AI Terminal

MODULE: AI_ANALYST
Interactive Q&A, Risk Assessment, Summarization
MODULE: DATA_EXTRACT
Excel Export, XBRL Parsing, Table Digitization
MODULE: PEER_COMP
Sector Benchmarking, Sentiment Analysis
SYSTEM ACCESS LOCKED
Authenticate / Register Log In

Raiffeisen Bank International AG

Quarterly Report May 22, 2014

756_rns_2014-05-22_e4780746-150f-4253-b907-4e45ed1dedf1.pdf

Quarterly Report

Open in Viewer

Opens in native device viewer

First Quarter Report 2014

Survey of key data

Raiffeisen Bank International Group
Monetary values in € million 2014 Change 2013
Income statement 1/1-31/3 1/1-31/3
Net interest income 979 13.2% 865
Net provisioning for impairment losses (281) 28.1% (220)
Net fee and commission income 376 0.2% 375
Net trading income (19) 80
General administrative expenses (755) (4.2)% (788)
Profit before tax 240 (4.3)% 251
Profit after tax 173 (0.7)% 174
Consolidated profit 161 2.5% 157
Statement of financial position 31/3 31/12
Loans and advances to banks 19,806 (11.0)% 22,243
Loans and advances to customers 79,692 (1.2)% 80,635
Deposits from banks 26,348 (12.5)% 30,105
Deposits from customers 63,599 (4.3)% 66,437
Equity 12,821 23.7% 10,364
Total assets 125,410 (4.0)% 130,640
Key ratios 1/1-31/3 1/1-31/3
Return on equity before tax 7.9% (1.3) PP 9.2%
Return on tangible equity 9.3% 0.1 PP 9.2%
Consolidated return on equity 4.8% (0.8) PP 5.6%
Cost/income ratio 56.1% (2.4) PP 58.5%
Return on assets before tax 0.74% (0.01) PP 0.75%
Net interest margin (average interest-bearing assets) 3.35% 0.46 PP 2.89%
NPL ratio 10.6% 0.6 PP 9.9%
Provisioning ratio (average loans and advances to customers) 1.40% 0.34 PP 1.06%
Bank-specific information1 31/3 31/12
Risk-weighted assets (total) 79,900 0.0% 79,897
Total capital 14,639 15.4% 12,686
Total capital requirement 6,392 0.0% 6,392
Common equity tier 1 ratio (transitional) 13.9% 3.3 PP 10.7%
Common equity tier 1 ratio (fully loaded) 9.9% n.a.
Total capital ratio 18.3% 2.4 PP 15.9%
Stock data 1/1-31/3 1/1-31/3
Earnings per share in € 0.41 (24.6)% 0.55
Closing price in € (31/3) 24.20 (4.7)% 25.39
High (closing prices) in € 31.27 (2.8)% 32.16
Low (closing prices) in € 20.60 (18.2)% 25.19
Number of shares in million (31/3) 292.98 49.9% 195.51
Market capitalization in € million (31/3) 7,090 42.8% 4,964
Resources 31/3 31/12
Employees as at reporting date 57,217 (1.2)% 57,901
Business outlets 2,991 (1.1)% 3,025
Customers in million 14.5 (0.5)% 14.6

1 Calculated according to the Austrian Banking Act (Bankwesengesetz, BWG) for illustrative purposes. RBI as part of the RZB Group is as a group not subject to the Austrian Banking Act.

RBI in the capital markets 4
Group management report 7
Market development 7
Performance 9
Comparison of results year-on-year 10
Comparison of results with the previous quarter 13
Statement of financial position 15
Risk management 17
Outlook 19
Segment reports 20
Division of segments 20
Segment overview 20
Central Europe 21
Southeastern Europe 28
Russia 37
CEE Other 40
Group Corporates 44
Group Markets 45
Corporate Center 46
Interim consolidated financial statements 48
Statement of comprehensive income 48
Statement of financial position 51
Statement of changes in equity 52
Statement of cash flows 53
Segment reporting 53
Notes 58
Notes to the income statement 61
Notes to the statement of financial position 65
Risk report 71
Additional notes 82
Publication details/Disclaimer 92

RBI in the capital markets

Capital increase

On 21 January 2014, RBI announced that it intended to strengthen its capital base by issuing new shares. The first stage of this capital increase was an offering of new shares to selected qualified institutional investors by way of an accelerated bookbuilding process (pre-placement), in which all 97,473,914 new shares were placed on 22 January. RZB participated in the capital increase via its wholly owned subsidiary Raiffeisen International Beteiligungs GmbH, with a commitment of € 750 million in the course of the pre-placement. 21.3 per cent of the shares from the pre-placement were subject to clawback with deferred settlement. This was to be applied to the extent that shareholders would exercise their subscription rights in the second stage of the capital increase, namely a rights offering during the period from 24 January to 7 February 2014.

Whereas RZB waived all of its subscription rights through its subsidiary Raiffeisen International Beteiligungs GmbH, the remaining shareholders exercised 35.7 per cent of their subscription rights. Consequently, 90,074,789 new shares were allocated to the qualified institutional investors from the pre-placement. This corresponds to 92.4 per cent of the total 97,473,914 shares issued by way of the capital increase, with existing shareholders receiving the remaining 7,399,125 new shares. At a subscription and offer price of € 28.50 per new share, gross proceeds from the deal amounted to roughly € 2.78 billion.

Crisis in Crimea impacts capital markets

In the first quarter of 2014, the dominant theme in the international financial markets was the political situation in Ukraine and the short-notice referendum resulting in Russia's annexation of the Crimean peninsula. The threat of spiraling sanctions against Russia, as well as uncertainty over the future course of the Russian administration, unsettled international investors considerably and, in March, led to corresponding share price losses in equity markets. Consequently, the Russian rouble and Ukrainian hryvnia devalued significantly against the US dollar and the euro. On a positive note, the US and the European Union are continuing their efforts to find a diplomatic solution. As a result, capital markets were already recovering towards the end of the first quarter.

Developments in a number of emerging markets likewise attracted attention in the financial markets. Following the Fed's announcement that it would gradually begin tapering its purchases of US government bonds, investors withdrew capital from these markets, which caused short-term turbulence in Turkey and India, for example.

Unlike the Fed, the European Central Bank sent no signals that it intended to withdraw liquidity from the market or end its loose monetary policy. To the contrary, owing to fresh fears of possible deflation in the eurozone, the ECB is even considering expanding its loose monetary policy.

Performance of RBI stock

RBI stock started the year with a share price of € 24.54 and reached its highest closing price for the reporting period at € 31.27 on 23 January 2014. The share price subsequently declined, resulting in a total share price loss of 1.4 per cent in the first quarter. As at the report's editorial deadline on 16 May 2014, it traded at € 21.40.

Price performance since 1 January 2013 compared to the ATX and EURO STOXX Banks

Active capital market communication

In the first quarter of 2014, RBI offered interested investors another opportunity to obtain first-hand information at road shows in Frankfurt, London, Milan, New York, Vienna, Warsaw, and Zurich. Currently, a total of 30 equity analysts and 22 debt analysts regularly report their investment recommendations on RBI. This makes RBI the company in Austria that has the by far largest number of analysts reporting on it on a regular basis.

To mark the publication of its 2013 annual results on 27 March 2014, RBI held a presentation for around 40 equity and debt investors, as well as analysts from Austria. Some 200 international analysts and investors participated in the subsequent conference call. On the following day, in London, the company presented itself to analysts and institutional investors from the world's most important financial centers. The event, which for some years now has taken place on the day following the publication of the annual results, was also met with keen interest on the part of the numerous investors that subscribed to the capital increase carried out at the beginning of the year. The ensuing question and answer session provided the roughly 100 participants with an opportunity for an in-depth exchange with the Management Board.

After the end of the reporting period, RBI participated in additional road shows in Geneva, Zurich and Zürs (Austria).

Stock data and details

RBI has been listed on the Vienna Stock Exchange since 25 April 2005. At the end of the first quarter, Raiffeisen Zentralbank Österreich AG (RZB) held roughly 60.7 per cent of RBI's stock, with the remaining shares in free float. RZB's stake, which was 78.5 per cent as at the end of 2013, was reduced following the capital increase at the beginning of 2014 in favor of the free float, which increased from around 21.5 per cent to roughly 39.3 per cent. With a broad geographic distribution and a wide range of investment objectives, the shareholders presented a balanced structure as at the editorial deadline. Investors included not only a large number of small Austrian investors, but also institutional shareholders, mainly from the USA and UK. Among the institutional shareholders were also sovereign wealth funds and supranational organizations, which promise stability owing to their preference for long-term investment strategies.

Share price as at 31 March 2014 € 24.20
High/low in the first quarter 2014 (closing prices) € 31.27 / € 20.60
Earnings per share from 1 January to 31 March 2014 € 0.41
Market capitalization as at 31 March 2014 € 7.1 billion
Average daily trading volume in the first quarter 2014 (single count) 833,937 shares
Stock exchange turnover in the first quarter 2014 (single count) € 1,385 million
Free float as at 31 March 2014 approximately 39.3%
ISIN AT0000606306
Ticker symbols RBI (Vienna Stock Exchange)
RBI AV (Bloomberg)
RBIV.VI (Reuters)
Market segment Prime Market
Number of shares issued as at 31 March 2014 292,979,038

Rating details

Rating agency Long-term rating Short-term rating Outlook
Moody's Investors Service A2 P-1 negative
Standard & Poor's A A-1 negative
Fitch Ratings A F1 negative

Financial calendar for 2014

4 June 2014 Annual General Meeting
11 June 2014 Ex-Dividend and Dividend Payment Date
7 August 2014 Start of Quiet Period
21 August 2014 Semi-Annual Report, Conference Call
6 November 2014 Start of Quiet Period
20 November 2014 Third Quarter Report, Conference Call

Contact for equity and debt investors

E-mail: [email protected] Internet: www.rbinternational.com Investor Relations Phone: +43-1-71 707-2089 Fax: +43-1-71 707-2138

Raiffeisen Bank International AG Group Investor Relations Am Stadtpark 9 1030 Vienna, Austria

Group management report

Market development

Following 1.2 per cent in 2013, economic growth of 0.5 per cent is expected in Central and Eastern Europe (CEE) in 2014, with development, once again, diverging considerably in Central and Eastern European regions. Recent GDP data, for the first quarter of 2014, and leading indicators support the view that economic growth in Central Europe (CE) and a number of Southeastern European (SEE) countries will accelerate significantly in 2014 – with economic growth above eurozone average. In contrast, Russia is expected to be marked by mild recession in 2014, while the CEE Other region (Ukraine and Belarus) will probably not be able to avoid a considerable economic slowdown.

Central Europe (CE) – the Czech Republic, Hungary, Poland, Slovakia, and Slovenia – is the most economically developed region in CEE. With the exception of Poland, CE economies are small, open, and highly dependent on exports to the eurozone. Following 0.8 per cent growth in 2013, economic growth in CE should increase significantly to 2.5 per cent in 2014, with Poland again being expected to post the strongest GDP growth at just over 3 per cent. Recent GDP data and leading indicators here point to a steady and sustainable improvement in economic conditions. In general, the recovery in CE benefits primarily from high economic growth momentum in Germany, as well as from expansionary monetary and currency policies in those CE countries with room to maneuver in this area.

In Southeastern Europe (SEE) – Albania, Bosnia and Herzegovina, Bulgaria, Croatia, Kosovo, Romania, and Serbia – the economy should grow by over 2 per cent in 2014, as in the previous year. As in 2013, Romania is expected to record the strongest growth in 2014, which is confirmed by recent GDP figures for the first quarter of 2014. Romania is currently benefitting from successfully implemented structural reforms. GDP growth in Bulgaria is projected at roughly 2 per cent for 2014. In most of the other countries in SEE, GDP growth looks set to continue below 2 per cent, and Croatia could remain in stagnation in 2014. This is attributable to the fact that structural reforms are still pending in a number of these countries, and that the high levels of debt in the private sector are only gradually being reduced.

Russia already suffered a marked economic downturn in 2013, which will strengthen in 2014. A mild recession is expected in Russia in 2014, with GDP declining 0.3 per cent (following 1.3 per cent growth in 2013). In Russia, but also in the CEE Other region, domestic weaknesses (low investment, unfavorable investment climate, and high capital outflows) have further intensified as a result of the current escalation of geopolitical tensions and the first (still) rather mild sanctions. Currency devaluations in Russia and Ukraine additionally weigh on the domestic economy, as well as on consumer confidence. Against this backdrop, Ukraine's GDP is expected to decline by around 5 per cent – with considerable downturn risk – in 2014.

Region/country 2012 2013e 2014f 2015f
Czech Republic (0.9) (0.9) 2.3 2.4
Hungary (1.7) 1.1 2.0 2.0
Poland 1.9 1.6 3.1 3.3
Slovakia 1.8 0.9 2.2 3.0
Slovenia (2.5) (1.1) (0.5) 1.5
CE 0.6 0.8 2.5 2.8
Albania 1.6 0.4 2.0 3.0
Bosnia and Herzegovina (1.1) 1.9 1.5 3.5
Bulgaria 0.6 0.9 2.0 3.5
Croatia (1.9) (1.0) (0.8) 1.0
Kosovo 2.5 3.0 3.0 4.0
Romania 0.6 3.5 3.5 3.5
Serbia (1.5) 2.5 1.0 2.0
SEE (0.1) 2.1 2.2 2.9
Russia 3.4 1.3 (0.3) 1.0
Belarus 1.7 0.9 0.5 1.5
Ukraine 0.2 0.0 (5.0) 1.5
CEE Other 0.6 0.2 (3.5) 1.5
CEE 2.1 1.2 0.5 1.7
Austria 0.9 0.4 1.5 2.3
Germany 0.9 0.5 1.8 2.5
Eurozone (0.6) (0.4) 1.5 2.0

Annual real GDP growth in per cent compared to the previous year

Performance

RBI generated a profit before tax of € 240 million in the first three months of 2014, a fall of € 11 million versus the comparable period in the previous year. Operating result rose 4 per cent to € 590 million, while general administrative expenses fell 4 per cent to € 755 million. In contrast, higher net provisioning for impairment losses – especially in Ukraine – had a negative effect on the result.

At € 1,345 million, operating income remained stable year-on-year: The net interest margin (calculated on interest-bearing assets) improved 46 basis points to 3.35 per cent owing to the reduction in receivables with lower margins, as well as to unsustainably higher interest income from derivatives at Group head office. This resulted in a 13 per cent increase in net interest income to € 979 million. Net trading income fell € 100 million to minus € 19 million due, among other things, to exchange-rate related valuation losses from foreign currency positions in Ukraine, valuation losses on derivatives in Russia, and a reduced net income from proprietary trading activities in Poland.

General administrative expenses fell 4 per cent, or € 33 million, to € 755 million year-on-year. Positive effects resulted from the ongoing cost reduction programs, predominantly in the Czech Republic and Poland, while the declines in Ukraine and Russia were primarily caused by currency devaluations. The average number of employees fell 1,709 to 57,843 year-on-year. The number of business outlets reduced by 66 to 2,991 year-on-year.

Compared to the same period last year, net provisioning for impairment losses rose 28 per cent, or € 62 million, to € 281 million. Individual loan loss provisions increased € 76 million to € 269 million, while portfolio-based loan loss provisions fell € 14 million compared to the same period in the previous year. The rise in net provisioning was primarily attributable to the devaluation of the hryvnia and to the difficult macro-economic situation in Ukraine.

Net income from derivatives and liabilities improved € 94 million to minus € 27 million. This improvement was attributable to net income from liabilities designated at fair value, in which the changed valuation of credit spreads, by € 116 million to € 34 million, was positively reflected. In contrast, net income from the valuation of derivatives entered into for hedging purposes fell € 22 million.

At € 173 million, profit after tax for the reporting period was almost on par with the previous year's level, while the tax rate decreased 3 percentage points to 28 per cent. Profit attributable to non-controlling interests fell € 5 million to minus € 12 million. After deducting profit attributable to non-controlling interests, consolidated profit amounted to € 161 million. As a result of the capital increase, carried out at the start of 2014, the average number of shares outstanding rose to 268.1 million (comparable period in the previous year: 194.9 million), in the first quarter of 2014. This resulted in earnings per share of € 0.41. In the same period of the previous year, this figure was € 0.55, based on the lower number of shares outstanding.

in € million 1/1-31/3/2014 1/1-31/3/2013 Change absolute Change in %
Net interest income 979 865 114 13.2%
Net fee and commission income 376 375 1 0.2%
Net trading income (19) 80 (100)
Sundry net operating income 10 26 (16) (61.3)%
Operating income 1,345 1,346 (1) (0.1)%
Staff expenses (390) (406) 16 (3.9)%
Other administrative expenses (286) (291) 5 (1.8)%
Depreciation (78) (91) 12 (13.5)%
General administrative expenses (755) (788) 33 (4.2)%
Operating result 590 558 32 5.8%
Net provisioning for impairment losses (281) (220) (62) 28.1%
Other results (69) (87) 19 (21.2)%
Profit before tax 240 251 (11) (4.3)%
Income taxes (67) (77) 10 (12.4)%
Profit after tax 173 174 (1) (0.7)%
Profit attributable to non-controlling interests (12) (17) 5 (29.7)%
Consolidated profit 161 157 4 2.5%

Comparison of results year-on-year

Net interest income

In the first three months of 2014, net interest income rose 13 per cent, or € 114 million, to € 979 million year-on-year. This positive development was mainly attributable to significantly lower interest expenses for customer deposits, as well as to higher interest income from derivatives, primarily at Group head office (up € 33 million).

The net interest margin rose 46 basis points to 3.35 per cent year-on-year, notably due to a reduction in short-term receivables and associated lower refinancing costs. The increase in the interest margin was also driven by higher interest income from derivatives at Group head office, repricing measures in the deposit business in Poland and Slovakia, as well as the favorable development of new business in Russia and Belarus. In Ukraine, net interest income rose due to lower interest expenses for deposits from customers (lower interest rates and volumes) and from banks. In the Czech Republic, on the other hand, interest income declined due to lower margins caused by competition conditions and currency effects. In Hungary, lower interest income from derivatives, as well as lower volumes in retail and corporate customer business, led to a slide in net interest income. In Romania, net interest income declined mainly due to a fall in market interest rates and reduced interest income from securities.

Net fee and commission income

Net fee and commission income rose € 1 million to € 376 million year-on-year. Net income from foreign currency, notes/coins and precious metals business grew 8 per cent, or € 6 million, to € 88 million, primarily as a result of higher volumes in Russia and Ukraine. Net income from the payment transfer business also posted growth of € 4 million, attributable to higher fees in Hungary following the introduction of the financial transaction tax, as well as to improved margins in account management and in the credit card business in Slovakia and Romania. In contrast, net income from loan and guarantee business fell 9 per cent, or € 6 million; this was attributable to reduced margins and volumes in Russia, to lower volumes in the Czech Republic, and to changes in the law in Slovakia.

Net trading income

Compared to the same period last year, net trading income declined € 100 million to minus € 19 million. This was mainly due to a € 110 million decrease in currency-based transactions. The decline was primarily attributable to exchange-rate related valuation losses from foreign currency positions in Ukraine, reduced net income from proprietary trading in Poland, and valuation losses on derivatives in Russia. Hungary, on the other hand, posted valuation gains from derivatives, and Belarus reported positive effects from a strategic currency position. In contrast, net income from interest-based transactions rose € 24 million to € 32 million. This

improvement was primarily due to valuation gains from securities positions and derivatives at Group head office, while Russia posted valuation losses.

Sundry net operating income

Sundry net operating income fell € 16 million to € 10 million year-on-year. The largest contribution to this decline was the financial transaction tax in Hungary (up €10 million year-on-year), as well as the allocation of other provisions, mainly in Hungary and Slovenia, totaling € 11 million.

General administrative expenses

General administrative expenses declined € 33 million to € 755 million, compared to the same period last year. This reduction was due to lower staff expenses, as well as to reduced depreciation of tangible and intangible assets. The cost/income ratio improved 2.1 percentage points to 56.1 per cent.

The largest component in general administrative expenses was staff expenses at 52 per cent, which decreased 4 per cent, or € 16 million, to € 390 million. This decline was due, on the one hand, to ongoing cost reduction programs – with the largest reductions in the Czech Republic and Poland, and on the other, to the significant currency devaluations in Russia and Ukraine. Vacation accruals at Group head office increased expenses.

The average number of staff (full-time equivalents) fell 1,709 year-on-year to 57,843. The biggest declines occurred in Ukraine (down 856), Hungary (down 305), Poland (down 204) and Bulgaria (down 179).

Other administrative expenses fell 2 per cent, or € 5 million, to € 286 million. In Russia and Ukraine, the achieved reduction was primarily due to currency effects. In Poland, other administrative expenses declined € 4 million, mainly as a result of lower advertising, legal, advisory and consulting expenses, as well as decreased office space expenses. In contrast, Group head office recorded a rise due to higher legal, advisory and consulting expenses, and higher IT expenses.

Depreciation of tangible and intangible fixed assets fell 14 per cent, or € 12 million, to € 78 million. This was largely attributable to currency effects and depreciation of tangible fixed assets in Russia, currency effects in Ukraine and reduced depreciation at Group head office.

Net provisioning for impairment losses

Compared to the same period last year, net provisioning for impairment losses rose 28 per cent, or € 62 million, to € 281 million. Individual loan loss provisions rose € 76 million to € 269 million, while net allocations for portfolio-based loan loss provisions fell € 14 million to € 13 million.

Ukraine posted overall significantly higher net provisioning for impairment losses (up € 65 million), above all related to foreigncurrency denominated loans, following the devaluation of the hryvnia and the resulting need for provisioning for secured US dollar loans in the amount of € 30 million. In Russia, a growing retail portfolio and the devaluation of the rouble led to higher net provisioning for impairment losses (up € 41 million). However, this was still at a moderate level in the first three months of 2014, particularly as net releases of impairment losses were posted in the comparable period of the previous year. Net provisioning for impairment losses in the Group Corporates segment showed a decline of € 39 million, following a need for higher net provisioning for impairment losses on various non-performing loans to large corporate customers in the same period of the previous year. Hungary revealed a year-on-year decline of € 17 million.

Compared to year-end, the portfolio of non-performing loans (NPL) to customers fell € 228 million to € 8,429 million. Here, currency effects – notably as a result of the devaluation of the Ukrainian hryvnia and the Russian rouble – resulted in a decline of € 168 million. The organic change was the net result of a clear reduction in non-performing loans in the Group Corporates segment (down € 153 million) and in Hungary (down € 57 million), while increases were posted in Russia (up € 64 million) and in Poland (up € 37 million). In the reporting period, the NPL ratio was 10.6 per cent compared to 10.7 per cent at the end of 2013. Non-performing loans were set against loan loss provisions of € 5,499 million, improving the NPL coverage ratio to 65.2 per cent compared to 63.1 per cent at the year-end.

The provisioning ratio, based on average volume of loans and advances to customers, increased 0.34 percentage points to 1.40 per cent year-on-year.

Other results

Other results – consisting of net income from derivatives and liabilities, net income from financial investments, goodwill impairments, bank levies and financial transaction tax, as well as net income from the disposal of Group assets – rose from minus € 87 million in the same period last year to minus € 69 million.

