Annual Report • Mar 29, 2012
Annual Report
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Raiff eisen Bank International AG (RBI) regards Central and Eastern Europe (including Austria) as its home market.
It is in Central and Eastern Europe (CEE) that it operates as a universal bank through a closely knit network of subsidiary banks, leasing companies and numerous specialized fi nancial service providers in 17 markets.
In CEE, some 56,000 staff in around 2,900 business outlets serve around 13.8 million customers. In Austria, RBI is one of the top corporate and investment banks. It is also represented in the world's fi nancial centers and operates branches and representative offi ces in Asia too.
All in all, RBI employs about 59,000 staff and has total assets of approximately € 147 billion.
| Monetary values in € million | 2011 | Change | 2010 | RBI pro 2009 |
Raiff eisen forma International International 2008 |
Raiff eisen 2007 |
|---|---|---|---|---|---|---|
| Income statement | ||||||
| Net interest income | 3,667 | 2.5% | 3,578 | 3,282 | 3,232 | 2,419 |
| Net provisioning for impairment losses | (1,064) | (10.9)% | (1,194) | (2,232) | (780) | (357) |
| Net fee and commission income | 1,490 | (0.1)% | 1,491 | 1,421 | 1,496 | 1,250 |
| Net trading income | 363 | 10.7% | 328 | 419 | 168 | 128 |
| General administrative expenses | (3,120) | 4.7% | (2,980) | (2,715) | (2,633) | (2,184) |
| Profi t before tax | 1,373 | 6.7% | 1,287 | 790 | 1,429 | 1,238 |
| Profi t after tax | 974 | (17.2)% | 1,177 | 531 | 1,078 | 973 |
| Consolidated profi t | 968 | (11.0)% | 1,087 | 450 | 982 | 841 |
| Statement of fi nancial position | ||||||
| Loans and advances to banks | 25,748 | 19.6% | 21,532 | 38,582 | 9,038 | 11,053 |
| Loans and advances to customers | 81,576 | 7.8% | 75,657 | 72,566 | 57,902 | 48,880 |
| Deposits from banks | 37,992 | 12.9% | 33,659 | 49,099 | 26,213 | 19,927 |
| Deposits from customers | 66,747 | 15.8% | 57,633 | 55,407 | 44,206 | 40,457 |
| Equity | 10,936 | 5.1% | 10,404 | 9,326 | 6,518 | 6,622 |
| Total assets | 146,985 | 12.1% | 131,173 | 145,638 | 85,397 | 72,743 |
| Key ratios Return on equity before tax |
13.7% | 0.0 PP | 13.7% | 9.5% | 22.0% | 25.7% |
| Return on equity after tax | 9.7% | (2.8) PP | 12.5% | 6.4% | 16.6% | 20.2% |
| Consolidated return on equity | 10.8% | (2.1) PP | 13.0% | 7.1% | 17.4% | 20.1% |
| Cost/income ratio | 57.0% | 1.8 PP | 55.1% | 52.5% | 54.0% | 57.6% |
| Return on assets before tax | 0.98% | 0.07 PP | 0.90% | 0.53% | 1.77% | 1.98% |
| Net interest margin | 2.61% | 0.10 PP | 2.51% | 3.73% | 3.99% | 3.86% |
| NPL ratio | 8.6% | (0.3) PP | 9.0% | 8.8% | 3.1% | 2.1% |
| Net provisioning ratio (average risk-weighted assets, credit risk) |
1.38% | (0.3) PP | 1.66% | 2.89% | 1.32% | 0.84% |
| Bank-specifi c information1 | ||||||
| Risk-weighted assets (credit risk) | 77,150 | 2.0% | 75,601 | 70,555 | 60,388 | 49,802 |
| Total own funds | 12,858 | 2.0% | 12,608 | 12,019 | 6,992 | 6,684 |
| Total own funds requirement | 7,624 | 0.5% | 7,585 | 7,137 | 5,767 | 4,317 |
| Excess cover ratio | 68.6% | 2.4 PP | 66.2% | 68.4% | 21.2% | 54.8% |
| Core tier 1 ratio, total | 9.0% | 0.2 PP | 8.9% | 8.5% | 7.4% | 9.6% |
| Tier 1 ratio, credit risk | 12.2% | 0.0 PP | 12.2% | 11.8% | 9.7% | 11.4% |
| Tier 1 ratio, total | 9.9% | 0.2 PP | 9.7% | 9.4% | 8.1% | 10.5% |
| Own funds ratio | 13.5% | 0.2 PP | 13.3% | 13.5% | 9.7% | 12.4% |
| Stock data | ||||||
| Earnings per share in € | 3.95 | (13.5)% | 4.56 | 1.29 | 6.39 | 5.80 |
| Price in € | 20.07 | (51.0)% | 41.00 | – | 19.30 | 103.60 |
| High (closing prices) in € | 45.10 | 5.5% | 42.75 | – | 110.20 | 122.50 |
| Low (closing prices) in € | 14.16 | (51.2)% | 29.01 | – | 16.23 | 98.25 |
| Number of shares in million | 195.51 | 0.0% | 195.51 | 195.51 | 154.67 | 154.67 |
| Market capitalization in € million | 3,924 | (51.1)% | 8,016 | – | 2,985 | 16,024 |
| Dividend per share in € | 1.052 | – | 1.05 | – | 0.93 | 0.93 |
| Resources | ||||||
| Number of employees as of | ||||||
| reporting date | 59,261 | (0.9)% | 59,782 | 59,211 | 63,376 | 58,365 |
| Business outlets | 2,928 | (1.1)% | 2,961 | 3,029 | 3,231 | 3,015 |
1 Calculated according to the Austrian Banking Act (Bankwesengesetz, BWG). Raiff eisen Bank International (RBI) as part of the RZB Group is not subject to the Austrian Banking Act. 2 Proposal to the Annual General Meeting.
In this report, Raiff eisen Bank International (RBI) refers to the RBI Group, and RBI AG is used wherever statements refer solely to Raiff eisen Bank International AG. The same applies to Raiff eisen International and Raiff eisen International Bank-Holding AG as well as to RZB and RZB AG.
| Interview with the Chairman of the Management Board | 8 |
|---|---|
| Management Board of RBI | 14 |
| Report of the Supervisory Board | 16 |
| RBI at a glance | 18 |
| RBI's strategy | 21 |
| RBI in the capital markets | 28 |
| Corporate Governance Report | 33 |
| Corporate responsibility | 44 |
"Our result
confi rms our sustainable business model, which will continue to keep us very competitive!"
The developments in Europe, and particularly in the peripheral states of the eurozone, left their mark on us. We too were unable to escape the eff ects of the market environment following the sovereign debt crisis – which is what it really is, rather than a banking crisis. RBI has no sovereign exposure to Greece, Ireland, Portugal and Spain, and a low exposure to Italy. Nevertheless, we too had to struggle with the impact of a renewed general loss of confi dence in banks.
We made progress with all our customer groups and implemented what we had planned to do. For example in private banking, we launched the "Friedrich Wilhelm Raiff eisen" brand in CEE, a high-end platform which markets our services to currently over 30,000 customers in this segment. We will see the fruits of this investment in the years to come. Moreover, we were successful in intensifying sales of our investment banking products. In Austria, for instance, we were lead manager for nine of the 13 public corporate bonds issued by Austria's biggest corporations, making us the clear leader in this area.
Absolutely not. Profi t before tax of € 1.4 billion in such a diffi cult economic environment is an achievement we can rightly be proud of. This represents a growth of 7 per cent compared to 2010. One thing that made this possible is that the markets in Central and Eastern Europe where we operate continued to show comparatively high economic growth, which also resulted in a signifi cant improvement in our risk situation. Our result confi rms our sustainable business model, which will continue to keep us very competitive!
There are a number of reasons, all of which are connected with our strategic orientation. Besides our traditionally low exposure to the peripheral European countries, we have always valued our CDS portfolio at market price. In addition, it has always been our goal – and we have achieved this – to acquire banking subsidiaries on favorable terms. We have been and still are relatively conservative in our provisioning, which means that we are constantly cleaning up our balance sheet. In the fourth quarter of 2008, for example, when the fi rst signs of the crisis in CEE became noticeable,
we started provisioning on a massive scale. I also want to highlight the fact that over the course of 2011 our NPL ratio fell by 0.3 percentage points to 8.6 per cent. A particularly welcome fact is that our coverage ratio – in other words, the ratio of loan loss provisions to non-performing loans – has risen to over 68 per cent throughout the Group. As a result, we further improved our balance sheet structure even in what was not exactly an easy year.
Hungary is without a doubt the most diffi cult market for us at the moment and indeed for almost all banks active there. This is partly due to structural problems in the economy, but we are also subject to the government's arbitrari-
ness, as seen for example in the excessive bank levy or in the possibility of repaying foreign currency mortgage loans at fi xed exchange rates. This forced us to increase provisioning, leading to a signifi cant loss in Hungary. Despite all this, however, we must not lose sight of the fact that we made a very good profi t in Hungary for many years, which enabled us to off set less favorable trends in other markets. Now, it's the other way round. It thereby becomes apparent that our diversifi cation across countries, customers and products is paying off .
2011 was a very good year, particularly in Russia and Poland, but also in Austria. In Russia we are one of the leading foreign banks, with over two million customers. From this strong starting position and given the very good prospects for growth in the Russian market, we will be able to generate a signifi cant contribution to earnings there on a long-term basis. In 2011 some 29 per cent of our profi t before tax came from Russia, up from 17 per cent the previous year. In Central Europe, Poland as the biggest country with above-average growth prospects is clearly our most important market. In 2011 the country contributed nearly 9 per cent to RBI's profi t before tax, 2.5 percentage points up on 2010. We are also doing well in Austria. Although we do feel the impact of the renewed downswing in the economy, we still earned around 27 per cent more in 2011 than in 2010 with Austrian and international customers we service from Vienna.
Let me be quite clear about this, it is not in line with our strategy to withdraw from individual countries. All I said was that in times where regulatory pressure is increasingly restricting the banks, we must be allowed to ponder over such extreme measures. This does not mean that this is our goal. Our aim is and will continue to be to serve our customers as far as possible throughout the entire CEE region.
Regulators naturally strive to improve confi dence in the banking industry, and increased minimum capital ratios are certainly one way to do this. However, this is being done at an unfortunate time, and on top of that, in too much haste. This measure is counterproductive, and could completely choke off economic growth which is already sluggish. The regulations published by the European Banking Authority (EBA) at the end of October call for what I regard as an arbitrarily chosen core tier 1 capital ratio of 9 per cent by the end of June 2012. This is putting pressure on many banks in Europe. We – to be more exact, the RZB Group – are not in this position. We have put together a comprehensive bundle of measures, consisting of numerous individual projects. We are also in the fortunate position of making profi ts which are strengthening our equity. As a result, we can meet the new requirements from our own resources.
There's no contradiction there. We said that we regard a capital increase as a possible option for strengthening our capital ratio, but, of course, this depends on the development of the macroeconomic environment. It's not news that the trend has been anything but favorable for such a move. It is, therefore, both reasonable and logical to make use of other options in order to achieve the capital ratio.
By meeting the EBA ratio, we are also reaching the Basel III ratio of 7 per cent, which the Austrian National Bank and the Financial Market Authority have set as mandatory from the start of 2013. The additional core capital buff er of up to 3 per cent will not take eff ect until 2016. Besides, I don't regard the guideline that in new business only up to € 110 should be lent for every € 100 of deposits as a major restriction. As growth in lending is tied to economic growth, it is likely to be moderate in the next few years.
Compared to others, we're very well placed. We already raised much of our total planned funding for 2011 in the fi rst half year, when the state of the bond markets was
signifi cantly better than after the summer. Given the high level of interest in the market, our issues were actually signifi cantly oversubscribed, with comparatively attractive risk premiums. We are also trying to diversify our refi nancing sources as far as possible, mostly through instruments which are not as sensitive to fi nancial market turmoils. By this I mean, for example, issues in local markets, private placements or fi nancing through supranational organizations.
You have to make a distinction here. In the eurozone we are facing a real systemic and political crisis. In Central and
Eastern Europe, however, the situation is diff erent and the economic uptrend is largely continuing. This region is and will continue to be the growth driver for Europe. Even if economic growth in the CEE region slows from 3.7 per cent in 2011 to 2.6 per cent in 2012, this is still higher than in the eurozone. This isn't a bad outlook for us!
Regionally, the focus will continue to be on our home market, CEE and Austria. Our priority here will still be the Corporate Customers division, which is the backbone of our company. However, we also want to expand our retail business. In all this, our absolute priority is to achieve the EBA ratio by mid-2012. We totally agree with our Raiff eisen core-shareholders that we absolutely want to avoid state infl uence. Thanks to the support within the Raiff eisen Banking Group, which celebrated its 125th anniversary in 2011, and thanks to the profi ts which we are retaining, we are able to increase equity from our own resources. To make sure this continues, we have launched a cost effi ciency program to reduce both personnel and other administrative costs.
We're right on track. All internal and external processes have run as planned, regarding both timing and desired results. We have already prepared the organizational structure for the combined bank, which leaves us ideally equipped for the time after the so-called closing, i.e. the legal completion of the transaction.
No. Poland was the last important market where we were short of critical mass. The acquisition of Polbank puts us in a very good position in all the major CEE markets, so no further acquisitions are needed. I can, however, imagine in the medium term that we could buy smaller customer portfolios if one of our competitors withdraws from a market.
I'm very aware that 2010 and 2011 called for a lot of patience and endurance on the part of our owners. In
2010, this was the result of massive doubts concerning our merger, which we have fortunately been able to dispel with facts and fi gures. Despite our good performance, 2011 suff ered from the negative developments in the stock markets. I'm confi dent that this sentiment will turn around again. Whether this will happen already in 2012, is a question nobody can answer reliably. In any case, I would like to thank all our shareholders – our major shareholder RZB and the many institutional and private investors – for their loyalty, and to assure them that we will continue to concentrate all our eff orts on the success of the company. I would like to thank our customers for their trust, and our 59,000 employees for their hard work. I know that my colleagues will continue to be fully committed in their work for RBI, even though conditions will be no easier for them in this time of austerity. My special thanks for this!
Group Strategy Human Resources Internal Audit Legal & Compliance Management Secretariat Organization & Internal Control System
PR, Marketing & Event Management
Corporate Customers
Corporate Sales Management & Development
Group Products
Network Corporate Customers & Support
Consumer Banking Collections Credit Services Group & Austrian IT Group Project Management Offi ce
International Operations & IT
IT-Markets & Treasury Lean & Service Excellence
Small Business & Premium Banking
Transaction Services
(until 15 April 2012) Capital Markets Credit Markets Institutional Clients Raiff eisen Research
(as of 16 April 2012) Capital Markets Credit Markets Institutional Clients Raiff eisen Research
Martin Grüll
Investor Relations Planning & Finance Tax Management Treasury
Peter Lennkh
International Banking Units Participations
Credit Management Corporates
Financial Institutions, Country & Portfolio Risk Management
Retail Risk Management
Risk Controlling
Risk Excellence & Projects
Workout
Dear Shareholders,
following years of crisis, the fi rst half of 2011 was shaped by a temporary relief and improvement in the general economic situation. The second half of the year, however, was marked by the intensifying sovereign debt crisis in Europe, accompanied by a signifi cant slowdown in economic growth. At the same time, European banks were aff ected by signifi cant changes to the regulatory standards concerning capital requirements which have to be implemented within a short time frame. Raiff eisen Zentralbank Österreich AG, as the superordinate banking institute and main shareholder of RBI, has to fulfi ll the 9 per cent capital ratio requirement by the end of June 2012 and therefore, together with RBI, immediately started the implementation of the necessary measures after the new requirement had been announced.
As in previous years, members of the Supervisory Board and its committees were fully informed by the Management Board in a timely and comprehensive manner during regular meetings about all pertinent business developments, including risk management of the bank and associated companies. Information was provided in writing as well as verbally.
At each meeting, the Management Board reported to the Supervisory Board on business developments in the various business divisions and explained current risk developments. In addition to its regular meetings, the Supervisory Board had many opportunities to hold discussions with the Management Board. The collaboration between Management Board and Supervisory Board was characterized by open and proactive communication.
During the period under review, there were fi ve Supervisory Board meetings. More than half of the meetings were attended by all members of the Supervisory Board. In all meetings, the Supervisory Board performed the tasks incumbent upon it by law and in accordance with the articles of association pursuant to the 2010 Austrian Corporate Governance Code. In accordance with the requirements of the Austrian Corporate Governance Code, the Supervisory Board arranged for an external assessment of its activities, the results of which were discussed in depth by the Supervisory Board.
In the meetings, as well as during talks held outside the meetings, the eff ects of the fi nancial and economic crisis, in particular the risk situation, were discussed at length. Thus, the Supervisory Board regularly received reports on the current earnings situation and the Group's liquidity and risk situation. In light of the amplifi cation of the sovereign debt crisis in Southern Europe, appropriate stress tests were presented to the Supervisory Board.
The new and stricter regulatory requirements for banks published in the second half of the year necessitated an adjustment of business policy, which the Management Board discussed in detail with the Supervisory Board. The new regulations concerning remuneration policy under banking law were also reported on several times, and resolutions were approved.
Overall, the Supervisory Board was able to fulfi ll its supervisory duties conscientiously and take all its decisions in a carefully reasoned way.
The Chairman of the Working Committee, Audit Committee and Personnel Committee regularly reported to the Supervisory Board on the relevant committee's work.
The Working Committee dealt primarily with the appointment of executive members in the Group, regulations governing holdings in affi liated companies and business transactions requiring its approval.
The Audit Committee monitored the accounting process, the eff ectiveness of the internal control system and the internal audit system, as well as the bank's risk management. It monitored the annual statutory audit and the consolidated fi nancial statement audit. It was also responsible for verifying and monitoring the independence of the statutory auditor. It reviewed the annual fi nancial statements and consolidated fi nancial statements and prepared for their adoption. It also dealt with the proposed appropriation of profi t, the Management Letter and Corporate Governance Report. In addition, it made a proposal in regard to the appointment of the statutory auditor.
The Personnel Committee dealt in particular with questions concerning the remuneration of the Management Board including the bonus scheme and directors' and offi cers' insurance.
At the Annual General Meeting held on 8 June 2011, Walter Rothensteiner was reelected as a member of the Supervisory Board and reappointed by the Supervisory Board as its Chairman. In addition to Alfred Lejsek, the Austrian Finance Minister appointed Anton Matzinger as Deputy State Commissioner.
These consolidated fi nancial statements (income statement, statement of fi nancial position, statement of changes in equity, cash fl ow statement and notes) as well as the annual fi nancial statements for RBI AG have been audited by KPMG Austria GmbH Wirtschaftsprüfungs- und Steuerberatungsgesellschaft, Vienna. The audit revealed no grounds for objections. All legislative provisions were fully satisfi ed. Therefore, the unqualifi ed Auditor's Report was issued.
The consistency check of the Corporate Governance report according to Section 243b of the Austrian Commercial Code (UGB) was performed by Univ.Prof.DDr. Waldemar Jud Corporate Governance Forschung CGF GmbH, and its fi nal results report yielded no signifi cant grounds for objections.
Following an extensive audit and discussion of the consolidated fi nancial statements and the annual fi nancial statements in the Audit Committee and in the Supervisory Board, the Supervisory Board agreed with the proposed appropriation of profi t and approved the annual fi nancial statements of RBI AG. The annual fi nancial statements have thus been adopted in accordance with Section 96 (4) of the Austrian Stock Corporation Act (AktG).
The Supervisory Board would like to express its gratitude to the Management Board, the Staff Council and all employees for their outstanding commitment in this constantly changing environment.
On behalf of the Supervisory Board Walter Rothensteiner, Chairman
Raiff eisen Bank International AG (RBI) regards Central and Eastern Europe (including Austria) as its home market. For nearly 25 years RBI has been operating in Central and Eastern Europe (CEE), where today it maintains a closely knit network of subsidiary banks, leasing companies and numerous specialized fi nancial service providers in 17 markets. As a universal bank, RBI ranks among the top 5 banks in twelve CEE countries and occupies a strong position in Russia. The powerful role is supported by the Raiff eisen brand, which is one of the most widely recognized brands in the region. Following its strategic realignment in 2010, RBI has positioned itself as a fully integrated corporate and retail banking group in CEE. The bank not only has good access to retail and corporate customers, but also boasts a comprehensive product off ering. The CEE markets are characterized by higher economic growth compared to Western Europe. RBI benefi ts not only from this growth, but also from the potential resulting from the region's need to catch up in terms of banking services. At the end of 2011 around 56,000 staff served approximately 13.8 million customers in around 2,900 business outlets in CEE.
In Austria RBI is one of the top corporate and investment banks. It primarily serves Austrian customers, but also international customers as well as major multinational clients operating in CEE. Moreover, RBI is represented in the world's fi nancial centers and operates branches and representative offi ces in Asia. All in all, RBI employs about 59,000 staff and has total assets of approximately € 147 billion.
RBI was established in October 2010 through the merger of Raiff eisen International with the principal business areas of Raiff eisen Zentralbank Österreich AG (RZB) – the corporate banking business and related participations. RBI's position as one of the leading banks in CEE and Austria was further reinforced by the merger. As a listed company, it had been possible for Raiff eisen International to raise equity capital through share issues even before the merger. But the merger enabled RBI to gain access to the debt market, where it is also able to issue debt via bank-specifi c instruments, e.g. those traded on the interbank market. A further key advantage of the new Group structure lies in the optimization of risk management. The integration of service areas allows RBI to off er bundled solutions from a single source to all markets that had previously been served separately by Raiff eisen International and RZB.
RBI has been listed on the Vienna stock exchange since 25 April 2005 (until 12 October 2010 as Raiff eisen International). It is represented in several leading national and international indices, including the ATX and EURO STOXX Banks. RZB, which functions as the central institution of the Austrian Raiff eisen Banking Group (RBG), remained the majority shareholder following the merger, holding approximately 78.5 per cent of the shares. The remaining 21.5 per cent of RBI's shares are in free fl oat.
RZB, the majority shareholder of RBI and central institution of the Austrian Raiff eisen Banking Group (RBG), was formed in 1927 as "Genossenschaftliche Zentralbank" (GZB). Raiff eisen gained its fi rst foothold in Central and Eastern Europe back in 1987, when it established its fi rst subsidiary bank in Hungary. Other own subsidiaries have since been established; from 2000 onwards, Raiff eisen's expansion in the CEE countries has mainly been achieved by acquiring existing banks, which are combined into a holding company that from 2003 operated under the name Raiff eisen Inter national. Raiff eisen International was listed on the stock exchange in April 2005 in order to fi nance its future growth as effi ciently as possible. RBI was subsequently established in 2010 through the merger of Raiff eisen International with the principal business areas of RZB.
Raiff eisen's strong roots in Austria date back more than 125 years. Raiff eisen's fi rst Austrian credit cooperative was founded in Mühldorf near the village of Spitz in the Wachau valley in 1886. Local cooperatives soon started working together and, in turn, founded regional cooperatives marking the beginning of the multi-tiered nature of the Raiff eisen organization. This not only helped to strengthen their position in the market, but also enabled better management and risk control. Numerous product and service cooperatives were founded on the back of increasing specialization and market integration. In mid-2011 RBG, the country's largest banking group, managed € 83.8 billion in Austrian customer deposits (excluding building society savings), of which around € 50.3 billion was held in savings deposits; with a market share of 32.2 per cent, RBG has continued to expand its role as market leader among Austria's banks. RBG has achieved its strong market position through healthy organic growth.
RBI is a member of the Raiff eisen customer guarantee association (Raiff eisen-Kundengarantiegemeinschaft, RKÖ), established in 2000, which made RBG a pioneer in deposit protection in Austria. Supplementing the statutory Austrian deposit guarantee scheme, the Raiff eisen customer guarantee association guarantees up to 100 per cent of customer deposits, depending on the fi nancial strength of the member institutions. Unlike the statutory deposit guarantee scheme, it covers all deposits, regardless of whether they belong to private individuals or businesses. The guarantee also applies to all foreign currency deposits and to claims related to issues of senior bonds.
RBI comprises seven segments, with its main focus on retail and corporate banking in the Central Europe, Southeastern Europe, Russia and CIS Other segments, while mass market and premium retail strategies are developed on a countryspecifi c basis.
| Segments | Focus |
|---|---|
| Central Europe | Retail and corporate customers in the Czech Republic, Hungary, Poland, Slovakia and Slovenia |
| Southeastern Europe | Retail and corporate customers in Albania, Bosnia and Herzegovina, Bulgaria, Croatia, Kosovo, Moldova, Romania and Serbia |
| Russia | Retail and corporate customers |
| CIS Other | Retail and corporate customers in Belarus, Kazakhstan and Ukraine |
| Group Corporates | Austrian and primarily Western European business customers as well as major multinational customers from CEE |
| Group Markets | Customer and proprietary trading on debt and equity capital markets |
| Corporate Center | Services performed by Group headquarters, such as liquidity and balance sheet structure management |
The Central Europe segment encompasses the most mature banking markets in Central and Eastern Europe, namely the Czech Republic, Hungary, Poland, Slovakia and Slovenia. Southeastern Europe comprises Albania, Bosnia and Herzegovina, Croatia, Kosovo, Moldova and Serbia, as well as Bulgaria and Romania, which both joined the EU in 2007. Moldova is included as part of Romania because of its close economic ties to that country and the way it is managed in the Group as a result. In addition to the Russia segment, which contains a bank, a leasing company and a capital management company, there is also the CIS Other segment, which includes RBI's activities in Belarus, Kazakhstan and Ukraine.
The Group Corporates segment mainly comprises activities with Austrian and international – mainly Western European – customers managed from Vienna. Business with major multinational customers from Central and Eastern Europe, excluding Austria, also falls under this segment. The Group Markets segment involves customer business and proprietary trading on debt and equity capital markets. The services performed by Group headquarters for various divisions in order to implement the Group's strategy are booked under the Corporate Center segment.
| Total assets | ||||
|---|---|---|---|---|
| 31/12/2011 | in € million | Change1 | Business outlets | Number of staff |
| Czech Republic | 8,789 | 11.1% | 129 | 3,012 |
| Hungary | 7,320 | (14.2)% | 134 | 2,977 |
| Poland | 7,368 | 6.4% | 116 | 3,169 |
| Slovakia | 9,682 | 7.9% | 156 | 3,805 |
| Slovenia | 1,732 | 7.5% | 17 | 323 |
| Reconciliation | (40) | 61.1% | – | – |
| CE segment | 34,852 | 2.7% | 552 | 13,286 |
| Albania | 2,330 | 16.0% | 105 | 1,427 |
| Bosnia and Herzegovina | 2,170 | 5.8% | 98 | 1,569 |
| Bulgaria | 3,681 | (2.9)% | 187 | 3,271 |
| Croatia | 5,465 | (6.7)% | 81 | 2,083 |
| Kosovo | 680 | 1.1% | 54 | 720 |
| Romania | 6,359 | 2.1% | 551 | 6,030 |
| Serbia | 2,207 | 3.6% | 85 | 1,765 |
| Reconciliation | (64) | 51.2% | – | – |
| SEE segment | 22,827 | 0.6% | 1,161 | 16,865 |
| Russia segment | 14,218 | 16.8% | 191 | 8,475 |
| Belarus | 1,223 | (19.2)% | 101 | 2,210 |
| Kazakhstan | 72 | (3.1)% | 1 | 11 |
| Ukraine | 5,467 | (1.4)% | 909 | 15,267 |
| Reconciliation | (1) | – | – | – |
| CIS Other segment | 6,761 | (5.2)% | 1,011 | 17,488 |
| Group Corporates segment | 22,843 | (2.7)% | 8 | |
| Group Markets segment | 25,732 | (5.5)% | 4 | 3,1472 |
| Corporate Center segment | 53,835 | 63.7% | 1 | |
| Reconciliation | (34,083) | 20.3% | – | – |
| Total | 146,985 | 12.1% | 2,928 | 59,261 |
1 Change of total assets versus fi gures 31 December 2010 expressed in local currencies varies due to fl uctuation euro exchange rates.
2 Allocation of staff to Group Corporates, Group Markets and Corporate Center is not possible.
RBI's primary strategic objective is to create long-term value for its shareholders which, in addition to free fl oat shareholders, include the Raiff eisen Zentralbank Österreich AG (RZB) as a strong core shareholder and central institution of the Austrian Raiff eisen Banking Group. This objective is to be achieved fi rst and foremost through a strong focus on customers and a full line of services. Taken together, these two factors lead to high customer satisfaction. Balanced portfolio- and risk diversifi cation in RBI's home market of Central and Eastern Europe (including Austria) and sustainable risk management ensure that these objectives remain valid in the long term.
Specifi cally, RBI's actions are based on the following principles:
The overall environment for banks is subject to a highly dynamic development. This applies particularly to the markets in which RBI operates. Changes in the market environment (competitors withdrawing, economic dynamics easing, supervisory regulations becoming more stringent, etc.) call for constant adaptation of the business focus. Strong, Group-wide coordination and collaboration among the individual corporate units is therefore of greatest importantance. A consequent focus on customers and transparent decision making processes determine the bank's success in the market. The open corporate culture embodied at RBI contributes to employee motivation and therefore to the achievement of the bank's strategic objectives.
In setting the direction for its business activities, RBI pursues two strategic approaches:
RBI's business is subdivided into seven segments. While the focus in the Central Europe, Southeastern Europe, Russia and CIS Other segments is on retail and corporate banking, activities with Austrian companies and major international customers are handled by Group Corporates. Group Markets deals with capital market customers and proprietary trading and the Corporate Center segment encompasses various services that are provided by Group headquarters and that assist in the implementation of the Group's overall strategy; they are assigned to this segment to ensure comparability.
In each of the countries in the Central Europe segment (Czech Republic, Hungary, Poland, Slovakia and Slovenia), RBI is represented by a bank, leasing companies and other specialized fi nancial institutions. In addition to corporate customer business, with its comprehensive range of high-end products, RBI is continuously expanding its retail customer business in this segment. The aim is to position itself as the leading universal bank in the region. The range of premium and private banking services is being extended due to the increased demand among affl uent private individuals for higher-end fi nancial and advisory services.
ZUNO Bank handles RBI's direct banking activities in the CEE region. ZUNO is currently active in the Slovakian and Czech markets, and at present off ers current and savings accounts. The plan is to expand these services to include retail lending, overdraft facilities and credit card services. Furthermore, there are plans to extend its regional presence into the Polish and Hungarian markets in 2012. ZUNO's business philosophy is to handle its business relationships entirely via electronic means (e.g., e-mail, online chat, Facebook, call centers, etc.).
In Poland, the acquisition of Polbank would strengthen RBI's retail banking business, making it one of the country's strongest universal banks in terms of market share and presence. In corporate banking, a decreasing interest income is to be off set by expanding service business which is wholly in line with RBI's strategy of building up capital- and liquidity-light products. This also includes a focus on cash management, which should at the same time help to strengthen customer relationships. In retail banking, the main focus is on the acquisition of affl uent retail customers and on the range of comprehensive solutions (e.g. insurance solutions). The planned merger of Polbank and Raiff eisen Bank Polska would generate synergies in sales and processing. The overall aim is to keep the development of costs stable.
In Slovakia, Raiff eisen possesses one of the best-known and most valuable brands in the Slovak banking sector through Tatra banka, which focuses on the affl uent customer segment. Its innovation leadership with regard to new technologies (e.g., Internet and mobile banking, instant card issuance services, contactless payment services, etc.) is set to be extended further. Workfl ows are being optimized in Slovakia, as they are throughout the entire network. The number of employees was reduced from around 3,700 to around 3,400 between 2008 and 2011.
In Slovenia, RBI is concentrating on business with local corporate and retail customers and on optimizing its network. Given the market environment, another area of focus here also concerns measures to reduce costs and optimize processes. In the Czech Republic, the main focus is on business with affl uent retail customers. To this end, projects have been launched to improve the way these customers are targeted via the existing branch network. Alternative sales alliances, such as joint credit card issuance with the mobile provider Vodafone ("AQUA"), are being expanded. In corporate customer business, RBI promotes capital- and liquidity-light products. In the Czech Republic, as in other countries, RBI generally prefers to lend to existing customers with good credit ratings. Internal improvements are also being developed to supplement the marketrelated measures. For example, a central IT system is currently being implemented to reduce the administrative expenditure on technology and processing, while organizational workfl ows are also being optimized. As a result, customer services were further improved despite a 9 per cent reduction in the number of administrative employees.
In Hungary where RBI also operates as a universal bank, its business model has been adapted to the diffi cult market environment. Corporate customers are being segmented more strongly by industrial sector in order to better serve customers' diff erent needs. The focus is on international corporate customers with good credit ratings, who, as in other countries, are being targeted with capital- and liquidity-light products, and on domestic small and medium-sized enterprises (SMEs). For the latter, the emphasis is increasingly on advisory and transaction-driven services such as cash management solutions. In the retail customer business, the sales network is being streamlined. In principle, lending is governed by strict rules with regard to credit ratings. Lending (particularly in foreign currencies) is defensively oriented, while the main focus for affl uent retail customers is on deposit business. The number of employees in Hungary has been reduced by a total of around 10 per cent by remodeling the organizational structure and processes, streamlining middle management and introducing more fl exible working hours.
RBI operates as a universal bank in the countries of the Southeastern Europe segment (Albania, Bosnia and Herzegovina, Bulgaria, Croatia, Kosovo, Romania and Serbia). It has a bank and leasing companies in each country, and in certain markets is also represented through capital management and asset management companies as well as through pension funds. The target customer group, however, varies according to country. RBI operates a leasing company in Moldova.
In Albania, the focus is on corporate and retail banking, with lending generally carried out on a selective basis. Other business activities, such as lending to fi nancial institutions or governments, are only conducted under strict conditions. The branch network is also only being expanded on a selective basis. One major strategic initiative for 2012 is the implementation of a new central IT system.
In Bosnia and Herzegovina, the focus is on SMEs, as well as on special off erings (e.g., investment fund solutions) for affl uent retail customers. Centralized product processing forms the cornerstone of a profi table branch network. Other business activities, such as the government bond portfolio, are handled on a restrictive basis or scaled back.
In Bulgaria, RBI's strategic objective is to strengthen existing relationships with corporate and retail customers. The partial withdrawal of Greek and Western European banks has created an opportunity here to become the main bank for customers with good credit ratings. The lending policy will continue to focus on good credit ratings and collateral. A cost-effi ciency program is also underway in Bulgaria.
The main focus in Kosovo, besides maintaining existing relationships with corporate customers, is on the sale of fi nancial service products (cross-selling). On the retail side, the aim is to increasingly target affl uent customers from the sole trader/ small entrepreneur segment. Moreover, factoring services are being tested in this market. No further expansion of the branch network is planned at present due to the strict cost management measures in place. An additional area of focus is optimizing processes and boosting productivity.
In Croatia, the focus is on large and medium-sized corporate customers and on retail customers. The strategic center of attention in corporate customer business is fi nancial services in connection with the EU structural and cohesion funds that are linked to Croatia's accession to the EU in 2013. Regarding affl uent retail customers, the focus, in addition to the sale of pension funds, is on end-to-end product solutions (cross-selling). The branch network is also being optimized.
In Romania, the focus is also on large and medium-sized corporate customers and on affl uent retail customers. The ongoing optimization of processes (e.g., loan processing for retail customers, other processing in the branches, regional centralization, etc.) allows costs to be reduced while maintaining or even improving the quality of service.
The market environment in Serbia continues to demand strict cost and risk management. The main focus here is on costcutting measures and process optimization. For both corporate and retail customers, the key aim from a market perspective is to further develop relationships with customers that have good credit ratings. High-end services and products form the basis therefore.
RBI's aim in Russia is to consolidate its role as one of the leading foreign banks. Business development in Russia is predominantly organic, in particular through the ongoing strengthening of RBI's existing presence in the regions. In corporate customer business – where RBI occupies a strong position in the country – the bank is increasingly supporting Russian companies to expand into other RBI markets. RBI's strategic orientation as a service provider for complex treasury (e.g., currency hedging) and investment banking (e.g., capital market issues) products, and also its general advisory activities with regard to fi nancial services, helps to strengthen this position. In affl uent retail customer business, the aim is to consolidate and develop RBI's position by further expanding high-end services (e.g., expanded online banking and insurance solutions, as well as improved advisory services). The establishment of regional competence centers ensures effi cient and customer-focused product processing.
This segment comprises Belarus and Ukraine as well as Kazakhstan, where RBI has a leasing company.
As the biggest foreign bank in Belarus, RBI is the fi rst point of contact for investors and international corporate customers. The aim is to further consolidate its pioneering role in the fi eld of affl uent retail banking by expanding alternative sales and service channels (e.g., through Internet and mobile banking). The challenging business environment (high infl ation, potential further devaluation of the currency) calls for a defensive business policy to limit RBI's risk position. This means continuing to pay close attention to customers' credit ratings, avoiding loans in foreign currencies and restricting the granting of loans.
In Ukraine, RBI off ers the full range of fi nancial services products through a dense branch network. The cooperation with supranational fi nancial institutions (EBRD, IFC, etc.) is to be strengthened in order to further develop the Ukrainian market. The focus here is on medium-sized companies, the agricultural sector and heavy industry. Here too, RBI is meeting the demand for sophisticated treasury and investment banking services. In retail customer business, existing customer relationships are being strengthened and sales of credit cards and insurance products are being promoted.
In the countries of the CIS Other segment, as elsewhere, RBI focuses on strict cost management.
The Group Corporates segment covers two key areas: fi rstly the Corporate Customers division, which services those Austrian companies and international – primarily Western European – corporate customers that generate the highest revenues, and secondly business with major Central and Eastern European customers, which is handled by the Network Corporate Customers & Support division. In line with the customer relationship approach, corporate customers are off ered comprehensive fi nancial services with a particular focus on advisory and service-intensive investment banking services and on off ering capital- and liquidity-light products. RBI's comprehensive network in the CEE region enables it to provide crossborder customer service to both Austrian and Western European corporate customers who are also active in these markets. The Corporate Customers division was restructured in 2011 through the creation of teams with a special industry focus to complement the initial primarily regional orientation. Sales management was also substantially strengthened through Group-wide strategic planning of customer activities. This permits more effi cient and comprehensive customer service, and is a substantial success factor in international corporate banking. In the Network Corporate Customers & Support division, the Global Account Management System was further optimized to enable RBI to off er its many customers with crossborder operations a customer service experience that is coordinated across the entire Group and – in conjunction with specialized product experts – an even more comprehensive product portfolio (Group products) across the whole network. The focus in the Asian branches and representative offi ces is on expanding existing customer relationships, particularly for selected project fi nancing mandates and trade fi nancing.
The Group Markets segment covers capital market customers and proprietary trading. In principle, activities in this segment are defensively orientated and mainly serve to support business activities in the corporate and retail divisions. This segment also includes net income from customer business, from sales of all banking products, and from business relationships with banks, institutional customers and governments. The aim is to strengthen capital- and liquidity-light products and thus improve service expertise with regard to capital market and investment banking products for governments and fi nancial institutions. This has enabled RBI to participate in syndicates involved in successful benchmark bond issues on the international capital markets (e.g., Credit Bank of Moscow, Erste Group, Intesa Sanpaolo, UniCredit, Monte dei Paschi di Siena).
The Corporate Center segment encompasses various services provided by Group headquarters (e.g. Group strategy, strategic risk management, Group accounting, Group-wide HR management and development, Group audit) that assist in the implementation of the Group's overall strategy and are assigned to this segment to ensure comparability. This segment also includes the following areas: liquidity management by means of the funds transfer pricing (FTP) concept (internal liquidity management at conditions comparable to those found on the external market) and balance sheet structure management as part of proprietary trading, participations (particularly in subsidiaries in the CEE region), income from banking operations carried out by Group headquarters and by the Maltese subsidiary for refi nancing Group units, Austrian transaction services business, which comprises processing and other services for fi nancial services providers, and income from holding and other companies that are not directly assigned to a segment.
In addition to the segments, RBI also manages its business according to business divisions and has established appropriate organizational and reporting structures for this purpose. This subdivision leads to the following strategic priorities:
In the course of the merger of Raiff eisen International with RZB's principal business areas, the corporate banking strategy of the newly created RBI underwent a comprehensive adaptation to align with macroeconomic conditions. The focus in doing so was on the maximum possible exploitation of synergies in the area of sales force management (particularly by means of Group-wide customer management and customer marketing) and product development (e.g., by building product competence centers) and long-term further development of RBI's market position in the medium-sized and large corporate customer segment. Long-term, comprehensive support of corporate customers continues to be central to the corporate banking strategy (relationship customer approach). "Comprehensive" in this context means off ering state-of-the-art fi nancial services with corporate and investment banking products across borders for all customer groups – medium-sized customers, large local companies and international corporate groups.
In the context of the strategic redesign, particular attention was paid to Group-wide further development of sales planning and controlling tools (account planning), with a focus on capital- and liquidity-light products. These tools have already been implemented successfully in most countries as part of various sales initiatives (e.g., in Austria, the Czech Republic, Poland, Romania and Slovakia). In addition, Group-wide product competence centers were established to facilitate customers' access to complex fi nancing products, e.g., in the area of project-, real estate- and export fi nancing, and to improve internal effi ciency. A further key area is the establishment of a uniform sales and service model for large and medium-sized corporate customers (e.g., by introducing more strongly industry-focused marketing in Austria and Russia or implementing mid offi ces in various countries). Furthermore, the bank has a special focus on continuously improving its internal processes. Best practices have been formulated in close collaboration with Risk Management and Operations, which serve as a guideline for process optimization activities in the individual countries.
The objective is to position RBI as the leading universal bank in retail banking in CEE. The well-established Raiff eisen brand and the widespread distribution network will make signifi cant contributions towards achieving this. Eff ective advisory, top-quality service and products with added value will support the build-up of a long-term relationship with RBI's approximately 13.5 million retail customers. There is an additional focus on business with affl uent private individuals (premium banking and private banking). The introduction of the "Friedrich Wilhelm Raiff eisen" brand has created a platform for the sale of superior services for the affl uent private banking segment. The rule for the retail segment as a whole is that existing customer relationships should be strengthened in order to achieve a higher value generation factor per customer. This will be achieved with an expanded range of fi nancial services that will be even more attuned to customers' individual needs than before: starting with the simple current account and going on to consumer credits and individual insurance solutions, right through to standardized deposit products and comprehensive investment counseling concepts.
The balance between lending activities, expanding the transaction service and diff erentiated bundles of current account products has proven to be successful and has led to an increase in the number of customers. RBI will continue this approach in 2012. Another focus will be on standardizing the range of products. In order to be able to provide an optimum mix of sales and service quality, RBI will continue to develop its sales organization.
Only three years after it was set up, the Premium Banking segment, which supports affl uent private individuals with liquid assets of up to € 200,000, already has nearly half a million customers. Around 1,000 account managers support these customers in the markets throughout Central and Eastern Europe. Their attention to service quality, products with high added value and attractive product bundles ensures that long-term customer relationships are developed.
The bank introduced the new "Friedrich Wilhelm Raiff eisen" brand to promote the private banking business. It stands for superior advisory services and provides asset management and investment advice for customers with liquid assets of at least € 200,000, depending on the region. This sub-segment, in particular, pursues a discretionary service approach and develops customized solutions (from current accounts to comprehensive capital market investments) for its customers. There are currently around 200 account managers supporting 32,000 such customers in seven countries (Czech Republic, Hungary, Poland, Romania, Russia, Slovakia and Ukraine). In addition, Kathrein Privatbank AG, a wholly owned subsidiary of RBI in Vienna, off ers private banking services.
This segment makes a signifi cant contribution to the earnings of the CEE region and represents a major opportunity for RBI. More than 90 per cent of all CEE companies are small businesses, which employ around 50 per cent of the total workforce. The strength of RBI's sales network enables it to support not only private and business customers, but also their employees.
RBI has some 2,500 relationship managers supporting more than 800,000 small businesses in 15 markets. The bank distinguishes between two customer groups in small business banking: micro businesses (with annual sales of up to € 1 million) and small businesses (with annual sales of up to € 3 – 8 million depending on the country). Great competence in advising customers and in transaction-related services is a key success factor for RBI. The bank off ers its customers an extensive product line, from everyday services to fi nancing.
RBI's sales and service model is supported by its closely knit branch network. The know-how at Group headquarters and the centralized management of all important processes, combined with the closeness to customers through the bank's local presence, ensure the best possible customer care.
In the course of the merger of Raiff eisen International with RZB's principal business areas, the markets strategy was also overhauled in 2010. Its core elements are concentration on customer business in the bank's home market and the further expansion of competence in capital market and investment banking products. The main focus, also in the present market environment, is on supporting companies in initial public off erings, acquisitions and sales. Support is provided to governments, fi nancial institutions and companies in their medium- and long-term fi nancing. These services protect equity and liquidity for RBI, strengthen profi tability and simultaneously relieve pressure on the balance sheet. A particular focus here is on the strategic hedging of customers' currency, interest rate and raw materials risks. Business transactions for the bank's own account (proprietary trading) are only carried out to support the markets strategy.
In line with the adapted market-side strategy, internal capacities are also being optimized. The bank's know-how in sales and in the product line is to be extended by more intensive training and continuing education activities. Customer marketing activities are coordinated Group-wide; in addition, a uniform Group-wide trading platform has been set up. Moreover, several initiatives have been launched to encourage further cross-border know-how transfer.
Through its direct access to all important stock exchanges in CEE and its leading position on the Vienna Stock Exchange, RBI (through its subsidiary Raiff eisen Centrobank) is strongly represented not only in equity trading in these regions, but also as a provider of certifi cates in Germany and Austria. At the same time, RBI as part of the Raiff eisen network is both the largest provider of mutual funds and the largest provider of third-party funds in Austria. The custody business, in which RBI already holds a leading position today, is also to be expanded in the CEE markets. The bank will make further investments in systems and service quality for this purpose.
With strong corporate data and a generally positive global economic environment, the international stock markets got off to a dynamic start in 2011, a trend that lasted until the Japanese tsunami and nuclear catastrophe struck in March. As soon as it became clear that the eff ects of these events on the global economy would be limited, the markets recovered briefl y. The continuous rise in oil prices through the remaining fi rst half of the year, partially the result of the protests in the Middle East and the war in Libya, did however lead to increasing uncertainty in fi nancial markets.
The second half of the year saw a signifi cant deterioration in the international and particularly European fi nancial markets. On the one hand, this was due to growing concerns regarding a slowdown in the global economy, and on the other hand to the downgrading of the US credit rating in August and a signifi cant worsening of the sovereign debt crisis in Europe leading to substantial drops in share prices. The focus here was on the peripheral European states of Greece, Portugal, Spain, Ireland and Italy. Despite generally good corporate fundamentals, the development of the stock markets was extremely volatile, and even good news had little power to boost stock prices in this situation. At the end of 2011, most analysts revised their forecasts for 2012 downwards for both companies and the market as a whole in view of the economic slowdown.
This environment also led to perceivable uncertainties in the banking sector in the second half of the year. The concern was focused on the commitments of many fi nancial institutions in the European peripheral states, capital adequacy and the more diffi cult conditions for refi nancing. The downgrading of several nations by the rating agencies and the associated drop in the prices of their bonds resulted in a need for write-downs ‒ in some cases substantial ‒ by fi nancial institutions which had invested in bonds from these issuers.
Political and regulatory decisions further increased the burden on the fi nancial sector, including the "Home Protection Plan" passed by the Hungarian parliament. This allows private citizens in Hungary to choose to repay foreign currency mortgage loans early at an exchange rate well below the market rate. Moreover, the European Banking Authority (EBA) decided that European banks are required to show a core capital ratio (core tier 1 as defi ned by the EBA) of 9 per cent by the end of June 2012. The introduction of a special bank levy by Austria and Hungary in 2010 was followed in 2011 by the Slovakian parliament's decision to impose such a levy from 2012 onwards.
While the RBI stock price developed at a relatively stable pace at the start of the year, the events in Japan led to a decrease at the end of the fi rst quarter, in line with most of the major share indices. Although the fi gures for the fi rst quarter were well received by analysts and investors, the share was unable to escape the negative trend in the market as a whole, and lost ground in the second half of the year, due to the general uncertainty in the markets. The factors responsible for this included the raising of requirements for core capital ratios of European banks by the EBA, the passage of the Hungarian Foreign Currency Act at the expense of the banks operating in Hungary, and last but not least a general concern about a further recession in the near future.
The high in RBI's share price for 2011 was on 9 February at € 45.10, its low was on 23 November at € 14.16. It opened the year at € 43.06, and the price at the end of the year was € 20.07. In all, the share accordingly lost 51 per cent over the course of the year. During the same period the ATX fell by 35 per cent and the EURO STOXX Banks fell even more sharply by 38 per cent. At the time of the editorial deadline of this report (12 March 2012) the stock stood at € 24.85. This represents a gain of 24 per cent from 31 December 2011.
At the end of 2011, the market capitalization of the 195.5 million RBI shares issued was € 3.9 billion.
