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07.09.05

RZB shows sustained dynamic development

Another record result: first-half profit before tax plus 78 per cent,return on equity 30 per cent, balance-sheet total plus 17 per cent.Network in Central and Eastern Europe enlarged and made even denser.Record-IPO of Raiffeisen International.

The Group headed by Raiffeisen Zentralbank Osterreich AG (RZB) has onceagain delivered an excellent result in the first half of 2005. TheGroup''s remarkable figures regarding return on equity, cost-to-incomeratio and return on assets are the best among Austria''s large banks. Allthis was achieved against the background of a continual slack economy inAustria and the rest of Euroland.

"Thanks to its strong customer-focus and good strategic alignment, RZBhas once again grown more vigorously than the market not only in Austria but also in Central and Eastern Europe, where the banking markets continue to develop rapidly. RZB was therefore able to enhance its good position in its home markets", said RZB-CEO WalterRothensteiner.

High growth-rates in Austria and CEE

RZB was able to sustain the high tempo of its growth, increasing itsBalance-sheet total by 16.5 per cent to 79.1 billion during the first six months of 2005. In other words, as in prior years, its growth far surpassed the average rate of growth calculated for all Austrian banks by Oesterreichische Nationalbank (OeNB), which stood at 6.9 per cent. There were sharp increasesin Loans and advances to customers (13.7 per cent) and Loans and advances to banks (14.4 per cent) as well as in Deposits from customers (14.6 per cent) and Deposits from banks (9.9 per cent).

RZB''s balance-sheet total increased particularly fast in Austria, whereit grew by 15.1 per cent compared with year-end 2004 to total 39.1 billion at the end of the period under review. The 13.7 per cent increase in the balance-sheet total of Raiffeisen International Bank-Holding AG (Raiffeisen International) to 32.9 billion also demonstrated RZB''s high growth path.

CEE network enlarged and condensed

In particular, RZB''s network in the CEE region, which operates under theumbrella of Raiffeisen International, continued to grow and to condense.For instance, Raiffeisen International set up a finance leasingsubsidiary in Kazakhstan and laid the foundations for the takeoveragreement of Bank Aval signed in August."The acquisition of Bank Avalwill turn RZB into the largest bank in the Ukraine. The bank, which is aspecialist in personal banking and business with small and medium-sizedenterprises, is an excellent complement of Raiffeisenbank Ukraine, whichis primarily focused on corporate banking", said Rothensteiner.

However, RZB''s expansion is mainly based on organic growth and theenlargement of the branch network in CEE. The group had 971 businessoutlets in the region at the end of the first half of 2005, as against832 a year earlier. Bank Aval will add roughly another 1,400 branches.As of June 2005, RZB had a presence in 17 markets in the region through15 banking subsidiaries, numerous specialist subsidiaries and tworepresentative offices.

Rising earning power and impressive profit growth

"RZB''s earning power in day-to-day operations remains excellent,validating the chosen growth-path, as the results have to be seen incontext with continuing high investments for the ongoing expansion",explained Rothensteiner.

Net interest income after provisioning was 47.4 per cent up on the sameperiod of 2004, first-half Net commission income advanced by 23.5 percent, and Trading profit increased by 10.2 per cent.

First-half Profit before tax was 78.4 per cent up on the year at 546.2 million. By comparison, the average profit from ordinary activities of all Austrian banks applying Austrian financial reporting standards as projected by OeNB rose by just 7.2 per cent.

Consolidated profit rose by 48.8 per cent to 330.7 million. The increase was smaller than the advance in profit before tax because of a hefty increase of 148 per cent in tax expense to 110.4 million and because Raiffeisen International''s IPO also substantially increased minority interests in profit.

Strong ratios ROE 30.1%, ROA 1.49%, CIR 52.5%

Despite a double-digit increase in equity, RZB''s Return on equity (ROE)before tax of 30.1 per cent was much higher than that of other majorAustrian banks. In addition, its Return on assets before tax of 1.49 percent and its Cost-to-income ratio of 52.5 per cent were also better thanthose of this peer group. The proceeds from the sale of shares inRaiffeisen International benefited these ratios. However, this one-offeffect of the IPO accounted for only about a fifth of RZB''s profitbefore tax.

Solid Capital base

Aggregate own funds increased by 11.9 per cent to 4.6 billion during the first half of 2005 and the Excess cover ratio remained very high at 28.6 per cent. The Group''s Own funds ratio was 10.3 per cent, while the Core capital ratio amounted to 9.8 per cent. Therefore, RZB''s overall capital position is very healthy. Given further profit retention, it should suffice to finance the Group''s medium-term plans.

IPO of Raiffeisen International

Raiffeisen Internationals IPO was RZBs most important equity transaction during the first half of 2005. Net of issuing costs, Raiffeisen Internationals proceeds from its IPO in April came to about 555 million. The Regional Raiffeisen Banks sold their entire stake in Raiffeisen International in the process, while RZB, EBRD and IFC sold parts of theirs. With a total volume of 1.11 billion, it was the largest in the history of Austria. Oversubscription of the order book by a factor of 22 and the biggest-ever daily traded volume on the Vienna stockexchange also made it into the Austrian record books.

Raiffeisen Zentralbank remains Raiffeisen Internationals largest shareholder by far with a stake of about 70 per cent. The EBRD and the IFC together hold a total of about 6 per cent, and the free float of Raiffeisen International, which is listed on the Vienna stock exchange, now accounts for about 24 per cent.

1,900 jobs created

The highly skilled workforce is one of the most valuable assets of RZB.With the extension of the branch network in CEE the staff numberincreased again. As of June 2005, the number of staff rose by 7.4 percent to 27,200 (in full-time equivalents). The growth in Austria was 4per cent to 2,468 and in CEE 7.7 per cent to 24,448.

A PDF file of the Interim Report for the first half of 2005 is availablein the Internet at http://www.rzb.at/zwischenbericht2005. The Englishversion is available at http://www.rzb.at/interimreport2005. You willfind Raiffeisen International''s semi-annual results athttp://www.ri.co.at, Company Info, Business Development.

For further information please contact Andreas Ecker-Nakamura (+43.1/71707-1753, andreas.ecker@rzb.at) or Michael Palzer (+43.1/717 07-1504,michael.palzer@ri.co.at).

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