In the first three months of 2014, net income from financial investments fell € 51 million compared to the same period in the previous year and amounted to € 37 million. The decline was due, on the one hand, to the gain from the sale of shares in equity participations posted in the same period of the previous year (down € 27 million), and on the other, to net income from the valuation of securities and net proceeds from the sale of securities in the current period being significantly lower (down € 23 million) than in the same period of the previous year.

Net income from derivatives and liabilities improved € 94 million to minus € 27 million. This was attributable to net income from liabilities designated at fair value, in which the changed valuation of credit spreads for own liabilities by € 116 million to € 34 million was positively reflected. In contrast, net income from the valuation of derivatives entered into for hedging purposes fell € 22 million.

The expense for bank levies rose € 23 million. This was due to the fact that in Hungary the bank levy for the whole of 2014, amounting to € 39 million, was already booked in January. In the previous year, an amount of only € 10 million was accrued in the first quarter, with the levies for the full year not posted until the second quarter.

Net income from disposal of Group assets amounted to minus € 11 million in the first quarter of 2014. In total, 13 subsidiaries were excluded from the consolidated group, 8 of which were excluded because they fell below the materiality threshold. The sale of the trading group F.J. Elsner, Vienna, resulted in a loss from the disposal of Group assets of € 11 million.

Income taxes

Income tax expense fell € 10 million to € 67 million – essentially due to a quarterly loss in Ukraine – compared to the previous year's period. In addition, income tax expense in Russia revealed an earnings-related fall compared to the same period in the previous year. The tax rate decreased 3 percentage points to 28 per cent.

in € million Q1/2014 Q4/2013 Change
absolute
Change in %
Net interest income 979 953 26 2.7%
Net fee and commission income 376 424 (48) (11.3)%
Net trading income (19) 81 (100)
Sundry net operating income 10 5 5 116.0%
Operating income 1,345 1,462 (117) (8.0)%
Staff expenses (390) (405) 15 (3.7)%
Other administrative expenses (286) (357) 71 (19.9)%
Depreciation (78) (147) 69 (46.8)%
General administrative expenses (755) (910) 155 (17.1)%
Operating result 590 552 39 7.0%
Net provisioning for impairment losses (281) (350) 68 (19.5)%
Other results (69) (64) (5) 8.2%
Profit before tax 240 138 102 73.6%
Income taxes (67) 4 (71)
Profit after tax 173 142 30 21.4%
Profit attributable to non-controlling interests (12) 4 (16)
Consolidated profit 161 146 14 9.8%

Comparison of results with the previous quarter

Net interest income

Compared to the fourth quarter of 2013, net interest income rose 3 per cent, or € 26 million, to € 979 million in the first quarter of 2014. The net interest margin (calculated on interest-bearing assets) improved 15 basis points quarter-on-quarter, to 3.35 per cent. This positive development was driven in particular by higher interest income from derivative financial instruments primarily at Group head office and in Russia. The majority of this increase at Group head office resulted from interest derivative transactions in connection with hedge accounting.

Net fee and commission income

Net fee and commission income fell € 48 million, to € 376 million, compared to the fourth quarter of 2013. The largest decline, at € 21 million, was in net income from the payment transfer business, due to higher fee expenses, as well as seasonal effects in Ukraine, Russia, and Romania, followed by a volume-driven € 15 million decline in net income from the loan and guarantee business. Similarly, net income from securities business decreased € 8 million, and net income from other banking services declined € 6 million.

Net trading income

Compared to the previous quarter, net trading income fell € 100 million to minus € 19 million. This was triggered by a decline in net income from currency-based transactions, primarily in Ukraine, which suffered valuation losses on foreign currency positions. Interest-based transactions improved due to valuation gains on securities positions and on derivative financial instruments at Group head office; whereas valuation losses were recorded in Russia and Hungary.

Sundry net operating income

In the first quarter of 2014, sundry net operating income increased € 5 million to € 10 million quarter-on-quarter. In the previous quarter, losses on the sale of tangible and intangible fixed assets negatively impacted net income.

General administrative expenses

General administrative expenses amounted to € 755 million in the first quarter of 2014, down € 155 million from € 910 million in the previous quarter, in which, seasonally, the level is always at its highest over the course of the year. Staff expenses fell 4 per cent quarter-on-quarter, or € 15 million, to € 390 million. Other administrative expenses decreased 20 per cent, or € 71 million, to € 286 million quarter-on-quarter, primarily due to reductions in advertising, PR and promotional expenses, as well as in office space and IT expenses. Depreciation of tangible and intangible fixed assets declined 47 per cent quarter-on-quarter, or € 69 million, to € 78 million. This was attributable to the impairment on a software project in the Czech Republic in the amount of € 47 million in the fourth quarter of 2013.

Net provisioning for impairment losses

Net provisioning for impairment losses fell € 68 million to € 281 million quarter-on-quarter. Lower net provisioning for impairment losses was mainly due to individual loan loss provisions (down € 164 million), driven by high net provisioning in the previous quarter in Hungary, Slovenia, Bulgaria, and the Czech Republic. As a result of the depreciation of the hryvnia, Ukraine's impairment requirement for foreign currency loans increased € 57 million. In contrast, portfolio-based loan loss provisions reported a net provision of € 13 million compared to a net release of € 80 million in the previous quarter.

Other results

Other results declined € 5 million to minus € 69 million quarter-on-quarter.

Net income from financial investments improved from minus € 15 million in the previous quarter to plus € 37 million in the reporting period as a result of valuation gains from the fair value securities portfolio, primarily in Ukraine and Hungary.

Net income from derivatives and liabilities declined € 14 million, to minus € 27 million, compared to the previous quarter. Net income from liabilities designated at fair value deteriorated € 95 million to minus € 61 million. The decline was mainly due to valuation losses on the interest rate component. In addition, net income from hedge accounting declined € 18 million, to minus € 13 million. This contrasted with improved net income from the credit spread, which increased € 21 million primarily as a result of the valuation of subordinated liabilities.

The bank levy increased € 33 million to stand at € 67 million in the first quarter of 2014. This was attributable to the levy in Hungary, which was booked upfront for the full year in the first quarter of 2014; whereas in the previous year it was recognized in the second quarter.

Income taxes

Tax expenses amounted to € 67 million in the first quarter of 2014, with a tax rate of 28 per cent. In the previous quarter, tax income totaled € 4 million, mainly as a result of a tax allocation with RZB AG.

Statement of financial position

RBI's total assets amounted to € 125.4 billion as at 31 March 2014 and thus were 4 per cent, or € 5.2 billion, below year-end 2013. Total assets dropped € 3.1 billion due to currency effects, mainly as a result of the sharp depreciation of the Ukrainian hryvnia (down 37 per cent) and of the Russian rouble (down 8 per cent). In addition, short-term receivables were reduced, in particular from the repo business.

Assets

in € million 31/3/2014 Share 31/12/2013 Share
Loans and advances to banks (less impairment losses) 19,695 15.7% 22,125 16.9%
Loans and advances to customers (less impairment losses) 74,193 59.2% 75,147 57.5%
Financial investments 17,630 14.1% 17,850 13.7%
Other assets 13,892 11.1% 15,518 11.9%
Total assets 125,410 100.0% 130,640 100.0%

Loans and advances to banks before deduction of loan loss provisions decreased € 2.4 billion to € 19.8 billion, since the beginning of the year. This was mainly attributable to a € 4.0 billion decline in receivables from repurchase and securities lending– predominantly at Group head office. In contrast, short-term receivables from the giro and clearing business increased € 1.2 billion while long-term receivables posted a rise of € 0.4 billion.

Loans and advances to customers before deduction of loan loss provisions fell € 0.9 billion to € 79.7 billion, since the beginning of the year, due to currency effects and continued subdued credit demand. Mortgage loans – mostly in Ukraine and Poland – were down € 0.7 billion, while receivables from repurchase and securities lending – predominantly at Group head office – decreased € 0.4 billion. At the same time, business with corporate customers fell € 0.5 billion and retail customer business declined € 0.4 billion. On a currency-adjusted basis, the core markets of Slovakia, Romania, and Russia posted gains.

Other assets decreased € 1.6 billion to € 13.9 billion. The cash reserve item contained therein declined € 1.9 billion.

Equity and liabilities

in € million 31/3/2014 Share 31/12/2013 Share
Deposits from banks 26,348 21.0% 30,105 23.0%
Deposits from customers 63,599 50.7% 66,437 50.9%
Equity and subordinated capital 16,875 13.5% 14,491 11.1%
Other liabilities 18,588 14.8% 19,607 15.0%
Total equity and liabilities 125,410 100.0% 130,640 100.0%

The refinancing volume of RBI via banks (primarily commercial banks) decreased to € 26.3 billion since the beginning of the year, as a result of a € 3.8 billion reduction in short-term deposits – mainly at Group head office.

Deposits from customers were down € 2.8 billion, to € 63.6 billion. Whereas deposits from corporate customers (notably at Group head office, in Ukraine, and Romania) fell € 2.7 billion and those from retail customers (mostly in Ukraine and Russia) declined € 0.8 billion, deposits from the public sector (predominantly in Russia and Poland) were up € 0.5 billion.

Other liabilities decreased € 1.0 billion to € 18.6 billion, attributable principally to debt securities issued.

Funding is as follows:

in € million 31/3/2014 Share 31/12/2013 Share
Customer deposits 63,599 60.9% 66,437 59.2%
Medium- and long-term refinancing 17,714 16.9% 19,495 17.4%
Short-term refinancing 19,145 18.3% 22,142 19.7%
Subordinated liabilities 4,054 3.9% 4,128 3.7%
Total 104,512 100.0% 112,201 100.0%

Equity on the statement of financial position

RBI's equity on the statement of financial position, consisting of consolidated equity, consolidated profit, and capital of noncontrolling interests, increased 24 per cent, or € 2,457 million, to € 12,821 million versus year-end 2013. The capital increase carried out at the beginning of 2014, in which 97,473,914 new shares were issued, resulted in a net capital gain of € 2,732 million.

This contrasted with total comprehensive income of minus € 278 million, which includes profit after tax of € 173 million, in addition to other comprehensive income of minus € 451 million, which was impacted by currency differences of minus € 466 million. The main drivers here were the depreciation of the Ukrainian hryvnia (down 37 per cent) and the Russian rouble (down 8 per cent). In contrast, the use of hyperinflation accounting in Belarus had a positive impact of € 13 million.

Total capital pursuant to the CRR/BWG

RBI does not form an independent credit institution group (Kreditinstitutsgruppe), as defined by the Austrian Banking Act (BWG) and is not subject to the regulatory provisions for banking groups, on a consolidated basis, as it is part of the RZB credit institution group. As of 1 January 2014, the provisions of Basel III under the Capital Requirements Regulation (CRR) and the provisions of the Capital Requirements Directive (CRD) IV incorporated into the BWG are decisive for the calculation of total capital. The consolidated values shown below have been calculated in accordance with the provisions of the CRR, as well as of the BWG, and are assumed in the RZB credit institution group calculation. The previous year's figures are based on the rules applicable under Basel II at the time.

As at 31 March 2014, total capital of RBI under Basel III amounted to € 14,639 million. This corresponds to an increase of € 1,953 million compared to the year-end figure calculated under Basel II, primarily due to the capital increase in early 2014. In contrast, the currency development of the Russian rouble and Ukrainian hryvnia had a negative impact. Tier 2 capital (after deductions) increased by € 123 million to € 3,510 million.

Total capital stood in contrast to a total capital requirement of € 6,392 million. The increase in the total capital requirement, as a result of the new Basel III regulations, was largely neutralized by the depreciation of the Russian rouble and Ukrainian hryvnia. The total capital requirement for credit risk was € 5,229 million, the total capital requirement for position risk in bonds, equities and commodities came to € 388 million, and the total capital requirement for operational risk stood at € 775 million.

The excess cover ratio was 129.0 per cent compared to 98.5 per cent as at year-end 2013, and was attributable to the capital increase carried out in early 2014. Based on total risk, the common equity tier 1 ratio (transitional) came to 13.9 per cent, with a total capital ratio of 18.3 per cent.

Without taking the transitional provisions defined by the CRR into account, the common equity tier 1 ratio (fully loaded) was 9.9 per cent.

Risk management

Taking and transforming risks are an integral component of the banking business. This makes active risk management as much of a core competence of overall bank governance as capital planning and management of the bank's profitability. In order to effectively identify, classify, and manage risks, the Group utilizes comprehensive risk management and controlling.

This function spans the entire organizational structure, including all levels of management, and is also implemented in each of the subsidiaries by local risk management units. Risk management is structured to ensure the careful handling and professional management of credit risk, country risk, market risk, liquidity risk, investment risk, and operational risk in order to ensure an appropriate risk-reward ratio. More detailed information on the structure of the risk organization and key figures can be found in the risk report.

Loan portfolio strategy

The following chart shows RBI's outstanding exposure by business area and region as at the end of the first quarter of 2014.

Exposure by region

The portfolio remained highly stable throughout the first quarter of 2014 and thus reflects the Group's business model. On the reporting date, the total credit exposure used for managing the portfolio was € 160,532 million. This amount includes exposures on and off the statement of financial position prior to the application of credit conversion factors and thus represents the total credit exposure.

Corporate customers are a central element of RBI's portfolio in all regions. As at 31 March 2014, outstanding exposure to corporate customers for the Group totaled € 77,116 million, down € 1,402 million from the end of financial year 2013. This was attributable to a credit portfolio reduction at some network banks, which was partly compensated by an increase in loans in the Austrian portfolio. As new loans are granted primarily to customers with very good ratings, due to stricter lending policies, the new business credit quality is higher than that of the existing portfolio.

Retail business is undertaken by RBI exclusively in Central and Eastern European markets and declined € 273 million to € 29,129 million, compared to year-end 2013. The decline was primarily attributable to the currency development of the Russian rouble and the Ukrainian hryvnia, whereas Southeastern Europe posted moderate gains.

The financial institutions sector consists mainly of loans and advances to, as well as securities from Western European banks, in addition to loans and advances to the Austrian Raiffeisen Banking Group (as part of liquidity management within the sector). This portfolio amounted to € 27,278 million at the end of the reporting period, remaining nearly unchanged from year-end 2013. Rating grade A3, at € 14,529 million, or 53.3 per cent, accounted for the majority of an increase of € 1,161 million over the year-end level. In contrast, rating grade B1 showed a decline of € 1,247 million.

In line with RBI's strategic orientation, credit exposure to sovereigns is kept at a low level. It serves primarily to meet the minimum reserve and liquidity management requirements. The credit portfolio in this segment was down slightly, at € 18,349 million, in the first quarter of 2014, which represented a decline of € 935 million from year-end 2013.

Situation in Ukraine

Geopolitical tensions in Ukraine pose an elevated risk of loss for RBI and thus present a challenge for its risk management. The main risks are foreign currency risk, arising from the rapid depreciation of the local currency, as well as associated credit risk from foreign currency loans.

In response to these developments, a series of countermeasures were taken in the first quarter of 2014, including, for example, further restrictions on granting foreign currency loans, more selective lending to corporate customers in various industries, and more comprehensive monitoring of customers' payment behavior. The preservation of a stable local liquidity position is also a key priority.

Changes in the regulatory environment

In the current reporting year, RBI continues to focus intensively on both existing and forthcoming regulatory requirements. One of the major themes, for which preparations were made in the past, is the amended legal regulations that came into effect with the EU directives on Basel III (CRD IV/CRR) at the beginning of the financial year.

The main focus was on preparing for the changes pertaining to the single supervisory mechanism, especially the associated comprehensive assessment by the ECB, which will also lead to an asset quality review and pan-European stress test during the first half of 2014. During these processes, the regulatory reviews will also focus on RBI as part of the RZB Group, as a result of which RBI was heavily integrated into these preparations in the first quarter.

Under the new Basel III regulations, risk management will continue to focus on the ongoing implementation of advanced calculation approaches in 2014. These activities comprise the implementation of the internal ratings-based (IRB) approach in the retail and non-retail segments of the Central and Eastern European subsidiaries, as well as further development of the internal market risk model and Group-wide further development of the standard approach for operational risk.

Outlook

We expect loans and advances to customers in 2014 to remain at the approximate level of the previous year.

We anticipate a net provisioning requirement of between € 1,300 million and € 1,400 million in 2014, however, results may be impacted by the ECB Asset Quality Review process and further deterioration of the situation in Ukraine and Russia.

In the course of our cost reduction program, we plan to reduce general administrative expenses to below the level of 2012 by 2016. We aim to achieve a cost/income ratio of between 50 to 55 per cent by 2016. Costs in 2014 are expected to be below the level of 2013.

We aim for a return on equity before tax of approximately 15 per cent and a consolidated return on equity of approximately 12 per cent in the medium term.

Segment reports

Division of segments

As a rule, RBI's internal management reporting is based on the current organizational structure. This matrix structure means that each member of the Management Board is responsible for both the individual countries and for specific business activities (country and functional responsibility model). A cash generating unit within the Group is either a country or a business activity. The presentation of the countries does not only include the subsidiary banks, but all of RBI's operating units (e.g., leasing companies) in the relevant countries. 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. This is why these reporting criteria are an essential component in the decision-making process. Thus, the division into segments was also undertaken in accordance with IFRS 8. The reconciliation contains mainly amounts resulting from intra-group results elimination and consolidation between the segments.

The following segments result thereof:

  • Central Europe (Czech Republic, Hungary, Poland, Slovakia, and Slovenia)
  • Southeastern Europe (Albania, Bosnia and Herzegovina, Bulgaria, Croatia, Kosovo, Romania, and Serbia)
  • Russia
  • CEE Other (Belarus, Kazakhstan, and Ukraine)
  • Group Corporates
  • Group Markets
  • Corporate Center

In the first quarter of 2014, Ukraine resolved to leave the CIS. Therefore the "CIS Other" segment was renamed "CEE Other". In order to provide a better overview of operating income, the figures for other net operating income, and therefore operating income, are listed excluding charges for impairment of goodwill and bank levies and will be reported as sundry net operating income.

Segment overview

In Central Europe, profit before tax decreased 23 per cent, or € 13 million, to € 44 million year-on-year. This was primarily due to increased losses in Hungary and a decline in net income in the Czech Republic; whereas other countries in the region achieved slightly higher net income.

At € 94 million, profit before tax in the Southeastern Europe segment remained virtually unchanged year-on-year. While net income significantly increased in Croatia, it fell in Romania.

With profit before tax of € 139 million, the Russia segment continued to make the largest regional contribution to net income, although this was down 30 per cent, or € 59 million, year-on-year. Net provisioning for impairment losses – releases were booked in the same period last year – and earnings from the sale of participations during this period in the previous year, were responsible for the year-on-year decline.

In the CEE Other segment, markedly increased net provisioning for impairment losses and a significantly higher net trading loss year-on-year had a negative impact on net income during the period. A loss of € 8 million was posted in the first quarter of 2014.

The Group Corporates segment's profit before tax doubled to € 81 million year-on-year. This was primarily attributable to higher net provisioning for impairment losses for loans to large corporate customers during the previous year's period.

Profit before tax in the Group Markets segment fell 32 per cent to € 17 million, year-on-year, mainly due to the valuation of derivative financial instruments.

Loss before tax in the Corporate Center segment amounted to € 248 million in the first quarter of 2014, after € 208 million in the same period of the previous year. The partial write-down, carried out during the reporting period, of the participation of Raiffeisen Bank Aval JSC, Kiev, was partly compensated by higher net interest and dividend income.

Central Europe

in € million 1/1-31/3
2014
1/1-31/3
2013
Change Q1/2014 Q4/2013 Change
Operating income 389 402 (3.4)% 389 419 (7.2)%
General administrative expenses (246) (259) (5.2)% (246) (314) (21.7)%
Operating result 143 143 0.0% 143 105 36.3%
Net provisioning for impairment losses (59) (74) (20.2)% (59) (143) (58.9)%
Other results (40) (12) 240.5% (40) (24) 69.6%
Profit/loss before tax 44 57 (23.4)% 44 (62)
Assets 38,430 39,432 (2.5)% 38,430 38,421 0.0%
Net interest margin (average interest-bearing
assets)
2.87% 2.77% 0.10 PP 2.87% 2.94% (0.07) PP
Return on equity before tax 4.8% 7.1% (2.3) PP 4.8% (7.6)%

In Central Europe, profit before tax decreased 23 per cent to € 44 million year-on-year. This was due primarily to increased losses in Hungary, resulting from the bank levy which was already booked for the full year in January 2014, and a decline in net income in the Czech Republic; whereas the other countries in the region achieved slightly higher net income. Return on equity before tax for the segment fell 2.3 percentage points to 4.8 per cent.

Operating income

At € 259 million, the segment's net interest income remained virtually unchanged year-on-year. An increase in net interest income in Poland and Slovakia almost offset declines in the segment's other countries. Whilst the positive development in Poland was due primarily to repricing measures in deposit business, higher margins in new retail business additionally led to the increase in net interest income in Slovakia. The biggest decline was reported in the Czech Republic as a result of lower margins in retail and corporate customer business due to competition, as well as currency effects. Net interest income also fell in Hungary, as interest income declined following reduced lending volumes, as well as lower income from derivative financial instruments and securities. The segment's net interest margin improved 10 basis points to 2.87 per cent, with falling interest margins in the Czech Republic and Slovenia offset by better results in Poland and Slovakia. Total assets were down 3 per cent, or € 1 billion, to € 38.4 billion year-on-year, due to optimized liquidity and weak demand for credit. Credit risk-weighted assets also decreased 7 per cent from € 21.7 billion to € 20.2 billion.

Net fee and commission income in the segment increased 2 per cent, or € 2 million, to € 130 million year-on-year. Net income from payment transfer business grew 11 per cent to € 61 million, largely driven by higher fees charged to customers in connection with the financial transaction tax recently introduced in Hungary. In contrast, net income from the sale of own and third party products fell 29 per cent to € 5 million, predominantly due to developments in Poland and the Czech Republic. Similarly, particularly in the Czech Republic, net income from foreign currency, notes/coins and precious metals business fell 4 per cent to € 35 million versus the same period last year as a result of margins.

The segment's net trading income declined € 5 million to € 7 million. Net income from currency-based transactions posted a decline from € 6 million to minus € 2 million year-on-year. Particularly in Poland, a significant reduction occurred due to lower net income from proprietary trading. At the same time, Hungary recorded a substantial increase owing to valuation gains from derivative financial instruments. In contrast, net income from interest-based transactions rose € 3 million to € 9 million year-on-year. This increase was attributable to valuation gains on interest-based derivatives in Hungary, whereas losses were posted in the Czech Republic.

Sundry net operating income for the region fell € 9 million to minus € 8 million. This was due, on the one hand, to increased tax expense arising from the financial transaction tax in Hungary, and on the other, to allocations for other provisions in Hungary and Slovenia.

General administrative expenses

The segment's general administrative expenses fell 5 per cent year-on-year to € 246 million. Staff expenses declined in most of the segment's countries, with the Czech Republic recording the biggest decline due to a cost reduction program. Other administrative expenses predominantly fell in Poland, Hungary, and the Czech Republic; whereas an increase was reported in Slovakia due to higher advertising, PR and promotional expenses, as well as increased deposit insurance fees. The segment's number of business outlets rose by 15 to 820 year-on-year, particularly as a result of increases in Slovakia. The cost/income ratio in the region improved 1.2 percentage points to 63.3 per cent.