In 2011, a total of 67.9 million RBI shares was traded. This represents a total volume of € 2.0 billion and an average daily volume of 273,679 shares.
At the close of 2011, approximately 15 per cent of RBI shares were held by institutional investors. These continued to show a broad geographical diversifi cation: 24 per cent were from the US, 21 per cent from Austria, 18 per cent from the UK and Ireland and 28 per cent from other EU countries. The remaining 9 per cent of institutional investors were from other countries, such as Singapore and Japan. A further 6 per cent of the free fl oat was held by private investors, mostly from Austria.
RBI shares are included in the following indices: ATX, ATX Prime, EURO STOXX, EURO STOXX Banks, STOXX Europe 600, STOXX Europe 600 Banks and MSCI World.
| Price on 31 December 2011 | € 20.07 |
|---|---|
| High/low in 2011 (closing prices) | € 45.10 / € 14.16 |
| Earnings per share for 2011 | € 3.95 |
| Market capitalization as of 31 December 2011 | € 3.9 billion |
| Average daily trading volume in 2011 (single counting) | 273,679 shares |
| Stock exchange turnover in 2011 (single counting) | € 2.0 billion |
| Free fl oat as of 31 December 2011 | 21.5% |
| Number of shares issued as of 31 December 2011 | 195,505,124 |
| Average number of shares in 2011 | 194,552,387 |
| ISIN | AT0000606306 |
| Ticker symbols | RBI (Vienna Stock |
| Exchange) | |
| RBI AV (Bloomberg) | |
| RBIV.VI (Reuters) | |
| Market segment | Prime Market |
The bond markets were also dominated by the European sovereign debt crisis in 2011. The gap in yields between peripheral European states like Greece, Italy, Ireland, Portugal and Spain and strong core nations like Germany and Austria continued to widen. Low-rated countries duly faced rising costs of fi nancing, while yields on German bonds continued to reach new lows. The uncertainties in the bond markets could not be reduced despite eff orts to consolidate national budgets, further expand the EFSF (European Financial Stability Facility) safety net and massive intervention by the ECB.
The European banking sector in particular was aff ected by the sovereign debt crisis. The growing mistrust of banks among one another but also of investors, made it much more diffi cult for banks to refi nance on the money and capital markets. In the second half of the year, European banks were almost entirely limited to secured bonds for refi nancing, and even then at signifi cantly higher interest rates than at the start of the year.
Despite the diffi cult market environment, RBI successfully used the international capital market for refi nancing, particularly in the fi rst half-year. For example, RBI issued unsecured benchmark bonds of € 1.0 billion in both January and March. In addition, RBI was the only Austrian bank in 2011 which placed a subordinated ten-year bond for € 500 million in May. Further information on funding activities is available starting from page 76.
In 2011 RBI was rated by Moody's Investors Service, Standard & Poor's and Fitch Ratings. RBI maintains regular contact with the rating agency analysts, and keeps them informed – along with the fi nancial community in general – of trends in business, in order to ensure the most accurate evaluation possible.
| Rating agency | Long-term rating |
Short-term rating |
Outlook |
|---|---|---|---|
| Moody's Investors Service | A1 | P-1 | Rating under review for downgrade |
| Standard & Poor's | A | A-1 | negative |
| Fitch Ratings | A | F1 | stable |
RBI's ordinary Annual General Meeting was held on 8 June 2011 at the Austria Center Vienna, and gave private investors in particular an appropriate platform to be informed about business developments directly by the Management Board. With some 700 participants, the 2011 Annual General Meeting was again one of the best-attended in recent Austrian capital market history.
A dividend of € 1.05 per share was authorized for the 2010 fi nancial year and was paid out to shareholders on 16 June 2011. This translated into a total dividend payment of € 204.3 million after taking account of own shares, on which no dividends are paid.
The Annual General Meeting also decided to revoke the authorization dating back to 2007 for the Management Board to increase capital ("authorized capital" – Section 169 Austrian Stock Corporation Act) with regard to the as yet unused portion. In connection with this, the Management Board was authorized to increase capital against cash and/or contributions in kind subject to shareholders' statutory pre-emptive rights as well as to repay all or part of participation capital.
The reports and presentations from the 2011 Annual General Meeting and a video of the Management Board presentations are available at www.rbinternational.com → Investor Relations → Events → Annual General Meeting.
The next ordinary Annual General Meeting will take place on 20 June 2012 at the Austria Center Vienna. For the 2011 fi nancial year the Management Board will propose to the Annual General Meeting the distribution of a dividend of € 1.05 per share; this represents a total dividend of € 205 million. Subject to approval by the Annual General Meeting, the dividend will be paid to shareholders on 27 June 2012, which will also be the ex-dividend date.
Since the merger of Raiff eisen International with the principal business areas of RZB, Group Investor Relations has been responsible not only for services to equity investors and analysts, but also for maintaining relationships with debt investors and analysts. A great deal of information was required, particularly by the latter, as a result of the two successfully placed benchmark issues and the placement of a lower tier 2 issue in 2011. To this end the Investor Relations Team participated in 18 roadshows in Amsterdam, Bologna, Cologne, Frankfurt, Helsinki, London, Milan, New York, Paris, Singapore, Stockholm and Zurich.
There was a particularly strong interest in the RBI Investor Presentation in London as part of the results announcement for the 2010 fi nancial year. More than 110 analysts and equity and bond investors, as well as members of the RBI Management Board and the Investor Relations Team participated in this event, which was marked by intense audience interest and a detailed discussion.
As a major stock exchange player, RBI took part in a UBS conference in New York in May, where the presentation to an audience of over 100 was followed by numerous one-on-ones. In addition, RBI management completed a two-week roadshow, which opened on 15 September with the invitation of over 50 participants to an investor lunch in Vienna. Following the opening, the Management Board gave a series of presentations in London, Warsaw, Washington DC and New York.
Further roadshows – in total 20 – were conducted in Frankfurt, Geneva, Kitzbühel, Paris, Stockholm, Zurich and Zürs. The investor relations activities in 2011 closed with visits to investor conferences in New York and London.
Alongside personal contact, RBI off ers comprehensive information on its Investor Relations website at www.rbinternational.com → Investor Relations. In addition to annual and interim reports, presentations and information on all aspects of the RBI shares, there are also live webcasts of events. Moreover, publications can be ordered and you can register with the RBI e-mail service for investors and potential investors.
| 29 March 2012 | Annual Report 2011, Analyst Conference, Conference Call |
|---|---|
| 30 March 2012 | RBI Investor Presentation, London |
| 10 May 2012 | Start of Quiet Period |
| 24 May 2012 | First Quarter Report, Conference Call |
| 20 June 2012 | Annual General Meeting |
| 27 June 2012 | Ex-Dividend and Dividend Payment Date |
| 15 August 2012 | Start of Quiet Period |
| 29 August 2012 | Semi-Annual Report, Conference Call |
| 14 November 2012 | Start of Quiet Period |
| 28 November 2012 | Third Quarter Report, Conference Call |
| E-mail: | [email protected] |
|---|---|
| Internet: | www.rbinternational.com → Investor Relations |
| Phone: | +43-1-71707 2089 |
| Fax: | +43-1-71707 2138 |
Raiff eisen Bank International AG Group Investor Relations Am Stadtpark 9 1030 Vienna Austria
RBI attaches great importance to responsible and transparent business management in order to deepen and maintain understanding and trust with its various stakeholders, including capital market participants in particular. To this end it undertakes to adhere to the Austrian Corporate Governance Codex (ACGC) as amended in January 2010. The ACGC is publicly available on the website of the Austrian Working Group for Corporate Governance (www.corporate-governance.at) and from the RBI website (www.rbinternational.com → Investor Relations → Corporate Governance).
Transparency is central to corporate governance and is of particular importance to RBI. Its Corporate Governance Report is divided into sections following the legal guidelines of Section 243b of the Austrian Commercial Code (UGB), and is based on the structure set forth in Appendix 2 of the ACGC.
The ACGC is organized into L, C and R Rules. L Rules (Legal Requirements) are based on compulsory legal requirements. C Rules (Comply or Explain) should be observed; any deviation must be explained and justifi ed in order to ensure conduct that complies with the Codex. R Rules (Recommendations) have the character of recommendations; non-compliance does not need to be reported or justifi ed.
RBI deviates from the following C Rules, but achieves conduct in accordance with the Codex through the following explanations and justifi cations:
C Rule 31: RBI deviates from C Rule 31 of the ACGC, which provides for the separate publication of the remuneration, both of the fi xed and performance-based, paid to individual members of the Management Board. Remuneration is published by RBI for the Management Board as a whole. Individual remuneration amounts are not published for reasons of data privacy and out of consideration for the individual Management Board members' right to privacy.
C Rule 45: RBI deviates from C Rule 45, which provides a non-competition clause for members of the Supervisory Board. RBI is a company of the Raiff eisen Bankengruppe Österreich (RBG), which is also a majority shareholder through its central institution, the RZB. Some members of the Supervisory Board therefore also exercise duties in corporate functions in RBG banks. A number of members of the Supervisory Board have duties in corporate functions in other banks and fi nancial services institutions. In this way, know-how and experience specifi c to the industry are applied in exercising the control function of the Supervisory Board, to the benefi t of the company.
Corresponding to R Rule 62 of the ACGC, as in previous years, the company commissioned an external evaluation by the research company Univ.Prof.DDr. Waldemar Jud Corporate Governance Forschung CGF GmbH. The report on this external evaluation is publicly available on www.rbinternational.com → Investor Relations → Corporate Governance → Examination of CG Codex.
The 2011 fi nancial year was shaped, as was the previous year, albeit with less intensity, by the merger of Raiff eisen International with the principal business areas of RZB. Measures were taken in relation to the internal control system and the restructuring of the organization. The framework of Group and company directives constitutes the key element of the internal control system. The focus in 2011 was on improving the quality and user-friendliness of existing directives. To this end, existing regulations were tightened, and, where possible, consolidated in higher-level units with a common theme. A stricter review process was also implemented and the access to the underlying database was further improved. Additionally, Operations & IT was restructured and merged with the executive division of Retail Banking due to the downsizing of the RBI Management Board.
In the 2011 fi nancial year the Management Board consisted of seven members:
| Management Board member | Year of birth | Original appointment | End of term |
|---|---|---|---|
| Herbert Stepic, | 1946 | 14 June 2001 | 31 December 20151 |
| Chairman | |||
| Karl Sevelda, | 1950 | 22 September 2010 | 31 December 20151 |
| Deputy Chairman | |||
| Aris Bogdaneris | 1963 | 1 October 2004 | 31 December 20151 |
| Patrick Butler | 1957 | 22 September 2010 | 15 April 20122 |
| Martin Grüll | 1959 | 3 January 2005 | 31 December 20151 |
| Peter Lennkh | 1963 | 1 October 2004 | 31 December 20151 |
| Johann Strobl | 1959 | 22 September 2010 | 31 December 20151 |
1 At the Supervisory Board meeting held on 7 June 2011, all mandates of the Management Board members were extended until 31 December 2015.
2 After the withdrawal of Patrick Butler on his own accord, the Supervisory Board appointed Klemens Breuer as the successor in this function for the period of 16 April 2012 to 31 December 2015.
Members of the Management Board held seats on the Supervisory Board or comparable functions, Board functions, management mandates and investments in the following domestic and foreign companies that are not included in the consolidated fi nancial statements:
| ■ Herbert Stepic: | OMV AG (Supervisory Board member) |
|---|---|
| Oesterreichische Kontrollbank AG (Supervisory Board member) | |
| "NONUSDECIMUS" FRANKE IMMOBILIEN HANDEL KG (shareholder) | |
| "SEPTIMUS" FRANKE IMMOBILIEN HANDEL KG (shareholder) | |
| H. Stepic F.C. GmbH (shareholder) | |
| ■ Karl Sevelda: | Bene Private Foundation (Management Board member) |
| BestLine Private Foundation (Management Board member) | |
| BENE AG (Supervisory Board member) | |
| Milletertius Kreihsler Immobilienhandel KG (shareholder) | |
| "SECUNDUS" FRANKE IMMOBILIEN HANDEL KG (shareholder) | |
| Michael Stranz Immobilienverwaltung Gamma KG (shareholder) | |
| ■ Johann Strobl: | Raiff eisen Leasing Management GmbH (Supervisory Board member) |
| Raiff eisen Zentralbank Österreich AG (Management Board member) | |
| Österreichische Raiff eisen-Einlagensicherung eGen (Management Board member) | |
| ■ Patrick Butler: | Wiener Börse AG (Supervisory Board member) |
| CEESEG AG (Supervisory Board member) | |
| ■ Aris Bogdaneris: | Visa Global Advisory Board (Advisory Council) |
| ■ Martin Grüll: | Stefan Stolitzka Private Foundation (Management Board member) |
During the fi nancial year 2011, the Supervisory Board comprised:
| Supervisory Board member | Year of birth | Original appointment | End of term |
|---|---|---|---|
| Walter Rothensteiner, Chairman |
1953 | 11 May 2001 | Annual General Meeting 2016 |
| Erwin Hameseder, First Deputy Chairman |
1956 | 8 July 20101 | Annual General Meeting 2015 |
| Ludwig Scharinger, Second Deputy Chairman |
1942 | 8 July 20101 | Annual General Meeting 2015 |
| Markus Mair, Third Deputy Chairman |
1964 | 8 July 20101 | Annual General Meeting 2015 |
| Stewart D. Gager | 1940 | 24 January 2005 | Annual General Meeting 2014 |
| Kurt Geiger | 1946 | 9 June 2009 | Annual General Meeting 2014 |
| Hannes Schmid | 1953 | 8 July 20101 | Annual General Meeting 2015 |
| Johannes Schuster | 1970 | 8 July 20101 | Annual General Meeting 2015 |
| Friedrich Sommer | 1948 | 8 July 20101 | Annual General Meeting 2015 |
| Christian Teufl | 1952 | 8 July 20101 | Annual General Meeting 2015 |
| Martin Prater2 | 1953 | 10 October 2010 | Until further notice |
| Rudolf Kortenhof2 | 1961 | 10 October 2010 | Until further notice |
| Peter Anzeletti-Reikl2 | 1965 | 10 October 2010 | Until further notice |
| Sabine Chadt2 | 1970 | 10 October 2010 | Until further notice |
| Helge Rechberger2 | 1967 | 10 October 2010 | Until further notice |
Eff ective from 10 October 2010
Delegated by the Works Council
In accordance with C Rule 53 of the ACGC, the Supervisory Board of RBI prescribed the following criteria for the independence of the members of the company's Supervisory Board:
Company circumstances and the mere exercise of the function of a Board member or managing director by a Super visory Board member does not, as a rule, lead to the company concerned being regarded as a "company in which a Supervisory Board member has a considerable fi nancial interest," to the extent that circumstances do not support the presumption that the Supervisory Board member derives a direct personal advantage from doing business with the company.
The Supervisory Board member shall not have been an auditor of the company, or a shareholder or an employee of the auditor in the previous three years.
In accordance with the criteria for the independence of Supervisory Board members, all RBI Supervisory Board members are considered independent.
Stewart D. Gager and Kurt Geiger, as members of the Supervisory Board, are neither shareholders with a share of greater than 10 per cent, nor do they represent the interests of such shareholders. They are therefore "free fl oat representatives" according to C Rule 54 of the ACGC 2010.
Members of the Supervisory Board had the following additional Supervisory Board mandates or comparable functions in domestic and foreign companies listed on the stock exchange:
■ Walter Rothensteiner: UNIQA Versicherungen AG ■ Erwin Hameseder: AGRANA Beteiligungs-AG, STRABAG SE, UNIQA Versicherungen AG, Südzucker AG, Flughafen Wien AG (chairman as of 31 August 2011) ■ Ludwig Scharinger: voestalpine AG, Austria Metall AG (as of 31 March 2011) ■ Christian Teufl : AGRANA Beteiligungs-AG, VK Mühlen AG ■ Hannes Schmid: UNIQA Versicherungen AG ■ Kurt Geiger: Demir Bank OJSC
The rules of procedure of the Supervisory Board govern its organization and allocate particular tasks to the Working, Audit and Personnel Committees. These committees are composed as follows:
| Chairman |
|---|
| First Deputy Chairman |
| Second Deputy Chairman |
| Third Deputy Chairman |
| Member |
The Management Board of RBI leads the company according to clearly defi ned goals, plans and guidelines on its own authority, with a focus on future-oriented business management in line with modern business principles. In this way it constantly pursues the good of the company and considers the interests of shareholders and employees.
The fi elds of activity of the members of the Management Board have been defi ned by the Supervisory Board, without prejudice to the general responsibility of the Management Board, as follows:
The Management Board manages the company's business in accordance with the law, the Articles of Association and the Management Board's rules of procedure. The weekly meetings of the Management Board are convened and led by the Chairman, and enable the mutual information gathering and decision-making in all matters that require the Board's approval. The rules of procedure of the Supervisory Board and the Management Board contain information and reporting duties of the Management Board as well as a catalog of measures that require the approval of the Supervisory Board.
The rules of procedure of the Management Board and of the Supervisory Board and its committees outline the business management measures that require the approval of the Supervisory Board or of the appropriate committee.
The Working Committee is responsible for all matters that are brought before it by the Supervisory Board. Thus it is called on to approve matters not reserved for the Supervisory Board. In particular, these include the creation and dissolution of subsidiaries and the acquisition of shares up to a certain book value, the conclusion and termination of syndicate and voting agreements with shareholders, the execution of functions in the management bodies of other companies by members of the Management Board, and the appointment of persons to the Management Boards and supervisory bodies of banks within the Group. Furthermore, the Working Committee approves the acceptance of operational banking risk above a certain level.
The Personnel Committee concerns itself with the remuneration of members of the Management Board and the contents of their employment contracts. In particular, it is responsible for approving the bonus payments and allocation of shares to members of the Management Board through the Share Incentive Program.
The Audit Committee oversees the accounting process and the eff ectiveness of the company's internal control-, audit- and risk management systems. Its tasks include supervising the annual audit of the fi nancial statements and of the consolidated fi nancial statements, as well as checking and supervising the independence of the Group's auditors, in particular with respect to the additional work performed for the audited company. The Committee audits the annual fi nancial statements, the management report, the consolidated fi nancial statements and the Group management report, and is responsible for the preparation of its fi ndings; it also audits the proposal for the appropriation of earnings and the Corporate Governance Report. It presents a report on the results of its audits to the Supervisory Board. The Committee is also responsible for preparing the recommendation of the Supervisory Board for the selection of the external auditor and bank auditor. Furthermore, the Audit Committee discusses the content of the management letter and the report on the eff ectiveness of the risk management system.
In the period under review, the Supervisory Board held fi ve meetings; in addition to this the Management Board informed the Supervisory Board regularly, promptly and fully concerning all relevant matters of the company's performance, including the risk position and risk management of the company and key Group companies, particularly at important junctures.
The Working Committee held eight meetings in the 2011 fi nancial year. The Audit and the Personnel Committee each held two meetings.
Further information on the activities of the Supervisory Board and its committees can be found in the Supervisory Board's Report.
The following amounts were paid to the Management Board of RBI:
| in € thousands | 2011 | 2010 |
|---|---|---|
| Fixed and performance-based remuneration | 7,545 | 8,191 |
| Of which amounts from affi liated companies (Supervisory Board remuneration) |
144 | 732 |
| Payments to pension funds and reinsurance policies | 1,703 | 183 |
| Share-based payments (performance-based) | 373 | 156 |
| Total | 9,621 | 8,530 |
The table contains fi xed and performance–based remuneration, including compensation for functions in the management bodies of associated companies, bonus payments and benefi ts in kind. In the fi nancial year the share of performancebased components amounted to 10 per cent (2010: 1.9 per cent).
The performance-based components of the Management Board's remuneration normally consist of bonus payments for 2010 that are linked to the achievement of the company's goals relating to profi t after tax, return on risk-adjusted capital (RORAC) and the cost/income ratio, as well as the achievement of annually agreed personal goals and the value of an allocation of shares under the Share Incentive Program (SIP) (see note (34) equity share-based remuneration). The bonus payments for 2010 for three members of the Management Board who had transferred from Raiff eisen Zentralbank Österreich Aktiengesellschaft (RZB) to RBI were measured in accordance with a criterion defi ned by RZB on the basis of return on equity (ROE). In accordance with the contractual provisions applicable to these persons up until the end of 2010, bonus payments totaling € 940,500 were calculated and will be due for payment in 2012 (€ 297,000) and 2013 (€ 643,500). The amount actually paid will be determined at the discretion of the Personnel Committee of RBI's Supervisory Board. The members of the Management Board coming from the former Raiff eisen International Bank-Holding AG (Raiff eisen International) who had waived bonus payments for 2010 were granted a non-recurring voluntary payment of a total of € 1,400,000, which is being executed in accordance with the system for deferred bonus payments described under note (34) equity.
It should be noted that the Management Board remuneration paid in 2011 is not directly comparable with that for 2010, as two members left the Management Board and three members transferred from RZB to RBI in 2010.
In accordance with Section 39 (2) in conjunction with Section 39b of the Austrian Banking Act (BWG) including annexes (Austrian provisions for the implementation of Section 22 (2) in conjunction with Annex V Part 11 of Directive 2006/48/EC in the version enacted by Directive 2010/76/EU), RBI's Supervisory Board approved the "General Principles of the Remuneration Policy and Practice" in 2011, monitors these regularly and is responsible for implementing them. Remuneration of the Management Board and other "risk personnel" must comply with these principles. In particular, the new principles will be applied to bonus payments for 2011 and subsequent years.
In 2011 the third tranche of the SIP (Share Incentive Program - SIP, 2008 tranche) matured. In accordance with the terms and conditions of the program (published in "euro adhoc" on 29 May 2008), the number of shares actually transferred was as follows:
| Group of persons | Number of due shares |
Value at share price of € 39.00 at the allotment day (12/4/2011) in € |
Number of actually transferred shares |
|---|---|---|---|
| Members of the Management Board | |||
| of RBI | 11,839 | 461,721 | 7,866 |
| Members of the Management Boards | |||
| of bank subsidiaries affi liated with RBI | 21,348 | 832,572 | 18,244 |
| Executives of RBI and | |||
| other affi liated companies | 5,515 | 215,085 | 3,028 |
In order to avoid legal uncertainties and in accordance with the program's terms and conditions, eligible employees in two countries were given a cash settlement instead of an allotment of shares. In Austria the eligible parties were granted the option of accepting a cash settlement in lieu of half of the matured shares in order to off set the wage tax payable at the time of transfer. Therefore, fewer shares were actually transferred than the number that had matured. The portfolio of own shares was subsequently reduced by the lower number of shares actually transferred.
Under the SIP, a new tranche has hitherto been issued each year - including also in 2011. However, because of the merger of Raiff eisen International with the principal business areas of RZB, no SIP tranche was issued in 2010. This means that on the balance sheet date, contingent shares for only two tranches were allocated. As of 31 December 2011 the number of these contingent shares was 608,964 (of which 370,092 were attributable to the 2009 allocation and 238,872 to the 2011 allocation). The number of contingently alloted shares originally announced changed due to various personnel alterations within Group units and the maturing of the 2008 SIP tranche, and is aggregated in the following table:
| Group of persons | Number of contingently alloted shares as at 31/12/2011 |
Minimum of allotment of shares |
Maximum of allotment of shares |
|---|---|---|---|
| Members of the Management Board | |||
| of RBI | 197,135 | 59,141 | 295,703 |
| Members of the Management Boards | |||
| of bank subsidiaries affi liated with RBI | 287,754 | 86,326 | 431,631 |
| Executives of RBI and | |||
| other affi liated companies | 124,075 | 37,223 | 186,113 |
No shares were repurchased for the SIP in 2011.
For six members of the Management Board essentially the same rules apply as for employees, which provide for a basic contribution to a pension fund on the part of the company and an additional contribution, if the employee makes his own contributions in the same amount. One member of the Management Board has a performance–based pension benefi t. For four members of the Management Board, additional individual pension benefi ts apply, which are fi nanced by a reinsurance policy. One member of the Management Board has been granted a further individual pension commitment, which is being funded by a single premium under a reinsurance policy (in an amount of € 1,500,000).
In the event of the termination of their function or service contract and departure from the company, two members of the Management Board are entitled to severance payments in accordance with the Salaried Employees Act and the Banking Sector Pay Scale Agreement, two members in accordance with contractual agreements and three members in accordance with the Employee Benefi t Act. In principle, the severance payment claims under the Salaried Employees Act or contractual agreements expire, with the exception of one member of the Management Board, when the employee terminates the employment relationship. In the case of one member of the Management Board, existing severance payment claims were converted in connection with the merger-related changes. Corresponding payments are being made in part in 2011 and 2012; in the 2011 fi nancial year, these payments came to € 2,022,022. Furthermore, protection is in place against occupational disability risk through one pension fund and/or on the basis of an individual pension benefi t, which is secured by a reinsurance policy. The contracts for members of the Management Board are concluded for the duration of their term in offi ce or are limited to a maximum of fi ve years. In case of a premature termination of offi ce by a member of the Management Board without cause, the severance payments will not exceed the remuneration of two years.
The Annual General Meeting on 8 June 2011 passed a resolution concerning the annual remuneration for the members of the Supervisory Board for the 2010 fi nancial year totaling € 422,500. Attendance fees were not paid.
| in € | 2010 |
|---|---|
| Chairman of the Supervisory Board | 70,000 |
| Deputy Chairman of the Supervisory Board | 60,000 |
| Member of the Supervisory Board | 50,000 |
In the 2011 fi nancial year, a D&O (directors and offi cers) pecuniary damage and liability insurance policy was concluded with UNIQA Sachversicherung AG for the Management Board and the Supervisory Board, the cost of which will be carried by the company.
The Annual General Meeting for the 2010 fi nancial year was held on 8 June 2011 at the Austria Center Vienna. The next Annual General Meeting for the 2011 fi nancial year will take place on 20 June 2012. The convening notice will be published a minimum of 28 days before the Annual General Meeting in electronic form and in the Wiener Zeitung's offi cial register.
The shareholders as owners of the company exercise their rights by voting at the General Meeting. The principle of "one share, one vote" applies. Accordingly, there are no restrictions on voting rights; all shareholders have equal rights. Every share confers one vote; registered shares have not been issued. The shareholders may exercise their voting rights themselves or by means of an authorized agent. Pursuant to the Articles of Association, the shareholder RZB is granted the right to nominate up to one third of the Supervisory Board members to be elected by the Annual General Meeting. In the event that RZB makes use of its right to nominate, the number of Supervisory Board members to be elected by the Annual General Meeting would be reduced accordingly. Aside from this restriction, the shares are subject to the abovementioned principle.
The opening session and the Management Board's speeches are streamed live on the internet at www.rbinternational.com → Investor Relations → Events → Annual General Meeting, and can also be viewed there at a later time. This creates maximum transparency also for those shareholders who cannot attend the Annual General Meeting in person.
One of Raiff eisen's fundamental values has always been to off er equal opportunities for equal performance regardless of gender or any other factors. For this reason, it is important to take suitable measures already during the recruiting process to ensure that the same standards are applied in the selection of staff . The relatively high proportion of 68 per cent of female employees at RBI underscores the effi cacy of these activities. A corresponding framework has been established within the company to continue promoting the advancement of women; in this connection, existing programs have been strengthened and extended. These programs particularly seek to increase the ability to reconcile family and career. Among other things, they include fl exible working hours, part-time models and teleworking. These models are implemented in nearly all the countries in which the Group is active, in accordance with the local statutory provisions. They are supplemented with further national initiatives, such as the company kindergarten with employee–friendly hours of operation at the Vienna site, or the "Mother Care" program at Raiff eisenbank Polska S.A., which supports women from the initial announcement of pregnancy until the child's fi rst birthday.
The Management Board is committed to consistently promoting the existing initiatives as well as maintaining its openness to new initiatives, in order to further increase the percentage of women in highly qualifi ed positions.
As of the end of 2011, around 55 per cent of the functions with staff responsibility in RBI Group are held by women; in the case of Tier 2 and Tier 3 management, this fi gure equals around 47 per cent. Training and continuing education programs are specifi cally off ered to promote management skills and meet with a favorable response. 27 per cent of the participants in the Group-wide top-management program "Execute" were women. Female employees accounted for 49 per cent of the restructured Advanced Leadership Training program for middle management.
Currently, 20 per cent of Board positions throughout the RBI Group are held by women. The fact that the proportion of female Board appointments stood at 43 per cent in 2011 demonstrates RBI's successful promotion of women.
The internet and in particular, the company website, play an important role for RBI with regard to open communication with shareholders and their representatives, customers, analysts, employees and the interested public. Thus, among other things, the website off ers regularly updated information about the following:
Both the Management Board and the Supervisory Board of RBI are required to disclose any potential confl icts of interest.
Members of the Management Board must therefore disclose to the Supervisory Board any signifi cant personal interests in transactions involving the company and Group companies, as well as any other confl icts of interest. They must also inform the other members of the Management Board. Members of the Management Board who occupy management positions within other companies must ensure a fair balance between the interests of the companies in question.
Members of the Supervisory Board must immediately report any potential confl icts of interest to the Chairman of the Supervisory Board. In the event that the Chairman himself should encounter a confl ict of interest, he must report this immediately to the Deputy Chairman. Company agreements with members of the Supervisory Board that require members to perform a service for the company or for a subsidiary outside their duty on the Supervisory Board (Section 228(3) UGB) in exchange for not-insignifi cant compensation require the approval of the Supervisory Board. This also applies to agreements with companies in which a member of the Supervisory Board has a signifi cant fi nancial interest. Furthermore, related party transactions as defi ned by Section 28 of the Austrian Banking Act (BWG) require the approval of the Supervisory Board.
RBI's accounting complies with the provisions of the International Financial Reporting Standards (IFRS). The annual fi nancial statements of RBI are prepared in accordance with the regulations of the Austrian Banking Act (BWG) in conjunction with the Austrian Commercial Code (UGB). The consolidated annual fi nancial statements are published within the fi rst four months of the fi nancial year following the year under review; interim reports are published no later than 56 days after the end of the respective period under review.
The Annual General Meeting selected KPMG Austria GmbH Wirtschaftsprüfungs- und Steuerberatungsgesellschaft, Vienna as its external auditor and bank auditor for the 2011 fi nancial year. KPMG has confi rmed to RBI that it has the certifi cation of a quality auditing system. It has also declared that there are no grounds for disqualifi cation or prejudice. The auditor prepares the statutory audit report and is responsible for exercising its disclosure obligations. The auditor also prepares a management letter to the Management Board, which includes details of weaknesses within the company. The management letter and the report on the effi ciency of the risk management is presented to the Chairman of the Supervisory Board, who shall ensure that the management letter is addressed by the Audit Committee and is reported on in the Supervisory Board.
Vienna, March 2012
The Management Board
Aris Bogdaneris Patrick Butler
Herbert Stepic Karl Sevelda
Martin Grüll Peter Lennkh Johann Strobl
The values which guide all Raiff eisen organizations to this day date back to the social reformer Friedrich Wilhelm Raiff eisen (1818–1888). He saw it as his duty to alleviate economic hardship and, in founding the fi rst cooperative banking association in 1862, he laid the foundation for today's global organization of Raiff eisen cooperatives. Principles such as the willingness to provide mutual assistance as well as the self-administration of the cooperative by its members have remained valid to this day. The Raiff eisen structure of values has consistently provided a stable foundation – even in times of change.
Social and corporate responsibility form an integral and self-evident part of the way RBI conducts its business. True to the motto, "We create sustainable success," active commitment contributes towards a sustainable development of both the company and society alike. Thereby, the responsibility extends to all three pillars of sustainability: business, environment and society. Across all business divisions, RBI remains dedicated to its goal of being a responsible bank, fair partner and committed corporate citizen.
A review of key measures and current initiatives is set out below. Detailed information on RBI's activities and its sustainability goals may be found in the RZB Group's 2010 Sustainability Report, available for download at www.rzb.at/ CorporateResponsibility/EN. The RZB Group publishes its Sustainability Reports every two years, with the content being based on the standards of the Global Reporting Initiative (GRI). The next report is scheduled to appear in 2013.
RBI's core business and fi nancial services are consciously oriented towards its future sustainability. RBI's investments, commitments and business dealings are structured in such a way that they positively contribute to sustainable development of all regions and economies in which RBI conducts its operations. This is, in RBI's view, the most eff ective lever for sustainable growth.
RBI's pledge to conduct its business management in a transparent and responsible manner is disclosed in the Code of Conduct (CoC), which is binding Group-wide. It defi nes RBI's core values and builds the foundation for a legally compliant and ethically minded corporate culture. Moreover, it ensures that the highest ethical standards are maintained. By the same measure, the Compliance Department exercises a comprehensive control function in the banking group as a whole. Among other things, the CoC dictates that no business may be conducted which could have a negative eff ect on the environment. Business dealings in sensitive areas such as weapons or nuclear power are likewise off limits. RBI also strictly adheres to international specifi cations concerning embargoes and trade restrictions.
The regularly updated CoC is available on RBI's website, as well as on the websites of its network banks in their respective languages. It was last revised in 2011.
RBI is a member of the UN Global Compact and, in its capacity as a listed company, has committed itself to comply with the Austrian Corporate Governance Codex. The Corporate Governance Report may be found from page 33 onwards.
A central pillar of RBI's business practices is the respectful interaction with all stakeholders in the spirit of partnership. An active and open dialog with all stakeholders provides the essential basis, which also serves to broaden the perspectives of the company and its decision-makers. An open exchange thus not only broadens the perspective on relevant topics for stakeholders, but also on RBI's internal and external perception.
The goal of this dialog is to gain a deeper, more meaningful mutual understanding. To this eff ect, a stakeholder council of the banking group was held in autumn 2011 for the second time, at which selected internal and external stakeholders from diff erent areas and organizations discussed their expectations regarding the company. At this event, a forward-looking development path for the company was jointly charted out.
"Helping people to help themselves" – one of Raiff eisen's founding principles – involves not only material support, but also an educational mandate to improve the knowledge of customers and non-customers on fi nancial aspects. In order to meet this challenge, RBI has taken extensive measures in all of its markets, which are either implemented by the relevant local bank on its own or in cooperation with specialized partners. In Bosnia and Herzegovina, Raiff eisen Bank is making an important contribution through its so-called "Financial News" and the "Alphabet of Economics," which receives regular coverage both on television and in the print media.
The Hungarian Raiff eisen Bank keeps its customers well informed on its products and services in easily understandable terms and, with its "I save" initiative, aims at providing comprehensive information on a range of topics, such as building up fi nancial reserves. Another initiative called "Everyday Financials" encompasses a wide spectrum of the fi nancial sector. As one of its partners, Raiff eisen Bank off ers practical knowledge about managing money and fi nancial services to the general public.
One declared objective of RBI is to promote environmental and climate protection and to take positive action against climate change. The creation of a meaningful connection between a profi t-oriented business policy and climate protection represents a major ecological and economic challenge. In the environmental management of the company itself, the highest priority has been assigned to climate protection measures, a subject area that presents considerable risks, but also off ers great opportunities.
A major focus for the Group is the sparing use of resources and materials. This entails the use and acquisition of 'green' materials on the one hand, and the effi cient use of resources combined with the best possible waste and emissions avoidance on the other. The most economical use of means of transport is just as much a priority as an effi cient energy supply which primarily makes use of renewable resources.
The Carbon Disclosure Project (CDP), launched in 2000, is aimed at increasing transparency in the reporting of greenhouse gas emissions. Since 2011, RBI has voluntarily provided information on its CO2 emissions, business-related climate risks and reduction targets as part of this program. The published data is compiled in the so-called Carbon Disclosure Leadership Index, which consists of input from the 30 highest scoring companies based on the criterion of completeness of reporting. With a score of 85 out of a possible 100 points, RBI ranks 13th and is thus the best ATX company. All of the information entered is available at www.cdproject.net.
In November 2011 the "I Love Velo" cooperation project between the Romanian Raiff eisen Bank and NGO Green Revolution was honored with the ENERGY GLOBE Award in the Upper Austrian city of Wels. Raiff eisen in Romania had initiated an internal project back in 2009 to encourage employees to ride bikes. In order to reach a wider public, Raiff eisen – in conjunction with Green Revolution – launched the "I Love Velo" program, Romania's fi rst free of charge bike-sharing project. In 2010, the Bank had also received the "Silver PR Award for Excellence" in the category of "Social Responsibility and Stakeholder Dialogue" for this project.
As a major economic force in the markets in which it conducts business, RBI is committed to upholding the responsibility of serving society as is demonstrated by its extensive measures and support for various initiatives. Below is a brief description of a few of the current RBI projects.
In September 2011, RBI organized its fi rst Community Day in cooperation with Caritas Vienna. A room for children and youths at the Caritas "House Amadou," a shelter for refugees and migrants, was redesigned on a Saturday. More than 30 employees – some of them with their children – voluntarily took part in "Project Rocking Horse," as the venture was called. The costs for the required materials were funded in part by RBI. The event was rounded off with a communal barbecue.
Several network banks also support Volunteer Days. The Czech Raiff eisen Bank, for example, played post offi ce for the children of the children's home "Klokanek" and their letters to Santa. Approximately 80 of the wishes posted were fulfi lled.
The children protection organization "die möwe" was established in 1989. As the fi rst social organization of its kind in Austria, it is dedicated to addressing the taboo topic of child abuse and mistreatment, off ering help for mistreated and abused children and young people. The Austrian Children Protection Award MYKI, which is presented in fi ve categories, was established in 2011 in order to contribute in this way to improving child protection and welfare. As the main sponsor, Raiff eisen presented the prize in the category of "Material security and social integration," two elements which RBI, as a fi nancial service provider, regards as very essential.
The H. Stepic CEE Charity, a non-profi t association, was founded in 2006 to improve living conditions for children, youths and women in Central and Eastern Europe. The voluntary and honorary involvement of the Raiff eisen network ensures that help is delivered quickly, unbureaucratically and without administrative costs to where it is needed. Aid projects are realized together with partners such as Caritas, Hilfswerk, the Austrian Red Cross and the charity association "kleine herzen." In November 2011, the H. Stepic CEE Charity broke new ground by jointly hosting a fundraising dinner with "kleine herzen," at which € 106,000 was raised. In addition, the German-language cookbook "Herzensküche," featuring recipes from Central and Eastern Europe reinterpreted by twelve internationally renowned chefs who agreed to waive their fees, serves as a culinary vehicle for eff ectively channeling donations. Proceeds from the sale of the cookbook go to support construction of a family home for orphans in Ukraine.
RBI employs around 59,000 staff from over 50 countries. In view of such a high degree of diversity, equal opportunity and integration are as much a central component of corporate culture as is the fair treatment of all employees.
As an employer, RBI creates an environment in which it challenges its employees, while also promoting and supporting their individual skills and capabilities. RBI is fi rmly committed to the principle of merit while, however, also endorsing an open corporate culture in which employees are able to continue developing on both a professional and personal basis.
Detailed information relating to the area of Human Resources can be found from page 83 onwards.
2011 started off well but from spring onwards the eurozone economy became increasingly sluggish. In the fi rst quarter, real gross domestic product (GDP) was still rising at a rate of 0.8 per cent, while in each of the following two quarters it increased only by approximately 0.2 and 0.1 per cent, respectively. In the fourth quarter, the eurozone even slipped into recession. For 2011 as a whole, GDP growth of 1.5 per cent is expected. At an average 2.7 per cent, the infl ation rate in 2011 was signifi cantly higher than the ECB's offi cial target. The main cause for the rise in infl ation was an increase in energy prices.
The US economy had grown by 3.0 per cent in 2010, but in 2011 growth here also slowed down again. This was mainly due to the sharp rise in oil prices as a result of the Arab Spring, modest rises in wages and salaries and the exceptionally high unemployment relative to US standards, all of which dragged private consumption down, especially in the fi rst half of the year. Moreover, the steps taken to consolidate the budget slowed the momentum down. However, thanks to the lower rise in prices and higher capital expenditure by companies, the economy recovered in the second half of the year, with real US GDP growing by 1.7 per cent in 2011.
In the Central and Eastern European (CEE) countries, which in 2010 had already somewhat recovered from the fi nancial crisis, achieving economic growth of 3.5 per cent, the positive trend continued in 2011. Exports continued to be the main engine of growth while domestic demand slowed considerably almost everywhere. Public sector expenditure contributed modestly towards economic output in light of the budgetary consolidation measures being introduced in many places. The drag on the economy generated by events in the eurozone, however, slowed the generally positive growth in 2011.
Poland and Slovakia reported the highest growth in Central Europe in 2011. While Poland benefi ted once more from robust domestic demand, achieving solid growth of 4.3 per cent, Slovakia generated a growth rate of 3.3 per cent thanks to its strong export sector. As a result of massive cost-cutting eff orts, economic growth in the Czech Republic lost momentum somewhat in 2011, falling to 1.7 per cent. Slovenia's weak banking sector put a strain on its growth, which consequently amounted to minus 0.2 per cent. Hungary's strong export sector made up for its weak domestic demand, resulting in GDP growth of 1.7 per cent.
At 1.9 per cent, GDP growth in Southeastern European countries was positive in 2011 after having suff ered noticeably from the crisis with fi gures of minus 0.7 per cent in 2010 and minus 5.4 per cent in 2009. Governments, however, could do little to boost the economy in view of the strenuous budgetary constraints. Even though domestic demand remained at a low level, it still contributed to the reduction of current account defi cits. The main driving force behind a return to growth was exports, although they also dropped.
In 2011, the economy continued to recover in the Commonwealth of Independent States (CIS). At 4.3 per cent, Russian economic growth remained at the previous year's level, mainly as a result of the persistently high prices for fuels and other commodities. Strong domestic demand, robust exports and a solid harvest accounted for economic growth of 5.2 per cent in Ukraine. In contrast, economic growth in Belarus came to a virtual standstill in the second half of 2011 as a result of the country's economic problems.
Overall, a considerable slowdown in economic growth in Central and Eastern Europe is expected in 2012, mainly due to the signifi cant deterioration of the situation in the eurozone as a result of the sovereign debt crisis. Thanks to Russia acting as its engine of growth, the CIS region is likely to continue to record the strongest growth. As a global recession is not expected, prices for commodities, especially oil, will probably remain stable, which will support the region's economic model which is based on exports of commodities. By contrast, Southeastern Europe is expected to record a signifi cant drop in exports in view of its geographical proximity to the eurozone members in Southern Europe that are under serious pressure. Within Central Europe, Poland is forecasted to see positive economic growth in 2012, supported – as before – by largely stable domestic demand. The other economies in Central Europe are suff ering from a drop in foreign demand from the eurozone, which will probably push them back into recession in the fi rst half of 2012. Analysts do not expect a boost to the economy of the CEE region as a whole until the second half of the year when the situation in the eurozone is expected to improve.
| Country | 2010 | 2011e | 2012f | 2013f | |
|---|---|---|---|---|---|
| CE | Czech Republic | 2.7 | 1.7 | (0.2) | 1.4 |
| Hungary | 1.3 | 1.7 | (0.5) | 1.5 | |
| Poland | 3.9 | 4.3 | 2.8 | 3.7 | |
| Slovakia | 4.0 | 3.3 | 0.8 | 2.5 | |
| Slovenia | 1.4 | (0.2) | 0.0 | 1.5 | |
| CE | 3.2 | 3.1 | 1.4 | 2.7 | |
| SEE | Albania | 3.9 | 2.0 | 2.5 | 3.5 |
| Bosnia and Herzegovina | 0.7 | 1.9 | 0.0 | 2.0 | |
| Bulgaria | 0.4 | 1.7 | 1.0 | 2.5 | |
| Croatia | (1.2) | 0.2 | (1.0) | 1.0 | |
| Kosovo | 3.9 | 4.0 | 3.0 | 4.0 | |
| Romania | (1.6) | 2.5 | 0.5 | 2.5 | |
| Serbia | 1.0 | 2.0 | 0.0 | 1.0 | |
| SEE | (0.7) | 1.9 | 0.3 | 2.1 | |
| CIS | Belarus | 7.6 | 5.3 | 3.0 | 3.0 |
| Russia | 4.3 | 4.3 | 3.7 | 4.0 | |
| Ukraine | 4.2 | 5.2 | 3.5 | 4.0 | |
| CIS | 4.4 | 4.4 | 3.7 | 4.0 | |
| CEE | 3.5 | 3.7 | 2.6 | 3.4 | |
| Austria | 2.3 | 3.1 | 0.3 | 1.3 | |
| Germany | 3.6 | 3.1 | 0.0 | 1.1 | |
| Eurozone | 1.8 | 1.5 | (0.5) | 1.1 |
| Annual real GDP growth in per cent compared to the previous year | |||||
|---|---|---|---|---|---|
After the 2009 collapse in economic output (real GDP: minus 3.8 per cent), the Austrian economy performed very well in 2010 (real GDP up 2.3 per cent) as well as in the fi rst half of 2011. This economic expansion was driven by high growth in exports and an increase in investment. In the second half of 2011, however, growth slowed down considerably; in the fourth quarter real GDP even declined slightly year-on-year. Nevertheless, the good fi rst half year ensured strong growth for the full year (real GDP: plus 3.1 per cent). These generally positive trends led to a further decline in unemployment, which, compared to the eurozone, was already very low. In contrast, infl ation rose sharply to 3.5 per cent as a result of higher crude oil prices in the fi rst half of 2011 and government measures, such as tax increases. Infl ation, however, had passed its peak in September (Harmonized Index of Consumer Prices: 3.9 per cent p.a.).
Asia remained by far the most dynamic region in the world in 2011, although it was slowed down noticeably in the second quarter by the events in Japan. Investments and a credit expansion fueled domestic demand in China, leading to a 9.2 per cent increase in 2011 after a 10.4 per cent rise 2010. Signs of overheating, however, led to a rapid rise in infl ation which was countered by restrictive monetary policy measures. The Chinese government was equally restrictive in tackling the looming real estate bubble. The slowdown in economic growth that has been evident since the second half of 2011 is likely to continue in 2012. India also suff ered from high infl ation which stood on average at more than 9 per cent in 2011. Combined with a decrease in demand from Europe, this led to a slowdown in economic growth to 6.1 per cent in the fourth quarter of 2011, after 6.9 per cent in the third quarter and 7.7 per cent in the second quarter 2011.
The European sovereign debt crisis had already had a negative impact on the fi nancial markets in 2010 but the situation only deteriorated in 2011. Following Greece and Ireland, Portugal became the third country in the eurozone forced to resort to help from the EFSF/IMF safety net as of April 2011. While Ireland and Portugal were largely successful in implementing the restructuring programs negotiated with the EU and the IMF, it became increasingly clear as 2011 progressed that Greece would come nowhere near to meeting the targets it had agreed on for the consolidation of its budget. It soon became evident that another "rescue package" would have to be put together to avoid a default. EU fi nance ministers approved this second rescue package for Greece in July; in addition to further offi cial loans, it stipulated a "voluntary" agreement by private bondholders to give up 21 per cent of their claims.
The fear that participation by the private sector would lead to a wave of contagion spreading to countries like Spain and Italy became reality in August 2011. Measured by GDP, Italy is the second-most heavily indebted country in the eurozone after Greece and its government bonds came under particularly heavy pressure. Even intervention by the ECB, which added Italian and Spanish papers to the government bonds it was buying at the beginning of August, only gave short-term relief. By the time the contagion reached Italy and Spain, at the latest, the sovereign debt crisis had become systemic with major negative eff ects on the whole fi nancial sector and, in turn, on the real economy. To stop this downward spiral, eurozone heads of state and government agreed on a package of measures at the end of October. However, the plans for a coordinated capitalization of the European banking sector, a leveraging of the EU safety net (the EFSF) and an increase of the amount of claims to be given up by the private sector as agreed in the second package for Greece only led to a brief interruption in the sell-off of bonds issued by European peripheral states. The ECB's decision at the end of 2011 to improve the European banks' liquidity supply by issuing triennial refi nancing operations caused a more sustainable relief in the European bond markets.
The sovereign debt crisis in the eurozone continued to dominate movements in the euro and US dollar exchange rates in 2011, with the negative developments in the US (such as the downgrading of its credit rating and the blocking of the budget reforms) only playing a secondary role. At 1.31, the euro started the year at a relatively low level against the US dollar but gradually recovered in the fi rst few months – in view of hopes for progress on the sovereign debt crisis – reaching the peak of 1.49 EUR/USD at the beginning of May. As the debt crisis then escalated, and especially when it extended to countries like Italy and Spain in the summer, the euro weakened noticeably in the second half of the year, hitting its low of 1.29 EUR/USD at the end of December.
As a consequence of the euro debt crisis and the increased need for security by investors, the Swiss franc continued its upward trend against the euro that had started in the fall of 2007. The resulting strong franc increasingly became a problem for the Swiss export sector. In August the Swiss National Bank (SNB) initially tried to counter the franc's appreciation with a signifi cant expansion in liquidity. When these attempts failed and the Swiss currency briefl y came close to parity with the euro, the SNB decided at the beginning of September to introduce an exchange rate fl oor of 1.20 EUR/CHF. So far the SNB has managed to defend this mark without any problems.
