaiffeisen Bank Aval) was added to the consolidated group in the fourthquarter 2005. JSC Impexbank in Moscow, as well as Budapest-locatedRaiffeisen Real Estate Management Zrt. (a real-estate developmentcompany), together with its project companies (REM Group), joined theconsolidated group in the second quarter 2006, accounting for changes of1.9 billion euros. Due to partly considerable depreciation of some CEEcurrencies (especially the Hungarian forint, the Ukrainian hryvnia andthe Polish zloty), the balance-sheet total was reduced by 0.6 billioneuros so that organic growth was slightly more than 8.3 billion euros or20 per cent, after allowing for these two factors.

Clear increase of operating income, further improvement of cost/incomeratio

Operating income grew by 54.5 per cent or 717.1 million euros to 2,033.6million euros. Net interest income rose by 48.7 per cent to 1,250.7million euros, which is higher than the growth in business volume. Netcommission income improved the most, namely by 135.0 per cent or 379.6million euros, amounting to 660.9 million euros. A large part of thisgrowth derives from the reclassification of income from customermargins, begun in 2006, which had previously been entered as tradingprofit. These customer margins grew strongly and reached 158 millioneuros. On account of the clearly expanded volume of customers andtransactions, other commission income also increased, namely by 79 percent or 221 million euros. The interest margin improved by 20 basicpoints to 3.73 per cent compared to the same period 2005."We are verypleased with the development of our income structure. It reflects theexpansion of our customer base and the success of our cross-sellinginitiatives," said Martin Groll, CFO of Raiffeisen International.

During the first nine months, administrative expenses rose by 47.7 percent or 373.6 million euros to 1,156.4 million euros over the figure forthe previous year. The integration of the banks acquired in Ukraine andRussia accounted for about 200 million euros of this sum. The organicincrease of administrative expenses was therefore only 21 per cent or165 million euros, which was mostly due to continued investments intonew locations and business segments. The cost/income ratio improved by2.6 percentage points year-on-year and amounted to 56.9 per cent.

After three quarters, profit from operating activities was 877.2 millioneuros, an increase of 64.3 per cent or 343.4 million euros over the yearbefore. About 120 million euros of this growth comes from the newlyconsolidated entities– especially Raiffeisen Bank Aval and Impexbank.

In comparison to the same period last year, provisioning for impairmentlosses rose by 91.8 per cent or 109.8 million euros to 229.3 millioneuros. Of that increase, 63 million euros is attributable to newlyconsolidated companies, and hence to the CIS. Of total provisioning forimpairment losses, that region accounted for 43 per cent, and CentralEurope and Southeastern Europe for 28 per cent and 29 per cent,respectively.

Return on equity improved again

At 30.6 per cent, return on equity (ROE) before tax is 8.8 percentagepoints above the value of year-end 2005, without the mentioned one-offeffect it would still amount to 26.5 per cent (plus 4.7 percentagepoints). Average equity rose by 25 per cent to 3,276 million euros; theincrease in profit is considerably above this value, especially due tothe one-off effect. Consolidated ROE (after tax and minorities) reached26.1 per cent, which is 8.9 percentage points higher than at year-end2005.

Since year-end 2005, equity shown on Raiffeisen International''s balancesheet grew by nearly 17 per cent or 548 million euros to 3,824 millioneuros. Set against the increase in equity– resulting from the current year''s profit after tax in the amount of 611.3 million euros and equity contributions from minority companies in various Group entities totaling 74 million euros – is a profit distribution for 2005 of altogether 94 million euros. Exchange-rate movements regarding several CEE currencies and the corresponding capital hedges resulted in a slight increase of equity by 3 million euros.

The Tier 1 ratio, banking book, which is of significance for assessingfinancial strength, amounts to 7.2 per cent (year-end 2005: 9.0 percent). The Tier 1 ratio, including market risk, amounts to 6.5 per cent(year-end 2005: 8.0 per cent) and is thus clearly above the minimumratio of four per cent required by law. The profit retained for 2006, aswell as the proceeds from the sales of JSC Raiffeisenbank Ukraine andthe participation in BTA, will significantly increase both ratios at theend of this year.