Net provisioning for impairment losses

At € 59 million, net provisioning for impairment losses in the Central Europe segment was € 15 million lower year-on-year. A positive trend was recorded in both individual and portfolio-based loan loss provisions. Net provisioning for individual loan loss provisions fell € 13 million to € 66 million, while net releases of portfolio-based loan loss provisions increased € 2 million to € 7 million. In terms of countries, net provisioning for impairment losses in Hungary fell € 17 million for both retail and corporate customers, and a € 6 million decline was recorded in Slovenia. Net provisioning for impairment losses increased € 3 million in the Czech Republic, Poland, and Slovakia. The share of non-bank non-performing loans in the Central Europe segment loan portfolio amounted to 11.9 per cent at the end of the reporting period (up 0.5 percentage point year-on-year).

Other results and taxes

The Central Europe segment's other results decreased € 28 million to minus € 40 million year-on-year.

In the reporting period, the bank levy contained in the other results rose € 29 million to € 47 million. This was due mainly to the € 39 million levy in Hungary which – in contrast to the previous year – was already booked in January for the whole of 2014.

Net income from derivatives and liabilities increased € 13 million to € 4 million year-on-year. This was primarily due to net income in Poland from the valuation of other derivatives used to hedge statement of financial position items.

The decline in net income from financial investments resulted from a € 14 million decrease in the valuation result of securities from the fair value portfolio, caused primarily by municipal bonds in Hungary.

Income tax expense decreased 13 per cent to € 20 million, while the tax rate increased 5 percentage points to 45 per cent. This high tax rate stemmed mainly from loss carry-forwards in Hungary, Slovenia, and Poland; these could not be fully deducted for tax purposes through the recognition of deferred taxes.

Detailed results of individual countries:

Czech Republic

in € million 1/1-31/3
2014
1/1-31/3
2013
Change Q1/2014 Q4/2013 Change
Net interest income 54 60 (9.8)% 54 55 (1.6)%
Net fee and commission income 27 31 (13.4)% 27 29 (6.6)%
Net trading income 1 0 2.0% 1 4 (88.9)%
Sundry net operating income 3 2 24.9% 3 5 (46.8)%
Operating income 84 94 (10.1)% 84 93 (9.8)%
General administrative expenses (50) (58) (13.1)% (50) (95) (47.2)%
Operating result 34 36 (5.3)% 34 (2)
Net provisioning for impairment losses (10) (7) 41.4% (10) (26) (61.8)%
Other results 4 1 254.2% 4 (4)
Profit/loss before tax 28 30 (7.5)% 28 (31)
Income taxes (6) (6) (12.8)% (6) 9
Profit/loss after tax 22 23 (6.1)% 22 (22)
Assets 7,791 8,510 (8.4)% 7,791 7,987 (2.4)%
Loans and advances to customers 5,959 6,353 (6.2)% 5,959 5,983 (0.4)%
hereof corporate % 43.0% 45.3% (2.3) PP 43.0% 44.0% (0.9) PP
hereof retail % 56.4% 54.6% 1.8 PP 56.4% 55.6% 0.8 PP
hereof foreign currency % 11.4% 8.7% 2.6 PP 11.4% 11.7% (0.3) PP
Deposits from customers 5,666 5,950 (4.8)% 5,666 5,757 (1.6)%
Loan/deposit ratio 105.2% 106.8% (1.6) PP 105.2% 104.5% 0.7 PP
Equity 726 744 (2.3)% 726 705 3.0%
Return on equity before tax 16.2% 17.3% (1.2) PP 16.2%
Return on equity after tax 12.8% 13.6% (0.7) PP 12.8%
Cost/income ratio 59.8% 61.8% (2.1) PP 59.8% 102.1% (42.3) PP
Net interest margin (average interest-bearing
assets)
2.89% 3.00% (0.11) PP 2.89% 2.90% (0.01) PP
Employees as at reporting date 2,749 3,037 (9.5)% 2,749 2,773 (0.9)%
Business outlets 130 129 0.8% 130 129 0.8%
Customers 469,111 484,650 (3.2)% 469,111 486,909 (3.7)%

Hungary

in € million 1/1-31/3
2014
1/1-31/3
2013
Change Q1/2014 Q4/2013 Change
Net interest income 43 47 (8.5)% 43 48 (10.2)%
Net fee and commission income 32 26 24.5% 32 34 (5.8)%
Net trading income 5 (4) 5 17 (67.9)%
Sundry net operating income (16) (3) 421.9% (16) (16) 1.2%
Operating income 64 66 (2.6)% 64 82 (22.2)%
General administrative expenses (42) (47) (10.8)% (42) (48) (14.2)%
Operating result 23 19 17.3% 23 34 (33.6)%
Net provisioning for impairment losses (18) (36) (48.6)% (18) (55) (66.7)%
Other results (35) 1 (35) (12) 198.1%
Loss before tax (31) (16) 95.7% (31) (33) (5.9)%
Income taxes (2) (4) (48.7)% (2) (3) (17.5)%
Loss after tax (33) (20) 64.6% (33) (35) (6.8)%
Assets 6,241 6,802 (8.2)% 6,241 6,230 0.2%
Loans and advances to customers 4,894 5,121 (4.4)% 4,894 4,990 (1.9)%
hereof corporate % 51.5% 56.8% (5.3) PP 51.5% 52.5% (1.0) PP
hereof retail % 35.4% 37.2% (1.9) PP 35.4% 36.0% (0.6) PP
hereof foreign currency % 61.8% 64.9% (3.1) PP 61.8% 60.5% 1.2 PP
Deposits from customers 4,115 4,700 (12.4)% 4,115 4,163 (1.1)%
Loan/deposit ratio 118.9% 109.2% 9.7 PP 118.9% 119.9% (1.0) PP
Equity 377 390 (3.3)% 377 402 (6.2)%
Return on equity before tax
Return on equity after tax
Cost/income ratio 64.8% 70.7% (6.0) PP 64.8% 58.7% 6.0 PP
Net interest margin (average interest-bearing
assets)
2.95% 2.85% 0.10 PP 2.95% 3.24% (0.29) PP
Employees as at reporting date 2,488 2,820 (11.8)% 2,488 2,603 (4.4)%
Business outlets 122 125 (2.4)% 122 122 0.0%
Customers 599,544 615,660 (2.6)% 599,544 606,021 (1.1)%

Poland

in € million 1/1-31/3
2014
1/1-31/3
2013
Change Q1/2014 Q4/2013 Change
Net interest income 80 76 5.6% 80 78 2.0%
Net fee and commission income 37 38 (1.8)% 37 38 (2.0)%
Net trading income 0 15 0 (1) (76.0)%
Sundry net operating income 2 3 (29.8)% 2 2 (3.7)%
Operating income 119 132 (9.6)% 119 117 1.5%
General administrative expenses (85) (90) (5.2)% (85) (96) (11.5)%
Operating result 34 42 (19.1)% 34 21 61.9%
Net provisioning for impairment losses (19) (16) 18.5% (19) (12) 60.2%
Other results 0 (13) (99.3)% 0 0
Profit before tax 14 13 12.4% 14 9 62.3%
Income taxes (4) (4) 5.4% (4) (3) 40.6%
Profit after tax 11 9 15.1% 11 6 71.5%
Assets 13,070 13,068 0.0% 13,070 12,881 1.5%
Loans and advances to customers 10,097 10,057 0.4% 10,097 9,744 3.6%
hereof corporate % 36.3% 32.4% 3.9 PP 36.3% 33.5% 2.8 PP
hereof retail % 63.6% 67.5% (3.9) PP 63.6% 66.4% (2.8) PP
hereof foreign currency % 51.4% 54.8% (3.4) PP 51.4% 55.4% (4.0) PP
Deposits from customers 7,370 7,731 (4.7)% 7,370 7,280 1.2%
Loan/deposit ratio 138.1% 130.5% 7.6 PP 138.1% 133.8% 4.3 PP
Equity 1,473 1,424 3.4% 1,473 1,475 (0.1)%
Return on equity before tax 4.0% 3.6% 0.4 PP 4.0% 2.5% 1.5 PP
Return on equity after tax 3.0% 2.6% 0.4 PP 3.0% 1.8% 1.2 PP
Cost/income ratio 71.7% 68.4% 3.3 PP 71.7% 82.2% (10.6) PP
Net interest margin (average interest-bearing
assets)
2.62% 2.40% 0.22 PP 2.62% 2.62% 0.00 PP
Employees as at reporting date 5,847 6,134 (4.7)% 5,847 5,985 (2.3)%
Business outlets 373 371 0.5% 373 370 0.8%
Customers 760,045 847,807 (10.4)% 760,045 776,917 (2.2)%

Slovakia

in € million 1/1-31/3
2014
1/1-31/3
2013
Change Q1/2014 Q4/2013 Change
Net interest income 79 73 8.9% 79 80 (0.7)%
Net fee and commission income 32 31 2.5% 32 34 (5.8)%
Net trading income 1 1 109.6% 1 1 (18.6)%
Sundry net operating income 6 6 8.1% 6 7 (14.2)%
Operating income 118 110 7.5% 118 122 (3.1)%
General administrative expenses (64) (59) 8.2% (64) (68) (5.6)%
Operating result 54 51 6.8% 54 54 0.0%
Net provisioning for impairment losses (12) (9) 31.1% (12) (19) (36.1)%
Other results (8) (8) 1.4% (8) (8) 6.2%
Profit before tax 34 33 1.5% 34 27 23.0%
Income taxes (8) (8) (2.3)% (8) (8) (0.6)%
Profit after tax 26 25 2.7% 26 19 32.8%
Assets 10,067 9,594 4.9% 10,067 10,009 0.6%
Loans and advances to customers 7,057 6,732 4.8% 7,057 6,879 2.6%
hereof corporate % 47.6% 48.8% (1.1) PP 47.6% 46.7% 1.0 PP
hereof retail % 52.2% 51.0% 1.2 PP 52.2% 53.0% (0.8) PP
hereof foreign currency % 1.0% 0.8% 0.2 PP 1.0% 0.6% 0.4 PP
Deposits from customers 7,365 7,191 2.4% 7,365 7,320 0.6%
Loan/deposit ratio 95.8% 93.6% 2.2 PP 95.8% 94.0% 1.8 PP
Equity 1,053 1,099 (4.2)% 1,053 1,028 2.4%
Return on equity before tax 13.9% 13.0% 0.8 PP 13.9% 11.9% 2.0 PP
Return on equity after tax 10.6% 9.8% 0.7 PP 10.6% 8.4% 2.2 PP
Cost/income ratio 54.2% 53.9% 0.3 PP 54.2% 55.6% (1.4) PP
Net interest margin (average interest-bearing
assets)
3.33% 3.23% 0.10 PP 3.33% 3.39% (0.06) PP
Employees as at reporting date 3,845 3,845 0.0% 3,845 3,853 (0.2)%
Business outlets 179 163 9.8% 179 165 8.5%
Customers 900,049 859,019 4.8% 900,049 895,376 0.5%

Slovenia

in € million 1/1-31/3
2014
1/1-31/3
2013
Change Q1/2014 Q4/2013 Change
Net interest income 4 5 (29.5)% 4 4 (12.1)%
Net fee and commission income 2 2 (6.7)% 2 2 (8.6)%
Net trading income 0 0 87.4% 0 0 15.3%
Sundry net operating income (3) 0 (3) (3) 12.8%
Operating income 3 8 (64.8)% 3 4 (27.3)%
General administrative expenses (5) (6) (18.0)% (5) (6) (26.1)%
Operating result (2) 2 (2) (3) (24.5)%
Net provisioning for impairment losses 1 (6) 1 (31)
Other results 0 0 0 0
Loss before tax (1) (4) (66.4)% (1) (34) (96.2)%
Income taxes 0 0 0 (1)
Loss after tax (1) (4) (66.1)% (1) (35) (96.3)%
Assets 1,264 1,468 (13.9)% 1,264 1,341 (5.8)%
Loans and advances to customers 1,000 1,208 (17.3)% 1,000 1,051 (4.9)%
hereof corporate % 60.1% 62.6% (2.5) PP 60.1% 60.9% (0.8) PP
hereof retail % 32.2% 30.9% 1.3 PP 32.2% 31.8% 0.4 PP
hereof foreign currency % 4.2% 4.7% (0.5) PP 4.2% 4.2% 0.0 PP
Deposits from customers 430 380 13.3% 430 423 1.7%
Loan/deposit ratio 232.5% 318.3% (85.8) PP 232.5% 248.4% (16.0) PP
Equity 31 52 (40.1)% 31 33 (4.0)%
Return on equity before tax
Return on equity after tax
Cost/income ratio 173.9% 74.6% 99.3 PP 173.9% 171.2% 2.7 PP
Net interest margin (average interest-bearing
assets)
1.24% 1.45% (0.21) PP 1.24% 1.36% (0.13) PP
Employees as at reporting date 247 276 (10.5)% 247 245 0.8%
Business outlets 16 17 (5.9)% 16 16 0.0%
Customers 64,528 66,404 (2.8)% 64,528 65,441 (1.4)%
in € million 1/1-31/3
2014
1/1-31/3
2013
Change Q1/2014 Q4/2013 Change
Operating income 318 312 1.9% 318 321 (1.0)%
General administrative expenses (163) (166) (2.0)% (163) (184) (11.2)%
Operating result 155 145 6.3% 155 137 12.6%
Net provisioning for impairment losses (63) (63) (0.3)% (63) (107) (41.5)%
Other results 2 12 (87.2)% 2 1 49.6%
Profit before tax 94 95 (1.1)% 94 31 197.5%
Assets 20,752 21,411 (3.1)% 20,752 21,160 (1.9)%
Net interest margin (average interest
bearing assets)
4.30% 4.20% 0.10 PP 4.30% 4.42% (0.12) PP
Return on equity before tax 16.1% 17.3% (1.1) PP 16.1% 6.2% 9.9 PP

Southeastern Europe

In Southeastern Europe, profit before tax remained almost unchanged at € 94 million year-on-year. Return on equity before tax declined 1.1 percentage points to 16.1 per cent.

Operating income

The segment's net interest income rose € 2 million to € 209 million year-on-year. Net interest income increased in all countries in the segment, with the exception of Romania and Kosovo. Lower market interest rates and falling interest income from securities were responsible for the fall in Romania. In contrast, a reduction in interest income due to lower lending volumes and considerably lower market interest rates in Bulgaria, Croatia, Bosnia and Herzegovina, as well as in Albania, was fully offset by lower interest expenses. The segment's net interest margin rose to 4.30 per cent (up 10 basis points). Total assets decreased 3 per cent to € 20.8 billion year-on-year, while credit risk-weighted assets also declined 2 per cent to € 12.7 billion.

Net fee and commission income was up 4 per cent, or € 3 million, to € 82 million. Net income from securities business more than doubled to € 5 million year-on-year, due especially to lead arranger activities in bond issues in Croatia, as well as due to higher volumes and margins also in Romania. Net income from payment transfer business increased 4 per cent and was positively influenced by margin improvements in account management and credit card business in Romania. At € 45 million, it again delivered the largest contribution to earnings in the SEE segment. In contrast, net income from loan and guarantee business declined 12 per cent to € 5 million, due to lower volumes predominantly in Croatia. Furthermore, net income from the sale of own and third party products fell 10 per cent to € 5 million, especially in Croatia as a result of the market environment.

Net trading income in the Southeastern Europe segment was up € 1 million to € 16 million year-on-year. The improvement in interest-based transactions, which increased € 1 million to € 10 million, was mainly based on business development in Croatia, where higher valuation gains from bonds in the trading portfolio were reported. In contrast, net trading income in Romania was slightly down, as a result of lower market yields and fewer transactions.

Sundry net operating income remained unchanged year-on-year at € 10 million.

General administrative expenses

The segment's general administrative expenses fell € 3 million to € 163 million year-on-year. Staff expenses and other administrative expenses were largely stable at € 73 million and € 71 million, respectively. Depreciation, however, decreased 15 per cent, or € 3 million, to € 19 million, mainly as a result of lower depreciation on tangible fixed assets in Romania, and on leased assets in Croatia. The cost/income ratio declined 2.0 percentage points to 51.3 per cent.

Net provisioning for impairment losses

Net provisioning for impairment losses in the Southeastern Europe segment remained unchanged year-on-year at € 63 million. The individual countries in the segment, however, developed differently. The need for provisioning fell year-on-year in Croatia, Bosnia and Herzegovina, Kosovo, as well as in Serbia. Net provisioning for impairment losses increased in Romania and Bulgaria as a result of a lower valuation of collateral. In Albania, higher provisions were required for large corporate customers. The share of non-bank non-performing loans in the segment's loan portfolio increased 0.8 percentage points to 14.0 per cent.

Other results and taxes

Other results in the segment fell € 10 million to € 2 million year-on-year.

Net income from derivatives and liabilities was down € 2 million year-on-year. This was attributable in particular to valuation losses on interest rate swaps in Croatia, which declined € 2 million.

Net income from financial investments decreased € 8 million to € 2 million. This was largely due to lower valuation results of securities from the fair value portfolio – mainly government bonds – in Romania and Serbia.

The region's tax expense increased slightly to € 14 million year-on-year, while the tax rate rose 1 percentage point to 15 per cent.

Detailed results of individual countries:

Albania

in € million 1/1-31/3
2014
1/1-31/3
2013
Change Q1/2014 Q4/2013 Change
Net interest income 21 18 12.4% 21 21 (1.1)%
Net fee and commission income 2 2 (0.6)% 2 1 90.0%
Net trading income 5 5 4.9% 5 5 12.2%
Sundry net operating income 0 1 0 (2) (86.8)%
Operating income 28 26 6.4% 28 24 14.8%
General administrative expenses (9) (9) 10.3% (9) (12) (20.0)%
Operating result 18 17 4.4% 18 12 48.3%
Net provisioning for impairment losses (6) (4) 51.6% (6) (11) (46.2)%
Other results 0 0 0 0
Profit before tax 12 13 (9.7)% 12 1 >500.0%
Income taxes (2) (1) 37.5% (2) 0
Profit after tax 10 12 (15.0)% 10 2 >500.0%
Assets 2,052 2,238 (8.3)% 2,052 2,084 (1.5)%
Loans and advances to customers 903 955 (5.4)% 903 916 (1.5)%
hereof corporate % 70.1% 69.0% 1.1 PP 70.1% 69.7% 0.4 PP
hereof retail % 29.9% 31.0% (1.1) PP 29.9% 30.3% (0.4) PP
hereof foreign currency % 68.5% 65.2% 3.3 PP 68.5% 68.5% (0.1) PP
Deposits from customers 1,684 1,970 (14.5)% 1,684 1,758 (4.2)%
Loan/deposit ratio 53.6% 48.5% 5.1 PP 53.6% 52.1% 1.5 PP
Equity 214 239 (10.5)% 214 220 (2.8)%
Return on equity before tax 24.7% 25.7% (1.0) PP 24.7% 2.6% 22.1 PP
Return on equity after tax 20.9% 23.1% (2.2) PP 20.9% 3.4% 17.5 PP
Cost/income ratio 34.2% 33.0% 1.2 PP 34.2% 49.1% (14.9) PP
Net interest margin (average interest-bearing
assets)
4.79% 3.84% 0.95 PP 4.79% 4.70% 0.09 PP
Employees as at reporting date 1,352 1,394 (3.0)% 1,352 1,371 (1.4)%
Business outlets 95 105 (9.5)% 95 104 (8.7)%
Customers 683,297 710,610 (3.8)% 683,297 719,949 (5.1)%

Bosnia and Herzegovina

in € million 1/1-31/3
2014
1/1-31/3
2013
Change Q1/2014 Q4/2013 Change
Net interest income 18 17 5.6% 18 19 (0.7)%
Net fee and commission income 8 8 4.4% 8 10 (16.9)%
Net trading income 0 0 (55.1)% 0 (1)
Sundry net operating income 1 1 3.8% 1 (1)
Operating income 28 26 4.6% 28 27 3.6%
General administrative expenses (14) (14) (0.3)% (14) (19) (26.0)%
Operating result 14 12 10.0% 14 8 75.6%
Net provisioning for impairment losses 0 (3) (98.4)% 0 (8) (99.5)%
Other results 0 0 0 0 250.2%
Profit before tax 13 10 33.4% 13 0
Income taxes (2) (1) 65.8% (2) 0
Profit after tax 12 9 29.8% 12 0 >500.0%
Assets 2,010 1,959 2.6% 2,010 2,022 (0.6)%
Loans and advances to customers 1,225 1,245 (1.6)% 1,225 1,223 0.1%
hereof corporate % 35.7% 38.9% (3.2) PP 35.7% 35.8% (0.1) PP
hereof retail % 63.9% 60.2% 3.6 PP 63.9% 63.7% 0.2 PP
hereof foreign currency % 71.7% 74.3% (2.6) PP 71.7% 73.4% (1.7) PP
Deposits from customers 1,551 1,506 3.0% 1,551 1,567 (1.0)%
Loan/deposit ratio 79.0% 82.7% (3.7) PP 79.0% 78.1% 0.9 PP
Equity 280 267 5.1% 280 269 4.3%
Return on equity before tax 20.6% 15.9% 4.7 PP 20.6%
Return on equity after tax 18.0% 14.3% 3.7 PP 18.0% 0.7% 17.4 PP
Cost/income ratio 50.6% 53.1% (2.5) PP 50.6% 70.9% (20.2) PP
Net interest margin (average interest-bearing
assets)
3.85% 3.78% 0.07 PP 3.85% 3.89% (0.04) PP
Employees as at reporting date 1,475 1,511 (2.4)% 1,475 1,491 (1.1)%
Business outlets 98 98 0.0% 98 98 0.0%
Customers 497,183 490,460 1.4% 497,183 496,690 0.1%

Bulgaria

in € million 1/1-31/3
2014
1/1-31/3
2013
Change Q1/2014 Q4/2013 Change
Net interest income 31 30 2.2% 31 31 1.0%
Net fee and commission income 9 9 (0.5)% 9 10 (8.6)%
Net trading income 1 1 84.8% 1 1 1.8%
Sundry net operating income 0 0 0 (4) (90.6)%
Operating income 41 40 1.7% 41 38 7.5%
General administrative expenses (22) (22) (0.3)% (22) (25) (10.1)%
Operating result 19 18 4.1% 19 14 39.4%
Net provisioning for impairment losses (17) (15) 12.3% (17) (37) (55.7)%
Other results 0 0 0 0 423.1%
Profit/loss before tax 3 3 (14.4)% 3 (24)
Income taxes 0 0 (2.8)% 0 2
Profit/loss after tax 2 3 (15.8)% 2 (21)
Assets 3,201 3,464 (7.6)% 3,201 3,203 (0.1)%
Loans and advances to customers 2,439 2,812 (13.3)% 2,439 2,526 (3.4)%
hereof corporate % 43.7% 45.7% (2.0) PP 43.7% 44.0% (0.3) PP
hereof retail % 55.8% 53.7% 2.1 PP 55.8% 55.5% 0.3 PP
hereof foreign currency % 67.0% 74.7% (7.8) PP 67.0% 67.2% (0.3) PP
Deposits from customers 2,038 2,152 (5.3)% 2,038 2,133 (4.5)%
Loan/deposit ratio 119.7% 130.7% (11.0) PP 119.7% 118.4% 1.3 PP
Equity 474 503 (5.7)% 474 472 0.5%
Return on equity before tax 2.2% 2.5% (0.3) PP 2.2%
Return on equity after tax 1.9% 2.2% (0.3) PP 1.9%
Cost/income ratio 54.0% 55.0% (1.1) PP 54.0% 64.5% (10.5) PP
Net interest margin (average interest-bearing
assets)
4.03% 3.66% 0.37 PP 4.03% 3.81% 0.22 PP
Employees as at reporting date 2,846 3,034 (6.2)% 2,846 2,965 (4.0)%
Business outlets 156 182 (14.3)% 156 168 (7.1)%
Customers 740,162 795,039 (6.9)% 740,162 740,812 (0.1)%