CEE currencies had initially remained stable up to the middle of 2011, but lost ground as the sovereign debt crisis deteriorated from mid-August onwards. This particularly aff ected the liquid currencies in Central Europe (the Czech koruna, Hungarian forint and Polish zloty), which dropped heavily against the euro. The rise in risk aversion due to the lack of a solution to the eurozone's problems spilled over into CEE and, as during the fi nancial crisis, induced investors to treat the whole region indiscriminately.
The Polish zloty has been subject to particularly heavy market pressure since the beginning of the sovereign debt crisis in the eurozone. The reason behind this is the very high liquidity in the Polish currency and bond markets. However, interventions in the markets by the Polish authorities in the course of 2011 temporarily stabilized the zloty. The Czech koruna also fell sharply against the euro from August onwards, but the Hungarian forint was most aff ected: Political decisions and a downgrading of Hungary's credit rating pushed it back to its 2009 lows against the euro. While the currencies of countries in Central Europe were subject to strong fl uctuations, Southeastern European currencies did not fully refl ect the uncertainties and increase in risk aversion on a direct basis. However, indirect eff ects, such as a decline in foreign investment, were certainly noticeable and led, in particular in the second half of 2011, to a depreciation of the Croatian kuna, Romanian leu and Serbian dinar. This trend is likely to continue in 2012.
The shortage and higher cost of external fi nancing for banks and governments and the lower demand for credit – both due to banks' more restrictive lending policies – resulted in stagnant credit growth in CEE (minus 1.5 per cent year-on-year) in 2009. The situation recovered in 2010 with credit in CEE expanding by almost 14 per cent overall. In 2011, a 14 per cent credit growth is expected to be achievable once more. CEE credit expansion rates were, however, generally much lower in 2010 and 2011 than in the years preceding the crisis from 2004 to 2008.
The positive trend continued in the fi rst half of 2011 and lending increased slightly, above all for corporate customers. Faced with stricter lending standards, however, CEE credit growth weakened noticeably in the second half of 2011. This development is likely to continue in 2012 in light of the challenging regulatory environment and economic trends, above all in the fi rst half of the year. Current forecasts for 2012 expect lending to expand only by 5 to 10 per cent in Central Europe and the CIS, and by 1 to 3 per cent in Southeastern Europe.
After rising by only 0.6 per cent in 2009, the banking sector's total assets (expressed in euros) grew by 13 per cent in 2010 and 14 per cent in 2011. As with the credit growth, these growth rates were signifi cantly lower than in the pre-crisis years of 2004 through 2008. Over the next few years, percentage increases in total assets throughout the CEE region are forecast to be in the low single digits but diff ering widely between the various countries. For instance, a low double-digit percentage increase in total assets should still be possible in Russia over the next few years, while it is likely to be in high single digits in Central European countries (except for Hungary). In view of the challenging environment (such as high ratios of loans to deposits and a high level of lending in relation to the strength of the economy), percentage growth in total assets in Southeastern European countries is likely to only be in low single digits.
The fi nancing environment for CEE states improved signifi cantly in 2010 and the fi rst half of 2011, securing both refi nancing and new issues of sovereign debt on the local and global bond markets. Many countries took advantage of the favorable situation to pre-fi nance their requirements. Yields on local sovereigns trended sideways for a long time. This was partly due to the ongoing expansionary monetary policy in Western Europe and partly to the decline in risk premiums. At the same time, investors took a very diff erentiated view of the individual CEE countries on the debt market. Risk factors such as indebtedness, budget defi cits and political uncertainty were all refl ected in bond prices. This environment will continue to benefi t the CEE countries promoting reforms. Risk premiums for many CEE countries are currently lower than those for a number of eurozone economies such as Italy, Portugal or Spain. The fi nancing environment for CEE governments and banks, however, deteriorated signifi cantly in the second half of 2011, which means that support measures (involving the IMF) for individual CEE countries cannot be ruled out for 2012.
The consolidated fi nancial statements of RBI are prepared in accordance with the International Financial Reporting Standards (IFRS) as applied in the EU. RBI AG also prepares separate fi nancial statements in accordance with the Austrian Commercial Code (UGB) in conjunction with the Austrian Banking Act (BWG), which provide the formal basis of assessment for calculating dividend distributions and the tax assessment. For more information on the disclosures required by the UGB and BWG, please see the relevant sections of this Group management report, including the notes section.
The majority of RBI is indirectly held by Raiff eisen Zentralbank Österreich AG (RZB), which makes it part of the RZB Group. RZB held a stake of around 78.5 per cent at the end of 2011; the remaining shares were free fl oat. As of 31 December 2011, RBI's scope of consolidation comprised 135 Group units, including 21 banks and a number of fi nancial institutions and bank-related service providers. For information about the change in the scope of consolidation, please refer to the relevant sections in the notes.
RBI's profi t before tax for 2011 rose by 7 per cent to € 1,373 million. The performance of the individual earnings components in the income statement diff ered widely. Performance also varied at regional level. While many CEE countries – in particular Russia (up 63 per cent to € 434 million), Slovakia (up 51 per cent to € 185 million) and the Group Corporates segment (up 26 per cent to € 374 million) – achieved signifi cant growth in earnings, Hungary reported a loss before tax of € 375 million. The situation in Hungary is partly the result of measures taken at political level (legislation allowing early repayment of foreign currency mortgage loans at preferential rates) and partly of a further decline in the quality of the loan portfolio in the local Group units.
Net provisioning for impairment losses dropped sharply – in total by 11 per cent or € 131 million – in most countries with the exception of Hungary as a result of the ongoing improvement in the economic environment and actively managed measures to stabilize the loan portfolio. While signifi cantly fewer loan loss provisions had to be allocated in many countries, net provisioning for impairment losses in Hungary rose as a result of its economic and political situation by € 282 million to € 478 million, thus making up almost half of the loan loss provisioning throughout the Group. Net provisioning for individual loan losses at RBI stood at € 1,177 million, representing a year-on-year decline of around 2 per cent. Owing to releases of provisions for Russia, Hungary, Ukraine and Slovakia, there was a net release of portfolio-based loan loss provisions in the reporting year amounting to € 105 million. The net provisioning ratio based on average credit riskweighted assets fell by 28 basis points to 1.38 per cent. The NPL ratio – the proportion of non-performing loans in the loan portfolio – improved, falling for the fi rst time in several years by 0.3 percentage points to 8.65 per cent.
Year-on-year, net income from derivatives and designated liabilities turned positive and came to € 413 million. This was partly due to a € 258 million rise in net income from revaluations of derivative instruments entered into for steering purposes, in particular because of the yield curve becoming fl atter from the second quarter onwards. At the same time, the value of designated liabilities arising from own issues decreased as a result of the signifi cant widening in RBI's credit spread following the developments on the capital markets; this led to a valuation gain of € 184 million.
The increased volatility on the fi nancial markets caused by the European sovereign debt crisis is refl ected in the valuation losses on securities and participations and the € 278 million drop in net income from fi nancial investments to minus € 141 million.
The changed macroeconomic outlook for Ukraine and the rise in the discount rate used for valuations resulted in a partial impairment of goodwill at Raiff eisen Bank Aval of € 183 million. This left the bank with goodwill on its balance sheet of € 29 million at the end of 2011. The low goodwill stated on the balance sheets of the banks in Hungary (€ 3 million) and Slovenia (less than € 1 million) were written down in full. Total goodwill at year-end stood at € 408 million.
Operating income excluding impairment of goodwill rose by 1 per cent or € 72 million to € 5,475 million. Net interest income increased by 3 per cent, thus making up two thirds of operating income. Slight volume-based declines stood in contrast to an increase of the net interest margin by 10 basis points to 2.61 per cent. At € 1,490 million, net fee and commission income remained virtually unchanged compared to the previous year, while net trading income rose year-on-year by 11 per cent. This is mainly attributable to valuation gains owing to a change in the valuation model to adapt to the alteration in legislation for capital guarantees. Negative eff ects arose from hyperinfl ation accounting (for Belarus), which had to be applied for the fi rst time in the fourth quarter of 2011. At minus € 45 million, other net operating income (excluding impairment of goodwill) was short of the prior-year fi gure by € 51 million. This is mainly due to the introduction of the Austrian bank levy, which resulted in additional expenses for RBI of € 83 million. This was reported as other non-income related taxes under other net operating income.
General administrative expenses rose year-on-year by just under 5 per cent or € 141 million to € 3,120 million. The cost/ income ratio (excluding impairment of goodwill) increased as a result by 1.8 percentage points to 57.0 per cent. Staff expenses rose year-on-year by 6 per cent or € 87 million. This was caused particularly by market-related salary adjustments and bonus payments in a number of markets and by changes in legislation for social security contributions in Russia and Slovakia. The average number of staff rose by 1 per cent or 833 to 60,021, primarily as a result of increases in staff numbers in Ukraine, Russia and Romania. The biggest increases were reported in the Czech Republic, Ukraine and Russia. Yearon-year, other administrative expenses increased by 2 per cent or € 23 million. Major factors here were the rise in deposit insurance fees (up 16 per cent) and IT expenses (up 10 per cent). The number of business outlets fell by 33 to 2,928 in the reporting year. Expansion in the Czech Republic (plus 17) was off set by declines in Ukraine (minus 22), Serbia (minus 10) and Hungary (minus 10).
At € 399 million, income taxes were € 289 million higher than in the previous year. This is due to non-recurring eff ects with deferred taxes in the reporting year and in 2010. In 2011, the losses in Hungary could not be made fully deductible for tax purposes by recognizing tax loss carry-forwards and, in addition, gains on own liabilities increased deferred taxes. By contrast, 2010 brought some tax relief, particularly as a result of deferred tax income arising from the recognition of tax loss carry-forwards in Austria (€ 120 million); a change in tax legislation in Ukraine provided additional tax relief (€ 26 million). In total the eff ective tax rate rose from 8.6 per cent to 29.1 per cent. Without the one-off eff ects above, the eff ective tax rate would have been 20 per cent.
Compared to profi t after tax, profi t attributable to non-controlling interests fell to a sharply disproportionate extent by 93 per cent to minus € 6 million. This decline was primarily due to the losses in Hungary in which non-controlling interests had a share of around 30 per cent. In addition, the rises in earnings were largely attributable to Group units with few noncontrolling interests, if any. After deducting profi t attributable to non-controlling interests, the consolidated profi t accounted for by RBI amounted to € 968 million, which represents a decline of 11 per cent or € 120 million year-on-year.
Earnings on each of the 194.6 million shares outstanding amounted to € 3.95 in 2011 after € 4.56 in the previous year. The Management Board will propose to the Annual General Meeting in June 2012 that a dividend of € 1.05 per share be paid for 2011, as for 2010. This would result in a total payment of € 205 million.
Return on equity before tax, an important fi gure for measuring performance, stood unchanged yearon-year at 13.7 per cent. This is primarily due to the straight-line increase in the components used to calculate it. Besides profi t before tax, the average equity that underlies the calculation of ROE grew by 7 per cent to € 10,032 million. While retained earnings made a positive contribution, currency movements and dividend distributions had a dampening eff ect. Excluding the impairment of goodwill, at 15.6 per cent, ROE would have been higher year-on-year. Consolidated ROE – based on the capital attributable to RBI shareholders – fell as a result of higher taxes by 2.1 percentage points to 10.8 per cent. r r
Equity including non-controlling interests rose by 5 per cent or € 532 million compared with the beginning of the year to € 10,936 million. An increase from other comprehensive income of € 811 million and contributions by non-controlling interests of € 169 million were off set by dividend distributions for 2010 totaling € 463 million. Of this amount, € 204 million was attributable to RBI shareholders, € 200 million to the participation capital and € 58 million to non-controlling interests.
Other comprehensive income was determined on the one side by the profi t after tax of € 974 million and, on the other side, by currency diff erences and capital hedges due to write-downs in Russia, Belarus and Poland totaling minus € 318 million. Net income from fi nancial assets available-for-sale represented a valuation gain after tax of € 113 million. Reversing through profi t or loss the valuation gain that arose from cash fl ow hedging as a result of the end of this hedging activity led to a minus of € 36 million (after taking deferred taxes into account). The hyperinfl ation accounting that it became necessary to apply in Belarus increased comprehensive income by € 95 million.
Regulatory own funds rose by 2 per cent year-on-year to € 12,858 million. The changes described in equity (excluding net valuation gains on fi nancial assets available-for-sale that are not relevant for regulatory purposes) raised tier 1 capital by 2 per cent to € 9,434 million, while additional own funds (tier 2) remained unchanged at € 3,368 million. Short-term additional own funds (tier 3) increased by 45 per cent to € 100 million as a result of tier 2 issues approaching maturity.
Despite the introduction of the CRD III regulations, which mainly aff ected market risk and were responsible for a rise of € 324 million, the own funds requirement remained virtually unchanged, increasing by € 39 million to € 7,624 million. A 2 per cent increase in credit risk and a 66 per cent increase in market risk were off set by a 65 per cent reduction in the own funds requirement for foreign currency risk as a result of a change in methodology.
The tier 1 ratio (total risk) increased by 0.2 percentage points to 9.9 per cent. The own funds ratio rose by 0.2 percentage points to 13.5 per cent. The core tier 1 ratio (without taking hybrid capital into account) improved from 8.9 per cent to 9.0 per cent.
Total assets gained 12 per cent or € 15.8 billion from the beginning of 2011, rising to € 147.0 billion. In all, currency effects reduced total assets by around 1 per cent. The growth in assets refl ected higher short-term loans to banks, partly including repo transactions, which raised loans and advances to banks by € 4.2 billion. Cash reserves also increased by € 6.6 billion due to higher balances at central banks. Loans and advances to customers after provisioning rose by € 5.6 billion, largely as a result of loans to major customers and repo transactions with non-banks. On the liabilities side, the increase was mainly due to two items: deposits from customers increased by € 9.1 billion, which was mainly on account of institutional and corporate customers (€ 6.3 billion) and private individuals (€ 3.3 billion). The loan/deposit ratio (loans and advances to customers divided by customer deposits) improved by 9 percentage points compared with the end of 2010 to 122 per cent. Deposits from banks also rose by € 4.3 billion as a result of an infl ow of short-term deposits, while debt securities issued declined by € 2.2 billion as a result of various issues maturing – in particular a € 1.5 billion stateguaranteed bond issued in 2009.
| Page 58 | Group Management Report | |||
|---|---|---|---|---|
| Detailed review of items in the income statement |
||||
| Operating result | ||||
| In € million | 1/1-31/12/2011 | 1/1-31/12/2010 Change absolute | Change in % | |
| Net interest income | 3,667 | 3,578 | 89 | 2.5% |
| Net fee and commission income | 1,490 | 1,491 | (1) | (0.1)% |
| Net trading income | 363 | 328 | 35 | 10.7% |
| Other net operating income1 | (45) | 6 | (51) | – |
| Operating income | 5,475 | 5,403 | 72 | 1.3% |
| Staff expenses | (1,540) | (1,453) | (87) | 6.0% |
| Other administrative expenses | (1,209) | (1,187) | (23) | 1.9% |
| Depreciation of intangible and tangible fi xed assets |
(372) | (340) | (31) | 9.2% |
| General administrative expenses | (3,120) | (2,980) | (141) | 4.7% |
| Operating result | 2,355 | 2,424 | (69) | (2.8)% |
| Net interest income RBI's net interest income rose 3 per cent in 2011, adding € 89 million to reach € 3,667 million. Net interest income there fore made up 67 per cent of operating income. The net interest margin (calculated using average total assets) improved by 10 basis points, coming in at 2.61 per cent. Average total assets were down 1 per cent. |
||||
| Net interest income was infl uenced by various factors in the reporting year. Business with customers improved considerably in Russia, Romania, Austria and Slovakia, and in addition, the more favorable refi nancing conditions boosted net interest income. Net interest income from fi nancial investments benefi ted from higher interest on government bonds acquired in Ukraine and Poland to place excess liquidity. In Hungary, on the other hand, income fell by |
Development | Development of the interest margin | ||
| € 42 million due to the diffi cult credit environment | 3.0% | |||
| and a decline in customer volumes. Belarus also saw income decrease by € 18 million, as the closing price on the reporting date was used for income statement |
2.5% | 2.61% 2.51% |
2.64% 2.59% |
2.61% 2.56% |
| items in line with IAS 29 (hyperinfl ation accounting). | 2.0% | |||
| The net interest margin recorded the strongest gain, advancing 34 basis points to 1.97 per cent as a re sult of more profi table new lending volumes within |
1.5% | |||
| the Group Corporates segment. In Russia, the net in terest margin rose due to increased new business and |
1.0% 0.5% |
|||
| improved refi nancing conditions, up 33 basis points to 4.47 per cent. In the Group Markets segment |
0.0% | |||
| the net interest margin increased 14 basis points to | 2010 2010 Q1/2011 Q1/2011 |
Q2/2011 Q2/2011 Q3/2011 Q3/2011 |
Q4/2011 Q4/2011 2011 |
The net interest margin recorded the strongest gain, advancing 34 basis points to 1.97 per cent as a result of more profi table new lending volumes within the Group Corporates segment. In Russia, the net interest margin rose due to increased new business and improved refi nancing conditions, up 33 basis points to 4.47 per cent. In the Group Markets segment the net interest margin increased 14 basis points to 0.85 per cent, while it increased 17 basis points to close at 4.07 per cent in the segment Southeastern
Europe. This is largely due to improved refi nancing and lower rates on customer deposits linked to excess liquidity in most SEE countries. The net interest margin in the CIS Other segment declined, mainly due to lower net interest income in Belarus, down 9 basis points to 6.10 per cent. In the Central Europe segment the net interest margin lost 13 basis points, coming in at 3.16 per cent due to the diffi cult market conditions and the resultant decline in customer volumes.
Net fee and commission income remained stable year-on-year at € 1,490 million, accounting for 27 per cent of operating income. Net income from the payment transfer business increased by € 12 million, while net income from other banking services gained € 11 million. In contrast, income from the securities business decreased by € 16 million. Net income from the sale of own and third-party products declined € 6 million year-on-year. r
Net income from the payment transfer business rose € 12 million to € 611 million, making it the largest component of net fee and commission income at 41 per cent. The increase was driven by the improved economic climate and the accompanying rise in transaction volumes. With € 103 million, Ukraine made the largest contribution, while optimized pricing policies in the Czech Republic generated a € 13 million increase.
Net income from the loan and guarantee business remained unchanged year-on-year at € 280 million,
with Russia and Romania accounting for the largest contributions at € 60 million and € 47 million respectively. While Russia recorded a € 26 million gain, narrower margins and lower volumes prompted a € 25 million decline in Romania.
Net income from the securities business declined € 16 million to € 119 million, partly due to developments in the Group Markets segment.
At € 330 million, net income from the foreign currency, notes/coins, and precious-metals business was on a par with the previous year. The main part of income was generated in Russia, Poland, the Czech Republic and Romania. Refl ecting increased volumes, the highest gains were recorded in Russia and the Czech Republic.
Net income from the management of investment and pension funds remained unchanged year-on-year at € 27 million; the majority of income was generated in Slovakia and Croatia.
RBI's net trading income rose 11 per cent or € 35 million to € 363 million. The fi gure encompasses net income from interestbased transactions (down € 40 million), net income from currency-based transactions (down € 14 million), net income from equity and index-based transactions (down € 5 million), the credit derivatives business (up € 3 million) and from other transactions (up € 92 million).
Net income from interest-based transactions declined 19 per cent, or € 40 million, to end the year at € 171 million. Net income in Russia dropped by € 15 million year-on-year, the 2010 fi gure, however, had been particularly high due to valuation gains on interest-rate products. Net income also fell in Croatia, driven by valuation losses on government bonds, which came under a great pressure due to the European sovereign debt crisis. The yield curve for the Group Markets and Group Corporates segments also fl attened, which resulted in a lower net income from interest swaps.
Net income from currency-based transactions was down 11 per cent, dropping € 14 million to close at € 107 million. IAS 29 was used to report hyperinfl ation in Belarus, which had a negative impact of € 84 million. However, this eff ect was partially off set by a € 44 million valuation gain linked to the high devaluation of the Belarusian rouble in relation to an existing strategic currency position taken to hedge equity. Net income in Russia on the other hand deteriorated due to valuation losses on currency transactions. In Central Europe, net income from currency-based transactions was improved by valuation gains on currency swaps, currency forwards and spot transactions in Poland, Hungary and the Czech Republic. Net income rose in Austria, boosted mainly by valuation gains on currency futures and the notes and coins business, which increased from € 17 million to € 25 million.
Net income from other business stemmed largely from capital guarantees issued. The valuation method was adjusted here to refl ect changes to the statutory requirements, which resulted in a net income of € 81 million.
Other net operating income excluding impairment of goodwill fell from € 6 million in 2010 to minus € 45 million. This was largely due to the bank levy introduced in 2011 in Austria amounting to € 83 million. In connection with the "Home Protection Plan" in Hungary, losses from the restructuring of non-performing loans could be off set against the bank levy, reducing it by € 31 million to € 10 million in the reporting year.
Rental income from investment property including operating leasing (land and buildings not used by the Group) added € 8 million year-on-year, largely due to new leasing contracts in Croatia and the turnover of a new Group unit in Russia. Net expense from allocation and release of other provisions declined by € 16 million to minus € 12 million. This was because of the need for higher provisions in 2010 for pending legal issues in Russia and Slovakia.
Net income from non-banking activities fell slightly year-on-year, as did net income from additional leasing services.
General administrative expenses rose by 5 per cent, up € 141 million to € 3,120 million. The cost/income ratio came to 57.0 per cent (2010: 55.1 per cent).
Staff expenses, which constituted the largest item in administrative expenses at 49 per cent, rose by 6 per cent or € 87 million year-on-year, to € 1,540 million.
This increase was mainly the result of market-related salary adjustments and bonus payments in a number of markets as well as changes to statutory social security contributions in Russia and Slovakia. At the same time, the rise in the average number of staff increased staff expenses in the Czech Republic (especially due to the expansion of the branch network), Ukraine, Russia, Poland and Slovakia. The average number of staff employed by the Group (full-time
in € million
Operating income General administrative expenses Cost/income ratio
1 Excl. impairment of goodwill
equivalents) rose 1 per cent or 833 persons to 60,021 employees. The largest increases were recorded in the Czech Republic (up 349), Ukraine (up 189), Russia (up 137), Poland (up 87) and Slovakia (up 75).
Other administrative expenses increased by 2 per cent or € 23 million to € 1,209 million. This was the result of increases in IT expenditure (up 10 per cent), deposit insurance fees (up 16 per cent), security expenses (up 11 per cent), and advertising, PR and promotional expenses (up 3 per cent). In contrast, other administrative expenses (down 14 per cent), offi ce supplies (down 3 per cent) and communication expenses (down 2 per cent) all declined.
The rise in IT expenses was mainly driven by new projects and software service agreements in Russia, Romania, Poland and Slovakia. In the Czech Republic, new calculation rules resulted in higher deposit insurance fee expenses. Advertising, PR and promotional expenses rose due to additional marketing activities in Slovakia and the Czech Republic. Security expenses were higher as a result of increased volumes of precious-metal transactions.
The number of business outlets decreased by 33 to 2,928 at year-end. The bulk of these reductions were recorded in Ukraine (down 22) and Serbia (down 10), while the number of outlets increased in the Czech Republic by 17 and in Romania by 8.
The depreciation of tangible and intangible fi xed assets rose € 31 million year-on-year to € 372 million (2010: € 340 mil lion). The depreciation of intangible assets recorded the most marked increase, advancing € 15 million to € 143 million. This was partly linked to the implementation of new software and a shorter useful life for the systems being replaced. New software projects in Ukraine, Romania, Russia and Austria also triggered further depreciation. The depreciation of tangible assets increased € 14 million, coming in at € 194 million. The main reason for this increase was an € 11 million impairment relating to property in Russia.
In the reporting year, investment in the Group totaled € 580 million. Of this, 49 per cent (€ 288 million) was on Group tangible assets. Investments in intangible assets, mainly in relation to software systems, accounted for 35 per cent of investment. Assets of the operating leasing business accounted for the remainder.
| In € million | 1/1-31/12/2011 | 1/1-31/12/2010 Change absolute | Change in % | |
|---|---|---|---|---|
| Operating result | 2,355 | 2,424 | (69) | (2.8)% |
| Net provisioning for impairment losses | (1,064) | (1,194) | 131 | (10.9)% |
| Other results1 | 82 | 58 | 24 | 41.7% |
| Profi t before tax | 1,373 | 1,287 | 86 | 6.7% |
| Income taxes | (399) | (110) | (289) | 262.4% |
| Profi t after tax | 974 | 1,177 | (203) | (17.2)% |
| Profi t attributable to non-controlling interests |
(6) | (90) | 83 | (92.8)% |
| Consolidated profi t | 968 | 1,087 | (120) | (11.0)% |
Incl. impairment of goodwill
Signs of economic recovery in most of RBI's markets in 2011 improved borrower ratings and thereby decreased the growth of non-performing loans. As a result, net provisioning for impairment losses (the balance of allocations and releases of provisions for the lending business and direct write-off s against income received on amounts for written-down claims) was lower in 2011. In addition, during the fi nancial and economic crisis RBI had already taken action to stabilize and improve the quality of the loan portfolio, as for example with the targeted loan restructuring. Overall, net provisioning for impairment losses declined 11 per cent or € 131 million to € 1,064 million in 2011. This item also included income from the sale of impaired loans totaling € 8 million. Although the improved economic climate resulted in signifi cant improvements in net provisioning for impairment losses in most markets, net provisioning rose 144 per cent to € 478 million in Hungary. Marked improvements were recorded in the Russia (down € 119 million), CIS Other (down € 86 million) and Southeastern Europe segments (down € 77 million), largely due to the improved environment for corporate customers. Net provisions in the Corporate Customers division decreased 17 per cent to € 470 million, while in the Retail Customers division it remained virtually unchanged year-on-year at € 600 million, mainly because of the situation in Hungary.
The marked decline in Hungary as compared to the previous year was triggered by the market environment and the new legal conditions for foreign currency mortgage loans to retail customers, which required elevated loan loss provisions. This resulted in an increase of € 282 million in net provisioning, bringing the total to € 478 million. This fi gure included € 109 million in provisions for the government's "Home Protection Plan": a new legislation passed by the Hungarian Parliament, specifying that foreign currency mortgage loans could be repaid early at favorable exchange rates (with the cost being borne by the banks). The associated loan loss provisions allow for an expected repayment ratio of 29 per cent for the relevant foreign currency loans.
Individual loan loss provisions were down 2 per cent or € 19 million year-on-year at € 1,177 million, against the release of portfolio-based loan loss provisions totaling € 105 million. The situation was improved by a decline in the volume of nonperforming loans in Russia and Slovakia as well as lower default rates among corporate and retail customers in Ukraine.
The net provisioning ratio – net provisioning for impairment losses to average credit risk-weighted assets – was 1.38 per cent, an improvement of 28 basis points. The loss rate – charged-off loans to total lending – was 0.38 per cent (2010: 0.41 per cent).
After currency eff ects, the value of non-performing loans was up € 266 million at € 7,056 million, with the biggest rises recorded in Hungary and Bulgaria. The NPL ratio, the ratio of non-performing loans to total customer loans, improved 0.3 percentage points to 8.6 per cent. Non-performing loans were covered by provisioning totaling € 4,826 million. This results in a coverage ratio of 68.4 per cent, an improvement of 2.1 percentage points against year-end 2010.
Net income from derivatives and designated liabilities advanced € 497 million to € 413 million. This item comprises net income from hedge accounting (up € 4 million), credit derivatives (up € 29 million), other derivatives (up € 258 million) and liabilities designated at fair value (up € 206 million).
Fixed interest swaps by Group headquarters accounted for the bulk of net income from other derivatives, which gained € 258 million to € 194 million. The sustained decline of the long-term euro yield curve since the fi rst quarter of 2011 had a positive eff ect on valuation gains for these products.
Liabilities designated at fair value (fair value option, applied since 2007) also served to increase net income from derivatives. This portfolio containing RBI issues generated valuation gains totaling € 249 million in the reporting year as a result of higher credit spreads. Combined with the interest component, this generated a plus of € 184 million, compared with minus € 22 million in 2010.
These valuation gains do not aff ect regulatory own funds, and as such are not relevant when calculating regulatory capital ratio (EBA).
In the period under review, the international capital markets were hit particularly hard by the European sovereign debt crisis, which resulted in a volatile development of the fair value of securities. In turn, this prompted a decline in net income from fi nancial investments of € 278 million to minus € 141 million.
Net income from securities at fair value through profi t or loss, comprising valuation gains and income from sales, decreased from € 120 million to minus € 135 million in 2011. Share valuation losses in Austria, falls in the value of municipal bonds in Hungary and fi xed-income securities in Ukraine all contributed to the decline.
Net income from equity participations dropped € 109 million year-on-year. This was mainly linked to converting a Bulgarian loan recognized in Austria to an equity participation, which was then written off . As the associated loan loss provision was released at the same time, the transaction had no eff ect on consolidated profi t.
The sale of government bonds generated gains totaling € 94 million, which boosted net income from fi nancial assets heldto-maturity. The sale was linked to the European Banking Authority's (EBA) increased regulatory capital requirements.
The other results were strongly aff ected by the € 187 million impairment in goodwill recorded in Ukraine, Hungary and Slovenia: The revised macroeconomic forecast for Ukraine and the rise in the applicable discount rate generated a partial goodwill impairment of € 183 million at Raiff eisen Bank Aval, which left the balance sheet showing goodwill for the Bank of € 29 million. Goodwill was already low for the banks in Hungary (€ 3 million) and Slovenia (less than € 1 million), and was completely written off . As at the end of the year, total goodwill came to € 408 million.
In 2011, net income from the disposal of Group assets was minus € 3 million. Five subsidiaries were no longer consolidated, four of them on the grounds of immateriality. One subsidiary was dropped from the consolidation following closure. The companies are primarily active in leasing, investment and fi nancial services.
Taxes in the reporting period came to € 399 million, against € 110 million in 2010.
The increase was driven above all by deferred tax expenses, which came to € 59 million in the fi nancial year 2011. Deferred tax income of € 247 million had been recorded in 2010. This change was largely the result of valuation gains on derivatives and liabilities designated at fair value in Austria. Moreover, it was not possible to off set losses in Hungary fully for tax purposes by recognizing tax loss carry-forwards. By contrast, 2010 had brought some tax relief, notably through deferred tax income arising from the recognition of tax loss carry-forwards in Austria (€ 120 million) as well as changes to tax legislation in Ukraine (€ 26 million).
Current taxes fell due to lower taxes in Austria, down to € 341 million in 2011 (2010: € 357 million).
The net result is that the eff ective tax rate rose from 8.6 per cent to 29.1 per cent. Without the one-off eff ects, the eff ective tax rate would have been around 20 per cent.
| In € million | Q4/2011 | Q3/2011 Change absolute | Change in % | |
|---|---|---|---|---|
| Net interest income | 943 | 943 | 1 | 0.1% |
| Net fee and commission income | 365 | 388 | (22) | (5.7)% |
| Net trading income | 70 | 37 | 34 | 91.1% |
| Other net operating income1 | (3) | (15) | 13 | (81.1)% |
| Operating income | 1,376 | 1,352 | 25 | 1.8% |
| Staff expenses | (399) | (385) | (14) | 3.7% |
| Other administrative expenses | (325) | (298) | (27) | 9.2% |
| Depreciation of intangible and tangible fi xed assets |
(110) | (90) | (20) | 22.1% |
| General administrative expenses | (834) | (772) | (61) | 7.9% |
| Operating result | 542 | 579 | (37) | (6.3)% |
1 Excl. impairment of goodwill
Net interest income in the fourth quarter of 2011 remained virtually unchanged at € 943 million. However, the net interest margin (calculated on average total assets) fell 8 basis points to 2.56 per cent. Average total assets increased by 3 per cent.
Broken down by segment, Central Europe showed the biggest decline, with the net interest margin decreasing by 25 basis points to 2.89 per cent. The main reason for this was the diffi cult economic environment in Hungary. In Southeastern Europe, the net interest margin fell 12 basis points to 4.04 per cent. The net interest margin also declined in CIS Other, from 6.79 per cent to 5.91 per cent. The main cause was hyperinfl ation in Belarus, while in Russia, net interest income rose due to the signifi cant increase in the corporate customer portfolio.
In the Group Corporates segment the net interest margin improved by 8 basis points to 2.16 per cent as a result of the expansion in business activities. The Group Markets segment showed a decrease of 7 basis points to 0.86 per cent, due to the sale of parts of the portfolio of securities held-to-maturity.
Net fee and commission income declined in the fourth quarter by € 22 million to € 365 million. This was mainly the result of lower net income from the loan and guarantee business and lower income from the securities business.
Net trading income rose quarter-on-quarter by 91 per cent or € 34 million to € 70 million. Net income from other business rose by € 117 million, due to the change in the valuation model for capital guarantees and valuation gains mentioned earlier. At the same time, net income from equity-based transactions turned around from minus € 19 million to € 8 million. This was due to valuation gains from a positive trend in the EURO STOXX and ATX in the fourth quarter of 2011.
Net income from currency-based transactions declined, falling from € 29 million in the third quarter of 2011 to minus € 55 million. This was mainly due to the drop in net income in Belarus following the application of IAS 29 (hyperinfl ation accounting), which was off set by valuation gains on a strategic currency position.
Net income from credit derivatives business decreased quarter-on-quarter by € 13 million.
Net income from other transactions relates entirely to capital guarantees. Here, the valuation methodology was adapted to the change in the legislation. This adjustment resulted in net income of € 81 million.
Other net operating income (excluding impairment of goodwill) in the fourth quarter was minus € 3 million, after minus € 15 million in the third quarter. There was a positive eff ect in the fourth quarter from other taxes due to the reduction in the bank levy in Hungary. In connection with the "Home Protection Plan," losses from the repayment of overdue loans could be off set against the bank levy. Expenses on allocations to provisions were higher in the fourth quarter at € 11 million than in previous quarters. Net income from non-banking activities made no contribution to other net operating income in the fourth quarter due to the lower billing of services, compared to the € 8 million achieved in the third quarter.
General administrative expenses in the fourth quarter totaled € 834 million, € 61 million more than in the previous quarter. Staff expenses rose € 14 million due to the expenses for future bonus payments recognized in the fourth quarter. As a result of the increase in the fourth quarter in legal, advisory and consulting expenses, security expenses, as well as advertising, PR and promotional expenses, other administrative expenses rose by € 27 million to € 325 million. Depreciation on tangible and intangible assets totaled € 110 million in the fourth quarter, up € 20 million compared to the previous quarter. The main reason for this was a depreciation of € 11 million on a building in Russia.
| In € million | Q4/2011 | Q3/2011 Change absolute | Change in % | |
|---|---|---|---|---|
| Operating result | 542 | 579 | (37) | (6.3)% |
| Net provisioning for impairment losses | (282) | (377) | 95 | (25.1)% |
| Other results1 | 81 | (49) | 130 | – |
| Profi t before tax | 342 | 153 | 188 | 122.9% |
| Income taxes | (127) | (71) | (56) | 79.3% |
| Profi t after tax | 214 | 82 | 132 | 160.1% |
| Profi t attributable to non-controlling interests |
8 | 48 | (40) | (83.5)% |
| Consolidated profi t | 222 | 130 | 92 | 70.4% |
1 Incl. impairment of goodwill
Net provisioning for impairment losses declined quarter-on-quarter by 25 per cent to € 282 million. This decrease is due primarily to provisioning already eff ected in the third quarter for impairment losses in Hungary. In connection with the "Home Protection Plan," under which the Hungarian Government allows private borrowers to repay foreign currency mortgage loans prematurely on favorable terms, a further € 56 million to provisioning for impairment losses was posted in the fourth quarter. With a repayment ratio of 29 per cent, this meant a full-year loss for RBI of € 108 million. In the Group Corporates segment, individual cases among large international corporate customers required an increase of € 64 million in provisioning for impairment losses.
The Southeastern Europe and CIS Other segments recognized slightly lower provisions in the fourth quarter. In Russia, net releases of provisions for loan losses totaled € 63 million. This was due to premature repayments and sales of non-performing loans, increased collateral and the reversal of portfolio-based loan loss provisions due to lower loss rates.
Non-performing loans remained virtually unchanged in the fi rst three quarters of 2011, with a slight organic increase off set by currency eff ects. However, in the fourth quarter there was a currency-adjusted increase in non-performing loans of € 234 million. This was due almost entirely to Hungary with an increase of € 97 million, and Bulgaria with an increase of € 145 million. However, the loans in question are mostly well collateralized. There was a signifi cant decrease in nonperforming loans in Austria and Russia.
Net income from derivative fi nancial instruments rose in the fourth quarter of 2011 by € 154 million to € 264 million. The main reason for this was a gain of € 135 million from liabilities designated at fair value. This item shows the net income from RBI issues, which generated valuation gains in the fourth quarter due to the higher spreads.
Net income from fi nancial investments rose quarter-on-quarter by € 162 million to € 5 million. There was an increase here in net income from securities held-to-maturity due to a profi t of € 94 million on the sale of government bonds. This sale was connected to the increase in regulatory own funds requirement by the European Banking Authority (EBA). Valuation gains from securities were stable in the fourth quarter, following signifi cant losses in the third quarter due to the turbulence in the fi nancial market.
Other net income was adversely aff ected in the fourth quarter of 2011 by the impairment of goodwill in the amount of € 183 million in Ukraine.
RBI reported taxes of € 127 million in the fourth quarter of 2011 (Q3/2011: € 71 million). Expenses on current taxes increased by € 19 million, mainly due to higher earnings before tax in Russia. In the fourth quarter, deferred tax expense due to net income from the revaluation of derivatives and own issues in Austria measured at fair value totaled € 32 million (Q3/2011: income of € 5 million). Moreover, it was not possible to off set losses in Hungary fully for tax purposes by recognizing tax loss carry-forwards.
As of 31 December 2011, total assets at RBI amounted to € 147.0 billion. This was 12 per cent or € 15.8 billion above the comparable fi gure for the end of 2010.
Securities Other assets
Breakdown of equity and liabilities on the balance sheet
Deposits from banks Deposits from customers Other liabilities Own funds (equity and subordinated capital)
Assets were dominated by loans and advances to customers (after provisioning), which accounted for a share of 52 per cent. The overall volume of fi nancial investments (including those held-for-trading) amounted to 18 per cent, loans and advances to banks to 17 per cent, and other assets to 12 per cent.
Loans and advances to customers (before provisioning) rose 8 per cent or € 5.9 billion to € 81.6 billion in 2011. Of the overall loans and advances to customers, the credit business represented € 53.9 billion or 66 per cent and mortgage loans accounted for € 17.9 billion or 22 per cent. Credit business with corporate customers amounted to € 58.9 billion, of which large corporate customers represented € 55.2 billion. The corporate customer business registered the highest credit growth of 11 per cent or € 5.9 billion, above all in the Group headquarters, Asia and Russia. Loans to retail customers totaled € 21.3 billion at year-end, of which private individuals accounted for € 19.0 billion. At the end of 2011 the loan/ deposit ratio (the ratio of customer loans to customer deposits) improved to 122 per cent (2010: 131 per cent).
Loans and advances to banks rose by 20 per cent or € 4.2 billion to € 25.7 billion. Due to market-related liquidity requirements, short-term interbank transactions were increased.
At the end of the year, the impairment losses on loans and advances totaled € 5.1 billion. Of this, € 4.8 billion represented provisions for loans and advances to customers and € 0.2 billion represented provisions for loans and advances to banks. € 3.0 billion of the customer-related loan loss provisions were related to corporate customers and € 1.8 billion aff ected retail customers. At € 1.6 billion, the highest amounts of loan loss provisions were attributed to Central Europe. The CIS Other segment and Southeastern Europe accounted for € 1.0 billion of loan loss provisions each, Group Corporates € 0.7 billion, Russia € 0.6 billion and Group Markets € 0.2 billion, respectively.
Compared to the end of 2010, fi nancial investments (including those held-for-trading) decreased by 2 per cent or € 0.5 billion to € 27.2 billion. While assets held-for-trading increased by approximately € 2.5 billion due to the valuation of derivatives, fi nancial investments contracted (minus € 3.1 billion). This reduction in fi nancial investments was mainly due to the sale of fi nancial assets held-to-maturity to meet the higher EBA regulatory own funds requirement, as well as to market developments.
Other assets increased by 59 per cent year-on-year to € 17.6 billion (2010: € 11.0 billion), virtually all of which was due to the higher cash reserve (up € 6.6 billion). Other assets were made up of the cash reserve (€ 11.4 billion), tangible and intangible fi xed assets (€ 2.6 billion), derivatives (€ 1.4 billion) and the remaining item of other assets (€ 2.2 billion).
Equity and liabilities were dominated by deposits from customers, which accounted for a share of 45 per cent. Deposits from banks remained unchanged at 26 per cent. Equity and subordinated capital represented 10 per cent of the equity and liabilities side of the statement of fi nancial position and the other liabilities totaled 18 per cent.
Deposits from customers rose by 16 per cent or € 9.1 billion to € 66.7 billion year-on-year. Of the total customer deposits, € 35.6 billion was attributable to corporate customers, who were responsible for a rise in deposits of € 6.2 billion. Of this, some € 3.7 billion was from repos. For retail customers, deposits rose € 3.4 billion to € 29.1 billion. This growth was almost entirely due to the higher number of deposits in the Czech Republic, Russia and Poland. ZUNO Bank contributed € 0.7 billion.
Deposits from banks amounted to € 38.0 billion. This represents an increase of 13 per cent or € 4.3 billion compared to the previous year's fi gure. This growth resulted primarily from deposits by commercial banks.
Other liabilities rose by 7 per cent or € 1.7 billion to € 27.2 billion. The largest growth came from trading liabilities with an increase of 69 per cent or € 4.0 billion to € 9.7 billion, caused primarily by swap valuations in Austria. Debt securities issued dropped by 13 per cent or € 2.2 billion to € 14.4 billion. Unsecured issues were no longer an option due to the market environment, so RBI moved increasingly towards private placements. Overall, the maturity of one of a total of three state-guaranteed RBI bonds led to a decrease of € 1.5 billion.
The bank's balance sheet equity, consisting of consolidated equity, consolidated profi t and non-controlling interests, increased since the end of 2010 by 5 per cent or € 532 million to € 10,936 million.
Consolidated equity, consisting of subscribed capital, participation capital, capital reserves and retained earnings increased by € 574 million to € 8,825 million. The growth in retained earnings was due primarily to the transfer of earnings of € 683 million from the fi nancial year 2010. Other comprehensive income reduced retained earnings by € 127 million, primarily due to exchange diff erences totaling minus € 271 million (including capital hedges). Net income from the valuation of fi nancial assets available-for-sale was € 113 million after deferred taxes. The eff ects from the application of hyperinfl ation accounting in Belarus amounted to € 83 million. As a result of a change in the hedging strategy, cash fl ow hedging was ended in the second quarter of 2011 and replaced by portfolio hedges. Valuation losses on ending the cash fl ow hedge (after taking deferred taxes into account) amounted to € 36 million.
RBI AG's Annual General Meeting in June 2011 approved the payment of a dividend of € 1.05 per share for the fi nancial year 2010, which involved a distribution totaling € 204 million. In addition, a dividend of € 200 million was paid on the participation capital. Consolidated profi t amounted to € 968 million.
Capital of non-controlling interests rose € 77 million to € 1,143 million, due primarily to capital contributions of € 169 million, mainly for Group units in Hungary, Slovakia and the Czech Republic. In addition, dividends amounting to € 58 million were distributed on non-controlling interests. The share of non-controlling interests in the eff ects of hyperinfl ation in Belarus amounted to € 12 million.
RBI does not form an independent credit institution group (Kreditinstitutsgruppe) as defi ned 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 majority of credit risk is calculated using the standardized approach in accordance with Section 22 of the BWG, credit risk for most non-retail business at RBI AG and its subsidiaries in Croatia, Malta, Romania, Slovakia, the Czech Republic, Hungary and the US is measured using the internal ratings based approach (foundation IRB approach). A large part of the loans and advances to retail customers in Slovakia and Hungary are measured under this approach. Market risk is predominantly calculated according to the standard approach in accordance with Section 22 of the BWG, RBI AG carries out the calculation in part according to the internal model. The consolidated values shown below have been calculated in accordance with the provisions of the BWG and are assumed in calculation fi gures for the RZB credit institution group.
Consolidated own funds pursuant to BWG amounted to € 12,858 million as of 31 December 2011, which represents an increase of 2 per cent or € 250 million.
Core capital rose 3 per cent or € 228 million to € 9,434 million, primarily due to profi t from the fi nancial year. The presumed dividend for distribution in the fi nancial year 2011 has already been deducted from this. The depreciation of in particular the Belarusian rouble, Hungarian forint and Polish zloty against the euro had a negative impact on own funds.
Additional own funds remained virtually unchanged from the previous year at € 3,368 million. This item consists of longterm subordinated capital, of which the largest part pertained to RBI AG at € 2,259 million, supplementary capital of RBI AG of € 599 million, and the provision excess of internal rating approach positions of € 234 million. Hidden reserves released in the reporting period pursuant to Section 57 of the BWG increased core capital by € 55 million.
Short-term subordinated capital rose € 31 million to € 100 million as a result of maturing tier 2 issues. The deduction items relating to participations, securitizations and insurance companies amounted to € 44 million (2010: € 34 million).
Own funds stood in contrast to a slightly higher own-funds requirement of € 7,624 million, an increase of € 39 million. The own funds requirement for credit risk was € 6,172 million (an increase of € 124 million), of which € 3,056 million related to the standardized approach and € 3,116 million to the IRB approach. The requirement for position risk in bonds, equities and commodities increased by € 193 million to € 520 million, primarily due to the introduction of the CRD III
regulations. Despite increases due to CRD III, own funds required for open currency positions fell by € 245 million to € 140 mil lion, resulting from a change in the calculation method. The requirement for operational risk was € 792 million (2010: € 824 million).
This led to an improvement of 2.4 percentage points in the excess cover ratio to 68.6 per cent or € 5,234 million.
The tier 1 ratio – based on credit risk – was 12.2 per cent. Based on total risk, the tier 1 ratio was 9.9 per cent, with a core tier 1 ratio of 9.0 per cent. The own funds ratio totaled 13.5 per cent.
European banks are required to raise their core tier 1 ratio as defi ned by the European Banking Authority (EBA) to 9 per cent by 30 June 2012 to shore up the fi nancial system.
For RZB, this results in an additional need for roughly € 2.1 billion according to EBA calculations published in December 2011. RBI itself was not covered by the EBA study, as RZB acts as a superordinate banking institution. RZB is taking the necessary measures to comply with the new requirements without resorting to state funds.
To this end, RZB – with the involvement of RBI – is implementing some 20 work streams which are divided into three main areas and will contribute some € 3 billion to meet the target.
These include, among others:
As a universal bank, RBI is not involved in research and development in the strictest sense of the term. In the context of fi nancial engineering, however, it does develop customized solutions for investment, fi nancing or risk hedging. Financial engineering encompasses not only structured investment products, but also structured fi nancing: fi nancing concepts which go beyond the application of standard instruments and are used in acquisition or project fi nancing, for example. RBI also develops individual solutions to hedge a broad spectrum of risks – from interest rate risk and currency risk through to commodity price risk.
Balanced and comprehensive fi nancial reporting is a priority for RBI and its governing bodies. Naturally, these reports must comply with all relevant statutory requirements. The Management Board is responsible for establishing and defi ning a suitable internal control and risk management system that encompasses the entire accounting process. The internal control system is intended to provide the management with the information needed to ensure eff ective internal controls for accounting, which are constantly being improved. The control system is designed to comply with all relevant guidelines and regulations and to optimize the conditions for specifi c control measures.
The consolidated fi nancial statements are prepared in accordance with the relevant Austrian laws, notably the Austrian Banking Act (BWG) and Austrian Commercial Code (UGB), which govern the preparation of consolidated annual fi nancial statements. The accounting standards used to prepare the consolidated fi nancial statements are the International Financial Reporting Standards (IFRS) as adopted by the EU, which RBI has been using since 2000 – initially on a voluntary basis.
An internal control system has been in place for many years at RBI and its parent, the RZB Group, which includes directives and instructions on key strategic topics. The system comprises
The management in each Group unit is responsible for implementing Group-wide instructions. Compliance with Group rules is monitored as part of the audits performed by internal and local auditors.
The consolidated fi nancial statements are prepared by the Group Financial Reporting department, which reports to the Chief Financial Offi cer. The relevant responsibilities are defi ned Group-wide within the framework of a dedicated function.
Signifi cant risks relating to the Group accounting process are evaluated and monitored by the Management Board. Complex accounting standards can increase the risk of errors, as can the use of diff erent valuation standards, particularly in relation to the Group's principal fi nancial instruments. A diffi cult business environment can also increase the risk of signifi cant fi nancial reporting errors. For the purpose of preparing the consolidated fi nancial statements, estimates have to be made for asset and liability items for which no market value can be reliably determined. This is particularly relevant for credit business, social capital, and the intrinsic value of securities, participations and goodwill.
