Annual Report (ESEF) • Feb 22, 2024
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Annual Financial Report 2023 · Highlights · · Consolidated profit of € 997 million, excluding Russia and Belarus and including € 873 million provisions for CHF mortgages in Poland · · Core revenues excluding Russia and Belarus up 17% year-over-year to € 6,006 million, driven by net interest income · · Lower provisioning for impairment losses year-over-year: € 296 million for the Group excluding Russia and Belarus · · CET1 ratio excluding Russia improves to 14.6% (Group CET1 ratio at 17.3%) · · Customer loans in Russia down € 3 billion in 2023 as part of de-risking approach to Russia · · Dividend proposal to the Annual General Meeting in April 2024: € 1.25 per share 2 · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 · Overview Monetary values in € million 2023 2022 Change 2021 2020 2019 Income statement 1/1-31/12 1/1-31/12 1/1-31/12 1/1-31/12 1/1-31/12 Net interest income 5,683 5,053 12.5% 3,327 3,121 3,412 Net fee and commission income 3,042 3,878 (21.6)% 1,985 1,684 1,797 General administrative expenses (3,908) (3,552) 10.0% (2,978) (2,832) (3,052) Operating result 5,158 6,158 (16.2)% 2,592 2,241 2,492 Impairment losses on financial assets (393) (949) (58.6)% (295) (598) (234) Profit/loss before tax 3,576 4,203 (14.9)% 1,790 1,183 1,767 Profit/loss after tax 2,578 3,797 (32.1)% 1,508 910 1,365 Consolidated profit/loss 2,386 3,627 (34.2)% 1,372 804 1,227 Statement of financial position 31/12 31/12 31/12 31/12 31/12 Loans to banks 14,714 15,716 (6.4)% 16,630 11,952 9,435 Loans to customers 99,434 103,230 (3.7)% 100,832 90,671 91,204 Deposits from banks 26,144 33,641 (22.3)% 34,607 29,121 23,607 Deposits from customers 119,353 125,099 (4.6)% 115,153 102,112 96,214 Equity 19,849 18,764 5.8% 15,475 14,288 13,765 Total assets 198,241 207,057 (4.3)% 192,101 165,959 152,200 Key figures 1/1-31/12 1/1-31/12 1/1-31/12 1/1-31/12 1/1-31/12 Return on equity before tax 19.8% 26.6% (6.9) PP 12.6% 8.8% 14.2% Return on equity after tax 14.3% 24.1% (9.8) PP 10.6% 6.8% 11.0% Consolidated return on equity 14.8% 26.8% (12.0) PP 10.9% 6.4% 11.0% Cost/income ratio 43.1% 36.6% 6.5 PP 53.5% 55.8% 55.1% Return on assets before tax 1.72% 2.02% (0.30) PP 0.99% 0.74% 1.18% Net interest margin (average interest-bearing assets) 2.87% 2.59% 0.28 PP 2.01% 2.13% 2.44% Provisioning ratio (average loans to customers) 0.34% 0.73% (0.39) PP 0.30% 0.67% 0.26% Bank-specific information 31/12 31/12 31/12 31/12 31/12 NPE ratio 1.9% 1.6% 0.3 PP 1.6% 1.9% 2.1% NPE coverage ratio 51.7% 59.0% (7.4) PP 62.5% 61.5% 61.0% Total risk-weighted assets (RWA) 93,664 97,680 (4.1)% 89,928 78,864 77,966 Common equity tier 1 ratio (transitional) 17.3% 16.0% 1.3 PP 13.1% 13.6% 13.9% Tier 1 ratio (transitional) 19.1% 17.7% 1.4 PP 15.0% 15.8% 15.5% Total capital ratio (transitional) 21.5% 20.2% 1.4 PP 17.6% 18.5% 18.0% Stock data 1/1-31/12 1/1-31/12 1/1-31/12 1/1-31/12 1/1-31/12 Earnings per share in € 6.93 10.76 (35.5)% 3.89 2.22 3.54 Closing price in € (31/12) 18.67 15.35 21.6% 25.88 16.68 22.39 High (closing prices) in € 18.75 28.42 (34.0)% 29.40 22.92 24.31 Low (closing prices) in € 12.73 10.00 27.3% 16.17 11.25 18.69 Number of shares in million (31/12) 328.94 328.94 0.0% 328.94 328.94 328.94 Market capitalization in € million (31/12) 6,141 5,049 21.6% 8,513 5,487 7,365 Dividend per share in € 1.25 0.80 56.3% – 1.23 – Resources 31/12 31/12 31/12 31/12 31/12 Employees as at reporting date (full-time equivalents) 44,887 44,414 1.1% 46,185 45,414 46,873 Business outlets 1,519 1,664 (8.7)% 1,771 1,857 2,040 Customers in million1 18.6 18.1 2.8% 19.5 17.6 17.2 1 Adjustment of the previous year's figures due to the inclusion of customers from the credit card business In this report RBI denotes the RBI Group. If RBI AG is used it denotes Raiffeisen Bank International AG. Head office refers to Raiffeisen Bank International AG excluding branches. Adding and subtracting rounded amounts in tables and charts may lead to minor discrepancies. Changes in tables are based on not rounded amounts. The ratios referenced in this report are defined in the consolidated financial statements under key figures. 3 · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 Content Group Management Report 5 Market development 6 Significant events in the reporting period 11 Earnings and financial performance 12 Research and development 20 Internal control and risk management system in relation to the Group accounting process 22 Capital, share, voting, and control rights 25 Risk management 28 Corporate Governance 28 Consolidated non-financial report 28 Human Resources 28 Outlook 30 Segment and country analysis 32 Consolidated financial statements 41 Company 42 Statement of comprehensive income 43 Statement of financial position 45 Statement of changes in equity 46 Statement of cash flows 47 Segment reporting 49 Notes 56 Principles underlying the consolidated financial statements 56 Notes to the income statement 69 Financial assets measured at amortized cost 79 Financial assets measured at fair value 88 Other assets and liabilities and equity 101 Notes of financial instruments 123 Risk report 145 Other disclosures 176 Regulatory information 209 Key figures 214 Events after the reporting date 217 Statement of all legal representatives 218 Independent Auditor's Report 219 Annual financial statements 224 Statement of financial position 225 Income statement 227 Notes 228 General disclosures 228 Recognition and measurement principles 229 Notes to the statement of financial position 236 Notes to the income statement 259 Other 263 Events after the reporting date 266 Management report 267 Market development 267 Business performance at Raiffeisen Bank International AG 272 Financial Performance Indicators 278 Capital, share, voting and control rights 282 Non-financial Performance Indicators 284 Research and Development 285 Corporate Governance 286 Risk report 287 Internal control and risk management system in relation to the accounting process 307 Outlook 310 Statement of the board of Management pursuant to § 82 (4) Z 3 Austrian Stock Exchange Act 313 Independent Auditor’s Report 314 4 · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 The report in English is a translation of the original German report. The only authentic version is the German version. Group Management Report 5 · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 · Market development Weak economy in a crisis-ridden environment While the US economy was remarkably robust in 2023, Europe’s economic environment was characterized by a stagnant economic cycle. Economic support from the services sector weakened significantly over the course of the year, while the industrial sector remained in recession for most of the year. As a result, more service-driven economies achieved slightly above-average growth, while more manufacturing-oriented countries in Western Europe such as Germany and Austria found themselves in mild recessions. Overall inflation fell noticeably in 2023, mostly due to energy prices, although the core rate of inflation sank much more gradually. Both the US Federal Reserve and the ECB continued their series of interest rate hikes into the (late) summer and then left key rates unchanged for the rest of the year. The euro area’s gross domestic product was only slightly higher on average in 2023 than in 2022. In the second half of 2023, economic momentum weakened and GDP was below the level of the first half of the year. What is striking in this economic cycle is the robust labor market. Unemployment rates have barely risen, many jobs are vacant and employment levels are high despite the persistently weak economy. Inflation fell from 8.6 per cent at the beginning of the year to below 3 per cent in the fall. Price increases for food and many tangible goods have slowed, and energy goods are actually cheaper than in the year before. Services, on the other hand, saw stronger price growth in 2023 than in 2022. The European Central Bank (ECB) raised its key rates 200 basis points in 2023. In addition, the bond holdings in the APP (asset purchase programme) portfolio were reduced around € 200 billion by stopping reinvestments of maturing bonds. The bulk of the central bank’s balance sheet reduction was achieved by allowing refinancing transactions to mature. The outstanding volume of these loans to commercial banks fell over € 1,300 billion by the end of 2023. While short-dated money market rates rose roughly the same amount as key interest rates, interest on swap rates and yields on German government bonds with five- to ten-year maturities were barely higher at the end of the year than at the beginning. However, performance was extremely volatile over the course of the year. One key element in the interest rate market is the inverted yield curve. In 2023, the interest rate for swap rates and German bonds with short maturities was consistently higher than that for long maturities. The Austrian economy was in recession in parts of 2023, with real GDP falling 0.7 per cent for the year as a whole. This made the Austrian economy one of the worst performers in the euro area. In addition to the industry and construction sector, this was also due to consumer related services. The construction industry experienced a stronger real correction in Austria than in many other euro countries. Inflation fell noticeably over the course of the year. However, at an annual average of 7.7 per cent, it was still well above the euro area’s level (2 percentage points). Austria’s conspicuously weak economy can also be partially attributed to above-average inflation. CEE: High interest rates and inflation, sluggish growth The CEE region’s economy was affected by inflation and industry weakness in 2023 in much the same way as the euro area and Austria were. Some of the measures taken in 2022 to combat inflation (price regulations and energy price caps) expired in 2023, which shifted inflationary pressure from 2022 to 2023. Inflationary pressure was overall more persistent in the region than in the euro area, in large part because the labor markets were already very tight before the war in Ukraine drove up (energy) prices, which increased wage pressures. Nevertheless, base effects for energy prices caused inflation to start falling in the first half of 2023. Given the significant steps taken by central banks in Central and Eastern Europe back in 2021 and 2022, most CEE countries did not enact more interest rate hikes in the first half of 2023 (with the exception of Albania and Serbia). As the year progressed, some central banks in the CEE region felt able to cut key rates in response to a further decline in inflation rates; other banks continued to wait. The industrial sector was weak in large parts of Central Europe (CE) in 2023. Because of this sector’s importance to these economies and close ties with the German industrial sector, the region underperformed most of Europe. However, a strong inflow of EU funds, improving foreign trade and a moderate recovery in consumer demand fueled a slight recovery over the course of the year. Thanks to a strong boost from foreign trade, Slovakia (up 1.3 per cent) outperformed the rest of the Central European countries (up 0.1 per cent). Support also came from access to NextGenerationEU funds (NGEU funds), which Poland and Hungary could not (yet) tap. 6Group management report · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 Once again, the economy in Southeastern Europe (SEE) outperformed the euro area and Central Europe because SEE depends much less on the industrial sector, which had been battered more by the war in Ukraine and high energy prices. Southeastern Europe’s strong performance was supported by an abundant inflow of EU funds along with a strong tourist season. Nevertheless, growth in SEE only reached 1.8 per cent in 2023, with Albania leading the way (up 3.5 per cent). Supporting factors in this country were the construction sector and tourism, private and public spending as well as investment. The lowest growth was posted in Romania (up 1.5 per cent), where the economy disappointed in the autumn due to the continued weakness of its industrial sector. In Eastern Europe (EE), Ukraine recorded the strongest growth in 2023 (up 5.7 per cent), due to its robust adjustment to the war and base effects. The Russian economy, in contrast, grew 2.5 per cent in 2023, supported by fiscal policy and defense spending. In Belarus, the impact of EU and US sanctions increased significantly, but the country managed to grow 3.9 per cent, partly due to state-subsidized investments in the modernization of industrial plants and machinery. Annual real GDP growth in per cent compared to the previous year Region/country 2022 2023e 2024f 2025f Poland 5.1 0.2 3.1 3.5 Slovakia 1.7 1.3 2.1 2.1 Czech Republic 2.4 (0.5) 1.7 3.2 Hungary 4.6 (0.5) 3.0 4.0 Central Europe 4.0 0.1 2.7 3.4 Albania 4.9 3.5 3.5 3.8 Bosnia and Herzegovina 4.2 1.8 3.0 3.5 Croatia 6.3 2.1 2.5 2.6 Kosovo 5.2 3.2 3.9 4.0 Romania 4.1 1.5 2.8 3.5 Serbia 2.4 2.5 3.0 4.0 Southeastern Europe 4.3 1.8 2.8 3.5 Belarus (4.7) 3.9 2.0 2.0 Russia (2.1) 2.5 1.5 0.9 Ukraine (29.1) 5.7 4.9 6.5 Eastern Europe (3.9) 2.8 1.8 1.4 Austria 4.8 (0.7) 0.2 1.4 Euro area 3.4 0.5 0.5 1.5 Source: Raiffeisen Research, as of beginning of February 2024, (e: estimate, f: forecast); subsequent revisions are possible for years already completed Banking sector in Austria The Austrian banking sector carried on the good performance from 2022 and improved on it in 2023. The operating business was supported by increasing net interest income and stable performance in the commission business. Nevertheless, operating costs increased as well. Risk costs in 2023 were lower than in the previous year, however. The funding environment for the Austrian banking sector was challenging in 2023. Nevertheless, Austrian banks held their own in the primary market once again and placed significantly larger volumes than in the years before 2022, especially in the covered bond segment. Growth rates of the loan volumes granted in both the household and corporate loan segments show a significant year-on-year slowdown. This is primarily due to the different interest rate environment and, to a lesser extent, to the changed regulatory framework for lending guidelines. The household segment showed negative year-on-year growth of minus 1.9 per cent as of November 2023. Loan growth in this segment became negative as of the middle of the year. The corporate segment reported annual growth of 2.9 per cent (November 2023 vs. November 2022) compared to growth of 11.3 per cent at the same time in the previous year. The banking sector’s capitalization increased further compared to the start of 2023, reaching 16.6 per cent (common equity tier 1 ratio) as of June 2023. The Austrian Financial Market Stability Board concluded in its September 2022 meeting that Austrian banks are less capitalized than their European peers and therefore recommended raising macroprudential buffer requirements for selected banks another 0.5 percentage points and gradually phasing in this increase over two years. Accordingly, these requirements rose 0.25 percentage points for selected institutions at the turn of the year. Group management report7 · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 Development of the banking sector in CEE As key interest rates remained high for most of 2023 (and euro markets caught up), CE/SEE banks were able to further improve their profitability thanks to wider net interest margins while risk costs remained rather limited as the number of loan defaults remained low. The average return on equity in the region was over 15 per cent, which is consistent with the most successful years before the global financial crisis. The turbulence in the US banking sector had no major impacts. All in all, core banking income proved to be strong enough to compensate for the additional bank taxes levied in certain countries, inflationary pressure on operating costs and the switch to a more expensive refinancing mix (rising percentage of time deposits, expensive MREL funding). At the same time, stricter financial conditions and the weaker economic environment slowed down lending significantly, which particularly affected investment loans to companies and the market for residential construction loans. The Eastern European markets experienced a strong turnaround as banks returned to profitability in Russia (normalized monetary conditions, politically supported lending) and Ukraine (high interest rates, macroeconomic improvements). Regulatory environment Supervisory priorities and interaction with the ECB · Reinforcing the management competence of the governing bodies to enable banks to effectively address the digitalization process: As a supervisory authority, the ECB wants to ensure that RBI has sound strategies and appropriate regulations in place to meet the challenges that digitalization presents. Effective digital transformation strategies and governance regulations can help RBI make its business models more resilient and sustainable. · Strengthening the banks’ resilience to direct macrofinancial and geopolitical shocks: In the current uncertain environment, it is essential for all banks that are under Single Supervisory Mechanism (SSM) supervision to remain resilient to external shocks. This means that they can withstand unexpected events, such as economic downturns or geopolitical crises, without jeopardizing their business operations. For this reason, the ECB wants to ensure that the European banks remedy weak points in their credit risk management frameworks, in order to strengthen their resilience against a possible asset quality deterioration, and quickly identify and mitigate risks. Sound planning and diversified funding sources can help ensure the European financial market maintains reliable access to funding. · Intensified efforts to combat climate change: The risks associated with climate change are changing rapidly with far-reaching economic consequences, among other things. The ECB believes that European banks need to take measures to mitigate these risks and have a role to play in funding the transition to a more sustainable economy. It also considers that banks can only mitigate their risk exposure by taking appropriate consideration of climate and environmental factors in their strategies, risk management practices and decision-making processes. New regulation in 2023 Finalization of Basel III (CRR III/CRD VI) In June 2023, agreement was reached on the cornerstones in the trilogue negotiations held between the European Council, the European Parliament, and the European Commission. In the second half of 2023, the legislative bodies concentrated on reaching agreement in the technical trilogues, followed by the approval in the EU Parliament and the EU Council plenary session. The published consolidated texts of the political agreement reached on CRR III and CRD VI are expected to be voted on in the plenary session of the European Parliament by the end of the first quarter of 2024. Despite efforts made by the European Banking Industry Committee (EBIC) to postpone the Basel III implementation date in the EU, due to the comprehensive changes brought about by the Capital Requirements Regulation (CRR III), the effective date of 1 January 2025, remains unchanged. RBI AG as a universal bank is affected by the proposed changes in various respects and makes substantial efforts to analyze and evaluate the new and updated requirements and their resulting impact. Through its intensive efforts at national and EU- level, RBI has clearly communicated its position on topics of particular interest. Among others, minority interest deductions, the treatment of equity holdings made pursuant to Legislative Programmes to promote specified sectors of the economy, retaining a 100 per cent risk-weighting for equity exposures that have been held for six years and applying a preferential treatment for intragroup exposures were addressed. RBI regularly analyzes the updated requirements and corresponding impact assessments for the standardized approach (STA) and the internal ratings-based approach (IRB). This allows it to prepare adequately for the implementation of the new requirements and assess the various changes affecting RWA calculations. This is to ensure a smooth transition to the new provisions and allows RBI to update its systems and adapt to the new calculation and reporting requirements. 8Group management report · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 Payment Services Directive and framework for financial data access The European Commission is working on creating an efficient and integrated market for payment services in the EU. As a result, two packages of measures were proposed: The first involves a revision of the Payment Services Directive. This proposal aims to extend and modernize the current Payment Services Directive (PSD2), which will become PSD3, and also to introduce a Payment Services Regulation (PSR). The proposed regulation determines standardized requirements for the provision of payment services and e-money services within the EU, with the objective of combating and curbing fraud in payment services, strengthening consumer rights, further aligning the competitive conditions between banks and non-banks, and improving the operation of open banking services. Second, the Commission is putting forward a legislative proposal for a framework for financial data access. This framework will establish clear rights and obligations for exchanging customer data in the financial sector beyond payment accounts. In practice, this will lead to more innovative financial products and services for users and stimulate competition in the financial sector. By contributing actively in this regulation, RBI could be remunerated accordingly for introducing application programming interfaces (APIs) that were developed as part of the program for financial data exchanges. Finally, the legislators agreed in the Commission’s proposal to make instant payments in euro available for all citizens and companies in the EU. This regulation aims to ensure that instant payments in euro are made affordable and secure, and can be easily processed in the entire EU. Instant payments in euro allow money to be transferred at all times within seconds. As a result of the new regulations, they will become the new normal for transfers. They should make life simpler for EU citizens, improve businesses' cash flows and bring savings for retailers. This will encourage new innovation opportunities for banks. Retail investment strategy On 24 May 2023, the European Commission put forward the retail investment strategy, which aims to promote greater retail investor participation on the capital markets. The European Commission suggested changes to current legislation (e.g. making product information more comparable or easier to understand) to reach the objective of deepening the capital markets union. Digital Operational Resilience Act (DORA) DORA entered into force on 16 January 2023 and will apply from 17 January 2025. The aim is to improve the digital operational stability of financial corporations throughout the EU and further harmonize the requirements for this. This regulatory framework covers core areas, such as risk management, incident management and reporting, reviewing the digital operational stability and the management of information and communication technology (ICT) third-party risks. DORA mandates the European Supervisory Authorities to jointly develop 13 policy instruments, presented in two batches. The first batch of technical standards was introduced in June 2023. The objective of the technical standards is to create consistent and detailed requirements in ICT risk management, reporting of major ICT-related incidents and ICT risk management for third parties. RBI is directly impacted by DORA and its technical standards, and is working intensively on implementing all the applicable requirements. Markets in Crypto Assets Regulation (MiCA) MiCA entered into force in June 2023. It lays down standard market rules for crypto assets in the EU and is therefore the first comprehensive framework for regulating the crypto currency market. The regulation covers crypto assets that are currently not governed by existing EU financial services legislation (MiFiD II). The objective of the MiCA regulation is to protect investors, prevent crypto asset misuse, ensure financial stability, create regulatory clarity and protect against market abuse and manipulation. The regulation comprises a significant number of technical standards and guidelines that have to be developed before the new regulation comes into force (within a period of 12 to 18 months depending on the mandate). The European Supervisory Authorities (ESAs) are working as a matter of high priority on providing three batches of technical standards to further break down the requirements. RBI is closely observing and analyzing all the related developments, and working on potential applications. Group management report9 · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 Minimum requirements for own funds and eligible liabilities (MREL) The Single Resolution Mechanism Regulation II (SRMR II) introduced the concept of the Maximum Distributable Amount related to MREL (M-MDA), which has been applicable since 1 January 2022. M-MDA allows the Single Resolution Board (SRB) to set restrictions on distributions for banks. While M-MDA has many similarities to the classic MDA regime of Article 141 CRD, it is subject to the discretionary decision of the resolution authority. Regulation (EU) 2022/2036 (CRR Quick Fix) was formally adopted on 19 October 2022. It introduced changes to the CRR and Bank Recovery and Resolution Directive (BRRD) applying to the calibration of the MREL requirements for banking groups with a multiple point of entry (MPE) resolution strategy and a methodology for indirect subscription of MREL instruments. The SRB published the updated MREL on 15 May 2023. In line with RBI’s MPE resolution strategy, it must be possible to process each resolution unit separately, without impairing the resolution capability of other resolution groups. To achieve this objective, each resolution group aims to maintain the necessary MREL capacity and be separable, in order to ensure that the MPE approach is feasible and credible. The MREL planning is an integral part of the budgeting process for RBI and its subsidiaries in the EU. The individual MREL capacities in the resolution groups are closely monitored. RBI and its subsidiaries in the EU conducted issues in order to fulfill their respective MREL requirements. Binding and final MREL requirements will apply within the Banking Union from 1 January 2024. RBI was able to cover a significant portion of its MREL requirements by issuing green and sustainable bonds. Crisis management and deposit insurance (CMDI) framework The EU Commission proposed an extensive review of the CMDI framework for banks. This review covers various directives and regulations, including the Deposit Guarantee Schemes Directive (DGSD), the Bank Recovery and Resolution Directive (BRRD), the Single Resolution Mechanism Regulation (SRMR) and the Daisy Chain Regulation. These proposals will focus mainly on extending the resolution system to SME banks and facilitate the use of national deposit insurance funds for resolution purposes, especially for smaller banks. It is currently envisaged that the EU Parliament and the EU Council will reach a joint decision on the Commission proposal in May 2024. Regulatory environment for ESG disclosures in the EU The European Green Deal was at the very top of the political agenda and the European Commission’s initiatives for 2023. This reaffirms the EU’s commitment to be at the forefront of sustainability efforts with ambitious environmental laws and the goal of being climate neutral by 2050. The funding of this transition will be crucially important in the coming years. The EU taxonomy and the Green Bond Standard are the most relevant sustainable financial instruments. In June 2023, the EU Commission adopted further EU taxonomy criteria for economic activities that make a significant contribution to biodiversity, environmental pollution and the circular economy. The inclusion of more economic activities and sectors will increase the usability and potential of the EU taxonomy in scaling up sustainable investment in the EU. RBI will disclose its first taxonomy alignment ratios from January 2024 onwards. The legislator will use the EU Corporate Sustainability Reporting Directive (CSRD), which was completed at the end of 2022, to rank the importance of ESG information equally with that of a company’s financial data. This will be substantiated by the European Sustainability Reporting Standards (ESRS) that were developed by the European Financial Reporting Advisory Group (EFRAG). The standards serve to limit the burden on reporting companies, while at the same time enabling them to verify the efforts they are making to meet the green deal agenda, and accordingly get access to sustainable finance. The new CSRD follows a double materiality concept. This means that companies must consider how sustainability aspects impact a company’s economic situation on the one hand and how a company’s operations impact sustainability aspects on the other. 10Group management report · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 · Significant events in the reporting period RBI has decided to acquire shares in STRABAG SE In December 2023 RBI has taken a decision to acquire 28,500,000 shares in STRABAG SE, representing 27.78 per cent of outstanding shares, via its Russian subsidiary AO Raiffeisenbank from Russian based MKAO Rasperia Trading Limited for a cash consideration of € 1,510 million (including dividend entitlements for 2021 and 2022). Closing of the acquisition is subject to various conditions precedent including satisfactory completion of the sanctions compliance due diligence by RBI, regulatory approvals, and merger clearance. Upon the successful closing of the acquisition, AO Raiffeisenbank intends to transfer the shares in STRABAG SE to RBI by issuing a dividend in kind. The approval of the dividend in kind by the competent Russian authorities is also a condition precedent for the acquisition of the shares in STRABAG SE by AO Raiffeisenbank. The impact on RBI consolidated CET1 ratio (16.5 per cent proforma including profits as of 31 December 2023) is expected to be c. minus 10 basis points at closing, while the CET1 ratio of RBI Group excluding Russia will increase by around 125 basis points (Price/Book zero deconsolidation scenario: 14.4 per cent proforma including profits as of 31 December 2023). The acquisition of the shares in STRABAG SE and distribution of the dividend in kind, subject to regulatory approvals and satisfaction of other conditions precedent, are expected to close in the first quarter of 2024. After closing, RBI will retain the shares in STRABAG SE as a long-term equity participation which will be contributed to and managed by its fully consolidated subsidiary GABARTS Beteiligungs GmbH & Co KG. With this transaction, RBI further reduces its exposure to Russia. Russia and Belarus In 2023, RBI continued to work on a spin-off or sale of AO Raiffeisenbank. Both alternatives require numerous approvals from various Russian and European authorities, and from the respective central banks. In the meantime, business activities in Russia will be further reduced. After the war broke out, the loan business has been scaled back significantly, and the loan volume has since fallen 43 per cent. In addition, the clearing, settlement and payment services business has been considerably reduced. This is reflected in the decline in net fee and commission income, which fell 43 per cent year-on-year. RBI continues to assess strategic options for the future of Priorbank in Belarus. Dividend On 21 November 2023, the Extraordinary General Meeting resolved to distribute a dividend of € 0.80 for each share that was entitled to a dividend for the 2022 financial year. The Board of Management will propose the distribution of a dividend of € 1.25 per share to the Annual General Meeting on 4 April 2024. Based on the shares issued, this would result in a maximum amount of € 411 million. Group management report11 · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 · Earnings and financial performance Due to the positive interest rate environment, RBI can look back on a successful business development in 2023. On the other hand, the financial year continued to be characterized by high inflationary pressure, a weak economy, low growth and, in some cases, tense labor markets. Nevertheless, RBI generated consolidated profit of € 2,386 million in this environment. If the earnings contributions from Russia and Belarus are excluded, this would result in a consolidated profit of € 997 million and thus an increase of 1 per cent compared to 2022 (excluding the proceeds of € 453 million realized at the time from the disposals of the Bulgarian Group units). The ECB continued its cycle of interest rate hikes of 200 basis points in 2023 into the summer. Key interest rates in the countries of Central and Eastern Europe also remained at a high level for most of the year, resulting in a significant increase in profitability thanks to higher interest margins. Net interest income increased € 631 million to € 5,683 million. The interest margin reached 2.87 per cent in the reporting period, versus 2.59 per cent in the comparable period. Net fee and commission income stabilized at a high level; the decline of € 837 million was entirely attributable to Russia (down € 856 million), both due to active restrictions on activities and the currency devaluation. RBI’s core revenues (net interest income and net fee and commission income) were down € 206 million or 2 per cent to € 8,725 million; excluding Russia and Belarus, however, there would have been an increase of € 868 million. High core revenues compensated for additional bank taxation in certain countries, rising operating costs due to inflation and, in some cases, higher refinancing costs from an increasing proportion of time deposits and more expensive MREL funding. General administrative expenses rose € 355 million year-on-year to € 3,908 million, primarily as a result of increases at head office and in Hungary, Romania and Russia. This was primarily due to the persistently high inflation rate, but also additional investments in many areas. The increased cost burden contributed to the deterioration of the cost/income ratio by 6.5 percentage points to 43.1 per cent. The devaluations of the average exchange rates of the Russian ruble by 21 per cent and the Ukrainian hryvnia by 14 per cent also had a negative effect on the consolidated profit. Risk costs of € 393 million, which were well below the previous year’s figure (€ 949 million), were mainly recorded in the Eastern Europe region (€ 191 million, with Russia and Ukraine accounting for € 95 million and € 94 million respectively) and at head office (€ 138 million). A negative factor was the € 368 million increase to € 873 million in expenses for credit-linked litigation and annulments of loan agreements in Poland. The consolidated profit should also be appreciated in view of this burden. Total assets fell approximately € 9 billion or 4.3 per cent to € 198 billion since the start of the year. Currency effects were responsible for a 2.6 per cent fall. On a currency-adjusted basis, customer business was stable overall; the decline of € 4 billion is primarily attributable to Russia. Lending volumes in Russia have been actively reduced since the start of the Russian war of aggression against Ukraine. The decline since the beginning of 2023 - exacerbated by the devaluation of the Russian ruble - amounted to € 3 billion. 12Group management report · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 Comparison of results with the previous year in € million 2023 2022 Change Net interest income 5,683 5,053 631 12.5% Dividend income 35 64 (29) (44.8)% Current income from investments in associates 85 64 21 32.5% Net fee and commission income 3,042 3,878 (837) (21.6)% Net trading income and fair value result 186 663 (477) (71.9)% Net gains/losses from hedge accounting (28) (41) 13 (32.3)% Sundry operating income 62 29 33 115.1% Operating income 9,065 9,710 (645) (6.6)% Staff expenses (2,209) (2,010) (199) 9.9% Other administrative expenses (1,224) (1,081) (143) 13.2% Depreciation (475) (461) (14) 3.0% General administrative expenses (3,908) (3,552) (355) 10.0% Operating result 5,158 6,158 (1,000) (16.2)% Other result (906) (667) (238) 35.7% Governmental measures and compulsory contributions (284) (337) 54 (16.0)% Impairment losses on financial assets (393) (949) 557 (58.6)% Profit/loss before tax 3,576 4,203 (628) (14.9)% Income taxes (997) (859) (138) 16.1% Profit/loss after tax from continuing operations 2,578 3,344 (766) (22.9)% Gains/losses from discontinued operations 0 453 (453) – Profit/loss after tax 2,578 3,797 (1,219) (32.1)% Profit attributable to non-controlling interests (192) (170) (22) 12.9% Consolidated profit/loss 2,386 3,627 (1,241) (34.2)% Operating income The € 631 million increase in net interest income to € 5,683 million was largely driven by interest rates. Due to the liquidity position in the reporting period, rising market interest rates in numerous Group countries led to a sharper increase in interest income than in interest expense. The increases amounted to € 169 million in Hungary, € 90 million in Romania, € 83 million in Slovakia, € 64 million in Croatia and € 42 million in Albania. Raiffeisen Bausparkasse Österreich Gesellschaft m.b.H reported an increase of € 42 million due to upward repricing of variable-rate loans and increased interest income from derivatives. In Serbia, net interest income rose € 124 million as a result of higher interest income from loans for non-financial corporations and households and also partly due to the integration of Crédit Agricole Srbija AD (on 1 April 2022). Volume-related higher interest income from government certificates of deposit, from money market transactions and from government bonds led to an increase of € 43 million in net interest income in Ukraine. Net interest income in Russia, on the other hand, fell € 116 million, due to a partially currency- related 34 per cent decline in loan volume. In Belarus, net interest income fell € 36 million due to falling market interest rates and the resulting lower margins. Net interest income also fell € 10 million in the Czech Republic, as increasing interest expenses for customer deposits from households and for newly issued MREL-eligible debt securities significantly exceeded the increase in interest income from repo business and customer loans. The group’s average interest-bearing assets increased 2 per cent year-on-year. The net interest margin improved 28 basis points to 2.87 per cent, with the largest increases of 192 basis points in Serbia, 144 basis points in Albania and 109 basis points in Hungary. Overall, net fee and commission income fell € 837 million to € 3,042 million. Net fee and commission income decreased due to the currency devaluations in Eastern Europe and continued to be influenced by the geopolitical situation. Russia reported the strongest decline of € 856 million, while the other countries of the Group remained stable. The result from foreign exchange business was down € 627 million, primarily in spot foreign exchange business in Russia and at head office. In Russia, this development was influenced by decreased volumes caused by the introduction of internal transaction limits as well as lower margins in corporate customer and retail business, at head office the fall in business was likewise margin-related. Due to lower fees, net income from the securities business also fell € 93 million, mainly in Russia. Net income from clearing, settlement and Group management report13 · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 payment services decreased € 77 million as a result of lower volumes, primarily in Russia. Net income from loan and guarantee business also fell € 32 million, most notably in Russia and at head office. Net trading income and fair value result declined € 477 million to € 186 million. The year-on-year decline was mainly due to a decrease of € 234 million in net trading income in Russia. Russian restrictions imposed on foreign currency transactions in 2022 led to a massive increase in foreign currency business in the previous year’s period. The introduction of internal transaction limits in the reporting period led to a fall in transactions and a corresponding reduction in the trader margin. In certificates business at head office, the sharp increase in the Group’s own credit spread resulted in the previous year in large valuation gains on certificate issues measured at fair value. Conversely, the Group’s own credit spread narrowed by around 35 basis points in the reporting year, resulting in a € 108 million year-on-year reduction in the valuation result. Higher currency-related valuation losses of minus € 95 million were mainly recorded in Hungary, Ukraine and Belarus. Other net operating income increased € 33 million to € 62 million. In the reporting period, net income from debt securities showed a € 31 million smaller loss of € 25 million. The loss in the reporting period was mainly attributable to Hungary, whereas in the previous year it mainly related to Russia. The derecognition of intangible assets at head office resulted in a loss of € 29 million in the previous year. An amount of € 48 million was allocated to other provisions in the reporting period for pending litigation in Russia and Austria, whereas in the previous year there were reversals of € 14 million, mainly in Romania and at head office. Charges for non-banking activities and operating leases on property resulted in higher income in the reporting period. General administrative expenses General administrative expenses were up 10 per cent or € 355 million year-on year to € 3,908 million. Staff expenses rose € 199 million to € 2,209 million, mainly at head office (up € 57 million) and in Russia (up € 48 million). The increase at head office was primarily attributable to salary adjustments under collective agreements and to an increase in the headcount. In Russia, the increase resulted from higher salaries and social security costs, provisions for one-off payments and an increase in the headcount, notably in IT. Staff expenses also increased in Hungary (up € 23 million), Slovakia (up € 20 million) and Romania (up € 15 million). The main drivers of the € 143 million rise in other administrative expenses were higher legal, advisory and consulting expenses (up € 44 million) and increased IT expenses (up € 37 million) at head office. There were further increases in other administrative expenses in Hungary (up € 27 million), Poland (up € 17 million) and Romania (up € 13 million). Depreciation and amortization of tangible and intangible fixed assets increased 3 per cent or € 14 million to € 475 million. The cost/income ratio increased year-on-year from 36.6 per cent to 43.1 per cent, primarily due to the decline in profit in Russia and to increased general administrative expenses. The number of business outlets fell 145 year-on-year to 1,519. The largest decline resulted from the war in Ukraine (down 65), followed by Serbia due to consolidations following the merger (down 46), and Belarus (down 13). The average headcount increased 245 full-time equivalents year-on-year to 44,439, mainly in Russia (up 522) and at head office (up 195). There was a significant decrease in Ukraine (down 891). 14Group management report · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 Other result The other result amounted to minus € 906 million in the reporting period, compared to minus € 667 million in the comparable period. Expenses for credit-linked, portfolio-based litigation and annulments had a negative effect of € 878 million (previous year’s period: € 510 million). These mainly related to mortgage loans in Poland denominated in or linked to a foreign currency. The increase in Poland of € 368 million primarily resulted from a decision by the European Court of Justice in June, leading to significantly increased actual and expected legal cases, higher loss rates, and losses due to cancellations of credit agreements. In contrast, valuation of investments in subsidiaries and associates led to a gain of € 21 million in the reporting period, mainly relating to the investments in LEIPNIK-LUNDENBURGER INVEST Beteiligungs AG and Oesterreichische Kontrollbank AG. In the previous year’s period, impairment losses of € 37 million were recognized on investments in associates and € 30 million on investments in subsidiaries. Governmental measures and compulsory contributions Governmental measures and compulsory contributions decreased € 54 million to € 284 million. Contributions to the bank resolution fund fell € 15 million, mostly at head office. The € 21 million decrease in deposit insurance fees mainly related to Russia, Hungary, Slovakia and Romania. No other compulsory contributions were incurred in the reporting period, whereas this item in the previous year included € 26 million in contributions to the state support fund for distressed borrowers in Poland. In contrast, bank levies increased € 8 million, mainly in Hungary (up € 31 million). The bank levy at head office was down € 21 million. Impairment losses on financial assets At € 393 million, impairment losses on financial assets were significantly lower in the reporting period than the figure of € 949 million in the comparable period. Risk provisions in Eastern Europe accounted for the largest share at € 191 million (previous year’s period: € 743 million) due to the ongoing Russian war of aggression in Ukraine and related risk factors. Of this, € 95 million (previous year’s period: € 471 million) related to Russia and € 94 million (previous year’s period: € 253 million) to Ukraine. Risk provisions at head office reached € 138 million (previous year’s period: € 149 million), primarily for non-financial corporations in connection with real estate loans. For defaulted loans (Stage 3), net impairments of € 389 million were recognized in the reporting period (previous year’s period: net € 382 million), of which € 191 million related to non-financial corporations and € 135 million to households. At country level, the Stage 3 impairment losses were primarily incurred by head office (€ 230 million) and Russia (€ 53 million). In Stage 1 and Stage 2, net impairment losses of € 4 million were recognized in the reporting period (previous year’s period: € 567 million, of which € 298 million in Russia and € 87 million in Ukraine). The NPE ratio rose 0.3 percentage points to 1.9 per cent due to loan defaults at head office. The NPE coverage ratio was 51.7 per cent at the reporting date, compared to 59.0 per cent in the previous year. Income taxes The € 138 million increase in income taxes to € 997 million was primarily due to Ukraine, which accounted for €108 million. This mainly relates to a windfall tax and a significant increase in profit. Significant increases in profit led to higher tax expense in most countries, for example with increases of € 31 million in Romania, € 19 million each in Serbia and Slovakia, € 17 million in Croatia, and € 11 million in Hungary. In the Czech Republic, on the other hand, profit was down, and the higher tax expense of € 9 million was due to a windfall tax in the amount of € 26 million. In Russia, income taxes of € 464 million were € 95 million lower than in the comparable period. This was due to the sharp fall in profit of € 811 million and the resulting lower tax burden, which was partly offset by a windfall tax in the amount of € 47 million. RBI’s effective tax rate rose 7.5 percentage points year-on-year to 27.9 per cent, mainly due to the non-tax-deductible expenses for credit-linked litigation and for annulments of loan agreements in Poland in the amount of € 873 million (previous year’s period: € 505 million) and to the newly introduced windfall taxes in Russia, the Czech Republic and Ukraine. Gains/losses from discontinued operations The gains/losses from discontinued operations in the previous year’s period included the deconsolidation of the Bulgarian Group units. Group management report15 · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 Comparison of results with the previous quarter Quarterly results in € million Q4/2022 Q1/2023 Q2/2023 Q3/2023 Q4/2023 Change Net interest income 1,462 1,385 1,364 1,441 1,494 52 3.6% Dividend income 24 11 7 10 8 (2) (17.9)% Current income from investments in associates 8 30 21 21 13 (7) (36.2)% Net fee and commission income 1,196 966 732 667 677 10 1.6% Net trading income and fair value result 192 86 30 89 (19) (108) – Net gains/losses from hedge accounting (20) (10) (7) 5 (16) (21) – Other net operating income (1) (9) 51 15 5 (10) (66.8)% Operating income 2,861 2,459 2,197 2,247 2,162 (86) (3.8)% Staff expenses (578) (562) (606) (491) (548) (57) 11.6% Other administrative expenses (278) (277) (323) (271) (354) (83) 30.4% Depreciation (123) (111) (116) (116) (132) (17) 14.3% General administrative expenses (978) (950) (1,045) (878) (1,034) (156) 17.8% Operating result 1,882 1,509 1,152 1,369 1,128 (242) (17.6)% Other result (442) (96) (354) (138) (317) (178) 128.8% Governmental measures and compulsory contributions (52) (236) (2) (22) (24) (2) 9.8% Impairment losses on financial assets (228) (301) 42 8 (142) (150) – Profit/loss before tax 1,160 877 838 1,216 645 (572) (47.0)% Income taxes (270) (176) (211) (269) (341) (72) 26.7% Profit/loss after tax from continuing operations 890 700 627 947 304 (644) (67.9)% Gains/losses from discontinued operations 0 0 0 0 0 0 – Profit/loss after tax 890 700 627 947 304 (644) (67.9)% Profit attributable to non-controlling interests (64) (43) (49) (68) (32) 37 (53.7)% Consolidated profit/loss 826 657 578 879 272 (607) (69.0)% Development of the fourth quarter of 2023 compared to the third quarter of 2023 Net interest income rose € 52 million to € 1,494 million. Russia reported the largest increase of € 52 million, mainly due to a partly currency-related rise in interest income from loans to banks. In Slovakia, net interest income rose € 8 million due to higher market interest rates for loans to non-financial corporations and households. In the Czech Republic, higher interest income from government bonds and lower interest expenses for derivatives led to an increase in net interest income of € 7 million. In Hungary, net interest income increased € 6 million, mainly due to higher net income from derivatives and interest rate swaps. The net interest margin increased 10 basis points to 3.06 per cent, which was primarily due to Russia Net fee and commission income increased 2 per cent, or € 10 million, to € 677 million. Net income from clearing, settlement and payment services improved € 5 million, primarily in Romania and the Czech Republic. Net income from customer resources distributed but not managed also increased € 5 million due to higher income and transactions, particularly in the Czech Republic and Romania. Net trading income and fair value result decreased € 108 million to minus € 19 million. A significant portion of the decrease occurred at head office, which posted a decline of € 67 million that was concentrated in interest rate derivatives and foreign currency positions. In addition, Russia also recorded a decline of € 33 million, primarily due to volatility in the Russian ruble. Raiffeisen Bausparkasse Gesellschaft m.b.H. also posted a lower valuation result of € 21 million. This was mainly driven by negative valuation effects among interest rate derivatives. Other net operating income came in at € 5 million in the second quarter, below the third-quarter level of € 15 million. Net income from insurance contracts was € 15 million lower in the fourth quarter, mainly in connection with the change to IFRS 17 in Croatia. General administrative expenses were up € 156 million quarter-on-quarter to € 1,034 million. Staff expenses increased € 57 million to € 548 million; other administrative expenses rose € 83 million to € 354 million; and depreciation increased € 17 million to € 132 million. The main drivers of the increase in the fourth quarter were higher staff expenses in Russia (increase: € 20 million), higher other administrative expenses in Romania (increase: € 20 million) and Russia (increase: € 18 million) and higher IT expenses at head office (increase: € 13 million). 16Group management report · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 The other result decreased € 178 million to minus € 317 million. This was mostly driven by expenses for credit-linked, portfolio- based litigation and annulments, which totaled € 273 million in the fourth quarter of 2023 after reaching € 176 million in the third quarter of 2023. They mainly related to the mortgage loan portfolio in Poland. The valuation of investments in associates resulted in reversals of impairment losses of € 16 million in the fourth quarter that were mainly related to Oesterreichische Kontrollbank AG. This was set against an impairment loss of € 19 million on shares in subsidiaries. Impairment losses on financial assets amounted to € 142 million in the fourth quarter after booking net releases of € 8 million in the third quarter. In the fourth quarter, net provisioning for impairment losses at head office of € 132 million (due to defaults at non-financial corporations) was offset by net releases of € 52 million in Russia. In the third quarter, the releases of loan loss provisions mainly affected Russia, with this effect being primarily due to the reduction of the customer portfolio that is subject to sanctions. The € 72 million increase in income taxes is mainly due to windfall tax in Ukraine and the Czech Republic. Statement of financial position Total assets have decreased by around € 9 billion or 4.3 per cent since the beginning of the year, with currency effects being responsible for a decline of 2.6 per cent. The devaluation of the Russian ruble (down 22 per cent), the Belarusian ruble (down 18 per cent) and the US dollar (down 3 per cent) was set against the appreciation of the Hungarian forint (up 5 per cent) and the Swiss franc (up 6 per cent). Assets in € million 31/12/2022 31/3/2023 30/6/2023 30/9/2023 31/12/2023 Change year-to- date Change previous quarter Loans to banks 15,716 17,442 17,358 15,716 14,714 (1,003) (6.4)% (1,003) (6.4)% Loans to customers 103,230 105,336 101,806 101,931 99,434 (3,796) (3.7)% (2,498) (2.5)% hereof non-financial corporations 48,829 48,939 48,296 47,713 47,049 (1,780) (3.6)% (664) (1.4)% hereof households 40,867 40,806 40,525 39,848 39,674 (1,193) (2.9)% (174) (0.4)% Securities 23,711 26,281 28,236 30,803 31,108 7,397 31.2% 305 1.0% Cash and other assets 64,401 61,919 58,723 55,724 52,986 (11,415) (17.7)% (2,738) (4.9)% Total 207,057 210,977 206,123 204,175 198,241 (8,817) (4.3)% (5,934) (2.9)% Loans to banks decreased € 935 million due to loan repayments mainly at head office and € 455 million in the Czech Republic due to a decline in repo transactions, while an increase of € 431 million was recorded in Serbia due to repo transactions. Loans to customer decreased by a total of € 3,796 million. The loan volume in Russia has been scaled back significantly since the beginning of the Russian war of aggression in Ukraine. It declined another € 3,014 million in total to € 5,973 million during the financial year, with the decline concentrated in unsecured loans, mortgage loans to households, working capital finance and fixed-term loans to non-financial corporations. However, the decline was mainly driven by the depreciation of the Russian ruble. Head office recorded a net decrease of € 1,411 million to € 26,382 million, half of which was attributable to repayments of loans to other financial corporations of € 809 million. In addition, both regular repayments and early repayments led to a € 764 million decrease in loans to non-financial corporations. In Slovakia, receivables increased € 371 million, mainly due to loans to households and non-financial corporations. In Romania, growth amounted to € 349 million, or 4 per cent, for non-financial corporations and other financial corporations, while growth in Croatia was € 293 million, or 9 per cent, mainly driven by loans to households and non-financial corporations. In the Czech Republic, an increase of € 257 million, or 1 per cent, was achieved mainly through project finance loans to non-financial corporations and consumer loans to households. The increase in securities was primarily attributable to investments – especially in government bonds – at head office (up € 2,619 million, including trading securities), in the Czech Republic (up € 2,210 million), Hungary (up € 993 million), Ukraine (up: € 636 million) and Slovakia (up € 558 million). The decline in cash balances of € 10,449 million was primarily due to a reduction at head office of € 9,797 million, mainly due to a reduction in central bank balances, while the increase in repo transactions partially offset this decline. Russia recorded a € 2,471 million fall in cash balances, primarily in overnight interbank placements. Slovakia posted a decline of € 456 million, with surplus cash being used for customer loans and investment loans. The market values of derivatives reported under other assets, primarily interest rate derivatives, declined € 1,831 million at head office. Group management report17 · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 Equity and liabilities in € million 31/12/2022 31/3/2023 30/6/2023 30/9/2023 31/12/2023 Change year-to- date Change previous quarter Deposits from banks 33,641 35,005 33,681 29,298 26,144 (7,496) (22.3)% (3,154) (10.8)% Deposits from customers 125,099 124,776 120,553 121,233 119,353 (5,746) (4.6)% (1,880) (1.6)% hereof non-financial corporations 50,042 49,850 45,827 45,813 45,084 (4,958) (9.9)% (729) (1.6)% hereof households 58,876 59,234 58,427 57,520 58,453 (423) (0.7)% 932 1.6% Debt securities issued and other liabilities 29,554 31,971 32,561 33,792 32,894 3,340 11.3% (898) (2.7)% Equity 18,764 19,225 19,329 19,851 19,849 1,085 5.8% (2) —% Total 207,057 210,977 206,123 204,175 198,241 (8,817) (4.3)% (5,934) (2.9)% The € 7,496 million or 22 per cent decrease in deposits from banks was mainly due to the redemption of TLTRO instruments and lower short-term deposits at head office (€ 8,394 million) as well as the redemption of TLTRO instruments in Slovakia (€ 775 million), which were offset by an increase in the Czech Republic (€ 529 million) due to repo transactions. The € 5,746 million reduction in deposits from customers compared to the end of the year was largely due to a reduction in short-term deposits from households and non-financial corporations in Russia, which were down € 5,537 million, largely as a result of currency effects. The decline in local currency was much smaller (8 per cent). The decrease in deposits of € 3,276 million at head office was mainly due to lower time deposits, in particular from Austrian and German non-financial corporations (total: € 3,160 million). In contrast, the Czech Republic recorded an increase of € 1,197 million, or 5 per cent, attributable to the rise in repo transactions with governments and short-term deposits mainly from households. Debt securities issued rose € 4,377 million. In the reporting period, a € 1.0 billion senior preferred bond, two mortgage-backed bonds, each with a nominal value of € 500 million, and a € 500 million senior non-preferred benchmark bond were issued at head office. MREL-eligible bonds were issued in the Czech Republic (€ 300 million), in Romania (€ 300 million) and in Slovakia (€ 500 million), including covered bonds in the latter case. The negative market values of derivatives reported under other liabilities, primarily interest rate derivatives at head office, declined € 1,308 million. For information relating to funding, please refer to note (44) Liquidity management in the risk report section of the consolidated financial statements. Liquidity and funding With its solid liquidity position and established processes for managing liquidity risk, RBI demonstrates its high adaptability even in times of crisis. In addition, separate monitoring of RBI's liquidity risk position excluding Russian subsidiaries was introduced in 2023. This shows that RBI's liquidity risk position remains within the target values even without the Russian business. The liquidity coverage ratio was 189 per cent as at 31 December 2023 (31 December 2022: 202 per cent) compared to a regulatory limit of 100 per cent, while the net stable funding ratio (NSFR) was 141 per cent (31 December 2022: 135 per cent). Group funding is derived from a strong base of customer deposits – primarily retail business in Central and Southeastern Europe – and is supplemented by wholesale funding, mainly through RBI AG and the subsidiary banks. In addition to funding from the regional Raiffeisen banks, financing loans from third parties and interbank loans with third-party banks are also used. The loan/deposit ratio amounted to 83.8 per cent as at 31 December 2023 (31 December 2022: 82.4 per cent). 18Group management report · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 Equity on the statement of financial position Equity including non-controlling interests rose € 1,085 million from the start of the year to € 19,849 million. Total comprehensive income of € 1,518 million comprised profit after tax of € 2,578 million and other comprehensive income of minus € 1,060 million. The currency movements in particular had a negative impact of minus € 1,168 million on other comprehensive income. The 22 per cent devaluation of the Russian ruble contributed negatively with € 989 million, while the 18 per cent devaluation of the Belarusian ruble contributed € 95 million and the 2 per cent devaluation of the Czech koruna contributed € 71 million to the negative currency impact. On the other hand, there were positive effects from fair value changes of equity instruments and financial assets amounting to € 71 million, as well as from hedging of net investments, primarily in the Russian ruble (€ 21 million) and the Czech koruna (€ 17 million), which resulted in a positive valuation result of € 37 million. Total capital pursuant to the CRR/Austrian Banking Act (BWG) Common equity tier 1 (CET1) after deductions amounted to € 16,203 million, representing an increase of € 560 million compared to the 2022 year-end figure. The main driver of the increase was the net profit for the current financial year. Tier 1 capital after deductions increased € 562 million to € 17,881 million. The increase was primarily attributable to effects in CET1. Tier 2 capital decreased € 96 million to € 2,287 million due to the regulatory maturing of outstanding instruments. Total capital amounted to € 20,168 million, which represents an increase of € 466 million year-on-year. Total risk-weighted assets (RWA) decreased by a total of € 4,016 million to € 93,664 million compared to the 2022 year-end figure. The main drivers for the reduction in credit risk were foreign currency effects from the Russian ruble and a decrease in the corporate and retail portfolio of € 3,684 million and € 1,437 million, respectively. The reduction was set against an increase of € 1,392 million in credit risk for governments and central banks, primarily due to higher risk weightings. Inorganic effects, which were primarily due to the implementation of the IRB approach at the Austrian savings and loan institution, resulted in a decrease of € 2,370 million. The RWAs for market risk increased due to the RWA backing of investments in foreign currencies, particularly those of the Russian subsidiary bank. This resulted in a (transitional) CET1 ratio of 17.3 per cent, a (transitional) tier 1 ratio of 19.1 per cent and a (transitional) total capital ratio of 21.5 per cent. Group management report19 · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 · Research and development Digitalization A central theme for banks in the advancement of digitalization is the growing relevance of mobile banking. Penetration (the rate of active mobile banking use) reached 60 per cent in retail (though this figure varies between markets) and is above that of local peers. The sale of E2E digital loans at group level reached 52 per cent in 2023. With its product range for retail customers and small businesses, RBI places a strong focus on the full end-to-end digitalization of core products (accounts, payments/cards and loans). RBI expects to achieve cost savings and additional income through this as well as the branch network optimization. In addition, RBI is continuing its efforts to develop more products and individual product components centrally and make them available to all of the Group’s banks. Aside from the cost benefit, this should lead to a substantial reduction in the time required for the full digitalization of the five most important products across the entire Group (current accounts, credit cards, consumer loans as well as current accounts and loans for SMEs). With the Easy Digital Investing (EDI) platform, Raiffeisenbank Czech Republic was the first large bank in the Czech Republic to introduce a mobile investment application for retail clients at the end of 2022. At the end of 2023, around 18,000 customers were already using the platform's services. Half of the EDI users are new-to-invest customers (i.e. customers, who have never had an investment product with Raiffeisenbank Czech Republic), which positively confirms RBI’s ability to attract new customers, and overall increases the penetration of investment products. EDI was developed as a standardized group solution, hence a timely rollout in other countries is currently being planned. Digitalization is also a key issue for corporate and institutional customers. The main challenge is to enable process streamlining and a reduction of paper-based procedures in the interface with customers. Since the end of 2019, RBI has digitized a series of products and services on the myRaiffeisen platform. This includes a digital KYC process (eKYC) for companies and institutional customers, digital account opening (Group eAccount Opening), digital export finance (eSpeedtrack) as well as further services such as eFinance, eGateway, eArchive, and the digital payment questionnaire for correspondent banking clients (ePIC). In 2022, eTradeOn, a tool to manage guarantees online, was added to the myRaiffeisen product range. RBI is one of the first banks in the CEE region to offer a group-wide account opening feature for international customers, addressing one of the core needs of thesegment for region-wide services. Further products and solutions are planned to follow in the coming years with a similar setup. Since 2019, RBI has successfully rolled out features to the network banks, achieving more than 4,000 digitally initiated KYC cases group-wide, supported by more than 1,600 digital account opening requests and a digitally requested lending volume of € 1.3 billion. Digital penetration of KYC processes in RBI head office is on a stable level of >70 per cent and the majority of first account openings are requested digitally. In response to customer needs in the FX business, RBI launched a single-bank FX platform (R-Flex) in Romania and Croatia in 2022 and in Hungary in 2023. R-Flex enables FX transactions in digital form, including real-time information and fast settlement, both in the online and mobile versions. Compared to the previous year, the number of platform users has increased from 4,500 to 37,000. It is planned to roll out the product to further countries in 2024. 20Group management report · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 Innovation Areas The topics of artificial intelligence (AI) and blockchain technology have been identified as strategically important fields for further monitoring and research for the RBI in 2023. In 2023, there was a notable surge in the adoption and utilization of AI technology, leading to the democratization of AI. To maintain competitiveness and consistently provide top-notch solutions to clients, RBI introduced a strategic AI initiative. This initiative aims to assess the impact of AI on RBI and explore its potential in customer-facing products. It will be implemented in stages, encompassing employee education, awareness, and the development of innovative products and services. Blockchain technology is another strategic field of interest for RBI due to its potential to revolutionize the financial industry. Potential applications include fast and secure payments and transactions, improving internal processes, and enabling tokenization of clients’ assets. A dedicated team for this topic was formed several years ago to monitor market developments and the technology’s potential for client-facing products. In 2023, two internal projects explored the potential of asset tokenization and institutional-grade digital asset custody, both of which will continue in 2024. IT In 2023, RBI adopted its 2024-2025 Strategy Outlook, which outlines its commitment to being a data-centric company, emphasizing data accessibility, quality, and business value. The bank streamlined operations and automated processes to cater to the growing need for real-time services, and RBI’s operating model shifted towards client-centricity, stability, and digitalization. RBI’s commitment to agility was emphasized by consistently developing maturity in this area, achieving enterprise agility, and securing a leading position in the CEE region. IT security was bolstered through a risk-based alert system that enables a rapid response and the migration of more than 14,000 repositories to GitHub to ensure greater efficiency in source code management. RBI attaches great importance to the introduction of cloud technology. By reaching the milestone of 50 per cent in Ukraine, Kosovo and Albania, RBI demonstrated a leading role among banks in these regions. The transition of applications to the cloud reached 44 per cent at head office level and 40 per cent at network banks level in 2023. In a bid to solidify its standing as a top-tier IT employer, RBI inaugurated Raiffeisen Tech centers in Poland, Romania, and Kosovo, creating job opportunities for global IT professionals and promoting employee development. Group management report21 · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 · Internal control and risk management system in relation to the Group accounting process Balanced and comprehensive financial reporting is a priority for RBI and its governing bodies. Compliance with all relevant statutory requirements is therefore a basic prerequisite. The Management Board is responsible for establishing and defining a suitable internal control and risk management system that encompasses the entire accounting process while adhering to company requirements. This is embedded in the company-wide framework for the internal control system (ICS). The ICS should ensure effective and continuously improving internal controls for accounting. The control system is designed to comply with all relevant guidelines and regulations and to optimize conditions for specific control measures in order to prevent any unintentional misstatements. Control environment The Group has an internal control system pertaining to financial reporting, which includes directives and instructions on key issues as a central element. This includes: · The hierarchical decision-making process for approving Group and company directives, as well as departmental and divisional instructions, · process descriptions for the preparation, quality control, approval, publication, implementation and monitoring of directives, and instructions including related controls, as well as · regulations for the revision and repeal of directives and instructions. The senior management of each Group unit is responsible for implementing the Group-wide instructions. Compliance with Group rules is monitored by the department Group Consolidation as well as through audits by Group and local auditors. The consolidated financial statements are prepared by the department Group Consolidation (division Group Accounting & Financial Methodologies), which belongs to the CFO area under the CEO. The associated responsibilities are defined for the Group within the frame-work of a dedicated Group function. Risk assessment Significant risks relating to the Group accounting process are evaluated and monitored by the Management Board. Complex accounting standards can increase the risk of errors, as can the use of differing valuation standards, particularly in relation to the Group’s principal financial instruments. A difficult business environment can also increase the risk of significant financial reporting errors. For the purpose of preparing the consolidated financial statements, estimates have to be made for asset and liability items for which no market value can be reliably determined. This essentially applies to risk provisions in the lending business, fair value and impairment of financial instruments, deferred taxes, provisions for pensions and pension-like obligations as well as provisions for legal cases. 22Group management report · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 Control measures The preparation of financial information on an individual Group unit level is decentralized and carried out by the respective Group unit in accordance with RBI guidelines; the calculation of parts of the impairment charges under IFRS 9 is, however, carried out centrally. The Group unit employees and the managers responsible for accounting are required to provide a full presentation and accurate valuation of all transactions. The local management is responsible for ensuring implementation of mandatory internal control measures, such as the separation of functions and the principle of dual control. The reconciliation and validation controls are embedded in the aggregation, calculation, and accounting valuation activities for all financial reporting processes. Particular focus is placed on the controls for the core processes that play a fundamental role in the preparation of the financial statements. This primarily relates to processes which are relevant for valuations, the results of which have a significant impact on the financial statements (e.g. valuation of credit risk provisions, derivatives, equity participations, provisions for personnel expenses and market risk). Consolidation The financial statement data are predominantly automatically transferred to the IBM Cognos Controller consolidation system. The IT system is kept secure by limiting access rights. The plausibility of each Group unit’s financial information is initially checked by the responsible key account manager in the department Group Consolidation. Group-level control activities comprise the analysis and, where necessary, modification of the financial statements submitted by Group units. In this process, the results of internal meetings as well as comments from the Group units and comments from external reviews are taken into account. Both the plausibility of the reporting package as well as critical matters pertaining to the Group unit are acknowledged. The subsequent consolidation steps are performed using the consolidation system, including capital consolidation, expense and income consolidation, and debt consolidation. Finally, intra-Group gains are eliminated where applicable. At the end of the consolidation process, the notes to the financial statements are prepared in accordance with IFRS and the BWG/UGB. All control measures constitute part of the day-to-day business processes and are used to prevent, detect and correct any potential errors or inconsistencies in the financial reporting. Control measures range from process controls of the consolidation steps, to account reconciliation, to the managerial review of the results for the period. The consolidated financial statements and management report are reviewed by the Audit Committee of the Supervisory Board and are also presented to the full Supervisory Board for its information. Information and communication The consolidated financial statements are prepared using Group-wide standardized data requirements. The accounting and valuation standards are defined and explained in the RBI Group Accounts Manual and must be applied when preparing the financial statements. Detailed instructions for the Group units on measuring credit risk and similar issues are provided in the Group directives. The relevant units are kept abreast of any changes to the instructions and standards through regular training courses. Each year the Annual Report contains the consolidated results in the form of a complete set of consolidated financial statements. In addition, the Group management report contains comments on the consolidated results in accordance with the statutory requirements. Throughout the year, consolidated monthly reports are produced for the RBI Management Board. The published statutory interim reports conform to the provisions of IAS 34 and are produced on a quarterly basis. Before publication, the consolidated financial statements are presented to senior managers and Management Board members for final approval and then submitted to the Supervisory Board’s Audit Committee. Analyses pertaining to the consolidated financial statements are also provided for management, as are forecast Group figures at regular intervals. The financial and capital planning process, undertaken by the department Group Planning, Reporting & Analysis, includes a three-year Group budget. Group management report23 · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 Monitoring Financial reporting is a primary focus of the ICS framework, whereby financial reporting processes are subject to risk-based prioritization and control examinations with results regularly reported to the Management Board and the Supervisory Board for evaluation. Additionally, the Audit Committee is required to monitor the financial reporting process. The Management Board is responsible for ongoing company-wide monitoring. The internal control system is based on three lines of defense. The first line of defense consists of individual departments, whereby department heads are responsible for monitoring their business areas and ensuring that an appropriate control environment is established. The departments conduct plausibility checks and control activities on a regular basis, in accordance with the documented processes. The second line of defense is made up of specialist areas focused on specific topics. These include, for example, Compliance, Data Quality Governance, Operational Risk Controlling, and Security & Business Continuity Management. Their primary aim is to support specialist areas with their control processes, to review the carrying out of controls, and to introduce leading practices within the organization. Internal audits are the third line of defense in the monitoring process. Responsibility for auditing lies with Group Internal Audit and the respective internal audit departments of the Group units. All internal auditing activities are subject to the Group Audit Standards, which are based on the Austrian Financial Market Authority’s minimum internal auditing requirements and international best practices. Group Internal Audit’s internal rules also apply (notably the Audit Charter). Group Audit regularly and independently verifies compliance with the internal rules within the RBI Group units. The head of Group Internal Audit reports directly to the Management Board, with additional reporting obligations to the Chairman of the Supervisory Board and members of the Audit Committee of the Supervisory Board. 24Group management report · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 · Capital, share, voting, and control rights The following disclosures satisfy the provisions of § 243a (1) of the Austrian Commercial Code (UGB): (1) As at 31 December 2023, the company’s share capital amounted to € 1,003,265,844.05 and was divided into 328,939,621 voting common bearer shares. As at 31 December 2023, 573,938 (31 December 2022: 510,450) of those were own shares, and consequently 328,365,683 shares were outstanding at the reporting date. Please see note (29) Equity and non-controlling interests for further disclosures. (2) The Articles of Association contain no restrictions concerning voting rights or the transfer of shares. The regional Raiffeisen banks and direct and indirect subsidiaries of the regional Raiffeisen banks are parties to a syndicate contract (syndicate agreement) regarding RBI AG. The terms of this syndicate agreement include not only a block voting agreement and preemption rights, but also a prohibition on sales of the RBI shares held by the regional Raiffeisen banks (with few exceptions) , if the sale would reduce the regional Raiffeisen banks’ aggregate shareholding in RBI AG (direct and/or indirect) to less than 40 per cent of the share capital plus one share. (3) Raiffeisenlandesbank Niederösterreich-Wien AG holds directly and indirectly total around 24.83 per cent of the share capital of the company. By virtue of the syndicate agreement regarding RBI AG, the regional Raiffeisen banks and their direct and indirect subsidiaries as parties acting in concert as defined in § 1 (6) of the Austrian Takeover Act (ÜbG). The regional Raiffeisen banks hold a total of around 61.00 per cent of the voting rights. The remaining shares of RBI AG are held in free float, with no other direct or indirect shareholdings amounting to 10 per cent or more known to the Management Board. (4) The Articles of Association do not contain any special rights of control associated with holding shares. According to the syndicate agreement for RBI AG, the regional Raiffeisen banks can nominate nine members of the RBI AG Supervisory Board. In addition to the members nominated by the regional Raiffeisen banks, the RBI AG Supervisory Board should also include three independent representatives of free-float shareholders who are not attributable to the Austrian Raiffeisen Banking Group. (5) There is no control of voting rights arising from interests held by employees in the share capital. (6) Pursuant to the Articles of Association, a person who is aged 68 years or older may not be appointed as a member of the Management Board or be reappointed for another term in office. The rule for the Supervisory Board is that a person who is aged 75 years or older may not be elected as a member of the Supervisory Board or be re-elected for another term in office. Moreover, no person who already holds eight supervisory board mandates in publicly traded companies may be a member of the Supervisory Board. Holding a position as chairman of the supervisory board of a publicly traded company would count twice for this purpose. The Annual General Meeting may choose to waive this restriction through a simple majority of votes if permitted by law. Any candidate who has more mandates for, or chairman positions on, supervisory boards in publicly traded companies must disclose this to the Annual General Meeting. There are no further regulations regarding the appointment or dismissal of members of the Management Board and the Supervisory Board beyond the provisions of the relevant laws. The Articles of Association stipulate that the resolutions of the Annual General Meeting are, provided that there are no mandatory statutory provisions to the contrary, adopted by a simple majority of the votes cast. Where the law requires a capital majority in addition to the voting majority, resolutions are adopted by a simple majority of the share capital represented in the votes. As a result of this provision, members of the Supervisory Board may be dis-missed prematurely by a simple majority. The Supervisory Board is authorized to adopt amendments to the Articles of Association that only affect the respective wording. This right may be delegated to committees. Furthermore, there are no regulations regarding amendments to the company Articles of Association beyond the provisions of the relevant laws. (7) Pursuant to § 169 of the Austrian Stock Corporation Act (AktG), the Management Board has been authorized since the Annual General Meeting of 13 June 2019 to increase the share capital with the approval of the Supervisory Board – in one or more tranches – by up to € 501,632,920.50 through the issuance of up to 164,469,810 new voting common bearer shares in exchange for contributions in cash and/or in kind (including by way of the right of indirect subscription by a bank pursuant to § 153 (6) of the AktG) by 2 August 2024 at the latest and to fix the offering price and terms of the issue with the approval of the Supervisory Board. The Management Board is further authorized to exclude shareholders’ subscription rights with the approval of the Supervisory Board (i) if the capital increase is carried out in exchange for contributions in kind, or (ii) if the capital increase is carried out in exchange for contributions in cash and the shares issued under the exclusion of subscription rights do not exceed 10 per cent of the company’s share capital (exclusion of subscription rights). The (i) utilization of authorized capital with exclusion of the statutory subscription right in the event of a capital increase in return for a contribution in cash, and the (ii) implementation of the conditional capital resolved upon in the Annual General Meeting on 20 October 2020 in order to grant conversion or subscription rights to convertible bond creditors may not exceed 10 per cent in total of the share capital of the Group management report25 · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 company. The utilization of the authorized capital in the form of a capital increase in return for a contribution in kind is not covered by this restriction. No use has been made to date of the authority granted in June 2019 to utilize the authorized capital. The share capital is conditionally increased (conditional capital) pursuant to § 159 (2) 1 of the AktG by up to € 100,326,584 by issuing of up to 32,893,962 ordinary bearer shares. The conditional capital increase will only be implemented to the extent that use is made of an irrevocable right of conversion into or subscription to shares which the company grants to the creditors holding convertible bonds issued on the basis of the resolution passed at the Annual General Meeting on 20 October 2020, or in the event of having to fulfil a conversion obligation set out in the convertible bonds’ terms of issuance. In both cases, the Management Board does not decide to allocate own shares. The issue price and the conversion ratio are to be calculated in accordance with recognized quantitative financial methodologies and the price of the company’s shares in a recognized pricing procedure (calculation basis of the issuance price); the issue price may not be below the proportionate amount of the share capital. The newly issued shares from the conditional capital increase are entitled to a dividend equivalent to that of the shares traded on the stock exchange at the time of issuance. The Management Board is authorized, with the approval of the Supervisory Board, to determine the further details of the implementation of the conditional capital increase. The Management Board was further authorized pursuant to § 174 (2) of the AktG by the Annual General Meeting on 20 October 2020, within 5 years from the date of the resolution, i.e. until 19 October 2025, with the consent of the Supervisory Board, to issue also in several tranches, convertible bonds with rights to convert into or subscribe to shares of the company or convertible bonds with conversion obligations (contingent convertible bonds pursuant to § 26 of the Banking Act), including convertible bonds that meet the requirements for Additional Tier 1 capital instruments pursuant to Regulation (EU) No. 575/2013 of the European Parliament and the Council of 26 June 2013 on supervisory requirements for credit institutions and investment firms, as amended, with full exclusion of shareholders’ subscription rights. The authorization includes the issuance of convertible bonds in a total nominal amount of up to € 1,000,000,000 with rights to convert into or subscribe to up to 32,893,962 ordinary bearer shares of the company with a proportionate amount of the share capital up to € 100,326,584. The issue price and the conversion ratio are to be calculated in accordance with recognized quantitative financial methodologies and the price of the company shares in a recognized pricing procedure (calculation basis of the issuance price); the issue price of the convertible bonds may not be below the proportionate amount of the share capital. In this respect, the Management Board is authorized to determine all further issuance and structural features as well as the issuance terms and conditions of the convertible bonds, in particular the interest rate, issue price, term of validity and denomination, provisions protecting against dilution, conversion period, conversion rights and obligations, conversion ratio and conversion price. The convertible bonds may also be issued – observing the limit of the corresponding equivalent value in euros – in the currency of the United States of America and in the currency of any other Organization for Economic Cooperation and Development (OECD) member state. The convertible bonds may also be issued by a company which Raiffeisen Bank International AG owns 100 per cent of, directly or indirectly. For this event, the Management Board is authorized to provide, with the consent of the Supervisory Board, a guarantee for the convertible bonds on behalf of the company and to grant the holders of the convertible bonds conversion rights into ordinary bearer shares of Raiffeisen Bank International AG and, if a conversion obligation is stipulated in the convertible bonds’ issuance terms, to enable the obligation of conversion into ordinary bearer shares of Raiffeisen Bank International AG to be fulfilled; with the exclusion of the rights of shareholders to subscribe to the convertible bonds.There have been no convertible bonds issued to date. The Annual General Meeting held on 31 March 2022 authorized the Management Board pursuant to § 65 (1) 8, § 65 (1a) and § 65 (1b) of the AktG to purchase own shares and to retire them if appropriate without requiring any further prior resolutions to be passed by the Annual General Meeting, though with the approval of the purchase by the Supervisory Board can also be effected off-exchange under the exclusion of the shareholders’ pro rata tender right. Own shares, whether already purchased or to be purchased, may not collectively exceed 10 per cent of the company’s share capital. The authorization to purchase own shares expires 30 months after the date of the Annual General Meeting resolution, i.e. until 30 September 2024. The acquisition price for repurchasing the shares may be no lower than € 3.05 per share and no higher than 10 per cent above the average unweighted closing price over the 10 trading days prior to exercising this authorization. The authorization may be exercised in full or in part or also in several partial amounts, for one or more purposes – with the exception of securities trading – by the company, by a subsidiary (§ 189a (7) of the UGB) or by third parties for the account of the company or a subsidiary. 26Group management report · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 The Management Board was further authorized, pursuant to § 65 (1b) of the AktG, to decide, with the approval of the Supervisory Board, on the sale of own shares by means other than the stock exchange or a public tender, to the full or partial exclusion of shareholders’ subscription rights, and to stipulate the terms of sale. Shareholders’ subscription rights may only be excluded if the own shares are used to pay for a contribution in kind, to acquire enterprises, businesses, operations or stakes in one or several companies in Austria or abroad. Furthermore, shareholders’ subscription rights may be excluded in the event that convertible bonds are issued in future, in order that (own) shares may be issued to such convertible bond creditors that have exercised their right of conversion into or subscription to shares in the company, and also in the event of a conversion obligation stipulated in the convertible bonds’ issuance conditions in order to fulfil this conversion obligation. This authorization may be exercised in whole, in part or in several partial amounts for one or more purposes by the company, a subsidiary (§ 189a 7 UGB) or by third parties for the account of the company or a subsidiary and remains in force for five years from the date of this resolution, i.e. until 31 March 2027. Since that time, there were no own shares purchased based on this authorization from March 2022. The Annual General Meeting of 31 March 2022 also authorized the Management Board, under the provisions of § 65 (1) 7 of the AktG, to purchase own shares for the purpose of securities trading, which may also be conducted off-market, during a period of 30 months from the date of the resolution (i.e. until 30 September 2024), provided that the trading portfolio of shares purchased for this purpose does not at the end of any given day exceed 5 per cent of the company's respective share capital. The consideration for each share to be acquired must not be less than half the closing price at the Vienna Stock Exchange on the last day of trading preceding the acquisition and must not exceed twice the closing price at the Vienna Stock Exchange on the last day of trading preceding the acquisition. This authorization may be exercised in full or in part or also in several partial amounts by the company, by a subsidiary (§ 189a (7) UGB) or by third parties acting for the account of the company or a subsidiary. (8) The following material agreements exist, to which the company is a party, and which take effect, change, or come to an end upon a change of control in the company as a result of a takeover bid: · RBI AG is insured under a Group-wide D&O policy. In the event of a merger with another legal entity, the insurance policy would automatically cease at the end of the insurance period in which the merger took effect. In such cases, insurance cover only exists for claims for damages arising from breaches of obligations that occurred before the merger, which are reported to the insurer prior to the termination of RBI AG’s Group-wide D&O insurance cover. · RBI AG is a member of the Professional Association of Raiffeisen Banks. Upon a change in control of RBI AG which results in the attainment of control by shareholders outside of the Raiffeisen Banking Group Austria, membership of the Professional Association of Raiffeisen Banks, as well as that of the Raiffeisen-IPS pursuant to Art. 113 (7) of the CRR, the Österreichische Raiffeisen-Sicherungseinrichtung eGen and of the Raiffeisen Customer Guarantee Scheme Austria may be terminated. RBI AG also serves as the central institution of the Raiffeisen Banking Group at a national level. Upon a change in control of RBI AG, related contracts (central institution of the liquidity group pursuant to § 27a of the BWG may end or change. · The company’s refinancing agreements and agreements concerning third-party financing for subsidiaries, which are guaranteed by the company, stipulate in some cases that the lenders can demand early repayment of the financing in the event of a change in control. (9) There are no indemnification agreements between the company and its Management Board and Supervisory Board members or employees that would take effect in the event of a public takeover bid. Group management report27 · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 · Risk management For information on risk management, please refer to the risk report in the consolidated financial statements. · Corporate Governance Further information can be found in the Corporate Governance Report chapter of the Annual Report, as well as on the RBI website (www.rbinternational.com → Investors → Corporate Governance & Remuneration). · Consolidated non-financial report Pursuant to the Sustainability and Diversity Improvement Act (NaDiVeG), the consolidated non-financial statement, which has to be prepared in accordance with § 267a of the Austrian Commercial Code (UGB), is issued as an independent non-financial report (Sustainability Report). The report containing detailed information on sustainability management developments, will be published online at www.rbinternational.com → Sustainability & ESG → Sustainability Reports and also contains the disclosure for the parent company in accordance with § 243a of the UGB. · Human Resources The Group People & Organisational Innovation division (P&OI) combines the areas of Human Resources and Organisational Development & Innovation. Combining these areas into a single division enables the group to forge an integrated approach to employee aspects, leadership, culture and organizational development. This makes P&OI a key partner in the implementation of RBI’s strategy and goals. The division prioritizes the efficient execution of personnel processes, encompassing tasks such as data administration, contract preparation or recruitment. In addition, the division is responsible for personnel development, career management, leadership development as well as professional education and training. In the area of organizational development, the division extends support for restructurings and transformations within the group by leveraging its expertise in specialized fields, such as change management and organizational design, while spearheading targeted initiatives in the area of operational innovation. Current labor market trends show increased turnover rates worldwide and a greater willingness to change jobs since the COVID-19 pandemic. On the other hand, the challenges stemming from the number of retirees leaving the workforce, evolving work preferences of Generations Y and Z, along with ongoing technological and regulatory changes, require existing employees to constantly adapt to new conditions. Furthermore, the number of retirees exiting the workforce, coupled with the evolving expectations and demands of Generations Y and Z, exert a significant influence on companies and the extent to which they are viewed as employers of choice. In 2023, RBI was honored multiple times as an employer of choice, including being named in the LinkedIn Top Employers 2023 and the We Are Developers top tech companies to work for. To maintain this position in the future, we must understand the expectations and demands of both current employees and applicants and strategically position the company accordingly. 28Group management report · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 In cooperation with the Vienna University of Economics and Business, the Career Dimensions @ RBI project was conducted in 2023 to comprehensively explore the career expectations of RBI employees and assess how well their expectations align with their actual experiences at RBI. The findings reveal that factors such as financial security, a healthy work-life balance, opportunities for continuous training and development as well as positive work relationships play a pivotal role in shaping the level of satisfaction employees experience in the course of their careers, while also influencing their level of motivation and commitment to their jobs. Drawing on these insights, RBI has initiated several programs to fulfill our key objectives: Remote work within the EU: Due in part to the international nature of RBI’s workforce, the desire to work abroad is growing. In July 2023, RBI became the first bank in Austria to enable its employees to work remotely in other EU countries on a temporary basis. Learning organization: As learning and continuous development contribute significantly to career satisfaction, RBI aims for the seamless integration of lifelong learning and collaborative knowledge-sharing into the company culture and practices, with a focus on: · Promoting a culture of learning, thereby repositioning learning as a priority within the company culture · Developing a competency in and a flexible approach to leaning · Achieving a higher level of automation and simplification through the use of new technologies · Producing a portfolio of relevant learning content · Devising uniform standards and quality criteria for learning formats and content (in terms of their approach to didactics, learning psychology and technology) Team development: The retention of employees is influenced by various factors, including the quality of work relationships, the level of job and career satisfaction, and personal performance. To enhance retention, teams receive development support through a series of workshops, with a special focus on fostering mutual trust, open communication, and effective collaboration methods. Management development: Managers receive support to optimize their role and guide their teams through periods of uncertainty and change, while giving due consideration to the individual needs and expectations of their team members. The training concentrated on bolstering individual resilience, fostering a common understanding of managerial expectations, and incorporating peer coaching and communication techniques. Transformation support: An internal team specializing in change management and change communication was formed to provide optimal support for a wide array of transformations, ranging from minor reorganizations to significant overhauls. The goal is to properly equip managers and employees for the transformation process, guide them through the process, garner their commitment to the change, and provide support to individuals and teams throughout the change journey. AI – opportunities for the future: Artificial Intelligence (AI) holds the potential to revolutionize the way people work and enhance overall efficiency. Employees are encouraged to explore AI and consider how it could be used at RBI. Since October 2023, employees of RBI AG have been able to access a version of ChatGPT tailored specifically to RBI. Diverse learning formats, including eLearning, are offered to deepen employees’ comprehension of AI and machine learning and discover the possibilities of this new technology while gaining insights into its limitations and potential challenges. Personnel development As at 31 December 2023, RBI had 44,887 employees (full-time equivalents), which was 473 more than at the end of 2022. The largest increases were recorded in Russia (plus 405), in head office (plus 148) and in Hungary (plus 91). The largest decrease occurred in Serbia (minus 236). Group management report29 · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 · Outlook Economic outlook After a year of stagnating economic growth, the economy is expected to return to a moderate growth trajectory in 2024. However, the economic upturn will probably only be moderate given the continuing high interest rates. The economy is expected to be supported by private consumption, which is benefiting from rebounding real wages. The industrial sector should exit its recessionary environment in the course of 2024. Significant increases in the price of fossil fuels due to military developments are a risk factor but not expected. A quick end to the war in Ukraine currently seems improbable. However, absent a further substantial military escalation, the war seems unlikely to have any additional negative implications for the economy in the euro area or the CE/SEE countries. Inflation will continue to fall in 2024 but not at the same pace as in 2023. The US Federal Reserve and the ECB are nevertheless likely to embark on a series of interest rate cuts over the course of the year, although they will proceed cautiously. Interest rates will therefore be significantly higher in 2024 than in previous years. One potential risk is that individual sectors of the financial system will struggle to cope with persistently higher interest rates. Central Europe Real wages in Central Europe (CE) are expected to rise as inflation continues to fall in 2024 despite a temporary increase in inflation due to the expiration of inflation-dampening measures. This should in turn help revive consumer demand, which should receive additional support from falling interest rates. Economic growth in the region is thus expected to be significantly higher in 2024 as a whole (2.7 per cent) than in the previous year (0.1 per cent). The top growth drivers are forecast to be Hungary (3.0 per cent), not least due to investments in the automotive and battery industry and the creation of new production capacity, and Poland (3.1 per cent). Poland is likely to receive a boost from NGEU funds as a result of the election and should receive economic tailwinds from the recovery of Germany’s industrial sector. Southeastern Europe Alongside resurgent consumer demand across Europe, Southeastern Europe (SEE), especially the Western Balkans, will benefit from the EU’s recently unveiled growth plan for the Western Balkans. GDP growth is expected to accelerate to 2.8 per cent in 2024 in this environment. Together with existing cash inflows from NGEU funds and the financial framework as well as the effects of nearshoring/friendshoring, the region should be able to benefit from its locational advantages (low labor costs and geographic location). The Western Balkan countries of Albania (3.5 per cent) and Kosovo (3.9 per cent) are predicted to have the highest economic growth in 2024. Eastern Europe In Eastern Europe, growth will once again be the strongest in Ukraine, where GDP is forecast to increase 4.9 per cent in 2024, driven by strong growth in private consumption and investment. Rising exports and inflows of external funds should support the economy as well. The Russian economy should record positive GDP growth in 2024 (1.5 per cent) despite the sanctions, military mobilization, unfavorable investment environment and economic isolation. However, its monetary policy has temporarily tightened in response to increasing inflationary pressure, some of which was prompted by the depreciation of the Russian ruble. In Belarus, limited domestic resources, growing competition from Chinese companies in the Russian market, ongoing EU/US sanctions and base effects will slow GDP growth in 2024 (2.0 per cent). Austria Following the 2023 recession, the Austrian economy is likely to return to a moderate growth trajectory in the first half of 2024. Real wage growth is expected to be clearly positive in 2024, which should support private consumption. Industrial companies should be finished with reducing their overflowing inventories by the spring, which should have a positive impact on new orders and ultimately on industrial production. However, the upturn is expected to be only moderate, with GDP growth of just 0.2 per cent expected for 2024 as a whole. Inflation will continue to drop in 2024, albeit at a much slower pace. Still, the inflation differential to the euro area is likely to be noticeably lower in 2024 than in 2023. 30Group management report · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 Banking sector in Austria 2023 was affected by regulatory decisions made in 2022 on mortgage lending standards for households and by the dramatic change in interest rates precipitated by the shift in the ECB’s interest rate stance. Following the change in the ECB’s interest rates, lending to both private households and companies is expected to remain significantly subdued in 2024. This is mirrored in the growth forecasts for the entire Austrian economy, which assume only a moderate upturn. Given the interest rate structure of outstanding retail and corporate loans, which contain a significant proportion of variable-rate-only loans, risks costs are expected to increase moderately in 2024 since higher interest rates will likely adversely affect both private households and companies. The steep increases in net interest income that the banking sector posted in 2022 and 2023 should begin to normalize in 2024. This is attributable to a progressive tightening of deposit conditions in the sector, especially for demand deposits, thereby exerting greater pressure on interest margins. Capital market refinancing costs also remain higher due to the changed interest rate environment across all bond classes. Nevertheless, the Austrian banking sector feels fundamentally well positioned to master the challenges ahead. CEE banking sector The upcoming monetary easing in CE/SEE core markets that fall outside the euro area will weigh on earnings for banks in the region. In contrast, the relative delay in the ECB cycle should continue to support interest margins for economies that are located in the euro area and tied to the euro. The weak economy could ultimately raise the risks to asset quality and moderately increase loan loss provisions, which the core earnings capacity should still be able to accommodate. On the cost side, special taxation and selected policy support programs for borrowers will likely remain in place (albeit probably in a weakened form), while EU-based banks will have to start refinancing MREL bonds. Regarding lending, the ongoing economic uncertainty may continue to discourage lending to the corporate sector while the retail market could bounce back faster. However, this will require an easing of financial conditions and a further recovery in real wages. On the regulatory front, ESG will remain high on the agenda and will see further implementation in the regulatory framework, with EU regulators setting the tone for the entire CEE region. Outlook for RBI - Guidance 2024 The following guidance refers to RBI excluding Russia and Belarus, whereas the corresponding figures in brackets refer to the existing footprint. RBI will continue to progress potential transactions which would result in the sale or spin-off of Raiffeisenbank Russia and deconsolidation of Raiffeisenbank Russia from RBI. In 2024, net interest income is expected around € 4.0 billion (around € 5.1 billion) and net fee and commission income around € 1.8 billion (around € 2.7 billion). We expect customer loan growth to increase by around 6 per cent (around 5 per cent). We expect general administrative expenses around € 3.3 billion (around € 4.0 billion), resulting in a cost/income ratio of around 52 per cent (around 47 per cent). The provisioning ratio – before use of overlays – is expected to be around 50 basis points (around 60 basis points). The consolidated return on equity is expected to be around 11 per cent (around 12 per cent) in 2024. At year-end 2024 we expect a CET1 ratio of around 14.6 per cent (around 17.8 per cent). Any decision on dividends will be based on the capital position of the Group excluding Russia. Medium term return on equity and payout ratio targets are suspended due to current uncertainties in Eastern Europe. In a ‘P/B Zero‘ Russia deconsolidation scenario, before benefit from STRABAG dividend-in-kind. Group management report31 · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 Segment and country analysis 32 · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 Segment reporting at RBI is based on the current organizational structure pursuant to IFRS 8. A cash generating unit within the Group is a country. For further information on segmentation, please refer to the chapter segment reporting in the consolidated financial statements as well as the RBI website (www.rbinternational.com → Investors → Results & Reports). Central Europe in € million 2023 2022 Change Q4/2023 Q3/2023 Change Net interest income 1,590 1,341 18.6% 428 409 4.4% Dividend income 12 3 383.9% 4 2 96.9% Current income from investments in associates 5 4 29.0% 1 1 (6.3)% Net fee and commission income 578 565 2.3% 152 138 9.6% Net trading income and fair value result (16) 0 >500.0% 2 5 (57.2)% Net gains/losses from hedge accounting (8) (5) 72.2% (8) 3 – Other net operating income 30 39 (23.8)% 10 2 460.4% Operating income 2,191 1,947 12.6% 589 561 5.0% General administrative expenses (1,009) (909) 11.0% (271) (252) 7.7% Operating result 1,182 1,037 14.0% 318 309 2.8% Other result (887) (512) 73.2% (279) (175) 59.2% Governmental measures and compulsory contributions (132) (137) (3.8)% (2) (3) (39.3)% Impairment losses on financial assets (27) (12) 122.6% (6) 16 – Profit/loss before tax 135 375 (64.0)% 32 148 (78.4)% Income taxes (192) (153) 25.6% (66) (48) 37.2% Profit/loss after tax (57) 222 – (34) 99 – Return on equity before tax 3.1% 9.7% (6.7) PP 2.9% 13.3% (10.4) PP Return on equity after tax – 5.8% – – 9.0% – Net interest margin (average interest-bearing assets) 2.49% 2.29% 0.20 PP 2.69% 2.57% 0.13 PP Cost/income ratio 46.1% 46.7% (0.7) PP 46.0% 44.9% 1.1 PP The year-on-year decrease in profit after tax mainly reflected an increase of € 368 million in expenses for credit-linked litigation and for annulments of loan agreements in Poland. This development resulted from a significant increase in litigation, higher loss ratios and losses from annulments of loan agreements resulting from a decision of the European Court of Justice in June. The increase of € 244 million in operating income was primarily attributable to the positive trend in net interest income as a result of higher market interest rates in Hungary (up € 169 million) and Slovakia (up: € 83 million). The Czech Republic reported a decrease of € 10 million, as rising interest expenses for customer deposits from households and for newly issued MREL-eligible debt securities clearly exceeded the increase in interest income from repo business and customer loans. General administrative expenses increased € 100 million, in Hungary (up € 56 million) as a result of higher staff expenses and transaction taxes, in Slovakia (up € 29 million) also as a result of higher staff expenses, and in Poland (up € 25 million) mainly due to increased legal and consulting expenses. Risk costs increased € 15 million as a result of higher allocations in the Czech Republic (up € 47 million), while improved general conditions in Hungary and Slovakia led to lower risk costs. The increase in income taxes was attributable to the improved result in Slovakia and the introduction of a windfall tax in the Czech Republic (€ 26 million). Segment and country analysis33 · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 Poland Slovakia in € million 2023 2022 2023 2022 Net interest income 19 12 404 322 Dividend income 0 0 0 0 Current income from investments in associates 0 0 5 4 Net fee and commission income 0 1 193 185 Net trading income and fair value result 2 2 14 11 Net gains/losses from hedge accounting 0 0 0 0 Other net operating income 14 (1) (1) 13 Operating income 36 15 615 534 General administrative expenses (67) (43) (271) (242) Operating result (32) (28) 344 291 Other result (873) (505) (1) 0 Governmental measures and compulsory contributions (4) (31) (7) (11) Impairment losses on financial assets 41 46 (30) (44) Profit/loss before tax (868) (518) 305 235 Income taxes 0 0 (64) (45) Profit/loss after tax (868) (518) 242 191 Czech Republic Hungary in € million 2023 2022 2023 2022 Net interest income 642 652 525 356 Dividend income 8 0 4 2 Net fee and commission income 183 197 202 183 Net trading income and fair value result 2 (10) (34) (3) Net gains/losses from hedge accounting (4) (4) (4) 0 Other net operating income 25 26 (8) 1 Operating income 857 860 684 539 General administrative expenses (391) (400) (280) (224) Operating result 466 460 404 315 Other result 0 9 (13) (16) Governmental measures and compulsory contributions (23) (22) (97) (73) Impairment losses on financial assets (41) 6 2 (20) Profit/loss before tax 401 452 297 205 Income taxes (96) (86) (33) (22) Profit/loss after tax 306 366 264 183 34Segment and country analysis · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 Southeastern Europe in € million 2023 2022 Change Q4/2023 Q3/2023 Change Net interest income 1,296 943 37.4% 343 336 2.3% Dividend income 4 8 (48.8)% 0 3 (87.3)% Net fee and commission income 456 449 1.5% 124 118 5.3% Net trading income and fair value result 31 (1) – 22 3 >500.0% Net gains/losses from hedge accounting 0 0 51.4% 0 0 (57.6)% Other net operating income 1 10 (85.9)% (11) 8 – Operating income 1,789 1,409 27.0% 479 467 2.6% General administrative expenses (752) (699) 7.7% (226) (175) 28.9% Operating result 1,037 711 45.9% 253 292 (13.1)% Other result (31) (13) 144.7% (24) 0 >500.0% Governmental measures and compulsory contributions (39) (42) (7.1)% (8) (6) 30.0% Impairment losses on financial assets (6) (70) (91.1)% (25) (21) 17.2% Profit/loss before tax 961 586 63.9% 196 264 (25.7)% Income taxes (155) (83) 85.9% (33) (39) (14.1)% Profit/loss after tax from continuing operations 806 503 60.3% 162 225 (27.7)% Gains/losses from discontinued operations 0 46 – 0 0 – Profit/loss after tax 806 548 47.0% 162 225 (27.7)% Return on equity before tax 30.8% 18.9% 12.0 PP 25.2% 33.6% (8.4) PP Return on equity after tax 25.9% 17.6% 8.2 PP 20.9% 28.6% (7.8) PP Net interest margin (average interest-bearing assets) 4.26% 3.46% 0.80 PP 4.34% 4.35% (0.01) PP Cost/income ratio 42.1% 49.6% (7.5) PP 47.1% 37.5% 9.6 PP In the previous year’s period, the profit for the period of the Bulgarian group units held for sale was disclosed under gains/ losses from discontinued operations. The result of deconsolidation of € 398 million was allocated to the Corporate Center segment. The increase in profit after tax from continuing operations was mainly attributable to significantly higher net interest income. The main drivers of the growth in net interest income were higher interest rates and higher loan volumes. Net interest income rose € 353 million or 37 per cent. Serbia accounted for € 124 million, primarily as a result of higher interest income due to the increase in the reference rate and from the acquisition of Crédit Agricole Srbija AD in April 2022. Strong growth in net interest income was also reported in Romania (€ 90 million or 18 per cent) and in Croatia (€ 64 million or 55 per cent). Net trading income and fair value result turned from minus € 1 million in the previous year’s period to plus € 31 million. This was attributable above all to Romania (up € 17 million) due to gains, or lower losses, on loans and debt securities measured at fair value and a positive result from the revaluation of foreign currency positions. These effects also led to an increase of € 11 million in Croatia. General administrative expenses were up € 54 million. The biggest increases were reported in staff expenses (€ 30 million), mainly driven by inflation-related salary rises. Other administrative expenses increased € 12 million largely as a result of higher IT and office space expenses. Other result was down € 18 million, most of which related to Serbia. This was caused by modification losses in credit business, which was affected by the national central bank’s decision to impose a temporary limitation of the nominal interest rate for mortgage loans with variable rates and an amount disbursed of up to € 200 thousand. Risk costs improved markedly with an allocation of € 6 million in the reporting period compared to allocations of € 70 million in the previous year’s period. This positive trend was evident in nearly all of the segment’s countries. Romania and Croatia reported the biggest declines in risk costs – above all for loans to households. Income taxes were up € 72 million to € 155 million, which mostly reflected higher earnings. Segment and country analysis35 · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 Albania Bosnia and Herzegovina Kosovo in € million 2023 2022 2023 2022 2023 2022 Net interest income 114 72 86 64 66 55 Dividend income 0 1 0 6 0 0 Net fee and commission income 20 19 54 56 17 17 Net trading income and fair value result (2) 0 2 3 1 0 Other net operating income (1) 0 (3) 1 6 5 Operating income 131 92 139 130 91 77 General administrative expenses (53) (45) (66) (63) (41) (37) Operating result 78 47 74 67 50 40 Other result (2) (2) 0 (1) 0 0 Governmental measures and compulsory contributions (7) (6) (6) (5) (2) (2) Impairment losses on financial assets 2 (2) (2) (6) (13) (5) Profit/loss before tax 71 38 66 56 36 33 Income taxes (11) (6) (3) (3) (4) (4) Profit/loss after tax 60 32 63 52 31 29 Croatia Romania Serbia in € million 2023 2022 2023 2022 2023 2022 Net interest income 181 116 579 489 270 147 Dividend income 0 0 3 0 0 0 Net fee and commission income 73 87 184 180 108 91 Net trading income and fair value result 6 (5) 9 (8) 14 8 Other net operating income (5) (1) 1 (1) 3 6 Operating income 256 197 778 661 395 252 General administrative expenses (125) (127) (346) (310) (122) (117) Operating result 131 71 432 350 273 135 Other result (12) (6) (5) (5) (13) 1 Governmental measures and compulsory contributions (2) (4) (10) (14) (12) (10) Impairment losses on financial assets 12 (9) 6 (30) (12) (19) Profit/loss before tax 130 52 423 301 236 107 Income taxes (25) (9) (77) (47) (34) (15) Profit/loss after tax 105 43 346 254 202 92 36Segment and country analysis · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 Eastern Europe in € million 2023 2022 Change Q4/2023 Q3/2023 Change Net interest income 1,915 2,025 (5.4)% 509 462 10.1% Dividend income 0 0 25.6% 0 0 – Current income from investments in associates 3 6 (54.7)% 0 1 (76.1)% Net fee and commission income 1,364 2,207 (38.2)% 239 253 (5.5)% Net trading income and fair value result 192 471 (59.1)% 14 53 (73.8)% Net gains/losses from hedge accounting (2) (29) (92.7)% 0 (1) – Other net operating income (32) (56) (42.7)% 1 (2) – Operating income 3,441 4,624 (25.6)% 763 767 (0.5)% General administrative expenses (983) (954) 3.0% (234) (183) 27.7% Operating result 2,458 3,670 (33.0)% 529 584 (9.4)% Other result (10) (6) 71.8% (4) (2) 131.5% Governmental measures and compulsory contributions (55) (66) (17.6)% (12) (13) (4.0)% Impairment losses on financial assets (191) (743) (74.3)% 34 48 (29.1)% Profit/loss before tax 2,203 2,855 (22.8)% 547 618 (11.4)% Income taxes (628) (619) 1.4% (238) (173) 37.8% Profit/loss after tax 1,575 2,236 (29.6)% 309 445 (30.5)% 0 0 Return on equity before tax 57.0% 88.1% (31.2) PP 56.6% 64.0% (7.4) PP Return on equity after tax 40.7% 69.0% (28.3) PP 32.0% 46.1% (14.1) PP Net interest margin (average interest-bearing assets) 6.84% 6.37% 0.47 PP 7.99% 6.99% 1.00 PP Cost/income ratio 28.6% 20.6% 7.9 PP 30.7% 23.9% 6.8 PP Net interest income was down € 110 million to € 1,915 million. In Russia, net interest income fell € 116 million, caused by a partially currency-related decline in loan volumes of 34 per cent. In Belarus, net interest income decreased € 36 million due to falling market interest rates and the related lower margins, while in Ukraine higher interest income from sovereign certificates of deposit, money market business and sovereign bonds led to a volume-driven rise of € 43 million in net interest income. Net fee and commission income declined as a result of currency devaluations and continued to be influenced by the geopolitical situation. The decrease was especially seen in Russia and reflected lower volumes following the introduction of internal transaction limits and lower margins in foreign currency business, which led to a fall of € 576 million. Net fee and commission income from clearing, settlement and payment services was also down € 184 million due to lower volumes, while net income from securities business declined € 99 million as a result of lower fees. Net trading income and fair value result decreased € 278 million primarily in Russia, above all due to a lower volume of customer transactions with foreign currencies and the related decline in the trader margin. Risk costs in the reporting period amounted to € 191 million (previous year’s period: € 743 million), of which € 95 million was recognized in Russia and € 94 million in Ukraine. The allocations for Stage 1 and Stage 2 totaled € 42 million in Russia (primarily non-financial corporations) and € 70 million in Ukraine (mainly governments and non-financial corporations). The year-on-year increase in income taxes was mainly attributable to the positive earnings development in Ukraine and the introduction of a new windfall tax. In Russia, the decline in profit resulted in a lower tax expense, which was partly offset by the introduction of a new windfall tax (€ 47 million). Segment and country analysis37 · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 Belarus Russia Ukraine in € million 2023 2022 2023 2022 2023 2022 Net interest income 86 123 1,411 1,527 418 375 Dividend income 0 0 0 0 0 0 Current income from investments in associates 0 0 3 6 0 0 Net fee and commission income 128 112 1,152 2,008 84 87 Net trading income and fair value result 25 37 135 369 33 65 Net gains/losses from hedge accounting 0 0 (2) (29) 0 0 Other net operating income (10) (15) (19) (37) (2) (3) Operating income 229 257 2,679 3,844 532 524 General administrative expenses (74) (76) (729) (696) (180) (182) Operating result 155 181 1,950 3,148 353 341 Other result (1) (2) (8) (7) (1) 4 Governmental measures and compulsory contributions (2) (3) (42) (54) (11) (10) Impairment losses on financial assets (2) (20) (95) (471) (94) (253) Profit/loss before tax 151 156 1,805 2,616 247 82 Income taxes (39) (43) (464) (559) (125) (17) Profit/loss after tax 112 113 1,341 2,058 121 65 38Segment and country analysis · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 Group Corporates & Markets in € million 2023 2022 Change Q4/2023 Q3/2023 Change Net interest income 967 733 32.0% 256 248 3.2% Dividend income 5 12 (61.9)% 0 2 (81.6)% Current income from investments in associates 14 6 134.4% 4 4 (7.9)% Net fee and commission income 578 617 (6.2)% 150 142 6.1% Net trading income and fair value result 163 141 15.3% 21 48 (55.1)% Net gains/losses from hedge accounting (5) (17) (67.7)% 1 1 10.0% Other net operating income 108 110 (1.6)% 26 19 36.7% Operating income 1,831 1,602 14.3% 458 462 (1.0)% General administrative expenses (882) (765) 15.3% (262) (203) 29.1% Operating result 948 837 13.3% 196 259 (24.5)% Other result 6 3 116.7% (2) 7 – Governmental measures and compulsory contributions (44) (54) (17.4)% (10) (8) 24.3% Impairment losses on financial assets (177) (122) 45.3% (151) (35) 331.9% Profit/loss before tax 733 664 10.4% 33 223 (85.3)% Income taxes (172) (148) 16.5% (15) (48) (68.7)% Profit/loss after tax 561 517 8.6% 18 175 (89.8)% Return on equity before tax 19.0% 17.2% 1.8 PP 3.4% 23.2% (19.8) PP Return on equity after tax 14.5% 13.4% 1.1 PP 1.8% 18.2% (16.4) PP Net interest margin (average interest-bearing assets) 1.53% 1.19% 0.34 PP 1.64% 1.55% 0.09 PP Cost/income ratio 48.2% 47.8% 0.4 PP 57.2% 43.9% 13.3 PP The year-on-year increase in profit after tax was driven mainly by the rise of € 235 million in net interest income. The rise in net interest income was mostly due to higher interest margins from customer deposits (cash management, money market deposits, building society business). In contrast, net fee and commission income fell markedly in foreign currency business with corporate customers after income was especially strong in the previous year. Income from trade finance, lending as well as clearing, settlement and payment services was also down. General administrative expenses increased € 117 million, primarily as a result of a rise in other administrative expenses, especially IT and communications expenses, and higher staff expenses (largely due to regular salaries and a higher headcount) at head office. In the reporting year, impairment losses on financial assets of € 177 million were considerably higher than in the previous year’s period (€ 122 million). Allocations in Stage 3 for real estate loans increased at head office, while net releases were recognized in Stage 1 and Stage 2. Segment and country analysis39 · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 Corporate Center in € million 2023 2022 Change Q4/2023 Q3/2023 Change Net interest income (96) (52) 84.6% (45) (17) 169.4% Dividend income 758 387 96.1% 288 43 >500.0% Current income from investments in associates 63 48 31.1% 8 14 (44.0)% Net fee and commission income 71 51 40.8% 15 19 (21.3)% Net trading income and fair value result (202) 9 – (91) (18) 393.6% Net gains/losses from hedge accounting (6) 2 – (6) 2 – Other net operating income 159 103 54.2% 60 31 94.5% Operating income 748 547 36.6% 230 74 210.5% General administrative expenses (483) (395) 22.2% (122) (106) 14.3% Operating result 265 152 73.8% 109 (32) – Other result 19 (139) – (2) 32 – Governmental measures and compulsory contributions (13) (38) (65.0)% 8 8 2.6% Impairment losses on financial assets 13 (19) – 2 1 114.9% Profit/loss before tax 283 (43) – 117 8 >500.0% Income taxes 155 144 7.7% 12 39 (68.3)% Profit/loss after tax from continuing operations 438 101 334.4% 130 47 174.9% Gains/losses from discontinued operations 0 398 – 0 0 – Profit/loss after tax 438 498 (12.1)% 130 47 174.9% Dividend income – largely higher intra-group dividends – resulted in an increase of € 372 million. In the previous-year reporting period, a loss was reported in the other result due to the derecognition of intangible assets of € 29 million at head office. The expense for governmental measures and compulsory contributions fell € 25 million to € 13 million mainly as a result of lower contributions to the bank resolution funds and lower bank levies at head office. Net releases of € 13 million were recognized for impairment losses on financial assets at head office in the reporting period (previous year period: net allocation of € 19 million). The other result amounted to € 19 million (previous year’s period: minus € 139 million). The measurement of investments in associates led to reversals of impairment of € 38 million in the reporting period. In contrast, in the comparable period of the previous year, impairment losses of € 37 million on investments in associates and € 30 million on investments in subsidiaries were recognized. In the previous year, € 68 million related to impairments of goodwill at a Czech (€ 60 million) and Serbian (€ 8 million) group unit. In contrast to these positive effects, net trading income and fair value result was down € 210 million. The certificate business at head office generated high valuation gains above all due to the steep rise in own credit spreads from certificate issues measured at fair value in the previous year. However, credit spreads declined some 35 basis points in the current year. As a result, the risk-related valuation result decreased year-on-year to minus € 49 million. In addition, the Treasury result fell € 43 million as a result of valuation effects. The increase of € 88 million in general administrative expenses reflected higher staff expenses mainly due to higher regular salaries and a rise in the headcount as well as higher IT and consulting expenses at head office. Net interest income was down € 44 million largely as a result of higher refinancing costs at head office. In the previous year’s period, gains/losses from discontinued operations included the deconsolidation result of the Bulgarian group units. 40Segment and country analysis · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 Consolidated financial statements 41 · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 · Company Raiffeisen Bank International AG (RBI AG) is registered in the commercial register of the Commercial Court of Vienna under FN 122119m. Its address is Am Stadtpark 9, 1030 Vienna. RBI regards Austria, where it is a leading corporate and investment bank, as well as Central and Eastern Europe (CEE) as its home market. Subsidiary banks cover 12 markets in the region. In addition, the Group includes numerous other financial service providers active in areas such as leasing, asset management, factoring and M&A. RBI not only offers Austrian and international companies a broad range of products in corporate and investment banking, but also a comprehensive coverage in CEE. Through an extensive branch network, local companies of all sizes as well as private customers are supplied with high quality financial products. RBI maintains representative offices and service branches in selected Asian and Western European locations to support its business activities. In total, around 45,000 RBI employees serve 18.6 million customers from more than 1,500 business outlets, the vast majority of which are in CEE. Since the company’s shares are traded on a regulated market as defined in § 1 (2) of the Austrian Stock Market Act (BörseG) (prime market of the Vienna Stock Exchange) and numerous RBI AG issues are listed on a regulated market in the EU, RBI AG is required by § 59a of the Austrian Banking Act (BWG) to prepare consolidated financial statements in accordance with the International Financial Reporting Standards (IFRSs). RBI has no majority shareholder. The eight regional Raiffeisen banks are core shareholders that collectively hold approximately 60.6 per cent of the shares, with the remaining shares in free float. As a credit institution within the meaning of § 1 of the Austrian Banking Act, RBI AG is subject to regulatory supervision by the Financial Market Authority located at Otto-Wagner-Platz 5, A-1090 Vienna (www.fma.gv.at) and the European Central Bank located at Sonnemannstraße 22, D-60314 Frankfurt am Main (www.bankingsupervision.europa.eu). The consolidated financial statements are lodged with the Companies Register in accordance with Austrian disclosure regulations and published through the electronic disclosure and information platform (EVI). They were signed by the Management Board on 12 February 2024 and subsequently submitted for the notice of the Supervisory Board. As part of the annual financial report as defined in § 124 of the Austrian Stock Market Act (BörseG), the consolidated financial report is also prepared and published in the unified electronic reporting format (ESEF format). The disclosures required under Article 434 of EU Regulation No 575/2013 on prudential requirements for credit institutions (Capital Requirements Regulation, CRR) are published on the internet on RBI’s website at www.rbinternational.com → Investors → Results & Reports. ESEF Information Name of ultimate parent of group Raiffeisen Bank International AG Name of reporting entity Raiffeisen Bank International AG Legal form of entity AG Principal place of business 1030 Vienna Address of entity's registered office Am Stadtpark 9, 1030 Vienna Domicile of entity Austria Country of incorporation Austria Description of nature of entity's operations and principal activities RBI regards Austria, where it is a leading corporate and investment bank, as well as Central and Eastern Europe (CEE) as its home market. 12 markets in the region are covered by subsidiary banks, the Group also comprises numerous other financial services providers, for instance in the field of leasing, asset management, factoring and M&A. RBI not only offers Austrian and international companies a broad range of products in corporate and investment banking, but also a comprehensive coverage in CEE. Through an extensive branch network, local companies of all sizes as well as private customers are supplied with high-quality financial products. RBI maintains representative offices and service branches in selected Asian and Western European locations to support its business activities. 