Croatia

in € million 1/1-31/3
2014
1/1-31/3
2013
Change Q1/2014 Q4/2013 Change
Net interest income 37 36 4.7% 37 41 (8.3)%
Net fee and commission income 15 14 9.5% 15 13 11.2%
Net trading income 3 2 86.2% 3 4 (13.1)%
Sundry net operating income 8 7 20.1% 8 5 51.5%
Operating income 63 58 10.0% 63 63 0.6%
General administrative expenses (32) (33) (5.6)% (32) (32) (0.6)%
Operating result 32 24 31.6% 32 31 1.9%
Net provisioning for impairment losses (12) (15) (17.9)% (12) (10) 17.3%
Other results 0 1 (97.5)% 0 (2)
Profit before tax 20 11 85.6% 20 19 1.7%
Income taxes (4) (2) 87.0% (4) (4) 1.7%
Profit after tax 16 8 85.3% 16 15 1.7%
Assets 4,639 4,948 (6.2)% 4,639 4,749 (2.3)%
Loans and advances to customers 3,388 3,498 (3.2)% 3,388 3,436 (1.4)%
hereof corporate % 42.3% 39.6% 2.7 PP 42.3% 41.8% 0.5 PP
hereof retail % 49.5% 49.5% 0.0 PP 49.5% 48.9% 0.6 PP
hereof foreign currency % 69.0% 62.1% 7.0 PP 69.0% 68.8% 0.2 PP
Deposits from customers 2,822 2,870 (1.7)% 2,822 2,863 (1.4)%
Loan/deposit ratio 119.6% 121.6% (2.0) PP 119.6% 120.0% (0.3) PP
Equity 705 765 (7.9)% 705 750 (6.1)%
Return on equity before tax 11.2% 5.7% 5.5 PP 11.2% 10.9% 0.3 PP
Return on equity after tax 9.0% 4.6% 4.4 PP 9.0% 8.7% 0.3 PP
Cost/income ratio 49.8% 58.0% (8.2) PP 49.8% 50.4% (0.6) PP
Net interest margin (average interest-bearing
assets)
3.66% 3.28% 0.38 PP 3.66% 3.99% (0.33) PP
Employees as at reporting date 2,039 2,063 (1.2)% 2,039 2,036 0.1%
Business outlets 76 79 (3.8)% 76 76 0.0%
Customers 477,294 475,925 0.3% 477,294 475,838 0.3%

Kosovo

in € million 1/1-31/3
2014
1/1-31/3
2013
Change Q1/2014 Q4/2013 Change
Net interest income 9 9 (0.5)% 9 9 (3.1)%
Net fee and commission income 2 2 (1.6)% 2 2 (17.2)%
Net trading income 0 0 (98.8)% 0 0
Sundry net operating income 0 0 201.5% 0 0 (1.0)%
Operating income 11 11 (3.2)% 11 11 (5.1)%
General administrative expenses (6) (6) 1.5% (6) (7) (15.1)%
Operating result 5 5 (8.6)% 5 4 11.7%
Net provisioning for impairment losses 1 (1) 1 (1)
Other results 0 0 0 0
Profit before tax 5 4 31.1% 5 4 47.8%
Income taxes (1) 0 53.8% (1) 0 91.1%
Profit after tax 5 4 28.6% 5 3 43.4%
Assets 717 628 14.1% 717 699 2.5%
Loans and advances to customers 457 444 2.8% 457 458 (0.2)%
hereof corporate % 38.9% 39.0% (0.1) PP 38.9% 39.4% (0.5) PP
hereof retail % 61.1% 61.0% 0.1 PP 61.1% 60.6% 0.5 PP
hereof foreign currency % 0.0% 0.0% 0.0 PP 0.0% 0.0% 0.0 PP
Deposits from customers 564 508 11.0% 564 558 1.1%
Loan/deposit ratio 81.0% 87.5% (6.4) PP 81.0% 82.1% (1.1) PP
Equity 112 103 9.0% 112 108 4.3%
Return on equity before tax 20.9% 17.1% 3.8 PP 20.9% 15.4% 5.5 PP
Return on equity after tax 18.4% 15.4% 3.0 PP 18.4% 13.9% 4.5 PP
Cost/income ratio 55.9% 53.3% 2.6 PP 55.9% 62.5% (6.6) PP
Net interest margin (average interest-bearing
assets)
5.24% 5.87% (0.63) PP 5.24% 5.69% (0.46) PP
Employees as at reporting date 700 698 0.3% 700 699 0.1%
Business outlets 54 52 3.8% 54 54 0.0%
Customers 253,830 258,799 (1.9)% 253,830 251,035 1.1%

Romania

in € million 1/1-31/3
2014
1/1-31/3
2013
Change Q1/2014 Q4/2013 Change
Net interest income 67 72 (6.1)% 67 69 (3.0)%
Net fee and commission income 38 36 4.3% 38 51 (25.1)%
Net trading income 6 6 (7.1)% 6 3 113.6%
Sundry net operating income 1 1 1.1% 1 (1)
Operating income 112 115 (2.8)% 112 122 (8.1)%
General administrative expenses (63) (65) (2.3)% (63) (71) (10.8)%
Operating result 49 51 (3.4)% 49 51 (4.2)%
Net provisioning for impairment losses (26) (21) 20.8% (26) (31) (16.5)%
Other results 2 6 (71.8)% 2 2 (14.8)%
Profit before tax 25 36 (29.4)% 25 23 11.4%
Income taxes (4) (6) (39.2)% (4) (4) (0.7)%
Profit after tax 22 30 (27.5)% 22 19 13.6%
Assets 6,264 6,370 (1.7)% 6,264 6,528 (4.0)%
Loans and advances to customers 4,318 4,195 3.0% 4,318 4,266 1.2%
hereof corporate % 34.2% 34.6% (0.4) PP 34.2% 32.8% 1.4 PP
hereof retail % 63.2% 62.6% 0.6 PP 63.2% 64.3% (1.0) PP
hereof foreign currency % 53.0% 54.1% (1.1) PP 53.0% 54.3% (1.2) PP
Deposits from customers 4,127 3,995 3.3% 4,127 4,344 (5.0)%
Loan/deposit ratio 104.6% 105.0% (0.3) PP 104.6% 98.2% 6.4 PP
Equity 701 665 5.4% 701 674 3.9%
Return on equity before tax 16.1% 25.0% (8.9) PP 16.1% 15.8% 0.3 PP
Return on equity after tax 13.9% 21.0% (7.1) PP 13.9% 13.4% 0.5 PP
Cost/income ratio 56.3% 56.0% 0.3 PP 56.3% 58.0% (1.8) PP
Net interest margin (average interest-bearing
assets)
4.36% 4.83% (0.47) PP 4.36% 4.47% (0.12) PP
Employees as at reporting date 5,329 5,393 (1.2)% 5,329 5,308 0.4%
Business outlets 530 526 0.8% 530 530 0.0%
Customers 2,053,737 1,981,086 3.7% 2,053,737 2,077,912 (1.2)%

Serbia

in € million 1/1-31/3
2014
1/1-31/3
2013
Change Q1/2014 Q4/2013 Change
Net interest income 25 25 3.5% 25 27 (7.2)%
Net fee and commission income 8 8 (0.5)% 8 9 (8.2)%
Net trading income 1 1 (58.3)% 1 1 (26.5)%
Sundry net operating income 1 2 (19.2)% 1 (1)
Operating income 35 36 (0.6)% 35 36 (1.3)%
General administrative expenses (17) (18) (6.0)% (17) (19) (10.0)%
Operating result 18 18 5.0% 18 17 8.3%
Net provisioning for impairment losses (3) (4) (32.2)% (3) (8) (68.4)%
Other results 0 4 0 0 >500.0%
Profit before tax 16 18 (13.3)% 16 9 83.2%
Income taxes (2) (2) (15.8)% (2) (1) 21.9%
Profit after tax 14 16 (12.9)% 14 7 96.2%
Assets 1,892 1,849 2.3% 1,892 1,875 0.9%
Loans and advances to customers 1,067 1,195 (10.7)% 1,067 1,105 (3.5)%
hereof corporate % 47.3% 51.2% (3.9) PP 47.3% 47.9% (0.5) PP
hereof retail % 50.2% 45.8% 4.5 PP 50.2% 49.9% 0.4 PP
hereof foreign currency % 74.8% 72.0% 2.9 PP 74.8% 69.8% 5.1 PP
Deposits from customers 1,164 1,097 6.2% 1,164 1,119 4.1%
Loan/deposit ratio 91.6% 109.0% (17.3) PP 91.6% 98.8% (7.1) PP
Equity 508 520 (2.3)% 508 498 2.1%
Return on equity before tax 13.2% 15.1% (1.9) PP 13.2% 7.5% 5.6 PP
Return on equity after tax 11.6% 13.3% (1.6) PP 11.6% 6.2% 5.4 PP
Cost/income ratio 48.1% 50.8% (2.8) PP 48.1% 52.7% (4.6) PP
Net interest margin (average interest-bearing
assets)
5.74% 5.60% 0.14 PP 5.74% 6.26% (0.52) PP
Employees as at reporting date 1,593 1,757 (9.3)% 1,593 1,602 (0.6)%
Business outlets 85 86 (1.2)% 85 85 0.0%
Customers 609,052 561,702 8.4% 609,052 604,122 0.8%

Russia

in € million 1/1-31/3
2014
1/1-31/3
2013
Change Q1/2014 Q4/2013 Change
Operating income 281 283 (0.5)% 281 292 (3.8)%
General administrative expenses (114) (125) (9.0)% (114) (161) (29.3)%
Operating result 168 158 6.1% 168 132 27.3%
Net provisioning for impairment losses (27) 15 (27) (29) (6.6)%
Other results (2) 26 (2) 5
Profit before tax 139 198 (29.8)% 139 108 28.6%
Assets 15,103 16,187 (6.7)% 15,103 15,555 (2.9)%
Net interest margin (average interest-bearing
assets)
5.46% 5.12% 0.34 PP 5.46% 4.79% 0.67 PP
Return on equity before tax 32.9% 48.1% (15.2) PP 32.9% 27.0% 5.9 PP

In Russia, profit before tax fell 30 per cent to € 139 million year-on-year. This was mainly due to net provisioning for impairment losses, as well as the net proceeds from the sale of participations in the comparable period of the previous year. Return on equity before tax declined 15.2 percentage points to 32.9 per cent.

Operating income

Net interest income in Russia rose 7 per cent, or € 12 million, to € 194 million year-on-year. Interest income from securities increased € 9 million and interest income from derivative financial instruments rose € 6 million. Increased interest income from loans due to higher volumes also had a positive effect, although this was largely offset by similarly rising interest expenses from customer deposits. The segment's net interest margin was up 34 basis points to 5.46 per cent year-on-year. Total assets fell 7 per cent to € 15.1 billion year-on-year mainly due to currency devaluation. Credit risk-weighted assets decreased 19 per cent to € 8.5 billion.

Net fee and commission income declined 5 per cent, or € 4 million, to € 66 million year-on-year. While net income from foreign currency, notes/coins and precious metals business rose € 5 million to € 18 million largely due to higher volumes, net income from loan and guarantee business declined € 4 million to € 16 million. Net income from payment transfer business also fell € 2 million to € 24 million. Net income from the sale of own and third party products decreased € 2 million to minus € 4 million as a result of higher expenses.

Net trading income amounted to € 12 million (down € 19 million), which was considerably lower than in the previous year. Net income from currency-based transactions fell € 5 million to € 22 million as a result of lower net income from foreign currency derivatives carried out for hedging purposes, and net income from interest-based transactions was down € 14 million to minus € 10 million as a result of valuation losses.

Sundry net operating income rose € 9 million to € 11 million, as a result of the sale of assets.

General administrative expenses

The segment's general administrative expenses fell 9 per cent, or € 11 million, to € 114 million due to currency movements. The decrease in staff expenses (down € 5 million) was largely attributable to the development of the Russian rouble, as well as to slightly lower wages and salaries. Other administrative expenses fell € 3 million as a result of currency movements and lower IT expenses. Depreciation expenses were down € 3 million, following lower depreciation on tangible fixed assets. The number of business outlets rose by 7 to 196 year-on-year. The cost/income ratio improved 3.7 percentage points to 40.4 per cent on account of lower administrative expenses.

Net provisioning for impairment losses

In Russia, in the reporting period, net provisioning for impairment losses totaled € 27 million. Even though this figure represents a moderate level, it contrasts with a net release of provisions totaling € 15 million in the comparable period of the previous year. In the first three months of 2014, new provisions were necessary, above all for retail customers, to counter the increase in lending volume and movement of the US dollar and euro against the Russian rouble. The share of non-bank non-performing loans in the credit portfolio of the segment increased 0.5 percentage points to 5.3 per cent year-on-year.

Other results and taxes

Other results in the Russia segment fell from € 26 million, in the comparable period of the previous year, to minus € 2 million in the reporting period. Net income from financial investments decreased from plus € 26 million in the first three months of 2013 to minus € 13 million in the reporting period. On the one hand, the decline was the result of higher losses from the valuation and sale of securities from the fair value portfolio, and on the other, of net proceeds of € 26 million from the sale of participations in the comparable prior-year period. Net income from derivative financial instruments improved € 12 million to plus € 12 million year-onyear, mainly due to valuation gains from interest rate swaps carried out to mitigate interest rate structure risk.

The tax expense developed in line with profit, while the tax rate was marginally higher at 22 per cent.

Russia

The table below provides an overview of the country results for Russia. Any discrepancies with regard to values specified for the Russia segment are the result of equity being allocated differently. The figures in the country overview are based on equity reported on the statement of financial position, while at the segment level equity is based on the actual equity used.

in € million 1/1-31/3
2014
1/1-31/3
2013
Change Q1/2014 Q4/2013 Change
Net interest income 194 182 6.6% 194 181 7.0%
Net fee and commission income 66 69 (5.5)% 66 77 (15.1)%
Net trading income 12 31 (62.2)% 12 34 (66.4)%
Sundry net operating income 11 1 >500.0% 11 0
Operating income 281 283 (0.5)% 281 292 (3.8)%
General administrative expenses (114) (125) (9.0)% (114) (161) (29.3)%
Operating result 168 158 6.1% 168 132 27.3%
Net provisioning for impairment losses (27) 15 (27) (29) (6.6)%
Other results (2) 26 (2) 5
Profit before tax 139 198 (29.8)% 139 108 28.6%
Income taxes (31) (43) (28.0)% (31) (22) 41.9%
Profit after tax 109 156 (30.3)% 109 87 25.3%
Assets 15,103 16,187 (6.7)% 15,103 15,555 (2.9)%
Loans and advances to customers 9,598 10,101 (5.0)% 9,598 9,967 (3.7)%
hereof corporate % 55.1% 62.7% (7.7) PP 55.1% 55.6% (0.5) PP
hereof retail % 44.9% 37.2% 7.7 PP 44.9% 44.4% 0.5 PP
hereof foreign currency % 34.5% 42.2% (7.7) PP 34.5% 33.5% 1.0 PP
Deposits from customers 9,805 10,447 (6.1)% 9,805 9,924 (1.2)%
Loan/deposit ratio 97.9% 96.7% 1.2 PP 97.9% 100.4% (2.5) PP
Equity 2,300 2,633 (12.7)% 2,300 2,360 (2.6)%
Return on equity before tax 27.3% 35.5% (8.2) PP 27.3% 22.4% 4.9 PP
Return on equity after tax 21.3% 27.9% (6.6) PP 21.3% 18.0% 3.3 PP
Cost/income ratio 40.4% 44.1% (3.7) PP 40.4% 55.0% (14.6) PP
Net interest margin (average interest-bearing
assets)
4.80% 5.12% (0.32) PP 5.46% 4.79% 0.67 PP
Employees as at reporting date 8,530 8,200 4.0% 8,530 8,542 (0.1)%
Business outlets 196 189 3.7% 196 195 0.5%
Customers 2,683,852 2,335,420 14.9% 2,683,852 2,617,291 2.5%

CEE Other

in € million 1/1-31/3
2014
1/1-31/3
2013
Change Q1/2014 Q4/2013 Change
Operating income 117 137 (14.3)% 117 171 (31.4)%
General administrative expenses (77) (90) (14.3)% (77) (89) (13.5)%
Operating result 40 47 (14.3)% 40 82 (51.0)%
Net provisioning for impairment losses (92) (25) 262.1% (92) (14) >500.0%
Other results 43 32 34.5% 43 0 >500.0%
Profit/loss before tax (8) 54 (8) 68
Assets 4,758 6,349 (25.1)% 4,758 5,809 (18.1)%
Net interest margin (average interest-bearing
assets)
8.89% 6.59% 2.31 PP 8.89% 8.59% 0.31 PP
Return on equity before tax 25.1% 32.7%

In the CEE Other segment, the net income for the period was negatively impacted by significantly higher net trading income and considerably higher net provisioning for impairment losses. The first quarter of 2014 resulted in a loss before tax for the period of € 8 million.

Operating income

The segment's net interest income rose overall 19 per cent, or € 17 million, to € 110 million. This was primarily attributable to a rise in net interest income in Ukraine of 17 per cent to € 84 million, due to lower interest expense and a fall in market interest rates. In Belarus, a higher lending volume and increased margins led to an increase of 25 per cent to € 25 million in net interest income. The net interest margin improved from 6.59 per cent to 8.89 per cent year-on-year. Total assets in the segment decreased 25 per cent to € 4.8 billion year-on-year, mainly due to currency effects, while credit risk-weighted assets declined 19 per cent to € 4.4 billion.

Net fee and commission income in the segment remained almost unchanged versus the prior year period, falling € 1 million to € 48 million. Net income from the payment transfer business declined 9 per cent, or € 3 million, due to higher expenses in Ukraine, but was almost offset by improved net income from foreign currency, notes/coins and precious metals business. The latter rose € 3 million to € 12 million, mainly in Ukraine.

Net trading income declined to minus € 40 million in the reporting period year-on-year, after minus € 4 million in the previous year's period. This was primarily due to net income from currency-based transactions, where Ukraine posted higher valuation losses from foreign currency positions. In Ukraine, valuations from bonds also led to a reduction of € 1 million in net income from interest-based transactions.

Sundry net operating income in the segment remained almost unchanged year-on-year at minus € 1 million.

General administrative expenses

Compared to the same period last year, general administrative expenses declined € 13 million to € 77 million. A large proportion of this reduction was recorded in Ukraine, primarily due to the devaluation of the hryvnia. The segment's staff expenses fell € 7 million as a result of headcount reduction and currency effects. The decline in other administrative expenses and depreciation was also currency-related. The number of business outlets decreased to 867. The cost/income ratio in the segment remained constant at 65.9 per cent.

Net provisioning for impairment losses

The region's net provisioning for impairment losses increased € 66 million to € 92 million year-on-year. The rise was mainly attributable to developments in Ukraine. This included € 85 million in individual loan loss provisions and € 7 million in portfoliobased loan loss provisions. Provisioning for impairment losses was largely required on foreign currency loans due to the devaluation of the Ukrainian hryvnia, and the resulting need to adjust provisioning for secured US dollar loans. In contrast, Belarus again had no need for provisioning for impairment losses on loans. The share of non-bank non-performing loans in the segment's overall loan portfolio fell 2.9 percentage points to 24.8 per cent year-on-year.

Other results and taxes

Other results in the segment rose € 11 million to € 43 million year-on-year. This rise was particularly due to valuation gains from the fair value securities portfolio. In Ukraine, net income from the valuation of fixed-income Ukrainian government bonds improved € 11 million to € 43 million year-on-year.

In the first three months of 2014, tax income of € 2 million was posted due to the utilization of tax loss carry-forwards.