The preparation of individual fi nancial statements is decentralized and carried out by each Group unit in accordance with the RZB Group guidelines. The Group unit employees and managers responsible for accounting are required to provide a full presentation and accurate valuation of all transactions. Diff erences in reporting dates and local accounting standards can result in inconsistencies between the individual fi nancial statements and the fi gures submitted to RBI. The local management is responsible for ensuring compliance with mandatory internal control measures, such as the separation of functions and the principle of dual control.
The fi nancial statement data, which are examined by an independent auditor, are usually entered directly in the Cognos Controller consolidation system by the end of January each year. The IT system is kept secure by limiting access rights.
The plausibility of each Group unit's fi nancial statements is initially checked by the relevant key account manager within the Group Financial Reporting department. The subsequent consolidation steps are then performed using the Cognos Controller consolidation system, including capital consolidation, expense and income consolidation, and debt consolidation. Lastly, possible intra-Group gains are eliminated. At the end of the consolidation process, the notes to the fi nancial statements are prepared in accordance with IFRS, the BWG and UGB.
In addition to the Management Board, the general control system also encompasses middle management (department heads). All control measures constitute part of the day-to-day business processes and are used to prevent, detect, and correct any potential errors or inconsistencies in the fi nancial reporting. Control measures range from managerial reviews of the interim results to the specifi c reconciliation of accounts through to analyzing ongoing accounting processes.
The consolidated fi nancial statements and management report are reviewed by the Audit Committee of the Supervisory Board and also presented to the Supervisory Board for information. The consolidated fi nancial statements are published on the Company's website and in the Wiener Zeitung's offi cial register and are fi led with the commercial register as part of the annual report.
The consolidated fi nancial statements are prepared using Group-wide standard forms. The accounting and valuation standards are defi ned and explained in the RZB Group Accounts Manual and must be applied when preparing the fi nancial statements. Detailed instructions for the Group units on measuring credit risk and similar issues are provided in the Group directives. The relevant units are kept abreast of any changes to the instructions and standards through regular training courses.
The main department Accounting & Reporting is responsible for compiling the consolidated results to produce the fi nal consolidated fi nancial statements. These consolidated fi nancial statements are examined by an independent auditor. In addition, the management summary (Group management report) provides verbal comments on the consolidated results in accordance with the statutory requirements.
The Group produces consolidated quarterly reports. Statutory interim reports are produced that conform to the provisions of IAS 34 and are also published quarterly in accordance with the Austrian Stock Corporation Act. Before publication, the consolidated fi nancial statements are presented to senior managers and the Chief Financial Offi cer for fi nal approval and then submitted to the Supervisory Board's Audit Committee. Analyses pertaining to the consolidated fi nancial statements are also provided for the management, as are preliminary Group fi gures at regular intervals. The fi nancial budgeting system includes a three-year Group budget.
The Management Board and Controlling department are responsible for ongoing internal monitoring. In addition, the relevant department heads are charged with monitoring their areas, including performing regular controls and plausibility checks.
Internal audits also constitute an integral part of the monitoring process. Group Audit at RZB is responsible for auditing. All internal auditing activities are subject to the Group Audit standards, which are based on the Austrian Financial Market Authority's minimum internal auditing requirements and international best practices. Group Audit's internal rules also apply (notably the audit charter).
Group Audit regularly and independently verifi es compliance with the internal rules within the RZB Group units. The head of Group Audit reports directly to the RZB and RBI Management Boards.
The following disclosures cover the provisions of Section 243a (1) of the Austrian Commercial Code (UGB):
(7) Pursuant to Section 169 of the Austrian Stock Corporation Act (AktG), the Management Board has been authorized since the Annual General Meeting of 8 June 2011 to increase the capital stock – in one or more tranches – by up to € 298,145,314.10 by issuing up to 97,752,562 new common bearer shares with voting rights against contributions in cash and/or in kind within fi ve years after recording the relevant amendment to the articles of association in the commercial register, while preserving the right of subscription to which the law entitles shareholders, including the right of indirect subscription by way of a bank pursuant to Section 153 (6) of the Austrian Stock Corporation Act, and to fi x the off ering price and terms of the issue with the approval of the Supervisory Board. The Supervisory Board or a committee authorized for this purpose by the Supervisory Board is authorized to adopt amendments to the articles of association that arise upon issuing shares from the authorized capital.
Pursuant to Section 159 (2) 1 of the Austrian Stock Corporation Act, the capital stock has been increased contingently by up to € 47,173,587.50 through the issue of up to 15,466,750 common bearer shares (contingent capital). The contingent capital increase would only be carried out to the extent that holders of convertible bonds issued under the resolution of the Annual General Meeting of 10 June 2008 make use of their right to convert such bonds into shares of the Company. No convertible bonds have been issued to date, however.
The Annual General Meeting of 8 July 2010 authorized the Management Board to acquire own shares, under the provisions of Section 65 (1) 8 of the Austrian Stock Corporation Act, during a period of 30 months from the date of the resolution, up to a maximum of 10 per cent of the Company's respective capital stock and, if deemed appropriate, to retire them. This authorization may be exercised in one or more installments, for one or more purposes, by the Company, by affi liated enterprises or, for their account, by third parties. The Management Board was further authorized to decide, with the approval of the Supervisory Board, on the sale of own shares by means other than the stock exchange or a public tender, to the exclusion of shareholders' subscription rights. This authorization replaces the authorization to buy back and use own shares that was granted at the Annual General Meeting of 10 June 2008. No own shares have been bought since the authorization was issued in July 2010.
The Annual General Meeting of 8 July 2010 also authorized the Management Board to acquire own shares for the purpose of securities trading, under the provisions of Section 65 (1) 7 of the Austrian Stock Corporation Act, during a period of 30 months from the date of the resolution, up to a maximum of 5 per cent of the Company's respective capital stock. The consideration for each share to be acquired must not be less than half the closing price at the Vienna Stock Exchange on the last day of trading preceding the acquisition and must not exceed twice the closing price at the Vienna Stock Exchange on the last day of trading preceding the acquisition. This authorization may be exercised in one or several installments by the Company, by affi liated enterprises or, for their account, by third parties.
The Annual General Meeting of 9 June 2009 authorized the Management Board of the Company to issue, in one or more tranches, participation rights having equity characteristics pursuant to Section 174 of the Austrian Stock Corporation Act in a total nominal amount of up to € 2 billion within fi ve years from the date of the resolution with the approval of the Supervisory Board in accordance with the terms for participation rights to be set by the Management Board and to the exclusion of shareholders' subscription rights. It should be noted that, under the provisions of the relevant laws, participation rights confer no voting rights or other membership rights. Issuing participation rights therefore entails no change of ownership structure from the standpoint of stock corporation law and shareholders' voting rights. The Company decided on 15 July 2009 to strengthen its capital by issuing participation rights in the amount of € 600 million based on the authorizing resolution of June 2009. In the course of the merger of RZB's principal business areas with Raiff eisen International to form RBI with eff ect from 10 October 2010, the mutual loans and liabilities of the receiving and the transferring company were wiped out. The same is true of the participatory rights in the amount of € 600 million, which had been subscribed in full by RZB. No further participation rights have been issued to date. Please consult the notes on equity (34) for more information.
In the course of the merger of the principal business areas of RZB with Raiff eisen International on 10 October 2010, the RZB issue "Raiff eisen-Partizipationskapital 2008/2009" in the amount of € 2.5 billion was transferred to RBI on unchanged terms.
Pursuant to Section 102a of the Austrian Banking Act (BWG), the Annual General Meeting of 8 June 2011 authorized the Management Board of the Company, within fi ve years of recording the relevant amendment to the articles of association in the commercial register, to retire either the participation capital in its entirety or the participation capital of individual tranches that were diff erentiated on issue, with the approval of the Supervisory Board and taking into account the terms of issue; partial retirement of participation capital of individual issues or tranches is permissible, provided the equal treatment of eligible holders of participation capital is ensured.
Banks refi nance themselves using equity, customer deposits and various capital and interbank market tools. In 2011 the banking environment was heavily infl uenced by the sovereign debt crisis, which made refi nancing diffi cult for banks – particularly via the fi nancial markets.
The refi nancing environment for banks deteriorated, particularly in the second half of 2011, as it was impossible to insulate it from the developments in the fi nancing of sovereigns. The public debate on equity requirements for European banks and their holdings of sovereign bonds also contributed to the general uncertainty. f r
There is still a demand for far-reaching solutions, and particularly for an intervention by the European Central Bank (ECB) in the form of even more extensive purchases of sovereign bonds issued by the peripheral European states. In the face of this situation, the ECB announced on 8 December 2011 that it will support banks by increasing liquidity, k
specifi cally through refi nancing transactions with a maturity of 36 months. At the same time, the ECB has eased requirements for securities it will accept for repo transactions, and prior to this had reduced the main refi nancing rate to 1 per cent.
Even so, the excessive dependance on central bank fi nancing is not a long-term solution. Given the current climate and relatively limited progress on the political level, banks – particularly from the peripheral European states – will continue to face higher risk premiums.
RBI refi nancing is based on two key elements. First, there are customer deposits which at the end of 2011 accounted for € 66.7 billion or 54 per cent of refi nancing, and second there is wholesale funding, which totaled € 56.5 billion, or the remaining 46 per cent. The high share of customer deposits creates a stable refi nancing basis, making RBI less vulnerable to the upheaval in the fi nancial markets.
In 2011 some 64 per cent of medium- and long-term wholesale funding of the RBI Group was generated by Group headquarters. The remaining 36 per cent came from the network banks.
The network banks in CEE also used the international markets for fi nancing, e.g. through a syndicated loan by the Romanian subsidiary, with participation by the European Bank for Reconstruction and Development (EBRD), or structured fi nancing in Croatia. Especially important for CEE subsidiaries is long-term fi nancing from sources which are less aff ected by changes in the international capital market. These should become even more important in future. Besides fi nancing backed by the Export Credit Agency (ECA), supranational institutions are another source of funding. At the end of 2011, some 11 per cent of the outstanding volume came from institutions like the European Investment Bank (EIB) or EBRD. These loans are generally long-term, and signifi cantly improve the structure of the fi nancing mix. Cooperation with these supranational institutions is an important element of funding in the regions where RBI operates, and will continue to play an important role. RBI cooperates with these institutions not only in fi nancing but also in other areas, e.g. in risk sharing programs which optimize risk-weighted assets.
In addition, the network banks benefi t in fi nancing from support by the Austrian Raiff eisen Banking Group (RBG). This longstanding partnership aids in both procurement of liquidity via the Raiff eisen sector and placement of the sector's funding instruments with its customers.
A key goal of RBI's funding activities is the broadest possible diversifi cation of fi nancing sources for the network banks. In combination with customer deposits, this is intended to lead to an even more sustainable and independent structure for network bank fi nancing in the future.
RBI's resources for medium- to long-term refi nancing include two issue programs, the "EUR 25,000,000,000 Debt Issuance Program" and the "EUR 20.000.000.000 Emissionsprogramm der Raiff eisen Bank International AG." Under these programs, bonds can be issued in diff erent currencies and with diff erent structures. The total volume of outstanding bonds under the programs may not exceed € 25 billion or € 20 billion respectively. At the end of the year 2011, there was a total of € 12 billion outstanding in the two programs.
In view of the diffi cult market environment, RBI implemented its funding plan quickly in 2011, with two-thirds of the total funding requirement raised in the fi rst quarter via wholesale funding, through the placement of two senior benchmark bonds. In January, the fi rst benchmark bond was issued as a senior fi xed-rate bond with a total volume of € 1 billion and a three-year maturity. This issue makes RBI the fi rst Austrian bank to issue an unsecured bond for over € 500 million since the start of the fi nancial crisis. It was placed at 145 basis points over mid-swaps, with a coupon of 3.625 per cent. The issue was signifi cantly oversubscribed.
A few weeks later, RBI took advantage of the more positive market environment in March 2011 to issue a second benchmark bond with a volume of € 1 billion. This issue was also signifi cantly oversubscribed. The bond had a variable coupon with a premium of 90 basis points over 3 month EURIBOR and a maturity of two years.
In May 2011 RBI was the only Austrian bank to place a subordinated bond for € 500 million with a ten-year maturity. This replaced a bond for € 366 million that had been called. It was placed at 325 basis points over mid-swaps, with a coupon of 6.625 per cent.
For short-term funding RBI used both the interbank market and its two programs for short-term issues (commercial papers), the "European Commercial Paper Program" and the "US Commercial Paper Program." Under these two programs RBI can issue commercial papers in various currencies, thereby enabling it to refi nance also outside the interbank market.
To diversify its funding sources, RBI is also working actively on developing secured refi nancing sources where longer-term funding can be secured by otherwise illiquid assets. The resulting mobilization of assets is to become increasingly important in the future.
Besides the diffi cult market environment for refi nancing USD by non-US banks, RBI's move to advance its funding activities to the fi rst quarter of 2011 for security purposes is refl ected in net interest income for 2011. The early implementation of the 2011 funding plan made a positive contribution to profi t.
2011 was marked by enormous market uncertainty. While the recovery of the global economy from 2010 continued in the fi rst six months of the year, the second half of 2011 off ered a diff erent setting. The sovereign debt crisis in the peripheral European states and the protracted negotiations, and in particular the political tensions regarding the countermeasures to be adopted, fueled anxiety and caused distrust on the European markets. During summer, fi nancial institutions started stockpiling their excess liquidity and placed it in "the safe haven" of the ECB rather than providing liquidity to the interbank market. Compared to previous years, the number and volume of new issues declined sharply. The increased nervousness was also refl ected on the stock markets, both by the high price volatility and some signifi cant declines in value, especially of fi nancial stocks.
In this environment, RBI Risk Management took into account the increased market volatility by using existing and new management tools and thus was able to respond in time to the changes in economic conditions. Particular emphasis was placed on maintaining a strong liquidity position and on reducing existing exposure to countries and fi nancial institutions especially in the markets aff ected by the sovereign debt crisis. Furthermore, internal processes and structures were critically evaluated, both to ensure the desired effi ciency of the risk control systems as well as to uncover potential risks from operational processes at an early stage and be able to manage them. All of these measures contributed towards further enhancing the robustness of the RBI loan portfolio.
In the fi rst six months of 2011 the European Banking Authority (EBA) performed a stress test in which 90 European banks took part. The test analyzed the impact of various economic development scenarios, using variables such as GDP growth rates, exchange rates and risk premiums, on future capital requirements, required loan loss provisioning as well as revenue and capital components. The direct and indirect infl uences of predetermined crisis scenarios were examined in detail.
The EBA in this case defi ned a core capital ratio of 5 per cent (core tier 1 capital ratio pursuant to CRD III) as a target over a two-year period after the onset of the crisis scenarios. RBI clearly exceeded this level with 7.8 per cent. In addition, the only minimal decline in the capital ratio of 0.3 percentage points over the stress period showed RBI's ability to withstand the crisis compared to the scenarios presented.
Especially the detailed publication of the banks' loans and advances to countries provided the fi nancial markets with fundamental information for risk assessment. Thereby RBI was shown to hold only a very small amount of debt from the peripheral European states and since publication has reduced it even further. To this end, risk management reduced both the limits as well as the outstanding risk exposure, to counteract negative consequences arising from the European sovereign debt crisis.
After analyzing the results of the stress tests and in view of the macroeconomic developments in the fall of 2011, the EBA decided to re-examine the capital adequacy of banks. Thereby it investigated the capital requirements necessary for the participating banks to achieve a capital ratio of 9 per cent. To shore up European fi nancial institutions against the volatile market environment and to ensure the stability of the fi nancial markets, banks must now attain this ratio by the end of June 2012. RBI only participated indirectly in this exercise as part of RZB; consequently there are no detailed results for RBI. Nevertheless, RBI developed a number of initiatives as part of RZB, to attain the prescribed ratio. The implementation of these measures already started in 2011.
In addition to the core tier 1 capital ratio of 9 per cent, EBA identifi ed further capital requirements as a buff er for the banks' portfolios of sovereign risk, arising from unrealized losses from loans and advances to countries whose market value fell during the sovereign debt crisis. For RZB, there was no additional capital requirement.
Besides the regulatory stress tests carried out by the regulatory authorities, RBI also performed internal analyses for further scenarios and potential risk drivers in 2011. Through close cooperation of all areas of risk management and the involvement of other experts from the network banks and controlling, these internal stress tests took into account a large number of risk factors and their impact on solvency. Market risks, operational risks, increased funding costs and numerous other capital and income components were included in the integrated approach, in addition to the increased capital requirement and high write-downs on the loan portfolio in case of stress. The Management Board was regularly informed of the stress test results and their analyses, so that the rapid introduction of countermeasures in case of a threatening situation is ensured.
Both economic development as well as the political environment in Hungary posed special challenges to risk management in 2011. Compared to other Central and Eastern European countries, the Hungarian economy shows lower growth rates; for 2012 Raiff eisen Research even expects a decline in real GDP to about 0.5 per cent. In light of this, RBI expects a further increase in the NPL ratio for the Hungarian market, which stood at 22.7 per cent as of year-end 2011. In order to minimize potential losses, RBI credit risk management therefore employs an early warning system, which identifi es any potential deterioration in credit quality and actively pursues the reduction of the credit exposure as well as the increase of collateral for clients with a poor credit rating.
In 2011 provisions for impairment losses totaling € 478 million were booked for Hungary. While € 521 million was allocated to individual loan loss provisions, portfolio-based loan loss provisions generated a release of € 43 million. Thus, the coverage ratio increased to about 61.7 per cent.
In addition to the bank levy introduced in Hungary in 2010 and the existing legal restrictions on banks, e.g. in property sales, legislation passed by the Hungarian Parliament on 20 September 2011 facilitated the premature repayment of mortgage loans in Swiss francs, euros and Japanese yen at fi xed exchange rates. These were 180 HUF per CHF, 250 HUF per EUR and 200 HUF per 100 JPY. In comparison, the actual exchange rates on 31 December 2011 were 259.3 HUF per CHF, 314.8 HUF per EUR and 310.5 HUF per 100 JPY. The fi xed exchange rates on 31 December 2011 for the Swiss franc were some 31 per cent, for the euro some 21 per cent and for the Japanese yen roughly 36 per cent below the actual rates. The regulation applies to bank customers who took on their foreign currency loans at a time when the rates were not above these levels. These clients had until 30 December 2011 to state their intention of full repayment which would then have to be completed within 60 days.
| In € million | 2011 | Share | 2010 | Share |
|---|---|---|---|---|
| Euro | 34 | 2.8% | 38 | 2.6% |
| Swiss franc | 1,185 | 97.2% | 1,429 | 97.3% |
| Other foreign currencies | 0 | <0.1% | 0 | <0.1% |
| Total | 1,218 | 100.0% | 1,468 | 100.0% |
The following table shows the volume of foreign currency mortgage loans to retail customers in Hungary:
The volume of actual or expected repayments as at 31 December 2011 totaled € 401 million, which corresponds to an acceptance rate of 28.9 per cent. Roughly half were already converted in 2011 and appropriate measures were taken for the remainder. The resulting loss amounted to € 109 million. Lower interest income in subsequent periods lies at around € 18 million.
Liquidity risk management was one of the most aff ected risk control units in 2011. In addition to the increased frequency of internal reporting and the high number of additional analytical tasks, especially since the new issues markets dried up, measures were taken to ensure that RBI maintained its strong liquidity buff er. At the same time, the crisis scenario analyses used for internal risk measurement and management were further developed and more closely integrated into the liquidity and the balance sheet management of the principal Group units.
The cash fl ow modeling for the expected base case was also revised in 2011 to include fi ndings from past years, in order to adjust the resulting forecasts for capital commitment and refi nancing needs. On the one hand, this should increase transparency with respect to actual costs and risks, and on the other hand naturally set a course for the correct management decisions.
The planned implementation of the liquidity requirements according to Basel III in 2011 was another issue regarding liquidity risk. Although there is still no fi nal draft of the regulatory requirements and these can therefore be interpreted very differently, calculations have already been conducted for RBI and individual Group units. The implementation of the required data landscape and of the corresponding calculation applications has also already been introduced and will constitute a key area of activity in 2012.
The Liquidity Contingency Committee (LCC) is a committee that concerns itself with liquidity management and measures in the case of diffi cult market situations or crises. Due to the diffi cult market situation, the LCC was convened in the second half of 2011 and had met several times by year-end.
RBI's interest income represents a signifi cant earnings factor and thus makes a material contribution towards stabilizing the capital base and to the success of the business model. To do justice to this signifi cance, risk management of interest fl ows is realized in its own entity independently of liquidity risk. Here, particularly the impact of diff erent interest rate scenarios on interest income is simulated. In close cooperation with the front-offi ce units, RBI thus prepares for various developments on the market and can react quickly in the case of negative trends. The emphasis in this area in 2011 was on further developing the available analytical and reporting tools on the one hand and on harmonizing these systems within the Group on the other.
Since January 2010 market risk management has been based on fi gures from an internal model. This is calculated using a hybrid approach; in other words, a combination of historical and Monte Carlo simulation with 5,000 scenarios, the valueat-risk (VaR) for changes in the risk factors of foreign currencies, interest rate development, credit spreads from bonds, Credit Default Swaps and equity indices. To improve modeling of risk factors where the probability of extreme price changes exceeds the probability given by the normal distribution, numerous approaches were integrated into the model. These include the enhancement of the scenarios to include extreme events or the consideration of the current volatility levels in generating scenarios and diff erent time horizons in the volatility estimate. This choice of model access already today forms the basis for putting in place the strict Basel III requirements in internal models. The model was additionally expanded to include a stressed-VaR module that meets the regulatory requirements that have been in eff ect since 31 December 2011.
Having passed the review process of the FMA and the Oesterreichische Nationalbank (OeNB), the model has been used since 30 August 2010 for calculating own funds requirements of foreign currency and the general interest rate risk in the trading book for Group headquarters. The daily scope of management includes the RBI trading and banking books based on the VaR on a holding period of 1 day and a confi dence interval of 99 per cent as well as sensitivity limits. The market risk position, the limit process and the presentation of all capital market activities in the income statement are among the items on the fi xed agenda for the weekly market risk committee meeting.
To ensure the quality of the model, daily back testing is performed. The results of these tests were always within the limits of the model expectations and have also featured no signifi cant deviations in recent months. Based on these positive results, the internal model is to be allocated to the best class ("green status") from a regulatory perspective.
The fact that 2011 was a diffi cult year for the CEE region and thus for RBI's home market, was refl ected in an increase in non-performing loans to non-banks (up 4 per cent or € 266 million compared to 2010). However, the allocation of corresponding loan loss provisions was partially off set by high returns from reorganization measures. Furthermore, adequate coverage was ensured through write-downs. This will also be one of the priorities in 2012.
In 2011, RBI also made signifi cant process improvements in the early recognition of troubled loans and their processing, thus largely preventing a further increase in non-performing loans. The larger range of the portfolios considered and the improved process effi ciency, the further development of the reporting system and the continuous exchange of experience between the individual members of the Group are signifi cant cornerstones here.
Once more, RBI was intensively involved with current and pending regulatory developments in 2011. The majority of the expected changes result from the EU CRD III guidelines on capital requirements and the even more extensive CRD IV/ CRR legislation proposed by the EU Commission. The potential impact on RBI of new and amended legislation has been analyzed in detail. The corresponding internal guidelines were adopted where necessary, for example, in relation to the remuneration policy and the appropriateness of remuneration.
In addition to the measures already taken in connection with the new Basel III regulations, risk management focused in 2011 on the ongoing implementation of the advanced Basel II approach. The Basel II related activities included the implementation of the internal ratings-based approach (IRB) in the retail- and non-retail sector in the subsidiaries in the CEE region, further development of the internal market risk model as well as the introduction of the standardized approach to operational risk throughout the Group.
The following table gives an overview of the current status of these projects. The implementation of the IRB approach in subsidiaries in the CEE region will continue in 2012.
| Credit risk | ||||
|---|---|---|---|---|
| Unit | Non- retail |
Retail | Market risk | Operational risk |
| Raiff eisen Bank International AG, Vienna (Austria) | IRB 1 | n.a. | Internal Model 2 | STA |
| RB International Finance (USA) LLC, New York (USA) | IRB | STA 3 | STA | STA |
| Raiff eisenbank a.s., Prague (Czech Republic) | IRB | STA | STA | STA |
| Raiff eisen Bank Zrt., Budapest (Hungary) | IRB | IRB | STA | STA |
| Raiff eisen Malta Bank plc., Sliema (Malta) | IRB | STA | STA | STA |
| Tatra banka a.s., Bratislava (Slovakia) | IRB | IRB | STA | STA |
| Raiff eisen Bank S.A., Bucharest (Romania) | IRB | STA | STA | STA |
| Raiff eisenbank Austria d.d., Zagreb (Croatia) | IRB 4 | STA | STA | STA |
| All other units | STA | STA | STA | STA |
1 IRB = Internal ratings-based approach
2 Only for risk related to the open currency positions and general interest rate risk in the trading book
3 STA = Standard approach
4 Only on a consolidated basis
The standard approach is currently used in all principal Group units for the capital backing of operational risk in accordance with Basel II.
Human Resources (HR) management is closely linked to RBI's economic performance. As a result, 2011 was a year of contrasts. The fi rst half of the year was marked by optimism and forecasts of growth, which prompted investments in recruitment and training, plus alterations to compensation principles. The situation changed in the second half of the year, however, and cost-cutting programs were introduced in all countries. f
As of 31 December 2011, RBI had 59,261 employees (measured on a full-time equivalent basis), down 1 per cent or 521 people against the end of 2010. The largest cutbacks, based on the total number of employees in a particular country, were recorded in Hungary, Russia and Ukraine. The average age of employees remained relatively low at 36 years, which refl ects the image of RBI as a young and dynamic bank. Graduates accounted for 74 per cent of employees, indicating a highly skilled workforce. 68 per cent of employees were women.
The performance management process was adapted to comply with the CRD III Requirements Directive (further details at the end of the section). In 2011, the bulk of improvements to HR tools and guidelines was based on these requirements. The key priorities lay in matching individual managers' performance targets to the business strategy, providing intensive training for managers and staff , and improving processes.
The priorities of professional development are closely linked to the RBI Group business strategy. Consequently, the 2011 training programs focussed on capital market products and risks with a view to enhancing corporate customer advisors' skills in this area, as well as on risk management and premium banking. All staff have access to a wide range of courses. In order to increase the impact of Group-wide training, so-called master trainers were appointed at each network bank. These serve as multipliers, facilitating the transfer of knowledge and expertise.
Alongside traditional training, the promotion of intra-Group mobility and the international exchange of knowledge and personnel were key aspects. For example, international trainee programs in Risk Management and Treasury encouraged a purposeful exchange of know-how and experience between the network banks.
The range of e-learning courses – a vital component in ongoing training – was expanded in the period under review. E-learning is primarily used to provide the best possible support for training on common topics as well as on local and Group-wide initiatives. Improvements to the technical infrastructure and more user-friendly features resulted in considerably higher levels of use and acceptance in 2011.
As an employer, RBI creates an environment that challenges employees, thereby developing and supporting their personal skills. In order to highlight the career options open to the most talented specialists and to encourage them to stay with the company, RBI wants to ensure that attractive alternatives to a career in management are available to them. The requisite structures have been established and provide the basis for a broad range of talent management measures.
In recognition of its management development strategy and programs, RBI became the fi rst Austrian company to be recognized in the international study "Top Companies for Leaders 2011." RBI came in sixth in the European ranking of the study, which was conducted by the American Fortune magazine in cooperation with human resources consultancies AonHewitt and the RBL Group. RBI was one of only a few banks to make it onto the list. Evaluation criteria included the strength of leadership practices and culture, examples of leader development on a global scale, alignment of leadership and business strategy, business performance, and company reputation. ation.
RBI's talent management features clear processes and eff ective tools. RBI has an impressive pool of top talent comprised of more than 120 individuals meaning that most high-level positions can be fi lled by internal candidates.
In order to give key managers detailed feedback on their current performance – including a market comparison – RBI developed a Group-wide top management audit in 2011. The audit forms the basis for individual development plans that promote internationalization and a diversifi cation of management skills. k
set up to identify and encourage high potentials, such as assessment centers for branch managers in Kosovo, for middle management in Russia and for top local talent in Hungary, as well as the Croatian School of Excellence and the Executive Education Program launched in cooperation with local and international business schools in Russia and Poland.
Long-standing successful management development programs for various target groups and management grades, as well as coaching and "360-degree feedback," continued in 2011. RBI also worked with the training teams of the Austrian Raiff eisen Banking Group (RBG) on the Raiff eisen Campus project – a project designed to foster more transparent talent management within the Raiff eisen Group as a whole in the medium term.
Many Raiff eisen units conducted employee surveys in 2011; in addition to Austria also Albania, Croatia, Kosovo, Poland, Romania and Serbia. In Austria more than 70 per cent of employees completed the survey. Alongside questions regarding working conditions, cooperation, information, communication and job satisfaction, one focus of the survey was dedicated to the concept of leadership. After evaluating the results, over 60 projects were developed and initiated in 2011. Moreover, measures were taken to improve internal information and communication and various features of the performance management and compensation systems were modifi ed.
Group-wide management, knowledge management and mutual learning remained key issues for RBI's Human Resources management activities in 2011. Priorities included implementing Group standards and promoting cooperation between subsidiary banks, particularly the exchange of experiences and best practices. The annual meeting of RBI HR managers was held in April and covered current topics such as job grading, change projects, compensation programs, performance management, and incentive schemes. Moreover, two regional meetings held in Minsk and Zagreb looked at diff erent regional and national requirements. The spotlights here were on optimal HR structure, employee development, and the optimization of administrative HR processes.
The Austrian Banking Act (Section 39b BWG), amended to comply with new EU legislation (Capital Requirements Directive III, CRD III), requires banks to have variable remuneration schemes from 2011 onwards. The aim is to motivate employees to adopt practices promoting sustainability and long-term growth. Consequently, RBI modifi ed its remuneration schemes in 2011, introducing special rules for managers, risk buyers (roles where business decisions directly aff ect the risk profi le), employees with supervisory duties, and employees who fall into the same remuneration group as managers and risk buyers and whose activities have a signifi cant impact on the risk profi le ("identifi ed staff ").
All RZB Group companies were evaluated to determine how certain criteria (e.g. business model, assets, economic capital, etc.) aff ect risk, after which decisions were taken on how to apply the new remuneration guidelines (in full, partially, or the basic minimum) and who qualifi ed as "identifi ed staff ." Based on that assessment, a detailed set of compensation principles was developed that form the backbone of remuneration policy and practices in RBI and RZB banks. This provides a framework across the Group to ensure that employee remuneration is aligned with the new legal requirements:
the costs of risks, liquidity and capital.
Individual performance is the output of achieved results and behaviors/competencies based on both quantitative and qualitative measures, assessed within the performance management process and by taking into account fi nancial and non-fi nancial criteria.
Additional rules apply to "identifi ed staff ," such as deferring parts of the variable remuneration for a stipulated period.
New compensation rules were introduced in all Group units, in line with the Group principles and the relevant local statutory requirements. In some countries, this involved altering existing variable remuneration schemes, as was the case for the annual bonus system in Bosnia and Herzegovina and the incentive schemes for individual retail units in Serbia.
In the course of the merger of Raiff eisen International with the principal business areas of RZB in 2010, the compensation structures in Austria were standardized and harmonized. This process was completed in 2011. The compensation and bonus systems were completely overhauled to comply with the new regulatory demands. The basic compensation model was compared against market standards, and salary margins were defi ned for all function groups. With these steps, the compensation scheme harmonization process – a key component in the development of a new corporate culture – was completed.
Having benefi ted from stable growth in their export markets in 2011, Central Europe's economic forecast for 2012 is signifi cantly gloomier. In this climate, Poland's GDP growth is likely to drop from 4.3 per cent in 2011 to 2.8 per cent in 2012. The situation is similar in Slovakia, which was still reporting growth of 3.3 per cent in 2011, but is likely to suff er a drop in economic output to 0.8 per cent in 2012. With domestic demand remaining weak and exports falling as a result of the expected recession in the eurozone, total economic output in the Czech Republic is expected to fall by 0.2 per cent in 2012. Similar developments are expected in Slovenia where the heavy dependence on exports, a fragile banking sector and a delay in political reforms generate grim prospects. The latest political decisions in Hungary have had an impact on investor confi dence. Combined with low domestic demand, the forecast here in 2012 is for economic output to fall by 0.5 per cent.
The renewed slowdown in the eurozone's economy, combined with persistently weak investment activity, is, as in the case of Central Europe, likely to have a dampening eff ect on Southeastern Europe and could lead to stagnation or even recession in some countries. Tighter lending, persistently high unemployment and a drop in transfers from Southeastern Europeans working abroad are impairing consumer spending. Governments there also have limited resources to signifi cantly increase consumption or fi nance investments. Consequently, GDP is expected to rise only marginally by around 0.3 per cent in 2012.
Even though oil prices are expected to remain high, lower growth is forecasted for the Russian Federation in 2012. Russia is increasingly struggling to transform its export price level into signifi cant economic growth. Nevertheless, at 3.7 per cent it should still be well within positive territory and above the average eurozone level. Domestic factors boosting the economy – through both private demand and investments – are likely to be somewhat weaker year-on-year. Similar developments are expected in Ukraine. Like Russia, it is heavily dependent on the volatile prices of commodities and, as such, is particularly exposed to risk in the current global environment. Growth in the economy is likely to drop from 5.2 per cent to 3.5 per cent. Domestic consumption remains high, while exports are decreasing slightly. Belarus will still have to struggle with the consequences of the economic crisis in 2012. With pressure from infl ation and depreciation still high, GDP growth of 3.0 per cent is expected.
Current forecasts predict a distinctive economic downturn at the end of 2011/beginning of 2012. Owing to the high fi nancing costs, fi scal counter steering is nearly impossible in most countries. On the contrary, persistent restrictive fi scal policies are to be expected for the majority of eurozone countries in 2012. Furthermore, the political environment will remain turbulent. Budget cutbacks and structural changes on the national, as well as bail-out packages on the European level will most likely be accompanied by criticism and protests. In light of these circumstances, a noticeable recession is anticipated from year-end 2011 until mid-2012. On the eurozone demand side this will be characterized by a decline in the demand for investments and public consumption. It is likely that some eurozone countries will experience a decline in their economic performance: Austria (0.3 per cent), Belgium (minus 0.2 per cent), Finland (0.0 per cent), France (0.1 per cent), Germany (0.0 per cent), Ireland (minus 0.7 per cent), Italy (minus 1.8 per cent) and Spain (minus 1.2 per cent). The largest GDP declines are forecast for Greece (minus 5.5 per cent) and Portugal (minus 3.8 per cent).
China will remain the motor for growth in Asia in 2012, even though economic growth will be noticeably slower due to the worldwide decline in demand for exports, as well as internal imbalances in the real estate market. Decreasing infl ation enables monetary countermeasures. At the same time, it is expected that fi scal policy will not interfere quite as strongly as it did in 2009 (strong increase in investments), but that smaller measures, geared towards stimulating consumption and supporting low income households, will be taken. In general, the government's targeted growth of 7.5 per cent in 2012 will be exceeded. India also faces a signifi cant slow-down in economic growth that will reach its low in the fi rst half of 2012. For 2012 the growth forecast stands at an average of 7.0 per cent.
In the context of expected overall economic developments, particularly in CEE, we are aiming, with the inclusion of the acquisition of Polbank, for a return on equity before tax of around 15 per cent in the medium term. This is excluding future acquisitions, any capital increases, as well as unexpected regulatory requirements from today's perspective.
In 2012, we expect a stable business volume due to the economic environment and restrictive regulatory requirements. From the customer standpoint, we plan to retain our Corporate Customers division as the backbone of our business and in the medium term to expand the proportion of business volume accounted for by our Retail Customers division.
Against the backdrop of a permanently changing regulatory environment and further strengthening of our balance sheet structure we are continuously evaluating the level and structure of our regulatory capital to be able to act promptly and fl exibly. Depending on market developments, a capital increase also continues to be a possible option.
Despite the cautious economic growth forecast, we expect to see a stabilization of the net provisioning ratio along with only a marginal increase in non-performing loan volumes. Due to current developments on the economic and political fronts, it is not possible to accurately predict when we will reach a turning point as far as non-performing loans are concerned.
In 2012, we expect higher bank levies than in the previous year. In Austria and CEE this will presumably result in a negative earnings eff ect of some € 160 million (of which approximately € 100 million in Austria, € 40 million in Hungary and € 20 million in Slovakia).
We plan to raise around € 4.6 billion in long-term wholesale funding (maturity of more than one year) for the RBI Group in 2012. In the capital markets we intend to raise € 2.1 billion in wholesale funding, of which around € 1.3 billion had already been placed as of mid-March.
In 2012 we will once again pay increased attention to cost development. Therefore, we have implemented Group-wide cost effi ciency programs in order to achieve a fl at cost development. The number of Group outlets is to remain fairly stable in 2012 (excluding Polbank), although there may continue to be some optimization of our network in some countries.
RBI signed an agreement with the Greek EFG Eurobank Ergasias S.A. (Eurobank EFG) on 3 February 2011 for the acquisition of a majority share of 70 per cent in its business unit Polbank EFG (Polbank) as a fi rst step. With its strong focus on private customers, Polbank would complement Raiff eisen Bank Polska ideally, which mainly focuses on corporate customers.
Signifi cant steps towards acquiring Polbank – for example the approvals by the European Commission and the transition to an independently licensed bank – as well as the preparations for the future organizational structure of the merged bank were successfully carried out in the 2011 fi nancial year. Closing the transaction now depends on the regulatory approval in Poland.
The tender off er period for buying back several RBI hybrid bonds ended on 5 March 2012. In total, RBI bought back securities with a total nominal value and at a liquidation preference amount of € 358 million. The buyback increases the core tier 1 capital by approximately € 113 million (the diff erence between the nominal and redemption amount) or the core tier 1 ratio by 0.12 percentage points. This strengthens the capital structure accordingly against the backdrop of the changes in the regulatory requirements.
In the course of its measures to prepare for the Basel III guidelines that will be in force as of 2013, RBI is currently optimizing its structure of participations. The European implementation of Basel III will limit the recognition of the capital contributions provided by minority shareholders. In order to avoid this eff ect, RBI will acquire the minority shareholdings that RZB holds in the Slovak Tatra banka a.s. and the Czech Republic's Raiff eisenbank a.s. By doing so, RBI will increase its already existing majority shareholdings in these network banks and will further simplify the shareholder structure.
On the completion of this measure – which is still subject to approval from the relevant regulatory authorities – RBI's equity share in Tatra banka in Slovakia will increase from 65.8 per cent to 78.6 per cent and from 51.0 per cent to 75.0 per cent in Raiff eisenbank in the Czech Republic. The purchase price for the shares will total approximately € 344 million, which will initially impact RBI's core tier 1 ratio by around 0.35 percentage points.
Segments 92 Segment overview 94 Central Europe 95 Southeastern Europe 103 Russia 112 CIS Other 115 Group Corporates 119 Group Markets 120 Corporate Center 122 Business divisions 124 Corporate Customers 125 Retail Customers 127 Financial Institutions & Public Sector 129 Capital Markets & Treasury 130 Participations & Other 131
Internal management reporting at RBI is based on the current organizational structure. The matrix structure means that each member of the Management Board is responsible both for individual countries and for specifi c 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 fi nancial strength and profi tability, which is why these reporting criteria are an essential component in the decision-making process. The division into segments is also in accordance with the International Financial Reporting Standards (IFRS) – in particular IFRS 8.
Markets in Central and Eastern Europe are thereby grouped together into regional segments in which countries with comparable economic profi les and similar long-term economic growth expectations are bundled into the same segment. Business activities outside the CEE region that have been newly added as a result of the merger with the principal business areas of RZB are divided according to business area.
In order to achieve the maximum possible transparency and clear lines of reporting, seven segments were defi ned in compliance with the IFRS 8 thresholds. IFRS 8 establishes a 10 per cent threshold for the key fi gures of operating income, profi t after tax and segment assets.
The Group comprises the following segments:
This segment encompasses the most advanced banking markets in Central and Eastern Europe, namely the EU countries Czech Republic, Hungary, Poland, Slovakia and Slovenia. These are also the markets in which RBI has been operating the longest. In all countries, RBI is represented by a bank, leasing companies and other specialized fi nancial institutions. In Poland, in addition to the main activity of the credit business with corporate customers and small and medium-sized entities (also via leasing and factoring), the focus is on retail banking and increasingly on affl uent customers too. In Slovakia, RBI is likewise active in its business divisions of corporate and retail customers, including leasing, while at the same time expanding banking services for affl uent customers. In Slovenia, the Group provides universal banking services as well as leasing, with Group units concentrating in particular on local corporate customers. In the Czech Republic, RBI off ers real estate leasing in addition to traditional banking services with corporate and retail customers. In Hungary, the Group provides services to private and corporate customers via a closely knit network and also through leasing companies. In addition, RBI is represented in Slovakia and the Czech Republic through its direct bank ZUNO.
The Southeastern Europe segment comprises Albania, Bosnia and Herzegovina, Bulgaria, Croatia, Kosovo, Romania and Serbia. In these countries RBI is represented by banks and leasing companies, and in some markets by its own investment and asset management companies and pension funds. In Albania and Bulgaria fi nancial services are off ered in all divisions. RBI is also present in Kosovo with an extensive product range. In Bosnia-Herzegovina the focus is on small and medium-sized companies, though private clients are also catered for with a broad product range. In Croatia the focus is on large and medium-sized corporate customers and on retail customers (also in the pension fund business). In Romania a wide range of fi nancial services is provided through a dense branch network. Additionally, Romania manages the corporate customer business in Moldova. In Serbia RBI positions itself as a universal bank and operates a leasing company.
Raiff eisenbank is one of the leading foreign banks in the country and focuses on corporate and retail customers. Through its nationwide branch network it also targets products at affl uent retail customers. The leasing business rounds off the product range. As in the other segments, future growth in Russia is expected to be organic, notably through continuous expansion of its existing presence in regional and national centers. In addition to this, RBI is increasingly supporting the expansion of Russian companies into the countries of Central and Eastern Europe. In view of the size of the banking market and the great potential yet to be exploited, the segment is of key signifi cance to RBI.
This segment comprises Belarus, Kazakhstan and Ukraine. In Belarus RBI operates through a bank and a leasing company. In Kazakhstan it is represented in the leasing business. In Ukraine RBI is represented by a bank, a leasing company and a credit card payment processing business and provides the full range of fi nancial services through its dense local distribution network.
The Group Corporates segment covers Austrian and international – notably Western European – corporate customers managed by RBI AG in Vienna within the Corporate Customers profi t center. These customers include Austria's largest companies, which for the most part enjoy an excellent credit rating. The segment also comprises the large corporate business with Central and Eastern European customers (excluding Austrian multinationals) in the Network Corporate Customers & Support profi t center. The Corporate Customers and Network Corporate Customers & Support profi t centers also include net income from structured trade fi nancing for commodity traders, documentary business, project fi nancing and a range of cofi nancing solutions. Corporate customer business at the China, Malaysia, Singapore and Malta branches is also allocated to this segment, as are fi nance companies in Hong Kong and the US with their focus on selected products for niche market customers.
The Group Markets segment covers customer and proprietary business related to the capital market. Net income from currency, interest and securities trading as well as from trading in structured products for fi nancial institutions is also allocated to this segment, as is proprietary business. The same applies to proprietary trading and market maker activities in Vienna, and to the branches in Singapore, China and London. This segment includes net income from sales of all banking products and business relationships with banks, institutional customers, governments and local authorities. Furthermore, income from Raiff eisen Centrobank (securities trading and capital market fi nancing) and from Kathrein Privatbank AG is also booked under this segment.
The Corporate Center segment encompasses all services provided by Group headquarters in various divisions that were created to implement the Group's overall strategy and are allocated to this segment to ensure comparability. Moreover, this segment includes the following areas: Liquidity management and balance sheet structure management as part of proprietary trading, participations (in particular those of subsidiaries in CEE), income from banking operations carried out by Group headquarters and by the Maltese subsidiary for refi nancing Group units, the Austrian transaction services business, which off ers a wide range of order processing products and services for fi nancial services providers, as well as income from the holding and other companies that do not fall directly under another segment.
Profi t before tax at RBI rose by 7 per cent year-on-year to € 1,373 million. On the one hand this increase was based on a slight rise in operating income adjusted for non-recurring eff ects, while on the other hand lower net provisioning for impairment losses also had a signifi cant positive impact on profi tability. In addition, the sharp increase in valuation gains arising from derivative fi nancial instruments also improved the result. At the same time, the 5 per cent rise in administrative expenses, which largely refl ected the active support of business growth, led to an increase in the cost/income ratio to 57.0 per cent.
Performance varied across the regional and functional segments in the year under review. However, the problems in Hungary and the impairment of goodwill in Ukraine were more than compensated for by other markets and areas.
In Central Europe, profi t before tax fell by € 236 million to € 33 million. An increase in net provisioning for impairment losses in Hungary was one of the main reasons for this decline. Balance sheet assets rose by 3 per cent compared with the previous year.
In the year under review, Southeastern Europe reported profi t before tax of € 351 million, a rise of 15 per cent compared to 2010. This result was positively infl uenced largely by lower net provisioning for impairment losses, whereas the slight fall in operating income had a negative eff ect. Total assets in this segment were 1 per cent up year-on-year.
With profi t before tax of € 434 million, Russia made the largest regional contribution to earnings. The rise of around 63 per cent achieved here, resulted from an increase in operating income and lower net provisioning for impairment losses. Balance sheet assets in this segment rose by 17 per cent compared to the previous year.
In the CIS Other segment, profi t before tax rose by 19 per cent to € 106 million, almost exclusively due to lower net provisioning for impairment losses. Balance sheet assets in the segment fell year-on-year by 5 per cent, largely due to stagnation in lending, and exchange rate eff ects.
The Group Corporates segment saw a 27 per cent rise in profi t before tax to € 374 million during the year under review. This was due to the rise in operating income and the year-on-year lower net provisioning for impairment losses. Balance sheet assets in this segment were 3 per cent down on the previous year.
in € million
2010 2011
Profi t before tax in the Group Markets segment rose year-on-year by 7 per cent to € 266 million. This was primarily due to an increase in operating income and a fall in net provisioning for impairment losses. Balance sheet assets were aff ected by the decline in business volume and went down 6 per cent on the previous year.
The net loss before tax in the Corporate Center segment came to € 65 million, partly due to write-downs of Group-internal investments, while a higher valuation of derivative fi nancial instruments had a positive infl uence on earnings. Balance sheet assets rose year-on-year by 64 per cent.
The structure of Group assets by segment changed as follows in the reporting year: The share of Central Europe fell by 2 percentage points to 19 per cent, while that of Southeastern Europe declined by 1 percentage point to 12 per cent. Russia's share remained unchanged at 8 per cent, while that of the CIS Other segment fell by 1 percentage point to 4 per cent. The share of Group Corporates fell by 2 percentage points to 13 per cent, and that of Group Markets by 3 percentage points to 14 per cent, while the Corporate Center segment share rose by 9 percentage points to 30 per cent.
In Central Europe, profi t before tax in 2011 was € 33 million, down 88 per cent on the previous year. Although operating income rose by 6 per cent, the sharp increase in provisioning in Hungary and the rise in administrative expenses, in particular, accounted for this decline. Return on equity before tax fell by 9.2 percentage points to 1.2 per cent.
| In € million | 2011 | 2010 | Change | Q4/2011 | Q3/2011 | Change |
|---|---|---|---|---|---|---|
| Operating income | 1,668 | 1,569 | 6.3% | 450 | 396 | 13.6% |
| General administrative expenses | (938) | (883) | 6.2% | (230) | (238) | (3.4)% |
| Operating result | 730 | 685 | 6.5% | 220 | 158 | 39.0% |
| Net provisioning for impairment losses | (646) | (408) | 58.3% | (162) | (307) | (47.3)% |
| Other results | (50) | (8) | >500.0% | (38) | (2) | >500.0% |
| Profi t/loss before tax | 33 | 269 | (87.8)% | 20 | (150) | – |
| Assets | 34,852 | 33,928 | 2.7% | 34,852 | 35,608 | (2.1)% |
| Net interest margin | 3.16% | 3.29% | (0.13) PP | 2.89% | 3.14% | (0.25) PP |
| Return on equity before tax | 1.2% | 10.4% | (9.2) PP | 2.9% | – | – |
Net interest income in the segment remained virtually unchanged year-on-year at € 1,102 million. The largest increases were realized here by the units in Slovakia and Poland, mainly due to the expansion of their customer portfolios. In Slovakia, this refl ected higher income from loans to corporate and retail customers. Growth was defi ned particularly by a signifi cant expansion of the mortgage loan portfolio, and with regard to corporate customers fi nancing in connection with environmental technology projects. In Poland, the rise in net interest income was based on a signifi cant increase in the corporate customer portfolio due to the improved demand for credit. In addition, the interest income from securities rose as excess liquidity was invested successfully, as it had been in the previous year. In the other countries within the segment, net interest income was down. In Hungary, this was due to a fall in lending volumes as a result of the ongoing diffi cult credit environment. In the Czech Republic, on the other hand, the higher interest expenses for customer deposits acquired proactively, as well as the interest expenses for the newly acquired subordinated capital, brought a reduction in earnings. The net interest margin in the region fell by 13 basis points to 3.16 per cent, and the balance sheet assets in this segment increased by 3 per cent year-on-year to € 34.9 billion. At the same time, risk-weighted assets fell by 6 per cent from € 22.9 billion to € 21.5 billion, particularly due to the decline in retail business in Slovakia as well as in the Corporate Customers and Financial Institutions divisions in Hungary.
