Raiffeisen Bank International with consolidated profit of € 277 million in the first half 2013
- Net interest income increases by 4.2 per cent to € 1,836 million (HY 2012: € 1,762 million)
- Net interest margin up by 42 basis points year-on-year to 3.06 per cent
- Net fee and commission income increases by 9.0 per cent to € 785 million (HY 2012: € 721 million)
- Operating income up by 2.7 per cent to € 2,686 million (HY 2012: € 2,614 million)
- General administrative expenses rise by 6.5 per cent to € 1,617 million (HY 2012: € 1,518 million)
- Net provisioning for impairment losses up by 17.3 per cent to € 469 million (HY 2012: € 400 million)
- Profit before tax declines by 49.6 per cent to € 467 million due to one-off effects (HY 2012: € 927 million)
- Consolidated profit decreases by 60.5 per cent to € 277 million (HY 2012: € 701 million)
- Non-performing Loan Ratio increases to 9.9 per cent (up 0.1 percentage points compared to year-end 2012)
- Core Tier 1 Ratio (total risk) at 10.4 per cent (year-end 2012: 10.7 per cent)
- Earnings per share decrease from € 3.09 in the comparative period of 2012 to € 0.91
All figures are based on International Financial Reporting Standards (IFRS).
Despite the ongoing difficult market environment and subdued economic forecasts, Raiffeisen Bank International AG (RBI) generated in the first six months of 2013 a profit before tax of € 467 million. The fall of € 460 million versus the comparable period was primarily attributable to one-off effects in the first half of 2012 such as the sale of bonds and the repurchase of hybrid core capital totaling € 272 million. Profit after tax declined by 57.6 per cent to € 311 million (HY 2012: € 734 million) due to the increased tax quota. Consolidated profit decreased by 60.5 per cent to € 277 million (HY 2012: € 701 million). Earnings per share declined from
€ 3.09 in the first half of 2012 by € 2.18 to € 0.91.
While net income from derivatives and liabilities declined € 167 million in the first half of 2013, a rise in both net fee and commission income and net interest income - especially due to an improved net interest margin - had a positive impact on operating income and thus also on profit before tax. Net interest margin (calculated on interest-bearing assets) increased 42 basis points to 3.06 per cent due to repricing measures in the deposit business as well as an optimization of liquidity.
"Against the backdrop of a still challenging environment, we are not dissatisfied with our results. Particularly the positive signals, such as the improved net interest margin and the increased operating income in combination with signs of an economic recovery, make us confident for the second half of the year", said RBI CEO Karl Sevelda.
Return on Equity before tax declined by 8.7 percentage points to 8.6 per cent.
Operating income increased by 2.7 per cent
Operating income increased by 2.7 per cent or € 71 million to € 2,686 million year-on-year. (HY 2012: € 2,614). This rise is mainly attributable to the € 65 million improvement in net fee and commission income, which was achieved through price adjustments in some markets but also through higher transaction volume.
Net interest income also developed favorably: In the first six months of 2013, net interest income rose 4 per cent, or € 75 million, to € 1,836 million year-on-year. At 68 per cent, it remains the largest component of operating income. The decrease in interest income due to lower lending volume was fully offset by lower interest expenses for customer deposits. Interest income from derivatives increased 30 per cent or € 50 million to € 213 million (predominantly at Group head office).
Net fee and commission income rose 9 per cent, or € 65 million, to € 785 million year-on-year. Of this increase, € 34 million, or 52 per cent, is attributable to a significant improvement in net income from payment transfer business. This resulted primarily from higher fees in Hungary following the introduction of the financial transaction tax, the Polbank consolidation, and a volume-driven increase in income from credit card business in Russia.
Net trading income fell 16 per cent or € 26 million to € 140 million year-on-year, Group head office posted a € 49 million decline in interest-based transactions, due to valuation losses on derivatives. However, this decrease was practically offset by improved net income from currency-based transactions, credit derivatives business, and other transactions.
In total, RBI's operating result amounted to € 1,069 million for the first half of 2013, which represents a decline of 2.6 per cent compared to the first half of 2012 (HY 2012: € 1,097 million).
Net provisioning for impairment losses increased
Net provisioning for impairment losses totaled € 249 million in the second quarter of 2013, up € 30 million from the previous quarter, which was within the expected range. Nearly all CEE countries reported an increase, whereas net provisioning in the Group Corporates segment was lower in the second quarter compared to the previous quarter. A number of larger defaults by corporate customers at Group head office had resulted in higher need for net provisioning for impairment losses in the previous quarter.
In the second quarter of 2013, the portfolio of non-performing loans to non-banks was down € 92 million to € 8,137 million. This was primarily attributable to currency effects of € 83 million. On a currency-adjusted basis, increases were posted in Central Europe (up € 109 million - predominantly in Poland, Hungary and Slovakia) and in Southeastern Europe (up € 39 million - chiefly in Croatia, Albania and Romania). All other segments reported declines (Group Corporates: down € 78 million, Group Markets: down € 42 million, CIS Other: down € 33 million). The NPL ratio remained constant at 9.9 per cent whereas the NPL coverage ratio fell 0.2 percentage points to 67.3 per cent quarter-on-quarter.