Below please find the detailed results of the individual countries in the segment:

Belarus

in € million 1/1-31/3
2014
1/1-31/3
2013
Change Q1/2014 Q4/2013 Change
Net interest income 25 20 25.3% 25 23 8.6%
Net fee and commission income 15 15 (2.6)% 15 15 (3.5)%
Net trading income 0 (6) (99.9)% 0 0
Sundry net operating income 0 (1) (95.0)% 0 0
Operating income 40 28 40.7% 40 39 2.5%
General administrative expenses (19) (18) 5.1% (19) (19) (3.1)%
Operating result 21 11 100.3% 21 20 8.0%
Net provisioning for impairment losses 0 0 (40.8)% 0 13 (99.2)%
Other results 0 0 0 0
Profit before tax 21 11 97.9% 21 33 (34.8)%
Income taxes (5) (2) 166.3% (5) (9) (45.0)%
Profit after tax 17 9 84.4% 17 24 (31.1)%
Assets 1,435 1,472 (2.5)% 1,435 1,446 (0.8)%
Loans and advances to customers 949 1,010 (6.0)% 949 910 4.2%
hereof corporate % 73.4% 76.8% (3.4) PP 73.4% 72.3% 1.2 PP
hereof retail % 26.6% 23.2% 3.4 PP 26.6% 27.7% (1.2) PP
hereof foreign currency % 73.4% 73.0% 0.4 PP 73.4% 72.4% 1.0 PP
Deposits from customers 773 926 (16.6)% 773 842 (8.3)%
Loan/deposit ratio 122.8% 109.0% 13.8 PP 122.8% 108.1% 14.7 PP
Equity 272 223 22.0% 272 270 0.9%
Return on equity before tax 37.4% 21.6% 15.8 PP 37.4% 64.7% (27.3) PP
Return on equity after tax 29.1% 18.0% 11.1 PP 29.1% 47.6% (18.6) PP
Cost/income ratio 46.8% 62.6% (15.8) PP 46.8% 49.5% (2.7) PP
Net interest margin (average interest-bearing
assets)
7.80% 6.39% 1.41 PP 7.80% 7.00% 0.79 PP
Employees as at reporting date 2,178 2,201 (1.0)% 2,178 2,216 (1.7)%
Business outlets 96 100 (4.0)% 96 100 (4.0)%
Customers 723,688 695,067 4.1% 723,688 719,919 0.5%

Ukraine

in € million 1/1-31/3
2014
1/1-31/3
2013
Change Q1/2014 Q4/2013 Change
Net interest income 84 72 16.8% 84 91 (7.5)%
Net fee and commission income 33 34 (0.6)% 33 39 (14.5)%
Net trading income (40) 2 (40) 3
Sundry net operating income (1) (1) (33.2)% (1) (2) (73.1)%
Operating income 77 107 (28.5)% 77 132 (41.8)%
General administrative expenses (58) (72) (19.2)% (58) (70) (16.3)%
Operating result 18 35 (47.8)% 18 62 (70.5)%
Net provisioning for impairment losses (92) (27) 244.5% (92) (27) 245.5%
Other results 43 32 34.6% 43 0 >500.0%
Profit/loss before tax (30) 41 (30) 35
Income taxes 7 (9) 7 (7)
Profit/loss after tax (24) 32 (24) 29
Assets 3,289 4,832 (31.9)% 3,289 4,327 (24.0)%
Loans and advances to customers 3,027 3,806 (20.5)% 3,027 3,599 (15.9)%
hereof corporate % 54.8% 51.9% 2.9 PP 54.8% 56.6% (1.8) PP
hereof retail % 44.9% 48.1% (3.2) PP 44.9% 43.4% 1.5 PP
hereof foreign currency % 54.3% 50.8% 3.4 PP 54.3% 46.9% 7.4 PP
Deposits from customers 1,610 2,835 (43.2)% 1,610 2,433 (33.8)%
Loan/deposit ratio 187.9% 134.2% 53.7 PP 187.9% 147.9% 40.0 PP
Equity 618 885 (30.2)% 618 878 (29.6)%
Return on equity before tax 19.6% 17.9%
Return on equity after tax 15.5% 14.6%
Cost/income ratio 76.2% 67.4% 8.8 PP 76.2% 53.0% 23.2 PP
Net interest margin (average interest-bearing
assets)
9.32% 6.66% 2.66 PP 9.32% 9.15% 0.17 PP
Employees as at reporting date 12,891 13,787 (6.5)% 12,891 13,053 (1.2)%
Business outlets 770 822 (6.3)% 770 798 (3.5)%
Customers 3,014,699 3,023,416 (0.3)% 3,014,699 3,062,204 (1.6)%

Group Corporates

in € million 1/1-31/3
2014
1/1-31/3
2013
Change Q1/2014 Q4/2013 Change
Operating income 162 156 3.8% 162 153 5.9%
General administrative expenses (45) (44) 2.3% (45) (49) (7.1)%
Operating result 117 112 4.4% 117 104 12.0%
Net provisioning for impairment losses (34) (73) (53.3)% (34) (50) (32.3)%
Other results (1) 0 (1) 3
Profit before tax 81 39 106.5% 81 57 43.3%
Assets 20,884 21,380 (2.3)% 20,884 20,812 0.3%
Net interest margin (average interest
bearing assets)
2.39% 2.17% 0.22 PP 2.39% 2.34% 0.05 PP
Return on equity before tax 15.7% 8.3% 7.5 PP 15.7% 12.6% 3.1 PP

Following the negative impact of higher net provisioning for impairment losses on loans to large corporate customers in the comparative period of the previous year, profit before tax in the Group Corporates segment rose € 42 million to € 81 million year-onyear. The segment's return on equity before tax rose 7.5 percentage points to 15.7 per cent.

Operating income

The segment's net interest income increased 14 per cent to € 124 million year-on-year. In particular, increased margins in the Corporate Customers profit center of Group head office (Austrian and multinational corporate customers serviced from Vienna) contributed to a 32 per cent improvement in net interest income to € 57 million. Similarly, in the Network Corporate Customers & Support profit center (predominantly international corporate customers with a CEE relationship), net interest income increased 10 per cent to € 23 million although the volume of business with Central and Eastern European corporate customers has declined since year-end 2013. The segment's net interest margin rose 22 basis points to 2.39 per cent due to improved asset margins. Total assets fell 2 per cent to € 20.9 billion year-on-year, due to a decline in the volume of loans to Central and Eastern European corporate customers. Credit risk-weighted assets fell 13 per cent to € 12.8 billion.

Net fee and commission income decreased € 6 million to € 37 million year-on-year. Declines were recorded in the business outlets in Asia and the USA, and also at Group head office. These were attributable to lower fee and commission income from bond issues, as well as from real estate, export and investment financing; whereas the project financing business resulted in higher fee and commission income.

The segment's net trading income declined from € 3 million in the comparable period of the previous year, to € 1 million in the reporting period. Both, net income from interest-based transactions, as well as from currency-based transactions decreased, mainly in the business outlets in Asia.

The segment's sundry net operating income fell € 2 million to less than € 1 million year-on-year. The decline resulted from assigning the bank levy to the segment for the first time in 2014.

General administrative expenses

The segment's general administrative expenses increased 2 per cent, or € 1 million to € 45 million year-on-year, mainly as a result of higher overhead costs that were allocated to the segment. At the end of the reporting period the segment consisted of 9 business outlets. The cost/income ratio improved 0.4 percentage points to 28.0 per cent.

Net provisioning for impairment losses

Net provisioning for impairment losses fell € 39 million to € 34 million year-on-year. In the same period of the previous year, individual loans to large corporate customers, particularly at Group head office as well as in Asia, led to higher risk costs. The share of non-bank non-performing loans in the segment's portfolio increased 1.6 percentage points to 6.0 per cent.

Other results and taxes

The segment's other results amounted to minus € 1 million in the reporting period.

Income tax expense increased 20 per cent to € 16 million, while the tax rate fell 14 percentage points to 19 per cent. This was attributable to improvements in net income in countries with very low tax rates.

Group Markets

in € million 1/1-31/3
2014
1/1-31/3
2013
Change Q1/2014 Q4/2013 Change
Operating income 83 76 9.1% 83 94 (11.7)%
General administrative expenses (64) (61) 5.2% (64) (60) 6.2%
Operating result 19 15 24.4% 19 34 (43.7)%
Net provisioning for impairment losses 2 (1) 2 (22)
Other results (4) 11 (4) 6
Profit before tax 17 25 (31.5)% 17 17 0.0%
Assets 16,755 19,438 (13.8)% 16,755 20,271 (17.3)%
Net interest margin (average interest
bearing assets)
1.09% 0.84% 0.25 PP 1.09% 0.95% 0.13 PP
Return on equity before tax 7.9% 8.9% (1.1) PP 7.9% 10.6% (2.7) PP

In the Group Markets segment, profit before tax fell 32 per cent to € 17 million year-on-year. The main reason for the decline was the valuation of derivatives. As a result, the segment's return on equity before tax declined 1.1 percentage points to 7.9 per cent.

Operating income

The segment's net interest income increased 27 per cent to € 41 million year-on-year. This was mainly attributable to the reclassification of net trading income in accordance with IFRS to net interest income in the Global Treasury Markets profit center and in the customer business of the Financial Institutions & Sovereigns profit center. This caused the net interest margin to increase 25 basis points to 1.09 per cent. Total assets in the segment decreased 14 per cent to € 16.8 billion year-on-year. The 23 per cent rise in credit risk-weighted assets to € 4.6 billion was mainly due to rating downgrades and the increase in exposure.

Net fee and commission income in the segment rose 9 per cent to € 29 million year-on-year.

The segment's net trading income declined 45 per cent to € 8 million. This was mainly due tovaluation losses from foreign currency positions. In contrast, net income from banknote trading and net income from structured products improved € 6 million overall.

Sundry net operating income improved € 2 million to € 5 million in the reporting period.

General administrative expenses

The Group Markets segment's general administrative expenses increased 5 per cent to € 64 million year-on-year. With operating income rising 9 per cent, the cost/income ratio improved 2.8 percentage points to 77.1 per cent.

Net provisioning for impairment losses

An individual loan loss provision of € 2 million was released in the reporting period. Non-performing loans accounted for 2.1 per cent of the segment's total credit exposure.

Other results and taxes

Other results in the segment fell from € 11 million to minus € 4 million year-on-year. This was mainly attributable to net income from derivatives, which declined € 13 million to minus € 4 million. This decrease was due to interest rate development for macro hedges at Group head office. Income tax expense rose € 4 million to € 7 million, while the tax rate increased to 38 per cent.

Corporate Center

in € million 1/1-31/3
2014
1/1-31/3
2013
Change Q1/2014 Q4/2013 Change
Operating income 127 4 >500.0% 127 48 164.0%
General administrative expenses (80) (72) 10.8% (80) (87) (8.7)%
Operating result 47 (67) 47 (39)
Net provisioning for impairment losses (8) 1 (8) 11
Other results (287) (142) 102.2% (287) (199) 43.8%
Loss before tax (248) (208) 19.0% (248) (227) 9.0%
Assets 34,172 43,580 (21.6)% 34,172 34,716 (1.6)%
Net interest margin (average interest-bearing
assets)
Return on equity before tax

The Corporate Center segment's profit before tax fell to minus € 248 million in the reporting period, despite significantly improved net interest and dividend income due to the partial write-down of the Raiffeisen Bank Aval JSC, Kiev, participation at the Group head office.

Operating income

Net interest income in the segment rose from minus € 12 million to plus € 128 million year-on-year. This increase was mainly due to intra-Group dividend income. In addition, lower refinancing costs had a positive impact as existing financing was replaced with cheaper financing. The interest expenses of € 16 million (comparable period in 2013: € 13 million) for the subordinated capital of RBI AG are also reported in this segment. The segment's total assets declined 22 per cent to € 34.2 billion compared to the same period last year; whereas credit risk-weighted assets rose 12 per cent to € 18.8 billion due to the introduction of the new corporate rating model and higher total capital requirement under Basel III.

Net fee and commission income improved 60 per cent to minus € 4 million year-on-year, due especially to higher fee and commission income from intra-Group securitization transactions and the acceptance of guarantees.

Net trading income in the segment fell € 17 million to minus € 26 million year-on-year. This was mainly attributable to valuation losses from open foreign currency positions in Ukraine.

Sundry net operating income fell € 7 million to € 30 million, due to the sale of F.J. Elsner Trading GmbH in the first quarter of 2014. The contribution to net income made by the Raiffeisen Service Center (back-office services for banks in Austria) remained almost unchanged at € 7 million.

General administrative expenses

The segment's general administrative expenses increased € 8 million to € 80 million year-on-year, due to higher overhead costs. The only business outlet reported in the segment is Group head office.

Net provisioning for impairment losses

Net provisioning for impairment losses generally plays a minor role in this segment due to the intra-Group nature of its business activities. In the first three months of 2014, net provisioning for impairment losses for customers of Group head office amounted to € 8 million.

Other results and taxes

Other results in the segment fell from minus € 142 million to minus € 287 million year-on-year. In particular, at € 216 million, the partial write-down on the Raiffeisen Bank Aval JSC, Kiev, participation had a negative impact on the net income of Group head office. In contrast, net income from derivatives and liabilities positively developed and improved € 85 million to minus € 31 million. This was attributable to net income from liabilities designated at fair value, in which valuations for credit spreads increased € 116 million to € 34 million.

The Austrian bank levy had a negative effect of € 17 million on net income. Net income from disposal of Group assets amounted to minus € 11 million and resulted mainly from the sale of three subsidiaries.

In the Corporate Center segment, tax income fell € 10 million to € 17 million year-on-year.

Interim consolidated financial statements

(Interim report as at 31 March 2014)

Statement of comprehensive income

Income statement

in € million Notes 1/1-31/3/2014 1/1-31/3/2013 Change
Interest income 1,442 1,490 (3.2)%
Interest expenses (463) (626) (26.0)%
Net interest income [2] 979 865 13.2%
Net provisioning for impairment losses [3] (281) (220) 28.1%
Net interest income after provisioning 697 645 8.1%
Fee and commission income 471 458 2.8%
Fee and commission expense (95) (83) 14.5%
Net fee and commission income [4] 376 375 0.2%
Net trading income [5] (19) 80
Net income from derivatives and liabilities [6] (27) (121) (77.3)%
Net income from financial investments [7] 37 87 (58.1)%
General administrative expenses [8] (755) (788) (4.2)%
Other net operating income [9] (57) (21) 173.7%
Net income from disposal of group assets (11) (6) 64.6%
Profit before tax 240 251 (4.3)%
Income taxes [10] (67) (77) (12.4)%
Profit after tax 173 174 (0.7)%
Profit attributable to non-controlling interests (12) (17) (29.7)%
Consolidated profit 161 157 2.5%

Earnings per share

in € 1/1-31/3/2014 1/1-31/3/2013 Change
Earnings per share 0.41 0.55 (0.13)

Earnings per share are obtained by dividing consolidated profit less dividend for participation capital by the average number of ordinary shares outstanding. As at 31 March 2014, the number of ordinary shares oustanding was 268.1 million (31 March 2013: 194.9 million). As there were no conversion rights or options outstanding, a dilution of earnings per share did not occur.

Total Group equity Non-controlling interests
in € million 1/1-31/3
2014
1/1-31/3
2013
1/1-31/3
2014
1/1-31/3
2013
1/1-31/3
2014
1/1-31/3
2013
Profit after tax 173 174 161 157 12 17
Items which are not reclassified to profit
and loss 0 0 0 0 0 0
Remeasurements of defined benefit plans 0 0 0 0 0 0
Deferred taxes on items which are not
reclassified to profit and loss
0 0 0 0 0 0
Items that may be reclassified subsequently
to profit or loss
(451) (6) (441) (3) (10) (2)
Exchange differences (466) 5 (455) 9 (11) (4)
hereof unrealized net gains (losses) of
the period
(466) 5 (455) 9 (11) (4)
hereof net gains (losses) reclassified to
income statement
0 0 0 0 0 0
Capital hedge 1 (1) 1 (1) 0 0
Hyperinflation 13 13 12 11 2 2
Net gains (losses) on derivatives hedging
fluctuating cash flows
0 (2) 0 (2) 0 0
hereof unrealized net gains (losses) of
the period
0 (2) 0 (2) 0 0
hereof net gains (losses) reclassified to
income statement
0 0 0 0 0 0
Changes in equity of companies valued at
equity
0 0 0 0 0 0
Net gains (losses) on financial assets
available-for-sale
3 (25) 3 (25) 0 0
hereof unrealized net gains (losses) of
the period
4 0 3 0 1 0
hereof net gains (losses) reclassified to
income statement
(1) (25) 0 (25) (1) 0
Deferred taxes on income and expenses
directly recognized in equity
(1) 5 (1) 5 0 0
hereof unrealized net gains (losses) of
the period
(1) 0 (1) 0 0 0
hereof net gains (losses) reclassified to
income statement
0 5 0 5 0 0
Sundry income and expenses directly
recognized in equity
0 0 0 0 0 0
Other comprehensive income (451) (6) (441) (3) (10) (2)
Total comprehensive income (278) 168 (280) 153 2 15

Other comprehensive income and total comprehensive income

Quarterly results

in € million Q2/2013 Q3/2013 Q4/2013 Q1/2014
Net interest income 972 940 953 979
Net provisioning for impairment losses (249) (330) (350) (281)
Net interest income after provisioning 722 610 603 697
Net fee and commission income 411 417 424 376
Net trading income 60 100 81 (19)
Net income from derivatives and liabilities (66) (56) (14) (27)
Net income from financial investments (23) 9 (15) 37
General administrative expenses (829) (813) (910) (755)
Other net operating income (58) (38) (30) (57)
Net income from disposal of group assets 0 0 0 (11)
Profit before tax 216 229 138 240
Income taxes (79) (80) 4 (67)
Profit after tax 137 149 142 173
Profit attributable to non-controlling interests (17) (15) 4 (12)
Consolidated profit 120 134 146 161
in € million Q2/2012 Q3/2012 Q4/2012 Q1/2013
Net interest income 886 834 876 865
Net provisioning for impairment losses (247) (224) (385) (220)
Net interest income after provisioning 639 611 491 645
Net fee and commission income 375 400 396 375
Net trading income 85 54 (6) 80
Net income from derivatives and liabilities (55) (88) (20) (121)
Net income from financial investments (8) 46 19 87
General administrative expenses1 (764) (818) (922) (788)
Other net operating income (28) (16) (50) (21)
Net income from disposal of group assets (2) 0 14 (6)
Profit before tax 243 188 (78) 251
Income taxes1 (83) (32) (59) (77)
Profit after tax 160 155 (137) 174
Profit attributable to non-controlling interests 0 (14) 24 (17)

1 Adaption of previous year figures due to the retrospective application of IAS 19R.

Statement of financial position

Assets
in € million
Notes 31/3/2014 31/12/2013 Change
Cash reserve 4,814 6,674 (27.9)%
Loans and advances to banks [12, 36] 19,806 22,243 (11.0)%
Loans and advances to customers [13, 36] 79,692 80,635 (1.2)%
Impairment losses on loans and advances [14] (5,610) (5,605) 0.1%
Trading assets [15, 36] 7,855 7,581 3.6%
Derivatives [16, 36] 982 982 0.0%
Financial investments [17, 36] 13,260 13,483 (1.7)%
Investments in associates [36] 0 5
Intangible fixed assets [18] 1,179 1,249 (5.6)%
Tangible fixed assets [19] 1,458 1,595 (8.6)%
Other assets [20, 36] 1,974 1,799 9.7%
Total assets 125,410 130,640 (4.0)%
Equity and liabilities
in € million Notes 31/3/2014 31/12/2013 Change
Deposits from banks [21, 36] 26,348 30,105 (12.5)%
Deposits from customers [22, 36] 63,599 66,437 (4.3)%
Debt securities issued [23] 10,511 11,533 (8.9)%
Provisions for liabilities and charges [24, 36] 775 733 5.7%
Trading liabilities [25, 36] 5,435 5,204 4.4%
Derivatives [26, 36] 377 384 (1.9)%
Other liabilities [27, 36] 1,490 1,753 (15.0)%
Subordinated capital [28, 36] 4,054 4,128 (1.8)%
Equity [29] 12,821 10,364 23.7%
Consolidated equity 12,169 9,322 30.5%
Consolidated profit 161 557 (71.2)%
Non-controlling interests 492 485 1.4%
Total equity and liabilities 125,410 130,640 (4.0)%
in € million Subscribed
capital
Participation
capital
Capital
reserves
Retained
earnings
Consolidated
profit
Non-controlling
interests
Total
Equity as at 1/1/2014 595 2,500 2,575 3,652 557 485 10,364
Capital increases 297 0 2,435 0 0 0 2,732
Transferred to retained earnings 0 0 0 557 (557) 0 0
Dividend payments 0 0 0 0 0 (2) (2)
Total comprehensive income 0 0 0 (441) 161 2 (278)
Own shares/share
incentive program
0 0 (5) 5 0 0 0
Other changes 0 0 (6) 5 0 7 6
Equity as at 31/3/2014 892 2,500 4,999 3,778 161 492 12,821

Statement of changes in equity

in € million Subscribed
capital
Participation
capital
Capital
reserves
Retained
earnings
Consolidated
profit
Non-controlling
interests
Total
Equity as at 1/1/20131 595 2,500 2,574 3,755 730 719 10,873
Capital increases 0 0 0 0 0 0 0
Transferred to retained earnings 0 0 0 730 (730) 0 0
Dividend payments 0 0 0 0 0 (2) (2)
Total comprehensive income 0 0 0 (3) 157 15 168
Own shares/share
incentive program 0 0 0 0 0 0 0
Other changes 0 0 0 35 0 (13) 22
Equity as at 31/3/2013 595 2,500 2,574 4,517 157 719 11,061

1 Adaption of previous year figures due to the retrospective application of IAS 19R.

Statement of cash flows

in € million 1/1-31/3/2014 1/1-31/3/2013
Cash and cash equivalents at the end of previous period 6,674 6,557
Net cash from operating activities (4,433) (1,624)
Net cash from investing activities (156) 65
Net cash from financing activities 2,945 (18)
Effect of exchange rate changes (217) 34
Cash and cash equivalents at the end of period 4,814 5,013

Segment reporting

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 (country and functional responsibility model). A cash generating unit within the Group is either a country or a business activity. 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 an essential component in the decision-making process. Thus, the division into segments was also undertaken in accordance with IFRS 8. The reconciliation contains mainly the amounts resulting from the elemination of intra-group results and consolidation between the segments.