Net fee and commission income grew in every country in the region except for Hungary, by a total of 4 per cent or € 17 million to € 491 million. Net income from payment transfer business increased year-on-year by 5 per cent to € 196 million, largely due to a rise in the number of transactions as well as to price adjustments for retail customers in the Czech Republic. Year-on-year, net income from the loan and guarantee business grew by 9 per cent to € 72 million. This increase was mainly generated in Poland by signifi cant growth in business activity and, in particular, through income from project fi nancing. Net income from foreign exchange, notes/coins, and precious-metals business remained unchanged at € 147 million in total, although in Hungary both the number and the volume of transactions in foreign currencies declined.
Net trading income rose year-on-year in Central Europe by 83 per cent to € 77 million. Net income from currency-based transactions was up by € 26 million to € 62 million, primarily due to revaluation gains on various foreign currency instruments in Poland and Hungary. Net income from interest-based transactions grew, compared to the previous year, by € 13 million to € 14 million. This mainly refl ected revaluation gains on interest rate swap transactions in the Czech Republic and Hungary.
Other net operating income in the region improved in the year under review from minus € 58 million to minus € 2 million. This increase was driven by higher net income from non-banking activities as well as reduced expenses for the banking levy in Hungary. This reduction was the result of the partial deductibility of losses from the early repayment of foreign currency loans as established with retroactive eff ect by the Hungarian government at the end of 2011.
The segment's general administrative expenses increased by 6 per cent or € 55 million to € 938 million compared to the previous year, largely due to the rise in staff expenses and other administrative expenses. The higher staff expenses were caused by an expansion in marketing channels in the Czech Republic as well as increased operating activities at the direct bank ZUNO in Slovakia. In Poland, insourcing measures produced a signifi cant increase in the number of employees and, consequently, in staff expenses. At the same time, other administrative expenses rose by 6 per cent to € 389 million. This rise was primarily connected with the additional business activities of the direct bank ZUNO in the Czech Republic and Slovakia, as well as with preparations for the acquisition of Polbank in Poland. Depreciation increased in several countries in the region, mainly as a result of the commissioning of several IT applications and the depreciation of various IT systems following implementation of a new core bank system. In Hungary, on the other hand, general administrative expenses fell due to the closure of several branches and the reduction in the number of employees. The number of business outlets in the segment fell by 3 to 552 year-on-year. The region's cost/income ratio remained unchanged at 56.3 per cent.
Although a fall in net provisioning for impairment losses was recorded in several countries in Central Europe, the segment as a whole posted a rise of 58 per cent or € 238 million to € 646 million. The main contributor to this was Hungary with net provisioning of € 478 million. The political and economic situation here called for additional collective individual loan loss provisions. One notable reason for this was the law permitting private individuals to repay foreign currency mortgage loans early at an exchange rate well below the market rate. The decisive repayment rate for allocations to loan loss provisions in the case of foreign currency loans was around 29 per cent.
Net allocations to individual loan loss provisions therefore increased year-on-year by 65 per cent to € 671 million. Alongside the circumstances described above, there was also a need to revalue collateral in Hungary. Market-related weak domestic demand had a negative eff ect on net provisioning for impairment losses particularly among retail customers. In Slovenia, one fairly large non-performing loan meant that a € 13 million higher net allocation to provisioning for impairment losses was required.
Portfolio-based loan loss provisions recorded a net release of € 21 million in the region. This was therefore an improvement of € 25 million in total on the previous year's level. This volume-related development largely related to consumer lending in Hungary, although, as already mentioned, net allocations to individual loan loss provisions continued to rise here. The highest net allocations to portfolio-based loan loss provisions occurred in the Czech Republic, mainly in connection with the expanded retail customer portfolio. The proportion of non-performing loans in the loan portfolio of the Central Europe segment stood at 9.8 per cent at the end of the reporting year.
Other results in the Central Europe segment fell from minus € 8 million to minus € 50 million. Net income from fi nancial investments was down year-on-year from minus € 2 million to minus € 59 million due to valuation losses in several countries. In Hungary, in particular, there was a signifi cant revaluation loss on municipal bonds as a result of the general increase in risk aversion and the resultant rise in bond yields. On the other hand, net income from derivative fi nancial investments turned around year-on-year from minus € 10 million to € 8 million. This improvement resulted predominantly from revaluation gains on various hedging transactions in the Czech Republic which had been entered into to adjust the foreign currency and interest rate structure. Changes in the positions held as well as the falling interest rate level had a positive impact here. Income taxes for the segment rose slightly by 1 per cent to € 66 million, as the losses in Hungary could only be used to a limited extent for allocations to deferred tax assets. Loss after deduction of non-controlling interests was € 11 million.
Below please fi nd the detailed results of the individual countries in the segment:
| In € million | 1/1–31/12 2011 |
1/1–31/12 2010 |
Change | Q4/2011 | Q3/2011 | Change |
|---|---|---|---|---|---|---|
| Net interest income | 278 | 281 | (1.1)% | 65 | 70 | (7.6)% |
| Net fee and commission income | 127 | 110 | 15.0% | 31 | 33 | (5.1)% |
| Net trading income | 7 | (3) | – | 3 | 0 | – |
| Other net operating income | 10 | 3 | 226.7% | 8 | 0 | – |
| Operating income | 422 | 392 | 7.7% | 107 | 103 | 4.0% |
| General administrative expenses | (237) | (205) | 15.7% | (55) | (64) | (12.9)% |
| Operating result | 185 | 187 | (1.0)% | 51 | 39 | 31.4% |
| Net provisioning for | ||||||
| impairment losses | (79) | (94) | (15.8)% | (22) | (25) | (14.0)% |
| Other results | 11 | (5) | – | (2) | 11 | – |
| Profi t before tax | 117 | 89 | 31.6% | 28 | 25 | 11.8% |
| Income taxes | (26) | (20) | 30.2% | (6) | (6) | 2.8% |
| Profi t after tax | 91 | 69 | 32.0% | 22 | 19 | 14.5% |
| Profi t attributable to | ||||||
| non-controlling interests | (46) | (36) | 28.3% | (8) | (11) | (22.1)% |
| Profi t after non-controlling | ||||||
| interests | 45 | 33 | 36.0% | 13 | 8 | 64.1% |
| Assets | 8,789 | 7,908 | 11.1% | 8,789 | 8,988 | (2.2)% |
| Loans and advances to customers | 6,538 | 6,483 | 0.8% | 6,538 | 6,799 | (3.8)% |
| hereof corporate % | 42.3% | 42.3% | (0.1) PP | 42.3% | 43.3% | (1.0) PP |
| hereof retail % | 57.6% | 57.4% | 0.2 PP | 57.6% | 56.6% | 1.1 PP |
| hereof foreign currency % | 6.9% | 7.1% | (0.2) PP | 6.9% | 6.6% | 0.3 PP |
| Deposits from customers | 6,039 | 5,035 | 20.0% | 6,039 | 6,004 | 0.6% |
| Loan/deposit ratio | 108.2% | 128.8% | (20.5) PP | 108.2% | 113.2% | (5.0) PP |
| Return on equity before tax | 20.8% | 17.4% | 3.4 PP | 19.6% | 16.9% | 2.6 PP |
| Return on equity after tax | 16.2% | 13.5% | 2.7 PP | 15.4% | 13.0% | 2.4 PP |
| Cost/income ratio | 56.1% | 52.2% | 3.9 PP | 51.8% | 61.9% | (10.1) PP |
| Number of employees as of | ||||||
| reporting date | 3,012 | 2,894 | 4.1% | 3,012 | 3,171 | (5.0)% |
| Business outlets | 129 | 112 | 15.2% | 129 | 128 | 0.8% |
| Number of customers | 470,666 | 423,371 | 11.2% | 470,666 | 435,751 | 8.0% |
| In € million | 1/1–31/12 2011 |
1/1–31/12 2010 |
Change | Q4/2011 | Q3/2011 | Change |
|---|---|---|---|---|---|---|
| Net interest income | 298 | 340 | (12.4)% | 61 | 76 | (19.3)% |
| Net fee and commission income | 90 | 99 | (9.5)% | 22 | 23 | (6.5)% |
| Net trading income | 38 | 24 | 60.0% | 28 | (2) | – |
| Other net operating income | (53) | (56) | (6.1)% | (2) | (18) | (86.2)% |
| Operating income | 373 | 407 | (8.3)% | 109 | 79 | 37.5% |
| General administrative expenses | (217) | (231) | (6.3)% | (52) | (57) | (8.4)% |
| Operating result | 157 | 176 | (11.0)% | 57 | 23 | 152.3% |
| Net provisioning for impairment losses |
(478) | (196) | 144.2% | (104) | (258) | (59.6)% |
| Other results | (54) | (8) | >500.0% | (28) | (13) | 116.7% |
| Loss before tax | (375) | (28) | >500.0% | (75) | (248) | (69.6)% |
| Income taxes | 19 | 8 | 157.5% | 7 | 3 | 96.8% |
| Loss after tax | (355) | (20) | >500.0% | (69) | (245) | (72.0)% |
| Profi t attributable to non-controlling interests |
27 | 10 | 173.1% | (71) | 93 | – |
| Loss after non-controlling | ||||||
| interests | (328) | (11) | >500.0% | (140) | (152) | (8.4)% |
| Assets | 7,320 | 8,534 | (14.2)% | 7,320 | 8,290 | (11.7)% |
| Loans and advances to customers | 5,564 | 6,279 | (11.4)% | 5,564 | 5,919 | (6.0)% |
| hereof corporate % | 53.2% | 51.6% | 1.6 PP | 53.2% | 51.9% | 1.3 PP |
| hereof retail % | 42.5% | 45.1% | (2.6) PP | 42.5% | 45.0% | (2.5) PP |
| hereof foreign currency % | 75.9% | 72.5% | 3.3 PP | 75.9% | 71.3% | 4.5 PP |
| Deposits from customers | 4,578 | 4,785 | (4.3)% | 4,578 | 4,883 | (6.2)% |
| Loan/deposit ratio | 121.5% | 131.2% | (9.7) PP | 121.5% | 121.2% | 0.3 PP |
| Return on equity before tax | – | – | – | – | – | – |
| Return on equity after tax | – | – | – | – | – | – |
| Cost/income ratio | 58.1% | 56.8% | 1.3 PP | 47.6% | 71.5% | (23.8) PP |
| Number of employees as of reporting date |
2,977 | 3,244 | (8.2)% | 2,977 | 3,188 | (6.6)% |
| Business outlets | 134 | 144 | (6.9)% | 134 | 144 | (6.9)% |
| Number of customers | 643,257 | 640,806 | 0.4% | 643,257 | 646,256 | (0.5)% |
| In € million | 1/1–31/12 2011 |
1/1–31/12 2010 |
Change | Q4/2011 | Q3/2011 | Change |
|---|---|---|---|---|---|---|
| Net interest income | 191 | 178 | 7.5% | 44 | 49 | (10.3)% |
| Net fee and commission income | 138 | 132 | 4.7% | 36 | 34 | 6.1% |
| Net trading income | 32 | 23 | 40.7% | 15 | 7 | 129.2% |
| Other net operating income | 16 | (6) | – | 5 | 1 | 334.3% |
| Operating income | 378 | 327 | 15.6% | 100 | 91 | 10.5% |
| General administrative expenses | (209) | (184) | 13.6% | (58) | (51) | 12.4% |
| Operating result | 169 | 143 | 18.1% | 43 | 40 | 8.0% |
| Net provisioning for impairment losses |
(58) | (61) | (5.5)% | (22) | (13) | 66.1% |
| Other results | 0 | 0 | 340.7% | 0 | 0 | – |
| Profi t before tax | 112 | 82 | 35.9% | 21 | 26 | (20.3)% |
| Income taxes | (24) | (22) | 8.3% | (5) | (6) | (24.2)% |
| Profi t after tax | 88 | 60 | 46.1% | 16 | 20 | (19.1)% |
| Profi t attributable to | ||||||
| non-controlling interests | (6) | (4) | 25.9% | (1) | (1) | (32.7)% |
| Profi t after non-controlling | ||||||
| interests | 82 | 56 | 47.7% | 16 | 19 | (18.3)% |
| Assets | 7,368 | 6,928 | 6.4% | 7,368 | 7,234 | 1.9% |
| Loans and advances to customers | 5,340 | 5,127 | 4.2% | 5,340 | 5,347 | (0.1)% |
| hereof corporate % | 61.8% | 57.2% | 4.6 PP | 61.8% | 60.6% | 1.2 PP |
| hereof retail % | 37.6% | 41.9% | (4.3) PP | 37.6% | 38.6% | (1.0) PP |
| hereof foreign currency % | 39.8% | 36.2% | 3.6 PP | 39.8% | 39.7% | 0.1 PP |
| Deposits from customers | 4,356 | 3,896 | 11.8% | 4,356 | 4,098 | 6.3% |
| Loan/deposit ratio | 122.6% | 131.6% | (9.0) PP | 122.6% | 130.5% | (7.9) PP |
| Return on equity before tax | 15.8% | 11.8% | 4.0 PP | 13.0% | 15.5% | (2.5) PP |
| Return on equity after tax | 12.4% | 8.6% | 3.8 PP | 10.1% | 11.9% | (1.8) PP |
| Cost/income ratio | 55.2% | 56.2% | (1.0) PP | 57.3% | 56.3% | 1.0 PP |
| Number of employees as of | ||||||
| reporting date | 3,169 | 3,071 | 3.2% | 3,169 | 3,149 | 0.6% |
| Business outlets | 116 | 123 | (5.7)% | 116 | 116 | 0.0% |
| Number of customers | 246,586 | 242,781 | 1.6% | 246,586 | 243,900 | 1.1% |
| In € million | 1/1–31/12 2011 |
1/1–31/12 2010 |
Change | Q4/2011 | Q3/2011 | Change |
|---|---|---|---|---|---|---|
| Net interest income | 304 | 280 | 8.4% | 76 | 76 | (0.1)% |
| Net fee and commission income | 129 | 126 | 2.5% | 32 | 33 | (2.9)% |
| Net trading income | (1) | (2) | (41.7)% | (1) | 0 | – |
| Other net operating income | 25 | 3 | >500.0% | 18 | 5 | 289.3% |
| Operating income | 456 | 406 | 12.2% | 125 | 114 | 9.5% |
| General administrative expenses | (251) | (237) | 5.8% | (61) | (60) | 1.0% |
| Operating result | 205 | 170 | 21.1% | 64 | 54 | 18.9% |
| Net provisioning for impairment losses |
(17) | (49) | (66.0)% | (12) | (7) | 61.4% |
| Other results | (4) | 2 | – | (5) | 2 | – |
| Profi t before tax | 185 | 122 | 51.2% | 48 | 49 | (3.1)% |
| Income taxes | (36) | (30) | 20.0% | (8) | (10) | (26.1)% |
| Profi t after tax | 149 | 93 | 61.2% | 40 | 39 | 3.1% |
| Profi t attributable to non-controlling interests |
(51) | (33) | 54.9% | (9) | (14) | (37.9)% |
| Profi t after non-controlling | ||||||
| interests | 98 | 60 | 64.6% | 31 | 24 | 27.2% |
| Assets | 9,682 | 8,972 | 7.9% | 9,682 | 9,453 | 2.4% |
| Loans and advances to customers | 6,636 | 6,011 | 10.4% | 6,636 | 6,536 | 1.5% |
| hereof corporate % | 52.0% | 53.3% | (1.3) PP | 52.0% | 53.0% | (1.0) PP |
| hereof retail % | 47.8% | 46.4% | 1.4 PP | 47.8% | 46.7% | 1.0 PP |
| hereof foreign currency % | 0.9% | 1.6% | (0.6) PP | 0.9% | 1.0% | 0.0 PP |
| Deposits from customers | 7,207 | 6,816 | 5.7% | 7,207 | 7,037 | 2.4% |
| Loan/deposit ratio | 92.1% | 88.2% | 3.9 PP | 92.1% | 92.9% | (0.8) PP |
| Return on equity before tax | 21.0% | 15.6% | 5.4 PP | 21.0% | 23.5% | (2.5) PP |
| Return on equity after tax | 16.9% | 11.8% | 5.1 PP | 17.6% | 18.5% | (0.9) PP |
| Cost/income ratio | 55.0% | 58.3% | (3.3) PP | 48.5% | 52.6% | (4.1) PP |
| Number of employees as of | ||||||
| reporting date Business outlets |
3,805 156 |
3,693 159 |
3.0% (1.9)% |
3,805 156 |
3,807 156 |
(0.1)% 0.0% |
| Number of customers | 788,215 | 735,722 | 7.1% | 788,215 | 770,491 | 2.3% |
| In € million | 1/1–31/12 2011 |
1/1–31/12 2010 |
Change | Q4/2011 | Q3/2011 | Change |
|---|---|---|---|---|---|---|
| Net interest income | 31 | 31 | (1.7)% | 7 | 7 | 2.4% |
| Net fee and commission income | 8 | 6 | 17.5% | 2 | 2 | (1.9)% |
| Net trading income | 0 | (1) | – | 0 | 0 | (84.9)% |
| Other net operating income | 0 | 2 | – | 0 | 0 | – |
| Operating income | 39 | 39 | (0.8)% | 9 | 10 | (8.8)% |
| General administrative expenses | (26) | (27) | (3.2)% | (5) | (7) | (20.7)% |
| Operating result | 13 | 12 | 4.5% | 4 | 3 | 17.0% |
| Net provisioning for impairment losses |
(15) | (9) | 72.8% | (2) | (3) | (39.2)% |
| Other results | (4) | 0 | – | (2) | (2) | 36.1% |
| Profi t/loss before tax | (6) | 4 | – | (1) | (2) | (64.7)% |
| Income taxes | 1 | (1) | – | 0 | 1 | (20.9)% |
| Profi t/loss after tax | (6) | 3 | – | 0 | (2) | (93.0)% |
| Profi t attributable to | ||||||
| non-controlling interests | 1 | 0 | – | 0 | 0 | (83.7)% |
| Profi t/loss after non-controlling | ||||||
| interests | (5) | 2 | – | 0 | (2) | (94.2)% |
| Assets | 1,732 | 1,611 | 7.5% | 1,732 | 1,668 | 3.8% |
| Loans and advances to customers | 1,303 | 1,317 | (1.0)% | 1,303 | 1,342 | (2.9)% |
| hereof corporate % | 61.7% | 69.1% | (7.4) PP | 61.7% | 62.4% | (0.7) PP |
| hereof retail % | 32.1% | 30.0% | 2.1 PP | 32.1% | 31.5% | 0.6 PP |
| hereof foreign currency % | 6.9% | 9.5% | (2.7) PP | 6.9% | 6.7% | 0.2 PP |
| Deposits from customers | 464 | 447 | 3.8% | 464 | 402 | 15.3% |
| Loan/deposit ratio | 281.0% | 294.7% | (13.8) PP | 281.0% | 333.6% | (52.6) PP |
| Return on equity before tax | – | 4.6% | – | – | – | – |
| Return on equity after tax | – | 3.2% | – | – | – | – |
| Cost/income ratio | 66.6% | 68.3% | (1.7) PP | 59.6% | 68.5% | (8.9) PP |
| Number of employees as of reporting date |
323 | 352 | (8.2)% | 323 | 342 | (5.6)% |
| Business outlets | 17 | 17 | 0.0% | 17 | 17 | 0.0% |
| Number of customers | 67,526 | 66,899 | 0.9% | 67,526 | 67,823 | (0.4)% |
In Southeastern Europe, profi t before tax rose year-on-year by 15 per cent to € 351 million. Lower net provisioning for impairment losses stood in contrast to a decline in operating income and other results. Return on equity before tax increased by 1.8 percentage points to 17.5 per cent.
| In € million | 2011 | 2010 | Change | Q4/2011 | Q3/2011 | Change |
|---|---|---|---|---|---|---|
| Operating income | 1,366 | 1,379 | (1.0)% | 350 | 338 | 3.3% |
| General administrative expenses | (746) | (738) | 1.2% | (192) | (183) | 5.0% |
| Operating result | 619 | 641 | (3.4)% | 158 | 155 | 1.4% |
| Net provisioning for impairment losses | (258) | (335) | (23.1)% | (64) | (70) | (7.6)% |
| Other results | (10) | (1) | >500.0% | (2) | (14) | (83.6)% |
| Profi t before tax | 351 | 305 | 15.3% | 91 | 72 | 26.8% |
| Assets | 22,827 | 22,697 | 0.6% | 22,827 | 22,630 | 0.9% |
| Net interest margin | 4.07% | 3.90% | 0.17 PP | 4.04% | 4.16% | (0.12) PP |
| Return on equity before tax | 17.5% | 15.7% | 1.8 PP | 18.1% | 14.0% | 4.1 PP |
Net interest income in the segment rose by 2 per cent to € 919 million. Growth was recorded in all the region's countries except for Bulgaria, with the strongest rise in net interest income posted in Romania. Here, despite the high pressure on margins, there was a signifi cant increase in lending volumes for large corporate customers and retail customers. In Bulgaria, on the other hand, net interest income from the customer portfolio fell as margins on the asset side declined sharply. The net interest margin for the segment was up 17 basis points in total to 4.07 per cent, while year-on-year the balance sheet assets remained virtually unchanged at € 22.8 billion. Risk-weighted assets (credit risk) fell by 2 per cent compared to the previous year to € 16.3 billion. The main reason for this was Croatia, where receivables from the public sector and borrowers guaranteed by the public sector were able to carry a lower weighting due to the country's imminent accession to the EU.
Net fee and commission income declined by 6 per cent year-on-year to € 365 million. The payment transfer business continued to be the biggest contributor with € 178 million (up 2 per cent), while income from credit and guarantee business fell by 32 per cent compared to the previous year to € 62 million. This was due to developments in Romania, where lower transaction volumes (particularly in the stagnant guarantee business) and a market-related fall in prices prompted a decline. In addition, the new provisions of the Consumer Protection Act, which had come into force in June 2010, also reduced earnings. Income from the securities business slipped 11 per cent to € 8 million, due especially to the sharp decline in public sector issues on the local fi nancial market in Croatia. Income from the foreign exchange, notes/coins, and precious-metals business rose by 4 per cent year-on-year to € 69 million.
Net trading income for Southeastern Europe was down 26 per cent year-on-year to € 41 million. Net income from currency-based transactions fell by 8 per cent to € 28 million. While the net valuation of forward and swap transactions in Romania rose slightly, net income in Croatia decreased due to the expiration of a number of currency swap transactions and signifi cantly lower currency volatility. Interest-based transactions posted income of € 15 million, a fall of 40 per cent. In Croatia, the widening of the credit spread resulted in valuation losses on various government bonds in the portfolio.
Other net operating income rose year-on-year by 8 per cent to € 40 million. The slight rise in net income from the operating leasing business to € 41 million had a positive eff ect, predominantly in Croatia.
The segment's general administrative expenses rose year-on-year by a total of 1 per cent to € 746 million. Staff expenses were down in several countries, particularly in Romania where the reduction was sharpest due to lower expenses for bonus payments. By contrast, other administrative expenses were 3 per cent higher in total. This rise was mainly attributable to Romania, where higher expenses were incurred for new IT applications and for deposit protection. A change in VAT regulations in Romania also had a negative impact. Depreciation in the segment rose by 5 per cent to € 108 million, primarily as a result of investment in intangible fi xed assets including IT applications, particularly in Romania. Conversely, general administrative expenses fell in Croatia due to savings virtually across the board. The combination of lower operating income and increased general administrative expenses meant that the cost/income ratio was up slightly by 1.1 percentage points to 54.7 per cent.
Net provisioning for impairment losses was down by a total of 23 per cent or € 77 million to € 258 million. Net allocations to individual loan loss provisions fell by 6 per cent or € 20 million to € 315 million. The main contributor to this was Croatia, where greater success with the collection of receivables and restructuring measures for loans to retail customers fueled the reduction. In addition, impairment loss provisions for a large corporate customer in Albania were also released. Portfoliobased loan loss provisions had a positive impact of € 54 million, with the highest releases recorded here in Bulgaria and Romania. Croatia, by contrast, saw an increase in net provisioning for the large customer portfolio due to adjustment to newly calculated loss rates. The proportion of non-performing loans in the segment's loan portfolio grew to 11.3 per cent, mainly as a result of larger individual cases in the corporate customer business.
Other results for the Southeastern Europe segment fell year-on-year by € 9 million to minus € 10 million. Net income from fi nancial investments was down from € 10 million to minus € 5 million due to disposal and valuation losses on government bonds in Romania as well as corporate bonds in Croatia. The deconsolidation of a leasing company in Moldova for materiality reasons resulted in a net loss on the disposal of Group assets of € 0.3 million.
Income taxes for the region climbed by 19 per cent year-on-year to € 47 million. The eff ective tax rate remained unchanged at 13 per cent.
Profi t after deduction of non-controlling interests rose by 16 per cent to € 289 million.
Below please fi nd the detailed results of the individual countries in the segment:
| In € million | 1/1–31/12 2011 |
1/1–31/12 2010 |
Change | Q4/2011 | Q3/2011 | Change |
|---|---|---|---|---|---|---|
| Net interest income | 87 | 87 | 0.7% | 22 | 22 | (1.1)% |
| Net fee and commission income | 8 | 8 | (2.6)% | 2 | 2 | (20.4)% |
| Net trading income | 14 | 15 | (5.5)% | 4 | 4 | 4.7% |
| Other net operating income | (1) | 0 | – | (1) | 0 | – |
| Operating income | 108 | 110 | (1.2)% | 26 | 28 | (5.6)% |
| General administrative expenses | (39) | (35) | 9.5% | (11) | (9) | 22.5% |
| Operating result | 70 | 74 | (6.3)% | 15 | 19 | (19.7)% |
| Net provisioning for impairment losses |
(14) | (31) | (53.9)% | 3 | (4) | – |
| Other results | 0 | 0 | – | 0 | 0 | – |
| Profi t before tax | 55 | 43 | 27.7% | 18 | 14 | 25.9% |
| Income taxes | (6) | (5) | 32.5% | (2) | (1) | 9.3% |
| Profi t after tax | 49 | 39 | 27.1% | 16 | 13 | 27.8% |
| Profi t attributable to non-controlling interests |
0 | 0 | (7.5)% | 0 | 0 | 325.5% |
| Profi t after non-controlling interests |
49 | 39 | 27.3% | 16 | 13 | 27.5% |
| Assets | 2,330 | 2,009 | 16.0% | 2,330 | 2,156 | 8.1% |
| Loans and advances to customers | 972 | 776 | 25.2% | 972 | 855 | 13.7% |
| hereof corporate % | 65.6% | 62.6% | 3.1 PP | 65.6% | 62.2% | 3.4 PP |
| hereof retail % | 34.4% | 37.4% | (3.1) PP | 34.4% | 37.8% | (3.4) PP |
| hereof foreign currency % | 57.6% | 63.5% | (5.9) PP | 57.6% | 65.5% | (7.9) PP |
| Deposits from customers | 2,005 | 1,704 | 17.6% | 2,005 | 1,840 | 9.0% |
| Loan/deposit ratio | 48.5% | 45.5% | 2.9 PP | 48.5% | 46.5% | 2.0 PP |
| Return on equity before tax | 29.6% | 24.7% | 4.9 PP | 43.5% | 33.4% | 10.1 PP |
| Return on equity after tax | 26.4% | 22.1% | 4.3 PP | 39.6% | 29.9% | 9.7 PP |
| Cost/income ratio | 35.8% | 32.3% | 3.5 PP | 43.4% | 33.5% | 9.9 PP |
| Number of employees as of reporting date |
1,427 | 1,343 | 6.3% | 1,427 | 1,378 | 3.6% |
| Business outlets | 105 | 105 | 0.0% | 105 | 104 | 1.0% |
| Number of customers | 692,142 | 635,145 | 9.0% | 692,142 | 689,725 | 0.4% |
| In € million | 1/1–31/12 2011 |
1/1–31/12 2010 |
Change | Q4/2011 | Q3/2011 | Change |
|---|---|---|---|---|---|---|
| Net interest income | 78 | 74 | 6.3% | 19 | 20 | (2.5)% |
| Net fee and commission income | 32 | 30 | 5.9% | 8 | 8 | (2.0)% |
| Net trading income | 1 | 1 | 63.1% | 0 | 0 | 56.2% |
| Other net operating income | 4 | 0 | >500.0% | 0 | 2 | (78.1)% |
| Operating income | 115 | 104 | 10.3% | 28 | 30 | (6.9)% |
| General administrative expenses | (66) | (67) | (0.8)% | (19) | (16) | 17.7% |
| Operating result | 49 | 37 | 30.1% | 9 | 14 | (34.9)% |
| Net provisioning for | ||||||
| impairment losses | (20) | (28) | (29.4)% | (7) | (6) | 26.8% |
| Other results | (2) | (1) | 114.5% | (1) | 0 | 192.5% |
| Profi t before tax | 27 | 9 | 212.6% | 1 | 8 | (87.5)% |
| Income taxes | (4) | (1) | 177.2% | (2) | 0 | >500.0% |
| Profi t/loss after tax | 23 | 7 | 219.6% | (1) | 8 | – |
| Profi t attributable to | ||||||
| non-controlling interests | 0 | 0 | (12.6)% | 0 | 0 | – |
| Profi t/loss after non-controlling | ||||||
| interests | 23 | 7 | 229.9% | (1) | 8 | – |
| Assets | 2,170 | 2,052 | 5.8% | 2,170 | 2,144 | 1.2% |
| Loans and advances to customers | 1,358 | 1,350 | 0.6% | 1,358 | 1,373 | (1.1)% |
| hereof corporate % | 42.8% | 42.4% | 0.4 PP | 42.8% | 43.5% | (0.7) PP |
| hereof retail % | 56.2% | 55.8% | 0.4 PP | 56.2% | 55.2% | 1.0 PP |
| hereof foreign currency % | 74.2% | 75.5% | (1.3) PP | 74.2% | 73.4% | 0.8 PP |
| Deposits from customers | 1,660 | 1,516 | 9.5% | 1,660 | 1,611 | 3.0% |
| Loan/deposit ratio | 81.8% | 89.1% | (7.2) PP | 81.8% | 85.3% | (3.4) PP |
| Return on equity before tax | 11.1% | 3.6% | 7.5 PP | 1.7% | 13.6% | (11.9) PP |
| Return on equity after tax | 9.5% | 3.0% | 6.4 PP | – | 13.1% | – |
| Cost/income ratio | 57.7% | 64.1% | (6.5) PP | 67.2% | 53.1% | 14.1 PP |
| Number of employees as of | ||||||
| reporting date | 1,569 | 1,640 | (4.3)% | 1,569 | 1,583 | (0.9)% |
| Business outlets | 98 | 98 | 0.0% | 98 | 98 | 0.0% |
| Number of customers | 591,507 | 638,528 | (7.4)% | 591,507 | 636,818 | (7.1)% |
| In € million | 1/1–31/12 2011 |
1/1–31/12 2010 |
Change | Q4/2011 | Q3/2011 | Change |
|---|---|---|---|---|---|---|
| Net interest income | 168 | 188 | (10.8)% | 41 | 42 | (0.8)% |
| Net fee and commission income | 37 | 35 | 7.3% | 10 | 10 | (5.0)% |
| Net trading income | 7 | 7 | 4.9% | 1 | 2 | (26.5)% |
| Other net operating income | 1 | (1) | – | 1 | 0 | 272.0% |
| Operating income | 213 | 229 | (6.8)% | 53 | 53 | (0.6)% |
| General administrative expenses | (98) | (96) | 1.3% | (25) | (24) | 1.2% |
| Operating result | 115 | 132 | (12.7)% | 28 | 29 | (2.0)% |
| Net provisioning for impairment losses |
(79) | (98) | (19.6)% | (29) | (24) | 21.1% |
| Other results | 0 | 1 | (63.4)% | 0 | 0 | – |
| Profi t before tax | 37 | 35 | 4.9% | 0 | 5 | – |
| Income taxes | (3) | (3) | 9.9% | 0 | 0 | – |
| Profi t after tax | 34 | 32 | 4.5% | 0 | 5 | – |
| Profi t attributable to | ||||||
| non-controlling interests | (1) | (1) | (42.3)% | 0 | 0 | – |
| Profi t after non-controlling | ||||||
| interests | 33 | 31 | 6.7% | 0 | 5 | – |
| Assets | 3,681 | 3,790 | (2.9)% | 3,681 | 3,705 | (0.7)% |
| Loans and advances to customers | 2,974 | 2,816 | 5.6% | 2,974 | 2,927 | 1.6% |
| hereof corporate % | 44.2% | 41.6% | 2.6 PP | 44.2% | 44.0% | 0.2 PP |
| hereof retail % | 55.3% | 57.9% | (2.7) PP | 55.3% | 55.5% | (0.2) PP |
| hereof foreign currency % | 78.3% | 78.6% | (0.3) PP | 78.3% | 79.5% | (1.2) PP |
| Deposits from customers | 2,171 | 2,056 | 5.6% | 2,171 | 2,124 | 2.2% |
| Loan/deposit ratio | 137.0% | 137.0% | 0.0 PP | 137.0% | 137.8% | (0.8) PP |
| Return on equity before tax | 7.5% | 7.3% | 0.2 PP | – | 4.4% | – |
| Return on equity after tax | 6.9% | 6.8% | 0.2 PP | – | 4.2% | – |
| Cost/income ratio | 45.9% | 42.2% | 3.7 PP | 46.8% | 46.0% | 0.8 PP |
| Number of employees as of | ||||||
| reporting date | 3,271 | 3,241 | 0.9% | 3,271 | 3,346 | (2.2)% |
| Business outlets | 187 | 190 | (1.6)% | 187 | 189 | (1.1)% |
| Number of customers | 775,580 | 736,622 | 5.3% | 775,580 | 763,485 | 1.6% |
| In € million | 1/1–31/12 2011 |
1/1–31/12 2010 |
Change | Q4/2011 | Q3/2011 | Change |
|---|---|---|---|---|---|---|
| Net interest income | 175 | 174 | 0.9% | 41 | 44 | (5.7)% |
| Net fee and commission income | 66 | 72 | (8.8)% | 16 | 18 | (13.1)% |
| Net trading income | 1 | 21 | (96.0)% | 4 | (7) | – |
| Other net operating income | 26 | 27 | (4.6)% | 7 | 5 | 38.5% |
| Operating income | 268 | 294 | (9.0)% | 67 | 59 | 13.8% |
| General administrative expenses | (151) | (157) | (3.9)% | (36) | (37) | (3.4)% |
| Operating result | 117 | 137 | (14.7)% | 32 | 22 | 42.2% |
| Net provisioning for | ||||||
| impairment losses | (52) | (68) | (22.8)% | (8) | (13) | (36.6)% |
| Other results | (13) | (6) | 107.5% | (7) | (9) | (21.4)% |
| Profi t before tax | 52 | 63 | (18.0)% | 16 | 0 | >500.0% |
| Income taxes | (10) | (13) | (23.8)% | (3) | 0 | >500.0% |
| Profi t after tax | 42 | 50 | (16.5)% | 13 | 0 | – |
| Profi t attributable to | ||||||
| non-controlling interests | (11) | (14) | (18.6)% | (4) | 1 | – |
| Profi t after non-controlling | ||||||
| interests | 31 | 36 | (15.7)% | 9 | 0 | >500.0% |
| Assets | 5,465 | 5,858 | (6.7)% | 5,465 | 5,490 | (0.4)% |
| Loans and advances to customers | 3,830 | 3,814 | 0.4% | 3,830 | 3,809 | 0.6% |
| hereof corporate % | 39.9% | 38.1% | 1.8 PP | 39.9% | 39.2% | 0.7 PP |
| hereof retail % | 48.6% | 50.2% | (1.6) PP | 48.6% | 49.1% | (0.5) PP |
| hereof foreign currency % | 67.4% | 72.2% | (4.8) PP | 67.4% | 67.8% | (0.4) PP |
| Deposits from customers | 3,121 | 3,102 | 0.6% | 3,121 | 3,150 | (0.9)% |
| Loan/deposit ratio | 122.7% | 123.0% | (0.3) PP | 122.7% | 120.9% | 1.8 PP |
| Return on equity before tax | 6.6% | 8.0% | (1.4) PP | 8.6% | – | – |
| Return on equity after tax | 5.3% | 6.4% | (1.0) PP | 7.1% | – | – |
| Cost/income ratio | 56.3% | 53.4% | 3.0 PP | 52.8% | 62.2% | (9.4) PP |
| Number of employees as of | ||||||
| reporting date | 2,083 | 2,216 | (6.0)% | 2,083 | 2,102 | (0.9)% |
| Business outlets | 81 | 84 | (3.6)% | 81 | 81 | 0.0% |
| Number of customers | 538,817 | 544,239 | (1.0)% | 538,817 | 538,202 | 0.1% |
| In € million | 1/1–31/12 2011 |
1/1–31/12 2010 |
Change | Q4/2011 | Q3/2011 | Change |
|---|---|---|---|---|---|---|
| Net interest income | 39 | 35 | 11.3% | 10 | 10 | 0.1% |
| Net fee and commission income | 8 | 7 | 5.9% | 2 | 2 | (6.0)% |
| Net trading income | 0 | 0 | – | 0 | 0 | – |
| Other net operating income | 0 | 0 | (62.2)% | 0 | 0 | – |
| Operating income | 47 | 42 | 10.8% | 12 | 12 | (0.2)% |
| General administrative expenses | (26) | (24) | 8.1% | (7) | (6) | 16.4% |
| Operating result | 20 | 18 | 14.5% | 5 | 6 | (17.8)% |
| Net provisioning for impairment losses |
(6) | (6) | 1.2% | (3) | (1) | 154.7% |
| Other results | (1) | 0 | 122.4% | 0 | 0 | (43.7)% |
| Profi t before tax | 14 | 12 | 18.8% | 2 | 4 | (59.8)% |
| Income taxes | (1) | (1) | (7.0)% | 0 | 0 | (52.2)% |
| Profi t after tax | 13 | 10 | 22.6% | 2 | 4 | (60.7)% |
| Profi t attributable to | ||||||
| non-controlling interests | 0 | 0 | – | 0 | 0 | – |
| Profi t after non-controlling | ||||||
| interests | 13 | 10 | 22.0% | 2 | 4 | (61.0)% |
| Assets | 680 | 673 | 1.1% | 680 | 702 | (3.1)% |
| Loans and advances to customers | 428 | 386 | 10.9% | 428 | 421 | 1.7% |
| hereof corporate % | 33.8% | 29.9% | 4.0 PP | 33.8% | 32.0% | 1.8 PP |
| hereof retail % | 66.2% | 70.1% | (4.0) PP | 66.2% | 68.0% | (1.8) PP |
| hereof foreign currency % | 0.0% | 0.0% | 0.0 PP | 0.0% | 0.0% | 0.0 PP |
| Deposits from customers | 557 | 550 | 1.3% | 557 | 580 | (4.0)% |
| Loan/deposit ratio | 76.9% | 70.2% | 6.6 PP | 76.9% | 72.6% | 4.3 PP |
| Return on equity before tax | 15.7% | 14.5% | 1.2 PP | 8.3% | 20.5% | (12.3) PP |
| Return on equity after tax | 14.1% | 12.6% | 1.5 PP | 7.2% | 18.3% | (11.1) PP |
| Cost/income ratio | 56.4% | 57.8% | (1.4) PP | 60.1% | 51.5% | 8.6 PP |
| Number of employees as of reporting date |
720 | 693 | 3.9% | 720 | 717 | 0.4% |
| Business outlets | 54 | 52 | 3.8% | 54 | 52 | 3.8% |
| Number of customers | 252,343 | 266,122 | (5.2)% | 252,343 | 245,849 | 2.6% |
| In € million | 1/1–31/12 2011 |
1/1–31/12 2010 |
Change | Q4/2011 | Q3/2011 | Change |
|---|---|---|---|---|---|---|
| Net interest income | 268 | 238 | 12.4% | 72 | 71 | 1.6% |
| Net fee and commission income | 179 | 202 | (11.1)% | 45 | 43 | 4.2% |
| Net trading income | 15 | 13 | 19.5% | 4 | 1 | 459.9% |
| Other net operating income | 6 | 0 | – | 5 | 2 | 137.7% |
| Operating income | 469 | 453 | 3.6% | 127 | 118 | 8.0% |
| General administrative expenses | (286) | (276) | 3.8% | (73) | (70) | 3.6% |
| Operating result | 182 | 176 | 3.2% | 54 | 48 | 14.4% |
| Net provisioning for impairment losses |
(68) | (72) | (5.3)% | (17) | (18) | (6.5)% |
| Other results | (1) | 12 | – | 4 | (6) | – |
| Profi t before tax | 113 | 116 | (2.6)% | 42 | 24 | 75.9% |
| Income taxes | (18) | (15) | 23.3% | (8) | (4) | 121.0% |
| Profi t after tax | 94 | 101 | (6.5)% | 34 | 20 | 68.1% |
| Profi t attributable to | ||||||
| non-controlling interests | (1) | 0 | 91.7% | 0 | 0 | – |
| Profi t after non-controlling | ||||||
| interests | 93 | 100 | (6.9)% | 34 | 20 | 66.9% |
| Assets | 6,359 | 6,227 | 2.1% | 6,359 | 6,292 | 1.1% |
| Loans and advances to customers | 4,428 | 4,247 | 4.3% | 4,428 | 4,404 | 0.5% |
| hereof corporate % | 37.1% | 34.2% | 2.9 PP | 37.1% | 37.3% | (0.3) PP |
| hereof retail % hereof foreign currency % |
60.8% 52.1% |
60.2% 52.1% |
0.7 PP 0.0 PP |
60.8% 52.1% |
60.2% 52.1% |
0.6 PP 0.0 PP |
| Deposits from customers | 3,904 | 3,631 | 7.5% | 3,904 | 3,758 | 3.9% |
| Loan/deposit ratio | 113.4% | 116.9% | (3.5) PP | 113.4% | 117.2% | (3.8) PP |
| Return on equity before tax | 23.1% | 26.9% | (3.7) PP | 35.8% | 20.3% | 15.5 PP |
| Return on equity after tax | 19.3% | 23.4% | (4.1) PP | 29.1% | 17.3% | 11.9 PP |
| Cost/income ratio | 61.1% | 61.0% | 0.1 PP | 57.2% | 59.6% | (2.4) PP |
| Number of employees as of | ||||||
| reporting date | 6,030 | 6,219 | (3.0)% | 6,030 | 6,065 | (0.6)% |
| Business outlets | 551 | 543 | 1.5% | 551 | 544 | 1.3% |
| Number of customers | 1,913,601 | 1,903,304 | 0.5% | 1,913,601 | 1,956,099 | (2.2)% |
| In € million | 1/1–31/12 2011 |
1/1–31/12 2010 |
Change | Q4/2011 | Q3/2011 | Change |
|---|---|---|---|---|---|---|
| Net interest income | 104 | 103 | 1.4% | 24 | 26 | (9.6)% |
| Net fee and commission income | 35 | 33 | 4.2% | 9 | 9 | 5.1% |
| Net trading income | 3 | 0 | >500.0% | 1 | 1 | 131.0% |
| Other net operating income | 4 | 4 | 8.5% | 1 | 2 | (45.1)% |
| Operating income | 147 | 141 | 4.5% | 35 | 37 | (5.4)% |
| General administrative expenses | (81) | (82) | (1.6)% | (21) | (20) | 9.2% |
| Operating result | 66 | 59 | 13.0% | 14 | 18 | (21.5)% |
| Net provisioning for impairment losses |
(18) | (32) | (43.5)% | (4) | (4) | (9.7)% |
| Other results | 6 | 1 | >500.0% | 2 | 2 | 18.5% |
| Profi t before tax | 54 | 27 | 98.2% | 12 | 16 | (20.2)% |
| Income taxes | (4) | (1) | 245.6% | (1) | (1) | (43.7)% |
| Profi t after tax | 50 | 26 | 91.7% | 12 | 15 | (18.4)% |
| Profi t attributable to non-controlling interests |
1 | 2 | (42.9)% | 0 | 0 | 36.3% |
| Profi t after non-controlling | ||||||
| interests | 51 | 28 | 83.9% | 12 | 15 | (17.9)% |
| Assets | 2,207 | 2,129 | 3.6% | 2,207 | 2,214 | (0.3)% |
| Loans and advances to customers | 1,331 | 1,391 | (4.4)% | 1,331 | 1,348 | (1.3)% |
| hereof corporate % | 53.8% | 55.5% | (1.7) PP | 53.8% | 54.1% | (0.3) PP |
| hereof retail % | 43.1% | 41.6% | 1.5 PP | 43.1% | 42.8% | 0.2 PP |
| hereof foreign currency % | 66.2% | 65.3% | 1.0 PP | 66.2% | 65.4% | 0.9 PP |
| Deposits from customers | 1,176 | 1,085 | 8.4% | 1,176 | 1,139 | 3.3% |
| Loan/deposit ratio | 113.1% | 128.3% | (15.1) PP | 113.1% | 118.4% | (5.2) PP |
| Return on equity before tax | 11.0% | 5.6% | 5.4 PP | 10.0% | 12.4% | (2.4) PP |
| Return on equity after tax | 10.2% | 5.4% | 4.8 PP | 9.5% | 11.5% | (2.0) PP |
| Cost/income ratio | 54.9% | 58.3% | (3.4) PP | 60.4% | 52.3% | 8.1 PP |
| Number of employees as of reporting date |
1,765 | 1,848 | (4.5)% | 1,765 | 1,772 | (0.4)% |
| Business outlets | 85 | 95 | (10.5)% | 85 | 85 | 0.0% |
| Number of customers | 508,503 | 501,553 | 1.4% | 508,503 | 499,849 | 1.7% |
In the Russia segment, profi t before tax increased by 63 per cent year-on-year, to € 434 million. Here, higher general administrative expenses were more than off set by the signifi cant increase in operating income. In particular, profi t before tax was improved by the release of provisions for impairment losses on loans and advances. The return on equity before tax rose by 9.3 percentage points to 34.0 per cent.
| In € million | 2011 | 2010 | Change | Q4/2011 | Q3/2011 | Change |
|---|---|---|---|---|---|---|
| Operating income | 853 | 767 | 11.2% | 213 | 192 | 10.9% |
| General administrative expenses | (488) | (415) | 17.5% | (153) | (113) | 34.7% |
| Operating result | 366 | 352 | 3.8% | 61 | 79 | (23.2)% |
| Net provisioning for impairment losses | 42 | (77) | – | 63 | (17) | – |
| Other results | 26 | (8) | – | 23 | 18 | 28.1% |
| Profi t before tax | 434 | 267 | 62.5% | 147 | 81 | 82.4% |
| Assets | 14,218 | 12,178 | 16.8% | 14,218 | 13,975 | 1.7% |
| Net interest margin | 4.47% | 4.14% | 0.33 PP | 4.50% | 4.49% | 0.01 PP |
| Return on equity before tax | 34.0% | 24.7% | 9.3 PP | 46.4% | 25.8% | 20.7 PP |
Net interest income in Russia rose by 16 per cent or € 83 million year-on-year, to € 590 million. This growth, despite increased pressure on margins, was mainly due to a total increase of 19 per cent in the portfolio of loans and advances to large corporate customers and private individuals, due to strong demand for loans. The signifi cant rise in interest income from derivative fi nancial instruments, mainly resulting from a larger number of transactions, also made a positive contribution to profi ts. In this segment, the net interest margin increased by 33 basis points year-on-year, to 4.47 per cent. Total assets gained 17 per cent year-on-year, reaching € 14.2 billion. The strong growth in the loan portfolio enabled a reduction in holdings of public sector securities. Credit risk-weighted assets rose by 21 per cent to € 10.5 billion, a result of a signifi cant rise in project fi nancing mandates and approved credit lines.
The segment's net fee and commission income rose by 11 per cent or € 24 million year-on-year, to reach € 238 million. Here, although the payment transfer business declined due to the release of accruals for expected income, it still made the largest contribution, amounting to € 82 million. Income from the securities business remained almost unchanged year-onyear at € 13 million. In proportion to the increase in transaction volumes, income from the foreign currency, notes/coins, and precious-metals business rose by 6 per cent to a total of € 53 million. Due to a change in the method of calculating fee and commission income, the net income from the loan and guarantee business rose by 75 per cent to € 60 million. The income from other banking services also increased by 17 per cent to € 38 million, primarily as a result of improved income from the collections business and import-export fi nancing.