42 Consolidated financial statements · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 · Statement of comprehensive income Income statement in € million Notes 2023 2022 Net interest income [1] 5,683 5,053 Interest income according to effective interest method 8,293 6,681 Interest income other 2,313 577 Interest expenses (4,923) (2,205) Dividend income [2] 35 64 Current income from investments in associates [3] 85 64 Net fee and commission income [4] 3,042 3,878 Fee and commission income 4,066 4,835 Fee and commission expenses (1,025) (957) Net trading income and fair value result [5] 186 663 Net gains/losses from hedge accounting [5] (28) (41) Other net operating income [6] 62 29 Operating income 9,065 9,710 Staff expenses (2,209) (2,010) Other administrative expenses (1,224) (1,081) Depreciation (475) (461) General administrative expenses [7] (3,908) (3,552) Operating result 5,158 6,158 Other result [8] (906) (667) Governmental measures and compulsory contributions [9] (284) (337) Impairment losses on financial assets [10] (393) (949) Profit/loss before tax 3,576 4,203 Income taxes [11] (997) (859) Profit/loss after tax from continuing operations 2,578 3,344 Gains/losses from discontinued operations 0 453 Profit/loss after tax 2,578 3,797 Profit attributable to non-controlling interests [29] (192) (170) Consolidated profit/loss 2,386 3,627 Consolidated financial statements43 · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 Other comprehensive income and total comprehensive income in € million Notes 2023 2022 Profit/loss after tax 2,578 3,797 Items which are not reclassified to profit or loss 0 53 Remeasurements of defined benefit plans [27] (2) 34 Fair value changes of equity instruments [17] (1) (59) Fair value changes due to changes in credit risk of financial liabilities [19] 6 61 Share of other comprehensive income from companies valued at equity [24] (2) 25 Deferred taxes on items which are not reclassified to profit or loss [11] (1) (7) Items that may be reclassified subsequently to profit or loss (1,060) (409) Exchange differences (1,168) (45) Hedge of net investments in foreign operations [22] 37 (39) Adaptations to the cash flow hedge reserve [22] 5 (45) Fair value changes of financial assets [17] 72 (110) Share of other comprehensive income from companies valued at equity [24] 6 (202) Deferred taxes on items which may be reclassified to profit or loss [11] (11) 33 Other comprehensive income (1,060) (356) Total comprehensive income 1,518 3,441 Profit attributable to non-controlling interests [29] (161) (147) hereof income statement [29] (192) (170) hereof other comprehensive income 31 24 Profit/loss attributable to owners of the parent 1,357 3,295 Earnings per share in € million 2023 2022 Consolidated profit/loss 2,386 3,627 Dividend claim on additional tier 1 (109) (92) Profit/loss attributable to ordinary shares 2,277 3,534 Average number of ordinary shares outstanding in million 328 329 Earnings per share in € 6.93 10.76 As no conversion rights or options were outstanding, no dilution of earnings per share occurred. The dividend on additional tier 1 capital is calculated; the effective payment is based on the decision of the Management Board at the respective payment date. 44 Consolidated financial statements · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 · Statement of financial position Assets in € million Notes 2023 2022 Cash, balances at central banks and other demand deposits [12] 43,234 53,683 Financial assets - amortized cost [13] 139,302 137,431 Financial assets - fair value through other comprehensive income [17, 23] 2,992 3,203 Non-trading financial assets - mandatorily fair value through profit/loss [18, 23] 949 757 Financial assets - designated fair value through profit/loss [19, 23] 185 84 Financial assets - held for trading [20, 23] 5,783 6,411 Hedge accounting [22] 1,160 1,608 Fair value adjustments of the hedged items in portfolio hedge of interest rate risk [22] (365) (947) Investments in subsidiaries and associates [24] 820 713 Tangible fixed assets [25] 1,672 1,684 Intangible fixed assets [25] 970 903 Current tax assets [11] 69 100 Deferred tax assets [11] 218 269 Other assets [26] 1,253 1,159 Total 198,241 207,057 Equity and liabilities in € million Notes 2023 2022 Financial liabilities - amortized cost [15] 164,711 175,142 Financial liabilities - designated fair value through profit/loss [19, 23] 1,088 950 Financial liabilities - held for trading [21, 23] 8,463 8,453 Hedge accounting [22] 1,466 2,054 Fair value adjustments of the hedged items in portfolio hedge of interest rate risk [22] (514) (1,217) Provisions for liabilities and charges [27] 1,644 1,479 Current tax liabilities [11] 242 181 Deferred tax liabilities [11] 43 36 Other liabilities [28] 1,248 1,215 Equity [29] 19,849 18,764 Consolidated equity 17,009 16,027 Non-controlling interests 1,231 1,127 Additional tier 1 1,610 1,610 Total 198,241 207,057 Consolidated financial statements45 · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 · Statement of changes in equity in € million Subscribed capital Capital reserves Retained earnings Cumulative other comprehensive income Consolidated equity Non- controlling interests Additional tier 1 Total Equity as at 1/1/2022 1,002 4,992 10,121 (3,272) 12,843 1,010 1,622 15,475 Capital increases/ decreases 0 0 0 0 0 0 0 0 Allocation dividend - AT1 0 0 (92) 0 (92) 0 92 0 Dividend payments 0 0 0 0 0 (26) (92) (119) Own shares (1) (2) 0 0 (3) 0 (12) (14) Other changes 0 0 (19) 4 (15) (4) 0 (19) Total comprehensive income 0 0 3,627 (332) 3,295 147 0 3,441 Equity as at 31/12/2022 1,002 4,990 13,637 (3,601) 16,027 1,127 1,610 18,764 Impact of adopting IFRS 17 0 0 (47) 50 3 0 0 2 Equity as at 1/1/2023 1,002 4,990 13,590 (3,551) 16,030 1,126 1,610 18,767 Capital increases/ decreases 0 0 0 0 0 0 0 0 Allocation dividend - AT1 0 0 (109) 0 (109) 0 109 0 Dividend payments 0 0 (263) 0 (263) (57) (109) (428) Own shares 0 (1) 0 0 (1) 0 (1) (2) Other changes 0 0 (5) 0 (5) 0 0 (5) Total comprehensive income 0 0 2,386 (1,029) 1,357 161 0 1,518 Equity as at 31/12/2023 1,002 4,988 15,600 (4,580) 17,009 1,231 1,610 19,849 46 Consolidated financial statements · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 · Statement of cash flows in € million Notes 2023 2022 Cash, balances at central banks and other demand deposits as at 1/1 [12] 53,683 38,557 Operating activities: Profit/loss before tax 3,576 4,203 Adjustments for the reconciliation of profit/loss after tax to the cash flow from operating activities: Depreciation, amortization, impairment and reversal of impairment on non-financial assets [7, 8] 500 549 Net provisioning for liabilities and charges and impairment losses on financial assets [6, 10, 27] 1,281 1,446 Gains/losses from the measurement and derecognition of assets and liabilities [5, 8] 110 (430) Current income from investments in associates [3] (85) (64) Other adjustments (net)¹ (5,516) (3,899) Subtotal (134) 1,806 Changes in assets and liabilities arising from operating activities after corrections for non-cash positions: Financial assets - amortized cost [13] (101) (124) Financial assets - fair value through other comprehensive income [17, 23] 343 1,217 Non-trading financial assets - mandatorily fair value through profit/loss [18, 23] (9) 185 Financial assets - designated fair value through profit/loss [19, 23] (101) 184 Financial assets - held for trading [20, 23] (1,452) 853 Other assets [26] (32) 102 Financial liabilities - amortized cost [15] (6,224) 13,118 Financial liabilities - designated fair value through profit/loss [19, 23] 181 (110) Financial liabilities - held for trading [21, 23] 1,303 9 Provisions for liabilities and charges [27] (475) (210) Other liabilities [28] (173) 33 Interest received [1] 9,762 6,770 Interest paid [1] (4,086) (2,049) Dividends received [2] 64 82 Income taxes paid [11] (834) (896) Net cash from operating activities (1,967) 20,969 Investing activities: Cash and cash equivalents from changes in scope of consolidation due to materiality (6) (9) Payments for purchase of: Investment securities and shares [13, 16, 18, 24] (9,171) (6,692) Tangible and intangible fixed assets [25] (592) (484) Subsidiaries 0 79 Proceeds from sale of: Investment securities and shares [13, 16, 18, 24] 2,971 2,451 Tangible and intangible fixed assets [25] 176 155 Subsidiaries [8] 0 31 Net cash from investing activities (6,622) (4,469) Financing activities: Capital decreases (2) (14) Inflows subordinated financial liabilities [15, 19] 0 520 Outflows subordinated financial liabilities [15, 19] (582) (749) Dividend payments (429) (119) Cash flows for leases (105) (68) Inflows from changes in non-controlling interests 0 0 Net cash from financing activities (1,118) (429) Effect of exchange rate changes (741) (945) Cash, balances at central banks and other demand deposits as at 30/9 [12] 43,234 53,683 1 Other (net) adjustments mainly include the deduction of net interest income and dividend income; the corresponding cash flows are shown under the items interest received, interest paid and dividends received. Consolidated financial statements47 · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 Cash flows from operating activities, investing activities, and financing activities are presented in the cash flow statement in a manner that best reflects RBI’s business operations. Cash flows from operating activities represent cash flows from the significant revenue-generating activities of the company. The determination of cash flows from operating activities is done using the indirect method, where the profit before taxes from the income statement is adjusted for non-cash items and expanded by the cash flow changes in assets and liabilities. Additionally, expense and income items attributable to the investment or financing activities are deducted. As a financial institution, RBI classifies paid interest, received interest, and dividends as cash flows from operating activities. The cash inflows and outflows for investment securities shown in the cash flow from investing activities include securities held for long-term investment purposes, while those for shares include unconsolidated subsidiaries and associated companies. Further information regarding cash, balances at central banks and other demand deposits can be found in note (12) Cash, balances at central banks and other demand deposits. Details regarding the changes in subordinated financial liabilities presented in the cash flow from financing activities can be found under note (15) Financial liabilities - amortized cost. For RBI as a credit institution group, the informativeness of the cash flow statement is considered to be low. The cash flow statement is not a tool for liquidity or financial planning. Additionally, it is not used as a steering instrument by the senior management. 48 Consolidated financial statements · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 · Segment reporting Segment classification Segmentation principles As a rule, internal management reporting at RBI is based on the current organizational structure. This matrix structure means that each member of the Management Board is responsible both for individual countries and for specific business activities. A cash generating unit (CGU) within the Group is a country. The presentation of the countries includes the operating units of RBI in the respective countries (in addition to subsidiary banks, e.g. also leasing companies). Accordingly, the RBI management bodies – Management Board and Supervisory Board – make key decisions that determine the resources allocated to any given segment based on its financial strength and profitability, which is why these reporting criteria are a material component in the decision-making process. The segments are also presented accordingly in compliance with IFRS 8. When assigning countries to the individual reportable segments, in addition to long-term economic similarities such as equity risk premiums, potential market growth and net interest margins, the expected risk and return levels are also taken into account when allocating resources. According to IFRS 8.12, it is also required that the following economic characteristics are taken into account when composing the reportable segments. The countries are combined into a reportable segment if the products and services offered are the same. In addition to the uniform production processes and sales channels, the target groups such as corporate customers, private customers and institutional customers are also similar in the individual segments. Banking regulations in each country are mainly monitored by central banks. In all countries, the central bank is responsible for formulating and implementing monetary policy, maintaining financial stability, and regulating the banking sector.The reconciliation contains mainly the amounts resulting from the elimination of intra-group results and consolidation between the segments. In order to achieve the maximum possible transparency and in the interest of clearer lines of reporting, five segments were defined in accordance with the IFRS 8 thresholds. IFRS 8 establishes a 10 per cent threshold for the key figures of operating income, profit after tax and segment assets. Central Europe This segment encompasses the most advanced banking markets in Central and Eastern Europe, namely the EU members, Czech Republic, Hungary, Poland and Slovakia. In Poland, RBI is present with a reduced portfolio of retail foreign currency mortgage loans. In Slovakia, RBI is active in the corporate and retail customer business, leasing, asset management and building society business. In retail business, Tatra banka is pursuing a multi-brand strategy. In the Czech Republic, RBI operates not only the traditional banking business with corporate and retail customers, but also real estate leasing and building society business. In Hungary, the Group provides services to retail and corporate customers. The focus is based on corporate customers and affluent retail customers. Southeastern Europe The Southeastern Europe segment comprises Albania, Bosnia and Herzegovina, Croatia, Kosovo, Romania, and Serbia. In these markets, RBI is represented by banks and leasing companies, as well as own capital management and asset management companies and pension funds in some markets. In Albania, financial services are offered across all business areas. In Kosovo, RBI also offers a comprehensive product range. In Bosnia and Herzegovina, the emphasis is on small and medium-sized enterprises, while also including a wide range of products for retail customers. In Croatia, the focus is on large and medium- sized corporate customers and on retail customers (including pension funds business). In Romania, a broad range of financial services is offered via a tightly knit branch network. In Serbia, the market is serviced by a universal bank and leasing companies. Consolidated financial statements49 · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 Eastern Europe This segment comprises Belarus, Russia, and Ukraine. In Belarus, RBI is represented by a bank, a leasing company and an insurance company. Raiffeisenbank Russia services both corporate and retail customers. Furthermore, RBI is active in Russia in the issuance and in the leasing business. In Ukraine, RBI is represented by a bank and provides a full range of financial services via a tightly knit local branch network. Group Corporates & Markets The Group Corporates & Markets segment covers operating business booked in Austria. This primarily comprises financing business with Austrian and international corporate customers serviced from Vienna, Financial Institutions & Sovereigns, the trading of equity instruments and capital market financing, and business with the institutions of the Raiffeisen Banking Group (RBG). This segment also covers the capital market-based customer and proprietary business in Austria. Besides RBI AG, this also includes financial services outsourced to subsidiaries, such as Vienna-based entities like Raiffeisen Digital Bank AG (digital retail banking activities), Kathrein Privatbank Aktiengesellschaft, Raiffeisen Leasing Group, Raiffeisen Factor Bank AG, Raiffeisen Bausparkasse Gesellschaft m.b.H., Valida Group (pension fund business) and Raiffeisen Kapitalanlage-Gesellschaft mit beschränkter Haftung. In addition, companies valued at equity that are active in the financial services sector are allocated to this segment: card complete Service Bank AG, Vienna, NOTARTREUHANDBANK AG, Vienna, Oesterreichische Kontrollbank AG, Vienna, EMCOM Beteiligungs GmbH, Vienna, Posojilnica Bank eGen, Klagenfurt. Corporate Center The Corporate Center segment encompasses services in various areas provided by head office and joint service providers that serve to implement the Group’s overall strategy and that are allocated to this segment to ensure comparability. Therefore, this segment includes the following areas: Liquidity management and balance sheet structure management, equity participation management, the banking operations carried out by head office for financing Group units, the Austrian and international transaction and services business for financial services providers, as well as other companies outside the financial service provider business that are not directly assigned to another segment e.g. real estate projects. Companies valued at equity that are not active in the financial services sector are also assigned to this segment such as UNIQA Insurance Group AG, Vienna, Raiffeisen Informatik GmbH & Co KG, Vienna, and LEIPNIK-LUNDENBURGER INVEST Beteiligungs Aktiengesellschaft, Vienna (holding company with participations in the flour, mill, and vending segments). Assessment of segment profit/loss The segment reporting according to IFRS 8 shows the segment performance based on internal management reporting, supplemented with the reconciliation of the segment results to the consolidated financial statements. In principle, RBI’s management reporting is based on IFRS. Therefore, no differences occur in the recognition and measurement principles between segment reporting and consolidated financial statements. The governance of each segment is based on key indicators relating to profitability, efficiency, constraint and business mix parameters. The target values of these key indicators are determined according to the specific market environment and adapted when necessary. Profitability Profitability is measured by the return on equity (ROE) and return on risk-adjusted capital (RORAC) based on the internal management systems. The return on equity shows the profitability of a CGU and is calculated as the ratio of profit/loss after deduction of non-controlling interests to average consolidated equity employed. The return on equity reflects the yield of the capital employed of each segment. The calculation of the RORAC incorporates risk-adjusted capital, which reflects the capital necessary in case of possible unexpected losses. In RBI, this capital requirement is calculated within the economic capital model for credit, market, and operational risk. This ratio shows the yield on the risk-adjusted equity (economic capital), but it is not an indicator pursuant to IFRS. Within the different countries and business lines the actual RORAC generated is compared with the respective predetermined minimal value (RORAC hurdle), which reflects appropriate market yield expectations. Efficiency The cost/income ratio represents the cost efficiency of the segment. The cost/income ratio shows general administrative expenses in relation to operating income, which is the sum of net interest income, dividend income, current income from investments in associates, net fee and commission income, net trading income and fair value result, net gains/losses from hedge accounting and other net operating income. 50 Consolidated financial statements · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 Constraints In accordance with the Basel III framework, specific legal regulations are to be considered. The proportion of common equity tier 1 capital to total risk-weighted assets (common equity tier 1 ratio) is for example an important indicator of whether the underlying capital is adequate for the business volume. Industry sector specifics lead to different risk weights within the calculation of risk-weighted assets according to CRR. These factors are crucial for the calculation of the regulatory minimum total capital requirements. As part of the annual Supervisory Review and Evaluation Process (SREP), the ECB stipulates in a notification that additional CET1 capital must be held in order to cover those risks which are not considered or are insufficiently considered in Pillar I. Moreover, the efficient use of the available capital is calculated internally, whereby the actual usage is compared to the theoretically available risk coverage capital. The long-term liquidity ratios are also restrictive and are defined in accordance with the regulatory requirements. The minimum requirements for total capital and eligible liabilities (MREL) result in restrictions on bank distributions (maximum distributable amount). Business mix The following key performance indicators are relevant in ensuring a reasonable and sustainable business structure, whereby the composition of the result and the underlying portfolio parameters are of significance. The structure of the primary funding basis for loans and advances to customers is measured by using the loan/deposit ratio. The net interest margin is calculated based on average interest-bearing assets. The presentation of segment performance is based on the income statement and geared to the reporting structure internally used. Income and expenses are attributed primarily to the country and secondary to business area in which they are generated. The segment reporting is thus shown by country and region, respectively. The segment result is shown up to the profit/loss after deduction of non-controlling interests. The segment assets are represented by the total assets and the risk-weighted assets. The reconciliation includes mainly the amounts resulting from the elimination of intra-group results and consolidation between the segments. The income statement is supplemented with financial ratios conventionally used within the industry to evaluate performance. The values shown in the segment reporting are for the most part taken from the IFRS individual financial statements, which are also used for the compilation of the consolidated financial statements. At head office, profit center results are taken from the internal management income statement. Consolidated financial statements51 · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 Segment reporting 2023 Central Europe Southeastern Europe Eastern Europe Group Corporates & Markets in € million Net interest income 1,590 1,296 1,915 967 Dividend income 12 4 0 5 Current income from investments in associates 5 0 3 14 Net fee and commission income 578 456 1,364 578 Net trading income and fair value result (16) 31 192 163 Net gains/losses from hedge accounting (8) 0 (2) (5) Other net operating income 30 1 (32) 108 Operating income 2,191 1,789 3,441 1,831 General administrative expenses (1,009) (752) (983) (882) Operating result 1,182 1,037 2,458 948 Other result (887) (31) (10) 6 Governmental measures and compulsory contributions (132) (39) (55) (44) Impairment losses on financial assets (27) (6) (191) (177) Profit/loss before tax 135 961 2,203 733 Income taxes (192) (155) (628) (172) Profit/loss after tax from continuing operations (57) 806 1,575 561 Gains/losses from discontinued operations 0 0 0 0 Profit/loss after tax (57) 806 1,575 561 Profit attributable to non-controlling interests (128) 0 (52) (13) Profit/loss after deduction of non-controlling interests (185) 805 1,522 549 Return on equity before tax 3.1 % 30.8 % 57.0 % 19.0 % Return on equity after tax – 25.9 % 40.7 % 14.5 % Net interest margin (average interest-bearing assets) 2.49 % 4.26 % 6.84 % 1.53 % Cost/income ratio 46.06 % 42.1 % 28.6 % 48.2 % Loan/deposit ratio 82.33 % 68.0 % 40.8 % 172.0 % Provisioning ratio (average loans to customers) 0.06 % 0.03 % 1.57 % 0.47 % NPE ratio 1.2 % 1.8 % 2.1 % 3.0 % NPE coverage ratio 58.4 % 66.6 % 73.6 % 35.6 % Assets 65,006 34,035 27,611 60,131 Total risk-weighted assets (RWA) 24,631 16,379 20,481 25,938 Equity 4,321 3,819 5,464 4,509 Loans to customers 37,596 18,594 7,967 35,958 Deposits from customers 47,702 26,680 20,159 28,836 Business outlets 339 667 490 23 Employees as at reporting date (full-time equivalents) 9,778 12,535 16,885 3,536 Customers in million 4.0 5.0 7.1 2.5 52 Consolidated financial statements · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 2023 Corporate Center Reconciliation Total in € million Net interest income (96) 10 5,683 Dividend income 758 (744) 35 Current income from investments in associates 63 0 85 Net fee and commission income 71 (7) 3,042 Net trading income and fair value result (202) 18 186 Net gains/losses from hedge accounting (6) (6) (28) Other net operating income 159 (205) 62 Operating income 748 (934) 9,065 General administrative expenses (483) 201 (3,908) Operating result 265 (732) 5,158 Other result 19 (3) (906) Governmental measures and compulsory contributions (13) 0 (284) Impairment losses on financial assets 13 (4) (393) Profit/loss before tax 283 (739) 3,576 Income taxes 155 (5) (997) Profit/loss after tax from continuing operations 438 (744) 2,578 Gains/losses from discontinued operations 0 0 0 Profit/loss after tax 438 (744) 2,578 Profit attributable to non-controlling interests 0 1 (192) Profit/loss after deduction of non-controlling interests 438 (743) 2,386 Return on equity before tax – – 19.8 % Return on equity after tax – – 14.3 % Net interest margin (average interest-bearing assets) – – 2.87 % Cost/income ratio – – 43.1 % Loan/deposit ratio – – 83.8 % Provisioning ratio (average loans to customers) – – 0.34 % NPE ratio – – 1.9 % NPE coverage ratio – – 51.7 % Assets 36,485 (25,028) 198,241 Total risk-weighted assets (RWA) 17,578 (11,344) 93,664 Equity 8,436 (6,698) 19,849 Loans to customers 989 (1,671) 99,434 Deposits from customers 766 (4,790) 119,353 Business outlets – – 1,519 Employees as at reporting date (full-time equivalents) 2,153 – 44,887 Customers in million 0.0 – 18.6 Consolidated financial statements53 · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 2022 Central Europe Southeastern Europe Eastern Europe Group Corporates & Markets in € million Net interest income 1,341 943 2,025 733 Dividend income 3 8 0 12 Current income from investments in associates 4 0 6 6 Net fee and commission income 565 449 2,207 617 Net trading income and fair value result 0 (1) 471 141 Net gains/losses from hedge accounting (5) 0 (29) (17) Other net operating income 39 10 (56) 110 Operating income 1,947 1,409 4,624 1,602 General administrative expenses (909) (699) (954) (765) Operating result 1,037 711 3,670 837 Other result (512) (13) (6) 3 Governmental measures and compulsory contributions (137) (42) (66) (54) Impairment losses on financial assets (12) (70) (743) (122) Profit/loss before tax 375 586 2,855 664 Income taxes (153) (83) (619) (148) Profit/loss after tax from continuing operations 222 503 2,236 517 Gains/losses from discontinued operations 0 46 0 0 Profit/loss after tax 222 548 2,236 517 Profit attributable to non-controlling interests (56) 0 (36) (16) Profit/loss after deduction of non-controlling interests 166 548 2,200 501 Return on equity before tax 9.7 % 18.9 % 88.1 % 17.2 % Return on equity after tax 5.8 % 17.6 % 69.0 % 13.4 % Net interest margin (average interest-bearing assets) 2.29 % 3.46 % 6.37 % 1.19 % Cost/income ratio 46.7 % 49.6 % 20.6 % 47.8 % Loan/deposit ratio 85.6 % 70.4 % 44.0 % 146.2 % Provisioning ratio (average loans to customers) 0.02 % 0.42 % 3.90 % 0.32 % NPE ratio 1.4 % 2.0 % 2.3 % 1.8 % NPE coverage ratio 59.7 % 70.2 % 65.1 % 47.1 % Assets 62,130 31,352 33,817 62,627 Total risk-weighted assets (RWA) 25,448 16,397 23,282 26,902 Equity 4,128 3,388 5,053 4,265 Loans to customers 37,707 17,839 11,340 37,115 Deposits from customers 45,700 25,253 25,847 31,631 Business outlets 343 729 569 23 Employees as at reporting date (full-time equivalents) 9,775 12,697 16,550 3,343 Customers in million1 3.7 4.9 7.0 2.4 1 Adjustment of the previous year's figures due to the inclusion of customers from the credit card business 54 Consolidated financial statements · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 2022 Corporate Center Reconciliation Total in € million Net interest income (52) 62 5,053 Dividend income 387 (345) 64 Current income from investments in associates 48 0 64 Net fee and commission income 51 (11) 3,878 Net trading income and fair value result 9 44 663 Net gains/losses from hedge accounting 2 7 (41) Other net operating income 103 (177) 29 Operating income 547 (420) 9,710 General administrative expenses (395) 170 (3,552) Operating result 152 (250) 6,158 Other result (139) (1) (667) Governmental measures and compulsory contributions (38) 0 (337) Impairment losses on financial assets (19) 17 (949) Profit/loss before tax (43) (234) 4,203 Income taxes 144 0 (859) Profit/loss after tax from continuing operations 101 (234) 3,344 Gains/losses from discontinued operations 398 10 453 Profit/loss after tax 498 (224) 3,797 Profit attributable to non-controlling interests 0 (62) (170) Profit/loss after deduction of non-controlling interests 498 (286) 3,627 Return on equity before tax – – 26.6 % Return on equity after tax – – 24.1 % Net interest margin (average interest-bearing assets) – – 2.59 % Cost/income ratio – – 36.6 % Loan/deposit ratio – – 82.4 % Provisioning ratio (average loans to customers) – – 0.73 % NPE ratio – – 1.6 % NPE coverage ratio – – 59.0 % Assets 44,774 (27,642) 207,057 Total risk-weighted assets (RWA) 15,008 (9,357) 97,680 Equity 8,542 (6,612) 18,764 Loans to customers 1,016 (1,788) 103,230 Deposits from customers 1,043 (4,374) 125,099 Business outlets – – 1,664 Employees as at reporting date (full-time equivalents) 2,049 – 44,414 Customers in million1 0.0 – 18.1 1 Adjustment of the previous year's figures due to the inclusion of customers from the credit card business Consolidated financial statements55 · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 · Notes Principles underlying the consolidated financial statements Principles of preparation The consolidated financial statements are prepared in accordance with the International Financial Reporting Standards (IFRS) published by the International Accounting Standards Board (IASB) and the international accounting standards adopted by the EU on the basis of IAS Regulation (EC) 1606/2002 including the applicable interpretations of the International Financial reporting Interpretations Committee (IFRIC/SIC). Standards and interpretations not yet applicable that have been published and endorsed by the EU are outlined in the section standards and interpretations not yet applicable (already endorsed by the EU). The consolidated financial statements also meet the requirements of § 245a of the Austrian Commercial Code (UGB) and § 59a of the Austrian Banking Act (BWG) regarding exempting consolidated financial statements that comply with internationally accepted accounting principles. A financial asset is recognized when it is probable that the future economic benefits will flow to the company and the acquisition or production costs, or another value can be reliably measured. A financial liability is recognized when it is probable that an outflow of resources embodying economic benefits will result from the settlement of the obligation and the amount at which the settlement will take place can be measured reliably. An exception are certain financial instruments which are recognized at fair value at the reporting date. Provided that the underlying contracts do not fall within the scope of IFRS 9 or IFRS 16, revenue is recognized if the conditions of IFRS 15 are met and if it is probable that the economic benefits will flow to the Group and the amount of revenue can be measured reliably. These consolidated financial statements have been prepared on a going concern. The consolidated financial statements are based on the reporting packages of all fully consolidated Group members, which are prepared according to IFRS rules and uniform Group standards. All material subsidiaries prepare their annual financial statements as at and for the year ended 31 December. Some IFRS disclosures made outside the notes form an integral part of the consolidated financial statements. These are mainly explanations on net income from segments, which are included in the notes on segment reporting. Detailed notes on IFRS 7 are included under note (42) Credit risk, note (43) Market risk and note (44) Liquidity management. This information is presented in accordance with IFRS 8 Operating Segments and IFRS 7 Financial Instruments Disclosures respectively. Classification and measurement of financial assets and financial liabilities A financial instrument is a contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity. On initial recognition, financial instruments are to be measured at fair value, which generally corresponds to the transaction price at the time of acquisition or issue. If the Group unit determines that the fair value on initial recognition differs from the transaction price, but this fair value measurement is not evidenced by a valuation technique that uses only data from observable markets, then the carrying amount of the financial asset or financial liability on initial recognition is adjusted to defer the difference between the fair value measurement and the transaction price. The deferred difference is subsequently recognized as a gain or loss only to the extent that it arises from change in a factor (including time) that market participants would consider in setting the price. According to IFRS 13, the fair value is defined as the exit price. For subsequent measurement, financial instruments are recognized in the statement of financial position according to the respective measurement category pursuant to IFRS 9, either at (amortized) cost or at fair value. The classification of financial assets under IFRS 9 is firstly based on the business model under which the assets are managed, and secondly on the cash flow characteristics of the assets. For RBI, this results in five classification categories for financial assets: · Financial assets measured at amortized cost (AC) · Financial assets measured at fair value through other comprehensive income (FVOCI) · Financial assets mandatorily measured at fair value through profit or loss (FVTPL) · Financial assets designated fair value through profit or loss (FVTPL) · Financial assets held for trading (HFT). 56 Consolidated financial statements · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 Financial liabilities are generally recognized according to IFRS 9 at (amortized) cost (financial liabilities – amortized cost) applying the effective interest method unless they are measured at fair value. This includes financial liabilities that are held for trading (financial liabilities – held for trading) and designated as FVTPL (financial liabilities – designated fair value through profit/loss). Changes in the fair value of liabilities designated at fair value through profit or loss which are caused by changes in RBI’s own default risk are to be shown in other comprehensive income. In accordance with IFRS 9, embedded derivatives are not separated from the host contract of a financial asset. Instead, financial assets are classified in accordance with the business model and their contractual characteristics as explained in the section business model assessment and in the section analysis of contractual cash flow characteristics. When recognizing financial liabilities, embedded derivatives are only separated from the host instrument and separately accounted for as derivatives if their economic characteristics and risks are not closely related to the economic characteristics and risks of the host contract, the embedded derivative meets the definition of a derivative and the hybrid financial instrument is not associated with a financial liability item that is held for trading or designated at fair value through profit or loss. Further details on the classification and measurement of financial assets and financial liabilities can be found in the notes of the respective items of the income statement and the statement of financial position. Reclassification of financial assets Reclassification is only possible for financial assets, not for financial liabilities. In RBI, a change in the measurement category is only possible if there is a change in the business model used to manage a financial asset. Such changes are expected to occur very rarely, are determined by the management following external or internal changes and must not only be significant for the entity’s operations but also be capable of being proven to external parties. If these conditions apply, then the reclassification is mandatory. If such a reclassification is necessary, this must be changed prospectively from the date of reclassification and approved by the RBI Management Board. Business model assessment RBI reviews the objective of the business model under which a financial asset is managed at a portfolio level because this best reflects the way the business is managed, and information is provided to management. The following factors are considered as evidence when assessing which business model is relevant: · How the performance of the business model (and the financial assets held within that business model) is assessed and reported to the entity’s key management personnel · The risks that affect the performance of the business model (and the financial assets held within that business model) and the way those risks are managed · How managers of the business are compensated – e.g. whether the compensation is based on the fair value of the assets managed or the contractual cash flows collected · The frequency, value, and timing of sales in prior periods, the reasons for such sales, and expectations about future sales activity · Whether sales activity and the collection of contractual cash flows are each integral or incidental to the business model (hold-to-collect versus hold-and-sell business model). Financial assets that are held for trading and those that are managed and whose performance is evaluated on a fair value basis will be measured at fair value through profit or loss (FVTPL). A business model’s objective can be to hold financial assets to collect contractual cash flows even when some sales of financial assets have occurred or are expected to occur. For RBI, the following sales may be consistent with the hold-to collect business model: · The sales are due to an increase in the credit risk of a financial asset. · The sales are infrequent (even if significant) or are insignificant individually and in aggregate (even if frequent). · The sales take place close to the maturity of the financial asset and the proceeds from the sales approximate the collection of the remaining contractual cash flows. The number of sales in RBI is small, and like the volume of the sales out of the hold-to-collect business model, monitored over time to have a documentation basis that respective sales are consistent with the hold-to-collect business model. The judgement is made under reference to the rules of IFRS 9 which foresee that those sales out of the hold-to-collect business model may be permissive in cases where the occur infrequently (even if significant in value) or insignificant in value both individually and in aggregate (even if frequent). Consolidated financial statements57 · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 Analysis of contractual cash flow characteristics If RBI has decided that the business model of a specific portfolio is to hold the financial assets to collect the contractual cash flows (or to both collect contractual cash flows and sell financial assets), it must assess whether the contractual terms of the financial assets allocated to this portfolio result on specific dates in cash flows that are solely payments of principal and interest on the principal amount outstanding. For this purpose, interest is defined as consideration for the time value of money and for the credit risk associated with the principal amount outstanding during a particular period and for other basic lending risks and costs, as well as a profit margin. This assessment will be carried out on an instrument-by-instrument basis on the date of initial recognition of the financial asset. In assessing whether the contractual cash flows are solely payments of principal and interest, RBI considers the contractual terms of the instrument. This includes assessing whether the financial asset contains a contractual term that could change the timing or amount of contractual cash flows in such a way that this condition is no longer met. RBI considers amongst other things: · Prepayment or extension terms · Leverage agreements · Claim is limited to specified assets or cash flows · Contractually linked instruments. IFRS 9 includes regulations for prepayment features with negative compensation. Negative compensation arises where the contractual terms permit the borrower to prepay the instrument before its contractual maturity, but the prepayment amount could be less than unpaid amounts of principal and interest. However, to qualify for amortized cost measurement, the negative compensation must be a reasonable compensation for early termination of the contract. Modification of the time value of money and the benchmark test The time value of money is the element of interest that provides consideration for only the passage of time. It does not take other risks (credit, liquidity etc.) or costs (administrative etc.) associated with holding a financial asset into account. In some cases, the time value of money element is modified (referred to as imperfect). This would be the case, for example, if a financial asset’s interest rate is periodically adjusted but the frequency of the interest rate adjustment does not match the tenor of the interest rate. In this case units must assess the modification as to whether the contractual cash flows represent solely payments of principal and interest, i.e. the modification term may not significantly alter the cash flows from a perfect benchmark instrument. RBI has developed a quantitative benchmark test to assess whether the cash flow condition has been met. This test determines whether the undiscounted modified contractual cash flows differ significantly from the undiscounted cash flows of a benchmark instrument. The benchmark instrument is equivalent to the tested asset in all respects except for the modified interest components. At the time when the transaction is initially entered, the quantitative benchmark test is performed using 1,000 forward-looking simulations of future market interest rates over the life of the financial asset. The test assumes a normal distribution of interest rates using the single-factor Hull-White model when simulating the scenarios. To pass the quantitative benchmark test, the financial asset being tested must not exceed two significance thresholds. The significance thresholds are established as the quotient of the simulated cash flows from the modified interest rate components and the benchmark instrument. The quotient must not exceed 10 per cent over a reporting period (three months) or 5 per cent over the entire life of the financial asset being tested. If one of these two significance thresholds is exceeded, the financial asset will have failed the benchmark test and must be measured at fair value through profit or loss. A benchmark test is applied for the following main contractual features that can potentially modify the time value of money: · Reset rate frequency does not match interest tenor · Lagging indicator · Smoothing clause · Grace period · Secondary market yield reference (UDRB: Average government bond yields weighted by outstanding amounts). 58 Consolidated financial statements · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 Relationships between items of the statement of financial position and measurement criteria Measurement Assets/liabilities Fair value Amortized cost Asset classes Cash, balances at central banks and other demand deposits x Financial assets - amortized cost x hereof loans from finance lease x Financial assets - fair value through other comprehensive income x Non-trading financial assets - mandatorily fair value through profit/loss x Financial assets - designated fair value through profit/loss x Financial assets - held for trading x Hedge accounting x Liability classes Financial liabilities - amortized cost x hereof liabilities from finance lease x Financial liabilities - designated fair value through profit/loss x Financial liabilities - held for trading x Hedge accounting x Key sources of estimation uncertainty and critical accounting judgments If estimates or assessments are necessary for accounting and measuring according to IAS/IFRS, they are made in accordance with the respective standards. They are based on past experiences and other factors, such as planning and expectations or forecasts of future events that appear likely, based on current judgement. The estimates and underlying assumptions are reviewed on an ongoing basis. Alterations to estimates that affect only one period will be considered only in that period. If the following reporting periods are also affected, the alterations will be taken into consideration in the current and following periods. The assumptions, estimates and accounting judgment mainly related to expected credit losses, the fair value and impairment calculation of financial instruments, deferred tax assets, provisions for pensions and similar obligations, provisions for litigation as well as the goodwill impairment test and immaterial assets capitalized during initial consolidation. The actual values can deviate from the estimated values. Additionally, in the light of the geopolitical situation RBI is exposed to increased risks related to foreign currency translation. Details can be found in the chapter exchange differences. Impairment in the lending business RBI ascertains on a forward-looking basis the expected credit losses (ECL) associated with its debt instrument assets carried at amortized cost and fair value through other comprehensive income and with the exposure arising from loan commitments, leasing receivables and financial guarantee contracts. The calculation of expected credit losses (ECL) requires the use of estimates that may not necessarily match actual results. In order to determine the amount of the impairment, significant credit risk parameters such as PD (Probability of Default), LGD (Loss Given Default) and EAD (Exposure at Default) as well as forward-looking information (economic forecasts) are to be estimated by management. The expected credit losses are adjusted at each reporting date. IFRS 9 requires the assessment if a significant increase in credit risk exists, without providing detailed guidance. Consequently, specific rules for the assessment have been defined, which consist of both qualitative information and quantitative thresholds. The methods for determining the amount of the impairment are explained in the section impairment general (IFRS 9). Quantitative information and sensitivity analyses are presented in the notes under (31). Judgement is required when calculating expected credit losses, especially when considering risks that are not adequately reflected in the models, such as overlays and other risk factors for sanction and geopolitical risks. Consolidated financial statements59 · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 Fair value of financial instruments Fair value is the price received for the sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. This applies regardless of whether the price can be directly observed or has been estimated on the basis of a measurement method. In determining the fair value of an asset or liability, the Group considers certain features of the asset or liability (e.g. condition and location of the asset, or restrictions in the sale and use of an asset) if market participants would also consider such features in determining the price for the acquisition of the respective asset or for the transfer of the liability at the measurement date. Where the market for a financial instrument is not active, fair value is established using a valuation technique or pricing model. For valuation methods and models, estimates are generally used depending on the complexity of the instrument and the availability of market-based data. The input parameters for these models are derived from observable market data where possible, nevertheless non-observable market data are required in many cases. Under certain circumstances, valuation adjustments are necessary to account for other factors such as model risk, liquidity risk or credit risk. The valuation models are described in the notes in the section on classification and measurement of financial assets and financial liabilities. In addition, the fair values of financial instruments are disclosed in the notes under (23) Fair value of financial instruments. Provisions for litigation Provisions are recognized when the Group has a present obligation from a past event, where it is likely that it will be obliged to settle, and an estimate of the amount is possible. The level of provisions is the best possible estimate of expected outflow of economic benefits at the reporting date while considering the risks and uncertainties underlying the commitment to fulfill the obligation. Risks and uncertainties are taken into consideration when making estimates. In some cases, lawsuits are filed by a number of retail customers. The measurement of the provision in such cases is based on a statistical approach. These approaches consider both static data, where relevant, and expert opinions, especially in connection with the lawsuits and losses expected in the future. Additional details are available under (46) Pending legal issues. Provision for pensions and similar obligations The cost of the defined benefit pension plan is determined using an actuarial valuation. The actuarial valuation involves making assumptions about future salary increases, mortality rates and future pension increases. Considerable accounting judgement is to be exercised in this connection in determining the criteria. Mercer´s interest rate recommendation is used to determine the discount rate from which expected returns are derived. The main criteria for the selection of such corporate bonds are the issuance volumes of the bonds, the quality of the bonds and the identification of outliers, which are not considered. Assumptions and estimates used for the long-term defined benefit obligation calculations are described in the section on pension obligations and other termination benefits. Quantitative information on long-term employee provisions is disclosed in the notes under (27) Provisions. Deferred tax assets Deferred tax assets are recognized only to the extent that it is probable that in the future sufficient taxable profit will be available against which those tax loss carry forwards, tax credits or deductible temporary differences can be utilized. A planning period of five years is used to this purpose. Such a period allows for a reliable estimate of the tax result based on planning. This assessment requires significant judgments and assumptions to be made by management. In determining the deferred tax assets, the management uses historical tax capacity and profitability information and, if relevant, forecasted operating results based upon approved business plans, including a review of the eligible carry-forward period. Analysis of contractual cash flow characteristics In addition to the business model test, a test of a financial asset’s cash flows is also necessary to allocate it to the measurement categories at amortized cost or at fair value through other comprehensive income. In order to pass the contractual cash flow characteristics test, the asset’s contractual cash flows must consist solely of payments of principal and interest on the principal amount outstanding. This analysis of whether contractual cash flows of financial assets consist solely of interest and principal payments involves critical judgments. At RBI, these judgments are mainly applied to loans with mismatched interest components, considering the individual contractual features of financial assets. In order to be able to assess whether a financial asset passes the cash flow characteristics test, a benchmark test is necessary in some circumstances to evaluate a changed element for the time value of money. 60 Consolidated financial statements · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 Goodwill impairment test All goodwill is tested each year with respect to its future economic benefits based on cash-generating units. An impairment test is conducted as of the reporting date if indications of possible impairment arise during the financial year. In the course of the impairment test, significant judgments, assumptions and estimates are required, in particular with regard to the timing and amount of future expected cash flows and the discount rate. For additional information, see (8) Other result and (25) Tangible fixed assets and intangible fixed assets. Impairment testing of companies valued at equity The carrying amounts of companies valued at equity must be tested for impairment if there are objective indications of impairment. At the end of each reporting period, an assessment is made as to whether there is any indication that the carrying amount of an investment exceeds its recoverable amount. IAS 36 contains a list of internal and external indicators that are considered as indications of impairment. If an indication arises that an entity valued at equity may be impaired, the recoverable amount of the asset is calculated. The significant judgments and estimates in connection with the impairment test relate particularly to the discount rate, the planning assumptions, and the future expected cash flows. Details can be found under (24) Investments in subsidiaries and associates. Application of new and revised standards Unless otherwise stated, the application of the following standards and interpretations is not currently expected to have any material impact on RBI. Amendments to IAS 1 (Disclosure of Accounting Policies; effective date: 1 January 2023) Starting from 1 January 2023 only material accounting policies are to be disclosed in the notes. The amendments to this standard consist majorly of changes in wording, which should lead to more clarity and unity in application. Amendments to IAS 8 (Definition of Accounting Estimates; effective date: 1 January 2023) The aim of this amendment is to clarify the distinction between changes in accounting policies (retrospective changes) and changes in accounting estimates (prospective changes). An accounting estimation is always based on a valuation uncertainty of financial balances in the financial statements. Changes in measurement techniques to calculate an estimate represent changes in accounting estimates, if they do not result from the correction of prior period errors. Amendments to IAS 12 (Deferred Tax arising from a Single Transaction; effective date: 1 January 2023) The main change in deferred tax related to assets and liabilities arising from a single transaction is to narrow the scope of the initial recognition exemption provided in IAS 12.15(b) and IAS 12.24. Accordingly, the initial recognition exemption does not apply to transactions in which equal amounts of deductible and taxable temporary differences arise on initial recognition. This is also explained in the newly inserted paragraph IAS 12.22A. Amendment to IAS 12 (International Tax Reform - Pillar 2 Model Rules, effective date: 1 January 2023) This amendment is intended to create a temporary exception for the recognition of deferred taxes if they arise from income taxes in connection with the Pillar 2 model rules. It also introduces targeted disclosure requirements to help investors better understand the impact of supplementary taxes on the company resulting from the reform, in particular before the country- specific legislation implementing the minimum taxation comes into force. RBI has applied this exception for the first time during the current financial year. For details please refer to note (11) Taxes. IFRS 17 (Insurance Contracts; effective date: 1 January 2023) IFRS 17 covers recognition and measurement, presentation and disclosure of insurance contracts. The aim of IFRS 17 consists of provision of relevant information by the financial statement preparing companies and thus a credible presentation of insurance contracts. This information should be the basis for users of financial statements to accurately evaluate the impact of insurance contracts on the financial position, financial performance and cash flows of companies. On adopting of IFRS 17, RBI’s equity increased by € 2 million as at 1 January 2023. Consolidated financial statements61 · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 Standards and interpretations not yet applicable (already endorsed by the EU) The following new or amended standards and interpretations, which have been adopted, but are not yet mandatory, have not been applied early. Unless otherwise stated, the application of the following standards and interpretations is currently not expected to have any material impact on RBI. Amendment to IAS 1 (Classification of liabilities as current or non-current; effective date: 1 January 2024) The amendments to IAS 1 are intended to clarify the criteria for classifying liabilities as current or non-current. In future, only rights that exist at the end of the reporting period are to be decisive for the classification of a liability. In addition, supplementary guidelines for the interpretation of the criteria of the right to defer settlement of the liability by at least twelve months as well as explanatory notes on the fulfillment criteria were added. Amendment to IAS 1 (Non-current liabilities with covenants; effective date: 1 January 2024) The amendments to IAS 1 clarify with regard to the classification of liabilities as current or non-current that only covenants that an entity must fulfil on or before the reporting date affect this classification. However, an entity must disclose information in the notes that enables users of financial statements to understand the risk that non-current liabilities with covenants could become repayable within twelve months. Amendment to IFRS 16 (Lease Liability in a Sale and Leaseback Transaction; effective date: 1 January 2024) The amendment contains requirements for the subsequent measurement of leases in the context of a sale and leaseback (SLB) for seller-lessees. This is primarily intended to standardize the subsequent measurement of lease liabilities to prevent inappropriate profit realization. In principle, the amendment means that the payments expected at the beginning of the term are to be considered in the subsequent measurement of lease liabilities as part of an SLB. In each period, the lease liability is reduced by the expected payments and the difference to the actual payments is recognized in profit or loss statement. Standards and interpretations not yet applicable (not yet endorsed by the EU) Amendment to IAS 7 and IFRS 7 (Supplier Finance Arrangements; effective date: 1 January 2024) The amendment aims to improve transparency with regard to the effects of supplier financing arrangements on an entity's liabilities, cash flows and liquidity risk. For this purpose, existing disclosure requirements are supplemented by additional and mandatory qualitative and quantitative disclosures. Amendment to IAS 21 (Non-exchangeability of foreign currencies; effective date: 1 January 2025) The amendment clarifies how an entity should assess whether a currency is exchangeable into another currency. Additionally, the amendment clarifies the determination of the exchange rate to be used and the required disclosures in the notes if the previous assessment has determined that the exchangeability of a currency is not given. 62 Consolidated financial statements · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 Exchange differences The consolidated financial statements of RBI were prepared in euro which is the functional currency of RBI AG. The functional currency is the currency of the principal economic environment in which the company operates. Each entity within the Group determines its own functional currency taking all factors listed in IAS 21 into account. All financial statements of fully consolidated companies prepared in a functional currency other than euro were translated into the reporting currency euro employing the modified closing rate method in accordance with IAS 21. Equity was translated at its historical exchange rates while all other assets, liabilities and the notes were translated at the prevailing foreign exchange rates as at the reporting date. Differences arising from the translation of equity (historical exchange rates) are offset against retained earnings. The income statement items were translated at the average exchange rates during the year calculated on the basis of monthend rates. Differences arising between the exchange rate as at the reporting date and the average exchange rate applied in the income statement were offset against equity (cumulative other comprehensive income). Accumulated exchange differences are reclassified from the item exchange differences shown in other comprehensive income to the income statement under net income from deconsolidation, in the event of a disposal of a foreign business operation which leads to loss of control, joint management or significant influence over this business operation. In the case of one subsidiary headquartered in the euro area, the Russian ruble is the reporting currency for measurement purposes given the economic substance of the underlying transactions. 2023 2022 As at Average As at Average Rates in units per € 31/12 1/1-31/12 31/12 1/1-31/12 Albanian lek (ALL) 103.880 108.872 114.230 118.870 Belarusian-ruble (BYN) 3.536 3.242 2.916 2.755 Bosnian marka (BAM) 1.956 1.956 1.956 1.956 Bulgarian lev (BGN) 1.956 1.956 1.956 1.956 Croatian kuna (HRK) — — 7.535 7.538 Polish zloty (PLN) 4.340 4.535 4.681 4.680 Romanian leu (RON) 4.976 4.951 4.950 4.935 Russian ruble (RUB) 99.137 91.770 77.789 72.644 Serbian dinar (RSD) 117.174 117.251 117.322 117.476 Czech koruna (CZK) 24.724 23.982 24.116 24.562 Ukrainian hryvnia (UAH) 42.208 39.706 38.951 34.146 Hungarian forint (HUF) 382.800 382.135 400.870 391.271 US dollar (USD) 1.105 1.082 1.067 1.056 In the context of the geopolitical situation, RBI is exposed to increased risks related to foreign currency translations. The ECB stopped publishing an official EUR/RUB exchange rate in March 2022 and an actual and factually achievable exchange rate (e.g. provided by Refinitiv or Electronic Broking Service (EBS): off-shore rate) established itself in addition to the theoretical, official exchange rate (rate determined by the Russian central bank on the basis of data from the Moscow Stock Exchange: on-shore rate). RBI is exposed to these risks particularly in the translation of monetary items denominated in a foreign currency and in the translation of fully consolidated foreign business operations. According to IAS 21, the respective closing rate is to be used when translating monetary items into the functional currency. The closing rate is in turn defined as the exchange rate that would apply if the transaction were executed immediately. In particular, it must be taken into account whether an officially quoted price is available on the closing date and whether it is available for immediate settlement. If multiple exchange rates are available, the exchange rate at which the future cash flows from the transaction could have been settled on the balance sheet date is to be used in accordance with IAS 21.26. In summary, RBI has concluded that this rate would have been to the most part the off-shore rate, which is therefore used in the currency translation as at 31 December 2023. RBI does not hold any material positions in Belarusian ruble and Ukrainian hryvnia outside of these two countries. RBI has subsidiaries that report in a functional currency other than the Group’s presentation currency. The translation of fully consolidated foreign operations into the reporting currency of RBI must be carried out in accordance with IAS 21.39: · At the closing rate at the reporting date (assets and liabilities) · At the exchange rate at the time of the respective transactions or, for practical reasons, at an appropriate average rate (income and expenses). For this purpose, as with the translation of foreign currency transactions, the determination of suitable exchange rates is necessary. Usually, the exchange rate used for this purpose is the one that would be applied when converting dividends from the foreign business operation or for any capital repatriations. Due to the government restrictions introduced in Russia, RBI assumes that cash inflows from foreign business operations in Russia could not be converted at the official exchange rate of the Russian central bank or that of the Moscow Stock Exchange as at the balance sheet date, rather, the actual and factually Consolidated financial statements63 · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 achievable rate would be applied. In transactions with international banks, the off-shore rate is usually used for this purpose; accordingly, the foreign business operation in Russia was translated at this rate on the balance sheet date. As at 31 December 2023, the EUR/RUB exchange rate used by RBI (off-shore rate) was 99.14 and that of the Russian Central Bank (on-shore rate) was 99.19. For the Belarusian ruble and the Ukrainian hryvnia, the rates published by the respective central bank continued to be considered suitable rates by RBI. However, due to the small size of the foreign operations in these countries (see chapter risk report), RBI is only exposed to a limited risk regarding foreign currency translation. RBI addresses the challenging conditions in the geopolitical environment and the resulting changes in the currency markets with ongoing monitoring of the estimates and assumptions presented here. In connection with similar circumstances, the IFRIC explicitly pointed out in its meeting on September 2018 (IFRIC Update 09-18) that companies in such a market environment must examine on an ongoing basis and on each balance sheet date whether the exchange rate used represents the correct rate in accordance with IAS 21. Consolidated group Fully consolidated Number of units 2023 2022 As at beginning of period 192 204 Included for the first time in the financial period 8 7 Merged in the financial period (2) (4) Excluded in the financial period (6) (15) As at end of period 192 192 Domicile in Austria 113 108 Domicile abroad 79 84 Banks 18 19 Financial institutions 111 118 Companies rendering bank-related ancillary services 11 10 Financial holding companies 6 5 Other 46 40 Included units Company, domicile (country) Share Included as of Reason Companies rendering bank-related ancillary services RBI Retail Innovation GmbH, Vienna (AT) 100.0% 1/1 Materiality Limited Liability Company RB-Digital, Moscow (RU) 100.0% 13/7 Foundation Other companies Neu-Marx Holding Eins GmbH & Co KG, Vienna (AT) 100.0% 1/1 Materiality Neu-Marx Holding Zwei GmbH & Co KG, Vienna (AT) 100.0% 1/1 Materiality Neu-Marx Immobilien Eins GmbH & Co KG, Vienna (AT) 100.0% 1/1 Materiality Neu-Marx Immobilien Zwei GmbH & Co KG, Vienna (AT) 100.0% 1/1 Materiality INFRA MI 1 Immobilien Gesellschaft mbH, Vienna (AT) 100.0% 1/1 Materiality Raiffeisen WohnBau Zwei GmbH, Vienna (AT) 100.0% 1/1 Materiality Excluded units Company, domicile (country) Share Excluded as of Reason Banks RBA Banka a.d., Novi Sad (former Crédit Agricole Srbija AD) (RS) 100.0 % 30/4 Merger Financial institutions DOROS Raiffeisen-Immobilien-Leasing GmbH, Vienna (AT) 100.0 % 1/10 Sale Equa Sales & Distribution s.r.o., Praha (CZ) 75.0 % 1/5 Materiality Health Resort RBI Immobilien-Leasing GmbH, Vienna (AT) 75.0 % 1/12 Sale Orestes Immobilienleasing GmbH & Co. Projekt Wiesbaden KG, Kriftel (DE) 6.0 % 1/2 Materiality Ostarrichi Immobilienleasing GmbH & Co. Projekt Langenbach KG, Kriftel (DE) 100.0 % 1/3 Materiality Raiffeisen consulting d.o.o., Zagreb (HR) 100.0 % 1/12 Merger Raiffeisen-Leasing Litauen UAB, Vilnius (LT) 92.3 % 1/7 Sale 64 Consolidated financial statements · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 Consequences and analysis of the armed conflict between Russia and Ukraine Going Concern The RBI Board of Management has prepared the consolidated financial statements as at 31 December 2023 on a going concern basis as they do not intend to liquidate RBI and based on current available information this is considered a realistic intention. Planning continues to indicate that RBI has the required economic resources to be able to meet ongoing regulatory requirements as well as being able to fund business and liquidity needs (liquidity and funding profile, including forecasts of internal liquidity metrics and regulatory liquidity coverage ratios). The most recent internally generated stress testing scenarios for liquidity and capital requirements have shown that RBI has adequate resources to withstand reasonably possible downside scenarios. Additionally, RBI has robust systems in place to mitigate the operational disruption of doing business in a warzone including the threat of cyberattacks. The RBI Board of Management has concluded that there are no material uncertainties that could cast significant doubt over their ability to continue as a going concern for at least a year from the date of approval, 12 February 2024, of the annual report to be issued. Control event The economic and political environment due to the war may indicate changes in the ability of an investor to control subsidiaries according to IFRS 10 in the affected areas. For RBI, especially Ukraine, Russia and Belarus can be counted among the affected areas. In assessing control, RBIs examination includes if it is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee according to the requirements of IFRS 10. If voting rights are relevant, RBI has control over an entity in which it directly or indirectly holds more than 50 per cent of the voting rights, except when there are indicators that another investee has the ability to determine unilaterally the relevant activities of the entity. RBI assesses evidence of control in cases in which it does not hold the majority of voting rights but has the ability to unilaterally govern the relevant activities of the entity. This ability may occur in cases in which RBI has the ability to control the relevant activities due to the extent and distribution of voting rights of the investees. If facts and circumstances indicate that there are changes to one or more elements of control, a reassessment whether control over the investee still exists is done. When examining the facts and circumstances RBI carefully considers whether there have been changes that may significantly limit its ability to exercise the rights or governance provisions with respect to a subsidiary due to the war or the sanctions imposed. RBI has concluded that no changes are necessary in the assessment of control and that control was not lost over the subsidiaries in the affected areas. Pro forma representation of the profit and loss statement and balance sheet excluding Russia The tables below show the pro-forma profit and loss as well as the balance sheet for RBI excluding Russian operations. Due to the capital controls imposed by Russia the higher levels of regulatory capital in Russia can not be used for regulatory capital purposes in the rest of the group. The pro-forma CET 1 ratio excluding Russian operations under the assumption that the deconsolidation takes place with a price book value of zero would amount to 14.6 per cent compared to 17.3 per cent including Russian operations. Consolidated financial statements65 · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 RBI Contribution Russia1 RBI excluding Russia in € million 2023 2022 2023 2022 2023 2022 Net interest income 5,683 5,053 1,314 1,528 4,369 3,525 Dividend income 35 64 0 0 35 64 Current income from investments in associates 85 64 3 6 82 58 Net fee and commission income 3,042 3,878 1,182 2,023 1,859 1,855 Net trading income and fair value result 186 663 131 372 55 291 Net gains/losses from hedge accounting (28) (41) (2) (29) (26) (12) Other net operating income 62 29 (25) (37) 87 66 Operating income 9,065 9,710 2,603 3,863 6,462 5,847 Staff expenses (2,209) (2,010) (580) (533) (1,629) (1,477) Other administrative expenses (1,224) (1,081) (95) (106) (1,129) (976) Depreciation (475) (461) (41) (50) (434) (411) General administrative expenses (3,908) (3,552) (715) (688) (3,192) (2,864) Operating result 5,158 6,158 1,888 3,175 3,270 2,983 Other result (906) (667) (8) (7) (898) (660) Governmental measures and compulsory contributions (284) (337) (42) (54) (242) (284) Impairment losses on financial assets (393) (949) (95) (471) (298) (479) Profit/loss before tax 3,576 4,203 1,743 2,643 1,832 1,560 Income taxes (997) (859) (464) (559) (533) (300) Profit/loss after tax from continuing operations 2,578 3,344 1,279 2,084 1,299 1,260 Gains/losses from discontinued operations 0 453 0 0 0 453 Profit/loss after tax 2,578 3,797 1,279 2,084 1,299 1,713 Profit attributable to non-controlling interests (192) (170) 0 0 (192) (170) Consolidated profit/loss 2,386 3,627 1,279 2,084 1,107 1,542 1 The contribution of Russia is defined as contribution to the Group and therefore deviates from the country results presented in the country view. RBI Contribution Russia RBI excluding Russia Assets in € million 2023 2022 2023 2022 2023 2022 Cash, balances at central banks and other demand deposits 43,234 53,683 6,695 8,613 36,540 45,070 Financial assets - amortized cost 139,302 137,431 10,305 12,980 128,998 124,451 Financial assets - fair value through other comprehensive income 2,992 3,203 3 2 2,988 3,200 Non-trading financial assets - mandatorily fair value through profit/loss 949 757 1 1 948 756 Financial assets - designated fair value through profit/loss 185 84 0 0 185 84 Financial assets - held for trading 5,783 6,411 48 54 5,735 6,357 Hedge accounting 1,160 1,608 10 8 1,150 1,600 Fair value adjustments of the hedged items in portfolio hedge of interest rate risk (365) (947) (65) (185) (300) (762) Investments in subsidiaries and associates 820 713 1 1 819 712 Tangible fixed assets 1,672 1,684 185 154 1,486 1,530 Intangible fixed assets 970 903 70 54 900 849 Current tax assets 69 100 5 10 64 90 Deferred tax assets 218 269 111 141 107 128 Other assets 1,253 1,159 102 107 1,151 1,052 Total 198,241 207,057 17,471 21,938 180,769 185,119 66 Consolidated financial statements · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 RBI Contribution Russia RBI excluding Russia Equity and liabilities in € million 2023 2022 2023 2022 2023 2022 Financial liabilities - amortized cost 164,711 175,142 12,656 17,425 152,054 157,717 Financial liabilities - designated fair value through profit/loss 1,088 950 1 1 1,088 949 Financial liabilities - held for trading 8,463 8,453 24 (23) 8,439 8,476 Hedge accounting 1,466 2,054 39 0 1,426 2,054 Fair value adjustments of the hedged items in portfolio hedge of interest rate risk (514) (1,217) (45) (63) (469) (1,154) Provisions for liabilities and charges 1,644 1,479 248 223 1,396 1,255 Current tax liabilities 242 181 35 77 207 104 Deferred tax liabilities 43 36 6 9 37 27 Other liabilities 1,248 1,215 57 151 1,192 1,064 Equity 19,849 18,764 4,450 4,138 15,400 14,626 Consolidated equity 17,009 16,027 4,450 4,138 12,559 11,889 Non-controlling interests 1,231 1,127 0 0 1,231 1,127 Additional tier 1 1,610 1,610 0 0 1,610 1,610 Total 198,241 207,057 17,471 21,938 180,769 185,119 Concentration risk Since the outbreak of war in Ukraine, RBIs activities in Russia, Ukraine, and Belarus have been exposed to increased risk. The heightened risk is driven by several factors such as the destruction of livelihoods and infrastructure in Ukraine as well as the loss and blockading of ports, sanctions imposed on Russia, uncertainty about the length of the war and price instability and economic contraction in Eastern Europe. The exposure to Russia, Ukraine and Belarus is presented in the tables below. The first table shows the split of the net carrying amount of loans and advances and debt securities based on IFRS measurement categories as well as the nominal of the off-balance exposure after impairments. The second table shows the concentration risk on counterparty level, whereby derivatives of the trading book are shown separately. Both tables are based on the country segmentation in accordance with IFRS 8. 2023 2022 in € million Russia Ukraine Belarus Total Russia Ukraine Belarus Total Financial assets - amortized cost 12,431 3,049 871 16,351 15,937 3,041 1,174 20,153 Financial assets - fair value through other comprehensive income 3 400 1 404 2 119 131 253 Non-trading financial assets - mandatorily fair value through profit/loss 3 0 0 3 2 0 0 2 Financial assets - designated fair value through profit/loss 0 0 0 0 0 0 0 0 Financial assets - held for trading 70 178 0 249 304 164 5 473 On-balance 12,508 3,628 872 17,008 16,245 3,325 1,310 20,880 Loan commitments, financial guarantees and other commitments 2,587 807 391 3,785 3,294 770 369 4,433 Total 15,095 4,435 1,263 20,793 19,539 4,095 1,679 25,313 2023 2022 in € million Russia Ukraine Belarus Total Russia Ukraine Belarus Total Derivatives 62 4 0 66 244 8 0 252 Central banks 250 823 0 1,073 732 774 0 1,506 General governments 188 1,229 133 1,550 212 655 262 1,130 Banks 5,855 269 46 6,169 5,758 260 320 6,337 Other financial corporations 210 56 10 275 642 52 1 694 Non-financial corporations 3,380 1,121 466 4,968 4,799 1,433 467 6,699 Households 2,564 126 216 2,906 3,859 142 260 4,261 On-balance 12,508 3,628 872 17,008 16,245 3,325 1,310 20,880 Loan commitments, financial guarantees and other commitments 2,587 807 391 3,785 3,294 770 369 4,433 Total 15,095 4,435 1,263 20,793 19,539 4,095 1,679 25,313 Consolidated financial statements67 · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 Valuation of collateral in Ukraine In Ukraine, there were many difficulties in determining the market value of collateral since the beginning of the war. These are on the one hand physical restrictions in some regions on the ability to conduct visual inspections and determine the potential level of damage and on the other hand the uncertainty about market development and transactions. For these reasons in occupied regions non-eligible status was applied and in regions with high risk of hostility or occupation significantly increased discounts were applied. For other areas of Ukraine there are ongoing on-site-visits and the valuation of real estate was fully restored. The Ukraine economy is adapting to military conditions. Impairment test for tangible and intangible fixed assets Due to the war between Russia and the Ukraine, tangible and intangible fixed assets in both countries were examined for indicators that could lead to an impairment in accordance with IAS 36. In Ukraine, the tangible fixed assets located in the occupied territories were written off to zero in previous year. All other tangible fixed assets were assessed individually and adjusted if damage occurred. This resulted in impairments less than € 1 million in the reporting year 2023 (previous year’s period: € 6 million). Due to changes in market prices, interest rates, rental prices and vacant properties, as a result of the geopolitical situation and a more detailed appraisal the impairment test for tangible fixed assets in Russia resulted in impairment losses of around € 16 million (previous year’s period € 1 million). The impairment test for intangible fixed assets resulted in impairment losses lower than € 1 million (previous year’s period: € 6 million). For the effects on the models for calculating impairments in accordance with IFRS 9, please refer to note (31) Expected credit losses. 68 Consolidated financial statements · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 Notes to the income statement (1) Net interest income Interest and interest-like income mainly includes interest income on financial assets such as loans, fixed-interest securities, as well as interest and interest-like income from the trading portfolio. Interest expenses and interest-like expenses mainly include interest paid on deposits, debt securities issued and subordinated capital. Interest income and interest expenses are accrued in the reporting period. Negative interest from asset items is shown in interest expenses; negative interest from liability items is shown in interest income. in € million 2023 2022 Interest income according to effective interest method 8,293 6,681 Financial assets - fair value through other comprehensive income 135 109 Financial assets - amortized cost 8,158 6,572 Interest income other 2,313 577 Financial assets - held for trading 311 182 Non-trading financial assets - mandatorily fair value through profit/loss 33 28 Financial assets - designated fair value through profit/loss 6 7 Derivatives – hedge accounting, interest rate risk 449 85 Other assets 1,512 156 Interest income on financial liabilities 1 119 Interest expenses (4,923) (2,205) Financial liabilities - amortized cost (3,717) (1,791) Financial liabilities - held for trading (325) (9) Financial liabilities - designated fair value through profit/loss (39) (32) Derivatives – hedge accounting, interest rate risk (815) (302) Other liabilities (16) (10) Interest expenses on financial assets (11) (60) Total 5,683 5,053 in € million 2023 2022 Net interest income 5,683 5,053 Average interest-bearing assets 198,044 194,789 Net interest margin 2.87 % 2.59 % Net interest income includes interest income of € 486 million (previous year’s period: € 325 million) from marked-to-market financial assets and interest expenses of € 364 million (previous year’s period: € 42 million) from marked-to-market financial liabilities. The € 631 million increase in net interest income to € 5,683 million was largely driven by interest rates. Due to the liquidity position in the reporting period, rising market interest rates in numerous Group countries led to a sharper increase in interest income than in interest expense. The increases amounted to € 169 million in Hungary, € 90 million in Romania, € 83 million in Slovakia, € 64 million in Croatia and € 42 million in Albania. Raiffeisen Bausparkasse Österreich Gesellschaft m.b.H reported an increase of € 42 million due to upward repricing of variable-rate loans and increased interest income from derivatives. In Serbia, net interest income rose € 124 million as a result of higher interest income from loans for non-financial corporations and households and also partly due to the integration of Crédit Agricole Srbija AD. Volume-related higher interest income from government certificates of deposit, from money market transactions and from government bonds led to an increase of € 43 million in net interest income in Ukraine. Net interest income in Russia, on the other hand, fell € 116 million, due to a partially currency-related 34 per cent decline in loan volume. In Belarus, net interest income fell € 36 million due to falling market interest rates and the resulting lower margins. Net interest income also fell € 10 million in the Czech Republic, as increasing interest expenses for customer deposits from households and for newly issued MREL-eligible debt securities significantly exceeded the increase in interest income from repo business and customer loans. The net interest margin improved 28 basis points to 2.87 per cent, with the largest increases of 192 basis points in Serbia, 144 basis points in Albania and 109 basis points in Hungary. Consolidated financial statements69 · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 (2) Dividend income Dividends from equities, subsidiaries not fully consolidated, strategic investments and associates not valued at equity are recognized under dividend income. Dividends are recognized through profit/loss if RBI’s legal entitlement to payment has materialized. in € million 2023 2022 Financial assets - held for trading 1 1 Non-trading financial assets - mandatorily fair value through profit/loss 2 9 Financial assets - fair value through other comprehensive income 8 9 Investments in subsidiaries and associates 24 45 Total 35 64 (3) Current income from investments in associates in € million 2023 2022 Current income from investments in associates 85 64 (4) Net fee and commission income RBI applies the five-step revenue recognition model in IFRS 15 - Revenues from contracts with customers - for the recognition of commission income when the contractual performance obligation to the customer has been satisfied. In cases where contractual arrangements are part of a financial instrument under IFRS 9 the instruments are initially recognized at fair value before applying IFRS 15. This is sometimes the case with loan commitments for which, depending on utilization, a portion of the fee must be disclosed as part of the effective interest rate method in net interest income in accordance with IFRS 9 or in net fee and commission income in accordance with IFRS 15 if not utilized . In RBI, fee income is primarily generated from services provided at a fixed price over a certain period, such as card and current account services or on a transactional basis at a point-in-time such as foreign exchange and payment services. In the case of asset management fees income is normally variable and depends on factors such as the volume of assets under management as well as performance of the underlying assets. Variable fees are recognized when all uncertainties, e.g., discounts or rebates, are resolved and amounts are known. If transactions are processed directly on behalf of the customer, the fees are reported on a gross basis. If, on the other hand, RBI acts as an agent, the fees are shown net of payments to third parties. Fees for foreign exchange and payment services are recognized in RBI at the time the service was rendered to the customer. Fees that accrue over a certain period are recognized predominantly on a straight-line basis over the term of the contract. In some cases, RBI offers a package of services (bundled services). These services may contain multiple performance obligations which are usually distinguishable performance obligations, such as current account services, and the transaction price is allocated to the individual performance obligation. RBI has no financing agreements and no material assets or liabilities from long-term contracts in connection with IFRS 15. The bank has not capitalized any expenses related to long-term contracts with customers which are covered by IFRS 15. Fee expenses are expensed as the services are received. in € million 2023 2022 Clearing, settlement and payment services 1,134 1,212 Loan and guarantee business 221 253 Securities 148 241 Asset management 253 266 Custody and fiduciary business 84 98 Customer resources distributed but not managed 60 63 Foreign exchange business 1,018 1,644 Other 124 102 Total 3,042 3,878 70 Consolidated financial statements · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 Overall, net fee and commission income fell € 837 million to € 3,042 million. Net fee and commission income decreased due to the currency devaluations in Eastern Europe and continued to be influenced by the geopolitical situation. Russia reported the strongest decline of € 856 million, while the other countries of the Group remained stable. The result from foreign exchange business was down € 627 million, primarily in spot foreign exchange business in Russia and at head office. In Russia, this development was influenced by decreased volumes caused by the introduction of internal transaction limits as well as lower margins in corporate customer and retail business, at head office the fall in business was likewise margin-related. Due to lower fees, net income from the securities business also fell € 93 million, mainly in Russia. Net income from clearing, settlement and payment services decreased € 77 million as a result of lower volumes, primarily in Russia. Net income from loan and guarantee business also fell € 32 million, most notably in Russia and at head office. Net fee and commission income includes income and expenses of € 1,969 million (previous year’s period: € 1,950 million) relating to financial assets and financial liabilities that are not measured at fair value through profit or loss. 2023 Central Europe Southeastern Europe Eastern Europe Group Corporates & Markets Corporate Center Reconciliation Total in € million Fee and commission income 801 653 1,723 893 135 (139) 4,066 Clearing, settlement and payment services 371 397 698 218 94 (100) 1,679 Clearing and settlement 43 45 450 0 26 (17) 547 Credit cards 58 51 18 48 6 0 182 Debit cards and other card payments 58 115 119 0 33 (30) 295 Other payment services 211 186 111 170 29 (53) 654 Loan and guarantee business 56 39 35 120 14 (6) 257 Securities 42 6 86 103 13 (19) 232 Asset management 22 27 18 335 0 0 402 Custody and fiduciary business 14 6 50 32 4 (4) 101 Customer resources distributed but not managed 40 29 33 0 0 0 102 Foreign exchange business 230 137 653 70 9 (5) 1,094 Other 26 12 149 16 1 (3) 200 Fee and commission expenses (223) (196) (359) (315) (63) 132 (1,025) Total 578 456 1,364 578 71 (7) 3,042 2022 Central Europe Southeastern Europe Eastern Europe Group Corporates & Markets Corporate Center Reconciliation Total in € million Fee and commission income 748 644 2,526 943 95 (120) 4,835 Clearing, settlement and payment services 325 393 817 190 69 (80) 1,714 Clearing and settlement 44 42 526 0 26 (16) 622 Credit cards 45 46 23 44 3 0 161 Debit cards and other card payments 48 102 163 0 26 (24) 316 Other payment services 188 203 105 146 15 (41) 616 Loan and guarantee business 57 37 48 136 8 (8) 278 Securities 40 4 184 94 6 (21) 307 Asset management 23 28 27 338 0 0 415 Custody and fiduciary business 11 5 47 53 3 (5) 114 Customer resources distributed but not managed 32 25 50 0 0 0 106 Foreign exchange business 231 139 1,229 115 8 (2) 1,720 Other 29 14 125 17 0 (3) 181 Fee and commission expenses (183) (195) (319) (326) (44) 110 (957) Total 565 449 2,207 617 51 (11) 3,878 Consolidated financial statements71 · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 (5) Net trading income, fair value result and net gains/losses from hedge accounting Net trading income comprises the trading margins resulting from the foreign exchange business, results due to foreign exchange revaluations and all realized and unrealized gains and losses from financial assets and liabilities at fair value. in € million 2023 2022 Net gains/losses on financial assets and liabilities - held for trading (143) 536 Derivatives 129 204 Equity instruments 58 (57) Debt securities 74 (68) Loans and advances 39 41 Short positions 1 5 Deposits 14 361 Debt securities issued (454) 81 Other financial liabilities (3) (32) Net gains/losses on non-trading financial assets - mandatorily fair value through profit or loss 77 (42) Equity instruments 0 0 Debt securities 11 (19) Loans and advances 66 (23) Net gains/losses on financial assets and liabilities - designated fair value through profit/loss (20) 90 Debt securities 5 (5) Deposits (3) 9 Debt securities issued (22) 86 Exchange differences, net 271 79 Total 186 663 The trading result and result from fair value assessments decreased by € 477 million to € 186 million.The main reason for the decline compared to the previous year was market turbulence in Russia and the increase in our own credit spreads as a result of Russia’s war of aggression against Ukraine in the comparison period of 2022. In the area of certificate business booked at head office high valuation gains from fair value assessed certificate issuances occurred due to the sharp increase in our own credit spreads in the previous year. In the current year, however, our own risk premiums reduced by about 35 basis points. As a result, the risk-related valuation result decreased by € 110 million to minus € 49 million compared to the previous year’s period. Without this effect, the contribution of the trading result at head office decreased by € 44 million to € 53 million, which was due to a decline in the certificate business and a lower net result from securities positions on the one hand, and own issued bonds measured at fair value on the other, despite an increased trading result relating to interest rate derivatives and foreign currency transactions. Trading activities in Russia led to a decrease in the trading result by € 234 million to € 134 million. The decrease includes currency-related conversion effects of minus € 35 million, which can be attributed to the different development of the average exchange rates of the Russian ruble compared to the Euro due to a significant devaluation in the second and third quarter of 2023. The currency-adjusted decrease of € 199 million was primarily due to a reduced volume of customer transactions with foreign currencies and the associated decline in trading margins. In the Czech Republic, Slovakia, Romania and Serbia, an increase in valuation gains related to foreign currency positions amounting to € 23 million was recorded. However, this was offset by higher currency-related valuation losses, especially in Hungary, Ukraine and Belarus, amounting to minus € 95 million. Fair value assessed investments in venture capital funds recorded valuation gains of € 15 million in the previous year, but losses of € 5 million occurred in the current year. in € million 2023 2022 Fair value changes of the hedging instruments 158 50 Fair value changes of the hedged items attributable to the hedged risk (185) (91) Ineffectiveness of cash flow hedge recognized in profit or loss 0 0 Total (28) (41) 72 Consolidated financial statements · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 (6) Other net operating income The other operating income contains other earnings components that arise in connection with the operating business activity. in € million 2023 2022 Gains/losses on derecognition of not modified financial assets and liabilities - not measured at fair value through profit/loss (26) (57) Debt securities (25) (57) Loans and advances (2) (4) Debt securities issued 2 4 Other financial liabilities 0 0 Gains/losses on derecognition of non-financial assets held for sale 4 (28) Investment property 1 0 Intangible fixed assets (4) (30) Other assets 7 1 Net income arising from non-banking activities 13 8 Sales revenues from non-banking activities 111 111 Expenses from non-banking activities (98) (104) Net income from additional leasing services 26 24 Revenues from additional leasing services 46 36 Expenses from additional leasing services (20) (12) Net income from insurance contracts (1) 0 Net rental income from investment property incl. operating lease (real estate) 60 50 Net rental income from investment property 19 17 Income from rental real estate 24 18 Expenses from rental real estate (4) (4) Income from other operating lease 25 24 Expenses from other operating lease (4) (4) Net expense from allocation and release of other provisions (48) 14 Other operating income/expenses 33 19 Total 62 29 Other operating income 414 351 Other operating expenses (351) (322) Other net operating income increased € 33 million to € 62 million. In the reporting period, net income from debt securities showed a € 31 million smaller loss of € 25 million. The loss in the reporting period was mainly attributable to Hungary, whereas in the previous year it mainly related to Russia. The derecognition of intangible assets at head office resulted in a loss of € 29 million in the previous year. An amount of € 48 million was allocated to other provisions in the reporting period for pending litigation in Russia and Austria, whereas in the previous year there were reversals of € 14 million, mainly in Romania and at head office. Charges for non-banking activities and operating leases on property resulted in higher income in the reporting period. (7) General administrative expenses in € million 2023 2022 Staff expenses (2,209) (2,010) Other administrative expenses (1,224) (1,081) Depreciation of tangible and intangible fixed assets (475) (461) Total (3,908) (3,552) Consolidated financial statements73 · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 Staff expenses in € million 2023 2022 Wages and salaries (1,686) (1,557) Social security costs and staff-related taxes (402) (359) Other voluntary social expenses (62) (55) Expenses for defined contribution pension plans (15) (16) Expenses/income from defined benefit pension plans (6) (5) Expenses for post-employment benefits (11) (12) Expenses for other long-term employee benefits excl. deferred bonus program (6) 10 Staff expenses under deferred bonus program (19) (14) Termination benefits (2) (3) Total (2,209) (2,010) Staff expenses rose € 199 million to € 2,209 million, mainly at head office (up € 57 million) and in Russia (up € 48 million). The increase at head office was primarily attributable to salary adjustments under collective agreements and to an increase in the headcount. In Russia, the increase resulted from higher salaries and social security costs, provisions for one-off payments and an increase in the headcount, notably in IT. Staff expenses also increased in Hungary (up € 23 million), Slovakia (up € 20 million) and Romania (up € 15 million). Expenses for severance payments and retirement benefits Under defined contribution plans, the company pays fixed contributions into a separate entity (pension fund). in € million 2023 2022 Members of the management board and senior staff (4) (4) Other employees (29) (30) Total (33) (35) Other administrative expenses in € million 2023 2022 Office space expenses (115) (106) IT expenses (388) (343) Legal, advisory and consulting expenses (202) (155) Advertising, PR and promotional expenses (121) (118) Communication expenses (80) (74) Office supplies (21) (21) Car expenses (11) (11) Security expenses (27) (27) Traveling expenses (19) (12) Training expenses for staff (21) (15) Other non-income related taxes (89) (70) Sundry administrative expenses (130) (127) Total (1,224) (1,081) hereof expenses for short-term leases (17) (14) hereof expenses for leases of low-value assets (4) (5) The main drivers of the € 143 million rise in other administrative expenses were higher legal, advisory and consulting expenses (up € 44 million) and increased IT expenses (up € 37 million) at head office. There were further increases in other administrative expenses in Hungary (up € 27 million), Poland (up € 17 million) and Romania (up € 13 million). Legal, advisory, and consulting expenses include fees for the auditors of RBI AG and its subsidiaries which comprise expenses for the audit of financial statements amounting to € 8 million (previous year’s period: € 7 million) and tax advisory as well as other additional consulting services – mainly confirmation services - amounting to € 4 million (previous year’s period: € 3 million). Thereof, € 3 million (previous year’s period: € 3 million) relates to the Group auditor for the audit of the financial statements and € 2 million (previous year’s period: € 1 million) relates to other consulting services. 74 Consolidated financial statements · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 Depreciation of tangible and intangible fixed assets in € million 2023 2022 Tangible fixed assets (239) (236) hereof right-of-use assets (81) (82) Intangible fixed assets (236) (226) Total (475) (461) (8) Other result in € million 2023 2022 Net modification gains/losses (27) (11) Gains/losses from changes in present value of non-substantially modified contracts (27) (11) Impairment or reversal of impairment on investments in subsidiaries and associates 21 (67) Impairment on non-financial assets (25) (88) Goodwill 0 (68) Other (25) (20) Result from non-current assets and disposal groups classified as held for sale and deconsolidation 4 10 Net income from non-current assets and disposal groups classified as held for sale 4 4 Result of deconsolidations 0 6 Tax expenses not attributable to the business activity 0 0 Expenses for credit-linked, portfolio-based litigations and annulments (878) (510) Total (906) (667) Information on the item net modification gains/losses from modified contract terms and on modified assets are shown under (14) Modified assets. The item impairment or reversal of impairment on investments in subsidiaries and associates amounting to € 21 million (previous year's period: minus € 67 million) comprises the valuation of investments in companies valued at equity of € 38 million (previous year's period: minus € 37 million) and impairment on investments in subsidiaries of € 17 million (previous year's period: € 30 million). The largest individual effects in the reporting period resulted from the valuation of Oesterreichische Kontrollbank AG and LEIPNIK-LUNDENBURGER INVEST Beteiligungs AG - totaling € 35 million due to updated business plans (previous year's period: minus € 65 million due to weaker economic conditions). Impairment on non-financial assets amounted to € 25 million in the reporting year (previous year's period: € 88 million), of which € 8 million were related to impairments in Russia, € 7 million in Croatia and € 7 million in the Corporate Center segment. In the previous period, € 68 million was attributable to impairments on goodwill at a Czech (€ 60 million) and a Serbian Group unit (€ 8 million) and € 20 million to impairments on property, plant and equipment mainly in occupied territories in Ukraine and on intangible fixed assets, especially on software in Russia and Slovakia. The previous year's result from non-current assets and disposal groups classified as held for sale and deconsolidation mainly included the deconsolidation of a Czech real estate company. In total, 6 Group units were deconsolidated during the reporting period. Further information on deconsolidated subsidiaries can be found in the Consolidated group chapter under Excluded units. Expenses for credit-linked, portfolio-based provisions for litigation and annulments amounted to € 878 million in the reporting period, of which € 873 million (previous year’s period: € 505 million) resulted from pending and expected legal proceedings in Poland related to mortgage loans denominated or linked to a foreign currency. The increase in Poland of € 368 million primarily resulted from a decision by the European Court of Justice in June, leading to significantly increased actual and expected legal cases, higher loss rates, and losses due to cancellations of credit agreements. Consolidated financial statements75 · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 (9) Governmental measures and compulsory contributions in € million 2023 2022 Governmental measures (95) (87) Bank levies (95) (87) Compulsory contributions (188) (250) Resolution fund (74) (89) Deposit insurance fees (114) (135) Other compulsory contributions 0 (26) Total (284) (337) Governmental measures and compulsory contributions decreased € 54 million to € 284 million. Contributions to the bank resolution fund fell € 15 million, mostly at head office. The € 21 million decrease in deposit insurance fees mainly related to Russia, Hungary, Slovakia and Romania. No other compulsory contributions were incurred in the reporting period, whereas this item in the previous year included € 26 million in contributions to the state support fund for distressed borrowers in Poland. In contrast, bank levies increased € 8 million, mainly in Hungary (up € 31 million). The bank levy at head office was down € 21 million. (10) Impairment losses on financial assets Impairment losses on financial assets consist of impairment losses on financial assets measured at fair value through other comprehensive income and impairment losses on financial assets measured at amortized cost. in € million 2023 2022 Loans and advances (362) (718) Debt securities (57) (167) Loan commitments, financial guarantees and other commitments given 27 (65) Total (393) (949) hereof financial assets - fair value through other comprehensive income 3 (15) hereof financial assets - amortized cost (422) (869) Risk costs, which were significantly below the previous year’s level, amounted to € 185 million in Austria (previous year’s period: € 132 million), mainly due to impairments for financing in the real estate sector at head office. An additional € 191 million was attributed to the Eastern Europe segment, of which € 95 million was for Russia (previous year’s period: € 471 million) and € 94 million for Ukraine (previous year’s period: € 253 million). In Russia, provisions in Stage 1 and Stage 2 amounted to € 42 million, particularly for non-financial corporations under sanctions, while in Stage 3 (default), € 53 million were booked, mainly for households. In Ukraine, € 70 million were booked in Stage 1 and Stage 2, predominantly for governments and non-financial corporations, and € 24 million in Stage 3, mainly for defaulted loans to non-financial corporations. Further details are shown under (13) Financial assets – amortized cost. (11) Taxes RBI AG as Group parent and 70 of its consolidated domestic subsidiaries are members of a tax group. Current taxes are calculated based on taxable income for the current year taking into account the tax group (in terms of a tax group allocation). The taxable income deviates from the profit/loss before tax of the consolidated statement of comprehensive income due to expenses and income which are taxable or tax-deductible in future years or never. The liability of the Group for current taxes is calculated based on the actual tax rate. Deferred taxes are calculated and recognized in accordance with IAS 12 applying the liability method and based on the tax rates applicable in the future. Deferred taxes are based on all temporary differences that result from comparing the carrying amounts of assets and liabilities in the IFRS accounts with the tax bases of assets and liabilities, and which will reverse in the future. Deferred taxes are calculated by using tax rates applicable in the countries concerned. A deferred tax asset should also be recognized on tax loss carry forwards if it is probable that sufficient taxable profit will be generated in future periods against which the tax loss carry forwards can be utilized within the same entity. On each reporting date, the carrying amount of the deferred tax assets is determined and the value determined is reduced if it is unlikely that sufficient taxable income will be available in order to realize the tax assets partly or fully. Deferred tax assets are offset against deferred tax liabilities for each subsidiary to the extent that offsetting is permitted. Income tax credits and income tax obligations are recorded under the items current and deferred tax assets and current and deferred tax liabilities. Current and deferred taxes are recognized in the income statement unless they are linked to items which are recognized in other comprehensive income, in which case the current and deferred taxes are also directly recognized in other comprehensive 76 Consolidated financial statements · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 income. IFRIC 23 is to be applied to the determination of taxable profit (tax loss), tax bases, unused tax losses, unused tax credits and tax rates when there is uncertainty over income tax treatments under IAS 12. RBI is required to use judgment to determine whether each tax treatment should be considered independently or whether some tax treatments should be considered together. If RBI concludes that it is not probable that a particular tax treatment is accepted, it must use the most likely amount or the expected value of the tax treatment. Otherwise, it uses the tax treatment that is consistent with its income tax filings. An entity has to reassess its judgments and estimates if facts and circumstances change. Non-income related taxes are recognized in other administrative expenses when the Group unit identifies the obligating event for the recognition of a liability in accordance with the relevant legislation. In practice this means either the liability is recognized progressively when the obligating event occurs over a period or the obligation is triggered on reaching a minimum threshold. The full liability is recognized when this minimum threshold is reached. In addition, RBI shows the tax expenses not attributed to business activity (from corporate restructurings) in the other result. Expenses for governmental measures and compulsory contributions are shown separately in the item of the same name. This includes the bank levies, the resolution fund, deposit insurance fees and other compulsory contributions (e.g. state borrowers’ support fund). in € million 2023 2022 Current income taxes (976) (973) Austria (16) (7) Foreign (960) (966) Deferred taxes (21) 114 Total (997) (859) Effective tax rate 27.9% 20.4% Reconciliation between profit/loss before tax and the effective tax burden: in € million 2023 2022 Profit/loss before tax 3,576 4,203 Theoretical income tax expense in the financial year based on the domestic income tax rate of 24 per cent (858) (1,051) Effect of divergent foreign tax rates 167 284 Tax decrease because of tax-exempted income from equity participations and other income 61 75 Tax increase because of non-deductible expenses (334) (67) Impairment on loss carry forwards (21) (16) Non-recognized taxes from net investment hedge (9) (11) Non-recognized taxes from value changes on companies valued at equity 9 (9) Non-recognized taxes from impairments on goodwill 0 (17) Other changes1 (13) (46) Effective tax burden (997) (859) Effective tax rate 27.9% 20.4% 1 Includes, among other things, the effect of windfall taxes Information on current and open tax proceedings can be found under (46) Pending legal issues. Furthermore, there are no material tax interpretations that would require disclosure within the meaning of IFRIC 23. The entry into force of the eco-social tax reform 2022 provides for a gradual reduction in the corporate tax rate from 25 per cent to 23 per cent, with an applicable tax rate of 24 per cent in 2023. The reduced tax rate was used for the calculation of deferred tax assets and liabilities based on the expected timing of the realization of the temporary differences from deferred taxes. Income taxes increased € 138 million to € 997 million which was mainly due to the significant increase in profit in the Southeastern Europe segment (up € 72 million). In the Central Europe segment, the increased taxes (up € 39 million) were also related to the increase in profit mainly in Hungary and to a smaller extent to the introduction of a windfall tax in the Czech Republic. In the Eastern Europe segment, the income taxes moderately increased by € 9 million. This was due to the lower current taxes of € 95 million resulting from the profit decrease in Russia (€ 819 million), which was partly compensated by the introduction of a windfall tax (€ 47 million) as well as non-deductible expenses for a new pension program for employees. Additionally, a positive profit development and the introduction of a windfall tax (50 per cent) in Ukraine led to an increase of € 108 million in taxes. At 27.9 per cent, the effective tax rate was more than 7 percentage points higher than in the comparable period, mainly due to non-tax-deductible expenses related to credit-linked and portfolio-based litigation provisions and annulments of loan agreements amounting to € 873 million (previous-year period: € 505 million) in Poland, as well as the newly introduced windfall taxes in Russia, the Czech Republic and Ukraine. Consolidated financial statements77 · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 Tax assets in € million 2023 2022 Current tax assets 69 100 Deferred tax assets 218 269 Tax claims from temporary differences 206 249 Loss carry forwards 12 20 Total 287 369 Net deferred taxes in € million 2023 2022 Financial assets - amortized cost 128 134 Financial liabilities - amortized cost 14 34 Financial liabilities - held for trading 9 35 Derivatives – Hedge accounting incl. fair value adjustments 51 78 Financial liabilities - designated fair value through profit/loss 0 2 Provisions for liabilities and charges 98 108 Investments in subsidiaries and associates 23 11 Tangible fixed assets 92 95 Other assets 88 111 Loss carry forwards 12 20 Other items of the statement of financial position 30 107 Deferred tax assets 543 733 Financial assets - held for trading 30 60 Financial assets - amortized cost 92 115 Financial liabilities - amortized cost 83 154 Financial assets - fair value through other comprehensive income 5 1 Financial assets and liabilities - designated fair value through profit/loss 1 0 Investments in subsidiaries and associates 7 13 Tangible fixed assets 14 53 Intangible fixed assets 68 54 Derivatives – Hedge accounting incl. fair value adjustments 18 8 Provisions for liabilities and charges 6 3 Other assets 15 19 Other liabilities 19 12 Other items of the statement of financial position 9 9 Deferred tax liabilities 368 500 Net deferred taxes 175 233 In the consolidated financial statements, deferred tax assets are recognized for unused tax loss carry forwards which amounted to € 12 million (previous year: € 20 million). The tax loss carry forwards are mainly without any time limit. The Group did not recognize deferred tax assets from tax loss carry forwards of € 358 million (previous year: € 489 million) because from a current point of view there is no prospect of realizing them within a reasonable period. Tax liabilities in € million 2023 2022 Current tax liabilities 242 181 Deferred tax liabilities 43 36 Temporary tax obligation 43 36 Total 285 217 RBI has applied the temporarily applicable, mandatory exemption, which was published by the IASB in May 2023 related to the international tax reform. This exemption applies to accounting requirements for deferred taxes according to IAS 12. Respectively, RBI does not consider taxes related to the OECD pillar 2 model rules for the calculation and presentation of deferred tax assets and liabilities. The OECD pillar 2 model rules require a global minimum tax rate of 15 per cent on profits of multinational corporations. This minimum tax regime was enacted as EU directive in December 2022 and had to be translated to national law by the member states by 31 December 2023. In Austria, the Minimum Taxation Reform Act (MinBestRefG) was published on 30 December 2023. The MinBestRefG includes the Minimum Taxation Act (MinBestG) to ensure a global minimum tax for corporate 78 Consolidated financial statements · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 groups and also provides for amendments to the Austrian Federal Fiscal Code (BAO) and the Austrian Commercial Code (UGB). RBI monitors the progress of the legislative procedures in jurisdictions relevant for the Group. By 31 December 2023, the following countries, where RBI operates have transposed the EU directive into local law: Austria, Czech Republic, Hungary and Romania. Subsidiaries of RBI are predominantly located in jurisdictions with a nominal or effective tax rate above the minimum tax rate of 15 per cent. Hence, with the current state of legislation, RBI expects tax implications only in a few countries due to the implementation of the global minimum tax by early 2024. It is possible, that the nominal tax rate may be increased or top-up taxes are introduced to avoid tax outflows from affected countries. In most countries where RBI operates, the Safe Harbor Rules will be met, except for the following countries: Hungary, Bosnia and Herzegovina, Kosovo, Serbia, and Austria. As of 31 December 2023, RBI expects an impact of a high single-digit million amount. Financial assets measured at amortized cost (12) Cash, balances at central banks and other demand deposits This item on the statement of financial position includes cash in hand, balances at central banks that are due on call, and demand deposits at banks that are due on call. in € million 2023 2022 Cash in hand 4,126 5,095 Balances at central banks 24,581 32,984 Other demand deposits at banks 14,527 15,604 Total 43,234 53,683 The item cash on hand, balances at central banks and other sight deposits at banks decreased by a total of € 10,449 million due to a decrease in balances with central banks. The decline was mainly driven by the head office in the amount of € 9,937 million. This item also includes the non-freely available minimum reserve, which amounted to € 20 million as of the reporting date (previous year: € 20 million). Russia, Ukraine and Belarus reported € 2,158 million in the item cash in hand, with Russia accounting for the largest portion. On the reporting date, Ukraine, Russia, and Belarus reported cash and cash equivalents of € 1,525 million that are currently subject to legal restrictions and are therefore not available for general use by head office. (13) Financial assets – amortized cost In RBI, a financial asset is measured at amortized cost (AC) if both of the following conditions are met: · The asset is held within a business model whose objective is to hold assets in order to collect contractual cash flows. · The contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding. These conditions are explained in more detail in the sections business model assessment, analysis of contractual cash flow characteristics, and modification of the time value of money and the benchmark test. Loans and advances to customers and banks are particularly assigned to this category. Loans and advances relating to finance lease business, which are recognized in accordance with IFRS 16, and securities which meet the above conditions, are also shown in this measurement category. They are measured at amortized cost. If there is a difference between the amount paid and face value – and this has an interest character – the effective interest method is used, and the amount is stated under net interest income. Interest income is calculated on the basis of the gross carrying amount provided the financial asset is not impaired. As soon as the financial asset is impaired, interest income is calculated based on the net carrying amount. The Consolidated financial statements79 · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 amortized cost is also adjusted by the expected loss recognized, using the expected loss approach in accordance with IFRS 9, as outlined in the section impairment general (IFRS 9). The effective interest rate method is a method of calculating the amortized cost of a financial instrument and allocating interest expenses and interest income to the relevant periods. The effective interest rate is the interest rate applied to discount the forecast future cash inflows and outflows (including all fees which form part of the effective interest rate, transaction costs and other premiums and discounts) over the expected term of the financial instrument or a shorter period, where applicable, to arrive at the net carrying amount from initial recognition. 2023 2022 in € million Gross carrying amount Accumulated impairment Carrying amount Gross carrying amount Accumulated impairment Carrying amount Debt securities 25,936 (214) 25,723 19,117 (157) 18,960 Central banks 5 0 5 4 0 4 General governments 21,319 (86) 21,233 14,627 (46) 14,581 Banks 2,855 (1) 2,854 2,668 (1) 2,667 Other financial corporations 974 (69) 905 988 (52) 936 Non-financial corporations 783 (57) 726 830 (58) 771 Loans and advances 116,468 (2,889) 113,580 121,443 (2,973) 118,471 Central banks 7,860 0 7,860 8,814 0 8,814 General governments 2,150 (6) 2,144 2,149 (7) 2,143 Banks 6,855 (3) 6,852 6,913 (13) 6,901 Other financial corporations 10,699 (157) 10,542 11,508 (148) 11,360 Non-financial corporations 48,569 (1,596) 46,973 50,358 (1,609) 48,749 Households 40,335 (1,125) 39,209 41,701 (1,196) 40,505 Total 142,405 (3,102) 139,302 140,561 (3,130) 137,431 The carrying amount of the item financial assets – amortized cost increased by € 1,872 million compared to year-end 2022. The addition to debt securities (up € 6,763 million) resulted predominantly from purchases of government bonds (up € 6,652 million), mainly in the Czech Republic (€ 2,220 million), at head office (€ 1,706 million), in Slovakia (€ 654 million) and Croatia (€ 541 million) . The lending business showed a decrease of € 4,891 million, mainly derived from a significant reduction of the lending volume in Russia, which was additionally amplified by the depreciation of the Russian ruble. Loans to non-financial corporations decreased € 1,777 million; a loan volume increase in the Czech Republic (up € 283 million) and Romania (up € 235 million), was contrasted by a decrease in Russia (down € 1,379 million), mainly in working capital financing and corporate loans, and at head office (down € 762 million), here mostly due to loan repayments. Loans to households decreased € 1,296 million, primarily in Russia (down € 1,294 million), and also in Poland (down € 733 million) mainly due to higher allocations for credit-linked and portfoliobased litigation provisions in connection with mortgage loans denominated in foreign currencies (CHF), which was partly offset by increases in other countries of the group, especially in Austria (Raiffeisen Bausparkasse Gesellschaft m.b.H.; up € 343 million) and in Croatia (up € 164 million). The decrease of short-term business (down € 1,819 million) resulted primarily from head office (down € 1,629 million), mainly due to loan repayments. In addition, there are financial assets – amortized cost of € 477 million in Russia from payments by issuers of local debt instruments that cannot currently be passed on to foreign investors due to existing US and EU sanctions and must therefore be deposited with the Russian Deposit Insurance Agency. They are not available for general use by head office. RBI’s credit portfolio is well diversified in terms of type of customer, geographical region, and industry. The following tables show the financial assets – amortized cost, by counterparty. This reveals the bank’s focus on non-financial corporations and households. 80 Consolidated financial statements · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 Gross carrying amount 2023 2022 in € million Stage 1 Stage 2 Stage 3 POCI Stage 1 Stage 2 Stage 3 POCI Central banks 7,615 250 0 0 8,680 138 0 0 General governments 22,696 596 178 0 15,653 954 169 0 Banks 8,823 883 4 0 9,236 342 4 0 Other financial corporations 9,073 2,208 286 106 10,010 2,311 75 100 Non-financial corporations 38,499 8,993 1,741 120 38,774 10,802 1,477 135 Households 30,999 8,215 1,007 115 33,385 7,135 1,047 134 hereof mortgage 20,729 6,257 361 76 22,770 5,463 385 90 Total 117,704 21,144 3,217 340 115,737 21,681 2,772 370 Accumulated impairment 2023 2022 in € million Stage 1 Stage 2 Stage 3 POCI Stage 1 Stage 2 Stage 3 POCI Central banks 0 0 0 0 0 0 0 0 General governments (57) (31) (5) 0 (5) (42) (5) 0 Banks (1) (2) (2) 0 (1) (9) (4) 0 Other financial corporations (11) (100) (89) (26) (15) (136) (34) (15) Non-financial corporations (179) (497) (926) (52) (165) (495) (941) (66) Households (123) (324) (649) (29) (145) (327) (688) (36) hereof mortgage (20) (132) (173) (17) (35) (140) (201) (23) Total (371) (954) (1,670) (107) (332) (1,010) (1,671) (117) ECL coverage ratio 2023 2022 Stage 1 Stage 2 Stage 3 POCI Stage 1 Stage 2 Stage 3 POCI Central banks 0.0% 0.1% - - 0.0% 0.0% - - General governments 0.2% 5.2% 2.7% 1.2% 0.0% 4.4% 3.0% 0.0% Banks 0.0% 0.2% 34.4% - 0.0% 2.6% 81.9% - Other financial corporations 0.1% 4.5% 31.0% 24.7% 0.2% 5.9% 44.7% 15.0% Non-financial corporations 0.5% 5.5% 53.2% 43.2% 0.4% 4.6% 63.7% 48.7% Households 0.4% 3.9% 64.5% 25.6% 0.4% 4.6% 65.7% 26.9% hereof mortgage 0.1% 2.1% 47.8% 22.8% 0.2% 2.6% 52.2% 25.5% Total 0.3% 4.5% 51.9% 31.5% 0.3% 4.7% 60.3% 31.7% The following breakdown of financial assets – amortized cost by region shows the high level of diversification of RBI’s credit business in the European markets: Gross carrying amount 2023 2022 in € million Stage 1 Stage 2 Stage 3 POCI Stage 1 Stage 2 Stage 3 POCI Central Europe 45,395 7,957 725 64 42,072 8,792 738 71 hereof Czech Republic 23,269 4,613 234 27 21,502 4,384 217 28 hereof Hungary 5,396 1,665 136 14 5,079 1,619 159 13 hereof Slovakia 16,054 1,495 225 10 14,214 2,327 223 10 Southeastern Europe 21,881 2,927 520 113 20,305 2,173 500 133 hereof Romania 9,441 1,054 203 43 9,041 998 194 46 Eastern Europe 11,354 5,391 487 46 13,708 6,668 659 56 hereof Russia 8,261 4,452 237 29 10,884 5,255 370 38 Austria and other1 39,073 4,869 1,484 117 39,652 4,048 876 110 Total 117,704 21,144 3,217 340 115,737 21,681 2,772 370 1 Austria mainly includes the business of the head office and Raiffeisen Bausparkasse Gesellschaft m.b.H. Other also includes any consolidation effects. Consolidated financial statements81 · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 Accumulated impairment 2023 2022 in € million Stage 1 Stage 2 Stage 3 POCI Stage 1 Stage 2 Stage 3 POCI Central Europe (129) (237) (413) (14) (120) (251) (428) (14) hereof Czech Republic (38) (88) (115) 6 (44) (80) (110) 11 hereof Hungary (29) (81) (62) (5) (29) (79) (61) (6) hereof Slovakia (59) (55) (128) (5) (41) (61) (139) (5) Southeastern Europe (99) (160) (345) (49) (111) (165) (352) (63) hereof Romania (47) (54) (133) (13) (55) (64) (136) (15) Eastern Europe (110) (429) (376) (11) (52) (426) (438) (23) hereof Russia (18) (336) (192) (3) (25) (310) (262) (13) Austria and other1 (34) (128) (536) (32) (49) (167) (453) (18) Total (371) (954) (1,670) (107) (332) (1,010) (1,671) (117) 1 Austria mainly includes the business of the head office and Raiffeisen Bausparkasse Gesellschaft m.b.H. Other also includes any consolidation effects. ECL coverage ratio 2023 2022 Stage 1 Stage 2 Stage 3 POCI Stage 1 Stage 2 Stage 3 POCI Central Europe 0.3% 3.0% 56.9% 22.4% 0.3% 2.9% 58.1% 18.9% hereof Czech Republic 0.2% 1.9% 49.0% - 0.2% 1.8% 50.6% - hereof Hungary 0.5% 4.9% 45.4% 39.4% 0.6% 4.9% 38.1% 45.3% hereof Slovakia 0.4% 3.7% 57.1% 55.3% 0.3% 2.6% 62.1% 54.7% Southeastern Europe 0.5% 5.5% 66.3% 43.6% 0.5% 7.6% 70.4% 47.0% hereof Romania 0.5% 5.1% 65.8% 30.6% 0.6% 6.4% 70.1% 33.4% Eastern Europe 1.0% 8.0% 77.2% 24.9% 0.4% 6.4% 66.4% 41.3% hereof Russia 0.2% 7.5% 81.0% 11.3% 0.2% 5.9% 70.8% 35.1% Austria and other1 0.1% 2.6% 36.1% 27.4% 0.1% 4.1% 51.7% 16.5% Total 0.3% 4.5% 51.9% 31.5% 0.3% 4.7% 60.3% 31.7% 1 Austria mainly includes the business of the head office and Raiffeisen Bausparkasse Gesellschaft m.b.H. Other also includes any consolidation effects. Stage 1 amounts include assets of € 18,845 million (previous year: € 11,915 million), for which the low credit risk exemption has been used, of which € 17,578 million (previous year: € 10,600 million) are accounted for as financial assets – amortized cost and € 1,267 million (previous year: € 1.315 million) as financial assets - fair value through other comprehensive income. RBI has loans and advances (financial assets – amortized cost) in the amount of € 1,722 million (previous year: € 987 million) with no expected credit losses due to collateral. Development of impairments Development of impairments on loans and bonds in the measurement categories of financial assets – amortized cost, financial assets – fair value through other comprehensive income and other demand deposits at banks: Stage 1 Stage 2 Stage 3 POCI Total in € million 12-month ECL Lifetime ECL Lifetime ECL Lifetime ECL As at 1/1/2023 333 1,026 1,673 117 3,150 Increases due to origination and acquisition 277 148 15 0 440 Decreases due to derecognition (76) (189) (287) (20) (573) Changes due to change in credit risk (net) (110) (58) 603 16 451 Changes due to modifications without derecognition (net) 0 0 4 (1) 3 Decrease due to write-offs (1) (4) (290) (9) (304) Changes due to model/risk parameters 5 34 5 0 44 Change in consolidated group 0 4 1 (4) 1 Foreign exchange and other (56) 18 (52) 8 (83) As at 31/12/2023 372 978 1,673 107 3,130 hereof fair value through other comprehensive income 1 9 2 0 12 hereof other demand deposits at banks 0 15 1 0 16 82 Consolidated financial statements · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 Stage 1 Stage 2 Stage 3 POCI Total in € million 12-month ECL Lifetime ECL Lifetime ECL Lifetime ECL As at 1/1/2022 196 687 1,567 118 2,569 Increases due to origination and acquisition 139 123 20 0 282 Decreases due to derecognition (41) (124) (289) (30) (484) Changes due to change in credit risk (net) 81 314 564 24 982 Changes due to modifications without derecognition (net) 0 (1) 1 0 0 Decrease due to write-offs (1) (3) (196) (10) (210) Changes due to model/risk parameters (3) 14 (10) 1 3 Change in consolidated group 3 3 0 14 19 Foreign exchange and other (41) 13 16 1 (11) As at 31/12/2022 333 1,026 1,673 117 3,150 hereof fair value through other comprehensive income 1 1 0 0 1 hereof other demand deposits at banks 0 0 1 0 1 Carrying amounts of financial assets – amortized cost by rating categories and stages The credit quality analysis of financial assets is a point in time assessment of the probability of default of the assets. · Excellent are exposures which demonstrate a strong capacity to meet financial commitments, with negligible or no probability of default (Non-retail PD range >0.0000 ≤ 0.0300 per cent and retail PD range >0.00 ≤ 0.17 per cent). · Strong are exposures which demonstrate a strong capacity to meet financial commitments, with negligible or low probability of default (Non-retail PD range >0.0300 ≤ 0.1878 per cent and retail PD range >0.17 ≤ 0.35 per cent). · Good are exposures which demonstrate a good capacity to meet financial commitments, with low default risk (Non- retail PD range >0.1878 ≤ 1.1735 per cent and retail PD range >0.35 ≤ 1.37 cent). · Satisfactory are exposures which require closer monitoring and demonstrate an average to fair capacity to meet financial commitments, with moderate default risk (Non-retail PD range >1.1735 ≤ 7.3344 per cent and retail PD range >1.37 ≤ 7.28 per cent). · Substandard are exposures which require varying degrees of special attention and default risk is of greater concern (Non-retail PD range >7.3344 < 100.0 per cent and retail PD range >7.28 < 100.0 per cent). · Credit-impaired are exposures which have been assessed as impaired (PD range 100.0 per cent for both Non-retail and retail). The following table shows the connection between the rating categories and stages according to IFRS 9. It should be noted that for financial assets in Stages 1 and 2, due to the relative nature of a significant increase in credit risk, it is not necessarily the case that Stage 2 assets have a lower credit rating than Stage 1 assets, although this is normally the case. 2023 Stage 1 Stage 2 Stage 3 POCI Total in € million 12-month ECL Lifetime ECL Lifetime ECL Lifetime ECL Excellent 15,951 807 0 0 16,758 Strong 35,954 3,344 0 1 39,299 Good 41,001 7,000 0 7 48,008 Satisfactory 19,653 6,110 0 15 25,778 Substandard 2,602 2,949 0 10 5,560 Credit impaired 0 0 3,153 290 3,443 Not rated 2,544 935 63 17 3,560 Gross carrying amount 117,704 21,144 3,217 340 142,405 Accumulated impairment (371) (954) (1,670) (107) (3,102) Carrying amount 117,333 20,190 1,547 233 139,302 Consolidated financial statements83 · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 2022 Stage 1 Stage 2 Stage 3 POCI Total in € million 12-month ECL Lifetime ECL Lifetime ECL Lifetime ECL Excellent 18,434 601 0 0 19,035 Strong 37,450 3,772 0 4 41,226 Good 35,444 6,956 0 6 42,406 Satisfactory 19,230 6,738 0 13 25,982 Substandard 2,212 3,322 0 20 5,553 Credit impaired 0 0 2,667 304 2,970 Not rated 2,966 292 106 24 3,388 Gross carrying amount 115,737 21,681 2,772 370 140,561 Accumulated impairment (332) (1,010) (1,671) (117) (3,130) Carrying amount 115,405 20,672 1,101 253 137,431 The category not rated mainly includes financial assets for households (predominantly in Serbia, Slovakia, and Croatia), for whom no ratings are available. The rating is therefore based on qualitative factors. (14) Modified assets If a financial asset is modified, RBI distinguishes between substantial and non-substantial modifications of financial assets. In RBI, terms are substantially modified if the discounted present value of the cash flows under the new terms using the original effective interest rate differs by at least 10 per cent from the discounted present value of the remaining cash flows of the original financial asset (present value test). In addition to the present value test further quantitative and qualitative criteria are considered to assess whether a substantial modification applies. The other quantitative criteria primarily consider the extension of the average remaining term. Stage 3 loans are often restructured to match the maximum expected payments from the customer. If this is the case, then additional judgement is required to determine whether the contractual change is a new instrument in economic terms. RBI has defined qualitative criteria for a significant change in the terms of the contract as a change in the underlying currency and also the introduction of clauses that would normally cause the contractual cash flow criteria according to IFRS 9 to fail, or a change in the type of instrument (e.g. a bond is converted to a loan). If the modifications are substantial, the existing asset is derecognized, and a new financial instrument is recognized at its fair value (including new classification and new stage allocation for impairment purposes). Non-substantial modifications do not lead to derecognition, but to an adjustment to the gross carrying amount through profit and loss. Due to the negative economic environment, such as high inflation, supply chain issues or the interest rate reversal, the net modification effects were increased in the reporting year 2023. Mainly driven by the government interventions in the level of the interest rates in Serbia and Hungary. Net modification effects increased year-on-year to minus € 27 million. 2023 Stage 1 Stage 2 Stage 3 POCI Total in € million Net modifications gains/losses of financial assets (9) (8) (8) (1) (27) Amortized cost before the modification of financial assets 3,039 1,163 148 3 4,353 Gross carrying amount of modified assets as at 31/12, which moved to Stage 1 during the year 0 0 0 0 0 2022 Stage 1 Stage 2 Stage 3 POCI Total in € million Net modifications gains/losses of financial assets (7) 1 (3) (1) (11) Amortized cost before the modification of financial assets 4,177 1,622 97 8 5,904 Gross carrying amount of modified assets as at 31/12, which moved to Stage 1 during the year 0 43 0 0 43 84 Consolidated financial statements · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 (15) Financial liabilities - amortized cost Liabilities are predominantly recognized at amortized cost. For differences between the amount paid and face value, the effective interest method is applied, and the amounts are shown in net interest income. This category mainly includes customer deposits and securities issues for refinancing purposes. Issued subordinated capital and supplementary capital are shown either in financial liabilities – amortized cost or financial liabilities – designated fair value through profit/loss. Securitized and non-securitized assets are subordinated if, in the event of liquidation or bankruptcy, they can only be met after the claims of the other – not subordinated – creditors have been satisfied. Supplementary capital is defined according to Article 63 of the regulation (EU) No 575/2013 (CRR). Corresponding instruments have an original maturity of at least five years, are of subordinate nature and are, among others, not allowed to contain an incentive to early redeem, a right of the investor to accelerate repayment or credit standing linked features that amend the level of dividend and/or interest payments of the issuer. in € million 2023 2022 Deposits from banks 26,124 33,612 Current accounts/overnight deposits 13,613 13,552 Deposits with agreed maturity 9,969 17,590 Repurchase agreements 2,542 2,470 Deposits from customers 119,331 125,017 Current accounts/overnight deposits 84,111 93,686 Deposits with agreed maturity 34,451 31,214 Repurchase agreements 769 117 Debt securities issued 17,772 14,559 Covered bonds 3,881 2,494 Hybrid contracts 499 483 Other debt securities issued 13,391 11,583 hereof convertible compound financial instruments 1,926 1,348 hereof non-convertible 11,465 10,235 Other financial liabilities 1,484 1,955 Total 164,711 175,142 hereof subordinated financial liabilities 2,167 2,614 hereof lease liabilities 371 394 Deposits with agreed maturity from banks decreased mainly in head office by € 7,045 million as well as in Slovakia by € 773 million. In both cases the decline resulted from repayments of TLTRO instruments. During the reporting period an amount of € 4,925 million was repaid in head office and an amount of € 890 million was repaid in Slovakia. As at the reporting date, the Group still holds volumes of € 2,200 million due in March 2024 and € 37 million due in December 2024. The carrying amount included in deposits from banks in this context was € 2,285 million. For further information on the accounting treatment of the TLTRO III instruments, please refer to the 2022 Annual Report, note (15) Financial liabilities - amortized cost. Current accounts/overnight deposits from customers declined by € 9,575 million. Particularly noteworthy in this development is an exchange rate effect from Russia amounting to € 4,054 million, which further accelerated the downward trend. An opposite development emerged in deposits with agreed maturity. The increase in this position amounted to € 3,237 million. Declines in head office (decrease: € 1,397 million) and Russia (decrease: € 838 million) counteracted this development. Covered bonds increased by € 1,041 million in head office and by € 502 million in Slovakia. Issuances from head office (increase: € 889 million), Slovakia (increase: € 335 million) and Croatia (increase: € 256 million) were the main drivers of the increase in non-convertible, securitized liabilities. Other financial liabilities mainly declined in Russia due to suspense and transit items. Consolidated financial statements85 · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 Deposits from banks and customers by asset classes: in € million 2023 2022 Central banks 2,987 8,915 General governments 3,698 2,892 Banks 23,137 24,697 Other financial corporations 12,097 13,208 Non-financial corporations 45,084 50,041 Households 58,452 58,876 Total 145,455 158,629 Liabilities against central banks declined in head office by € 5,021 million. Liabilities against non-financial corporations declined mainly in Russia (decrease: € 3,386 million) and head office (decrease: € 3,169 million). Principal debt securities issued: Issuer ISIN Type Currency Nominal value in € million Coupon Due Call redemption date RBI AG XS2579606927 Senior public placement EUR 1,000 4.8% 26/01/2027 26/01/2026 RBI AG XS2146564930 Senior private placement EUR 800 4.1% 27/03/2025 No RBI AG XS2106056653 Senior public placement EUR 750 0.3% 22/01/2025 No RBI AG XS2055627538 Senior public placement EUR 750 0.4% 25/09/2026 No RBI AG XS2526835694 Senior public placement EUR 500 4.1% 08/09/2025 No TBSK SK4000022430 Senior private placement EUR 500 3.4% 31/01/2026 No RBI AG XS2596528716 Senior public placement EUR 500 3.9% 16/03/2026 No RBI AG XS2537097409 Senior public placement EUR 500 2.9% 28/09/2026 No RBI AG XS2481491160 Senior public placement EUR 500 1.5% 24/05/2027 No RBI AG XS2626022656 Senior public placement EUR 500 3.4% 27/09/2027 No RBI AG XS2435783613 Senior public placement EUR 500 0.1% 26/01/2028 No RBI AG XS2547936984 Senior public placement EUR 500 5.8% 27/01/2028 No RBI AG XS2682093526 Senior public placement EUR 500 6.0% 15/09/2028 15/09/2027 RBI AG XS2086861437 Senior public placement EUR 500 0.1% 03/12/2029 No RBI AG XS2049823763 Subordinated EUR 500 1.5% 12/03/2030 12/03/2025 RBI AG XS2189786226 Subordinated EUR 500 2.9% 18/06/2032 18/06/2027 RBI AG XS2534786590 Subordinated EUR 500 7.4% 20/12/2032 20/09/2027 RBI AG XS2353473692 Subordinated EUR 500 1.4% 17/06/2033 17/03/2028 In the reporting period, expenses for subordinated liabilities amounted to € 103 million (previous year: € 101 million). Development of subordinated financial liabilities in the measurement categories of amortized cost and designated at fair value through profit/loss: in € million Carrying amount as at 1/1/2022 3,165 Change in carrying amount (462) hereof cash (228) hereof effect of exchange rate changes (26) hereof changes of fair value (208) Carrying amount as at 31/12/2022 2,703 Change in carrying amount (536) hereof cash (582) hereof effect of exchange rate changes (3) hereof changes of fair value 49 Carrying amount as at 31/12/2023 2,167 86 Consolidated financial statements · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 (16) Fair value of financial instruments not reported at fair value For the following instruments, the fair value is calculated only for the purposes of providing information in the notes and has no impact on the consolidated statement of financial position or on the consolidated income statement. A simplified fair value calculation method for retail and non-retail portfolios is applied for all short-term transactions (transactions with maturities up to three months). The fair value of these short-term transactions will be equal to the carrying amount of the product. For the other transactions, the methodology as described in the section entitled Fair value of financial instruments reported at fair value is applied. 2023 in € million Level I Level II Level III Fair value Carrying amount Difference Assets Cash, balances at central banks and other demand deposits 0 43,234 0 43,234 43,234 0 Financial assets - amortized cost 21,474 2,246 113,497 137,217 139,302 (2,085) Debt securities 21,474 2,246 1,862 25,582 25,723 (141) Loans and advances 0 0 111,636 111,636 113,580 (1,944) Equity and liabilities Financial liabilities - amortized cost 834 15,398 147,236 163,468 164,339 (871) Deposits from banks and customers¹ 0 0 144,287 144,287 145,084 (797) Debt securities issued 834 15,398 1,465 17,697 17,772 (75) Other financial liabilities 0 0 1,484 1,484 1,484 0 1 Not including lease liabilities in accordance with IFRS 7 Level I Quoted market prices Level II Valuation techniques based on market data Level III Valuation techniques not based on market data 2022 in € million Level I Level II Level III Fair value Carrying amount Difference Assets Cash, balances at central banks and other demand deposits 0 53,683 0 53,683 53,683 0 Financial assets - amortized cost 15,260 1,452 116,767 133,479 137,431 (3,951) Debt securities 15,260 1,452 1,426 18,138 18,960 (822) Loans and advances 0 0 115,341 115,341 118,471 (3,130) Equity and liabilities 0 Financial liabilities - amortized cost 263 12,915 160,571 173,749 174,748 (999) Deposits from banks and customers¹ 0 0 157,675 157,675 158,235 (560) Debt securities issued² 263 12,915 942 14,120 14,559 (439) Other financial liabilities 0 0 1,955 1,955 1,955 0 1 Not including lease liabilities in accordance with IFRS 7 Level I Quoted market prices Level II Valuation techniques based on market data Level III Valuation techniques not based on market data 2 Previous-year figures adapted Consolidated financial statements87 · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 Financial assets measured at fair value (17) Financial assets – fair value through other comprehensive income In RBI, a debt instrument is measured at fair value through other comprehensive income if both of the following conditions are met: · A financial asset is held within a business model whose objective is both collecting contractual cash flows and selling financial assets. · The contractual terms of the financial asset rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding. Securities for the purpose of liquidity management are particularly assigned to this category. Recognition is at fair value. Interest income, foreign exchange gains and losses from remeasurements and impairment expenses and reversals of impairment are recorded in the income statement and calculated in the same way as financial assets measured at amortized cost. The remaining fair value changes are recorded in other comprehensive income. On derecognition, the cumulative net gains or losses from the fair value changes which are recorded in other comprehensive income are reclassified to the income statement. Details on the applied impairment model are shown in the section general rules on impairment (IFRS 9). In RBI, an equity instrument is shown at fair value through other comprehensive income if RBI irrevocably decides on initial recognition to present subsequent changes in fair value in other comprehensive income (OCI). This decision is made on an investment-by-investment basis for each investment and essentially covers strategic investments that are not fully consolidated and investments in associates not valued at equity. In contrast to debt instruments, the gains and losses recorded in other comprehensive income (OCI) are not reclassified to the income statement on sale; impairments are not recorded through profit or loss, either. 