The following segments result thereof:

  • Central Europe
  • Southeastern Europe
  • Russia
  • CEE Other
  • Group Corporates
  • Group Markets
  • Corporate Center

In the first quarter of 2014 Ukraine decided to leave the CIS. The segment CIS Other has been renamed as CEE Other.

in € million
Europe
Europe
Russia
CEE Other
Net interest income
259
209
194
Net fee and commission income
130
82
66
Net trading income
7
16
12
110
48
(40)
(1)
117
Corporates
124
37
1
0
Sundry net operating income
(8)
10
11
Operating income
389
318
281
162
General administrative expenses
(246)
(163)
(114)
(77) (45)
Operating result
143
155
168
40 117
Net provisioning for impairment losses
(59)
(63)
(27)
(92) (34)
Other results
(40)
2
(2)
43 (1)
Profit before tax
44
94
139
(8) 81
Income taxes
(20)
(14)
(31)
2 (16)
Profit after tax
24
80
109
(7) 66
Profit attributable to non-controlling interests
(11)
0
1
0 0
Profit/Loss after non-controlling interests
13
80
109
(7) 66
Share of profit before tax
36.7%
78.4%
116.7%
68.2%
Risk-weighted assets (credit risk)
20,159
12,662
8,545
4,444 12,757
Risk-weighted assets (total)
23,636
15,254
10,614
5,437 13,235
Total capital requirement
1,891
1,220
849
435 1,059
Assets
38,430
20,752
15,103
4,758 20,884
Liabilities
34,768
17,758
12,803
3,864 14,932
Net interest margin (average interest-bearing assets)
2.87%
4.30%
5.46%
8.89% 2.39%
NPL ratio
11.9%
14.0%
5.3%
24.8% 6.0%
NPL coverage ratio
64.8%
64.1%
73.8%
78.2% 54.9%
Cost/income ratio
63.3%
51.3%
40.4%
65.9% 28.0%
Provisioning ratio (average loans and advances to
customers)
0.81%
1.09%
1.21%
1.40% 0.95%
Average equity
3,673
2,321
1,694
888 2,071
Return on equity before tax
4.8%
16.1%
32.9%
15.7%
Business outlets
820
1,094
196
867 9
1/1-31/3/2014
in € million
Group
Markets
Corporate
Center
Reconciliation Total
Net interest income 41 128 (87) 979
Net fee and commission income 29 (4) (12) 376
Net trading income 8 (26) 4 (19)
Sundry net operating income 5 30 (36) 10
Operating income 83 127 (132) 1,345
General administrative expenses (64) (80) 34 (755)
Operating result 19 47 (98) 590
Net provisioning for impairment losses 2 (8) (1) (281)
Other results (4) (287) 219 (69)
Profit before tax 17 (248) 121 240
Income taxes (7) 17 0 (67)
Profit after tax 11 (231) 121 173
Profit attributable to non-controlling interests 0 (2) 0 (12)
Profit/Loss after non-controlling interests 11 (232) 121 161
Share of profit before tax 14.6% 100.0%
Risk-weighted assets (credit risk) 4,639 18,752 (16,602) 65,357
Risk-weighted assets (total) 5,943 19,207 (13,426) 79,900
Total capital requirement 475 1,537 (1,074) 6,392
Assets 16,755 34,172 (25,445) 125,410
Liabilities 17,814 24,132 (13,481) 112,590
Net interest margin (average interest-bearing assets) 1.09% 3.35%
NPL ratio 10.8% 11.6% 10.6%
NPL coverage ratio 65.3% 45.9% 65.2%
Cost/income ratio 77.1% 62.7% 56.1%
Provisioning ratio (average loans and advances to
customers)
1.48% 1.40%
Average equity 884 2,750 (2,190) 12,091
Return on equity before tax 7.9% 7.9%
Business outlets 4 1 2,991
1/1-31/3/2013
in € million
Central
Europe
Southeastern
Europe
Russia CEE Other Group
Corporates
Net interest income 260 207 182 93 109
Net fee and commission income 128 79 69 49 43
Net trading income 12 15 31 (4) 3
Sundry net operating income 1 10 1 (1) 2
Operating income 402 312 283 137 156
General administrative expenses (259) (166) (125) (90) (44)
Operating result 143 145 158 47 112
Net provisioning for impairment losses (74) (63) 15 (25) (73)
Other results (12) 12 26 32 0
Profit before tax 57 95 198 54 39
Income taxes (22) (13) (43) (11) (13)
Profit after tax 35 82 156 43 26
Profit attributable to non-controlling interests (11) (10) 0 (3) 0
Profit after non-controlling interests 23 72 155 40 27
Share of profit before tax 22.0% 36.4% 76.2% 20.6% 15.1%
Risk-weighted assets (credit risk) 21,650 12,971 10,586 5,474 14,580
Risk-weighted assets (total) 25,277 15,712 12,965 6,661 14,830
Total capital requirement 2,022 1,257 1,037 533 1,186
Assets 39,432 21,411 16,187 6,349 21,380
Liabilities 35,705 18,348 13,553 5,237 13,928
Net interest margin (average interest-bearing
assets)
2.77% 4.20% 5.12% 6.59% 2.17%
NPL ratio 11.4% 13.2% 4.8% 27.6% 4.4%
NPL coverage ratio 63.8% 61.5% 99.7% 70.9% 66.6%
Cost/income ratio 64.5% 53.3% 44.1% 65.9% 28.4%
Provisioning ratio (average loans and advances
to customers)
1.46% 1.69% (0.23)% 2.02% 0.20%
Average equity 3,232 2,192 1,649 854 1,910
Return on equity before tax 7.1% 17.3% 48.1% 25.1% 8.3%
Business outlets 805 1,128 189 923 8
1/1-31/3/2013
in € million
Group
Markets
Corporate
Center
Reconciliation Total
Net interest income 32 (12) (6) 865
Net fee and commission income 26 (11) (9) 375
Net trading income 15 (9) 18 80
Sundry net operating income 2 37 (26) 26
Operating income 76 4 (24) 1,346
General administrative expenses (61) (72) 30 (788)
Operating result 15 (67) 5 558
Net provisioning for impairment losses (1) 1 0 (220)
Other results 11 (142) (15) (87)
Profit before tax 25 (208) (10) 251
Income taxes (2) 27 0 (77)
Profit after tax 23 (181) (10) 174
Profit attributable to non-controlling interests 0 0 7 (17)
Profit/Loss after non-controlling interests 23 (181) (2) 157
Share of profit before tax 9.8% (80.0)% 100.0%
Risk-weighted assets (credit risk) 3,777 16,710 (16,430) 69,319
Risk-weighted assets (total) 5,219 16,497 (13,421) 83,740
Total capital requirement 418 1,320 (1,074) 6,699
Assets 19,438 43,580 (35,845) 131,932
Liabilities 19,567 31,792 (17,259) 120,871
Net interest margin (average interest-bearing assets) 0.84% 2.89%
NPL ratio 6.4% 9.9%
NPL coverage ratio 88.9% 67.5%
Cost/income ratio 79.9% 58.5%
Provisioning ratio (average loans and advances to
customers)
0.82% (0.13)% 1.06%
Average equity 1,137 2,482 (2,492) 10,963
Return on equity before tax 8.9% 9.2%
Business outlets 3 1 3,057

Notes

Principles underlying the consolidated financial statements

Principles of preparation

The condensed interim consolidated financial statements of RBI 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). The condensed consolidated interim financial statements as at 31 March 2014 are prepared in accordance with IAS 34.

In addition to the information on risks arising from financial instruments in the individual notes to the financial statements, the risk report section in particular contains detailed information on the issues of credit risk, concentration risk, market risk, and liquidity risk.

RBI's interim report as at 31 March 2014 did not undergo a complete audit, nor did it undergo an audit inspection carried out by a certified auditor (framework prime market of the Vienna Stock Exchange).

The same recognition and measurement principles and consolidation methods were fundamentally applied in the interim reporting, as those used in preparing the consolidated financial statements 2013 (see Annual Report 2013, page 116 ff). Standards and interpretations to be applied in the EU from 1 January 2014 onward were accounted for in this interim report. The application of these standards had no material influence on the condensed interim consolidated financial statements.

Application of new and revised standards

All those accounting standards described below, are of relevance for the Group and were applied for the preparation of the condensed consolidated interim financial statements for the first quarter 2014.

IFRS 10 replaces the parts of IAS 27 (Consolidated and Separate Financial Statements) that deal with consolidated financial statements. SIC-12 (Consolidation – Special Purpose Entities) will be replaced by IFRS 10. In IFRS 10, there is only one basis for consolidation, namely control. Under IFRS 10, control exists if an investor has all three of the following elements: (a) controlling influence over an investee, (b) exposure, or rights, to variable returns from its involvement with the investee, and (c) the ability to use its power over the investee to affect the amount of the investor's return. Extensive guidance has been added in the standard to deal with complex scenarios.

Due to the first-time application of IFRS 10, the structured company Compass Variety Funding Limited, Dublin (IE), was fully consolidated for the first time, due to the fact that RBI has control over specified assets (leasing claims) according to IFRS10.B76– IFRS10.B79, which are separated from the general participation entity. Due to the initial consolidation of the structured company, refinancing gathered via the structured entity of € 52 million as at reporting date (31 December 2013: € 66.8 million) was shown under deposits from banks.

IFRS 11 replaces IAS 31 (Interests in Joint Ventures) and SIC-13 (Jointly Controlled Entities – Non-Monetary Contributions by Ventures). From 1 January 2014 onward, IFRS 11 deals with how a joint arrangement should be classified. Joint arrangements are classified as a contractual agreement in which two or more parties practice joint management. Joint management can extend to a joint venture or a joint operation. In contrast to IAS 31, accounting for jointly controlled assets is no longer addressed separately in IFRS 11; the rules for joint ventures are applied. The classification of a joint arrangement as joint operation or joint venture depends on the rights and obligations of the parties to the agreement. In addition, joint ventures under IFRS 11 must be accounted for using the equity method, whereas jointly controlled entities under IAS 31 can be accounted for using proportionate consolidation or the equity method. The first-time application of the revised version of IFRS 11 has no impact on the consolidated financial statements.

IFRS 12 is a disclosure standard regarding statements in the notes. From 1 January 2014 onward, it is applicable to entities that have interests in subsidiaries, joint arrangements (joint ventures or joint operations), associates and/or unconsolidated structured entities. In general, the disclosure requirements in IFRS 12 are far more extensive than those in the current standards. The first-time application of the revised version of IFRS 12 will lead to additional statements in the notes at year-end 2014, but has no accounting impact on the consolidated financial statements of RBI.

The amendment of IFRS 10, IFRS 11 and IAS 27 provide an exception to the consolidation requirements of subsidiaries in IFRS 10 (Consolidated Financial Statements) as of 1 January 2014. This applies if the parent company meets the definition of an "investment company" (for example, certain mutual funds). These entities measure their investments in particular subsidiaries at fair value through profit and loss in accordance with IFRS 9 (Financial Instruments) or IAS 39 (Financial Instruments: Recognition and Measurement). These amendments have no impact on the consolidated financial statements of RBI. Additionally, the transition guidance in IFRS 10, IFRS 11 and IFRS 12 was clarified and reliefs were provided in all three standards. Adjusted comparative information

is only required for the preceding comparable period. Moreover, in connection with the disclosure in the notes on nonconsolidated structured entities, there is no obligation to provide comparative information for periods that precede the first-time application of IAS 12.

From 1 January 2014 onward, joint ventures are added to the scope of the revised IAS 28, as under IFRS 11, joint ventures may only be included in the consolidated financial statements according to the equity method, which is the only allowable method. The first-time application of the revised version of IAS 28 has no impact on the consolidated financial statements.

The amendments made to IAS 32 clarify existing application issues relating to the offsetting of financial assets and financial liabilities. Specifically, the amendments clarify the meaning of "currently has a legally enforceable right to set off" and "simultaneous realization and settlement". The first-time application of the revised version of IAS 32 as at 1 January 2014 has no impact on the consolidated financial statements.

From 1 January 2014 on, the amendments of IAS 36 involve a correction of the disclosure rules that were changed, more extensively than originally intended, in connection with IFRS 13. These relate to impaired assets in which the recoverable amount is equivalent to fair value less costs of disposal. At present, the recoverable amount must be disclosed regardless of impairment. The correction now restricts the disclosure to actual impairments, but extends the disclosures to be made in such cases. These changes – apart from the possible need to make additional disclosures – will have no influence on the consolidated financial statements

From 1 January 2014 onward, as a result of the amendments of IAS 39 derivatives remain designated as hedging instruments in existing hedging relationships despite novation. Novation refers to cases in which the original parties to a derivatives contract agree that a central counterparty shall replace their original counterparty to become the counterparty to each of the original parties. The fundamental requirement is that the use of a central counterparty is required by law or regulation. Moreover, changes to contractual arrangements must be limited to those that are necessary for novation. The objective of the amendments is to avoid any impact on hedge accounting as a consequence of the write-off of the derivative on the conversion of the contract to a central counterparty. The changes have no material impact on the consolidated financial statements.

Critical accounting judgements and key sources of estimation uncertainty

If estimates or assessments are necessary for accounting and measuring under IAS/IFRS rules, they are made in accordance with the respective standards. They are based on past experience and other factors, such as planning and expectations or forecasts of future events that appear likely from today's standard. This primarily affects impairment losses in the credit business, the fair value and the impairment of financial instruments, deferred taxes, provisions for pensions and pension-related liabilities, and calculations used to determine the recoverability of goodwill and the intangible asset values capitalized in the course of the initial consolidation. The actual values may deviate from the estimated figures.

Currencies

2014 2013
As at Average As at Average
Rates in units per € 31/3 1/1-31/3 31/12 1/1-31/3
Albanian lek (ALL) 140.270 140.263 140.200 139.685
Belarusian rouble (BYR) 13,570.000 13,287.500 13,080.000 11,350.000
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) 7.648 7.644 7.627 7.583
Czech koruna (CZK) 27.442 27.428 27.427 25.537
Hungarian forint (HUF) 307.180 306.983 297.040 296.198
Kazakh tenge (KZT) 249.700 230.965 211.170 198.293
Malaysian Ringgit (MYR) 4.498 4.518 4.522 4.068
Polish zloty (PLN) 4.172 4.186 4.154 4.150
Romanian leu (RON) 4.459 4.482 4.471 4.402
Russian rouble (RUB) 48.780 47.949 45.325 40.238
Serbian dinar (RSD) 115.385 115.471 114.642 112.199
Singapore dollar (SGD) 1.737 1.739 1.741 1.625
Turkish lira (TRY) 2.969 3.015 2.961 2.355
Ukrainian hryvnia (UAH) 15.072 12.650 11.042 10.516
US-Dollar (USD) 1.379 1.373 1.379 1.317

Consolidated group

Fully consolidated Equity method
Number of units 31/3/2014 31/12/2013 31/3/2014 31/12/2013
As at beginning of period 143 137 1 1
Included for the first time in the financial period 3 14 0 0
Merged in the financial period 0 (1) 0 0
Excluded in the financial period (13) (7) (1) 0
As at end of period 133 143 0 1

Excluded units

in € million ELSNER-Group Others Total
Assets 70 78 148
Liabilities 58 78 136
Total identifiable net assets 12 0 12
Non-controlling interests 0 0 0
Net assets after non-controlling interests 12 0 12
Goodwill 0 0 0
Goodwill/Badwill from exchange differences 0 0 0
Selling price/carrying amount 1 0 2
Net income from disposal of group assets (11) 1 (11)

Notes to the income statement

(1) Income statement according to measurement categories

in € million 1/1-31/3/2014 1/1-31/3/2013
Net income from financial assets and liabilities held-for-trading 196 (25)
Net income from financial assets and liabilities at fair value through profit or
loss
44 86
Net income from financial assets available-for-sale 2 28
Net income from loans and advances 921 1,047
Net income from financial assets held-to-maturity 42 49
Net income from financial liabilities measured at acquisition cost (463) (625)
Net income from derivatives (hedging) 32 15
Net revaluations from exchange differences (87) 116
Other operating income/expenses (447) (441)
Total profit before tax from continuing operations 240 251

(2) Net interest income

in € million 1/1-31/3/2014 1/1-31/3/2013
Interest and interest-like income, total 1,442 1,490
Interest income 1,435 1,485
from balances at central banks 8 13
from loans and advances to banks 48 53
from loans and advances to customers 1,095 1,148
from financial investments 112 131
from leasing claims 46 48
from derivative financial instruments (non-trading), net 127 92
Current income 1 0
Interest-like income 6 5
Current income from associates 0 0
Interest expenses and interest-like expenses, total (463) (626)
Interest expenses (451) (612)
on deposits from central banks (2) (1)
on deposits from banks (85) (108)
on deposits from customers (249) (358)
on debt securities issued (63) (96)
on subordinated capital (52) (48)
Interest-like expenses (12) (14)
Total 979 865

(3) Net provisioning for impairment losses

in € million 1/1-31/3/2014 1/1-31/3/2013
Individual loan loss provisions (269) (194)
Allocation to provisions for impairment losses (594) (490)
Release of provisions for impairment losses 344 297
Direct write-downs (29) (14)
Income received on written-down claims 10 12
Portfolio-based loan loss provisions (13) (27)
Allocation to provisions for impairment losses (149) (159)
Release of provisions for impairment losses 136 132
Gains from loan termination or sale 1 1
Total (281) (220)

(4) Net fee and commission income

in € million 1/1-31/3/2014 1/1-31/3/2013
Payment transfer business 172 168
Loan and guarantee business 53 59
Securities business 31 30
Foreign currency, notes/coins, and precious metals business 88 82
Management of investment and pension funds 7 7
Sale of own and third party products 8 12
Other banking services 16 16
Total 376 375

(5) Net trading income

in € million 1/1-31/3/2014 1/1-31/3/2013
Interest-based transactions 32 8
Currency-based transactions (40) 70
Equity-/index-based transactions 7 4
Credit derivatives business 0 0
Other transactions (20) (2)
Total (19) 80

The refinancing expenses for trading assets that are included in net trading income amounted to € 14 million (comparable period: € 12 million).

(6) Income from derivatives and liabilities

in € million 1/1-31/3/2014 1/1-31/3/2013
Net income from hedge accounting (13) 10
Net income from credit derivatives 0 0
Net income from other derivatives 47 (77)
Net income from liabilities designated at fair value (61) (55)
Total (27) (121)

(7) Net income from financial investments

in € million 1/1-31/3/2014 1/1-31/3/2013
Net income from securities held-to-maturity 0 0
Net income from equity participations 1 28
Net valuations of equity participations 0 0
Net proceeds from sales of equity participations 1 28
Net income from securities at fair value through profit and loss 35 59
Net valuations of securities 36 53
Net proceeds from sales of securities (1) 6
Net income from available-for-sale securities 0 0
Total 37 87

(8) General administrative expenses

in € million 1/1-31/3/2014 1/1-31/3/2013
Staff expenses (390) (406)
Other administrative expenses (286) (291)
Depreciation of intangible and tangible fixed assets (78) (91)
Total (755) (788)

(9) Other net operating income

in € million 1/1-31/3/2014 1/1-31/3/2013
Net income arising from non-banking activities 8 12
Sales revenues from non-banking activities 126 133
Expenses arising from non-banking activities (118) (122)
Net income from additional leasing services 0 1
Revenues from additional leasing services 16 18
Expenses from additional leasing services (16) (17)
Rental income from operating lease (vehicles and equipment) 8 8
Rental income from investment property incl. operating lease (real estate) 8 6
Net proceeds from disposal of tangible and intangible fixed assets 0 0
Other taxes (83) (58)
hereof bank levies and financial transaction tax (67) (44)
Impairment of goodwill 0 (3)
Net expense from allocation and release of other provisions (11) (1)
Sundry operating income 21 21
Sundry operating expenses (8) (8)
Total (57) (21)

(10) Income taxes

in € million 1/1-31/3/2014 1/1-31/3/2013
Current income taxes (49) (63)
Austria 1 (1)
Foreign (50) (62)
Deferred taxes (19) (14)
Total (67) (77)

Notes to the statement of financial position

(11) Statement of financial position according to measurement categories

Assets according to measurement categories
in € million
31/3/2014 31/12/20131
Cash reserve 4,814 6,674
Trading assets 8,275 7,990
Financial assets at fair value through profit or loss 7,406 8,440
Investments in associates 0 5
Financial assets available-for-sale 1,517 823
Loans and advances 95,862 99,071
Financial assets held-to-maturity 4,336 4,220
Derivatives (hedging) 563 573
Other assets 2,637 2,843
Total assets 125,410 130,640

1 Adaptation of previous year's figures due to change of classification.

Positive fair values of derivatives not designated as hedging instruments according to IAS 39 hedge accounting are reported in the measurement category trading assets. The measurement category financial assets available-for-sale comprises other affiliated companies, other equity participations and fixed-interest securities. Loans and advances are reported on a net basis after provisions for impairment losses. Other assets comprise intangible and tangible fixed assets.

Equity and liabilities according to measurement categories
in € million 31/3/2014 31/12/2013
Trading liabilities 5,715 5,456
Financial liabilities 103,443 111,342
Liabilities at fair value through profit and loss 2,559 2,612
Derivatives (hedging) 97 133
Provisions for liabilities and charges 775 733
Equity 12,821 10,364
Total equity and liabilities 125,410 130,640

Negative fair values of derivatives not designated as hedging instruments according to IAS 39 hedge accounting are reported in the measurement category trading liabilities.

(12) Loans and advances to banks

Loans and advances to banks classified regionally (counterparty's seat) are as follows:

31/3/2014 31/12/2013
8,354 8,297
11,452 13,946
19,806 22,243

Loans and advances to banks include € 2,749 million (31/12/2013: € 4,664 million) from repo transactions.

(13) Loans and advances to customers

Loans and advances to customers break down into asset classes as follows:

in € million 31/3/2014 31/12/2013
Sovereigns 1,631 1,648
Corporate customers – large corporates 48,818 49,320
Corporate customers – mid market 3,072 3,089
Retail customers – private individuals 23,346 23,756
Retail customers – small and medium-sized entities 2,824 2,822
Other 0 0
Total 79,692 80,635

Loans and advances to customers include € 962 million (31/12/2013: € 1,323 million) from repo transactions.

Loans and advances to customers classified regionally (counterparty's seat) are as follows:

in € million 31/3/2014 31/12/2013
Austria 7,390 7,224
Foreign 72,303 73,410
Total 79,692 80,635

(14) Impairment losses on loans and advances

Provisions for impairment losses are allocated to the following asset classes:

in € million 31/3/2014 31/12/2013
Banks 111 118
Sovereigns 1 6
Corporate customers – large corporates 2,958 2,837
Corporate customers – mid market 370 531
Retail customers – private individuals 1,821 1,777
Retail customers – small and medium-sized entities 349 337
Total 5,610 5,605

(15) Trading assets

in € million 31/3/2014 31/12/2013
Bonds, notes and other fixed-interest securities 4,001 3,954
Shares and other variable-yield securities 370 408
Positive fair values of derivative financial instruments 3,485 3,219
Total 7,855 7,581

(16) Derivatives

in € million 31/3/2014 31/12/2013
Positive fair values of derivatives in fair value hedges (IAS 39) 540 544
Positive fair values of derivatives in cash flow hedges (IAS 39) 6 6
Positive fair values of derivatives in net investment hedge (IAS 39) 24 23
Positive fair values of other derivatives 413 409
Total 982 982

(17) Financial investments

in € million 31/3/2014 31/12/2013
Bonds, notes and other fixed-interest securities 12,655 12,862
Shares and other variable-yield securities 128 150
Equity participations 477 470
Total 13,260 13,483

(18) Intangible fixed assets

in € million 31/3/2014 31/12/2013
Goodwill 523 544
Software 523 545
Other intangible fixed assets 134 159
Total 1,179 1,249

(19) Tangible fixed assets

in € million 31/3/2014 31/12/2013
Land and buildings used by the Group for own purpose 659 712
Other land and buildings (investment property) 187 208
Office furniture, equipment and other tangible fixed assets 357 399
Leased assets (operating lease) 254 277
Total 1,458 1,595

(20) Other assets

in € million 31/3/2014 31/12/2013
Tax assets 567 601
Current tax assets 103 112
Deferred tax assets 464 489
Receivables arising from non-banking activities 72 93
Prepayments and other deferrals 328 232
Clearing claims from securities and payment transfer business 636 388
Lease in progress 58 80
Assets held for sale (IFRS 5) 60 56
Inventories 87 147
Valuation fair value hedge portfolio 18 16
Any other business 149 188
Total 1,974 1,799

(21) Deposits from banks

Deposits from banks classified regionally (counterparty's seat) break down as follows:

in € million 31/3/2014 31/12/2013
Austria 10,780 16,775
Foreign 15,568 13,330
Total 26,348 30,105

Deposits from banks include € 972 million (31/12/2013: € 1,220 million) from repo transactions.

(22) Deposits from customers

Deposits from customers break down as follows:

in € million 31/3/2014 31/12/2013
Sovereigns 1,367 820
Corporate customers – large corporates 28,890 31,439
Corporate customers – mid market 2,312 2,419
Retail customers – private individuals 26,395 27,059
Retail customers – small and medium-sized entities 4,122 4,280
Other 514 420
Total 63,599 66,437

Deposits from customers include € 332 million (31/12/2013: € 743 million) from repo transactions.