The net trading income decreased from € 74 million to € 38 million. Here, the net income from interest-based transactions, at € 45 million, was 24 per cent lower than in the previous year. This was mainly due to lower net valuations of fi xed-interest bonds and notes in comparison with the previous year. The net income from currency-based transactions also declined, decreasing by € 21 million to minus € 7 million. Lower revaluation gains from currency swaps linked to proprietary trading and from foreign currency positions were responsible for this decline.
The segment's other net operating income improved by € 16 million to reach minus € 13 million. This was primarily a result of signifi cantly lower allocations to other provisions – after relatively high allocations in the previous year, mainly for litigation following the closure of an outlet – as well as the increase in income from the operating leasing business in connection with real estate.
The segment's general administrative expenses increased by a total of 18 per cent to reach € 488 million. This was primarily caused by an increase in staff expenses due to salary increases and a rise in ancillary salary costs. Other administrative expenses rose primarily because of increased IT, legal, advisory and consulting expenses. Depreciation advanced yearon-year by 24 per cent, mainly due to impairment of tangible and intangible fi xed assets. The number of business outlets fell by 7 to 191. The cost/income ratio increased year-on-year to 57.2 per cent.
Net provisioning for impairment losses resulted in a positive fi gure of € 42 million, which is a year-on-year improvement of € 119 million. This was mainly due to lower allocations to individual loan loss provisions for the portfolio of loans and advances to large corporate customers and private individuals. The development was a result of the signifi cant decline in non-performing loans, of improved repayment ratios regarding overdue loans, and of the sale of loans. The ratio of nonperforming loans in the loan portfolio decreased by 3.0 percentage points year-on-year, to 5.8 per cent. In the net allocations to portfolio-based loan loss provisions, a net release was again observed, which was also € 21 million higher than in the previous year, amounting to € 31 million. The reason for this was an improvement in the historical default rates used for the calculation of portfolio-based loan loss provisions.
The other results from the Russia segment amounted to € 26 million in total. The key element of this was net income from derivatives of € 27 million, due primarily to net income from revaluation from the interest swap transactions concluded in order to mitigate interest rate structure risk. Due to the deconsolidation of a leasing company for materiality reasons, the segment showed a net loss from disposal of Group assets of € 1 million.
Income taxes doubled year-on-year, to reach € 112 million. The eff ective tax rate rose 6 percentage points to 26 per cent, as a result of the higher share of expenses not deductible for tax purposes.
Profi t after deduction of non-controlling interests increased by 51 per cent, to € 322 million.
The table below provides an overview of the country results for Russia. Any discrepancies with regard to the values specifi ed for the Russia segment are the result of equity being allocated diff erently: The income fi gures in the country overview are based on the balance sheet equity; at segment level, the equity used in the calculation is based on actual equity used.
| 1/1–31/12 | 1/1–31/12 | |||||
|---|---|---|---|---|---|---|
| In € million | 2011 | 2010 | Change | Q4/2011 | Q3/2011 | Change |
| Net interest income | 590 | 507 | 16.4% | 159 | 153 | 3.9% |
| Net fee and commission income | 238 | 214 | 11.0% | 64 | 64 | (0.6)% |
| Net trading income | 38 | 74 | (48.7)% | 1 | (22) | – |
| Other net operating income | (14) | (26) | (47.0)% | (10) | (2) | 366.4% |
| Operating income | 852 | 770 | 10.7% | 213 | 192 | 10.9% |
| General administrative expenses | (488) | (415) | 17.5% | (153) | (113) | 34.7% |
| Operating result | 365 | 355 | 2.7% | 61 | 79 | (23.2)% |
| Net provisioning for impairment losses |
42 | (77) | – | 63 | (17) | – |
| Other results | 27 | (11) | – | 23 | 18 | 28.6% |
| Profi t before tax | 434 | 267 | 62.5% | 147 | 81 | 82.5% |
| Income taxes | (112) | (53) | 110.7% | (36) | (27) | 34.0% |
| Profi t after tax | 322 | 214 | 50.4% | 111 | 54 | 106.5% |
| Profi t attributable to non-controlling interests |
(5) | (2) | 236.2% | (2) | (1) | 58.1% |
| Profi t after non-controlling | ||||||
| interests | 316 | 212 | 49.1% | 109 | 53 | 107.8% |
| Assets | 14,476 | 12,442 | 16.3% | 14,476 | 13,975 | 3.6% |
| Loans and advances to customers | 9,073 | 7,601 | 19.4% | 9,073 | 9,219 | (1.6)% |
| hereof corporate % | 70.2% | 72.5% | (2.4) PP | 70.2% | 72.5% | (2.3) PP |
| hereof retail % | 29.7% | 26.9% | 2.8 PP | 29.7% | 27.2% | 2.5 PP |
| hereof foreign currency % | 48.5% | 44.7% | 3.9 PP | 48.5% | 47.7% | 0.8 PP |
| Deposits from customers | 9,320 | 6,764 | 37.8% | 9,320 | 9,270 | 0.5% |
| Loan/deposit ratio | 97.3% | 112.4% | (15.0) PP | 97.3% | 99.5% | (2.1) PP |
| Return on equity before tax | 36.9% | 26.8% | 10.0 PP | 55.4% | 18.5% | 36.9 PP |
| Return on equity after tax | 27.3% | 21.5% | 5.9 PP | 42.0% | 12.4% | 29.6 PP |
| Cost/income ratio | 57.2% | 53.9% | 3.3 PP | 71.5% | 58.8% | 12.6 PP |
| Number of employees as of | ||||||
| reporting date | 8,475 | 8,618 | (1.7)% | 8,475 | 8,697 | (2.6)% |
| Business outlets | 191 | 198 | (3.5)% | 191 | 192 | (0.5)% |
| Number of customers | 2,135,551 | 1,860,036 | 14.8% | 2,135,551 | 2,032,056 | 5.1% |
Profi t before tax in the CIS Other segment rose by 19 per cent to € 106 million in the year under review. On the one hand, the improvement was attributable to the decline in net provisioning for impairment losses; on the other hand, the segment's net income was infl uenced by the unstable currency situation and resulting sharp devaluation of the Belarusian rouble. It has since been classifi ed as the currency of a hyperinfl ationary country. In order to ensure comparability with previous periods, reporting had to be adjusted following the introduction of hyperinfl ation accounting in the fourth quarter. The adjustment eff ectively reduced profi t by a net amount of € 54 million. The segment's return on equity before tax rose by 1.7 percentage points to 15.1 per cent.
| In € million | 2011 | 2010 | Change | Q4/2011 | Q3/2011 | Change |
|---|---|---|---|---|---|---|
| Operating income | 584 | 622 | (6.1)% | 86 | 169 | (48.9)% |
| General administrative expenses | (336) | (346) | (3.0)% | (88) | (83) | 5.2% |
| Operating result | 248 | 276 | (10.1)% | (1) | 86 | – |
| Net provisioning for impairment losses | (128) | (214) | (40.2)% | (29) | (28) | 4.5% |
| Other results | (15) | 27 | – | (7) | (13) | (47.7)% |
| Profi t/loss before tax | 106 | 89 | 18.5% | (37) | 45 | – |
| Assets | 6,761 | 7,131 | (5.2)% | 6,761 | 6,758 | 0.0% |
| Net interest margin | 6.10% | 6.19% | (0.09) PP | 5.91% | 6.79% | (0.89) PP |
| Return on equity before tax | 15.1% | 13.4% | 1.7 PP | – | 25.3% | – |
Net interest income for the segment fell by 2 per cent, or € 8 million, to € 415 million. At the same time, net interest income in Ukraine rose by 3 per cent, mainly due to a reduction in interest expenses for customer deposits, as well as higher income from the increased portfolio of Ukrainian government bonds. By contrast, net interest income in Belarus decreased year-on-year, infl uenced by currency translation coupled with the increased share of net interest income in local currency.
The segment's balance sheet assets declined by 5 per cent year-on-year to € 6.8 billion, primarily due to weaker credit growth in Ukraine. In addition, currency devaluation in Belarus also had a negative impact despite credit expansion in local currency. The net interest margin decreased by 9 basis points to 6.10 per cent. Credit risk-weighted assets declined by 3.2 per cent year-on-year to € 5.5 billion owing to a drop in retail customers in Ukraine.
The segment's net fee and commission income fell by 4 per cent year-on-year to € 176 million, with income from payment transfer business making the largest contribution, remaining nearly unchanged at € 129 million. The resulting net income improvement in Ukraine was attributable to the increase in the number of accounts and transactions with retail and corporate customers. As foreign currency lending to private customers has been discontinued in Ukraine, net income of € 35 million from the foreign currency, notes/coins, and precious-metals business came in 17 per cent below the previous year's level. The net income contribution from the loan and guarantee business was somewhat lower at € 5 million. In Belarus, foreign currency translation resulted in an overall decrease in net fee and commission income.
Net trading income in the region fell year-on-year from € 23 million to minus € 1 million, with net income from currencybased transactions declining to minus € 5 million in total. Although the application of hyperinfl ation accounting in Belarus impacted net trading income by € 84 million, the loss was mitigated by valuation gains arising from strategic currency positions taken to hedge equity, which exceeded the previous year's € 1 million level by € 76 million. The reason for this was the signifi cantly sharper devaluation (63 per cent) of the local currency against the euro in the period under review. A currency swap realized in the year under review likewise generated income of € 44 million. By contrast, net income from interest-based transactions fell by € 8 million to € 5 million year-on-year. Net income from fi xed income government securities and bonds was lower year-on-year due to mark-to-market valuation in Ukraine.
The segment's other net operating income, which is comprised of a number of smaller income and expense items, improved year-on-year from minus € 8 million to minus € 7 million, mainly due to the release of other provisions established in 2010 for a meanwhile concluded litigation in connection with real estate in Ukraine.
General administrative expenses dropped by 3 per cent year-on-year to € 336 million. At the same time, staff expenses remained nearly unchanged despite an increase in the number of employees in Ukraine. The staff increase in Ukraine resulted from an expansion in credit and customer activity and from the establishment of the Transaction Services Center, which provides numerous clearing and other services for the local network. The € 13 million decline in other administrative expenses to € 117 million was related to various expense items mainly in Ukraine. Depreciation of intangible and tangible fi xed assets increased, mainly due to IT investments in the new core bank system in Ukraine. By contrast, currency devaluation led to lower administrative expenses in Belarus. As a result of the sharper decline in operating income relative to general administrative expenses, the cost/income ratio for the segment rose by 1.9 percentage points to 57.5 per cent.
In 2011 net provisioning for impairment losses fell by 40 per cent to € 128 million. The improvement, which is mainly attributable to Ukraine, was based not least on a decrease of € 63 million in individual loan loss provisions, made possible due to increased success in debt collection, as well as higher loan repayments. Also noticeable was the general improvement in portfolio quality for retail and corporate customers. As in the previous year, portfolio-based loan loss provisions reported a net release, which amounted to € 34 million in 2011. The improvement was due exclusively to lower allocations to portfolio provisioning in Ukraine, refl ecting a decrease in the underlying credit portfolio and at the same time an improvement in its portfolio quality. By contrast, the diffi cult economic situation in Belarus required net allocations of € 21 million to corporate customer portfolio-based loan loss provisions. The share of non-performing loans in the total credit portfolio stood at 29.7 per cent, still the highest among all segments, albeit with strong regional diff erences (Belarus: 2.0 per cent, Ukraine: 34.8 per cent).
Other results fell € 42 million year-on-year to minus € 15 million, due mainly to the decline from € 27 million to minus € 15 million in net income from fi nancial investments. Valuation gains on the fi xed income portfolio of Ukrainian government bonds recognized at fair value fell below the previous year's level owing to the deteriorating macroeconomic situation. In addition, losses on the sale of Ukrainian government bonds were realized.
Income taxes for the segment climbed to € 52 million. The eff ective tax rate increased to 49 per cent, primarily as a result of the hyperinfl ation accounting rules applied in Belarus, as well as higher non-deductible expenses in Ukraine.
Profi t after deduction of non-controlling interests declined by 31 per cent to € 51 million.
Below please fi nd the detailed results of the individual countries in the segment, whereby Kazakhstan is not listed as it is of minor signifi cance:
| 1/1–31/12 | 1/1–31/12 | |||||
|---|---|---|---|---|---|---|
| In € million | 2011 | 2010 | Change | Q4/2011 | Q3/2011 | Change |
| Net interest income | 68 | 85 | (20.6)% | 6 | 19 | (66.5)% |
| Net fee and commission income | 45 | 56 | (20.7)% | 8 | 12 | (29.2)% |
| Net trading income | (6) | 8 | – | (52) | 6 | – |
| Other net operating income | (1) | (1) | 156.0% | (1) | 0 | – |
| Operating income | 105 | 149 | (29.2)% | (39) | 37 | – |
| General administrative expenses | (54) | (65) | (17.0)% | (11) | (14) | (17.7)% |
| Operating result | 51 | 84 | (38.8)% | (50) | 23 | – |
| Net provisioning for | ||||||
| impairment losses | (18) | (13) | 47.0% | 2 | (12) | – |
| Other results | 0 | 0 | 316.6% | 0 | 0 | – |
| Profi t/loss before tax | 33 | 71 | (53.4)% | (47) | 12 | – |
| Income taxes | (28) | (20) | 34.5% | (8) | (5) | 62.7% |
| Profi t/loss after tax | 6 | 51 | (89.0)% | (55) | 7 | – |
| Profi t attributable to | ||||||
| non-controlling interests | (1) | (7) | (82.8)% | 7 | (1) | – |
| Profi t/loss after non-controlling | ||||||
| interests | 4 | 44 | (90.0)% | (49) | 6 | – |
| Assets | 1,223 | 1,512 | (19.2)% | 1,223 | 1,347 | (9.2)% |
| Loans and advances to customers | 772 | 1,096 | (29.6)% | 772 | 874 | (11.7)% |
| hereof corporate % | 72.2% | 53.4% | 18.8 PP | 72.2% | 65.9% | 6.4 PP |
| hereof retail % | 27.8% | 46.6% | (18.8) PP | 27.8% | 34.1% | (6.4) PP |
| hereof foreign currency % | 66.1% | 51.1% | 15.0 PP | 66.1% | 58.4% | 7.8 PP |
| Deposits from customers | 668 | 854 | (21.8)% | 668 | 754 | (11.4)% |
| Loan/deposit ratio | 115.6% | 128.3% | (12.7) PP | 115.6% | 116.0% | (0.4) PP |
| Return on equity before tax | 16.6% | 38.1% | (21.5) PP | – | 49.3% | – |
| Return on equity after tax | 2.8% | 27.1% | (24.3) PP | – | 28.6% | – |
| Cost/income ratio | 51.4% | 43.9% | 7.6 PP | – | 36.6% | – |
| Number of employees as of | ||||||
| reporting date | 2,210 | 2,223 | (0.6)% | 2,210 | 2,234 | (1.1)% |
| Business outlets | 101 | 96 | 5.2% | 101 | 96 | 5.2% |
| Number of customers | 790,811 | 833,239 | (5.1)% | 790,811 | 797,017 | (0.8)% |
| In € million | 1/1–31/12 2011 |
1/1–31/12 2010 |
Change | Q4/2011 | Q3/2011 | Change |
|---|---|---|---|---|---|---|
| Net interest income | 343 | 333 | 3.0% | 92 | 92 | 0.0% |
| Net fee and commission income | 131 | 127 | 3.1% | 36 | 35 | 3.7% |
| Net trading income | 6 | 15 | (60.0)% | (1) | 2 | – |
| Other net operating income | (5) | (7) | (30.4)% | (4) | 1 | – |
| Operating income | 475 | 468 | 1.5% | 124 | 130 | (5.2)% |
| General administrative expenses | (281) | (280) | 0.2% | (76) | (69) | 9.6% |
| Operating result | 194 | 187 | 3.5% | 47 | 61 | (22.1)% |
| Net provisioning for impairment losses |
(108) | (200) | (46.0)% | (30) | (16) | 92.7% |
| Other results | (15) | 27 | – | (7) | (12) | (44.1)% |
| Profi t before tax | 70 | 14 | 407.6% | 10 | 33 | (68.9)% |
| Income taxes | (24) | 14 | – | (6) | (8) | (24.6)% |
| Profi t after tax | 47 | 28 | 68.9% | 4 | 25 | (82.2)% |
| Profi t attributable to non-controlling interests |
13 | 0 | – | 9 | 1 | >500.0% |
| Profi t after non-controlling interests |
59 | 28 | 115.3% | 14 | 26 | (47.4)% |
| Assets | 5,467 | 5,544 | (1.4)% | 5,467 | 5,341 | 2.3% |
| Loans and advances to customers | 4,248 | 4,148 | 2.4% | 4,248 | 4,158 | 2.2% |
| hereof corporate % | 51.3% | 45.9% | 5.4 PP | 51.3% | 49.9% | 1.4 PP |
| hereof retail % | 48.7% | 54.1% | (5.4) PP | 48.7% | 50.1% | (1.4) PP |
| hereof foreign currency % | 56.8% | 65.6% | (8.8) PP | 56.8% | 58.0% | (1.2) PP |
| Deposits from customers | 2,631 | 2,555 | 3.0% | 2,631 | 2,543 | 3.5% |
| Loan/deposit ratio | 161.5% | 162.3% | (0.9) PP | 161.5% | 163.5% | (2.0) PP |
| Return on equity before tax | 9.3% | 1.9% | 7.4 PP | 5.1% | 17.5% | (12.4) PP |
| Return on equity after tax | 6.2% | 3.8% | 2.4 PP | 2.3% | 13.5% | (11.2) PP |
| Cost/income ratio | 59.2% | 60.0% | (0.8) PP | 61.6% | 53.3% | 8.3 PP |
| Number of employees as of reporting date |
15,267 | 15,432 | (1.1)% | 15,267 | 15,528 | (1.7)% |
| Business outlets | 909 | 931 | (2.4)% | 909 | 917 | (0.9)% |
| Number of customers | 3,380,743 | 3,902,438 | (13.4)% | 3,380,743 | 3,402,385 | (0.6)% |
Profi t before tax for this segment rose by 27 per cent year-on-year to € 374 million in 2011 due to signifi cantly higher operating income and lower net provisioning for impairment losses. Return on equity before tax rose by 3.9 percentage points to 22.4 per cent.
| In € million | 2011 | 2010 | Change | Q4/2011 | Q3/2011 | Change |
|---|---|---|---|---|---|---|
| Operating income | 634 | 547 | 15.9% | 182 | 161 | 13.3% |
| General administrative expenses | (141) | (142) | (0.6)% | (39) | (31) | 24.0% |
| Operating result | 493 | 405 | 21.6% | 143 | 129 | 10.7% |
| Net provisioning for impairment losses |
(116) | (129) | (10.5)% | (79) | (17) | 374.3% |
| Other results | (4) | 19 | – | 2 | (6) | – |
| Profi t before tax | 374 | 295 | 26.5% | 66 | 107 | (38.5)% |
| Assets | 22,843 | 23,478 | (2.7)% | 22,843 | 21,596 | 5.8% |
| Net interest margin | 1.97% | 1.63% | 0.34 PP | 2.16% | 2.08% | 0.08 PP |
| Return on equity before tax | 22.4% | 18.5% | 3.9 PP | 15.8% | 25.3% | (9.5) PP |
Net interest income for the segment grew by 16 per cent or € 58 million to € 429 million. The stable growth throughout the year under review was due to higher margins on the asset side in business with Austrian and Western European corporate customers of RBI AG, as low-margin lending was continuously being replaced by more profi table credit business. However, overall business volumes declined due to subdued credit demand and strong competitive pressure in the Austrian and Western European corporate customer segment. By expanding their business activities, the Asian branches likewise increased their contribution to net interest income, by 35 per cent to € 147 million. Net interest income also at the Maltese subsidiary was up by 47 per cent to € 28 million thanks to an increase in business volumes and improved margins. The net interest margin for the Group Corporates segment rose by 34 basis points to 1.97 per cent, while balance sheet assets fell by 3 per cent year-on-year, or € 0.6 billion, to € 22.8 billion. Credit risk-weighted assets increased by 1 per cent to € 15.7 billion due to an increase in the volume of guarantees issued at RBI AG.
Net fee and commission income rose by 15 per cent or € 22 million to € 178 million, whereby the increase earned by Group headquarters was based on the increase in sales of capital and funding light products. Service income from business with customers from CEE was particularly strong due to the rise in fee and commission income both from standard loans and from project and structured fi nancing. Net income from export fi nancing grew as well. The Group unit in the US increased its net fee and commission income to € 17 million, mainly from its loan and guarantee business.
Net trading income rose by 11 per cent to € 21 million. Whereas valuation gains on currency and interest-based transactions with a range of fi nancial instruments in the profi t center of Group headquarters declined, net trading income for the Group unit in Singapore increased by € 11 million.
The segment's general administrative expenses fell by 1 per cent year-on-year to € 141 million. In particular, they were somewhat lower at Group headquarters in 2011 after the previous year's result had been impacted by merger-related expenses. This segment comprised eight business outlets at the end of the year under review. The cost/income ratio improved by 3.7 percentage points to 22.2 per cent.
Net provisioning for impairment losses declined by 11 per cent to € 116 million, mainly due to net allocations to individual loan loss provisions for loans and advances to corporate customers at Group headquarters, which were lower thanks to improved credit conditions. By contrast, RBI AG's branches in Asia posted higher net provisioning for impairment losses as a side eff ect of signifi cant loan portfolio growth. The share of non-performing loans in the loan portfolio stood at 3.0 per cent at the end of the year under review and was therefore relatively low compared to the other segments.
Other results in the segment fell year-on-year by € 23 million to minus € 4 million, mainly due to the absence of positive valuation gains from mark-to-market valuations of corporate bonds. Due to the deconsolidation of a leasing company for materiality reasons, the segment showed a net loss from disposal of group assets of € 1 million.
Income taxes increased year-on-year by € 11 million to € 76 million, while the eff ective tax rate decreased by 2 percentage points to 20 per cent.
Profi t after deduction of non-controlling interests rose by 29 per cent to € 297 million.
Profi t before tax in the Group Markets segment grew by 7 per cent to € 266 million in the year under review due to higher operating income driven by an increase in net trading income, as well as lower net provisioning for impairment losses. Return on equity before tax rose by 4.1 percentage points to 19.5 per cent.
| In € million | 2011 | 2010 | Change | Q4/2011 | Q3/2011 | Change |
|---|---|---|---|---|---|---|
| Operating income | 548 | 514 | 6.6% | 174 | 93 | 87.5% |
| General administrative expenses | (264) | (241) | 9.5% | (66) | (71) | (6.8)% |
| Operating result | 284 | 273 | 4.1% | 108 | 22 | 391.0% |
| Net provisioning for impairment losses | (14) | (31) | (56.3)% | (6) | 1 | – |
| Other results | (4) | 7 | – | 62 | (113) | – |
| Profi t/loss before tax | 266 | 249 | 6.9% | 164 | (90) | – |
| Assets | 25,732 | 27,218 | (5.5)% | 25,732 | 28,565 | (9.9)% |
| Net interest margin | 0.85% | 0.70% | 0.14 PP | 0.86% | 0.94% | (0.07) PP |
| Return on equity before tax | 19.5% | 15.4% | 4.1 PP | 46.3% | – | – |
Net interest income for the segment fell by 19 per cent year-on-year to € 229 million due in part to the maturity and sale of parts of the high-quality securities portfolio, which consists exclusively of top-rated securities. Net income thereof amounted to € 81 million in the year under review, down from € 97 million in the previous year. Moreover, the RBI AG investment portfolio was structured even more conservatively in the light of the European sovereign debt crisis in 2011. Net interest income decreased as a result of the decline in total business volume of highly liquid bonds from fi nancial institutions, the further reduction in various risk positions and a selective transaction selection. In addition, the restriction on trading limits in market risks, fl attening of the yield curve, and an ECB liquidity injection that reduced credit spreads on high-quality securities also contributed to the decline in net interest income.
Balance sheet assets in this segment fell by 6 per cent year-on-year to € 25.7 billion, mainly due to a reduction in business volume, as well as the sale of parts of the securities portfolio held-to-maturity and of various risk positions at Group headquarters, which had become necessary on account of regulatory requirements. The segment's net interest margin increased by 14 basis points to 0.85 per cent, while its risk-weighted assets declined by 3 per cent to € 5.1 billion. However, this decline was mitigated by an increase in off -balance-sheet items.
Net fee and commission income for the segment was up 7 per cent to € 115 million versus the previous year. This increase came primarily from the Financial Institutions profi t center and was attributable to higher profi ts not only from service contracts in cash management but also – despite the stagnating market for institutional issues – from the issuing business. The private banking and asset management division of subsidiary Kathrein Privatbank AG in Vienna made a stable contribution of € 12 million from its securities business. The Mergers & Acquisitions division likewise increased its contribution to net fee and commission income to € 9 million. By contrast, net fee and commission income of Raiff eisen Centrobank Group declined to € 17 million due to lower income from support provided to corporate customers for primary market transactions.
Net trading income for the segment rose by 89 per cent year-on-year to € 176 million, to which Raiff eisen Centrobank contributed a substantial € 45 million (up 2 per cent). This contribution consisted primarily of net income from positive valuation gains on certifi cates issued within the scope of equity and index-based transactions and structured bonds. Group headquarters' contribution from proprietary trading mainly in fi xed income securities, as well as from structured products, was signifi cantly lower than in the previous year owing to a reduction in risk positions. By contrast, market maker profi t from customer and proprietary trading in foreign currency products made a higher contribution and income from bank note and coin trading also improved to € 20 million. The valuation of capital guarantees issued resulted in net income of € 72 million, up from minus € 14 million in the previous year, mainly due to a change in the method of valuation against the background of legislative changes.
Other net operating income fell by 6 per cent year-on-year to € 28 million. This includes a reduction in income from Raiff eisen Centrobank Group to € 12 million related to turbulences in the commodities markets. Raiff eisen Centrobank Group's net operating income came mainly from commodity trading of special purpose companies in the US and Germany, to which commodity trading of F.J. Elsner Trading contributed an additional € 10 million.
The general administrative expenses of the Group Markets segment increased by 10 per cent year-on-year to € 264 million, mainly due to the full commissioning of an IT system for derivatives as well as to the introduction of IT applications in RBI AG's custody division. At the same time, transportation costs increased owing to the expansion of RBI AG's bank note and coin trading business. An intensifi cation of business activities also led to a year-on-year increase in the reimbursed unit costs of the processing company Raiff eisen Service Center GmbH (RSC). The segment comprised four business outlets at the end of the year under review. Due to the rise in general administrative expenses, the cost/income ratio increased by 1.3 percentage points to 48.1 per cent.
Net provisioning for impairment losses was € 14 million, confi ned nearly entirely to the Financial Institutions & Sovereigns profi t center and largely related to a fi nancial institution in Denmark and a customer in the Middle East. Non-performing loans made up 0.8 per cent of the segment's total credit exposure.
Other results fell from € 7 million to minus € 4 million in the year under review, with net income from derivatives at Group headquarters coming in lower than in the previous year. This was attributable to the close-out payments in connection with the sale of parts of the securities portfolio held–to-maturity. Net income from fi nancial investments remained nearly unchanged. This was due to the valuation of the securities portfolio and of CDS transactions within the scope of Group headquarters' risk assumption, which resulted in write-ups in the fourth quarter stemming from high market volatility in the previous periods.
Income taxes climbed to € 72 million. The segment's tax rate was 27 per cent, up 2 percentage points from its 2010 level.
Profi t after deduction of non-controlling interests rose by 4 per cent to € 194 million.
The Corporate Center segment posted a net loss before tax of € 65 million. The € 174 million decrease year-on-year was primarily attributable to the decline in other results. The return on equity before tax was negative, amounting to 3.4 per cent.
| In € million | 2011 | 2010 | Change | Q4/2011 | Q3/2011 | Change |
|---|---|---|---|---|---|---|
| Operating income | 356 | 426 | (16.6)% | (20) | 49 | – |
| General administrative expenses | (318) | (307) | 3.5% | (113) | (69) | 63.9% |
| Operating result | 38 | 120 | (68.4)% | (133) | (20) | >500.0% |
| Net provisioning for impairment losses | 55 | 0 | – | (5) | 60 | – |
| Other results | (158) | (11) | >500.0% | (251) | 83 | – |
| Profi t/loss before tax | (65) | 109 | – | (389) | 123 | – |
| Assets | 53,835 | 32,879 | 63.7% | 53,835 | 52,695 | 2.2% |
| Net interest margin | 0.80% | 0.79% | 0.00 PP | 0.10% | 0.25% | (0.15) PP |
| Return on equity before tax | – | 5.3% | – | – | 26.1% | – |
The segment's net interest income climbed by 25 per cent year-on-year, to reach € 363 million. The dividend income from Group subsidiaries in other segments rose by 48 per cent, while a management-related net interest loss by the Treasury profi t center at Group headquarters lowered income. Here, the capital-raising costs for own issues rose because such issues with lower premiums from the years before the fi nancial crisis matured and were replaced with new issues. In addition, RBI's liquidity reserves were increased signifi cantly, which also curbed the net interest income. Income from internal fi nancing within the RBI network remained almost unchanged year-on-year. The € 33 million in interest expenses for RBI AG's subordinated capital are also reported under this segment. The segment's assets grew by 64 per cent year-on-year, reaching € 53.8 billion, particularly as a result of the increase in surplus liquidity. Credit risk-weighted assets rose by 22 per cent to reach € 19.6 billion, mainly because of the increase in liquidity reserves. In comparison, this rise was lower, mainly due to the lower risk weighting of additional assets.
The net fee and commission income decreased year-on-year, from minus € 17 million to minus € 65 million. This was largely due to commission payments by Group headquarters for country risk insurance in connection with fi nancing abroad, as well as fee and commission expense associated with placed issues.
The segment's net trading income climbed by 86 per cent to reach € 38 million. This increase was primarily due to the Group headquarters' Treasury department, and resulted from liquidity management and proprietary trading in the context of balance sheet structure management. Valuation gains on various foreign currency and interest-related fi nancial instruments that were held for hedging purposes constituted another contributory factor.
The segment's other net operating income totaled € 20 million, compared with € 133 million in the previous year. This decline was triggered by the newly introduced special bank levy in Austria, amounting to € 83 million. As in the previous year, income from the Raiff eisen Data Service Center in Vienna, which primarily provides treasury services, made a positive contribution to income, totaling € 27 million.
The general administrative expenses rose by 4 per cent or € 11 million, to reach € 318 million, largely due to the rising expenditure of the direct bank ZUNO's headquarters, based in Vienna. The only business outlet recognized in this segment is the Group headquarters.
Net provisioning for impairment losses generally plays a minor role, due to the intra-Group nature of the segment's business activities. However, largely because of the conversion of a loan into an equity participation, there was a release of provisions for impairment losses in the amount of € 60 million. Nevertheless, due to the simultaneous write-down of the relevant equity participation, this had no eff ect on the segment's results.
The other results decreased year-on-year to minus € 158 million. Net income from fi nancial investments included in this fi gure fell from € 16 million to minus € 538 million, largely due to valuation losses on Group internal equity participations. On the other hand, the net income from derivatives turned around from minus € 34 million to € 382 million. This was caused by net valuations on hedging transactions for own issues, which resulted from the favorable position of RBI AG with regard to decreasing long-term interest rates.
Income taxes amounted to € 24 million, after reaching € 183 million in the previous year. This decrease was primarily attributable to the high dividend income in this segment that is not included in the basis of taxation. The signifi cant year-onyear change is also due to the considerably lower deferred taxes, resulting from valuation diff erences for various fi nancial instruments and equity participations between the fi nancial statements under IFRS and the fi nancial statements for tax purposes. In addition, the reduced eligibility of loss carry-forwards decreased the positive tax amount.
The loss after deduction of non-controlling interests decreased by € 332 million, to € 40 million.
In addition to being subdivided into segments in accordance with IFRS 8, RBI is also organized into business divisions that refl ect the internal organization and reporting structure. The Group's business is broken down into the following divisions:
Corporate Customers includes business with local and international large and medium-sized companies. Retail Customers handles business with private individuals and small and medium-sized entities (SMEs) with annual sales of generally up to € 5 million. The Financial Institutions & Public Sector business division focuses on business with customers from the fi nancial and public sectors. Capital Markets & Treasury covers Treasury's proprietary trading and investment banking, which is undertaken only in certain Group units. Participations & Other is concerned with non-bank-specifi c activities, as well as the administration of participations. It also deals with other cross-division functions, particularly at the Group headquarters.
| Financial | ||||||
|---|---|---|---|---|---|---|
| Corporate | Retail | Institutions | Capital & Public Markets & |
Partici- pations & |
||
| In € million | Customers Customers | Sector | Treasury | Other | Total | |
| Net interest income | 1,352 | 1,656 | 338 | 80 | 242 | 3,667 |
| Net fee and commission income | 553 | 824 | 134 | 2 | (24) | 1,490 |
| Net trading income | 24 | 2 | 63 | 290 | (16) | 363 |
| Other net operating income | (3) | (2) | (10) | (57) | (160) | (232) |
| Operating income | 1,925 | 2,480 | 526 | 315 | 42 | 5,288 |
| General administrative expenses | (634) | (1,806) | (226) | (215) | (240) | (3,120) |
| Operating result | 1,291 | 675 | 300 | 100 | (198) | 2,168 |
| Net provisioning for impairment losses | (470) | (600) | (22) | (2) | 30 | (1,064) |
| Other results | (2) | (13) | (44) | 291 | 37 | 269 |
| Profi t/loss before tax | 819 | 61 | 235 | 389 | (131) | 1,373 |
| Risk-weighted assets (credit risk) | 42,198 | 15,955 | 7,759 | 6,919 | 4,320 | 77,150 |
| Total own funds requirement | 3,662 | 1,645 | 699 | 1,262 | 356 | 7,624 |
| Cost/income ratio | 32.9% | 72.8% | 42.9% | 68.3% | 104.9% | 57.0% |
| Average equity | 5,090 | 2,373 | 1,139 | 1,057 | 373 | 10,032 |
| Return on equity before tax | 16.1% | 2.6% | 20.6% | 36.8% | – | 13.7% |
| Financial | ||||||
|---|---|---|---|---|---|---|
| Corporate | Retail | Institutions | Capital & Public Markets & |
Partici- pations & |
||
| In € million | Customers Customers | Sector | Treasury | Other | Total | |
| Net interest income | 1,238 | 1,639 | 282 | 231 | 188 | 3,578 |
| Net fee and commission income | 518 | 845 | 147 | 0 | (19) | 1,491 |
| Net trading income | 32 | 2 | 54 | 238 | 2 | 328 |
| Other net operating income | 12 | (9) | (2) | (2) | 7 | 6 |
| Operating income | 1,800 | 2,475 | 481 | 468 | 179 | 5,403 |
| General administrative expenses | (574) | (1,762) | (198) | (172) | (274) | (2,980) |
| Operating result | 1,226 | 714 | 282 | 297 | (95) | 2,424 |
| Net provisioning for impairment losses | (564) | (601) | (23) | 1 | (7) | (1,194) |
| Other results | 18 | 18 | 3 | (1) | 20 | 58 |
| Profi t/loss before tax | 680 | 131 | 262 | 297 | (83) | 1,287 |
| Risk-weighted assets (credit risk) | 39,352 | 17,260 | 8,762 | 8,168 | 2,059 | 75,601 |
| Total own funds requirement | 3,427 | 1,761 | 775 | 1,435 | 187 | 7,585 |
| Cost/income ratio | 31.9% | 71.2% | 41.3% | 36.7% | 153.1% | 55.1% |
| Average equity | 4,563 | 2,319 | 982 | 1,168 | 368 | 9,400 |
| Return on equity before tax | 14.9% | 5.7% | 26.7% | 25.4% | – | 13.7% |
After RBI had defi ned its corporate banking strategy and the cornerstones thereof in 2010, the 2011 fi nancial year in the Corporate Customers business division was greatly infl uenced by the successful implementation of strategic initiatives throughout the entire Group. Emphasis was placed on the adaptation and optimization of customer service and acquisition models in the large customers and SMEs segment, the implementation of initiatives in product development and sales, the intensifi cation of know-how transfer within the Group, and the increase in effi ciency of business processes.
At the same time, various organizational measures were taken in order to promote capital- and liquidity-light products. These included, for instance, the installation of regional treasury experts in Poland and the Czech Republic, as well as the establishment of a distinct treasury sales unit in Russia.
Furthermore, in Austria and in a number of network banks, e.g. in Russia, Bulgaria, Croatia and Serbia, a stronger industry focus was realized in acquisition and corporate customer services, in order to provide customers with services in a more targeted manner.
The implementation of mid-offi ce concepts in the Russian, Bulgarian, Serbian and Slovakian network banks' regional centers served to increase effi ciency in the mid-corporate segment. These pursued the goal of minimizing the customer advisors' administrative load and thus further increasing the quality of customer services in acquisition and consulting.
2011 was also greatly infl uenced by a decisive improvement in cooperation between customer managers, product managers and risk managers, due to the comprehensive introduction of account planning methods and customer relationship management (CRM) systems. In particular, this helped to systemize and intensify Group-wide cooperation, with a special focus on capital- and liquidity-light products.
In Austria, the increased focus on Treasury & Investment Banking (this fi eld was one of the main topics of training for all customer advisors in 2011) has already yielded very pleasing initial results: with an issuing volume of around € 2,850 million in nine transactions, RBI held a leading position in Austria regarding issues of Austrian companies in 2011. In several network banks, product innovations were introduced in the fi elds of cash management, cash pooling and factoring.
A key element of RBI's corporate banking strategy is the introduction of a Group-wide concept which, on the one hand, supports know-how transfer within the Group and, on the other hand, promotes centralized development of complex corporate banking products with local support for increased effi ciency. Several initiatives were launched in this regard. For instance, the Group-wide deployment of product experts intensifi ed knowledge transfer. In addition, a newly developed technical platform will make it easier in future to compile and effi ciently distribute specialist knowledge throughout the entire RBI network.
At the start of the year 2011, the so-called "Group product concept" was introduced. This envisages increased cooperation within the Group in several product areas (project fi nance, real estate fi nance, export credit agency, guaranteed loans and cash management) regarding large transactions and complex transactions. Already in the fi rst year, this project proved a resounding success, with more than 200 transactions registered and over 30 completed, and in 10 of these cases, RBI was the mandated lead arranger.
The Corporate Customers business division posted a sharp rise in net income in the year under review, with profi t before tax increasing by 20 per cent to € 819 million. This was primarily due to the reduction in net provisioning for impairment losses and the increased net interest income.
The operating income rose from € 1,800 million to € 1,925 million due to higher net interest income and a slightly increased net fee and commission income, and was thus 7 per cent higher than the previous year's level. The 9 per cent rise in net interest income was primarily attributable to business with large customers in Russia, Slovakia and Asia. However, in RBI AG, the net interest income from large customers remained below the level of the previous year.
Net fee and commission income increased by 7 per cent to € 553 million. The largest contribution to this growth came from business in Russia. On the other hand, other net operating income decreased from € 12 million to minus € 3 million. Here, net income decreased by € 29 million, primarily due to the bank levies in Austria and Hungary.
The general administrative expenses increased by 10 per cent to € 634 million. In Russia, higher ancillary salary costs, bonus payments and IT expenses caused an increase in this regard, while in Slovakia, the reasons were higher social security costs and staff -related taxes, as well as a rise in the number of staff . The cost/income ratio increased by 1 percentage point, to reach 33.0 per cent.
The other results decreased from € 18 million to minus € 2 million. Here, net income from fi nancial investments in particular was signifi cantly down on the previous year.
Credit risk-weighted assets increased year-on-year by 7 per cent to € 42.2 billion. The main reason for this was the rise in total loans.
Return on equity before tax in the Corporate Customers business division rose by 1.2 percentage points to 16.1 per cent, due to the growth in profi t before tax.
Due to changes in the economic environment in the second half of the year, this business division was confronted with less demand for loans among private individuals. Nevertheless, in 2011, RBI achieved an increase in loans to private individuals of 2 per cent in total.
Here, the quality of newly issued loans is still the center of attention. The bank continually monitors risk-relevant product parameters, such as the maximum loan-to-value ratio for mortgages or the maximum term for personal loans.
In 2011, RBI was very successful with its focus on close customer relationships and the development of solid customer deposits. The latter increased in the private individuals segment by 12 per cent as a result of sales and customer care activities, which also enabled RBI to improve its position in most markets. Here, customer faith in the Raiff eisen brand was of decisive signifi cance and allowed RBI to expand its customer and deposit base without having to off er higher interest rates.
With the exception of Hungary, net provisioning for impairment losses was signifi cantly lower than in 2010 due to higher credit quality and improved collection processes. With regard to private individuals, it decreased year-on-year by 4 per cent, Group-wide. This value already includes the eff ects of the diffi cult situation in Hungary, where the net provisioning for impairment losses was considerably higher than in the year 2010.
In 2012, RBI will continue its "primary relationship banking initiative," which targets customers whose main bank is the respective Raiff eisen unit. For this purpose, the packageability of products is to be developed further, transparency is to be increased and the quality of service is to undergo additional improvement.
In 2011, expansion of the range of products and services for affl uent customers (under the Premium Banking brand) was continued, which led to 80,000 additional customers being acquired for the Premium Banking services. At the end of 2011, over 1,000 relationship managers were servicing more than 500,000 customers in this segment.
Also in 2011, the private banking business was continued to be promoted in RBI's CEE network, under the brand "Friedrich Wilhelm Raiff eisen." Here, the goal is to off er a unique service level for the more than 30,000 customers in this subsegment.
Despite the diffi cult environment for small companies in CEE, the profi tability of this customer segment was maintained in 2011. Thus, declining income from loans was compensated for by increased income from the transaction business and from products linked with commissions, as well as by optimization of the sales and service model. Relationship managers concentrated on customers with higher value creation, which thus decreased the cost of customer services; in addition, the focus on early collection and loan settlements caused a slight year-on-year reduction of risk costs.
The year 2011 also proved to be another successful year in the development of the Allfi nanz business in CEE, together with the strategic partner UNIQA Versicherungen AG. In particular, the range of services for current accounts was expanded and off ered to customers from all segments in the key markets. Thanks to the joint initiative with UNIQA, the sale of independent life insurance products was expanded across eleven countries in the RBI network.
RBI views the asset management business in CEE as an important growth market. For this reason, the bank is focusing on developing attractive and secure investment instruments for distribution to its customers through the regional bank network. In 2011, despite the extremely diffi cult environment for the investment fund business, the average managed assets increased by 13 per cent to € 6.2 billion.
Kathrein Privatbank AG, based in Vienna, has established itself over recent years as a private bank for business owners, foundations and asset transfers. In 2011, the assets managed by this private bank stood at around € 4.3 billion (2010: € 4.6 billion), of which € 2.2 billion was in fund assets which declined year-on-year by € 130 million (2010: € 2.4 billion). Due to devaluations of fi xed assets, profi t decreased year-on-year by € 5.6 million, falling to € 3.2 million.
In addition to the branch already in place in Slovakia, ZUNO Bank AG, RBI's direct bank subsidiary, opened a business outlet in the Czech Republic in July 2011. Here too, the products and services off ered are primarily aimed at private individuals. They include deposit products such as time deposits, savings accounts and current accounts, plus a broad spectrum of payment transfer products, including currency exchange. In 2011, the development of this still young network bank's business was far in excess of the expected fi gures in both countries and customer deposits already reached € 0.8 billion. At the end of 2011, ZUNO Bank AG also completed the preparations for credit business: as of spring 2012, customers in Slovakia and the Czech Republic are to be off ered current account advances and personal loans, and from summer 2012 onwards they will also be off ered credit card products.
Profi t before tax in the Retail Customers business division amounted to € 61 million in the year under review. Compared with 2010, this represents a decline of € 70 million, which is largely attributable to higher general administrative expenses.
This business division's operating income advanced by € 5 million to reach € 2,480 million. Net interest income in particular, at € 1,656 million, increased year-on-year by € 17 million; here, the largest growth was achieved in Russia and the Czech Republic. On the other hand, net fee and commission income decreased by € 21 million and contributed € 824 million to the operating income. Russia and Romania again made the largest contributions in this regard with € 139 million and € 136 million respectively, primarily from the payment transfer business and from the loan and guarantee business. The Czech Republic saw the largest increase, of € 17 million, which was also primarily achieved in the payment transfer business. Other net operating income improved year-on-year from minus € 9 million to minus € 2 million, largely due to the decrease in the bank levy.
As a result of salary increases, bonus payments and growth in IT expenses for various banking systems, general administrative expenses increased by 3 per cent to € 1,806 million in the year under review. Thus, the cost/income ratio increased by 1.6 percentage points, to reach 72.8 per cent.
Despite the tense market situation, net provisioning for impairment losses was successfully kept at the previous year's level of € 600 million. Here, the highest level of net provisioning for individual and portfolio-based impairment losses was required in Hungary (€ 249 million), while net provisioning for impairment losses was realized to a lesser extent in Ukraine, Croatia and Bulgaria.
Due to the development of business with Special Customers, the other results decreased from € 18 million to minus € 13 million.
The credit risk-weighted assets in the Retail Customers business division decreased by 8 per cent to € 16.0 billion, mainly as a result of the decline in Hungary.
The return on equity before tax decreased by 3.1 percentage points to 2.6 per cent.
The development of the Financial Institutions & Sovereigns division was principally characterized in the second half of 2011 by increasing uncertainty on the international and, in particular, European fi nancial markets. The reasons for this were the debt reorganization negotiations with Greece and increasing pressure on other Southern European countries due to their strained fi nancial situation. Delays in increasing the European Financial Stability Facility (EFSF) also contributed to uncertainty and reluctance on the part of the fi nancial industry.
The still quite positive market environment in the fi rst half of the year favored the issuing business among institutional issuers. RBI also benefi tted from this and was able to win a series of lead management mandates. In the second half of the year, however, due to the markedly more diffi cult conditions, there was a clear cooling off in capital market activity from institutional clients.
However, in the second half of the fi nancial year the trend towards capital- and liquidity-light products was strengthened. The background to this development was formed by the more stringent EU regulations on core capital ratios for banks which were emerging. Here RBI was able to highlight its leading role as a partner for payment transfers between East and West and win over new clients. The division also benefi tted from the strong demand for custody and fund services and was able to acquire new clients in the banknote trade.
The noticeable change in the traditional credit business over the past approximately three years continued to increase in pace. The central approach to this change is a considerable strengthening of client relations with a high cross-selling potential and a selective transaction choice with smaller volumes. In general the restrictive conditions were carried by a clear slowing of business and by focusing on the distribution of capital light products.
The Financial Institutions & Public Sector division posted a slight fall in profi ts over the year, with profi t before tax falling by 10 per cent to € 235 million. Whereas performance was, on the one hand, infl uenced by the increase in net interest income, returns on fi nancial investments were, on the other hand, lacking.
Operating income increased due to the higher net interest income from € 481 million to € 526 million, thereby exceeding the previous year's level by 9 per cent. The increase in net interest income of 20 per cent resulted predominantly from the increased volume of business at the Group headquarters, in Asia and Romania. In the reporting period, net fee and commissions income, on the other hand, was at € 134 million, down by 8 per cent compared to the 2010 level, due to reduced loan and guarantee business in Malta. Net trading income, however, increased considerably by € 9 million to € 63 million, while other operating income declined from minus € 2 million to minus € 10 million year-on-year. The bank levy in Austria reduced other net operating income by € 13 million.
General administrative expenses increased by 14 per cent to € 226 million, due to which the cost/income ratio also increased slightly by 1.7 percentage points to 42.9 per cent. As in all divisions, the rise was caused by salary increases and bonus payments, as well as by growth in IT expenses as a result of investments.
Other income fell from € 3 million to minus € 44 million, mainly as a result of lower market valuations of municipal bonds in Hungary.
Credit risk-weighted assets decreased year-on-year due to reductions in volume by 11 per cent to € 7.8 billion.
Return on equity before tax in the Financial Institutions & Public Sector division fell due to the reduced profi t before tax by 6.0 percentage points to 20.6 per cent.
The European debt crisis, the expansion of the debt upper limit in the US and political unrest made for highly volatile markets in 2011 and great uncertainty on the fi nancial markets. Despite this trying market environment, the Capital Markets division posted outstanding results due to innovative solution strategies.
The "FX Raiff eisen" internet platform was introduced to clients, enabling a new level of service to be achieved. Thanks to active advisory services in questions relating to foreign currency management, the division succeeded in raising client satisfaction and product sales alike. The expansion of the bank note business likewise clearly contributed to increased income. Numerous corporate customers were also won over by the hedging of their interest rate risks in concluding interest rate swaps and caps.
The money market business posted a further increase in secured transactions and shorter maturities. ECB-eligible bonds and blue chip shares were accepted as collateral on which basis customers profi ted from the favorable fi nancing costs in the repo business.