2023 Gross carrying amount Accumulated impairment Cumulative other comprehensive income Carrying amount in € million Equity instruments 182 – 0 182 Other financial corporations 101 – 0 101 Non-financial corporations 81 – 0 81 Debt securities 2,864 (12) (42) 2,810 General governments 1,981 (9) (33) 1,939 Banks 748 (1) (8) 740 Other financial corporations 3 0 0 3 Non-financial corporations 132 (3) (1) 128 Total 3,045 (12) (42) 2,992 2022 Gross carrying amount Accumulated impairment Cumulative other comprehensive income Carrying amount in € million Equity instruments 169 – 0 169 Other financial corporations 99 – 0 99 Non-financial corporations 69 – 0 69 Debt securities 3,160 (15) (111) 3,034 General governments 2,291 (13) (92) 2,186 Banks 730 0 (13) 717 Other financial corporations 3 0 0 3 Non-financial corporations 136 (1) (6) 128 Total 3,328 (15) (111) 3,203 The carrying amount decreased due to sale and redemptions of debt securities mainly in Croatia and Serbia, compensated by purchases of government bonds in Hungary and the Ukraine. 88 Consolidated financial statements · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 Equity instruments in financial assets – fair value through other comprehensive income: in € million 2023 2022 Visa Inc., San Francisco (US), Class A Preferred Stock 17 18 CEESEG Aktiengesellschaft, Vienna (AT), ordinary shares 25 26 Medicur - Holding Gesellschaft m.b.H., Vienna (AT), company shares 19 18 HOBEX AG, Salzburg (AT), company shares 9 7 PSA Payment Services Austria GmbH, Vienna (AT), company shares 7 6 Other 104 93 Total 182 169 Dividends paid on equity instruments - fair value through other comprehensive income 8 9 Carrying amounts of financial assets – fair value through other comprehensive income, excluding equity instruments, by rating categories and stages 2023 Stage 1 Stage 2 Stage 3 POCI Total in € million 12-month ECL Lifetime ECL Lifetime ECL Lifetime ECL Excellent 371 4 0 0 375 Strong 1,005 8 0 0 1,013 Good 1,215 170 0 0 1,385 Satisfactory 2 3 0 0 6 Substandard 0 64 0 0 64 Credit impaired 0 0 2 0 2 Not rated 18 0 0 0 18 Gross carrying amount 2,611 250 2 0 2,864 Accumulated impairment (1) (9) (2) 0 (12) Cumulative other comprehensive income (46) 4 0 0 (42) Carrying amount 2,564 244 1 0 2,810 2022 Stage 1 Stage 2 Stage 3 POCI Total in € million 12-month ECL Lifetime ECL Lifetime ECL Lifetime ECL Excellent 587 0 0 0 587 Strong 1,676 0 0 0 1,676 Good 714 2 0 0 716 Satisfactory 0 27 0 0 27 Substandard 0 132 0 0 132 Credit impaired 0 0 2 0 2 Not rated 19 0 0 0 19 Gross carrying amount 2,997 160 2 0 3,160 Accumulated impairment (1) (13) (1) 0 (15) Cumulative other comprehensive income (115) 3 0 0 (111) Carrying amount 2,881 150 2 0 3,034 (18) Non-trading financial assets - mandatorily fair value through profit/loss In RBI, a financial asset is mandatorily measured at fair value if the financial asset is managed neither at amortized cost nor at fair value through other comprehensive income, and if there is no intention to trade and the asset was not voluntarily designated at fair value. Essentially, this concerns securities and loans which do not pass the contractual cash flow characteristics analysis and portfolios of financial assets which are not held for trading, which are managed at fair value and whose performance is assessed. Consolidated financial statements89 · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 in € million 2023 2022 Equity instruments 8 6 Other financial corporations 7 6 Non-financial corporations 1 0 Debt securities 374 276 General governments 146 69 Banks 25 12 Other financial corporations 185 182 Non-financial corporations 18 12 Loans and advances 567 475 General governments 1 1 Banks 2 2 Other financial corporations 24 30 Non-financial corporations 76 80 Households 464 362 Total 949 757 (19) Financial assets and liabilities – designated fair value through profit/ loss This category comprises mainly all those financial assets that are irrevocably designated as financial instruments at fair value (so-called fair value option) upon initial recognition in the statement of financial position. An entity may use this designation only when doing so eliminates or significantly reduces incongruities in measurement or recognition. These arise if the measurement of financial assets or liabilities or the recognition of resulting gains or losses has a different basis. Financial liabilities are also designated as financial instruments at fair value to avoid valuation discrepancies with related derivatives. The fair value of financial obligations under the fair value option in this category reflects all market risk factors, including those related to the credit risk of the issuer. The financial liabilities are mostly structured bonds. The fair value of these financial liabilities is calculated by discounting the contractual cash flows with a credit risk-adjusted yield curve, which reflects the level at which the Group could issue similar financial instruments at the reporting date. The market risk parameters are determined based on similar financial instruments. Valuation results for liabilities that are designated as a financial instrument at fair value are recognized in net trading income and fair value result. Interest income is shown in net interest income; valuation results and proceeds from disposals are shown in net trading income and fair value result. For financial liabilities designated at fair value through profit or loss, changes in fair value attributable to a change in own credit risk is not reported in the income statement but in other comprehensive income. Financial assets - designated fair value through profit/loss in € million 2023 2022 Debt securities 185 84 General governments 155 43 Banks 22 26 Non-financial corporations 8 15 Total 185 84 90 Consolidated financial statements · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 Financial liabilities – designated fair value through profit/loss in € million 2023 2022 Deposits from banks 20 29 Deposits with agreed maturity 20 29 Deposits from customers 22 82 Deposits with agreed maturity 22 82 Debt securities issued 1,046 839 Hybrid contracts 1 1 Other debt securities issued 1,046 838 hereof non-convertible 1,046 838 Total 1,088 950 hereof subordinated financial liabilities 0 89 (20) Financial assets – held for trading Financial assets and liabilities – held for trading are acquired or incurred principally for the purpose of generating profit from short-term fluctuations in market prices. Securities and derivative financial instruments held for trading are recognized at fair value. If securities are listed, the fair value is based on stock exchange prices. Where such prices are not available, internal prices based on present value calculations for originated financial instruments and futures or option pricing models for options are applied. Present value calculations are based on an interest rate curve which consists of money market rates, future rates, and swap rates. Positive fair values are shown under financial assets – held for trading. Negative fair values are shown under financial liabilities – held for trading. Changes in fair value are shown in net trading income. Derivatives held for hedging purposes pursuant to IAS 39 are shown in the statement of financial position under the item hedge accounting. In addition, any liabilities from the short-selling of securities are shown in financial liabilities – held for trading. Capital guaranteed products (guarantee funds and pension plans) are shown as sold put options on the respective funds to be guaranteed. The Group has provided capital guarantee obligations as part of the government-funded state-subsidized pension plans according to § 108h (1) item 3 EStG (Austrian Income Tax Act). The bank guarantees that the retirement annuity, available for the payment amount is not less than the sum of the amounts paid by the taxpayer plus credits for such taxable premiums within the meaning of § 108g EStG. Interest income is shown in net interest income, valuation results and proceeds from disposals are shown in net trading income and fair value result. in € million 2023 2022 Derivatives 3,774 5,059 Interest rate contracts 2,719 3,912 Equity contracts 201 35 Foreign exchange rate and gold contracts 797 1,075 Credit contracts 26 11 Commodities 1 3 Other 31 23 Equity instruments 426 287 Banks 50 37 Other financial corporations 126 100 Non-financial corporations 250 149 Debt securities 1,583 1,064 Central banks 64 0 General governments 1,210 719 Banks 224 211 Other financial corporations 22 63 Non-financial corporations 64 71 Loans and advances 0 0 Total 5,783 6,411 The reduction of € 628 million to € 5,783 million was mainly due to valuation effects and exchange rate fluctuations in derivatives as well as a higher hedged volume, particularly in interest rate and foreign currency derivatives at head office. Consolidated financial statements91 · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 Within the item financial assets – held for trading, the securities provided as security, which the recipient is entitled to sell or pledge, amounted to € 46 million (previous year: € 41 million). Derivative financial instruments Within the operating activity, RBI carries out transactions with derivative financial instruments for trading and hedging purposes. RBI uses derivatives including swaps, standardized forward contracts, futures, credit derivatives, options, and similar contracts. RBI uses derivatives to meet client requirements concerning their risk management, to manage and hedge risks and to generate profit in proprietary trading. Derivatives are recognized at the time of the transaction at fair value and subsequently revalued to fair value. The resulting valuation gain or loss is recognized in net trading income and fair value result unless the derivative is designated as a hedging instrument for hedge accounting purposes and the hedge is effective. Here the timing of the recognition of the gain or loss on the hedging instrument depends on the type of hedging relationship. Derivatives which are used for hedging against market risk (excluding trading assets/liabilities) for a non-homogeneous portfolio do not meet the conditions for IAS 39 hedge accounting. These are recognized as follows: the dirty price is booked under the item financial assets – held for trading or financial liabilities – held for trading in the statement of financial position. The change in value of these derivatives based on the clean price, is shown in net trading income and fair value result and interest is shown in net interest income. Credit derivatives, the value of which is dependent on future specified credit (non-)events are shown at fair value under the item financial assets – held for trading or financial liabilities – held for trading. Changes in valuation are recognized under net trading income and fair value result. 2023 Nominal amount Fair value in € million Assets Equity and liabilities Trading book 186,235 3,468 (3,168) Interest rate contracts 131,196 2,552 (2,598) Equity contracts 5,057 201 (2) Foreign exchange rate and gold contracts 47,559 656 (541) Credit contracts 1,341 26 (20) Commodities 21 1 0 Other 1,061 31 (7) Banking book 17,106 307 (211) Interest rate contracts 11,945 167 (88) Foreign exchange rate and gold contracts 5,141 140 (109) Credit contracts 20 0 (15) Total 203,341 3,774 (3,379) OTC products 199,937 3,759 (3,366) Products traded on stock exchange 3,404 15 (13) 2022 Nominal amount Fair value in € million Assets Equity and liabilities Trading book 149,831 4,601 (4,552) Interest rate contracts 99,495 3,585 (3,701) Equity contracts 4,375 35 (2) Foreign exchange rate and gold contracts 43,414 944 (825) Credit contracts 1,452 11 (8) Commodities 35 3 0 Other 1,060 23 (16) Banking book 56,072 458 (250) Interest rate contracts 48,590 326 (195) Foreign exchange rate and gold contracts 7,466 131 (52) Credit contracts 16 1 (4) Total 205,902 5,059 (4,802) OTC products 198,722 4,936 (4,762) Products traded on stock exchange 4,618 87 (13) 92 Consolidated financial statements · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 (21) Financial liabilities - held for trading in € million 2023 2022 Derivatives 3,379 4,802 Interest rate contracts 2,686 3,896 Equity contracts 2 2 Foreign exchange rate and gold contracts 650 877 Credit contracts 35 12 Commodities 0 0 Other 7 16 Short positions 567 91 Equity instruments 11 7 Debt securities 556 83 Debt securities issued 4,517 3,560 Hybrid contracts 4,517 3,388 Other financial liabilities 1 1 Total 8,463 8,453 In the item derivatives was a reduction, which is due to valuation effects and exchange rate fluctuations, particularly in interest rate and foreign currency derivatives at head office. However, there was an increase in the securitized liabilities item, which is due to the increase in hybrid contracts at head office. Details on valuation principles are shown under (20) Financial assets – held for trading. (22) Hedge accounting and fair value adjustments of the hedged items in portfolio hedge IFRS 9 granted the accounting policy choice to continue the application of the provisions given in IAS 39 until the IASB finishes its existing project of replacing the portfolio hedge accounting rules in IAS 39. RBI opted to use this policy choice and i still applying the hedge accounting rules according to IAS in the version endorsed by the EU (EU carve-out). Notwithstanding that, the changes in the disclosures in the notes pursuant to IFRS 7 are taken into account. If hedging instruments, mainly derivatives, are held for the purpose of risk management and if the respective transactions meet specific criteria, RBI designates them into hedge accounting relationships. This can occur in the way of fair value hedges, cash flow hedges or net investment hedges. At the beginning of the hedging relationship, the relationship between underlying and hedging instrument, including the risk management objectives, is documented. Furthermore, it is necessary to regularly document from the beginning and during the lifetime of the hedging relationship that the fair value or cash flow hedge is highly effective in respect of the offset of valuation changes between hedging instrument and hedged item. in € million 2023 2022 Positive fair values of derivatives in micro fair value hedge 392 611 Interest rate contracts 392 611 Positive fair values of derivatives in micro cash flow hedge 1 1 Interest rate contracts 1 1 Positive fair values of derivatives in net investment hedge 5 4 Positive fair values of derivatives in portfolio hedge 762 991 Cash flow hedge 151 100 Fair value hedge 611 891 Total 1,160 1,608 in € million 2023 2022 Fair value adjustments of the hedged items in portfolio hedge of interest rate risk (365) (947) Total (365) (947) Consolidated financial statements93 · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 in € million 2023 2022 Negative fair values of derivatives in micro fair value hedge 491 605 Interest rate contracts 491 605 Negative fair values of derivatives in micro cash flow hedge 0 1 Interest rate contracts 0 1 Negative fair values of derivatives in net investment hedge 13 34 Negative fair values of derivatives in portfolio hedge 962 1,414 Cash flow hedge 107 87 Fair value hedge 854 1,328 Total 1,466 2,054 in € million 2023 2022 Fair value adjustments of the hedged items in portfolio hedge of interest rate risk (514) (1,217) Total (514) (1,217) Hedge accounting – additional information Depending on the risk to be hedged, fair value and cash flow hedge accounting are used. The aim is to reduce the interest rate risk and volatility in the income statement. Both types may be modeled at the micro level and in portfolios. Net investment hedges are mainly applied to hedge the net investment risk against fluctuations in the Romanian leu, the Czech koruna, and the Hungarian forint. Hedges on the net investment with respect to the fluctuations in the Russian rubel expired in the first half-year of 2023. In fair value hedges and cash flow hedges, various financial instruments are designated as hedged items in hedges. These instruments consist mainly of loans and advances on the asset side and deposits on the liability side. Other items included in hedge accounting relationships are debt securities and securitized liabilities. Most of the hedging instruments are interest rate and foreign exchange contracts. More information on RBI’s risk management strategy is provided in the risk report under (43) Market risk. The effects of hedges on the statement of comprehensive income are included in (5) Net trading income, fair value result and net gains/losses from hedge accounting, while those on the statement of changes in equity are included in (29) Equity and non- controlling interests. Hedge of a net investment in an economically independent operation (net investment hedge) In RBI, foreign exchange hedges of net investments in economically independent sub-units are executed to reduce differences arising from the foreign currency translation on equity. FX Forwards are mainly used as hedging instruments. Where the hedge is effective the resulting gains or losses from foreign currency translation are recognized in other comprehensive income and shown separately in the statement of comprehensive income. Any ineffective part of the hedge is recognized in net trading income. Any valuation part that is implied in FX Forwards due to the different interest rate differential on the two currencies is shown in net trading income. Hedging instruments Breakdown of hedging instruments by type of hedge accounting at the level of nominal amounts, both in total and by contractual termination, and at the level of the carrying amounts. 2023 Nominal amount Maturity Carrying amount in € million Up to 3 months More than 3 months, up to 1 year 1 year, up to 5 years More than 5 years Assets Liabilities Interest rate contracts 60,285 1,049 5,943 34,516 18,777 1,152 1,445 Cash flow hedge 4,518 59 1,434 2,378 647 149 100 Fair value hedge 55,767 990 4,509 32,138 18,130 1,003 1,345 Foreign exchange contracts 1,771 0 63 291 1,417 8 20 Cash flow hedge 321 0 51 234 36 3 7 Fair value hedge 120 0 12 57 51 0 0 Net investment hedge 1,330 0 0 0 1,330 5 13 Total 62,055 1,049 6,006 34,806 20,195 1,160 1,466 94 Consolidated financial statements · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 2022 Nominal amount Maturity Carrying amount in € million Up to 3 months More than 3 months, up to 1 year 1 year, up to 5 years More than 5 years Assets Liabilities Interest rate contracts 51,556 669 3,730 27,279 19,878 1,604 2,020 Cash flow hedge 2,140 30 337 1,075 698 102 87 Fair value hedge 49,416 639 3,393 26,204 19,180 1,502 1,933 Foreign exchange contracts 1,114 0 0 91 1,023 4 34 Cash flow hedge 125 0 0 91 34 0 0 Fair value hedge 29 0 0 0 29 0 0 Net investment hedge 960 0 0 0 960 4 34 Total 52,670 669 3,730 27,369 20,902 1,608 2,054 Fair value hedges Hedge accounting according to IAS 39 applies to those derivatives that are used to hedge the fair value of financial assets and liabilities. The credit business is especially subject to such fair value risks if it deals with fixed-interest loans. Interest rate swaps that satisfy the prerequisites for hedge accounting are contracted to hedge against the interest rate risks arising from individual loans or refinancing. Thus, hedges are formally documented, continuously assessed, and tested to be highly effective. Throughout the term of a hedge relationship, it can therefore be assumed that changes in the fair value of a hedged item will be nearly completely offset by a change in the fair value of the hedging instrument and that the actual effectiveness outcome will lie within a range of 80 to 125 per cent. Derivative instruments held to hedge the fair value of individual items in the statement of financial position (except trading derivatives) are recognized at fair value (dirty price) under the item hedge accounting (for assets: positive dirty prices; for liabilities: negative dirty prices). Changes in the carrying amounts of hedged items (assets or liabilities) are allocated directly to the corresponding items of the statement of financial position and reported separately in the notes. Both the effect of changes in the carrying amounts of hedged items and the effects of changes in the clean prices of the derivative instruments are recorded under net gains/losses from hedge accounting. Within the management of interest rate risks, the hedging of interest rate risk is also undertaken on the portfolio level. Individual transactions or groups of transactions with similar risk structures, divided into maturities according to the expected repayment and interest rate adjustment date in a portfolio, are hedged. Portfolios can contain assets only, liabilities only, or both. For hedge accounting, the change in the value of the hedged asset or liability is shown in net gains/losses from hedge accounting. The hedged amount of the hedged items is determined in the consolidated financial statements including sight deposits (the rules of the EU carve-out are therefore applied). Details of the underlying transactions for fair value hedges: 2023 Carrying amount of the hedged items Accumulated amount of fair value adjustments of the hedged items Changes in fair value of the hedged items1 in € million Assets Liabilities Assets Liabilities Interest rate hedges 27,363 25,198 (829) (1,151) (189) Debt securities 11,253 0 (406) 0 688 Loans and advances 16,110 0 (423) 0 383 Deposits 0 12,173 0 (641) (779) Debt securities issued 0 13,025 0 (510) (482) Other financial liabilities 0 0 0 0 0 Foreign exchange hedges 58 46 (5) (1) 4 Other assets 58 0 (5) 0 4 Other liabilities 0 46 0 (1) 0 Total 27,420 25,244 (833) (1,152) (185) 1 Fair value changes in the underlying transactions which were used in the reporting period to calculate ineffectiveness Consolidated financial statements95 · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 2022 Carrying amount of the hedged items Accumulated amount of fair value adjustments of the hedged items Changes in fair value of the hedged items1 in € million2 Assets Liabilities Assets Liabilities Interest rate hedges 20,030 22,746 (2,112) (2,238) (89) Debt securities 7,256 200 (1,139) 2 (977) Loans and advances 12,774 0 (972) 2 (1,027) Deposits 0 11,621 0 (1,437) 941 Debt securities issued 0 10,925 0 (806) 974 Other financial liabilities 0 0 0 0 0 Foreign exchange hedges 51 47 (9) (1) (2) Other assets 51 0 (9) 0 (3) Other liabilities 0 47 0 (1) 1 Total 20,081 22,793 (2,121) (2,239) (91) 1 Fair value changes in the underlying transactions which were used in the reporting period to calculate ineffectiveness 2 Previous-year figures adapted Cash flow hedges Cash flow hedge accounting according to IAS 39 applies for those derivatives that are used to hedge against the risk of fluctuating future cash flows. Variable interest loans and liabilities, as well as expected transactions such as expected borrowing or investment, are especially subject to such cash flow risks. Interest rate swaps used to hedge against the risk of fluctuating cash flows arising from specific variable interest rate items are recognized as follows: The hedging instrument is recognized at fair value, changes in its clean price are recorded in other comprehensive income. Any ineffective portion is recognized in the income statement under net gains/losses from hedge accounting. Details on changes in the value of the hedging instruments in cash flow hedge relationships considering the various disclosure of the effective part in the other comprehensive income and the ineffective part in the income statement: 2023 Change in the value of the hedging instruments recognized in other comprehensive income Hedge ineffectiveness recognized in profit or loss in € million Interest rate hedges 4 0 Loans and advances 95 0 Deposits (91) 0 Foreign exchange hedges 0 0 Other assets (1) 0 Other liabilities 1 0 Total 5 0 2022 Change in the value of the hedging instruments recognized in other comprehensive income Hedge ineffectiveness recognized in profit or loss in € million Interest rate hedges (45) (1) Loans and advances (113) (1) Deposits 68 0 Foreign exchange hedges (1) 0 Other assets (1) 0 Other liabilities 0 0 Total -45 0 96 Consolidated financial statements · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 (23) Notes to fair value of financial instruments In accordance with IFRS 13, RBI uses the following fair value hierarchy to determine and report the fair value for financial instruments. The allocation of certain financial instruments to the level categories requires regular assessment, especially if the valuation is based on both observable and unobservable inputs. The classification of an instrument may change over time, even after considering changes in market liquidity and thus price transparency. Quotation on an active market (Level I) Financial instruments whose fair values are measured based on quoted market prices are allocated to Level I of the fair value hierarchy. This category includes particularly equity instruments traded on the stock exchange, debt instruments traded on the interbank market and derivatives traded on the stock exchange. The valuation is mainly based on external data sources (stock exchange prices or broker quotes in liquid market segments). In an active market, transactions involving assets and liabilities are traded in sufficient frequency and volumes that price information is continuously available. Indicators for active markets are the number, the frequency of update or the quality of quotations (e.g. banks or stock exchanges). Moreover, narrow bid/ask spreads and quotations from market participants within a certain corridor are also indicators of an active liquid market. Financial instruments whose fair value measurements are based on quoted market prices mainly consist of quoted securities, a small proportion of derivatives and liquid bonds traded on over-the-counter markets (OTC). Measurement techniques based on observable market data (Level II) When quoted prices are not available on an active market, the financial instrument is then classified as Level II if the fair value can be determined using recognized measurement models which utilize observable prices or parameters (particularly present value calculations or option price models). The observable market data mainly consist of yield curves, credit spreads and volatilities. RBI generally uses measurement models that undergo internal review by the Market Risk Committee to ensure appropriate measurement parameters. The measurement techniques based on observable market data concern most of the OTC derivatives and non-quoted debt instruments. Measurement techniques not based on observable market data (Level III) If the fair value measurement can be made neither based on sufficiently regular market prices (Level I) nor on measurement models that are based entirely on observable market prices (Level II), individual input parameters that are not observable in the market are estimated using appropriate assumptions. If unobservable parameters have a significant impact on the measurement of the underlying financial instrument, it is assigned to Level III of the fair value hierarchy. These regularly unobservable measurement parameters include credit spreads derived from internal estimates. These input parameters may include data which is calculated in terms of approximated values from historical data among other factors (fair value hierarchy Level III). The utilization of these models requires assumptions and estimates of the Management. The scope of the assumptions and estimates depends on the price transparency of the financial instrument, its market, and the complexity of the instrument. For financial instruments valued at amortized cost (this comprises loans and advances, deposits, other short-term borrowings, and long-term liabilities), the Group discloses the fair value. In principle, there is low or no trading activity for these instruments, therefore a significant degree of assessment by the Management is necessary for determining the fair value. Fair value of financial instruments measured at fair value The loan portfolio is included in the central calculation of fair value. Fair value is calculated monthly and is based on the discounted cash flow method. The expected cash flows are discounted using an appropriate discount rate (e.g. risk-free interest rate plus premium). The method applied to calculate the discount rate depends on the segment (i.e. retail and non- retail). In addition, the fair value of the embedded options is calculated for the loan portfolio, and the method applied is based on the customer segment (i.e. retail and non-retail). The measurement of the embedded options in the retail segment is based on behavioral modeling (e.g. linear regression/moving twelve-month average of prepayment rates). The measurement of embedded options in loans in the non-retail segment assumes that the customer will behave in an entirely rational manner. The embedded options in non-retail loans such as prepayment, disbursement and replenishment are replicated with swaptions and measured using the trinomial tree Hull-White structural model. The Black model, which is based on the log-normal distribution of yields, is generally used to measure interest rate options (caps and floors). As there is a volatile interest rate environment, the shifted log-normal Black model is used to measure interest rate options. It is based on a displaced diffusion model (log-normal distribution with a shift in interest rates). For bonds, tradable market prices are mostly used. If no quotes are available, a discounted cash flow model is used to value the securities. The yield curve and an adequate credit spread are used as measurement parameters. The credit spread is determined through comparable financial instruments available on the market. Credit default spreads were used to measure a Consolidated financial statements97 · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 small part of the portfolio. In addition, consideration is given to third party external measurements, which are indicative in all cases. The positions are assigned to levels at the end of the reporting period. In RBI, well-known conventional market valuation techniques are used to measure OTC derivatives. For example, interest rate swaps, cross currency swaps and forward rate agreements are measured using the customary discounted cash flow model for these products. OTC options, such as foreign exchange options or caps and floors, are based on valuation models which are in line with market standards. In the case of the examples listed, such models would be the Garman-Kohlhagen model, Black- Scholes 1972 and Black 1976. Monte Carlo simulations are used to measure complex options. Credit value adjustments (CVA) and debit value adjustments (DVA) are also necessary to determine fair value to reflect counterparty default risk associated with OTC derivative transactions, especially for contractual partners for whom a credit support annex does not provide protection. This amount represents the respective estimated market value of a security measure which is required to hedge against counterparty credit risk in the Group’s OTC derivative portfolios. The CVA depends on the expected future exposure (expected positive exposure) and the probability of default of the contractual partner. The expected positive exposure is calculated by simulating a large number of scenarios for future points in time, taking into account all available risk factors (e.g. currency and yield curves). OTC derivatives are measured at market values taking into account these scenarios at the respective future points in time and are aggregated at counterparty level in order to then ascertain the expected positive exposure for all points in time. Counterparties with CSA contracts (credit support annex contracts) are taken into account in the calculation. The expected exposures are not calculated directly from simulated market values, but from a future expected change in market values based on a margin period of risk of ten days. In order to determining the probability of default for each counterparty, where direct credit default swap (CDS) quotations are available, the Group calculates the market-based probability of default and, implicitly, the loss given default (LGD) for the respective counterparty. The probability of default for counterparties which are not actively traded on the market is calculated by assigning a counterparty’s internal rating to a sector and rating specific CDS curve. The DVA is determined by the expected negative exposure and by RBI's credit quality and represents the value adjustment for own probability of default. The method of calculation is analogous to that of the CVA. No funding value adjustment (FVA) was considered to measure OTC derivatives. RBI is observing market developments and will develop a method to calculate the FVA where appropriate. In the tables below, the financial instruments reported at fair value in the statement of financial position are grouped according to items in the statement of financial position. Assets 2023 2022 in € million Level I Level II Level III Level I Level II Level III Financial assets - held for trading 1,629 4,140 14 1,010 5,371 29 Derivatives 3 3,771 0 3 5,057 0 Equity instruments 410 12 4 271 16 0 Debt securities 1,216 357 10 736 299 29 Non-trading financial assets - mandatorily fair value through profit/loss 295 38 616 150 80 527 Equity instruments 1 6 1 1 5 0 Debt securities 294 32 48 149 74 52 Loans and advances 0 0 567 0 0 475 Financial assets - designated fair value through profit/ loss 160 25 0 48 36 0 Debt securities 160 25 0 48 36 0 Financial assets - fair value through other comprehensive income 2,238 495 259 2,441 536 225 Equity instruments 20 0 162 17 2 150 Debt securities 2,218 495 97 2,424 535 75 Hedge accounting 0 1,160 0 0 1,608 0 98 Consolidated financial statements · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 Equity and liabilities 2023 2022 in € million Level I Level II Level III Level I Level II Level III Financial liabilities - held for trading 559 7,904 0 93 8,360 0 Derivatives 3 3,376 0 6 4,796 0 Short positions 556 11 0 86 5 0 Debt securities issued 0 4,517 0 0 3,560 0 Other financial liabilities 1 0 0 1 0 0 Financial liabilities - designated fair value through profit/loss 0 1,088 0 0 950 0 Deposits 0 42 0 0 111 0 Debt securities issued 0 1,046 0 0 839 0 Hedge accounting 0 1,466 0 0 2,054 0 Movements of financial instruments valued at fair value between Level I and Level II As at 31 December 2023, only derived prices were available for financial instruments amounting to € 24 million. For example, the BVAL value (Bloomberg Evaluation) was used instead of the BGN value (Bloomberg Generic Price). Consequently, these securities were reclassified from Level I to Level II. The shifts from Level II to Level I relate to bonds of € 7 million for which market values were available at the reporting date. Movements of financial instruments at fair value in Level III The total portfolio of Level III assets saw a net increase of € 108 million in the reporting period. In the case of financial instruments mandatorily recognized at fair value there was a net increase of € 89 million, primarily due to additions and gains realised on the sale of loans in Hungary and Austria. The valuation category financial assets - fair value through other comprehensive income saw an increase of € 34 million net. The reason for this increase was additions in Romania and Austria. In the measurement category financial assets - held for trading, the volume of government bonds decreased by € 15 million, primarily due to sales in Russia, while additions in Albania were reversed by disposals in the same amount. The total net change of € 108 million included net exchange rate fluctuations of around € 10 million. Assets in € million As at 1/1/2023 Change in consolidated group Exchange differences Additions Disposals Financial assets - held for trading 29 0 (5) 39 (48) Non-trading financial assets - mandatorily fair value through profit/loss 527 0 16 69 (58) Financial assets - designated fair value through profit/loss 0 0 0 0 0 Financial assets - fair value through other comprehensive income 225 0 (1) 40 (4) Total 781 0 10 147 (110) Assets in € million Gains/loss in P/L Gain/loss in other comprehensive income Transfer to Level III Transfer from Level III As at 31/12/2023 Financial assets - held for trading (2) 0 2 0 14 Non-trading financial assets - mandatorily fair value through profit/loss 68 0 0 (5) 616 Financial assets - designated fair value through profit/loss 0 0 0 0 0 Financial assets - fair value through other comprehensive income (2) 0 0 0 259 Total 64 0 2 (5) 889 Equity and liabilities in € million¹ As at 1/1/2023 Change in consolidated group Exchange differences Additions Disposals Financial liabilities - held for trading 0 0 0 0 0 Gesamt 0 0 0 0 0 Equity and liabilities in € million¹ Gains/loss in P/L Gain/loss in other comprehensive income Transfer to Level III Transfer from Level III As at 31/12/2023 Financial liabilities - held for trading 0 0 0 0 0 Total 0 0 0 0 0 1 Values stated at 0 contain fair values of less than half a million euros. Consolidated financial statements99 · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 Qualitative information on the valuation of financial instruments in Level III Assets Fair value in € million¹ Valuation technique Significant unobservable inputs Range of unobservable inputs 2023 Financial assets - held for trading 14 Supplementary capital 4 Indicative prices Indications – Treasury bills, fixed coupon bonds 10 DCF method Credit spread 1.39 - 76.04% Forward foreign exchange contracts 0 DCF method Interest rate 10 - 30% Non-trading financial assets - mandatorily fair value through profit/loss 616 Other interests 1 Simplified net present value method Expert opinion – – Bonds, notes and other fixed-interest securities 48 Net asset value Financing auction/transaction costs Market price indication (Auction-) Price Loans 567 Retail: DCF method (Black Scholes, prepayment option, withdrawal option etc.) Non-Retail: DCF method/ Financial option pricing Black Scholes (shifted), Hull-White trinominal tree Discount spread (new business) Funding curves (liquidity costs) Credit risk premium (CDS curves) 1.07 - 3.47% over all currencies 0.05 - 6,85% over all currencies 0.09 - 10,10% (depending on the rating: from AA to CCC) Financial assets - designated fair value through profit/loss 0 Fixed coupon bonds 0 Net assets Price – Financial assets - fair value through other comprehensive income 259 Other interests 44 Dividend discount model Simplified income approach DCF method Credit spread Cash flow Discount rate Dividends Beta factor – Other interests 64 Adjusted net asset value Adjusted equity – Other interests 53 Market comparable companies Transaction price Purchase price Cost approach Valuation report (expert judgement) Cost minus impairment EV/Sales EV/EBIT P/E P/B – Treasury bills, municipal bonds 97 DCF method Interest rate – Total 889 Equity and liabilities Fair value in € million¹ Valuation technique Significant unobservable inputs Range of unobservable inputs 2023 Financial liabilities - held for trading 0 Forward foreign exchange contracts 0 DCF method Interest rate 10 - 30% Total 0 1 Values stated at 0 contain fair values of less than half a million euros. 100 Consolidated financial statements · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 Sensitivity of the fair value of financial assets (Level III) and liabilities measured at fair value Calculations of unobservable input parameters are mainly based on changes in credit spreads for bonds and loans as well as market values of comparable equities. For bonds and loans, an increase (decrease) in credit spread of 100 basis points (75 basis points) leads to a corresponding decrease (increase) in fair value. For unquoted equity instruments an increase (decrease) in price of 10 per cent leads to a corresponding increase (decrease) in fair value. Financial assets 2023 2022 Carrying amount Fair value changes Carrying amount Fair value changes in € million Level III Positive Negative Level III Positive Negative Loans and advances 567 11 (11) 475 12 (14) Debt securities 58 5 (5) 81 5 (5) Income statement effect - 16 (16) - 17 (19) 2023 2022 Carrying amount Fair value changes Carrying amount Fair value changes in € million Level III Positive Negative Level III Positive Negative Debt securities 97 2 (2) 75 2 (3) Equity instruments 162 16 (17) 149 18 (15) Other comprehensive income effect - 18 (19) - 21 (18) Other assets and liabilities and equity (24) Investments in subsidiaries and associates in € million 2023 2022 Investments in affiliated companies 187 193 Investments in associates valued at equity 632 520 Total 820 713 Number of subsidiaries not included 227 249 Investments in associates valued at equity: in € million Share in % 2023 Carrying amount 2023 Carrying amount 2022 card complete Service Bank AG, Vienna (AT) 25.0% 9 12 EMCOM Beteiligungs GmbH, Vienna (AT) 33.6% 7 7 LEIPNIK-LUNDENBURGER INVEST Beteiligungs Aktiengesellschaft, Vienna (AT) 33.1% 189 153 Limited Liability Company "Insurance Company "Raiffeisen Life", Moscow (RU)1 25.0% 0 8 NOTARTREUHANDBANK AG, Vienna (AT) 26.0% 14 12 Oesterreichische Kontrollbank Aktiengesellschaft, Vienna (AT) 8.1% 69 44 Österreichische Hotel- und Tourismusbank Gesellschaft m.b.H., Vienna (AT) 31.3% 16 11 Posojilnica Bank eGen, Klagenfurt (AT) 49.7% 18 13 Prva stavebna sporitelna a.s., Bratislava (SK) 32.5% 46 41 Raiffeisen Informatik GmbH & Co KG, Vienna (AT) 47.6% 13 11 Raiffeisen-Leasing Management GmbH, Vienna (AT) 50.0% 10 10 UNIQA Insurance Group AG, Vienna (AT) 10.9% 240 199 Total 632 520 1 Investments in associates valued at equity unit for LLC are presented in the item Non-current assets and disposal groups classified as held for sale at year end 2023. Consolidated financial statements101 · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 The carrying amount of investments in associates values at equity increased from € 520 million to € 632 million. The increase is primarily due to LEIPNIK-LUNDENBURGER INVEST Beteiligungs Aktiengesellschaft and UNIQA Insurance Group AG. In the current reporting period, there was a reversal of the impairment losses at LEIPNIK-LUNDENBURGER INVEST Beteiligungs Aktiengesellschaft due to the stabilisation of the market conditions, despite the ongoing war in Ukraine. The increase of the carrying amount of UNIQA Insurance Group AG is primarily due to higher earning contributions in the reporting period 2023. Significant influence over UNIQA Insurance Group AG exists due to a syndicate agreement with the other core shareholders that governs the right to appoint members of the Supervisory Board, among other things. Significant influence over Oesterreichische Kontrollbank Aktiengesellschaft exists due to two permanent positions on the Supervisory Board. Financial information on associates valued at equity as at 30 September 2023: in € million CCSB EMCOM LLI1,2 LLC3 NTB OeKB1 Assets 664 20 1,244 250 2,238 34,668 Operating income (1) 0 90 3 21 68 Profit/loss from discontinuing operations (2) 2 57 8 12 54 Profit/loss after tax from discontinued operations 0 0 0 0 0 0 Other comprehensive income 0 0 (6) (4) 0 (3) Total comprehensive income (2) 2 52 3 12 51 Attributable to non-controlling interests 0 0 3 0 0 1 Attributable to investee's shareholders (2) 2 48 3 12 50 Current assets 660 20 399 69 311 7,480 Non-current assets 3 0 885 181 1,927 27,188 Short-term liabilities (594) 0 (466) (13) (1,943) (13,505) Long-term liabilities (23) 0 (244) (199) (240) (20,244) Net assets 47 20 573 37 56 918 Attributable to non-controlling interests 0 0 11 0 0 18 Attributable to investee's shareholders 47 20 563 37 56 900 Group's interest in net assets of investee as at 1/1 12 7 162 8 12 70 Change in share/first time inclusion 0 0 0 0 0 0 Total comprehensive income attributable to the Group 0 1 14 1 3 5 hereof income statement 0 1 18 3 3 6 hereof other comprehensive income 0 0 (4) (2) 0 0 Dividends received 0 (1) (3) 0 (1) (3) Share in the capital increase 0 0 13 0 0 0 Group's interest in net assets of investee as at 30/9 12 7 186 9 14 73 Valulation (2) 0 3 0 0 (4) Carrying amount 9 7 189 9 14 69 1 Consolidated financial statements: Profit and equity is after deduction of non-controlling interests. 2 The capital increase was considered as of 5 October 2023. 3 Investments in associates valued at equity unit for LLC are presented in the item Non-current assets and disposal groups classified as held for sale at year end 2023. CCSB: card complete Service Bank AG, Vienna (AT) EMCOM: EMCOM Beteiligungs GmbH, Vienna (AT) LLI: LEIPNIK-LUNDENBURGER INVEST Beteiligungs Aktiengesellschaft, Vienna (AT) LLC: Raiffeisen Life Insurance Company LLC, Moscow (RU) NTB: NOTARTREUHANDBANK AG, Vienna (AT) OeKB: Oesterreichische Kontrollbank Aktiengesellschaft, Vienna (AT) 102 Consolidated financial statements · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 in € million OEHT POSO PSS RIZ R-Leasing UNIQA1 Assets 1,290 402 3,127 439 48 27,222 Operating income 5 4 53 8 (1) 366 Profit/loss from discontinuing operations 3 7 16 6 (1) 245 Profit/loss after tax from discontinued operations 0 0 0 0 0 (19) Other comprehensive income 0 1 0 (1) 3 18 Total comprehensive income 3 8 16 5 2 244 Attributable to non-controlling interests 0 0 0 0 0 0 Attributable to investee's shareholders 3 8 16 5 2 243 Current assets 8 154 537 171 45 1,430 Non-current assets 1,282 247 2,590 268 3 25,791 Short-term liabilities (10) (168) (822) (162) (17) (1,148) Long-term liabilities (1,229) (182) (1,998) (183) 0 (23,851) Net assets 50 52 307 93 31 2,223 Attributable to non-controlling interests 0 0 0 0 0 19 Attributable to investee's shareholders 50 52 307 93 31 2,203 Group's interest in net assets of investee as at 1/1 15 20 95 41 17 199 Change in share/first time inclusion 0 0 0 0 0 0 Total comprehensive income attributable to the Group 2 5 5 4 0 60 hereof income statement 2 5 5 4 (1) 40 hereof other comprehensive income 0 0 0 0 0 20 Dividends received (1) 0 0 (1) (2) (18) Share in the capital increase 0 0 0 0 0 0 Group's interest in net assets of investee as at 30/9 16 26 100 44 16 240 Valulation 0 (8) (53) (31) (6) 0 Carrying amount 16 18 46 13 10 240 1 Consolidated financial statements: Profit and equity is after deduction of non-controlling interests. OEHT: Österreichische Hotel- und Tourismusbank Gesellschaft m.b.H., Vienna (AT) POSO: Posojilnica Bank eGen, Klagenfurt (AT) PSS: Prva stavebna sporitelna a.s., Bratislava (SK) RIZ: Raiffeisen Informatik GmbH & Co KG, Vienna (AT) R-Leasing: Raiffeisen-Leasing Management GmbH, Vienna (AT) UNIQA: UNIQA Insurance Group AG, Vienna (AT) Impairment test for companies valued at equity At the end of each reporting period an assessment is made whether there is any indication that the carrying amount of an equity investment is higher than its recoverable amount. IAS 36 has a list of external and internal indicators of impairment. If there is an indication that a company valued at equity may be impaired, then the asset's recoverable amount is calculated. The following key assumptions have been made for the impairment test. 2023 2022 Cash generating units LLI OeKB UNIQA LLI OeKB UNIQA Average discount interest rate (after tax) 8.1% 8.2% 10.4% 7.8% 8.6% 10.4% Planning period 5 years 3 years 5 years 5 years 3 years 5 years LLI: LEIPNIK-LUNDENBURGER INVEST Beteiligungs Aktiengesellschaft, Vienna (AT) OeKB: Oesterreichische Kontrollbank Aktiengesellschaft, Vienna (AT) UNIQA: UNIQA Insurance Group AG, Vienna (AT) Based on the most recent impairment tests, reversals on impairment loss were recognized for the majority of the investment portfolio. The positive development in macroeconomic and interest rate environment had a positive impact on the companies’ earnings prospects. Consolidated financial statements103 · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 Summary of significant planning assumptions and description of the management approach to identify the values: Cash generating units Brief description Key assumptions Management approach LEIPNIK-LUNDENBURGER INVEST Beteiligungs Aktiengesellschaft (LLI) In the two core areas of milling and vending (hot and cold) beverages and food from vending machines, the LLI companies are market leaders in Austria and in some EU countries (Eastern Europe and Germany). The planning reflects, in addition to the expected developments in raw material prices and costs, which are partially reflected in the sales prices, a capital injection of € 80 million. In the medium to long term, a general normalization of market conditions is expected. Planning assumptions reflect current external conditions and were approved by the supervisory board. Planning includes actions to address current and expected market developments. In addition to cost savings and a suitable pricing strategy, these include further specializations, optimization through digitalization and the development of new products. Oesterreichische Kontrollbank Aktiengesellschaft (OeKB) OeKB fulfills two essential functions for the Austrian export industry. Firstly, it is the Republic of Austria’s export credit agency; secondly, it is an issuer on the capital market. Its main subsidiaries are Österreichische Hotel- und Tourismusbank (OEHT) and Oesterreichische Entwicklungsbank (OeEB). The planning assumptions take into account the development of volumes in export finance and have been adopted in the valuation approach. They show stable growth of loan volume over the following years. The management approach reflects the current external conditions. The rising interest rate level and the current inflationary environment were taken into account in the planning assumptions. Existing mandates from the Republic of Austria comprise a stable basis for OeKB’s business activities, which are complemented by the other services. UNIQA Insurance Group AG (UNIQA) UNIQA Insurance Group AG is one of the leading insurance groups in its core markets of Austria and CEE. The group has approximately 40 companies in 18 countries and serves about 16 million customers. The brands UNIQA and Raiffeisen Versicherung are two strong insurance brands in Austria and are well positioned in the CEE markets. By taking appropriate countermeasures, UNIQA intends to continue to pursue its long-term profitability targets despite the increasing cost pressure. In summary, despite the volatile environment, it is assumed that the long-term strategic orientation will be maintained and, accordingly, that long- term returns will remain stable. The management approach was essentially adopted as the valuation approach. It continues to be based on ongoing pursuit of the established strategic direction. Accordingly, it is assumed that a solid return on equity and the strong solvency situation will be maintained. This provides the basis for sustained dividend growth and a stable dividend yield. Sensitivity analysis In order to examine how a change in parameters essential for determining the cost of capital affects the value of equity, these parameters were varied in the course of the sensitivity analysis carried out. Changes in the valuation of these companies may therefore result in an adjustment to the carrying amount. In the event of a downside scenario (increase in the cost of capital by 50 basis points), Prva stavebna sporitelna a.s, card complete Service Bank AG, Posojilnica Bank eGen would decrease by less than 10 per cent, and that of Raiffeisen Informatik GmbH & Co KG by around 12 per cent, thus leading to a further reduction in the carrying amount. For LEIPNIK-LUNDENBURGER INVEST Beteiligungs Aktiengesellschaft, Oesterreichische Kontrollbank Aktiengesellschaft, ÖHT Österreichische Hotel und Tourismusbank GmbH there would be a reversal of impairment losses, despite the lower value in use. EMCOM Beteiligungs GmbH, NOTARTREUHANDBANK AG and UNIQA Insurance Group AG, are excluded from this scenario; a further decline in value would not lead to a reduction in the carrying amount here as the value in use would still be higher than the proportionate equity. 104 Consolidated financial statements · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 (25) Tangible and intangible fixed assets Tangible fixed assets Land and buildings as well as office furniture and equipment reported under tangible fixed assets are measured at cost of acquisition or conversion less depreciation. Depreciation is recorded under the item general administrative expenses. The straight-line method is used for depreciation and is based on the following useful life figures: Useful life Years Buildings 25 – 50 Office furniture and equipment 5 – 10 Hardware 3 – 7 Right-of-use assets 2 – 35 Land is not subject to depreciation. Expected useful lives, residual values and depreciation methods are reviewed annually. Any necessary future change of estimates is taken into account. Any anticipated permanent impairment is reported in the income statement and shown under the item impairment on non- financial assets. In case that the reason for the impairment no longer exists, a write-up will take place up to a maximum of the amount of the amortized cost of the asset. A tangible fixed asset is derecognized on disposal or when no future economic benefit can be expected from the continued use of the asset. The resulting gain or loss from the sale or retirement of any asset is determined as the difference between the proceeds and the carrying amount of the asset and is recognized in other net operating income. Investment property This is property that is held to earn rental income and/or for capital appreciation. Investment property is reported at amortized cost using the cost model permitted by IAS 40 and is shown under tangible fixed assets because of minor importance. Straight line depreciation is based on the useful life. The normal useful life of investment property is identical to that of buildings recognized under tangible fixed assets. Depreciation is recorded under the item general administrative expenses. Impairments that are expected to be permanent are recognized in profit or loss and shown in the item impairment on non-financial assets. If the reasons for the impairment cease to exist, a write-up is made up to the amortized acquisition costs. Investment property is derecognized on disposal or when it is no longer to be used and no future economic benefit can be expected from disposal. The resulting gain or loss from the disposal is determined as the difference between the net proceeds from the disposal and the carrying amount of the asset and is recognized in other net operating income in the reporting period in which the asset was sold. Intangible fixed assets Acquired intangible fixed assets In RBI, separately acquired intangible fixed assets, i.e. those with a definite useful life not acquired in a business combination, are capitalized at acquisition cost less accumulated amortization and impairment. Amortization is accrued in a straight line over the expected useful life and reported as an expense in the income statement. The expected useful life and the depreciation method are reviewed at each reporting date and any possible changes in measurement taken into account prospectively. Separately acquired intangible fixed assets with an indefinite useful life are capitalized at acquisition cost less accumulated impairment. The normal useful life of software is between four and six years. The normal useful life for large software projects may extend over a longer period. Consolidated financial statements105 · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 Internally developed intangible fixed assets – research and development costs Internally developed intangible assets comprise exclusively software and are capitalized if it is probable that the future economic benefits attributable to the asset will accrue to RBI and the cost of the asset can be measured reliably. Expenses for research are recognized as an expense when they are incurred. An internally developed intangible fixed asset resulting from development activities or from the development stage of an internal project is capitalized when the following evidence is provided: · The final completion of the intangible fixed asset is technically feasible so that it will be available for use or sale. · It is intended to finally complete the intangible fixed asset and to use or to sell it. · The ability exists to use or to sell the intangible fixed asset. The intangible fixed asset is likely to generate future economic benefit. · The availability of adequate technical, financial, and other resources required to complete development and to use or sell the intangible fixed asset is assured. · The ability exists to reliably determine the expenditure incurred during the development of the intangible fixed asset. The amount at which an internally developed intangible fixed asset is initially capitalized is the sum of all expenses incurred beginning from the day on which the aforementioned conditions are initially met. If an internally developed intangible fixed asset cannot be capitalized, or if there is not yet an intangible fixed asset, the development costs are reported in the income statement for the reporting period in which they are incurred. Capitalized development costs are generally amortized in the Group in a straight line over a useful life of five years. The normal useful life of software is between four and six years. The normal useful life for large software projects may extend over a longer period. Intangible fixed assets acquired in a business combination In RBI, intangible fixed assets acquired in a business combination are reported separately from goodwill and are measured at fair value at the time of acquisition. Goodwill and other intangible fixed assets without definite useful lives are tested for impairment at each reporting date. Impairment tests are also performed whenever certain events (trigger events) occur during the year. Whenever circumstances indicate that the expected benefit no longer exists, impairment must be recognized pursuant to IAS 36. Intangible fixed assets with a definite useful life are amortized over the period during which the intangible fixed asset can be used. Group companies use brands to differentiate their services from the competition. According to IFRS 3, brands of acquired companies are recognized separately under the item intangible fixed assets. Brands have an indeterminable useful life and are therefore not subject to scheduled amortization. Brands are to be tested annually for impairment and additionally whenever indications of impairment arise. Core deposits acquired as part of a business combination are reported separately under intangible fixed assets in accordance with IFRS 3. The core deposits were based on a useful life of ten years. The core deposits represent the present value of the cost savings obtained by subtracting the costs of the core deposits from the costs for an equivalent amount of funds from an alternative market source. The intangible value of the core deposits stems from the fact that the core deposits are a cost- effective stable funding source. The core deposits were measured using the discounted cash flow (DCF) method in which the forecast cost savings are discounted using the cost of equity. 106 Consolidated financial statements · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 Presentation of tangible and intangible assets in € million 2023 2022 Tangible fixed assets 1,672 1,684 Land and buildings used by the group for own purpose 454 494 Office furniture, equipment and other tangible fixed assets 341 332 Investment property 412 389 Other leased assets (operating lease) 108 95 Right-of-use assets 357 374 Intangible fixed assets 970 903 Software 843 767 Goodwill1 38 38 Brand 2 2 Customer relationships1 13 19 Core deposits intangibles 51 60 Other intangible fixed assets 23 17 Total 2,641 2,587 Fair value of investment property 574 522 1 Previous-year figures adapted due to changed allocation Cost of acquisition or conversion in € million As at 1/1/2023 Change in consolidated group Exchange differences Additions Disposals Transfers As at 31/12/2023 Tangible fixed assets 3,356 9 (120) 388 (231) 0 3,402 Land and buildings used by the group for own purpose 952 1 (41) 74 (50) (1) 934 Office furniture, equipment and other tangible fixed assets 999 (1) (62) 153 (86) 1 1,004 Investment property 552 7 (1) 39 (27) 1 571 Other leased assets (operating lease) 200 2 (2) 48 (28) 0 220 Right-of-use assets 654 0 (14) 73 (39) 0 674 Intangible fixed assets 3,032 0 (107) 362 (174) 0 3,114 Software 2,414 0 (75) 348 (170) 8 2,525 Goodwill1 467 0 (29) 0 0 0 438 Brand 3 0 0 0 0 0 3 Customer relationships1 26 0 0 0 0 0 26 Core deposits intangibles 70 0 (2) 0 0 0 68 Other intangible fixed assets 51 0 0 14 (3) (8) 54 Total 6,388 9 (227) 750 (404) 0 6,516 1 Previous-year figures adapted due to changed allocation Write-ups, amortization, depreciation, impairment Carrying amount in € million Cumulative hereof write- ups hereof depreciation/ impairment As at 31/12/2023 Tangible fixed assets (1,731) 1 (260) 1,672 Land and buildings used by the group for own purpose (480) 1 (50) 454 Office furniture, equipment and other tangible fixed assets (663) 0 (98) 341 Investment property (159) 0 (11) 412 Other leased assets (operating lease) (112) 0 (17) 108 Right-of-use assets (317) 0 (84) 357 Intangible fixed assets (2,144) 20 (244) 970 Software (1,681) 20 (227) 843 Goodwill (400) 0 0 38 Brand (1) 0 0 2 Customer relationships (14) 0 (6) 13 Core deposits intangibles (17) 0 (8) 51 Other intangible fixed assets (31) 0 (3) 23 Total (3,875) 21 (504) 2,641 Consolidated financial statements107 · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 Cost of acquisition or conversion in € million As at 1/1/2022 Change in consolidated group Exchange differences Additions Disposals Transfers As at 31/12/2022 Tangible fixed assets 3,255 (52) (9) 356 (194) 0 3,356 Land and buildings used by the group for own purpose 973 (23) 1 26 (28) 2 952 Office furniture, equipment and other tangible fixed assets 970 0 (7) 115 (79) 0 999 Investment property 503 (40) (4) 108 (14) (2) 552 Other leased assets (operating lease) 185 (2) 2 37 (22) 0 200 Right-of-use assets 623 13 (1) 70 (51) 0 654 Intangible fixed assets 2,930 (44) (3) 328 (179) 0 3,032 Software 2,332 (49) (5) 310 (164) (10) 2,414 Goodwill1 456 9 1 1 0 0 467 Brand 3 0 0 0 0 0 3 Customer relationships1 37 (1) (1) 5 (14) 0 26 Core deposits intangibles 63 0 2 5 0 0 70 Other intangible fixed assets 38 (3) 0 7 (1) 10 51 Total 6,185 (96) (12) 684 (373) 0 6,388 1 Previous-year figures adapted due to changed allocation Write-ups, amortization, depreciation, impairment Carrying amount in € million Cumulative hereof write- ups hereof depreciation/ impairment As at 31/12/2022 Tangible fixed assets (1,672) 1 (246) 1,684 Land and buildings used by the group for own purpose (457) 0 (37) 494 Office furniture, equipment and other tangible fixed assets (667) 1 (96) 332 Investment property (163) 0 (10) 389 Other leased assets (operating lease) (105) 0 (17) 95 Right-of-use assets (280) 0 (87) 374 Intangible fixed assets (2,129) 2 (305) 903 Software (1,647) 2 (221) 767 Goodwill1 (429) 0 (68) 38 Brand (1) 0 0 2 Customer relationships1 (8) 0 (7) 19 Core deposits intangibles (10) 0 (6) 60 Other intangible fixed assets (35) 0 (2) 17 Total (3,801) 3 (551) 2,587 1 Previous-year figures adapted due to changed allocation Software in € million 2023 2022 Acquired software 594 567 Internally developed software 249 200 108 Consolidated financial statements · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 Goodwill The carrying amount of the goodwill as well as the gross amounts of and the accumulated impairment on the goodwill developed for the cash generating units as follows: 2023 in € million AKCENTA RBRS EQUA RBCZ RKAG Other Total As at 1/1 9 2 0 0 27 1 38 Additions 0 0 0 0 0 0 0 Merger 0 0 0 0 0 0 0 Impairment 0 0 0 0 0 0 0 Exchange rate changes 0 0 0 0 0 0 0 As at 31/12 9 2 0 0 27 1 38 Gross amount 9 10 0 60 54 306 438 Accumulated impairment¹ 0 (8) 0 (60) (27) (305) (400) 1 Calculated with average exchange rates AKCENTA: Akcenta CZ a.s., Prague (CZ) RBRS Raiffeisen banka a.d., Novi Belgrade (RS) EQUA: Equa bank a.s., Prague (CZ) RBCZ: Raiffeisenbank a.s., Prague (CZ) RKAG: Raiffeisen Kapitalanlage-Gesellschaft m.b.H., Vienna (AT) 2022 in € million AKCENTA CASRS EQUA RBCZ RKAG2 Other Total As at 1/1 9 0 18 41 27 1 95 Additions 0 10 0 0 0 0 10 Merger 0 0 (18) 18 0 0 0 Impairment 0 (8) 0 (60) 0 0 (68) Exchange rate changes 0 0 0 1 0 0 2 As at 31/12 9 2 0 0 27 1 38 Gross amount 9 10 0 60 54 335 467 Accumulated impairment¹ 0 (8) 0 (60) (27) (334) (429) 1 Calculated with average exchange rates AKCENTA: Akcenta CZ a.s., Prague (CZ) CASRS Crédit Agricole Srbija AD, Novi Sad (RS) EQUA: Equa bank a.s., Prague (CZ) RBCZ: Raiffeisenbank a.s., Prague (CZ) RKAG: Raiffeisen Kapitalanlage-Gesellschaft m.b.H., Vienna (AT) 2 Previous-year figures adapted due to changed allocation Impairment test for goodwill On each reporting date, goodwill is examined with a view to its future economic utility on the basis of cash generating units (CGU's). A cash generating unit is defined by the management and represents the smallest identifiable group of assets of a company that generates cash inflows from operations. Within RBI, all segments according to segment reporting are determined as cash generating units. Legal entities within the segments form their own CGU for the purpose of impairment testing of goodwill. The carrying amount of the relevant entity (including any assigned goodwill) is compared with its recoverable amount. This is, as a general principle, defined as the higher of the fair value less selling costs and the amount resulting from its value in use. The value in use is based on expected potential dividends discounted using a rate of interest reflecting the risk involved. The estimation of the future results requires an assessment of previous as well as future performance. The latter must consider the likely development of the relevant markets and the overall macroeconomic environment. Impairment tests for goodwill based on cash-generating units use a multi-year plan drawn up by the relevant management team and approved by the bodies responsible. This covers the CGU's medium-term prospects for success taking into account its business strategy, overall macroeconomic conditions (gross domestic product, inflation expectations, etc.) and the specific market circumstances. The data is then used to capture the terminal value based on a going concern concept. Discounting of the earnings relevant for the measurement, i.e. potential dividends, is undertaken using risk-adapted and country-specific equity capital cost rates determined by means of the capital asset pricing model. The individual interest rate parameters (risk- free interest rate, inflation difference, market risk premium, country-specific risks, and beta factors) were defined by using external information sources. The entire planning horizon is divided into three phases with phase I covering the management planning period of three years. Detailed planning, including macroeconomic planning data, is extrapolated in phase II, which lasts another two years. The terminal value is then calculated in phase III based on the assumption of a going concern. In line with IAS 36, impairment tests for goodwill are carried out during the year if a reason for impairment occurs. Consolidated financial statements109 · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 Key assumptions 2023 2022 Cash generating units RKAG RBRS AKCENTA RBCZ RKAG RBRS/CASRS AKCENTA Average discount interest rate (after tax) 10.2% 18.1% 11.3% 12.8% 10.3% 19.8% 11.9% Growth rates in phase I and II (5 years) p.a.¹ 5.3% 7.5% 30.3% 5.9% 0.9% 14.1% n/a Growth rates in phase III (terminal value) p.a. 2.0% 3.5% 2.0% 0.0% 2.0% 3.8% 2.0% 1 Growth rates are based on the future development of the dividend distribution, adjusted for irregular dividend distributions due to the economic environment. RKAG: Raiffeisen Kapitalanlage-Gesellschaft m.b.H., Vienna (AT) RBRS: Raiffeisen banka a.d. Novi, Belgrade (RS) AKCENTA: Akcenta CZ a.s., Prague (CZ) RBCZ: Raiffeisenbank a.s., Prague (CZ) RBRS/CASRS: Raiffeisen banka a.d., Belgrade (RS), Crédit Agricole Srbija AD, Novi Sad (RS) Cash generating units Key assumptions Management approach Risk estimation RKAG RKAG is one of Austria's leading fund/ asset management companies, that has been operating internationally for many years and is a well-known participant in various European countries. The development is expected to remain stable. Furthermore, higher margins are expected, especially in the ESG environment. Administrative expenses remain stable, with the exception of slight increases in the IT area. The assumptions of planning are based on internal and external sources. Macroeconomic assumptions of the research department were compared with data from external sources and the five-year plan and are presented to the company's managers. The budget was approved by the Supervisory Board. The main risk of the yields lies in the development of the funds volume, which in turn depends on the market and its development. Other influencing factors include future sales capacities, customer asset allocation and the level of achievable margins. RBRS Serbia is one of the focus countries for the Group, where the market share has been strengthened by the acquisition of CASRS. The market is expected to grow by 4 per cent (corporate) respectively 6.5 per cent (retail) in 2024-26. Margins are projected to decline slightly due to interest rate expectations, while profits remain stable. The assumptions are based on both internal and external sources. Macroeconomic assumptions of the research department were compared with data from external sources and the five-year plan, presented to the Board of Management and approved by the Supervisory Board. Reference interest rates are expected to decline from 6.2 per cent in 2024 to 4 per cent in 2026. As a result, net interest income will also decline in the future. Commission result is expected to increase in 2024 and the following years due to the removal of NBS restrictions and the expansion of business activities. The earnings risk mainly relates to the interest rate and margin development of the RBRS portfolio. AKCENTA The Payment Service Providers (PSP) market in Central and Eastern Europe has been experiencing significant growth in recent years. Factors contributing to this growth include increasing e-commerce activities, rising demand for digital payments, and government initiatives to promote cashless transactions. The market is becoming more competitive, with both local and international PSPs expanding their operations in the region as well as traditional banks lowering fees and fx margins and thus directly competing with robust PSPs. Additionally, advancements in technology, such as mobile payments and digital wallets, are driving the growth of the PSP market in Central and Eastern Europe. In 2023 Akcenta renewed its 5 year strategy and set on the project of the comprehensive digital transformation, incl. new IT core system. Akcenta offers competitive exchange rates and lower transaction fees compared to traditional financial institutions. It not only enables SMEs to benefit from favourable currency exchanges but also provides risk management tools such as forward contracts, options, and hedging solutions to help its clients mitigate currency risks and protect themselves from currency fluctuations. Akcenta offers guidance and support to SMEs, helping them navigate the complexities of Forex trading and manage their international transactions effectively. Its value proposition is based on cost- effective, convenient, and efficient solutions for managing their foreign exchange requirements, allowing SMEs to focus on their core business operations. As a result of its sound, sustainable financial performance as well as profit generating capacity, Akcenta boasts a solid financial base, substantially exceeding the regulatory capital requirements. Akcenta adheres to strict compliance and regulatory standards to ensure the security and integrity of its operations. This includes implementing measures to prevent money laundering, fraud, and other financial risks. RKAG: Raiffeisen Kapitalanlage-Gesellschaft m.b.H., Vienna (AT) RBRS: Raiffeisen banka a.d. Novi, Belgrade (RS) AKCENTA: Akcenta CZ a.s., Prague (CZ) 110 Consolidated financial statements · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 Sensitivity analysis A sensitivity analysis was carried out based on the above-mentioned assumptions to evaluate the stability of the results of the impairment test for goodwill. From several options for this analysis, one relevant parameter was selected, namely the cost of equity. The following overview demonstrates to what extent an increase or decrease in the cost of equity could occur without the value in use of cash generating units declining below the respective carrying amount (equity capital plus goodwill). 2023 2022 Maximum sensitivity RKAG RBRS AKCENTA RKAG RBRS/CASRS AKCENTA Increase in discount interest rate 13.9 PP 2.93 PP 0.5 PP 10.27 PP (0.37)PP 1.84 PP RKAG: Raiffeisen Kapitalanlage-Gesellschaft m.b.H., Vienna (AT) RBRS: Raiffeisen banka a.d. Novi, Belgrade (RS), AKCENTA: Akcenta CZ a.s., Prague (CZ) RBRS/CASRS: Raiffeisen banka a.d., Belgrad (RS), Crédit Agricole Srbija AD, Novi Sad (RS) (26) Other assets in € million 2023 2022 Prepayments and other deferrals 340 350 Merchandise inventory and suspense accounts for services rendered not yet charged out 157 148 Non-current assets and disposal groups classified as held for sale 12 3 Other assets 743 659 Total 1,253 1,159 Non-current assets and disposal groups classified as held for sale Non-current assets and disposal groups are classified as held for sale when the related carrying amount will be recovered principally through a sale transaction rather than through continuing use. This condition is only considered met if the sale is highly probable and the asset (or disposal groups) is immediately available for sale and management has adopted a plan to sell the asset (or disposal group). Moreover, the sale transaction must be highly probable of being recognized as a completed sale within twelve months of the classification. Non-current assets and disposal groups classified as held for sale are valued at the lower amount of their original carrying amount or fair value less costs to sell and are reported under the item non-current assets and disposal groups classified as held for sale. Income from non-current assets held for sale and discontinued operations is reported in the other result. If the impairment expense of the discontinued operations exceeds the carrying amount of the assets which fall under the scope of IFRS 5, there is no special provision in the IFRS on how to deal with this difference. Based on internal Accounting policy this difference would be recognized in the item provisions for onerous contracts in the statement of financial position. In the case that the Board of Management has adopted a plan for the sale, and aforementioned conditions are met, all assets and liabilities of the subsidiary will be recognized as held for sale. This applies irrespective of whether the Group retains a non- controlling interest in the former subsidiary after the sale or not. Results from discontinued business operations are reported separately in the income statement as gains/losses from discontinued operations. (27) Provisions Provisions are recognized when the Group has a present obligation from a past event, where it is likely that it will be obliged to settle, and a reliable estimate of the amount is possible. The level of provisions is the best possible estimate of expected outflow of economic benefits at the reporting date while taking into account the risks and uncertainties underlying the commitment to fulfill the obligation. If a provision is formed based on cash flows estimated to fulfill an obligation, the cash flows must be discounted if the interest effect is material. Consolidated financial statements111 · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 Allocation of provisions is booked through different line items in the income statement depending on the nature of the provision. Allocation of loan loss provisions for contingent liabilities is recorded in the income statement under the item impairment losses on financial assets. Restructuring provisioning and other employee benefits are allocated in general administrative expenses. Provision allocations that are not assigned to general administrative expenses are as a matter of principle booked against other net operating income. in € million 2023 2022 Provisions for off-balance sheet items 206 245 Other commitments and guarantees given according to IFRS 9 204 236 Other commitments and guarantees given according to IAS 37 2 10 Provisions for staff 507 495 Pensions and other post employment defined benefit obligations 182 176 Other long-term employee benefits 47 44 Bonus payments 275 272 Termination benefits 3 4 Other provisions 931 739 Pending legal issues and tax litigation 636 448 Restructuring 6 7 Onerous contracts 60 57 Other provisions 229 226 Total 1,644 1,479 Provisions increased by € 166 million to € 1,644 million, primarily due to higher provisions for pending legal issues and tax litigation (increase: € 188 million). In particular, provisions allocated in accordance with IAS 37 for mortgage loans linked to Swiss Franc in Poland increased to € 500 million (previous year: € 307 million). Furthermore, in Croatia there was an increase related to Swiss franc loans, from € 5 million to € 67 million. More details are available under (46) Pending legal issues. in € million As at 1/1/2023 Change in consolidated group Allocation Release Usage Transfers, exchange differences As at 31/12/2023 Provisions for off-balance sheet items1 10 0 1 (6) 0 (2) 2 Other commitments and guarantees given according to IAS 37 10 0 1 (6) 0 (2) 2 Provisions for staff 495 (5) 238 (10) (181) (30) 507 Pensions and other post employment defined benefit obligations 176 1 19 (1) (11) (1) 182 Other long-term employee benefits 44 (1) 5 0 (1) 0 47 Bonus payments 272 (5) 214 (8) (168) (29) 275 Termination benefits 4 0 1 0 (1) 0 3 Other provisions 739 (2) 1,249 (68) (392) (594) 931 Pending legal issues and tax litigation 448 (3) 869 (8) (100) (570) 636 Restructuring 7 0 2 0 (3) (1) 6 Onerous contracts 57 0 3 0 0 0 60 Other provisions 226 0 375 (60) (289) (23) 229 Total 1,243 (7) 1,488 (84) (573) (625) 1,441 1 Provisions for off-balance-sheet items pursuant to IFRS 9 are not included and due to a more granular presentation broken down by stages under (30) Loan commitments, financial guarantees and other commitments. 112 Consolidated financial statements · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 in € million As at 1/1/2022 Change in consolidated group Allocation Release Usage Transfers, exchange differences As at 31/12/2022 Provisions for off-balance sheet items1 3 0 9 (2) 0 0 10 Other commitments and guarantees given according to IAS 37 3 0 9 (2) 0 0 10 Provisions for staff 426 16 223 (20) (148) (2) 495 Pensions and other post employment defined benefit obligations 195 12 (18) (3) (12) 2 176 Other long-term employee benefits 57 1 (7) (3) (3) (1) 44 Bonus payments 171 4 247 (15) (132) (4) 272 Termination benefits 3 0 0 0 (1) 1 4 Other provisions 776 0 737 (50) (211) (514) 739 Pending legal issues and tax litigation 551 1 480 (25) (66) (493) 448 Restructuring 17 0 0 (7) (4) 1 7 Onerous contracts 59 0 1 0 0 (3) 57 Other provisions 149 (1) 256 (19) (140) (18) 226 Total 1,205 16 969 (72) (358) (516) 1,243 1 Provisions for off-balance-sheet items pursuant to IFRS 9 are not included and due to a more granular presentation broken down by stages under (30) Loan commitments, financial guarantees and other commitments. Pension obligations and other termination benefits All defined benefit plans relating to so-called social capital (provisions for pensions, provisions for severance payments and provisions for service anniversary bonuses) are measured using the Projected Unit Credit Method in accordance with IAS 19 – Employee Benefits. The biometrical basis for the calculation of provisions for pensions, severance payments and service anniversary bonuses for Austrian companies is provided by AVÖ 2018-P-Rechnungsgrundlagen für die Pensionsversicherung (Computational Framework for Pension Insurance), using the relevant parameters for salaried employees. In other countries, comparable actuarial parameters are used for calculation. · Defined benefit pension plans in Austria and other countries · Other post-employment benefits in Austria and other countries · These defined benefit plans and other post-employment benefits expose the Group to actuarial risks, such as longevity risk, currency risk, interest rate risk and market (investment) risk. A liability and expense is recognized for termination benefits when RBI can no longer withdraw the offer of those benefits. Where the benefits are not expected to be settled within 12 months of the reporting date they are discounted. Funding For pensions there are different plans: unfunded, partly funded and fully funded. The partly and fully funded plans are all invested by Valida Pension AG. Valida Pension AG is a pension fund and is subject in particular to the provisions of the PKG (Pension Act) and BPG (Company Pension Act). The Group expects to pay € 581 thousand in contributions to its defined benefit plans in 2023. Pension obligations/defined benefit pension plans Financial status in € million 2023 2022 Defined benefit obligation (DBO) 147 142 Fair value of plan assets (37) (37) Net liabilities/assets 110 105 Consolidated financial statements113 · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 Defined benefit obligations in € million 2023 2022 Defined benefit obligation as at 1/1 142 145 Change in consolidated group 1 11 Exchange differences (2) 0 Current service cost 4 2 Interest cost 4 2 Payments (8) (8) Loss/gain on DBO due to past service cost 0 0 Transfer 3 2 Remeasurements 5 (13) Defined benefit obligation as at 31/12 147 142 The change in remeasurements largely resulted from the modification of the financial parameters. Plan assets in € million 2023 2022 Plan assets as at 1/1 37 42 Interest income 1 0 Contributions to plan assets 1 1 Plan payments (2) (2) Transfer 0 (1) Return on plan assets excl. interest income 1 (3) Plan assets as at 31/12 37 37 Return on plan assets 2 (2) Fair value of rights to reimbursement recognized as an asset 10 10 Structure of plan assets in per cent 2023 2022 Debt securities 33 28 Shares 32 35 Alternative Investments 12 11 Real estate 6 13 Cash 16 13 Total 100 100 In the reporting year, most of the plan assets were quoted on an active market; less than 20 per cent were not quoted on an active market. Asset-Liability Matching The pension provider Valida Pension AG has established an asset/risk management process (ARM process). According to this process, the risk-bearing capacity of each fund is evaluated once a year based on the liability structure of investment and risk associations, which itself is derived from the statement of financial position. Based on this risk-bearing capacity, the investment structure of the fund is derived. When determining the investment structure, defined and documented customer requirements are considered. The defined investment structure is implemented in the two funds named VRG 60 and VRG 7, in which the accrued amounts for RBI are invested with an investment concept. The weighting of predefined asset classes moves within a range according to objective criteria, which can be derived from market trends. In times of stress, hedges of the equity component are put in place. 114 Consolidated financial statements · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 Actuarial assumptions The actuarial assumptions used to calculate the net defined, long-term benefit obligation: in per cent 2023 2022 Discount rate 3.0-8.0 2.7-9.3 Future pension basis increase 0.5-3.0 0.5-3.2 Future pension increase 0.5-3.0 0.5-3.2 The actuarial calculation of pension obligations at head office is based on a discount rate of 3.66 per cent (previous year: 3.64 per cent) p.a. and effective pensionable salary increases, and pension increases of 7.5 per cent in the first year, 4.2 per cent in the second year and 3.1 per cent in the third year and 3.0 per cent in the subsequent years (previous year: 8.0 per cent in the first year, 5.1 per cent in the second year and 3.2 per cent in subsequent years). The longevity assumptions used to calculate the net defined benefit obligation: Years 2023 2022 Longevity at age 65 for current pensioners - males 23.5 23.4 Longevity at age 65 for current pensioners - females 26.0 26.1 Longevity at age 65 for current members aged 45 - males 26.2 25.8 Longevity at age 65 for current members aged 45 - females 28.4 28.3 The weighted average duration of the net defined benefit obligation was 9.6 years (previous year: 11.0 years). Sensitivity analysis Changes at the reporting date to one of the relevant actuarial assumptions, holding other assumptions constant, would have affected the defined benefit obligation by the amounts shown below: in € million 2023 2022 Increase Decrease Increase Decrease Discount rate (1 percentage point change) (13) 15 (12) 14 Future salary growth (0.5 percentage change) 1 (1) 1 (1) Future pension increase (0.25 percentage change) 3 (3) 3 (1) Remaining life expectancy (change 1 year) 7 (7) 7 (7) Other termination benefits in € million 2023 2022 Defined benefit obligation as at 1/1 71 92 Change in consolidated group 0 0 Current service cost 3 5 Interest cost 3 1 Payments (4) (6) Loss/gain on DBO due to past service cost 0 0 Transfers 0 0 Remeasurements 0 (22) Defined benefit obligation as at 31/12 72 71 Consolidated financial statements115 · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 Actuarial assumptions The long-term actuarial assumptions used to calculate the other termination benefits: in per cent 2023 2022 Discount rate 2.6-4.0 2.6-4.0 Additional future salary increase for employees 3.2-5.1 3.2-5.1 Employee benefit expenses Details of employee benefit expenses (expenses for defined benefit pension plans, other benefits due to termination of employment) are stated under (7) General administrative expenses. (28) Other liabilities in € million 2023 2022 Provisions for overdue vacations 74 72 Liabilities from insurance activities 280 271 Deferred income and accrued expenses 564 509 Sundry liabilities 330 363 Total 1,248 1,215 Insurance business RBI’s insurance business consists of pension and other insurance products in Croatia and Belarus. Due to the existence of insurance risk and investment risk in these products, it is necessary to apply IFRS 17 for the accounting of the resulting liabilities. All assets related to the provision of pension products are accounted for under IFRS 9. The following table shows an analysis of the change in insurance contract liabilities: in € million Estimates of the present value of the future cash flows Risk adjustment Contractual service margin Total As at 1/1/2023 203 6 55 264 Insurance service result 23 1 (27) (3) Insurance finance expenses 6 0 0 6 Total changes in the profit and loss 29 1 (27) 3 Premiums received 50 0 0 50 Claims, benefits and other expenses paid (36) 0 0 (36) Total cash flows 14 0 0 14 Effect of exchange rate changes (1) 0 0 (1) As at 31/12/2023 246 7 28 280 This table presents the development of the liability from the beginning of the period considering the net cash flows and P&L effects. From the IFRS 17 view, the total liability is split into three parts. The first part contains mainly the best estimate of the reserve for future liabilities, i.e. the present value of future annuities and future expenses. On top of that an additional risk adjustment is added, which represents the non-financial components of the reserve (e.g. longevity, mortality, expense assumption). The reserve plus risk adjustment are the liability (cash outflow) towards third persons. The contractual service margin is the expected future profit. 116 Consolidated financial statements · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 Analysis of the development of liabilities for remaining coverage and for incurred claims: in € million Liabilities for remaining coverage Liabilities for incurred claims Total Excluding onerous contracts component Onerous contracts component As at 1/1/2023 262 2 0 264 Insurance revenue (38) 0 0 (38) Insurance service expenses 0 0 35 35 Insurance service result (38) 0 36 (3) Insurance finance expenses 6 0 0 6 Total changes in the profit and loss (32) 0 36 3 Premiums received 50 0 0 50 Claims, benefits and other expenses paid 0 0 (35) (36) Total cash flows 50 0 (35) 14 Effect of exchange rate changes (1) 0 0 (1) As at 31/12/2023 279 2 0 280 Liabilities for remaining coverage relate to future payouts and liabilities for incurred claims relate to past claims. The onerous contract component occurs when pricing is too low due to market development and the contracts becoming onerous. Insurance revenue consists mainly of revenue for coverage provided in the period and revenue from release of risk adjustment in the period. Insurance service expenses consist of claims and other insurance service expenses as well as changes in cash flows and risk adjustments that relate to coverage provided in the period and in the past. The insurance finance expenses relate to the unwinding of discount rates and the change in discount rates. Fulfillment cash flows Fulfillment cash flows comprise estimates of future cash flows, an adjustment to reflect the time value of money and the financial risks related to the future cash flows (discounting) and a risk adjustment for non-financial risk. The time value of money and financial risks consist of the risk-free rate which is derived from government bonds with a credit risk adjustment. On top of the risk-free rate the illiquidity premium is added. The illiquidity premium is derived from the spread of government and corporate bonds of same credit quality and the illiquidity characteristic of the portfolio. The following table provides information on the yield curves used to discount estimated future cash flows: 1 year 5 years 10 years 20 years 30 years Croatia 4.2% 3.5% 3.7% 4.0% 4.1% Belarus 11.6% 12.2% 11.4% 10.2% 9.1% The risk adjustment for non-financial risk is the compensation required for bearing the uncertainty about the amount and timing of the cash flows that arises from non-financial risks in insurance contracts. The risk margin is calculated based on a cost of capital approach. The mortality tables used are composed out of the official ones from the Croatian Bureau of Statistics and the National Statistical portal of the Republic of Belarus. The calculation of the probability of termination and of the expected expenses is based on historical data. Forecasted investment income is calculated based on companies’ current investment portfolio. Risks in the insurance business RBI’s insurance business comprises two main lines of business: pension insurance, where interest rate and future expense risk are the main risks, and life insurance, where interest rate, mortality and termination risk are significant. · Interest rate risk – the risk of change of the market observable rates · Mortality risk – the risk of loss or adverse changes of insurance obligations’ value because of mortality rate changes · Longevity risk – the risk that future expenses for pension payments will increase due to decrease of mortality rates · Future cost risk – the risk of increase of future expenses has an impact on the contractual service margin · Termination risk – due to possible termination of contracts. Consolidated financial statements117 · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 RBI does not use reinsurance contracts to mitigate the risk but mitigates the risk by portfolio mix. Sensitivity to the above risks is very low due to the absorbing effect of the contractual service margin and small amount of onerous contracts, therefore, it is not shown here. (29) Equity and non-controlling interests RBI applies IAS 32 Financial Instruments: Presentation, to decide whether to classify as financial liability or equity. Financial instruments issued are classified as liabilities if the contractual agreement results in RBI being committed to either deliver cash or another financial asset or a variable number of equity shares to the holder of the instrument. If this is not the case the instrument is classified as an equity instrument and the proceeds, net of transaction costs, are recognized in equity. in € million 2023 2022 Consolidated equity 17,009 16,027 Subscribed capital 1,002 1,002 Capital reserves 4,988 4,990 Retained earnings 15,600 13,637 hereof consolidated profit/loss 2,386 3,627 Cumulative other comprehensive income (4,580) (3,601) Non-controlling interests 1,231 1,127 Additional tier 1 1,610 1,610 Total 19,849 18,764 The development of equity is shown in chapter statement of changes in equity. The list of all companies which were included in the scope of consolidation for the first time can be found in chapter consolidated group. The consolidated return on equity amounted to 14.8 per cent in the financial year (previous year: 26.8 per cent). This decreased due to the 17 per cent increased average equity base and the lower consolidated profit. The return on total assets calculated in accordance with § 64 (1) 19 BWG was 1.29 per cent (previous year: 1.83 per cent). Subscribed capital As at 31 December 2023, the company’s share capital amounted to € 1,003,265,844.05 and was divided into 328,939,621 voting common bearer shares. As at 31 December 2023, 573,938 (31 December 2022: 510,450) of those were own shares, and consequently 328,365,683 shares were outstanding at the reporting date. Own shares At the reporting date, own shares of RBI AG are deducted directly from equity. Gains and losses on own shares have no impact on the income statement. The Annual General Meeting held on 31 March 2022 authorized the Management Board pursuant to § 65 (1) 8, § 65 (1a) and § 65 (1b) of the AktG to purchase own shares and to retire them if appropriate without requiring any further prior resolutions to be passed by the Annual General Meeting, though with the approval of the purchase by the Supervisory Board can also be effected off-exchange under the exclusion of the shareholders’ pro rata tender right. Own shares, whether already purchased or to be purchased, may not collectively exceed 10 per cent of the company’s share capital. The authorization to purchase own shares expires 30 months after the date of the Annual General Meeting resolution, i.e. until 30 September 2024. The acquisition price for repurchasing the shares may be no lower than € 3.05 per share and no higher than 10 per cent above the average unweighted closing price over the 10 trading days prior to exercising this authorization. The authorization may be exercised in full or in part or also in several partial amounts, for one or more purposes – with the exception of securities trading – by the company, by a subsidiary (§ 189a (7) of the UGB) or by third parties for the account of the company or a subsidiary. The Management Board was further authorized, pursuant to § 65 (1b) of the AktG, to decide, with the approval of the Supervisory Board, on the sale of own shares by means other than the stock exchange or a public tender, to the full or partial exclusion of shareholders’ subscription rights, and to stipulate the terms of sale. Shareholders’ subscription rights may only be excluded if the own shares are used to pay for a contribution in kind, to acquire enterprises, businesses, operations or stakes in one or several companies in Austria or abroad. Furthermore, shareholders’ subscription rights may be excluded in the event that convertible bonds are issued in future, in order that (own) shares may be issued to such convertible bond creditors that have exercised their right of conversion into or subscription to shares in the company, and also in the event of a conversion obligation stipulated in the convertible bonds’ issuance conditions in order to fulfil this conversion obligation. This authorization may be exercised in whole, in part or in several partial amounts for one or more purposes by the company, a subsidiary (§ 189a 118 Consolidated financial statements · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 7 UGB) or by third parties for the account of the company or a subsidiary and remains in force for five years from the date of this resolution, i.e. until 31 March 2027. Since that time, there were no own shares purchased based on this authorization from March 2022. The Annual General Meeting of 31 March 2022 also authorized the Management Board, under the provisions of § 65 (1) 7 of the AktG, to purchase own shares for the purpose of securities trading, which may also be conducted off-market, during a period of 30 months from the date of the resolution (i.e. until 30 September 2024), provided that the trading portfolio of shares purchased for this purpose does not at the end of any given day exceed 5 per cent of the company's respective share capital. The consideration for each share to be acquired must not be less than half the closing price at the Vienna Stock Exchange on the last day of trading preceding the acquisition and must not exceed twice the closing price at the Vienna Stock Exchange on the last day of trading preceding the acquisition. This authorization may be exercised in full or in part or also in several partial amounts by the company, by a subsidiary (§ 189a (7) UGB) or by third parties acting for the account of the company or a subsidiary. Authorized capital Pursuant to § 169 of the Austrian Stock Corporation Act (AktG), the Management Board has been authorized since the Annual General Meeting of 13 June 2019 to increase the share capital with the approval of the Supervisory Board – in one or more tranches – by up to € 501,632,920.50 through the issuance of up to 164,469,810 new voting common bearer shares in exchange for contributions in cash and/or in kind (including by way of the right of indirect subscription by a bank pursuant to § 153 (6) of the AktG) by 2 August 2024 at the latest and to fix the offering price and terms of the issue with the approval of the Supervisory Board. The Management Board is further authorized to exclude shareholders’ subscription rights with the approval of the Supervisory Board (i) if the capital increase is carried out in exchange for contributions in kind, or (ii) if the capital increase is carried out in exchange for contributions in cash and the shares issued under the exclusion of subscription rights do not exceed 10 per cent of the company’s share capital (exclusion of subscription rights). The (i) utilization of authorized capital with exclusion of the statutory subscription right in the event of a capital increase in return for a contribution in cash, and the (ii) implementation of the conditional capital resolved upon in the Annual General Meeting on 20 October 2020 in order to grant conversion or subscription rights to convertible bond creditors may not exceed 10 per cent in total of the share capital of the company. The utilization of the authorized capital in the form of a capital increase in return for a contribution in kind is not covered by this restriction. No use has been made to date of the authority granted in June 2019 to utilize the authorized capital. Dividend Due to the ongoing war in Ukraine and the resulting geopolitical and economic uncertainty, the Management Board and Supervisory Board proposed to the Annual General Meeting on 30 March 2023 that the net profit for 2022 be carried forward to new account. After the volatile market environment in the spring, it was deemed prudent to wait for further developments in the financial year 2023 in terms of cautious capital and liquidity management. The extraordinary General Meeting decided on 21 November 2023, due to the positive development in the financial year 2023, the distribution of a dividend of € 0.80 for each share that was entitled to a dividend for the 2022 financial year. Dividend proposal The Management Board will purpose to the Annual General Meeting on 4 April 2024, the distribution of a dividend of € 1.25 per share. This would result in a maximum amount of € 411 million based on the issued shares. Number of shares outstanding Number of shares 2023 2022 Number of shares issued as at 1/1 328,939,621 328,939,621 New shares issued 0 0 Number of shares issued as at 31/12 328,939,621 328,939,621 Own shares as at 1/1 510,450 322,204 Purchase of own shares 63,488 188,246 Sale of own shares 0 0 Less own shares as at 31/12 573,938 510,450 Number of shares outstanding as at 31/12 328,365,683 328,429,171 Consolidated financial statements119 · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 Additional tier 1 capital On 5 July 2017, RBI AG issued perpetual additional tier 1 capital (AT1) with a nominal value of € 650,000 thousand. The interest rate was until 14 December 2022 6.125 per cent p.a. and was reset thereafter at 8.659 per cent. RBI placed another issue of perpetual additional tier 1 capital (AT1) with a volume of € 500,000 thousand on 24 January 2018. The discretionary coupon on this issue is 4.5 per cent p.a. until mid-June 2025, after which it will be reset. On 29 July 2020, RBI placed another perpetual additional tier 1 capital (AT1) instrument in the amount of € 500,000 thousand. The discretionary coupon on this issue is 6 per cent p.a. until December 2026, after which point it will be reset. Due to the terms and conditions of issue, the additional tier 1 capital is classified as equity under IAS 32. Own shares, which have a nominal value of € 28,200 thousand, were also deducted from the capital. The nominal value per security for all tranches is € 200 thousand. Number of AT1 securities 2023 2022 Number of AT1 securities issued as at 1/1 8,250 8,250 New AT1 securities issued 0 0 Number of AT1 securities issued as at 31/12 8,250 8,250 Own AT1 securities as at 1/1 138 80 Purchase of own AT1 securities 102 217 Sale of own AT1 securities (99) (159) Less own AT1 securities as at 31/12 141 138 Number of AT1 securities outstanding as at 31/12 8,109 8,112 Development of cumulative other comprehensive income of Group equity (without non-controlling interests) Other comprehensive income comprises all income and expenses directly recognized in equity according to IFRS standards. Income and expenses recognized directly in equity that are reclassified in the income statement are reported separately from income and expenses recognized directly in equity that are not reclassified in the income statement. Currency differences resulting from the translation of equity in subsidiaries held in foreign currency, changes resulting from the hedging of net investments in a foreign entity (capital hedge), the effective part of a cash flow hedge, changes resulting from valuation of financial assets (debt instruments) of the category FVOCI, proportionate other comprehensive income from associates valued at equity as well as deferred taxes on the mentioned items are recognized in other comprehensive income. Revaluations of defined benefit plans, valuation changes of financial assets (equity instruments) of the category FVOCI, valuation changes on account of the change in the own default risk of financial liabilities at fair value, proportionate other comprehensive income from associates as well as deferred taxes on the mentioned items are reported in other comprehensive income and are not reclassified to the income statement. in € million Remeasurements reserve acc. to IAS 19 Exchange differences Net investment hedge Cash flow hedge As at 1/1/2022 (40) (3,473) 178 (29) Unrealized net gains/losses of the period 34 0 0 0 Items that may be reclassified subsequently to profit or loss 0 (33) (39) (41) Net gains/losses reclassified to income statement 0 7 0 0 Reclassification of the valuation reserve of financial assets 0 0 0 0 As at 31/12/2022 (6) (3,500) 138 (70) Impact of adopting IFRS 17 0 0 0 0 As at 1/1/2023 (6) (3,500) 138 (70) Unrealized net gains/losses of the period (2) 0 0 0 Items that may be reclassified subsequently to profit or loss 0 (1,130) 37 (3) Net gains/losses reclassified to income statement 0 0 0 0 Reclassification of the valuation reserve of financial assets 0 0 0 0 As at 31/12/2023 (9) (4,629) 175 (73) Deferred taxes 3 0 0 21 As at 31/12/2023 net (5) (4,629) 175 (52) 120 Consolidated financial statements · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 in € million At Fair Value OCI Fair Value Option At equity Total As at 1/1/2022 147 (55) (7) (3,280) Unrealized net gains/losses of the period (59) 61 25 60 Items that may be reclassified subsequently to profit or loss (108) 0 (202) (422) Net gains/losses reclassified to income statement 0 0 0 7 Reclassification of the valuation reserve of financial assets 3 0 0 3 As at 31/12/2022 (16) 6 (184) (3,632) Impact of adopting IFRS 17 0 0 50 50 As at 1/1/2023 (16) 6 (134) (3,582) Unrealized net gains/losses of the period (1) 6 (2) 0 Items that may be reclassified subsequently to profit or loss 69 0 6 (1,020) Net gains/losses reclassified to income statement 0 0 0 0 Reclassification of the valuation reserve of financial assets 0 0 0 0 As at 31/12/2023 52 12 (130) (4,602) Deferred taxes (4) (3) 4 22 As at 31/12/2023 net 47 9 (126) (4,580) Development of deferred taxes included in other comprehensive income: in € million 1/1/2022 Development 31/12/2022 Development 2023 Remeasurements reserve acc. to IAS 19 2 1 2 1 3 Exchange differences 0 0 0 0 0 Net investment hedge 0 0 0 0 0 Cash flow hedge 6 13 19 2 21 At fair value OCI (2) 9 8 (12) (4) Fair value option 0 (1) (1) (1) (3) At equity 2 1 3 1 4 Deferred taxes total 8 23 31 (9) 22 The changes in fair value of designated liabilities resulting from changes in RBI's own default risk amounted to € 6 million in the reporting period (previous year: € 61 million). The difference between the current fair value of these designated liabilities and the contractually agreed payment amount for the date of final maturity amounted to € 85 million (previous year: € 81 million). There were no significant transfers within equity or derecognition of liabilities measured at fair value in the reporting period. Non-controlling interests The following table contains financial information on the Group's subsidiaries in which there are significant non-controlling interests. The amounts shown relate to non-controlling interests that were not eliminated. 2023 in € million Share of voting rights and equity of non- controlling interests Net assets of non-controlling interests Profit/loss of non-controlling interests Other comprehensive income of non- controlling interests Total comprehensive income of non- controlling interests Raiffeisen Bank JSC, Kiev (UA) 31.8% 163 39 (12) 27 Raiffeisenbank a.s., Prague (CZ) 25.0% 545 57 (9) 48 Tatra banka a.s., Bratislava (SK) 21.2% 330 50 1 51 Priorbank JSC, Minsk (BY) 12.3% 58 13 (11) 2 Valida Pension AG, Vienna (AT) 42.6% 80 3 0 3 Other n/a 55 30 0 30 Total 1,231 192 (31) 161 Consolidated financial statements121 · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 2022 in € million Share of voting rights and equity of non- controlling interests Net assets of non-controlling interests Profit/loss of non-controlling interests Other comprehensive income of non- controlling interests Total comprehensive income of non- controlling interests Raiffeisen Bank JSC, Kiev (UA) 31.8% 136 21 (33) (12) Raiffeisenbank a.s., Prague (CZ) 25.0% 532 79 12 91 Tatra banka a.s., Bratislava (SK) 21.2% 300 41 (3) 39 Priorbank JSC, Minsk (BY) 12.3% 56 14 (1) 13 Valida Pension AG, Vienna (AT) 42.6% 77 6 0 6 Other n/a 26 10 1 11 Total 1,127 170 (24) 147 As opposed to the above stated financial information which only relates to significant non-controlling interests, the following table contains financial information of the significant individual subsidiaries (including controlling interests): 2023 in € million Raiffeisen Bank JSC, Kiev (UA) Raiffeisenbank a.s., Prague (CZ) Tatra banka a.s., Bratislava (SK) Priorbank JSC, Minsk (BY) Valida Pension AG, Vienna (AT) Operating income 532 732 589 216 33 Profit/loss after tax 121 229 237 106 8 Other comprehensive income (37) (36) 5 (88) 0 Total comprehensive income 84 193 243 18 8 Current assets 3,680 12,290 8,221 2,110 85 Non-current assets 793 15,093 13,852 220 237 Short-term liabilities 3,942 22,866 18,047 1,832 10 Long-term liabilities 18 2,338 2,472 23 124 Net assets 512 2,178 1,553 476 188 Net cash from operating activities 377 2,825 317 161 59 Net cash from investing activities (445) (2,393) (648) 213 0 Net cash from financing activities (3) (160) (122) (1) (10) Effect of exchange rate changes (27) 0 (4) (171) 0 Net increase in cash and cash equivalents (97) 271 (457) 202 49 Dividends paid to non-controlling interests during the year1 0 34 21 0 0 1 Included in net cash from financing activities 2022 in € million Raiffeisen Bank JSC, Kiew (UA) Raiffeisenbank a.s., Prag (CZ) Tatra banka a.s., Bratislava (SK) Priorbank JSC, Minsk (BY) Valida Pension AG, Wien (AT) Operating income 523 754 508 247 35 Profit/loss after tax 65 314 194 117 13 Other comprehensive income (102) 48 (12) (11) 0 Total comprehensive income (37) 362 182 105 13 Current assets 3,661 11,812 8,661 1,972 91 Non-current assets 598 13,123 12,941 587 231 Short-term liabilities 3,807 20,698 16,446 2,077 10 Long-term liabilities 23 2,109 3,741 24 131 Net assets 428 2,127 1,415 458 181 Net cash from operating activities 388 501 1,237 1,159 (4) Net cash from investing activities (339) (296) (655) (257) (2) Net cash from financing activities (3) (38) (134) (1) 0 Effect of exchange rate changes (57) 24 (1) 2 0 Net increase in cash and cash equivalents (11) 191 448 903 (7) Dividends paid to non-controlling interests during the year1 0 2 24 0 0 1 Included in net cash from financing activities Significant restrictions For Raiffeisenbank a.s., Prague, a syndicate contract exists between RBI AG and the joint shareholder. The syndicate contract regulates especially purchase options between direct and indirect shareholders. The syndicate contract expires automatically if control over the company changes – also in the case of a takeover bid. The European Bank for Reconstruction and Development (EBRD) participated in the capital increase of Raiffeisen Bank JSC, Kiev, which took place in December 2015. Within the course of this transaction, RBI agreed with EBRD – if EBRD makes a 122 Consolidated financial statements · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 corresponding request to RBI within a time window between the sixth and eighth year after EBRD acquired shares in Raiffeisen Bank JSC, Kiev – to offer ERBD RBI shares commensurate in value in exchange for the Raiffeisen Bank JSC, Kiev, shares held by EBRD in a so-called share swap. The execution of this transaction is subject to approvals from regulatory authorities, the Annual General Meeting and other committees. Notes of financial instruments (30) Loan commitments, financial guarantees and other commitments Financial guarantees According to IFRS 9, a financial guarantee is a contract under which the guarantor is obliged to make certain payments that compensate the party to whom the guarantee is issued for losses arising in the event that a particular debtor does not fulfill payment obligations on time as stipulated in the original terms of a debt instrument. At the date of recognition of a financial guarantee, the initial fair value corresponds under market conditions to the premium at the date of signature of the contract. In contrast to the presentation of impairments of financial assets, expected loan defaults are shown as a provision on the liabilities side. Contingent liabilities and commitments This item mainly includes contingent liabilities from undrawn loan commitments. Loan commitments must be reported when a credit risk may occur. These include commitments to provide loans, to purchase securities or to provide guarantees and acceptances. Loan loss provisions for loan commitments are reported under provisions for liabilities and charges. Often, loan commitments are only partially drawn and thus comprise a drawn and an undrawn commitment. If it is not possible to separately identify the expected credit losses applicable to a drawn commitment and those to an undrawn commitment, these are shown together with the impairments of the financial asset, in accordance with IFRS 7. The total expected credit losses are shown as a provision if they exceed the gross carrying amount of the financial asset. Major contingent liabilities from legal disputes are shown under (46) Pending legal issues. in € million 2023 2022 Loan commitments given 36,601 37,193 Financial guarantees given 9,761 9,370 Other commitments given 4,939 4,580 Total 51,301 51,143 Provisions for off-balance sheet items according to IFRS 9 (204) (236) The decrease in provisions for off-balance sheet risks in accordance with IFRS 9 was mainly attributable to Russia in the amount of € 13 million and to head office in the amount of € 18 million and was mainly related to provisions for non-financial corporations. In addition to the provisions presented for off-balance sheet risks in accordance with IFRS 9, provisions of € 2 million were recognized for other commitments made in accordance with IAS 37 (previous year: € 10 million). Nominal value and provisions for off-balance sheet liabilities from commitments and financial guarantees according to IFRS 9 shown by counterparties and stages – in accordance with § 51 (13) of the Austrian Banking Act (BWG): 2023 Nominal amount Provisions for off-balance sheet items according to IFRS 9 ECL coverage ratio in € million Stage 1 Stage 2 Stage 3 Stage 1 Stage 2 Stage 3 Stage 1 Stage 2 Stage 3 Central banks 0 0 0 0 0 0 0.2% - - General governments 219 4 20 0 0 0 0.0% 3.8% 0.0% Banks 2,142 260 0 0 (1) 0 0.0% 0.5% - Other financial corporations 5,999 511 4 (10) (5) (3) 0.2% 0.9% 68.7% Non-financial corporations 30,883 4,915 109 (38) (82) (36) 0.1% 1.7% 33.2% Households 5,334 886 15 (11) (8) (10) 0.2% 0.9% 66.9% Total 44,577 6,576 149 (58) (96) (49) 0.1% 1.5% 33.2% Consolidated financial statements123 · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 2022 Nominal amount Provisions for off-balance sheet items according to IFRS 9 ECL coverage ratio in € million Stage 1 Stage 2 Stage 3 Stage 1 Stage 2 Stage 3 Stage 1 Stage 2 Stage 3 Central banks 0 0 0 0 0 0 0.1% - - General governments 317 6 41 0 0 0 0.0% 2.7% 0.0% Banks 1,967 307 10 0 (5) (1) 0.0% 1.5% 10.0% Other financial corporations 5,350 1,235 7 (5) (6) (1) 0.1% 0.5% 18.1% Non-financial corporations 27,874 6,878 152 (45) (94) (43) 0.2% 1.4% 28.0% Households 5,939 1,043 16 (14) (10) (12) 0.2% 0.9% 72.3% Total 41,447 9,470 227 (64) (115) (56) 0.2% 1.2% 24.9% Development of provisions for loan commitments, financial guarantees and other commitments given: Stage 1 Stage 2 Stage 3 Total in € million 12-month ECL Lifetime ECL Lifetime ECL As at 1/1/2023 64 115 56 236 Increases due to origination and acquisition 46 33 4 83 Decreases due to derecognition (20) (41) (10) (72) Changes due to change in credit risk (net) (28) (5) 1 (32) Decrease due to write-offs 0 0 0 0 Changes due to model/risk parameters 0 0 0 0 Change in consolidated group 0 0 0 0 Foreign exchange and other (5) (5) (2) (11) As at 31/12/2023 58 96 49 204 Stage 1 Stage 2 Stage 3 Total in € million 12-month ECL Lifetime ECL Lifetime ECL As at 1/1/2022 43 84 58 185 Increases due to origination and acquisition 42 27 5 73 Decreases due to derecognition (14) (24) (8) (45) Changes due to change in credit risk (net) (3) 29 3 29 Decrease due to write-offs 0 0 (2) (2) Changes due to model/risk parameters 0 1 0 0 Change in consolidated group 0 0 0 0 Foreign exchange and other (3) (1) 0 (5) As at 31/12/2022 64 115 56 236 Nominal values of off-balance sheet commitments by rating categories and stages: 2023 Stage 1 Stage 2 Stage 3 Total in € million 12-month ECL Lifetime ECL Lifetime ECL Excellent 415 73 0 488 Strong 18,297 1,320 0 19,616 Good 18,929 3,009 0 21,938 Satisfactory 4,969 1,687 0 6,656 Substandard 92 414 0 506 Credit impaired 0 0 148 148 Not rated 1,875 73 0 1,948 Nominal amount 44,577 6,576 149 51,301 Provisions for off-balance sheet items according to IFRS 9 (58) (96) (49) (204) Nominal amount after provisions 44,518 6,480 99 51,098 124 Consolidated financial statements · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 2022 Stage 1 Stage 2 Stage 3 Total in € million 12-month ECL Lifetime ECL Lifetime ECL Excellent 2,158 127 0 2,285 Strong 15,967 3,093 0 19,059 Good 16,450 3,883 0 20,333 Satisfactory 4,723 1,860 0 6,583 Substandard 228 441 0 669 Credit impaired 0 0 226 226 Not rated 1,921 66 1 1,987 Nominal amount 41,447 9,470 227 51,143 Provisions for off-balance sheet items according to IFRS 9 (64) (115) (56) (236) Nominal amount after provisions 41,383 9,355 170 50,908 The category not rated includes off-balance sheet commitments for some retail customers for whom no ratings are available. The rating is therefore based on qualitative factors. (31) Expected credit losses Expected credit losses from financial instruments should reflect an unbiased and probability-weighted amount that is determined by evaluating a range of possible outcomes, the time value of money and reasonable and supportable information that is available without undue cost or effort at the reporting date about past events, current conditions and forecasts of future economic conditions. General approach The measurement of impairment for expected credit loss on financial assets measured at amortized cost and fair value through other comprehensive income is an area that requires the use of models and assumptions about future economic conditions and payment behavior. Judgments are required in applying the accounting requirements for measuring expected credit losses, inter alia: · Determining criteria for a significant increase in credit risk · Choosing appropriate models and assumptions for the measurement of expected credit losses · Consideration of risk factors beyond the current models · Establishing the number and relative weightings of forward-looking scenarios for each type of product/market and the associated expected credit losses · Establishing groups of similar financial assets for the purposes of measuring expected credit losses. Credit risk is the risk of suffering financial loss should customers, clients or market counterparties fail to fulfil their contractual obligations or fail to do so on time. Credit risk arises mainly from interbank, commercial and personal loans, and loan commitments, but can also arise from financial guarantees given, such as, credit guarantees, letters of credit, and acceptances. Other credit risks arise from investments in debt securities and from trading activities (trading credit risks), as well as from settlement balances with market counterparties and reverse repurchase agreements. Models are applied in order to estimate the likelihood of defaults occurring, the associated default ratios and the exposure at default. RBI measures credit risks using the probability of default (PD), exposure at default (EAD) and loss given default (LGD). ESG factors are not yet explicitly included in ECL modelling. However, they are taken into account in the calculation of the overlays as “Other special risk factors” or “Post-model adjustments”. Consolidated financial statements125 · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 Significant increase in the credit risk RBI considers a financial instrument to have experienced a significant increase in credit risk when one or more of the following quantitative, qualitative or backstop criteria have been met: Quantitative criteria RBI’s rating systems incorporate all available quantitative and qualitative information relevant for forecasting the credit risk into the PD. This metric is based primarily on a statistical selection and weighting of all available indicators. In addition, the PD adjusted in accordance with IFRS 9 requirements takes into account not only historical information and the current economic environment, but also, in particular, forward-looking information such as the forecast for the development of macroeconomic conditions. As a consequence, RBI uses the PD as a frame of reference for assessing whether the credit risk of a financial instrument has risen significantly since the date of its initial recognition. By embedding the review of the relative transfer criterion within the robust processes and procedures of the bank’s Group-wide credit risk management framework, the bank ensures that a significant increase in the credit risk is identified in a reliable and timely manner based on objective criteria. The review to determine whether the credit default risk as at the financial reporting date has risen significantly since the initial recognition of the respective financial instrument is performed as at the reporting date. This review compares the observed probability of default over the residual maturity of the financial instrument (Lifetime PD) against the lifetime PD over the same period as expected on the date of recognition. RBI uses quantitative criteria as the primary indicator of significant increase in credit risk for all material portfolios. For quantitative staging RBI compares the lifetime PD curve at reporting date with the forward lifetime PD curve at the date of initial recognition. Given the different nature of products between non-retail and retail customers, the methods for assessing potential significant increases in credit risk also differ slightly. In order to make the two curves for credit risk of non-retail customers comparable, the PDs are scaled down to annualized PDs. A significant increase in credit risk is considered to have occurred if the PD increase was 250 per cent or greater. For longer maturities the threshold of 250 per cent is reduced to account for a maturity effect. For retail exposures, the remaining cumulative PDs are compared as the logit difference (logit is in statistics the natural logarithm of a probability) between lifetime PD at reporting date and lifetime PD at origination conditional to survival up to the reporting date. A significant increase in credit risk is considered to have occurred once this logit difference is above a certain threshold. The threshold levels are calculated separately for each portfolio which is covered by individual rating-based lifetime PD models. Based on historical data, the thresholds are estimated as a specific quantile of the distribution of the above- mentioned logit differences on the worsening portfolio (defined by country and product such as mortgage loans, credit cards and SME loans). That usually translates to a PD increase between 150 and up to 250 per cent, dependent on the default behavior of the different portfolios. RBI has developed an adjusted methodology for retail exposures following the implementation of the ECB/EBA IRB repair package on internal (Pillar 1) models. It has already been implemented in the Croatian subsidiary in 2021 and was rolled out to all of the remaining subsidiaries in 2022 and 2023. The effects on expected credit losses at group level were minimal for the most part. The existing approach was adjusted to account for the underlying change in the pillar 1 calibration philosophy, which, while still following a hybrid approach (mix of stable over the credit cycle and following the cycle), is more focused on stability. Due to the higher stability of the rating classification of individual loan claims, this leads to smaller differences on the logits and therefore the quantile will be chosen based on three criteria. The quantile should be still in range of 150 per cent to 250 per cent relative increase; observed volatility of the Stage 2 share over time as well as the historic observed levels of Stage 2 on portfolio level should be the guidance. The general reference values are defined on product level and range from 65 per cent to 75 per cent based on the experience gained during method development for the available selected portfolios. According to the existing methodology, 50 per cent of the PD with the greatest deterioration over their lifetime were considered significant. Qualitative criteria RBI uses qualitative criteria in addition to quantitative criteria to recognize a significant increase in credit risk for all material portfolios. For the corporate customer, sovereign, bank and project finance portfolios, a transfer to Stage 2 takes place if the borrower meets one or more of the following criteria: · Detection of first signs of credit deterioration in the early warning system · Changes in contract terms as a forbearance measure · External risk factors with a potentially significant impact on the client’s repayment ability The assessment of a significant increase in credit risk incorporates forward-looking information and is performed on a monthly basis at an individual transaction level for all corporate customer, sovereign, bank and project finance portfolios held by RBI. 126 Consolidated financial statements · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 For retail portfolios, a Stage 2 transfer takes place if the borrower meets one or more of the following qualitative criteria: · Forbearance flag active · Default of material exposure (> 20 per cent of total exposure) of the same customer on another product (PI segment) · Holistic approach – applicable for cases where new forward-looking information becomes available for a segment or portion of the portfolio and this information is not yet captured in the rating system. If such cases are identified, management measures this portfolio with lifetime expected credit losses (as a collective assessment). The assessment of significant increase in credit risk incorporates forward-looking information and is performed on a monthly basis at an individual transaction level for all retail portfolios held by RBI. Backstop A backstop is applied, and the financial instrument considered to have experienced a significant increase in credit risk if contractual payments are more than 30 days overdue. In a few limited cases, financial assets which are more than 30 days overdue may not show a significantly higher credit risk. Low credit risk exemption In selected cases for sovereign debt securities, RBI makes use of the low credit risk exemption. All securities which are presented as low credit risk have a rating equivalent to investment grade or better, i.e. minimum S&P BBB-, Moody’s Baa3 or Fitch BBB-. This exemption does not apply to the lending business. Definition of default and credit-impaired assets RBI uses the same definition of default for the purposes of calculating expected credit losses under IFRS 9 as for its CRR capital reporting (Basel III). This definition also places a defaulted receivable in Stage 3. Default is assessed by referring to quantitative and qualitative triggers. The condition for default is, firstly, when contractual payments are more than 90 days past due. Secondly, borrowers are considered to be in default if they are in significant financial difficulty and any credit obligation is unlikely to be repaid in full. The definition of default has been applied consistently to model the probability of default (PD), exposure at default (EAD) and loss given default (LGD) throughout RBI’s expected loss calculations. Explanation of inputs, assumptions and estimation techniques The expected credit loss is measured on either a twelve-month or lifetime basis depending on whether a significant increase in credit risk has occurred since initial recognition or whether an asset is considered to be credit-impaired. Forward-looking economic information is also included in determining the twelve-month and lifetime PD, EAD and LGD. These assumptions vary by product type. Expected credit losses are the discounted product of the probability of default (PD), loss given default (LGD), exposure at default (EAD) and discount factor (D). Probability of Default (PD) The probability of default represents the likelihood of a borrower defaulting on its financial obligation either over the next twelve months or over the remaining lifetime of the obligation. In general, the lifetime probability of default is calculated using the regulatory twelve-month probability of default, stripped of any conservative adjustments, as a starting point. Thereafter various statistical methods are used to generate an estimate of how the default profile will develop from the point of initial recognition throughout the lifetime of the loan or portfolio of loans. The default profile is based on historical observed data. Different models have been used to estimate the default profile of outstanding lending amounts and these can be grouped into the following categories: · Corporate customers, project finance and financial institutions: The default profile is generated using a parametric survival regression (Weibull) approach. Forward-looking information is incorporated into the probability of default using the Vasicek one factor model. The default rate calibration is based on Kaplan Maier methodology with withdrawal adjustment. · Retail lending and mortgage loans: The default profile is generated using parametric survival regression in a competing risk framework. Forward-looking information is incorporated into the probability of default using satellite models. · Sovereigns, local and regional governments, insurance companies and collective investment undertakings: The default profile is generated using a transition matrix approach. Forward-looking information is incorporated into the probability of default using the Vasicek one factor model. Consolidated financial statements127 · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 In the limited circumstances where some inputs are not fully available, grouping, averaging and benchmarking of inputs are used for the calculation. Loss Given Default (LGD) Loss given default represents RBI’s expectation of the extent of loss on a defaulted exposure. Loss given default is expressed as a percentage loss per unit of exposure at the time of default. Different models are used to estimate the loss given default of outstanding lending amounts and these can be grouped into the following categories: · Corporate customers, project finance, financial institutions, local and regional governments, insurance companies: The loss given default is generated by discounting cash flows collected during the workout process. Forward-looking information is incorporated into the loss given default using the Vasicek model. · Retail lending and mortgage loans: The loss given default is generated by stripping the downturn adjustments and other margins of conservatism form the regulatory loss given default. Forward-looking information is incorporated into the loss given default using various satellite models. · Sovereigns: The loss given default is found by using market implied sources. In the limited circumstances where some inputs are not fully available, alternative recovery models, benchmarking of inputs and expert judgment are used for the calculation. Exposure at Default (EAD) Exposure at default is based on the amount RBI expects to be owed at the time of default. The twelve-month and lifetime EADs are determined based on the expected payment profile, which varies by contract type. For amortizing products and bullet repayment loans, this is based on the contractual repayments owed by the borrower over a twelve-month or lifetime basis. If not already taken into account in the PD estimate over the loan term, early (full) repayment/refinance assumptions are also considered in the calculation. For revolving products, the exposure at default is predicted by taking current drawn balance and adding a credit conversion factor which allows for the expected drawdown of the remaining limit by the time of default. The prudential regulatory margins are removed from the credit conversion factor. In the limited circumstances where some inputs are not fully available benchmarking of inputs is used for the calculation. Discount factor (D) In principle, for financial assets and assets off the statement of financial position which are not leasing or POCI, the discount factor used in the expected credit loss calculation is derived from the effective interest rate or an approximation thereof. Calculation For loans in Stage 1 and 2, the expected credit loss is the product of PD, LGD and EAD multiplied by the probability not to default prior to the considered time period. The latter is expressed by the survivorship function S. This calculates future values of expected credit losses, which are then discounted back to the reporting date and summed. The calculated values of expected credit losses are then weighted by forward-looking scenario. Different models have been used to estimate the provisions in Stage 3, and these can be grouped into the following categories: · Corporate customers, project finance, sovereigns, financial institutions, local and regional governments, insurance companies and collective investment undertakings: Stage 3 provisions are calculated by workout managers who discount expected cash flows by the appropriate effective interest rate. · For retail loans, Stage 3 impairments are determined for the majority of Group units by calculating the statistically derived best estimate of expected loss adjusted for indirect costs. 