Deposits from customers classified regionally (counterparty's seat) are as follows:

in € million 31/3/2014 31/12/2013
Austria 5,094 5,619
Foreign 58,505 60,818
Total 63,599 66,437

(23) Debt securities issued

in € million 31/3/2014 31/12/2013
Bonds and notes issued 9,376 11,061
Money market instruments issued 1,093 428
Other debt securities issued 42 44
Total 10,511 11,533

(24) Provisions for liabilities and charges

in € million 31/3/2014 31/12/2013
Severance payments and other 68 69
Retirement benefits 25 25
Taxes 87 93
Current 51 64
Deferred 36 29
Contingent liabilities and commitments 112 119
Pending legal issues 53 54
Overdue vacation 59 57
Bonus payments 233 231
Restructuring 9 9
Other 128 77
Total 775 733

(25) Trading liabilities

in € million 31/3/2014 31/12/2013
Negative fair values of derivative financial instruments 4,245 4,027
Interest-based transactions 2,557 2,453
Currency-based transactions 619 592
Equity-/index-based transactions 917 841
Credit derivatives business 9 8
Other transactions 143 133
Short-selling of trading assets 553 551
Certificates issued 637 626
Total 5,435 5,204

(26) Derivatives

in € million 31/3/2014 31/12/2013
Negative fair values of derivatives in fair value hedges (IAS 39) 66 104
Negative fair values of derivatives in cash flow hedges (IAS 39) 31 28
Negative fair values of credit derivatives 0 0
Negative fair values of derivative financial instruments 280 252
Total 377 384

(27) Other liabilities

in € million 31/3/2014 31/12/2013
Liabilities from non-banking activities 83 98
Liabilities from insurance contracts 299 320
Accruals and deferred items 241 267
Liabilities from dividends 3 1
Clearing claims from securities and payment transfer business 419 552
Valuation fair value hedge portfolio 43 39
Any other business 403 476
Total 1,490 1,753

(28) Subordinated capital

in € million 31/3/2014 31/12/2013
Hybrid tier 1 capital 441 451
Subordinated liabilities 3,613 3,371
Supplementary capital 0 305
Total 4,054 4,128

(29) Equity

in € million 31/3/2014 31/12/2013
Consolidated equity 12,169 9,322
Subscribed capital 892 595
Participation capital 2,500 2,500
Capital reserves 4,999 2,564
Retained earnings 3,778 3,664
Consolidated profit 161 557
Non-controlling interests 492 485
Total 12,821 10,364

The subscribed capital of RBI AG as defined by the articles of incorporation amounts to € 894 million. After deduction of 557,295 own shares, the stated subscribed capital totaled € 892 million.

Risk report

(30) Risks arising from financial instruments

Active risk management is a core competency of RBI. In order to effectively identify, measure, and manage risks, the Group has implemented comprehensive risk management and controlling. The risk management system is an integral part of overall bank management and it is continuously being developed. RBI's risk management is geared toward ensuring that credit and country risks, market and liquidity risks, risks arising from holdings and operational risks are dealt with conscientiously and managed professionally. The principles and organization of risk management are disclosed in the relevant chapters of the 2013 Annual Report, pages 176 ff.

Economic capital

Economic capital constitutes an important instrument in overall bank risk management. It sets the internal capital requirement for all material risk categories being measured based on comparable models and thus allows for an aggregated view of the Group's risk profile. Economic capital has thus become an important instrument in overall bank risk management and is used for making risk-adjusted business decisions and in performance measurement. For this purpose, a business unit's profit is set in relation to the economic capital attributed to the unit (return on risk-adjusted capital, RORAC).

Risk contribution of individual risk types to economic capital:

in € million 31/3/2014 Share 31/12/2013 Share
Credit risk corporate customers 2,342 28.3% 2,433 30.9%
Credit risk private individuals 2,020 24.4% 2,060 26.2%
Market risk 1,038 12.5% 630 8.0%
Operational risk 733 8.9% 682 8.7%
Credit risk sovereigns 509 6.1% 487 6.2%
Credit risk financial institutions 292 3.5% 267 3.4%
Liquidity risk 272 3.3% 297 3.8%
Other tangible fixed assets 237 2.9% 263 3.3%
Participation risk 199 2.4% 185 2.3%
Macroeconomic risk 189 2.3% 189 2.4%
CVA risk 52 2.3% 0 0.0%
Risk buffer 394 4.8% 375 4.8%
Total 8,278 100.0% 7,868 100.0%

Regional allocation of economic capital according to booking Group unit:

in € million 31/3/2014 Share 31/12/2013 Share
Central Europe 2,954 35.7% 2,959 37.6%
Southeastern Europe 1,709 20.6% 1,652 21.0%
Austria 1,307 15.8% 1,276 16.2%
Russia 1,278 15.4% 1,121 14.2%
CEE Other 749 9.1% 660 8.4%
Rest of World 281 3.4% 199 2.5%
Total 8,278 100.0% 7,868 100.0%

RBI uses a confidence level of 99.95 per cent for calculating economic capital. This confidence level is derived from the probability of default implied by the target rating. The objective of calculating economic capital is to determine the amount of capital that would be required for servicing all of the claims of customers and creditors even in the case of such an extremely rare loss event.

Credit risk

Reconciliation of figures from IFRS consolidated financial statements to total credit exposure (according to Basel II)

The following table translates items of the statement of financial position (banking and trading book positions) into the maximum credit exposure, which is used in portfolio management. It includes exposures on and off the statement of financial position before the application of credit-conversion factors and thus represents the maximum credit exposure. It is not reduced by the effects of credit risk mitigation, for example guarantees and physical collateral, effects that are, however, considered in the total assessment of credit risks. The total credit exposure is used – if not explicitly stated otherwise – for showing exposures in all subsequent charts in the risk report. The reasons for the deviation between the figures of internal portfolio management and external accounting are the different scopes of consolidation (regulatory versus IFRS, i.e. corporate legal basis), different classification and presentation of exposure volumes.

in € million 31/3/2014 31/12/2013
Cash reserve 2,688 4,166
Loans and advances to banks 19,806 22,243
Loans and advances to customers 79,692 80,635
Trading assets 7,855 7,581
Derivatives 982 982
Financial investments 12,655 12,862
Other assets 208 243
Contingent liabilities 10,900 10,990
Commitments 9,165 10,279
Revocable credit lines 16,115 16,727
Description differences 465 (3,384)
Total 160,532 163,323

Items on the statement of financial position contain only credit risk parts.

A more detailed credit portfolio analysis is based on individual customer ratings. Ratings are performed separately for different asset classes using internal risk classification models (rating and scoring models), which are validated by a central organization unit. Default probabilities assigned to individual rating grades are estimated for each asset class separately. As a consequence the default probability of the same ordinal rating grade (e.g. corporates 4, financial institutions A3, and sovereigns A3) is different between these asset classes.

Rating models in the main non-retail asset classes – corporates, financial institutions, and sovereigns – are uniform in all Group units and rank creditworthiness in 27 grades for corporate customers and 10 grades for financial institutions and sovereigns. For retail asset classes, country specific scorecards are developed based on uniform Group standards. Customer rating, as well as validation is supported by specific software tools (e.g., for business valuation, rating and default database).

Credit portfolio – Corporates

The following table shows the total credit exposure by internal rating for corporate customers (large corporates and mid-market). For a better readability, the 25 grades of the new rating scale are summarized to the 9 main rating grades. When making an overall assessment of credit risk, collateral and recovery rates in the event of default must also be taken into account.

in € million 31/3/2014 Share 31/12/2013 Share
1 Minimal risk 7,183 9.3% 6,534 8.3%
2 Excellent credit standing 9,011 11.7% 8,950 11.4%
3 Very good credit standing 8,117 10.5% 8,575 10.9%
4 Good credit standing 10,295 13.3% 10,624 13.5%
5 Sound credit standing 13,696 17.8% 13,338 17.0%
6 Acceptable credit standing 11,729 15.2% 12,623 16.1%
7 Marginal credit standing 7,470 9.7% 7,304 9.3%
8 Weak credit standing / sub-standard 2,093 2.7% 2,605 3.3%
9 Very weak credit standing / doubtful 1,887 2.4% 1,973 2.5%
10 Default 5,187 6.7% 5,268 6.7%
NR Not rated 450 0.6% 724 0.9%
Total 77,116 100.0% 78,518 100.0%

Compared to year-end 2013, total credit exposure for corporate customers decreased € 1,402 million to € 77,116 million. At the end of the first quarter, the largest segment in terms of corporate customers was Group Corporates with € 31,456 million, followed by Central Europe with € 17,534 million, Southeastern Europe with € 9,867 million and Russia with € 9,188 million. The rest is divided between Group Markets with € 4,810 million, CEE Other with € 3,164 million and Corporate Center with € 1,097 million.

The share of loans with good to minimum risk credit profiles slightly increased to 44.8 per cent (2013: 44.1 per cent). The share of loans with marginal credit standing to even weaker credit profiles decreased from 15.1 per cent to 14.8 per cent which reflects the loan portfolio's active management. Based thereon, the portfolio's growth is strongly focused on economically thriving markets and at the same time the high lending standards demand that new loans were granted primarily to customers with good credit ratings. The share of default loans under Basel III (rating 10) amounted to 6.7 per cent or € 5,187 million of total credit exposure to corporate customers. The highest increase was shown in the segment Group Corporates.

The following table provides a breakdown by country of risk of the maximum credit exposure for corporate customers and project finance structured by regions:

in € million 31/3/2014 Share 31/12/2013 Share
Central Europe 21,274 24.8% 21,394 24.5%
Austria 17,177 20.0% 16,758 19.2%
Southeastern Europe 12,463 14.5% 10,285 11.8%
Western Europe 10,548 12.3% 9,741 11.2%
Russia 10,235 11.9% 11,520 13.2%
Asia 6,069 7.1% 5,956 6.8%
CEE Other 3,299 3.8% 3,896 4.5%
Other 4,712 5.5% 7,717 8.8%
Total 85,776 100.0% 87,266 100.0%
in € million 31/3/2014 Share 31/12/2013 Share
Wholesale and retail trade 20,570 24.0% 20,689 23.7%
Manufacturing 18,067 21.1% 18,362 21.0%
Real estate 9,632 11.2% 9,865 11.3%
Financial intermediation 8,722 10.2% 8,006 9.2%
Construction 6,440 7.5% 6,346 7.3%
Transport, storage and communication 3,689 4.3% 3,736 4.3%
Electricity, gas, steam and hot water supply 3,939 4.6% 4,124 4.7%
Freelance/technical services 5,081 5.9% 5,217 6.0%
Other industries 9,635 11.2% 10,921 12.5%
Total 85,776 100.0% 87,266 100.0%

The table below provides a breakdown of the maximum credit exposure for corporates and project finance selected by industries:

The rating model for project finance has five different grades and takes into account both the individual probability of default and the available collateral. The exposure from project finance is shown in the table below:

in € million 31/3/2014 Share 31/12/2013 Share
6.1 Excellent project risk profile – very low risk 3,316 38.3% 3,388 38.7%
6.2 Good project risk profile – low risk 3,097 35.8% 2,971 34.0%
6.3 Acceptable project risk profile – average risk 1,075 12.4% 1,225 14.0%
6.4 Poor project risk profile – high risk 614 7.1% 616 7.0%
6.5 Default 545 6.3% 539 6.2%
NR Not rated 14 0.2% 10 0.1%
Total 8,660 100.0% 8,749 100.0%

The credit exposure in project finance amounted to € 8,660 million at the end of the first quarter of 2014, with the two best rating grades – Excellent project risk profile, with a very low risk and Good project risk profile, with a low risk – accounting for the highest share, at 74.1 per cent. This reflects mainly the high level of collateralization in such specialized lending transactions. Compared to year-end 2013, the share of unrated loans increased to 0.2 per cent or € 14 million.

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. The table below provides a breakdown of RBI's retail credit exposure:

in € million 31/3/2014 Share 31/12/2013 Share
Retail customers – private individuals 25,803 88.6% 26,194 89.1%
Retail customers – small and medium-sized entities 3,326 11.4% 3,208 10.9%
Total 29,129 100.0% 29,402 100.0%
hereof non-performing loans 2,900 9.9% 2,923 9.9%
hereof individual loan loss provision 1,975 6.7% 1,928 6.6%
hereof portfolio-based loan loss provision 195 0.7% 186 0.6%
31/3/2014 Central Southeastern Russia CEE Group
in € million Europe Europe Other Markets
Retail customers – private individuals 13,628 6,712 4,337 1,096 17
Retail customers – small and medium
sized entities
2,049 872 181 235 0
Total 15,677 7,584 4,518 1,332 17
hereof non-performing loans 1,567 605 154 568 1
hereof individual loan loss provision 1,010 364 119 440 0
hereof portfolio-based loan loss provision 90 44 40 19 0

The total credit exposure of retail customers breaks down by segments as follows (excluding Corporate Center):

31/12/2013 Central Southeastern Russia CEE Group
in € million Europe Europe Other Markets
Retail customers – private individuals 13,461 6,672 4,633 1,414 14
Retail customers – small and medium
sized entities
2,085 740 93 290 0
Total 15,546 7,412 4,727 1,704 14
hereof non-performing loans 1,572 599 150 597 1
hereof individual loan loss provision 989 358 119 419 0
hereof portfolio-based loan loss provision 91 42 29 20 0

Compared to year-end 2013, the total credit exposure to retail customers decreased € 273 million to € 29,129 million in the first quarter of 2014. The highest volume amounting to € 15,677 million was booked in the segment Central Europe. Compared to year-end 2013, this represents an increase of € 132 million mainly resulting from currency effects in Hungary. Southeastern Europe ranks second with a credit exposure of € 7,584 million. Compared to year-end 2013, this represents an increase of € 172 million. The segment Russia and CEE Other reported a decline of € 209 million and € 372 million mainly caused by currency devaluation of Russian rouble and Ukrainian hryvnia.

In the table below, the retail exposure selected by products is shown:

in € million 31/3/2014 Share 31/12/2013 Share
Mortgage loans 14,022 48.1% 14,055 47.8%
Personal loans 6,430 22.1% 6,660 22.7%
Credit cards 2,356 8.1% 2,351 8.0%
Car loans 2,481 8.5% 2,617 8.9%
Overdraft 2,099 7.2% 2,103 7.2%
SME financing 1,741 6.0% 1,616 5.5%
Total 29,129 100.0% 29,402 100.0%

The share of foreign currency loans in the retail portfolio provides an indication of potential change in default rates if the exchange rate of the domestic currency changes. The internal risk assessment thus takes into account not only the share of foreign currency loans, but also the usually stricter lending criteria of loan distribution and – in several countries – the customer's ability to match payments with foreign currency income.

in € million 31/3/2014 Share 31/12/2013 Share
Swiss franc 4,143 47.0% 4,560 50.4%
Euro 3,772 42.8% 3,557 39.3%
US-Dollar 885 10.0% 915 10.1%
Other foreign currencies 11 0.1% 11 0.1%
Loans in foreign currencies 8,811 100.0% 9,043 100.0%
Share of total loans 30.2% 30.8%

Compared to year-end 2013, foreign currency loans in Swiss francs declined, while Euro loans and foreign currency loans in US-Dollars increased.

Credit portfolio – Financial institutions

The financial institutions asset class mainly contains banks and securities firms. The internal rating model for financial institutions is based on a peer-group approach that takes both qualitative and quantitative information into account. The final rating for financial institutions is capped by the country rating of the respective home country.

The following table shows the maximum credit exposure by internal rating for financial institutions (excluding central banks). Due to the limited number of customers (or observable defaults), the default probabilities of individual rating categories in this asset class are estimated based on a combination of internal and external data.

in € million 31/3/2014 Share 31/12/2013 Share
A1 Excellent credit standing 224 0.8% 245 0.9%
A2 Very good credit standing 1,162 4.3% 974 3.6%
A3 Good credit standing 14,529 53.3% 13,368 48.8%
B1 Sound credit standing 6,793 24.9% 8,040 29.4%
B2 Average credit standing 1,699 6.2% 1,769 6.5%
B3 Mediocre credit standing 1,358 5.0% 1,733 6.3%
B4 Weak credit standing 569 2.1% 518 1.9%
B5 Very weak credit standing 392 1.4% 304 1.1%
C Doubtful/high default risk 119 0.4% 187 0.7%
D Default 205 0.8% 213 0.8%
NR Not rated 229 0.8% 18 0.1%
Total 27,278 100.0% 27,370 100.0%

Total credit exposure amounted to € 27,278 million in the first quarter of 2014, which represents a decline of € 92 million compared to the year-end 2013. At € 14,529 million, or 53.3 per cent, the bulk of this customer group was in the A3 rating class, which increased € 1,161 million compared to year-end 2013. This increase resulted from growth of loans to banks and money market business.

At € 20,823 million or 76.3 per cent, the segment Group Markets had the largest share of the loan portfolio with financial institutions, followed by the segment Group Corporates with € 2,660 million, or 9.7 per cent.

in € million 31/3/2014 Share 31/12/2013 Share
Money market 8,586 31.5% 7,521 27.5%
Derivatives 7,306 26.8% 7,270 26.6%
Loans 4,513 16.5% 2,960 10.8%
Bonds 3,165 11.6% 4,683 17.1%
Repo 2,786 10.2% 4,002 14.6%
Other 923 3.4% 933 3.4%
Total 27,278 100.0% 27,370 100.0%

The table below shows the total credit exposure to financial institutions (excluding central banks) selected by products:

Credit portfolio – Sovereigns

Another asset class is formed by central governments, central banks and regional municipalities, as well as other public sector entities. The table below provides a breakdown of the total credit exposure to sovereigns (including central banks) by internal rating:

in € million 31/3/2014 Share 31/12/2013 Share
A1 Excellent credit standing 2,005 10.9% 1,660 8.6%
A2 Very good credit standing 1,185 6.5% 1,350 7.0%
A3 Good credit standing 3,213 17.5% 3,144 16.3%
B1 Sound credit standing 2,547 13.9% 2,844 14.8%
B2 Average credit standing 867 4.7% 1,076 5.6%
B3 Mediocre credit standing 3,433 18.7% 4,061 21.1%
B4 Weak credit standing 3,881 21.2% 3,683 19.1%
B5 Very weak credit standing 775 4.2% 1,403 7.3%
C Doubtful/high default risk 427 2.3% 5 0.0%
D Default 1 0.0% 37 0.2%
NR Not rated 15 0.1% 21 0.1%
Total 18,349 100.0% 19,284 100.0%

Compared to year-end 2013, the credit exposure to sovereigns sank € 935 million to € 18,349 million in the first quarter of 2014, which represents 11.4 per cent of the bank's total credit exposure.

The rating class excellent credit standing (A1 rating) reported an increase of € 345 million. This resulted from a rise in the portfolio of German government bonds (plus € 276 million) and an increase of the minimum reserve at the Austrian National Bank (plus € 40 million).

The intermediate rating classes good credit standing (A3 rating) to mediocre credit standing (B3 rating) accounted for the highest share with 54.8 per cent of the total credit exposure. The high level of exposure in the intermediate rating classes was mainly due to deposits of Group units in Central and Southeastern Europe at their local central banks. These are mandatory for meeting the respective minimum reserve requirements or used to manage excess liquidity on a short-term basis, and are therefore inextricably linked to the business activities in these countries. The exposure in rating classes B4 and B5 amounted to € 4,656 million, or 25.4 per cent, of total loans outstanding. Loans in the rating class C increased due to a rating deterioration in Ukraine from B5 to C.

The breakdown below shows the total credit exposure to sovereigns (including central banks) selected by products:

in € million 31/3/2014 Share 31/12/2013 Share
Bonds 12,464 67.9% 12,471 64.7%
Loans 4,691 25.6% 5,555 28.8%
Derivatives 749 4.1% 726 3.8%
Other 446 2.4% 532 2.8%
Total 18,349 100.0% 19,284 100.0%

The table below shows the credit exposure to the public sector in non-investment grade (rating B3 and below):

in € million 31/3/2014 Share 31/12/20131 Share
Hungary 2,231 26.1% 2,068 22.5%
Romania 1,668 19.5% 2,168 23.5%
Croatia 858 10.1% 941 10.2%
Albania 822 9.6% 844 9.2%
Serbia 573 6.7% 557 6.0%
Other 2,381 27.9% 2,633 28.6%
Total 8,532 100.0% 9,210 100.0%

1 Adaption of previous year figures due to different mapping.

Compared to year-end 2013, the credit exposure to non-investment grade sovereigns decreased € 678 million to € 8,532 million. It resulted mainly from deposits of Group units with the local central banks in Central and Southeastern Europe. They are used for meeting the respective minimum reserve requirements and for managing the short-term investment of excess liquidity, and are therefore inextricably linked to the business activities in these countries.

Non-performing loans and provisioning

The table below shows the share of non-performing loans (NPL) in the defined asset classes loans and advances to customers and loans and advances to banks (excluding items off the statement of financial position) in the statement of financial position and the corresponding share of provisioning:

NPL NPL ratio NPL coverage ratio
in € million 31/3/2014 31/12/2013 31/3/2014 31/12/2013 31/3/2014 31/12/2013
Corporate customers 5,529 5,707 10.7% 10.9% 60.2% 59.0%
Retail customers 2,900 2,922 11.1% 11.0% 74.8% 72.3%
Sovereigns 1 29 0.0% 1.8% 41.5% 17.6%
Total nonbanks 8,429 8,657 10.6% 10.7% 65.2% 63.1%
Banks 143 153 0.7% 0.7% 73.6% 72.6%
Total 8,573 8,811 8.6% 8.6% 65.4% 63.5%
NPL NPL ratio NPL coverage ratio
in € million 31/3/2014 31/12/2013 31/3/2014 31/12/2013 31/3/2014 31/12/2013
Central Europe 3,455 3,509 11.2% 11.4% 64.8% 64.3%
Southeastern
Europe
1,929 1,944 11.6% 12.1% 59.5% 58.4%
Russia 510 482 4.0% 3.9% 73.7% 77.7%
CEE Other 992 1,108 23.7% 23.3% 78.2% 72.2%
Group Corporates 1,219 1,373 5.6% 6.5% 55.1% 47.2%
Group Markets 423 351 2.6% 2.1% 68.8% 84.7%
Corporate Center 44 44 0.7% 0.7% 254.4% 215.4%
Total 8,573 8,811 8.6% 8.6% 65.4% 63.5%

The table below shows the share of non-performing loans (NPL) in the defined asset classes loans and advances to customers and loans and advances to banks (excluding items off the statement of financial position) as reported in the statement of financial position and the corresponding share of provisioning, selected by segments:

The table below shows the development of non-performing loans in the defined asset classes loans and advances to customers and loans and advances to banks (excluding items off the statement of financial position) as reported in the statement of financial position:

in € million As at
1/1/2014
Change in
consolidated group
Exchange
differences
Additions Disposals As at
31/3/2014
Corporate customers 5,707 0 (110) 453 (520) 5,529
Retail customers 2,922 0 (57) 398 (363) 2,900
Sovereigns 29 0 (1) 0 (28) 1
Total nonbanks 8,657 0 (168) 850 (910) 8,429
Banks 153 0 0 0 (11) 143
Total 8,811 0 (168) 851 (921) 8,573

In Corporate Customers, total non-performing loans decreased € 177 million to € 5,529 million at the end of the first quarter of 2014. The ratio of non-performing loans to total credit exposure sank 0.2 percentage points to 10.7 per cent, at the same time the NPL coverage ratio increased 1.2 percentage points to 60.2 per cent. In the retail porfolio, non-performing loans declined 0.8 per cent, or € 22 million, to € 2,900 million. The ratio of non-performing loans to total credit exposure increased 0.1 percentage points to 11.1 per cent, the NPL coverage ratio rose 2.5 percentage points to 74.8 per cent. Non-performing loans for financial institutions amounted to € 143 million at the end of the first quarter of 2014, thus representing a decrease of € 10 million compared to year-end 2013 and the NPL coverage ratio rose 1.0 percentage points to 73.6 per cent.