Segment reporting

Raiffeisen International has structured its business activitiesaccording to customer segments and regions:

Retail customers showbiggest growth dynamics

When presenting the result according to business sectors, the mostimportant element is the growth of profit before tax deriving from theRetail Customers segment by as much as 157 per cent to 219.4 millioneuros. This clearly reflects the economies of scale that were targetedby investing into products and market presence in the past years. Theshare in the overall result is thus 29 per cent, which is an increase by8 percentage points over the comparable period of the previous year. Thereturn on equity before tax of this segment was 27.8 per cent, comparedto 16.2 per cent for the same period last year.

The result of the Corporate Customers segment improved by 51 per centand amounted to 350.1 million euros. Its contribution to the overallresult is 47 per cent, which still makes it the most important customersegment. Moderate increases in administrative expenses and growth ininterest income above the level of the business volume contributed tothis development. This segment''s ROE was 31.7 per cent, compared to 25.2per cent for the same period of the previous year.

The Treasury segment recorded below-average growth. Its pre-tax profitwent up by 7 per cent to 143.1 million euros, which is mainly due to theslacker income from interest. The ROE went down from 40.1 per cent in2005 to 33.1 per cent this year.

The CIS contributes one third to the result

From a regional perspective, the CIS showed the largest increase by farin profit before tax (up by 228 per cent to 315.9 million euros). Thementioned one-off effect of the sale of the minority share in BTAaccounted significantly for this increase. Discounting this effect, theCIS contributed one third to the pre-tax result (up ten percentagepoints against September 2005). The ROE before tax (net of the one-offeffect), as recorded for this region, amounted to 31.4 per cent (after30.6 per cent for the same period last year). The cost/income ratio wentup from 41.2 to 54.9 per cent on account of the focus of Raiffeisen BankAval and Impexbank on retail customers.

The other regions also clearly increased their results. The pre-taxresult of the Group units in Central Europe grew by 28 per cent to 231.2million euros and accounted for 35 per cent of the overall resultdisregarding the one-off effect (down by 8 percentage points). The ROEimproved by 4.3 percentage points and amounted to 22.9 per cent, and thecost/income ratio went up by 5.9 percentage points to 58.6 per cent.

The Group companies in Southeastern Europe improved their performance by47 per cent and recorded a profit before tax of 205.4 million euros,contributing 32 per cent to the overall result disregarding the one-offeffect (down by 2 percentage points). This region''s ROE improved by 3.4percentage points to 26.8 per cent, and the cost/income ratio went downby 5.1 percentage points to 57.1 per cent.

Outlook

In view of the positive business development in the past few months, themanagement now expects consolidated profit for 2006 of about 550 millioneuros excluding the proceeds from the sale of Raiffeisenbank Ukraine andthe proceeds from the sale of the minority stake in Bank TuranAlem inKazakhstan.

The management expects annual growth of the balance sheet total by atleast 20 per cent annually in the period to 2008. The largest increasesare anticipated in the CIS, partly because of the acquisitions madethere.

The company forecasts an ROE before tax of more than 25 per cent for theyear 2009. The cost/income ratio is expected to be below 58 per cent.The management has set the target for the risk/earnings ratio at about15 per cent.

You can download the quarterly report at http://www.ri.co.at.



RaiffeisenInternational operates one of the leading banking networks in CEE withsubsidiary banks and leasing companies in 16 markets. More than 11.7million customers are attended to at more than 2,775 business outlets.Representative offices in Lithuania and Moldova complement the Group''spresence in the region. Raiffeisen International is a fully consolidatedsubsidiary of Raiffeisen Zentralbank Osterreich AG (RZB), which owns 70per cent of the common stock. The remaining 30 per cent is free float.The shares are traded on the Vienna Stock Exchange. RZB is a leadingcorporate and investment bank in Austria and the central institution ofthe Austrian Raiffeisen Banking Group, the country''s largest bankinggroup.

For further information please contact Michael Palzer (+43-1-71707-1504, michael.palzer@ri.co.at) or Martin Schreiber (+43-1-71707-1562, martin.schreiber@ri.co.at).

http://www.ri.co.at, http://www.rzb.at

 

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