128 Consolidated financial statements · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 Shared credit risk characteristics Stage 1, Stage 2 and Stage 3 provisions for retail customers are measured on a collective basis. For non-retail business in Stage 3, most of the provisions are individually assessed. For expected credit losses modelled on a collective basis, a grouping of exposures is performed on the basis of shared credit risk characteristics so that the exposures within each group are similar. Retail exposure characteristics are grouped according to country, customer classification (households and SMEs), product (e.g. mortgage, personal loans, overdraft facilities or credit cards), PD rating grade and LGD pool. Each combination of the above characteristics is considered as a group with a uniform expected loss profile. Non-retail exposure characteristics are assigned to a probability of default according to rating grade and customer segment. This groups customer types into individual assessment models. For the determination of LGD and EAD parameters, the portfolio is grouped by country and product. Forward-looking information As a rule, the risk parameters specific to IFRS 9 are estimated not only on historical default information but also particularly on the current economic environment and forward-looking information. This assessment primarily involves regularly reviewing the effects which the bank’s macroeconomic forecasts will have regarding the amount of the ECL and including these effects in the determination of the ECL. The assessment of significant increases in credit risk and the calculation of expected credit losses both incorporate forward- looking information. RBI has performed historical analysis and identified the key economic variables impacting credit risk and expected credit losses for each portfolio. These economic variables and their associated impact on the probability of default, loss given default and exposure at default vary by category. Forecasts of these economic variables (the base economic scenario) are provided by Raiffeisen Research on a quarterly basis and provide the best estimate view of the economy over the next three years. Beyond three years, no macroeconomic adjustment is carried out. That means that after three years, to project the economic variables for the full remaining lifetime of each instrument, a mean reversion approach has been used, which means that economic variables tend to revert to either a long-term average rate or a long-term average growth rate until maturity. The impact of these economic variables on the probability of default, loss given default and exposure at default has been determined by performing statistical regression to understand the impact changes in these variables have had historically on default rates and on the components of loss given default and exposure at default. In addition to the base economic scenario, Raiffeisen Research also estimates an optimistic and a pessimistic scenario to ensure that the non-linearity of the ECL, depending on macroeconomic conditions, is captured. In both the pessimistic and optimistic scenarios, the methodology was adjusted as a result of the high level of uncertainty related to the current geopolitical situation, specifically the war in Ukraine. As part of these revisions, variables such as the multiplier were set to reflect the higher weighting of the downside risks to the baseline GDP scenarios, thereby reflecting the asymmetrical character of such risks. As with any economic forecast, the projections and likelihoods of occurrence are subject to a high degree of inherent uncertainty; therefore, the actual outcomes may be significantly different from those projected. RBI considers these forecasts to represent its best estimate of the future outcomes and cover any potential non-linearities and asymmetries within RBI’s different portfolios. The most significant assumptions used as a starting point for the expected credit loss estimates at year-end are shown below (source: Raiffeisen Research, November 2023). Since 10-year government bonds are not issued either in Ukraine or Belarus, there are no long-term reference rates in these countries. Due to the current circumstances in Ukraine, no macroeconomic assumptions are currently being made regarding real estate prices. Belarus also lacks a short-term reference rate. Consolidated financial statements129 · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 Real GDP Unemployment 2024 2025 2026 2024 2025 2026 Upside scenario 4.3% 3.6% 3.6% 6.3% 6.3% 6.2% Croatia Base 2.5% 2.6% 2.6% 6.7% 6.5% 6.4% Downside scenario (0.5)% 0.9% 0.9% 8.7% 7.6% 7.5% Upside scenario 8.7% 8.3% 7.8% 11.7% 8.9% 7.9% Ukraine Base 5.4% 6.5% 6.0% 12.0% 9.0% 8.0% Downside scenario 0.1% 3.5% 3.0% 13.2% 9.7% 8.7% Upside scenario 3.8% 3.0% 3.0% 3.9% 4.0% 4.0% Belarus Base 2.0% 2.0% 2.0% 4.0% 4.0% 4.0% Downside scenario (0.7)% 0.5% 0.5% 4.4% 4.2% 4.2% Upside scenario 1.6% 1.9% 2.0% 5.0% 4.9% 4.8% Austria Base 0.6% 1.4% 1.4% 5.1% 4.9% 4.8% Downside scenario (0.9)% 0.6% 0.6% 5.5% 5.1% 5.0% Upside scenario 4.2% 4.3% 4.3% 4.9% 5.2% 6.0% Poland Base 2.7% 3.5% 3.5% 5.4% 5.5% 6.3% Downside scenario 1.4% 2.8% 2.8% 6.8% 6.3% 7.1% Upside scenario 3.2% 1.8% 1.8% 3.3% 3.9% 3.9% Russia Base 1.5% 0.9% 0.9% 3.5% 4.0% 4.0% Downside scenario (1.0)% 0.0% 1.0% 4.4% 4.5% 4.5% Upside scenario 4.4% 4.4% 3.9% 5.2% 5.1% 4.8% Romania Base 2.8% 3.5% 3.0% 5.4% 5.2% 4.9% Downside scenario 0.4% 2.2% 1.7% 6.0% 5.5% 5.2% Upside scenario 2.9% 2.9% 2.8% 5.0% 5.1% 5.0% Slovakia Base 1.6% 2.2% 2.1% 5.5% 5.4% 5.3% Downside scenario (0.5)% 1.0% 0.9% 7.8% 6.7% 6.6% Upside scenario 3.3% 3.7% 3.4% 3.5% 3.4% 3.1% Czech Republic Base 2.1% 3.0% 2.7% 3.8% 3.5% 3.2% Downside scenario 0.3% 2.0% 1.7% 4.7% 4.0% 3.7% Upside scenario 4.3% 4.7% 5.2% 3.5% 3.6% 3.5% Hungary Base 3.0% 4.0% 4.5% 3.8% 3.7% 3.6% Downside scenario 1.1% 2.9% 3.5% 5.1% 4.4% 4.3% Long-term bond rate Real estate prices 2024 2025 2026 2024 2025 2026 Upside scenario 2.2% 2.4% 2.4% 4.5% 4.2% 4.2% Croatia Base 3.6% 3.2% 3.2% 1.5% 2.5% 2.5% Downside scenario 6.2% 4.6% 4.6% (2.4)% 0.3% 0.3% Upside scenario n/a n/a n/a n/a n/a n/a Ukraine Base n/a n/a n/a n/a n/a n/a Downside scenario n/a n/a n/a n/a n/a n/a Upside scenario n/a n/a n/a 11.9% 8.7% 8.7% Belarus Base n/a n/a n/a 7.0% 6.0% 6.0% Downside scenario n/a n/a n/a 0.9% 2.6% 2.6% Upside scenario 1.8% 1.9% 1.8% (6.6)% 1.8% 1.8% Austria Base 3.1% 2.6% 2.5% (8.0)% 1.0% 1.0% Downside scenario 4.6% 3.4% 3.3% (9.9)% 0.0% 0.0% Upside scenario 3.8% 4.1% 3.1% 0.6% 4.2% 4.2% Poland Base 5.5% 5.0% 4.0% (1.5)% 3.0% 3.0% Downside scenario 7.6% 6.1% 5.1% (4.3)% 1.5% 1.5% Upside scenario 10.7% 7.7% 7.7% 2.0% 3.8% 3.8% Russia Base 11.7% 8.3% 8.2% (3.0)% 1.0% 1.0% Downside scenario 14.4% 9.8% 9.8% (9.3)% (2.5)% (2.5)% Upside scenario 5.3% 5.3% 4.3% 3.9% 4.8% 4.8% Romania Base 6.8% 6.1% 5.2% 1.5% 3.5% 3.5% Downside scenario 9.5% 7.6% 6.7% (1.6)% 1.8% 1.8% Upside scenario 2.4% 2.5% 2.4% 2.8% 5.4% 5.4% Slovakia Base 3.6% 3.2% 3.1% (1.5)% 3.0% 3.0% Downside scenario 5.8% 4.4% 4.3% (7.1)% (0.1)% (0.1)% Upside scenario 2.6% 2.7% 2.6% 1.3% 4.6% 4.6% Czech Republic Base 3.8% 3.4% 3.3% (1.5)% 3.0% 3.0% Downside scenario 6.0% 4.6% 4.5% (5.2)% 1.0% 1.0% Upside scenario 4.7% 5.1% 5.0% 1.6% 5.5% 5.5% Hungary Base 6.2% 6.0% 5.9% (2.0)% 3.5% 3.5% Downside scenario 9.0% 7.5% 7.4% (6.7)% 0.9% 0.9% 130 Consolidated financial statements · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 Consumer price index Short-term interest rate 2024 2025 2026 2024 2025 2026 Upside scenario 1.2% 1.5% 0.9% 2.6% 2.7% 2.3% Croatia Base 3.3% 2.6% 2.0% 3.8% 3.3% 3.0% Downside scenario 4.4% 3.2% 2.6% 4.7% 3.8% 3.4% Upside scenario (1.0)% 3.6% 1.6% 17.7% 13.6% 10.2% Ukraine Base 7.9% 8.5% 6.5% 20.8% 15.4% 11.9% Downside scenario 12.5% 11.1% 9.1% 25.6% 18.0% 14.6% Upside scenario (7.9)% (0.2)% (1.3)% n/a n/a n/a Belarus Base 8.0% 8.6% 7.5% n/a n/a n/a Downside scenario 16.3% 13.2% 12.1% n/a n/a n/a Upside scenario 2.5% 2.0% 1.8% 2.6% 2.7% 2.3% Austria Base 3.8% 2.8% 2.5% 3.8% 3.3% 3.0% Downside scenario 4.5% 3.2% 2.9% 4.7% 3.8% 3.4% Upside scenario 2.5% 0.8% 1.4% 3.6% 3.6% 2.1% Poland Base 5.3% 2.4% 3.0% 5.6% 4.7% 3.2% Downside scenario 6.8% 3.2% 3.8% 7.8% 5.9% 4.5% Upside scenario 2.0% 3.0% 3.0% 11.8% 7.2% 6.7% Russia Base 6.4% 4.1% 4.0% 12.8% 7.7% 7.3% Downside scenario 8.7% 5.4% 4.0% 15.3% 9.1% 8.6% Upside scenario 3.8% 2.3% 1.5% 3.8% 3.8% 2.5% Romania Base 6.8% 4.0% 3.2% 6.2% 5.1% 3.8% Downside scenario 8.3% 4.9% 4.0% 8.0% 6.1% 4.8% Upside scenario 2.1% 0.7% 0.7% 2.6% 2.7% 2.3% Slovakia Base 5.2% 2.4% 2.4% 3.8% 3.3% 3.0% Downside scenario 6.7% 3.2% 3.2% 4.7% 3.8% 3.4% Upside scenario 0.5% 0.8% 0.6% 4.9% 3.4% 2.7% Czech Republic Base 3.1% 2.2% 2.0% 5.7% 3.8% 3.1% Downside scenario 4.4% 3.0% 2.7% 6.5% 4.3% 3.5% Upside scenario 3.0% 1.6% 1.4% 6.8% 5.1% 4.5% Hungary Base 5.8% 3.2% 3.0% 7.3% 5.4% 4.8% Downside scenario 7.3% 4.0% 3.8% 10.0% 7.0% 6.0% For the development of a macroeconomic model, a variety of relevant macroeconomic variables were considered. The model employed is a linear regression model with the aim of explaining changes in or the level of the default rate. The following types of macro variables were considered as drivers of the credit cycle: real GDP growth, unemployment rate, 3-month money market rate, 10-year government bond yield, housing price index, FX rates, and the HICP inflation rate. For each country (or portfolio in case of retail exposure), a relevant set is determined based on the ability to explain historically observed default rates. Through the cycle, PDs are overlaid with the results of the macro-economic model to reflect the current and expected state of economy. For corporate customers, additionally the condition of the credit cycle is also taken into account depending on the industry. While no further adjustment is made to the effect of the macro models for corporate customers in industries with a neutral outlook, the expected credit risk is assumed as additionally increased for corporate customers in industries with a poor outlook. For non-retail exposure for LGD, the macro model is applied on the underlying cure rates, i.e. a positive macro- economic outlook drives up the cure rates and this reduces the LGD. For retail exposures, the workout LGD is modelled in a similar manner to the default rates either directly or as well via the components like cure rate, loss given cure as well as loss given non-cure. The long-run average LGDs are overlaid with the results of the macro models to reflect current and expected state of economy. The weightings assigned to each scenario at the end of the reporting year-end are as follows: 25 per cent optimistic, 50 per cent base and 25 per cent pessimistic scenarios. For corporate customers, the following risks and complications resulting from current economic and political developments are included in the macroeconomic models: High inflation rates by historical standards are currently triggering significant increases in key interest rates in many countries, leading to higher financing costs for companies. This development is incorporated into the models of major parts of the portfolio through a change in the 3-month money market rate and the yield on government bonds, resulting in an increase in expected default risk. While high inflation rates may be associated with higher default risk in bivariant analyses, the underlying drivers of higher default risk are actually higher interest rates as a result of higher inflation and economic growth trending downwards, which often occur simultaneously. These drivers are directly captured in the economic growth and interest rate models. In macroeconomic terms, the years 2020 and 2021 were characterized by extremely high volatility, starting with a strong decline in real GDP followed by a similar rate of positive economic growth. In contrast to comparable recessions after the great financial crisis, these developments have not been met by a wave of insolvencies and defaults, which can be attributed to two factors. For one, the COVID-driven recession primarily consisted of a temporary suspension of economic activity, which did not necessitate significant structural adjustments. Furthermore, massive political measures were taken to support the economy in order to avoid long-term consequences stemming from events such as unemployment and insolvencies. These developments underscore how the relationship between macroeconomic indicators and credit risk are influenced by circumstances that are difficult to capture by quantitative means. In order to avoid implicit distortions in the macroeconomic regression models caused by the correlation of events during the COVID pandemic, observations from the years 2020 and 2021 were not incorporated into the model. The development of real GDP during the COVID pandemic also showed how models need to take a sufficiently long history of economic developments into consideration in order to differentiate between strong economic growth immediately following a massive recession (which leads to no notable reduction in the average default risk) and generally strong economic growth (which does lead to a Consolidated financial statements131 · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 reduction in default risk). For segments with a longer period of historical data, current models are able to make such a differentiation, which leads to more accurate projections. The core assumption underlying the application of macroeconomic credit risk models is that the empirical correlations between macroeconomic indicators and default risk can be extrapolated to future. In the case of the war in Ukraine, such an assumption should be critically examined. The empirical correlation between these two factors can be characterized by a direct but transitory rise in default risk. Due to the uncertainty surrounding the extent to which such a correlation can be applied to the current situation, the empirical regression model for corporate customers is averaged with the results of a second model, in which the rise in default risk resulting from a recession is strongly delayed. Overlays and other risk factors In situations where the existing input parameters, assumptions and modelling do not cover all relevant risk factors, post-model adjustments and specific risk factors are the most important types of overlays. This is generally the case if there are temporary circumstances, time restrictions to adequately incorporate relevant new information into the rating and if individual loans within a loan portfolio develop differently than originally expected. In view of the given circumstances, in particular the war in Ukraine and the economic dislocations it has caused, it is necessary to reflect additional risks in the impairments. All of these adjustments are approved locally by the subsidiaries and centrally by the Group Risk Committee (GRC). There are portfolio-specific adjustments due to the war and associated sanctions, which are presented in the category geopolitical risk. For the central models in the corporate segment, the additional risk was considered using the risk factors, while in the local retail segment the risks were applied on top of the models. For retail exposures, post-model adjustments are the main types of overlays applied for the calculation of the expected credit losses. Generally, post-model adjustments are only a temporary solution to avoid potential distortions. They are temporary and typically not valid for more than one to two years. In contrast to the post-model adjustments, the other risk factors have a somewhat longer time horizon, as sanction risks, for example, can exist for longer. In addition, retail relevant ECL overlays are subject to earlier in-model adjustments due to a shorter time horizon. The overlays are shown in the table below and split according to the relevant categories. 2023 Modeled ECL Other special risk factors Post-model adjustments Total in € million Macroeconomic risk Geopolitical risk Macroeconomic risk Geopolitical risk Central banks 0 0 0 0 0 0 General governments 86 1 10 0 0 97 Banks 5 0 15 0 0 20 Other financial corporations 126 0 0 0 0 126 Non-financial corporations 163 239 382 10 4 797 Households 360 0 0 96 9 466 Total 740 239 407 106 13 1,505 2022 Modeled ECL Other special risk factors Post-model adjustments Total in € million COVID-19 related Spill-over effects Russia/Ukraine war COVID-19 related Other Central banks 0 0 0 0 0 0 0 General governments 46 0 1 15 0 0 61 Banks 1 0 0 14 0 0 15 Other financial corporations 163 0 0 0 0 0 163 Non-financial corporations 150 10 251 374 3 15 801 Households 446 0 0 0 3 45 495 Total 805 10 251 403 6 60 1,535 The overlays and other risk factors resulted in additional Stage 1 and Stage 2 provisions of € 765 million (previous year: € 729 million). Of this amount, € 420 million (previous year: € 413 million) related to geopolitical risk, € 345 million (previous year: € 301 million) to macroeconomic risk (spill-over effects and other). At the end of 2023, no additional provisions for COVID-19 were included (previous year: € 16 million). An amount of € 13 million was recognized in the spill-over effects due to climate risks. Of this amount, € 4 million relates to corporate customers and € 9 million to retail customers. 132 Consolidated financial statements · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 Other special risk factors For corporate customers, additional impairments were recognized in the amount of € 239 million (previous year: € 261 million) for macroeconomic effects. At year-end 2023, these effects only included the so called spill-over effects whereas in the previous year COVID-19 related effects were also included (previous year: € 10 million). These risks are not included in the country-specific branch matrix. Macroeconomic risk, so called spill-over effects, comprises expected downgrades of corporate clients due to circumstances such as higher energy prices, inflation, supply chain disruptions and due to lower revenues and higher costs because of the higher energy costs. Additional impairments in the amount of € 406 million (previous year: € 403 million) were recognized for EU and US sanctions against Russia and Belarus (€ 342 million) and for the effects of the war in Ukraine (€ 64 million). These impairments were recognized in response to the outbreak of war, the sanctions imposed and the uncertainties that have ensued, and based on RBI’s internal monitoring and control policies. The exposures were also transferred to Stage 2 for other special risk factors that represent a significant increase in credit risk. Recognition of additional provisions in the amount of € 64 million (previous year: € 38 million) in Ukraine resulted from the modelling of the ongoing destruction of the country’s energy infrastructure, ensuing blackouts, the continued shelling and an extension of loan maturities. For corporate customers we consider the possibility of a short-term disorderly scenario where carbon emissions are more expensive and fossil energy prices are higher to take account of climate and environmental risks. While for a diversified portfolio, like to RBI Group´s, the effects tend net out to a large degree, however there is an elevated risk in some sectors. These are sectors with customers with low environmental scores such as oil and gas construction. Higher probability of defaults for these sectors lead to an increase in the expected credit losses. Post-model adjustments During the last several quarters the retail customers were severely exposed to increasing inflationary pressure, which impacted their ability to cover their loans obligations. As part of the IFRS 9 framework, there are PD and LGD macro models at country and product level, which serve the need to address these high risks stemming from the macroeconomic environment. However, for certain countries and portfolios where the macroeconomic models either lag behind the key macroeconomic variables (inflation, interest rates, unemployment, etc.) or are not part of the model, post-model adjustments are implemented for identified high risk customer group. The latter involve a qualitative assessment of exposures for the expected significant increase in credit risk and their subsequent transfer from Stage 1 to Stage 2 as well as in particular cases increase of the PD and/or LGD estimates respectively. The criteria for identifying such credit exposures is based on information from the loan application and historical payment behavior and is subsequently refined using stressed macroeconomic variables. The post- model adjustments are reversed either after the risks have materialized by transferring the affected receivables to Stage 3 or if the expected risks do not materialize. For the Ukrainian retail portfolio, which has been fully reclassified as Stage 2 since the beginning of the war, the assessment of provision coverage is based on local expert judgement, which is obtained from the regular contact with individual customers by the debt collection department. Furthermore, structured customer surveys are carried out to keep up to date with the needs and potential issues that could influence the repayment ability of the customers. For assets and customers located in occupied regions or territories, which run a high risk of hostilities or occupation, risk parameters were increased to take into account higher expected future losses due to the above-mentioned surveys. In addition, the scenario-based approach mentioned above for the quantification of potential future losses from the very dynamic situation of the war in the Ukraine was also applied to retail exposures, leading to additional impairments in the amount of € 13 million (previous year: € 10 million). There is currently ongoing redevelopment of the PD, LGD and macro models in the PI segment, which would reflect the increased default rates over the last one-and-half years from one side and the new customer behavior from another side. In a first step, a top down assessment of mortgage collateral for retail customers was carried out to consider climate and environmental risks, which pose a very high physical risk (flooding, landslides, wildfires). In particular land around large rivers such as the Danube leads to a higher risk for mortgage collateral. Based on quantitative and qualitative data mortgages showing elevated risk, the loans were transferred into stage 2 on a collective basis, leading to a higher expected credit loss. Over the next few years we expect to develop and include the above climate-related matters into the expected credit loss parameters. We consider the climate related credit risks for micro clients to be immaterial. Consolidated financial statements133 · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 Sensitivity analysis To simulate a range for potential changes to estimates and the related change in impairments, the following sensitivity analyses of the most significant assumptions affecting the expected impairments were performed as follows. The sensitivity analysis involved a recalculation of the impairments for expected credit losses in the existing models. The risk factors and post-model adjustments – except for the Stage 1 simulations – are fully included in all scenarios and are not subject to further adjustments. As a result of the complexity of the model, many drivers are not mutually exclusive. The tables below provide a comparison between the reported accumulated impairment for expected credit losses for financial assets in Stage 1 and Stage 2 (weighted by 25 per cent optimistic, 50 per cent baseline and 25 per cent pessimistic scenarios), and then each scenario weighted by 100 per cent on its own. The optimistic and pessimistic scenarios do not reflect extreme cases in the sample space of the 25 per cent optimistic and pessimistic scenarios, but rather an economically plausible proxy. This means that these scenarios are at around 25 per cent and 75 per cent respectively on the distribution curve. In general, IFRS 9 specific estimates of risk parameters take historical default information into account and particularly the current economic environment. The effects of the estimates based on macroeconomic forecasts are shown in the forward-looking component. This information is provided for illustrative purposes. 2023 Accumulated impairment (Stage 1 and 2) in € million Simulated scenario Point in time component Forward-looking component 100% Optimistic 1,389 1,386 2 100% Base 1,491 1,386 104 100% Pessimistic 1,648 1,386 262 Weighted average (25/50/25%) 1,505 1,386 118 2022 Accumulated impairment (Stage 1 and 2) in € million Simulated scenario Point in time component Forward-looking component 100% Optimistic 1,396 1,282 114 100% Base 1,507 1,282 225 100% Pessimistic 1,732 1,282 450 Weighted average (25/50/25%) 1,535 1,282 252 Overall, the macroeconomic scenarios are currently worse than the long-term average, leading to an increase of the forward- looking component of € 118 million. The positive scenario, which is presented in the table below, follows the premise that all exposures are classified as Stage 1 and all macroeconomic and geopolitical risks are not relevant. The table below shows the impact of staging on accumulated impairment for financial assets on the assumption that all accumulated impairment is measured based on twelve-month expected losses (Stage 1). Accumulated impairment (Stage 1 and 2) in € million 2023 2022 Accumulated impairment if 100% in Stage 1 647 613 Weighted average (25/50/25%) 1,505 1,535 Additional amounts in Stage 2 due to staging 857 921 The negative scenario assumes that all exposures are classified as Stage 2. As a result, all macroeconomic and geopolitical risks are considered in this analysis. The table below shows the impact of staging on accumulated impairment for financial assets on the assumption that all accumulated impairment is measured based on lifetime expected losses (Stage 2). Accumulated impairment (Stage 1 and 2) in € million 2023 2022 Accumulated impairment if 100% in Stage 2 2,151 2,232 Weighted average (25/50/25%) 1,505 1,535 Additional amounts in Stage 2 646 697 134 Consolidated financial statements · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 The table below provides a comparison between the reported accumulated impairment for expected credit losses for financial assets in Stage 3 and the pessimistic scenario weighted by 100 per cent. The pessimistic scenario does not reflect an extreme case from the result range of the 25 per cent most pessimistic scenarios, but an economically plausible representative of it. Accumulated impairment (Stage 3) in € million 2023 2022 Pessimistic scenario 2,115 2,038 Weighted average 1,721 1,729 Increase in provisions due to pessimistic scenario 394 310 Derecognition of financial assets Loans and debt securities are written-off (either partially or fully) where there is no expectation of payment or recovery. This happens when the borrower no longer has income from operations and collateral values cannot generate sufficient cash flows. For the exposure of companies in bankruptcy, loans are written down to the value of the collateral if the company no longer generates cash flows from its operating business. The retail business takes qualitative factors into account. In cases where no payment has been made for one year, the outstanding amounts are written-off even though derecognized assets may remain subject to enforcement activities. For the exposure of companies in gone concern cases, loans are written down to the value of the collateral if the company no longer generates cash flows from its operating business. The contractual amount outstanding on financial assets that were written off and are still subject to enforcement activity was € 1,425 million (previous year: € 1,484 million). Derecognition of financial liabilities The Group derecognizes a financial liability if the obligations of the Group have been paid, expired, or revoked. The income or expense from the repurchase of own liabilities is shown in the notes under (6) Other net operating income. The repurchase of own bonds also falls under derecognition of financial liabilities. Differences on repurchase between the carrying amount of the liability (including premiums and discounts) and the purchase price are reported in the income statement under other net operating income unless they are liabilities designated at fair value. If the Group repurchases financial liabilities that are accounted for using the fair value option, fair value changes resulting from a deterioration of the Group’s creditworthiness (and thus a change in the default risk of the financial liability) are recognized through other comprehensive income and not reclassified to profit or loss. The following table shows the gross carrying amount and impairment of the financial assets – amortized cost and financial assets – fair value through other comprehensive income that have moved in the reporting period from expected twelve-month losses (Stage 1) to expected lifetime losses (Stages 2 and 3) or vice versa: 2023 Gross carrying amount Impairment ECL coverage ratio in € million 12-month ECL Lifetime ECL 12-month ECL Lifetime ECL 12-month ECL Lifetime ECL Movement from 12-month ECL to lifetime ECL (10,261) 10,261 (66) 721 0.6% 7.0% Central banks (47) 47 0 0 0.0% 0.0% General governments (103) 103 (1) 1 0.9% 1.2% Banks (826) 826 0 2 0.0% 0.3% Other financial corporations (713) 713 (4) 49 0.5% 6.9% Non-financial corporations (3,306) 3,306 (29) 405 0.9% 12.2% Households (5,266) 5,266 (32) 265 0.6% 5.0% Movement from lifetime ECL to 12- month ECL 4,688 (4,688) 22 (159) 0.5% 3.4% Central banks 0 0 0 0 - - General governments 97 (97) 0 0 0.1% 0.3% Banks 24 (24) 0 0 0.0% 0.1% Other financial corporations 168 (168) 0 (1) 0.1% 0.5% Non-financial corporations 2,316 (2,316) 13 (74) 0.6% 3.2% Households 2,083 (2,083) 8 (84) 0.4% 4.0% Consolidated financial statements135 · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 The increase in expected credit losses arising from the measurement of the loss allowance moving from twelve-month expected credit losses to lifetime losses was € 655 million (previous year: € 733 million). The decrease in expected credit losses arising from the measurement of the loss allowance moving from lifetime losses to twelve-month expected credit losses was € 137 million (previous year: € 156 million). 2022 Gross carrying amount Impairment ECL coverage ratio in € million 12-month ECL Lifetime ECL 12-month ECL Lifetime ECL 12-month ECL Lifetime ECL Movement from 12-month ECL to lifetime ECL (11,451) 11,451 (48) 781 0.4% 6.8% Central banks (138) 138 0 0 0.0% 0.0% General governments (817) 817 (4) 36 0.5% 4.5% Banks (232) 232 0 13 0.0% 5.7% Other financial corporations (864) 864 (1) 50 0.1% 5.8% Non-financial corporations (5,329) 5,329 (24) 380 0.5% 7.1% Households (4,071) 4,071 (18) 302 0.5% 7.4% Movement from lifetime ECL to 12- month ECL 8,335 (8,335) 37 (193) 0.4% 2.3% Central banks 0 0 0 0 - - General governments 45 (45) 0 0 0.1% 0.6% Banks 54 (54) 0 0 0.0% 0.1% Other financial corporations 559 (559) 6 (11) 1.0% 1.9% Non-financial corporations 2,509 (2,509) 19 (76) 0.8% 3.0% Households 5,168 (5,168) 12 (106) 0.2% 2.1% (32) Collateral and maximum exposure to credit risk The following table contains details of the maximum exposure as the basis for the following disclosures regarding collateral: 2023 Maximum exposure to credit risk in € million Not subject to impairment standards Subject to impairment standards hereof loans and advances non-trading as well as loan commitments, financial guarantees and other commitments Financial assets - amortized cost 0 142,405 116,468 Financial assets - fair value through other comprehensive income¹ 0 2,864 0 Non-trading financial assets - mandatorily fair value through profit/loss 941 0 567 Financial assets - designated fair value through profit/loss 185 0 0 Financial assets - held for trading 5,357 0 0 On-balance 6,483 145,268 117,036 Loan commitments, financial guarantees and other commitments 0 51,301 51,301 Total 6,483 196,569 168,337 1 Gross carrying amount is defined according to FINREP Annex V 1.34(b) 2022 Maximum exposure to credit risk in € million Not subject to impairment standards Subject to impairment standards hereof loans and advances non-trading as well as loan commitments, financial guarantees and other commitments Financial assets - amortized cost 0 140,561 121,443 Financial assets - fair value through other comprehensive income¹ 0 3,160 0 Non-trading financial assets - mandatorily fair value through profit/loss 751 0 475 Financial assets - designated fair value through profit/loss 84 0 0 Financial assets - held for trading 6,124 0 0 On-balance 6,958 143,720 121,918 Loan commitments, financial guarantees and other commitments 0 51,143 51,143 Total 6,958 194,864 173,061 1 Gross carrying amount is defined according to FINREP Annex V 1.34(b) 136 Consolidated financial statements · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 RBI employs a range of policies to mitigate credit risk, the most common of which is the acceptance of collateral for loans and advances provided. A valuation of collateral is performed during the credit approval process. This is then reviewed periodically using various validation processes. The main types of collateral which are accepted in RBI are residential and commercial real estate collateral, financial collateral, guarantees and movable goods. Long-term financing is generally secured, and revolving credit facilities are generally unsecured. Debt securities are mainly unsecured. Derivatives can be secured by cash or master netting agreements. Collateral from leasing business primarily consist of the value of the leased assets themselves. Items shown in cash and cash equivalents are considered to have negligible credit risk. Collateral is taken into account uniformly on the basis of Group directives. The Group directives regarding obtaining collateral were not significantly changed during the reporting period; however, they are updated on a yearly basis. The collateral values shown in the tables are capped at the maximum value of the gross carrying amount of the financial asset. The following table shows non-trading loans and advances as well as loan commitments, financial guarantees and other commitments that are subject to impairment: 2023 Maximum exposure to credit risk Fair value of collateral Credit risk exposure net of collateral in € million Central banks 7,860 6,415 1,444 General governments 2,151 929 1,222 Banks 6,857 4,868 1,989 Other financial corporations 10,723 4,453 6,270 Non-financial corporations 48,645 21,603 27,042 Households 40,799 27,134 13,665 Loan commitments, financial guarantees and other commitments 51,301 6,113 45,188 Total 168,337 71,516 96,821 2022 Maximum exposure to credit risk Fair value of collateral Credit risk exposure net of collateral in € million Central banks 8,814 6,849 1,965 General governments 2,150 1,026 1,124 Banks 6,915 4,708 2,207 Other financial corporations 11,538 4,166 7,372 Non-financial corporations 50,439 22,260 28,179 Households 42,063 27,838 14,225 Loan commitments, financial guarantees and other commitments 51,143 7,743 43,400 Total 173,061 74,590 98,471 More than half of collateral which can be considered by RBI relate to loans collateralized by immovable property and of this more than 70 per cent is residential immovable property. Additional collateral mainly comes from guarantees received which include reverse repo and securities lending business, among other things. Details of the maximum exposure from financial assets in Stage 3 and the corresponding collateral: 2023 Maximum exposure to credit risk (Stage 3) Fair value of collateral (Stage 3) Credit risk exposure net of collateral (Stage 3) Impairment (Stage 3) in € million Central banks 0 0 0 0 General governments 178 178 0 (5) Banks 4 0 4 (2) Other financial corporations 286 163 124 (89) Non-financial corporations 1,741 609 1,132 (926) Households 1,007 226 781 (649) Loan commitments, financial guarantees and other commitments 149 28 121 (49) Total 3,365 1,203 2,162 (1,719) Consolidated financial statements137 · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 2022 Maximum exposure to credit risk (Stage 3) Fair value of collateral (Stage 3) Credit risk exposure net of collateral (Stage 3) Impairment (Stage 3) in € million Central banks 0 0 0 0 General governments 169 165 5 (5) Banks 4 0 4 (4) Other financial corporations 75 6 69 (34) Non-financial corporations 1,477 354 1,123 (941) Households 1,047 226 821 (688) Loan commitments, financial guarantees and other commitments 227 27 200 (56) Total 2,999 778 2,222 (1,728) RBI holds an immaterial amount of repossessed assets on the statement of financial position. (33) Offsetting of financial assets and liabilities The disclosures set out in the tables below include financial assets and financial liabilities that are offset in the Group’s statement of financial position or are subject to an enforceable/unenforceable master netting arrangement or similar agreement that covers similar financial instruments, irrespective of whether they are offset in the statement of financial position or not. Where the borrower and lender are the same, offsetting of loans and liabilities with matching maturities and currencies occurs if a legal right, by contract or otherwise, exists and offsetting is in line with the actually expected course of the business. Similar agreements include derivative clearing agreements, global master repurchase agreements, and global master securities lending agreements. Similar financial instruments include derivatives, sales and repurchase agreements, reverse sale and repurchase agreements, and securities borrowing and lending agreements. Some of the agreements are not set-off in the statement of financial position. This is because they create, for the parties to the agreement, a right of set-off of recognized amounts that is enforceable only following an event of default, insolvency or bankruptcy of the Group or the counterparties or following other predetermined events. In addition, the Group and its counterparties do not intend to settle on a net basis or to realize the assets and settle the liabilities simultaneously. The Group receives and gives collaterals in the form of cash and marketable securities. 2023 Gross amount Net amount recognized financial assets Amounts from global netting agreements Net- amount in € million recognized financial assets recognized financial liabilities set-off Financial instruments Cash collateral received Derivatives (legally enforceable) 7,072 2,671 4,401 3,915 16 470 Reverse repurchase, securities lending and similar agreements (legally enforceable) 16,840 0 16,840 16,598 0 242 Total 23,912 2,671 21,241 20,513 16 712 2023 Gross amount Net amount recognized financial liabilities Amounts from global netting agreements Net- amount in € million recognized financial liabilities recognized financial assets set-off Financial instruments Cash collateral received Derivatives (legally enforceable) 6,950 2,671 4,279 3,748 33 498 Reverse repurchase, securities lending and similar agreements (legally enforceable) 3,282 0 3,282 3,265 0 17 Total 10,232 2,671 7,561 7,013 33 515 In 2023, assets which were not subject to legally enforceable netting agreements amounted to € 177,000 million (previous year: € 185,928 million), of which an immaterial part was accounted for by derivative financial instruments and cash balances from reverse repo business. Liabilities which were not subject to legally enforceable netting agreements totaled € 170,830 million in 2023 (previous year: € 179,925 million), of which only an immaterial part was accounted for by derivative financial instruments and cash deposits from repo business. 138 Consolidated financial statements · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 2022 Gross amount Net amount recognized financial assets Amounts from global netting agreements Net- amount in € million recognized financial assets recognized financial liabilities set-off Financial instruments Cash collateral received Derivatives (legally enforceable) 9,753 4,039 5,715 5,025 53 637 Reverse repurchase, securities lending and similar agreements (legally enforceable) 15,414 0 15,414 15,167 0 247 Total 25,168 4,039 21,129 20,192 53 884 2022 Gross amount Net amount recognized financial liabilities Amounts from global netting agreements Net- amount in € million recognized financial liabilities recognized financial assets set-off Financial instruments Cash collateral received Derivatives (legally enforceable) 9,777 4,039 5,738 5,008 47 684 Reverse repurchase, securities lending and similar agreements (legally enforceable) 2,629 0 2,629 2,527 0 102 Total 12,407 4,039 8,368 7,534 47 786 (34) Securitization (RBI as originator) RBI securitizes various financial assets by placing risks from these financial assets in the form of portfolios. This is done on a case-by-case basis by transferring the portfolio-based risks to special purpose vehicles (SPV) or structured entities (SE) that issue securities to investors. The assets transferred may be derecognized fully or partly. The most relevant type of transaction for RBI consists of synthetic securitizations that are reflected in the form of a transfer of risks in the existence of portfolio guarantees received from a third party. Depending on which tranche is placed externally, RBI may, as the originator, also retain rights to securitized financial assets in the form of senior or subordinated tranches, interest claims or other residual claims (retained rights). The objective of the Group’s securitization transactions is to relieve Group regulatory total capital and to use additional refinancing sources. The following transactions for all or at least some tranches were executed with external contractual partners, were still active in the reporting year 2023 and resulted in a credit risk mitigation which led to a reduction in risk-weighted assets in regulatory reporting. The stated amounts represent the securitized portfolio and the underlying receivables as well as the externally placed tranche at the balance sheet date. in € million Date of contract End of maturity Max. volume Securitized portfolio Outstanding portfolio2 Portfolio Externally placed tranche Amount of the externally placed tranche Synthetic Transaction ROOF RBCZ 2023 June 2023 June 2033 960 935 2,815 Corporate loans Mezzanine 60 Synthetic Transaction ROOF HR MORTGAGES 2023 Dec. 2023 Nov. 2035 660 660 694 Mortgage loans Mezzanine 61 Synthetic Transaction ROOF CORPORATE 2023 Sept. 2023 Oct. 2033 1,852 1,852 7,759 Corporate loans Mezzanine 102 Synthetic Transaction ROOF CROATIA 2022 Dec. 2022 June 2034 366 362 628 Corporate loans Mezzanine 26 Synthetic Transaction ROOF HUNGARY 2022 Dec. 2022 March 2035 596 596 627 Building society loans Mezzanine 76 Synthetic Transaction ROOF ROMANIA 2022 Nov. 2022 June 2039 307 293 312 Corporate loans Mezzanine 26 Synthetic Transaction ROOF CORPORATE 2022 June 2022 Dec. 2032 1,818 1,818 7,325 Corporate loans Mezzanine 100 Synthetic Transaction ROOF CORPORATE 2021 Dec. 2021 Dec. 2031 4,080 4,062 8,142 Corporate loans Mezzanine 216 Synthetic Transaction ROOF CRE 2019 1 Oct. 2019 Sept. 2029 1,262 995 2,885 Corporate customer, Project finance Mezzanine 75 Synthetic Transaction EIF Western Balkans EDIF Serbia Nov. 2018 Dec. 2028 20 2 3 SME loans Junior 0 Synthetic Transaction EIF COSME Serbia Dec. 2020 June 2034 64 16 32 SME loans Junior 2 Synthetic Transaction State Guarantee Serbia May 2020 April 2024 147 15 19 SME loans Junior 5 Synthetic Transaction EIF DCFTA Ukraine Dec. 2017 Dec. 2031 176 50 71 SME loans Junior 10 Consolidated financial statements139 · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 in € million Date of contract End of maturity Max. volume Securitized portfolio Outstanding portfolio2 Portfolio Externally placed tranche Amount of the externally placed tranche Synthetic Transaction EIF JEREMIE Romania Dec. 2010 Dec. 2025 173 0 0 SME loans Junior 0 Synthetic Transaction EIF JEREMIE Slovakia March 2013 June 2025 60 0 1 SME loans Junior 1 Synthetic Transaction EIF Western Balkans EDIF Albania Dec. 2016 June 2028 17 2 2 SME loans Junior 2 Synthetic Transaction EIF Western Balkans EDIF Croatia April 2025 May 2023 20 0 0 SME loans Junior 0 Synthetic Transaction EIF COSME Romania April 2017 Dec. 2034 434 71 96 SME loans Junior 15 Synthetic Transaction EIF EASI Romania July 2020 Dec. 2032 65 14 16 SME loans Junior 10 Synthetic Transaction EBRD Unfunded RSF Ukraine Oct. 2023 Dec. 2029 50 10 20 Corporate and SME loans Junior 5 1 Junior tranche held in the Group 2 Outstanding portfolio (securitized and non-securitized) SME: Small and medium-sized enterprises The synthetic ROOF transactions are split into a senior, a mezzanine and a junior tranche. The credit risk of the mezzanine tranche is guaranteed by either institutional investors or supranationals, while the credit risk of the junior and senior tranches is retained. The following transactions were already active at the beginning of the year and are not terminated as of end of the year: ROOF CRE 2019, ROOF Corporate 2021, ROOF Corporate 2022, ROOF HUNGARY 2022, ROOF CROATIA 2022 and ROOF ROMANIA 2022. In 2023 three new ROOF transactions were realized. Raiffeisenbank a.s., Prague, executed ROOF RBCZ 2023. The credit risk of the mezzanine tranche is guaranteed, and cash collateralized, by institutional investors, while the credit risk of the junior and senior tranches is retained. RBI AG executed ROOF CORPORATE 2023. The credit risk of the mezzanine tranche is guaranteed, and cash collateralized, by institutional investors, while the credit risk of the junior and senior tranches is retained. Raiffeisenbank Austria d.d., Zagreb, executed ROOF HR MORTGAGES 2023. The credit risk of the mezzanine tranche is guaranteed by institutional investors, while the credit risk of the junior and senior tranches is retained. As part of the EBRD Unfunded Risk Sharing Facility program, Raiffeisen Bank JSC, Kiev, signed a portfolio guarantee agreement which was funded by the EU and which is aimed to facilitate access to finance for private corporate companies under the Resilience and Livelihood Framework and the SME Competitiveness in Eastern Partnership program. As part of the Western Balkans Enterprise Development and Innovation Facility, Raiffeisen Bank Serbia, Belgrade, signed a portfolio guarantee agreement which was funded by the EU and which is aimed at providing access to finance for small and medium-sized enterprises. Significant risk transfer for this transaction is being recognized from year-end 2022 onwards. As part of the COSME initiative, Raiffeisen Bank Serbia, Belgrade, signed a portfolio guarantee agreement in 2020, which was funded by the EU and which is aimed at providing access to finance for small and medium-sized enterprises. Significant risk transfer for this transaction is being recognized from year-end 2022 onwards. As part of a State Guarantee initiative, Raiffeisen Bank Serbia, Belgrade, signed a portfolio guarantee agreement in 2020, which was funded by the Serbian National Bank, and which is aimed at providing support during the COVID-19 crisis. Significant risk transfer for this transaction is being recognized from January 2021 onwards. As part of the DCFTA initiative, Raiffeisen Bank JSC, Kiev, signed a portfolio guarantee agreement in 2017, which was funded by the EU and which is aimed at providing access to finance for small and medium-sized enterprises. Significant risk transfer for this transaction is being recognized from year-end 2021 on-wards. As part of the JEREMIE initiative, the participating subsidiaries (Raiffeisenbank S.A., Bucharest, and Tatra banka a.s., Bratislava) have received guarantees from the European Investment Fund (EIF) to support lending to small and medium-sized enterprises. Since 2016 the Slovakian JEREMIE transaction has been converted into a funded credit guarantee via a Slovakian state-owned fund, EIF is no longer part of the transaction. As part of the Western Balkans Enterprise Development and Innovation Facility, Raiffeisenbank Sh.a., Tirana, signed a portfolio guarantee agreement which was funded by the EU and which, like the JEREMIE initiatives, is aimed at providing access to finance for small and medium-sized enterprises. 140 Consolidated financial statements · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 As part of the COSME initiative, Raiffeisenbank S.A., Bucharest, signed a portfolio guarantee agreement in 2017, which was funded by the EU and which, like the JEREMIE initiatives, is aimed at providing access to finance for small and medium-sized enterprises. Significant risk transfer for this transaction is being recognized from year-end 2020 onwards. As part of the EaSI initiative, Raiffeisenbank S.A., Bucharest, signed a portfolio guarantee agreement which was funded by the EU and which, like the JEREMIE initiatives, is aimed at providing access to finance for small and medium-sized enterprises. The synthetic transaction ROOF MORTGAGES 2020 was terminated by 31 December 2023. The Western Balkans Enterprise Development and Innovation Facility by Raiffeisenbank Austria d.d., Zagreb, was terminated in May 2023. In addition to the early termination of the ROOF MORTGAGES 2020 transaction, a reimbursement asset of € 22 million was recognized for the ROOF CRE 2019 transaction, reflecting a deterioration of the underlying portfolio. The reimbursement asset mirrors the potential claim against the guarantor of the mezzanine tranche. (35) Transferred assets The Group enters into transactions that result in the transfer of trading assets, financial investments and loans and advances to customers. The transferred financial assets continue to be recognized in their entirety or to the extent of the Group’s continuing involvement or are derecognized in their entirety. The Group transfers financial assets that are not derecognized in their entirety or for which the Group has continuing involvement primarily through sale and repurchase of securities, securities lending, and securitization activities. Transferred financial assets not derecognized Sale and repurchase agreements are transactions in which the Group sells a security and simultaneously agrees to repurchase it at a fixed price on a future date. The Group continues to recognize the securities in their entirety in the statement of financial position because it retains substantially all of the risks and rewards of ownership. The cash consideration received is recognized as a financial asset and a financial liability is recognized for the obligation to pay the repurchase price. Because the Group sells the contractual rights to the cash flows of the securities, it does not have the ability to use the transferred assets during the term of the arrangement. Securities lending agreements are transactions in which the Group lends securities for a fee and receives cash as collateral. The Group continues to recognize the securities in their entirety in the statement of financial position because it retains substantially all of the risks and rewards of ownership. The cash received is recognized as a financial asset and a financial liability is recognized for the obligation to repay it. Because as part of the lending arrangement the Group sells the contractual rights to the cash flows of the securities, it does not have the ability to use the transferred assets during the term of the arrangement. Loans and advances to customers are sold by the Group to securitization vehicles that in turn issue notes to investors collateralized by the purchased assets. In the securitizations in which the Group transfers loans and advances to an unconsolidated securitization vehicle, it retains some credit risk while transferring some credit risk, prepayment, and interest rate risk to the vehicle. The Group therefore does not retain or transfer substantially all of the risks and rewards of such assets. 2023 Transferred assets Associated liabilities in € million Carrying amount hereof securitizations hereof repurchase agreements Carrying amount hereof securitizations hereof repurchase agreements Financial assets - held for trading 42 0 42 42 0 42 Financial assets - fair value through other comprehensive income 0 0 0 0 0 0 Financial assets - amortized cost 2,071 83 1,988 1,919 67 1,852 Total 2,112 83 2,030 1,961 67 1,893 Consolidated financial statements141 · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 2022 Transferred assets Associated liabilities in € million Carrying amount hereof securitizations hereof repurchase agreements Carrying amount hereof securitizations hereof repurchase agreements Financial assets - held for trading 0 0 0 0 0 0 Financial assets - fair value through other comprehensive income 0 0 0 0 0 0 Financial assets - amortized cost 877 0 877 804 0 804 Total 877 0 877 804 0 804 The Group currently has no securitization transactions in which financial assets are partly derecognized. (36) Assets pledged as collateral and received financial assets The Group pledges assets mainly for repurchase agreements, securities lending agreements as well as other lending arrangements and for margining purposes in relation to derivative liabilities. The table below contains assets from repo business, securities lending business, securitizations, debentures transferred as collateral of liabilities or guarantees (i.e. collateralized deposits): 2023 2022 in € million Pledged Otherwise restricted with liabilities Pledged Otherwise restricted with liabilities Financial assets - held for trading 46 0 41 0 Non-trading financial assets - mandatorily fair value through profit/loss 13 0 15 0 Financial assets - designated fair value through profit/loss 0 0 0 0 Financial assets - fair value through other comprehensive income 441 57 389 0 Financial assets - amortized cost 15,818 1,428 20,151 2,182 Total 16,318 1,485 20,596 2,182 Statutory, contractual, or regulatory requirements as well as protective rights of non-controlling interests might restrict the ability of the Group to access and transfer assets freely to or from other Group entities and settle liabilities. As at the reporting date, the Group has not granted any material protective rights associated with non-controlling interests and therefore these were not a source of significant restrictions. The following products restrict the Group in the use of its assets: repurchase agreements, securities lending contracts as well as other lending contracts for margining purposes in relation to derivative liabilities, securitizations, and various insurance activities. The table below shows assets pledged as collateral, which are therefore connected to a liability. These assets are restricted from usage to secure funding, for legal or other reasons. in € million 2023 2022 Securities and other financial assets accepted as collateral which can be sold or repledged 20,697 19,763 hereof which have been sold or repledged 3,698 3,179 The Group received collaterals which can be sold or repledged even if no default occurs in the course of reverse repo business, securities lending business, derivative and other transactions. 142 Consolidated financial statements · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 (37) Breakdown of remaining terms of maturity Assets Current assets Non-current assets 2023 Due at call or without maturity Up to 3 months More than 3 months, up to 1 year More than 1 year, up to 5 years More than 5 years in € million Cash, balances at central banks and other demand deposits 39,380 3,854 0 0 0 Financial assets - amortized cost 9,419 20,093 16,243 47,573 45,975 Financial assets - fair value through other comprehensive income 121 214 628 1,200 829 Non-trading financial assets - mandatorily fair value through profit/loss 167 18 64 112 588 Financial assets - designated fair value through profit/ loss 1 7 0 175 2 Financial assets - held for trading 376 1,828 191 1,598 1,790 Hedge accounting (367) 22 70 440 630 Investments in subsidiaries and associates 820 — — — — Tangible fixed assets 1,672 — — — — Intangible fixed assets 970 — — — — Current tax assets 69 — — — — Deferred tax assets 91 0 14 110 2 Non-current assets and disposal groups classified as held for sale 12 0 0 0 0 Other assets 468 714 47 9 3 Total 53,200 26,750 17,256 51,215 49,819 Liabilities Short-term liabilities Long-term liabilities 2023 Due at call or without maturity Up to 3 months More than 3 months, up to 1 year More than 1 year, up to 5 years More than 5 years in € million Financial liabilities - amortized cost 83,195 27,514 13,514 32,209 8,278 Financial liabilities - designated fair value through profit/ loss 0 26 96 829 137 Financial liabilities - held for trading 22 1,087 573 4,113 2,667 Hedge accounting (520) 27 56 831 558 Provisions for liabilities and charges 918 30 172 203 323 Current tax liabilities 99 125 18 0 0 Deferred tax liabilities 31 1 8 1 2 Liabilities included in disposal groups classified as held for sale 0 0 0 0 0 Other liabilities 671 323 59 91 104 Subtotal 84,416 29,133 14,497 38,278 12,068 Equity 19,849 0 0 0 0 Total 104,265 29,133 14,497 38,278 12,068 Consolidated financial statements143 · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 Assets Current assets Non-current assets 2022 Due at call or without maturity Up to 3 months More than 3 months, up to 1 year More than 1 year, up to 5 years More than 5 years in € million Cash, balances at central banks and other demand deposits 48,093 5,590 0 0 0 Financial assets - amortized cost 10,132 19,904 17,756 46,642 42,996 Financial assets - fair value through other comprehensive income 143 254 597 1,434 775 Non-trading financial assets - mandatorily fair value through profit/loss 159 20 53 110 414 Financial assets - designated fair value through profit/ loss 0 0 9 72 4 Financial assets - held for trading 313 1,420 167 2,237 2,273 Hedge accounting (934) 9 43 572 970 Investments in subsidiaries and associates 713 — — — — Tangible fixed assets 1,684 — — — — Intangible fixed assets 903 — — — — Current tax assets 100 — — — — Deferred tax assets 112 0 15 141 2 Non-current assets and disposal groups classified as held for sale 3 0 0 0 0 Other assets 489 613 42 12 1 Total 61,911 27,810 18,681 51,220 47,435 Liabilities Short-term liabilities Long-term liabilities 2022 Due at call or without maturity Up to 3 months More than 3 months, up to 1 year More than 1 year, up to 5 years More than 5 years in € million Financial liabilities - amortized cost 90,377 21,030 24,029 27,031 12,675 Financial liabilities - designated fair value through profit/ loss 0 12 144 665 130 Financial liabilities - held for trading 17 774 503 4,059 3,101 Hedge accounting (1,217) 42 82 1,155 774 Provisions for liabilities and charges 762 25 204 104 384 Current tax liabilities 95 85 2 0 0 Deferred tax liabilities 22 0 12 0 2 Liabilities included in disposal groups classified as held for sale 0 0 0 0 0 Other liabilities 666 320 43 86 101 Subtotal 90,722 22,288 25,018 33,099 17,166 Equity 18,764 0 0 0 0 Total 109,486 22,288 25,018 33,099 17,166 (38) Foreign assets/liabilities in € million 2023 20221 Assets 158,529 157,236 Equity and liabilities 125,020 131,573 1 Previous-year figures adapted 144 Consolidated financial statements · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 Risk report Active risk management is a core competency of RBI. In order to effectively identify, measure, and manage risks the Group con- tinues to develop its comprehensive risk management system. Risk management is an integral part of overall bank manage- ment. Particularly, in addition to legal and regulatory requirements, it considers the nature, scale, and complexity of the Group’s business activities and the resulting risks. The figures below refer to the regulatory scope of consolidation pursuant to CRR, which differs slightly from the scope of consolidation pursuant to IFRS. In terms of risk, the companies in the IFRS scope of con- solidation that are not included therein are covered by the participation risk. The risk report describes the principles and organization of risk management and describes current risk exposure in all material risk categories. (39) Risk management principles The Group has a system of risk principles and procedures in place for measuring and monitoring risk, which is aimed at control- ling and managing material risks in the Group. The risk policy and risk management principles are laid out by the Management Board. These are regularly reported and discussed in the Supervisory Board committees. The principles include the following risk policies: · Risk awareness: A risk culture is promoted which consciously deals with the risks inherent in banking business, in particular through the transparent presentation of information and the use of suitable tools. · Risk appetite: Risk-taking is cautious and requires a predefined minimum return on the risk. · Risk management: State-of-the-art risk management and risk controlling technologies are used which are commensurate with the materiality of the risks; risk data and risk report technologies are also effectively combined. · Regulatory requirements: All provisions and requirements of the supervisory authorities relating to risk management are taken into account and complied with. · Integrated risk management: Credit, country, market, liquidity, and operational risks are managed as key risks on a Group-wide basis. For this purpose, these risks are measured, limited, aggregated, and compared to available risk coverage capital. · Standardized methodologies: Risk measurement and risk limitation methods are standardized Group-wide in order to en-sure a consistent and coherent approach to risk management. This forms the basis for consistent overall bank management across all countries and business lines in RBI. · Continuous planning: Risk strategies and risk capital are reviewed and approved in the course of the annual budgeting and planning process, whereby special attention is also paid to preventing risk concentrations. · Independent control: A clear personnel and organizational separation is maintained between business operations and all risk management or risk control activities. · Ex ante and ex post control: Risks are consistently measured within the scope of product selling and in risk-adjusted performance measurement. Thereby it is ensured that business in general is conducted only under risk-return considerations and that there are no incentives for taking high risks. · New business areas: New products and market launches are subject to a prior, specific risk analysis and risk assessment and are decided on by the relevant committees. Individual risk management units of the Group develop detailed risk strategies, which set more concrete risk targets and spe- cific standards in compliance with these general principles. The overall Group risk strategy is derived from the Group’s business strategy and the risk appetite and adds risk-relevant aspects to the planned business structure and strategic development. These aspects include for example structural limits and capital ratio targets which have to be met in the budgeting process and in the scope of business decisions. More specific targets for individual risk categories are set in detailed risk strategies. The credit risk strategy of the Group, for instance, sets credit portfolio limits for individual countries, segments and industries and defines the credit approval authority for limit applications. Consolidated financial statements145 · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 (40) Organization of risk management The Management Board of the Group ensures the proper organization and ongoing development of risk management. It de- cides which procedures are to be employed for identifying, measuring, and monitoring risks, and makes steering decisions ac- cording to the risk reports and analyses. The Management Board is supported in undertaking these tasks by independent risk management units and special committees. Risk management functions are performed on different levels in the Group. RBI AG develops and implements the relevant con- cepts as the parent credit institution and in cooperation with the subsidiaries of the Group. The central risk management units are responsible for the adequate and appropriate implementation of the Group’s risk management processes. Particularly, they establish common Group directives and set business-specific standards, tools, and practices for all Group entities. ESG risks (Environmental, Social and Governance) were implemented and managed within the framework of a project that spans business lines and includes all risk areas. In the future, ESG risk management will be integrated into the respective risk management units of RBI. Supervisory Board Executive Committee of the Supervisory Board Risk Committee of the Supervisory Board Central and local risk management functions and committees · for all risk categories · for all Group units Raiffeisen Bank International (Management Board) Credit Management (Corporate customers, Banks and Sovereigns, Retail) Credit Portfolio Management Risk Controlling (Credit, Market, Liquidity and Operational Risks) Special Exposures Management Group Risk Committee Group Asset/Liability Committee Market Risk Committee Credit Committees Problem Loan Committee Securitization Committee Group Oerational Risk Management & Controls Committee Group Security Committee Data Governance Board Contingency/Recovery/Resolution Committee Local risk management units and committees · for all risk categories · for all Group units Banks and leasing companies Specialist units Consolidation level Group functions Committees Division/department In addition, local risk management units are established in the different Group entities of RBI. They implement the risk policies for specific risk types and take active steering decisions within the approved risk budgets in order to achieve the targets set in the business policy. For this purpose, they monitor resulting risks using standardized measurement tools and report them to central risk management units via defined interfaces. The central Group Risk Controlling division assumes the independent risk controlling function required by banking law. Its re- sponsibilities include developing the Group-wide framework for overall bank risk management (integrating all risk types) and preparing independent reports on the risk profile for the Supervisory Board’s Risk Committee, the Group Management Board and the heads of individual business units. It also measures the required risk coverage capital for different Group units and cal- culates the utilization of the allocated risk capital budgets in the internal capital adequacy framework. Risk committees The Group Risk Committee is the most senior decision-making body for all the Group’s risk-related topic areas. It decides on the risk management methods and on the control concepts used for the overall Group and for key subdivisions, and is responsible for ongoing development and implementation of methods and parameters for risk quantification and for refining steering instruments. This also includes setting the risk appetite and the various risk budgets and limits at overall bank level as well as monitoring the current risk situation with respect to internal capital adequacy and the corresponding risk limits. It approves risk management and control activities (such as the allocation of risk capital) and advises the Management Board in these matters. The Group Risk Committee’s scope of responsibility also includes resolution-related topics and decisions reflecting the respective SRB guidelines and requirements. The Group Asset/Liability Committee assesses and manages the statement of financial position structure and liquidity risk and defines the standards for internal funds transfer pricing. In this context it plays an important role in planning long-term funding and hedging structural interest rate and foreign exchange risks. The Group Capital Management Committee is a sub- committee of the Group Asset/Liability Committee and analyses, controls and manages the regulatory capital ratios as well as the structural currency and interest rate risk of the Group’s capital position. 146 Consolidated financial statements · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 The Market Risk Committee controls market risks arising from trading and banking book transactions and establishes corresponding limits and processes. Particularly, it relies on profit and loss reports, the risks calculated and the limit utilization, as well as the results of scenario analyses and stress tests with respect to market risks. The Credit Committees are staffed by front office and back office representatives, with the staff assignments depending on the type of customer (corporate customers, banks, sovereigns and retail). The committees decide upon the specific lending criteria for the different customer segments and countries and make all credit decisions concerning those segments and countries in connection with the credit approval process (depending on rating and exposure size). The Problem Loan Committee is the most important committee in the evaluation and decision-making process concerning problem loans. Its chairman is the Chief Risk Officer (CRO). Further members with voting rights are those members of the Management Board responsible for the customer divisions, the Chief Financial Officer (CFO), and the relevant division and depart-mental managers from risk management and special exposures management. The Securitization Committee is the decision-making committee for limit requests in relation to securitization positions within the specific decision-making authority framework. It develops proposals for modifications to the securitization strategy for the Management Board. In addition, the Securitization Committee offers a platform for exchanging information regarding securitization positions and market developments. The Group Operational Risk Management & Controls Committee comprises representatives of the business areas (retail, market and corporate customers) and representatives from Compliance (including financial crime), Internal Control System, Operations, Security, IT Risk Management and Risk Controlling, under chairmanship of the CRO. This committee is responsible for managing the Group’s operational risk (including conduct risk). It derives and sets the operational risk strategy based on the risk profile and the business strategy and makes decisions regarding actions, controls and risk acceptance. The Group Security Committee is responsible for the implementation of and compliance with the Security Policy and the IT Risk Management Policy within the Group. This includes, inter alia, approving the Security Policy and the IT Risk Management Policy, defining key performance indicators and key risk indicators, which must be reported on at Group level and in the local security committees, and defining and checking the risk appetite in relation to IT risk and security. The Data Governance Board is the Group’s higher-level decision-making body for all subject areas relating to data governance. This also includes in particular topics relating to data quality as well as to compliance with the BCBS 239 principles. The Contingency/Recovery/Resolution Committee is a decision-making body convened by the Management Board. The composition of the committee varies as circumstances require depending on the intensity and focus of the specific requirements pertaining to the situation (e.g. capital and/or liquidity). The core task of the committee is to maintain or recover financial stability in accordance with BaSAG (Austrian Banking Recovery and Resolution Act) and BRRD (Banking Recovery and Resolution Directive) in the event of a critical financial situation. Quality assurance and internal audit Quality assurance with respect to risk management refers to ensuring the integrity, soundness, and accuracy of processes, models, calculations, and data sources. This is to ensure that the Group adheres to all legal requirements and that it can achieve the highest standards in risk management-related operations. Two very important functions in assuring independent oversight are performed by the divisions Audit and Compliance. Independent internal auditing is a legal requirement and a cen- tral pillar of the internal control system. Internal Audit periodically assesses all business processes and contributes considerably to securing and improving them. It sends its reports directly to the Management Board, which discusses them on a regular ba- sis in its board meetings. The Compliance Office is responsible for all issues concerning compliance with legal requirements in addition to and as an integral part of the internal control system. Thereby compliance with existing regulations in daily opera- tions is monitored. The comprehensive risk management control function is one of the key responsibilities of the Supervisory Board’s Risk Committee, which for this purpose uses the analyses and reports prepared by Audit, Compliance, and Risk Control- ling. Consolidated financial statements147 · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 (41) Overall group risk management Maintaining an adequate level of capital is a core objective of the Group. Capital requirements are monitored regularly based on the risk level as measured by internal models, and in choosing appropriate models the materiality of risks annually assessed is considered. This concept of overall bank risk management provides for meeting capital requirements from both a regulatory perspective (normative perspective) and from economic points of view (economic perspective). Thus it covers the quantitative aspects of the Internal Capital Adequacy Assessment Process (ICAAP) as legally required and as described in the ICAAP Directive published by the European Central Bank. The full ICAAP process of the Group is audited during the supervisory review process for RBI credit institution group (RBI-Kreditinstitutsgruppe) on an annual basis. The Risk Appetite Framework (RAF) limits the Group’s overall risk in accordance with the Group’s strategic business objectives and allocates the risk capital calculated to the different risk categories and business areas. The primary aim of the RAF is to limit risk, particularly in adverse scenarios and for major singular risks in such a way as to guarantee compliance with regula- tory minimum ratios. The Risk Appetite Framework is, therefore, closely linked with the ICAAP and the ILAAP (Internal Liquidity Adequacy Assessment Process) and sets the concentration risk limits for the risk types identified as significant in the risk as- sessment. There is also a connection to the recovery plan as the risk capacity and risk tolerance limits in the RAF are aligned with the corresponding trigger monitoring limits. In addition, the risk appetite decided by the Management Board and the Group’s risk strategy and its implementation are reported regularly to the Supervisory Board’s Risk Committee. Approach Risk Measurement technique Confidence level Economic perspective Economic capital Risk that unexpected losses from the economic point of view exceed the internal capital The unexpected loss for the risk horizon of one year (economic capital) may not exceed the current value of the tier 1 capital. 99.90 per cent Normative perspective Stress scenarios Risk of falling below a sustainable tier 1 ratio throughout an economic cycle Capital and earnings projection for a three-year planning period based on assumptions of a significant downturn in the economy Around 95 per cent, based on potential management decisions to reduce risk temporarily or raise additional equity capital Economic perspective – economic capital approach In this approach, risks are measured based on economic capital, which represents a comparable risk indicator across all risk types. Economic capital is calculated as the sum of unexpected losses stemming from different Group units and different risk categories. In addition, a general buffer is held to cover risk types not explicitly quantified. The Group uses a confidence level of 99.90 per cent to calculate economic capital. The economic capital recorded a slight increase to € 8,826 million compared to year-end 2022. The strong increase in credit risk to sovereigns was primarily due to rating downgrades, increased exposure and concentration effects. This increase was partly offset by the decline in credit risk related to retail and corporate customers. During the year 2022, climate risk was implemented as a deduction from internal capital in the ICAAP. 148 Consolidated financial statements · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 Risk contribution of individual risk types to economic capital: in € million 2023 Share 2022 Share Credit risk corporate customers 1,481 16.8 % 1,653 19.1 % Credit risk retail customers 1,388 15.7 % 1,610 18.7 % FX risk capital position 1,343 15.2 % 1,312 15.2 % Credit risk sovereigns 1,159 13.1 % 595 6.9 % Market risk 840 9.5 % 929 10.8 % Operational risk 757 8.6 % 799 9.3 % Participation risk 735 8.3 % 646 7.5 % Owned property risk 322 3.6 % 306 3.5 % Credit risk banks 300 3.4 % 348 4.0 % Liquidity risk 66 0.7 % 0 0.0 % CVA risk 16 0.2 % 22 0.3 % Risk buffer 420 4.8 % 411 4.8 % Total 8,826 100.0 % 8,632 100.0 % Regional allocation of economic capital by Group unit domicile: in € million 2023 Share 2022 Share Central Europe 2,548 28.9 % 1,952 22.6 % Austria 2,395 27.1 % 2,208 25.6 % Eastern Europe 2,282 25.9 % 2,634 30.5 % Southeastern Europe 1,601 18.1 % 1,839 21.3 % Total 8,826 100.0 % 8,632 100.0 % In the risk capital allocation as at 31 December 2023, there was a reduction in the segments Eastern Europe (Russia, Ukraine, Belarus) and Southeastern Europe compared to year-end 2022. In contrast, the economic capital for Austria and Central Europe segment increased. Economic capital is an important instrument in overall bank risk management. Economic capital limits are allocated to individual business areas during the annual budgeting process and are supplemented in day-to-day management by volume, sensitivity, and value-at-risk limits. The Group planning process is undertaken on a revolving basis for the coming three years and incorporates future changes in economic capital as well as available internal capital. Economic capital thus substantially influences plans for future lending activities and the overall limit for market risk. Risk-adjusted performance measurement is also based on the indicator for economic capital. The profitability of a business unit is examined in relation to the amount of economic capital attributed to the unit in question (risk-adjusted profit in relation to risk-adjusted capital, RORAC), which yields a comparable performance indicator for all business units in the Group. That indi- cator is used in turn as a key figure in overall bank management and for future capital allocation, and influences the remunera-tion paid to the Group’s executive management. Normative perspective – stress scenarios The analysis of the stress scenarios in the normative perspective of the ICAAP is intended to ensure that the Group has suffi- ciently high capital ratios at the end of the multi-year planning period, even in a severe macroeconomic downturn scenario. The analysis is based on a multi-year macroeconomic stress test where hypothetical market developments in a severe but re- alistic economic downturn scenario are simulated. The risk parameters used include interest rates, foreign exchange rates and securities prices, as well as changes in default probabilities and rating migrations in the credit portfolio. The integrated stress test focuses primarily on the capital ratios at the end of the multi-year observation period. These should not fall below a sustainable level, meaning that they should not require the bank to substantially increase capital or to signifi- cantly reduce its business activities. The current minimum amount of capital is therefore determined by the size of a potential economic downturn. The downturn scenario assumed incorporates recognition of the necessary loan loss provisions and po- tential pro-cyclical effects (which increase the minimum regulatory capital requirement) along with the impact of foreign ex- change rate fluctuations and other valuation and earnings effects. Regulatory changes that are already known are considered for the planning period. This perspective thus also complements traditional risk measurement methods based on the value-at-risk concept (which is in general based on historical data). Therefore, it can account for exceptional market situations that have not been observed in the past, and permits estimation of the potential impact of such developments. The stress test also allows for analyzing risk concentrations (e.g. individual positions, industries, or geographical regions) and gives insight into profitability, liquidity situa- tion, and solvency under extreme situations. Building on these analyses, risk management in the Group actively contributes to portfolio diversification, for example via limits for the total credit exposure to individual industry segments and countries and through ongoing updates to lending standards. Consolidated financial statements149 · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 ESG – Risks The following sections give a brief overview of ESG risks including climate-related risks and environmental risks on financial instruments in RBI, including information about the nature and extent of risks arising from financial instruments and how RBI manages those risks. Nature of risks arising from financial instruments Environmental, social and governance (ESG risks) risks can manifest themselves in negative financial impacts as well as reputational damages of RBI, its customers, other counterparties, or assets RBI is invested in. These risks are viewed as cross- dimensional risks that may impact the traditional risk types (market, operational, credit, liquidity risks). Please refer to RBI Sustainability Report (Chapter Identification & definition of ESG risks) for a more detailed explanation of the ESG risks and its transmission channels to traditional risk types (liquidity, operational including litigation and reputational risks, market and credit risks. Extent of ESG risks arising from financial instruments Currently RBI continues to focus on tackling climate and environmental risks and its related components (transition and physical risks). In parallel, the necessary steps are taken in order to address the increasing risks related to the circular economy and biodiversity loss (see the related chapters in the RBI Sustainability Report). Transition risk: The initial transition risk assessment was carried out on the basis of the Financed Greenhouse Gas Emissions calculation, as shown in RBI’s Sustainability Report. The main risks were distributed across the utilities, oil & gas, agricultural products, chemical, construction and steel & ferrous metals sectors. RBI’s transition risk has also been evaluated as part of ICAAP materiality assessment during the reporting year. Physical risk: A materiality assessment of RBI’s exposure to physical risk has been performed during the reporting year as part of the ICAAP process, and furthermore exposure vulnerable to physical risks is subject to pillar 3 ESG disclosure since year end 2022 onwards. Potential impact of physical risks is part of the RBI’s internal ESG score model and is furthermore considered during the collateral valuation process or as Post-model-adjustments. As of the materiality assessment 2023, with cut-off date 31.12.2022, moderate transition risk was identified on long-term (>10 years) for credit and operational risk only. Transmission of other transitional and physical risks were assessed at a low level for RBI. Please refer to RBI’s Sustainability Report (Chapter RBI’s climate and environmental business strategy), for detailed description of the internal methodology applied for climate and environmental risks materiality assessment. As a signatory to the Principles for Responsible Banking, RBI also carried out a first impact analysis in 2021 and 2022 using the UNEP FI tool. In 2023, the sustainability impact of Raiffeisen Capital Management´s portfolio was analyzed. The results are published in the RBI Sustainability Report. The analyses identified climate change and circular economy as important focus areas within internal steering. How the company manages the ESG risks arising from financial instruments A climate and environmental risk specific materiality assessment was the base for the implementation in the ICAAP framework and is expected to be refined over the next years as methodologies are being further developed and common practices evolve. The first calculation of the financed greenhouse gas emissions and the performance of the impact analysis (part of the RBI Group’s commitment as a signatory to the Principles for Responsible Banking) identified those industries prone to transition risks and where measures need to be set in place in order to align the portfolio to the Paris Agreement. Science-based climate targets (SBTs) were set for RBI, as approved by the SBT initiative in September 2022. Work has been done on the development of corresponding sector-specific policies. The SBTs are set on a medium-term basis, whereas the sectoral polices aim to address short-term operational implementation leading to the fulfillment of these commitments. In the reporting year, special policies (in addition to the ones already existing for gambling and nuclear power) have been approved for thermal coal, tobacco, oil and gas, and steel, real estate and construction. During 2023 the customer clustering has been automatized and is based on the internally developed total ESG score and volume targets have been set (this relates to oil and gas, steel, real estate and construction). The resulting commitments, based on voluntary commitments and in accordance with regulations, are approved via the Group Risk Committee (GRC) and the RBI Management Board. On the operational side, the corporate lending process has been enhanced to reflect on the ESG related risk, thus addressing ESG in the 3 lines of defense model. 150 Consolidated financial statements · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 (42) Credit risk Credit risk is the largest risk for the Group’s business. Credit risk means the risk of suffering financial loss should any of the Group’s customers or counterparties fail to fulfil their contractual obligations to the Group. Credit risk arises mainly from loans and advances to banks, loans and advances to customers, lending commitments and financial guarantees given. The Group is also exposed to other credit risks arising from investments in debt securities and other exposures associated with trading ac- tivities, derivatives, settlement agreements and reverse repo transactions. Limit application process In the non-retail area, each lending transaction runs through the limit application process before a decision is made. This pro- cess covers – besides new lending – increases in existing limits, rollovers, overdrafts, and changes in the risk profile of a bor- rower (e.g. with respect to the financial situation of the borrower, the agreed terms and conditions, or the collateral furnished) compared to the time of the original lending decision. It is also used when setting counterparty limits for trading and new issu- ance operations as well as other credit limits, and for equity investments subject to credit risk. Credit decisions are made within the context of a competence authority hierarchy based on the size and type of the loan. Approval from the business and the credit risk management divisions is always required when making individual limit decisions or performing regular rating renewals. If the individual decision-making parties disagree, the potential transaction is decided upon by the next higher-ranking credit authority. The whole limit application process is based on defined uniform principles and rules. Account management for multinational customers doing business with more than one RBI Group unit simultaneously is supported by the Global Account Management System, for example. This is made possible by Group-wide unique customer identification in the non-retail asset classes. The limit application process in the retail division is automated to a great degree due to the high number of applications and relatively low exposure amounts. Limit applications are often assessed and approved in central processing centers based on credit score cards. This process is facilitated by the respective IT systems. Credit portfolio management Credit portfolio management in the Group is, among other aspects, based on the credit portfolio strategy which is in turn based on the business and risk strategy. The strategy selected is used to limit the exposure amount in different countries, in- dustries or product types and thus prevents undesired risk concentrations. Additionally, the long-term potentials of different markets are continuously analyzed. This allows for an early strategic repositioning of future lending activities. Consolidated financial statements151 · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 Reconciliation of figures from the IFRS consolidated financial statements to credit exposure (according to CRR) The following table shows the reconciliation of the gross carrying amounts of the items on the statement of financial position to the credit exposure (banking and trading book positions), which is used in portfolio management. It includes both exposures on and off the statement of financial position before the application of credit-conversion factors, and thus represents the total credit exposure. It is not reduced by the effects of credit risk mitigation such as guarantees or physical collateral, effects that are, however, considered in the total assessment of credit risk. The total credit exposure is also used – if not explicitly stated otherwise – for referring to exposures in all subsequent tables in the risk report. The reasons for the differences in the values used for internal portfolio management and for external financial accounting are the different scopes of consolidation (regulatory versus accounting rules according to IFRS) and differences in the classification and presentation of exposure volumes, especially in the case of repo transactions and derivatives, particularly SA-CCR (standardized approach for measuring counterparty credit risk). in € million 2023 2022 Cash, balances at central banks and other demand deposits 39,109 48,587 Financial assets - amortized cost 142,405 140,561 Financial assets - fair value through other comprehensive income 2,864 3,160 Non-trading financial assets - mandatorily fair value through profit/loss 941 751 Financial assets - designated fair value through profit/loss 185 84 Financial assets - held for trading 5,357 6,124 Hedge accounting 795 661 Current tax assets 69 100 Deferred tax assets 218 269 Other assets 1,083 912 Loan commitments given 36,601 37,193 Financial guarantees given 9,761 9,370 Other commitments given 4,939 4,580 Reconciliation difference (7,338) (6,399) Credit exposure 236,988 245,953 Around € 3.3 billion of the reconciliation difference was attributable to the SA-CCR-Netting. The detailed credit portfolio analysis shows the breakdown by rating category. Customer rating assessments are performed separately for different asset classes using internal risk classification models (rating and scoring models), which are validated by a central organizational unit. The default probabilities assigned to individual rating grades are calculated separately for each asset class. However, the use of a master scale enables rating grades to be compared even across business segments. Rating models in the non-retail asset classes – corporates, banks and sovereigns – are uniform in all Group units and rank cre- ditworthiness in 27 grades of the master scale. For retail asset classes, country specific scorecards are developed based on uniform Group standards. Tools are used to produce and validate ratings (e.g. business valuation tools, rating and default data-bases). Credit exposure by asset classes (rating models): in € million 2023 2022 Corporate customers 87,530 90,300 Project finance 9,412 9,268 Retail customers 48,396 50,412 Banks 30,751 32,156 Sovereigns 60,898 63,816 Total 236,988 245,953 152 Consolidated financial statements · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 Credit portfolio – Corporate customers The internal rating models for corporate customers take into account qualitative parameters, various ratios from the state- ment of financial position, and profit ratios covering different aspects of customer creditworthiness for various industries and countries. In addition, the model for smaller corporates also includes an account behavior component. The following table shows the credit exposure according to internal corporate rating (large corporates, mid-market and small corporates). For presentation purposes, the individual grades of the rating scale have been combined into nine main rating grades. in € million Lower PD bound in % Upper PD bound in % 2023 Share 2022 Share 1 Minimal risk > 0.0000 % ≤ 0.0300 % 1,745 2.0 % 2,716 3.0 % 2 Excellent credit standing > 0.0300 % ≤ 0.0751 % 7,496 8.6 % 7,374 8.2 % 3 Very good credit standing > 0.0751 % ≤ 0.1878 % 21,036 24.0 % 21,867 24.2 % 4 Good credit standing > 0.1878 % ≤ 0.4694 % 22,233 25.4 % 21,709 24.0 % 5 Sound credit standing > 0.4694 % ≤ 1.1735 % 16,477 18.8 % 16,627 18.4 % 6 Acceptable credit standing > 1.1735 % ≤ 2.9338 % 10,841 12.4 % 11,000 12.2 % 7 Marginal credit standing > 2.9338 % ≤ 7.3344 % 3,320 3.8 % 3,677 4.1 % 8 Weak credit standing/sub-standard > 7.3344 % ≤ 18.3360 % 1,229 1.4 % 2,070 2.3 % 9 Very weak credit standing/doubtful > 18.3360 % < 100 % 1,196 1.4 % 1,706 1.9 % 10 Default 100 % 100 % 1,846 2.1 % 1,427 1.6 % NR Not rated 110 0.1 % 128 0.1 % Total 87,530 100.0 % 90,300 100.0 % The credit exposure to corporate customers decreased € 2,770 million to € 87,530 million compared to year-end 2022. Decreases were recorded in Russia with € 3,187 (partly due to currency effects), Austria, France and Ireland, which were partly offset by increases in the Czech Republic, Germany, Croatia and Slovakia. In Russia, exposure volumes have been reduced since the beginning of the Russian war in Ukraine, which was enhanced by the devaluation of the Russian ruble. The largest decline was recorded in rating grade 1, which was due to rating downgrades of individual Austrian customers and reduced credit exposures in Ireland. The decline in rating grade 8 resulted from both rating upgrades of individual Slovakian customers to rating grade 7 and the reduction of credit exposure in Russia. The decrease in rating grade 3 was due to reduced credit exposures in Germany and Hungary (partly due to rating downgrades to rating grade 4) as well as in Great Britain and Russia. In rating grade 9, the decline resulted from a reduction in credit exposure and from rating upgrades of individual customers in Russia. The increase in defaulted loans was due to defaulted financing in the real estate sector. The five grades rating model for project finance is based on the slotting criteria in accordance with EBA/RTS/2016/02. In June 2023, the model parameters for real estate financing were adjusted based on the current macroeconomic parameters (especially inflation expectations). in € million 2023 Share 2022 Share 6.1 Excellent project risk profile – very low risk 5,453 57.9 % 4,857 52.4 % 6.2 Good project risk profile – low risk 3,075 32.7 % 3,617 39.0 % 6.3 Acceptable project risk profile – average risk 316 3.4 % 423 4.6 % 6.4 Poor project risk profile – high risk 250 2.7 % 94 1.0 % 6.5 Default 316 3.4 % 264 2.8 % NR Not rated 2 0.0 % 13 0.1 % Total 9,412 100.0 % 9,268 100.0 % The € 144 million increase in project finance was mainly attributable to increases in the Czech Republic and Hungary, which were partly offset by Russia. The rise in rating grade 6.1 was due to the increase in credit financing in the Czech Republic and Germany, and to rating upgrades of individual customers from rating grade 6.2 in Germany, the Czech Republic and Russia. In addition, the decline in rating grade 6.2 was due to rating downgrades of individual customers in rating grade 6.3, in Romania, in rating grade 6.4 in Germany and in rating grade 6.5 in Austria. Consolidated financial statements153 · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 Breakdown by country of risk of the credit exposure to corporate customers and project finance structured by region, taking into account the guarantor: in € million 2023 Share 2022 Share Central Europe 26,754 27.6 % 25,596 25.7 % Western Europe 24,365 25.1 % 25,093 25.2 % Austria 18,805 19.4 % 19,125 19.2 % Southeastern Europe 15,031 15.5 % 14,464 14.5 % Eastern Europe 8,088 8.3 % 11,625 11.7 % Asia 2,156 2.2 % 1,918 1.9 % Other 1,742 1.8 % 1,748 1.8 % Total 96,942 100.0 % 99,569 100.0 % The decline in Eastern Europe resulted from reduced credit and facility financing as well as guarantees given in Russia, partly currency related due to the devaluation of the Russian ruble. In addition, credit financing decreased in Ukraine. The decrease in Western Europe was mainly due to reduced credit financing in France and Ireland. The increase in Central Europe essentially resulted from the increase in facility financing in the Czech Republic, Hungary and Slovakia. In Southeastern Europe, the rise was due to an increase in facility financing and guarantees in Croatia and Romania. Credit exposure to corporates and project finance by industry of the original customer: in € million 2023 Share 2022 Share Manufacturing 23,549 24.3 % 24,711 24.8 % Wholesale and retail trade 20,486 21.1 % 20,800 20.9 % Real estate 12,737 13.1 % 12,943 13.0 % Financial intermediation 8,783 9.1 % 9,191 9.2 % Construction 6,066 6.3 % 6,156 6.2 % Electricity, gas, steam and hot water supply 6,195 6.4 % 5,580 5.6 % Transport, storage and communication 3,751 3.9 % 3,743 3.8 % Freelance/technical services 2,700 2.8 % 2,870 2.9 % Other industries 12,674 13.1 % 13,574 13.6 % Total 96,942 100.0 % 99,569 100.0 % Credit portfolio – Retail customers Retail customers are subdivided into private individuals and small and medium-sized entities (SMEs). For retail customers a two-fold scoring system is used, consisting of the initial and ad-hoc scoring based on customer data and of the behavioral scoring based on account data. in € million 2023 Share 2022 Share Retail customers – private individuals 45,194 93.4 % 47,338 93.9 % Retail customers – small and medium-sized entities 3,203 6.6 % 3,074 6.1 % Total 48,396 100.0 % 50,412 100.0 % Credit exposure to retail customers by internal rating: in € million Lower PD bound in % Upper PD bound in % 2023 Share 2022 Share 0.5 Minimal risk > 0.00 % ≤ 0.17 % 8,575 17.7 % 11,488 22.8 % 1.0 Excellent credit standing > 0.17 % ≤ 0.35 % 7,881 16.3 % 9,574 19.0 % 1.5 Very good credit standing > 0.35 % ≤ 0.69 % 8,404 17.4 % 8,851 17.6 % 2.0 Good credit standing > 0.69 % ≤ 1.37 % 7,424 15.3 % 6,210 12.3 % 2.5 Sound credit standing > 1.37 % ≤ 2.70 % 5,127 10.6 % 3,919 7.8 % 3.0 Acceptable credit standing > 2.70 % ≤ 5.26 % 2,932 6.1 % 2,403 4.8 % 3.5 Marginal credit standing > 5.26 % ≤ 10.00 % 1,361 2.8 % 1,189 2.4 % 4.0 Weak credit standing/sub-standard > 10.00 % ≤ 18.18 % 666 1.4 % 535 1.1 % 4.5 Very weak credit standing/doubtful > 18.18 % < 100 % 886 1.8 % 652 1.3 % 5.0 Default 100 % 100 % 1,215 2.5 % 1,286 2.6 % NR Not rated 3,924 8.1 % 4,305 8.5 % Total 48,396 100.0 % 50,412 100.0 % 154 Consolidated financial statements · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 The declines in rating grades 0.5 and 1.0 were due to rating downgrades of Romanian and Russian clients. The not rated credit exposure includes credit card limits in Austria and retail customers in Serbia, Hungary and Croatia. These customers either do not have an internal rating due to the acquisition, or are part of portfolios under permanent partial use or portfolios for which PD model are in implementation process. In case of leasing units, creditworthiness is assessed based on scorecard models. Credit exposure to retail customers by segments: 2023 in € million Central Europe Southeastern Europe Eastern Europe Group Corporates & Markets Retail customers – private individuals 21,741 10,139 4,386 8,928 Retail customers – small and medium-sized entities 1,850 1,194 159 0 Total 23,591 11,333 4,545 8,928 hereof non-performing exposure 535 411 228 46 2022 in € million Central Europe Southeastern Europe Eastern Europe Group Corporates & Markets Retail customers – private individuals 22,600 10,031 5,819 8,888 Retail customers – small and medium-sized entities 1,766 1,105 202 0 Total 24,366 11,137 6,021 8,888 hereof non-performing exposure 540 386 321 45 Credit exposure to retail customers decreased by € 2,016 million in 2023. The largest decline of € 1,476 million was recorded in Eastern Europe and primarily attributable to reduced loan volumes in Russia (mainly due to the development of the Russian ruble). In addition, there was a decrease of € 775 million in Central Europe mainly due to litigation provisions for mortgage loans in Poland. Retail credit exposure by products: in € million 2023 Share 2022 Share Mortgage loans 28,081 58.0 % 29,990 59.5 % Personal loans 10,742 22.2 % 10,993 21.8 % Credit cards 5,237 10.8 % 5,215 10.3 % SME financing 2,437 5.0 % 2,370 4.7 % Overdraft 1,219 2.5 % 1,204 2.4 % Car loans 681 1.4 % 640 1.3 % Total 48,396 100.0 % 50,412 100.0 % 2023 in € million Central Europe Southeastern Europe Eastern Europe Group Corporates & Markets Mortgage loans 16,146 3,449 1,533 6,953 Personal loans 4,075 4,956 1,354 356 Credit cards 1,373 1,274 1,184 1,406 SME financing 1,024 1,043 232 137 Overdraft 569 343 232 75 Car loans 404 267 10 0 Total 23,591 11,333 4,545 8,928 2022 in € million Central Europe Southeastern Europe Eastern Europe Group Corporates & Markets Mortgage loans 17,354 3,566 2,328 6,742 Personal loans 3,774 4,833 2,101 284 Credit cards 1,383 1,113 1,123 1,596 SME financing 950 1,015 243 163 Overdraft 546 345 209 104 Car loans 358 265 17 0 Total 24,366 11,137 6,021 8,888 Consolidated financial statements155 · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 Credit portfolio – Banks The following table shows the credit exposure by internal rating for banks (excluding central banks). Due to the small number of customers (or observable defaults), the default probabilities of individual rating grades in this asset class are calculated based on a combination of internal and external data. In May 2023, the rating model for credit institutions was adjusted in accordance to the EBA guidelines after approval of ECB. in € million Lower PD bound in % Upper PD bound in % 2023 Share 2022 Share 1 Minimal risk > 0.0000 % ≤ 0.0300 % 3,731 12.1 % 7,233 22.5 % 2 Excellent credit standing > 0.0300 % ≤ 0.0751 % 4,268 13.9 % 9,373 29.1 % 3 Very good credit standing > 0.0751 % ≤ 0.1878 % 15,471 50.3 % 10,270 31.9 % 4 Good credit standing > 0.1878 % ≤ 0.4694 % 2,549 8.3 % 499 1.6 % 5 Sound credit standing > 0.4694 % ≤ 1.1735 % 316 1.0 % 127 0.4 % 6 Acceptable credit standing > 1.1735 % ≤ 2.9338 % 3,890 12.6 % 3,780 11.8 % 7 Marginal credit standing > 2.9338 % ≤ 7.3344 % 259 0.8 % 435 1.4 % 8 Weak credit standing/sub-standard > 7.3344 % ≤ 18.3360 % 112 0.4 % 35 0.1 % 9 Very weak credit standing/doubtful > 18.3360 % < 100 % 150 0.5 % 385 1.2 % 10 Default 100 % 100 % 4 0.0 % 16 0.0 % NR Not rated 2 0.0 % 4 0.0 % Total 30,751 100.0 % 32,156 100.0 % Credit exposure to banks decreased primarily due to the decrease in loans and advances in China and the USA. This decline was partly offset by an increase in repo transactions in France, Ireland, Spain, Italy and Great Britain. Rating grade 2 recorded the largest decrease due to reduced loans and advances in China and due to rating downgrades of individual Chinese, Austrian, German and Irish banks to rating grade 3. In addition, the increase in rating grade 3 resulted from rating downgrades of individual Austrian banks from rating grade 1. Additionally, rating grade 1 recorded a decline in loans and advances with American banks. The increase in rating grade 4 was mainly due to the rating downgrade of an Italian bank from rating grade 3. The rating shifts are mainly due to the rating model change for credit institutions described above. Credit exposure to banks (excluding central banks) by products: in € million 2023 Share 2022 Share Western Europe 14,744 47.9 % 12,431 38.7 % Eastern Europe 4,202 13.7 % 4,576 14.2 % Austria 3,539 11.5 % 3,400 10.6 % Asia 2,451 8.0 % 4,043 12.6 % Central Europe 1,257 4.1 % 1,142 3.6 % Southeastern Europe 458 1.5 % 400 1.2 % Other 4,100 13.3 % 6,165 19.2 % Total 30,751 100.0 % 32,156 100.0 % Credit exposure to banks (excluding central banks) by products: in € million 2023 Share 2022 Share Repo 14,003 45.5 % 12,049 37.5 % Loans and advances 8,559 27.8 % 12,124 37.7 % Bonds 5,300 17.2 % 4,950 15.4 % Money market 1,532 5.0 % 1,515 4.7 % Derivatives 496 1.6 % 534 1.7 % Other 862 2.8 % 984 3.1 % Total 30,751 100.0 % 32,156 100.0 % 156 Consolidated financial statements · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 Credit portfolio – Sovereigns Another asset class is formed by central governments, central banks, and regional municipalities as well as other public sector entities. The credit exposure to sovereigns includes local and regional governments. Credit exposure to sovereigns (including central banks) by internal rating: in € million Lower PD bound in % Upper PD bound in % 2023 Share 2022 Share 1 Minimal risk > 0.0000 % ≤ 0.0300 % 9,182 15.1 % 36,204 56.7 % 2 Excellent credit standing > 0.0300 % ≤ 0.0751 % 22,846 37.5 % 12,860 20.2 % 3 Very good credit standing > 0.0751 % ≤ 0.1878 % 15,800 25.9 % 6,398 10.0 % 4 Good credit standing > 0.1878 % ≤ 0.4694 % 6,512 10.7 % 4,433 6.9 % 5 Sound credit standing > 0.4694 % ≤ 1.1735 % 2,235 3.7 % 545 0.9 % 6 Acceptable credit standing > 1.1735 % ≤ 2.9338 % 2,359 3.9 % 1,220 1.9 % 7 Marginal credit standing > 2.9338 % ≤ 7.3344 % 14 0.0 % 24 0.0 % 8 Weak credit standing/sub-standard > 7.3344 % ≤ 18.3360 % 5 0.0 % 0 0.0 % 9 Very weak credit standing/doubtful > 18.3360 % < 100 % 1,780 2.9 % 1,768 2.8 % 10 Default 100 % 100 % 164 0.3 % 362 0.6 % NR Not rated 0 0.0 % 2 0.0 % Total 60,898 100.0 % 63,816 100.0 % Rating grade 1 recorded the largest decrease, which was mainly due to the rating downgrades of Austria and the Czech Republic, as well as the Austrian national bank. This decline was the reason for the increase in rating grade 2, which was partly offset by rating downgrades of Slovakia and the Hungarian national bank to rating grade 3. In addition, the increase in rating grade 3 was due to the rating upgrade of Croatia from rating grade 4. The increase in rating grade 4 was mainly a result of rating downgrades of Hungary and Romania from rating grade 3. The rise in rating grade 5 resulted mainly from the rating downgrade of Serbia from rating grade 4. Credit exposure to sovereigns (including central banks) by product: in € million 2023 Share 2022 Share Bonds 23,595 38.7 % 17,662 27.7 % Money market 17,774 29.2 % 26,803 42.0 % Loans and advances 12,435 20.4 % 12,135 19.0 % Repo 6,677 11.0 % 6,663 10.4 % Derivatives 70 0.1 % 162 0.3 % Other 347 0.6 % 391 0.6 % Total 60,898 100.0 % 63,816 100.0 % The decline in money market transactions resulted mainly from the reduction at the Austrian. Hungarian and Slovakian national bank and was partly offset by an increase in money market transactions with the Croatian national bank. Bond portfolio mainly increased in the Czech Republic, Slovakia, Austria and in Hungary. Non-investment grade credit exposure to sovereigns (rating grade 5 and below): in € million 2023 Share 2022 Share Russia 2,013 30.7 % 1,239 31.6 % Serbia 1,740 26.5 % 0 0.0 % Ukraine 1,585 24.2 % 1,312 33.5 % Bosnia and Herzegovina 494 7.5 % 186 4.7 % Albania 452 6.9 % 527 13.5 % Belarus 196 3.0 % 603 15.4 % Other 80 1.2 % 53 1.3 % Total 6,558 100.0 % 3,921 100.0 % The exposure mainly includes deposits of Group units at local central banks in Central, Eastern, and Southeastern Europe. The deposits serve to fulfil the respective minimum reserve requirements and act as a vehicle for short-term investment of excess liquidity and are therefore inextricably linked with business activity in these countries, as well as government bonds. Consolidated financial statements157 · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 Country risk Country risk includes transfer and convertibility risk, as well as political risk and macroeconomic risk in a broader sense. For RBI, it arises from cross-border transactions and operations in foreign countries via its subsidiaries. Activities in core markets are given particular attention in this respect. Active country risk management is ensured across the Group based on the country risk policy regularly approved by the Management Board. This policy is part of the credit portfolio limit system and sets a strict limitation on cross-border risk exposure to individual countries in order to avoid risk concentrations. At the same time, the policy is designed to incentivize risk-taking within the RBI’s core markets. The limit levels for individual countries are established using an internal model based on pillars such as the Group’s own capitalization, the internal sovereign rating, and the size and dynamics of the country and its banking sector. Country risk is also reflected in product pricing and in risk-adjusted performance measurement via the internal funds transfer pricing system. In this way, RBI provides the business units with an incentive to mitigate country risk (e.g. by taking out insurance with export credit insurance organizations or seeking guarantors in third countries). The insights gained from the country risk analysis are not only used for limiting the total cross-border exposure, but also for managing the total credit exposure in each individual country (i.e. including the exposure funded by local deposits). RBI thus gears its business activities to the expected macroeconomic trends within the different markets, which promotes broad diversification of its credit portfolio. Concentration risk The credit portfolio of the Group is well diversified in terms of geographical region and industry. Single name concentrations are also actively managed (based on the concept of groups of connected customers) by way of limits and regular reporting. As a result, portfolio granularity is high. The regional breakdown of the exposures reflects the broad diversification of credit busi- ness in the Group’s European markets. Credit exposures across all asset classes by the borrower’s country of risk, grouped by regions: in € million 2023 Share 2022 Share Central Europe 75,237 31.7 % 71,413 29.0 % Czech Republic 34,094 14.4 % 31,738 12.9 % Slovakia 24,822 10.5 % 24,085 9.8 % Hungary 12,326 5.2 % 11,169 4.5 % Poland 3,241 1.4 % 3,922 1.6 % Other 754 0.3 % 498 0.2 % Austria 47,136 19.9 % 56,770 23.1 % Western Europe 43,614 18.4 % 41,789 17.0 % Germany 12,184 5.1 % 11,929 4.9 % France 7,899 3.3 % 7,756 3.2 % Spain 3,668 1.5 % 3,265 1.3 % Great Britain 3,612 1.5 % 3,713 1.5 % Switzerland 3,126 1.3 % 3,143 1.3 % Luxembourg 2,664 1.1 % 2,939 1.2 % Netherlands 2,497 1.1 % 2,458 1.0 % Italy 2,409 1.0 % 2,151 0.9 % Belgium 1,435 0.6 % 990 0.4 % Ireland 802 0.3 % 800 0.3 % Other 3,319 1.4 % 2,644 1.1 % Southeastern Europe 38,349 16.2 % 35,464 14.4 % Romania 17,704 7.5 % 16,352 6.6 % Croatia 7,783 3.3 % 7,298 3.0 % Serbia 6,724 2.8 % 6,467 2.6 % Bosnia and Herzegovina 2,571 1.1 % 2,125 0.9 % Albania 1,939 0.8 % 1,788 0.7 % Other 1,628 0.7 % 1,434 0.6 % 158 Consolidated financial statements · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 in € million 2023 Share 2022 Share Eastern Europe 20,842 8.8 % 25,552 10.4 % Russia 15,016 6.3 % 19,195 7.8 % Ukraine 3,966 1.7 % 4,018 1.6 % Belarus 1,326 0.6 % 1,805 0.7 % Other 534 0.2 % 534 0.2 % Asia 4,830 2.0 % 6,345 2.6 % North America 3,635 1.5 % 4,497 1.8 % Rest of World 3,344 1.4 % 4,124 1.7 % Total 236,988 100.0 % 245,953 100.0 % Austria recorded the largest decline due to lower money market transactions and lower deposits at the Austrian national bank. In Eastern Europe, there was a decrease in loans and advances in Russia, Belarus and Ukraine, in guarantees given in Russia, and, mainly currency-related, in consumer and mortgage loans in Russia. The declined exposure in North America and Asia was due to loans and advances to banks in the USA and China. In Central Europe, the rise was due to increased bond portfolios in the Czech Republic, Hungary and Slovakia, increased facility financing in the Czech Republic and Slovakia, and increased loans and advances in Hungary. Southeastern Europe recorded an increase in money market transactions and bond portfolio in Croatia. The increase in Western Europe was due to increased repo transactions in Spain, Great Britain, France, Ireland and Italy, and in facility financing in Germany and the Netherlands. Credit exposure across all asset classes by currencies: in € million 2023 Share 2022 Share Euro (EUR) 133,540 56.3 % 136,367 55.4 % Czech koruna (CZK) 28,747 12.1 % 27,711 11.3 % US dollar (USD) 21,120 8.9 % 22,350 9.1 % Russian ruble (RUB) 14,241 6.0 % 17,266 7.0 % Romanian leu (RON) 12,853 5.4 % 11,388 4.6 % Hungarian forint (HUF) 9,341 3.9 % 7,949 3.2 % Ukrainian hryvnia (UAH) 3,368 1.4 % 3,298 1.3 % Serbian dinar (RSD) 3,130 1.3 % 2,737 1.1 % Bosnian marka (BAM) 2,507 1.1 % 2,274 0.9 % Chinese yuan (CNY) 1,572 0.7 % 3,560 1.4 % Albanian lek (ALL) 1,532 0.6 % 1,290 0.5 % Swiss franc (CHF) 1,369 0.6 % 2,080 0.8 % Great Britain Pound (GBP) 1,047 0.4 % 1,314 0.5 % Belarusian-ruble (BYN) 1,018 0.4 % 1,104 0.4 % Polish zloty (PLN) 686 0.3 % 736 0.3 % Croatian kuna (HRK) 0 0.0 % 3,885 1.6 % Other foreign currencies 915 0.4 % 645 0.3 % Total 236,988 100.0 % 245,953 100.0 % Consolidated financial statements159 · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 The Group’s credit exposure based on industry classification: in € million 2023 Share 2022 Share Banking and insurance 70,059 29.6 % 80,890 32.9 % Private households 45,220 19.1 % 45,142 18.4 % Public administration and defense and social insurance institutions 24,614 10.4 % 18,739 7.6 % Other manufacturing 18,206 7.7 % 19,140 7.8 % Wholesale trade and commission trade (except car trading) 15,150 6.4 % 15,403 6.3 % Real estate activities 12,882 5.4 % 13,120 5.3 % Construction 6,818 2.9 % 6,805 2.8 % Electricity, gas, steam and hot water supply 6,271 2.6 % 5,737 2.3 % Retail trade and repair of consumer goods 5,426 2.3 % 5,758 2.3 % Land transport, transport via pipelines 3,155 1.3 % 3,328 1.4 % Manufacture of food products and beverages 2,799 1.2 % 2,803 1.1 % Land transport, transport via pipelines 2,708 1.1 % 2,577 1.0 % Manufacture of basic metals 2,213 0.9 % 2,877 1.2 % Manufacture of machinery and equipment 1,966 0.8 % 1,846 0.8 % Other transport 1,615 0.7 % 1,770 0.7 % Sale of motor vehicles 1,529 0.6 % 1,348 0.5 % Extraction of crude petroleum and natural gas 886 0.4 % 1,033 0.4 % Other industries 15,472 6.5 % 17,636 7.2 % Total 236,988 100.0 % 245,953 100.0 % Structured credit portfolio The Group invests in structured products. The total exposure to structured products showed a nominal amount of € 545 million (previous year: € 511 million) and a carrying amount of € 537 million (previous year: € 530 million). These are mainly investments in asset-backed securities (ABS), asset-based financing (ABF), and in some cases collateralized debt obligations (CDO). A total of 100 per cent of the portfolio (previous year: 97 per cent) contains loans and advances to European customers. The year-on-year increase in nominals is attributable to purchases due to new transactions. Counterparty credit risk The default of a counterparty in a derivative, repurchase, securities lending, or borrowing transaction can lead to losses from re-establishing an equivalent contract. In the Group, this risk is measured by the mark-to-market approach where a predefined add-on is added to the current positive fair value of the contract in order to account for potential future changes. For internal management purposes potential price changes, which affect the fair value of an instrument, are calculated specifically for dif- ferent contract types based on historical market price changes. For derivative contracts the standard limit approval process applies, where the same risk classification, limitation, and monitor-ing process is used as for traditional lending. In doing so, the weighted nominal exposure of derivative contracts is added to the customers’ total exposure in the limit application and monitoring process as well as in the calculation and allocation of internal capital. An important strategy for reducing counterparty credit risk is utilization of credit risk mitigation techniques such as netting agreements and collateralization. In general, the Group strives to establish standardized ISDA master agreements with all ma- jor counterparties for derivative transactions in order to be able to perform close-out netting and credit support annexes (CSA) for full risk coverage for positive fair values on a daily basis. Non-performing exposures (NPE) Since November 2019 RBI has fully applied the new definition of default of the CRR and also the corresponding requirements of the EBA (EBA/GL/2016/07). 160 Consolidated financial statements · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 Non-performing exposures pursuant to the applicable definition contained in the Implementing Technical Standard (ITS) on Supervisory Reporting (Forbearance and non-performing exposures) issued by the EBA: NPE NPE ratio NPE coverage ratio in € million 2023 2022 2023 2022 2023 2022 General governments 178 169 8.3 % 7.9 % 2.7 % 3.0 % Banks 3 6 0.0 % 0.0 % 47.1 % 63.1 % Other financial corporations 392 163 3.7 % 1.4 % 29.3 % 29.8 % Non-financial corporations 1,843 1,619 3.8 % 3.2 % 53.5 % 62.8 % Households 1,075 1,133 2.6 % 2.7 % 64.8 % 66.2 % Loans and advances 3,491 3,090 2.2 % 1.8 % 51.7 % 59.1 % Bonds 7 3 0.0 % 0.0 % 24.2 % 0.0 % Total 3,498 3,093 1.9 % 1.6 % 51.7 % 59.0 % Compared to year-end 2022, the volume of non-performing exposures increased € 406 million to € 3,498 million. In organic terms, this was a growth of € 462 million, mainly in Group Corporates & Markets segment with € 642 million in real estate, while Russia declined with € 103 million; the currency trend, mainly as a result of the devaluation of the Russian ruble, contributed a total of € 56 million. A decrease of € 621 million resulted from derecognitions and sales, this contrasted with new defaults mainly of loans to non-financial corporations. The NPE ratio rose 0.3 percentage points to 1.9 per cent compared to year-end 2022. The coverage ratio fell 7.4 percentage points to 51.7 per cent. Development of non-performing exposure by asset classes (excluding items off the statement of financial position): in € million As at 1/1/2023 Change in consolidated group Currency Additions Disposals As at 31/12/2023 General governments 169 0 0 10 (1) 178 Banks 6 0 0 0 (2) 3 Other financial corporations 163 0 (2) 250 (19) 392 Non-financial corporations 1,619 0 (35) 856 (597) 1,843 Households 1,133 0 (19) 470 (508) 1,075 Loans and advances (NPL) 3,090 0 (56) 1,585 (1,128) 3,491 Bonds 3 0 0 4 0 7 Total (NPE) 3,093 0 (56) 1,590 (1,128) 3,498 in € million As at 1/1/2022 Change in consolidated group Currency Additions Disposals As at 31/12/2022 General governments 1 (1) 0 169 0 169 Banks 3 0 0 2 0 6 Other financial corporations 113 0 0 92 (42) 163 Non-financial corporations 1,574 (36) 30 624 (572) 1,619 Households 1,131 (38) 12 471 (444) 1,133 Loans and advances (NPL) 2,822 (75) 43 1,358 (1,058) 3,090 Bonds 0 0 0 3 0 3 Total (NPE) 2,823 (75) 43 1,361 (1,059) 3,093 Share of non-performing exposure (NPE) by segments (excluding items off the statement of financial position): NPE NPE ratio NPE coverage ratio in € million 2023 2022 2023 2022 2023 2022 Central Europe 783 831 1.2 % 1.4 % 58.4 % 59.7 % Southeastern Europe 592 591 1.8 % 2.0 % 66.6 % 70.2 % Eastern Europe 528 708 2.1 % 2.3 % 73.6 % 65.1 % Group Corporates & Markets 1,595 962 3.0 % 1.8 % 35.6 % 47.1 % Corporate Center 0 0 0.0 % 0.0 % 100.0 % 100.0 % Total 3,498 3,093 1.9 % 1.6 % 51.7 % 59.0 % Non-performing exposure in the Group Corporate & Markets segment recorded an increase of € 633 million to € 1,595 million, primarily due to the rise in the real estate sector. Offsetting this were derecognitions and sales of non-performing loans in the amount of € 203 million. The NPE ratio increased 1.2 percentage points compared to year-end 2022 to 3.0 per cent. The coverage ratio declined 11.6 percentage points to 35.6 per cent. Consolidated financial statements161 · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 Non-performing exposure in the Southeastern Europe segment remained nearly unchanged at € 592 million in comparison to year-end 2022. Beside Kosovo, Romania and Serbia, in all other countries non-performing exposure declined mainly due to sales and derecognitions of non-performing loans in the amount of € 139 million, mainly in Romania with € 95 million, contrasted with higher new defaults of loans to households. The NPE ratio declined 0.2 percentage points to 1.8 per cent, the coverage ratio sank 3.6 percentage points to 66.6 per cent. Falling € 181 million to € 528 million, the Eastern Europe segment contributed to the decrease in non-performing exposure, on the one hand due to devaluation of the Russian ruble and the Ukrainian Hryvna in the total amount of € 57 million, on the other due to derecognitions and sales of non-performing loans in the amount of € 181 million, mainly in Russia with € 150 million. The NPE ratio fell 0.2 percentage points to 2.1 per cent. The coverage ratio increased 8.4 percentage points to 73.6 per cent. The Central Europe segment reported a € 48 million decrease in non-performing exposure to € 783 million, mainly due to decreases in Hungary and Poland totaling € 58 million, whereas Slovakia and the Czech Republic reported a totaling of € 10 million slight increase in non-performing exposure, derecognitions and sales of non-performing loans in the amount of € 99 million contributed to the reduction. The NPE ratio in relation to the total exposure fell 0.1 percentage points to 1.2 per cent compared to year-end 2022. The coverage ratio fell 1.3 percentage points to 58.4 per cent. Non-performing exposure with restructuring measures: Refinancing Instruments with modified maturities and conditions Total in € million 2023 2022 2023 2022 2023 2022 General governments 0 0 0 0 0 0 Banks 0 0 0 0 0 0 Other financial corporations 62 60 47 38 109 98 Non-financial corporations 93 81 784 886 877 967 Households 8 8 249 273 257 281 Total 163 149 1,080 1,197 1,243 1,346 Non-performing exposure with restructuring measures by segments: in € million 2023 Share 2022 Share Central Europe 239 19.3 % 259 19.2 % Southeastern Europe 156 12.6 % 182 13.5 % Eastern Europe 326 26.2 % 350 26.0 % Group Corporates & Markets 521 41.9 % 555 41.2 % Total 1,243 100.0 % 1,346 100.0 % (43) Market risk The Group defines market risk as the risk of possible losses arising from changes in market prices of trading and investment positions. Market risk estimates are based on changes in exchange rates, interest rates, credit spreads, equity and commodity prices, and other market parameters (e.g. implied volatilities). Market risks from the customer divisions are transferred to the Treasury division using the transfer price method. Treasury is responsible for managing structural market risks and for complying with the Group’s overall limit. The Capital Markets division is responsible for proprietary trading, market making, and customer business in money market and capital market products. In previous years the global COVID-19 situation required increased monitoring of market trends and position changes for RBI, in 2022 the Russia-Ukraine war outbreak provided the challenge for market risk management, which continued during 2023 as well. Active risk management and daily monitoring with a focus on the Russian, Ukrainian and Belarusian markets and portfolios, dual steering approach (Group without Russian entities) introduction for the Group beginning of 2023, as well as the derivative exposure reduction between head office and Russian entity were necessary in order to adapt to the changed environment. 162 Consolidated financial statements · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 Organization of market risk management All market risks are measured, monitored, and managed on Group level. The Market Risk Committee is responsible for strategic market risk management issues. It is responsible for managing and controlling all market risks in the Group. The Group’s overall limit is set by the Management Board on the basis of the risk-taking capacity and income budget. This limit is apportioned to sub-limits in coordination with business divisions according to the strategy, business model and risk appetite. The Market Risk Management department ensures that the business volume and product range comply with the defined strategy of the Group. It is responsible for implementing and enhancing risk management processes, risk management infrastructure and systems, manuals, and measurement techniques for all market risk categories and credit risk arising from market price changes in derivative transactions. Furthermore, Market Risk Management independently measures and reports all market risks on a daily basis. All products in which open positions can be held are listed in the product catalog. New products are added to this list only after successfully completing the product approval process. Product applications are investigated thoroughly for any risks. They are approved only if the new products can be implemented in the bank’s front- and back-office and risk management systems. Limit system The Group uses a comprehensive risk management approach for both the trading and the banking books (total-return approach). Market risk is therefore managed consistently in all trading and banking books. The following indicators are measured and limited on a daily basis in the market risk management system: · Value-at-Risk (VaR) – confidence level 99 per cent Value-at-Risk is the main market risk steering instrument in liquid markets and normal market situations. Two different methods of calculation are used, depending on the steering approach. The consistency between P&L and risk figures is in parallel necessary with the economic scope of RBI in order to ensure comprehensive control. The change of the limit system was approved by the regulator. For the overall portfolio including the banking book, a model is used that is based on a historical simulation and which is suitable for longer-term steering of the market risks from the banking books (ALL model, confidence level 99 per cent, risk horizon 20 days). The calculation is based on overlapping 20-day returns of the last seven years and is also used for allocating economic capital. For all market risks with a direct impact on the income statement, a model is used that provides a good forecast of short-term volatility (IFRS P&L model, confidence level 99 per cent, risk horizon 1 day). The Austrian Financial Market Authority has approved this approach as an internal model for calculating the total capital requirement for market risks for RBI AG’s trading book. Both models calculate value-at-risk indicators for changes in the risk factors foreign currencies, interest rate trend, credit spreads, implicit volatility, stock indices and basis spreads. · Sensitivities (to changes in exchange rates and interest rates, gamma, vega, equity and commodity prices) Sensitivity limits are to ensure that concentrations are avoided in normal market situations and are the main steering in-strument under extreme market situations and in illiquid markets or in markets that are structurally difficult to measure. · Stop loss Stop loss limits serve to strengthen the discipline of traders such that they do not allow losses to accumulate on their own proprietary positions but strictly limit them instead. A comprehensive stress testing concept complements this multi-level limit system. It simulates potential present value changes of defined scenarios for the total portfolio. The results on market risk concentrations shown by these stress tests are reported to the Market Risk Committee and taken into account when setting limits. Stress test reports for individual portfolios are included in daily market risk reporting. Value-at-Risk (VaR) The following tables show the risk indicators (VaR ALL 99 per cent, 20 days and VaR IFRS-P&L 99 per cent, 1 day) for the individual market risk categories in the trading book, while the overall risk is shown for the banking book. The Group’s VaR mainly results from structural equity positions, structural interest rate risk, and credit spread risks of bonds, which are held as liquidity buffer. The IFRS-P&L model aims to measure short-term market fluctuations, while the ALL model focuses on measuring structural interest rate risks. Similarly to year-end of 2022, in 2023 the currency risk of the structural positions in the ruble, hryvnia, forint and Belarusian ruble remained the main driver, as well as interest rate risk increased compared to the year-end of 2022. Consolidated financial statements163 · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 Model IFRS-P&L trading book VaR (99%, 1d) VaR as at Average VaR Minimum VaR Maximum VaR VaR as at in € million 2023 2022 Currency risk 0 1 0 8 1 Interest rate risk 2 3 1 6 1 Credit spread risk 2 2 1 6 6 Share price risk 1 1 1 1 1 Vega risk 1 0 0 1 0 Basis risk 4 4 2 10 12 Total 6 6 4 13 14 Model IFRS-P&L total VaR (99%, 1d) VaR as at Average VaR Minimum VaR Maximum VaR VaR as at in € million 2023 2022 Currency risk 10 7 2 14 13 Interest rate risk 8 5 2 32 4 Credit spread risk 4 4 3 7 6 Share price risk 1 1 1 1 1 Vega risk 1 1 0 3 1 Basis risk 5 6 3 20 30 Total 19 13 9 36 35 Model ALL VaR (99%, 20d) VaR as at Average VaR Minimum VaR Maximum VaR VaR as at in € million 2023 2022 Economic capital ALL 649 542 460 1,022 565 Vega risk ALL 10 13 6 33 16 Total ALL 659 554 472 1,032 581 Economic capital banking book 620 549 463 1,066 572 Vega risk banking book 9 13 6 32 15 Total banking book 630 560 485 1,076 587 Interest rate risk in the banking book 167 176 68 274 120 The risk measurement approaches employed are verified – besides analyzing returns qualitatively – on an ongoing basis through backtesting and statistical validation techniques. If model weaknesses are identified, then they are adapted accordingly. In the 2023 reporting year, there was one hypothetical backtesting violation. The following graph compares the VaR to the theoretical gains and losses on a daily basis. The VaR represents the maximum loss which will not be exceeded within one day, with a confidence level of 99 per cent. It is compared to the respective theoretical gain or loss which would arise on the following day due to the actual market conditions at the time. 164 Consolidated financial statements · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 Exchange rate risk and capital (ratio) hedge Market risk in the Group results primarily from exchange rate risk, which stems from foreign-currency denominated equity in- vestments in foreign Group units and the corresponding hedging positions entered into by the Group Asset/Liability Committee. In a narrow sense, exchange rate risk denotes the risk of losses being incurred due to open foreign exchange positions. However, exchange rate fluctuations also influence current revenues and expenses. They also affect regulatory capital requirements for assets denominated in foreign currencies, even if they are financed in the same currency and thus do not create an open foreign exchange position. The Group holds material equity participations located outside of the euro area with equity denominated in the corresponding local currency. Also, a significant share of risk-weighted assets in the Group is denominated in foreign currencies. Changes in foreign exchange rates thus lead to changes in the consolidated capital of the Group and to changes in the total capital requirement for credit risk as well. From a regulatory perspective, the ECB approved a waiver for the Group which permits a reduction in the RWA’s associated with market risk. This requires that the Group follow a specific hedging strategy that allows the exchange rate risks to be protected against potential shocks. In order to manage exchange rate risk, RBI currently follows a stable capital ratio strategy. The goal of this hedging strategy is to balance tier 1 capital and risk-weighted assets in all currencies according to the targeted tier 1 ratio (i.e. reduce excess capi- tal or deficits in relation to risk-weighted assets for each currency) such that the tier 1 ratio remains stable even if foreign ex- change rates change. The Group aims at stabilizing its capital ratio when managing exchange rate risks. Changes in foreign exchange rates thus lead to changes in the consolidated equity amount; however, the regulatory capital requirement for credit risks stemming from assets denominated in foreign currencies also changes correspondingly. This risk is managed on a monthly basis in the Group Asset/Liability Committee based on historical foreign exchange volatilities, exchange rate forecasts, and the sensitivity of the tier 1 ratio to changes in individual foreign exchange rates. The following table shows all material open foreign exchange rate positions as at 29 December 2023 and the corresponding values for the previous year. The figures include both trading positions as well as capital positions of the subsidiaries with foreign currency denominated statements of financial position (short positions are shown with a negative sign and long positions with a positive sign). The increase in open foreign exchange positions as of 29 December 2023 in Eastern Europe, especially in the Russian ruble (RUB), was due to removal of the ECB waiver for RUB currency. This reduction is the result of market restrictions, especially in terms of the availability of EUR/RUB hedge instruments as a result of the war. in € million 2023 2022 ALL 285 59 BAM 965 351 BGN 185 65 BYN 709 309 CNY 13 6 CHF (1,184) (377) CZK 484 512 HRK 0 437 HUF 847 236 PLN 48 0 RON 2,440 660 RSD 1,607 497 RUB 7,173 2,064 UAH 1,790 310 USD (2,153) (930) Consolidated financial statements165 · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 Interest rate risk in the trading book The largest present value changes for the trading book of the Group given a one-basis-point interest rate increase for the whole yield curve in € thousand. 2023 in € thousand Total < 3 m > 3 to 6 m > 6 to 12 m > 1 to 2 y > 2 to 3 y > 3 to 5 y > 5 to 7 y > 7 to 10 y > 10 to 15 y > 15 to 20 y > 20 y ALL 0 0 0 0 0 0 0 0 0 0 0 0 CHF (10) (1) 3 (10) (3) 0 0 0 0 0 0 0 CNY 4 0 0 4 0 0 0 0 0 0 0 0 CZK 4 (1) (2) 11 (7) (5) 6 0 5 (1) (1) (1) EUR (56) 3 10 (3) (1) (32) 23 (32) 3 (25) 13 (13) HRK 0 0 0 0 0 0 0 0 0 0 0 0 HUF 11 2 0 (4) (3) (1) 5 (3) 14 1 0 0 NOK 1 0 0 0 0 0 0 0 0 0 0 0 PLN 3 0 0 (8) 9 (1) 5 3 (4) 0 0 0 RON (7) 1 0 3 (1) (10) 3 0 (2) (1) 0 0 RUB (29) (16) (8) 0 (2) 0 (1) 0 (1) 0 0 0 UAH (24) 0 0 (2) (12) (9) (1) 0 0 0 0 0 USD (32) 9 7 (13) (13) (34) (20) (5) 1 9 9 20 Other (15) 0 (1) (2) (1) (1) (3) (1) (6) 0 0 0 The presentation of currencies changed year-on-year depending on the absolute amount of interest rate sensitivity. 2022 in € thousand Total < 3 m > 3 to 6 m > 6 to 12 m > 1 to 2 y > 2 to 3 y > 3 to 5 y > 5 to 7 y > 7 to 10 y > 10 to 15 y > 15 to 20 y > 20 y ALL 0 0 0 0 0 0 0 0 0 0 0 0 CHF 4 5 0 0 (1) 1 0 0 0 0 0 0 CNY 5 0 0 5 0 0 0 0 0 0 0 0 CZK (10) (5) 3 9 8 2 (5) (13) (8) (1) 0 0 EUR (58) (4) 6 9 27 6 (4) (58) (12) (4) (13) (12) HRK (7) 0 0 0 1 0 (2) (2) 0 (3) 0 0 HUF (4) 5 (1) (6) (3) 0 0 (1) 3 0 0 0 NOK 1 0 0 0 1 0 0 0 0 0 0 0 PLN (1) 0 (2) 1 (2) (1) 7 (2) (2) 0 0 0 RON (9) 1 (1) (1) 1 (4) (4) 0 0 0 0 0 RUB (16) (15) 2 (14) 7 3 3 (2) 1 (2) 0 0 UAH (16) (1) (1) (1) (9) (2) (2) 0 0 0 0 0 USD 13 4 2 (1) 0 0 7 (2) (6) 5 6 (2) Other (5) 2 0 (2) (1) (3) 0 0 0 0 0 0 Interest rate risk in the banking book Different maturities and repricing schedules of assets and the corresponding liabilities (i.e. deposits and financing from money markets and capital markets) cause interest rate risk in the Group. This risk arises in particular from incomplete compensation of the interest rate sensitivity of expected cash flows, their interest rate adjustment cycles, and other optional features. Interest rate risk in the banking book is material for the euro and US dollar as major currencies as well as for local currencies of Group units located in Central and Eastern Europe. This risk is mainly hedged by a combination of transactions on and off the statement of financial position where in particular interest rate swaps and – to a smaller extent – also interest rate forwards and interest rate options are used. Management of the statement of financial position is a core task of the central Global Treasury division and of individual network banks, which are supported by the Group Asset/Liability Committee. They base their decisions on various interest income analyses and simulations that ensure proper interest rate sensitivity in line with expected changes in market rates and the overall risk appetite. Interest rate risk in the banking book is not only measured within a value-at-risk framework but also managed by the traditional tools of nominal and interest rate gap analyses. Interest rate risk is subject to quarterly reporting in the context of the interest rate risk statistic submitted to the banking supervisor. This report also shows the change in the present value of the banking book as a percentage of total capital in line with the CRR requirements. Maturity assumptions needed in this analysis are defined as specified by regulatory authorities and based on internal statistics and empirical values. 166 Consolidated financial statements · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 Change in the present value of the Group’s banking book given a one-basis point interest rate increase in € thousand: 2023 in € thousand Total < 3 m > 3 to 6 m > 6 to 12 m > 1 to 2 y > 2 to 3 y > 3 to 5 y > 5 to 7 y > 7 to 10 y > 10 to 15 y > 15 to 20 y > 20 y ALL 24 (1) (1) (4) (10) 11 27 (15) 1 11 4 0 BGN 0 0 0 0 0 0 0 0 0 0 0 0 BYN (6) 2 2 6 (4) (3) (2) (2) (3) (2) 0 0 CHF (68) (25) (4) 0 4 4 2 (17) (10) (13) (7) (1) CNY (3) (1) (1) (1) 0 0 0 0 0 0 0 0 CZK (831) 42 (18) (10) (209) (197) (201) 112 (155) (167) (27) (1) EUR (876) 12 (124) 46 194 (15) 202 (235) (293) (417) (237) (8) GBP (7) (4) 2 1 (1) (7) 1 0 0 0 0 0 HRK 0 0 0 0 0 0 0 0 0 0 0 0 HUF (295) 5 2 (38) (9) (13) (92) (48) (97) (4) (1) 0 PLN (14) (2) (7) 2 3 (1) (3) (4) (2) 0 0 0 RON 101 2 11 1 (68) 11 24 (50) 167 4 (1) 0 RSD (12) 1 1 4 (8) 19 32 (17) (45) 0 0 0 RUB (101) (3) (21) (7) (121) (57) 78 90 31 (73) (16) (2) SGD 0 0 0 0 0 0 0 0 0 0 0 0 UAH (30) 5 3 (2) (14) (14) (7) 0 0 0 0 0 USD 139 15 (32) 23 72 50 4 (6) 11 1 0 0 Other (61) 2 (22) 38 11 (4) (7) (36) (29) (8) (4) 0 The presentation of currencies changed year-on-year depending on the absolute amount of interest rate sensitivity. 2022 in € thousand Total < 3 m > 3 to 6 m > 6 to 12 m > 1 to 2 y > 2 to 3 y > 3 to 5 y > 5 to 7 y > 7 to 10 y > 10 to 15 y > 15 to 20 y > 20 y ALL 55 (2) (4) (13) 6 19 45 3 5 7 (4) (8) BGN 0 0 0 0 0 0 0 0 0 0 0 0 BYN (2) (1) (1) 0 1 2 (1) (1) 0 0 0 0 CHF (86) (53) (1) 1 3 3 3 (13) (10) (11) (7) (2) CNY (5) (2) (1) (1) 0 0 0 0 0 0 0 0 CZK (788) 55 (19) 2 (179) (178) (274) (127) (35) (32) 0 0 EUR (911) 72 31 92 (295) (162) (325) (334) 146 (68) (50) (19) GBP (11) (2) 0 0 1 (2) (7) (1) 0 0 0 0 HRK 182 6 (2) (9) 9 33 80 (4) 54 15 0 0 HUF (210) 6 (3) (20) (16) (12) (58) (44) (62) (2) 1 0 PLN (20) (3) (5) 2 (1) (3) (3) (3) (4) 0 0 0 RON (206) (3) 6 10 (11) (2) (10) (121) (77) 4 (1) 0 RSD 12 (1) (3) 1 (2) (7) 25 (1) 0 0 0 0 RUB (9) 35 (4) 12 (138) (30) 35 95 83 (81) (15) (2) SGD 0 0 0 0 0 0 0 0 0 0 0 0 UAH 6 3 1 (4) 8 6 (7) 0 0 0 0 0 USD 228 57 96 40 16 2 29 10 0 (23) 0 0 Other (34) 7 (3) (5) (1) 1 (2) (13) (11) (2) (3) 0 Credit spread risk The market risk management framework uses time-dependent bond and CDS spread curves as risk factors in order to measure credit spread risks. It captures all capital market instruments in the trading and banking book. (44) Liquidity management Despite the ongoing Russian invasion in Ukraine and intense media coverage of RBI, the liquidity position remained stable throughout 2023. In response to the unstable environment, several decisions were made and implemented in 2023 to establish an additional liquidity buffer. These decisions included increasing buffers in selected and total currencies and adjusting models based on observed statistics from previous years. Ongoing analysis, monitoring, and scenario analysis for potential adverse developments have been Consolidated financial statements167 · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 implemented. Additionally, a separate monitoring of RBI’s liquidity risk position, excluding Russian subsidiaries, was initiated in 2023, proving that RBI’s liquidity risk position remains within target levels even without the Russian business. The ILAAP framework and governance once again proved to be solid and functioning even in times of crisis. Daily monitoring of the liquidity position using dynamic dashboards showed that the infrastructure and monitoring are effective and support quick reactions in times of crisis. Funding structure The Group’s funding structure is highly focused on retail business in Central and Eastern Europe. In addition, as a result of the Austrian Raiffeisen Banking Group’s strong local market presence, the Group also benefits from funding through the Raiffeisen Landesbanken. Different funding sources are utilized in accordance with the principle of diversification. These include the issue of international bonds by RBI AG, the issue of local bonds by the Group units and the use of third-party financing loans (includ- ing supranationals). Partly due to tight country limits and partly due to beneficial pricing, the Group units also use interbank loans with third-party banks. Principles Internal liquidity management is an important business process within general bank management, because it ensures the continuous availability of funds required to cover day-to-day demands. Liquidity adequacy is ensured from both an economic and a regulatory perspective. In order to approach the economic per- spective RBI established a governance framework comprising internal limits and steering measures which complies with the Principles for Sound Liquidity Risk Management and Supervision set out by the Basel Committee on Banking Supervision and the Kreditinstitute-Risikomanagement-Verordnung (KI-RMV) issued by the Austrian regulatory authority. The regulatory component is addressed by complying with the reporting requirements under Basel III (Liquidity Coverage Ratio, Net Stable Funding Ratio, and Additional Liquidity Monitoring Metrics) as well as by complying with the regulatory limits. In addition, some Group units have additional liquidity and reporting requirements set by their local supervisory authorities. Organization and responsibility Responsibility for ensuring adequate levels of liquidity lies with the overall Management Board. The board members with func- tional responsibility are the Chief Financial Officer (Treasury) and the Chief Risk Officer (Risk Controlling). Accordingly, the pro- cesses regarding liquidity risk are essentially run by two areas within the bank: Firstly the Treasury units, which take on liquidity risk positions within the strategy, guidelines and parameters set by the responsible decision-making bodies. Secondly, they are monitored and supported by independent Risk Controlling units, which measure and model liquidity risk positions, set limits and supervise compliance with those. 