In Group Corporates, non-performing loans sank significantly by 11.3 per cent, or € 155 million, to € 1,219 million, which mainly resulted from the regrouping of a non-performing loan exposure of € 63 million. Here, the NPL ratio sank 0.9 percentage points to 5.6 per cent, while the NPL coverage ratio increased 7.9 percentage points to 55.1 per cent. In the segment CEE Other, nonperforming loans sank 10.5 per cent, or € 116 million, to € 992 million. The NPL ratio increased 0.4 percentage points to 23.7 per cent and also the NPL coverage ratio went up 6.0 percentage points to 78.2 per cent. In Central Europe, nonperforming loans decreased 1.5 per cent, or € 54 million, to € 3,455 million. The ratio of non-performing loans to total credit exposure sank 0.2 percentage points to 11.2 per cent, while the NPL coverage ratio went up 0.5 percentage points to 64.8 per cent. In the segment Group Markets, non-performing loans increased 20.6 per cent, or € 72 million, to € 423 million (regrouping of a non-performing loan exposure of € 63 million). At the same time, the ratio of non-performing loans to credit exposure rose 0.5 percentage points to 2.6 per cent and the NPL coverage sank 15.9 percentage points to 68.8 per cent.

The following table shows the development of impairment losses on loans and provisions for liabilities off the statement of financial position:

in € million As at
1/1/2014
Change in
consolidated group
Allocation1 Release Usage2 Transfers, exchange
differences
As at
31/3/2014
Individual loan
loss provision 5,195 0 613 (344) (145) (123) 5,196
Portfolio-based
loan loss provisions 529 1 149 (136) 0 (18) 526
Total 5,725 1 762 (480) (145) (141) 5,722

1 Allocation including direct write-downs and income on written down claims. 2 Usage including direct write-downs and income on written down claims.

Concentration risk

RBI's credit portfolio 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 limits and regular reporting. As a consequence, portfolio granularity is high. The regional breakdown of the loans reflects the broad diversification of credit business in the European markets. The following table shows the regional distribution of the credit exposure of all asset classes by the borrower's home country and grouped by region:

in € million 31/3/2014 Share 31/12/2013 Share
Austria 29,150 18.2% 27,976 18.1%
Central Europe 46,728 29.1% 46,350 28.1%
Poland 14,449 9.0% 14,181 8.6%
Slovakia 12,021 7.5% 11,706 6.7%
Czech Republic 10,343 6.4% 10,700 6.5%
Hungary 8,162 5.1% 8,034 5.1%
Other 1,754 1.1% 1,728 1.2%
European Union 19,743 12.3% 20,890 13.5%
Germany 6,233 3.9% 5,546 3.6%
France 2,987 1.9% 5,106 3.1%
Great Britain 5,026 3.1% 4,294 4.1%
Netherlands 1,673 1.0% 1,600 0.8%
Other 3,824 2.4% 4,344 1.9%
Southeastern Europe 24,195 15.1% 24,562 14.5%
Romania 8,122 5.1% 8,597 4.7%
Croatia 5,314 3.3% 5,351 3.3%
Bulgaria 3,861 2.4% 3,914 2.5%
Serbia 2,317 1.4% 2,217 1.2%
Other 4,581 2.9% 4,482 2.7%
in € million 31/3/2014 Share 31/12/2013 Share
Russia 18,420 11.5% 20,440 11.7%
Asia 7,532 4.7% 9,033 5.7%
China 4,038 2.5% 4,208 2.4%
Singapore 1,329 0.8% 1,516 1.0%
Other 2,165 1.3% 3,308 2.2%
CEE Other 6,405 4.0% 7,509 4.4%
Ukraine 4,793 3.0% 5,545 3.3%
Other 1,613 1.0% 1,964 1.0%
North America 4,679 2.9% 4,134 2.1%
Rest of World 3,679 2.3% 2,429 2.0%
Total 160,532 100.0% 163,323 100.0%

RBI does not own any banking subsidiaries that are incorporated in the so-called European periphery countries. Nonetheless, some of the bank's loans and advances are to customers domiciled in theses countries and result from credit financing and capital markets activities. All in all, the Group has almost no exposure to government bonds in these countries (except for the Republic of Italy).

Market risk

Market risk management is based on figures from an internal model that calculates value-at-risk (VaR) for changes in the following risk factors: foreign exchange, interest rate changes, credit spreads and equity indices. The Austrian financial market authority and the Austrian national bank have approved this model, and it is used to calculate own fund requirements for market risk.

The following table lists risk measures for overall market risk in the trading and banking book for each risk type. The VaR is dominated by risk arising from equity positions held in foreign currencies, structural interest risks and spread risks on the bond books (frequently held as a liquidity reserve).

Total VaR 99% 1d VaR as at Average VaR Minimum VaR Maximum VaR VaR as at
in € million 31/3/2014 31/12/2013
Currency risk 72 70 35 122 41
Interest rate risk 26 15 8 31 9
Credit spread risk 14 17 12 23 22
Share price risk 1 1 1 2 1
Vega risk 1 1 0 1 0
Total 94 83 48 131 57

Excange rate risk on total bank level also includes equity positions of subsidiaries denominated in foreign currency. The structural exchange rate risk resulting from equity positions is managed independently from the mainly short-term trading positions.

Liquidity risk

The following table shows the liquidity gap and the ratio of expected cash inflows plus counterbalancing capacity to cash outflows (liquidity ratio) for selected maturities on a cumulative basis, taking into account all items on the statement of financial position and transactions off the statement of financial position. Based on expert opinions, statistical analyses and country specifics, this calculation also incorporates estimates on the prolongation of defined assets, the so-called sediment of customer deposits, and the liquidity counterbalancing capacity (in particular, assets that are eligible for refinancing at central banks and that can be used as collateral in repo transactions).

in € million 31/3/2014 31/12/2013
Maturity 1 week 1 month 1 year 1 week 1 month 1 year
Liquidity gap 12,192 12,758 11,588 15,223 12,372 13,124
Liquidity ratio 132% 124% 110% 155% 126% 113%

Internal limts are used in each Group unit in order to limit liquidity risk. They require a positive short-term liquidity gap based on the internal liquidity model. The Group holds sizeable amounts of liquid securities and favors assets eligible in tender transactions in the lending business in order to ensure liquidity in various currencies. In the case of a liquidity shortage in the Group, contingency plans would come into force. Such prioritized action lists for handling liquidity needs exist for all major Group units.

Additional notes

(31) Contingent liabilities and commitments

in € million 31/3/2014 31/12/2013
Contingent liabilities 13,783 10,990
Acceptances and endorsements 100 38
Credit guarantees 9,397 6,199
Other guarantees 2,525 2,504
Letters of credit (documentary business) 1,699 2,189
Other contingent liabilities 63 60
Commitments 9,165 10,279
Irrevocable credit lines and stand-by facilities 9,165 10,279
Up to 1 year 3,003 2,798
More than 1 year 6,162 7,481

(32) Derivatives

31/3/2014 Nominal amount by maturity Fair values
in € million Up to 1 year > 1 year to
5 years
More than 5 years Total Positive Negative
Interest rate contracts 34,058 55,057 40,850 129,965 3,539 (2,836)
Foreign exchange rate
and gold contracts
57,020 10,761 2,494 70,275 818 (717)
Equity/index contracts 1,345 1,700 372 3,417 84 (917)
Commodities 289 180 11 480 15 (116)
Credit derivatives 69 1,235 181 1,485 12 (10)
Precious metals contracts 48 24 13 84 0 (26)
Total 92,828 68,957 43,921 205,706 4,467 (4,622)
31/12/2013 Nominal amount by maturity Fair values
in € million Up to 1 year > 1 year to 5 years More than 5 years Total Positive Negative
Interest rate contracts 30,570 53,289 40,047 123,906 3,378 (2,774)
Foreign exchange rate
and gold contracts
45,598 9,059 2,410 57,067 748 (655)
Equity/index contracts 1,507 1,507 407 3,422 59 (841)
Commodities 202 171 11 384 10 (116)
Credit derivatives 116 1,431 0 1,547 10 (9)
Precious metals contracts 48 13 12 73 0 (17)
Total 78,040 65,470 42,888 186,398 4,206 (4,412)

(33) Fair Value of financial instruments not reported at fair value

31/3/2014
in € million Level I Level II Level III Fair value Carrying amount Difference
Assets
Cash reserve 0 4,814 0 4,814 4,814 0
Loans and advances to banks 0 14,091 5,774 19,865 19,695 170
Loans and advances to customers 0 20,511 52,630 73,140 74,192 (1,052)
Financial investments 3,689 797 408 4,893 4,809 84
Liabilities
Deposits from banks 0 21,106 5,175 26,281 26,348 (67)
Deposits from customers 0 29,026 34,692 63,718 63,599 119
Debt securities issued 264 8,049 129 8,442 8,417 25
Subordinated capital 0 3,672 0 3,672 3,589 83
31/12/2013
in € million Level I Level II Level III Fair value Carrying amount Difference
Assets
Cash reserve 0 6,674 0 6,674 6,674 0
Loans and advances to banks 0 16,658 5,510 22,168 22,125 43
Loans and advances to customers 0 20,268 53,757 74,025 75,147 (1,123)
Financial investments 3,764 613 406 4,783 4,672 111
Liabilities
Deposits from banks 0 26,389 3,817 30,206 30,105 101
Deposits from customers 0 34,890 31,647 66,537 66,437 101
Debt securities issued 278 9,043 159 9,480 9,411 69
Subordinated capital 0 3,673 33 3,706 3,637 69
31/3/2014 31/12/2013
in € million Level I Level II Level III Level I Level II Level III
Trading assets 3,982 4,121 171 4,070 3,755 165
Positive fair values of derivatives1 83 3,728 93 59 3,481 88
Shares and other variable-yield securities 365 1 0 403 4 0
Bonds, notes and other fixed-interest securities 3,534 393 78 3,608 270 77
Call/time deposits from trading purposes 0 0 0 0 0 0
Financial assets at fair value through profit or loss 4,304 3,073 30 4,788 3,639 12
Shares and other variable-yield securities 24 99 5 43 103 5
Bonds, notes and other fixed-interest securities 4,280 2,974 25 4,746 3,537 7
Financial assets available-for-sale 1,043 27 41 346 25 49
Other interests2 4 27 40 4 25 37
Bonds, notes and other fixed-interest securities 1,039 0 0 341 0 12
Shares and other variable-yield securities 0 0 0 0 0 0
Derivatives (hedging) 0 540 24 0 550 23
Positive fair values of derivatives from hedge
accounting
0 540 24 0 550 23

(34) Fair value of financial instruments reported at fair value

31/3/2014 31/12/2013
in € million Level I Level II Level III Level I Level II Level III
Trading liabilities 690 5,002 23 631 4,801 24
Negative fair values of derivatives financial
instruments1
146 4,363 16 129 4,133 17
Call/time deposits from trading purposes 0 0 0 0 0 0
Short-selling of trading assets 543 10 0 502 50 0
Certificates issued 0 629 7 0 618 7
Liabilities at fair value through profit and loss 0 2,559 0 0 2,612 0
Debt securities issued 0 2,093 0 0 2,122 0
Subordinated capital 0 466 0 0 491 0
Derivatives (hedging) 0 97 0 0 133 0
Negative fair values of derivatives from hedge
accounting
0 97 0 0 133 0

1 Including other derivatives.

2 Includes only securities traded on the stock exchange.

Level I Quoted market prices.

Level II Valuation techniques based on market data.

Level III Valuation techniques not based on market data.

Movements between Level I and Level II

Compared to year-end 2013, the share of financial assets according to Level II decreased slightly. The decrease resulted primarily from the reduction of the fair values of bonds, notes and other fixed-interest securities. Regarding bonds, notes and other fixedinterest securities, there was a slight shift from Level I to Level II (€ 229 million), which is due to change from the fair value measurement method to a theoretical evaluation for individual securities.

Movements in Level III of financial instruments at fair value

The following tables show the changes in the fair value of financial instruments whose valuation models are based on unobservable parameters. In the first quarter 2014, there was no material reclassification in Level III.

in € million As at
1/1/2014
Changes in
consolidated group
Exchange
differences
Purchases Sales,
repayment
Trading assets 165 0 3 2 (3)
Financial assets at fair value through
profit or loss
12 0 0 25 (8)
Financial assets available-for-sale 12 0 0 0 (11)
Derivatives (hedging) 23 0 0 0 0
in € million Gains/loss in
P/L
Gains/loss in other
comprehensive
income
Transfer to
level III
Transfer from
level III
As at
31/3/2014
Trading assets (3) 0 0 0 171
Financial assets at fair value through
profit or loss
0 0 0 0 30
Financial assets available-for-sale 0 0 0 0 0
Derivatives (hedging) 0 0 1 (1) 24
in € million As at
1/1/2014
Changes in
consolidated group
Exchange
differences
Purchases Sales,
repayment
Trading liabilities 24 0 0 0 0
in € million Gains/loss in
P/L
Gains/loss in other
comprehensive
income
Transfer to
level III
Transfer from
level III
As at
31/3/2014
Trading liabilities (1) 0 0 0 23
Financial assets Type Fair
value in
€ million
Valuation
technique
Significant
unobservable
inputs
Range of
unobservable
inputs
Shares and other variable-yield
securities
Closed end real
estate fund
0 Net asset
value
Haircuts 20 - 50%
Shares and other variable-yield
securities
Shares 5 Approximati
on method
Bonds, notes and other fixed-interest
securities
Fixed coupon
bonds
103 Discounted
cash flow
Credit spread 10 - 20%
Probability of
default
Loss severity
Bonds, notes and other fixed-interest
securities
Asset backed
securities
0 Broker
estimate
Expected
prepayment rate
Positive fair value of banking book
derivatives without hedge
accounting
Forward foreign
exchange
contracts
116 Discounted
cash flow
Interest rate 10 - 30%
Total 225

Qualitative information for the valuation of financial instruments in Level III

Financial liabilities Type Fair
value in
€ million
Valuation
technique
Significant
unobservable
inputs
Range of
unobservable
inputs
Negative fair value of banking Closing Period
Currency risk
2 - 16%
0 - 5%
book derivatives without hedge Option LT volatility 0 - 3%
accounting OTC options 16 model Index category 0 - 5%
Closing period 0 - 3%
Bid-Ask Spread 0 - 3%
Issued certificates for trading Option LT Volatility 0 - 3%
purposes Certificates 7 model Index category 0 - 2.5%
Total 23

(35) Offsetting of financial assets and liabilities

31/3/2014 Gross amount Net amount Related amounts not set off in the
statement of financial position
Financial
Cash collateral
Net
amount
of recognised
assets set off
in the
statement of
financial
of recognised
liabilities set
off in the
statement of
financial
of recognised
assets set off
in the
statement of
financial
in € million position position position instruments received
Derivatives 3,648 7 3,640 3,216 15 410
Reverse repurchase,
securities lending & similar
agreements
3,763 313 3,451 3,750 0 (299)
Other financial instruments 0 0 0 0 0 0
Total 7,411 320 7,091 6,966 15 110
31/3/2014 Gross amount Net amount Related amounts not set off in the
statement of financial position
Net
amount
of recognised of recognised of recognised
liabilities set assets set off liabilities set
off in the in the off in the
statement of statement of statement of
in € million financial
position
financial
position
financial
position
Financial
instruments
Cash collateral
pledged
Derivatives 3,415 7 3,408 3,738 63 (393)
Repurchase, securities
lending & similar agreements
1,261 0 1,261 1,247 0 14
Other financial instruments 0 0 0 0 0 0
Total 4,676 7 4,669 4,985 63 (379)
31/12/2013 Gross amount Net amount Related amounts not set off in the
statement of financial position
Net
amount
in € million of recognised
assets set off
in the
statement of
financial
position
of recognised
liabilities set
off in the
statement of
financial
position
of recognised
assets set off
in the
statement of
financial
position
Financial
Cash collateral
instruments
received
Derivatives 3,496 40 3,456 3,063 16 376
Reverse repurchase,
securities lending & similar
agreements
8,133 0 8,133 8,124 2 7
Other financial instruments 0 0 0 0 0 0
Total 11,629 40 11,589 11,187 18 384
31/12/2013 Gross amount Net amount Related amounts not set off in the
statement of financial position
Net
amount
in € million of recognised
liabilities set
off in the
statement of
financial
position
of recognised
assets set off
in the
statement of
financial
position
of recognised
liabilities set
off in the
statement of
financial
position
Financial
instruments
Cash collateral
pledged
Derivatives 3,269 40 3,229 3,531 52 (354)
Repurchase, securities
lending & similar agreements
1,863 0 1,863 1,863 0 0
Other financial instruments 0 0 0 0 0 0
Total 5,131 40 5,091 5,394 52 (354)

(36) Related parties

Transactions with related parties that are natural persons are limited to banking business transactions that are carried out at fair market conditions. Moreover, members of the Management Board hold shares of Raiffeisen Bank International AG. Detailed information regarding this issue is published on the homepage of Raiffeisen Bank International. Further business transactions, especially large banking business transactions with related parties that are natural persons, were not concluded in the current financial year.

The following tables show transactions with related companies. Parent companies are Raiffeisen-Landesbanken-Holding GmbH, Vienna and Raiffeisen Zentralbank Österreich Aktiengesellschaft, Vienna:

31/3/2014
in € million
Parent
companies
Affiliated
companies
Companies
valued at equity
Other interests
Loans and advances to banks 6,433 156 321 117
Loans and advances to customers 0 1,295 70 77
Trading assets 0 37 1 2
Financial investments 0 407 2 72
Investments in associates 0 0 0 0
Other assets (incl. derivatives) 55 19 0 0
Deposits from banks 1,850 299 3,709 87
Deposits from customers 0 244 368 107
Provisions for liabilities and charges 1 0 0 0
Trading liabilities 0 99 0 0
Other liabilities including derivatives 2 12 16 1
Subordinated capital 53 0 0 0
Guarantees given 0 128 2 6
Guarantees received 903 394 209 39
31/12/2013
in € million
Parent
companies
Affiliated
companies
Companies
valued at equity
Other interests
Loans and advances to banks 6,032 89 218 120
Loans and advances to customers 0 1,525 41 295
Trading assets 0 47 1 2
Financial investments 0 405 2 66
Investments in associates 0 0 5 0
Other assets (incl. derivatives) 51 18 0 0
Deposits from banks 9,224 240 3,969 204
Deposits from customers 1 261 779 511
Provisions for liabilities and charges 0 0 0 0
Trading liabilities 0 78 0 0
Other liabilities including derivatives 0 23 0 0
Subordinated capital 52 0 0 0
Guarantees given 0 117 1 5
Guarantees received 925 390 201 40

(37) Regulatory total capital

RBI does not form an independent credit institution group as defined by the Austrian Banking Act (BWG) and therefore is not subject to the regulatory provisions on a consolidated basis as it is part of the RZB Group. The following figures are for information purposes only.

The total capital of RBI (according to Basel III) breaks down as follows:

in € million 31/3/2014
Paid-in capital 7,503
Earned capital 4,131
Non-controlling interests 374
Common equity tier 1 (before deductions) 12,007
Intangible fixed assets (338)
Goodwill (518)
Provision shortage for IRB positions (20)
Deduction securitizations (2)
Deduction deferred tax assets 0
Deduction insurance and other investments 0
Common equity tier 1 (after deductions) 11,129
Additional tier 1 353
Deduction securitizations (4)
Intangible fixed assets (318)
Provision shortage for IRB positions (39)
Deduction insurance and other investments 0
Non-controlling interests 8
Tier 1 11,129
Provision excess of internal rating approach positions 226
Hidden reserve 19
Long-term subordinated capital 3,269
Deduction securitizations (4)
Deduction insurance and other investments 0
Non-controlling interests 1
Tier 2 (after deductions) 3,510
Total capital 14,639
Total capital requirement 6,392
Common equity tier 1 ratio (transitional) 13.9%
Tier 1 ratio 13.9%
Total capital ratio 18.3%

The total capital requirement breaks down as follows:

in € million 31/3/2014
Risk-weighted assets (total) 79,900
Total capital requirement credit risk 5,229
Internal rating approach 2,996
Standardized approach 2,181
CVA risk 52
Total capital requirement for position risk in bonds, equities, commodities and open currency positions 388
Total capital requirement for operational risk 775
Total capital requirement 6,392

As at year-end 2013, the own funds of RBI according to Austrian Banking Act (BWG) 1993/Amendment 2006 – Basel II break down as follows:

in € million 31/12/2013
Paid-in capital 5,669
Earned capital 3,135
Non-controlling interests 428
Hybrid tier 1 capital 441
Intangible fixed assets (705)
Core capital (tier 1 capital) 8,968
Deductions from core capital (13)
Eligible core capital (after deductions) 8,955
Supplementary capital according to Section 23 (1) 5 BWG 0
Provision excess of internal rating approach positions 221
Hidden reserves 8
Long-term subordinated capital 3,157
Additional own funds (tier 2 capital) 3,387
Deduction items: participations, securitizations (13)
Eligible additional own funds (after deductions) 3,374
Deduction items: insurance companies 0
Tier 2 capital available to be redesignated as tier 3 capital 357
Total own funds 12,686
Total own funds requirement 6,392
Excess own funds 6,294
Excess cover ratio 98.5%
Core tier 1 ratio, total 10.7%
Tier 1 ratio, credit risk 13.7%
Tier 1 ratio, total 11.2%
Own funds ratio 15.9%

The total own funds requirement breaks down as follows:

in € million 31/12/2013
Risk-weighted assets according to section 22 BWG 65,334
of which 8 per cent minimum own funds for the credit risk according to Sections 22a to 22h BWG 5,227
Standardized approach 2,278
Internal rating approach 2,949
Settlement risk 0
Own funds requirement for position risk in bonds, equities and commodities 297
Own funds requirement for open currency positions 60
Own funds requirement for operational risk 808
Total own funds requirement 6,392

(38) Average number of staff

The average number of staff employed during the reporting period (full-time equivalents) breaks down as follows:

Full-time equivalents 1/1-31/3/2014 1/1-31/3/2013
Austria 2,646 2,637
Foreign 55,197 56,915
Total 57,843 59,552

Publication details/Disclaimer

Publication details

Publisher: Raiffeisen Bank International AG, Am Stadtpark 9, 1030 Vienna, Austria Editorial team: Group Investor Relations Editorial deadline: 16 May 2014 Produced in Vienna Internet: www.rbinternational.com

This report is also available in German.

Group Investor Relations inquiries: Group Communications inquiries: E-mail: [email protected] E-mail: [email protected] Internet: www.rbinternational.com Investor Relations Internet: www.rbinternational.com Public Relations Phone: +43-1-71 707-2089 Phone: +43-1-71 707-1298

Disclaimer

The forecasts, plans and forward-looking statements contained in this report are based on the state of knowledge and assessments of Raiffeisen Bank International AG at the time of its preparation. Like all statements addressing the future, they are subject to known and unknown risks and uncertainties that could cause actual results to differ materially. No guarantees can therefore be given that the forecasts and targeted values or the forward-looking statements will actually materialize.

This report is for information purposes only and contains neither a recommendation to buy or sell nor an offer of sale or subscription to shares nor does it constitute an invitation to make an offer to sell shares.

This report has been prepared and the data checked with the greatest possible care. Nonetheless, rounding, transmission, typesetting and printing errors cannot be ruled out. In the summing up of rounded amounts and percentages, rounding-off differences may occur. This report was prepared in German. The report in English is a translation of the original German report. The only authentic version is the German version. Raiffeisen Bank International AG is not liable for any losses or similar damages that may occur as a result of or in connection with the use of this report.

www.rbinternational.com

Talk to a Data Expert

Have a question? We'll get back to you promptly.