In the division of fi xed income products were off ered to hedge refi nancing, as were special solutions for the restructuring of existing business. Infl ation and foreign currency bonds in particular were increasingly in demand in this sector. In Asia several USD multi-callable notes were able to be placed, thereby strengthening RBI's presence in this region.
In proprietary trading, stable success was achieved by active management of reduced volumes.
In recent years, RBI has established itself as a central investment bank in the Raiff eisen sector for services to national and international fi nance investors and listed companies through its subsidiary Raiff eisen Centrobank. Customers include institutional investors who buy shares and share derivatives from the CEE region as well as Austria and surrounding EU countries. In market making, the Raiff eisen Centrobank is number 1 on the Vienna stock exchange and a leading trader of equities in the CEE. RBI's direct stock exchange membership on numerous international stock exchanges, as well as optimal access to local markets in CEE through its network banks allow RBI's customers to participate in contemporary and low-cost stock trading in this region.
Treasury business is covered in the "Funding" section of the management report.
In 2011 the Capital Markets & Treasury division posted a profi t before tax of € 389 million, an increase of 31 per cent year-on-year.
Operating income in this division fell by 33 per cent year-on-year to € 315 million. Due to the existing liquidity surplus, net interest income at € 80 million was € 151 million down on the previous year's fi gure. The main reason for this was the negative interest income at Group headquarters and in Hungary. Predominantly due to the bank levy in Austria, other net operating income also fell year-on-year by € 55 million to minus € 57 million.
Net trading income rose 22 per cent to € 290 million, mainly caused by an increase at Group headquarters based on valuation gains from interest rate and currency derivatives. Additionally, the valuation of capital guarantees issued produced a very positive result of € 72 million, in comparison with minus € 14 million in the previous year.
General administrative expenses increased, primarily due to the implementation of a system for structured products, by 26 per cent year-on-year to € 215 million.
Other results posted a plus of € 291 million on the back of the income from derivative fi nancial instruments of RBI AG. High value appreciations on fi nancial instruments clearly outweighed the negative performance of fi nancial investments.
Due to the change in method in calculating the own funds requirement for open currency positions, the overall own funds requirement also fell. The requirement for market risk, however, increased due to regulatory changes (CRD III) by 12 per cent to € 1,262 million.
The return on equity before tax in this division rose by 11.4 percentage points to 36.8 per cent as the result of a marked improvement in profi t before tax.
The Participations & Other division posted a net loss before tax of € 131 million, after a minus of € 83 million the year before. There was, however, a marked increase in net interest income, which rose by 28 per cent to € 242 million. The result also includes the imputed results from the investment of equity, which increased strongly on the back of interest rate hikes in Ukraine, Croatia, Slovakia and Hungary in the reporting period.
Net fee and commission income of the division included the somewhat higher (year-on-year) commissions payments of RBI AG for country risk insurance. Impairment of goodwill in Ukraine, Hungary and Slovenia negatively aff ected other net operating income with € 187 million in the year under review.
Participations & Other also includes expenses from central Group management. According to internal guidelines, these expenses remain in this business division and are not wholly distributed among other divisions.
Statement of comprehensive income 134 Statement of fi nancial position 138 Statement of changes in equity 139 Statement of cash fl ows 140 Segment reporting 142 Notes 150 Auditor's report 262
| € 000 | Notes | 2011 | 2010 | Change |
|---|---|---|---|---|
| Interest income | 6,614,417 | 6,364,799 | 3.9% | |
| Current income from associates | 89 | 200 | (55.5)% | |
| Interest expenses | (2,947,356) | (2,786,831) | 5.8% | |
| Net interest income | [2] | 3,667,150 | 3,578,168 | 2.5% |
| Net provisioning for impairment losses | [3] | (1,063,551) | (1,194,084) | (10.9)% |
| Net interest income after provisioning | 2,603,599 | 2,384,084 | 9.2% | |
| Fee and commission income | 1,795,257 | 1,753,233 | 2.4% | |
| Fee and commission expense | (305,330) | (262,441) | 16.3% | |
| Net fee and commission income | [4] | 1,489,927 | 1,490,792 | (0.1)% |
| Net trading income | [5] | 363,261 | 328,121 | 10.7% |
| Net income from derivatives and designated liabilities | [6] | 412,828 | (84,185) | – |
| Net income from financial investments | [7] | (141,077) | 137,223 | – |
| General administrative expenses | [8] | (3,120,440) | (2,979,745) | 4.7% |
| Other net operating income | [9] | (232,167) | 6,297 | – |
| Net income from disposal of group assets | [10] | (2,575) | 4,734 | – |
| Profit before tax | 1,373,355 | 1,287,322 | 6.7% | |
| Income taxes | [11] | (399,243) | (110,161) | 262.4% |
| Profit after tax | 974,113 | 1,177,161 | (17.2)% | |
| Profit attributable to non-controlling interests | (6,449) | (89,685) | (92.8)% | |
| Consolidated profit | 967,663 | 1,087,475 | (11.0)% |
| Total | Group equity | Non-controlling interests | ||||
|---|---|---|---|---|---|---|
| € 000 | 2011 | 2010 | 2011 | 2010 | 2011 | 2010 |
| Consolidated profit | 974,113 | 1,177,161 | 967,663 | 1,087,475 | 6,449 | 89,685 |
| Exchange differences | (349,606) | 188,893 | (302,230) | 180,388 | (47,376) | 8,506 |
| hereof unrealized net gains (losses) of the period |
(349,606) | 188,893 | (302,230) | 180,388 | (47,376) | 8,506 |
| Capital hedge | 31,321 | (11,332) | 31,321 | (11,332) | 0 | 0 |
| Hyperinflatin | 95,152 | 0 | 83,486 | 0 | 11,666 | 0 |
| Net gains (losses) on derivatives hedging fluctuating cash flows |
(45,951) | 38,578 | (45,951) | 38,578 | 0 | 0 |
| hereof unrealized net gains (losses) of the period |
(46,904) | 38,578 | (46,904) | 38,578 | 0 | 0 |
| hereof net gains (losses) reclassified to income statement |
953 | 0 | 953 | 0 | 0 | 0 |
| Changes in equity of companies valued at equity |
39 | 0 | 39 | 0 | 0 | 0 |
| Net gains (losses) on financial assets available-for-sale |
150,824 | 10,140 | 150,824 | 10,140 | 0 | 0 |
| hereof unrealized net gains (losses) of the period |
153,967 | 10,140 | 153,967 | 10,140 | 0 | 0 |
| hereof net gains (losses) reclassified to income statement |
(3,143) | 0 | (3,143) | 0 | 0 | 0 |
| Deferred taxes on income and expenses directly recognized in equity |
(44,556) | (7,680) | (44,556) | (7,680) | 0 | 0 |
| Other comprehensive income | (162,777) | 218,599 | (127,066) | 210,094 | (35,711) | 8,506 |
| Total comprehensive income | 811,336 | 1,395,760 | 840,597 | 1,297,569 | (29,262) | 98,191 |
Capital hedge comprises hedges for investments in economically independent sub-units.
The item fair value reserve (available-for-sale financial assets) contains net valuations of financial investments.
Due to changed intentions regarding a part of the held-to-maturity portfolio, a volume of € 3,165,000 thousand of held-tomaturity securities was reclassified as available-for-sale. This reclassification caused an increase in other comprehensive income in the amount of income recognized of € 116,917 thousand (after tax).
Through the application of IAS 29 (hyperinflation accounting) in Belarus € 95,152 thousand was recognized directly in other comprehensive income.
Due to a change in hedging strategy some cash flow hedging was ended in the second quarter 2011 and replaced by portfolio hedging. The valuation losses on the termination of cash flow hedges amounted to € 36 million (after deferred tax).
Items recognized directly in retained earnings developed as follows:
| € 000 | Exchange differences |
Capital hedge |
Cash flow hedge |
Fair value reserve (afs financial assets) |
Hyper inflation |
Deferred tax |
|---|---|---|---|---|---|---|
| As of 1/1/2010 | (1,336,732) | 52,703 | 7,316 | 38,006 | 0 | 309,404 |
| Unrealized net gains (losses) of the period |
180,388 | (11,332) | 38,578 | 10,140 | 0 | (7,680) |
| As of 31/12/2010 | (1,156,344) | 41,371 | 45,894 | 48,146 | 0 | 301,723 |
| Unrealized net gains (losses) of the period |
(302,230) | 31,321 | (46,904) | 153,967 | 83,486 | (44,556) |
| Net gains (losses) reclassified to income statement |
0 | 0 | 953 | (3,143) | 0 | 0 |
| As of 31/12/2011 | (1,458,574) | 72,692 | (57) | 198,970 | 83,486 | 257,167 |
| In € | Notes | 2011 | 2010 | Change |
|---|---|---|---|---|
| Earnings per share | [12] | 3.95 | 4.56 | (0.62) |
Earnings per share are obtained by dividing adjusted consolidated profit (less dividend for participation capital in the reporting period and participation rights in the previous year) by the average number of common shares outstanding. In the fiscal year 2011, the number of common shares outstanding was 194,552 thousand compared with 194,530 thousand in the previous year.
There were no conversion rights or options outstanding, so undiluted earnings per share are equal to diluted earnings per share.
The quarterly results are as follows:
| € 000 | Q1/2011 | Q2/2011 | Q3/2011 | Q4/2011 |
|---|---|---|---|---|
| Net interest income | 884,252 | 896,934 | 942,574 | 943,390 |
| Net provisioning for impairment losses | (208,197) | (196,820) | (376,587) | (281,947) |
| Net interest income after provisioning | 676,055 | 700,114 | 565,988 | 661,443 |
| Net fee and commission income | 357,108 | 379,835 | 387,560 | 365,423 |
| Net trading income | 123,425 | 132,767 | 36,786 | 70,283 |
| Net income from derivatives and designated | ||||
| liabilities | 2,798 | 37,841 | 108,412 | 263,776 |
| Net income from financial investments | 25,067 | (13,085) | (157,706) | 4,646 |
| General administrative expenses | (753,016) | (761,300) | (772,372) | (833,753) |
| Other net operating income | (23,902) | (2,609) | (15,415) | (190,240) |
| Net income from disposal of group assets | (2,494) | (91) | 6 | 4 |
| Profit before tax | 405,042 | 473,472 | 153,258 | 341,583 |
| Income taxes | (99,684) | (101,388) | (70,895) | (127,276) |
| Profit after tax | 305,358 | 372,084 | 82,363 | 214,307 |
| Profit attributable to non-controlling interests | (35,346) | (26,944) | 47,962 | 7,879 |
| Consolidated profit | 270,012 | 345,140 | 130,326 | 222,186 |
| € 000 | Q1/2010 | Q2/2010 | Q3/2010 | Q4/2010 |
|---|---|---|---|---|
| Net interest income | 858,629 | 921,476 | 927,182 | 870,881 |
| Net provisioning for impairment losses | (324,942) | (282,697) | (305,746) | (280,700) |
| Net interest income after provisioning | 533,687 | 638,779 | 621,436 | 590,181 |
| Net fee and commission income | 336,882 | 378,111 | 373,272 | 402,527 |
| Net trading income | 126,157 | 66,198 | 65,814 | 69,951 |
| Net income from derivatives and designated liabilities |
(45,209) | (86,338) | 4,596 | 42,766 |
| Net income from financial investments | 140,521 | (87,853) | 83,542 | 1,013 |
| General administrative expenses | (699,961) | (724,872) | (727,773) | (827,139) |
| Other net operating income | (4,591) | 2,986 | (2,942) | 10,846 |
| Net income from disposal of group assets | 4,659 | 211 | (155) | 19 |
| Profit before tax | 392,145 | 187,221 | 417,791 | 290,165 |
| Income taxes | (33,202) | (30,584) | (80,422) | 34,048 |
| Profit after tax | 358,943 | 156,637 | 337,369 | 324,213 |
| Profit attributable to non-controlling interests | (25,238) | (18,157) | (26,368) | (19,923) |
| Consolidated profit | 333,705 | 138,480 | 311,001 | 304,290 |
| Assets | ||||
|---|---|---|---|---|
| € 000 | Notes | 31/12/2011 | 31/12/2010 | Change |
| Cash reserve | [14, 35] | 11,401,747 | 4,806,891 | 137.2% |
| Loans and advances to banks | [15, 35, 36] | 25,748,044 | 21,532,406 | 19.6% |
| Loans and advances to customers | [16, 35, 36] | 81,576,235 | 75,657,061 | 7.8% |
| Impairment losses on loans and advances | [17, 35] | (5,053,212) | (4,755,872) | 6.3% |
| Trading assets | [18, 35, 36] | 10,616,671 | 8,068,393 | 31.6% |
| Derivatives | [19, 35, 36] | 1,404,809 | 1,488,036 | (5.6)% |
| Financial investments | [20, 35, 36] | 16,534,964 | 19,630,902 | (15.8)% |
| Investments in associates | [21, 35, 36] | 5,017 | 4,961 | 1.1% |
| Intangible fixed assets | [22, 24, 35] | 1,065,548 | 1,219,816 | (12.6)% |
| Tangible fixed assets | [23, 24, 35] | 1,511,477 | 1,453,630 | 4.0% |
| Other assets | [25, 35, 36] | 2,173,703 | 2,066,890 | 5.2% |
| Total assets | 146,985,003 | 131,173,114 | 12.1% |
| Equity and liabilities | ||||
|---|---|---|---|---|
| € 000 | Notes | 31/12/2011 | 31/12/2010 | Change |
| Deposits from banks | [26, 35, 36] | 37,991,809 | 33,659,182 | 12.9% |
| Deposits from customers | [27, 35, 36] | 66,747,234 | 57,633,113 | 15.8% |
| Debt securities issued | [28, 35, 36] | 14,366,814 | 16,555,382 | (13.2)% |
| Provisions for liabilities and charges | [29, 35, 36] | 770,957 | 671,908 | 14.7% |
| Trading liabilities | [30, 35, 36] | 9,714,926 | 5,741,591 | 69.2% |
| Derivatives | [31, 35, 36] | 791,720 | 1,263,528 | (37.3)% |
| Other liabilities | [32, 35, 36] | 1,515,024 | 1,243,387 | 21.8% |
| Subordinated capital | [33, 35, 36] | 4,150,733 | 4,001,098 | 3.7% |
| Equity | [34, 35] | 10,935,786 | 10,403,925 | 5.1% |
| Consolidated equity | 8,825,228 | 8,250,760 | 7.0% | |
| Consolidated profit | 967,663 | 1,087,475 | (11.0)% | |
| Non-controlling interests | 1,142,894 | 1,065,690 | 7.2% | |
| Total equity and liabilities | 146,985,003 | 131,173,114 | 12.1% |
| Subscribed capital |
Participation capital/ |
Capital reserves |
Retained earnings |
Consolidated profit |
Non controlling |
Total | |
|---|---|---|---|---|---|---|---|
| € 000 | Participation rights |
interests | |||||
| Equity as of | |||||||
| 31/12/2009 | 468,733 | 600,000 | 2,569,132 | 2,152,598 | 212,181 | 997,538 | 7,000,182 |
| Effects due to the merger |
124,555 | 1,900,000 | (1,951) | 299,757 | 0 | 2,898 | 2,325,259 |
| Equity as of 1/1/2010 |
593,288 | 2,500,000 | 2,567,181 | 2,452,355 | 212,181 | 1,000,436 | 9,325,441 |
| Capital increases | 0 | 0 | 0 | 0 | 0 | 3,013 | 3,013 |
| Transferred to retained earnings |
0 | 0 | 0 | 182,044 | (182,044) | 0 | 0 |
| Dividend payments | 0 | 0 | 0 | (304,700) | (30,136) | (49,305) | (384,141) |
| Total comprehensive income |
0 | 0 | 0 | 210,094 | 1,087,475 | 98,191 | 1,395,760 |
| Own shares/share incentive program |
35 | 0 | 693 | 0 | 0 | 0 | 729 |
| Other changes | 0 | 0 | 0 | 49,769 | 0 | 13,355 | 63,124 |
| Equity as of 31/12/2010 |
593,323 | 2,500,000 | 2,567,874 | 2,589,562 | 1,087,475 | 1,065,690 | 10,403,925 |
| Capital increases | 0 | 0 | 0 | 0 | 0 | 168,930 | 168,930 |
| Transferred to retained earnings |
0 | 0 | 0 | 683,186 | (683,186) | 0 | 0 |
| Dividend payments | 0 | 0 | 0 | 0 | (404,289) | (58,498) | (462,788) |
| Total comprehensive income |
0 | 0 | 0 | (127,066) | 967,663 | (29,262) | 811,336 |
| Own shares/share incentive program |
89 | 0 | 2,904 | 0 | 0 | 0 | 2,993 |
| Other changes | 0 | 0 | 0 | 15,356 | 0 | (3,966) | 11,390 |
| Equity as of 31/12/2011 |
593,412 | 2,500,000 | 2,570,778 | 3,161,038 | 967,663 | 1,142,894 | 10,935,786 |
Further details about the above mentioned changes are reported under note (34) equity.
Other changes in equity are due to currency differences between the income statement and the statement of financial position and changes in shares in Group units.
The effects due to the merger of the principal business areas of RZB with Raiffeisen International in the year 2010 amounted to € 2,325,259 thousand and consist of the participation capital amounting to € 2,500,000 thousand and retained earnings of € 299,757 thousand, which were transferred and a capital increase of € 124,555 thousand against a contribution in kind. In the course of the merger, receivables and liabilities of the target and the acquiring company were offset. This was also the case for the participation rights of € 600,000 thousand, which were fully held by RZB AG.
| € 000 | 2011 | 2010 |
|---|---|---|
| Profit after tax | 974,113 | 1,177,161 |
| Non-cash positions in profit and transition to net cash from operating activities: | ||
| Write-downs/write-ups of tangible fixed assets and financial investments | 671,303 | 341,948 |
| Net provisioning for liabilities and charges and impairment losses | 1,316,152 | 1,503,170 |
| Gains (losses) from disposals of tangible fixed assets and financial investments | (98,695) | (11,505) |
| Other adjustments (net) | 611,542 | 132,854 |
| Subtotal | 3,474,415 | 3,143,628 |
| Changes in assets and liabilities arising from operating activities after corrections for non-cash positions: |
||
| Loans and advances to banks and customers | (9,666,520) | 13,332,712 |
| Trading assets/trading liabilities (net) | 1,576,554 | 1,829,844 |
| Other assets/other liabilities (net) | (4,629,542) | (1,894,152) |
| Deposits from banks and customers | 13,046,255 | (13,256,519) |
| Debt securities issued | (1,933,292) | (3,366,047) |
| Net cash from operating activities | 1,867,870 | (210,534) |
| Proceeds from sale of: | ||
| Financial investments | 8,156,189 | 4,253,340 |
| Tangible and intangible fixed assets | 87,840 | 70,471 |
| Proceeds from disposal of group assets | 3 | 0 |
| Payments for purchase of: | ||
| Financial investments | (2,536,354) | (4,147,648) |
| Tangible and intangible fixed assets | (580,305) | (618,706) |
| Net cash from investing activities | 5,127,373 | (442,543) |
| Capital increases | 168,930 | 3,013 |
| Inflows/outflows of subordinated capital | 149,635 | (312,759) |
| Dividend payments | (462,788) | (384,141) |
| Net cash from financing activities | (144,223) | (693,887) |
| € 000 | 2011 | 2010 |
|---|---|---|
| Cash and cash equivalents at the end of previous period | 4,806,891 | 4,179,572 |
| Effects due to the merger | 0 | 1,913,574 |
| Net cash from operating activities | 1,867,870 | (210,534) |
| Net cash from investing activities | 5,127,373 | (442,543) |
| Net cash from financing activities | (144,223) | (693,887) |
| Effect of exchange rate changes | (256,163) | 60,709 |
| Cash and cash equivalents at the end of period | 11,401,747 | 4,806,891 |
| Payments for taxes, interest and dividends | 2011 | 2010 |
|---|---|---|
| Interest received | 6,517,369 | 6,486,758 |
| Dividends received | 19,320 | 1,172 |
| Interest paid | (2,848,428) | (2,496,266) |
| Income taxes paid | (190,806) | (118,789) |
The statement of cash flows shows the structure and changes in cash and cash equivalents during the financial year and is broken down into three sections: net cash from operating activities, from investing activities and from financing activities.
Net cash from operating activities comprises inflows and outflows from loans and advances to banks and customers, from deposits from banks and customers as well as debt securities issued. Inflows and outflows from trading assets and liabilities, from derivatives, as well as from other assets and other liabilities are also shown in operating activities. The interest, dividend and tax payments from operating activities are separately stated.
Net cash from investing activities shows inflows and outflows from financial investments, tangible and intangible assets, proceeds from disposal of group assets, and payments for acquisition of subsidiaries.
Net cash from financing activities consists of inflows and outflows of equity and subordinated capital. This covers capital increases, dividend payments, and changes in subordinated capital.
Cash and cash equivalents include the cash reserve recognized in the statement of financial position, which consists of cash in hand and balances at central banks due at call. It does not include loans and advances to banks that are due at call, which belong to operating activities.
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.
Markets in Central and Eastern Europe are thereby grouped together into regional segments in which countries with comparable economic profiles and similar long-term economic growth expectations are bundled into the same segment. Business activities outside the CEE region that have been newly added as a result of the merger with the principal business areas of RZB are divided according to business area.
In order to achieve the maximum possible transparency and clear lines of reporting, seven segments were defined in compliance with the IFRS 8 thresholds. IFRS 8 establishes a 10 per cent threshold for the key figures of operating income, result after tax and segment assets.
The following segments resulted thereof:
This segment encompasses the most advanced banking markets in the EU-countries in Central and Eastern Europe, namely Poland, Slovakia, Slovenia, the Czech Republic and Hungary. They are also the markets in which RBI has been operating the longest. In each of the countries, RBI is represented by a bank, leasing companies and other specialized financial institutions. In Poland, in addition to the main activity of the credit business with corporate customers and small and medium-sized enterprises (also via leasing and factoring), the focus is on retail banking and increasingly on affluent customers too. In Slovakia, RBI is likewise active in its business divisions of Corporate and Retail Customers, including leasing, while at the same time expanding banking services for affluent customers. In Slovenia, the Group provides universal banking services and also leasing, with Group units concentrating in particular on local corporate customers. In the Czech Republic, RBI offers real estate leasing in addition to traditional banking services with corporate and retail customers. In Hungary, the Group provides services to private and corporate customers via the Bank's tightly knit network and also through leasing companies. In addition, RBI is represented in Slovakia and the Czech Republic through branches of its direct bank ZUNO.
The Southeastern Europe segment comprises Albania, Bosnia and Herzegovina, Bulgaria, Kosovo, Croatia, Romania and Serbia. In these countries, RBI is represented by banks, leasing companies, as well as, in some markets, by separate capital management and asset management companies and pension funds. In Albania and Kosovo, financial services are offered across all business divisions. In Kosovo, RBI also offers a comprehensive product range. In Bosnia and Herzegovina the emphasis is on small and medium-sized enterprises, while also boasting a wide range of products for retail customers. In Croatia the focus is on large and medium-sized corporate customers and also on retail customers (pension funds business). In Romania a broad range of financial services is offered via its tightly knit branch network. Moreover, the the Moldovan corporate customer market is also served from Romania. In Serbia, the market is serviced by a universal bank and a leasing company.
Raiffeisenbank is one of the leading foreign banks in Russia and services both corporate and retail customers. The national branch network also offers products tailored for affluent private individuals. The product range in Russia is rounded off by leasing business. In view of the size of the banking market and its high natural and industrial potential, the Russia segment is of key significance for RBI.
This segment comprises Belarus, Kazakhstan and Ukraine. In Belarus, RBI is represented by a bank and a leasing company, whilst in Kazakhstan it is represented in the leasing business .In Ukraine RBI is represented by a bank, a leasing and a cardprocessing company and provides a full range of financial services and products via a tightly knit branch network.
The Group Corporates segment covers business with Austrian and international – notably Western European – corporate customers of the RBI AG managed from Vienna, and grouped within the Corporate Customers profit center. These customers include Austria's largest companies and multinational customers.. The segment also comprises the large corporate business with Central and Eastern European customers as well multinationals with CEE-business, included in the Network Corporate Customers & Support profit center. The Corporate Customers and Network Corporate Customers & Support profit centers also include net income from structured trade financing for commodity traders, documentary business, project financing and a range of cofinancing solutions. Corporate customer business in further countries is operated via the Singapore, China, Malaysia and Malta branches, which are also included in this segment. Financing companies in USA and Hong Kong, which focus on niche market customers with selected products, are also allocated to this segment.
The Group Markets segment covers RBI AG's customer and proprietary business related to the capital market. Income from currency, interest and securities trading as well as from trading in structured products for financial institutions is also allocated to this segment, as is proprietary business. The same applies to proprietary trading and market maker activities in Vienna, and to the branches in Singapore, China and London. This segment includes net income from customer business, sales of all banking products and business relationships with banks, institutional customers, governments and local authorities too. Furthermore, income from Raiffeisen Centrobank (equity trading and capital market financing) and from Kathrein & Co. Privatgeschäftsbank is also booked under this segment.
The Corporate Center segment encompasses all of the services provided by Group headquarters in various divisions that serve to implement the Group's overall strategy and that are allocated to this segment to ensure comparability. Moreover, this segment includes the following areas: Liquidity management and balance sheet structure management as part of proprietary trading, participations (in particular those of subsidiaries in CEE), income from banking operations carried out by Group headquarters and by the Maltese subsidiary for refinancing Group units, the Austrian transaction services business operated by Raiffeisen Daten Service Center GmbH, which offers a wide range of order processing products and services for financial services providers, as well as income from the holding and other companies that do not fall directly under another segment.
The segment reporting according to IFRS 8 shows the segment performance on the basis of internal management reporting, supplemented with the reconciliation of the segment results to the group results. In principle, RBI´s management reporting is based on IFRS. Therefore, no differences occur in the recognition and measurement principles between segment reporting and consolidated financial accounts.
The control of the separate segments is based on key indicators, which are assembled of several parameters like profitability, growth, efficency, constraints and the business mix. The target values of the separate key indicators are determined according to the specific market environment and adapted on demand.
The performance of the CGUs is evaluated as follows:
The profitability is measured by the return on equity (ROE) and return on risk-adjusted capital (RORAC) based on the internal management systems. The return on equity shows the profitability of a CGU and is calculated as the proportion between profit/loss after deduction of non-controlling interests and the average consolidated capital employed. The return on equity reflects the yield of the capital of each segment. The calculation of the RORAC indicates the risk adjusted capital, which reflects the demand of own funds and which has to be brought forward in case of unexpected losses by the bank. In RBI this capital requirement is calculated within the economic capital model for credit, market and operational risk. That ratio shows the interest of the risk-adjusted equity (economic capital), which is no indicator according to IFRS. Within the different countries and business lines the real earned RORAC will be compared with the predetermined minimal value for the RORAC (Hurdle), which reflects the market adequate yield expectations.
Growth is a very important indicator. Within the risk management certain limits are set for each segment. For this measurement growth rates for the profit after non-controlling interests and total revenues are considered. The diversification of the result is very crucial for the quality and the accordance with the strategic targets.
The cost/income ratio represents the cost efficiency of the segment. The cost/income ratio shows the proportion of the administrative expenses and the operating income, meaning the sum of net interest income, net fee and commission income, net trading income and the other net operating income.
In accordance with Basel II framework, specific determining factors have to be considered. The proportion of core tier 1 capital to risk-weighted assets (core tier 1 ratio) is an important indicator if the capital underlying for the business volume is adequate. The industry sector specifics are tending to different risk weights within the calculation of risk-weighted assets according to the Austrian Banking Act (based on Basel II). These factors are crucial for the calculation of the regulatory minimum own funds requirements. Moreover the efficient use of the available capital is calculated internally, whereby the actual usage is brought in proportion to the theoretical available risk coverage capital. The long-term liquidity ratios are additionally restrictive and they are defined in accordance with the regulatory guidelines. The performance is also measured with the risk/earning ratio.
The following key performance indicators are relevant for a reasonable and effective business structure, whereby the composition of the results and the indicators are significant. The structure of the prime funding basis for loans and advances to customers are measured using the loan/deposit ratio (proportion of loans and advances to customer to deposits from customers). The share of the result derived from the core business is relevant as well. The proportion of the net fee and commission income to the operating income is also a key performance indicator, which is included in the target setting for the business mix.
The presentation of segment performance is based on the income statement. Income and expenses are attributed to the country and/or business division in which they are generated. Operating income positions are the net interest income, net fee and commission income, net trading income and the other net operating income. The other results include the net income from financial investments, the net income from derivatives (hedging) and designated liabilities and the net income from disposal of group assets. The segment result is shown till the profit/loss after deduction of non-controlling interests. The segment assets are represented by the total assets and the risk-weighted assets. The item liabilities includes all positions of the liabilities side expect the equity. The reconciliation implies mainly the amounts resulting from the elimination of intragroup results and consolidation between the segments. Finally, financial ratios – usual in the line of business – are added to evaluate the results. The values shown in the segment reporting are also used for the compilation of the consolidated financial statements and are retrieved from the IFRS individual financial statements. In some units profit centre results are taken from the internal management income statement.
| Financial year 2011 € 000 |
Central Europe |
Southeastern Europe |
Russia | CIS Other | Group Corporates |
|---|---|---|---|---|---|
| Net interest income | 1,102,442 | 919,084 | 590,101 | 415,451 | 429,344 |
| Net fee and commission income | 490,576 | 364,937 | 237,692 | 175,546 | 177,798 |
| Net trading income | 76,670 | 41,448 | 38,155 | (511) | 21,062 |
| Other net operating income | (1,731) | 40,098 | (12,595) | (6,578) | 5,952 |
| Operating income | 1,667,957 | 1,365,567 | 853,353 | 583,909 | 634,156 |
| General administrative expenses | (938,370) | (746,465) | (487,695) | (335,975) | (140,992) |
| Operating result | 729,587 | 619,102 | 365,658 | 247,935 | 493,164 |
| Net provisioning for impairment losses | (646,147) | (257,872) | 42,062 | (127,685) | (115,520) |
| Other results | (50,487) | (9,967) | 25,989 | (14,626) | (3,966) |
| Profit/loss before tax | 32,953 | 351,263 | 433,708 | 105,624 | 373,678 |
| Income taxes | (65,676) | (46,552) | (112,129) | (51,611) | (75,950) |
| Profit/loss after tax | (32,723) | 304,710 | 321,579 | 54,013 | 297,727 |
| Profit attributable to non-controlling interests | 21,819 | (15,937) | 163 | (3,202) | 0 |
| Profit/Loss after deduction of non-controlling interests |
(10,904) | 288,773 | 321,742 | 50,811 | 297,727 |
| Share of profit before tax | 2.2% | 23.4% | 28.9% | 7.0% | 24.9% |
| Risk-weighted assets (credit risk) | 21,510,076 | 16,324,786 | 10,516,501 | 5,489,957 | 15,732,909 |
| Total own funds requirement | 1,965,168 | 1,524,020 | 1,032,772 | 532,183 | 1,333,051 |
| Assets | 34,851,819 | 22,827,461 | 14,217,958 | 6,760,777 | 22,842,660 |
| Liabilities | 31,798,430 | 19,829,743 | 12,135,402 | 5,723,562 | 15,377,841 |
| Net interest margin | 3.16% | 4.07% | 4.47% | 6.10% | 1.97% |
| NPL ratio | 9.8% | 11.3% | 5.8% | 29.7% | 3.0% |
| Coverage ratio | 60.7% | 58.6% | 100.2% | 68.2% | 66.7% |
| Cost/income ratio | 56.3% | 54.7% | 57.2% | 57.5% | 22.2% |
| Net provisioning ratio (average risk weighted assets, credit risk) |
2.76% | 1.56% | 0.29% | 2.38% | 0.31% |
| Average equity | 2,739,633 | 2,008,833 | 1,274,757 | 699,066 | 1,667,298 |
| Return on equity before tax | 1.2% | 17.5% | 34.0% | 15.1% | 22.4% |
| Business outlets | 552 | 1,161 | 191 | 1,011 | 8 |
| Financial year 2011 € 000 |
Group Markets |
Corporate Center |
Reconciliation | Total |
|---|---|---|---|---|
| Net interest income | 229,251 | 362,936 | (381,459) | 3,667,150 |
| Net fee and commission income | 114,603 | (64,740) | (6,485) | 1,489,927 |
| Net trading income | 176,015 | 37,648 | (27,226) | 363,261 |
| Other net operating income | 27,855 | 19,670 | (304,838) | (232,167) |
| Operating income | 547,723 | 355,514 | (720,008) | 5,288,171 |
| General administrative expenses | (263,594) | (317,693) | 110,345 | (3,120,440) |
| Operating result | 284,128 | 37,821 | (609,663) | 2,167,731 |
| Net provisioning for impairment losses | (13,544) | 55,157 | (2) | (1,063,551) |
| Other results | (4,337) | (157,640) | 484,209 | 269,175 |
| Profit/loss before tax | 266,293 | (64,663) | (125,501) | 1,373,355 |
| Income taxes | (71,629) | 24,353 | (49) | (399,243) |
| Profit/loss after tax | 194,664 | (40,309) | (125,548) | 974,113 |
| Profit attributable to non-controlling interests | (879) | (17) | (8,396) | (6,449) |
| Profit/Loss after deduction of non-controlling interests |
193,784 | (40,326) | (133,943) | 967,663 |
| Share of profit before tax | 17.8% | (4.3)% | – | 100.00% |
| Risk-weighted assets (credit risk) | 5,128,754 | 19,595,510 | (17,148,006) | 77,150,488 |
| Total own funds requirement | 841,134 | 1,682,990 | (1,287,189) | 7,624,128 |
| Assets | 25,731,849 | 53,835,243 | (34,082,764) | 146,985,003 |
| Liabilities | 29,357,601 | 43,818,972 | (21,992,334) | 136,049,217 |
| Net interest margin | 0.85% | 0.80% | – | 2.61% |
| NPL ratio | 6.5% | 0.0% | – | 8.6% |
| Coverage ratio | 107.8% | 0.0% | – | 68.4% |
| Cost/income ratio | 48.1% | 89.4% | – | 57.0% |
| Net provisioning ratio (average risk-weighted assets, credit risk) |
0.19% | (0.47)% | – | 1.38% |
| Average equity | 1,363,455 | 1,917,504 | (1,638,511) | 10,032,035 |
| Return on equity before tax | 19.5% | – | – | 13.7% |
| Business outlets | 4 | 1 | – | 2,928 |
| Financial year 2010 € 000 |
Central Europe |
Southeastern Europe |
Russia | CIS Other | Group Corporates |
|---|---|---|---|---|---|
| Net interest income | 1,111,026 | 897,698 | 507,164 | 423,575 | 370,949 |
| Net fee and commission income | 473,413 | 387,627 | 214,076 | 183,272 | 155,350 |
| Net trading income | 41,862 | 56,228 | 74,381 | 23,158 | 18,934 |
| Other net operating income | (57,777) | 37,245 | (28,390) | (7,875) | 2,009 |
| Operating income | 1,568,524 | 1,378,798 | 767,231 | 622,131 | 547,240 |
| General administrative expenses | (883,347) | (737,901) | (414,943) | (346,301) | (141,772) |
| Operating result | 685,178 | 640,898 | 352,287 | 275,830 | 405,468 |
| Net provisioning for impairment losses | (408,211) | (335,319) | (76,929) | (213,575) | (129,055) |
| Other results | (7,824) | (885) | (8,405) | 26,903 | 18,872 |
| Profit/loss before tax | 269,143 | 304,694 | 266,954 | 89,157 | 295,285 |
| Income taxes | (65,305) | (39,157) | (53,215) | (7,169) | (65,431) |
| Profit/loss after tax | 203,838 | 265,536 | 213,739 | 81,988 | 229,855 |
| Profit attributable to non-controlling interests | (54,393) | (17,212) | (234) | (8,443) | (7) |
| Profit/Loss after deduction of non-controlling interests |
149,445 | 248,324 | 213,505 | 73,545 | 229,848 |
| Share of profit before tax | 17.0% | 19.2% | 16.9% | 5.6% | 18.6% |
| Risk-weighted assets (credit risk) | 22,885,702 | 16,698,004 | 8,692,338 | 5,671,068 | 15,644,778 |
| Total own funds requirement | 2,099,495 | 1,562,652 | 890,931 | 558,895 | 1,301,410 |
| Assets | 33,928,326 | 22,696,524 | 12,177,759 | 7,130,917 | 23,477,902 |
| Liabilities | 31,087,480 | 19,850,740 | 10,276,908 | 6,114,129 | 16,148,276 |
| Net interest margin | 3.29% | 3.90% | 4.14% | 6.19% | 1.63% |
| NPL ratio | 9.1% | 9.0% | 8.8% | 26.9% | 4.3% |
| Coverage ratio | 53.3% | 68.2% | 94.3% | 69.6% | 65.2% |
| Cost/income ratio | 56.3% | 53.5% | 54.1% | 55.7% | 25.9% |
| Net provisioning ratio (average risk weighted assets, credit risk) |
1.86% | 2.07% | 0.96% | 4.00% | 0.86% |
| Average equity | 2,583,387 | 1,941,597 | 1,079,227 | 664,146 | 1,593,673 |
| Return on equity before tax | 10.4% | 15.7% | 24.7% | 13.4% | 18.5% |
| Business outlets | 555 | 1,167 | 198 | 1,028 | 8 |
| Financial year 2010 € 000 |
Group Markets |
Corporate Center |
Reconciliation | Total |
|---|---|---|---|---|
| Net interest income | 284,250 | 290,873 | (307,367) | 3,578,168 |
| Net fee and commission income | 106,806 | (17,376) | (12,376) | 1,490,792 |
| Net trading income | 93,165 | 20,231 | 162 | 328,121 |
| Other net operating income | 29,513 | 132,772 | (101,199) | 6,297 |
| Operating income | 513,734 | 426,499 | (420,778) | 5,403,379 |
| General administrative expenses | (240,704) | (306,826) | 92,049 | (2,979,745) |
| Operating result | 273,031 | 119,673 | (328,731) | 2,423,634 |
| Net provisioning for impairment losses | (30,995) | 0 | 0 | (1,194,084) |
| Other results | 7,106 | (10,601) | 32,606 | 57,772 |
| Profit/loss before tax | 249,141 | 109,073 | (296,125) | 1,287,322 |
| Income taxes | (62,039) | 183,051 | (896) | (110,161) |
| Profit/loss after tax | 187,103 | 292,123 | (297,021) | 1,177,161 |
| Profit attributable to non-controlling interests | (795) | (29) | (8,572) | (89,685) |
| Profit/Loss after deduction of non-controlling interests |
186,308 | 292,095 | (305,595) | 1,087,475 |
| Share of profit before tax | 15.7% | 6.9% | – | 100.0% |
| Risk-weighted assets (credit risk) | 5,273,302 | 16,128,878 | (15,392,757) | 75,601,313 |
| Total own funds requirement | 1,086,617 | 1,366,356 | (1,281,505) | 7,584,851 |
| Assets | 27,217,880 | 32,878,590 | (28,334,784) | 131,173,114 |
| Liabilities | 26,647,480 | 40,820,712 | (30,176,536) | 120,769,189 |
| Net interest margin | 0.70% | 0.79% | – | 2.51% |
| NPL ratio | 5.7% | 0.0% | – | 9.0% |
| Coverage ratio | 88.9% | 0.0% | – | 66.3% |
| Cost/income ratio | 46.9% | 71.9% | – | 55.1% |
| Net provisioning ratio (average risk-weighted assets, credit risk) |
0.43% | 0.00% | – | 1.66% |
| Average equity | 1,613,915 | 2,043,176 | (2,119,140) | 9,399,981 |
| Return on equity before tax | 15.4% | 5.3% | – | 13.7% |
| Business outlets | 4 | 1 | – | 2,961 |
Raiffeisen Bank International AG (RBI AG) is registered at the Vienna Commercial Court (Handelsgericht Wien) under Companies Register number FN 122.119m. The company is domiciled at Am Stadtpark 9, 1030 Vienna. The consolidated financial statements are lodged in the Companies Register in accordance with Austrian disclosure regulations and published in the official register of the Wiener Zeitung. Raiffeisen-Landesbanken-Holding GmbH indirectly holds the majority stake in Raiffeisen Bank International AG and therefore RBI is entered into the consolitdated financial statements of Raiffeisen-Landesbanken-Holding GmbH. Raiffeisen Zentralbank Österreich Aktiengesellschaft is the superordinated credit institution and RBI forms part of this credit institution group.
Raiffeisen Bank International (RBI) is a universal bank focusing on corporates and private customers in Central and Eastern Europe (CEE) and exclusively on corporates in Austria. In CEE, RBI consists of a closely-knit network of banks, leasing companies and numerous specialized financial service providers with 2,928 business outlets. In Austria, RBI concentrates on the top 1,000 corporate customers and it is one of Austria's most prominent corporate finance and export and trade finance banks. Cash and asset management, treasury operations and investment banking are further fields of activity. RBI's focus as a highly specialized financial engineer is on serving Austrian and foreign key accounts, multinationals and providers of financial services. RBI has branches, subsidiaries and representative offices in the world's major financial centers and in Asia, which have selective business with corporate customers and financial institutions.
The consolidated financial statements were signed by the Management Board on 12 March 2012 and subsequently submitted to the Supervisory Board for review and notice.
The consolidated financial statements for the financial year 2011 and the comparative figures for the financial year 2010 were prepared in accordance with the International Financial Reporting Standards (IFRS) published by the International Accounting Standards Board (IASB) as far as they were adopted by the EU on the basis of IAS Regulation (EC) 1606/2002. The interpretations of the International Financial Reporting Interpretations Committee (IFRIC/SIC) that were already applicable have been considered. All standards published by the IASB as International Accounting Standards to be applied to financial statements for 2011 and adopted by the EU, have been applied. The consolidated financial statements satisfy the requirements of Section 245a of the Austrian Commercial Code (UGB) and Section 59a of the Austrian Banking Act (BWG) regarding exempting consolidated financial statements that comply with internationally accepted accounting principles. IAS 20, IAS 31, IAS 41, IFRS 4 and IFRS 6 have not been applied as there were no relevant business transactions in the Group.
Since the beginning of 2011 the application of the revised IAS 24 became mandatory (Related party transactions; entered into force on January 1st, 2011). On the one hand it provides a partial exemption from disclosure requirements for businesses under the control, joint control or where there is significant influence by the public sector and on the other hand contains a clarification of the definition of a related party. RBI AG and its subsidiaries are not companies that are under the control, joint control or are significantly influenced by the public sector. Therefore, these changes have no material impact on the consolidated financial statements for 2011
The amendments to IAS 32 (Classification of rights issues; entered into force on 1st February 2010) relating to the classification of granted rights, options or warrants to acquire a fixed number of own shares at a fixed price in any currency. These rights should be recognized as equity if they are granted on a pro rata to all existing shareholders of the same class of share. The changes in IAS 24 have no material impact on the consolidated financial statements for 2011
Changes in IFRS 1 have been added (indicating relief concerning the statements for first time adoption of IFRS) which bring relief for the initial implementation of those additional disclosure requirements which were adopted in IFRS 7 in March 2009 for the first time. Since RBI is not a first time adopter of IFRS, IFRS 1 has had no effect on the consolidated financial statements for 2011.
IFRIC 14 (The limit on a defined benefit asset, minimum funding requirements and their interaction; entered into force on January 1st, 2011) specifies additional criteria which limits the recognition of plan assets determined under IAS 19. The company must have use of excess assets for reducing future payments, to be able to recognize these as an asset. These changes have no effect on the consolidated financial statements for 2011.
IFRIC 19 (Repayment of financial liabilities with equity instruments; entered into force July 1st, 2010) now clarifies that equity instruments issued to creditors to extinguish a financial liability are part of the consideration paid pursuant to IAS 39.41 and the equity instruments should be measured at fair value. If this cannot be reliably determined, the equity instruments should be shown at the fair value of the extinguished liability. These changes have no effect on the consolidated financial statements for 2011
Furthermore, in the framework of the "Improvements Project - 2010" the following standards and interpretations were amended.
No early adoption of other new and amended standards and interpretations that have been adopted, but whose use is not mandatory, was made. This applies to IFRS 9 (Financial instruments; entry into force January 1st, 2015), IFRS 10 (Consolidated financial statements; entry into force on January 1st, 2013), IFRS 11 (Joint arrangements; entry into force January 1st, 2013), IFRS 12 (Details of shareholdings in other companies; entry into force on January 1st, 2013), IAS 27 Separate financial statements;entry into force on January 1st, 2013), IAS 28 (Investments in associates and joint ventures; entry into force January 1st, 2013), IFRS 13 (Assessment of fair value; entry into force on January 1st, 2013), IFRS 1 (First-time adoption of International Financial Reporting Standards; entry into force on July 1st, 2011), IAS 1 (Presentation of financial statements; entry into force July 1st, 2011), IAS 12 (Income tax, entry into force on January 1st, 2012) and IFRS 7 (Financial instruments: transfer of financial asset values; entry into force July 1st, 2011).
The consolidated financial statements are based on the reporting packages of all fully consolidated Group members, which are prepared according to IFRS rules and uniform Group standards. With the exception of five subsidiaries – with a year end reporting date on 30 June and which are therefore accounted for with interim financial statements – all fully consolidated companies prepare their annual financial statements as of 31 December. The deviating reporting dates are due to dividend policy reasons and because of seasonal business transactions. Figures in these financial statements are stated in thousands of euros. The following tables may include rounding differences.
The consolidated financial statements are based on the principle of going concern. A financial asset is recognized when it is probable that the future economic benefits will flow to the enterprise and the acquisition or conversion costs or another value can be reliably measured. A financial liability is recognized when it is probable that an outflow of resources embodying economic benefits will result from the settlement of the obligation and the amount at which the settlement will take place can be measured reliably.
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 our current perspective. Basically, this applies to impairment losses on loans and advances, fair value and impairment of financial instruments, deferred taxes, provisions for retirement and similar benefits, the recoverability of goodwill and intangible fixed assets that are recognized in the course of business combinations. The actual figures may deviate from the estimated values.
Deferred taxes were not separately shown in the income statement and on the statement of financial position. Details are provided in the statement of comprehensive income and the notes (11) income taxes, (25) other assets and (29) provisions for liabilities and charges.
All material subsidiaries, in which RBI AG directly or indirectly, holds either more than 50 per cent of the voting rights or otherwise has control over the financial and operating policies are fully consolidated. In principle, these subsidiaries are firstly integrated in the consolidated group on the date when RBI obtains control of the company and are excluded when it no longer has control of the company. The Group reviews the adequacy of previously made decisions on which companies to consolidate at least every quarter. Accordingly, any organizational changes are immediately taken into account. These include, apart from changes in ownership, also changes due to existing or newly signed contractual obligations by a unit of the Group. . Subsidiaries with deviating reporting dates are accounted for with their interim financial statements. The results from subsidiaries that were acquired or disposed of during the year are recorded, in the consolidated income statement, either from the actual date of acquisition or up to the actual date of disposal.
Special purpose entities (SPE) which are controlled by the group from an economic point of view, are integrated according to SIC 12. To determine whether a special purpose entity is controlled from an economic perspective, a number of factors are to be taken into consideration. These include an investigation into whether the activities carried out by the SPE in favor of the Group are in accordance with its specific business needs so that it can take advantage of the activities of the SPE, whether the Group has the decision-making powers to achieve the majority of the benefits from the SPE, whether in fact the Group receives the majority of the benefits of the activities of the SPE, or whether the Group retains the majority of the assets associated with the residual or ownership risks in order to benefit from its activities.
In the case that further shares are acquired under existing control or shares are sold without loss of control, such transactions are recognized directly in equity during the course of continuing consolidation.
Intra-group business combinations (transactions under common control) are accounted for by carrying over book values.
Non-controlling interests are shown in the consolidated statement of financial position as part of equity, but separately from Raiffeisen Bank International shareholders' equity. The profit attributable to non-controlling interests is shown separately in the consolidated income statement.
Material interests in associated companies – where the Group exerts a significant influence on financial and operating polices of these companies – are valued at equity and reported under the item "investments in associates." Profit or losses occurring in companies valued at equity are shown net in "current income from associates." The same rules apply to companies valued at equity (offsetting acquisition costs against proportional fair net asset value) as apply to fully consolidated companies. On principle, IFRS financial statements of associated companies are used. Changes in equity of companies valued at equity are shown in the consolidated accounts in other comprehensive income.
Shareholdings in subsidiaries not included in the consolidated financial statements because of their minor significance and shareholdings in companies that have not been valued at equity are shown under the item "financial investments" and are measured at acquisition cost.
In the scope of debt consolidation, intra-group balances between parent company and subsidiaries and intra-group balances between subsidiaries are eliminated in the consolidated accounts. Remaining temporary differences are recognized under "other assets/other liabilities."
Intra-group income and expenses are eliminated and temporary differences resulting from bank business transactions are shown partly in net interest income and partly in net trading income. Other differences were shown in the item "other net operating income."