168 Consolidated financial statements · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 83.8 % Loan/Deposit Ratio (up 1.4 PP) Besides the responsible units in the line functions, all network banks have respective asset/liability management committees (ALCOs). These committees act as decision-making bodies with respect to all matters affecting the management of the liquid- ity position and balance sheet structure of a unit including the definition of strategies and policies for managing liquidity risks. The ALCOs take decisions and provide standard reports on liquidity risk to the Board of Management at least on a monthly ba- sis. On Group level these functions are taken by the Group ALCO. Treasury operations and the respective ALCO decisions are mainly based on Group-wide, standardized Group rules and their local supplements, which take specific regional factors into account. Liquidity strategy Treasury units are committed to achieving KPIs and to complying with risk-based principles. The current set of KPIs includes general targets, e.g. for return on risk-adjusted capital (RORAC) or coverage ratios, as well as specific Treasury targets for li- quidity such as a minimum survival period in defined stress scenarios or minimum liquidity targets in regulatory indicators. While generating an adequate structural income from maturity transformation which reflects the liquidity and market risk po- sitions taken by the bank, Treasury has to follow a prudent and sustainable risk policy when steering the balance sheet. Strate- gic goals comprise a reduction of parent funding within the Group, the sustainable management of the depositor base and credit growth as well as continuous compliance with regulatory requirements and the internal limit framework. Liquidity risk framework Regulatory and internal liquidity reports and ratios are generated based on certain modelling assumptions. Whereas the regu- latory reports are calculated on specifications given by authorities, the internal reports are modelled with assumptions from empirical observations. The Group has a substantial database along with expertise in forecasting cash flows arising from all material on- and off-bal- ance sheet positions. The modelling of liquidity inflows and outflows is carried out on an appropriate granular level, differenti- ating between product and customer segments, and, where applicable, currencies as well. Modelling of retail and corporate customer deposits includes assumptions concerning the retention times for deposits after maturity. The model assumptions are quite prudent, e.g. there is a no-rollover assumption on funding from banks and all funding channels and the liquidity buffer are stressed simultaneously. The cornerstones of the economic liquidity risk framework are the Going Concern (GC) and the Time-to-Wall (TTW) scenario. The Going Concern report shows the structural liquidity position. It covers all main risk drivers which could detrimentally affect the Group in a business-as-usual scenario. The Going Concern models are important input factors for the liquidity contribution to the internal funds transfer pricing model. On the other hand, the Time-to-Wall report shows the survival horizon for defined adverse scenarios and stress models (market, reputational and combined crisis) and determines the minimum level of the li- quidity buffer (and/or the counter-balancing capacity) of the Group and its individual units. The liquidity scenarios are modelled using a Group-wide approach, acknowledging local specifications where they are justified by influencing factors such as the market or legal environment or certain business characteristics; the calculation is performed at RBI AG. The modelling of cash inflows and outflows differentiates between product and customer segments, while if appli- cable, a distinction is also made between different currencies. For products without a contractual maturity, the distribution of cash inflows and outflows is calculated using a geometric Brownian motion which derives the statistical forecasts for future daily balances from the observed, exponentially weighted historical volatility of the corresponding products. For market crisis scenario a special model for assessment of the potential liquidity outflow due to margin calls is in place. This model relies on Value-at-Risk calculations to estimate the potential depreciation of derivative portfolios involving counterparties with CSA or variation margin agreements. By incorporating this outflow into the liquidity risk stress test, a corresponding buffer is maintained to account for potential margin calls in extremely adverse situations. The liquidity risk framework is continuously developed at both Group level and at the level of the individual Group units. The technical infrastructure is enhanced in numerous Group-wide projects and data availability is improved in order to meet the new reporting and management requirements for this area of risk. Consolidated financial statements169 · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 Risk appetite and liquidity limits The liquidity position is monitored on Group level and on individual unit level and is restricted by means of a comprehensive limit system. Limits are defined both under a business-as-usual as well as under a stress perspective. In accordance with the defined risk appetite, each Group unit must demonstrate a survival horizon of several months (TTW) in a severe, combined stress scenario (reputational and market stress). This can be ensured either by a structurally positive liquidity profile or by a sufficiently high liquidity buffer. In a normal going-concern environment, maturity transformation must be fully covered by the available liquidity buffer in the medium term. This means that the cumulative liquidity position over a period of up to one year must be positive. In the long term (one year or more), maturity transformation is permitted up to a certain level. The internal model limits are supplemented by limits for compliance with regulatory liquidity ratios, such as the liquidity coverage ratio. All limits must be complied with on a daily basis. Liquidity monitoring The bank uses a range of customized measurement tools and early warning indicators that provide board members and senior management with timely and forward-looking information. The limit framework ensures that the bank can continue to operate in a period of severe stress. Monitoring of limits and reporting limit compliance is performed regularly and effectively. Any breach by Group units is reported to the Group ALCO and escalated. In such cases, appropriate steps are undertaken in consultation with the relevant unit or contentious matters are escalated to the next highest responsible body. Liquidity stress testing Stress tests are conducted for RBI AG and the network banks on a daily basis and on Group level. The tests cover three scenar- ios (market, reputational and combined crisis), consider the effects of the scenarios for a period of several months and demon- strate that stress events can simultaneously result in a time-critical liquidity requirement in several currencies. The stress scenarios include the principal funding and market liquidity risks. This means that in the stress tests of the Group, all network units are simultaneously subject to a pronounced combined crisis for all their major products. The results of the stress tests are reported to the Chief Risk Officer and the Chief Financial Officer as well as other members of management on a weekly basis; they also form a key component of the monthly ALCO meetings and are included in the bank’s strategic planning and contin- gency planning. A conservative approach is adopted when establishing outflow ratios based on historical data and expert opinions. The simula- tion assumes a lack of access to the money or capital market and simultaneously significant outflows of customer deposits. In this respect, the deposit concentration risk is also considered by assigning higher outflow ratios to large customers. Further- more, stress assumptions are formulated for the drawdown of guarantees and credit obligations. In addition, the liquidity buffer positions are adapted by haircuts in order to cover the risk of disadvantageous market movements, and the potential outflows resulting from collateralized derivative transactions are estimated. The bank continuously monitors whether the stress assumptions are still appropriate or whether new risks need to be considered. The Time-to-Wall concept has established itself as the main control instrument for day-to-day liquidity management and is therefore a central component of funding planning and budgeting. It is also fundamental to determining performance ratios relating to liquidity. Liquidity buffer As shown by the daily liquidity risk reports, the main Group units actively maintain and manage liquidity buffers, including high- quality liquid assets (HQLA) which are always sufficient to cover the net outflows expected in crisis scenarios. The Group has sizeable, unencumbered and liquid securities portfolios and favors securities eligible for central bank tender transactions in order to ensure sufficient liquidity in various currencies. The main Group units ensure the availability of liquidity buffers, test their ability to utilize central bank funds, constantly evaluate their collateral positions as regards their market value and en- cumbrance and examine the remaining counterbalancing capacity, including the funding potential and the saleability of the assets. Generally, a haircut is applied to all liquidity buffer positions. In the stressed liquidity report (time-to-wall), these haircuts in- clude a market-risk specific haircut and a central bank haircut. While the market risk haircut represents the potential price vol- atility of the securities held as assets as part of the liquidity buffer, the central bank haircut represents an additional haircut for each individual relevant security that may be offered as collateral. 170 Consolidated financial statements · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 Intraday liquidity management In compliance with regulatory requirements for intraday liquidity management, the available liquidity is calculated daily analo- gous to the outflow assumptions of the regular liquidity stress reports (time-to-wall) for RBI AG. In case of limit breaches, an intraday contingency and escalation process is triggered commensurate with the severity of the breach. For the whole of RBI, the local intraday liquidity management process is within the responsibility of the local Treasury unit which ensures that the following minimum standards are implemented locally: clear responsibilities and workflows for managing intraday liquidity; daily monitoring of available intraday liquidity; intraday liquidity forecasting model and limit; escalation and contingency pro- cesses and measures in case of limit breaches. Contingency funding plan Under difficult liquidity conditions, the units switch to a contingency process in which they follow predefined liquidity contin- gency plans. These contingency plans also constitute an element of the liquidity management framework and are mandatory for all significant Group units. The emergency management process is designed so that the Group can retain a strong liquidity position even in serious crisis situations. Liquidity position Group funding is founded on a strong customer deposit base supplemented by wholesale funding – mainly via RBI AG and the Group units. Funding instruments are appropriately diversified and are used regularly. The ability to procure funds is precisely monitored and evaluated by the Treasury ALM units and the ALCOs. In the past year and to date, the Group’s excess liquidity was above all regulatory and internal limits (with a handful of excep- tions in the area of internal sub-limits). The result of the internal time-to-wall stress test demonstrates that the Group would survive throughout the modelled stress phase of several months even without applying contingency measures. The Going Concern report shows the structural liquidity position. It covers all material risk drivers which might affect the Group in a business as usual scenario. The results of the going concern scenario are shown in the following table. It illustrates excess liquidity and the ratio of expected cash inflows plus counterbalancing capacity to cash outflows (liquidity ratio) for selected maturities on a cumulative basis. Based on assumptions employing expert opinions, statistical analyses and country specifics, this calculation also incorporates estimates of the stability of the customer deposit base, outflows from items off the state- ment of financial position and downward market movements in relation to positions which influence the liquidity counterbal- ancing capacity. in € million 2023 2022 Maturity 1 month 1 year 1 month 1 year Liquidity gap 49,061 57,382 47,281 46,094 Liquidity ratio 190 % 152 % 179 % 136 % Liquidity coverage ratio (LCR) The liquidity coverage ratio (LCR) requires the short-term resilience of banks by ensuring that they have an adequate stock of unencumbered high-quality liquid assets (HQLAs) to meet potential liability run offs that might occur in a crisis, which can be converted into cash to meet liquidity needs for a minimum of 30 calendar days in a liquidity stress scenario. The calculation of expected inflows and outflows of funds and the HQLAs is based on regulatory guidelines. The regulatory limit for LCR is 100 per cent. in € million 2023 2022 Average liquid assets 39,310 43,954 Net outflows 20,781 21,712 Inflows 18,773 21,475 Outflows 39,554 43,188 Liquidity Coverage Ratio 189 % 202 % Consolidated financial statements171 · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 Net Stable Funding Ratio (NSFR) The NSFR is defined as the ratio of available stable funding to required stable funding. Available stable funding is defined as the portion of equity and debt which is expected to be a reliable source of funds over the time horizon of one year covered by the NSFR. A bank’s required stable funding depends on the liquidity characteristics and residual maturities of the various assets and off-balance-sheet positions. RBI targets a balanced funding position. The required stable funding and available stable funding are based on regulatory requirements. The regulatory NSFR limit is 100 per cent. in € million 2023 2022 Required stable funding 115,960 119,608 Available stable funding 163,982 161,545 Net Stable Funding Ratio 141 % 135 % NSFR remained stable in 2023. Funding liquidity risk Funding liquidity risk is mainly driven by changes in the risk strategy of lenders or by a deterioration in the creditworthiness of a bank that needs external funding. Funding rates and supply rise and fall with credit spreads, which change due to the market or bank-specific situation. As a consequence, long-term funding depends on restoring confidence in banks and increased efforts in collecting customer deposits. RBI AG’s banking activities are financed by combining wholesale funding and the retail franchise of deposit-taking subsidiary banks. It is the central liquidity balancing agent for the local Group units in Central and Eastern Europe. In the Group’s funding plans, special attention is paid to a diversified structure of funding to mitigate funding liquidity risk. In the Group, funds are not only raised by RBI AG as the Group’s parent institution, but also individually by different banking sub- sidiaries. Those efforts are coordinated and optimized through a joint funding plan. Moreover, RBI AG arranges medium-term and long-term funding for its subsidiaries through syndicated loans, bilateral funding agreements with banks, and financing facilities provided by supranational institutions. These funding sources are based on long-term business relationships. For managing and limiting liquidity risks, the targets for the loan/deposit ratio (the ratio of customer loans to customer depos- its) in the individual subsidiary banks take into account the planned future business volumes as well as the feasibility of in- creasing customer deposits in different countries. On the one hand, this initiative reduces external funding requirements. On the other hand, it also reduces the need for internal funding operations and the risk associated with such liquidity transfers. 172 Consolidated financial statements · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 The following table shows a breakdown of cash flows according to the contractual maturity of financial assets: 2023 in € million Carrying amount Contractual cash flows Up to 3 months More than 3 months, up to 1 year More than 1 year, up to 5 years More than 5 years Non-derivative financial assets 188,055 212,587 76,767 21,740 60,224 53,856 Cash, balances at central banks and other demand deposits 43,234 43,523 43,523 0 0 0 Loans and advances 114,147 133,352 30,138 18,220 45,295 39,699 Central banks 7,860 7,884 7,868 16 0 0 General governments 2,145 2,313 147 215 714 1,237 Banks 6,854 7,013 5,218 328 1,172 295 Other financial corporations 10,566 11,822 3,880 1,684 5,035 1,223 Non-financial corporations 47,049 52,593 10,567 12,019 24,754 5,252 Households 39,674 51,728 2,458 3,958 13,619 31,692 Debt securities 30,674 35,713 3,106 3,520 14,929 14,157 Central banks 68 64 64 0 0 0 General governments 24,683 28,967 2,521 2,675 10,905 12,866 Banks 3,865 4,289 356 539 2,494 900 Other financial corporations 1,114 1,265 67 172 862 165 Non-financial corporations 944 1,127 99 135 668 226 Derivative financial assets 4,569 3,925 449 694 1,803 979 Derivatives - Trading book 3,774 3,636 450 636 1,610 941 Derivatives – hedge accounting 1,160 297 9 57 192 39 Fair value adjustments of the hedged items in portfolio hedge of interest rate risk (365) (9) (10) 0 2 (1) 2022 in € million Carrying amount Contractual cash flows Up to 3 months More than 3 months, up to 1 year More than 1 year, up to 5 years More than 5 years Non-derivative financial assets 196,046 217,983 90,430 23,034 58,282 46,245 Cash, balances at central banks and other demand deposits 53,683 54,010 54,010 0 0 0 Loans and advances 118,946 137,710 34,514 19,563 47,180 36,453 Central banks 8,814 8,816 8,816 0 0 0 General governments 2,143 2,301 278 282 726 1,015 Banks 6,902 6,983 5,242 401 998 341 Other financial corporations 11,390 12,435 4,402 1,707 4,970 1,357 Non-financial corporations 48,829 54,038 12,926 10,947 23,982 6,183 Households 40,867 53,136 2,850 6,226 16,503 27,557 Debt securities 23,418 26,262 1,905 3,470 11,103 9,792 Central banks 4 4 4 0 0 0 General governments 17,599 19,781 1,351 2,670 7,947 7,812 Banks 3,634 3,814 252 622 2,125 814 Other financial corporations 1,184 1,422 199 88 461 682 Non-financial corporations 997 1,242 98 90 570 483 Derivative financial assets 5,721 5,188 265 1,037 2,357 1,529 Derivatives - Trading book 5,059 5,128 571 973 2,139 1,445 Derivatives – hedge accounting 1,608 378 11 64 218 85 Fair value adjustments of the hedged items in portfolio hedge of interest rate risk (947) (318) (316) 0 0 (2) Consolidated financial statements173 · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 The following table shows a breakdown of cash flows according to the contractual maturity of financial liabilities: 2023 in € million Carrying amount Contractual cash flows Up to 3 months More than 3 months, up to 1 year More than 1 year, up to 5 years More than 5 years Non-derivative financial liabilities 170,883 174,220 123,254 10,997 30,488 9,481 Deposits 145,497 146,580 120,571 9,445 11,866 4,698 Central banks 2,987 3,046 2,604 65 250 128 General governments 3,702 3,744 3,116 439 156 34 Banks 23,158 23,608 15,411 1,427 4,899 1,871 Other financial corporations 12,114 12,450 8,864 799 1,212 1,574 Non-financial corporations 45,084 45,211 42,598 2,115 363 135 Households 58,453 58,521 47,978 4,601 4,987 955 Short positions 567 560 554 6 0 0 Debt securities issued 23,335 25,691 755 1,530 18,622 4,783 Other financial liabilities 1,484 1,389 1,374 15 0 0 Derivative financial liabilities 4,331 4,288 231 817 2,042 1,197 Derivatives - Trading book 3,379 4,364 614 694 1,924 1,132 Derivatives – hedge accounting 1,466 394 93 124 117 59 Fair value adjustments of the hedged items in portfolio hedge of interest rate risk (514) (469) (476) 0 1 5 Financial guarantees given 9,761 9,753 4,670 2,049 1,708 1,326 Issued loan commitments 36,601 36,601 13,170 5,119 9,000 9,312 2022 in € million Carrying amount Contractual cash flows Up to 3 months More than 3 months, up to 1 year More than 1 year, up to 5 years More than 5 years Non-derivative financial liabilities 179,743 184,492 129,428 16,338 27,789 10,937 Deposits 158,740 160,679 126,827 14,086 15,208 4,558 Central banks 8,915 9,489 524 4,760 4,067 138 General governments 2,895 2,954 2,030 469 378 76 Banks 24,726 25,132 17,427 1,833 4,437 1,435 Other financial corporations 13,286 14,023 9,882 1,088 1,135 1,918 Non-financial corporations 50,042 50,135 47,321 2,180 427 207 Households 58,876 58,946 49,642 3,757 4,763 784 Short positions 91 91 91 0 0 0 Debt securities issued 18,957 21,785 601 2,231 12,581 6,372 Other financial liabilities 1,955 1,938 1,910 21 0 7 Derivative financial liabilities 5,639 5,512 (287) 1,292 3,062 1,445 Derivatives - Trading book 4,802 6,117 822 1,131 2,692 1,472 Derivatives – hedge accounting 2,054 549 47 161 370 (30) Fair value adjustments of the hedged items in portfolio hedge of interest rate risk (1,217) (1,154) (1,156) 0 0 2 Financial guarantees given 9,370 9,370 4,239 2,187 1,751 1,193 Issued loan commitments 37,193 37,193 11,483 5,714 9,996 9,999 (45) Operational risks Operational risk is defined as the risk of losses resulting from inadequate or failed internal processes, people and systems or from external events, including legal risk. In this risk category internal risk drivers such as unauthorized activities, fraud or theft, conduct-related losses, modelling errors, execution and process errors, or business disruption and system failures are managed. External factors such as damage to physical assets or fraud are managed and controlled as well. This risk category is analyzed and managed based on own historical loss data and the results of risk assessments. As with other risk types the principle of firewalling of risk management and risk controlling is also applied to operational risk in the Group. To this end, individuals are designated and trained as Operational Risk Managers for each business area. Operational Risk Managers provide central Operational Risk Controlling with reports on risk assessments, loss events, indicator values and measures. They are supported in their work by Dedicated Operational Risk Specialists (DORS). Operational risk controlling units are responsible for reporting, implementing the framework, developing control measures and monitoring compliance with requirements. Within the framework of the annual risk management cycle, they also coordinate the participation of the relevant second line of defense departments (Financial Crime Management, Compliance, Vendor Man- agement, Outsourcing Management, Insurance Management, Information Security, Physical Security, Business Continuity Man- 174 Consolidated financial statements · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 agement, Internal Control System, Technology Risk Management) and all first line of defense partners (Operational Risk Managers). Risk identification Identifying and evaluating risks that might endanger the Group’s existence (but the occurrence of which is highly improbable) and areas where losses are more likely to arise more frequently (but have only limited impact) are important aspects of opera- tional risk management. Operational risk assessment is executed in a structured and Group-wide uniform manner according to risk categories such as business processes and event types. Moreover, risk assessment applies to new products as well. All Group units grade the im- pact of high probability/low impact events and low probability/high impact incidents according to their estimation of the loss potential for the next year and in the next ten years. Low probability/high impact events are quantified by a Group-wide ana- lytical tool (scenarios). The internal risk profile, losses arising and external changes determine which cases are dealt with in de- tail. In addition, scenario analyses for focus topics such as ESG, model risks or cyber risks are specified via the Group. Monitoring In order to monitor operational risks, early warning indicators are used that allow prompt identification and minimization of losses. Loss data is collected in a central database called Archer (an overall non-financial risk platform) in a structured manner and on a Group-wide basis according to the event type and the business line. In addition to the requirements for internal and external reporting, information on loss events is exchanged with international data pools to further develop operational risk management tools as well as to track measures and control effectiveness. The Group is a participant in the ORX data pool (Operational Risk Data Exchange Association), whose data are currently used for internal benchmark purposes and analyses and as part of the operational risk model. The ORX data consortium is an association of banks and insurance groups for statis- tical purposes. The results of the analyses as well as events resulting from operational risks are reported in a comprehensive manner to the relevant Operational Risk Management Committee on a regular basis. Quantification and mitigation At year-end 2023, the equity requirement for operational risk was calculated using the standardized approach. This led to a € 120 million increase in capital requirements (€ 1.5 billion higher RWAs) due to the discontinuation of the advanced measure- ment approach. This adjustment will be effective until the implementation of the CRR III. The economic capital is based on an internal model with external and internal losses as input factors and Group-wide scenar- ios. Risk-based control is carried out with allocation based on the input factors of the relevant units and the operating income for stabilization. The standards which are implemented and complied with at Group level correspond to an advanced approach for all operational risk methods. To reduce operational risk, business managers decide on preventive risk-reduction actions such as risk mitigation or risk trans- fer. The progress and effectiveness of these actions is monitored by Risk Control. The former also define contingency plans and nominate responsible persons or departments for initiating the defined actions if losses in fact occur. In addition, several dedi- cated organizational units provide support to business units for preventing operational risks. An important role in connection with operational risk activities is taken on by Financial Crime Management and Technology Risk Management. Financial Crime Management provides support for the prevention and identification of fraud. Technology Risk Management has an important role in defining and monitoring IT risks. The Group also conducts an extensive staff training program and has different con- tingency plans and back-up systems in place. Loss data per category of operational risk are collected for all units in the CRR Group. Consolidated financial statements175 · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 These are distributed across the Basel risk categories as follows, but do not include any loss events that are already reflected in the credit risk provisions: in € million 2023 Share 2022 Share Clients, Products and Business Practices 962 95.2% 541 92.8 % Internal Fraud 33 3.3% 2 0.3 % Disasters and Public Safety 8 0.8% 16 2.8 % Technology and Infrastructure Failures 3 0.3% 1 0.1 % External Fraud 3 0.3% 6 1.1 % Excecution, Delivery and Process Management 2 0.2% 17 2.9 % Employment Practices and Workplace Safety 1 0.1% 0 0.0 % Total 1,011 100.0% 584 100.0 % Number of OpRisk events 2023 Share 2022 Share External Fraud 33,743 77.9% 28,305 65.4% Clients, Products and Business Practices 5,561 12.8% 4,480 10.3% Technology and Infrastructure Failures 2,443 5.6% 348 0.8% Excecution, Delivery and Process Management 1,117 2.6% 1,219 2.8% Disasters and Public Safety 274 0.6% 7,153 16.5% Internal Fraud 90 0.2% 73 0.2% Employment Practices and Workplace Safety 83 0.2% 100 0.2% Total 43,311 100.0% 41,678 96.2% Other disclosures (46) Pending legal issues RBI is involved in various legal, administrative or arbitration proceedings before various courts and authorities mainly arising in the ordinary course of business and involving contractual, labor, and other matters. A provision is only recognized if there is a legal or constructive obligation because of a past event, payment is likely, and the amount can be reliably estimated. A contingent liability that arises from a past event is disclosed unless payment is highly unlikely. A contingent asset that arises from a past event is reported if there is high probability of occurrence. In no instance in the description that follows is an amount stated in which, in accordance with IAS 37, this would be severely detrimental. In some cases, provisions are measured on a portfolio basis because this results in the obligation being estimated with greater reliability. RBI has grouped its provisions, contingent assets, and contingent liabilities under the headings of consumer protection, banking business, regulatory enforcement, and tax litigation. Consumer protection RBI faces customer lawsuits in connection with consumer protection matters. Most claims relate to terms of contract that are alleged to breach consumer protection or other laws. The legal risk associated with such claims is heightened by the danger of politically motivated legislation that increases the degree of unpredictability. Croatia In Croatia, following litigation initiated by a Croatian consumer association against Raiffeisenbank Austria, d.d., Zagreb (RBHR), and other Croatian banks, two contractual clauses used in consumer loan agreements between 2003/2004 and 2008 were declared null and void: an interest change clause and a CHF index clause. The decision on the interest adjustment clause cannot be challenged any more. The decision on the nullity of the CHF index clause which was confirmed by the Croatian Supreme Court also passed control of the Croatian Constitutional Court. RBHR is exploring the possibility to challenge this decision, and submitted an application before the European Court for Human Rights in August 2021. The issue of CHF-indexed loans which were converted under the Croatian Conversion Act into EUR-indexed loans was pending before the Court of Justice of the European Union (CJEU) for preliminary ruling. In May 2022, CJEU published a preliminary ruling but like the Croatian Supreme Court in a sample dispute, CJEU did not answer whether consumers of converted loans are entitled to any additional compensation (besides the positive effects of the conversion performed under provisions of the Croatian Consumers Credit Act 2015). Therefore, the issue whether consumers are entitled to additional compensation (notwithstanding conversion) remained for domestic courts to judge, primarily for the Croatian Supreme Court. Based on the decisions already rendered on the nullity of the interest change clause and/or the CHF index clause, a number of borrowers have already raised claims against RBHR. In 176 Consolidated financial statements · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 its session in December 2022, the Croatian Supreme Court adopted the view that consumers are entitled to additional compensation only in the amount of default interest on overpayments (if any) made until the conversion of CHF-indexed loans into EUR-indexed loans in 2015. However, in April 2023, the President of the Supreme Court informed the public that the adopted legal position did not pass the control by the Registrar for Judicial Practice of the Supreme Court which has authority to return any decision in case it considers that it does not comply with the law. A possible solution (whether consumers are entitled to additional compensation or not) is expected to be given in the individual rulings of the Croatian Supreme Court. Only such specific rulings may then be challenged before the Constitutional Court. Given current legal uncertainties relating to the statute of limitations, the validity of the CHF index clause/conversion performed, the calculation of the additional compensation, the further course of action, the final outcome of the request for preliminary ruling and the number of borrowers raising such claims, final quantification of the financial impact and the possible damage is not possible at this point of time. In this connection, the provision recognized on a portfolio basis was increased to € 67 million (previous year: € 62 million). Poland In Poland, a significant number of civil lawsuits are pending in relation to certain contractual stipulations connected with consumer mortgage loans denominated in or indexed to foreign currencies. As at 31 December 2023, the total amount in dispute was approximately PLN 5,411 million (€ 1,156 million). The number of lawsuits continues to increase. In this context, a Polish court requested the Court of Justice of the European Union (CJEU) to clarify whether certain clauses in these agreements breach European law and are unfair. The CJEU’s preliminary ruling (C-260/18) in October 2019 does not answer whether the loan agreements are invalid in whole or part but merely gives interpretative guidance on the principles according to which the national courts must decide in each individual case. According to this, a loan agreement without unfair terms should remain valid provided that it is in conformity with national law. If a loan agreement cannot remain valid without the unfair term, the entire contract would have to be annulled. If the annulment of the entire contract triggers material negative consequences for the borrower, the Polish courts can replace the unfair term by a valid term in accordance with national law. The consequences of the contract being annulled must be carefully examined so that the borrower can consider all potential negative consequences of annulment. However, the consequences of canceling an annulled loan agreement remain unclear and may be serious for the borrower, for example due to the obligation to repay the loan immediately including the costs of using the loan amount. It remains to be seen how the principles developed by the CJEU will be applied under national law on a case-by-case basis. In another proceeding involving RBI, the District Court for Warszawa-Wola in Warsaw requested the CJEU to issue a preliminary ruling concerning the way in which the contractual provisions concerning the rules for determining the buying and selling rates for foreign currency are to be formulated in the case of consumer mortgage loans indexed to a foreign currency. In the judgement of 18 November 2021 in case C-212/20, the CJEU considered that the content of a clause of a loan agreement that sets the buying and selling prices of a foreign currency to which the loan is indexed must enable a reasonably well informed and reasonably observant consumer, based on clear and intelligible criteria, to understand the way in which the foreign currency exchange rate used to calculate the amount of the repayment installments is set. Based on information specified in such a provision, the consumer must be able to determine on his or her own, at any time, the exchange rate applied by the entrepreneur. In the justification the CJEU specified that a provision that does not enable the consumer to determine the exchange rate himself or herself is unfair. Moreover, the CJEU indicated in said judgement that the national court, when the considered term of a consumer contract is unfair, is not allowed to interpret that term in order to remedy its unfairness, even if that interpretation would correspond to the common intention of the parties to that contract. Only if the invalidity of the unfair term were to require the national court to annul the contract in its entirety, thereby exposing the consumer to particularly unfavorable consequences, so that the consumer would thus be penalized, the national court might replace that term with a supplementary provision of national law. The CJEU therefore did not entirely preclude national courts hearing such cases from supplementing the contract with supplementary provisions of national law, but gaps may not be filled solely with national provisions of a general nature and such remedy may be applied only in strictly limited cases as specified by the CJEU. The assessment of an unfair nature of contractual provisions as well as the decision concerning supplementation of the contract after removal of unfair contractual clauses, however, still falls within the competence of the national court hearing the case. The CJEU did not determine at all whether, in the consequence of the above-mentioned actions, the entire foreign currency contract is to be annulled. The current judicial practice of Polish courts is already consistent with the CJEU’s preliminary ruling and, thus, unfavorable for banks holding consumer mortgage loans indexed to a foreign currency. The respective clauses, depending on the assessment made by the national court hearing the case, may not meet the requirements as specified in the above CJEU judgement. Consolidated financial statements177 · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 On 15 June 2023, the CJEU announced its judgment in case C-520/21 on the consequences of the annulment of a mortgage loan agreement vitiated by unfair terms. The consumer mortgage loan agreement indexed to CHF had been annulled on the ground that the conversion clauses determining the rate of exchange into PLN for purposes of the monthly installments were considered to be unfair and that the loan agreement could not continue in existence after removal of the unfair terms. The CJEU observed that EU law does not expressly govern the consequences of the annulment of a consumer contract which are to be determined by domestic legislation in the individual EU member states. Such domestic legislation has to be compatible with EU law and its objectives, in particular to restore the situation which the consumer would have been in had the annulled contract not existed as well as not to undermine the deterrent effect sought by EU law. According to the CJEU, EU law does not preclude consumers from seeking compensation from the bank going beyond the reimbursement of the monthly installments paid and the expenses paid in respect of the performance the mortgage loan agreement together with the payment of default interest at the statutory rate from the date on which notice is served. Nevertheless, it is a matter for the national courts to determine whether upholding such claims on the part of the consumers is in accordance with the principle of proportionality. By contrast, EU law precludes the bank from being able to claim from the consumer compensation going beyond reimbursement of the capital paid in respect of the performance of the mortgage loan agreement together with the payment of default interest at the statutory rate from the date on which notice is served. A significant inflow of new cases has been observed since the beginning of 2020 as a result of the CJEU preliminary ruling and of intensified marketing activity by law firms acting on behalf of borrowers. Such an increased inflow of new cases has not only been observed by RBI’s Polish branch, but by all banks handling currency loan portfolios in Poland. Furthermore, Polish courts have approached the CJEU with requests for a preliminary ruling in other civil proceedings. That ruling could lead to further clarifications and may influence how court cases concerning foreign currency loans are decided by national Polish courts. The impact assessment in relation to affected FX-indexed or FX-denominated loan agreements may also be influenced by the outcome of ongoing administrative proceedings conducted by the President of the Office of Competition and Consumer Protection (UOKiK) against RBI’s Polish branch. Such administrative proceedings are, inter alia, based on the alleged practice of infringing collective consumer interests as well as on the classification of clauses in standard agreements as unfair. As at this point of time, it is uncertain what the potential impact of said proceedings could be on FX-indexed or FX-denominated loan agreements and RBI. Furthermore, such proceedings have resulted in and could result in the imposition of administrative fines on RBI’s Polish branch – and in the event of appeals – in administrative court proceedings. Moreover, the Polish Financial Ombudsman, acting on behalf of two borrowers, has initiated a civil proceeding against RBI alleging employment of unfair commercial practices towards consumers in respect of a case in which RBI – following the annulment of a loan agreement – claimed the full loan amount originally disbursed without taking into account repayments made in the meantime as well as amounts due for the use of capital by the borrowers based on the principle of unjust enrichment, and has demanded that RBI discontinue such practices. In May 2023, the claim of the Financial Ombudsman was dismissed by the court of first instance. Model description and sensitivity analysis RBI has around 26,000 CHF loans to customers outstanding with a total volume of around € 1,9 billion and a further 10,000 loans have been repaid. These also include loans that are not expected to be the subject of litigation. RBI has recognized a provision for the lawsuits filed in Poland. As lawsuits have been filed by a number of customers, the provision is based on a statistical approach that takes into account both statistical data, where relevant, and expert opinions. The term provision, used here, includes provisions according to IFRS 9, where the gross carrying amount is reduced by the provision amount due to revision of expected cash flows, as well as provisions according to IAS 37. Possible decision scenarios have been estimated together with the expected loss rates per scenario. The expected impact is based on loans from customers who have filed or, based on propensity to litigate, expected to file a lawsuit against the bank. To calculate the financial impact per scenario, the claim amount is multiplied by the estimated financial outflow in the scenario and the probability that the bank will ultimately have to pay compensation to the customer. An appropriate discount rate is applied to outflows that are not expected to arise within one year. The resulting provision has been increased to € 1,652 million (previous year: € 803 million). The total amount of the provision for CHF loans in Poland represents RBI’s best estimate of the future outflow of economic benefits. In calculating the CHF provision for lawsuits filed in Poland, it is nevertheless necessary to form an opinion on matters that are inherently uncertain, such as official pronouncements, the number of future lawsuits, the probability of losing court cases and the development of jurisprudence that lead to negative scenarios. 178 Consolidated financial statements · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 A number of risks and uncertainties remain, and the cost could therefore differ from RBI’s estimates and the assumptions underpinning them and result in a further provision being required. The main measurable uncertainties associated with the calculation of the provision relate to a potential reduction in the discount period, a decrease in discount rates, an increase in the number of total expected claims for outstanding and repaid loans and an increase in the provision coverage of outstanding or repaid loans. The sensitivity analysis refined during the reporting year for changes in the actual parameters over the next 12 months, while holding all other parameters constant, is shown in the table below: 2023 Actual parameter Increase/Decrease of the parameter New parameter Increase/Decrease in provision (in € million) Provision amount in € million 1,652 Reduction in discounting period in years 7 (1) 6 55 Decrease in discount rate (IFRS 9 provision) 1.88 % (0.30)PP 1.58 % 22 Increase in propensity to litigate active loans 85.00 % 0.01PP 86.00 % 16 Increase in average loss coverage on outstanding loans 108.00 % 0.01PP 109.00 % 11 Decrease in discount rate (IAS 37 provision) 6.90 % (1.00)PP 5.90 % 14 Increase in propensity to litigate repaid loans 42.00 % 1.00PP 43.00 % 2 The assumptions are based on internal, observable statistics as well as on market observations. The increase in provision is linear for each change, with the exception of the discount rate changes which are logarithmic increases. Furthermore, the model does not take into account changes related to unexpected developments in jurisprudence. Furthermore, RBI has around 10 thousand Euro denominated loans to customers outstanding with a total volume of around € 500 million and a further 8,000 loans have been repaid. A small number of customers with Euro denominated loans have filed litigation against RBI. Settlement program After launching a pilot projekt for an out-of- court settlement program based on the proposal by the Chairman of the Polish Financial Supervisory Authority (KNF) in the second half of 2023, RBI fully launched the settlement program in December 2023. The major goal of the settlement program is to limit the expected losses resulting from the current negative jurisprudence that in most case cancels the mortgage contract. The base offer consists of recalculation of the amount originally disbursed in CHF as if the loan was issued in PLN from the outset applying a WIBOR reference rate increased by the margin historically applied to such loans. This leads to a write-off of a portion of the loan balance depending on the individually negotiated settlement offer. The settlements are offered through a mediation proceeding conducted by the Polish Financial Supervisory Authority. In 2024 RBI will increase its efforts to encourage customers to join the settlement program through active approaching of customers. As of 31 of December 2023, RBI made 946 individual settlement proposals, out of which 244 customers have signed agreements to enter a mediation process. The bank included in the provisioning calculation the estimated number of settlements to be signed with customers reflecting the adjusted level of future losses in these settlement cases. The consideration of settlements in the provision calculation is affected by factors such as the interest rate of PLN loans, the CHF/ PLN conversion rate, the development of the ruling practice and the duration of proceedings. Romania In October 2017, the Romanian consumer protection authority (ANPC) issued an order for RBI’s Romanian network bank Raiffeisen Bank S.A., Bucharest (RBRO), to stop its alleged practice of not informing its customers about future changes in the interest rate charged to the customers. The order did not expressly provide for any direct monetary restitution or payment from RBRO. RBRO, disputed this order in court but finally lost. In September 2022, the decision was rendered in writing. After discussions with ANPC and in accordance with an external legal opinion, RBRO issued new repayment schedules and started to repay certain amounts and related legal interest to affected customers. Based on the latest internal calculations, the expected negative financial impact is expected not to exceed € 28.5 million. Now, after nearly the total aforementioned amount had been paid to customers, ANPC has requested RBRO to provide detailed information on the implementation of the court’s decision and RBRO provided such information. A provision of € 3 million (previous year: € 13 million) has been recognized. Consolidated financial statements179 · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 Furthermore, RBRO, is involved in a number of lawsuits, some of them class actions, as well as administrative proceedings pursued by ANPC, in particular in connection with consumer loans and current account contracts. The proceedings are mainly based on the allegation that certain contractual provisions and practices applied by RBRO violate consumer protection laws and regulations. Such proceedings may result in administrative fines, the invalidation of clauses in agreements, the retroactive change in payment schedules and the reimbursement of certain fees or parts of interest payments charged to customers in the past. One of the proceedings involving ANPC affects a major part of the Romanian banking industry, including RBRO. ANPC has disputed the way installments in connection with consumer loans are computed and claims that repayment schedules with fixed installments, which are composed of a bigger portion of interest and a lower portion of principal in the early stages of the repayment, are detrimental to consumers. It issued an order to stop such practice but a number of banks, including RBRO, have obtained a suspension in court of the application of such ANPC measure. As the meaning of the order is not clear, it is not possible to determine at this point of time whether there will be any negative financial impact on RBRO and, if yes, the potential damage involved. However, in case of a mandatory change of repayment schedules, the impact could be significant. Banking business RBI and its subsidiaries provide services for corporate customers that increase litigation risk at the operating level. The most important cases are as follows: Following the insolvency of Alpine Holding GmbH (Alpine) in 2013, a number of lawsuits were filed by retail investors in Austria against RBI and another credit institution in connection with a bond which had been issued by Alpine in 2012 in an aggregate principal amount of € 100 million. The claims asserted against RBI originally amounted to approximately € 10 million. In total, claims of approximately € 8 million had been filed in court by investors either directly or or indirectly through a 'class action' of the Austrian Federal Chamber for Workers and Employees (Bundeskammer für Arbeiter und Angestellte). Owing to the termination of some of the proceedings and claim reductions in other proceedings, the value in dispute of the pending court proceedings against RBI currently amounts to approximately € 7 million. Among other things, it is claimed that the banks acted as joint lead managers of the bond issue and were or at least should have been aware of financial problems of Alpine at the time of the issue. Thus, they should have known that Alpine was not in a position to redeem the bonds as set forth in the terms and conditions of the bonds. It is alleged that the capital market prospectus in relation to the bond issue was misleading and incomplete and that the joint lead managers including RBI, were aware of that fact. In December 2023, in several joint proceedings the court of first instance issued a partial judgment and dismissed the claims of the investors based on prospectus liability in the amount of in total approximately € 5.9 million regarding RBI related claims. The judgment is not final. In the first quarter of 2021, RBI learned about a claim already filed against it in Jakarta by an Indonesian company in November 2020. The amount of the alleged claim is approximately USD 129 million (€ 121 million) in material damages and USD 200 million (€ 188 million) in immaterial damages. The claim was served upon RBI in May 2022. On 27 June 2023, the South Jakarta District Court (Pengadilan Negeri Jakarta Selatan), held that RBI has committed an unlawful act against the Indonesian company and ordered RBI to pay damages in the amount of USD 119 million (€ 112 million). In view of the facts of the case and the legal situation, RBI is still of the opinion that the claims are neither valid nor enforceable against RBI and therefore filed an appeal against the judgment with the High Court of Jakarta (Pengadilan Tinggi Jakarta). In August 2019, RBI launched a claim for approximately € 44 million against a Cayman Islands incorporated parent company, several of its subsidiaries and one former subsidiary (the Cayman Islands Defendants) in the Grand Court of the Cayman Islands, Financial Services Division (the CI Proceedings). In the CI Proceedings, RBI alleges that the Cayman Islands Defendants participated in transactions to defraud creditors and a fraudulent conspiracy to injure RBI, by dissipating assets so as to frustrate RBI’s claims under a number of parent company guarantees. Furthermore, RBI alleges that said transfers were carried out at undervalue or without consideration between or among the Cayman Islands Defendants. RBI obtained an order against one of the Cayman Islands Defendants in September 2019, placing restrictions on its ability to deal with its assets, pending determination of the CI Proceedings. RBI obtained a similar order against a further Cayman Islands Defendant in May 2020 (together the Freezing Orders). In November 2019, some of the Cayman Islands Defendants filed a counterclaim in the amount of € 203 million against RBI in the course of the CI Proceedings. RBI considers that the counterclaim, which is based on documents that the Cayman Islands Defendants have refused to disclose to date, is entirely without merit. In July 2021, RBI applied for permission to amend its claim in the CI Proceedings, to add an additional defendant and claim further damages and associated relief, bringing the total sums claimed by RBI in the CI Proceedings to approximately € 87 million plus interest and costs. That application has yet to be determined. In December 2021, the Cayman Islands Court of Appeal gave judgment on an appeal brought by two of the Cayman Islands Defendants, against the Freezing Orders. The Court of Appeal has refused to dismiss the Freezing Orders, which will remain in place. The CI Proceedings are ongoing. In January 2021, RBI issued an arbitration claim for an amount of approximately € 87 million plus interest and costs against one of the Cayman Islands Defendants, at the time incorporated in the Marshall Islands, before the Vienna International Arbitral Centre (VIAC) (the VIAC Arbitration). The VIAC Arbitration concerned RBI’s claims under guarantees provided by said company to RBI. In October 2022, the sole arbitrator issued an award, ordering the respondent to pay to RBI: (i) over € 62 million and USD 19 million (€ 18 million) in respect of the principal sums due under the guarantees, (ii) interest on those amounts at a rate of 5 per cent per annum accruing from 27 February 2018 until the date of payment, (iii) fees, costs and expenses incurred by RBI in ancillary proceedings in various jurisdictions worldwide, (iv) the costs of the VIAC Arbitration. 180 Consolidated financial statements · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 In 2013, a Cypriot company (the Cypriot Claimant) filed an action for damages in the amount of approximately € 43 million against RBI’s subsidiary in Slovakia, Tatra banka, a.s. (Tatra banka). In January 2016, the Cypriot Claimant filed a petition to increase the claimed amount by € 84 million and the court approved this petition. It means that the total claimed amount in this lawsuit is approximately € 127 million. The lawsuit is based on similar grounds to a claim by a client of Tatra banka (the Slovak Client) that in the meantime had been rejected in full by the Slovak courts. The Cypriot Claimant filed the action as it had acquired the claim from a shareholder of the holding company of the Slovak Client. The Cypriot Claimant claims that Tatra banka breached its contractual obligations towards the Slovak Client by refusing to execute payment orders from the Slovak Client’s accounts without cause and by not extending the maturity of facilities despite a previous promise to do so, which led to non-payment of the Slovak Client’s obligations towards its business partners and the termination of the Slovak Client’s business activities. According to the Cypriot Claimant, this had caused cessation of the business activities and, subsequently, bankruptcy of the Slovak Client and, thus, also damage to the shareholder of the holding company in the form of a loss of value of its shares. Subsequently, said shareholder assigned its claim to the Cypriot Claimant. The Cypriot Claimant claims that Tatra banka acted contra bonos mores as well as contrary to fair business conduct and requires Tatra banka to pay part of its claims corresponding to the loss in value of the holding company’s shares. In November 2019, the claim was rejected in full by the first-instance court. The Cypriot Claimant filed an appeal against this first-instance judgement in January 2020. In June 2022, the judgement of the appellate court upholding the first-instance court judgement was delivered to Tatra banka. In August 2022, the Cypriot Claimant filed an extraordinary appeal against the appellate judgement. Regulatory enforcement RBI and its subsidiaries are subject to numerous national and international regulatory authorities. Following an audit review by the Romanian Court of Auditors regarding the activity of Aedificium Banca pentru Locuinte S.A. (formerly Raiffeisen Banca pentru Locuinte S.A.), (RBL), a building society and subsidiary of Raiffeisen Bank S.A., Bucharest, the Romanian Court of Auditors claimed that several deficiencies were identified and that conditions for payment by RBL of state premiums on savings had not been met. Should RBL not succeed in reclaiming said amounts from its customers or providing satisfactory documentation, RBL would be held liable for the payment of such funds. RBL initiated court proceedings to contest the findings of the Romanian Court of Auditors and won on the merits regarding the most significant alleged deficiencies. The case was appealed at the Romanian High Court of Cassation and Justice. In November 2020, the Romanian High Court of Cassation and Justice overturned the previous court decision and confirmed the view of the Romanian Court of Auditors. Upon the application of RBL, the Romanian High Court of Cassation and Justice requested the Constitutional Court to decide whether the Court of Auditors was, in principle, entitled to scrutinize RBL. The proceeding is still pending and could – depending on its outcome – enable RBL to file an extraordinary recourse against the decision of the Romanian High Court of Cassation and Justice. At the end of June 2022, RBL took advantage of a legal provision allowing entities to pay debts towards the state (principal - respectively the state premiums) and be exonerated from payment of accessories (penalty interest). RBL has paid the principal of € 23 million and requested to be exonerated to pay accessories of € 30 million. In July 2022, the Ministry of Development, Public Works and Administration (Ministry) rejected RBL’s request for exoneration. RBL has disputed this decision in court. In December 2022, the Ministry has issued a title and asked RBL to pay also the penalties within 30 days. RBL disputed the payment request both at the ministry level and in court, and also filed a motion in court, to ask for a suspension of the payment request, given that RBL considers that the amnesty should have been granted and therefore, RBL should be exonerated from payment of penalties. The suspension was granted by the court. This decision is now final. In May 2023, RBL obtained a decision by the court that the amnesty should have been granted and that the Ministry should grant it. However, the Ministry filed a recourse against this decision. In March 2018, an administrative fine of € 2.7 million (which was calculated by reference to the annual consolidated revenue of RBI and constitutes 0.06 per cent of the last available annual consolidated revenue) was imposed on RBI in the course of administrative proceedings based on alleged non-compliance with formal documentation requirements relating to the know- your-customer principle. According to the interpretation of the Austrian Financial Market Authority (FMA), RBI had failed to comply with these administrative obligations in a few individual cases. FMA did not allege that any money laundering or other crime had occurred, or that there was any suspicion of, or any relation to, any criminal act. RBI took the view that it had duly complied with all due diligence obligations regarding know-your-customer requirements and appealed against the fining order in its entirety. The Federal Administrative Court (Bundesverwaltungsgericht) confirmed FMA’s decision at first instance, against which RBI appealed to the Austrian Supreme Administrative Court (Verwaltungsgerichtshof). In December 2019, the Austrian Supreme Administrative Court revoked the decision of the lower administrative instances and referred the case back to the Federal Administrative Court. In the retrial on 6 May 2021, the Federal Administrative Court again confirmed FMA’s decision in general but reduced the administrative fine to € 824 thousand and allowed another appeal before the Austrian Supreme Administrative Court. Such appeal was filed by RBI. In July 2023, the Austrian Supreme Administrative Court revoked the decision of the administrative court of first instance and, again, referred the case back to the court of first instance. A provision of an appropriate amount has been recognized. Consolidated financial statements181 · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 In September 2018, two administrative fines totaling PLN 55 million (€ 12 million) were imposed on Raiffeisen Bank Polska S.A. (RBPL), the former Polish subsidiary of RBI in the course of administrative proceedings based on alleged non-performance of duties as the depositary and liquidator of certain investment funds. RBPL as custodian of investment funds assumed the role of liquidator of certain funds in February 2018. According to the interpretation of the Polish Financial Supervision Authority – which is known by its Polish abbreviation, KNF – RBPL failed to comply with certain obligations in its function as depository bank and liquidator of the funds. In the course of the transactions related to the sale of the core banking operations of RBPL to Bank BGZ BNP Paribas S.A., the responsibility for said administrative proceedings and related fines was assumed by RBI. RBI filed appeals against these fines in their entirety. In September 2019, in relation to the PLN 5 million (€ 1 million) fine regarding RBPL’s duties as depositary bank, the Voivodship Administrative Court considered RBI’s appeal and overturned the KNF decision in its entirety. However, the KNF filed an appeal in cassation against the judgement. In relation to the PLN 50 million (€ 11 million) fine regarding RBPL’s function as liquidator, the Voivodship Administrative Court decided to dismiss the appeal and uphold the KNF decision in its entirety. RBI has raised appeal in cassation to the Supreme Administrative Court because it takes the view that RBPL has duly complied with all its duties. In April 2023, the Supreme Administrative Court decided to refer the case regarding the PLN 5 million (€ 1 million) fine back to the Voivodship Administrative Court for reconsideration. Furthermore, the Supreme Administrative Court dismissed RBI’s appeal in cassation in connection with the PLN 50 million (€ 11 million) fine which is now final. However in October 2023 RBI filed a complaint to the European Court of Human Rights over this verdict. In October 2023, the Voivodship Administrative Court dismissed RBI’s appeal and upheld the KNF decision imposing the PLN 5 million (€ 1 million) penalty on RBI in relation to the alleged violations of RBI's duties as depositary of certain investment funds. A cassation appeal against this judgment to the Supreme Administrative court is possible. Both fines have already been paid. In this context, several individual lawsuits and four class actions, aggregating claims of holders of certificates in the above- mentioned investment funds currently in liquidation, were filed against RBI, whereby the total amount in dispute as at 31 December 2023 equals approximately PLN 77 million (€ 16 million). Additionally, RBI was informed that a modification of a statement of claim had been submitted to the court which could result in an increase of the total amount in dispute by approximately PLN 91 million (€ 19 million). However, such modification has not yet been served upon RBI. The plaintiffs of the class actions demand the confirmation of RBI’s responsibility for the alleged improper performance of RBPL (in respect of which RBI is the legal successor) as custodian bank. Such confirmation would secure and facilitate their financial claims in further lawsuits. Due to RBI’s legal assessment, no provision has been recognized. Additionally, RBI received a number of claim notices from BNP in connection with certain bank operations in respect of which BNP is the legal successor to RBPL. Said claim notices primarily relate to administrative proceedings conducted by the KNF (Polish Financial Supervision Authority) in connection with alleged failures of RBPL/BNP in acting as a depository of investment funds and could lead to cash penalties. Furthermore, claims in this context have been raised by investors to BNP, and as a mitigating measure RBI supports BNP in this regard. The financial impact can not be estimated at this time. In November 2020, the Austrian Chamber for Workers and Employees (Bundeskammer für Arbeiter und Angestellte), (BAK) filed an application for injunctive relief against Raiffeisen Bausparkasse Gesellschaft m.b.H. (RBSPK), a wholly owned subsidiary of RBI, with the commercial court of Vienna. RBSPK had terminated long-lasting building savings contracts (Bausparverträge) in an aggregate amount of approximately € 94 million. The minimum rate of interest on said overnight building savings deposits was between 1 per cent p.a. and 4.5 per cent p.a. BAK claims that RBSPK did not have the right to terminate such contracts whereas RBSPK is of the opinion that said contracts constitute a continuing obligation, which can – under Austrian law – be terminated by giving proper notice. RBSPK received the court decision of the court of first instance in August 2021 and the court of second instance in February 2022; both basically stating that the termination of the savings contracts is considered unlawful. RBSK has appealed against the decision of the court of second instance in March 2022. In November 2023, RBSK received the decision of the Austrian Supreme Court (Oberster Gerichtshof) to refer the case back to the commercial court in Vienna (Handelsgericht Wien) to verify the subject matter of the claim (ie specifics of the contractual relationship between RBSK and its customers with respect to the terminated building savings contracts). A final decision of the Supreme Court on the admissibility of the termination is still outstanding. In January 2023, RBI was informed by FMA that an administrative proceeding has been started based on the alleged non- compliance with certain legal requirements regarding the know-your-customer principle in connection with three customers of RBI’s correspondent banking business. The transactions relevant for the administrative proceedings had been processed by RBI between 2017 and 2020. According to the interpretation of FMA, RBI had not sufficiently convinced itself that these banks had appropriate due diligence procedures in place regarding customers of their own correspondent banking business. Thus, in the view of FMA, RBI failed to fully comply with its administrative obligations in this regard. FMA did not state that any money laundering or other crime had occurred, or that there was any suspicion of, or any relation to, any criminal act. The administrative proceeding is ongoing and might lead to administrative fines. 182 Consolidated financial statements · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 In January 2023, RBI received a Request for Information (RFI) by the Office of Foreign Assets Control (OFAC) of the US Department of the Treasury. OFAC administers and enforces economic and trade sanctions based on US foreign policy and national security goals. A breach of US sanctions may, among others, result in fines, the freezing of accounts or the termination of business relationships with US correspondent banks. The questions raised by OFAC in the RFI are seeking to clarify payments business and related processes maintained by RBI with US correspondent banks in light of the developments related to Russia and Ukraine. As a matter of principle, RBI maintains policies and procedures that ensure compliance with applicable embargoes and financial sanctions and is cooperating fully with OFAC in relation to their request to the extent permitted by applicable laws and regulations. Tax litigation RBI is, or is expected to be, involved in various tax audits, tax reviews and tax proceedings. RBI is involved in the following significant tax proceedings, among others: In Germany, a tax review and tax proceedings led to a tax burden of approximately € 23 million in connection with real estate transfer tax. As the taxes are already paid, there is no need for an accrual. In Romania, tax assessments by the Romanian tax authorities have resulted in an extraordinary tax burden in an aggregate amount of additional taxes of approximately € 32 million plus penalty payments of about € 21 million. Following administrative and other proceedings, whereby some of them are still ongoing, the extraordinary tax burden has been lowered to € 47 million so far. In most of the aforementioned amounts, the decision of the respective tax authorities is or will be challenged. (47) Other agreements Institutional protection scheme (Raiffeisen-IPS) Raiffeisen Bank International AG and its Austrian bank subsidiaries, the regional Raiffeisen banks and the local Raiffeisen banks, are part of the agreement on an institutional protection scheme (Raiffeisen-IPS) as well as the Austrian Raiffeisen- Sicherungseinrichtung eGen (ÖRS), as a statutory protection scheme. In the agreement on the Raiffeisen-IPS, the member institutions agree to ensure one another’s security and in particular, join forces to ensure liquidity and solvency when required. The new Raiffeisen-IPS was recognized by the relevant supervisory authorities (ECB and FMA) as an institutional protection scheme according to Article 113 (7) CRR (Capital Requirements Regulation of the European Union) and its related rights and obligations of the participating member institutions. This allows, among other things, for receivables to be risk-weighted at zero per cent between Raiffeisen-IPS members. The Raiffeisen-IPS is subject to joint regulatory supervision and capital requirements must also be met on a consolidated basis. The Raiffeisen-IPS was recognized together with ÖRS by the Austrian Financial Market Authority (FMA) as a statutory deposit guarantee and investor protection scheme according to the Austrian Deposit Guarantee and Investor Protection Act Einlagensicherungs- und Anlegerentschädigungsgesetz (ESAEG). ÖRS is mandated to operate the reporting and early risk assessment systems for the Raiffeisen-IPS. ÖRS also acts as trustee and manages the liquid assets for the Raiffeisen-IPS. The Raiffeisen-IPS is controlled by a joint risk council, comprising representatives of RBI AG, the regional Raiffeisen banks and the Raiffeisen banks. Tasks that could be solved on a regional level were delegated to the regional risk councils, each comprising representatives of the respective regional Raiffeisen banks and Raiffeisen banks, by the joint risk council. Consolidated financial statements183 · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 Raiffeisen Customer Guarantee Scheme (RKÖ) RBI AG is a member of Raiffeisen-Kundengarantiegemeinschaft Austria (Raiffeisen Customer Guarantee Scheme Austria (RKÖ)). The members of this association have a contractual obligation to guarantee jointly the punctual fulfillment of the entirety of an insolvent association member’s commitments arising from customer deposits and its own issues up to the limit of the sum of the individual capacities of the remaining association members. The individual capacity of an association member is measured on the basis of its freely available reserves subject to the pertinent provisions of the Austrian Banking Act (BWG). In view of the change in the legal and regulatory framework and implementation of an institutional protection scheme, the RKÖ and its respective member institutions decided in 2019 to discontinue the scheme for new transactions. Accordingly, the supplementary protection by RKÖ may only be granted to protected transactions entered into before 1 October 2019. The rights of customers with regard to statutory deposit insurance are not affected and remain fully in place. (48) Fiduciary business pursuant to § 48 (1) of the Austrian Banking Act (BWG) Transactions arising from the holding and placing of assets on behalf of third parties are not shown in the statement of financial position. Fees arising from these transactions are shown under net fee and commission income. Fiduciary business not recognized in the statement of financial position was concluded with the following volumes on the reporting date: in € million 2023 2022 Fiduciary assets 195 210 Loans to customers 187 203 Financial investments 7 7 Fiduciary liabilities 195 210 Deposits from banks 76 79 Deposits from customers 111 124 Other fiduciary liabilities 7 7 Funds managed by the Group: in € million 2023 20221 Retail investment funds 30,382 31,015 Equity-based and balanced funds 21,457 21,835 Bond-based funds 8,518 8,667 Other 408 513 Special funds 14,017 12,767 Property-based funds 290 352 Pension funds 18,206 16,293 Customer portfolio managed on a discretionary basis 3,202 2,455 Other investment vehicles 69 95 Total 66,166 62,978 1 Previous-year figures adapted (49) Leasing At inception of a contract, RBI assesses whether the contract is, or contains, a lease. A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a certain period in exchange for consideration. To assess whether a contract conveys the right to control the use of an identified asset, RBI assesses whether the following criteria are met: · The contract involves the use of an identified asset – this is the case if either the asset is explicitly specified in the contract or the asset is implicitly specified at the time that it is made available for use by the customer that is capable of being used to meet the contract terms. If the supplier has a material substitution right, then the asset is considered as not identified; · RBI has the right to obtain substantially all the economic benefit from use of the asset throughout the period of use; and · RBI has the right to direct how and for what purpose the asset is used throughout the period of use or the relevant decisions about how and for what purpose the asset is used are predetermined. 184 Consolidated financial statements · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 RBI as lessor When RBI acts as lessor, it determines at lease inception whether the lease is accounted for as finance or operating lease. In RBI a lease is classified as a finance lease if substantially all the risks and rewards incidental to ownership are transferred. Typical factors that, individually or in combination, would normally lead to a lease being classified as a finance lease: · Transfer of ownership of the asset by the end of the contract term; · Option to purchase the asset at a price that is expected to be sufficiently lower than the fair value at the date the option becomes exercisable for it to be reasonably certain at the inception date that the option will be exercised; · The lease term is for major part of the economic life of the asset (even if the title is not transferred); · At the inception date, the present value of the lease payments equals at least substantially the fair value of the asset; and · The asset is of such a specialized nature that only the lessee can use it without major modifications. Sometimes RBI is an intermediate lessor which means that RBI acts as both the lessee and lessor of the same underlying asset and accounts for its interest in the main lease and the sublease separately. When the main lease is a short-term lease, the sublease is classified as an operating lease. Otherwise, RBI assesses the classification of a sublease by reference to the right- of-use asset in the main lease and not by reference to the underlying asset of the main lease. RBI recognizes the lease payments associated with the operating lease as income on a straight-line basis over the lease term. Income from finance and operating leases is as follows: in € million 2023 2022 Finance lease 186 152 Finance income on the net investment lease 186 152 Operating Lease 95 78 Lease income 95 78 Total 281 229 There is no lease income from variable lease payments that do not depend on an index or a rate. Finance leases Assets under finance leases break down as follows; the respective carrying amounts are presented in the statement of financial position under financial assets – amortized cost: in € million 2023 2022 Vehicles leasing 1,663 1,654 Real estate leasing 765 827 Equipment leasing 703 775 Total 3,131 3,256 Consolidated financial statements185 · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 Maturity analysis of lease receivables to be received after the reporting date: in € million 2023 2022 Gross investment value 3,624 3,712 Minimum lease payments 3,305 3,376 Up to 3 months 279 267 More than 3 months, up to 1 year 659 695 More than 1 year, up to 5 years 1,896 1,878 More than 5 years 472 536 Non-guaranteed residual value 318 336 Unearned finance income 493 456 Up to 3 months 39 36 More than 3 months, up to 1 year 106 97 More than 1 year, up to 5 years 258 229 More than 5 years 89 94 Net investment value 3,131 3,256 In the financial year, there was no income relating to variable lease payments not included in the measurement of the net investment in the lease. Profit due to sale of leased assets as part of a finance lease was € 3 million (previous year: € 4 million). Operating leases Assets under operating leases (including unleased parts) break down as follows; the respective carrying amounts are presented in the statement of financial position under tangible fixed assets: in € million 2023 2022 Vehicles leasing 100 85 Real estate leasing 225 224 Equipment leasing 1 0 Total 326 309 Maturity analysis of undiscounted lease receivables to be received after the reporting date: in € million 2023 2022 Up to 1 year 52 43 More than 1 year, up to 5 years 122 104 More than 5 years 54 60 Total 229 207 RBI as lessee RBI recognizes a right-of-use asset and a lease liability at the lease commencement date which is the date on which a lessor (a supplier) makes an underlying asset available for use by RBI. The right-of-use asset is measured at cost at the commencement date. The cost of the right-of-use asset comprises the amount equal to the lease liability at its initial recognition adjusted for any lease payments made at or before the commencement of the lease plus any initial direct costs incurred and an estimate of costs to dismantle and remove the underlying asset, or to restore the underlying asset or the site on which it is located, less any lease incentives. The right-of-use asset is subsequently depreciated using the straight-line method in accordance with IAS 16 from the commencement date to the earlier of the end of the useful life or the end of the lease term of the right-of-use asset. The right-of use asset is reduced by impairments, if any, and adjusted for certain remeasurements of the lease liability. At the commencement date, RBI measures the lease liability at the present value of the lease payments that are not paid at that date. The lease payments shall be discounted using the interest rate implicit in the lease if that rate can be readily determined. If that rate cannot be readily determined, the lessee shall use the incremental borrowing rate. 186 Consolidated financial statements · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 The lease payments included in the measurement of the lease liability comprise the following: · Fixed payments including in-substance fixed payments; · Variable lease payments that depend on an index or rate, initially measured using the index or rate as at the commencement date; · Amounts expected to be payable by the lessee under residual value guarantees; · The exercise price of a purchase option if RBI is reasonably certain to exercise that option; and · Payments of penalties for terminating the lease, if the lease term reflects the lessee exercising an option to terminate the lease. The lease liability is measured on an ongoing basis similarly to other financial liabilities, using an effective interest method, so that the carrying amount of the lease liability is measured on an amortized cost basis and the interest expense is allocated over the lease term. It is remeasured when there is a change in future lease payments arising from a change in an index or rate, if there is a change in the RBI’s estimate of the amount expected to be payable under a residual value guarantee, or if RBI changes its assessment of whether it will exercise a purchase, extension, or termination option. When the lease liability is remeasured in this way, a corresponding adjustment is made to the carrying amount of the right-of-use asset or is recorded in profit or loss if the carrying amount of the right-of-use asset has been reduced to zero. RBI has elected not to recognize right-of-use assets and lease liabilities for short-term leases of equipment that have a lease term of twelve months or less and leases of low-value assets, including IT equipment. RBI recognizes the lease payments associated with these leases as an expense on a straight-line basis over the lease term. Leases mainly relate to land and buildings, vehicles, and IT equipment. Right-of-use assets The following table shows the development of right-of-use assets for property, plant and equipment, which are presented in the statement of financial position under tangible fixed assets, and related accumulated depreciation, which is presented in profit or loss under general administrative expenses: in € million 2023 2022 Cost of acquisition or conversion as at 1/1 666 622 Change in consolidated group (12) 13 Exchange differences (14) (1) Additions 73 70 Disposals (39) (51) Transfers 0 0 Cost of acquisition or conversion as at 31/12 674 654 Accumulated write-ups/depreciation/impairment (317) (280) hereof depreciation/impairment (84) (87) Caryying amount as at 31/12 357 374 Lease liabilities The following table shows the maturity analysis of lease liabilities, showing the undiscounted lease payments to be paid after the reporting date; the respective carrying amounts are presented under financial assets – amortized cost: in € million 2023 2022 Up to 1 year 83 80 More than 1 year, up to 5 years 213 218 More than 5 years 108 137 Total 404 435 Consolidated financial statements187 · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 Amounts recognized in profit or loss Interest on lease liabilities is presented in profit or loss under net interest income and expenses relating to short-term leases and leases of low-value assets are presented in other administrative expenses. in € million 2023 2022 Interest on lease liabilities (10) (8) Variable lease payments not included in the measurement of lease liabilities 0 0 Income from sub-leasing right-of-use assets 0 0 Expenses relating to short-term leases (17) (14) Expenses relating to leases of low-value assets (4) (5) Total (31) (26) (50) Key figures pursuant to § 64 (1) 18 of the Austrian Banking Act (BWG) 2023 Operating income hereof net interest income Profit/loss before tax Income taxes Number of employees as at reporting date in € million Czech Republic 857 642 401 (96) 3,599 Hungary 684 525 297 (33) 2,404 Poland 36 19 (868) 0 291 Slovakia 615 404 305 (64) 3,484 Central Europe 2,191 1,590 135 (192) 9,778 Albania 131 114 71 (11) 1,271 Bosnia and Herzegovina 139 86 66 (3) 1,376 Croatia 256 181 130 (25) 1,773 Kosovo 91 66 36 (4) 965 Romania 778 579 423 (77) 5,037 Serbia 395 270 236 (34) 2,113 Southeastern Europe 1,789 1,296 961 (155) 12,535 Belarus 229 86 151 (39) 1,610 Russia 2,679 1,411 1,805 (464) 9,942 Ukraine 532 418 247 (125) 5,333 Eastern Europe 3,441 1,915 2,203 (628) 16,885 Austria and other 2,578 871 1,016 (17) 5,689 Reconciliation (934) 10 (739) (5) 0 Total 9,065 5,683 3,576 (997) 44,887 2022 Operating income hereof net interest income Profit/loss before tax Income taxes Number of employees as at reporting date in € million Czech Republic 860 652 452 (86) 3,736 Hungary 539 356 205 (22) 2,313 Poland 15 12 (518) 0 260 Slovakia 534 322 235 (45) 3,466 Central Europe 1,947 1,341 375 (153) 9,775 Albania 92 72 38 (6) 1,247 Bosnia and Herzegovina 130 64 56 (3) 1,338 Croatia 197 116 52 (9) 1,760 Kosovo 77 55 33 (4) 919 Romania 661 489 301 (47) 5,084 Serbia 252 147 107 (15) 2,349 Southeastern Europe 1,409 943 586 (83) 12,697 Belarus 257 123 156 (43) 1,613 Russia 3,844 1,527 2,616 (559) 9,537 Ukraine 524 375 82 (17) 5,400 Eastern Europe 4,624 2,025 2,855 (619) 16,550 Austria and other 2,149 681 621 (4) 5,392 Reconciliation (420) 62 (234) 0 0 Total 9,710 5,053 4,203 (859) 44,414 188 Consolidated financial statements · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 (51) Foreign currency volumes pursuant to § 64 (1) 2 of the Austrian Banking Act (BWG) in € million 2023 2022 Assets 89,762 92,433 Equity and liabilities 72,199 79,783 (52) Volume of the securities trading book pursuant to § 64 (1) 15 of the Austrian Banking Act (BWG) in € million 2023 2022 Securities 7,064 3,981 Other financial instruments 185,838 132,350 Total 192,902 136,331 (53) Securities admitted for trading on a stock exchange pursuant to § 64 (1) 10 of the Austrian Banking Act (BWG) in € million 2023 2022 Listed Unlisted Listed Unlisted Debt securities and other fixed-income securities 24,260 511 18,050 582 Shares and other variable-yield securities 327 0 213 1 Investments 10 114 10 116 Total 24,598 625 18,273 699 (54) Subordinated assets pursuant to § 45 (2) of the Austrian Banking Act (BWG) in € million 2023 2022 Loans and advances 37 99 Debt securities 70 85 Total 107 184 (55) Employees Full-time equivalents 2023 2022 Average number of staff 44,439 44,194 hereof salaried employees 43,818 43,639 hereof wage earners 621 555 Employees as at reporting date 44,887 44,414 hereof Austria 4,836 4,585 hereof abroad 40,051 39,829 (56) Related parties The main companies exercising a significant influence are Raiffeisenlandesbank Niederösterreich-Wien AG, Vienna, as the largest single shareholder, its parent company, Raiffeisen-Holding Niederösterreich-Wien registrierte Genossenschaft mit Consolidated financial statements189 · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 beschränkter Haftung, Vienna, and their fully consolidated subsidiaries. The amounts shown under affiliated companies relate to affiliated companies that are not consolidated due to immateriality. Transactions with related parties (companies and individuals) are limited to banking business transactions that are carried out at fair market conditions. Moreover, members of the Management Board hold shares in RBI AG. Detailed information regarding this is published on the homepage of Raiffeisen Bank International. 2023 Companies with significant influence Affiliated companies Investments in associates valued at equity Other interests in € million Selected financial assets 78 424 1,004 940 Equity instruments 1 187 632 181 Debt securities 29 0 110 69 Loans and advances 49 236 262 691 Selected financial liabilities 2,536 131 5,110 1,213 Deposits 2,536 131 5,108 1,213 Debt securities issued 0 0 2 0 Other items 100 24 493 143 Loan commitments, financial guarantees and other commitments given 60 24 492 129 Loan commitments, financial guarantees and other commitments received 40 0 2 13 Nominal amount of derivatives 97 0 84 998 Accumulated impairment, accumulated negative changes in fair value due to credit risk and provisions on non-performing exposures 0 (3) 0 0 2022 Companies with significant influence Affiliated companies Investments in associates valued at equity Other interests in € million Selected financial assets 45 429 1,006 887 Equity instruments 1 193 520 168 Debt securities 35 0 194 68 Loans and advances 9 236 292 651 Selected financial liabilities 2,327 105 5,048 1,613 Deposits 2,327 105 5,041 1,613 Debt securities issued 0 0 6 0 Other items 152 13 563 146 Loan commitments, financial guarantees and other commitments given 99 13 531 140 Loan commitments, financial guarantees and other commitments received 52 0 32 6 Nominal amount of derivatives 221 0 120 1,254 Accumulated impairment, accumulated negative changes in fair value due to credit risk and provisions on non-performing exposures 0 (2) 0 0 2023 Companies with significant influence Affiliated companies Investments in associates valued at equity Other interests in € million Interest income 4 9 16 15 Interest expenses (75) (4) (122) (68) Dividend income 0 15 30 5 Fee and commission income 4 35 11 10 Fee and commission expenses (5) (3) (12) (24) Increase/decrease in impairment, fair value changes due to credit risk and provisions for non-performing exposures 0 (12) 6 0 2022 Companies with significant influence Affiliated companies Investments in associates valued at equity Other interests in € million Interest income 11 6 13 17 Interest expenses (20) (2) (34) (14) Dividend income 0 8 38 7 Fee and commission income 5 15 13 6 Fee and commission expenses (2) (1) (12) (19) Increase/decrease in impairment, fair value changes due to credit risk and provisions for non-performing exposures 0 (30) 2 0 190 Consolidated financial statements · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 (57) Relations to key management Group relationship with key management Key management refers to the members of the Management Board and the Supervisory Board of RBI AG. Transactions between key management and RBI are as follows: in € thousand 2023 2022 Debt securities 1,635 657 Shares 2,786 2,581 Deposits and other receivables 423 1,288 Loans and other liabilities 213 — Lease liabilities 17 59 Transactions of related parties of key management to RBI: in € thousand 2023 2022 Debt securities 217 — Shares 4 3 Deposits and other receivables 619 676 Loans and other liabilities 3 7 There is no compensation agreed between the company and members of the Management Board and Supervisory Board or employees in the case of a takeover bid. Remuneration of members of the Management Board according to IAS 24.17 The expenses according to IAS 24 were recognized on an accrual basis and according to the rules of the underlying standard (IAS 19). in € thousand 2023 2022 Short-term employee benefits 9,268 9,165 Post-employment benefits 397 412 Other long-term benefits 2,761 1,135 Total 12,426 10,712 Short-term employee benefits shown in the above table contain salaries and benefits in kind and other benefits, remuneration for board functions at affiliated companies and those portions of the bonus provision that are due in the short term. Furthermore, it also includes changes possibly arising from the difference between the bonus provision and the bonus later awarded. Post-employment benefits comprise payments to pension funds and payments according to Retirement Plan Act (Mitarbeitervorsorgegesetz), severance payments, vacation compensations as well as net allocations to provisions for retirement benefits and severance payments. Other long-term benefits contain portions of the bonus provision relating to deferred bonus portions in cash and retained portions payable in instruments. For the latter, valuation changes due to currency fluctuations are also considered. The bonus agreement is linked to the achievement of annually agreed objectives. The respective step-in criteria as well as the individual performance targets can be found in the current remuneration policy (www.rbinternational.com → Corporate Governance & Remuneration → Remuneration Policy). The bonus level is determined by the level of the return on equity and the cost/income ratio, whereby the target values to be achieved reflect the so-called strategic targets for the return on equity and the cost/income ratio at RBI level. Members of the Management Board are subject in principle to the same regulations as apply to employees. These regulations provide for a basic contribution to a pension fund from the company and an additional contribution if the employee pays own contributions of the same amount. Consolidated financial statements191 · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 In the event of termination of function or employment contract and leaving of the company, the members of the Management Board have entitlements under the Company Retirement Plan Act (Betriebliches Mitarbeitervorsorgegesetz). The entitlement to receive severance payments according to contractual agreements lapses in the case of termination by the employee. Moreover, there is an individual pension commitment through a pension fund which is secured by reinsurance. The Management Board members’ contracts either run for the duration of their term of office or are limited to a maximum of five years. In the event of early termination of a Management Board member’s contract without good cause, the severance payment is limited to a maximum of two years’ total annual remuneration (except for one member of the Management Board covered by previous contractual arrangements). An amount of € 1,577 thousand (previous year’s period: € 1,386 thousand) was paid in pension benefits to former members of the Management Board and to their surviving dependents. In addition to these amounts, short-term benefits, and deferred bonus components as well as severance payments and termination benefits totaling € 469 thousand (previous year’s period: € 978 thousand) were paid to former members of the Management Board. Remuneration of members of the Supervisory Board in € thousand 2023 2022 Remunerations Supervisory Board 1,171 1,127 In The Annual General Meeting held on 22 April 2021 approved a remuneration model for the Supervisory Board, beginning on 23 April 2021 and for the following years. It was decided to distribute the remuneration as follows: Chairman € 120 thousand, Deputy Chairman € 95 thousand, members of the Supervisory Board € 60 thousand, plus attendance fees, for the Chairman of the Audit Committee and the Risk Committee each additional € 17.5 thousand. In the 2023 financial year, no contracts subject to approval within the meaning of § 95 (5) 12 of the Austrian Stock Corporation Act (AktG) were concluded with members of the Supervisory Board. Remuneration of members of the Advisory Council in € thousand 2023 2022 Remuneration Advisory Council 191 188 The Annual General Meeting held on 21 June 2018 passed a resolution to grant remuneration to the Advisory Council members for their work. It was decided to distribute the remuneration as follows: Chairman € 25 thousand, Deputy Chairman € 20 thousand, each additional member € 15 thousand, plus attendance fees. 192 Consolidated financial statements · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 (58) Boards Management Board Members of the Management Board Initial appointment Initial appointment Johann Strobl, Chairman 22 September 20101 28 February 2027 Marie-Valerie Brunner 1 November 2023 31 October 2026 Andreas Gschwenter 1 July 2015 30 June 2026 Łukasz Januszewski 1 March 2018 28 February 2026 Hannes Mösenbacher 18 March 2017 28 February 2025 Andrii Stepanenko 1 March 2018 28 February 2026 Peter Lennkh 1 October 2004 31 August 20232 1 Effective as of 10 October 2010 2 On 31 August 2023 Peter Lennkh stepped down from the Management Board. . Supervisory Board Supervisory Board members Initial appointment End of term Erwin Hameseder, Chairman 8 July 20101 Annual General Meeting 2025 Martin Schaller 1st Deputy Chairman 4 June 2014 Annual General Meeting 2024 Heinrich Schaller 2nd Deputy Chairman 20 June 2012 Annual General Meeting 2027 Michael Alge 31 March 2022 Annual General Meeting 2027 Eva Eberhartinger 22 June 2017 Annual General Meeting 2027 Andrea Gaal 21 June 2018 Annual General Meeting 2028 Peter Gauper2 22 June 2017 14 June 2023 Michael Höllerer 31 March 2022 Annual General Meeting 2027 Rudolf Könighofer 22 June 2017 Annual General Meeting 2027 Heinz Konrad 20 October 2020 Annual General Meeting 2025 Reinhard Mayr 20 October 2020 Annual General Meeting 2025 Birgit Noggler 22 June 2017 Annual General Meeting 2027 Manfred Wilhelmer3 21 November 2023 Annual General Meeting 2028 Natalie Egger-Grunicke4 18 February 2016 Until further notice Peter Anzeletti-Reikl4 10 October 2010 Until further notice Rudolf Kortenhof4 10 October 2010 Until further notice Gebhard Muster4 22 June 2017 Until further notice Helge Rechberger4 10 October 2010 Until further notice Denise Simek4 1 October 2021 Until further notice 1 Effective as of 10 October 2010 2 Peter Gauper resigned from his position with effect from 14 June 2023 3 Member of the Supervisory Board with effect from the Annual General Meeting on 21 November 2023 4 Delegated by the Staff Council State Commissioners · Alfred Lejsek, State Commissioner (since 1 January 2011) · Matthias Kudweis, Deputy State Commissioner (since 1 April 2021) Consolidated financial statements193 · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 (59) Group composition Subsidiaries All material subsidiaries over which RBI AG directly or indirectly has control are fully consolidated. The Group has control over an entity when it is exposed, or has rights, to variable returns from its involvement with the investee and the ability to affect those returns through its power over the investee. Investments in subsidiaries that are not fully consolidated are shown under the item investments in subsidiaries and associates. Structured entities are entities in which the voting or similar rights are not the dominant factor for determining control. This is the case, for example, if the voting rights are solely related to administration activities and the relevant activities are governed by contractual agreements. Same as to subsidiaries, consolidation of structured entities is necessary, if the Group has control over the entity. In the Group, the obligation to consolidate structured entities is reviewed as part of a process that includes transactions, where the structured entity is either formed by the Group with or without participation of third parties, or, in which the Group with or without participation of third parties enters into contractual relationships with already existing structured entities. Whether an entity should be consolidated or not is reviewed at least quarterly or if an event occurs. To determine whether an entity should be consolidated, a series of control factors need to be checked. These include an examination of · the purpose and the constitution of the entity, · the relevant activities and how they are determined, if the Group has the ability to determine the relevant activity through its rights, · if the Group is exposed to risks of or has rights to variable returns, · if the Group has the ability to use its power over the investee in order to affect the amounts of variable returns. If voting rights are relevant, the Group has control over an entity in which it directly or indirectly holds more than 50 per cent of the voting rights; except when there are indicators that another investee has the ability to determine unilaterally the relevant activities of the entity. One or more of the following points may be such an indicator: · Another investor has control over more than half of the voting rights due to an agreement with the Group, · Another investor has the ability to control financial policy and operational activities of the equity participation due to legal provisions or an agreement, · Another investor has control over the equity participation due to its possibility to appoint and withdraw the majority of members of the Board or members of an equivalent governing body, · Another investor has control over the entity due to its possibility to possess the majority of the delivered voting rights in a meeting of members of the Board or of members an equivalent governing body. When judging control, also potential voting rights are considered as far as they are material. The Group assesses evidence of control in cases in which it does not hold the majority of voting rights but has the ability to unilaterally govern the relevant activities of the entity. This ability may occur in cases in which the Group has the ability to control the relevant activities due to the extent and distribution of voting rights of the investees. In principle, subsidiaries are initially integrated into the consolidated group on the date when the Group obtains direct or indirect control and are excluded from the consolidated group from the date on when it no longer has control over the company. The results from subsidiaries acquired or disposed of during the year are recorded in the consolidated income statement, either from the assumption of control or up to the loss of control. During the initial consolidation of previously not included controlled subsidiaries due to their immateriality, changes in the value of individual assets and liabilities between the date of acquisition or foundation and the initial consolidation as well as profits/losses generated in this period of the subsidiary in question are taken into account directly in equity. These modifications are reported in the other changes. The Group reviews the adequacy of previous decisions on which companies to consolidate at least every quarter. Accordingly, any organizational changes are immediately considered. Apart from changes in ownership, these also include any changes to the Group’s existing contractual arrangements or new contractual arrangements with a unit. 194 Consolidated financial statements · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 Non-controlling interests are shown in the consolidated statement of financial position as part of equity, but separately from RBI AG's equity. The profit attributable to non-controlling interests is shown separately in the consolidated income statement. In debt consolidation, intra-group loans and liabilities are eliminated. Remaining temporary differences are recognized under the item other assets or other liabilities in the consolidated statement of financial position. Intra-group income and expenses are also eliminated and temporary differences resulting from bank business transactions are included partly in net interest income and partly in net trading income. Other differences are shown in the item other net operating income. Intra-group results are eliminated insofar as they have a material effect on the income statement items. Transactions between Group members are executed principally at market conditions. Changes in the Group’s ownership interests in existing subsidiaries If, in the case of existing control, further shares are acquired or sold without loss of control, in subsequent consolidation such transactions are recognized directly in equity. The carrying amount of the shares held by the Group and the non-controlling interests are adjusted in such a way as to reflect changes in existing shareholdings in subsidiaries. Any difference between the amount which is adjusted for the non-controlling interests and the fair value of the consideration paid or received is recognized directly in equity and is assigned to the shareholders of the parent company. If the company loses control over a subsidiary, the income/loss from disposal of group assets is shown in the income statement. This is calculated as the difference between · the total amount of fair value of the received consideration and fair value of the shares retained and · the carrying amount of assets (including goodwill), liabilities of the subsidiary and all non-controlling interests. All amounts related to these subsidiaries and shown in other comprehensive income are recognized in the same way as would be the case for the sale of assets. This means the amounts are reclassified to the income statement or directly transferred to retained earnings. Associated companies An associated company is an entity over which the Group has significant influence. Significant influence is the power to participate in the financial and operating policy decisions of an entity in which shares are held. No control or joint management of decision-making processes exists. As a rule, significant influence is assumed if the Group holds 20 to 50 per cent of the voting rights. When judging whether the Group has the ability to exert a significant influence on another entity, the existence and the effect of potential voting rights which are actually exercisable, or convertible are taken into account. Further parameters for judging significant influence are, for example, the representation in executive committees and supervisory boards (Supervisory Board in Austrian Joint Stock companies) of the entity and material business transactions with the entity. Investments in associated companies are valued at equity and shown in the statement of financial position under the item investments in subsidiaries and associates under the sub-item investments in associates valued at equity. The acquisition cost of these investments including goodwill is determined at the time of their initial consolidation, applying by analogy the same rules as for subsidiaries (offsetting acquisition costs against proportional fair net asset value). If associated companies are material, appropriate adjustments are made to the equity carrying amount, in accordance with developments in the company’s equity. Profit or losses of companies valued at equity are netted and recognized in the item current income from investments in associates. Losses attributable to companies accounted for using the equity method are only recognized up to the level of the equity carrying amount. Losses in excess of this amount are not recognized since there is no obligation to offset excess losses. Furthermore, any amounts recognized by the associate through other comprehensive income will be recognized in the other comprehensive income statement of RBI. This is especially relevant for valuation effects seen from financial assets at fair value through other comprehensive income (FVOCI). At each reporting date, the Group reviews to what extent there is objective evidence for impairment of an equity participation in an associated company. If there is objective evidence of impairment, an impairment test is carried out, in which the recoverable value of the participation – this is higher of the value in use and the fair value less selling costs – is compared to the carrying amount. An impairment made in previous periods is reversed only if the assumptions underlying the determination of the recoverable value have been changed since recognition of the last impairment. In this case the carrying amount is written up to the higher recoverable value. Consolidated financial statements195 · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 Business combinations The acquisition of business operations is recognized according to the acquisition method. The consideration transferred in a business combination is measured at fair value. This is calculated as the aggregate of the acquisition-date fair values of all assets transferred, liabilities assumed from former owners of the acquired business combination and equity instruments issued by the Group in exchange for control of the business combination. Transaction costs related to business combinations are recognized in the income statement when incurred. Goodwill is measured as the excess of the aggregate of the value of the consideration transferred, the amount of any non- controlling interest and the acquisition-date fair value of the acquirer’s previously held equity interest in the acquiree (if any), and the net of the acquisition-date amounts of the fair values of identifiable assets acquired and the liabilities assumed. In the case that the difference is negative after further review, the resulting gain is recognized immediately in the income statement. Non-controlling interests which confer ownership rights and grant the right to the owner to receive a proportionate share of the net assets of the entity in the event of liquidation, are measured either at fair value or at the non-controlling interest’s proportionate share of net assets of the acquiree at the acquisition date. This accounting policy option can be newly made for every business combination. Other components of non-controlling interests are measured at fair value or with measurement values derived from other standards. If the consideration transferred includes a contingent consideration, this is measured at the acquisition-date fair value. If the contingent consideration is classified as equity, it is not re-measured on the following reporting dates. Its settlement is recognized within equity. A contingent consideration classified as assets or liabilities is measured on the following reporting dates at fair value and a resulting profit or loss is recognized in the income statement. Adjustments to the measurement or additional recognition of further assets and liabilities to reflect information about facts and circumstances which already existed at the time of acquisition are corrected retrospectively within the measurement period and posted accordingly against goodwill. The measurement period may not exceed one year from the date of acquisition. Consolidated subsidiaries where RBI holds less than 50 per cent of the ordinary voting shares Subsidiaries in which the Group holds less than half of the voting rights are fully consolidated if RBI has effective control according to the criteria of IFRS 10. This involves examining whether the Group is exposed or has rights to variable returns from its involvement in the investee and has the ability to affect those returns through its power over the investee. Structured units have been designed in such a way that voting rights or other similar rights are not the dominant factor in establishing control of a company. The Group has several leasing companies in the legal form of a GmbH & Co KG, in which a Group company assumes the role of general partner. Through this structure, the Group assumes the requisite personal liability which qualifies as exposure to the variability of the returns generated by the structured companies. These companies are included in the list of fully consolidated affiliated companies. Subsidiaries not fully consolidated where RBI holds more than 50 per cent of the ordinary voting shares Due to their negligible contribution to the Group’s assets, earnings, and financial position, 227 subsidiaries were not included in the consolidated financial statements (previous year: 249). Total assets of the companies not included came to less than 1 per cent of the Group’s total assets. 196 Consolidated financial statements · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 List of fully consolidated affiliated companies Company, domicile (country) Subscribed capital1 in local currency Share1 Type2 "Raiffeisen-Rent" Vermögensberatung und Treuhand Gesellschaft m.b.H., Vienna (AT) 364,000 EUR 100.0% FI Abade Immobilienleasing GmbH, Eschborn (DE) 25,000 EUR 100.0% FI Abade Immobilienleasing GmbH & Co Projekt Lauterbach KG, Kriftel (DE) 5,000 EUR 6.0% FI Abura Immobilienleasing GmbH & Co. Projekt Seniorenhaus Boppard KG, Kriftel (DE) 5,000 EUR 6.0% FI Achat Immobilien GmbH & Co. Projekt Hochtaunus-Stift KG, Kriftel (DE) 10,000 EUR 1.0% FI Acridin Immobilienleasing GmbH & Co. Projekt Marienfeld KG, Kriftel (DE) 5,000 EUR 100.0% FI Adagium Immobilienleasing GmbH, Eschborn (DE) 25,000 EUR 100.0% FI Adamas Immobilienleasing GmbH & Co. Projekt Pflegeheim Werdau KG, Kriftel (DE) 5,000 EUR 100.0% FI Adiantum Immobilienleasing GmbH & Co. Projekt Schillerhöhe Weimar KG, Kriftel (DE) 5,000 EUR 6.0% FI Adorant Immobilienleasing GmbH & Co. Projekt Heilsbronn und Neuendettelsau KG, Kriftel (DE) 5,000 EUR 6.0% OT Ados Immobilienleasing GmbH, Eschborn (DE) 25,000 EUR 75.0% FI Adrittura Immobilienleasing GmbH & Co. Projekt Eiching KG, Kriftel (DE) 5,000 EUR 100.0% OT Aedificium Banca pentru Locuinte S.A., Bucharest (RO) 50,186,880 RON 99.9% BA Agamemnon Immobilienleasing GmbH & Co. Projekt Pflegeheim Freiberg KG, Kriftel (DE) 5,000 EUR 100.0% FI AGIOS Raiffeisen-Immobilien Leasing Gesellschaft m.b.H., Vienna (AT) 36,400 EUR 51.0% FI Akcenta CZ a.s., Prague (CZ) 100,125,000 CZK 92.5% BR AKRISIOS Raiffeisen-Immobilien-Leasing GmbH, Vienna (AT) 35,000 EUR 100.0% FI AL Taunussteiner Grundstücks-GmbH & Co KG, Kriftel (DE) 9,400 EUR 93.6% FI A-Leasing SpA, Treviso (IT) 68,410,000 EUR 100.0% FI Allgäu Reha Immobilienleasing GmbH, Kriftel (DE) 25,000 EUR 75.0% OT AMYKOS RBI Leasing-Immobilien GmbH, Vienna (AT) 35,000 EUR 75.0% FI Anton Proksch Institut Kalksburg RBI Immobilien Leasing GmbH, Vienna (AT) 35,000 EUR 75.0% OT AO Raiffeisenbank, Moscow (RU) 36,711,260,000 RUB 100.0% BA ARCANA Raiffeisen-Immobilien-Leasing Gesellschaft m.b.H., Vienna (AT) 36,400 EUR 100.0% FI A-Real Estate S.p.A., Bozen (IT) 390,000 EUR 100.0% FI ASCENT Pflege Borna Immobilienleasing GmbH, Kriftel (DE) 25,000 EUR 75.0% OT ASCENT Pflege Erfurt Immobilienleasing GmbH, Kriftel (DE) 25,000 EUR 75.0% OT ASCENT Pflege Hettstedt Immobilienleasing GmbH, Kriftel (DE) 25,000 EUR 75.0% OT ASCENT Pflege Schleswig Immobilienleasing GmbH, Kriftel (DE) 25,000 EUR 75.0% OT Austria Leasing Beteiligungsgesellschaft mbH, Eschborn (DE) 25,000 EUR 100.0% FI Austria Leasing GmbH, Eschborn (DE) 1,000,000 EUR 100.0% FI B52 RBI Leasing-Immobilien GmbH, Vienna (AT) 35,000 EUR 75.0% OT BAILE Handels- und Beteiligungsgesellschaft m.b.H., Vienna (AT) 40,000 EUR 100.0% FI Baumgartner Höhe RBI Leasing-Immobilien GmbH, Vienna (AT) 35,000 EUR 75.0% FI Burgenländische Kommunalgebäudeleasing Gesellschaft m.b.H., Vienna (AT) 35,000 EUR 100.0% FI Campus ATZ + DOS RBI Immobilien-Leasing GmbH, Vienna (AT) 35,000 EUR 75.0% OT Campus NBhf RBI Immobilien-Leasing GmbH, Vienna (AT) 35,000 EUR 75.0% OT Canopa Raiffeisen-Immobilien-Leasing Gesellschaft m.b.H., Vienna (AT) 36,400 EUR 100.0% FI Centralised Raiffeisen International Services & Payments S.R.L., Bucharest (RO) 2,820,000 RON 100.0% BR CERES Raiffeisen-Immobilien-Leasing GmbH, Vienna (AT) 35,000 EUR 100.0% FI CINOVA RBI Leasing-Immobilien GmbH, Vienna (AT) 35,000 EUR 75.0% FI CP Inlandsimmobilien-Holding GmbH, Vienna (AT) 364,000 EUR 100.0% OT CUPIDO Raiffeisen-Immobilien-Leasing GmbH, Vienna (AT) 35,000 EUR 100.0% FI Elevator Ventures Beteiligungs GmbH, Vienna (AT) 100,000 EUR 100.0% FI ETEOKLES Raiffeisen-Immobilien-Leasing GmbH, Vienna (AT) 35,000 EUR 100.0% FI Expo 2000 Real Estate EOOD, Sofia (BG) 10,000 BGN 100.0% OT FCC Office Building SRL, Bucharest (RO) 30,298,500 RON 100.0% BR Floreasca City Center Verwaltung Kft., Budapest (HU) 44,000 HUF 100.0% FI FMK Fachmarktcenter Kohlbruck Betriebs GmbH, Eschborn (DE) 30,678 EUR 94.5% OT FMZ PRIMUS Ingatlanfejlesztö Kft., Budapest (HU) 11,077 EUR 100.0% OT GENO Leasing Ges.m.b.H., Vienna (AT) 36,400 EUR 100.0% FI GTNMS RBI Immobilien-Leasing GmbH, Vienna (AT) 35,000 EUR 75.0% OT HABITO Raiffeisen-Immobilien-Leasing GmbH, Vienna (AT) 35,000 EUR 100.0% FI INFRA MI 1 Immobilien Gesellschaft mbH, Vienna (AT) 72,673 EUR 100.0% OT Infrastruktur Heilbad Sauerbrunn RBI-Leasing GmbH & Co.KG., Bad Sauerbrunn (AT) 3,511,188 EUR 75.0% FI Insurance Limited Liability Company "Priorlife", Minsk (BY) 7,682,300 BYN 87.7% VV Invest Vermögensverwaltungs-GmbH, Vienna (AT) 73,000 EUR 100.0% OT JLLC "Raiffeisen-leasing", Minsk (BY) 430,025 BYN 91.4% FI Kathrein Privatbank Aktiengesellschaft, Vienna (AT) 20,000,000 EUR 100.0% BA KAURI Handels und Beteiligungs GmbH, Vienna (AT) 50,000 EUR 88.0% FI Consolidated financial statements197 · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 Company, domicile (country) Subscribed capital1 in local currency Share1 Type2 LARENTIA Raiffeisen-Immobilien-Leasing GmbH, Vienna (AT) 35,000 EUR 100.0% OT Lentia Immobilienleasing GmbH & Co. Albert-Osswald-Haus KG, Kriftel (DE) 5,000 EUR 6.0% FI Limited Liability Company RB-Digital, Moscow (RU) 1,500,000 RUB 100.0% BR LYRA Raiffeisen Immobilien Leasing Gesellschaft m.b.H., Vienna (AT) 36,400 EUR 100.0% FI Neu-Marx Holding Eins GmbH & Co KG, Vienna (AT) 10,000 EUR 100.0% OT Neu-Marx Holding Zwei GmbH & Co KG, Vienna (AT) 10,000 EUR 100.0% OT Neu-Marx Immobilien Eins GmbH & Co KG, Vienna (AT) 10,000 EUR 100.0% OT Neu-Marx Immobilien Zwei GmbH & Co KG, Vienna (AT) 10,000 EUR 100.0% OT Objekt Linser Areal Immoblilienerrichtungs GmbH & Co. KG, Vienna (AT) 1,000 EUR 100.0% OT OOO Raiffeisen Capital Asset Management Company, Moscow (RU) 225,000,000 RUB 100.0% FI OOO Raiffeisen-Leasing, Moscow (RU) 1,071,000,000 RUB 100.0% FI OVIS Raiffeisen-Immobilien-Leasing Gesellschaft m.b.H., Vienna (AT) 36,400 EUR 100.0% FI PELIAS Raiffeisen-Immobilien-Leasing GmbH, Vienna (AT) 36,400 EUR 100.0% FI PERSES RBI Leasing-Immobilien GmbH, Vienna (AT) 35,000 EUR 75.0% FI PLANA Raiffeisen-Leasing Gesellschaft m.b.H., Vienna (AT) 36,400 EUR 100.0% FI Priorbank JSC, Minsk (BY) 86,147,909 BYN 87.7% BA R Karpo Immobilien Linie S.R.L., Bucharest (RO) 200 RON 100.0% OT R.P.I. Handels- und Beteiligungsgesellschaft m.b.H., Vienna (AT) 36,336 EUR 100.0% FI Raiffeisen Bank d.d. Bosna i Hercegovina, Sarajevo (BA) 247,167,000 BAM 100.0% BA Raiffeisen Bank JSC, Kiev (UA) 6,154,516,258 UAH 68.2% BA Raiffeisen Bank Kosovo J.S.C., Pristina (KO) 63,000,000 EUR 100.0% BA Raiffeisen Bank S.A., Bucharest (RO) 1,200,000,000 RON 99.9% BA Raiffeisen Bank Sh.a., Tirana (AL) 14,178,593,030 ALL 100.0% BA Raiffeisen Bank Zrt., Budapest (HU) 50,000,090,000 HUF 100.0% BA Raiffeisen banka a.d., Novi Belgrade (RS) 27,466,157,580 RSD 100.0% BA Raiffeisen Bausparkasse Gesellschaft m.b.H., Vienna (AT) 35,000,000 EUR 100.0% BA Raiffeisen Bausparkassen Holding GmbH, Vienna (AT) 10,000,000 EUR 100.0% FI Raiffeisen CEE Region Holding GmbH, Vienna (AT) 35,000 EUR 100.0% FH Raiffeisen CIS Region Holding GmbH, Vienna (AT) 35,000 EUR 100.0% FH Raiffeisen Corporate Leasing GmbH, Vienna (AT) 35,000 EUR 100.0% FI Raiffeisen Corporate Lízing Zrt., Budapest (HU) 50,100,000 HUF 100.0% FI Raiffeisen Digital Bank AG, Vienna (AT) 47,598,850 EUR 100.0% BA Raiffeisen Factor Bank AG, Vienna (AT) 10,000,000 EUR 100.0% FI Raiffeisen FinCorp, s.r.o., Prague (CZ) 200,000 CZK 75.0% FI Raiffeisen Group IT GmbH, Vienna (AT) 100,000 EUR 100.0% BR Raiffeisen International Liegenschaftsbesitz GmbH, Vienna (AT) 35,000 EUR 100.0% FI Raiffeisen Kapitalanlage-Gesellschaft m.b.H., Vienna (AT) 15,000,000 EUR 100.0% FI Raiffeisen Leasing d.o.o., Belgrade (RS) 405,021,700 RSD 100.0% FI Raiffeisen Leasing d.o.o. Sarajevo, Sarajevo (BA) 11,450,452 BAM 100.0% FI Raiffeisen Leasing IFN S.A., Bucharest (RO) 14,935,400 RON 99.9% FI Raiffeisen Leasing Kosovo LLC, Pristina (KO) 642,857 EUR 100.0% FI Raiffeisen Leasing sh.a., Tirana (AL) 263,520,134 ALL 100.0% FI Raiffeisen Leasing-Projektfinanzierung Gesellschaft m.b.H., Vienna (AT) 72,673 EUR 100.0% FI Raiffeisen Mandatory and Voluntary Pension Funds Management Company Plc., Zagreb (HR) 19,038,463 EUR 100.0% OT Raiffeisen ÖHT Beteiligungs GmbH, Vienna (AT) 35,000 EUR 88.0% FI Raiffeisen Pension Insurance d.d., Zagreb (HR) 8,242,086 EUR 100.0% VV Raiffeisen Property Holding International GmbH, Vienna (AT) 35,000 EUR 100.0% FI Raiffeisen Property International GmbH, Vienna (AT) 40,000 EUR 100.0% OT Raiffeisen Property Management GmbH, Vienna (AT) 40,000 EUR 100.0% OT Raiffeisen Rehazentrum Schruns Immobilienleasing GmbH, Vienna (AT) 36,400 EUR 51.0% FI Raiffeisen Rent DOO, Belgrade (RS) 243,099,913 RSD 100.0% OT Raiffeisen RS Beteiligungs GmbH, Vienna (AT) 35,000 EUR 100.0% FH Raiffeisen SEE Region Holding GmbH, Vienna (AT) 35,000 EUR 100.0% FH Raiffeisen stavebni sporitelna a.s., Prague (CZ) 650,000,000 CZK 75.0% BA Raiffeisen WohnBau Seeresidenz Weyregg GmbH, Vienna (AT) 35,000 EUR 100.0% OT Raiffeisen WohnBau Tirol GmbH, Vienna (AT) 35,000 EUR 100.0% OT Raiffeisen WohnBau Vienna GmbH, Vienna (AT) 35,000 EUR 100.0% OT Raiffeisen WohnBau Wien GmbH, Vienna (AT) 35,000 EUR 100.0% OT Raiffeisen WohnBau Zwei GmbH, Vienna (AT) 35,000 EUR 100.0% OT Raiffeisen Wohnbaubank Aktiengesellschaft, Vienna (AT) 5,100,000 EUR 100.0% FI Raiffeisen-Anlagenvermietung Gesellschaft m.b.H., Vienna (AT) 36,400 EUR 100.0% FI Raiffeisenbank a.s., Prague (CZ) 15,460,800,000 CZK 75.0% BA 198 Consolidated financial statements · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 Company, domicile (country) Subscribed capital1 in local currency Share1 Type2 Raiffeisenbank Austria d.d., Zagreb (HR) 480,646,626 EUR 100.0% BA Raiffeisen-Gemeindegebäudeleasing Gesellschaft m.b.H., Vienna (AT) 35,000 EUR 100.0% FI Raiffeisen-Immobilien-Leasing Gesellschaft m.b.H., Vienna (AT) 36,400 EUR 100.0% FI Raiffeisen-Invest-Gesellschaft m.b.H., Vienna (AT) 40,000 EUR 100.0% FI Raiffeisen-Kommunalgebäudeleasing Gesellschaft m.b.H., Vienna (AT) 35,000 EUR 100.0% FI Raiffeisen-Leasing Beteiligung GesmbH, Vienna (AT) 36,400 EUR 100.0% FI Raiffeisen-Leasing d.o.o., Zagreb (HR) 3,981,684 EUR 100.0% FI Raiffeisen-Leasing Equipment Finance GmbH, Vienna (AT) 35,000 EUR 100.0% FI Raiffeisen-Leasing Finanzierungs GmbH, Vienna (AT) 5,000,000 EUR 100.0% FI Raiffeisen-Leasing Fuhrparkmanagement Gesellschaft m.b.H., Vienna (AT) 36,400 EUR 100.0% OT Raiffeisen-Leasing Gesellschaft m.b.H., Vienna (AT) 363,364 EUR 100.0% FI Raiffeisen-Leasing Immobilienmanagement Gesellschaft m.b.H., Vienna (AT) 36,400 EUR 100.0% FI Raiffeisen-Leasing International Gesellschaft m.b.H., Vienna (AT) 36,336 EUR 100.0% FI Raiffeisen-Leasing, s.r.o., Prague (CZ) 450,000,000 CZK 75.0% FI Raiffeisen-Rent Immobilienprojektentwicklung Gesellschaft m.b.H. Objekt Wallgasse 12 KG, Vienna (AT) 4,886,449 EUR 100.0% OT Raiffeisen-Rent-Immobilienprojektentwicklung Gesellschaft m.b.H., Objekt Lenaugasse 11 KG, Vienna (AT) 6,169,924 EUR 100.0% OT RALT Raiffeisen-Leasing Gesellschaft m.b.H., Vienna (AT) 218,500 EUR 100.0% FI RALT Raiffeisen-Leasing Gesellschaft m.b.H. & Co. KG, Vienna (AT) 20,348,394 EUR 100.0% FI RAN vierzehn Raiffeisen-Anlagevermietung GmbH, Vienna (AT) 36,336 EUR 100.0% FI RAN zehn Raiffeisen-Anlagenvermietung Gesellschaft m.b.H., Vienna (AT) 36,336 EUR 100.0% FI RB International Markets (USA) LLC, New York (US) 8,000,000 USD 100.0% FI RBI Beteiligungs GmbH, Vienna (AT) 100,000 EUR 100.0% FH RBI eins Leasing Holding GmbH, Vienna (AT) 35,000 EUR 75.0% FI RBI Invest GmbH, Vienna (AT) 500,000 EUR 100.0% FH RBI ITS Leasing-Immobilien GmbH, Vienna (AT) 35,000 EUR 75.0% FI RBI LEA Beteiligungs GmbH, Vienna (AT) 70,000 EUR 100.0% FI RBI Leasing GmbH, Vienna (AT) 100,000 EUR 75.0% FI RBI LGG Holding GmbH, Vienna (AT) 35,000 EUR 100.0% FI RBI Retail Innovation GmbH, Vienna (AT) 35,000 EUR 100.0% BR REC Alpha LLC, Kiev (UA) 1,201,407,344 UAH 100.0% BR Regional Card Processing Center s.r.o., Bratislava (SK) 539,465 EUR 100.0% BR RIL VII Raiffeisen-Immobilien-Leasing Gesellschaft m.b.H., Vienna (AT) 36,400 EUR 100.0% FI RIL XIV Raiffeisen-Immobilien-Leasing Gesellschaft m.b.H., Vienna (AT) 36,400 EUR 100.0% FI RIRE Holding GmbH, Vienna (AT) 35,000 EUR 100.0% FI RL Anlagenvermietung Gesellschaft m.b.H., Eschborn (DE) 50,000 DEM 100.0% FI RL Grundstückverwaltung Klagenfurt-Süd GmbH, Vienna (AT) 35,000 EUR 100.0% FI RL LUX Holding S.a.r.l., Luxembourg (LU) 12,500 EUR 100.0% OT RL Retail Holding GmbH, Vienna (AT) 36,000 EUR 100.0% FI RL-ALPHA Holding GmbH, Vienna (AT) 35,000 EUR 100.0% FI RLI Holding Gesellschaft m.b.H., Vienna (AT) 40,000 EUR 100.0% FI RL-Mörby AB, Stockholm (SE) 100,000 SEK 100.0% FI RL-Nordic AB, Stockholm (SE) 50,000,000 SEK 100.0% FI RL-Pro Auxo Sp.z.o.o., Warsaw (PL) 50,000 PLN 100.0% FI RL-PROMITOR Holding GmbH, Vienna (AT) 35,000 EUR 100.0% OT RL-PROMITOR Sp. z.o.o., Warsaw (PL) 50,000 PLN 100.0% OT RUBRA Raiffeisen-Immobilien-Leasing Gesellschaft m.b.H., Vienna (AT) 36,400 EUR 100.0% FI RZB - BLS Holding GmbH, Vienna (AT) 500,000 EUR 100.0% FI RZB Versicherungsbeteiligung GmbH, Vienna (AT) 500,000 EUR 100.0% FI S.A.I. Raiffeisen Asset Management S.A., Bucharest (RO) 10,656,000 RON 99.9% FI SALVELINUS Handels- und Beteiligungsgesellschaft m.b.H, Vienna (AT) 40,000 EUR 100.0% FI SAMARA Raiffeisen-Immobilien-Leasing Gesellschaft m.b.H., Vienna (AT) 36,400 EUR 100.0% FI SINIS Raiffeisen-Immobilien-Leasing Gesellschaft m.b.H., Vienna (AT) 35,000 EUR 100.0% FI Sky Tower Immobilien- und Verwaltung Kft, Budapest (HU) 44,000 HUF 100.0% OT Skytower Building SRL, Bucharest (RO) 126,661,500 RON 100.0% OT SOLAR II Raiffeisen-Immobilien-Leasing Gesellschaft m.b.H., Vienna (AT) 36,400 EUR 100.0% FI Tatra Asset Management, správ. spol., a.s., Bratislava (SK) 1,659,700 EUR 78.8% FI Tatra banka, a.s., Bratislava (SK) 64,326,228 EUR 78.8% BA Tatra-Leasing, s.r.o., Bratislava (SK) 6,638,785 EUR 78.8% FI Ukrainian Processing Center PJSC, Kiev (UA) 180,000 UAH 100.0% BR Unterinntaler Raiffeisen-Leasing GmbH & Co KG, Vienna (AT) 36,336 EUR 100.0% FI Consolidated financial statements199 · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 Company, domicile (country) Subscribed capital1 in local currency Share1 Type2 URSA Raiffeisen-Immobilien-Leasing Gesellschaft m.b.H., Vienna (AT) 36,400 EUR 100.0% FI Valida Holding AG, Vienna (AT) 5,000,000 EUR 57.4% FI Valida Pension AG, Vienna (AT) 10,200,000 EUR 57.4% OT Valida Plus AG, Vienna (AT) 5,500,000 EUR 57.4% FI Viktor Property, s.r.o., Prague (CZ) 200,000 CZK 75.0% OT Vindalo Properties Limited, Limassol (CY) 67,998 RUB 100.0% BR WEGA Raiffeisen-Immobilien-Leasing Gesellschaft m.b.H., Vienna (AT) 36,400 EUR 100.0% FI WHIBK Raiffeisen-Immobilien-Leasing GmbH, Vienna (AT) 35,000 EUR 100.0% FI ZHS Office- & Facilitymanagement GmbH, Vienna (AT) 36,336 EUR 98.6% BR 1 Less own shares 2 Company type: BA Bank, BR Company rendering banking-related ancillary services, FH Financial holding, FI Financial institution, OT Other companies, VV Insurance, SC Securities firms Structured units The following tables show the carrying amounts of the financial assets and financial liabilities to non-consolidated structured entities broken down by type of structured entity. The carrying amounts presented below do not reflect the true variability of returns faced by the Group as they do not take the effects of collateral or hedges into account. Assets 2023 in € million Loans and advances Equity instruments Foreign exchange business Derivatives Securitization vehicles 41 0 501 0 Third party funding entities 207 18 0 0 Funds 0 0 0 0 Total 248 18 501 0 2022 in € million Loans and advances Equity instruments Foreign exchange business Derivatives Securitization vehicles 86 0 446 0 Third party funding entities 227 7 0 0 Funds 0 0 0 0 Total 313 7 446 0 Liabilities 2023 in € million Deposits Equity instruments Debt securities issued Derivatives Securitization vehicles 0 0 0 0 Third party funding entities 7 1 0 0 Funds 0 0 0 0 Total 7 1 0 0 2022 in € million Deposits Equity instruments Debt securities issued Derivatives Securitization vehicles 0 0 0 0 Third party funding entities 6 1 0 0 Funds 0 0 0 0 Total 6 1 0 0 Nature, purpose and extent of the Group’s interests in non-consolidated structured entities The Group engages in various business activities with structured entities which are designed to achieve a specific business purpose. A structured entity is one that has been set up so that any voting rights or similar rights are not the dominant factor in deciding who controls the entity. An example is when voting rights relate only to administrative tasks and the relevant activities are directed by contractual arrangements. 