Higher general administrative expenses
General administrative expenses rose € 99 million to € 1,617 million compared to the same period last year; most of which was attributable to the consolidation of Polbank in May 2012 and its ongoing integration. Despite increases in operating income, the cost/income ratio thus rose 2.1 percentage points to 60.2 per cent.
Staff expenses, at 50 per cent, provided the largest component in general administrative expenses: a 6 per cent increase, or € 48 million, to € 815 million. This increase mainly resulted from the Polbank consolidation, salary adjustments in Russia, and collective wage increases at Group head office. In contrast, cost reductions in Ukraine as well as staff reductions in Hungary had a positive effect.
The average number of employees (full-time equivalents) fell by 2,290 to 59,393 year-on-year. The largest reductions occurred in Ukraine (down 1,317), Romania (down 533), Hungary (down 142), and Bulgaria (down 135).
Other administrative expenses increased 8 per cent or € 43 million to € 615 million. Although several countries posted considerable reductions, the Polbank consolidation, outsourcing of IT activities at Group head office and an increase in advertising campaigns in Russia, resulted in an overall increase.
Depreciation of tangible and intangible fixed assets rose 5 per cent, or € 9 million, to € 186 million, largely due to the Polbank consolidation and to the impairment of buildings in Russia.
Total assets declined 4 per cent compared to the end of 2012
Compared to the end of 2012, RBI's total assets declined 4 per cent or € 5.8 billion to € 130.3 billion in the first half of 2013. The year-on-year decrease is more pronounced, down 15 per cent, or € 22.4 billion. This is primarily attributable to the ongoing optimization of liquidity.
Compared to year-end 2012, loans and advances to customers after deduction of loan loss provisions fell € 1.4 billion to € 76.5 billion, mainly due to a decrease of € 0.8 billion in receivables from repurchase and securities lending transactions. Credit business with corporate customers declined € 1.0 billion, notably in Austria and Asia. By contrast, business with retail customers increased € 0.3 billion, particularly in Russia while it fell in Poland due also to currency effects.
By contrast, deposits from customers rose slightly by € 0.3 billion, to € 66.6 billion. Whereas short-term deposits from corporate customers (notably at Group head office) grew € 0.6 billion and those from the public sector (predominantly in Russia) were up € 0.7 billion, short-term deposits from retail customers fell € 1.0 billion. The largest declines occurred in Poland (down € 0.7 billion), the Czech Republic (down € 0.2 billion), and Hungary (down € 0.2 billion).
Core Tier 1 Ratio at 10.4 per cent
RBI's equity on the statement of financial position, consisting of consolidated equity, consolidated profit and the capital of non-controlling interests, declined 4 per cent, or € 445 million, to € 10,428 million versus year-end 2012.
The excess cover ratio fell 5.5 percentage points to 89.0 per cent, representing an excess cover of € 5,892 million. Based on total risk, the core tier 1 ratio came to 10.4 per cent, with a tier 1 ratio of 10.9 per cent. The own funds ratio declined to 15.1 per cent.
As of June 30, 2013 the number of business outlets was 3,056 which equates to a reduction of 50 business outlets (1.6 per cent) compared to year-end 2012.
Net interest income rose 12 per cent in the second quarter of 2013
Compared to the first quarter of 2013, net interest income rose 12 per cent, or € 107 million, to € 972 million in the second quarter of 2013. The net interest margin (calculated on interest-bearing assets) improved 37 basis points quarter-on-quarter, to 3.25 per cent. The main factors responsible for the improvement were the continued optimization of the liquidity position and a reduction in high-interest customer deposits.
The consolidated profit for the second quarter was at € 120 million, which is a reduction by € 37 million or 23.5 per cent compared to the previous quarter.
In the context of the expected overall economic developments, particularly in CEE, RBI is aiming for a return on equity before tax of around 15 per cent in the medium term. This is excluding any capital increases, as well as unexpected regulatory requirements from today's perspective.
In 2013, RBI aims to maintain loans and advances to customers at the level of the previous year. In the current year RBI expects a slight increase in the net interest margin. From the customer standpoint, RBI plans to retain its Corporate Customers division as the backbone of its business and in the medium term to expand the proportion of business volume accounted for by its Retail Customers division.
In light of the economic prospects, the situation remains tense in several of RBI's markets. In 2013, RBI therefore expects a similar net provisioning requirement as in the previous year. In 2013, RBI will once again pay increased attention to cost development. RBI expects a flat or slightly increasing cost base, particularly due to the first-time full year consolidation of Polbank.
Against the backdrop of a permanently changing regulatory environment and further strengthening of the balance sheet structure RBI is continuously evaluating the level and structure of its regulatory capital to be able to act promptly and flexibly. Depending on market developments, a capital increase also continues to be a possible option.
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