Difficult environment in the first three quarters of 2014: RBI with a consolidated profit of € 225 million
- Net interest income increases 4.2 per cent to € 2,894 million year-on-year (Q1-Q3/2013: € 2,776 million)
- Operating income decreases 3.0 per cent to € 4,137 million (Q1-Q3/2013: € 4,267 million)
- General administrative expenses decrease 5.5 per cent to € 2,295 million (Q1-Q3/2013: € 2,430 million)
- Net provisioning for impairment losses increases 35.4 per cent to € 1,083 million (Q1-Q3/2013: € 800 million)
- Profit before tax decreases 27.9 per cent to € 502 million (Q1-Q3/2013: € 696 million)
- Profit after tax decreases 43.7 per cent to € 259 million (Q1-Q3/2013: € 461 million)
- Consolidated profit decreases 45.2 per cent to € 225 million (Q1-Q3/2013: € 411 million)
- Non-performing loan ratio increases 0.4 percentage points to 11.1 per cent compared to year-end 2013
- Common equity tier 1 ratio (transitional) increases 0.3 percentage points to 11.0 per cent
- Earnings per share decrease 68.9 per cent to € 0.42 year-on-year (Q3/2013: € 1.34)
All figures are based on International Financial Reporting Standards (IFRS).
In the first three quarters of 2014, Raiffeisen Bank International AG (RBI) generated a profit before tax of € 502 million, which corresponds to a decrease of 28 per cent, or € 194 million, year-on-year. The reporting period was dominated by geopolitical tensions in Ukraine and new strains on the banking sector in Hungary.
Profit after tax decreased 44 per cent to € 259 million year-on-year. Profit attributable to non-controlling interests decreased € 16 million, to minus € 34 million. This resulted in consolidated profit of € 225 million.
Due to the capital increase carried out at the beginning of 2014, the average number of shares outstanding in the reporting period rose to 282.7 million (comparable period in the previous year: 194.9 million). This resulted in earnings per share of € 0.42, which stood at € 1.34 in the comparable period of the previous year.ň
Net interest income rose 4 per cent
Operating income declined 3 per cent, or € 130 million, to € 4,137 million year-on-year.
In the first nine months of 2014, net interest income rose 4 per cent, or € 117 million, to € 2,894 million year-on-year.
Cost/income ratio improved to 55.5 per cent
General administrative expenses were down 6 per cent, or € 135 million, to € 2,295 million year-on-year. The cost/income ratio improved 1.5 percentage points to 55.5 per cent.
At 50 per cent, the largest component in general administrative expenses was staff expenses - a decline of 6 per cent, or € 78 million, to € 1,149 million.
Increase in net provisioning for impairment losses of 35 per cent mainly due to crisis in Ukraine
Compared to the same period last year, net provisioning for impairment losses rose by a total of 35 per cent, or € 283 million, to € 1,083 million. This was primarily due to a € 272 million increase in net provisioning for individual loan loss provisions - of which Ukraine accounted for € 227 million. Net provisioning for portfolio-based loan loss provisions increased € 4 million to € 32 million. This contrasted with lower income (down € 7 million) from the sale of impaired loans.
In the reporting period, the NPL ratio rose 0.4 percentage points to 11.1 per cent compared to year-end 2013. Non-performing loans were set against loan loss provisions of € 6,018 million, improving the NPL coverage ratio to 65.4 per cent compared to 63.1 per cent as at year-end.
Currency development with negative impact on RBI's total capital
As at 30 September 2014, RBI's total capital according to Basel III amounted to € 12,333 million. This corresponds to a decrease of € 353 million compared to the year-end 2013 figure calculated under Basel II and was primarily driven by the negative performance of the Ukrainian hryvnia and Russian rouble. While the capital increase at the beginning of 2014 resulted in a net capital gain, the repayment of state participation capital in June 2014 in the amount of € 1,750 million, as well as the repayment of private participation capital in September 2014 in the amount of € 750 million, had a negative effect on regulatory capital.
The excess cover ratio was 94.2 per cent at the end of the third quarter - compared to 98.5 per cent at year-end 2013 - and was attributable to negative currency development. Based on total risk, the common equity tier 1 ratio (transitional) was 11.0 per cent, with a total capital ratio of 15.5 per cent.
High net provisioning for impairment losses in third quarter with negative impact on results
Compared to the second quarter, net interest income fell 4 per cent, or € 35 million, to € 940 million in the third quarter. Net fee and commission income rose € 15 million to € 404 million compared to the second quarter.
Compared to the previous quarter, net trading income improved from € 28 million to € 30 million. This was triggered by an increase in net income from interest-based transactions in Poland, the Czech Republic, and Romania. In Russia, valuation losses were posted. In contrast, currency-based transactions declined, mainly in Russia and Ukraine, where the significant currency devaluation led to valuation losses on derivatives and foreign currency positions.
Net provisioning for impairment losses rose 80 per cent, or € 228 million, to € 515 million quarter-on-quarter. This was mainly attributable to the Group Corporates segment and Ukraine. Overall, net provisioning for individual loan loss provisions rose € 214 million and portfolio-based loan loss provisions increased € 15 million.
The consolidated loss for the third quarter 2014 was at € 119 million, which is a decrease by € 302 million compared to the previous quarter.
„As expected, the quarterly results were influenced by negative one-off effects. The crisis in Eastern Ukraine resulted in a strong increase of risk costs and the banking hostile legislation in Hungary led to high follow-up costs, while the operating result remained almost stable compared to the previous quarter. We are, to a large extent, satisfied with the business development in our other markets. Therefore, we expect to return to the profit zone in the coming financial year and we anticipate a consolidated profit in the mid triple digit millions," Karl Sevelda, RBI's CEO, commented on the results.
RBI expects loans and advances to customers in 2014 to remain at the approximate level of the previous year. The bank anticipates a net provisioning requirement of approximately € 1,800 million in 2014, however, results may be impacted by a further deterioration of the situation in Ukraine and Russia.
In the course of RBI's cost reduction program, the bank plans to reduce general administrative expenses to below the level of 2012 by 2016. RBI aims to achieve a cost/income ratio of between 50 and 55 per cent by 2016. Costs in 2014 are expected to be below the level of 2013.
As a consequence of the latest developments, a negative result for 2014 is to be expected. For 2015 RBI expects a consolidated profit in the mid triple digit millions.
The bank aims for a return on equity before tax of approximately 14 per cent and a consolidated return on equity of approximately 11 per cent in the medium term.