200 Consolidated financial statements · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 A structured entity often has some of or all the following features or attributes: · Restricted activities · A narrow and well-defined objective · Insufficient equity to permit the structured entity to finance its activities without subordinated financial support · Financing in the form of the issue of multiple contractually linked instruments to investors that create concentrations of credit or other risks (tranches) The principal uses of structured entities are to provide clients with access to specific portfolios of assets and to provide market liquidity for clients through securitizing financial assets. Structured entities may be established as corporations, trusts, or partnerships. Structured entities generally finance the purchase of assets by issuing debt and equity securities that are collateralized by and/or indexed to the assets held by the structured entities. Structured entities are consolidated when the substance of the relationship between the Group and the structured entities indicates that the structured entities are controlled by the Group. Below is a description of the Group’s investments in non-consolidated structured entities by type. Third party funding entities The Group provides funding to structured entities that hold a variety of assets. These entities may take the form of funding entities, trusts, and private investment companies. The funding is collateralized by the assets in the structured entities. The Group’s investment activity involves predominantly lending. Securitization vehicles The Group establishes securitization vehicles which purchase diversified pools of assets, including fixed income securities, company loans, and asset-backed securities (ABS; predominantly commercial and residential mortgage-backed securities (RMBS) and credit card receivables). The vehicles fund these purchases by issuing multiple tranches of debt and equity securities, the repayment of which is linked to the performance of the assets contained in the vehicles. Funds The Group establishes structured entities to accommodate client requirements to hold investments in specific assets. The Group also invests in funds that are sponsored by third parties. A Group entity may act as fund manager, custodian or in another function and provide funding and liquidity facilities to both Group-sponsored and third-party funds. The funding provided is collateralized by the underlying assets held by the fund. Maximum exposure to and size of non-consolidated structured entities The maximum exposure to loss is determined by considering the nature of the interest in the non-consolidated structured entity. The maximum exposure for loans and trading instruments is reflected by their carrying amounts in the statement of financial position. The maximum exposure for derivatives and instruments off the statement of financial position such as guarantees, liquidity facilities and loan commitments under IFRS 12, as interpreted by the Group, is reflected by the respective notional amount. Such amounts do not reflect the economic risks faced by the Group because they do not take the effects of collateral or hedges or the probability of such losses being incurred into account. As at 31 December 2023, the notional values of derivatives and instruments off the statement of financial position amounted to € 0 million (previous year: € 0 million) and € 34 million (previous year: € 27 million) respectively. Since information on the size of structured entities is not always publicly available, the Group has determined that its exposure is an appropriate guide to the risk of loss from investments in non- consolidated structured entities. Financial support As in the previous year, the Group has not provided financial support to non-consolidated structured entities during the financial year. Consolidated financial statements201 · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 Sponsored structured entities As a sponsor, the Group is often involved in the legal set up and marketing of the entity and supports the entity in different ways such as providing operational support to ensure the entity’s continued operation. The Group is also deemed a sponsor for a structured entity if market participants would reasonably associate the entity with the Group. Additionally, the use of the Raiffeisen name for the structured entity often indicates that the Group has acted as a sponsor. The gross proceeds from sponsored entities for the year ending 31 December 2023 amounted to € 246 million (previous year: € 250 million). No assets were transferred to sponsored non-consolidated structured entities in the reporting period and the previous year. (60) List of equity participations Associated companies valued at equity Company, domicile (country) Subscribed capital in local currency Share Type1 card complete Service Bank AG, Vienna (AT) 6,000,000 EUR 25.0% BA EMCOM Beteiligungs GmbH, Vienna (AT) 37,000 EUR 33.6% FI LEIPNIK-LUNDENBURGER INVEST Beteiligungs Aktiengesellschaft, Vienna (AT) 32,624,283 EUR 33.1% OT NOTARTREUHANDBANK AG, Vienna (AT) 8,030,000 EUR 26.0% FI Oesterreichische Kontrollbank Aktiengesellschaft, Vienna (AT) 130,000,000 EUR 8.1% BA Österreichische Hotel- und Tourismusbank Gesellschaft m.b.H., Vienna (AT) 11,627,653 EUR 31.3% BA Posojilnica Bank eGen, Klagenfurt (AT) 74,555,670 EUR 49.7% BA Prva stavebna sporitelna a.s., Bratislava (SK) 66,500,000 EUR 32.5% BA Raiffeisen Informatik GmbH & Co KG, Vienna (AT) 1,460,000 EUR 47.6% BR Limited Liability Company "Insurance Company "Raiffeisen Life", Moscow (RU) 450,000,000 RUB 25.0% VV Raiffeisen-Leasing Management GmbH, Vienna (AT) 300,000 EUR 50.0% OT UNIQA Insurance Group AG, Vienna (AT) 309,000,000 EUR 10.9% VV 1 Company type: BA Bank, BR Company rendering banking-related ancillary services, FH Financial holding, FI Financial institution, OT Other companies, VV Insurance, SC Securities firms Other affiliated companies Company, domicile (country) Subscribed capital in local currency Share Type1 Abrawiza Immobilienleasing GmbH, Eschborn (DE) 25,000 EUR 100.0% OT Abrawiza Immobilienleasing GmbH & Co. Projekt Fernwald KG, Kriftel (DE) 5,000 EUR 6.0% OT Abura Immobilienleasing GmbH, Eschborn (DE) 25,000 EUR 100.0% FI ACB Ponava, s.r.o., Prague (CZ) 200,000 CZK 100.0% OT Achat Immobilienleasing GmbH, Eschborn (DE) 25,000 EUR 100.0% FI Acridin Immobilienleasing GmbH, Eschborn (DE) 25,000 EUR 100.0% FI Adamas Immobilienleasing GmbH, Eschborn (DE) 25,000 EUR 100.0% FI Adiantum Immobilienleasing GmbH, Eschborn (DE) 25,000 EUR 100.0% FI Adipes Immobilienleasing GmbH, Eschborn (DE) 25,000 EUR 100.0% OT Adipes Immobilienleasing GmbH & Co. Projekt Bremervörde KG, Kriftel (DE) 5,000 EUR 100.0% OT Adorant Immobilienleasing GmbH, Eschborn (DE) 25,000 EUR 100.0% OT Adrett Immobilienleasing GmbH, Eschborn (DE) 25,000 EUR 100.0% OT Adrittura Immobilienleasing GmbH, Eschborn (DE) 25,000 EUR 100.0% OT Adufe Immobilienleasing GmbH, Eschborn (DE) 25,000 EUR 100.0% OT Agamemnon Immobilienleasing GmbH, Eschborn (DE) 25,000 EUR 100.0% FI Aglaia Property, s.r.o., Prague (CZ) 50,000 CZK 100.0% OT AKCENTA DE GmbH, Hamburg (DE) 25,000 EUR 100.0% FI Akcenta Digital s.r.o., Hradec Kralove (CZ) 20,000 CZK 100.0% FI Akcenta Logistic a.s. in Liqu., Hradec Kralove (CZ) 2,000,000 CZK 100.0% OT Ananke Property, s.r.o., Prague (CZ) 50,000 CZK 100.0% OT Angaga Handels- und Beteiligungs GmbH, Vienna (AT) 35,000 EUR 100.0% OT Antoninska 2 s.r.o., Prague (CZ) 50,000 CZK 90.0% OT Apate Property, s.r.o., Prague (CZ) 50,000 CZK 100.0% OT Appolon Property, s.r.o., Prague (CZ) 200,000 CZK 100.0% OT Ares property, s.r.o., Prague (CZ) 50,000 CZK 100.0% OT Argos Property, s.r.o., Prague (CZ) 50,000 CZK 100.0% OT ASCENT Reha Bad Ems Immobilienleasing GmbH, Kriftel (DE) 25,000 EUR 100.0% OT 202 Consolidated financial statements · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 Company, domicile (country) Subscribed capital in local currency Share Type1 ASCENT Reha Lehmrade Immobilienleasing GmbH, Kriftel (DE) 25,000 EUR 100.0% OT ASCENT Reha Schwedenstein Immobilienleasing GmbH, Kriftel (DE) 25,000 EUR 100.0% OT Astra Property, s.r.o., Prague (CZ) 50,000 CZK 100.0% OT Ate Property, s.r.o., Prague (CZ) 50,000 CZK 100.0% OT AURIGA Raiffeisen-Immobilien-Leasing Gesellschaft m.b.H., Vienna (AT) 36,400 EUR 100.0% FI Austria Leasing GmbH & Co. KG Immobilienverwaltung CURA, Kriftel (DE) 10,000 EUR 100.0% FI Austria Leasing GmbH & Co. KG Immobilienverwaltung Projekt Eberdingen, Kriftel (DE) 10,000 EUR 100.0% FI Austria Leasing Immobilienverwaltungsgesellschaft mbH, Eschborn (DE) 25,000 EUR 100.0% FI Bafep21 RBI Immobilien-Leasing GmbH, Vienna (AT) 35,000 EUR 100.0% OT Beroe Property, s.r.o., Prague (CZ) 50,000 CZK 100.0% OT Chronos Property, s.r.o., Prague (CZ) 200,000 CZK 100.0% OT CP Linzerstraße 221-227 Projektentwicklungs GmbH, Vienna (AT) 37,000 EUR 100.0% OT CP Logistikcenter Errichtungs- und Verwaltungs GmbH, Vienna (AT) 37,000 EUR 100.0% OT CP Projekte Muthgasse Entwicklungs GmbH, Vienna (AT) 40,000 EUR 100.0% OT Cranto Property, s.r.o., Prague (CZ) 50,000 CZK 90.0% OT Credibilis a.s., Prague (CZ) 2,000,000 CZK 100.0% OT CURO Raiffeisen-Immobilien-Leasing Gesellschaft m.b.H., Vienna (AT) 36,400 EUR 100.0% OT Dafne Property, s.r.o., Prague (CZ) 50,000 CZK 100.0% OT Dero Property, s.r.o., Prague (CZ) 50,000 CZK 100.0% OT Dike Property, s.r.o., Prague (CZ) 200,000 CZK 100.0% OT Dolni namesti 34, s.r.o., Prague (CZ) 10,000 CZK 90.0% OT Dom-office 2000, Minsk (BY) 283,478 BYN 100.0% OT Doplnková dôchodková spoločnosť Tatra banky, a.s., Bratislava (SK) 1,659,700 EUR 100.0% FI DORISCUS ENTERPRISES LTD., Limassol (CY) 19,843,400 EUR 86.6% OT Eos Property, s.r.o., Prague (CZ) 50,000 CZK 100.0% OT Essox d.o.o., Belgrade (RS) 100 RSD 100.0% OT Eunomia Property, s.r.o., Prague (CZ) 50,000 CZK 100.0% OT Eurolease RE Leasing, s. r. o., Bratislava (SK) 6,125,256 EUR 100.0% OT EV II EuVECA GmbH & Co KG, Vienna (AT) — EUR 100.0% FI EV II GmbH, Vienna (AT) — EUR 100.0% BR Expo Forest 1 EOOD, Sofia (BG) 5,000 BGN 100.0% OT Expo Forest 2 EOOD, Sofia (BG) 5,000 BGN 100.0% OT Expo Forest 3 EOOD, Sofia (BG) 5,000 BGN 100.0% OT Expo Forest 4 EOOD, Sofia (BG) 5,000 BGN 100.0% OT Extra Year Investments Limited, Tortola (VG) 50,000 USD 100.0% FI Fairo GmbH, Vienna (AT) 35,000 EUR 100.0% BR FARIO Handels- und Beteiligungsgesellschaft m.b.H., Vienna (AT) 40,000 EUR 100.0% OT Fidurock Residential a.s., Prague (CZ) 2,000,000 CZK 90.0% OT FIRA Properties a.s., Prague (CZ) 1,800,000 CZK 90.0% OT First Leasing Service Center GmbH, Vienna (AT) 35,000 EUR 100.0% OT Fobos Property, s.r.o., Prague (CZ) 50,000 CZK 100.0% OT Folos Property, s.r.o., Prague (CZ) 50,000 CZK 100.0% OT Gaia Property, s.r.o., Prague (CZ) 200,000 CZK 100.0% OT Golden Rainbow International Limited, Tortola (VG) 1 SGD 100.0% FI Grainulos s.r.o., Prague (CZ) 1 CZK 100.0% OT GRENA REAL s.r.o., Prague (CZ) 89,715 CZK 100.0% OT GS55 Sazovice s.r.o., Prague (CZ) 15,558,000 CZK 90.0% OT Harmonia Property, s.r.o., Prague (CZ) 50,000 CZK 100.0% OT Hebe Property, s.r.o., Prague (CZ) 200,000 CZK 95.0% OT Hefaistos Property, s.r.o., Prague (CZ) 50,000 CZK 100.0% OT Hestia Property, s.r.o., Prague (CZ) 50,000 CZK 100.0% OT Holeckova Property s.r.o., Prague (CZ) 210,000 CZK 100.0% OT Humanitarian Fund ''Budimir Bosko Kostic'', Belgrade (RS) 30,000 RSD 100.0% OT Hypnos Property, s.r.o., Prague (CZ) 50,000 CZK 100.0% OT IDUS Handels- und Beteiligungs GmbH, Vienna (AT) 40,000 EUR 100.0% OT IGNIS Raiffeisen-Immobilien-Leasing Gesellschaft m.b.H., Vienna (AT) 36,400 EUR 100.0% FI Immoservice Polska Sp.z.o.o., Warsaw (PL) 50,000 PLN 100.0% OT Infrastruktur Heilbad Sauerbrunn GmbH, Vienna (AT) 35,000 EUR 100.0% FI INPROX Split d.o.o., Zagreb (HR) 13,270 EUR 100.0% OT ISIS Raiffeisen Immobilien Leasing GmbH, Vienna (AT) 36,400 EUR 100.0% FI JFD Real s.r.o., Prague (CZ) 50,000 CZK 100.0% OT Kalypso Property, s.r.o., Prague (CZ) 200,000 CZK 100.0% OT Consolidated financial statements203 · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 Company, domicile (country) Subscribed capital in local currency Share Type1 Kappa Estates s.r.o., Prague (CZ) 200,000 CZK 100.0% OT Kathrein & Co Life Settlement Gesellschaft m.b.H., Vienna (AT) 35,000 EUR 100.0% OT Kathrein & Co. Trust Holding GmbH, Vienna (AT) 35,000 EUR 100.0% OT Kathrein Capital Management GmbH, Vienna (AT) 1,000,000 EUR 100.0% FI Kathrein Private Equity GmbH, Vienna (AT) 190,000 EUR 100.0% SC Keto Property, s.r.o., Prague (CZ) 50,000 CZK 100.0% OT Kleio Property, s.r.o., Prague (CZ) 50,000 CZK 100.0% OT Körlog Logistika Építö és Kivitelezö Korlátolt Feleösségü Társaság, Budapest (HU) 11,077 EUR 100.0% OT LENTIA Immobilienleasing GmbH, Eschborn (DE) 25,000 EUR 100.0% FI Leto Property, s.r.o., Prague (CZ) 200,000 CZK 77.0% OT Ligea Property, s.r.o., Prague (CZ) 50,000 CZK 100.0% OT Limited Liability Company “Raiffeisen Leasing”, Kiev (UA) 1,240,152,866 UAH 100.0% OT Limited Liability Company European Insurance Agency, Moscow (RU) 120,000 RUB 100.0% OT Limited Liability Company FAIRO, Kiev (UA) 358,998,892 UAH 100.0% BR Limited Liability Company REC GAMMA, Kiev (UA) 49,015,000 UAH 100.0% BR Limited Liabilty Company RBRU Specialized Depositary, Moscow (RU) 100,000,000 RUB 100.0% FI LOTA Handels- und Beteiligungs-GmbH, Vienna (AT) 35,000 EUR 100.0% OT Lucius Property, s.r.o., Prague (CZ) 200,000 CZK 100.0% OT Luna Property, s.r.o., Prague (CZ) 200,000 CZK 100.0% OT MAMONT GmbH, Kiev (UA) 66,872,100 UAH 100.0% OT Medea Property, s.r.o., Prague (CZ) 50,000 CZK 100.0% OT MELIKERTES Raiffeisen-Mobilien-Leasing GmbH, Vienna (AT) 35,000 EUR 100.0% OT Melpomene Property, s.r.o., Prague (CZ) 50,000 CZK 100.0% OT Morfeus Property, s.r.o., Prague (CZ) 50,000 CZK 100.0% OT MORHUA Handels- und Beteiligungs GmbH, Vienna (AT) 36,336 EUR 100.0% OT Nereus Property, s.r.o., Prague (CZ) 50,000 CZK 100.0% OT Nerudova Property s.r.o., Hradec Kralove (CZ) 200,000 CZK 100.0% BR Objekt Linser Areal Immobilienerrichtungs GmbH, Vienna (AT) 35,000 EUR 100.0% OT OOO Estate Management, Minsk (BY) 15,963,046 BYN 100.0% OT Orchideus Property, s.r.o., Prague (CZ) 200,000 CZK 100.0% OT Orestes Immobilienleasing GmbH, Eschborn (DE) 25,000 EUR 100.0% OT OSTARRICHI Immobilienleasing GmbH, Eschborn (DE) 25,000 EUR 100.0% OT Ostarrichi Immobilienleasing GmbH & Co. Projekt Langenbach KG, Kriftel (DE) 5,000 EUR 100.0% OT Palace Holding s.r.o., Prague (CZ) 2,700,000 CZK 90.0% OT PARO Raiffeisen Immobilien Leasing Gesellschaft m.b.H., Vienna (AT) 36,400 EUR 100.0% FI PLUSFINANCE LAND S.R.L., Bucharest (RO) 1,000 RON 100.0% BR Plutos Property, s.r.o., Prague (CZ) 50,000 CZK 100.0% OT Pontos Property, s.r.o., Prague (CZ) 200,000 CZK 100.0% OT Priamos Immobilienleasing GmbH, Eschborn (DE) 25,000 EUR 100.0% OT Pro Invest da Vinci e.o.o.d., Sofia (BG) 5,000 BGN 100.0% OT Production unitary enterprise "PriortransAgro", Minsk (BY) 50,000 BYN 100.0% OT Propria Raiffeisen-Immobilien-Leasing GmbH, Vienna (AT) 35,000 EUR 90.0% OT Queens Garden Sp z.o.o., Warsaw (PL) 100,000 PLN 100.0% OT R.B.T. Beteiligungsgesellschaft m.b.H, Vienna (AT) 36,336 EUR 58.8% OT R.L.H. Holding GmbH, Vienna (AT) 35,000 EUR 100.0% FI Radwinter sp.z o.o., Warsaw (PL) 20,000 PLN 100.0% OT Raiffeisen Apart GmbH, Vienna (AT) 35,000 EUR 100.0% OT Raiffeisen Assistance D.O.O., Beograd, Belgrade (RS) 4,307,115 RSD 100.0% OT Raiffeisen Assistance doo Sarajevo, Sarajevo (BA) 4,000 BAM 100.0% OT Raiffeisen Autó Lízing Kft., Budapest (HU) 3,000,000 HUF 100.0% OT Raiffeisen Befektetési Alapkezelõ Zrt., Budapest (HU) 100,000,000 HUF 100.0% FI Raiffeisen Biztosításközvetítö Kft., Budapest (HU) 5,000,000 HUF 100.0% VV Raiffeisen Burgenland Leasing GmbH, Vienna (AT) 38,000 EUR 100.0% FI Raiffeisen Capital a.d. Banja Luka, Banja Luka (BA) 355,000 BAM 100.0% FI Raiffeisen Continuum GmbH & Co KG, Vienna (AT) 85,000 EUR 58.8% FI Raiffeisen Continuum Management GmbH, Vienna (AT) 100,000 EUR 50.0% FI Raiffeisen Direct Investments CZ, s.r.o., Prague (CZ) 50,000 CZK 100.0% OT Raiffeisen Future AD Beograd drustvo za upravljanje dobrovoljnim penzijskim fondom, Belgrade (RS) 143,200,000 RSD 100.0% FI Raiffeisen Immobilien Kapitalanlage-Gesellschaft m.b.H., Vienna (AT) 5,000,000 EUR 100.0% FI Raiffeisen Ingatlan Üzemeltető Kft., Budapest (HU) 3,000,000 HUF 100.0% OT Raiffeisen Insurance and Reinsurance Broker S.R.L, Bucharest (RO) 180,000 RON 100.0% BR 204 Consolidated financial statements · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 Company, domicile (country) Subscribed capital in local currency Share Type1 Raiffeisen Insurance Broker Kosovo L.L.C., Pristina (KO) 10,000 EUR 100.0% BR Raiffeisen International Invest Holding GmbH, Vienna (AT) 35,000 EUR 100.0% FI RAIFFEISEN INVEST AD DRUSTVO ZA UPRAVLJANJE INVESTICIONIM FONDOVIMA BEOGRAD, Belgrade (RS) 47,660,000 RSD 100.0% FI Raiffeisen Invest d.o.o., Zagreb (HR) 1,560,780 EUR 100.0% FI Raiffeisen Invest Drustvo za upravljanje fondovima d.d. Sarajevo, Sarajevo (BA) 1,118,600 BAM 100.0% FI Raiffeisen INVEST Sh.a., Tirana (AL) 90,000,000 ALL 100.0% FI Raiffeisen investicni spolecnost a.s., Prague (CZ) 40,000,000 CZK 100.0% FI Raiffeisen Investment Advisory GmbH, Vienna (AT) 35,000 EUR 100.0% FI Raiffeisen Investment Financial Advisory Services Ltd. Co., Istanbul (TR) 2,930,000 TRY 100.0% FI Raiffeisen Leasing d.o.o., Ljubljana (SI) 3,738,107 EUR 100.0% OT Raiffeisen Property Estate s.r.o., Bratislava (SK) 5,000 EUR 100.0% OT Raiffeisen Property Management Bulgaria EOOD, Sofia (BG) 80,000 BGN 100.0% OT Raiffeisen Property Management s.r.o., Bratislava (SK) 5,000 EUR 100.0% OT Raiffeisen Rent S.R.L, Bucharest (RO) 2,962,800 RON 100.0% OT Raiffeisen Salzburg Invest GmbH, Salzburg (AT) 500,000 EUR 100.0% FI Raiffeisen Tech GmbH, Vienna (AT) 35,000 EUR 100.0% FI Raiffeisen Windpark Zistersdorf GmbH, Vienna (AT) 37,000 EUR 100.0% OT Raiffeisen Wohnbauleasing Gesellschaft m.b.H., Vienna (AT) 36,400 EUR 100.0% FI Raiffeisen-Leasing Anlagen und KFZ Vermietungs GmbH, Vienna (AT) 35,000 EUR 100.0% FI Raiffeisen-Leasing Immobilienverwaltung Gesellschaft m.b.H., Vienna (AT) 36,400 EUR 100.0% OT Raiffeisen-Wohnbauleasing Österreich GmbH, Vienna (AT) 35,000 EUR 100.0% FI RAN elf Raiffeisen-Anlagenvermietung Gesellschaft m.b.H., Vienna (AT) 36,336 EUR 100.0% FI RB International Investment Asia Limited, Labuan (MY) 1 USD 100.0% OT RB Szolgáltató Központ Kft. - RBSC Kft., Nyíregyháza (HU) 3,000,000 HUF 100.0% OT RBI Kantinenbetriebs GmbH, Vienna (AT) 35,000 EUR 100.0% OT RBI PE Handels- und Beteiligungs GmbH, Vienna (AT) 150,000 EUR 100.0% FI RBI Real Estate Services Czechia s.r.o., Prague (CZ) 100,000 CZK 100.0% OT RBI Real Estate Services Polska SP.z.o.o., Warsaw (PL) 400,000 PLN 100.0% OT RBI Retail Innovation LLC, Kiev (UA) 8,241,525 UAH 100.0% BR RBI Retail Innovation SK s.r.o., Bratislava (SK) 75,000 EUR 100.0% BR RBM Wohnbau Ges.m.b.H., Vienna (AT) 37,000 EUR 100.0% OT RCR Ukraine LLC, Kiev (UA) 282,699 UAH 100.0% BR RDI Czech 1 s.r.o., Prague (CZ) 200,000 CZK 100.0% OT RDI Czech 3 s.r.o, Prague (CZ) 200,000 CZK 100.0% OT RDI Czech 4 s.r.o, Prague (CZ) 2,500,000 CZK 100.0% OT RDI Czech 5 s.r.o, Prague (CZ) 200,000 CZK 100.0% OT RDI Czech 6 s.r.o, Prague (CZ) 3,700,000 CZK 100.0% OT RDI Management s.r.o., Prague (CZ) 200,000 CZK 100.0% OT Real Estate Rent 4 DOO, Belgrade (RS) 40,310 RSD 100.0% OT REF HP 1 s.r.o., Prague (CZ) 200,000 CZK 100.0% OT Rent PO, s.r.o., Bratislava (SK) 6,639 EUR 100.0% FI Residence Park Trebes, s.r.o., Prague (CZ) 20,000,000 CZK 100.0% OT RIL XIII Raiffeisen-Immobilien-Leasing Gesellschaft m.b.H., Vienna (AT) 36,400 EUR 100.0% FI R-Insurance Services sp. z o.o., Ruda O.S. (PL) 5,000 PLN 100.0% OT RIRBRO ESTATE MANAGEMENT S.R.L., Bucharest (RO) 1,000 RON 100.0% BR RK 60 Kft, Budapest (HU) 3,000,000 HUF 100.0% OT RL Leasing Gesellschaft m.b.H., Eschborn (DE) 25,565 EUR 100.0% FI RL-BETA Holding GmbH, Vienna (AT) 35,000 EUR 100.0% OT RL-Lamda s.r.o., Bratislava (SK) 6,639 EUR 100.0% OT RL-Opis Holding GmbH, Vienna (AT) 35,000 EUR 100.0% OT RL-Prom-Wald Sp. Z.o.o, Warsaw (PL) 50,000 PLN 100.0% OT RLRE Carina Property, s.r.o., Prague (CZ) 200,000 CZK 100.0% OT RLRE Ypsilon Property, s.r.o., Prague (CZ) 200,000 CZK 100.0% OT Robert Károly Körút Irodaház Kft., Budapest (HU) 3,000,000 HUF 100.0% OT RPM Budapest KFT, Budapest (HU) 3,000,000 HUF 100.0% OT SASSK Ltd., Kiev (UA) 152,322,000 UAH 88.7% OT Sazavska 826 s.r.o., Prague (CZ) 50,000 CZK 90.0% OT Scantius Holding GmbH, Vienna (AT) 35,000 EUR 100.0% OT SCT Kárász utca Ingatlankezelő Kft., Budapest (HU) 3,000,000 HUF 100.0% OT SCTE Elsö Ingatlanfejlesztö és Ingatlanhasznosító Kft., Budapest (HU) 3,000,000 HUF 100.0% OT SeEnergy PT, s.r.o., Prague (CZ) 700,000 CZK 100.0% OT Consolidated financial statements205 · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 Company, domicile (country) Subscribed capital in local currency Share Type1 SF Hotelerrichtungsgesellschaft m.b.H., Vienna (AT) 36,336 EUR 100.0% OT Sky Solar Distribuce s.r.o., Prague (CZ) 200,000 CZK 77.0% OT SOLIDA Raiffeisen-Immobilien-Leasing Gesellschaft m.b.H., Vienna (AT) 36,400 EUR 50.5% FI St. Marx-Immobilien Verwertungs- und Verwaltungs GmbH, Vienna (AT) 36,336 EUR 100.0% OT Stara 19 s.r.o., Prague (CZ) 200,000 CZK 90.0% OT STYRIA Immobilienleasing GmbH, Eschborn (DE) 25,000 EUR 100.0% OT Szentkiraly utca 18 Kft., Budapest (HU) 5,000,000 HUF 100.0% OT Tatra Leasing Broker, s.r.o., Bratislava (SK) 6,639 EUR 100.0% OT TEG 1 Immobilienentwicklungs GmbH & Co KG, Vienna (AT) 10,000 EUR 100.0% OT Thaumas Property, s.r.o., Prague (CZ) 50,000 CZK 100.0% OT Theia Property, s.r.o., Prague (CZ) 50,000 CZK 100.0% OT Valida Consulting GmbH, Vienna (AT) 500,000 EUR 100.0% OT Veletrzni 42 s.r.o., Prague (CZ) 100,000 CZK 90.0% OT Vlhka 26 s.r.o., Prague (CZ) 200,000 CZK 90.0% OT Zahradnicka Property s.r.o., Bratislava (SK) 5,000 EUR 100.0% OT ZUNO GmbH, Vienna (AT) 35,000 EUR 100.0% OT 1 Company type: BA Bank, BR Company rendering banking-related ancillary services, FH Financial holding, FI Financial institution, OT Other companies, VV Insurance, SC Securities firms Other equity participations Company, domicile (country) Subscribed capital in local currency Share Type1 Accession Mezzanine Capital III L.P., St. Helier (JE) 1,501 EUR 3.3% OT Adoria Grundstückvermietungs Gesellschaft m.b.H., St. Pölten (AT) 36,360 EUR 24.5% FI Agricultural Open Joint Stock Company Illintsi Livestock Breeding Enterprise, Illinci (UA) 703,100 UAH 4.7% OT AIL Swiss-Austria Leasing AG, Glattbrugg (CH) 5,000,000 CHF 50.0% FI ALCS Association of Leasing Companies in Serbia, Belgrade (RS) 853,710 RSD 12.5% OT Analytical Credit Rating Agency (Joint Stock Company), Moscow (RU) 3,000,024,000 RUB 3.7% OT A-Trust GmbH, Vienna (AT) 5,290,013 EUR 12.1% OT Austrian Reporting Services GmbH, Vienna (AT) 41,176 EUR 15.0% BR AVION-Grundverwertungsgesellschaft m.b.H., Vienna (AT) 36,336 EUR 49.0% FI Bad Sauerbrunn Thermalwasser Nutzungs- und Verwertungs GmbH., Bad Sauerbrunn (AT) 36,336 EUR 50.0% OT Belarussian currency and stock exchange JSC, Minsk (BY) 14,328,656 BYN <0,1% OT Biroul de Credit S.A., Bucharest (RO) 4,114,615 RON 13.2% FI BTS Holding a.s. "v likvidácii", Bratislava (SK) 35,700 EUR 19.0% OT Budapest Stock Exchange, Budapest (HU) 541,348,100 HUF <0,1% OT CADO Raiffeisen-Immobilien-Leasing Ges.m.b.H., Vienna (AT) 36,400 EUR 50.0% OT Central Depository and Clearing Company, Inc., Zagreb (HR) 12,545,623 EUR 0.1% FI CIT ONE SA, Bucharest (RO) 21,270,270 RON 33.3% BR Commodity Exchange Crimean Interbank Currency Exchange, Simferopol (UA) 420,000 UAH 4.8% OT CONATUS Grundstückvermietungs Gesellschaft m.b.H., St. Pölten (AT) 36,360 EUR 24.5% OT CULINA Grundstückvermietungs Gesellschaft m.b.H., St. Pölten (AT) 36,360 EUR 25.0% FI D. Trust Certifikacná Autorita, a.s., Bratislava (SK) 331,939 EUR 10.0% OT Die Niederösterreichische Leasing Gesellschaft m.b.H., Vienna (AT) 36,400 EUR 35.0% FI Die Niederösterreichische Leasing GmbH & Co KG, Vienna (AT) 72,673 EUR 40.0% FI Einlagensicherung AUSTRIA Ges.m.b.H., Vienna (AT) 515,000 EUR 0.2% FI EMERGING EUROPE GROWTH FUND II, L.P., Delaware (US) 370,000,000 USD 1.9% OT Epsilon - Grundverwertungsgesellschaft m.b.H. in Liqu., Vienna (AT) 36,336 EUR 24.0% OT ESQUILIN Grundstücksverwaltungs Gesellschaft m.b.H., St. Pölten (AT) 36,336 EUR 24.5% FI Euro Banking Association (ABE Clearing S.A.S.), Paris (FR) 48,000 EUR 2.1% FI European Investment Fund S.A., Luxembourg (LU) 7,370,000,000 EUR 0.1% FI Export and Industry Bank Inc., Makati City (PH) 4,734,452,540 PHP 9.5% BA FORIS Grundstückvermietungs Gesellschaft m.b.H., St. Pölten (AT) 36,360 EUR 24.5% FI G + R Leasing Gesellschaft m.b.H., Graz (AT) 36,400 EUR 25.0% FI G + R Leasing Gesellschaft m.b.H. & Co. KG., Graz (AT) 72,673 EUR 50.0% FI Garantiqa Hitelgarancia ZRt., Budapest (HU) 7,839,600,000 HUF 0.2% BR Greenix Limited, Tortola (VG) 100,000 USD 25.0% OT HOBEX AG, Salzburg (AT) 1,000,000 EUR 8.5% FI Hrvatski registar obveza po kreditima d.o.o., Zagreb (HR) 1,791,758 EUR 10.5% BR Joint Stock Company Stock Exchange PFTS, Kiev (UA) 32,010,000 UAH 0.2% OT Kommunal-Infrastruktur & Immobilien Zeltweg GmbH, Zeltweg (AT) 35,000 EUR 20.0% OT 206 Consolidated financial statements · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 Company, domicile (country) Subscribed capital in local currency Share Type1 LITUS Grundstückvermietungs Gesellschaft m.b.H., St. Pölten (AT) 36,360 EUR 24.5% FI Lorit Kommunalgebäudeleasing Gesellschaft m.b.H., Vienna (AT) 42,000 EUR 8.3% FI MASTERINVEST Kapitalanlage GmbH, Vienna (AT) 2,500,000 EUR 37.5% FI MAZ-Kupava, Minsk (BY) 4,000 BYN 7.6% OT Medicur - Holding Gesellschaft m.b.H., Vienna (AT) 4,360,500 EUR 25.0% OT Minsk shoe open joint-stock company "Luch", Minsk (BY) 9,002,918 BYN 5.2% OT MIRA Raiffeisen-Immobilien-Leasing Gesellschaft m.b.H., Vienna (AT) 36,400 EUR 50.0% FI Monilogi s.r.o., Bratislava (SK) — EUR 26.0% OT National Settlement Depositary, Moscow (RU) 1,180,675,000 RUB <0,1% FI NÖ Raiffeisen Kommunalprojekte Service Gesellschaft m.b.H., Vienna (AT) 50,000 EUR 26.0% FI NÖ Raiffeisen-Leasing Gemeindeprojekte Gesellschaft m.b.H., Vienna (AT) 36,400 EUR 1.0% FI NÖ. HYPO Leasing und Raiffeisen-Immobilien-Leasing Traisenhaus GesmbH & Co OG, St. Pölten (AT) 24,868,540 ATS 50.0% OT NÖ-KL Kommunalgebäudeleasing Gesellschaft m.b.H., Vienna (AT) 37,400 EUR 33.3% FI Oberpinzg. Fremdenverkehrförderungs- und Bergbahnen AG, Neukirchen am Großvenediger (AT) 3,297,530 EUR <0,1% OT OJSC NBFI Single Settlement and Information Space, Minsk (BY) 474,917,123,425 BYN 4.2% FI Open Joint Stock Company Kyiv Special Project and Design Bureau Menas, Kiev (UA) 3,383,218 UAH 4.7% OT Orpea S.A, Puteaux Cedex (FR) 646,291,571 EUR 0.6% OT Österreichische Raiffeisen-Sicherungseinrichtung eGen, Vienna (AT) 121,200 EUR 8.7% FI Österreichische Wertpapierdaten Service GmbH, Vienna (AT) 100,000 EUR 25.3% BR Pisano Limited, London (GB) 4,041 GBP 17.6% OT Private Joint Stock Company Bird Farm Bershadskyi, Viytivka (UA) 6,691,141 UAH 0.5% OT Private Joint Stock Company First All-Ukrainian Credit Bureau, Kiev (UA) 11,750,000 UAH 5.1% OT Private Joint Stock Company Sumy Enterprise Agrotechservice, Sumy (UA) 1,545,000 UAH 0.6% OT Private Joint Stock Company Ukrainian Interbank Currency Exchange, Kiev (UA) 36,000,000 UAH 3.1% OT PSA Payment Services Austria GmbH, Vienna (AT) 285,000 EUR 11.2% FI Public Joint Stock Company National Depositary of Ukraine, Kiev (UA) 103,200,000 UAH 0.1% BR Public Joint Stock Company Settlement Center for Servicing of Contracts in Financial Markets, Kiev (UA) 206,700,000 UAH <0,1% OT QUIRINAL Grundstücksverwaltungs Gesellschaft m.b.H., Vienna (AT) 37,063 EUR 33.3% FI Raiffeisen Continuum GmbH, Vienna (AT) 100,000 EUR 14.3% OT Raiffeisen Digital GmbH, Vienna (AT) 75,000 EUR 1.2% BR Raiffeisen e-force GmbH, Vienna (AT) 145,346 EUR 28.2% BR Raiffeisen Informatik Geschäftsführungs GmbH, Vienna (AT) 70,000 EUR 47.6% BR Raiffeisen Kooperations eGen, Vienna (AT) 9,000,000 EUR 11.1% OT Raiffeisen Salzburg Leasing GmbH, Salzburg (AT) 35,000 EUR 19.0% FI Raiffeisen Software GmbH, Linz (AT) 150,000 EUR 1.2% BR RAIFFEISEN-HOLDING NIEDERÖSTERREICH-WIEN registrierte Genossenschaft mit beschränkter Haftung, Vienna (AT) 96,391,536 EUR <0,1% BA Raiffeisen-IMPULS-Liegenschaftsverwaltung Gesellschaft m.b.H., Linz (AT) 500,000 ATS 25.0% FI Raiffeisen-Impuls-Zeta Immobilien GmbH, Linz (AT) 58,333 EUR 40.0% FI Raiffeisenlandesbank Kärnten - Rechenzentrum und Revisionsverband, registrierte Genossenschaft mit beschränkter Haftung, Klagenfurt (AT) 6,715,500 EUR <0,1% BA Raiffeisen-Landesbank Tirol AG, Rum (AT) 90,850,000 EUR <0,1% BA Raiffeisen-Leasing BOT s.r.o., Prague (CZ) 100,000 CZK 20.0% OT Raiffeisen-Leasing Mobilien und KFZ GmbH, Vienna (AT) 35,000 EUR 15.0% FI Registry of Securities in FBH, Sarajevo (BA) 2,052,300 BAM 1.4% BR Rehazentrum Kitzbühel Immobilien-Leasing GmbH, Innsbruck (AT) 35,000 EUR 19.0% FI REMUS Raiffeisen-Immobilien-Leasing Gesellschaft m.b.H., Vienna (AT) 36,400 EUR 50.0% FI RLB Holding eGen OÖ, Linz (AT) 1,566,758 EUR <0,1% FI RLKG Raiffeisen-Leasing GmbH, Vienna (AT) 40,000 EUR 12.5% FI RSAL Raiffeisen Steiermark Anlagenleasing GmbH, Graz (AT) 38,000 EUR 19.0% FI RSC Raiffeisen Service Center GmbH, Vienna (AT) 2,000,000 EUR 50.3% BR RSIL Immobilienleasing Raiffeisen Steiermark GmbH, Graz (AT) 38,000 EUR 19.0% FI S.C. DEPOZITARUL CENTRAL S.A., Bucharest (RO) 25,291,953 RON 2.6% OT Sarajevska berza-burza vrijednosnih papira dd Sarajevo, Sarajevo (BA) 1,967,680 BAM 10.5% FI Seilbahnleasing GmbH, Innsbruck (AT) 36,000 EUR 33.3% OT SELENE Raiffeisen-Immobilien-Leasing Gesellschaft m.b.H., Innsbruck (AT) 36,400 EUR 1.0% OT SKR Lager 102 AB, Stockholm (SE) 100,000 SEK 49.0% OT Slovak Banking Credit Bureau, s.r.o., Bratislava (SK) 9,958 EUR 33.3% BR Societatea de Transfer de Fonduri si Decontari-TRANSFOND S.A, Bucharest (RO) 6,720,000 RON 3.4% FI Society for Worldwide Interbank Financial Telekommunication scrl, La Hulpe (BE) 638,483,100 EUR 0.4% FI SPICA Raiffeisen-Immobilien-Leasing Gesellschaft m.b.H., Vienna (AT) 36,400 EUR 50.0% FI Consolidated financial statements207 · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 Company, domicile (country) Subscribed capital in local currency Share Type1 Steirische Gemeindegebäude Leasing Gesellschaft m.b.H., Vienna (AT) 36,336 EUR 50.0% FI Steirische Kommunalgebäudeleasing Gesellschaft m.b.H., Vienna (AT) 36,336 EUR 25.0% FI Steirische Leasing für Gebietskörperschaften Ges.m.b.H., Vienna (AT) 36,336 EUR 50.0% FI Steirische Leasing für öffentliche Bauten Gesellschaft m.b.H., Vienna (AT) 36,336 EUR 50.0% OT SWO Kommunalgebäudeleasing Gesellschaft m.b.H., Vienna (AT) 36,336 EUR 50.0% FI Syrena Immobilien Holding AG, Spittal an der Drau (AT) 22,600,370 EUR 21.0% OT Tarfin Limited, London (GB) 13,958,993 GBP 5.7% OT The Zagreb Stock Exchange joint stock company, Zagreb (HR) 46,357,000 EUR 2.9% OT TKL II. Grundverwertungsgesellschaft m.b.H., Vienna (AT) 39,000 EUR 8.3% OT TKL V Grundverwertungsgesellschaft m.b.H., Innsbruck (AT) 39,000 EUR 33.3% OT TKL VI Grundverwertungsgesellschaft m.b.H., Innsbruck (AT) 39,000 EUR 33.3% FI TKL VII Grundverwertungsgesellschaft m.b.H., Innsbruck (AT) 39,000 EUR 33.3% FI TKL VIII Grundverwertungsgesellschaft m.b.H., Innsbruck (AT) 39,000 EUR 24.5% FI Tojon Beteiligungs GmbH, Vienna (AT) 70,000 EUR 25.0% OT Top Vorsorge-Management GmbH, Vienna (AT) 35,000 EUR 50.0% OT TRABITUS Grundstücksvermietungs Gesellschaft m.b.H., Vienna (AT) 36,360 EUR 25.0% OT VALET-Grundstücksverwaltungs Gesellschaft m.b.H., St. Pölten (AT) 36,360 EUR 24.5% FI vc trade GmbH, Frankfurt am Main (DE) 40,688 EUR 9.5% BR VERMREAL Liegenschaftserwerbs- und -betriebs GmbH, Vienna (AT) 36,336 EUR 17.0% OT Visa Inc., San Francisco (US) 192,981 USD <0,1% BR Vorarlberger Kommunalgebäudeleasing Gesellschaft m.b.H. in Liqu., Dornbirn (AT) 42,000 EUR 33.3% OT W 3 Errichtungs- und Betriebs-Aktiengesellschaft, Vienna (AT) 800,000 EUR 20.0% OT Wiener Börse Aktiengesellschaft, Vienna (AT) 18,620,720 EUR 7.0% OT Zhytomyr Commodity Agroindustrial Exchange, Zhitomir (UA) 476,515 UAH 3.1% OT Ziloti Holding S.A., Luxembourg (LU) 48,963 EUR 0.9% OT 1 Company type: BA Bank, BR Company rendering banking-related ancillary services, FH Financial holding, FI Financial institution, OT Other companies, VV Insurance, SC Securities firms 208 Consolidated financial statements · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 Regulatory information (61) Capital management and total capital according to CRR/CRD IV and Austrian Banking Act (BWG) RBI is subject to the own funds requirements in accordance with Article 92 CRR and the combined capital buffer requirement in accordance with the provisions of the BWG. For RBI, the combined capital buffer requirement currently includes a capital conservation buffer (§ 22 BWG), a systemic risk buffer (§ 23e BWG), a capital buffer for systemically important institutions (§ 23d BWG) and a countercyclical capital buffer (§ 23a BWG). A violation of the combined capital buffer requirement would potentially lead to restrictions on, for example, dividend distributions and coupon payments for certain capital instruments. In addition, based on the Supervisory Review and Evaluation Process (SREP) carried out annually, ECB currently requires RBI to hold additional capital to cover those risks that are not or not adequately covered under Pillar 1. The so-called Pillar 2 Capital Requirement (P2R) of 2.80 per cent (31 December 2023: 2.58 per cent) is determined based on the assessment of the business model, the assessment of governance and risk management, the assessment of risks to capital and the assessment of risks to liquidity and financing. Based on ECB's final decision, this requirement must be complied with only at the consolidated level of RBI as of January 1, 2024. In addition, the ECB expects the Pillar 2 Guidance (P2G) of 1.25 per cent to also be adhered to at the consolidated level. In principle, national supervisors can implement the systemic risk buffer (up to 3 per cent), the capital buffer for systemically important institutions (up to 3 per cent) and the countercyclical capital buffer (up to 2.5 per cent). The Financial Market Stability Board (FMSB), which is responsible in Austria, has recommended that the Austrian Financial Market Authority (FMA) prescribes a systemic risk buffer (SyRP) for certain banks, including RBI. In addition, a capital buffer was also recommended for certain systemically important banks (O-SII buffer), including RBI. Both buffers were put into force by the FMA via the Capital Buffer Regulation (Kapitalpuffer-Verordnung). For RBI the SyRP was set at 1 per cent and the O-SII buffer at 1.25 per cent on consolidated level. From January 1, 2024, the SyRP is set at 1 per cent at the consolidated level and 0.50 per cent at the unconsolidated level, the O-SII buffer is set at 1.75 per cent at the consolidated level and 0.50 per cent at the unconsolidated level. Furthermore a capital conservation buffer of 2.5 per cent must be adhered to. The determination of the countercyclical capital buffer is also the responsibility of national supervisors and results at RBI level in a weighted average based on the country distribution of the business. This buffer was set at 0 per cent in Austria. At its 39th meeting on 11 December 2023, the FMSB recommended the countercyclical capital buffer to be maintained further at 0 per cent. In addition, those buffer rates that have been set in other member states are included at RBI level and considered based on a weighted average calculation in the capital requirements. In RBI, the countercyclical capital buffer amounts to 0.65 per cent. The capital requirements applicable throughout the year were continuously complied with. In total, there was a requirement for the CET1 ratio (including the combined capital buffer requirement) of 11.33 per cent for RBI as at 31 December 2023 and considering P2G, this means a quota of 12.58 per cent to be adhered to. As of January 1, 2024, the requirement for the CET1 ratio increases by 39 basis points to 11.72 per cent and considering P2G, the quota to be adhered to is 12.98 per cent for RBI. Any expected regulatory changes or developments are continuously monitored, presented, and analyzed in scenario calculations. Potential effects are considered in planning and control, provided that the extent and implementation are foreseeable. Consolidated financial statements209 · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 Total capital The following consolidated figures have been calculated in accordance with the provisions of the Capital Requirements Regulation (CRR) and other statutory provisions such as the Implementing Technical Standards (ITS) of the European Banking Authority (EBA). in € million 2023 2022 Capital instruments and the related share premium accounts 5,990 5,991 Retained earnings 13,518 10,482 Accumulated other comprehensive income (and other reserves) (5,046) (3,974) Minority interests (amount allowed in consolidated CET1) 695 607 Common equity tier 1 (CET1) capital before regulatory adjustments 17,028 16,442 Additional value adjustments (negative amount) (66) (93) Deductions for new net provisioning 0 0 Intangible assets (net of related tax liability) (negative amount) (620) (605) Deferred tax assets that rely on future profitability excluding those arising from temporary differences (net of related tax liability where the conditions in Article 38 (3) are met) (negative amount) (12) (23) Fair value reserves related to gains or losses on cash flow hedges 52 51 Negative amounts resulting from the calculation of expected loss amounts 0 0 Gains or losses on liabilities valued at fair value resulting from changes in own credit standing (9) (4) Direct and indirect holdings by an institution of own CET1 instruments (negative amount) (20) (20) Exposure amount of the following items which qualify for a risk weight of 1250%, where the institution opts for the deduction alternative (52) (30) hereof: securitization positions (negative amount) (52) (30) Other regulatory adjustments (97) (74) Total regulatory adjustments to common equity tier 1 (CET1) (825) (799) Common equity tier 1 (CET1) capital 16,203 15,643 Capital instruments and the related share premium accounts 1,669 1,675 Amount of qualifying items referred to in Article 484 (4) and the related share premium accounts subject to phase out from AT1 0 0 Qualifying tier 1 capital included in consolidated AT1 capital (including minority interests not included in row 5) issued by subsidiaries and held by third parties 41 34 Total regulatory adjustments to Additional Tier 1 (AT1) capital (33) (33) Additional tier 1 (AT1) capital 1,677 1,676 Tier 1 capital (T1 = CET1 + AT1) 17,881 17,319 Capital instruments and the related share premium accounts 2,244 2,362 Qualifying own funds instruments included in consolidated T2 capital (including minority interests and AT1 instruments not included in rows 5 or 34) issued by subsidiaries and held by third parties 29 51 Credit risk adjustments 253 282 Total regulatory adjustments to Tier 2 (T2) capital (239) (312) Tier 2 (T2) capital 2,287 2,383 Total capital (TC = T1 + T2) 20,168 19,702 Total risk-weighted assets (RWA) 93,664 97,680 210 Consolidated financial statements · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 Total capital requirement and risk-weighted assets in € million 2023 2022 Risk-weighted exposure Capital requirement Risk-weighted exposure Capital requirement Total risk-weighted assets (RWA) 93,664 7,493 97,680 7,814 Risk-weighted exposure amounts for credit, counterparty credit and dilution risks and free deliveries 68,068 5,445 76,208 6,097 Standardized approach (SA) 25,966 2,077 29,196 2,336 Exposure classes excluding securitization positions 25,966 2,077 29,196 2,336 Central governments or central banks 5,285 423 2,666 213 Regional governments or local authorities 119 10 128 10 Public sector entities 124 10 16 1 Institutions 188 15 241 19 Corporates 6,412 513 7,274 582 Retail 5,131 410 6,823 546 Secured by mortgages on immovable property 3,249 260 6,461 517 Exposure in default 548 44 635 51 Items associated with particular high risk 56 4 233 19 Covered bonds 0 0 4 0 Collective investments undertakings (CIU) 81 6 66 5 Equity interests 1,620 130 1,537 123 Other items 3,116 249 3,112 249 Internal ratings based approach (IRB) 42,102 3,368 47,012 3,761 IRB approaches when neither own estimates of LGD nor conversion factors are used 32,526 2,602 38,960 3,117 Central governments or central banks 0 0 2,657 213 Institutions 3,014 241 3,111 249 Corporates - SME 2,767 221 3,375 270 Corporates - Specialized lending 4,299 344 3,827 306 Corporates - Other 22,446 1,796 25,991 2,079 IRB approaches when own estimates of LGD and/or conversion factors are used 8,616 689 7,302 584 Retail - Secured by real estate SME 101 8 72 6 Retail - Secured by real estate non-SME 3,433 275 3,057 245 Retail - Qualifying revolving 569 46 423 34 Retail - Other SME 367 29 376 30 Retail - Other non-SME 4,146 332 3,374 270 Equity interests 661 53 409 33 Simple risk weight approach 0 0 0 0 Other equity exposure 0 0 0 0 PD/LGD approach 0 0 0 0 Other non-credit obligation assets 300 24 341 27 Consolidated financial statements211 · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 in € million 2023 2022 Risk-weighted exposure Capital requirement Risk-weighted exposure Capital requirement Total risk exposure amount for settlement/delivery 21 2 19 1 Settlement/delivery risk in the non-trading book 0 0 0 0 Settlement/delivery risk in the trading book 21 2 19 1 Total risk exposure amount for position, foreign exchange and commodities risk 8,573 686 6,889 551 Risk exposure amount for position, foreign exchange and commodities risks under standardized approaches (SA) 7,270 582 5,634 451 Traded debt instruments 917 73 962 77 Equity interests 58 5 74 6 Particular approach for position risk in CIUs 1 0 1 0 Foreign exchange 6,292 503 4,591 367 Commodities 2 0 6 0 Risk exposure amount for position, foreign exchange and commodities risks under internal models (IM) 1,303 104 1,255 100 Total risk exposure amount for operational risk 14,786 1,183 12,667 1,013 OpR standardized (STA) /alternative standardized (ASA) approaches 14,786 1,183 12,667 1,013 OpR advanced measurement approaches (AMA) 0 0 0 0 Total risk exposure amount for credit valuation adjustments 201 16 280 22 Standardized method 201 16 280 22 Other risk exposure amounts 2,015 161 1,618 129 of which risk-weighted exposure amounts for credit risk: securitization positions (revised securitization framework) 2,015 161 1,618 129 Regulatory capital ratios in per cent 2023 2022 Common equity tier 1 ratio (transitional) 17.3 % 16.0 % Common equity tier 1 ratio (fully loaded) 17.0 % 15.6 % Tier 1 ratio (transitional) 19.1 % 17.7 % Tier 1 ratio (fully loaded) 18.8 % 17.3 % Total capital ratio (transitional) 21.5 % 20.2 % Total capital ratio (fully loaded) 21.4 % 20.0 % Leverage ratio The leverage ratio is defined in Part 7 of the CRR. As at 31 December 2023, there is a mandatory quantitative requirement of 3 per cent: in € million 2023 2022 Leverage exposure 229,189 235,640 Tier 1 17,881 17,319 Leverage ratio in per cent (transitional) 7.8 % 7.3 % Leverage ratio in per cent (fully loaded) 7.7 % 7.1 % 212 Consolidated financial statements · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 Overview of the calculation methods that are applied to determine total capital requirements in the subsidiaries: Credit risk Market risk Operational risk Unit Non-Retail Retail Raiffeisen Bank International AG, Vienna (AT) IRB STA Internal model, STA STA Raiffeisenbank a.s., Prague (CZ) IRB IRB STA STA Raiffeisen Bank Zrt., Budapest (HU) IRB IRB STA STA Tatra banka a.s., Bratislava (SK) IRB IRB STA STA Raiffeisen Bank S.A., Bucharest (RO) IRB IRB STA STA Raiffeisen Bank d.d. Bosna i Hercegovina, Sarajevo (BA) IRB IRB STA STA Raiffeisenbank Austria d.d., Zagreb (HR) IRB STA STA STA Raiffeisen Banka a.d., Novi Beograd (RS) IRB IRB STA STA AO Raiffeisenbank, Moscow (RU) IRB STA STA STA Raiffeisen Bank Sh.a., Tirana (AL) IRB IRB STA STA Kathrein Privatbank Aktiengesellschaft, Vienna (AT) STA STA n/a STA Raiffeisen Bausparkasse Gesellschaft m.b.H., Vienna (AT) IRB IRB STA STA All other units STA STA STA STA IRB: Internal Ratings Based Approach Internal model for open currency position risks and general interest rate risk in the trading book STA: Standardized Approach Consolidated financial statements213 · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 · Key figures Alternative Performance Measures (APM) The Group uses alternative performance measures in its financial reporting, not defined by IFRS or CRR regulations, to describe RBI Group's financial position and performance. These should not be viewed in isolation but treated as supplementary information. These key figures are often used in the financial sector to analyze and describe the earnings and financial position. The special items used below to calculate some alternative performance measures arise from the nature of Group’s business, i.e. that of a universal banking group. However, it is to mention that the definitions mostly vary between companies. Please find the definitions of these ratios below. Consolidated return on equity – Consolidated profit less dividend on additional tier 1 capital in relation to average consolidated equity (i.e. the equity attributable to the shareholders of RBI). Average consolidated equity is based on month-end figures excluding non-controlling interests and does not include current year profit. Cost/income ratio is an economic metric and shows the company’s costs in relation to its income. The ratio gives a clear view of operational efficiency. Banks use the cost/income ratio as an efficiency measure for steering the bank and for easily comparing its efficiency with other financial institutions. General administrative expenses in relation to operating income (before impairment) are calculated for the cost/income ratio. General administrative expenses comprise staff expenses, other administrative expenses, and depreciation/amortization of intangible and tangible fixed assets. Operating income comprises net interest income, dividend income, current income from investments in associates, net fee and commission income, net trading income and fair value result, net gains/losses from hedge accounting and other net operating income. Effective tax rate (ETR) – Relation of income tax expense to profit before tax. The effective tax rate differs from the company’s jurisdictional tax rate due to many accounting factors and enables a better comparison among companies. The effective tax rate of a company is the average rate at which its pre-tax profits are taxed. It is calculated by dividing total tax expense (income taxes) by profit before tax. Total tax expense includes current income taxes and deferred taxes. Loan/deposit ratio is used to assess a bank’s liquidity. It is calculated with loans to non-financial corporations and households in relation to deposits from non-financial corporations and households. Net interest margin is used for external comparison with other banks as well as an internal profitability measurement of products and segments. It is calculated with net interest income set in relation to average interest-bearing assets (total assets less investments in subsidiaries and associates, tangible fixed assets, intangible fixed assets, tax assets and other assets). NPE – Non-performing exposure – It contains all non-performing loans and debt securities according to the applicable definition of the EBA document Implementing Technical Standards (ITS) on Supervisory Reporting (Forbearance and non- performing exposures). NPL – Non-performing loans – It contains all non-performing loans according to the applicable definition of the EBA document Implementing Technical Standards (ITS) on Supervisory Reporting (Forbearance and non-performing exposures). NPE ratio is an economic ratio to demonstrate the proportion of non-performing loans and debt securities in relation to the entire loan portfolio of customers and banks, and debt securities. The ratio reflects the quality of the loan portfolio of the bank and provides an indicator for the performance of the bank’s credit risk management. NPL ratio is an economic ratio to demonstrate the proportion of non-performing loans in relation to the entire loan portfolio to customers and banks. The ratio reflects the quality of the loan portfolio of the bank and provides an indicator for the performance of the bank’s credit risk management. NPE coverage ratio describes to which extent non-performing loans and debt securities have been covered by impairments (Stage 3) thus expressing the ability of a bank to absorb losses from its NPE. It is calculated with impairment losses on loans to customers and banks and on debt securities set in relation to non-performing loans to customers and banks and debt securities. NPL coverage ratio describes to which extent non-performing loans have been covered by impairments (Stage 3) thus expressing the ability of a bank to absorb losses from its NPL. It is calculated with impairment losses on loans to customers and banks set in relation to non-performing loans to customers and banks. 214 Consolidated financial statements · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 Operating result is used to describe the operative performance of a bank for the reporting period. It consists of operating income less general administrative expenses. Operating income – They are primarily income components of the ongoing business operations (before impairment). It comprises net interest income, dividend income, current income from investments in associates, net fee and commission income, net trading income and fair value result, net gains/losses from hedge accounting and other net operating income. Provisioning ratio is an indicator for development of risk costs and provisioning policy of an enterprise. It is computed by dividing impairment or reversal of impairment on financial assets (customer loans) by average customer loans. Return on assets (ROA before/after tax) is a profitability ratio and measures how efficiently a company can manage its assets to produce profits during a period. It is computed by dividing profit before tax/after tax by average assets (based on total assets, average means the average of year-end figure and the relevant month´s figures). Return on equity (ROE before/after tax) provides a profitability measure for both management and investors by expressing the profit for the period as presented in the income statement as a percentage of the respective underlying (either equity or total assets). Return on equity demonstrates the profitability of the bank on the capital invested by its shareholders and thus the success of their investment. Return on equity is a useful measure to easily compare the profitability of a bank with other financial institutions. Return on the total equity including non-controlling interests, i.e. profit before tax respectively after tax in relation to average equity on the statement of financial position. Average equity is calculated on month-end figures including non-controlling interests and does not include current year profit. Return on risk-adjusted capital (RORAC) is a ratio of a risk-adjusted performance management and shows the yield on the risk-adjusted capital (economic capital). The return on risk-adjusted capital is computed by dividing consolidated profit by the risk-adjusted capital (i.e. average economic capital). This capital requirement is calculated within the economic capital model for credit, market, and operational risk. Total capital specific key figures Common equity tier 1 ratio – Common equity tier 1 as a percentage of total risk-weighted assets (RWA) according to CRR/CRD IV regulation. Leverage ratio – The ratio of tier 1 capital to all exposures on and off the statement of financial position insofar as they are not deducted when determining the capital measurand. The calculation is in accordance with the methodology set out in CRD IV. Total risk-weighted assets (RWA) – Risk-weighted assets (credit risk, CVA risk) including market risk and operational risk. Tier 1 ratio – Tier 1 capital to total risk-weighted assets (RWA). Total capital ratio – Total capital as a percentage of total risk-weighted assets (RWA). Consolidated financial statements215 · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 · List of abbreviations AIArtificial Intelligence BPBasis Points BWG Austrian Banking Act (Bankwesengesetz) CDS Credit Default Swap CE Central Europe CEE Central and Eastern Europe CET 1Common Equity Tier 1 CIBCorporate and Investment Banking CoE Cost of Equity CRR Capital Requirements Regulation DCF Discounted Cash-Flow EAD Exposure at Default EBA European Banking Authority ECL Expected Credit Losses EE Eastern Europe ECB European Central Bank ESAEG Deposit Protection and Investor Compensation Act (Einlagensicherungs- und Anlegerentschädigungsgesetz) ESG Environmental, Social and Governance EVIElectronic Disclosure and Information Platform FMA Financial Market Authority FMSB Financial Market Stability Board GDP Gross Domestic Product HQLA High Quality Liquid Assets IAS/IFRS International Accounting Standards/International Financial Reporting Standards IBOR Interbank Offered Rate IPS Institutional Protection Scheme IRB Internal Ratings Based ITSImplementing Technical Standards LCR Liquidity Coverage Ratio LGD Loss Given Default MREL Minimum Requirement for Own Funds and Eligible Liabilities NGEUNextGenerationEU-Fonds NPE Non-Performing Exposure NPL Non-Performing Loans NSFR Net Stable Funding Ratio OTC Over The Counter PD Past Due PEPP Pandemic Emergency Purchase Programme POCI Purchased or Originated Credit Impaired RBI Raiffeisen Bank International Group RBI AG Raiffeisen Bank International Aktiengesellschaft RWA Risk-Weighted Assets RORAC Return on Risk Adjusted Capital SA Standardized Approach SA-CCR Standardized Approach to Counterparty Credit Risk SEE Southeastern Europe SICR Significant Increase in Credit Risk SIRP Special Interest Rate Period SRB Systemic Risk Buffer SREP Supervisory Review and Evaluation Process TLTRO Targeted Longer-Term Refinancing Operations UNEP FI UN Environment Programme Finance Initiative VaR Value-at-Risk WACC Weighted Average Cost of Capital 216 Consolidated financial statements · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 · Events after the reporting date There were no significant events after the reporting date. . Qualified electronically signed by: Vienna, 12 February 2024 The Management Board Johann Strobl m.p. Marie-Valerie Brunner m.p. Andreas Gschwenter m.p. Łukasz Januszewski m.p. Hannes Mösenbacher m.p. Andrii Stepanenko m.p. Consolidated financial statements217 · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 Statement of all legal representatives We confirm to the best of our knowledge that the consolidated financial statements give a true and fair view of the assets, liabilities, financial position and profit or loss of the Group as required by the applicable accounting standards and that the Group management report gives a true and fair view of the development and performance of the business and the position of the Group, together with a description of the principal risks and uncertainties the Group faces. Qualified electronically signed by: Vienna, 12 February 2024 The Management Board Johann Strobl m.p. Marie-Valerie Brunner m.p. Andreas Gschwenter m.p. Łukasz Januszewski m.p. Hannes Mösenbacher m.p. Andrii Stepanenko m.p. 218Statement of all legal representatives · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 Independent Auditor's Report Report on the Audit of the Consolidated Financial Statements Opinion We have audited the consolidated financial statements of Raiffeisen Bank International AG, Vienna, and its subsidiaries (the Group), which comprise the statement of financial position as at 31 December 2023, the statement of comprehensive income, the statement of changes in equity and the statement of cash flows for the financial year then ended, and notes to the consolidated financial statements. In our opinion, the accompanying consolidated financial statements comply with legal requirements and give a true and fair view of the financial position of the Group as at 31 December 2023, and of its consolidated financial performance and consolidated cash flows for the year then ended in accordance with International Financial Reporting Standards (IFRS) as adopted by the EU and the additional requirements under section 245a UGB (Austrian Commercial Code) and the Austrian Banking Act. Basis for Opinion We conducted our audit in accordance with the Regulation (EU) No. 537/2014 and the Austrian Standards on Auditing. Those standards require the application of the International Standards on Auditing (ISAs). Our responsibilities under those standards are further described in the Auditors' Responsibilities for the Audit of the Consolidated Financial Statements section of our report. We are independent of the Group in accordance with laws and regulations applicable in Austria and we have fulfilled our other professional responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Key Audit Matters Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the consolidated financial statements of the current period. These matters were addressed in the context of our audit of the consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. 1. Expected credit losses for loans and advances to non-financial corporations and households 2. Adequacy of “provision” for foreign currency loans in the branch in Poland 1. Expected credit losses for loans and advances to non-financial corporations and households Description and Issue Loans and advances to non-financial corporations and households are reported under the balance sheet item "Financial assets - amortized cost" with an amount of EUR 86.2 billion after deduction of valuation allowances of EUR 2.7 billion. Loans and advances to non-financial corporations are EUR 47.0 billion and loans and receivables to households are EUR 39.2 billion. The Management Board describes the process for monitoring credit risk and the procedure for determining impairment losses in Note 31 “Expected credit losses” and Note 42 “Credit risk” in the Notes. Calculations of expected credit losses for individually significant exposures in default are based on losses determined for various weighted scenarios. These are determined by the assessment of the economic situation and development of the respective customer, the valuation of collateral, and the estimate of the amount and timing of the recoveries derived from Independent Auditor's Report219 · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 these. The allowances for defaulted, individually non-significant receivables are determined on the basis of common risk characteristics. The valuation parameter are based on statistical data as well as assumptions about future developments. For not defaulted receivables, the expected credit loss for the next twelve months or – in case of a significant increase in credit risk since initial recognition – for the entire remaining lifetime is recognized (Stage 1 and Stage 2). Significant estimates and assumptions are required in determining the expected credit loss. These include rating-based probabilities of default, the expected development of the outstanding amount at the time of default and loss rates. The estimates take into account current and forward-looking information. If the input parameters, assumptions and modelling do not cover all relevant risk factors, the Bank will temporarily use post- model adjustments and adjustments for other risk factors. The calculation of expected credit losses and the additional provisions from the post-model adjustments and the adjustments for other risk factors are based on assumptions and estimates that give rise to significant uncertainties with regard to the amount of the expected credit losses. Therefore, we have determined the expected credit losses for loans and advances to non-financial corporations and households as a key audit matter. Our response In testing expected credit losses for loans and advances to non-financial corporations and households, we performed the following significant audit procedures: ▪ We assessed the methodologies used to determine expected credit losses and their compliance with IFRS. ▪ We analyzed the documentation of the processes of monitoring loans and risk provisioning, and critically assessed whether these processes are suitable for identifying loan losses and adequately reflecting the recoverability of exposures. We also assessed the processes and tested key controls regarding their design and implementation, including the relevant IT systems, and tested their effectiveness on a sample basis. ▪ By performing analytical audit procedures, we examined the development of receivables with regard to the key characteristics relevant to the classification of the loan, such as quality, type of care, rating and level allocation throughout the year and in comparison with the previous year. ▪ We tested individual exposures selected on the basis of a sample determined according to risk criteria. For defaulted loans, we assessed the Bank's estimates of the amount and timing of recoveries, taking into account collateral, and examined whether the assumptions used in the calculation were appropriate and derivable from internal or external evidence. For non-defaulted loans, we examined whether indicators of default exist. ▪ In order to assess the appropriateness of the expected credit losses for non-defaulted loans (Stage 1 and Stage 2), we examined the plausibility of assumptions and the statistical/mathematical appropriateness of the models used, as well as the proper application of the models. In particular, we examined the assumptions in connection with forward-looking information and post-model adjustments and adjustments for other risk factors. Furthermore, we examined the appropriateness of the assumptions “probability of default”, “loss given default” and the level allocation model, taking into account the results of the bank's internal validations, and reperformed selected calculation steps. In addition, IT specialists tested the effectiveness of key automated controls of the IT systems relevant for the calculation. ▪ Finally, we assessed whether the disclosures in the notes to the consolidated financial statements regarding the calculation of expected credit losses and the significant assumptions and estimation uncertainties are appropriate. 2. Adequacy of “provisions” for foreign currency loans of the branch in Poland Description and Issue As at December 31, 2023, the Bank has recorded in total a “provision” in connection with foreign currency loans of the branch in Poland in the amount of EUR 1.652 million. The bank describes the legal risk, the procedure for determining the “provision” and related uncertainties in the chapter “Poland” in Note 46 “Pending legal issues” of the notes to the consolidated financial statements. Due to the lack of clear answers by the competent courts, including the supreme courts, and the necessary assumptions about the future behavior of borrowers and former borrowers, there are considerable estimation uncertainties and scope for judgment in determining the amount of the “provision”, which is why we have determined the adequacy of the “provision” for foreign currency loans of the branch in Poland to be a key audit matter. Our Response 220Independent Auditor's Report · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 In particular, we performed the following audit procedures in testing the adequacy of the “provision”: ▪ We assessed the Bank's processes and controls for determining the provision, including the key controls applied, and their suitability for ensuring the determination of an appropriate “provision”. ▪ We verified the plausibility and critically assessed the Bank's method for determining the “provision”, including the derivation of the underlying assumptions and their appropriateness. ▪ We verified the mathematical accuracy of the Bank's calculations. ▪ We have obtained information from lawyers commissioned by the bank to deal with the issue and critically evaluated it. ▪ We reviewed the current case law with regard to foreign currency loans and appreciated their consideration for the calculation of provision. ▪ We reviewed the disclosure of the risks in the notes to the consolidated financial statements for appropriateness. Other Information The legal representatives are responsible for the other information. Other information comprises all information in the Annual Financial Report and in the Annual Report, but does not include the annual financial statements, management report, consolidated financial statements, the consolidated management report and the related auditor's reports. Except for the report of the Supervisory Board, we received the other information prior to the date of this auditor's report. The report of the Supervisory Board is expected to be made available to us after this date. Our opinion on the consolidated financial statements does not cover this other information and we do not and will not express any form of assurance thereon. In connection with our audit of the consolidated financial statements, our responsibility is to read the other information identified above and, in doing so, consider whether it is materially inconsistent with the consolidated financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. If, based on our work performed on the other information obtained before the date of the auditor's report, we conclude that there has been a material misstatement of such other information, we are required to report that fact. We have nothing to report in this regard. Responsibilities of Management and the Audit Committee for the Consolidated Financial Statements Management is responsible for the preparation of the consolidated financial statements that give a true and fair view in accordance with International Financial Reporting Standards (IFRS) as adopted by the EU, the additional requirements under section 245a UGB and the Austrian Banking Act, and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error. In preparing the consolidated financial statements, management is responsible for assessing the Group's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Group or to cease operations, or has no realistic alternative but to do so. The audit committee is responsible for overseeing the Group's financial reporting process. Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors' report that includes our opinion. Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance with EU rules and Austrian Generally Accepted Auditing Standards, which require the application of the ISAs, will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated financial statements. As part of an audit in accordance with Regulation (EU) 537/2014 and with Austrian Generally Accepted Auditing Standards, which require the application of the ISAs, we exercise professional judgement and maintain professional skepticism throughout the audit. Independent Auditor's Report221 · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 We also: ▪ Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. ▪ Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group's internal control. ▪ Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management. ▪ Conclude on the appropriateness of the directors' use of the going concern basis of accounting and based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditors' report to the related disclosures in the consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditors' report. However, future events or conditions may cause the Group to cease to continue as a going concern. ▪ Evaluate the overall presentation, structure and content of the consolidated financial statements, including the disclosures, and whether the consolidated financial statements represent the underlying transactions and events in a manner that give a true and fair view. ▪ Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion. We communicate with the audit committee regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. We also provide the audit committee with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to affect our independence and, where relevant, any actions taken to eliminate hazards or safeguards applied From the matters communicated with the audit committee, we determine those matters that were of most significance in the audit of the consolidated financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditors' report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication. Report on the Consolidated Management Report Pursuant to Austrian Commercial Code, the consolidated management report is to be audited as to whether it is consistent with the consolidated financial statements and whether it has been prepared in accordance with the applicable legal requirements. Management is responsible for the preparation of the consolidated management report in accordance with the Austrian Commercial Code. We conducted our audit in accordance with laws and regulations applicable with respect to the consolidated management report. 222Independent Auditor's Report · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 Opinion In our opinion, the consolidated management report attached is prepared in accordance with the applicable legal requirements, the disclosures pursuant to section 243a UGB are appropriate, and it is consistent with the consolidated financial statements. Statement Based on the findings during the audit of the consolidated financial statements and due to the thus obtained understanding concerning the Group and its circumstances no material misstatements in the consolidated management report came to our attention. Additional Information in Accordance with Article 10 of EU Regulation (EU) 537/2014 We were elected as auditor of the Group at the annual general shareholders' meeting on 31 March 2022 for the fiscal year ending on 31 December 2023 and mandated by the chairman of the Supervisory Board on 31 March 2022. Furthermore, we were elected as auditor at the annual general shareholders' meeting on 30 March 2023 for the subsequent fiscal year and mandated by the chairman of the Supervisory Board on 31 March 2023. We have been the auditor, without interruption since the financial year ending 31 December 2021. We confirm that the audit opinion in the section "Report on the Consolidated Financial Statements" is consistent with the additional report to the audit committee referred to in article 11 of the EU regulation. We declare that no prohibited non-audit services (article 5 par. 1 of the EU regulation) were provided by us and that we remained independent from the Group in conducting the audit. Engagement Partner The engagement partner responsible for the audit is Peter Bitzyk. Qualified electronically signed by: Vienna, 13 February 2024 Deloitte Audit Wirtschaftsprüfungs GmbH Peter Bitzyk Certified Public Accountant Publication or sharing with third parties of the consolidated financial statements together with our auditors' opinion is only allowed if the financial statements and the management report are identical with the audited version. This audit opinion is only applicable to the German and complete financial statements with the management report. Section 281 para 2 UGB applies to alternated versions. This translation is for convenience purposes only. Only the German original is legally valid and binding. Independent Auditor's Report223 · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 Annual financial statements Annual financial statements224 · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 · Statement of financial position ASSETS 31/12/2023 31/12/2022 in € in € thousand 1. Cash in hand and balances with central banks 9,986,222,925.94 20,375,942 2. Treasury bills and other bills eligible for refinancing with central banks 8,780,883,575.24 6,798,155 3. Loans to banks 13,583,573,841.50 13,491,490 a) Repayable on demand 1,471,800,364.72 1,448,055 b) Other loans and advances 12,111,773,476.78 12,043,434 4. Loans to customers 27,699,948,522.95 29,863,730 5. Debt securities and other fixed-income securities 3,777,295,419.35 4,793,367 a) Issued by public bodies 156,606,619.50 159,656 b) Issued by other borrowers 3,620,688,799.85 4,633,710 hereof own financial instruments 1,459,889,748.02 2,501,811 6. Shares and other variable-yield securities 1,042,844,657.39 859,072 7. Equity interests 67,646,421.27 58,941 hereof: in credit institutions 27,157,140.97 19,192 8. Investments in affiliated companies 10,262,525,020.16 9,674,953 hereof: in credit institutions 1,718,194,689.67 1,177,956 9. Intangible fixed assets 19,508,748.07 27,548 10. Tangible fixed assets 16,891,864.81 27,394 11. Other assets 6,989,545,060.22 6,551,745 12. Deferred income and accrued expenses 96,652,180.03 91,199 13. Deferred tax assets 411,458.82 1,077 Total 82,323,949,695.75 92,614,612 Annual financial statements225 · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 EQUITY AND LIABILITIES 31/12/2023 31/12/2022 in € in € thousand 1. Deposits from banks 26,684,645,838.09 35,300,134 a) Repayable on demand 4,525,879,654.76 5,532,067 b) With agreed maturity dates or periods of notice 22,158,766,183.33 29,768,067 2. Deposits from customers 19,901,522,232.04 23,097,485 a) Savings deposits 0.00 0 b) Other liabilities 19,901,522,232.04 23,097,485 aa) Repayable on demand 6,759,789,691.49 7,188,568 bb) With agreed maturity dates or periods of notice 13,141,732,540.55 15,908,917 3. Debt securities issued 17,079,035,550.25 15,470,239 a) Debt securities issued 14,909,121,579.06 13,419,345 b) Other securitised liabilities 2,169,913,971.19 2,050,893 4. Other liabilities 4,572,765,378.93 5,380,247 5. Deferred income and accrued expenses 203,194,080.14 208,620 6. Provisions 947,696,455.07 766,903 a) Provisions for severance payments 51,173,984.33 51,039 b) Provisions for pensions 61,474,724.36 61,150 c) Provisions for taxation 18,253,470.04 10,356 d) Other 816,794,276.34 644,358 7. Supplementary capital pursuant to chapter 4 of title I of part 2 of regulation (EU) no 575/2013 2,107,910,127.81 2,696,099 8. Additional Tier 1 capital pursuant to chapter 3 of title I of part 2 of regulation (EU) no 575/2013 1,655,025,324.73 1,655,025 9. Subscribed capital 1,001,515,333.15 1,001,709 a) Share capital 1,003,265,844.05 1,003,266 b) Nominal value of own shares (1,750,510.90) (1,557) 10. Capital reserves 4,427,905,632.09 4,429,065 a) Committed 4,334,726,183.14 4,334,286 b) Uncommitted 93,179,448.95 94,779 11. Retained earnings 2,376,177,728.22 1,686,418 a) Legal reserve 5,500,000.00 5,500 b) Other reserves 2,370,677,728.22 1,680,918 12. Liability reserve pursuant to article 57 (5) 535,097,489.59 535,097 13. Net profit for the year 831,458,525.64 387,571 Total 82,323,949,695.75 92,614,612 Items off the statement of financial position ASSETS 31/12/2023 31/12/2022 in € in € thousand 1. Foreign assets 45,380,132,414.21 45,641,871 EQUITY AND LIABILITIES 31/12/2023 31/12/2022 in € in € thousand 1. Contingent liabilities 7,736,762,142.74 7,188,967 Guarantees and assets pledged as collateral security 7,736,762,142.74 7,188,967 2. Commitments 19,711,703,105.00 19,434,120 hereof: liabilities from repurchase agreements 0.00 0 3. Commitments arising from agency services 187,452,782.11 203,304 4. Eligible own funds according to part 2 of regulation (EU) no 575/2013 11,695,854,570.80 11,179,557 hereof: supplementary capital pursuant to chapter 4 of title I of part 2 of regulation EU) no 575/2013 1,990,442,752.19 2,252,687 5. Capital requirements pursuant to Article 92 of Regulation (EU) No 575/2013 40,461,265,709.96 41,903,360 hereof: capital requirements pursuant to article 92 (1) (a) to (c) of regulation (EU) no 575/2013 a) hereof: Common Equity Tier 1 capital ratio pursuant to Article 92 (a) 19.9 % 17.3 % b) hereof: Tier 1 capital ratio pursuant to Article 92 (b) 23.9 % 21.1 % c) hereof: total capital ratio pursuant to Article 92 (c) 28.8 % 26.6 % 6. Foreign liabilities 22,092,657,400.53 27,096,050 226Annual financial statements · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 · Income statement 2023 2022 in € in € thousand 1. Interest receivable and similar income 2,952,782,419.21 1,187,116 hereof: from fixed-income securities 235,123,538.19 74,642 2. Interest payable and similar expenses (2,529,367,782.75) (700,655) I. NET INTEREST INCOME 423,414,636.46 486,461 3. Income from securities and participating interests 1,786,418,289.76 564,321 a) Income from shares and other variable-yield securities 76,684,279.09 49,133 b) Income from participating interests 8,056,442.47 7,543 c) Income from shares in affiliated undertakings 1,701,677,568.20 507,644 4. Fee and commission income 555,787,190.12 531,264 5. Fee and commission expenses (194,354,216.19) (178,609) 6. Net profit or net loss on financial operations 56,805,678.37 93,490 7. Sundry operating income 305,412,883.90 212,648 II. OPERATING INCOME 2,933,484,462.42 1,709,574 8. General administrative expenses (1,022,229,060.98) (872,307) a) Staff costs (506,046,469.45) (420,295) hereof: aa) Wages and salaries (389,021,415.47) (336,897) bb) Expenses for statutory social contributions and compulsory contributions related to wages and salaries (82,452,037.06) (74,747) cc) Other social expenses (10,295,253.39) (8,471) dd) Expenses for pensions and assistance (12,772,307.35) (10,255) ee) Allocation/Release of provision for pensions (324,566.15) 5,238 ff) Expenses for severance payments and contributions to severance funds (11,180,890.03) 4,836 b) Other administrative expenses (516,182,591.53) (452,011) 9. Value adjustments in respect of asset items 9 and 10 (12,315,181.65) (13,685) 10. Sundry operating expenses (1,131,444,148.30) (655,486) III. OPERATING EXPENSES (2,165,988,390.93) (1,541,479) IV. OPERATING RESULT 767,496,071.49 168,096 11./12. Net income/expenses from the disposal and valuation of loans and advances and securities classified as current assets 49,986,970.25 (164,641) 13./14. Net income/expenses from the disposal and valuation of securities evaluated as financial investments and of shares in affiliated companies and participating interests 568,408,510.85 (976,414) V. PROFIT ON ORDINARY ACTIVITIES 1,385,891,552.59 (972,960) 15. Current income taxes 14,410,365.46 5,531 16. Other taxes not reported under item 15 (3,840,568.15) (20,193) 17. Result from Business Combinations 0.00 (3,553) VI. PROFIT FOR THE YEAR AFTER TAX 1,396,461,349.90 (991,175) 18. Changes in reserves (688,135,440.86) 998,747 hereof: allocation to liability reserve 0.00 0 VII. NET INCOME FOR THE YEAR 708,325,909.04 7,571 19. Profit/Loss brought forward 123,132,616.60 380,000 VIII. Net profit for the year 831,458,525.64 387,571 Annual financial statements227 · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 Notes · General disclosures Raiffeisen Bank International AG (RBI AG] is registered in the company register at the Commercial Court of Vienna under FN 122119m. Its registered office is at Am Stadtpark 9, 1030 Vienna. The annual financial statements are deposited at the company register court and published in the Austrian Electronic Announcement and Information Platform of the Federation (“EVI”) in accordance with the Austrian disclosure regulations. The annual financial statements for the year ending 31 December 2023 were prepared by the Management Board in accordance with the Austrian Commercial Code (UGB) as amended by the latest version of the Austrian Financial Reporting Amendment Act (RAG), taking into account the special provisions of the Austrian Banking Act (BWG) that apply to credit institutions, including the CRR Regulation 575/2013/EU and the Austrian Stock Corporation Act (AktG). According to Section 221 (Size categories) of the Austrian Commercial Code (UGB), RBI AG qualifies as a large corporation. It is also a public interest entity pursuant to Section 43 (1a) of the Austrian Banking Act (BWG) in conjunction with Section 189a of the Austrian Commercial Code. RBI AG is a corporate and investment bank for companies in Austria and for large corporate customers in Western Europe. Through its equity participations, RBI has one of the largest networks held by Western banking groups in Central and Eastern Europe (CEE). It transacts business in this region through subsidiary banks, leasing companies and numerous specialized financial service providers with some 1,500 branches. In Austria, RBI AG is also active in business activities in the areas of housing finance, leasing, asset management, pension funds, factoring and private banking. RBI AG's 18.6 million clients include commercial clients, small and medium-sized entities, private individuals, financial institutions and government entities. In addition, RBI is the lead institution of the Raiffeisen Banking Group Austria (RBG) and serves as the central institution of the Raiffeisen regional banks as defined by the Austrian Banking Act (BWG). RBI AG also has branch offices in Bratislava, Frankfurt, London, Warsaw, Singapore and Beijing. As shares in the company are traded on a regulated market within the meaning of Section 1 (2) BörseG (prime market of the Vienna Stock Exchange) and numerous securities issued by RBI AG are admitted to a regulated market in the EU, RBI AG has to publish annual consolidated financial statements in accordance with Section 59a of the Austrian Banking Act (BWG) in compliance with International Financial Reporting Standards. These consolidated financial statements are published on the Internet (https://www.rbinternational.com/en/investors/reports.html). As a credit institution within the meaning of Section 1 of the Austrian Banking Act (BWG), RBI AG is subject to the regulatory oversight of the Financial Market Authority, Otto-Wagner-Platz 5, A-1090 Vienna (www.fma.gv.at) and the European Central Bank, Sonnemannstrasse 20 D-60314 Frankfurt am Main (www.bankingsupervision.europa.eu). The disclosure requirements set out in Part 8 of the EU Regulation 575/2013 on prudential requirements for credit institutions (Capital Requirements Regulation, CRR) are published online on the bank’s website at https://www.rbinternational.com/en/ investors/reports.html.l Statutory deposit guarantee and investor protection scheme –Austrian Raiffeisen-Sicherungseinrichtung eGen Up until 28 November 2021, Raiffeisen Bank International AG and its Austrian bank subsidiaries were part of the Einlagensicher- ung AUSTRIA Gesellschaft m.b.H. (ESA), as a general protection scheme in Austria. In March 2021, RBI AG, its Austrian subsidiary banks, the regional Raiffeisen banks and the local Raiffeisen banks concluded an agreement on a new institutional protection scheme (Raiffeisen-IPS) in accordance with Article 113 (7) CRR (Capital 228Notes · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 Requirements Regulation of the European Union). Under the agreement, the participating institutions undertake to provide mutual cover and, in particular, to ensure each other's liquidity and solvency if necessary. This new Raiffeisen-IPS was approved in May 2021 by the competent supervisory authorities ECB and FMA as an institutional protection scheme within the meaning of Article 113 (7) CRR with the associated rights and obligations of the participating institutions. According to one of the provisions of the agreement, exposures between Raiffeisen-IPS members may be assigned a risk weight of zero per cent. Raiffeisen-IPS is subject to joint regulatory supervision, according to which the capital adequacy requirements must be complied with on a consolidated basis. The Austrian Raiffeisen-Sicherungseinrichtung eGen (ÖRS) performs early risk identification and reporting tasks for Raiffeisen- IPS. ÖRS also manages the liquid special assets of Raiffeisen-IPS as trustee. The Raiffeisen-IPS is controlled by a joint risk council, comprising representatives of RBI AG, the regional Raiffeisen banks and the Raiffeisen banks. Tasks that could be solved on a regional level were delegated to the regional risk councils, each comprising representatives of the respective regional Raiffeisen banks and Raiffeisen banks, by the joint risk council. · Recognition and measurement principles General principles The annual financial statements are prepared in accordance with the principles of proper accounting, the disclosure and valuation rules of the Austrian Banking Act, and taking into account standard practice as described in Section 222 (2) of the Austrian Commercial Code (UGB), to give a true and fair view of the company's net assets, financial position and earnings. The consolidated financial statements were prepared in compliance with the consistency principle. Assets and liabilities are valued on the principle of individual valuation and on the assumption that the company will continue to exist as a going concern. The principle of prudence is applied, taking into account the special characteristics of the banking business. Regarding negative interest, RBI AG has adopted the accounting approach of recognizing negative interest from loans under interest income and negative interest from liabilities under interest expenses. Amounts in foreign currencies Assets and liabilities in foreign currencies are converted at the ECB’s reference exchange rates as at 29 December 2023 pursuant to Section 58 (1) of the Austrian Banking Act (BWG). As the ECB stopped publishing an official EUR/RUB exchange rate at the beginning of March 2022, RBI AG was forced to generate a valid alternative exchange rate. For EUR/RUB, official conversion rates (onshore rates), which are set by the Russian Central Bank or on the basis of data from the Moscow Stock Exchange, and effectively achievable conversion rates (offshore rates), such as those disseminated by Bloomberg, sprang up on foreign exchange markets. Due to the current restrictions, payment flows with Russia are assumed to not be convertible at the official exchange rate. Since EUR/RUB transactions with international banks are usually settled at offshore rates, the latter are more likely to reflect the actual and effectively achievable exchange rate. Consequently, an offshore EUR/RUB exchange rate is used for the valuation of RUB transactions and assets in RBI AG as of the reporting date. Notes229 · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 Fair value measurement Stock market prices are used to determine the fair value of listed products. If stock market prices are not available, prices for original financial instruments and forward transactions are determined based on the calculated present value. The prices for options are determined based on suitable option price models. The calculation of present value is based on a yield curve composed of money-market, futures and swap rates and does not include a credit spread. Option pricing formulas as described by Black-Scholes 1972, Black 1976 and Garman-Kohlhagen are used together with other common models for the valuation of structured options. The price definition of OTC derivatives involves both value adjustments for the counterparty’s probability of default (credit value adjustment – CVA) as well as adjustments for own credit risk (debit value adjustment – DVA). The CVA involves, first, the determination of the expected positive exposure and, second, the counterparty's probability of default. The DVA is determined by the expected negative exposure and RBI AGs credit quality. To determine the expected positive exposure, a large number of scenarios for future points in time are simulated, reflecting all available risk factors (e.g. currency and yield curves). Having regard to these scenarios, the OTC derivatives are measured at market value and aggregated at counterparty level to finally determine the positive exposure for all the dates. As a further component for the CVA, a probability of default has to be determined for each counterparty. If CDS (credit default swap) quotes are available, RBI AG derives the market-based probability of default for the respective counterparty and implicitly the loss-given default (LGD). To determine the probability of default of counterparties that are not actively traded in the market, the counterparty's internal rating is assigned to a sector- and rating-specific CDS curve. The DVA is determined by the expected negative exposure and RBI's credit quality and represents the value adjustment with regard to RBI AG's own probability of default. The method applied to calculate the negative exposure is similar to that used for the CVA; the expected negative market value is applied instead of the expected positive market value. From the simulated future aggregated counterparty market values, negative, rather than positive, exposures are determined. These represent the expected liability to the counterparty at the respective future dates. To determine the own probability of default, direct CDS quotes of RBI AG are used. The capital-guaranteed products (guarantee funds and pension provisions) are reported as put options sold on the respective funds to be guaranteed. Valuation is based on a Monte Carlo simulation and is in accordance with the framework conditions stipulated by law pursuant to Section 57 of the Austrian Banking Act. Financial instruments in the banking book Securities intended to serve business purposes on a permanent basis (investment portfolio) are valued as fixed assets. The difference between the purchase cost and repayment amount is recognized under financial assets and written off or recognized over the residual term according to the effective interest method. Securities held as current assets have been valued strictly according to the lower of cost or market value principle, with any reversals of impairment losses up to amortized cost. Derivatives on interest rates (interest rate swaps, interest rate options and forward rate agreements) and on exchange rates (cross currency interest rate swaps and forward exchange transactions) are accounted for according to the accrued interest method, in which interest amounts are accrued for each period. In designating derivatives as part of effective micro hedging transactions, compensatory valuation of the underlying transaction and hedging derivative takes place. RBI AG uses interest rate swaps to hedge the interest rate risk from assets (bonds and loans) and liabilities (own issues, promissory notes and custodian business) on the statement of financial position. Fixed cash flows are exchanged for variable cash flows to minimize the interest rate risk. The currency risk is hedged by currency-related swaps, such as cross currency swaps, FX swaps or FX forward contracts. When the requirements are met, the above-mentioned derivatives form part of a valuation unit. Their market value is therefore not reported in the annual financial statements, as they are offset by cash flows from the underlying transactions recognized through profit and loss. The hedging relationships are recognized as micro fair value hedges in accordance with AFRAC 15 “Derivatives and Hedging Instruments”. On designation, the effectiveness of the hedging relationship is reviewed by a prospective effectiveness test with 100 basis point shifts in the yield curve. 230Notes · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 The effectiveness is measured retrospectively on the basis of a monthly regression analysis. Here, a set of 20 data points is used to determine the required calculation parameters used for the retrospective effectiveness test. A hedge is deemed to be effective if changes in the fair value of the underlying and hedging transaction are in a range of 80-125 per cent. The banking book also includes derivatives which do not meet the criteria of a trading book and are not part of a micro hedge relationship. The focus is not on short-term gains but on management of income and interest rate risk through positioning based on medium- to long-term market opinion. These derivatives were administrated in defined portfolios in order to guarantee a documented mapping to functional units. Within these functional units an imparity-based valuation takes place. For a negative accounting balance per functional unit a provision for impending loss will be allocated, while a positive accounting balance will be unrecognized. Derivatives of the bank book, which are not reflected in functional units, are valued according to the imparity principle. In the case of negative market values, a provision for impending loss will be allocated. The disclosure is shown in the income statement under position 7 and/or 10 – Other operating income/Other operating expenses . Credit default swaps have the following effect on the income statement: The margins received or paid (including accruals) are reported under net commission income. Valuations are conducted in adherence to the imparity principle under the tenants of prudence. A provision for impending losses is recognized in the event that negative market values arise. Financial instruments in the trading book The securities in the trading portfolio are valued on a mark-to-market basis. In the absence of observable market rates or prices, the fair value is determined using valuation models. All derivatives transactions in the trading book are also recognized at fair value. Loans and advances Loans and advances are generally recognized at amortized cost, taking into account the effective interest method in accordance with the AFRAC 14 rules and/or the measurement options they provide for in connection with the position paper of the AFRAC and the FMA on issues relating to subsequent measurement of credit exposures at banks. For loans, acquisition cost is the starting point for the valuation. In the case of an original financial asset, the cost of acquisition is generally equal to the amount paid out, including any incidental acquisition costs. In general, the acquisition is not recognized through the income statement. In the case of acquired loans, the cost of acquisition is measured by reference to the purchase price. Pursuant to section 56 (2) and (3) of the Austrian Banking Act, premiums and discounts resulting from the issue, as well as differences arising from the acquisition on the secondary market, may either be recognized immediately in profit or loss or on a scheduled basis. When exercising the above-mentioned measurement option in relation to securities recognized as fixed assets in accordance with section 56 BWG, any difference between the acquisition cost and the repayment amount is deferred and reported in net interest income. On every reporting date, an assessment is conducted to determine whether there is objective evidence that a financial asset or group of financial assets is impaired. Impairments are in any case accounted for by loan loss provisions either in the form of specific loan loss provisions or portfolio-based loan loss provisions. If the reasons for an impairment no longer apply, the impairment is reversed up to a maximum of no more than the cost of acquisition after reversing the difference (premium/discount). Net provisioning for impairment losses The IFRS 9 credit risk provisioning model is also applied in accordance with commercial law for the determination of credit risk provisions. Expected credit losses for credit risks, risks for credit commitments and off-balance sheet credit risks from financial guarantees and letters of credit are recognized as impairments and determined according to the change in credit risk from the date of addition. Impairment losses on loans are deducted from the carrying amount at amortized cost in the statement of financial position. Provisions are recognized for impairment losses on loan commitments, financial guarantees and letters of credit. Accordingly, two options exist for calculating the amount of risk provisioning: · according to the expected 12-month loss (12-month ECL) or · according to the total lifetime loss (Lifetime ECL) Depending on the change in credit risk between the date of initial recognition and the measurement date, the financial instruments are classified into one of three impairment levels: Notes231 · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 · Stage 1 covers all newly recognized financial instruments as well as those for which the credit risk has not increased significantly since initial recognition. In addition, Stage 1 comprises all financial instruments that have a low credit risk and for which RBI AG makes use of the “low credit risk exemption.” All debt securities with an investment-grade level credit rating as of the reporting date are considered to have a low credit risk. This rule is not applied in the lending business. For loans, an impairment loss is recognized for the expected 12-month loss on initial recognition. Loans from Stage 2 for which the credit risk has significantly improved are reclassified and recognized in Stage 1. A Stage 1 impairment loss is added to the portfolio loan loss provisions in the statement of changes in valuation (12- month loss). · Stage 2 contains financial instruments for which the credit risk has increased significantly since initial recognition but no default has yet occurred. For these receivables, an impairment loss is calculated on the basis of the total lifetime loss and also recognized as a portfolio-based loan loss provision. · Stage 3 covers financial instruments that are classified as impaired as at the reporting date. For the purposes of the definition of default, RBI AG applies the conditions stipulated under Article 178 CRR. For defaults on financial instruments in Stage 3, the expected credit loss over the entire remaining term of the financial instrument is also to be recognized as impairment. Portfolio-based loan loss provisions For loans made in Austria by RBI AG, the expected loss for both stages is calculated on an individual transaction basis applying statistical risk parameters derived from the Basel IRB approach and adjusted to the requirements of IFRS 9. Stage 1 and 2 provisions for Swiss franc-denominated loans are recognized on a portfolio level. Additional details pertaining to this subject can be referenced in the section addressing litigation risk associated with foreign currency loans in Poland. The following are the most important inputs for calculating expected credit losses at RBI AG: · Probability of default (PD): At RBI AG, the probability of default (PD) is the probability with which a borrower will be unable to meet its payment obligations either within the next twelve months or over the entire remaining term. · Exposure at default (EAD): Exposure at default corresponds to the amount at the time of default owed to RBI AG over the next twelve months or over the entire term. · Loss given default (LGD): Loss given default corresponds to the expectation at RBI AG relating to the loss amount in the event of default. The estimation of risk parameters includes not only historical default information but also the current economic environment (point-in-time orientation) and forward-looking information. In particular, the bank’s macroeconomic forecasts are reviewed regularly in relation to their impact on the level of expected credit losses, and such forecasts are integrated into the related calculations. For this purpose, a baseline scenario is applied based on current RBI Research forecasts relating to key macroeconomic parameters, supplemented by other model-relevant macroeconomic parameters. In addition to the base scenario, Raiffeisen Research has also compiled both an optimistic and a pessimistic scenario to ensure that non-linearity is captured in its models. For the pessimistic and optimistic scenarios, the methodology was adjusted due to the high level of uncertainty associated with the current geopolitical situation (war in Ukraine). Post-model adjustments to expected credit loss allowance estimates are adjustments which are used in circumstances where existing inputs, assumptions and model techniques do not capture all relevant risk factors. This is generally the case when existing inputs, assumptions and model techniques might not capture all relevant risk factors due to transient circumstances or insufficient time to appropriately incorporate relevant new information in the rating, and when individual lending exposures within a group of lending exposures react to factors or events differently than initially expected. The emergence of new macroeconomic, microeconomic or political events, along with expected changes to parameters, models or data that are not incorporated in current parameters, internal risk rating migrations or forward-looking information are examples of such circumstances. In general RBI units use post-model adjustments to allowances for expected credit losses only as an interim solution. In order to reduce the potential for bias, add-ons and post-model adjustments are of a temporary nature and typically remain valid for no longer than one to two years. All material adjustments are authorized by the Group Risk Committee (GRC). From an accounting point of view, add-ons (post-model adjustments) are based on a collective assessment. “Other risk factors” typically comprise a longer time horizon than post-model adjustments (e.g. the prolongation of sanctions risks), which leads to ECL-overlays. Post-model adjustments are transferred to in-model adjustments. 232Notes · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 Individual loan loss provisions Impairments are recognized on an individual basis for financial instruments that are classified as impaired on the reporting date. RBI employs the definition of default as the criteria for classifying a financial instrument as impaired. Default is assessed in relation to quantitative and qualitative triggers. Firstly, a borrower is considered to be in default if they are assessed to be more than 90 days past due on their contractual payments. Secondly, a borrower is considered to be in default if they are in significant financial difficulty and are unlikely to repay any credit obligation in full. This definition of default has been applied consistently in RBI’s expected credit loss calculations to model the probability of default, the exposure at default and the loss given default. Objective evidence of impairment leading to impairment charges on an individual exposure includes the counterparty experiencing significant financial difficulties, a breach of contract (e.g. default or delinquency in interest or principal payments), or a high probability that the borrower will enter bankruptcy or another form of financial reorganization. Loans for which there is objective evidence of impairment are tested for impairment. For this purpose, the expected default amount is calculated as the difference between the expected repayments of principal, interest payments and collateral proceeds and the gross carrying amount of the loan. The expected repayment amounts are discounted in accordance with their probability of occurrence and the scenarios, weighted using the effective interest rate. The loan is recognized in the balance sheet less the total loss on maturity. The resulting net carrying amount is used as the basis for calculating future interest income. General individual loan loss provisions for retail lending in the Polish branch are recognized based on the best statistically derived estimate of the expected loss after adjusting for indirect costs. Investments and shares in affiliated companies Equity participations and interests in affiliated companies are carried at cost unless sustained losses, a reduction in their equity or other indicators require them to be written down to their fair value. They are written up to no more than their cost of acquisition if the reasons for the long-term impairment no longer apply. Equity participations and affiliated companies are valued at the end of each financial year (and on ad-hoc basis) by means of an impairment test. Their fair value is determined during the test. Fair value is calculated using a discounted cash flow model, which calculates the enterprise value as the present value of future financial profits. The dividend discount model is also employed to account for the specific characteristics of investment companies operating in the financial services sector, and the weighted average cost of capital model is used for investment companies outside the financial services sector (e.g., LEIPNIK-LUNDENBURGER INVEST Beteiligungs AG, Vienna). The dividend discount model accounts for the specific characteristics of the banking business, including the need to comply with capital adequacy regulations. The present value of the expected future dividends that may be distributed to the shareholders after meeting all appropriate capital adequacy regulations is the recoverable amount. Accordingly, under the WACC method, the fair value of total capital is determined in a first step on the basis of free cash flows and, in a second step, the recoverable amount is determined by deducting net financial debt. The recoverable amount is calculated based in principal on a three to five-year detailed planning period. Significant planning uncertainties, which came about to some extent as a result of the direct consequences of the crisis in Ukraine, were taken into account in scenario analyses. The sustainable future (permanent dividend phase) is generally based on a going concern assumption (perpetuity). In most cases, the income used for the valuation is assumed to grow at a country-specific nominal rate based on the projected long-term inflation rate. If companies are significantly overcapitalized, an interim phase of five years is defined without extending the detailed planning phase. During this period, these companies can distribute full dividends without violating capital adequacy regulations. In the permanent dividend phase, earnings must be retained as the company grows in order to continue to comply with capital adequacy regulations. Earnings retention is not required if no growth is expected in the permanent dividend phase. In the permanent dividend phase, the model assumes a normalized, economically sustainable earnings situation in which the return on equity and the costs of equity or cost of capital converge. According to AFRAC 24 (16), liquidation value is generally the lower bound of any investment valuation absent any legal or de facto constraints to continue the investee company. Liquidation value is defined as the pro rata breakup value of the assets minus the liabilities held by the entity. When setting a liquidation value, a sector-specific, individual analysis is conducted, which includes a comparison using the discounted cash flow method. Liquidation value is employed when it represents the lower bound of the investment’s valuation range under the conditions set out. Notes233 · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 Tangible and intangible fixed assets Intangible fixed assets and tangible fixed assets are valued at acquisition or production cost less scheduled depreciation. Scheduled depreciation is on a straight-line basis (pro rata temporis). An impairment loss is recognized if an asset is permanently impaired below its carrying amount. Scheduled depreciation is based on the following periods of use: Useful life Years Useful life Years Buildings 50 Software 4 bis 10 Office equipment 3 to 5 Hardware 3 Office fixtures and fittings 5 to 10 Business equipment 5 bis 10 Vehicles 5 Tenancy rights 10 Low-value fixed assets are written off in full in the year of acquisition. Issuance expenses Issuance and management fees and premiums or discounts for bonds issued are distributed over the given term of the obligation using the effective interest method. Other issuance expenses are expensed immediately. Pension and severance payment obligations The provisions for pension and severance payment obligations are determined in accordance with IAS 19 – Employee Benefits – based on the projected unit credit method. The actuarial calculation of pension obligations for active employees is based on an interest rate of 3.66 per cent (31/12/2022: 3.64 per cent) p.a. and an effective pensionable salary increase of 7.5 per cent in the first year, 4.2 per cent in the second year and 3.1 per cent in the third year as well as 3.0 per cent in subsequent years (31/12/2022: 8.0 per cent in the first year, 5.1 per cent in the second year and 3.2 per cent in subsequently years). The parameters for retired employees are calculated using a capitalization rate of 3.66 per cent (31/12/2022: 3.64 per cent) per year and an expected increase in retirement benefits of 7.5 per cent in the first year, 4.2 per cent in the second year and 3.1 per cent in the third year as well as 3.0 per cent in subsequent years (31/12/2022: 8.0 per cent in the first year, 5.1 per cent in the second year and 3.2 per cent in the subsequent years), and in the case of pension commitments with existing reinsurance policies of 0.5 per cent (31/12/2022: 0.5 per cent). The calculations are based on an assumed retirement age of 65, subject to transitional statutory requirements for women as well as special arrangements contained in individual contracts. The imputed retirement age was applied as the end date of funding. The basis for the calculation of provisions for pensions is provided by the AVÖ 2018-P Rechnungsgrundlagen für die Pensionsversicherung (Computational Framework for Pension Insurance), using the variant for salaried employees. The actuarial calculation of severance payments and long-service bonus obligations is based on an interest rate of 3.66 per cent (31/12/2022: 3.65 per cent for severance payments and 3.64 per cent for long-service bonus obligations) p. a., for birthday benefits 3.68 per cent (31/12/2022: 3.64 per cent) and an average salary increase of 7.5 per cent in the first year, 4.2 per cent in the second year, 3.1 per cent in the third year and 3.0 per cent in subsequent years (31/12/2022: 8.0 per cent in the first year, 5.1 per cent in second year and 3.2 per cent in subsequent years) p.a. 234Notes · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 Other provisions Other provisions are recorded at the level at which they are likely to be required. They take into account all identifiable risks and liabilities, the level of which is not yet known. Long-term provisions are currently discounted in accordance with § 211 (2) of the Austrian Commercial Code (UGB), whereby they are discounted at a standard market rate if the effect of discounting is deemed material. Provisions for litigation costs for lawsuits filed in connection with foreign currency loans in Poland (please refer to the section titled “Litigation risk for foreign currency loans in Poland” for details on the accounting method applied and any changes made to such method) were discounted at a rate of 6.90 per cent (31/12/2022: 7.25 per cent). Other provisions include provisions for bonuses for identified staff (pursuant to European Banking Authority CP 42, 46). RBI AG fulfills the obligations set forth in the Annex to Section 39b of the Austrian Banking Act (BWG) as follows: 60 per cent of the annual bonus is paid out 50 per cent as an upfront cash payment and 50 per cent by way of a phantom share plan with a retention period of one year. Forty per cent of the annual bonus is subject to a five-year deferral period and likewise paid out 50 per cent in cash and 50 per cent by way of the phantom share plan. The phantom shares are converted on allocation and payment each using the average price of the preceding financial year. Liabilities These are recognized at the higher of the nominal value or the repayment amount. The difference between the issue and repayment amount is allocated according to the effective interest method. Zero-coupon bonds are recognized at nominal value plus accrued interest on a pro rata basis up to the reporting date. Notes235 · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 · Notes to the statement of financial position Assets Loans and advances Breakdown of maturities Loans and advances to credit institutions, loans and advances to customers and other assets are broken down by their residual terms as follows: in € thousand 31/12/2023 31/12/2022 Loans to banks 13,583,573.8 13,491,489.6 Repayable on demand 1,471,800.4 1,448,055.5 Up to 3 months 9,476,260.8 8,662,406.1 More than 3 months, up to 1 year 401,584.1 505,354.7 More than 1 year, up to 5 years 1,667,223.0 1,156,799.4 More than 5 years 566,705.6 1,718,873.9 Loans to customers 27,699,948.5 29,863,729.7 Repayable on demand 6,270,409.7 5,634,842.9 Up to 3 months 1,175,753.0 587,523.8 More than 3 months, up to 1 year 3,781,101.1 3,437,810.6 More than 1 year, up to 5 years 13,630,523.7 13,863,947.0 More than 5 years 2,842,161.1 6,339,605.4 Other assets 6,989,545.1 6,551,745.3 Up to 3 months 4,805,290.0 5,709,447.2 More than 3 months, up to 1 year 1,700,000.0 500,000.0 More than 5 years 484,255.1 342,298.1 The risk section of the management report includes more details about the distribution of loans and advances on a regional basis. Derivative financial instruments Hedging relationships Hedges with hedging periods up to 2043 existed as at 31 December 2023. Derivative financial instruments for hedging interest rate and credit risks are used for underlying transactions on both the assets and liabilities side. As of the reporting date, risks from bonds and loans are hedged on the assets side, and risks from own issues, registered bonds, promissory note loans and deposits are hedged on the liabilities side. The clean present value of the hedging transactions (i.e. excluding accrued interest) for the existing hedging relationships together amounts to a negative market value of € 109,773 thousand (31/12/2022: € 154,294 thousand), of which € 262,353 thousand (31/12/2022: € 368,402 thousand) is attributable to positive market values and € 372,126 thousand (31/12/2022: € 522,696 thousand) to negative market values. In the financial year 2023, no material settlement payments were made in connection with derivatives in hedging relationships (31/12/2022: € 0 thousand). In the course of the IBOR reform, compensation payments were made in the amount of € 196 thousand (2022: € 0 thousand), which were immediately recognized in profit or loss in accordance with AFRAC Statement 15 on Derivatives and Hedging Instruments (UGB) Rz 77 et seq. 236Notes · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 Interest rate management derivatives RBI employs interest rate derivatives to hedge interest rate risks in accordance with the accounting regulations pertaining to hedging relationships and functional units, as outlined in AFRAC 15 “Derivatives and Hedging Instruments” and the FMA Circular on “Accounting issues relating to interest rate derivatives and valuation adjustments for derivatives.” Provisions for impending losses on these derivatives amount to € 68,708 thousand on the reporting date (31/12/2022: € 73,140 thousand). In the financial year 2023, allocations in the amount of € 14,557 thousand (31/12/2022: € 53,430 thousand) and reversals in the amount of € 18,988 thousand (31/12/2022: € 10,259 thousand) resulted from the change in the market values of the functional units of the hedging derivatives. Currency derivatives In financial year 2023, provisions were recognized in the amount of € 6,199 thousand (31/12/2022: € 6,727 thousand) for impending losses on non-netted UAH transactions that were initially recognized in 2022 based on the geopolitical situation. In the reporting year, reversals were made in the amount of € 528 thousand (31/12/2022: € 0 thousand). Credit default swaps To a lesser extent, RBI AG also actively manages positions in credit derivatives (in the form of credit default swaps), which require individual valuation in accordance with the FMA circular on accounting issues relating to interest rate derivatives and valuation adjustments for derivatives. Provisions for impending losses amount to € 7,575 thousand as of the reporting date (31/12/2022: € 2,316 thousand). In the financial year 2023, allocations in the amount of € 5,259 thousand (31/12/2022: € 2,316 thousand) and reversals in the amount of € 0 thousand (31/12/2022: € 879 thousand) resulted from changes in the market value of these derivatives. Functional units The portfolio-based management of functional units is summarized according to the strategy applied to manage interest risk for the currencies contained therein, with the positive and negative fair values shown below: 31/12/2023 31/12/2022 Valuation effect in € thousand Positive values Negative values Positive values Negative values 31/12/2023 CHF 0 (150) 0 (387) 237 CZK 3,186 (2,184) 2,706 (1,131) (573) EUR 49,614 (26,448) 62,025 (31,789) (7,070) GBP 0 0 6 0 (6) HUF 9,800 0 7,335 0 2,465 NOK 2 0 6 0 (4) PLN 0 (1,895) 0 0 (1,895) RON 54 0 125 0 (71) RUB 1,010 0 0 (568) 1,578 USD 340 (831) 275 (1,215) 449 Total 64,006 (31,508) 72,478 (35,090) (4,890) The main factors driving the valuation result were the change in the level of interest rates in EUR and USD, an expansion in netting volumes, an increase in PLN business and a reduction in RUB business. The following table summarizes the currencies of the hedging derivatives that are not suitable for management under functional units. This gives the following picture for the positive and negative fair values as of the reporting date: 31/12/2023 31/12/2022 Valuation effect in € thousand Positive values Negative values Positive values Negative values 31/12/2023 EUR 4,252 (7,575) 15,096 (2,316) (16,103) Total 4,252 (7,575) 15,096 (2,316) (16,103) Notes237 · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 The following tables show the open forward transactions for the reporting year and the previous year: 31/12/2023 Nominal amount by maturity Fair value Carrying amount in € thousand Up to 1 year More than 1 year, up to 5 years More than 5 years Total hereof trading book positive negative positive negative Total 89,725,880 132,170,152 79,372,038 301,268,070 196,313,436 4,746,270 4,455,184 4,054,656 3,718,712 a) Interest rate contracts 41,809,732 119,847,836 75,887,155 237,544,723 137,653,487 3,753,124 3,736,511 3,096,764 3,009,582 OTC products Interest rate swaps 35,590,026 106,659,018 71,908,239 214,157,283 123,298,779 3,604,223 3,717,766 2,935,971 2,908,823 Floating Interest rate swaps 0 Interest rate futures 1,900,987 404,465 0 2,305,452 2,305,452 1,017 670 1,017 670 Interest rate options - buy 1,582,871 3,970,076 1,360,797 6,913,744 5,618,012 114,477 126,369 Interest rate options - sell 2,462,441 7,891,137 2,142,651 12,496,229 4,759,229 8,003 0 90,017 Other similar interest rate contracts 109,934 575,405 375,818 1,061,157 1,061,157 31,197 6,745 31,197 6,745 Products traded on stock exchange Interest rate futures 30,308 7,349 1,178 38,835 38,835 31 4 31 4 Interest rate options 133,165 340,386 98,472 572,023 572,023 2,179 3,323 2,179 3,323 b) Foreign exchange rate contracts 46,459,532 8,097,831 2,117,202 56,674,565 52,247,454 688,941 597,612 653,687 591,391 OTC products Cross-currency interest rate swaps 2,463,602 7,239,990 2,117,202 11,820,794 7,452,175 293,869 191,412 258,033 185,191 Forward foreign exchange contracts 39,726,990 20,956 0 39,747,946 39,747,946 385,675 402,013 385,675 402,013 Currency options – purchased 3,443,566 275,712 0 3,719,278 3,660,786 9,397 0 9,979 Currency options – sold 807,849 561,173 0 1,369,022 1,369,022 0 4,120 0 4,120 Other similar interest rate contracts Products traded on stock exchange Currency contracts (futures) 17,525 0 0 17,525 17,525 67 0 67 c) Securities-related transactions 1,243,703 2,935,613 870,787 5,050,103 5,050,103 277,234 79,153 277,234 79,153 OTC products Equity/Index options -buy 226,524 1,925,388 651,696 2,803,608 2,803,608 276,270 0 276,270 0 Equity/Index options -sell 243,717 929,950 219,091 1,392,758 1,392,759 0 79,153 0 79,153 Products traded on stock exchange Equity/Index options 773,462 80,275 0 853,737 853,736 964 0 964 0 d) Commodity contracts 19,520 1,839 0 21,359 21,359 598 37 598 37 OTC products Commodities 1,900 1,839 0 3,739 3,739 598 0 598 0 Products traded on stock exchange Commodity futures 17,620 0 0 17,620 17,620 0 37 0 37 e) Credit derivative contracts 193,393 1,287,033 496,894 1,977,320 1,341,033 26,373 41,871 26,373 38,549 OTC products Credit default swap 193,393 1,287,033 496,894 1,977,320 1,341,033 26,373 41,871 26,373 38,549 238Notes · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 31/12/2022 Nominal amount by maturity Fair value Carrying amount in € thousand Up to 1 year More than 1 year, up to 5 years More than 5 years Total hereof trading book positive negative positive negative Total 84,330,522 116,250,894 78,496,258 279,077,674 184,149,989 9,105,538 9,090,068 5,191,707 5,037,385 a) Interest rate contracts 38,761,427 104,613,375 74,926,013 218,300,815 126,491,881 7,824,676 8,047,858 3,976,963 4,013,510 OTC products Interest rate swaps 34,439,803 91,032,083 69,960,936 195,432,822 112,883,883 7,603,198 7,943,494 3,729,873 3,854,152 Floating Interest rate swaps 0 Interest rate futures 2,344,706 100,000 0 2,444,706 2,070,520 4,314 -433 4,314 433 Interest rate options - buy 644,694 4,900,701 1,726,545 7,271,940 5,761,131 210,329 217,336 Interest rate options - sell 1,259,091 7,970,283 2,908,678 12,138,052 4,763,052 98,559 152,687 Other similar interest rate contracts 36,759 502,150 311,238 850,147 850,147 4,769 5,841 23,374 5,841 Products traded on stock exchange Interest rate futures 6,874 9,282 7,366 23,522 23,522 0 19 0 19 Interest rate options 29,500 98,876 11,250 139,626 139,626 2,066 378 2,066 378 b) Foreign exchange rate contracts 45,078,733 7,690,209 2,281,218 55,050,160 52,494,737 1,072,114 862,829 1,014,083 839,801 OTC products Cross-currency interest rate swaps 2,925,917 5,533,956 2,281,218 10,741,091 8,195,130 465,995 252,206 407,964 229,178 Forward foreign exchange contracts 41,214,037 1,952,743 0 43,166,780 43,166,779 596,759 600,886 596,759 600,886 Currency options – purchased 388,265 66,683 0 454,948 445,487 9,360 9,360 0 Currency options – sold 550,514 136,826 0 687,340 687,341 9,737 0 9,737 Products traded on stock exchange c) Securities-related transactions 469,362 2,496,741 745,700 3,711,802 3,711,802 190,022 165,528 190,022 165,528 OTC products Equity/Index options -buy 199,755 1,379,749 639,661 2,219,165 2,219,166 190,022 0 190,022 Equity/Index options -sell 269,606 1,116,992 106,039 1,492,637 1,492,637 0 165,528 165,528 Products traded on stock exchange d) Commodity contracts 0 0 0 0 0 0 0 0 0 e) Credit derivative contracts 21,000 1,450,569 543,327 2,014,896 1,451,569 18,726 13,853 10,639 18,546 OTC products Credit default swap 21,000 1,450,569 543,327 2,014,896 1,451,569 18,726 13,853 10,639 18,546 The following derivatives shown in the list of open forward transactions are recognized at fair value in the statement of financial position: Derivative financial instruments Positive fair values Negative fair values in € thousand 31/12/2023 31/12/2022 31/12/2023 31/12/2022 Derivatives in the trading book a) Interest rate contracts 2,728,475 3,787,182 2,744,555 3,914,276 b) Foreign exchange rate contracts 649,185 1,003,131 574,235 826,011 c) Share and index contracts 200,563 25,764 2,091 1,270 d) Credit derivatives 26,373 10,757 26,987 9,948 e) Commodities 598 0 37 0 Securities Debt securities and other fixed-income securities amounting to € 406,606 thousand (31/12/2022: € 350,601 thousand) will mature next financial year. The table below lists the securities admitted to stock exchange trading (asset side), broken down into listed and unlisted securities (amounts incl. interest accrued): Securities Listed Unlisted Listed Unlisted in € thousand 31/12/2023 31/12/2023 31/12/2022 31/12/2022 Debt securities and other fixed-income securities 3,749,212.0 28,083.5 4,746,281.7 47,085.3 Shares and other variable-yield securities 365,001.7 0.0 256,359.0 1,439.0 The table below lists securities admitted to stock exchange trading (asset side) measured as fixed assets or current assets (including trading portfolio): Notes239 · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 Securities Fixed assets Current assets Fixed assets Current assets in € thousand 31/12/2023 31/12/2023 31/12/2022 31/12/2022 Debt securities and other fixed-income securities 1,933,349.7 1,843,945.7 1,922,436.3 2,870,930.7 Shares and other variable-yield securities 0.0 365,001.7 0.0 257,799.0 The table below shows the disposal of securities from fixed assets. Of this amount, € 1,019,992 thousand related to repayments (31/12/2022: € 924,927 thousand). On-balance Nominal amount Net result Nominal amount Net result in € thousand 31/12/2023 31/12/2023 31/12/2022 31/12/2022 Treasury bills and other bills eligible for refinancing with central banks 447,841.7 (3,895.1) 248,160.0 (6,532.1) Loans to banks 53,893.6 0.0 82,120.2 0.0 Loans to customers 286,049.3 (225.0) 312,016.2 (1,142.6) Debt securities and other fixed-income securities 301,207.2 112.3 564,538.5 (2,148.5) Shares and other variable-yield securities 0.0 0.0 58,000.0 0.0 Total 1,088,991.8 (4,007.8) 1,264,834.9 (9,823.2) Difference between the acquisition cost and the repayment amount for securities (except zero-coupon bonds) in the investment portfolio (banking book): The difference between the amortized costs and the repayment amounts is comprised of € 55,075 thousand (31/12/2022: € 75,036 thousand) to be recognized in the future as expenditure, and € 165,708 thousand (31/12/2022: € 93,801 thousand) to be recognized as income. In the case of securities admitted to stock exchange trading and recognized at fair value that do not have the characteristics of financial investments, the difference between the acquisition cost and the higher fair value is € 7,742 thousand (31/12/2022: € 4,934 thousand) pursuant to Section 56 (4) of the Austrian Banking Act (BWG) and € 0 thousand (31/12/2022: € 2,458 thousand) pursuant to Section 56 (5) of the Austrian Banking Act (BWG). The item loans and advances to credit institutions contains own bonds that are not admitted for public trading in an amount of € 16,509 thousand (31/12/2022: € 15,272 thousand). Securities amounting to € 496,340 thousand (31/12/2022: € 583,472 thousand) are the subject of genuine repurchase transactions on the reporting date, whereby RBI AG is the seller and the securities continue to be recognized on the statement of financial position. The volume of RBI’s trading book pursuant to Article 103 CRR is € 203,359,690 thousand (31/12/2022: € 120,771,058 thousand), with € 7,046,254 thousand (31/12/2022: € 4,612,566 thousand) accounted for by securities and € 196,313,436 thousand (31/12/2022: € 116,158,492 thousand) accounted for by other financial instruments. Securities relates to the carrying amounts of the instruments, while other financial instruments relates to derivatives, including nominal values. The fair value is lower than the carrying amount for the following financial instruments that are reported as financial investments: Financial investments Carrying amount Fair value Carrying amount Fair value in € thousand 31/12/2023 31/12/2023 31/12/2022 31/12/2022 1. Treasury bills and other bills eligible for refinancing with central banks 5,885,751.1 5,367,189.4 6,404,251.8 5,612,351.7 2. Loans to banks 98,581.5 96,588.0 158,905.8 153,715.1 3. Loans to customers 311,806.0 305,201.8 218,440.7 211,276.9 4. Debt securities and other fixed-income securities a) Issued by public bodies 0.0 0.0 0.0 0.0 b) Issued by other borrowers 1,461,315.4 1,369,290.2 1,848,630.9 169,663.2 5. Shares and other variable-yield securities 363,288.0 361,463.5 440,222.1 431,710.6 Total 8,120,742.0 7,499,732.9 9,070,451.3 6,578,717.5 An impairment (in accordance with Section 204 (2) of the Austrian Commercial Code (UGB) is not accounted for as the assessment of the credit rating of the security borrower is such that scheduled interest payments and repayments are expected to be made. 240Notes · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 Investments and shares in affiliated companies There are cross shareholdings with UNIQA Insurance Group AG, Vienna, and Posojilnica Bank eGen, Klagenfurt. There are no profit and loss transfer agreements as at 31 December 2023. Affiliated companies Company, domicile (country) Total nominal value in thousand Currency Direct share of RBI Equity in € thousand Result in € thousand1 From annual financial statements2 Akcenta CZ a.s., Prag3 100,125 CZK 70 % 602 86 31/12/2023 Akcenta Logisitic a.s., Prag3 2,000 CZK 70 % 200 17 31/12/2022 Angaga Handels- und Beteiligungs GmbH, Wien 35 EUR 100 % 2,150 (291) 31/12/2023 AO Raiffeisenbank, Moskau3 36,711,260 RUB 100 % 4,358,883 1,349,655 31/12/2023 BAILE Handels- und Beteiligungsgesellschaft m.b.H.,Wien2 40 EUR 100 % 249,295 12,867 31/12/2023 Centralised Raiffeisen International Services & Payments S.R.L., Bukarest 2,820 RON 100 % 19,996 2,991 31/12/2023 Elevator Ventures Beteiligungs GmbH, Wien 100 EUR 100 % 36,457 (2,082) 31/12/2023 Extra Year Investments Limited, Tortola 50 USD 100 % 7,080 760 31/12/2022 Fairo GmbH, Wien2 35 EUR 100 % 2,692 (2,979) 31/12/2023 FAIRO LLC, Kiew 1,881 UAH 100 % 7,575 750 31/12/2022 FARIO Handels- und Beteiligungsgesellschaft m.b.H., Wien 40 EUR 100 % 2,070 (9) 31/12/2023 GABARTS Beteiligungs GmbH & Co. KG 10 EUR 100 % N/A4 N/A N/A Golden Rainbow International Limited, Tortola <1 USD 100 % 7,080 60 31/12/2022 Kathrein Privatbank Aktiengesellschaft, Wien (AT)2 20,000 EUR 100 % 50,453 2,285 31/12/2023 KAURI Handels und Beteiligungs GmbH, Wien2 50 EUR 88 % 7,080 760 31/12/2023 LOTA Handels- und Beteiligungs-GmbH, Wien 35 EUR 100 % 1,921 (15) 31/12/2023 R.L.H. Holding GmbH, Wien 35 EUR 100 % 7,575 750 31/12/2023 R.P.I. Handels- und Beteiligungsges.m.b.H., Wien2 36 EUR 100 % 155 (11) 31/12/2023 RADWINTER SP.Z.O.O 10 PLN 100 % 2,400 (18) 31/12/2022 Raiffeisen Bank Aval JSC, Kiew (UA) 6,154,516 UAH 68 % 511,892 121,394 31/12/2023 Raiffeisen Continuum GmbH & Co KG, Wien 85 EUR 59 % 110 (45) 31/12/2022 Raiffeisen Continuum GmbH, Wien 100 EUR 14 % 967,574 15,226 31/12/2022 Raiffeisen Continuum Management GmbH, Wien 100 EUR 50 % 248,357 20,664 31/12/2022 Raiffeisen Digital Bank AG 47,599 EUR 100 % 115,913 (32,823) 31/12/2023 Raiffeisen Investment Advisory GmbH, Wien 730 EUR 100 % 997 60 31/12/2023 Raiffeisen RS Beteiligungs GmbH, Wien2 35 EUR 100 % 5,894,010 1,518,059 31/12/2023 Raiffeisen Tech GmbH4 35 EUR 100 % N/A N/A N/A RALT Raiffeisen Leasing Ges.m.b.H, Wien2 219 EUR 100 % 46,971 1,010 31/12/2023 RALT Raiffeisen-Leasing GmbH & Co. KG, Wien2 19,970 EUR 97 % 32,799 0 31/12/2023 RB International Investment Asia Limited, Labuan <1 USD 100 % 178 (23) 31/12/2022 RB International Markets (USA) LLC, New York3 8,000 USD 100 % 13,392 375 31/12/2022 RBI Group IT GmbH, Wien 100 EUR 100 % 110 <1 31/12/2023 RBI Invest GmbH, Wien2 500 EUR 100 % 967,574 20,977 31/12/2023 RBI Kantinenbetriebs GmbH, Wien 35 EUR 100 % 1,086 (616) 31/12/2022 RBI LEA Beteiligungs GmbH, Wien2 70 EUR 100 % 248,357 8,566 31/12/2023 RBI PE Handels- und Beteiligungs GmbH, Wien2 150 EUR 100 % 686 (27) 31/12/2023 RBI Retail Innovation GmbH, Wien2 35 EUR 100 % 5,289 (45) 31/12/2023 REC Alpha LLC, Kiew3 1,596,843 UAH 85 % 3,328 (109) 31/12/2023 Regional Card Processing Center s.r.o., Bratislava3 539 EUR 100 % 23,207 2,193 31/12/2023 R-Insurance Services sp. z o.o. 5 PLN 100 % 3,319 640 31/12/2023 RL Leasing GmbH, München (DE) 26 EUR 25 % 28 (6) 31/12/2022 RZB-BLS Holding GmbH, Wien2 500 EUR 100 % 430,042 (109) 31/12/2023 Salvelinus Handels- und Beteiligungsges.m.b.H., Wien2 40 EUR 100 % 391,709 2,193 31/12/2023 Scantius Holding GmbH4 35 EUR 100 % N/A N/A N/A TEG 1 Imm GmbH & Co KG4 10 EUR 100 % N/A N/A N/A Ukrainian Processing Center PJSC, Kiew3 180 UAH 100 % 34,192 9,625 31/12/2023 ZHS Office- & Facilitymanagement GmbH, Wien2 36 EUR 1 % 909 49 31/12/2023 1 The result (in part from the consolidated financial statements) in € thousand corresponds to the annual profit/loss 2 Equity and result reported in accordance with IFRS (fully consolidated domestic entities) 3 Equity and result reported in accordance with IFRS (fully consolidated foreign entities) 4 Foundation 2023 Notes241 · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 Fixed assets The land value of developed land amounts to € 33 thousand (31/21/2022: € 2,667 thousand). The reduction relates to a contribution into a project company. RBI AG was not directly involved in the leasing business as a lessor in 2023. Obligations from the use of tangible fixed assets not reported on the statement of financial position amount to € 42,528 thousand (31/12/2022: € 39,998 thousand) for the following financial year, of which € 39,101 thousand were owed to affiliated companies (31/12/2022: € 36,591 thousand). The total amount of obligations for the following five years amounts to € 248,899 thousand (31/12/2022: € 237,098 thousand), of which € 228,845 thousand are owed to affiliated companies (31/12/2022: € 216,900 thousand). The intangible fixed assets item includes no intangible fixed assets acquired from affiliated companies. The following tables show the changes in fixed assets: in € thousand Cost of acquisition or conversion Item Description of fixed assets As at 1/1/2023 Additions due to merger Exchange differences Additions Disposals Transfers As at 31/12/2023 1 2 3 4 5 6 7 1. Treasury bills and other bills eligible for refinancing with central banks 6,495,961 0 (918) 1,791,342 (449,791) 0 7,836,594 2. Loans to banks 157,863 0 (2,540) 55,000 (53,120) 0 157,203 3. Loans to customers 641,962 0 (2,594) 193,327 (205,940) 0 626,755 4. Debt securities and other fixed-income securities 1,917,673 0 (6,420) 301,020 (291,995) 0 1,920,278 a) Issued by public bodies 0 0 0 0 0 0 0 b) own debt securities 0 0 0 0 0 0 0 c) Issued by other borrowers 1,917,673 0 (6,420) 301,020 (291,995) 0 1,920,278 5. Shares and other variable-yield securities 518,400 0 0 40,000 0 0 558,400 6. Equity interests 97,362 0 0 5,168 (722) (7,739) 94,069 7. Investments in affiliated companies 12,552,877 0 0 42,108 (31,327) (14) 12,563,644 8. Intangible fixed assets 212,403 0 373 3,431 (26,253) 0 189,954 9. Tangible fixed assets 67,125 0 188 2,786 (23,435) 0 46,664 10. Other assets 231 0 0 0 0 0 231 Total 0 (18,331) 2,735,202 (1,374,578) (7,753) 25,914,070 in € thousand Writing up/depreciation/revaluation Carrying amount Item Cumulative depreciation as of 1/1/2023 Additions due to merger Exchange differences Cumulative depreciation and amortization disposal Write-ups Depreciation Transfers Cumulative depreciation as of 31/12/2023 31/12/2023 31/12/2022 8 9 10 11 12 13 14 15 16 17 1. (33,966) 0 (26) 2,789 18,064 (18,923) 0 (32,062) 7,804,532 6,461,995 2. (11) 0 1 42 570 (481) 0 121 157,324 157,853 3. (809) 0 (11) 176 1,388 (370) 0 374 627,129 641,154 4. (4,501) 0 (57) 590 5,451 (4,658) 0 (3,175) 1,917,103 1,913,172 a) 0 0 0 (1) 0 0 0 0 0 0 b) 0 0 0 0 0 0 0 0 0 0 c) (4,501) 0 (57) 590 5,451 (4,658) 0 (3,175) 1,917,103 1,913,172 5. 0 0 0 0 0 0 0 0 558,400 518,400 6. (38,421) 0 0 0 5,923 (1,675) 7,751 (26,422) 67,646 58,941 7. (2,877,924) 0 0 19,388 640,789 (83,374) 2 (2,301,119) 10,262,525 9,674,953 8. (184,856) 0 (48) 22,630 0 (8,171) 0 (170,445) 19,509 27,548 9. (39,731) 0 (97) 14,200 0 (4,144) 0 (29,772) 16,892 27,394 10. 0 0 0 0 0 0 0 0 231 231 (3,184,720) 0 (295) 60,404 677,636 (126,454) 7,753 (2,565,676) 23,348,394 21,394,812 242Notes · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 Other assets As at 31 December 2023, other assets totaled € 6,989,545 thousand (31/12/2022: € 6,551,745 thousand). This item also contains loans and advances from treasury transactions (positive market values arising from derivatives in the trading book, including derivatives for capital guarantees, as well as accrued interest from derivatives in the banking book – for details, refer to the table on open forward transactions) in the amount of € 4,090,369 thousand (31/12/2022: € 5,105,179 thousand). This item also includes loans and advances (special fund) to the Austrian Raiffeisen Deposit Guarantee scheme (ÖRES) relating to the Raiffeisen-IPS contribution of € 484,255 thousand (31/12/2022: € 392,005 thousand), loans and advances to the tax administration in the amount of € 48,510 thousand (31/12/2022: € 54,935 thousand), holdings of precious metals in coin and other forms in the amount of € 238,726 thousand (31/12/2022: € 113,743 thousand), loans and advances to Group members arising from tax transfers in the amount of € 51,846 thousand (31/12/2022: € 51,225 thousand) and dividends receivable totaling € 1,700,550 thousand (31/12/2022: € 500,540 thousand). The other assets also contain income of € 2,154,521 thousand (31/12/2022: € 746,521 thousand) which is not payable until after the reporting date. Deferred tax assets The deferred tax assets of € 411 thousand (31/12/2022: € 1,077 thousand) shown in the statement of financial position result primarily from tax loss carryforwards against American tax authorities of the subsidiary RB International Finance (USA), LLC, New York, which was liquidated in 2017. They are based on the planned future taxable profit of the subsidiary RB International Markets (USA) LLC, New York (tax rate: 25.4 per cent). Existing liability-side temporary differences were fully offset against asset-side temporary differences in the amount of € 23,354 thousand (31/12/2022: none). No deferred tax assets were recognized for asset-side temporary differences of € 155,083 thousand (31/12/2022: € 207,025 thousand) and € 1,841,125 thousand (31/12/2022: € 2,107,800 thousand) from domestic tax loss carry forwards as it does not appear that they can be realized within a reasonable time from today's perspective. For the calculation of deferred tax assets and liabilities, the applicable tax rate is that which is likely to be applied upon realization (reversal) of the underlying temporary difference. With the eco-social tax reform 2022, a gradual reduction of the corporate income tax rate from 25 per cent to 23 per cent (2023: 24 per cent, from 2024: 23 per cent) was adopted in Austria. For deferred tax assets, a tax rate of 11.5 per cent is to be applied. For deferred tax liabilities, the corresponding tax rates are 24 per cent and 23 per cent, or 12 per cent and 11.5 per cent where such liabilities can be offset against loss carryforwards or deferred tax assets. The rationale behind recognizing deferred tax assets at half the statutory corporate tax rate is grounded in the certainty of future relief at this rate, as stipulated by the relevant group allocation agreement. Any additional relief cannot be reliably estimated for the respective group member, given the member’s lack of influence on the determination of the taxable profit share at group level. Deferred tax liabilities are recognized at 23 per cent (in the absence the possibility of offsetting them with deferred tax assets) due to the agreed allocation rate for positive results. This rate is only lower when there is a taxable profit share. Subordinated assets Subordinated assets contained under assets: in € thousand 31/12/2023 31/12/2022 Loans to banks 547,425.1 857,921.5 hereof to affiliated companies 545,687.2 856,230.6 hereof to companies linked by virtue of a participating interest 1,737.8 1,690.9 Loans to customers 36,844.0 112,583.6 hereof to affiliated companies 0.0 6,480.8 hereof to companies linked by virtue of a participating interest 2,215.0 2,212.1 Debt securities and other fixed-income securities 56,615.1 62,497.3 hereof to affiliated companies 0.0 0.0 hereof to companies linked by virtue of a participating interest 0.0 3,047.2 Shares and other variable-yield securities 636,420.3 597,828.3 hereof to affiliated companies 594,673.9 543,470.1 hereof to companies linked by virtue of a participating interest 1,364.2 3,262.5 The table above incorporates proprietary holdings of Tier 2 and AT1 instruments, delineated in finer granularity within the respective liability line item. Notes243 · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 Restrictions related to asset availability As at the reporting date, there were restrictions related to asset availability (in accordance with Section 64 (1) 8 BWG): in € thousand 31/12/2023 31/12/2022 Indemnification for securities lending transactions 229,491.9 142,868.5 Loans assigned to Oestereichische Kontrollbank (OeKB) 3,089,881.1 2,736,859.9 Indemnification for OeNB tender 0.0 3,582,633.5 Loans assigned to European Investment Bank (EIB) 21,004.7 37,533.6 Loans assigned to Kreditanstalt für Wiederaufbau (KfW) 156,420.6 170,249.6 Institutional Protection Scheme 484,255.1 342,298.1 Margin requirements 54,620.7 54,671.8 Treasury call deposits for contractual netting agreements 1,652,917.7 2,120,256.9 Total 5,688,591.8 9,187,371.9 In addition, assets with usage restrictions in an amount of € 2,160,860 thousand (31/12/2022: € 2,469,367 thousand) exist for covered bonds which have been established but not yet issued. RBI AG recognizes derivatives with a carrying amounts of € 4,090,369 thousand (31/12/2022: € 5,105,179 thousand) under other assets, of which € 3,718,901 thousand (31/12/2022: € 4,633,419 thousand) are collateralized by cash collateral. The item other liabilities also includes derivatives with a carrying amount of € 3,722,604 thousand (31/12/2022: € 4,916,710 thousand), of which € 3,333,134 thousand (31.12.2022: € 4,345,431 thousand) are collateralized by cash collateral. These carrying amounts of derivatives classified under other assets include carrying amounts attributable to members of the Austrian resolution group in the amount of € 879 thousand (31/12/2022: € 1,557 thousand) and carrying amounts attributable to other liabilities in the amount of € 24,993 thousand (31/12/2022: € 8,224 thousand), which are also collateralized by cash collateral. None of the balance sheet items are netted out, as each contracting party is granted the right to offset recognized amounts, which is enforceable only if an event such as insolvency or bankruptcy occurs. Moreover, there exists is no intention to settle on a net basis.. Asset items for affiliated companies and companies linked by virtue of a participating interest Loans and advances as well as debt securities and other fixed-income securities to and from affiliated companies and companies linked by virtue of a participating interest: in € thousand 31/12/2023 31/12/2022 Loans to banks To affiliated companies 2,601,073.4 3,522,104.8 To companies linked by virtue of a participating interest 399,564.3 374,155.7 Loans to customers To affiliated companies 1,370,064.6 1,399,316.8 To companies linked by virtue of a participating interest 71,038.3 87,615.2 Debt securities and other fixed-income securities To affiliated companies 74,124.1 71,157.9 To companies linked by virtue of a participating interest 58,586.6 157,889.7 244Notes · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 Equity and liabilities Liabilities Breakdown of maturities Liabilities to credit institutions, liabilities to customers, securitized liabilities and other liabilities break down by their residual terms as follows: in € thousand 31/12/2023 31/12/2022 Deposits from banks 26,684,645.8 35,300,134.0 Repayable on demand 4,525,879.7 5,532,066.9 Up to 3 months 15,007,974.9 17,210,346.0 More than 3 months, up to 1 year 1,106,792.6 5,619,876.2 More than 1 year, up to 5 years 3,851,217.8 4,227,131.9 More than 5 years 2,192,781.0 2,710,713.0 Deposits from customers 19,901,522.2 23,097,485.1 Repayable on demand 6,759,789.7 7,188,567.9 Up to 3 months 9,496,320.5 9,960,315.9 More than 3 months, up to 1 year 2,426,369.5 4,274,787.6 More than 1 year, up to 5 years 449,384.2 795,655.4 More than 5 years 769,658.4 878,158.2 Debt securities issued 17,079,035.6 15,470,238.6 Up to 3 months 346,615.9 480,233.0 More than 3 months, up to 1 year 701,189.3 1,350,599.4 More than 1 year, up to 5 years 15,269,369.8 11,582,481.1 More than 5 years 761,860.6 2,056,925.0 Other liabilities 4,572,765.4 5,380,247.1 Up to 3 months 4,572,765.4 5,380,247.1 Bonds and notes issued amounting to € 1,057,003 thousand (31/12/2022: € 1,780,679 thousand) will become due in next financial year. Liabilities to affiliated companies and companies linked by virtue of a participating interest: in € thousand 31/12/2023 31/12/2022 Deposits from banks From affiliated companies 4,958,637.2 5,956,385.9 From companies linked by virtue of a participating interest 5,242,490.3 5,182,369.3 Deposits from customers From affiliated companies 4,519,741.4 4,153,936.4 From companies linked by virtue of a participating interest 66,141.3 67,874.5 TLTRO III program (Targeted Longer-Term Refinancing Operations) As of the reporting date, RBI AG had no long-term financing from the TLTRO-III Program (31/12/2022: nominal amount of € 4,925,000 thousand). In 2023, all open tranches were repaid early, which included € 3,500,000 thousand in January 2023 (maturing in June 2023), € 800,000 thousand in June 2023 (maturing in December 2023), and in December 2023 € 200,000 thousand (maturing in March 2024) and € 425,000 thousand (maturing in June 2024). In the year under review, negative interest from the TLTRO III programs in the amount of € 919 thousand (31/12/2022: € 28,831 thousand) was recognized in net interest income, while interest expenses in the amount of € 27,496 thousand were recognized (31/12/2022: € 0 thousand. Notes245 · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 Other liabilities As at 31 December 2023, other liabilities amounted to € 4,572,765 thousand (31/12/2022: € 5,380,247 thousand). This item also contains liabilities from treasury transactions (primarily negative market values arising from derivatives in the trading book, as well as accrued interest from derivatives in the banking book – for details, refer to the table on open forward transactions) in the amount of € 3,715,786 thousand (31/12/2022: € 4,901,000 thousand) and liabilities from shot positions in bonds of € 555,015 thousand (31/12/2022: € 80,929 thousand) from short positions in bonds. The fair market value of the hedges for capital guarantees for funds is € 6,799 thousand (31/12/2022: € 15,710 thousand). The item also includes accrued interest for Tier 2 capital of € 20,418 thousand (31/12/2022: € 70,933 thousand), liabilities from tax transfers (corporate income tax) and liabilities from creditable capital yields and withholding tax toward Group members totaling € 21,194 thousand (31/12/2022: € 27,067 thousand). The other liabilities also contain expenses in the amount of € 388,166 thousand (31/12/2022: € 233,751 thousand), for which payment is to be made after the reporting date. Provisions Provisions amount to € 51,174 thousand (31/12/2022: € 51,039 thousand) for severance payments, € 61,475 thousand (31/12/2022: € 61,150 thousand) for pensions, € 18,253 thousand (31/12/2022: € 10,356 thousand) for tax provisions, and € 816,794 thousand (31/12/2022: € 644,358 thousand) for other provisions (for additional information about other provisions, please refer to the breakdown in the table below). Reinsurance policies for pension provisions are in place in the amount of € 9,768 thousand (31/12/2022: € 9,955 thousand). In the financial year under review these were offset with claims of the same amount. The tax provisions of € 18,253 thousand mainly relate to provisions for corporate income tax from 2020 in the amount of € 7,500 thousand, with an additional € 1,744 thousand related to 2022 and € 8,150 thousand to 2023. The increase in other provisions to € 192,881 thousand resulted primarily from higher provisions for litigation risks related to legal disputes for foreign currency loans in Poland. Provisions for guaranteed loans and for operational risks/claims/other experienced a year-on-year decline. As of 31 December 2023, a provision for impending losses is recognized in the amount of € 82,482 thousand (31/12/2022: € 82,183 thousand) for derivatives valued as functional units, valuation units as well as credit derivatives and unsettled UAH transactions. Litigation risk for foreign currency loans in Poland In Poland, a significant number of civil lawsuits are pending in relation to certain contractual stipulations connected with consumer mortgage loans denominated in or indexed to foreign currencies. As at 31 December 2023, the total amount in dispute was approximately PLN 5,411 million (€ 1,156 million). The number of lawsuits continues to increase. In this context, a Polish court requested the Court of Justice of the European Union (CJEU) to clarify whether certain clauses in these agreements breach European law and are unfair. The CJEU’s preliminary ruling (C-260/18) in October 2019 does not answer whether the loan agreements are invalid in whole or part but merely gives interpretative guidance on the principles according to which the national courts must decide in each individual case. According to this, a loan agreement without unfair terms should remain valid provided that it is in conformity with national law. If a loan agreement cannot remain valid without the unfair term, the entire contract would have to be annulled. If the annulment of the entire contract triggers material negative consequences for the borrower, the Polish courts can replace the unfair term by a valid term in accordance with national law. The consequences of the contract being annulled must be carefully examined so that the borrower can consider all potential negative consequences of annulment. However, the consequences of canceling an annulled loan agreement remain unclear and may be serious for the borrower, for example due to the obligation to repay the loan immediately including the costs of using the loan amount. It remains to be seen how the principles developed by the CJEU will be applied under national law on a case-by-case basis. In another proceeding involving RBI, the District Court for Warszawa-Wola in Warsaw requested the CJEU to issue a preliminary ruling concerning the way in which the contractual provisions concerning the rules for determining the buying and selling rates for foreign currency are to be formulated in the case of consumer mortgage loans indexed to a foreign currency. In the judgement of 18 November 2021 in case C-212/20, the CJEU considered that the content of a clause of a loan agreement that sets the buying and selling prices of a foreign currency to which the loan is indexed must enable a reasonably well informed and reasonably observant consumer, based on clear and intelligible criteria, to understand the way in which the foreign currency exchange rate used to calculate the amount of the repayment installments is set. Based on information specified in such a provision, the consumer must be able to determine on his or her own, at any time, the exchange rate applied by the entrepreneur. In the justification the CJEU specified that a provision that does not enable the consumer to determine the exchange rate himself or herself is unfair. Moreover, the CJEU indicated in said judgement that the national court, when the considered term of a consumer contract is unfair, is not allowed to interpret that term in order to remedy its unfairness, even if that interpretation would correspond to the common intention of the parties to that contract. Only if the invalidity of the unfair term were to require the national court to annul the contract in its entirety, thereby exposing the consumer to 246Notes · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 particularly unfavorable consequences, so that the consumer would thus be penalized, the national court might replace that term with a supplementary provision of national law. The CJEU therefore did not entirely preclude national courts hearing such cases from supplementing the contract with supplementary provisions of national law, but gaps may not be filled solely with national provisions of a general nature and such remedy may be applied only in strictly limited cases as specified by the CJEU. The assessment of an unfair nature of contractual provisions as well as the decision concerning supplementation of the contract after removal of unfair contractual clauses, however, still falls within the competence of the national court hearing the case. The CJEU did not determine at all whether, in the consequence of the above-mentioned actions, the entire foreign currency contract is to be annulled. The current judicial practice of Polish courts is already consistent with the CJEU’s preliminary ruling and, thus, unfavorable for banks holding consumer mortgage loans indexed to a foreign currency. The respective clauses, depending on the assessment made by the national court hearing the case, may not meet the requirements as specified in the above CJEU judgement. On 15 June 2023, the CJEU announced its judgment in case C-520/21 on the consequences of the annulment of a mortgage loan agreement vitiated by unfair terms. The consumer mortgage loan agreement indexed to CHF had been annulled on the ground that the conversion clauses determining the rate of exchange into PLN for purposes of the monthly installments were considered to be unfair and that the loan agreement could not continue in existence after removal of the unfair terms. The CJEU observed that EU law does not expressly govern the consequences of the annulment of a consumer contract which are to be determined by domestic legislation in the individual EU member states. Such domestic legislation has to be compatible with EU law and its objectives, in particular to restore the situation which the consumer would have been in had the annulled contract not existed as well as not to undermine the deterrent effect sought by EU law. According to the CJEU, EU law does not preclude consumers from seeking compensation from the bank going beyond the reimbursement of the monthly installments paid and the expenses paid in respect of the performance the mortgage loan agreement together with the payment of default interest at the statutory rate from the date on which notice is served. Nevertheless, it is a matter for the national courts to determine whether upholding such claims on the part of the consumers is in accordance with the principle of proportionality. By contrast, EU law precludes the bank from being able to claim from the consumer compensation going beyond reimbursement of the capital paid in respect of the performance of the mortgage loan agreement together with the payment of default interest at the statutory rate from the date on which notice is served. A significant inflow of new cases has been observed since the beginning of 2020 as a result of the CJEU preliminary ruling and of intensified marketing activity by law firms acting on behalf of borrowers. Such an increased inflow of new cases has not only been observed by RBI’s Polish branch, but by all banks handling currency loan portfolios in Poland. Furthermore, Polish courts have approached the CJEU with requests for a preliminary ruling in other civil proceedings. That ruling could lead to further clarifications and may influence how court cases concerning foreign currency loans are decided by national Polish courts. The impact assessment in relation to affected FX-indexed or FX-denominated loan agreements may also be influenced by the outcome of ongoing administrative proceedings conducted by the President of the Office of Competition and Consumer Protection (UOKiK) against RBI’s Polish branch. Such administrative proceedings are, inter alia, based on the alleged practice of infringing collective consumer interests as well as on the classification of clauses in standard agreements as unfair. As at this point of time, it is uncertain what the potential impact of said proceedings could be on FX-indexed or FX-denominated loan agreements and RBI. Furthermore, such proceedings have resulted in and could result in the imposition of administrative fines on RBI’s Polish branch – and in the event of appeals – in administrative court proceedings. Moreover, the Polish Financial Ombudsman, acting on behalf of two borrowers, has initiated a civil proceeding against RBI alleging employment of unfair commercial practices towards consumers in respect of a case in which RBI – following the annulment of a loan agreement – claimed the full loan amount originally disbursed without taking into account repayments made in the meantime as well as amounts due for the use of capital by the borrowers based on the principle of unjust enrichment, and has demanded that RBI discontinue such practices. In May 2023, the claim of the Financial Ombudsman was dismissed by the court of first instance. Model description and sensitivity analysis RBI has around 26,000 CHF loans to customers outstanding with a total volume of around € 1,9 billion and a further 10,000 loans have been repaid. These also include loans that are not expected to be the subject of litigation. RBI has recognized a provision for the lawsuits filed in Poland. As lawsuits have been filed by a number of customers, the provision is based on a statistical approach that takes into account both statistical data, where relevant, and expert opinions. Possible decision scenarios have been estimated together with the expected loss rates per scenario. The expected impact is based on loans from customers who have filed or, based on propensity to litigate, expected to file a lawsuit against the bank. To calculate the financial impact per scenario, the claim amount is multiplied by the estimated financial outflow in the scenario and the probability that the bank will ultimately have to pay compensation to the customer. An appropriate discount rate is applied to outflows that are not expected to arise within one year. The resulting provisions were increased to € 1,652 million (31/12/2022: € 803 million). As at the reporting date of 31/12/2023, RBI AG reported provisions for litigation risks for repaid loans in connection with this matter in the amount of € 500 million (31/12/2022: € 307 million), which are included in the following table on other provisions under “Process risks”. In addition, reductions in the carrying amount for active loans in the amount of € 1,152 million are taken into account as at the reporting date of 31/12/2023 (31/12/2022: € 496 million). Notes247 · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 The total amount of the provision for CHF loans in Poland represents RBI’s best estimate of the future outflow of economic benefits. In calculating the CHF provision for lawsuits filed in Poland, it is nevertheless necessary to form an opinion on matters that are inherently uncertain, such as official pronouncements, the number of future lawsuits, the probability of losing court cases and the development of jurisprudence that lead to negative scenarios. A number of risks and uncertainties remain, and the cost could therefore differ from RBI’s estimates and the assumptions underpinning them and result in a further provision being required. The main measurable uncertainties associated with the calculation of the provision relate to a potential reduction in the discount period, a decrease in discount rates, an increase in the number of total expected claims for outstanding and repaid loans and an increase in the provision coverage of outstanding or repaid loans. The sensitivity analysis refined during the reporting year for changes in the actual parameters over the next 12 months, while holding all other parameters constant, is shown in the table below: 31/12/2023 Actual parameter Increase/Decrease of the parameter New parameter Increase/Decrease in provision (in € million) Provision amount in € million 1,652 Reduction in discounting period in years 7 (1) 6 55 Decrease in discount rate (reduction of carrying amounts of loans) 1.88 % (0.30)PP 1.58 % 22 Increase in propensity to litigate active loans 85.00 % 0.01PP 86.00 % 16 Increase in average loss coverage on outstanding loans 108.00 % 0.01PP 109.00 % 11 Decrease in discount rate (other provisions) 6.90 % (1.00)PP 5.90 % 14 Increase in propensity to litigate repaid loans 42.00 % 1.00PP 43.00 % 2 The assumptions are based on internal, observable statistics as well as on market observations. The increase in provision is linear for each change, with the exception of the discount rate changes which are logarithmic increases. Furthermore, the model does not take into account changes related to unexpected developments in jurisprudence. Furthermore, RBI has around 10 thousand Euro denominated loans to customers outstanding with a total volume of around € 500 million and a further 8,000 loans have been repaid. A small number of customers with Euro denominated loans have filed litigation against RBI. Settlement program After launching a pilot projekt for an out-of- court settlement program based on the proposal by the Chairman of the Polish Financial Supervisory Authority (KNF) in the second half of 2023, RBI fully launched the settlement program in December 2023. The major goal of the settlement program is to limit the expected losses resulting from the current negative jurisprudence that in most case cancels the mortgage contract. The base offer consists of recalculation of the amount originally disbursed in CHF as if the loan was issued in PLN from the outset applying a WIBOR reference rate increased by the margin historically applied to such loans. This leads to a write-off of a portion of the loan balance depending on the individually negotiated settlement offer. The settlements are offered through a mediation proceeding conducted by the Polish Financial Supervisory Authority. In 2024 RBI will increase its efforts to encourage customers to join the settlement program through active approaching of customers. As of 31 of December 2023, RBI made 946 individual settlement proposals, out of which 244 customers have signed agreements to enter a mediation process. The bank included in the provisioning calculation the estimated number of settlements to be signed with customers reflecting the adjusted level of future losses in these settlement cases. The consideration of settlements in the provision calculation is affected by factors such as the interest rate of PLN loans, the CHF/ PLN conversion rate, the development of the ruling practice and the duration of proceedings. 248Notes · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 Other provisions in € thousand 31/12/2023 31/12/2022 Losses on bankbook derivatives 82,482.0 82,182.7 Guarantee loans 36,631.0 54,426.1 Process risks 501,545.5 308,664.6 Bonus payments 51,505.9 45,358.0 Anniversary payments and birthday payments 33,595.6 31,267.5 Overdue vacation 29,510.5 29,369.7 Restructuring costs 874.0 1,134.0 Supervisory Board fees 1,170.7 1,127.0 Operational risk/losses/other 33,833.9 46,851.0 Audit costs 1,374.4 1,162.3 Other expenses/outstanding invoices 44,270.8 42,814.6 Total 816,794.3 644,357.5 Tier 2 capital according to part two, title I, chapter 4 of regulation (EU) no. 575/2013 As at 31 December 2023, tier 2 capital amounts to € 2,107,910 thousand (31/12/2022: € 2,696,099 thousand). Company tier 2 capital according to CRR: in € thousand 31/12/2023 31/12/2022 6% RBI Schuldverschreibung 2013-2023 0.0 9,141.4 RBI SUB.CALL.NTS 20-32 1,547.7 1,970.1 RBI NFS 19-30/S193T1 5,091.8 5,148.7 RBI NACHR. ANL. 21-33 3,792.9 3,270.8 RBI NTS 22-32 S258/T1 4,320.2 4,476.8 In the reporting year, issuances of Tier 2 capital took place in the amount of € 13,958 thousand (31/12/2022: € 5 thousand), and covered bonds in the amount of € 1,150,000 thousand were redeemed (31/12/2022: € 80 thousand). As a result, this line item had a positive impact on earnings in the amount of € 7,592 thousand for the financial year 2023 (31/12/2022: € 0 thousand). Subordinated liabilities List of subordinated loans (including tier 2 capital) that exceed 10 per cent of the total subordinated liabilities of € 2,107,910 thousand (i.e. that exceed € 210,791 thousand): Name ISIN Nominal value in € thousand Emission Due Currency Interest rate Call date Subordination Subordinated Notes 2030 Serie 193 XS2049823763 500.0 12/09/2019 12/03/2030 EUR 1.500% 12/03/2025 Tier 2 Subordinated Notes 2032 Serie 215 XS2189786226 500.0 18/06/2020 18/06/2032 EUR 2.875% 18/06/2027 Tier 2 Subordinated Notes 2033 Serie 231 XS2353473692 500.0 17/06/2021 17/06/2033 EUR 1.375% 17/03/2028 Tier 2 Subordinated Notes 2032 Serie 258 XS2534786590 500.0 20/09/2022 20/12/2032 EUR 7.375% 20/09/2027 Tier 2 Subordinated liabilities also include eight subordinated schuldschein loans with maturities of between 1 and 10 years, which are denominated in EUR. Claims by creditors for repayment of these liabilities are subordinated to other creditors and, in the event of bankruptcy or liquidation, may only be repaid after all non-subordinated creditors have been repaid. No contractual regulations exist in relation to the aforementioned liabilities concerning any conversion or early termination. Expenses for subordinated liabilities The expenses for subordinated liabilities in the financial year amount to € 102,866 thousand (2022: € 105,593 thousand). Notes249 · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 Additional tier 1 capital As in the previous year, no additional tier 1 capital was issued in 2023. With the AT1 capital placed to date in the volume of € 1,650,000 thousand (€ 650,000 thousand in 2017, € 500,000 thousand in 2018 and € 500,000 thousand in 2020), RBI AG has currently completed its planned AT1 issuance program. Additional tier 1 capital, including accrued interest, as of 31 December 2023 amounts to € 1,655,025 thousand (31/12/ 2022: € 1,655,025 thousand). The discount in the amount of € 5,826 thousand is carried as a deferred expense until the respective first call date (17 June 2024, 15 June 2025, and 15 December 2026). RBI AG holds the following amounts of its own AT1 instruments: in € thousand 31/12/2023 31/12/2022 RBI FIX TO FLR 17/UD 13,689.8 16,445.6 RBI FIX TO FLR 18/UD 3,255.9 977.8 RBI FIX TO RES RTE TIER 1 8,583.4 6,295.3 Assets and liabilities in foreign currency in € thousand 31/12/2023 31/12/2022 Assets in foreign currency 13,629,131.0 17,634,244.3 Liabilities in foreign currency 13,754,091.6 14,814,848.5 Equity Subscribed capital As at 31 December 2023, the company’s share capital amounted to € 1,003,265,844.05 and was divided into 328,939,621 voting common bearer shares. As at 31 December 2023, 573,938 (31 December 2022: 510,450) of those were own shares, and consequently 328,365,683 shares were outstanding at the reporting date. Own shares The Annual General Meeting held on 31 March 2022 authorized the Management Board pursuant to § 65 (1) 8, § 65 (1a) and § 65 (1b) of the AktG to purchase own shares and to retire them if appropriate without requiring any further prior resolutions to be passed by the Annual General Meeting, though with the approval of the purchase by the Supervisory Board can also be effected off-exchange under the exclusion of the shareholders’ pro rata tender right. Own shares, whether already purchased or to be purchased, may not collectively exceed 10 per cent of the company’s share capital. The authorization to purchase own shares expires 30 months after the date of the Annual General Meeting resolution, i.e. until 30 September 2024. The acquisition price for repurchasing the shares may be no lower than € 3.05 per share and no higher than 10 per cent above the average unweighted closing price over the 10 trading days prior to exercising this authorization. The authorization may be exercised in full or in part or also in several partial amounts, for one or more purposes – with the exception of securities trading – by the company, by a subsidiary (§ 189a (7) of the UGB) or by third parties for the account of the company or a subsidiary. The Management Board was further authorized, pursuant to § 65 (1b) of the AktG, to decide, with the approval of the Supervisory Board, on the sale of own shares by means other than the stock exchange or a public tender, to the full or partial exclusion of shareholders’ subscription rights, and to stipulate the terms of sale. Shareholders’ subscription rights may only be excluded if the own shares are used to pay for a contribution in kind, to acquire enterprises, businesses, operations or stakes in one or several companies in Austria or abroad. Furthermore, shareholders’ subscription rights may be excluded in the event that convertible bonds are issued in future, in order that (own) shares may be issued to such convertible bond creditors that have exercised their right of conversion into or subscription to shares in the company, and also in the event of a conversion obligation stipulated in the convertible bonds’ issuance conditions in order to fulfil this conversion obligation. This authorization may be exercised in whole, in part or in several partial amounts for one or more purposes by the company, a subsidiary (§ 189a 7 UGB) or by third parties for the account of the company or a subsidiary and remains in force for five years from the date of this resolution, i.e. until 31 March 2027. Since that time, there were no own shares purchased based on this authorization from March 2022. The Annual General Meeting of 31 March 2022 also authorized the Management Board, under the provisions of § 65 (1) 7 of the AktG, to purchase own shares for the purpose of securities trading, which may also be conducted off-market, during a period of 30 months from the date of the resolution (i.e. until 30 September 2024), provided that the trading portfolio of shares purchased for this purpose does not at the end of any given day exceed 5 per cent of the company's respective share capital. The consideration for each share to be acquired must not be less than half the closing price at the Vienna Stock Exchange on 250Notes · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 the last day of trading preceding the acquisition and must not exceed twice the closing price at the Vienna Stock Exchange on the last day of trading preceding the acquisition. This authorization may be exercised in full or in part or also in several partial amounts by the company, by a subsidiary (§ 189a (7) UGB) or by third parties acting for the account of the company or a subsidiary. Authorized capital Pursuant to § 169 of the Austrian Stock Corporation Act (AktG), the Management Board has been authorized since the Annual General Meeting of 13 June 2019 to increase the share capital with the approval of the Supervisory Board – in one or more tranches – by up to € 501,632,920.50 through the issuance of up to 164,469,810 new voting common bearer shares in exchange for contributions in cash and/or in kind (including by way of the right of indirect subscription by a bank pursuant to § 153 (6) of the AktG) by 2 August 2024 at the latest and to fix the offering price and terms of the issue with the approval of the Supervisory Board. The Management Board is further authorized to exclude shareholders’ subscription rights with the approval of the Supervisory Board (i) if the capital increase is carried out in exchange for contributions in kind, or (ii) if the capital increase is carried out in exchange for contributions in cash and the shares issued under the exclusion of subscription rights do not exceed 10 per cent of the company’s share capital (exclusion of subscription rights). The (i) utilization of authorized capital with exclusion of the statutory subscription right in the event of a capital increase in return for a contribution in cash, and the (ii) implementation of the conditional capital resolved upon in the Annual General Meeting on 20 October 2020 in order to grant conversion or subscription rights to convertible bond creditors may not exceed 10 per cent in total of the share capital of the company. The utilization of the authorized capital in the form of a capital increase in return for a contribution in kind is not covered by this restriction. No use has been made to date of the authority granted in June 2019 to utilize the authorized capital. Capital reserves The committed capital reserves amounted to € 4,334,726 thousand (31/12/2022: € 4,334,286 thousand), while the uncommitted capital reserves totaled € 93,179 thousand (31/12/2022: € 94,779 thousand). The change resulted from the recognition of treasury shares in accordance with section 229 (1a) and (1b) UGB. Retained earnings Retained earnings consist of legal reserves of € 5,500 thousand (31/12/2022: € 5,500 thousand) and other free reserves amounting to € 2,370,678 thousand (31/12/2022: € 1,680,918 thousand). Of the other free reserves, an amount of € 502,050 thousand (31/12/2022: € 403,914 thousand) is allocated to the Raiffeisen-IPS. An amount of € 98,135 thousand (31/12/2022: € 51,253 thousand) was allocated to other reserves in the 2023 financial year as a reserve for the Raiffeisen institutional protection scheme (Raiffeisen-IPS) based on the agreement to establish an institutional protection scheme and a corresponding resolution by the Raiffeisen-IPS Joint Risk Council. The Raiffeisen-IPS reserve is not eligible for inclusion in the calculation of own funds pursuant to CRR. In addition, free reserves were increased in the amount of € 590,000 thousand in financial year 2023 (31/12/2022: release of € 1,050,000 thousand). Liability reserves As at 31 December 2023, liability reserves stood unchanged at € 535,097 thousand (31/12/2022: € 535,097 thousand). Notes251 · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 Additional notes Notes on liability arrangements In the government-promoted, subsidized forward private planning scheme, RBI AG has issued capital guarantee obligations in accordance with Section 108h (1) 3 of the Income Tax Act (EStG). In this context, the bank guarantees that in the event of transferring the capital into a perpetual annuity the payment amount available for this annuity is not less than the sum of the contributions made by the taxpayer plus the premiums credited to this taxpayer pursuant to Section 108g EStG. As at 31 December 2023, the volume of these guarantees stood at € 855,915 thousand (31/21/2022: € 801,585 thousand). Raiffeisen Customer Guarantee Scheme (RKÖ) RBI AG is a member of Raiffeisen-Kundengarantiegemeinschaft Austria (Raiffeisen Customer Guarantee Scheme Austria (RKÖ)). The members of this association have a contractual obligation to guarantee jointly the punctual fulfillment of the entirety of an insolvent association member’s commitments arising from customer deposits and its own issues up to the limit of the sum of the individual capacities of the remaining association members. The individual capacity of an association member is measured on the basis of its freely available reserves subject to the pertinent provisions of the Austrian Banking Act (BWG). In view of the change in the legal and regulatory framework and implementation of an institutional protection scheme, the RKÖ and its respective member institutions decided in 2019 to discontinue the scheme for new transactions. Accordingly, the supplementary protection by RKÖ may only be granted to protected transactions entered into before 1 October 2019. The rights of customers with regard to statutory deposit insurance are not affected and remain fully in place. Institutional protection scheme (Raiffeisen-IPS) Raiffeisen Bank International AG and its Austrian bank subsidiaries, the regional Raiffeisen banks and the local Raiffeisen banks, are part of the agreement on an institutional protection scheme (Raiffeisen-IPS) as well as the Austrian Raiffeisen- Sicherungseinrichtung eGen (ÖRS), as a statutory protection scheme. In the agreement on the Raiffeisen-IPS, the member institutions agree to ensure one another’s security and in particular, join forces to ensure liquidity and solvency when required. The new Raiffeisen-IPS was recognized by the relevant supervisory authorities (ECB and FMA) as an institutional protection scheme according to Article 113 (7) CRR (Capital Requirements Regulation of the European Union) and its related rights and obligations of the participating member institutions. This allows, among other things, for receivables to be risk-weighted at zero per cent between Raiffeisen-IPS members. The Raiffeisen-IPS is subject to joint regulatory supervision and capital requirements must also be met on a consolidated basis. The Raiffeisen-IPS was recognized together with ÖRS by the Austrian Financial Market Authority (FMA) as a statutory deposit guarantee and investor protection scheme according to the Austrian Deposit Guarantee and Investor Protection Act Einlagensicherungs- und Anlegerentschädigungsgesetz (ESAEG). ÖRS is mandated to operate the reporting and early risk assessment systems for the Raiffeisen-IPS. ÖRS also acts as trustee and manages the liquid assets for the Raiffeisen-IPS. The Raiffeisen-IPS is controlled by a joint risk council, comprising representatives of RBI AG, the regional Raiffeisen banks and the Raiffeisen banks. Tasks that could be solved on a regional level were delegated to the regional risk councils, each comprising representatives of the respective regional Raiffeisen banks and Raiffeisen banks, by the joint risk council. Letters of comfort and other financial obligations As at 31 December 2023, soft letters of comfort in the amount of € 127,632 thousand (31/12/2022: € 133,673 thousand) had been issued. Open capital commitments on share capital in the amount of € 21,772 thousand were recorded at 31 December 2023 (31/12/2022: € 23,492 thousand). Contingent liabilities recorded in statement of financial position of RBI AG of € 7,736,762 thousand were reported as at 31 December 2023 (31/12/2022: € 7,188,967 thousand). Of that amount, € 6,780,029 thousand (31/12/2022: € 6,278,399 thousand) was attributable to guarantees and € 956,733 thousand (31/12/2022: € 910,568 thousand) to letters of credit. Of the guarantees, an amount of € 638,949 thousand (31/12/2022: € 738,389 thousand) relates to guarantees to affiliated companies. As at 31 December 2023, € 19,711,703 thousand (31/12/2022: € 19,434,120 thousand) in credit risk was reported under liabilities in the statement of financial position. In the reporting year, € 10,763,135 thousand of that amount relates to irrevocable loan commitments not yet drawn down (31/12/2022: € 11,312,946 thousand) and € 8,948,568 thousand to revocable loan commitments (31/12/2022: € 8,121,174 thousand). 252Notes · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 Pending legal issues RBI AG is involved in various legal, administrative or arbitration proceedings before various courts and authorities, both as a plaintiff and a defendant. The proceedings generally arise in the ordinary course of business in contractual, employment and other matters. A provision is only recognized if there is a legal or constructive obligation as a result of a past event, payment is likely and the amount can be estimated as accurately as possible. A contingent liability that arises from a past event is disclosed unless payment is highly unlikely. A contingent asset that arises from a past event is reported if there is high probability of occurrence. In the following description, no amount is specified in those cases in which it would be severely detrimental to do so. Banking business RBI and its subsidiaries provide services for corporate customers that increase litigation risk at the operating level. The most important cases are as follows: Following the insolvency of Alpine Holding GmbH (Alpine) in 2013, a number of lawsuits were filed by retail investors in Austria against RBI and another credit institution in connection with a bond which had been issued by Alpine in 2012 in an aggregate principal amount of € 100 million. The claims asserted against RBI originally amounted to approximately € 10 million. In total, claims of approximately € 8 million had been filed in court by investors either directly or or indirectly through a 'class action' of the Austrian Federal Chamber for Workers and Employees (Bundeskammer für Arbeiter und Angestellte). Owing to the termination of some of the proceedings and claim reductions in other proceedings, the value in dispute of the pending court proceedings against RBI currently amounts to approximately € 7 million. Among other things, it is claimed that the banks acted as joint lead managers of the bond issue and were or at least should have been aware of financial problems of Alpine at the time of the issue. Thus, they should have known that Alpine was not in a position to redeem the bonds as set forth in the terms and conditions of the bonds. It is alleged that the capital market prospectus in relation to the bond issue was misleading and incomplete and that the joint lead managers including RBI, were aware of that fact. In December 2023, in several joint proceedings the court of first instance issued a partial judgment and dismissed the claims of the investors based on prospectus liability in the amount of in total approximately € 5.9 million regarding RBI related claims. The judgment is not final. In the first quarter of 2021, RBI learned about a claim already filed against it in Jakarta by an Indonesian company in November 2020. The amount of the alleged claim is approximately USD 129 million (€ 121 million) in material damages and USD 200 million (€ 188 million) in immaterial damages. The claim was served upon RBI in May 2022. On 27 June 2023, the South Jakarta District Court (Pengadilan Negeri Jakarta Selatan), held that RBI has committed an unlawful act against the Indonesian company and ordered RBI to pay damages in the amount of USD 119 million (€ 112 million). In view of the facts of the case and the legal situation, RBI is still of the opinion that the claims are neither valid nor enforceable against RBI and therefore filed an appeal against the judgment with the High Court of Jakarta (Pengadilan Tinggi Jakarta). In August 2019, RBI launched a claim for approximately € 44 million against a Cayman Islands incorporated parent company, several of its subsidiaries and one former subsidiary (the Cayman Islands Defendants) in the Grand Court of the Cayman Islands, Financial Services Division (the CI Proceedings). In the CI Proceedings, RBI alleges that the Cayman Islands Defendants participated in transactions to defraud creditors and a fraudulent conspiracy to injure RBI, by dissipating assets so as to frustrate RBI’s claims under a number of parent company guarantees. Furthermore, RBI alleges that said transfers were carried out at undervalue or without consideration between or among the Cayman Islands Defendants. RBI obtained an order against one of the Cayman Islands Defendants in September 2019, placing restrictions on its ability to deal with its assets, pending determination of the CI Proceedings. RBI obtained a similar order against a further Cayman Islands Defendant in May 2020 (together the Freezing Orders). In November 2019, some of the Cayman Islands Defendants filed a counterclaim in the amount of € 203 million against RBI in the course of the CI Proceedings. RBI considers that the counterclaim, which is based on documents that the Cayman Islands Defendants have refused to disclose to date, is entirely without merit. In July 2021, RBI applied for permission to amend its claim in the CI Proceedings, to add an additional defendant and claim further damages and associated relief, bringing the total sums claimed by RBI in the CI Proceedings to approximately € 87 million plus interest and costs. That application has yet to be determined. In December 2021, the Cayman Islands Court of Appeal gave judgment on an appeal brought by two of the Cayman Islands Defendants, against the Freezing Orders. The Court of Appeal has refused to dismiss the Freezing Orders, which will remain in place. The CI Proceedings are ongoing. In January 2021, RBI issued an arbitration claim for an amount of approximately € 87 million plus interest and costs against one of the Cayman Islands Defendants, at the time incorporated in the Marshall Islands, before the Vienna International Arbitral Centre (VIAC) (the VIAC Arbitration). The VIAC Arbitration concerned RBI’s claims under guarantees provided by said company to RBI. In October 2022, the sole arbitrator issued an award, ordering the respondent to pay to RBI: (i) over € 62 million and USD 19 million (€ 18 million) in respect of the principal sums due under the guarantees, (ii) interest on those amounts at a rate of 5 per cent per annum accruing from 27 February 2018 until the date of payment, (iii) fees, costs and expenses incurred by RBI in ancillary proceedings in various jurisdictions worldwide, (iv) the costs of the VIAC Arbitration. Notes253 · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 Regulatory enforcement The RBI AG provides services to corporate clients that increase the risk of legal disputes at the operational level. The most significant cases are: In March 2018, an administrative fine of € 2.7 million (which was calculated by reference to the annual consolidated revenue of RBI and constitutes 0.06 per cent of the last available annual consolidated revenue) was imposed on RBI in the course of administrative proceedings based on alleged non-compliance with formal documentation requirements relating to the know- your-customer principle. According to the interpretation of the Austrian Financial Market Authority (FMA), RBI had failed to comply with these administrative obligations in a few individual cases. FMA did not allege that any money laundering or other crime had occurred, or that there was any suspicion of, or any relation to, any criminal act. RBI took the view that it had duly complied with all due diligence obligations regarding know-your-customer requirements and appealed against the fining order in its entirety. The Federal Administrative Court (Bundesverwaltungsgericht) confirmed FMA’s decision at first instance, against which RBI appealed to the Austrian Supreme Administrative Court (Verwaltungsgerichtshof). In December 2019, the Austrian Supreme Administrative Court revoked the decision of the lower administrative instances and referred the case back to the Federal Administrative Court. In the retrial on 6 May 2021, the Federal Administrative Court again confirmed FMA’s decision in general but reduced the administrative fine to € 824 thousand and allowed another appeal before the Austrian Supreme Administrative Court. Such appeal was filed by RBI. In July 2023, the Austrian Supreme Administrative Court revoked the decision of the administrative court of first instance and, again, referred the case back to the court of first instance. A provision of an appropriate amount has been recognized. In September 2018, two administrative fines totaling PLN 55 million (€ 12 million) were imposed on Raiffeisen Bank Polska S.A. (RBPL), the former Polish subsidiary of RBI in the course of administrative proceedings based on alleged non-performance of duties as the depositary and liquidator of certain investment funds. RBPL as custodian of investment funds assumed the role of liquidator of certain funds in February 2018. According to the interpretation of the Polish Financial Supervision Authority – which is known by its Polish abbreviation, KNF – RBPL failed to comply with certain obligations in its function as depository bank and liquidator of the funds. In the course of the transactions related to the sale of the core banking operations of RBPL to Bank BGZ BNP Paribas S.A., the responsibility for said administrative proceedings and related fines was assumed by RBI. RBI filed appeals against these fines in their entirety. In September 2019, in relation to the PLN 5 million (€ 1 million) fine regarding RBPL’s duties as depositary bank, the Voivodship Administrative Court considered RBI’s appeal and overturned the KNF decision in its entirety. However, the KNF filed an appeal in cassation against the judgement. In relation to the PLN 50 million (€ 11 million) fine regarding RBPL’s function as liquidator, the Voivodship Administrative Court decided to dismiss the appeal and uphold the KNF decision in its entirety. RBI has raised appeal in cassation to the Supreme Administrative Court because it takes the view that RBPL has duly complied with all its duties. In April 2023, the Supreme Administrative Court decided to refer the case regarding the PLN 5 million (€ 1 million) fine back to the Voivodship Administrative Court for reconsideration. Furthermore, the Supreme Administrative Court dismissed RBI’s appeal in cassation in connection with the PLN 50 million (€ 11 million) fine which is now final. However in October 2023 RBI filed a complaint to the European Court of Human Rights over this verdict. In October 2023, the Voivodship Administrative Court dismissed RBI’s appeal and upheld the KNF decision imposing the PLN 5 million (€ 1 million) penalty on RBI in relation to the alleged violations of RBI's duties as depositary of certain investment funds. A cassation appeal against this judgment to the Supreme Administrative court is possible. Both fines have already been paid. In this context, several individual lawsuits and four class actions, aggregating claims of holders of certificates in the above- mentioned investment funds currently in liquidation, were filed against RBI, whereby the total amount in dispute as at 31 December 2023 equals approximately PLN 77 million (€ 16 million). Additionally, RBI was informed that a modification of a statement of claim had been submitted to the court which could result in an increase of the total amount in dispute by approximately PLN 91 million (€ 19 million). However, such modification has not yet been served upon RBI. The plaintiffs of the class actions demand the confirmation of RBI’s responsibility for the alleged improper performance of RBPL (in respect of which RBI is the legal successor) as custodian bank. Such confirmation would secure and facilitate their financial claims in further lawsuits. Due to RBI’s legal assessment, no provision has been recognized. Additionally, RBI received a number of claim notices from BNP in connection with certain bank operations in respect of which BNP is the legal successor to RBPL. Said claim notices primarily relate to administrative proceedings conducted by the KNF (Polish Financial Supervision Authority) in connection with alleged failures of RBPL/BNP in acting as a depository of investment funds and could lead to cash penalties. Furthermore, claims in this context have been raised by investors to BNP, and as a mitigating measure RBI supports BNP in this regard. The financial impact can not be estimated at this time. In January 2023, RBI was informed by FMA that an administrative proceeding has been started based on the alleged non- compliance with certain legal requirements regarding the know-your-customer principle in connection with three customers of RBI’s correspondent banking business. The transactions relevant for the administrative proceedings had been processed by RBI between 2017 and 2020. According to the interpretation of FMA, RBI had not sufficiently convinced itself that these banks had appropriate due diligence procedures in place regarding customers of their own correspondent banking business. Thus, in the view of FMA, RBI failed to fully comply with its administrative obligations in this regard. FMA did not state that any money laundering or other crime had occurred, or that there was any suspicion of, or any relation to, any criminal act. The administrative proceeding is ongoing and might lead to administrative fines. In January 2023, RBI received a Request for Information (RFI) by the Office of Foreign Assets Control (OFAC) of the US Department of the Treasury. OFAC administers and enforces economic and trade sanctions based on US foreign policy and 254Notes · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 national security goals. A breach of US sanctions may, among others, result in fines, the freezing of accounts or the termination of business relationships with US correspondent banks. The questions raised by OFAC in the RFI are seeking to clarify payments business and related processes maintained by RBI with US correspondent banks in light of the developments related to Russia and Ukraine. As a matter of principle, RBI maintains policies and procedures that ensure compliance with applicable embargoes and financial sanctions and is cooperating fully with OFAC in relation to their request to the extent permitted by applicable laws and regulations. In August 2023 the Austrian Financial Markets Authority (FMA) instigated administrative fining proceedings against RBI regarding a suspected breach by Raiffeisen Centrobank AG ("RCB") of insider trading rules according to EU Regulation 596/2014 (MAR) in September 2022 in respect of a financial instrument for which RCB acted as market maker. RCB was a fully consolidated Austrian subsidiary of RBI and RBI became the legal successor of the relevant parts of RCB’s business by way of a demerger by absorption in December 2022. The relevant transaction which is the basis of the allegations amounts to approximately € 85 thousand. Tax litigation RBI AG is engaged in several consequential tax proceedings, including but not limited to the following: IIn Germany, a tax liability totaling approximately € 23 million arose in connection with real estate transfer taxes. As the taxes have already been settled, the establishment of a provision is deemed unnecessary. The tax authority’s decision has been contested at the Federal Fiscal Court in Munich. . Notes255 · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 Total capital according to CCR in € thousand 31/12/2023 31/12/2022 Capital instruments and the related share premium accounts 5,409,421 5,414,618 Retained earnings 420,284 2,017,115 Accumulated other comprehensive income (and other reserves)1 2,447,900 0 Minority interests (amount allowed in consolidated CET1) 0 0 Common equity tier 1 (CET1) capital before regulatory adjustments 8,277,605 7,431,733 Additional value adjustments (negative amount) (41,468) (54,015) Intangible assets (net of related tax liability) (negative amount) (19,509) (22,099) Deferred tax assets that rely on future profitability excluding those arising from temporary differences (net of related tax liability where the conditions in Article 38 (3) are met) (negative amount) (411) (1,077) Fair value reserves related to gains or losses on cash flow hedges 0 0 Gains or losses on liabilities valued at fair value resulting from changes in own credit standing 0 0 Direct and indirect holdings by an institution of own CET1 instruments (negative amount)2 (20,000) 0 Exposure amount of the following items which qualify for a risk weight of 1250%, where the institution opts for the deduction alternative (36,977) 0 hereof: qualifying holdings outside the financial sector (negative amount) 0 0 hereof: securitization positions (negative amount) (36,977) 0 hereof: securitization positions (negative amount) 0 0 Other regulatory adjustments (60,702) (38,846) Total regulatory adjustments to common equity tier 1 (CET1) (179,067) (116,037) Common equity tier 1 (CET1) capital 8,098,538 7,315,696 Capital instruments and the related share premium accounts 1,639,874 1,644,174 hereof: classified as equity under applicable accounting standards 0 0 hereof: classified as liabilities under applicable accounting standards 0 0 Amount of qualifying items referred to in Article 484 (4) and the related share premium accounts subject to phase out from AT1 0 0 Qualifying tier 1 capital included in AT1 capital (including minority interests not included in row 5) issued by subsidiaries and held by third parties 0 0 Additional Tier 1 (AT1) capital before regulatory adjustments 1,639,874 1,644,174 Direct and indirect holdings by an institution of own AT1 instruments (negative amount) (33,000) (33,000) Total regulatory adjustments to Additional Tier 1 (AT1) capital (33,000) (33,000) Additional tier 1 (AT1) capital 1,606,874 1,611,174 Tier 1 capital (T1 = CET1 + AT1) 9,705,412 8,926,870 Capital instruments and the related share premium accounts 2,059,118 2,174,901 Qualifying own funds instruments included in T2 capital (including minority interests and AT1 instruments not included in rows 5 or 34) issued by subsidiaries and held by third parties 0 0 Credit risk adjustments 0 149,647 Tier 2 (T2) capital before regulatory adjustments 2,059,118 2,324,548 Tier 2 (T2) capital: regulatory adjustments (38,675) (41,861) Direct and indirect holdings by an institution of own T2 instruments and subordinated loans (negative amount) (30,000) (30,000) Total regulatory adjustments to Tier 2 (T2) capital (68,675) (71,861) Tier 2 (T2) capital 1,990,443 2,252,687 Total capital (TC = T1 + T2) 11,695,855 11,179,557 Risk-weighted assets in respect of amounts subject to pre-CRR treatment and transitional treatments subject to phase out as prescribed in Regulation (EU) No 575/2013 (i.e. CRR residual amount) 40,461,266 41,903,360 Total risk-weighted assets (RWA) 40,461,266 41,903,360 1 Comparative figures as at the reporting date 31/12/2022 in the amount of € 1,892,696 thousand are shown in the item “Retained earnings” 2 Comparative figures as at the reporting date 31/12/2022 in the amount of € minus 20,000 are shown in the item “Capital instruments and the related share premium accounts” A presentation of consolidated own funds in accordance with CRR can be found in the consolidated financial statements in the chapter “Capital management and total capital according to CRR/CRD IV and Austrian Banking Act (BWG).” 256Notes · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 Own funds requirements and risk-weighted assets in € thousand 31/12/2023 31/12/2022 Risk-weighted exposure Capital requirement Risk-weighted exposure Capital requirement Total risk-weighted assets (RWA) 40,461,266 3,236,901 41,903,360 3,352,269 Risk-weighted exposure amounts for credit, counterparty credit and dilution risks and free deliveries 34,625,104 2,770,008 35,802,082 2,864,167 Standardized approach (SA) 2,013,877 161,110 3,326,324 266,106 Exposure classes excluding securitization positions 2,013,877 161,110 3,326,324 266,106 Central governments and central banks 25,025 2,002 0 0 Regional governments or local authorities 10,709 857 17,524 1,402 Public sector entities 84,587 6,767 0 0 Institutions 2,442 195 2,304 184 Corporates 2,623 210 5,511 441 Retail 106,345 8,508 240,257 19,221 Secured by mortgages on immovable property 955,069 76,406 2,362,419 188,994 Exposure in default 28,904 2,312 20,530 1,642 Items associated with particular high risk 0 0 0 0 Covered bonds 0 0 0 0 Collective investments undertakings (CIU) 0 0 14 1 Equity interests 73,489 5,879 86,130 6,890 Other items 724,291 57,943 591,635 47,331 Internal ratings based approach (IRB) 31,700,665 2,536,053 32,475,759 2,598,061 IRB approaches when neither own estimates of LGD nor conversion factors are used 15,772,934 1,261,835 18,587,936 1,487,035 Central governments and central banks 0 0 71,565 5,725 Institutions 2,243,888 179,511 3,053,197 244,256 Corporates - SME 102,572 8,206 285,445 22,836 Corporates - Specialized lending 1,306,059 104,485 1,130,277 90,422 Corporates - Other 12,120,414 969,633 14,047,451 1,123,796 IRB approaches when own estimates of LGD and/or conversion factors are used 0 0 0 0 Equity interests 15,899,514 1,271,961 13,859,991 1,108,799 Simple risk weight approach 0 0 0 0 Other equity exposure 0 0 0 0 PD/LGD approach 0 0 0 0 Securitization positions1 910,563 72,845 719,124 57,530 Internal ratings based approach (IRB) 0 0 0 Other non-credit obligation assets 28,217 2,257 0 0 Notes257 · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 in € thousand 31/12/2023 31/12/2022 Risk-weighted exposure Capital requirement Risk-weighted exposure Capital requirement Total risk exposure amount for settlement/delivery 23,058 1,845 18,517 1,481 Settlement/delivery risk in the non-trading book 458 37 0 0 Settlement/delivery risk in the trading book 22,601 1,808 18,517 1,481 Total risk exposure amount for position, foreign exchange and commodities risk 2,598,770 207,902 2,249,908 179,993 Risk exposure amount for position, foreign exchange and commodities risks under standardized approaches (SA) 1,295,472 103,638 994,932 79,595 Traded debt instruments 275,838 22,067 362,653 29,012 Equity interests 57,842 4,627 82,688 6,615 Particular approach for position risk in CIUs 1,348 108 780 62 Foreign exchange 958,474 76,678 545,993 43,679 Commodities 1,970 158 2,817 225 Risk exposure amount for position, foreign exchange and commodities risks under internal models (IM) 1,303,297 104,264 1,254,976 100,398 Total risk exposure amount for operational risk (OpR) 3,033,801 242,704 2,904,518 232,361 OpR standardized (STA) /alternative standardized (ASA) approaches 3,033,801 242,704 2,904,518 232,361 OpR advanced measurement approaches (AMA) 0 0 0 Total risk exposure amount for credit valuation adjustments 180,532 14,443 209,211 16,737 Standardized method 180,532 14,443 209,211 16,737 Other risk exposure amounts1 0 0 0 0 1 Specification of the previous year's disclosure and presentation of other risk position amounts as at the reporting date 31/12/2022 in the amount of € 719,124 thousand (risk weighted exposure) and € 57,530 thousand (capital requirement) in the item “Securitization positions” Equity ratios¹ in per cent 31/12/2023 31/12/2022 Common equity tier 1 ratio (fully loaded) 19.9% 17.3% Tier 1 ratio (fully loaded) 23.9% 21.1% Total capital ratio (fully loaded) 28.8% 26.6% 1 Fully loaded Leverage ratio in € thousand 31/12/2023 31/12/2022 Leverage exposure 90,876,965 92,902,358 Tier 1 9,705,412 8,926,870 Leverage ratio in per cent ¹ 10.7 % 9.6 % 1 Fully loaded 258Notes · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 · Notes to the income statement Income by geographic market in accordance with section 64 (1) 9 BWG A regional allocation to segments according to the business outlets’ registered offices results in the following distribution: 2023 in € thousand Total Austria Rest of Europe Asia Interest receivable and similar income 2,952,782.4 2,869,314.5 81,637.7 1,830.2 hereof: from fixed-income securities 235,123.5 234,949.9 0.0 173.7 Income from variable-yield securities and participations 1,786,418.3 1,786,418.3 0.0 0.0 Fee and commission income 555,787.2 554,482.7 1,304.5 0.0 Net profit or net loss on financial operations 56,805.7 54,124.1 3,642.6 (960.9) Sundry operating income 305,412.9 277,399.7 23,685.5 4,327.6 2022 in € thousand Total Austria Rest of Europe Asia Interest receivable and similar income 1,187,115.6 1,147,541.4 38,303.7 1,270.5 hereof: from fixed-income securities 74,642.0 74,212.2 352,6 77,2 Income from variable-yield securities and participations 564,320.6 564,320.6 0,0 0,0 Fee and commission income 531,264.2 528,626.4 2,637.8 0,0 Net profit or net loss on financial operations 93,490.1 93,300.2 3,119.3 (2,929.5) Sundry operating income 212,647.6 197,999.0 9,616.6 5,032.0 Negative interest rates An expense, resulting from negative interest for loans and advances, was shown in an amount of € 2,834 thousand (2022: € 34,495 thousand) in the item interest receivable and similar income. This contrasted with income of € 2,152 thousand (2022: € 140,410 thousand) resulting from negative interest for liabilities, which was shown in the item interest payable and similar expenses. The decrease in this item is due to the general development of interest rates. Other operating income Other operating income includes staff and administrative expenses passed on for services in the amount of € 145,209 thousand (2022: € 157,242 thousand), income from releases of provisions for impending losses from derivatives in the amount of € 19,517 thousand (2022: € 6,714 thousand), income from close-out fees for derivatives on the banking book in an amount of € 97,778 thousand (2022: € 16,963 thousand), as well as income from the release of other provisions in the amount of € 1,742 thousand (2022: € 3,980 thousand). Notes259 · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 Staff expenses Expenses for severance payments and benefits for occupational employee pension funds in the amount of € 11,181 thousand (2022: minus € 4,836 thousand) include € 6,450 thousand (2022: income of € 10,688 thousand) in expenses for severance payments. In the 2022 financial year, income in the expenses for severance payments and pension expenses resulted from changes in actuarial parameters used to determine provisions. Other administrative expenses The auditor expenses for the financial year, broken down by service, are presented in the consolidated financial statements. Sundry operating expenses The sundry operating expenses increased € 475,958 thousand to € 1,131,444 thousand in 2023. This includes allocations for provisions for impending losses for banking book derivatives in an amount of € 19,816 thousand (2022: € 62,582 thousand), allocations for other provisions for liabilities and charges (see also the item “Provisions” in the statement of financial position and the section “Litigation risk for foreign currency loans in Poland”) of € 873,400 thousand (2022: € 462,000 thousand), as well as expenses deriving from close-out fees for banking book derivatives in an amount of € 157,002 thousand (2022: € 9,971 thousand). Also included are expenses from staff and administrative costs passed on in the amount of € 30,113 thousand (2022: € 57,944 thousand). Disposal and valuation of loans and advances and securities classified as current assets Net income/expenses from the disposal and valuation of loans and advances and securities classified as current assets recorded a positive balance – unlike in the previous year - of € 49,987 thousand (2022: minus € 164,641 thousand). This change derived, firstly, from a positive net gain/loss on the valuation and disposal of marketable securities and banking book derivatives in the amount of € 149,120 thousand (2022: minus € 60,546 thousand) and from an improvement in the net gain/ loss on the valuation of loans and advances as well as guarantees to an amount of minus € 99,133 thousand (2022: minus € 104,095 thousand). RBI AG recognized net provisioning for individual loan loss provisions of € 213,567 thousand. This represented a year-on-year increase of € 128,560 thousand. The increase was largely due to increased individual loan loss provisions which were required due to the current economic trends in the area of real estate financing. In contrast, a positive trend was noted in the risk evaluation of non-defaulted loans in the financial year under review. On balance, therefore, a net release of portfolio-based loan loss impairments was made in an amount of € 106,086 thousand in the financial year under review (2022: net addition of € 20,910 thousand). This decrease is attributable to the release of provisions made in the previous year for general political risks, including in particular the Russia sanctions and the Russian business managed from Vienna, in an amount of € 46,940 thousand (2022: minus € 22,862 thousand). In addition, the releases of impairments (special risk factors) due to reduced macroeconomic risks in an amount of € 27,030 thousand (2022: minus € 22,778 thousand) contributed to this decrease. In addition, net releases were made in the financial year under review due to organic development of RBI AG’s loan portfolio. For substantial as well as non-substantial contract modifications, gains in carrying amounts of € 1,560 thousand (2022: minus € 1,820 thousand) were realized in the financial year. Net income from extraordinary disposals of loan receivables amounted to minus € 1,224 thousand (2022: minus € 2,311 thousand). In the financial year under review, losses were realized on shares in investment funds in an amount of € 0 thousand (2022: € 162 thousand). Income from distributions amounted to € 0 thousand (2022: € 2 thousand). 260Notes · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 Disposal and valuation of securities evaluated as financial investments and of shares in affiliated companies and participating interests The item net income/expenses from the disposal and valuation of securities evaluated as financial investments and of shares in affiliated companies and participating interests included reversals of write-downs in the total amount of € 646,712 thousand, of which € 604,249 thousand was attributable to AO Raiffeisenbank, € 14,107 thousand to RZB-BLS Holding GmbH, € 10,073 thousand to BAILE Handels- und Beteiligungsgesellschaft m.b.H., and € 7,386 thousand to Salvelinus Handels- und Beteiligungsges.m.b.H. Shares in affiliated companies and equity participations were written down by € 85,049 thousand in total, including Raiffeisen Digital Bank AG in the amount of € 66,850 thousand and FAIRO GmbH in the amount of € 9,795 thousand. In total, gains of € 10,974 thousand (2022: € 17 thousand) were realized on the sale of shares in affiliated companies and participating interests in the financial year. A total of € 572,637 thousand in gains (2022: € 965,955 thousand in losses) from both the valuation and disposal of shares in affiliated companies and participating interests has therefore been recognized. In the financial year 2023, a net amount of € 3,837 thousand in price losses was realized from the sale of securities held as financial assets. In the comparable period of 2022, the price loss was € 9,823 thousand. Tax on profit or loss The tax on profit or loss shows net positive income from taxes in the amount of € 14,410 thousand (2022: € 5,531 thousand) for the financial year 2023. The item includes income from current income taxes of € 15,105 thousand (2022: € 5,859 thousand), a deferred tax expense of € 631 thousand (2022: deferred tax income of € 504 thousand) and tax income for previous years of € 7,943 thousand (2022: tax expense of € 258 thousand). Furthermore, foreign withholding taxes are included in an amount of € 8,007 thousand (2022: € 574 thousand). RBI AG is the group parent of a corporate group pursuant to Section 9 of the Corporation Tax Act (KStG). As of 31 December 2023, 71 companies (including the parent company) were members of the group of companies (31/12/2022: 54 companies) pursuant to Section 9 of the Corporation Tax Act (KStG). If a group company achieves a positive taxable result, the tax allocation to be paid for the tax-deductible profit share is 12 per cent and for the non-deductible profit share 24 per cent. In addition, the positive tax levy amounts to 12 per cent if a positive result of a group company reduces the balance on the record account (i.e. an off-book account that the group parent keeps for the group company for the purpose of keeping records of negative results of the group member and later offsetting them against positive results of the group member). In the event of negative results for tax purposes, the group member has a claim against the group parent amounting to 12 per cent of the negative result. At the end of 2022, the EU adopted the Directive on implementing a global minimum tax rate of 15 per cent on profits of multinational companies in accordance with the OECD’s Base Erosion and Profit Shifting Project. The Directive had to be implemented into national law by the individual Member States by 31 December 2023. In Austria, the Minimum Taxation Reform Act (MinBestRefG) was published in the Federal Gazette. The Minimum Taxation Reform Act includes the new federal act on guaranteeing a global minimum taxation rate for corporate groups (Minimum Taxation Act, MinBestG) and also provides for amendments to the Federal Fiscal Code (BAO) and the Austrian Company Code (UGB). RBI is monitoring the progress in the legislative process in the jurisdictions of relevance for the Group. By 31 December 2023, the EU Directive had been implemented in local law in the following countries in which the Group operates: Austria, the Czech Republic, Hungary and Romania. Since the majority of the Group’s subsidiaries are located in jurisdictions whose nominal tax rate or effective tax rate is higher than the minimum tax rate of 15 per cent, based on the current status of legislation, tax effects from the entry into force of the global minimum tax rate, expected for the start of 2024, are only anticipated in individual countries. It is possible that the nominal tax rate will be increased or that supplementary taxes will be introduced in order to prevent an outflow of taxes from the countries affected. In most countries where RBI operates, the Safe Harbour Rules were complied with as at 31 December 2023. The following countries represent an exception: Hungary, Bosnia and Herzegovina, Kosovo, Serbia and Austria. As at 31 December 2023, RBI AG anticipates an effect in the high single-digit millions. Notes261 · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 Branches on a consolidated basis 2023 in € thousand Bratislava Frankfurt London Beijing Singapore Warsaw Domicile state Slovakia Germany Great Britain China Singapore Poland Net interest income 26 0 0 1,430 174 81,435 Operating income (15,593) 334 6 463 196 87,731 Profit on ordinary activities (17,337) (1,506) (3,984) (2,785) (1,444) (853,345) Income taxes (252) (51) (74) (221) 0 0 Number of employees (average) 20 8 13 15 4 273 Public subsidies received None None None None None None 2022 in € thousand Bratislava Frankfurt London Beijing Singapore Warsaw Domicile state Slovakia Germany Great Britain China Singapore Poland Net interest income 1 0 (4) 1,168 77 37,950 Operating income 5,408 410 (127) (1,765) 76 45,105 Profit on ordinary activities 3,728 (1,826) (4,306) (5,487) (1,617) (485,460) Income taxes (214) (36) (66) (200) 0 0 Number of employees (average) 25 8 14 16 4 254 Public subsidies received None None 17.0 None None None With regard to the business areas in which the branches operate, please refer to the chapter “Branches and representative offices” in the management report Overall return on assets The overall return on assets (net loss or profit after tax divided by the average total assets) in 2023 was 1.60 per cent (2022: minus 1.13 per cent). Profit contribution from 2022 On 30 March 2023, due to the continuing uncertainties resulting from the war in Ukraine, the Annual General Meeting resolved to carry forward the entirety of the retained earnings. Following the volatile market environment in the spring, it was decided, in the interests of prudent capital and liquidity management, to initially await further developments in the course of the 2023 financial year. At the extraordinary general meeting on 21 November 2023, it was decided, due to the positive development in the 2023 financial year, to distribute a dividend of € 0.80 per dividend-bearing share for the 2022 financial year. Proposal for the appropriation of profits The Management Board will make a proposal to the Annual General Meeting on 4 April 2024 to distribute a dividend of € 1.25 per share. Based on the shares issued, this would result in a maximum amount of € 411 million. 262Notes · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 · Other Transactions with related parties (companies and individuals) are limited to banking business transactions that are carried out at fair market conditions. In the financial year the company had an average of 3,658 employees (2022: 3,445). Expenses for severance payments and pensions Pension Severance payments in € thousand 2023 2022 2023 2022 Members of the management board and senior staff 1,821 (2,744) 895 (1,134) Employees 11,276 7,761 10,286 (3,702) Total 13,097 5,017 11,181 (4,836) The income from severance payments and pension expenses in the financial year 2022 resulted from changes in actuarial parameters used to determine provisions. Boards Management Board Members of the Management Board Initial appointment End of term Johann Strobl, Chairman 22 September 20101 28 February 2027 Marie-Valerie Brunner 1 November 2023 31 October 2026 Andreas Gschwenter 1 July 2015 30 June 2026 Łukasz Januszewski 1 March 2018 28 February 2026 Hannes Mösenbacher 18 March 2017 28 February 2025 Andrii Stepanenko 1 March 2018 28 February 2026 Peter Lennkh 1 October 2004 31 August 20232 1 Effective as of 10 October 2010 2 On 31 August 2023 Peter Lennkh stepped down from the Management Board. Supervisory Board Supervisory Board members Initial appointment End of term Erwin Hameseder, Chairman 8 July 20101 Annual General Meeting 2025 Martin Schaller 1st Deputy Chairman 4 June 2014 Annual General Meeting 2024 Heinrich Schaller 2nd Deputy Chairman 20 June 2012 Annual General Meeting 2027 Michael Alge 31 March 2022 Annual General Meeting 2027 Eva Eberhartinger 22 June 2017 Annual General Meeting 2027 Andrea Gaal 21 June 2018 Annual General Meeting 2028 Peter Gauper2 22 June 2017 14 June 2023 Michael Höllerer 31 March 2022 Annual General Meeting 2027 Rudolf Könighofer 22 June 2017 Annual General Meeting 2027 Heinz Konrad 20 October 2020 Annual General Meeting 2025 Reinhard Mayr 20 October 2020 Annual General Meeting 2025 Birgit Noggler 22 June 2017 Annual General Meeting 2027 Manfred Wilhelmer3 21 November 2023 Annual General Meeting 2028 Natalie Egger-Grunicke4 18 February 2016 Until further notice Peter Anzeletti-Reikl4 10 October 2010 Until further notice Notes263 · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 Supervisory Board members Initial appointment End of term Rudolf Kortenhof4 10 October 2010 Until further notice Gebhard Muster4 22 June 2017 Until further notice Helge Rechberger4 10 October 2010 Until further notice Denise Simek4 1 October 2021 Until further notice 1 Effective as of 10 October 2010 2 Peter Gauper resigned from his position with effect from 14 June 2023 3 Member of the Supervisory Board with effect from the Annual General Meeting on 21 November 2023 4 Delegated by the Staff Council State Commissioners · Alfred Lejsek, State Commissioner (since 1 January 2011) · Matthias Kudweis, Deputy State Commissioner (since 1 April 2021) Remuneration of members of the Management Board The following remuneration was paid to the Management Board: in € thousand 2023 2022 Fixed remunerations 4,807 4,906 Bonus (performance-based) 3,510 3,742 Payments to pension funds and reinsurance policies 397 412 Other remunerations 2,546 2,330 Total 11,259 11,390 hereof remuneration from affiliated companies (Supervisory board remuneration) 2,329 2,145 The fixed remunerations shown in the table include salaries and non-cash benefits. The performance-based components of the Management Board’s remuneration cover bonus payments. The bonuses reported above are immediately payable bonus amounts for 2022 and deferred bonus amounts for previous years. The bonus agreement is linked to the achievement of annually agreed objectives. The respective step-in criteria as well as the individual performance targets can be found in the current remuneration policy (www.rbinternational.com → Corporate Governance & Remuneration → Remuneration Policy). The amount of the bonus depends on the return on equity and on the cost/income ratio, and the objectives are derived from the Group’s target medium-term ROE. Payment is made according to the applicable regulations of the Austrian Banking Act (BWG) implemented in the internal regulations (see employee compensation plans in the section recognition and measurement principles). Other remuneration covers remuneration for functions in the boards of affiliated subsidiaries, insurance policies and grants. An amount of € 1,577 thousand (previous year: € 1,386 thousand) was paid in pension benefits to former members of the Management Board and to their surviving dependents in the 2023 financial year. In addition to these amounts, short-term benefits and deferred bonus components as well as severance payments totaling € 469 thousand (previous year: € 978 thousand) were paid to former members of the Management Board. In addition to the amounts presented above, there are expenses of € 2,761 thousand (31/12/2022: € 1,135 thousand) as portions of the bonus provision, which relate to deferred bonus portions payable in cash and retained portions payable in instruments. In the case of the latter, valuation changes due to exchange rate fluctuations are also taken into account. Remuneration of members of the Supervisory Board in € thousand 2023 2022 Remunerations Supervisory Board 1,171 1,127 264Notes · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 In The Annual General Meeting held on 22 April 2021 approved a remuneration model for the Supervisory Board, beginning on 23 April 2021 and for the following years. It was decided to distribute the remuneration as follows: Chairman € 120 thousand, Deputy Chairman € 95 thousand, members of the Supervisory Board € 60 thousand, plus attendance fees, for the Chairman of the Audit Committee and the Risk Committee each additional € 17.5 thousand. In the 2023 financial year, no contracts subject to approval within the meaning of § 95 (5) 12 of the Austrian Stock Corporation Act (AktG) were concluded with members of the Supervisory Board. Remuneration of members of the Advisory Council in € thousand 2023 2022 Remuneration Advisory Council 191 188 The Annual General Meeting held on 21 June 2018 passed a resolution to grant remuneration to the Advisory Council members for their work. It was decided to distribute the remuneration as follows: Chairman € 25 thousand, Deputy Chairman € 20 thousand, each additional member € 15 thousand, plus attendance fees. Amounts of loans and grants extended to members of the Management Board and Supervisory Board, as well as other legal transactions The relationships of members of the Management Board and Supervisory Board to RBI AG are as follows: in € thousand 2023 2022 Debt securities 1,635 657 Shares 2,786 2,581 Deposits and other receivables 423 1,288 Loans and other liabilities 213 — Lease liabilities 17 59 Of the amounts stated, bonds worth € 784 thousand (2022: € 22 thousand), shares worth € 1,545 thousand (2022: € 1,576 thousand) and deposits and other receivables worth € 10 thousand (2022: € 750 thousand) are attributable to members of the Management Board. The remaining items are attributable to the Supervisory Board. Notes265 · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 · Events after the reporting date There were no significant events after the reporting date. Qualified electronically signed by: Vienna, 12 February 2024 The Management Board Johann Strobl m.p. Marie-Valerie Brunner m.p. Andreas Gschwenter m.p. Łukasz Januszewski m.p. Hannes Mösenbacher m.p. Andrii Stepanenko m.p. 266Notes · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 Management report · Market development Weak economy in a crisis-ridden environment While the US economy was remarkably robust in 2023, Europe’s economic environment was characterized by a stagnant economic cycle. Economic support from the services sector weakened significantly over the course of the year, while the industrial sector remained in recession for most of the year. As a result, more service-driven economies achieved slightly above-average growth, while more manufacturing-oriented countries in Western Europe such as Germany and Austria found themselves in mild recessions. Overall inflation fell noticeably in 2023, mostly due to energy prices, although the core rate of inflation sank much more gradually. Both the US Federal Reserve and the ECB continued their series of interest rate hikes into the (late) summer and then left key rates unchanged for the rest of the year. The euro area’s gross domestic product was only slightly higher on average in 2023 than in 2022. In the second half of 2023, economic momentum weakened and GDP was below the level of the first half of the year. What is striking in this economic cycle is the robust labor market. Unemployment rates have barely risen, many jobs are vacant and employment levels are high despite the persistently weak economy. Inflation fell from 8.6 per cent at the beginning of the year to below 3 per cent in the fall. Price increases for food and many tangible goods have slowed, and energy goods are actually cheaper than in the year before. Services, on the other hand, saw stronger price growth in 2023 than in 2022. The European Central Bank (ECB) raised its key rates 200 basis points in 2023. In addition, the bond holdings in the APP (asset purchase programme) portfolio were reduced around € 200 billion by stopping reinvestments of maturing bonds. The bulk of the central bank’s balance sheet reduction was achieved by allowing refinancing transactions to mature. The outstanding volume of these loans to commercial banks fell over € 1,300 billion by the end of 2023. While short-dated money market rates rose roughly the same amount as key interest rates, interest on swap rates and yields on German government bonds with five- to ten-year maturities were barely higher at the end of the year than at the beginning. However, performance was extremely volatile over the course of the year. One key element in the interest rate market is the inverted yield curve. In 2023, the interest rate for swap rates and German bonds with short maturities was consistently higher than that for long maturities. The Austrian economy was in recession in parts of 2023, with real GDP falling 0.7 per cent for the year as a whole. This made the Austrian economy one of the worst performers in the euro area. In addition to the industry and construction sector, this was also due to consumer related services. The construction industry experienced a stronger real correction in Austria than in many other euro countries. Inflation fell noticeably over the course of the year. However, at an annual average of 7.7 per cent, it was still well above the euro area’s level (2 percentage points). Austria’s conspicuously weak economy can also be partially attributed to above-average inflation. CEE: High interest rates and inflation, sluggish growth The CEE region’s economy was affected by inflation and industry weakness in 2023 in much the same way as the euro area and Austria were. Some of the measures taken in 2022 to combat inflation (price regulations and energy price caps) expired in 2023, which shifted inflationary pressure from 2022 to 2023. Inflationary pressure was overall more persistent in the region than in the euro area, in large part because the labor markets were already very tight before the war in Ukraine drove up (energy) prices, which increased wage pressures. Nevertheless, base effects for energy prices caused inflation to start falling in the first half of 2023. Given the significant steps taken by central banks in Central and Eastern Europe back in 2021 and 2022, most CEE countries did not enact more interest rate hikes in the first half of 2023 (with the exception of Albania and Serbia). As the year progressed, some central banks in the CEE region felt able to cut key rates in response to a further decline in inflation rates; other banks continued to wait. The industrial sector was weak in large parts of Central Europe (CE) in 2023. Because of this sector’s importance to these economies and close ties with the German industrial sector, the region underperformed most of Europe. However, a strong inflow of EU funds, improving foreign trade and a moderate recovery in consumer demand fueled a slight recovery over the course of the year. Thanks to a strong boost from foreign trade, Slovakia (up 1.3 per cent) outperformed the rest of the Central European countries (up 0.1 per cent). Support also came from access to NextGenerationEU funds (NGEU funds), which Poland and Hungary could not (yet) tap. Management report267 · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 Once again, the economy in Southeastern Europe (SEE) outperformed the euro area and Central Europe because SEE depends much less on the industrial sector, which had been battered more by the war in Ukraine and high energy prices. Southeastern Europe’s strong performance was supported by an abundant inflow of EU funds along with a strong tourist season. Nevertheless, growth in SEE only reached 1.8 per cent in 2023, with Albania leading the way (up 3.5 per cent). Supporting factors in this country were the construction sector and tourism, private and public spending as well as investment. The lowest growth was posted in Romania (up 1.5 per cent), where the economy disappointed in the autumn due to the continued weakness of its industrial sector. In Eastern Europe (EE), Ukraine recorded the strongest growth in 2023 (up 5.7 per cent), due to its robust adjustment to the war and base effects. The Russian economy, in contrast, grew 2.5 per cent in 2023, supported by fiscal policy and defense spending. In Belarus, the impact of EU and US sanctions increased significantly, but the country managed to grow 3.9 per cent, partly due to state-subsidized investments in the modernization of industrial plants and machinery. Annual real GDP growth in per cent compared to the previous year Region/Land 2022 2023e 2024f 2025f Poland 5.1 0.2 3.1 3.5 Slovakia 1.7 1.3 2.1 2.1 Czech Republic 2.4 (0.5) 1.7 3.2 Hungary 4.6 (0.5) 3.0 4.0 Central Europe 4.0 0.1 2.7 3.4 Albania 4.9 3.5 3.5 3.8 Bosnia and Herzegovina 4.2 1.8 3.0 3.5 Croatia 6.3 2.1 2.5 2.6 Kosovo 5.2 3.2 3.9 4.0 Romania 4.1 1.5 2.8 3.5 Serbia 2.4 2.5 3.0 4.0 Southeastern Europe 4.3 1.8 2.8 3.5 Belarus (4.7) 3.9 2.0 2.0 Russia (2.1) 2.5 1.5 0.9 Ukraine (29.1) 5.7 4.9 6.5 Eastern Europe (3.9) 2.8 1.8 1.4 Austria 4.8 (0.7) 0.2 1.4 Euro area 3.4 0.5 0.5 1.5 Source: Raiffeisen Research, as of beginning of February 2024, (e: estimate, f: forecast); subsequent revisions are possible for years already completed Banking sector in Austria The Austrian banking sector carried on the good performance from 2022 and improved on it in 2023. The operating business was supported by increasing net interest income and stable performance in the commission business. Nevertheless, operating costs increased as well. Risk costs in 2023 were lower than in the previous year, however. The funding environment for the Austrian banking sector was challenging in 2023. Nevertheless, Austrian banks held their own in the primary market once again and placed significantly larger volumes than in the years before 2022, especially in the covered bond segment. Growth rates of the loan volumes granted in both the household and corporate loan segments show a significant year-on-year slowdown. This is primarily due to the different interest rate environment and, to a lesser extent, to the changed regulatory framework for lending guidelines. The household segment showed negative year-on-year growth of minus 1.9 per cent as of November 2023. Loan growth in this segment became negative as of the middle of the year. The corporate segment reported annual growth of 2.9 per cent (November 2023 vs. November 2022) compared to growth of 11.3 per cent at the same time in the previous year. The banking sector’s capitalization increased further compared to the start of 2023, reaching 16.6 per cent (common equity tier 1 ratio) as of June 2023. The Austrian Financial Market Stability Board concluded in its September 2022 meeting that Austrian banks are less capitalized than their European peers and therefore recommended raising macroprudential buffer requirements for selected banks another 0.5 percentage points and gradually phasing in this increase over two years. Accordingly, these requirements rose 0.25 percentage points for selected institutions at the turn of the year. 268Management report · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 Development of the banking sector in CEE As key interest rates remained high for most of 2023 (and euro markets caught up), CE/SEE banks were able to further improve their profitability thanks to wider net interest margins while risk costs remained rather limited as the number of loan defaults remained low. The average return on equity in the region was over 15 per cent, which is consistent with the most successful years before the global financial crisis. The turbulence in the US banking sector had no major impacts. All in all, core banking income proved to be strong enough to compensate for the additional bank taxes levied in certain countries, inflationary pressure on operating costs and the switch to a more expensive refinancing mix (rising percentage of time deposits, expensive MREL funding). At the same time, stricter financial conditions and the weaker economic environment slowed down lending significantly, which particularly affected investment loans to companies and the market for residential construction loans. The Eastern European markets experienced a strong turnaround as banks returned to profitability in Russia (normalized monetary conditions, politically supported lending) and Ukraine (high interest rates, macroeconomic improvements). Regulatory environment Supervisory priorities and interaction with the ECB · Reinforcing the management competence of the governing bodies to enable banks to effectively address the digitalization process: As a supervisory authority, the ECB wants to ensure that RBI has sound strategies and appropriate regulations in place to meet the challenges that digitalization presents. Effective digital transformation strategies and governance regulations can help RBI make its business models more resilient and sustainable. · Strengthening the banks’ resilience to direct macrofinancial and geopolitical shocks: In the current uncertain environment, it is essential for all banks that are under Single Supervisory Mechanism (SSM) supervision to remain resilient to external shocks. This means that they can withstand unexpected events, such as economic downturns or geopolitical crises, without jeopardizing their business operations. For this reason, the ECB wants to ensure that the European banks remedy weak points in their credit risk management frameworks, in order to strengthen their resilience against a possible asset quality deterioration, and quickly identify and mitigate risks. Sound planning and diversified funding sources can help ensure the European financial market maintains reliable access to funding. · Intensified efforts to combat climate change: The risks associated with climate change are changing rapidly with far-reaching economic consequences, among other things. The ECB believes that European banks need to take measures to mitigate these risks and have a role to play in funding the transition to a more sustainable economy. It also considers that banks can only mitigate their risk exposure by taking appropriate consideration of climate and environmental factors in their strategies, risk management practices and decision-making processes. New regulation in 2023 Finalization of Basel III (CRR III/CRD VI) In June 2023, agreement was reached on the cornerstones in the trilogue negotiations held between the European Council, the European Parliament, and the European Commission. In the second half of 2023, the legislative bodies concentrated on reaching agreement in the technical trilogues, followed by the approval in the EU Parliament and the EU Council plenary session. The published consolidated texts of the political agreement reached on CRR III and CRD VI are expected to be voted on in the plenary session of the European Parliament by the end of the first quarter of 2024. Despite efforts made by the European Banking Industry Committee (EBIC) to postpone the Basel III implementation date in the EU, due to the comprehensive changes brought about by the Capital Requirements Regulation (CRR III), the effective date of 1 January 2025, remains unchanged. RBI AG as a universal bank is affected by the proposed changes in various respects and makes substantial efforts to analyze and evaluate the new and updated requirements and their resulting impact. Through its intensive efforts at national and EU- level, RBI has clearly communicated its position on topics of particular interest. Among others, minority interest deductions, the treatment of equity holdings made pursuant to Legislative Programmes to promote specified sectors of the economy, retaining a 100 per cent risk-weighting for equity exposures that have been held for six years and applying a preferential treatment for intragroup exposures were addressed. RBI regularly analyzes the updated requirements and corresponding impact assessments for the standardized approach (STA) and the internal ratings-based approach (IRB). This allows it to prepare adequately for the implementation of the new requirements and assess the various changes affecting RWA calculations. This is to ensure a smooth transition to the new provisions and allows RBI to update its systems and adapt to the new calculation and reporting requirements. Management report269 · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 Payment Services Directive and framework for financial data access The European Commission is working on creating an efficient and integrated market for payment services in the EU. As a result, two packages of measures were proposed: The first involves a revision of the Payment Services Directive. This proposal aims to extend and modernize the current Payment Services Directive (PSD2), which will become PSD3, and also to introduce a Payment Services Regulation (PSR). The proposed regulation determines standardized requirements for the provision of payment services and e-money services within the EU, with the objective of combating and curbing fraud in payment services, strengthening consumer rights, further aligning the competitive conditions between banks and non-banks, and improving the operation of open banking services. Second, the Commission is putting forward a legislative proposal for a framework for financial data access. This framework will establish clear rights and obligations for exchanging customer data in the financial sector beyond payment accounts. In practice, this will lead to more innovative financial products and services for users and stimulate competition in the financial sector. By contributing actively in this regulation, RBI could be remunerated accordingly for introducing application programming interfaces (APIs) that were developed as part of the program for financial data exchanges. Finally, the legislators agreed in the Commission’s proposal to make instant payments in euro available for all citizens and companies in the EU. This regulation aims to ensure that instant payments in euro are made affordable and secure, and can be easily processed in the entire EU. Instant payments in euro allow money to be transferred at all times within seconds. As a result of the new regulations, they will become the new normal for transfers. They should make life simpler for EU citizens, improve businesses' cash flows and bring savings for retailers. This will encourage new innovation opportunities for banks. Retail investment strategy On 24 May 2023, the European Commission put forward the retail investment strategy, which aims to promote greater retail investor participation on the capital markets. The European Commission suggested changes to current legislation (e.g. making product information more comparable or easier to understand) to reach the objective of deepening the capital markets union. Digital Operational Resilience Act (DORA) DORA entered into force on 16 January 2023 and will apply from 17 January 2025. The aim is to improve the digital operational stability of financial corporations throughout the EU and further harmonize the requirements for this. This regulatory framework covers core areas, such as risk management, incident management and reporting, reviewing the digital operational stability and the management of information and communication technology (ICT) third-party risks. DORA mandates the European Supervisory Authorities to jointly develop 13 policy instruments, presented in two batches. The first batch of technical standards was introduced in June 2023. The objective of the technical standards is to create consistent and detailed requirements in ICT risk management, reporting of major ICT-related incidents and ICT risk management for third parties. RBI is directly impacted by DORA and its technical standards, and is working intensively on implementing all the applicable requirements. Markets in Crypto Assets Regulation (MiCA) MiCA entered into force in June 2023. It lays down standard market rules for crypto assets in the EU and is therefore the first comprehensive framework for regulating the crypto currency market. The regulation covers crypto assets that are currently not governed by existing EU financial services legislation (MiFiD II). The objective of the MiCA regulation is to protect investors, prevent crypto asset misuse, ensure financial stability, create regulatory clarity and protect against market abuse and manipulation. The regulation comprises a significant number of technical standards and guidelines that have to be developed before the new regulation comes into force (within a period of 12 to 18 months depending on the mandate). The European Supervisory Authorities (ESAs) are working as a matter of high priority on providing three batches of technical standards to further break down the requirements. RBI is closely observing and analyzing all the related developments, and working on potential applications. Minimum requirements for own funds and eligible liabilities (MREL) The Single Resolution Mechanism Regulation II (SRMR II) introduced the concept of the Maximum Distributable Amount related to MREL (M-MDA), which has been applicable since 1 January 2022. M-MDA allows the Single Resolution Board (SRB) to set restrictions on distributions for banks. While M-MDA has many similarities to the classic MDA regime of Article 141 CRD, it is subject to the discretionary decision of the resolution authority. Regulation (EU) 2022/2036 (CRR Quick Fix) was formally adopted on 19 October 2022. It introduced changes to the CRR and Bank Recovery and Resolution Directive (BRRD) applying to the calibration of the MREL requirements for banking groups with a multiple point of entry (MPE) resolution strategy and a methodology for indirect subscription of MREL instruments. The SRB published the updated MREL on 15 May 2023. 270Management report · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 In line with RBI’s MPE resolution strategy, it must be possible to process each resolution unit separately, without impairing the resolution capability of other resolution groups. To achieve this objective, each resolution group aims to maintain the necessary MREL capacity and be separable, in order to ensure that the MPE approach is feasible and credible. The MREL planning is an integral part of the budgeting process for RBI and its subsidiaries in the EU. The individual MREL capacities in the resolution groups are closely monitored. RBI and its subsidiaries in the EU conducted issues in order to fulfill their respective MREL requirements. Binding and final MREL requirements will apply within the Banking Union from 1 January 2024. RBI was able to cover a significant portion of its MREL requirements by issuing green and sustainable bonds. Crisis management and deposit insurance (CMDI) framework The EU Commission proposed an extensive review of the CMDI framework for banks. This review covers various directives and regulations, including the Deposit Guarantee Schemes Directive (DGSD), the Bank Recovery and Resolution Directive (BRRD), the Single Resolution Mechanism Regulation (SRMR) and the Daisy Chain Regulation. These proposals will focus mainly on extending the resolution system to SME banks and facilitate the use of national deposit insurance funds for resolution purposes, especially for smaller banks. It is currently envisaged that the EU Parliament and the EU Council will reach a joint decision on the Commission proposal in May 2024. Regulatory environment for ESG disclosures in the EU The European Green Deal was at the very top of the political agenda and the European Commission’s initiatives for 2023. This reaffirms the EU’s commitment to be at the forefront of sustainability efforts with ambitious environmental laws and the goal of being climate neutral by 2050. The funding of this transition will be crucially important in the coming years. The EU taxonomy and the Green Bond Standard are the most relevant sustainable financial instruments. In June 2023, the EU Commission adopted further EU taxonomy criteria for economic activities that make a significant contribution to biodiversity, environmental pollution and the circular economy. The inclusion of more economic activities and sectors will increase the usability and potential of the EU taxonomy in scaling up sustainable investment in the EU. RBI will disclose its first taxonomy alignment ratios from January 2024 onwards. The legislator will use the EU Corporate Sustainability Reporting Directive (CSRD), which was completed at the end of 2022, to rank the importance of ESG information equally with that of a company’s financial data. This will be substantiated by the European Sustainability Reporting Standards (ESRS) that were developed by the European Financial Reporting Advisory Group (EFRAG). The standards serve to limit the burden on reporting companies, while at the same time enabling them to verify the efforts they are making to meet the green deal agenda, and accordingly get access to sustainable finance. The new CSRD follows a double materiality concept. This means that companies must consider how sustainability aspects impact a company’s economic situation on the one hand and how a company’s operations impact sustainability aspects on the other. Management report271 · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 · Business performance at Raiffeisen Bank International AG Business development RBI AG is one of Austria’s leading corporate and investment banks. The Corporates business serves the top 1,000 companies in the country as well as many large international and multinational corporations. These clients benefit from RBI AG’s extensive know-how and service portfolio in export financing, trade financing, cash management, Treasury and fixed-income. Institutional Clients groups business with banks and other institutional customers. It originally developed out of Correspondent Banking and Trade Finance and today stands for an integrated client-centric approach to doing business with banks, national and supranational institutions, insurance companies, asset managers and other institutional customers. Its extensive product and service range includes, among others, clearing, settlement and payment services, custody and depositary banking services, capital market and securities transactions as well as loan financing and advisory services aimed at helping our clients achieve a more sustainable business orientation. The Capital Markets business includes trading on own account and for third parties. RBI AG offers its customers individually tailored solutions for liquidity and balance-sheet management, and for managing interest rate and currency risks as well. Its particular strengths lie in interest rate, currency and credit products for the German-speaking countries (Austria, Germany and Switzerland) and CEE. Cash products, derivatives and structured products are also offered, as well as debt capital raising via bond issuance. A professional structuring team as well as strong sales and placement power ensure successful project execution. In the Raiffeisen Certificates, Retail Bonds & Equity Trading business area, RBI AG, as a leading and multi-award-winning Austrian certificate provider, offers more than 6,000 investment and leverage products that allow opportunity/risk-optimized investing, particularly for retail customers. This is a cross-asset offering aimed at customers in the DACH region as well as many markets in Central and Eastern Europe. Raiffeisen certificates are publicly offered in 11 countries in both the primary and secondary markets through exchanges, trading platforms and via RBI as a systematic internalizer. The retail bond business was also integrated into this business area in September 2023. The business area also includes market making and proprietary trading activities in equities, equity derivatives and commodities, with a focus on Central and Eastern Europe. RBI is one of the leading market makers on various stock exchanges in this segment. The Treasury and Group Subsidiaries and Equity Investments businesses are internal control areas for the management of refinancing and the bank’s investment portfolio. Corporates The Corporates business serves Austrian and international corporate customers. In addition to Austria’s largest companies, the focus is on Western European corporate customers with business activities in CEE, large corporate customers from Central and Eastern Europe and internationally active commodities and trading companies. Despite the challenging geopolitical and economic developments, the Corporate Banking business managed from Vienna performed well over the course of the past financial year. The extensive support for our corporate customers enabled us to assert and strengthen our position as a relationship bank. Income increased further compared to the strong previous year. Important sources of income in the previous financial year once again included traditional lending business and, thanks to the bank’s outstanding product expertise, structured project and acquisition financing, real estate financing and hedging for our customers’ interest rate and foreign currency positions, despite subdued demand for credit. Significant year-on-year growth was recorded in the deposit business due to the changed interest rate environment. The deteriorating economic situation significantly increased risk costs year-on-year. The Corporates business segment nevertheless achieved a very good result. 272Management report · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 Further progress was made in environmental, social and governance (ESG) activities. Customer demand for advisory services in the field of sustainability and sustainable financing solutions remained very high. The high level of interest in ESG was also reflected in the volume of ESG-compliant financing, which was increased further year-on-year. The Climate & Environmental Business Strategy further refined the ESG framework for our business activities. The customer care approach for corporate customers serviced in several countries was improved further to achieve a more uniform service across the RBI Group. The digital product range was also expanded to further enhance the customer experience. The financial year was also significantly influenced by the reorganization of the Corporate Banking and Markets & Investment Banking Management Board areas. The newly created Corporate and Investment Banking (CIB) Customer Coverage and Corporate and Investment Banking (CIB) Products & Solutions Management Board areas have been jointly serving corporate and institutional clients as One Business Bank since 1 September 2023. Valerie Brunner has been overseeing CIB Customer Coverage as a member of the Management Board since 1 November 2023, while Lukasz Januszewski is in charge of CIB Products & Solutions. Institutional Clients In 2023, the Institutional Customers (IC) business area of RBI AG performed remarkably well. Its performance was driven by a combination of growth in the foreign currency and international clearing, settlement and payment services business as well as successful upselling initiatives. Further uplift came from positive developments supported by the current interest rate level in the eurozone and in the CEE currencies. The Group’s gross income in the Institutional Customers business area was significantly higher than the already pleasing result in 2022. Business activities in the CIS region were adversely affected by the ongoing RU/UA crisis. The teams responsible for the Institutional Customers business continued their efforts to terminate correspondent banking relationships with third-party banks in RU and BY wherever possible in order to further reduce risk exposure to these markets. These efforts focused on managing and channeling our important customer relationships in order to comply with all the sanctions and meet the information needs of our global customers. The growing Institutional Customers business in all other regions more than offset the decline in the CIS region thanks to increased transaction volumes in clearing, settlement and payment services, trade finance and securities services. Persistently high inflation and elevated interest rates in some of our markets also supported our efforts to increase business activities in the fixed income value chain and helped to generate significant net interest income from deposits and current accounts. We continued to promote ESG (environmental, social, governance) activities in the Institutional Customers (IC) business area in the past financial year. Demand remained strong for our advisory services in sustainability and sustainable banking services in financing and investment and for capital market issues for our customers. Strong interest in ESG translated into numerous customer communications on this subject. The Climate & Environmental Business Strategy has further refined the ESG framework for our business activities. Our declared objective for 2023 was the successful execution of our comprehensive “One Business Bank” strategy. It focuses on strengthening cross-selling and intensifying Group-wide cooperation in order to profitably expand our product range for our IC customers. In both areas, we reached key milestones toward achieving business success in this segment in the years to come. The previous year once again demonstrated that the regional growth potential for RBI AG in the IC business segment remains intact and that RBI can continue to successfully play its central role as a bridge between East and West for our customers. Capital Markets It was yet another year of geopolitical discord. The European Central Bank responded to the high inflation rate with repeated interest rate hikes; the stock markets nevertheless rose sharply in this environment (DAX up 20.3 per cent, etc.). FX trading matched the previous year’s outstanding result despite lower volatility and trading volumes than the year before due to greater internalization in market making and successful positioning in the CEE region. A new pricing engine including an automated sales trader workflow was implemented for FX options. The previous year’s result was significantly exceeded in money market trading and the securities refinancing business. This was the first time in a long while that demand for EUR financing rose in addition to USD. However, no sustained margin expansion was observed despite further increases in EUR and USD money market interest rates. The customer / counterparty portfolio was expanded in CEE and Southeast Asia in particular. Additional digitalization and automation measures were implemented to raise efficiency. The securities proprietary trading and investment books once again also closed out the year successfully thanks to prudent positioning. Management report273 · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 The best result ever in the eurobonds segment was achieved amid interest rate hikes, a 10-month-long flat market and a bond rally in the last two months of the year. RBI bonds in particular appreciated significantly in value due to the dividend payment and the planned in-kind dividend paid by RBRU to RBI AG. The very positive trend of increased sales and improved profits with interest rate derivatives continued. Indeed, the best result in history was achieved with interest rate derivatives, together with local currency bonds and derivatives, despite the write-off of all existing Russian bond positions. The retail market’s demand for inflation-linked RBI bonds continued in the first half of 2023, but fell away in the second half of the year as inflation declined. Nevertheless, inflation remained an issue for us in H2: Croatian pension funds began using inflation swaps in 2023 to hedge their liabilities against inflation. Collaborating with the Corporates area resulted in various meetings with prominent Austrian corporate customers regarding their interest rate risks. A range of interest rate scenarios and a peer group comparison were presented to the customers to illustrate their balance sheet interest rate risks, followed by several hedging solutions. This discussion resulted in a number of transactions that should solidify long-term relationships with the companies and enhance RBI’s reputation as a problem solver. Various data analytics tools were refined and implemented to enable bond traders, for example, to measure their risks in futures in real time. This has helped with the successful management of relatively large positions, particularly in the extremely fast-moving market for Austrian government bonds, thus significantly increasing the volume traded in market making. In addition, the pricing library for non-standard swaps was extended to CEE currencies; a relative value tool was rolled out that identifies attractive spreads between bonds; and a nearest-neighbor software program was introduced to suggest alternative bonds to customers if RBI does not have the customer’s desired bond on its books. Treasury For medium to long-term refinancing, RBI AG uses long-term deposits and issuance. Issuance is mainly done under RBI AG’s EUR 25,000,000,000 Debt Issuance Program, which enables bonds to be issued in different currencies, formats and structures. RBI AG has also had a program for issuing small-volume bonds and certificates since the integration of Raiffeisen Centro Bank AG. In 2023, RBI AG once again increasingly used international large-volume bonds in various formats alongside long-term deposits in order to implement its funding plan. One € 1,000 million senior issue in January was followed by two € 500 million mortgage covered bond issues in March and May and a € 500 million non-preferred, non-subordinated eligible note in September. RBI AG’s remaining refinancing requirements were covered by small unsecured private placements. The total volume of multi-year deposits and issuance taken up in 2023 amounted to approximately € 4,953 million and had a weighted maturity of approximately four years. At year-end 2022, the total volume of outstanding issued unsecured bonds excluding AT1 amounted to approximately € 9,859 million. For optimum coverage of liquidity requirements, in RBI AG has since 2019 participated in long-term secured financing via the European System of Central Banks (ESCB), i.e. TLTRO III (Targeted Longer-Term Refinancing Operations) of the ECB (European Central Bank). In November 2022, RBI AG repaid an initial TLTRO III tranche of € 500 million ahead of schedule. RBI AG repaid an additional € 3,500 million early in January 2023, € 800 million in June 2023 and € 625 million in December 2023. The total volume of ESCB financing has thus been repaid in full. Certificates and Equity Trading The first full financial year following the integration into RBI AG (demerger date 30 June 2022, legal effect upon entry in the commercial register on 1 December 2022) was very satisfactory, especially in the certificates business. Raiffeisen Certificates Inflation remained high in the first half of 2023. That made it nearly impossible for retail customers to preserve the real value of their assets with traditional fixed-term deposit instruments, despite higher interest rates. However, certificates, which are mainly offered in this customer segment, generated positive real interest rates/returns. The successful business performance and strong issuance activity showed that Raiffeisen Certificates’ product range satisfied important customer needs with very attractive terms. Total issuance was up 35.6 per cent year-on-year, setting a new record and making a significant contribution to the funding of Raiffeisen Bank International AG. The volume of Raiffeisen certificates outstanding at the end of 2023 therefore reached a new all-time high (up 20.6 per cent from the end of 2022). Overall, € 1.96 billion in Raiffeisen certificates were traded in 2023. In order to focus even more strongly on retail customer needs, Raiffeisen Bank International AG’s retail bond business was successfully integrated into the Raiffeisen Certificates, Retail Bonds and Equity Trading business area in September 2023. A total of € 0.32 billion in retail bonds were traded in 2023. 274Management report · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 In the Austrian Raiffeisen sector, the outstanding volume of Raiffeisen certificates reached a new record at the end of 2023 (up 27.0 per cent from 2022). A new record volume of certificates (up 22.8 per cent from 2022) was sold in collaboration with the Raiffeisen banks and regional Raiffeisen banks, including individual issues and intensive training programs for advisors. We also continued to expand digital communication channels such as videos and webinars for advisors and website tools in 2023. The relaunch of Certificate Finder 2.0 in February 2023 gives interested investors a simple website tool for finding a suitable selection of certificates with exciting risk/reward profiles in just a few steps. A record-breaking result was also achieved in the Central and Eastern Europe region, including the current core markets of Slovakia, the Czech Republic, Hungary, Croatia and Poland. The volume of certificates sold increased 41.8 per cent year-on-year. This result was made possible both by the issuance of certificates tailored to customer requirements and market conditions and by very effective collaboration with the local network banks. We also continued to successfully and rigorously expand the digital market presence of certificates in the region. For example, we collaborated with the network banks in Bosnia-Herzegovina and Kosovo to offer certificates to retail customers for the first time. Raiffeisen Czech Republic now offers customers the opportunity to purchase certificates 100 per cent digitally via the online broker EDI (Easy Digital Investing). Work is underway to roll this offering out to other countries. The range of listed certificates on the Warsaw Stock Exchange has also been significantly expanded with the relaunch of the Polish website, which is specifically geared towards the needs of individuals who make their own investment decisions. The Slovak branch of Raiffeisen Bank International AG in Bratislava, whose business activities include the issuance of certificates for the Slovakian market, achieved a particularly high market penetration among retail customers with customized issues. Raiffeisen Certificates received several awards for its products and services in 2023. Raiffeisen Certificates was named Austria’s Best Certificate House for the 17th time in a row at the Zertifikate Award Austria ceremony in September. The team also gained international success at the Structured Retail Products Europe 2023 Awards in London and was re-confirmed as Capital Market Leader in Poland by the Warsaw Stock Exchange. Equity Trading The stock markets were highly volatile in the first half of the year and especially the first quarter of the 2023 financial year, resulting in good business performance in market making. The second half of the year was much calmer despite the geopolitical situation, with much lower volatility in the fourth quarter (due to interest rate and inflation trends), which had a negative impact on the general trading and market-making business, especially in Austria and the Western European markets. We further expanded our trading activities and product range in Poland in particular and Eastern Europe in general, which delivered a very good contribution to earnings. The number of market-making mandates for equities and exchange-traded derivatives on the Central and Eastern European exchanges increased slightly to 237 mandates in total. At the end of the year, RBI was responsible for 108 mandates on the Warsaw Stock Exchange, 49 on the German stock exchanges, 38 mandates on the Vienna Stock Exchange, 29 on the Prague Stock Exchange and 13 on the Bucharest Stock Exchange. On the innovation side, the first-ever certificate on Bitcoin futures was launched in December 2023. Management report275 · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 Group Subsidiaries and Equity Investments Following the sale of Raiffeisenbank Bulgaria in 2022, RBI AG has 12 subsidiary banks in CEE. The certificates business of the former Raiffeisen Centrobank AG, which is strategically relevant for the RBI Group, was transferred to RBI AG as of 1 December 2022, while the company, now named Raiffeisen Digital Bank AG, simultaneously commenced operations in order to expand and deepen our digital product and service range for customers. Crédit Agricole Srbija AD, which was integrated into the consolidated group for the first time as of 1 April 2022, was merged with the Serbian subsidiary bank, Raiffeisen banka a.d., as of 30 April 2023. The business operations of RBI AG and its bank subsidiaries are complemented by numerous additional Austrian and international subsidiaries in the strategic financial services sector as well as other participations, mostly in banking-related ancillary services. RBI AG’s participation strategy aims to safeguard and expand the strategic interests of RBI AG and to steadily increase the value of the overall portfolio. There were no significant shifts in the investment portfolio in 2023. Governance and administration of all participations is steered by RBI Group Subsidiaries and Equity Investments. There were significant write-ups at AO Raiffeisenbank (€ 604.2 million), RZB-BLS Holding GmbH (€ 14.1 million), BAILE Handels- und Beteiligungsgesellschaft m.b.H. (€ 10.1 million) and Salvelinus Handels- und Beteiligungsges.m.b.H. (€ 7.4 million). Significant write-downs were booked at Raiffeisen Digital Bank AG (€ 66.9 million) and FAIRO GmbH (€ 9.8 million). Most of the investees showed a stable to positive development despite ongoing challenges in the macroeconomic environment such as persistently high inflation, a further rise in interest rates and the ongoing conflict in Ukraine. On the one hand, the direct impact of the Ukraine conflict on the investees remained limited since they have little to no direct exposure or business activities in the relevant regions. On the other hand, the general increase in prices, including higher staff costs, was (more than) offset by improvements in earnings. For example, the rising interest rate environment had a positive impact on the earnings prospects of the financial institutions, which constitute the most significant part of the investment portfolio. Retail RBI AG’s retail business consists exclusively of a portfolio of foreign currency retail mortgage loans at the Polish branch in Warsaw. As at 31 December 2023, the net carrying amount of the loan exposures (less impairments) totaled approximately € 2.4 billion, consisting of € 1.90 billion (2022: € 1.91 billion) in Swiss franc loans, € 0.4 billion (2022: € 0.4 billion) in euro loans and € 0.01 billion (2022: € 0.02 billion) in Polish zloty loans. The branch does not currently engage in deposit gathering or new customer acquisition, focusing instead on servicing the foreign currency loans transferred to the branch until their final maturity and on providing services to the borrowers. In 2023, as in previous years, the business environment was marked by the legal dispute between customers with Swiss franc- denominated residential mortgage loans and banks. A provision was recognized in the amount of € 1,652 million (2022: € 803 million) on account of this still-pending legal issue. Polish banks received considerable support from interest rates in the first few months of 2023. The banks’ net interest margin (NIM) continued to rise, while the higher interest rates have not yet caused any significant deterioration in asset quality. The interest rate cuts in September and October totaled 100 basis points. Loan growth was moderate in 2023 with a slight recovery in mortgage sales thanks to the government’s subsidy program, while deposit growth accelerated. The unfavorable ruling of the Court of Justice of the European Union on CHF loans in June 2023 undoubtedly prompted the banks to significantly increase provisions for legal risks in the first half of 2023. 276Management report · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 · Branches and representative offices RBI AG operates a total of six branches in Bratislava, Frankfurt, London, Warsaw, Singapore and Beijing. As service branches, these branches support RBI AG in Vienna and the network banks in customer care and sales activities. In addition to these branches, RBI AG also operates representative offices in Paris, Stockholm, Mumbai, Seoul and Ho Chi Minh City. RBI AG has a branch in Poland. The Polish portfolio mainly comprises retail customers’ foreign-currency mortgage loans. The branch focuses on the administration of the foreign currency loans until their maturity, and additionally takes over the role of liquidator for selected investment funds. It also develops digital solutions for the market and investment banking business, as well as digital cloud solutions for RBI AG. In 2022, a competence center was also established for the core banking system Temenos T24. Through its extensive knowledge of the local markets in Southeast Asia and its contacts with companies, banks and authorities, the Singapore branch supports customers in sales activities, and also in establishing branches or partnerships with local companies. Vice versa, the branch helps companies from the region forge contacts with companies and banks in Austria and Central and Eastern Europe. The Beijing branch operates as a service branch and supports RBI AG and the network banks in customer service and sales activities relating to China. The Belt and Road initiative, under which the branch concluded various cooperation agreements with leading Chinese banks and funds as well as major companies and other financial institutions, is an important driver for international trade and direct investments between Central and Eastern Europe and China. The branch in Beijing serves Chinese state companies, financial institutions and major private companies by providing access from and to RBI AG’s home markets. Business cooperation was intensified in the last year. In particular, RBI AG is increasingly involved in the transcontinental cash management and trading business of these companies and financial institutions, and is well positioned to offer local banking products in CEE to support the increasing Chinese investments in certain sectors. The Frankfurt branch office successfully continued its consulting and structuring services in various forms of working capital financing, as well as its local sales-support activities for RBI AG in its business with subsidiaries of German corporate customers, especially in CEE. In 2023, further working capital financing mandates were secured and implemented for customers in RBI AG’s focus markets, and business was further developed. In addition to winning new customers, another key task in the corporate customer business involves providing sales support for RBI AG’s network, in close collaboration with the corporate customer departments of the RBI Group. The increasing demand from German SME corporate customers for contact points in Germany reflects customers’ centralization of administration functions and decision-making authorities. Building contacts with decision makers at customers’ head offices strengthens customer relationships in CEE and opens up cross- selling potential. RBI AG has been present in London since 1989 and offers a broad range of services for different customer segments. Institutional customers are served by our Capital Market Bond Desk, which offers primary and secondary sales of sovereign and corporate bonds, including special CEE and CIS bonds in local currencies, as well as private placements and structured products. A special focus is on fund financing and alternative investments, where we offer products such as subscription credit facilities as part of our global asset-based finance activities. Our corporate desk provides corporate customers based in the United Kingdom and Ireland with an extensive range of financial products and services offered by RBI AG and the Group’s network banks. The London branch is licensed and supervised by the Financial Conduct Authority. Petr Polach was appointed the new General Manager of RBI’s London branch with effect from October 2023. The branch in Slovakia, which was established in 2017 as a branch of Raiffeisen Centrobank AG, was acquired by and integrated into RBI AG as part of the spin-off process to acquire Raiffeisen Centrobank AG’s Certificates and Equity Trading banking division, and was registered with the commercial register on 1 December 2022. The branch covers a broad range of services and structured products (certificates) for retail customers of Tatra banka a.s. in Slovakia. Following the integration into RBI AG, it has extended its range of services to include Group procurement services and Group reporting services. Management report277 · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 · Financial Performance Indicators Statement of Financial Position RBI AG’s total assets were down € 10,290,662 thousand, or 11.1 per cent, to € 82,323,950 thousand in the 2023 financial year. On the assets side, the decrease is mainly due to lower balances at central banks. On the liabilities side, it mostly relates to a decline in liabilities to credit institutions, among other things due to the repayment of ECB targeted longer-term refinancing operations (TLTRO III). The € 10,389,719 thousand decrease in cash reserves and balances at central banks to € 9,986,223 thousand resulted mainly from reduced investment of surplus liquidity in the form of deposits at the Austrian National Bank and the repayment of ECB targeted longer-term refinancing operations (TLTRO III) due to the interest rate level. Treasury bills and other bills eligible for refinancing with the central bank increased € 1,982,729 thousand to € 8,780,884 thousand in the past financial year, mainly as a result of the higher volume of government bonds. Loans and advances to credit institutions remained virtually unchanged relative to the previous year-end, with a moderate € 92,084 thousand rise to € 13,583,574 thousand. Within this, loans and advances repayable on demand showed an increase of € 23,744 thousand and other loans and advances an increase of € 68,339 thousand. Loans and advances to customers decreased € 2,163,781 thousand, or 7.2 per cent, to € 27,699,949 thousand. The decline mainly reflected a € 2,565,603 thousand reduction in the loan volume. This contrasted with a € 319,794 thousand increase in repo and lending business. Value adjustments to loans and advances to customers were down € 23,188 thousand. Debt securities and other fixed-income securities decreased € 1,016,072 thousand year-on-year, or 21.2 per cent, to € 3,777,295 thousand. Own debt securities held as assets declined a significant 41.6 per cent, or € 1,041,922 thousand, to € 1,459,890 thousand. Shares in affiliated companies increased € 587,572 thousand to € 10,262,525 thousand. This mainly relates to a write-up at AO Raiffeisenbank, RU, in connection with the activities described in the Outlook section. Other assets increased € 437,800 thousand, with a year-end carrying amount of € 6,989,545 thousand. This is mainly due to higher dividends receivable amounting to € 1,200,000 thousand. There was also an increase in accrued interest from derivatives in the banking book, which were up € 207,990 thousand. In contrast, there was a significant decrease of € 1,230,616 thousand, or 25.5 per cent, in positive market values from derivative financial instruments in the trading book. On the liabilities side, liabilities to credit institutions showed a significant decline of € 8,615,488 thousand, or 24.4 per cent, to € 26,684,646 thousand. Liabilities to credit institutions represent a significant source of funding for RBI AG, at 32 per cent of total assets. Long-term money market transactions decreased € 7,609,301 thousand in the financial year. In connection with the ECB’s Targeted Longer-Term Refinancing Operations (TLTRO III), the ECB increased the key interest rate underlying these financial instruments in several steps in the past year, resulting in a repayment in the full amount of € 4,925,000 thousand in the 2023 financial year. Long-term money market transactions were also down on the previous year-end, with a decrease of € 2,757,023 thousand. Short-term giro and clearing business showed a decline of € 1,404,810 thousand. Conversely, short-term interbank money market transactions increased € 393,066 thousand. Liabilities to customers decreased € 3,195,963 thousand, or 13.8 per cent, to € 19,901,522 thousand. The decrease is mainly due to lower long-term money market transactions and time deposits, which were down € 1,198,139 thousand and € 1,685,923 thousand, respectively, on the previous year-end. Short-term giro and clearing business was also down, with a decrease of € 427,684 thousand. Securitized liabilities and supplementary capital according to CRR rose € 1,020,608 thousand, or 5.6 per cent, year-on-year to € 19,186,946 thousand. Funds raised through new issues totaled € 4,076,008 thousand in 2023 (2022: € 4,300,265 thousand). In contrast, retirements of securitized liabilities from scheduled and early repayments amounted to € 3,055,381 thousand in 2023 (2022: € 340,217 thousand). During the reporting year, RBI AG issued an unsecured, non-subordinated senior non-preferred bond for € 500,000 thousand with a maturity of five years. 278Management report · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 Other liabilities decreased € 807,482 thousand year-on-year to € 4,572,765 thousand. This mainly relates to € 1,390,144 thousand lower negative market values from derivative financial instruments in the trading book. Liabilities from short positions in trading increased € 474,086 thousand. Accruals on derivatives in the banking book were also up € 204,931 thousand. The provisions included provisions of € 51,174 thousand for severance payments (31/12/2022: € 51,039 thousand), provisions of € 61,475 thousand for pensions (31/12/2022: € 61,150 thousand), tax provisions of € 18,253 thousand (31/12/2022: € 10,356 thousand), and other provisions of € 816,794 thousand (31/12/2022: € 644,358 thousand). The increase in tax provisions is mainly due to the allocation to the provision for corporation tax for 2023 in the amount of € 8,150 thousand. The rise in other provisions mainly relates, in the amount of € 192,881 thousand, to higher provisions for litigation risks, the main item being the provision for litigation risks due to litigation concerning foreign currency loans in Poland. Provisions for guarantee loans and provisions for operational risk/losses/other decreased compared to the previous year. Total risk exposure at year-end 2023 was € 40,461,266 thousand (2022: € 41,903,360 thousand). Of that amount, credit risk accounted for € 34,625,104 thousand (2022: € 35,802,082 thousand), market risk for € 2,598,770 thousand (2022: € 2,249,908 thousand), and operational risk for € 3,033,801 thousand (2022: € 2,904,518 thousand). Total risk exposure was down around € 1,442,094 thousand year-on-year. Common equity tier I (CET1) capital was up to € 8,098,538 thousand at year-end 2023 (2022: € 7,315,696 thousand). Tier 1 capital amounted to € 9,705,412 thousand (2022: € 8,926,870 thousand). RBI AG issued no additional tier 1 capital in 2023. Tier 2 capital amounted to € 1,990,443 thousand (2022: € 2,252,687 thousand). All in all, total capital amounted to € 11,695,855 thousand, a year-on-year rise of € 516,298 thousand. The CET1 ratio improved relative to the previous year’s figure to 19.9 per cent (2022: 17.3 per cent). The tier 1 ratio was 23.9 per cent and thus increased 2.8 percentage points year-on-year. The total capital ratio was 28.8 per cent (2022: 26.6 per cent). All capital ratios were sufficiently above the respective requirements (including all buffer and Pillar 2 requirements). The committed capital reserves of € 4,334,726 thousand (31/12/2022: € 4,334,286 thousand) were virtually unchanged in the financial year. The uncommitted capital reserves amount to € 93,179 thousand (2022: € 94,779 thousand). The number of own shares related to the share incentive program (SIP) for key personnel in the company (Management Board and senior executives) and members of the management boards of associated bank subsidiaries where the own shares were acquired in the years 2005 to 2009 amounted to 322,204 shares at year-end 2023. With a nominal value of € 983 thousand, this represented 0.1 per cent of share capital. The share incentive programs expired in 2018, ending commitments to allot further own shares under the programs. The total number of own shares was 573,938 shares at year-end 2023 (2022: 510,450 shares). The increase is due to the market-making obligation of the Certificates and Equity Trading business division. Retained earnings covered legal reserves of € 5,500 thousand (31/12/2022: € 5,500 thousand) and other free reserves of € 2,370,678 thousand (31/12/2022: € 1,680,918 thousand). Of the other free reserves, an amount of € 502,049 thousand (31/12/2022: € 403,914 thousand) was earmarked for the Raiffeisen IPS. As a result of the agreement on the establishment of the institutional protection scheme and a corresponding decision of the Raiffeisen IPS Risk Council, a contribution of € 98,135 thousand (31/12/2022: € 51,253 thousand) was allocated to other reserves in 2023 as a reserve for the Raiffeisen IPS. The reserve for the Federal IPS is not eligible for inclusion in the calculation of own funds under the CRR. The liability reserve of € 535,097 thousand was unchanged at year-end 2023 (31/12/2022: € 535,097 thousand). Earnings performance In the 2023 financial year, RBI AG reported a decrease in net interest income of 13.0 per cent, or € 63,046 thousand, to € 423,415 thousand. The interest rate environment during the reporting period was characterized by the increase in the ECB’s key interest rates to 4.5 per cent at the end of 2023 (31/12/2022: 2.5 per cent). The decline in RBI AG’s net income is due to the higher expense of refinancing the bank’s own issues (including AT1 coupons) and volume-related declines in the corporate customer business. The terms of existing longer-term refinancing transactions were also adjusted upwards in several steps over the course of the year, creating an incentive for early repayment. As of the end of 2023, RBI AG repaid all outstanding tranches of the ECB’s TLTRO III program for a total of € 4,925,000 thousand. Income from securities and participating interests increased € 1,222,098 thousand to € 1,786,418 thousand due to higher dividend income from affiliated companies. The income from participating interests in the 2023 financial year was mainly from RS Beteiligungs GmbH (€ 1,700,000 thousand). The net amount of commissions payable and commissions receivable was up € 8,778 thousand to € 361,433 thousand. Much of the increase related to a € 39,706 thousand higher volume of transactions in clearing, settlement and payment services. Securities and custody business, on the other hand, decreased € 16,767 thousand, partly due to fee and commission expenses in Management report279 · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 Certificates and Equity Trading, which is included for a full reporting period for the first time following the integration of Raiffeisen Centrobank AG in the previous year with a demerger date of 30 June 2022. Net fee and commission income from the loan and guarantee business was also down, falling € 9,851 thousand relative to the previous year. The foreign currency, notes/ coins and precious metals business also decreased € 5,888 thousand in the financial year. The net profit on financial operations was positive at € 56,806 thousand in the 2023 financial year, € 36,684 thousand below the previous year’s level (2022: profit of € 93,490 thousand). This mainly reflected € 615,609 thousand lower net trading income from the valuation of certificates, included for a full financial year for the first time in 2023, from the former Raiffeisen Centrobank AG integrated as of the 30 June 2022 demerger date, and from other transactions. Net income from currency- based derivative, foreign currency and notes/coins business was also down, at € 49,564 thousand. Net trading income from interest-based derivative and securities transactions increased € 639,125 thousand in the 2023 financial year, again with a significant contribution from the integration of Raiffeisen Centrobank AG with valuation effects in connection with the hedging of certificates issued in the previous year. Other operating income includes staff and administrative expenses passed on for services in the amount of € 145,207 thousand (2022: € 157,242 thousand), income from releases of provisions for impending losses from derivatives in the amount of € 19,517 thousand (2022: € 6,714 thousand), income from close-out fees for derivatives on the banking book in an amount of € 97,778 thousand (2022: € 16,963 thousand) and income from the release of other provisions in the amount of € 1,742 thousand (2022: € 3,980 thousand). Operating income therefore totaled € 2,933,485 thousand, a 71.6 per cent increase year-on-year (2022: € 1,709,574 thousand). Operating expenses were up 40.5 per cent relative to the 2022 financial year to € 2,165,988 thousand. Staff expenses increased € 85,751 thousand, or 20.4 per cent, to € 506,046 thousand. The increase in expenses for wages and salaries over the previous year reflects the inflation-related wage and salary rises and the larger headcount. Other administrative expenses increased € 64,171 thousand, or 14.2 per cent, to € 516,183 thousand and consisted mainly of IT expenses of € 188,122 thousand (2022: € 161,453 thousand), consulting and audit fees of € 137,791 thousand (2022: € 78,684 thousand), rent of € 37,999 thousand (2022: € 35,460 thousand), and communication expenses of € 25,687 thousand (2022: € 18,863 thousand). Depreciation of tangible assets and intangible fixed assets showed a decrease of € 1,370 thousand to € 12,315 thousand in the reporting period (2022: € 13,685 thousand). Other operating expenses increased a significant € 475,958 thousand in the past financial year to € 1,131,444 thousand. This includes provisions for impending losses on banking book derivatives in the amount of € 19,816 thousand (2022: € 62,582 thousand), allocations of other provisions (see also the “Provisions” item and under the heading “Litigation risk for foreign currency loans in Poland”) in the amount of € 873,400 thousand (2022: € 462,000 thousand) and expenses of € 157,002 thousand (2022: € 9,971 thousand) from close-out fees for banking book derivatives. Also included are expenses for staff and administrative expenses passed on for services in the amount of € 30,113 thousand (2022: € 57,944 thousand). After deducting operating expenses from operating income, RBI AG generated an operating result of € 767,496 thousand for the 2023 financial year. This represents a year-on-year increase of € 599,400 thousand. As a consequence, the cost/income ratio (operating expenses divided by operating income) was 73.84 per cent (2022: 90.17 per cent). Net income/expenses from the disposal and valuation of loans and advances and securities classified as current assets resulted in net income – in contrast to the previous year – of € 49,987 thousand (2022: net expense of € 164,641 thousand). This development was due, firstly, to positive valuation results and proceeds from disposals of securities held as current assets and banking book derivatives in the amount of € 149,120 thousand (2022: minus € 60,546 thousand) and, secondly, to an improvement in the valuation of loans and guarantees to minus € 99,133 thousand (2022: minus € 104,095 thousand). With regard to individual loan loss provisions, RBI AG reported a net allocation to provisions of € 213,567 thousand, an increase of € 128,560 thousand compared to the previous year. The increase is mainly due to increased individual loan loss provisions, which became necessary due to the current economic trends in real estate financing. In contrast, the current financial year shows a positive trend in the risk assessment of non-defaulted loans and advances. The result was a net release of portfolio- based loss provisions in the current financial year in the amount of € 106,086 thousand (2022: net allocation of € 20,910 thousand). The decrease is due to the release of provisions recognized in the previous year for general political risks, notably the Russia sanctions and the Russian business managed from Vienna, in the amount of € 46,940 thousand (2022: minus € 22,862 thousand). A further contributor was the reversal of valuation allowances (special risk factors) in the amount of € 27,030 thousand due to reduced macroeconomic risks. In addition, there were net reversals in the current financial year due to the organic development of RBI AG’s loan portfolio. Material and non-material contractual amendments generated book gains of € 1,560 thousand (2022: minus € 1,820 thousand). Net income from exceptional disposals of loan receivables amounted to minus € 1,124 thousand in the financial year (2022: minus € 2,311 thousand). No losses on shares in investment funds were realized in the financial year (2022: € 162 thousand). Net income/expenses from the disposal and valuation of securities valued as financial investments and of shares in affiliated companies and equity participations included write-ups totaling € 646,712 thousand in the financial year, including € 604,249 thousand at AO Raiffeisenbank, RU. Shares in affiliated companies and equity participations were written down by a total of 280Management report · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 € 85,049 thousand in the financial year, including € 66,850 thousand at Raiffeisen Digital Bank AG, Vienna, and € 9,795 thousand at Fairo GmbH, Vienna. Disposals of shares in affiliated companies and equity participations resulted in net income of € 10,974 thousand in the financial year (2022: € 17 thousand). In total, € 572,637 thousand in gains (2022: € 965,955 thousand in losses) were reported on the valuation and disposal of shares in affiliated companies and equity participations. As a result, the profit on ordinary activities for the year under review amounted to € 1,385,892 thousand (2022: loss of € 972,960 thousand). The return on equity before tax (profit before tax divided by average equity in 2023, including AT1 instruments) was 14.0 per cent in the financial year (2022: minus 9.7 per cent). The net reorganization loss of € 3,553 thousand shown for the 2022 financial year related to the demerger of Raiffeisen Centrobank AG for absorption in RBI AG. The income tax item shows net income of € 14,410 thousand for the 2023 financial year (2022: income of € 5,531 thousand). This includes income from current income taxes of € 15,105 thousand (2022: income of € 5,859 thousand), deferred tax expense of € 631 thousand (2022: deferred tax income of € 504 thousand) and tax income for previous years of € 7,943 thousand (2022: expense of € 258 thousand). Also included in this item is foreign withholding tax in the amount of € 8,007 thousand (2022: € 574 thousand). The return on equity after tax (net income after tax divided by average equity in 2023, including AT1 instruments) was 14.1 per cent (2022: minus 9.9 per cent). The profit after tax in 2023 was thus € 1,396,461 thousand (2022: loss after tax of € 991,175 thousand). After movements in reserves of minus € 688,135 thousand and profit of € 123,133 thousand brought forward from the previous year, net profit was € 831,459 thousand (2022: € 387,571 thousand). Management report281 · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 · Capital, share, voting and control rights The following disclosures satisfy the provisions of § 243a (1) of the Austrian Commercial Code (UGB): (1) As at 31 December 2023, the company’s share capital amounted to € 1,003,265,844.05 and was divided into 328,939,621 voting common bearer shares. As at 31 December 2023, 573,938 (31 December 2022: 510,450) of those were own shares, and consequently 328,365,683 shares were outstanding at the reporting date. (2) The Articles of Association contain no restrictions concerning voting rights or the transfer of shares. The regional Raiffeisen banks and direct and indirect subsidiaries of the regional Raiffeisen banks are parties to a syndicate contract (syndicate agreement) regarding RBI AG. The terms of this syndicate agreement include not only a block voting agreement and preemption rights, but also a prohibition on sales of the RBI shares held by the regional Raiffeisen banks (with few exceptions) , if the sale would reduce the regional Raiffeisen banks’ aggregate shareholding in RBI AG (direct and/or indirect) to less than 40 per cent of the share capital plus one share. (3) Raiffeisenlandesbank Niederösterreich-Wien AG holds directly and indirectly total around 24.83 per cent of the share capital of the company. By virtue of the syndicate agreement regarding RBI AG, the regional Raiffeisen banks and their direct and indirect subsidiaries as parties acting in concert as defined in § 1 (6) of the Austrian Takeover Act (ÜbG). The regional Raiffeisen banks hold a total of around 61.00 per cent of the voting rights. The remaining shares of RBI AG are held in free float, with no other direct or indirect shareholdings amounting to 10 per cent or more known to the Management Board. (4) The Articles of Association do not contain any special rights of control associated with holding shares. According to the syndicate agreement for RBI AG, the regional Raiffeisen banks can nominate nine members of the RBI AG Supervisory Board. In addition to the members nominated by the regional Raiffeisen banks, the RBI AG Supervisory Board should also include three independent representatives of free-float shareholders who are not attributable to the Austrian Raiffeisen Banking Group. (5) There is no control of voting rights arising from interests held by employees in the share capital. (6) Pursuant to the Articles of Association, a person who is aged 68 years or older may not be appointed as a member of the Management Board or be reappointed for another term in office. The rule for the Supervisory Board is that a person who is aged 75 years or older may not be elected as a member of the Supervisory Board or be re-elected for another term in office. Moreover, no person who already holds eight supervisory board mandates in publicly traded companies may be a member of the Supervisory Board. Holding a position as chairman of the supervisory board of a publicly traded company would count twice for this purpose. The Annual General Meeting may choose to waive this restriction through a simple majority of votes if permitted by law. Any candidate who has more mandates for, or chairman positions on, supervisory boards in publicly traded companies must disclose this to the Annual General Meeting. There are no further regulations regarding the appointment or dismissal of members of the Management Board and the Supervisory Board beyond the provisions of the relevant laws. The Articles of Association stipulate that the resolutions of the Annual General Meeting are, provided that there are no mandatory statutory provisions to the contrary, adopted by a simple majority of the votes cast. Where the law requires a capital majority in addition to the voting majority, resolutions are adopted by a simple majority of the share capital represented in the votes. As a result of this provision, members of the Supervisory Board may be dis-missed prematurely by a simple majority. The Supervisory Board is authorized to adopt amendments to the Articles of Association that only affect the respective wording. This right may be delegated to committees. Furthermore, there are no regulations regarding amendments to the company Articles of Association beyond the provisions of the relevant laws. (7) Pursuant to § 169 of the Austrian Stock Corporation Act (AktG), the Management Board has been authorized since the Annual General Meeting of 13 June 2019 to increase the share capital with the approval of the Supervisory Board – in one or more tranches – by up to € 501,632,920.50 through the issuance of up to 164,469,810 new voting common bearer shares in exchange for contributions in cash and/or in kind (including by way of the right of indirect subscription by a bank pursuant to § 153 (6) of the AktG) by 2 August 2024 at the latest and to fix the offering price and terms of the issue with the approval of the Supervisory Board. The Management Board is further authorized to exclude shareholders’ subscription rights with the approval of the Supervisory Board (i) if the capital increase is carried out in exchange for contributions in kind, or (ii) if the capital increase is carried out in exchange for contributions in cash and the shares issued under the exclusion of subscription rights do not exceed 10 per cent of the company’s share capital (exclusion of subscription rights). The (i) utilization of authorized capital with exclusion of the statutory subscription right in the event of a capital increase in return for a contribution in cash, and the (ii) implementation of the conditional capital resolved upon in the Annual General Meeting on 20 October 2020 in order to grant conversion or subscription rights to convertible bond creditors may not exceed 10 per cent in total of the share capital of the company. The utilization of the authorized capital in the form of a capital increase in return for a contribution in kind is not 282Management report · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 covered by this restriction. No use has been made to date of the authority granted in June 2019 to utilize the authorized capital. The share capital is conditionally increased (conditional capital) pursuant to § 159 (2) 1 of the AktG by up to € 100,326,584 by issuing of up to 32,893,962 ordinary bearer shares. The conditional capital increase will only be implemented to the extent that use is made of an irrevocable right of conversion into or subscription to shares which the company grants to the creditors holding convertible bonds issued on the basis of the resolution passed at the Annual General Meeting on 20 October 2020, or in the event of having to fulfil a conversion obligation set out in the convertible bonds’ terms of issuance. In both cases, the Management Board does not decide to allocate own shares. The issue price and the conversion ratio are to be calculated in accordance with recognized quantitative financial methodologies and the price of the company’s shares in a recognized pricing procedure (calculation basis of the issuance price); the issue price may not be below the proportionate amount of the share capital. The newly issued shares from the conditional capital increase are entitled to a dividend equivalent to that of the shares traded on the stock exchange at the time of issuance. The Management Board is authorized, with the approval of the Supervisory Board, to determine the further details of the implementation of the conditional capital increase. The Management Board was further authorized pursuant to § 174 (2) of the AktG by the Annual General Meeting on 20 October 2020, within 5 years from the date of the resolution, i.e. until 19 October 2025, with the consent of the Supervisory Board, to issue also in several tranches, convertible bonds with rights to convert into or subscribe to shares of the company or convertible bonds with conversion obligations (contingent convertible bonds pursuant to § 26 of the Banking Act), including convertible bonds that meet the requirements for Additional Tier 1 capital instruments pursuant to Regulation (EU) No. 575/2013 of the European Parliament and the Council of 26 June 2013 on supervisory requirements for credit institutions and investment firms, as amended, with full exclusion of shareholders’ subscription rights. The authorization includes the issuance of convertible bonds in a total nominal amount of up to € 1,000,000,000 with rights to convert into or subscribe to up to 32,893,962 ordinary bearer shares of the company with a proportionate amount of the share capital up to € 100,326,584. The issue price and the conversion ratio are to be calculated in accordance with recognized quantitative financial methodologies and the price of the company shares in a recognized pricing procedure (calculation basis of the issuance price); the issue price of the convertible bonds may not be below the proportionate amount of the share capital. In this respect, the Management Board is authorized to determine all further issuance and structural features as well as the issuance terms and conditions of the convertible bonds, in particular the interest rate, issue price, term of validity and denomination, provisions protecting against dilution, conversion period, conversion rights and obligations, conversion ratio and conversion price. The convertible bonds may also be issued – observing the limit of the corresponding equivalent value in euros – in the currency of the United States of America and in the currency of any other Organization for Economic Cooperation and Development (OECD) member state. The convertible bonds may also be issued by a company which Raiffeisen Bank International AG owns 100 per cent of, directly or indirectly. For this event, the Management Board is authorized to provide, with the consent of the Supervisory Board, a guarantee for the convertible bonds on behalf of the company and to grant the holders of the convertible bonds conversion rights into ordinary bearer shares of Raiffeisen Bank International AG and, if a conversion obligation is stipulated in the convertible bonds’ issuance terms, to enable the obligation of conversion into ordinary bearer shares of Raiffeisen Bank International AG to be fulfilled; with the exclusion of the rights of shareholders to subscribe to the convertible bonds.There have been no convertible bonds issued to date. The Annual General Meeting held on 31 March 2022 authorized the Management Board pursuant to § 65 (1) 8, § 65 (1a) and § 65 (1b) of the AktG to purchase own shares and to retire them if appropriate without requiring any further prior resolutions to be passed by the Annual General Meeting, though with the approval of the purchase by the Supervisory Board can also be effected off-exchange under the exclusion of the shareholders’ pro rata tender right. Own shares, whether already purchased or to be purchased, may not collectively exceed 10 per cent of the company’s share capital. The authorization to purchase own shares expires 30 months after the date of the Annual General Meeting resolution, i.e. until 30 September 2024. The acquisition price for repurchasing the shares may be no lower than € 3.05 per share and no higher than 10 per cent above the average unweighted closing price over the 10 trading days prior to exercising this authorization. The authorization may be exercised in full or in part or also in several partial amounts, for one or more purposes – with the exception of securities trading – by the company, by a subsidiary (§ 189a (7) of the UGB) or by third parties for the account of the company or a subsidiary. The Management Board was further authorized, pursuant to § 65 (1b) of the AktG, to decide, with the approval of the Supervisory Board, on the sale of own shares by means other than the stock exchange or a public tender, to the full or partial exclusion of shareholders’ subscription rights, and to stipulate the terms of sale. Shareholders’ subscription rights may only be excluded if the own shares are used to pay for a contribution in kind, to acquire enterprises, businesses, operations or stakes in one or several companies in Austria or abroad. Furthermore, shareholders’ subscription rights may be excluded in the event that convertible bonds are issued in future, in order that (own) shares may be issued to such convertible bond creditors that have exercised their right of conversion into or subscription to shares in the company, and also in the event of a conversion obligation stipulated in the convertible bonds’ issuance conditions in order to fulfil this conversion obligation. This authorization may be exercised in whole, in part or in several partial amounts for one or more purposes by the company, a subsidiary (§ 189a 7 UGB) or by third parties for the account of the company or a subsidiary and remains in force for five years from the date of this resolution, i.e. until 31 March 2027. Since that time, there were no own shares purchased based on this authorization from March 2022. The Annual General Meeting of 31 March 2022 also authorized the Management Board, under the provisions of § 65 (1) 7 of the AktG, to purchase own shares for the purpose of securities trading, which may also be conducted off-market, during a period of 30 months from the date of the resolution (i.e. until 30 September 2024), provided that the trading portfolio of shares purchased for this purpose does not at the end of any given day exceed 5 per cent of the company's respective share capital. Management report283 · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 The consideration for each share to be acquired must not be less than half the closing price at the Vienna Stock Exchange on the last day of trading preceding the acquisition and must not exceed twice the closing price at the Vienna Stock Exchange on the last day of trading preceding the acquisition. This authorization may be exercised in full or in part or also in several partial amounts by the company, by a subsidiary (§ 189a (7) UGB) or by third parties acting for the account of the company or a subsidiary. (8) The following material agreements exist, to which the company is a party, and which take effect, change, or come to an end upon a change of control in the company as a result of a takeover bid: · RBI AG is insured under a Group-wide D&O policy. In the event of a merger with another legal entity, the insurance policy would automatically cease at the end of the insurance period in which the merger took effect. In such cases, insurance cover only exists for claims for damages arising from breaches of obligations that occurred before the merger, which are reported to the insurer prior to the termination of RBI AG’s Group-wide D&O insurance cover. · RBI AG is a member of the Professional Association of Raiffeisen Banks. Upon a change in control of RBI AG which results in the attainment of control by shareholders outside of the Raiffeisen Banking Group Austria, membership of the Professional Association of Raiffeisen Banks, as well as that of the Raiffeisen-IPS pursuant to Art. 113 (7) of the CRR, the Österreichische Raiffeisen-Sicherungseinrichtung eGen and of the Raiffeisen Customer Guarantee Scheme Austria may be terminated. RBI AG also serves as the central institution of the Raiffeisen Banking Group at a national level. Upon a change in control of RBI AG, related contracts (central institution of the liquidity group pursuant to § 27a of the BWG may end or change. · The company’s refinancing agreements and agreements concerning third-party financing for subsidiaries, which are guaranteed by the company, stipulate in some cases that the lenders can demand early repayment of the financing in the event of a change in control. (9) There are no indemnification agreements between the company and its Management Board and Supervisory Board members or employees that would take effect in the event of a public takeover bid. · Non-financial Performance Indicators Pursuant to the Sustainability and Diversity Improvement Act (NaDiVeG), the consolidated non-financial statement, which has to be prepared in accordance with § 267a of the Austrian Commercial Code (UGB), is issued as an independent non-financial report (Sustainability Report). The report containing detailed information on sustainability management developments, will be published online at www.rbinternational.com → Sustainability & ESG → Sustainability Reports and also contains the disclosure for the parent company in accordance with § 243a of the UGB. 284Management report · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 · Research and Development The current research and development activities of RBI AG are explained below with reference § 243 (3) 2 UGB. Due to the approach of developing products and technical solutions more centrally and subsequently making them available to all banks in the group, the activities in RBI are discussed in the following statements. Digitalization A central theme for banks in the advancement of digitalization is the growing relevance of mobile banking. Penetration (the rate of active mobile banking use) reached 60 per cent in retail (though this figure varies between markets) and is above that of local peers. The sale of E2E digital loans at group level reached 52 per cent in 2023. With its product range for retail customers and small businesses, RBI places a strong focus on the full end-to-end digitalization of core products (accounts, payments/cards and loans). RBI expects to achieve cost savings and additional income through this as well as the branch network optimization. In addition, RBI is continuing its efforts to develop more products and individual product components centrally and make them available to all of the Group’s banks. Aside from the cost benefit, this should lead to a substantial reduction in the time required for the full digitalization of the five most important products across the entire Group (current accounts, credit cards, consumer loans as well as current accounts and loans for SMEs). With the Easy Digital Investing (EDI) platform, Raiffeisenbank Czech Republic was the first large bank in the Czech Republic to introduce a mobile investment application for retail clients at the end of 2022. At the end of 2023, around 18,000 customers were already using the platform's services. Half of the EDI users are new-to-invest customers (i.e. customers, who have never had an investment product with Raiffeisenbank Czech Republic), which positively confirms RBI’s ability to attract new customers, and overall increases the penetration of investment products. EDI was developed as a standardized group solution, hence a timely rollout in other countries is currently being planned. Digitalization is also a key issue for corporate and institutional customers. The main challenge is to enable process streamlining and a reduction of paper-based procedures in the interface with customers. Since the end of 2019, RBI has digitized a series of products and services on the myRaiffeisen platform. This includes a digital KYC process (eKYC) for companies and institutional customers, digital account opening (Group eAccount Opening), digital export finance (eSpeedtrack) as well as further services such as eFinance, eGateway, eArchive, and the digital payment questionnaire for correspondent banking clients (ePIC). In 2022, eTradeOn, a tool to manage guarantees online, was added to the myRaiffeisen product range. RBI is one of the first banks in the CEE region to offer a group-wide account opening feature for international customers, addressing one of the core needs of thesegment for region-wide services. Further products and solutions are planned to follow in the coming years with a similar setup. Since 2019, RBI has successfully rolled out features to the network banks, achieving more than 4,000 digitally initiated KYC cases group-wide, supported by more than 1,600 digital account opening requests and a digitally requested lending volume of € 1.3 billion. Digital penetration of KYC processes in RBI head office is on a stable level of >70 per cent and the majority of first account openings are requested digitally. In response to customer needs in the FX business, RBI launched a single-bank FX platform (R-Flex) in Romania and Croatia in 2022 and in Hungary in 2023. R-Flex enables FX transactions in digital form, including real-time information and fast settlement, both in the online and mobile versions. Compared to the previous year, the number of platform users has increased from 4,500 to 37,000. It is planned to roll out the product to further countries in 2024. Management report285 · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 Innovation Areas The topics of artificial intelligence (AI) and blockchain technology have been identified as strategically important fields for further monitoring and research for the RBI in 2023. In 2023, there was a notable surge in the adoption and utilization of AI technology, leading to the democratization of AI. To maintain competitiveness and consistently provide top-notch solutions to clients, RBI introduced a strategic AI initiative. This initiative aims to assess the impact of AI on RBI and explore its potential in customer-facing products. It will be implemented in stages, encompassing employee education, awareness, and the development of innovative products and services. Blockchain technology is another strategic field of interest for RBI due to its potential to revolutionize the financial industry. Potential applications include fast and secure payments and transactions, improving internal processes, and enabling tokenization of clients’ assets. A dedicated team for this topic was formed several years ago to monitor market developments and the technology’s potential for client-facing products. In 2023, two internal projects explored the potential of asset tokenization and institutional-grade digital asset custody, both of which will continue in 2024. IT In 2023, RBI adopted its 2024-2025 Strategy Outlook, which outlines its commitment to being a data-centric company, emphasizing data accessibility, quality, and business value. The bank streamlined operations and automated processes to cater to the growing need for real-time services, and RBI’s operating model shifted towards client-centricity, stability, and digitalization. RBI’s commitment to agility was emphasized by consistently developing maturity in this area, achieving enterprise agility, and securing a leading position in the CEE region. IT security was bolstered through a risk-based alert system that enables a rapid response and the migration of more than 14,000 repositories to GitHub to ensure greater efficiency in source code management. RBI attaches great importance to the introduction of cloud technology. By reaching the milestone of 50 per cent in Ukraine, Kosovo and Albania, RBI demonstrated a leading role among banks in these regions. The transition of applications to the cloud reached 44 per cent at head office level and 40 per cent at network banks level in 2023. In a bid to solidify its standing as a top-tier IT employer, RBI inaugurated Raiffeisen Tech centers in Poland, Romania, and Kosovo, creating job opportunities for global IT professionals and promoting employee development. · Corporate Governance Further information can be found in the Corporate Governance Report chapter of the Annual Report, as well as on the RBI website (www.rbinternational.com → Investors → Corporate Governance & Remuneration). 286Management report · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 · Risk report Active risk management is a core competency of RBI AG. In order to effectively identify, measure, and manage risks the bank continues to develop its comprehensive risk management system. Risk management is an integral part of overall bank management. In particular, in addition to legal and regulatory requirements, it takes into account the nature, scale, and complexity of the business activities and the resulting risks. The risk report describes the principles and organization of risk management and describes current risk exposure in all material risk categories. Risk management principles RBI AG has a system of risk principles and procedures in place for measuring and monitoring risk, which is aimed at controlling and managing the bank’s risks. The risk policies and risk management principles are laid out by the Management Board of RBI AG. These are regularly reported and discussed in the Supervisory Board committees. The bank’s risk principles include the following: · Risk awareness A risk culture is promoted which consciously deals with the risks inherent in banking business, in particular through the transparent presentation of information and the use of suitable tools. · Risk appetite Risk-taking is cautious and requires a pre-defined minimum return on the risk. · Risk management State-of-the-art risk management and risk controlling technologies are used which are commensurate with the materiality of the risks; risk data and risk report technologies are also effectively combined. · Regulatory requirements All provisions and requirements of the supervisory authorities relating to risk management are taken into account and complied with. · Integrated risk management Credit, country, market, liquidity, participation and operational risks are managed as key risks on a bank-wide basis. For this purpose, these risks are measured, limited, aggregated, and compared to available risk coverage capital. · Standardized methodologies Risk measurement and risk limitation methods are standardized in order to ensure a consistent and coherent approach to risk management. This forms the basis for consistent overall bank management across all countries and business lines in RBI AG. · Continuous planning Risk strategies and risk capital are reviewed and approved in the course of the annual budgeting and planning process, whereby special attention is also paid to preventing risk concentrations. · Independent control A clear personnel and organizational separation is maintained between business operations and all risk management or risk controlling activities. · Ex ante and ex post control Risks are consistently measured within the scope of product selling and in risk-adjusted performance measurement. Thereby it is ensured that business in general is conducted only under risk-return considerations and that there are no incentives for taking high risks. · New business areas New products and market launches are subject to a prior, specific risk analysis and risk assessment and are decided on by the relevant committees and bodies. Management report287 · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 Organization of risk management The Management Board of RBI AG ensures the proper organization and ongoing development of risk management. It decides which procedures are to be employed for identifying, measuring, and monitoring risks, and makes steering decisions according to the risk reports and analyses. The Management Board is supported in undertaking these tasks by independent risk management units and special committees. RBI AG’s risk management functions are performed on different levels. RBI AG develops and implements the relevant concepts as the parent credit institution and in cooperation with the subsidiaries of the Group. The central risk management units are responsible for the adequate and appropriate implementation of the risk management processes throughout the company. In addition, they implement the risk policy in the respective risk categories and manage RBI AG’s activities within the approved risk budget. ESG risks are implemented and managed within the framework of a project that spans business lines and includes all risk areas. The central and independent risk controlling function under the Austrian Banking Act is performed by the Group Risk Controlling organizational area. Its responsibilities include developing the company-wide framework for overall bank risk management (integrating all risk types) and preparing independent reports on the risk profile for the Supervisory Board’s Risk Committee, the Management Board and the heads of individual business units. Risk committees The Group Risk Committee is the most senior decision-making body for all of the Group’s risk-related topic areas. It decides on the risk management methods and on the control concepts used for the overall Group and for key subdivisions, and is responsible for ongoing development and implementation of methods and parameters for risk quantification and for refining steering instruments. This also includes setting the risk appetite and the various risk budgets and limits at overall bank level as well as monitoring the current risk situation with respect to internal capital adequacy and the corresponding risk limits. It approves risk management and controlling activities (such as the allocation of risk capital) and advises the Management Board on these matters. The Group Risk Committee’s scope of responsibility also includes resolution-related topics and decisions reflecting the respective SRB guidelines & requirements. The Group Asset/Liability Committee assesses and manages the statement of financial position structure and liquidity risks and defines the standards for internal funds transfer pricing. In this context it plays an important role in planning long-term funding and the hedging of structural interest rate and foreign exchange risks. The Group Capital Management Committee is a sub-committee of the Group Asset/Liability Committee and analyses, controls and manages the regulatory capital ratios as well as the structural currency and interest rate risk of the capital position. The Market Risk Committee controls market risks arising from trading and banking book transactions and establishes corresponding limits and processes. In particular, it relies on profit and loss reports, the risks calculated and the limit utilization, as well as the results of scenario analyses and stress tests with respect to market risks. The Credit Committees are staffed by front office and back office representatives, with the staff assignments depending on the type of customer (corporate customers, banks and sovereigns). The committees decide upon the specific lending criteria for the different customer segments and countries and make all credit decisions concerning those segments and countries in connection with the credit approval process (depending on rating and exposure size). The Problem Loan Committee is the most important committee in the evaluation and decision-making process concerning problem loans. It primarily comprises decision-making authorities; its chairman is the Chief Risk Officer (CRO) of RBI AG. Further members with voting rights are those members of the Management Board responsible for the customer divisions, the Chief Financial Officer (CFO), and the relevant division and departmental managers from risk management and special exposures management. The Securitization Committee is the decision-making committee for limit requests in relation to securitization positions within the specific decision-making authority framework. It develops proposals for modifications to the securitization strategy for the Management Board. In addition, the Securitization Committee offers a platform for exchanging information regarding securitization positions and market developments. The Group Operational Risk Management & Controls Committee comprises representatives of the business areas (retail, market and corporate customers) and representatives from Compliance (including financial crime), Internal Control System, Operations, Security, IT Risk Management and Risk Controlling, under chairmanship of the CRO. This committee is responsible for managing operational risk (including conduct risk). It derives and sets the operational risk strategy based on the risk profile and the business strategy and also makes decisions regarding actions, controls and risk acceptance. The Group Security Committee is responsible for the implementation of and compliance with the Security Policy and the IT Risk Management Policy within the Group. This includes, inter alia, approving the Security Policy and the IT Risk Management Policy, defining key performance indicators and key risk indicators, which must be reported on at Group level and in the local security committees, and defining and checking the risk appetite in relation to IT risk and security. 288Management report · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 The Data Governance Board is the Group’s higher-level decision-making body for all subject areas relating to data governance. This also includes in particular topics relating to data quality as well as to compliance with the BCBS 239 principles. The Contingency/Recovery Committee is a decision-making body convened by the Management Board. The composition of the committee varies as circumstances require depending on the intensity and focus of the specific requirements pertaining to the situation (e.g. capital and/or liquidity). The core task of the committee is to maintain or recover financial stability in accordance with the Federal Act on the Recovery and Resolution of Banks (BaSAG) and the Banking Recovery and Resolution Directive (BRRD) in the event of a critical financial situation. Quality assurance and internal audit Quality assurance with respect to risk management refers to ensuring the integrity, soundness, and accuracy of processes, models, calculations, and data sources. This is to ensure that RBI AG adheres to all legal requirements and that it can achieve the highest standards in risk management operations. Two very important functions in assuring independent oversight are performed by the divisions Audit and Compliance. Independent internal auditing is a legal requirement and a central pillar of the internal control system. Internal Audit periodically assesses all business processes and contributes considerably to securing and improving them. It sends its reports directly to the Management Board of RBI AG, which discusses them on a regular basis in its board meetings. The Compliance Office is responsible for all issues concerning compliance with legal requirements in addition to and as an integral part of the internal control system. Thus, compliance with existing regulations in daily operations is monitored. Moreover, an independent and objective audit, free of potential conflicts of interest, is carried out during the audit of the annual financial statements by the independent auditors. Overall bank risk management Maintaining an adequate level of capital is a core objective of the Company’s risk management. Capital requirements are monitored regularly based on the risk level measured by internal models, and in choosing appropriate models the materiality of risks annually assessed is taken into account. This concept of overall bank risk management provides for meeting capital requirements from both a regulatory perspective (normative perspective) and from an economic point of view (economic perspective). Thus it covers the quantitative aspects of the internal capital adequacy assessment process (ICAAP) as legally required and as described in the ICAAP Directive published by the European Central Bank. RBI AG’s overall ICAAP process is audited during the supervisory review process for the RBI credit institution group (RBI Kreditinstitutsgruppe) on an annual basis. The Risk Appetite Framework (RAF) limits the Group’s overall risk in line with the strategic business objectives and allocates the risk capital calculated to the different risk categories and business areas. The primary aim of the RAF is to limit risk, particularly in adverse scenarios and for major singular risks, in such a way as to guarantee compliance with regulatory minimum ratios. The Risk Appetite Framework is therefore closely linked with the ICAAP and the ILAAP (Internal Liquidity Adequacy Assessment Process) and sets concentration limits for the risk types identified as significant in the risk assessment. There is also a connection to the recovery plan as the risk capacity and risk tolerance limits in the RAF are aligned with the corresponding trigger monitoring limits. In addition, the risk appetite decided by the Management Board and the Group’s risk strategy and its implementation are reported regularly to the Supervisory Board’s Risk Committee. Management report289 · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 Approach Risk Measurement technique Confidence level Economic perspective Economic capital Risk that unexpected losses from the economic point of view exceed the internal capital The unexpected loss for the risk horizon of one year (economic capital) may not exceed the current value of the tier 1 capital. 99.90 per cent Normative perspective Stress scenarios Risk of falling below a sustainable tier 1 ratio throughout an economic cycle Capital and earnings projection for a three-year planning period based on assumptions of a significant downturn in the economy Around 95 per cent, based on potential management decisions to reduce risk temporarily or raise additional equity capital ESG risks Environmental, Social and Governance (ESG) risks are considered cross-dimensional risks which affect all areas of risk management. As a result, ESG risk factors are continuously integrated into the management of risk types within the existing risk management framework (based on the internally developed materiality assessment). The ESG Risk Framework provides a detailed description of how the components are worked out, of how the ESG risk is managed, and of its impact on the four traditional pillars of risk management (definition & identification, measurement, risk control, and reporting & monitoring). Risk control takes particular account of strategic business decisions by RBI which specifically provide for further steps in contributing towards the promise undertaken in the Paris Agreement of limiting global warming to less than 2 degrees by 2050. Economic perspective – economic capital approach In this approach, risks are measured on the basis of economic capital, which represents a comparable risk indicator across all risk types. Economic capital is calculated as the sum of unexpected losses stemming from different risk categories. In addition, a general buffer is held to cover risk types not explicitly quantified. The following table shows the risk distribution of individual risk types to economic capital: in € thousand 31/12/2023 Share 31/12/2022 Share Participation risk 5,796,364 76.2 % 5,115,770 74.9 % Credit risk corporate customers 550,118 7.2 % 623,513 9.1 % Market risk 301,253 4.0 % 300,540 4.4 % Credit risk sovereigns 276,043 3.6 % 119,363 1.7 % Owned property risk 114,187 1.5 % 98,625 1.4 % Operational risk 101,310 1.3 % 126,056 1.8 % Credit risk banks 73,565 1.0 % 78,222 1.1 % Credit risk retail customers 17,013 0.2 % 29,913 0.4 % CVA risk 13,984 0.2 % 16,703 0.2 % Risk buffer 362,192 4.8 % 325,435 4.8 % Total 7,606,029 100.0 % 6,834,139 100.0 % The economic capital increased year on year to € 7,606,029 thousand. For RBI AG, the participation risk is the most material risk type in terms of amount. In addition to further increase in participation risk, also credit risk to sovereigns increased. RBI AG uses a confidence level of 99.90 per cent to calculate economic capital. Economic capital is an important instrument in overall bank risk management and is used in allocating risk budgets. Economic capital limits are allocated to individual business areas during the annual budgeting process and are supplemented in day-to- day management by volume, sensitivity, and value-at-risk limits. At RBI AG, this is planned on a revolving basis for the upcoming three years and incorporates the future development of economic capital as well as available internal capital. Economic capital thus substantially influences plans for future lending activities and the overall limit for taking market risk. Risk-adjusted performance measurement is also based on the indicator for economic capital. The profitability of a business unit is examined in relation to the amount of economic capital attributed to the unit in question (risk-adjusted profit in relation to risk-adjusted capital, RORAC), which yields a comparable performance indicator for all business units in the bank. That indicator is used in turn as a key figure in overall bank management and for future capital allocations to business units, and influences the remuneration paid to the Bank’s executive management. 290Management report · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 Normative perspective – stress scenarios The analysis of the stress scenarios in the normative perspective of the ICAAP is intended to ensure that RBI AG has sufficiently high capital ratios at the end of the multi-year planning period, even in a severe macroeconomic downturn scenario. The analysis is based on a multi-year macroeconomic stress test where hypothetical market developments in a severe but realistic economic downturn scenario are simulated. The risk parameters considered include interest rates, foreign exchange rates and securities prices, as well as changes in default probabilities and rating migrations in the credit portfolio. The integrated stress test focuses primarily on the capital ratios at the end of the multi-year observation period. These should not fall below a sustainable level, meaning that they should not require the bank to substantially increase capital or to significantly reduce its business activities. The current minimum amount of capital is therefore determined by the size of a potential economic downturn. The downturn scenario assumed incorporates recognition of the necessary loan loss provisions and potential pro-cyclical effects (which increase the minimum regulatory capital requirement) along with the impact of foreign exchange rate fluctuations and other valuation and earnings effects. Regulatory changes already known are taken into account for the planning period. This perspective thus also complements traditional risk measurement methods based on the value-at-risk concept (which is in general based on historical data). Therefore, it can account for exceptional market situations that have not been observed in the past, and also permits estimation of the potential impact of such developments. The stress test also allows for analyzing risk concentrations (e.g. individual positions, industries, or geographical regions) and gives insight into profitability, liquidity situation, and solvency under extreme situations. Building on these analyses, RBI AG’s risk management actively contributes to portfolio diversification, for example via limits for the total exposure to individual industry segments and countries and through ongoing updates to lending standards. Credit risk RBI AG’s credit risk stems mainly from default risks that arise from business with retail and corporate customers, other banks and sovereign borrowers. It is by far the most important risk category for RBI AG, which is also indicated by internal and regulatory capital requirements. Credit risk is therefore analyzed and monitored both on an individual loan and customer basis as well as on a portfolio basis. Credit risk management and lending decisions are based on the respective credit risk policies, credit risk manuals, and the tools and processes which have been developed for this purpose. The internal control system for credit risks includes different types of monitoring measures, which are tightly integrated into the workflows to be monitored – from the customer’s initial credit application, to the bank’s credit approval, and finally to the repayment of the loan. No lending transaction is performed in the non-retail segments before the limit application process has been completed. This process applies not only to new lending, but also to increases in existing limits, roll-overs, overdrafts, and to cases in which the borrower’s risk profile is no longer the same as the profile that formed the basis for the original lending decision (e.g., with respect to the financial situation of the borrower, purpose or collateral). It also applies to the setting of counterparty limits in trading and new issuance operations, other credit limits, and to participations. Credit decisions are made within the context of a competence authority hierarchy based on the size and type of the loan. Approval from the business and the credit risk management divisions is always required when making individual limit decisions or performing regular rating renewals. If the individual decision-making parties disagree, the potential transaction is decided upon by the next higher-ranking credit authority. Management report291 · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 Credit exposure by asset classes (rating models): in € thousand 31/12/2023 Share 31/12/2022 Share Corporate customers 42,853,909 46.7 % 43,700,074 43.7 % Project finance 2,562,816 2.8 % 2,382,088 2.4 % Retail customers 2,797,094 3.0 % 3,572,301 3.6 % Banks 22,863,788 24.9 % 21,757,362 21.7 % Sovereigns 20,660,142 22.5 % 28,693,945 28.7 % Total 91,737,749 100.0 % 100,105,769 100.0 % Credit portfolio – Corporate customers The internal rating models for corporate customers take into account qualitative parameters, various ratios from the statement of financial position, and profit ratios covering different aspects of customer creditworthiness for various industries and countries. In addition, the model for smaller corporates also includes an account behavior component. The following table shows the total credit exposure according to internal corporate ratings (large corporates, mid-market and small corporates). For presentation purposes, the individual grades of the rating scale have been combined into nine main rating grades. in € thousand 31/12/2023 Share 31/12/2022 Share 1 Minimal risk 1,454,211 3.4 % 2,316,588 5.3 % 2 Excellent credit standing 5,398,143 12.6 % 5,554,815 12.7 % 3 Very good credit standing 14,325,960 33.4 % 14,615,313 33.4 % 4 Good credit standing 12,479,463 29.1 % 11,481,652 26.3 % 5 Sound credit standing 5,469,893 12.8 % 6,139,146 14.0 % 6 Acceptable credit standing 1,858,430 4.3 % 1,814,903 4.2 % 7 Marginal credit standing 404,070 0.9 % 678,200 1.6 % 8 Weak credit standing/sub-standard 143,882 0.3 % 177,641 0.4 % 9 Very weak credit standing/doubtful 39,516 0.1 % 197,873 0.5 % 10 Default 1,279,396 3.0 % 722,432 1.7 % NR Not rated 943 — % 1,511 — % Total 42,853,909 100.0 % 43,700,074 100.0 % The total credit exposure for corporate customers decreased € 846,165 thousand compared to year-end 2022 to € 42,853,909 thousand. The decline for corporate customers was primarily due to a reduction in credit and facility financing in Austria, France and Germany. The largest decline was recorded in rating grade 1 due to rating downgrades of individual Austrian customers and reduced credit exposures in Ireland. The decrease in rating grade 3 was due to reduced credit exposures in Germany, Great Britain and Hungary (partly due to rating downgrades to rating grade 4), which was partly offset by increased credit financing in Austria. The decline in rating grade 5 resulted from decreased credit exposures in Austria and rating downgrades of individual Austrian customers. Rating grade 4 recorded an increase due to new customers and increased credit exposures mainly in Germany, Switzerland, Great Britain, Hungary and China. The increase in defaulted loans was due to defaulted financing in the real estate sector. The five grades rating model for project finance is based on the slotting criteria in accordance with EBA/RTS/2016/02. In June 2023, the model parameters for real estate financing were adjusted based on the current macroeconomic parameters (especially inflation expectations). in € thousand 31/12/2023 Share 31/12/2022 Share 6.1 Excellent project risk profile – very low risk 1,562,846 61.0 % 1,229,865 51.6 % 6.2 Good project risk profile – low risk 565,445 22.1 % 940,681 39.5 % 6.3 Acceptable project risk profile – average risk 91,022 3.6 % 79,463 3.3 % 6.4 Poor project risk profile – high risk 152,988 6.0 % 0 — % 6.5 Default 190,514 7.4 % 132,080 5.5 % NR Not rated 0 — % 0 — % Total 2,562,816 100.0 % 2,382,088 100.0 % Credit exposure to loans reported under project financing showed a decline of € 180,728 thousand to € 2,562,816 thousand as at 31 December 2023. The increase in rating grade 6.1 resulted mainly from new financing in the Czech Republic and Germany as well as from rating upgrades of a German and Czech customer to rating grade 6.2. In addition to the rating downgrades to rating grade 6.1 the decline in rating grade 6.2 resulted from rating downgrades of individual customers to rating grade 6.3 in 292Management report · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 Austria and Romania, to rating grade 6.4 in Germany and Austria and to rating grade 6.5 in Austria. The increase in rating grade 6.4 was also due to rating downgrades of an Italian customer from rating grade 6,3. Credit portfolio – Retail customers Credit exposure to retail customers according to internal rating: in € thousand 31/12/2023 Share 31/12/2022 Share 0.5 Minimal risk 471,785 16.9 % 687,187 19.2 % 1.0 Excellent credit standing 367,028 13.1 % 616,399 17.3 % 1.5 Very good credit standing 121,710 4.4 % 246,033 6.9 % 2.0 Good credit standing 52,739 1.9 % 120,068 3.4 % 2.5 Sound credit standing 40,956 1.5 % 71,820 2.0 % 3.0 Acceptable credit standing 20,820 0.7 % 43,222 1.2 % 3.5 Marginal credit standing 11,573 0.4 % 30,910 0.9 % 4.0 Weak credit standing/sub-standard 7,063 0.3 % 15,134 0.4 % 4.5 Very weak credit standing/doubtful 17,113 0.6 % 20,223 0.6 % 5.0 Default 145,448 5.2 % 154,418 4.3 % NR Not rated 1,540,860 55.1 % 1,566,887 43.9 % Total 2,797,094 100.0 % 3,572,301 100.0 % The not rated credit exposure includes credit card limits in Austria. Credit portfolio – Banks The following table shows the total credit exposure by internal rating for banks (excluding central banks). Due to the small number of customers (or observable defaults), the default probabilities of individual rating grades in this asset class are calculated based on a combination of internal and external data. In May 2023, the rating model for credit institutions was adjusted in accordance to the EBA guidelines after approval of ECB. in € thousand 31/12/2023 Share 31/12/2022 Share 1 Minimal risk 2,862,516 12.5 % 4,111,731 18.9 % 2 Excellent credit standing 2,606,044 11.4 % 7,274,225 33.4 % 3 Very good credit standing 13,887,198 60.7 % 8,394,710 38.6 % 4 Good credit standing 2,598,571 11.4 % 770,109 3.5 % 5 Sound credit standing 574,398 2.5 % 140,397 0.6 % 6 Acceptable credit standing 145,336 0.6 % 709,926 3.3 % 7 Marginal credit standing 23,291 0.1 % 161,898 0.7 % 8 Weak credit standing/sub-standard 91,680 0.4 % 2,035 — % 9 Very weak credit standing/doubtful 71,830 0.3 % 177,342 0.8 % 10 Default 2,874 — % 14,868 0.1 % NR Not rated 50 — % 123 — % Total 22,863,788 100.0 % 21,757,362 100.0 % Total credit exposure to banks as at 31 December 2023 amounted to € 22,863,788 thousand, an increase of € 1,106,427 thousand compared to year-end 2022. This increase resulted mainly from a rise in repo transactions in France, Ireland, Italy, Spain and Great Britain and was partly offset by a decrease of loans and advances in Austria, Russia and the Ukraine. Rating grade 3 recorded the largest increase, due to rating downgrades of Austrian, German, French and Irish banks from rating grade 2 and individual Austrian banks from rating grade 1. This increase was partly offset due to the rating downgrade of an Italian bank to rating grade 4. The rating shifts are mainly due to the rating model change for credit institutions described above. Management report293 · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 Credit portfolio – Sovereigns Another asset class is formed by central governments, central banks, and regional municipalities as well as other public sector entities. The credit exposure to sovereigns includes local and regional governments. Credit exposure to sovereigns (including central banks) by internal rating: in € thousand 31/12/2023 Share 31/12/2022 Share 1 Excellent credit standing 1,410,157 6.8 % 25,323,328 88.3 % 2 Very good credit standing 17,536,045 84.9 % 2,125,793 7.4 % 3 Good credit standing 1,243,979 6.0 % 1,116,341 3.9 % 4 Sound credit standing 396,683 1.9 % 120,608 0.4 % 5 Average credit standing 33,926 0.2 % 365 — % 6 Mediocre credit standing 10,851 0.1 % 501 — % 7 Weak credit standing 2,388 — % 6 — % 8 Very weak credit standing 20 — % 118 — % 9 Doubtful/high default risk 18,429 0.1 % 236 — % 10 Default 7,664 — % 6,648 — % NR Not rated 0 — % 0 — % Total 20,660,142 100.0 % 28,693,945 100.0 % Credit exposure to sovereigns decreased € 8,033,803 thousand to € 20,660,142 thousand compared to year-end 2022, mainly due to decreased money market transactions with the Austrian national bank. In addition, there was a rating downgrade of Austria and the Austrian national bank from rating grade 1 to rating grade 2. Credit portfolio management RBI AG’s credit portfolio is managed, among other factors, on the basis of the portfolio strategy. This limits the exposure to different countries, industries and product types to avoid undesired risk concentrations. In addition, the long-term opportunities in the single markets are regularly analyzed. This enables future lending activities to be strategically repositioned at an early stage. RBI AG’s credit portfolio is broadly diversified by region and sector. The geographical breakdown of the loans on and off the statement of financial position reflects the broad diversification of the credit business in the European markets. These loans are broken down by region according to the borrower’s country of risk as follows (countries with credit exposure greater than € 1 billion are shown separately): in € thousand 31/12/2023 Share 31/12/2022 Share Austria 37,881,272 41.3 % 47,082,483 47.0 % Germany 10,184,070 11.1 % 10,224,710 10.2 % France 7,315,069 8.0 % 6,679,377 6.7 % Spain 3,569,659 3.9 % 3,133,711 3.1 % Great Britain 3,371,626 3.7 % 3,440,816 3.4 % Switzerland 2,895,921 3.2 % 2,779,454 2.8 % Poland 2,592,395 2.8 % 3,478,141 3.5 % Luxembourg 2,499,501 2.7 % 2,805,857 2.8 % Netherlands 2,245,376 2.4 % 2,238,861 2.2 % Italy 2,183,659 2.4 % 1,971,632 2.0 % Far East 1,960,166 2.1 % 1,840,064 1.8 % Czech Republic 1,435,323 1.6 % 1,289,840 1.3 % United States of America 1,287,412 1.4 % 1,337,870 1.3 % Belgium 1,188,004 1.3 % 827,248 0.8 % Romania 1,022,437 1.1 % 840,936 0.8 % Other 10,105,862 11.0 % 10,134,770 10.1 % Total 91,737,749 100.0 % 100,105,769 100.0 % RBI AG’s loan portfolio declined € 8,368,020 thousand to € 91,737,749 thousand. In Austria the decrease of € 9,201,211 thousand to € 37,881,272 thousand resulted mainly from reduced money market transactions and lower deposits at the Austrian national bank. France recorded an increase of € 635,692 thousand mainly due to increased repo transactions and bond portfolio. This increase was partly offset by decreased credit financing. The decrease in Poland resulted mainly from credit financing and 294Management report · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 reduced bond portfolio. Repo transactions and guarantees given in particular were responsible for the positive development in Spain. The € 360,755 thousand increase to € 1,188,004 in Belgium was mainly due to the bond portfolio. Risk policies and the assessment of credit ratings at RBI AG also take account of the borrowers’ industries. Banking and insurance represent the largest industry class in the credit portfolio. However, this is largely attributable to exposures to members of the Austrian Raiffeisen Group. Sovereigns mainly includes securities of the Republic of Austria as issuer. Credit exposure broken down by industry classification: in € thousand 31/12/2023 Share 31/12/2022 Share Financial Intermediation 37,553,230 40.9 % 46,529,652 46.5 % Manufacturing 13,656,018 14.9 % 13,776,882 13.8 % Public administration and defense and social insurance institutions 8,611,974 9.4 % 7,162,072 7.2 % Wholesale and retail trade; repair of motor vehicles, motorcycles and personal and household goods 8,424,477 9.2 % 8,551,650 8.5 % Real estate, renting and business activities 7,376,120 8.0 % 7,869,158 7.9 % Electricity, gas and water supply 3,211,969 3.5 % 2,867,694 2.9 % Private households 2,722,226 3.0 % 3,442,487 3.4 % Education; health and social work; other community, social and personal service activities 2,556,718 2.8 % 1,328,836 1.3 % Construction 1,724,748 1.9 % 1,586,078 1.6 % Agriculture, hunting and forestry; fishing; mining and quarrying 964,673 1.1 % 919,467 0.9 % Transport, storage and communication 920,275 1.0 % 817,733 0.8 % Other 4,015,322 4.4 % 5,254,060 5.2 % Total 91,737,749 100.0 % 100,105,769 100.0 % The detailed credit portfolio analysis shows the breakdown by rating grade. Customer rating assessments are performed separately for different asset classes using internal risk classification models (rating and scoring models), which are validated by a central organizational unit. The default probabilities assigned to individual rating grades are calculated separately for each asset class. However, the use of a master scale enables rating grades to be compared even across business segments. For retail asset classes, country-specific scorecards are developed based on uniform Group standards. Corresponding tools are used to produce and validate ratings (e.g. business valuation tools, rating and default databases). Collateralization is one of the main strategies and an actively pursued measure for reducing potential credit risks. The value of collateral and the effects of other risk mitigation techniques are determined during the limit application process. The risk mitigation effect taken into account is the value that RBI AG expects to receive when it sells the collateral within a reasonable period. Types of eligible collateral are defined in the collateral list and relevant valuation guidelines. The collateral value is calculated according to uniform methods, including standardized calculation formulas based on market values, predefined minimum discounts, and expert assessments. Credit default and workout process The credit portfolio and individual borrowers are subject to constant monitoring. The main objectives of monitoring are to ensure that the borrower meets the terms and conditions of the contract and to keep track of the borrower’s financial position. Such a review is conducted at least once annually in the non-retail asset classes (corporates, financial institutions, and sovereigns). This includes a rating review and the revaluation of financial and tangible collateral. Problem loans (where debtors might run into material financial difficulties or a delayed payment is expected) need special treatment. If restructuring is necessary, problem loans are assigned either to a designated specialist or to a restructuring unit (workout department),which work independently of the market side and are also subject to a separate responsibility. Involving employees of the workout departments at an early stage can help reduce losses from problem loans and/or optimize the collateral structure of the loan. Credit default is assessed on the basis of quantitative and qualitative criteria. First, a borrower is considered to be in default if its contractual payments are more than 90 days overdue. Second, a borrower is considered to be in default if it meets the criteria of unlikely payment, which indicate that the customer is in significant financial difficulty and is unlikely to meet its payment obligations. A loan obligation is no longer classified as default if - after a period of at least three months (six months after a non-performing retail restructuring, and 12 months after a non-performing non-retail restructuring) – the customer has shown good payment discipline during this period and no further indications of a high probability of default have been identified. Management report295 · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 Non-performing exposures pursuant to the applicable definition contained in the Implementing Technical Standard (ITS) on Supervisory Reporting (Forbearance and non-performing exposures) issued by the EBA: NPE NPE ratio NPE coverage ratio in € thousand 31/12/2023 31/12/2022 31/12/2023 31/12/2022 31/12/2023 31/12/2022 General governments 177,808 169,037 18.2 % 19.7 % 2.7 % 3.0 % Banks 2,733 4,931 — % — % 36.2 % 58.3 % Other financial corporations 378,964 155,584 4.2 % 1.6 % 27.9 % 29.3 % Non-financial corporations 950,846 608,476 5.6 % 3.5 % 46.3 % 69.9 % Households 110,584 119,046 7.6 % 5.5 % 81.0 % 84.7 % Loans and advances 1,620,935 1,057,075 3.2 % 1.7 % 39.5 % 54.9 % Bonds 0 0 — % — % — % — % Total 1,620,935 1,057,075 2.6 % 1.5 % 39.5 % 54.9 % The following table shows the development of impairment losses on loans and provisions for liabilities off the statement of financial position during the financial year and the corresponding asset classes: in € thousand As at 1/1/2023 Additions due to merger Allocation Release2 Usage1 Reclassifications, exchange differences3 As at 31/12/2023 Individual loan loss provisions 882,352 0 396,828 (183,781) (153,502) (4,640) 937,258 Banks 2,873 513 (1,856) (472) (67) 991 Corporate customers 767,911 351,471 (118,775) (148,300) (13,502) 838,805 Retail customers 100,783 19,828 (35,628) (4,313) 8,936 89,606 Sovereigns 4,999 4,204 (3,946) (417) 0 4,840 Off-balance sheet obligations 5,787 20,812 (23,576) 0 (7) 3,016 Portfolio-based loan loss provisions 293,991 0 585,970 (692,057) 0 6,542 194,446 Banks 9,781 11,865 (20,800) 0 4,361 5,207 Corporate customers 200,308 485,010 (544,364) 0 267 141,221 Retail customers 35,110 7,140 (30,058) 0 2,071 14,263 Sovereigns 153 146 (160) 0 0 139 Off-balance sheet obligations 48,639 81,809 (96,675) 0 (157) 33,616 Total 1,176,343 0 982,798 (875,838) (153,502) 1,902 1,131,704 1 This contains unwinding interest income from impaired customers and changes in internal interest exemptions 2 This contains changes in internal interest exemptions 3 This contains reclassifications of provisions and changes in customer categories Country risk Country risk includes transfer and convertibility risks as well as political risk and macroeconomic risk in a broader sense, which arises from cross-border transactions in foreign countries. Activities in core markets are given particular attention in this respect. As part of an established approach across all RBI Group units, RBI AG’s active country-risk management is ensured based on the country risk policy, which is set regularly and approved by the Management Board. This policy is part of the credit portfolio limit system and sets a strict limitation on cross-border risk exposure to individual countries. At the same time, the policy is designed to incentivize risk-taking within the RBI Group’s core markets. The limit levels for individual countries are established using an internal model based on pillars such as the RBI Group’s own capitalization, the internal sovereign rating, and the size and dynamics of the country and its banking sector. Country risk is also reflected through the internal funds transfer pricing system in product pricing and in risk-adjusted performance measurement. In this way, the bank offers the business units an incentive to hedge country risks (e.g. by seeking insurance with export credit insurance organizations or guarantors in third countries). The insights gained from the country risk analysis are not only used to limit total cross-border exposure, but also to manage the total credit exposure in each individual country (i.e. including the exposure that is funded by local deposits). RBI AG thus aligns its business activities with the expected economic development in different markets and enhances the broad diversification of its credit portfolio. 296Management report · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 Counterparty credit risk The default of a counterparty in a derivative, repurchase, securities lending transaction can lead to losses from reestablishing an equivalent contract. At RBI AG this risk is measured by the mark-to-market approach where a predefined add-on is added to the current positive fair value of the contract in order to account for potential future changes. For internal management purposes potential price changes, which affect the fair value of an instrument, are calculated specifically for different contract types based on historical market price changes. For derivative contracts the standard limit approval process applies, where the same risk classification, limitation, and monitoring process is used as for traditional lending. Credit risk mitigation instruments such as netting agreements and collateralization represent an important strategy for reducing counterparty credit risk. In general, RBI AG strives to establish standardized ISDA master agreements with all major counterparties for derivative transactions in order to be able to perform close-out netting and credit support annexes (CSA) for full risk coverage for positive fair values on a daily basis. Participation risk The risks from listed and unlisted participations are also considered to be part of the banking book. They are reported separately under this risk category. Most of RBI AG’s direct or indirect participations are fully consolidated in the consolidated financial statements and their risks are therefore captured in detail. Accordingly, the management, measurement and monitoring methods described for the other types of risk are used for the risks arising out of such participations. The roots of participation risk and default risk are similar: a deterioration in the financial situation of a participation is normally followed by a rating downgrade (or default) of that unit. The calculation of the economic capital for participations is based on an extension of the credit risk approach according to Basel III. RBI AG’s participations are managed by RBI Group Subsidiaries & Equity Investments. It monitors the risks that arise from long- term participations in equity and is also responsible for the ensuing results. New investments are made only by RBI AG’s Management Board on the basis of a separate due diligence. Market risk RBI AG defines market risk as the risk of possible losses arising from changes in market prices of trading and banking book positions. Market risk estimates are based on changes in exchange rates, interest rates, credit spreads, equity and commodity prices and other relevant market parameters (e.g. implied volatilities). Market risks from the customer divisions are transferred to the Treasury division using the transfer price method. Treasury is responsible for managing structural market risks and for complying with the bank’s overall limit. The Capital Markets division is responsible for proprietary trading, market making, and customer business in money market and capital market products. In previous years the global COVID-19 situation required increased monitoring of market trends and position changes for RBI AG. In 2022 the war in Ukraine provided the challenge for market risk management, which continued during 2023 as well. Active risk management and daily monitoring with a focus on the Russian, Ukrainian and Belarusian markets were necessary in order to adapt to the changed environment. Management report297 · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 Organization of market risk management RBI AG measures, monitors, and manages all market risks for the bank as a whole. The Market Risk Committee is responsible for strategic market risk management issues. It is responsible for managing and controlling all market risks. The bank’s overall limit is set by the Management Board on the basis of the risk-taking capacity and income budget. This limit is apportioned to sub-limits in coordination with business divisions according to strategy, business model and risk appetite. The Market Risk Management department ensures that the business volume and product range comply with the defined and agreed strategy and risk appetite. It is responsible for developing and enhancing risk management processes, manuals, measurement techniques, risk management infrastructure and systems for all market risk categories and credit risks arising from market price changes in derivative transactions. Furthermore, Market Risk Management independently measures and reports all market risks on a daily basis. All products in which open positions can be held are listed in the product catalog. New products are added to this list only after successfully completing the product approval process. Product applications are investigated thoroughly for any risks. They are approved only if the new products can be implemented in the bank’s front- and back-office and risk management systems. Limit system RBI AG uses a comprehensive risk management approach for both the trading and the banking books (total-return approach). Market risk is therefore managed consistently in all trading and banking books. The following indicators are measured and limited on a daily basis in the market risk management system: · Value-at-Risk (VaR) confidence level 99 per cent Value-at-Risk is the main market risk steering instrument in liquid markets and normal market situations. Two different methods of calculation are used, depending on the steering approach. The consistency between P&L and risk figures is in parallel necessary with the economic scope of RBI AG in order to ensure comprehensive control. For the overall portfolio including the banking book, a model is used that is based on a historical simulation and which is suitable for longer-term steering of the market risks from the banking books (ALL model, confidence level 99 per cent, risk horizon 20 days). The calculation is based on overlapping 20-day returns of the last seven years and is also used for allocating economic capital. For all market risks with a direct impact on the income statement, a model is used that provides a good forecast of short-term volatility (IFRS P&L model, confidence level 99 per cent, risk horizon 1 day). The Austrian Financial Market Authority has approved this approach as an internal model for calculating the total capital requirement for market risks for RBI AG’s trading book. Both models calculate value-at-risk indicators for changes in the risk factors foreign currencies, interest rate trend, credit spreads, implicit volatility, stock indices and basis spreads. · Sensitivities (to changes in exchange rates and interest rates, gamma, vega, equity and commodity prices) Sensitivity limits are to ensure that concentrations are avoided in normal market situations and are the main steering instrument under extreme market situations and in illiquid markets or in markets that are structurally difficult to measure. · Stop loss Stop loss limits serve to strengthen the discipline of traders such that they do not allow losses to accumulate on their own proprietary positions but strictly limit them instead. A comprehensive stress testing concept complements this multi-level limit system. It simulates potential present value changes of defined scenarios for the total portfolio. The results on market risk concentrations shown by these stress tests are reported to the Market Risk Committee and taken into account when setting limits. Stress test reports for individual portfolios are included in daily market risk reporting. Value-at-Risk and theoretical market price changes of trading book The following tables show the VaR (VaR ALL 99 per cent, 20 days and VaR IFRS P&L 99 per cent, one day) for the individual market risk categories in the trading books, while the overall risk is shown for the banking book. The IFRS-P&L model aims to measure short-term market fluctuations, while the ALL model focuses on measuring structural interest rate risks. Structural equity positions, structural interest rate risks, especially in euro, and also spread risks from bond books maintained as a liquidity buffer dominate RBI AG’s VaR. 298Management report · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 Model IFRS-P&L trading book VaR (99%, 1d) VaR as at Average VaR Minimum VaR Maximum VaR VaR as at in € thousand 31/12/2023 31/12/2022 Currency risk 275 741 172 1,421 386 Interest rate risk 938 1,343 518 2,445 707 Credit spread risk 1,559 1,390 469 3,365 2,331 Vega risk 463 326 85 973 91 Basis risk 904 965 420 1,997 1,402 Total 2,430 2,433 1,352 4,345 3,031 Model IFRS-P&L total VaR (99%, 1d) VaR as at Average VaR Minimum VaR Maximum VaR VaR as at in € thousand 31/12/2023 31/12/2022 Currency risk 4,127 3,268 1,167 7,903 2,629 Interest rate risk 7,294 2,587 915 34,291 1,044 Credit spread risk 3,410 3,461 2,551 5,480 3,380 Vega risk 621 557 175 1,856 154 Basis risk 1,897 3,013 1,645 6,503 2,743 Total 11,299 7,573 5,415 37,155 5,557 Model ALL VaR (99%, 20d) VaR as at Average VaR Minimum VaR Maximum VaR VaR as at in € thousand 31/12/2023 31/12/2022 Economic capital ALL 129,000 64,886 23,214 130,000 49,648 Vega risk ALL 7,231 9,178 4,478 18,483 11,297 Total ALL 136,231 73,777 34,146 137,824 60,944 Economic capital banking book 121,488 60,812 18,233 127,858 46,090 Vega risk banking book 6,907 8,883 4,398 17,856 10,991 Total banking book 128,394 69,425 28,331 135,910 57,081 Interest rate risk in the banking book 16,877 38,580 16,511 148,073 24,067 Besides qualitative analysis of profitability, backtesting and statistical validation techniques are regularly used to monitor the risk measurement methods employed. If model weaknesses are identified, the methods are adjusted. In the 2023 reporting year there was one hypothetical backtesting violation. The following chart compares VaR with the hypothetical profits and losses on a daily basis. VaR denotes the maximum loss that will not be exceeded with a 99 per cent confidence level within a day. It is compared to the respective theoretical gain or loss which would arise on the following day due to the actual market conditions at the time. Management report299 · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 Interest rate risk in the trading book The following table shows the largest present value changes in the trading book given a parallel one-basis-point interest rate increase (significant currencies shown separately). The trading book strategy remains largely unchanged. 31/12/2023 Total < 3 m > 3 to 6 m > 6 to 12 m > 1 to 2 y > 2 to 3 y > 3 to 5 y > 5 to 7 y > 7 to 10 y > 10 to 15 y > 15 to 20 y > 20 y in € thousand CHF (10) (1) 3 (10) (3) 0 0 0 0 0 0 0 CNY 4 0 0 4 0 0 0 0 0 0 0 0 CZK 10 0 0 2 (1) 0 5 (1) 10 (2) (1) (1) EUR (49) 9 10 (3) (5) (31) 22 (32) 2 (21) 13 (13) GBP (4) 0 (2) (1) 0 0 (1) 0 0 0 0 0 HRK 0 0 0 0 0 0 0 0 0 0 0 0 HUF 13 2 0 (4) (2) (1) 3 (2) 14 1 0 0 NOK 1 0 0 0 0 0 0 0 0 0 0 0 PLN 3 0 0 (8) 9 (1) 5 3 (4) 0 0 0 RON (4) 0 0 0 0 (8) 4 0 0 0 0 0 RUB (5) 0 (1) 0 (1) 0 (1) 0 (1) 0 0 0 USD (1) 6 4 (13) (12) (4) (16) (5) 1 9 9 20 Other 44 (16) (14) 33 17 44 (21) 37 (23) 14 (21) (6) 31/12/2022 Total < 3 m > 3 to 6 m > 6 to 12 m > 1 to 2 y > 2 to 3 y > 3 to 5 y > 5 to 7 y > 7 to 10 y > 10 to 15 y > 15 to 20 y > 20 y in € thousand CHF 4 5 0 0 (1) 1 0 0 0 0 0 0 CNY 5 0 0 5 0 0 0 0 0 0 0 0 CZK (4) (6) 1 9 10 4 0 (12) (9) (1) 0 0 EUR (70) 1 6 7 19 2 (6) (58) (13) (3) (12) (12) GBP 1 1 0 (1) 1 0 0 0 0 0 0 0 HRK (7) 0 0 0 1 0 (2) (2) 0 (3) 0 0 HUF (1) 4 0 (6) (1) 1 1 (2) 4 0 0 0 NOK 1 0 0 0 1 0 0 0 0 0 0 0 PLN (1) 0 (2) 1 (2) (1) 7 (2) (2) 0 0 0 RON (6) 0 0 0 1 (4) (4) 0 0 0 0 0 RUB (4) 0 0 (1) (2) 0 2 (1) (1) (1) 0 0 USD (7) (1) 2 (6) (2) (3) (2) 5 (7) 5 6 (2) Other (2) 0 0 0 (1) (1) 0 0 0 0 0 0 Interest rate risk in the banking book Different maturities and repricing schedules of assets and the corresponding liabilities (i.e. deposits and financing from money markets and capital markets) cause interest rate risk in RBI AG. This risk arises in particular from different interest rate sensitivities, rate adjustments, and other optionality of expected cash flows. Interest rate risk in the banking book is material for the euro and US dollar as major currencies. This risk is mainly hedged by a combination of transactions on and off the statement of financial position where in particular interest rate swaps and – to a smaller extent – also interest rate forwards and interest rate options are used. Management of the statement of financial position is a core task of the Treasury division, which is supported by the Group Asset/Liability Committee. The latter uses scenarios and interest income simulations that ensure proper interest rate sensitivity in line with expected changes in market rates and the overall risk appetite. Interest rate risk in the banking book is not only measured in a value-at-risk framework but also managed by the traditional tools of nominal and interest rate gap analyses. The following table shows the change in the present value of the banking book given a one-basis-point parallel interest rate increase. The main currencies are shown separately. 300Management report · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 31/12/2023 Total < 3 m > 3 to 6 m > 6 to 12 m > 1 to 2 y > 2 to 3 y > 3 to 5 y > 5 to 7 y > 7 to 10 y > 10 to 15 y > 15 to 20 y > 20 y in € thousand CHF (73) (21) (1) (2) (3) (1) (3) (13) (9) (13) (6) (1) CNY (2) 0 (1) (1) 0 0 0 0 0 0 0 0 CZK (20) 4 0 (5) (4) (5) 1 (8) (3) 0 0 0 EUR (323) (2) (24) 141 124 (2) (69) (138) (78) (137) (146) 7 GBP (5) (2) 3 0 (1) (7) 2 0 0 0 0 0 HUF (6) 1 (3) 3 2 (1) (9) (1) 1 0 0 0 PLN (12) (2) (6) 1 0 (2) (3) 0 0 0 0 0 SGD 0 0 0 0 0 0 0 0 0 0 0 0 USD 20 2 (27) 7 0 3 15 11 8 1 0 0 Other 0 (1) 0 1 3 4 (1) 0 (1) (2) (3) 0 31/12/2022 Total < 3 m > 3 to 6 m > 6 to 12 m > 1 to 2 y > 2 to 3 y > 3 to 5 y > 5 to 7 y > 7 to 10 y > 10 to 15 y > 15 to 20 y > 20 y in € thousand CHF (94) (52) 0 (1) (2) (2) (1) (10) (8) (10) (7) (1) CNY (2) 0 (1) (1) 0 0 0 0 0 0 0 0 CZK 1 4 0 (3) (16) (2) (4) 12 13 (2) 0 0 EUR (564) 30 124 156 (77) (165) (617) (247) 354 (55) (54) (13) GBP (10) (1) 0 (1) 1 (2) (7) 0 0 0 0 0 HUF 5 1 (2) 0 3 0 1 1 1 0 0 0 PLN (22) (2) (5) 2 (4) (3) (9) 0 0 0 0 0 SGD 0 0 0 0 0 0 0 0 0 0 0 0 USD 122 23 101 11 8 (3) 0 2 2 (23) 0 0 Other (3) (1) 0 0 0 1 3 0 0 (2) (3) 0 Credit spread risk The market risk management framework uses time-dependent bond and CDS-spread curves as risk factors in order to measure credit spread risks. It captures all capital market instruments in the trading and banking book. Liquidity management Principles Internal liquidity management is an important business process within general bank management, because it ensures the continuous availability of funds required to cover day-to-day demands. Liquidity adequacy is ensured from both an economic and a regulatory perspective. In order to approach the economic perspective RBI AG established a governance framework comprising internal limits and steering measures which complies with the Principles for Sound Liquidity Risk Management and Supervision set out by the Basel Committee on Banking Supervision and the Kreditinstitute-Risikomanagement-Verordnung (KI-RMV) issued by the Austrian regulatory authority. The regulatory component is addressed by compliance with reporting requirements under Basel III (Liquidity Coverage Ratio, Net Stable Funding Ratio and Additional Liquidity Monitoring Metrics) as well as by complying with the regulatory limits. Liquidity risk management during the war in Ukraine Despite the ongoing war in Ukraine and intense media coverage of RBI, the liquidity position remained stable throughout 2023. In response to the unstable environment, several decisions were made and implemented in 2023 to establish an additional liquidity buffer. These decisions included increasing buffers in selected currencies and adjusting models based on observed statistics from previous years and the reporting year. Ongoing analysis, monitoring, and scenario analysis for potential adverse developments have been implemented. Management report301 · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 The ILAAP framework and governance once again proved to be solid and functioning even in times of crisis. Daily monitoring of the liquidity position using dynamic dashboards showed that the infrastructure and monitoring are effective and support quick reactions in times of crisis. Organization and responsibility Responsibility for ensuring adequate levels of liquidity lies with the overall Management Board. The board members with functional responsibility are the Chief Financial Officer (Treasury) and the Chief Risk Officer (Risk Controlling). Accordingly, the processes regarding liquidity risk are essentially run by two areas within the bank: Firstly the Treasury unit, which takes on liquidity risk positions within the strategy, guidelines and parameters set by the responsible decision-making bodies. Secondly, they are monitored and supported by the independent Risk Controlling unit, which measures and models liquidity risk positions, sets limits and supervises compliance with them. Besides the responsible units in the line functions, the Asset/Liability Management Committee (ALCO) acts as the decision- making body with respect to all matters affecting the management of the liquidity position and statement-of-financial- position structure of RBI AG, including the definition of strategies and policies for managing liquidity risks. The ALCO takes decisions and provides standard reports on liquidity risk to the respective Management Boards at least on a monthly basis. Liquidity strategy Treasury units are committed to achieving KPIs and to complying with risk-based principles. The current set of KPIs includes general targets (e.g. for return on risk-adjusted capital (RORAC) or coverage ratios), as well as specific Treasury targets for liquidity such as a minimum survival period in defined stress scenarios or minimum liquidity targets in regulatory indicators. While generating an adequate structural income from maturity transformation which reflects the liquidity and market risk positions taken by the bank, Treasury has to follow a prudent and sustainable risk policy when steering the balance sheet. Strategic goals comprise a reduction in parent funding within the group, the sustainable management of the depositor base and of credit growth as well as continuous compliance with regulatory requirements and the internal limit framework. Liquidity Risk Framework Regulatory and internal liquidity reports and ratios are generated and determined based on particular modelling assumptions. Whereas the regulatory reports are calculated on specifications given by authorities, the internal reports are modelled with assumptions from empirical observations. RBI AG has a substantial database along with expertise in forecasting cash flows arising from all material on- and off-balance sheet positions. The modelling of liquidity inflows and outflows is carried out on a sufficient granular level, differentiating between product and customer segments, and, where applicable, currencies as well. Modelling of customer deposits includes assumptions concerning the retention times for deposits after maturity. The model assumptions are quite prudent, e.g. there is a "no rollover" assumption on funding from banks and all funding channels and the liquidity buffer are stressed simultaneously. The cornerstones of the economic liquidity risk framework are the Going Concern (GC) and the Time to Wall (TTW) scenario. The Going Concern report shows the structural liquidity position. It covers all main risk drivers which could detrimentally affect RBI AG in a business-as-usual scenario. The Going Concern models are important input factors for the liquidity contribution to the internal funds transfer pricing model. On the other hand, the Time to Wall report shows the survival horizon for defined adverse scenarios and stress models (market, reputational and combined crisis) and determines the minimum level of the liquidity buffer (and/or the counter-balancing capacity) for each Group unit. The liquidity scenarios are modelled using a Group-wide approach which considers local specifics where warranted due to influencing factors such as the market or the legal environment or certain business characteristics. When modelling cash inflows and outflows a distinction is at minimum made between products, customer segments and individual currencies (where applicable). For products without a contractual maturity, the distribution of cash inflows and outflows is calculated using a geometric Brownian motion which derives statistical forecasts for future daily balances from the observed, exponentially weighted historical volatility of the corresponding products. For market crisis scenario a special model for assessment of the potential liquidity outflow due to margin calls is in place. This model relies on Value-at-Risk calculations to estimate the potential depreciation of derivative portfolios involving counterparties with CSA or variation margin agreements. By incorporating this outflow into the liquidity risk stress test, a corresponding buffer is maintained to account for potential margin calls in extremely adverse situations. The liquidity risk framework is continuously developed. The technical infrastructure is enhanced in numerous projects and data availability is improved in order to meet the new reporting and management requirements for this area of risk. 302Management report · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 Risk appetite and liquidity limits The liquidity position is monitored at the level of RBI AG and at the level of its branches and is restricted by means of a comprehensive limit system. Limits are defined both under a business-as-usual as well as under a stress perspective. In accordance with the defined risk appetite, each unit must demonstrate a survival horizon of several months (TTW) in a severe, combined stress scenario (reputational and market stress). This can be ensured either by a structurally positive liquidity profile or by a sufficiently high liquidity buffer. In a normal going-concern environment (GC), maturity transformation must be fully covered by the available liquidity buffer in the medium term. This means that the cumulative liquidity position over a period of up to one year must be positive. In the long term (one year or more), maturity transformation is permitted up to a certain level. For internal models, these limits are supplemented by limits for compliance with regulatory liquidity ratios, such as the liquidity coverage ratio (LCR). All limits must be complied with on a daily basis. Liquidity monitoring The bank uses a range of customized measurement tools and early warning indicators that provide board members and senior management with timely and forward-looking information. The limit framework ensures that the bank can continue to operate in a period of severe stress. Monitoring of limits and reporting limit compliance is performed regularly and effectively. Any breach by Group units is reported to the Group ALCO and escalated. In such cases, appropriate steps are undertaken in consultation with the relevant unit or contentious matters are escalated to the next highest responsible body. Liquidity stress test Stress tests are conducted for RBI AG on a daily basis on Group level. The tests cover three scenarios (market, reputational and combined crisis), consider the effects of the scenarios for a period of several months and demonstrate that stress events can simultaneously result in a time-critical liquidity requirement in several currencies. The stress scenarios include the principal funding and market liquidity risks; all units of RBI AG are simultaneously subject to a severe combined crisis for all their major products. The results of the stress tests are reported to the Management Board and other members of management on a weekly basis; they also form a key component of the monthly ALCO meetings and are included in the bank’s strategic planning and contingency planning. A conservative approach is adopted when establishing outflow ratios based on historical data and expert opinions. The simulations assume a lack of access to the money or capital markets and simultaneously significant outflows of customer deposits. In this respect, the deposit concentration risk is also considered by assigning higher outflow ratios to large customers. Furthermore, stress assumptions are formulated for the drawdown of guarantees and credit obligations. In addition, the liquidity buffer positions are adapted by haircuts in order to cover the risk of disadvantageous market movements, and the potential outflows resulting from collateralized derivative transactions are estimated. The bank continuously monitors whether the stress assumptions are still appropriate or whether new risks need to be considered. The time to wall concept has established itself as the main control instrument for day-to-day liquidity management and is therefore a central component of funding planning and budgeting. It is also fundamental to determining performance ratios relating to liquidity. Liquidity buffer As shown by the daily liquidity risk reports, the main Group units actively maintain and manage liquidity buffers, including high- quality liquid assets (HQLA) which are always sufficient to cover the net outflows expected in crisis scenarios. RBI AG has sizeable, unencumbered and liquid securities portfolios and favors securities eligible for Central Bank tender transactions in order to ensure sufficient liquidity in various currencies. The main Group units ensure the availability of liquidity buffers, test their ability to utilize central bank funds, constantly evaluate their collateral positions as regards their market value and encumbrance and examine the remaining counterbalancing capacity, including the funding potential and the salability of the assets. Generally, a haircut is applied to all liquidity buffer positions. In the stressed liquidity report (time-to-wall), these haircuts include a market-risk specific haircut and a central bank haircut. While the market risk haircut represents the potential price volatility of the securities held as assets as part of the liquidity buffer, the central bank haircut represents an additional haircut for each individual relevant security that may be offered as collateral. Management report303 · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 Intraday liquidity management In compliance with regulatory requirements for intraday liquidity risk management, the available liquidity is calculated daily on the basis of the outflow assumptions of the regular liquidity stress report (time-to-wall) for RBI AG. In case of limit breaches, the intraday contingency and escalation process is triggered. Contingency funding plan Under difficult liquidity conditions, the units switch to a contingency process in which they follow predefined liquidity contingency plans. These contingency plans also constitute an element of the liquidity management framework and are mandatory for all significant Group units and thus also for RBI AG. The emergency management process is designed so that the Group can retain a strong liquidity position even in serious crisis situations. Liquidity position Funding is founded on a strong deposit base. Funding requirements are regularly updated to take account of balance sheet developments and to ensure that liquidity ratios are maintained in accordance with management requirements. The ability to procure funds is precisely monitored and evaluated by Treasury. In the past year and to date, RBI AG’s excess liquidity was significantly above all regulatory and internal limits (with a few exceptions in the area of internal sub-limits). The result of the internal time to wall stress test demonstrates that RBI AG would survive throughout the modelled stress phase of several months even without applying contingency measures. The results of the going-concern scenario are shown in the following table. It illustrates excess liquidity and the ratio of expected cash inflows plus the counterbalancing capacity to cash outflows (liquidity ratio) for selected maturities on a cumulative basis. Based on assumptions employing expert opinions, statistical analyses and country specifics, this calculation also incorporates estimates of the stability of the customer deposit base, outflows from off-balance sheet items and downward market movements in relation to positions which influence the liquidity counterbalancing capacity. in € thousand 31/12/2023 31/12/2022 Maturity 1 month 1 year 1 month 1 year Liquidity gap 10,849,049 12,837,604 9,791,000 6,063,994 Liquidity ratio 125 % 115 % 120 % 106 % Liquidity coverage ratio (LCR) The liquidity coverage ratio (LCR) requires the short-term resilience of banks by ensuring that they have an adequate stock of unencumbered high-quality liquid assets (HQLA) to meet potential liability run offs that might occur in a crisis, which can be converted into cash to meet the liquidity needs for a minimum of 30 calendar days in a liquidity stress scenario. The calculation of the expected cash inflows and outflows of funds and the HQLAs is based on regulatory guidelines. The regulatory limit for the LCR is 100 per cent. in € thousand 31/12/2023 31/12/2022 Average liquid assets 20,480,949 26,465,842 Net outflows 13,404,737 17,341,910 Inflows 9,716,429 9,032,834 Outflows 23,121,167 26,374,744 Liquidity Coverage Ratio 153 % 153 % Despite the increased volume of own issuance and the decrease in the loan portfolio, LCR remained unchanged compared to year-end 2022 as these effects were offset by the repayment of the TLTRO instruments. 304Management report · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 Net Stable Funding Ratio (NSFR) The NSFR is defined as the ratio of available stable funding to required stable funding. Available stable funding is defined as that portion of equity and debt which is expected to be a reliable source of funds over the time horizon of one year covered by the NSFR. A bank’s required stable funding depends on the liquidity characteristics and residual maturities of the various assets held and of off-balance sheet positions. RBI AG targets a balanced funding position. in € thousand 31/12/2023 31/12/2022 Required stable funding 40,558,033 41,960,579 Available stable funding 47,374,467 46,603,649 Net Stable Funding Ratio 117 % 111 % The increase of NSFR compared to year-end 2022 was mainly due to increased volume of own issuance and decreased loan portfolios. Operational risk Operational risk is defined as the risk of losses resulting from inadequate or failed internal processes, people and systems or from external events, including legal risk. In this risk category internal risk drivers such as unauthorized activities, fraud or theft, conduct-related losses, modelling errors, execution and process errors, or business disruption and system failures are managed. External factors such as damage to physical assets or fraud are managed and controlled as well. This risk category is analyzed and managed based on RBI AG’s own historical loss data and the results of risk assessment. As with other risk types the principle of firewalling of risk management and risk controlling is also applied to operational risk at RBI AG. To this end, individuals are designated and trained as Operational Risk Managers for each division. Operational Risk Managers provide central Operational Risk Controlling with reports on risk assessments, loss events, indicators and measures. They are supported in their work by Dedicated Operational Risk Specialists (DORS). Operational risk controlling units are responsible for reporting, implementing the framework, developing control measures and monitoring compliance with requirements. Within the framework of the annual risk management cycle, they also coordinate the participation of the relevant second line of defense departments (Financial Crime Management, Compliance, Vendor Management, Outsourcing Management, Insurance Management, Information Security, Physical Security, BCM, Internal Control System, Technology Risk Management) and all first line of defense contacts (Operational Risk Managers). Risk identification Identifying and evaluating risks that might endanger the bank’s existence (but the occurrence of which is highly improbable) and areas where losses are more likely to arise more frequently (but have only limited impact) are important aspects of operational risk management. Operational risk assessment is executed in a structured manner according to risk categories such as business processes and event types. Moreover, risk assessment applies to new products as well. The impact of high probability/low impact events and low probability/high impact events is measured over a one-year and a ten-year horizon. Low probability/high impact events are quantified on the basis of scenarios. The internal risk profile, losses arising and external changes determine which cases are dealt with in detail. In addition, scenario analyses for focus topics such as ESG, model risks or cyber risks are specified via the Group. Monitoring In order to monitor operational risks, early warning indicators are used that allow prompt identification and minimization of losses. Loss data is collected in a central database called Archer (an overall non-financial risk platform) in a structured manner according to the event type and the business line. In addition to the requirements for internal and external reporting, information on loss events is exchanged with international data pools to further develop operational risk management tools as well as to track measures and control effectiveness. Since 2010, RBI AG has been a participant in the ORX data pool (Operational Risk Data Exchange Association), whose data are currently used for internal benchmark purposes and analyses and as part of the operational risk model. The ORX data consortium is an association of banks and insurance groups for statistical purposes. The results of the analyses as well as events resulting from operational risks are reported in a comprehensive manner to the relevant Operational Risk Management Committee on a regular basis. Management report305 · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 Quantification and mitigation At the end of 2023, the equity requirement was calculated using the standardized approach. The economic capital is based on an internal model with the input factors from the external and internal loss events and the Group-wide scenarios. Risk-based management is carried out with the allocation on the basis of the input factors of the corresponding units and operating income for stabilization. The implementation of these high qualitative standards has already been rolled out in broad sections of the Group. To reduce operational risk, business managers decide on preventive risk reduction actions such as risk mitigation or risk transfer. The progress and effectiveness of these actions is monitored by Risk Control. The former also define contingency plans and nominate responsible persons or departments for initiating the defined actions if losses in fact occur. In addition, several dedicated organizational units provide support to business units for preventing operational risks. An important role in connection with operational risk activities is taken on by Financial Crime Management and by Technology Risk Management. Financial Crime Management provides support for the prevention and identification of fraud. Technology Risk Management has an important role in defining and monitoring IT risks. RBI AG also organizes regular extensive staff training programs and has a range of contingency plans and back-up systems in place. Loss data per category of operational risk for RBI AG is distributed across the Basel risk categories as follows, but do not include any loss events that are already reflected in the credit risk provisions: in € thousand 31/12/2023 Share 31/12/2022 Share Clients, Products and Business Practices 916,408 99.4 % 512,051 99.1 % External Fraud 370 0.0 % 1,808 0.3 % Disasters and Public Safety 4,089 0.4 % 1,546 0.3 % Excecution, Delivery and Process Management 584 0.1 % 1,136 0.2 % Employment Practices and Workplace Safety 137 0.0 % 144 0.0% Technology and Infrastructure Failures 245 0.0 % 1 0.0% Total 921,833 100.0 % 516,686 100.0 % Number of OpRisk events 31/12/2023 Share 31/12/2022 Share Clients, Products and Business Practices 894 24.3 % 323 6.1 % External Fraud 2,548 69.2 % 4,670 88.7 % Disasters and Public Safety 63 1.7 % 12 0.2 % Excecution, Delivery and Process Management 161 4.4 % 214 4.1 % Employment Practices and Workplace Safety 7 0.2 % 43 0.8 % Technology and Infrastructure Failures 8 0.2 % 2 0.0 % Total 3,681 100.0 % 5,264 100.0 % 306Management report · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 · Internal control and risk management system in relation to the accounting process Introduction The establishment and definition of a suitable internal control and risk management system with regard to the accounting process is extremely significant for RBI AG. The Finance Services Banking department, which is part of Group Accounting and is located in the CFO unit under the CEO, prepares and coordinates the annual financial statements of RBI AG. The foreign branches deliver financial statements to the head office. They themselves are responsible for preparing the financial statements, taking into account the applicable UGB/BWG accounting manual of RBI AG. The annual financial statements are prepared on the basis of the relevant Austrian laws, above all the Austrian Banking Act (BWG) and the Austrian Commercial Code (UGB), which deal with the preparation of annual financial statements. RBI AG’s general ledger is maintained in SAP S4 HANA. The GEBOS core banking system fulfills important sub-ledger functions such as credit and deposit processing, and clearing, settlement and payment services. Other sub-ledgers exist in addition to GEBOS, including in particular: · Wall Street Systems and Murex (Treasury transactions) · GEOS und GEOS Nostro (securities settlement and nostro securities management) · VEGA (Certificates and Equity-Trading) · Clearing, settlement and payment services · Trade finance (guarantees and letters of credit) · UBIX (stock exchange traded securities derivatives) · ARTS/SE4 (Repo and lending business) · SAP sub-ledgers (accounts receivable/accounts payable/fixed asset accounting) · FineVare (loan loss provisioning) · Cognos Controller for preparing the consolidated financial statements of RBI AG including branches The accounting process can be described as follows: · Day-to-day accounting Day-to-day accounting records of business transactions are mainly posted to the respective integrated subledgers. The relevant accounting data is directly and automatically transferred to the general ledger. In addition, individual postings are recorded directly in the SAP general ledger. The SAP general ledger has multi-GAAP functionality, meaning two equivalent general ledgers are maintained in parallel: one in accordance with UGB/BWG reporting standards and also a parallel ledger in accordance with IFRS. An operational chart of accounts exists for both of the general ledgers; depending on the respective content, all postings are effected either in both general ledgers simultaneously or only in one of the two. The parallelism of the entries and existence of the two parallel general ledgers removes the need for reconciliation from UGB/BWG to IFRS. · Individual financial statements for RBI head office in accordance with UGB/BWG The SAP trial balance in accordance with UGB/BWG results from the posting data of the respective subsystems of the banking operations which is delivered via automated interfaces. In addition, supplementary ledger-specific closing entries are made directly in SAP. These are independent of the respective subsystems. The sum of all these entries gives the statement of financial position and the income statement pursuant to UGB/BWG for RBI’s head office excluding branches. Management report307 · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 · Individual financial statements of RBI AG In a final step, the financial statements of RBI AG in accordance with UGB/BWG are produced. These include head office and also the branches. Both the branch data and the closing data of head office are provided by automated transfer from the accounting systems into the IBM Cognos Controller consolidation system. The data are consolidated in this system, on the basis of which RBI AG’s individual financial statements are prepared. Control environment In general, all Group-internal instructions can be retrieved from the Group Internal Law Database. With regard to accounting, mention should be made above all of the Group Accounts Manual, which contains a description of the following points in particular: · Accounting rules for general and special transactions · Measurement methods · Required (quantitative) information in the notes Further guidelines relate solely to RBI AG or only deal with functions within departments. The Corporate Directive Accounting Guidelines for example apply to the accounting system. These deal with the instruction process for the settlement of purchase invoices, cost refunds and the management of clearing accounts. Regulations in connection with bookkeeping and accounting within the framework of the separate financial statements according to the Austrian Commercial Code/Austrian Banking Act are set out in the UGB/BWG Accounting Manual. Risk assessment The assessment of the risk of incorrect financial reporting is based on various criteria taking into account appropriate escalation mechanisms. Valuations of complex financial instruments may lead to an increased risk of error. In addition, asset and liability items have to be valued for the preparation of the annual financial statements; in particular the assessment of the impairment of receivables, securities and participations, which are based on estimates of future developments, gives rise to a risk. Control measures The control measures encompass a wide range of reconciliation processes, notably the reconciliation between the general ledger in SAP and the sub-ledgers. Besides the four eyes principle, automation-aided controls and monitoring instruments dependent on risk levels are used, such as the reconciliation between accounting and balance sheet risk management. The duties assigned to individual positions are documented and updated on an ongoing basis. Particular emphasis is placed on effective deputizing arrangements to ensure that deadlines are not missed due to the absence of one person. The controls in the core processes are important for the financial statements process. These primarily involve measurement-related processes whose results have a significant influence on the financial statements (e.g. loan loss provisioning, derivatives, equity participations, personnel provisions, market risk). The Audit Committee of the Supervisory Board considers the annual financial statements and the management report, which are also approved and adopted by the Supervisory Board in accordance with § 96(4) of the German Stock Corporation Act (AktG). They are published via the online platform Verlautbarungs- und Informationsplattform (EVI) and filed with the commercial register. 308Management report · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 Information and communication Information on the accounting treatment of the respective products is regularly exchanged with the specialist departments. For example, regular monthly meetings take place with the Capital Markets and Treasury departments, in which among other topics accounting for complex products is addressed. The Accounting team is also represented at regularly scheduled jour-fixe meetings during the product launch process in order to provide information on the technical aspects of accounting and their implications for product launches. Regular department events ensure that employees receive ongoing training on changes to accounting rules under UGB, BWG and IFRS. As part of the reporting process, the Management Board receives monthly and quarterly reports analyzing the results of RBI AG. The Supervisory Board is also regularly informed about the results at its meetings. RBI yearly publishes the annual report. During the year external reports are available quarterly for the consolidated results of RBI AG. The reporting cycle is quarterly: besides the consolidated financial statements, a semi-annual financial report and interim quarterly reports for the Group are published. In addition, reports have to be regularly provided to the banking supervisory authority. Monitoring Financial reporting is an important part of the ICS, in which the accounting processes are subject to additional monitoring and control, the results of which are presented to the Management Board and Supervisory Board. The Audit Committee is also responsible for monitoring the accounting process. The Management Board is responsible for ongoing company-wide monitoring. In accordance with the target operating model, three successive lines of defense are in place to meet the increased requirements for internal control systems. The first line of defense is formed by the individual departments, where department heads are responsible for monitoring their business areas. Controls and plausibility checks are conducted on a regular basis within the departments, in accordance with the documented processes. The second line of defense is provided by issue-specific specialist areas. These include, for example, Compliance, Data Quality Governance, Operational Risk Controlling or Security & Business Continuity Management. Their primary aim is to support the individual departments when carrying out control steps, to validate the actual controls and to introduce state-of-the-art practices within the organization. Internal audits are the third line of defense in the monitoring process. Responsibility for auditing lies with Group Internal Audit at RBI AG. All internal auditing activities are subject to the Group Audit standards, which are based on the Austrian Financial Market Authority’s minimum internal auditing requirements and international best practices. Group Audit’s internal rules are additionally applicable (notably the Audit Charter). Group Audit regularly and independently verifies compliance with the internal rules within the RBI Group units. The head of Group Internal Audit reports directly to the Management Board. Management report309 · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 · Outlook Economic outlook After a year of stagnating economic growth, the economy is expected to return to a moderate growth trajectory in 2024. However, the economic upturn will probably only be moderate given the continuing high interest rates. The economy is expected to be supported by private consumption, which is benefiting from rebounding real wages. The industrial sector should exit its recessionary environment in the course of 2024. Significant increases in the price of fossil fuels due to military developments are a risk factor but not expected. A quick end to the war in Ukraine currently seems improbable. However, absent a further substantial military escalation, the war seems unlikely to have any additional negative implications for the economy in the euro area or the CE/SEE countries. Inflation will continue to fall in 2024 but not at the same pace as in 2023. The US Federal Reserve and the ECB are nevertheless likely to embark on a series of interest rate cuts over the course of the year, although they will proceed cautiously. Interest rates will therefore be significantly higher in 2024 than in previous years. One potential risk is that individual sectors of the financial system will struggle to cope with persistently higher interest rates. Central Europe Real wages in Central Europe (CE) are expected to rise as inflation continues to fall in 2024 despite a temporary increase in inflation due to the expiration of inflation-dampening measures. This should in turn help revive consumer demand, which should receive additional support from falling interest rates. Economic growth in the region is thus expected to be significantly higher in 2024 as a whole (2.7 per cent) than in the previous year (0.1 per cent). The top growth drivers are forecast to be Hungary (3.0 per cent), not least due to investments in the automotive and battery industry and the creation of new production capacity, and Poland (3.1 per cent). Poland is likely to receive a boost from NGEU funds as a result of the election and should receive economic tailwinds from the recovery of Germany’s industrial sector. Southeastern Europe Alongside resurgent consumer demand across Europe, Southeastern Europe (SEE), especially the Western Balkans, will benefit from the EU’s recently unveiled growth plan for the Western Balkans. GDP growth is expected to accelerate to 2.8 per cent in 2024 in this environment. Together with existing cash inflows from NGEU funds and the financial framework as well as the effects of nearshoring/friendshoring, the region should be able to benefit from its locational advantages (low labor costs and geographic location). The Western Balkan countries of Albania (3.5 per cent) and Kosovo (3.9 per cent) are predicted to have the highest economic growth in 2024. Eastern Europe In Eastern Europe, growth will once again be the strongest in Ukraine, where GDP is forecast to increase 4.9 per cent in 2024, driven by strong growth in private consumption and investment. Rising exports and inflows of external funds should support the economy as well. The Russian economy should record positive GDP growth in 2024 (1.5 per cent) despite the sanctions, military mobilization, unfavorable investment environment and economic isolation. However, its monetary policy has temporarily tightened in response to increasing inflationary pressure, some of which was prompted by the depreciation of the Russian ruble. In Belarus, limited domestic resources, growing competition from Chinese companies in the Russian market, ongoing EU/US sanctions and base effects will slow GDP growth in 2024 (2.0 per cent). Austria Following the 2023 recession, the Austrian economy is likely to return to a moderate growth trajectory in the first half of 2024. Real wage growth is expected to be clearly positive in 2024, which should support private consumption. Industrial companies should be finished with reducing their overflowing inventories by the spring, which should have a positive impact on new orders and ultimately on industrial production. However, the upturn is expected to be only moderate, with GDP growth of just 0.2 per cent expected for 2024 as a whole. Inflation will continue to drop in 2024, albeit at a much slower pace. Still, the inflation differential to the euro area is likely to be noticeably lower in 2024 than in 2023. Banking sector in Austria 2023 was affected by regulatory decisions made in 2022 on mortgage lending standards for households and by the dramatic change in interest rates precipitated by the shift in the ECB’s interest rate stance. Following the change in the ECB’s interest rates, lending to both private households and companies is expected to remain significantly subdued in 2024. This is mirrored in the growth forecasts for the entire Austrian economy, which assume only a moderate upturn. Given the interest rate structure 310Management report · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 of outstanding retail and corporate loans, which contain a significant proportion of variable-rate-only loans, risks costs are expected to increase moderately in 2024 since higher interest rates will likely adversely affect both private households and companies. The steep increases in net interest income that the banking sector posted in 2022 and 2023 should begin to normalize in 2024. This is attributable to a progressive tightening of deposit conditions in the sector, especially for demand deposits, thereby exerting greater pressure on interest margins. Capital market refinancing costs also remain higher due to the changed interest rate environment across all bond classes. Nevertheless, the Austrian banking sector feels fundamentally well positioned to master the challenges ahead. CEE banking sector The upcoming monetary easing in CE/SEE core markets that fall outside the euro area will weigh on earnings for banks in the region. In contrast, the relative delay in the ECB cycle should continue to support interest margins for economies that are located in the euro area and tied to the euro. The weak economy could ultimately raise the risks to asset quality and moderately increase loan loss provisions, which the core earnings capacity should still be able to accommodate. On the cost side, special taxation and selected policy support programs for borrowers will likely remain in place (albeit probably in a weakened form), while EU-based banks will have to start refinancing MREL bonds. Regarding lending, the ongoing economic uncertainty may continue to discourage lending to the corporate sector while the retail market could bounce back faster. However, this will require an easing of financial conditions and a further recovery in real wages. On the regulatory front, ESG will remain high on the agenda and will see further implementation in the regulatory framework, with EU regulators setting the tone for the entire CEE region. RBI AG’s outlook for 2024 The outlook assumes that interest rates for the main currency, the euro, will decline slightly starting in 2024. We also expect USD interest rates to fall slightly by the end of 2024. Interest rates are expected to decrease further in the coming years. The eurozone economy is expected to grow 1.5 per cent in 2024, with Austria growing at a slightly slower rate of 1.4 per cent. A similar economic situation is expected for 2025 and 2026. In addition, inflation is forecast to start falling in 2024 after having peaked in 2022 and 2023. We expect net interest income to trend downward. Margins on customer deposits benefited from the rapid rise in EUR and USD interest rates in 2023. Deposit rates are expected to be adjusted due to market developments in 2024, which will reduce this positive effect. In addition, higher risk premiums for new issues have a negative impact on net interest income. The average customer loan volume is expected to remain stable or increase slightly. Commission business is expected to decline in 2024 after booking exceptionally high income in the cross-border Russia business from payment transaction commissions and exchange differences in 2022 and 2023. Except for Russia, earnings in core markets and core products are expected to trend upward with support from the implementation of the AT 2025 strategy. In terms of operating expenses, we expect staff expenses to rise due to inflation. We are planning for non-staff expenses to increase at the average of the inflation rate in 2023 and the forecast inflation in 2024. The risk costs are based on expected loss levels, macroeconomic assumptions and risk model forecasts. The sanctions and compliance risk for Russia is closely monitored for all transactions. The volume of cross-border Russia business is expected to continue to decrease. Management report311 · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 RBI has decided to acquire shares in STRABAG SE In December 2023 RBI has taken a decision to acquire 28,500,000 shares in STRABAG SE, representing 27.78 per cent of outstanding shares, via its Russian subsidiary AO Raiffeisenbank from Russian based MKAO Rasperia Trading Limited for a cash consideration of € 1,510 million (including dividend entitlements for 2021 and 2022). Closing of the acquisition is subject to various conditions precedent including satisfactory completion of the sanctions compliance due diligence by RBI, regulatory approvals, and merger clearance. Upon the successful closing of the acquisition, AO Raiffeisenbank intends to transfer the shares in STRABAG SE to RBI by issuing a dividend in kind. The approval of the dividend in kind by the competent Russian authorities is also a condition precedent for the acquisition of the shares in STRABAG SE by AO Raiffeisenbank. The acquisition of the shares in STRABAG SE and distribution of the dividend in kind, subject to regulatory approvals and satisfaction of other conditions precedent, are expected to close in the first quarter of 2024. After closing, RBI will retain the shares in STRABAG SE as a long-term equity participation which will be contributed to and managed by its fully consolidated subsidiary GABARTS Beteiligungs GmbH & Co KG. With this transaction, RBI further reduces its exposure to Russia. Russia and Belarus In 2023, RBI continued to work on a spin-off or sale of AO Raiffeisenbank. Both alternatives require numerous approvals from various Russian and European authorities, and from the respective central banks. In the meantime, business activities in Russia will be further reduced. RBI continues to assess strategic options for the future of Priorbank in Belarus. 312Management report · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 Statement of the board of Management pursuant to § 82 (4) Z 3 Austrian Stock Exchange Act We confirm to the best of our knowledge that the financial statement give a true and fair view of the assets, liabilities, finan- cial positions and profit or loss of the company as required by the applicable accounting standards and that the management report gives a true and fair view of the development and performance of the business and the position of the company, to- gether with a description of the principal risks and uncertainties the company faces. Qualified electronically signed by: Vienna, 12 February 2024 The Management Board Johann Strobl m.p. Marie-Valerie Brunner m.p. Andreas Gschwenter m.p. Łukasz Januszewski m.p. Hannes Mösenbacher m.p. Andrii Stepanenko m.p. Statement of the board of Management pursuant to § 82 (4) Z 3 Austrian Stock Exchange Act313 · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 Independent Auditor’s Report Report on the Audit of the Annual Financial Statements Opinion We have audited the annual financial statements of Raiffeisen Bank International AG, Vienna, which comprise the statement of financial position as at 31 December 2023, the income statement, and notes to the consolidated financial statements. In our opinion, the accompanying financial statements comply with legal requirements and give a true and fair view of the financial position of the company as at 31 December 2023, and of its financial performance and for the year then ended in accordance with Austrian Generally Accepted Accounting Principles and the Austrian Banking Act. Basis for Opinion We conducted our audit in accordance with the Regulation (EU) No. 537/2014 and the Austrian Standards on Auditing. Those standards require the application of the International Standards on Auditing (ISAs). Our responsibilities under those standards are further described in the Auditors' Responsibilities for the Audit of the Financial Statements section of our report. We are independent of the Company in accordance with laws and regulations applicable in Austria and we have fulfilled our other professional responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Key Audit Matters Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial statements of the current period. These matters were addressed in the context of our audit of the financial statements in a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. 1. Recoverability of loans and advances to customers 2. Recoverability of shares in affiliated undertakings 3. Adequacy of provision for foreign currency loans in the branch in Poland 1. Recoverability of loans and advances to customers Description and Issue Loans and advances to customers are reported with an amount of EUR 27,7 billion after deduction of valuation allowances. They mostly are loans and advances to Austrian and international non-financial corporations and to a lower extent retail customers in the Polish branch. The Bank describes the process for monitoring credit risk and the procedure for determining credit losses in the section “Recognition and Measurement Principles” of the notes to the financial statements and in the “Credit Risk” section of the Risk Report in the Management Report. Calculations of credit losses for defaulted loans to corporates are based on losses determined for various weighted scenarios. These are determined by the assessment of the economic situation and development of the respective customer, the valuation of collateral, and the estimate of the amount and timing of the recoveries derived from these. Specific loan loss provisions for retail customers and expected credit losses for loans and advances for which no default has been identified are based on models with statistical assumptions such as rating-based probability of default, which are used 314Independent Auditor’s Report · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 to estimate the expected credit loss. The Bank uses the methodology of IFRS 9 to determine expected credit losses (12 months expected credit loss or, in the case of a significant increase in credit risk since initial recognition – lifetime expected credit loss). Post model adjustments and other adjustments are made when input parameter, assumptions and modeling do not cover all relevant risks. The calculation of the expected credit losses on loans and advances to customers is an estimate that is based on assumptions about future developments to a considerable extent. The expected credit loss depends on the selection of the data, the key assumptions, statistical and mathematical models and the correct execution of the calculation steps. We have therefore identified the recoverability of loans to customers as a key audit matter. Our response In testing expected credit losses for loans and advances to customers, we performed the following significant audit procedures: • We assessed the methodologies used to determine expected credit losses and their compliance with the Austrian Generally Accepted Accounting Principles and those of the Banking Act. • We analyzed the documentation of the processes of monitoring loans and risk provisioning, and critically assessed whether these processes are suitable for identifying loan losses and adequately reflecting the recoverability of exposures. We also assessed the processes and tested key controls regarding their design and implementation, including the relevant IT systems, and tested their effectiveness on a sample basis. • By performing analytical audit procedures, we examined changes of loans and advances with regard to the main characteristics relevant for the categorisation of the loans, such as quality, type of supervision, rating and level allocation as well as the development of risk provisions at customer and portfolio level throughout the year and in comparison with the previous year. • We tested individual exposures selected on the basis of a sample determined according to selected risk criteria: For defaulted loans, we assessed the Bank's estimates of the amount and timing of recoveries, taking into account collateral, and examined whether the assumptions used in the calculation were appropriate and derived from internal or external evidence. For non-defaulted loans, we examined whether indicators of default exist. • In order to assess the appropriateness of the expected credit losses for non-defaulted loans, we examined the plausibility of assumptions and the statistical/mathematical appropriateness of the models used, as well as the proper application of the models, with the assistance of specialists. In particular, we examined the assumptions in connection with forward-looking information and post-model adjustments. Furthermore, we examined the appropriateness of the assumptions “probability of default”, “loss given default” and the staging model, taking into account the results of the bank's internal validations, and reperformed selected calculation steps. In addition, IT specialists tested the effectiveness of key automated controls of the IT systems relevant for these calculations. • Finally, we assessed whether the disclosures in the notes to the financial statements regarding the calculation of expected credit losses and the significant assumptions and estimation uncertainties are appropriate. 2. Recoverability of shares in affiliated undertakings Description and Issue Shares in affiliated undertakings represent a significant balance sheet item at Raiffeisen Bank International AG with a total amount of approximately EUR 10.3 billion. The Bank holds interests, mostly through holding companies, in particular in domestic and foreign credit institutions as well as in finance and project companies. The Management Board describes the procedures for impairment testing for shares in affiliated undertakings in the section ”Recognition and Measurement Principles” in the notes as well as in the section “Participation risk” of the Risk Report in the management report. The Bank reviews whether there are triggers for an impairment or whether a reversal of a previous impairment is required. Partly internal and partly external valuations are used to determine the recoverable amount. The valuations are based on assumptions and estimates regarding future business development and resulting returns to owners, especially in the form of dividends. The expected business performance is usually based on the budgeted figures approved by the corporate bodies of the respective companies. The discount rates used are derived from the financial and capital markets. The parameter used in these calculations are based on assumptions that are subject to a high degree of uncertainty. Changes in these assumptions may lead to significantly different results. Due to the sensitivity of the valuation results and the high Independent Auditor’s Report315 · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 degree of discretion in the assumptions, we have identified the valuation of shares of affiliated undertakings as a key audit matter. Our response In auditing the valuation of shares in affiliated undertakings, we performed the following key audit procedures: • We analyzed the documentation of the processes for monitoring and valuation of shares in affiliated undertakings and critically assessed whether these processes are suitable for identifying necessary impairments or reversals of impairments and appropriately reflecting the recoverability of the shares. • We reviewed the valuation models used, and – based on risk-based samples - the key planning assumptions and the valuation parameter with the involvement of our valuation specialists. We evaluated the planning and valuation parameters for selected valuations, based on external market data and historical data. We assessed the appropriateness of the interest rate parameters by comparing them with market- and industry-specific benchmarks and compared the cash flows used in the valuation model with the approved plans. The mathematical correctness of the valuations was verified on a sample basis. • Finally, we assessed whether the disclosures in the notes to the financial statements on the determination of an impairment of shares in affiliated undertakings are appropriate. 3. Adequacy of provision for foreign currency loans in the branch in Poland Description and Issue As at 31 December 2023, the Bank has recorded provisions (partly a provision, partly a deduction from carrying value) in connection with foreign currency loans in the branch in Poland in the amount of EUR 1,652 million. The Bank describes the legal risks, the procedure for determining the provisions and related uncertainties in the chapter “Litigation risk for foreign currency loans in Poland” of the notes to the financial statements. Due to the lack of clear answers by the competent courts, including the supreme courts, and the necessary assumptions about the future behavior of borrowers and former borrowers, there are considerable estimation uncertainties and scope for judgement in determining provision. Thus, we have determined the adequacy of the provision for foreign currency loans of the branch in Poland to be a key audit matter. Our Response In particular, we performed the following audit procedures in testing the adequacy of the “provision”: • We assessed the Bank's processes and controls for determining the “provision”, including the key controls applied, and their suitability for ensuring the determination of an appropriate “provision”. • We verified the plausibility and critically assessed the Bank's method for determining the “provision”, including the derivation of the underlying assumptions and their appropriateness. • We verified the mathematical accuracy of the Bank's calculations. • We obtained information from the lawyers engaged by the Bank for this subject matter and critically assessed this information. • We have reviewed the current case law with regard to foreign currency loans and have assessed its consideration for the calculation of the provision. • We reviewed the disclosure of the risks in the notes to the financial statements for appropriateness. 316Independent Auditor’s Report · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 Other Information The legal representatives are responsible for the other information. The other information comprises all information in the Annual Financial Report, except for the annual financial statements, the management report, the consolidated financial statements, the group management report and the related auditor's reports. Our audit opinion on the financial statements does not cover the other information, and we do not express any form of assurance conclusion thereon. In connection with our audit of the financial statements, our responsibility is to read the other information mentioned above and assess whether it is materially inconsistent with the financial statements or our knowledge obtained in the audit, or otherwise appears misleading. If, based on the work we have performed on the other information obtained prior to the date of this auditor’s report, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. Responsibilities of Management and the Audit Committee for the Financial Statements Management is responsible for the preparation of the financial statements that give a true and fair view of the financial position of the Company and of its financial performance for the year then ended in accordance with Austrian Generally Accepted Accounting Principles and the Austrian Banking Act, and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, management is responsible for assessing the Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so. The audit committee is responsible for overseeing the Company’s financial reporting process. Auditor’s Responsibilities for the Audit of the Financial Statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors' report that includes our opinion. Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance with EU rules and Austrian Generally Accepted Auditing Standards, which require the application of the ISAs, will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements. As part of an audit in accordance with Regulation (EU) 537/2014 and with Austrian Generally Accepted Auditing Standards, which require the application of the ISAs, we exercise professional judgement and maintain professional skepticism throughout the audit. We also: • Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. • Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control. • Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management. • Conclude on the appropriateness of the directors' use of the going concern basis of accounting and based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditors' report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditors' report. However, future events or conditions may cause the Company to cease to continue as a going concern. Independent Auditor’s Report317 · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 • Evaluate the overall presentation, structure, and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that give a true and fair view. We communicate with the audit committee regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. We also provide the audit committee with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where relevant, actions taken to eliminate hazards or safeguards applied. From the matters communicated with the audit committee, we determine those matters that were of most significance in the audit of the financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditors' report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication. Report on the Management Report Pursuant to Austrian Commercial Code, the management report is to be audited as to whether it is consistent with the financial statements and whether it has been prepared in accordance with the applicable legal requirements. Management is responsible for the preparation of the management report in accordance with the Austrian Commercial Code. We conducted our audit in accordance with laws and regulations applicable with respect to the management report. Opinion In our opinion, the management report attached is prepared in accordance with the applicable legal requirements, the disclosures pursuant to section 243a UGB are appropriate, and it is consistent with the financial statements. Statement Based on the findings during the audit of the financial statements and due to the thus obtained understanding concerning the Company and its circumstances no material misstatements in the management report came to our attention. Additional Information in Accordance with Article 10 of EU Regulation (EU) 537/2014 We were elected as auditor of the Company at the annual general shareholders' meeting on 31 March 2022 for the fiscal year ending on 31 December 2023 and mandated by the chairman of the Supervisory Board on 31 March 2022. Furthermore, we were elected as auditor at the annual general shareholders' meeting on 30 March 2023 for the subsequent fiscal year and mandated by the chairman of the Supervisory Board on 31 March 2023. We are the auditor of the Company since the financial year ending 31 December 2021. We confirm that the audit opinion in the section "Report on the Financial Statements" is consistent with the additional report to the audit committee referred to in article 11 of the EU regulation. We declare that no prohibited non-audit services (article 5 par. 1 of the EU regulation) were provided by us and that we remained independent from the Company in conducting the audit. 318Independent Auditor’s Report · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023 Engagement Partner The engagement partner responsible for the audit is Peter Bitzyk. Qualified electronically signed by: Vienna, 13 February 2024 Deloitte Audit Wirtschaftsprüfungs GmbH Peter Bitzyk Certified Public Accountant Publication or sharing with third parties of the financial statements together with our auditors' opinion is only allowed if the financial statements and the management report are identical with the audited version. This audit opinion is only applicable to the German and complete financial statements with the management report. Section 281 para 2 UGB applies to alternated versions. This translation is for convenience purposes only. Only the German original is legally valid and binding. Independent Auditor’s Report319 · Raiffeisen Bank International | Member of RBI Group | Financial Year 2023
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