Intra-group results are eliminated insofar as they had a material effect on the items of the income statement. Bank business transactions between Group members are usually executed in arm's length transaction.
In the course of capital consolidation, all identifiable assets, liabilities and contingent liabilities of the subsidiary are measured at their fair values on the acquisition date according to IFRS 3. The acquisition costs are offset with the proportional net assets. The resulting positive differences are capitalized as goodwill. The goodwill is tested annually for impairment. Negative differences arising within initial consolidation will be recognized immediately in profit.
On each reporting date, goodwill is examined with a view to their future economic utility on the basis of cash generating units. A cash generating unit is defined by the management and represents the smallest identifiable group of assets of a company that generates cash inflows from operations. Within RBI, all segments according to segment reporting are determined as cash generating units and within the segments, the legal entities form the cash generating unit for impairment testing of goodwill. The carrying value of the cash generating unit (including any allocated goodwill) is compared with its recoverable value. The recoverable value represents the higher of an item's value in use and the fair value less cost to sell. It is based on the expected profits of the units. They are discounted at an interest rate reflecting the risk involved. The estimation of future earnings requires judgment of the past and actual performance and the expected development in the respective markets and overall macro-economic environment.
The estimation of the future development of the cash generating units starts with macroeconomic facts (gross domestic product, inflation expectations) and considers specific market conditions and the business policy. The data is then used to capture the terminal value on a going concern concept. Discounting of the earnings relevant for the measurement (expected dividends) is made on different country-specific equity capital cost rates, which are based on the capital asset pricing model. The individual components (risk-free interest rate, inflation difference, market risk premium, country-specific risks and beta factors) are defined by using external information sources. It was used to calculate the recoverable amount of a planning horizon of 10 years assumed to represent the medium-term developments in the CEE region better. The planning period is divided into two phases, whereby phase I covers the first ten years, phase II covers the period over ten years.
During 2011 impairment charges of € 187 million were made against goodwill on RBI Group level. The largest impairment charge (€ 183 million) arose in the Ukrainian Raiffeisen Bank Aval JSC due to the changed macro-economic outlook (GDP, growth rate, CPI, banking assets development). The recovery of the Ukrainian economy was slower than was forecasted in 2010. As a result the targeted market share and ROE were lower than last year's assumptions. The discount rate used for the impairment test for goodwill of Raiffeisen Bank Aval JC was between 21.7per cent and 13.7 per cent, depending on parameter. There were minor goodwill impairment charges amounting to € 3.4 million for the Hungarian Raiffeisen Bank Zrt. and € 0.6 million for the Slovenian Raiffeisen Bank Sh.a...
The material goodwill resulted from the following cash generating units: Raiffeisen Bank Aval JSC, Kiev (AVAL), Ukrainian Processing Center PJSC, Kiev (UPC), ZAO Raiffeisenbank, Moscow (RBRU), Raiffeisen Bank Sh.a., Tirane (RBAL) and Raiffeisenbank a.s, Prague (RBCZ).
| Cash generating units | AVAL | RBRU | RBCZ | RBAL | UPC |
|---|---|---|---|---|---|
| In € million | |||||
| Goodwill | 29 | 257 | 40 | 53 | 15 |
| Group equity | 96.2% | 100.0% | 51.0% | 100.0% | 100.0% |
| Method used to calculate the | FV less cost to | FV less cost to | FV less cost to | FV less cost to | FV less cost to |
| fair value | sell | sell | sell | sell | sell |
| Discount rates (after tax) | 13.7% – 21.7% | 13.8% – 15.1% | 9.3% – 9.9% | 11.2% – 14.8% | 13.7% – 21.7% |
| Growth rates in phase II | 6.5% | 7.0% | 3.0% | 4.0% | 0.0% |
| Planning period | 10 years | 10 years | 10 years | 10 years | 10 years |
| Impairment | Yes | No | No | No | No |
A sensitivity analysis was used to test the robustness of the impairment test for goodwill which was based on the above given assumptions. From a number of options for this analysis, two parameters were selected, namely, the cost of equity and the reduction in earnings. The table below shows to what extent an increase in the cost of equity or a reduction in earnings could be made without the fair value of the cash-generating units sinking below the carrying value (equity plus goodwill):
| Maximum sensitivity1 | AVAL | RBRU | RBCZ | RBAL | UPC |
|---|---|---|---|---|---|
| Increase in discount rate | – | 7.3 PP | 9.6 PP | 15.4 PP | 13.4 PP |
| Reduction in earnings | – | (48.0)% | (58.0)% | (76.0)% | (53.0)% |
1 Only change in terminal value assumptions.
Group companies use brands to differentiate their services from the competition. According to IFRS 3, brands of acquired companies have been recognized separately under the item "intangible fixed assets." Brands have an indeterminable useful life and are therefore not subject to scheduled amortization. Brands have to be tested annually for impairment and additionally whenever indications of impairment arise.
The value of brands was determined using the comparable historical cost approach, because neither immediately comparable transactions nor a market with observable prices were available at the time of purchase price allocation. Documentation of brand-related marketing expenses in the previous years was taken as the data base for the historical cost approach.
If customer contracts and associated customer relationships are acquired in a business combination, they must be recognized separately from goodwill, if they are based on contractual or other rights. The acquired companies meet the criteria for a separate recognition of non-contractual customer relationships for existing customers. The customer base is valued using the multiperiod excess earnings method based on projected future income and expenses allocable to the respective customer base. The projections are based on planning figures for the corresponding years.
The number of fully consolidated companies and companies valued at equity changed as follows:
| Number of units | Fully consolidated | Equity method | ||
|---|---|---|---|---|
| 31/12/2011 | 31/12/2010 | 31/12/2011 | 31/12/2010 | |
| As of beginning of period | 132 | 135 | 1 | 1 |
| Included in the course of merger | 0 | 38 | 0 | 0 |
| Included for the first time in the financial period | 8 | 6 | 0 | 0 |
| Excluded in the financial period | (5) | (47) | 0 | 0 |
| As of end of period | 135 | 132 | 1 | 1 |
Of the 135 entities in the Group, 29 are domiciled in Austria (2010: 27) and 106 abroad (2010: 105). They comprise 21 banks, 60 financial institutions, 19 companies rendering bank-related ancillary services, 10 financial holding companies and 25 other companies. Because of their minor importance in giving a view of the Group's assets, financial and earnings position 231 subsidiaries were not included in the consolidated financial statements (2010: 173). They are recognized at cost under financial investments. The total assets of the companies not included came to less than 1 per cent of the Group's aggregated total assets.
A list of fully consolidated companies, companies valued at equity and other equity participations may be found on page 258 ff.
In the financial year 2011, the following companies were included into the consolidated financial statements for the first time:
| Name | Share | Included as of | Reason |
|---|---|---|---|
| Financial institutions | |||
| Raiffeisen Investment Financial Advisory Services Ltd. Co., Istanbul (TR) | 78.11% | 1/6 | Start of operations |
| Financial holding companies | |||
| Raiffeisen CIS Region Holding GmbH, Vienna (AT) | 100.0 % | 1/12 | Start of operations |
| Raiffeisen RS Beteiligungs GmbH, Vienna (AT) | 100.0 % | 1/11 | Materiality |
| RIRE Holding GmbH, Vienna (AT) | 100.0 % | 1/3 | Materiality |
| Companies rendering banking-related ancillary services | |||
| OOO "R3", Novosibirsk (RUS) | 100.0 % | 1/3 | Materiality |
| S.C. PLUSFINANCE ESTATE 1 S.R.L., Bucharest (RO) | 100.0 % | 1/9 | Materiality |
| Other companies | |||
| Julius Baer Multiflex SICAV-SIF Verto Recovery Fund, Vienna (AT) | 100.0 % | 1/12 | Start of operations |
| Viktor Property, s.r.o., Praha (CZ) | 65.15 % | 1/4 | Materiality |
In the financial year 2011, the following companies were excluded from the consolidated group:
| Name | Share | Excluded as of | Reason |
|---|---|---|---|
| Financial institutions | |||
| ICS Raiffeisen Leasing s.r.l, Chisinau (MD) | 75.22 % | 28/2 | Immaterial |
| MOVEO Raiffeisen-Leasing GmbH, Vienna (AT) | 51.00 % | 28/2 | Immaterial |
| OOO "Vneshleasing", Moscow (RUS) | 100,0 % | 28/2 | Immaterial |
| Financial holdings | |||
| R.L.H. Holding GmbH, Vienna (AT) | 100,0 % | 28/2 | Immaterial |
| Other companies | |||
| REH Limited, Limassol (CY) | 100,0 % | 31/3 | End of operations |
In the reporting period, there was no effect on cash flow resulting from disposal of group assets, as the disposal was mainly due to reasons of immateriality.
Financial statements of fully consolidated companies prepared in foreign currencies were translated into euros employing the modified current rate method in accordance with IAS 21. Equity was translated at its historical exchange rates while all other assets, liabilities and the notes were translated at the prevailing foreign exchange rates as of the reporting date. Differences arising from the translation of equity (historical exchange rates) were offset against retained earnings.
The items of the income statement were translated at the average exchange rates during the year calculated on the basis of month-end rates. Differences arising between the exchange rate as of the reporting date and the average exchange rate applied in the income statement were offset against equity.
The following exchange rates were used for currency translation:
| Rates in units per € | 2011 | 2010 | |||
|---|---|---|---|---|---|
| As of | Average | As of | Average | ||
| 31/12 | 1/1-31/12 | 31/12 | 1/1-31/12 | ||
| Albanian lek (ALL) | 138.930 | 140.498 | 138.770 | 138.041 | |
| Belarusian rouble (BYR) | 10.800.000 | 7.056.431 | 3.972.600 | 3.953.672 | |
| Bosnian marka (BAM) | 1.956 | 1.956 | 1.956 | 1.956 | |
| Bulgarian lev (BGN) | 1.956 | 1.956 | 1.956 | 1.379 | |
| Croatian kuna (HRK) | 7.537 | 7.444 | 7.383 | 0.858 | |
| Czech koruna (CZK) | 25.787 | 24.635 | 25.061 | 10.550 | |
| Great Britain Pound (GBP) | 0.835 | 0.870 | 0.861 | 1.956 | |
| Hungarian forint (HUF) | 314.580 | 280.460 | 277.950 | 276.039 | |
| Kazakh tenge (KZT) | 191.720 | 204.444 | 195.230 | 25.356 | |
| Lithuanian Litas (LTL) | 3.453 | 3.453 | 3.453 | 276.039 | |
| Moldovan leu (MDL) | 15.074 | 16.421 | 16.105 | 16.436 | |
| Polish zloty (PLN) | 4.458 | 4.125 | 3.975 | 196.093 | |
| Romanian leu (RON) | 4.323 | 4.242 | 4.262 | 16.436 | |
| Russian rouble (RUB) | 41.765 | 41.022 | 40.820 | 4.013 | |
| Serbian dinar (RSD) | 104.641 | 102.306 | 105.498 | 40.447 | |
| Singapore Dollar (SGD) | 1.682 | 1.751 | 1.714 | 1.812 | |
| Swedish Krona (SEK) | 8.912 | 9.004 | 8.966 | 4.218 | |
| Swiss Franc (CHF) | 1.216 | 1.233 | 1.250 | 102.903 | |
| Turkish lira (TRY) | 2.443 | 2.333 | 2.069 | 2.333 | |
| Ukrainian hryvnia (UAH) | 10.298 | 11.092 | 10.573 | 10.550 | |
| US-Dollar (USD) | 1.294 | 1.395 | 1.336 | 1.330 |
Since 1 January 2011, Belarus has been classified in accordance with IAS 29 (Financial reporting in hyperinflationary economies) as a highly inflationary economy. Thus, the local activities of RBI are no longer recognized on the basis of historical acquisition and production costs, but have been adjusted for the effects of inflation. For this purpose the local inflation index has been used.
The application of the relevant provisions in IAS 29 in connection with IFRIC 7 (Applying the restatement approach under IAS 29 Financial reporting in hyperinflationary economies) impacts the financial statements of RBI on 31 December 2011, as well as the financial statements of subsequent periods. Previously published consolidated financial statements of previous periods are not restated.
The application of IAS 29 (financial reporting in hyperinflationary countries) has the following effects on RBI:
On 31 December 2011 all non-monetary assets were subjected to a one-off inflation adjustment starting from the date of purchase, or starting from the end of the last application of IAS 29 in 2006. This led to a revaluation of non-monetary balance sheet items, and, as a result thereof, to higher depreciation charges. In subsequent periods, these non-monetary items will be continued to be adjusted by the inflation factor for the reporting period.
All items in the profit and loss account as of 1 January 2011 will be adjusted for inflation with retroactive effect and converted into EUR using the exchange rate. Gains and losses resulting from the inflation adjustment of monetary assets and liabilities are shown separately.
The application of IAS 29 is made in Belarusian roubles, that is, before foreign currency translation.
According to IAS 39, all financial assets, financial liabilities and derivative financial instruments are to be recognized on the statement of financial position. A financial instrument is defined as any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity. Measurement of financial instruments is effected according to the measurement categories to which they belong. They are defined as follows:
Trading assets/liabilities are acquired or incurred principally for the purpose of generating profit from short-term fluctuations in market prices. Securities (including short selling of securities) and derivative financial instruments held-for-trading are recognized at their fair values. If securities are listed, the fair value is based on stock exchange prices. Where such prices are not available, internal prices based on present value calculations for originated financial instruments and futures or option pricing models for options are applied. Present value calculations are based on an interest curve which consists of money market rates, future rates and swap rates and does not include risk premium. As option price formulas Black-Scholes 1972, Black 1976 or Garman-Kohlhagen are applied depending on the kind of option.
Derivative financial instruments held-for-trading are also shown under the item "trading assets" or "trading liabilities." Positive fair values including accrued interest (dirty price) are shown under trading assets. Negative fair values are recorded under trading liabilities. Positive and negative fair values are not netted. Changes in dirty prices are recognized in net trading income. Derivatives that are used neither for trading purposes nor for hedging purposes are recorded under the item "derivatives." Furthermore, any liabilities from the short selling of securities are shown in trading liabilities.
In 2011, the valuation methodology for capital-guaranteed products was adapted to the changed legal framework. The capitalguaranteed products (guarantee funds and pension plans) are shown as sold put options on the respective funds to be guaranteed. The valuation is based on a Monte-Carlo simulation. The RBI has provided capital guarantee obligations as part of the government-funded state-sponsored pension plans according to Section 108h (1) Z 3 EStG. The bank guarantees the retirement annuity, available for the payment amount, is not less than the sum of the amounts paid by the taxpayer plus credited for such taxable premiums within the meaning of the -Section 108g EStG.
This category comprises mainly all those financial assets that are irrevocably designated as financial instrument at fair value (socalled fair value option) upon initial recognition in the statement of financial position independent of the intention to trade. An entity may use this designation only when doing so results in more relevant information for the user of the financial statements. This is the case for those financial assets, which belong to a portfolio, which is managed and its performance evaluated on a fair value basis.
These instruments are bonds, notes and other fixed-interest securities or shares and other variable-yield securities. These financial instruments are valued at fair value under IAS 39. In the statement of financial position, they are shown under the item "financial investments," current income is shown under net interest income, valuation results and proceeds from disposals are shown in net income from financial investments.
On the other hand, financial liabilities are designated as financial instruments at fair value to avoid valuation discrepancies with related derivatives. The fair value of financial obligations under the fair value option contains all market risk factors, including those related to the credit risk of the Group of the issuers.
In the fourth quarter of 2011 the worsening financial crisis led to inactivity in the markets to the extent that for the valuation of the credit risk the observable market prices were no longer available. Therefore, the valuation method was changed. A weighted credit spread was determined to assess own creditworthiness composed of the credit spreads from private placement volumes of the last 12 months and market indications for own benchmark issues. The weighting was made in proportion to the volumes placed. The calculation of the credit spread of subordinated emissions is based on the average observable subordinated spreads for the last 12 months in the iTraxx Senior Financials. The financial liabilities are mostly structured bonds. The fair value of these financial liabilities is calculated by discounting the contractual cash flows with a credit-risk-adjusted yield curve, which reflects the level at which the Group could issue similar financial instruments at the balance sheet date. The market risk parameters are evaluated according to similar financial instruments that are held as financial asssets. Valuation results for liabilities that are designated as a financial instrument at fair value are recognized in income from derivative financial instruments.
Non-derivative financial assets (securities with fixed or determinable payments and fixed maturities) purchased with the intention and ability to hold them to maturity are reported in the item "financial investments." They are recognized at amortized cost and differences are amortized over the term to maturity and recognized in the income statement under net interest income. If impairment occurs it is taken account of when determining the amortized cost and impairment is shown in net income from financial investments. Coupon payments are also recognized under net interest income. A sale of these financial instruments is only allowed in cases explicitly stated in IAS 39.
Non-derivative financial assets with fixed or determinable payment for which there is no active market are allocated to this category. They are measured at amortized cost. If impairment occurs it is taken account of when determining the amortized cost. If there is a difference between the amount paid and face value – and this has interest character – the effective interest method is used and the amount is accrued as profit or loss. Profits from the sale of impaired loans are recognized in the income statement in the item "net provisioning for impairment losses." Moreover, debt instruments are also stated here if there is no active market for them. Derecognition of financial assets within the framework of securitizations is – after checking if the securitized special purpose entity has to be integrated into the consolidated accounts – done on a risk and rewards or control test according to IAS 39 after identifying loss of control over the contractual rights arising from the financial asset.
The category of financial assets available-for-sale contains equity participations and those financial instruments that did not qualify for any of the other three categories. They are stated at fair value, if a fair value is reliably measurable. Valuation differences are shown in other comprehensive income and only recognized in the income statement under net income from financial investments if there is an objective indication of impairment. For equity instruments impairment exists, among other things, if the fair value is either significantly or for a prolonged period of time below cost.
In the Group, equity instruments classified as available-for-sale are written-off when the fair value over the last six months before the reporting date was consistently more than 20 per cent below carrying value, or in the last twelve months, on average, more than 10 per cent below carrying value. In addition to these quantitative indications (trigger events), qualitative indications from IAS 39.59 are considered. It is not permitted to include the appreciation in value in the income statement for equity instruments classified as available for sale, but rather this should be recognized in other comprehensive income under the item fair value reserve (available-for-sale financial assets). This means that only impairments or disposals are to be shown in the income statement.
Unquoted equity instruments, for which reliable fair values cannot be assessed regularly, are valued at cost less impairment losses and it is not possible to show an appreciation in value.
This kind of financial instruments is reported under the item "financial investments."
Liabilities are predominantly recognized at amortized cost. Discounted debt securities and similar obligations are measured at their present value. Financial liabilities measured at fair value are shown in the category "liabilities at fair value through profit and loss."
In accordance with IAS 39.50, non-derivative financial instruments classified as trading assets and available-for-sale financial instruments can be reclassified as financial assets held-to-maturity and loans and advances in exceptional circumstancesThe effects resulting from such reclassifications are shown in the notes under (20) financial investments.
The fair value is the amount for which an asset could be exchanged and liability settled between knowledgeable, willing parties in an arm's length transaction.
If market prices are available, the fair value is reflected best by the market price. This category contains equity instruments traded on the stock exchange, debt instruments traded on the interbank market, and derivatives traded on the stock exchange.
When current bid and asking prices for financial instruments are unavailable, the prices of similar financial instruments provide evidence of the current fair value or are determined by accepted measurement methods enclosing observable prices or parameters (in particular present value calculation or option price model). These methods concern the majority of the OTC-derivates and non-quoted debt instruments.
If no observable stock exchange prices or prices are available, the fair value will be measured by adequate measurement models. The utilization of these models requires assumptions and estimates of the management. The scope of assumptions and estimates depend on the price transparency of the financial instrument, the market and the complexity of the instrument.
As the nature of the financial instruments is already shown by the classification of the items of the statement of financial position, the formation of categories is built in line with these items, which include financial instruments. Categories of financial instruments on the asset side are primarily cash reserve, loans and advances to banks, loans and advances to customers, trading assets, derivative financial instruments, derivatives for hedge accounting, and financial investments (among this category are separately financial assets not traded on an active market and which are shown at cost). Categories of financial instruments on the liability side are most notably liabilities from trading activities, derivative financial instruments, derivatives for hedge accounting, deposits from banks, deposits from customers, debt securities issued and subordinated capital.
| Classes | Fair | Measurement Amortized |
Others | Category according to IAS 39 |
|---|---|---|---|---|
| Asset classes | Value | Cost | ||
| Cash reserve | Nominal value |
n/a | ||
| Trading assets | X | Held-for-trading | ||
| Derivatives | X | Held-for-trading | ||
| Loans and advances to banks | X | Loans and advances | ||
| Loans and advances to customers | X | Loans and advances | ||
| of which finance lease business | X | n/a | ||
| Financial investments | X | At fair value through profit and loss | ||
| Financial investments | X | Available-for-sale | ||
| Financial investments | X | Held-to-maturity | ||
| of which not traded on an active market | At Cost | Available-for-sale | ||
| Positive fair values of derivatives for hedge accounting (IAS 39) |
X | n/a | ||
| Liability classes | ||||
| Trading liabilities | X | Held-for-trading | ||
| Derivatives | X | Held-for-trading | ||
| Deposits from banks | X | Financial liabilities | ||
| Deposits from customers | X | Financial liabilities | ||
| Subordinated capital | X | Financial liabilities | ||
| Debt securities issued | X | Financial liabilities | ||
| Debt securities issued | X | At fair value through profit and loss | ||
| Negative fair values of derivatives for hedge accounting (IAS 39) |
X | n/a |
The Group uses derivates including swaps, standardized forward contracts, futures, credit derivatives, options and similar contracts. Within the operating activity, the Group carries out different transactions with derivative financial instruments for trading and hedging purposes. The Group applies derivatives in order to meet the requirements of the clients concerning their risk management, to manage and secure risks and to generate profit in proprietary trading. Derivatives are initially recognized at the time of the transaction at fair value and subsequently revalued to fair value. The resulting valuation gain or loss is recognized immediately in net income from derivatives, unless the derivative is designated as a hedging instrument for hedge accounting purposes and the hedge is effective. Here the timing of the recognition will depend on the type of hedging relationship.
Derivatives, which are used for hedging against market risk (excluding trading assets/liabilities) for a non-homogeneous portfolio, do not meet the conditions for IAS 39 hedge accounting. These are recognized as follows: the dirty price is booked under "derivatives" in the statement of financial position (positive fair values on the asset side and negative fair values on the liability side). The change in value of these derivatives, on the basis of the clean price, is shown in net income from derivatives and interest is shown in net interest income.
Credit derivatives, the value of which is dependent on future specified credit (non-) events are shown under "derivatives" (positive fair values on the asset side and negative fair values on the liability side). Changes in valuation are recognized under net income from derivatives.
If derivates are held for the purpose of risk management and if the respective transactions meet specific criteria, the Group uses hedge accounting. The Group designates certain hedging instruments as fair value hedges, cash flow hedges or capital hedges. Most of these are derivatives. At the beginning of the hedging relationship, the relationship between underlying and hedging instrument, including the risk management objectives, is documented. Furthermore, it is necessary to regularly document from the beginning and during the hedging relationship that the fair value or cash flow hedge is effective to a large degree.
Hedge Accounting according to IAS 39 applies for those derivatives that are used to hedge the fair values of financial assets and liabilities. The credit business is especially subject to such fair value risks if it deals with fixed-interest loans. Interest-rate swaps that satisfy the prerequisites for hedge accounting are contracted to hedge against the interest-rate risks arising from individual loans or refinancing. Thus, hedges are formally documented, continuously assessed, and rated to be highly effective. In other words, throughout the term of a hedge, it can be assumed that changes in the fair value of a hedged item will be nearly completely offset by a change in the fair value of the hedging instrument and that the actual outcome will lie within a band of 80 to 125 per cent.
Derivative instruments held to hedge the fair values of individual items in the statement of financial position (except trading assets/liabilities) are recognized at their fair values (dirty prices) under "derivatives" (on the assets side: positive dirty prices; on liabilities side: negative dirty prices). Changes in the carrying amounts of hedged items (assets or liabilities) are allocated directly to the corresponding items of the statement of financial position and reported separately in the notes.
Both the effect of changes in the carrying values of positions requiring hedging and the effects of changes in the clean prices of the derivative instruments are recorded under net income from derivatives (net income from hedge accounting).
For the first time in 2011, in RBI the hedging of interest rate risk has been made on the portfolio level. Individual transactions or groups of transactions with similar risk structures, divided into maturities according to the expected repayment and interest rate adjustment date in a portfolio were hedged. Portfolios can be assets only, liabilities only or both. For hedge accounting, the change in the value of the hedged asset or liability is shown as a separate item in other assets/liabilities. The hedged amount of the hedged items is determined in the consolidated financial statements excluding sight or savings deposits (the rules of the EU carve-out are thereby not applied).
Cash flow hedge accounting according to IAS 39 applies for those derivatives that are used to hedge against the risk of fluctuating future cash flows. Variable-interest liabilities are especially subject to such cash flow risks. Interest rate swaps used to hedge against the risk of fluctuating cash flows arising from specific variable interest-rate items, are recognized as follows: The hedging instrument is recognized at fair value, changes in its clean price are recorded as separate item in other comprehensive income. The ineffective portion is recognized in profit or loss on the other hand, in the position derivative financial instruments and designated liabilities.
In the Group, hedges of investments in economically independent sub-units (IAS 39.102) are made in order to reduce differences arising from the translation of equity. Liabilities in foreign currency, currency options, currency futures and currency swaps are mainly used as hedging instruments. Where the hedge is effective the resulting gains or losses from foreign currency translation are recognized and shown separately in other comprehensive income. Any ineffective part of this hedge relation is recognized in net trading income. The related interest components are shown in net interest income. There are no deferred taxes calculated for the income from capital hedge due to the applied exception regulations according to IAS 12.39.
In the case of identity of borrower and lender, offsetting of loans and liabilities with matching maturities and currencies occurs only if a legal right, by contract or otherwise, exists and offsetting is in line with the actually expected course of the business.
The cash reserve includes cash in hand and balances at central banks that are due on call. They are shown with their nominal value.
At each reporting date an assessment is made as to whether there is any objective evidence that a financial asset or group of financial assets is impaired. A financial asset or a group of financial assets is impaired and impairment losses are incurred, when:
Credit risk is accounted for by making individual impairment provisions and portfolio-based impairment provisions. The latter comprise impairment provisions for portfolios of loans with identical risk profiles that are compiled under certain conditions. In the retail segment, provisions are built according to product portfolio and past due days. Individual and portfoliobased impairment provisions are not netted against corresponding receivables but are stated separately in the statement of financial position.
For credit risks related to loans and advances to customers and banks, provisions are made in the amount of expected loss according to homogeneous Group-wide standards. Risk of loss is deemed to exist if the discounted projected repayment amounts and interest payments are below the carrying value of the loans, taking collateral into account. Portfolio-based impairments are calculated according to valuation models that estimate expected future cash flows for the loans in the respective loan portfolio based on loss experience history. This is carried out regularly by considering economic conditions. For nonretail portfolios without a documented loss history of their own, peer group benchmark figures serve as a comparative base.
The entirety of the provision for impairment losses arising from loans reported in the statement of financial position (individual loan loss provisions and portfolio-based loan loss provisions) is shown as a separate item on the assets side, below loans and advances to banks and customers. The provision for impairment losses arising from transactions outside the statement of financial position is recorded under provisions for liabilities and charges.
A financial asset is derecognized when the contractual rights to the cash flows arising from a financial asset expire or when the Group has transferred the rights or if the Group has the obligation in case that certain criterion occurs to transfer the cash flows to one or more receivers. A transferred asset is also derecognized if all material risks and rewards of ownership of the assets are transferred.
The Group securitizes several financial assets from transactions with private customers and business customers by selling them to a special purpose entity that issues securities to investors. The assets transferred are derecognized fully or partly. Rights to securitized financial assets can be retained in the form of junior or subordinated tranches, interest claims or other remaining claims (retained rights).
The Group derecognizes a financial liability if the obligations of the Group have been paid, expired or revoked.
In a genuine sale and repurchase transaction, the Group sells assets to a third party and agrees at the same time to repurchase these assets at an agreed price and time. The assets remain on the statement of financial position of the Group and are measured like the item in the statement of financial position where they are shown. Cash inflows arising from a sale and repurchase transaction are recognized in the statement of financial position as deposits from banks or deposits from customers depending on the counterparty.
Under reverse repurchase agreements, assets are acquired with the obligation to sell them in the future. Cash outflows arising from reverse repurchase agreements are recorded in the statement of financial position under "loans and advances to banks" or "loans and advances to customers."
Interest expense from sale and repurchase agreements and interest income from reverse sale and repurchase agreements are accrued in a straight line over their term to maturity and are shown under net interest income.
Securities lending transactions are shown in the same way as genuine sale and repurchase agreements. This means loaned securities continue to remain in the securities portfolio and are valued according to IAS 39. Borrowed securities are not recognized and not valued. Cash collateral provided for securities-lending transactions are shown as a claim and collateral received are shown as a liability.
Leases are classified according to their contractual structure as follows:
When nearly all the risks and rewards of a leased asset are transferred to the lessee, the Group as lessor recognizes a loan to banks or customers. The loan amount is the amount of the net investment. The proceeds from the finance lease are distributed at a constant periodic rate of the outstanding net investment in the leases. Under a finance lease the lessee holds assets that are shown under the relevant tangible fixed asset item, which corresponds to a lease liability.
An operating lease occurs when the risks and rewards of ownership remain with the lessor. The leased assets are allocated to the Group under tangible fixed assets and depreciated in accordance with the principles applicable to the type of fixed assets. Rental income from the corresponding lease object is amortized on a straight-line basis over the term of the leasing contract and reported in other net operating income. Expenses for operating leases are generally amortized on a straight-line basis over the term of leasing contract and reported as administrative expenses.
Shareholdings in subsidiaries not included in the consolidated financial statements because of their minor significance and shareholdings in companies that are not valued at equity are shown under financial investments and are measured at amortized cost if no shares prices are available.
Other shareholdings are categorized as "financial assets available-for-sale" upon initial recognition. Changes in value are therefore recognized in other comprehensive income. Impairment is shown in net income from financial investments.
Under this item, internally developed and acquired software, brand rights, acquired customer bases and especially goodwill are stated. Intangible fixed assets acquired in a business combination are reported separately from goodwill and measured at fair value. Goodwill and other intangible fixed assets (e.g. brand rights) without definite useful lives are tested for impairment at each reporting date and also during the year whenever trigger events occur. Whenever events or changes in circumstances indicate that the expected benefit no longer exists, impairment must be made pursuant to IAS 36.
Acquired intangible fixed assets (software, customer base) with determinable useful lives are capitalized at acquisition cost and amortized over their estimated useful lives.
Internally developed intangible fixed assets comprise exclusively of software. Software is capitalized if it is probable that the future economic benefits attributable to the asset will accrue to the enterprise and the cost of the asset can be measured reliably. Expenses for research are recognized as an expense when they are incurred. The useful life of software is between four and six years and may be longer for major software projects. The useful life of the acquired customer base was set at seven years for corporate customers and for the acquired customer base in the retail segment of Raiffeisen Bank Aval JSC at 20 years and for OAO Impexbank (meanwhile merged with ZAO Raiffeisenbank) and eBanka a.s. (meanwhile merged with Raiffeisenbank a.s.) at five years.
Tangible fixed assets are measured at cost of acquisition or conversion less scheduled depreciation. The straight-line method is used for depreciation and is based on the following useful life figures:
| Useful life | Years |
|---|---|
| Buildings | 25 – 50 |
| Office furniture and equipment | 5 – 10 |
| Hardware | 3 – 5 |
Land is not subject to scheduled depreciation.
Expected useful lives, residual values and depreciation methods are reviewed annually and any necessary future change of estimates are taken into account. If a permanent impairment is to be expected, extraordinary write-downs are carried out. In the event that the reason for the write-down no longer applies, a write-up will take place up to the amount of the amortized cost of the asset.
The resulting gain or loss from the sale of any asset is determined as the difference between the proceeds and the carrying value of the asset and is recognized in other net operating income. When assets are retired, the remaining carrying amount is also recognized there.
This means property that is held to earn rental income and/or for capital appreciation. Investment property is reported at amortized cost using the cost model permitted by IAS 40 and is shown under tangible fixed assets because of minor importance. Income resulting from investment property is shown in other net operating income.
Inventories are measured at the lower of cost or net realizable value. Write-downs are made if the acquisition cost is above the net realizable value as of the reporting date or if limited usage or longer storage periods have impaired the value of the inventory.
Non-current assets and discontinued operations are classified as held for sale when the related carrying amount will be recovered principally through a sale transaction rather than through continuing use. This condition is only considered met if the sale is highly probable and the asset (or discontinued operation) is immediately available for sale and furthermore that the management has committed itself to a sale. Moreover, the sale transaction must be completed within 12 months.
Non-current assets and discontinued operations classified as held for sale are valued at the lower amount of their original carrying value or fair value less costs to sell and are reported under other assets.
Provisions are recognized when the Group has a present obligation from a past event, where it is likely that it will be obliged to settle, and a reliable estimate of the amount is possible. The level of provisions is the best possible estimate of expected outflow of economic benefits at the reporting date while taking into account the risks and uncertainties underlying the commitment to fulfill the obligation. Risks and uncertainties are taken into account in the estimate. Long-term provisions are recognized at their present value.
All defined benefit plans relating to so-called social capital (provisions for pensions, provisions for severance payments and provisions for anniversary bonuses) are measured using the Projected Unit Credit Method in accordance with IAS 19 – Employee Benefits.
The actuarial calculation of pension obligations for active employees is based on the following assumptions:
| Per cent | 2011 | 2010 |
|---|---|---|
| Interest rate | 4.5 | 4.25 |
| Effective salary increase for active employees | 3.0 | 2.5 |
| Individual career trend for active employees | – | 2.5 |
| Expected increase in retirement benefits | 2.0 | 2.0 |
| Expected return on plan assets | 4.5 | 4.25 |
Calculations are based on an assumed retirement accession age of 65 years for men and 62 years for women and are subject to transitional statutory regulations and special arrangements in individual contracts.
Actuarial gains or losses calculated for pension obligations are recognized immediately in profit. No use was made of the corridor method according to IAS 19.92.
The actuarial computation of severance payments and anniversary bonuses is based on the following assumptions:
| Per cent | 2011 | 2010 |
|---|---|---|
| Interest rate | 4.5 | 4.25 |
| Average increase in salary | 3.0 | 2.5 |
| Individual career trend | – | 2.5 |
The biometrical basis for the calculation of provisions for pensions, severance payments and anniversary bonuses of Austrian companies is provided by AVÖ 2008-P-Rechnungsgrundlagen für die Pensionsversicherung (Computational Framework for Pension Insurance) – Pagler & Pagler, using the variant for salaried employees. In other countries, comparable actuarial parameters are used for calculation.
Under defined contribution plans, the company pays fixed contributions into a separate entity (a fund). These payments are recognized as staff expenses in the income statement.
In RBI variable compensation is based on bonus pools on the bank or profit center level. Every variable pay system has fixed minimum and maximum levels and thus defines maximum payout values.
For the fiscal year 2010, the bonus pools were based on the ratios net profit after tax, the cost/income ratio and return on risk adjusted capital (RORAC) where a comparison of the budget with the year-end figures was made. The bonus of all board members of affiliated banks in Central and Eastern Europe was already in2010 treated as a deferred payment where 30 percent of the annual bonus will be deferred over 3 years. The payout at the beginning of 2014 is dependent on the average annual target achievement (comparison of the budget with the year-end figures) of the ratios net profit after tax and RORAC of the respective Group's unit.
As of the fiscal year 2011, the general and specific principles, as represented on page (general HR part) for the allocation, for the claim and for the payment of variable remuneration (including the payment of the deferred portion of the bonus) for board members of RBI AG and certain Group units and identified staff ("personnel with an impact on the risk profile") are applied:
The allocation, the claim and the payment of the variable remuneration (including the payment of a portion of the deferred bonus) depend on the following criteria:
The obligation from number 11 of the annex to Section 39b of the Austrian Banking Act, under which a proportion of at least 50 per cent of variable compensation for risk personnel should take the form of shares or equivalent non-cash payment instruments, is covered in the RBI Group by a stock phantom plan. Proportionally 50 per cent of the "Up-front" and "deferred" bonus section will be divided by the average closing price of RBI's shares on the Vienna Stock Exchange for that year serving as the basis for calculating the bonus. Thereby, a certain amount of phantom shares will be determined. This amount will be fixed for the entire duration of the deferral period. After the expiration of the respective retention period the amount of specified phantom shares will be multiplied by RBI's share price for the previous fiscal year. The resulting cash will be paid when the next available monthly salary is paid.
These rules are valid unless any applicable local laws prescribe a different procedure.
Further details of the employee compensation plans are described in the management report.
The Management Board, with approval by the Supervisory Board, of RBI AG has approved the existence of a share incentive program (SIP) which offers performance based allotments of shares to eligible employees at home and abroad for a given period. Eligible employees are current board members and selected executives of RBI AG, as well as executives of its affiliated bank subsidiaries and other affiliated companies.
The number of ordinary shares of RBI AG which will ultimately be transferred depends on the achievement of two performance criteria: the targeted return on equity (ROE) and the performance of the share of the RBI AG compared to the total shareholder return of the shares of companies in DJ EURO STOXX Banks index after a three-year holding period. Furthermore, an employment contract must exist with RBI. Participation in the SIP is voluntary.
Expenses related to the share incentive program in accordance with IFRS 2 (share-based payment) are charged to equity.
This item comprises subordinated capital and supplementary capital. Liabilities documented or undocumented are subordinated if, in the event of liquidation or bankruptcy, they can only be met after the claims of the other – not subordinated – creditors have been satisfied. Supplementary capital contains all paid-in own funds which are available for the company for at least eight years, for which interest is paid only from the profit and which can be repaid in the case of solvency only after all other debtors are satisfied.
Interest and interest-like income mainly includes interest income on loans and advances to banks and customers and from fixedinterest securities. In addition, current income from shares and other variable-yield securities (especially dividends), income from equity participations and from investments accounted for at equity, and similar income calculated as interest are also reported under net interest income. Dividend income is recognized if the entitlement of the owner for payment exists. Interest expenses and interest-like expenses mainly include interest paid on deposits from banks and customers and on debt securities issued and subordinated capital. Interest income and interest expenses are accrued in the reporting period.
Net fee and commission income mainly includes income and expenses arising from payment transfer business, foreign exchange business and credit business. Fee and commission income and expenses are accrued in the reporting period.
Net trading income comprises the trading margins resulting from the foreign exchange business, results due to foreign exchange revaluations and all realized and unrealized gains and losses from financial assets and liabilities at fair value. In addition, it includes all interest and dividend income attributable to trading activities and related refinancing costs.
General administrative expenses include staff and other administrative expenses as well as amortization/depreciation and impairment losses for tangible and intangible fixed assets.
Current taxes are calculated on the basis of taxable income of the current year. The taxable income deviates from the profit of the statement of comprehensive income due to expenses and income which are taxable or tax-deductible in the following years or which are never taxable or tax-deductible. The liability of the Group for current taxes is recognized on the basis of the actual tax rate or the future tax rate which is enacted by the end of the reporting period.
Deferred taxes are recognized and calculated in accordance with IAS 12 applying the liability method. Deferred taxes are based on all temporary differences that result from comparing the carrying amounts of assets and liabilities in the IFRS accounts with the tax bases of assets and liabilities, and which will reverse in the future. Deferred taxes are calculated by using tax rates applicable in the countries concerned. A deferred tax asset should also be recognized on tax loss carry-forwards if it is probable that sufficient taxable profit will be achieved against which the tax loss carry-forwards can be utilized within the same entity. On each reporting date, the carrying amount of the deferred tax assets is reviewed and impaired if it is no longer probable that sufficient taxable income is available in order to partly or fully realize the tax assets. Deferred tax assets and deferred tax liabilities within the same entity are netted.
Income tax credits and income tax obligations are recorded separately under the item "other assets" and "tax provisions" respectively.
Current and deferred taxes are recognized as profit or loss. In case that they are linked to items which are recognized in other comprehensive income, current and deferred taxes are also directly recognized in other comprehensive income.
Other comprehensive income comprises all income and expenses directly recognized in equity according to IFRS standards. Other comprehensive income contains currency differences resulting from the translation of equity held in foreign currency, changes resulting from the hedging of net investments in a foreign entity (capital hedge), the effective part of a cash flow hedge, changes resulting from valuation of available-for-sale financial assets as well as deferred taxes on the mentioned items.
Transactions arising from the holding and placing of assets on behalf of third parties are not shown in the statement of financial position. Fees arising from these transactions are shown under net fee and commission income.
According to IAS 39, a financial guarantee is a contract under which the guarantor is obliged to make payments that compensate the party to whom the guarantee is issued for a loss arising in the event that a particular debtor does not fulfill payment obligations on time as stipulated in the original terms of the debt instrument. At the date of recognition of a financial guarantee, the initial fair value corresponds under market conditions to the premium at the date of signature of the contract. For subsequent valuations the credit commitment has to be presented as provision according to IAS 37.
The Group has contingent liabilities from guarantees, credit guarantees, letters of credit and loan commitments recognized at face value. Guarantees are used in situations in which the Group guarantees payment to the creditor to fulfill the obligation of a third party. Irrevocable credit lines must be reported when a credit risk may occur. These include commitments to provide loans, to purchase securities or to provide guarantees and acceptances. Loan loss provisions for contingent liabilities and irrevocable loan commitments are reported under provisions for liabilities and charges.
Own shares of RBI AG at the balance sheet date, are deducted directly from equity. Gains and losses on own shares have no impact on the income statement.
The cash flow statement reports the change in the cash and cash equivalents of the company through the net cash from operating activities, investing and financing activities. Cash flows for investing activities mainly include proceeds from the sale, or payments for the acquisition of financial investments and tangible fixed assets. The net cash from financing activities shows all cash flows from equity capital, subordinated capital, and participation capital. All other cash flows are – according to international practices for financial institutions – assigned to operating activities.
Notes on segment reporting are to be found in the chapter segment reports.
Information about risks arising from financial instruments is disclosed in the explanatory notes. The risk report in particular contains detailed information on the issue of credit risk, country risk, concentration risk, market risk and liquidity risk.
Information on capital management, regulatory own funds and risk-weighted assets are disclosed under note (53) capital management and regulatory own funds according to the Austrian Banking Act.
The following table shows income statement according to IAS 39 measurement categories:
| € 000 | 2011 | 2010 |
|---|---|---|
| Net gains (losses) on financial assets and liabilities held-for-trading | 778,573 | 304,784 |
| Financial assets and liabilities at fair value through profit or loss | 378,787 | 364,155 |
| Interest income | 330,247 | 252,385 |
| Net gains (losses) on financial assets and liabilities at fair value through profit or loss |
48,540 | 111,770 |
| Financial assets available-for-sale | (49,875) | 20,638 |
| Interest income | 48,439 | 9,666 |
| Net realized gains (losses) on financial assets available-for-sale | 13,752 | 15,728 |
| Impairment on financial assets available-for-sale | (112,066) | (4,756) |
| Loans and advances | 4,430,597 | 4,134,392 |
| Interest income | 5,494,091 | 5,342,692 |
| Net realized gains (losses) on financial assets not measured at fair value through profit and loss |
8,147 | 2,879 |
| Impairment on financial assets not measured at fair value through profit and loss | (1,071,641) | (1,211,179) |
| Financial assets held-to-maturity | 534,990 | 452,050 |
| Interest income | 442,795 | 445,896 |
| Net realized gains (losses) on financial assets not measured at fair value through profit and loss |
94,364 | 5,010 |
| Impairment on financial assets not measured at fair value through profit and loss | (2,169) | 1,144 |
| Financial liabilities | (2,937,351) | (2,784,131) |
| Interest expenses | (2,937,351) | (2,784,131) |
| Derivatives (hedging) | 23,729 | (10,324) |
| Net interest income | (6,104) | (9,718) |
| Net gains (losses) from hedge accounting | 29,834 | (606) |
| Net revaluations from exchange differences | 79,072 | 283,481 |
| Other operating income/expenses | (1,865,166) | (1,477,723) |
| Profit before tax from continuing operations | 1,373,355 | 1,287,322 |
The net interest income position includes interest income and expenses from items of banking business, dividend income, and fees and commissions with interest-like characteristics.
| € 000 | 2011 | 2010 |
|---|---|---|
| Interest and interest-like income, total | 6,614,417 | 6,364,799 |
| Interest income | 6,529,231 | 6,334,282 |
| from balances at central banks | 61,796 | 84,969 |
| from loans and advances to banks | 441,781 | 447,943 |
| from loans and advances to customers | 4,743,939 | 4,571,885 |
| from financial investments | 770,497 | 696,577 |
| from leasing claims | 222,377 | 221,448 |
| from derivative financial instruments (non-trading), net | 288,841 | 311,460 |
| Current income | 50,983 | 11,369 |
| from shares and other variable-yield securities | 2,544 | 1,703 |
| from shares in affiliated companies | 44,853 | 5,474 |
| from other interests | 3,586 | 4,192 |
| Interest-like income | 34,203 | 19,148 |
| Current income from associates | 89 | 200 |
| Interest expenses and interest-like expenses, total | (2,947,356) | (2,786,831) |
| Interest expenses | (2,905,336) | (2,740,480) |
| on deposits from central banks | (10,004) | (2,700) |
| on deposits from banks | (649,222) | (678,759) |
| on deposits from customers | (1,410,681) | (1,251,006) |
| on debt securities issued | (616,433) | (610,492) |
| on subordinated capital | (218,995) | (197,523) |
| Interest-like expenses | (42,020) | (46,351) |
| Net interest income | 3,667,150 | 3,578,168 |
The interest margin on the respective averages of the stated base has developed as follows:
| Per cent | 2011 | 2010 |
|---|---|---|
| Interest margin (total assets) | 2.61 | 2.51 |
| Interest margin (risk-weighted assets, credit risk) | 4.77 | 4.97 |
Interest income includes interest income (unwinding) from impaired loans to customers and impaired loans to banks in the amount of € 204,960 thousand (2010: € 234,803 thousand). Interest income from impaired loans and advances to customers and banks is recognized with the rate of interest used to discount the future cash flows for the purpose of measuring impairment loss.
Net provisioning for impairment losses on items reported on and off the statement of financial position is as follows:
| € 000 | 2011 | 2010 |
|---|---|---|
| Individual loan loss provisions | (1,176,630) | (1,196,101) |
| Allocation to provisions for impairment losses | (1,678,462) | (1,681,809) |
| Release of provisions for impairment losses | 558,700 | 530,848 |
| Direct write-downs | (132,780) | (90,047) |
| Income received on written-down claims | 75,912 | 44,907 |
| Portfolio-based loan loss provisions | 104,932 | (862) |
| Allocation to provisions for impairment losses | (280,577) | (390,664) |
| Release of provisions for impairment losses | 385,510 | 389,802 |
| Gains from loan termination or sale | 8,147 | 2,879 |
| Total | (1,063,551) | (1,194,084) |
Details on risk provisions are shown under note (17) impairment losses on loans and advances.
| Ratios | 2011 | 2010 |
|---|---|---|
| Net provisioning ratio (average risk-weighted assets, credit risk) | 1.38% | 1.66% |
| Net provisioning ratio (total loans outstanding) | 0.57% | 0.71% |
| Loss rate | 0.38% | 0.41% |
| Portfolio rate (total loans outstanding) | 2.80% | 2.90% |
| € 000 | 2011 | 2010 |
|---|---|---|
| Payment transfer business | 611,021 | 599,023 |
| Loan and guarantee business | 280,453 | 281,567 |
| Securities business | 118,790 | 134,553 |
| Foreign currency, notes/coins, and precious-metals business | 329,765 | 329,909 |
| Management of investment and pension funds | 26,550 | 26,337 |
| Sale of own and third party products | 41,323 | 47,176 |
| Credit derivatives business | 1,462 | 2,804 |
| Other banking services | 80,563 | 69,423 |
| Total | 1,489,927 | 1,490,792 |
The position net trading income includes interest and dividend income, refinancing costs, commissions and any changes in fair value of trading portfolios.
| € 000 | 2011 | 2010 |
|---|---|---|
| Interest-based transactions | 170,643 | 211,076 |
| Currency-based transactions | 107,334 | 121,171 |
| Equity-/index-based transactions | 4,583 | 9,570 |
| Credit derivatives business | 2,132 | (700) |
| Other transactions | 78,569 | (12,996) |
| Total | 363,261 | 328,121 |
In the year 2011 there was a change in the method of valuation used for given capital guarantees due to legislative changes. This adjustment had an effect on earnings in the amount of € 81,224 thousand in other transactions. The effect on the previous year's figures cannot be quantified.
Currency-based transactions contained an effect due to the application of IAS 29 hyperinflation in Belarus in the amount of € 84,345 thousand.
| € 000 | 2011 | 2010 |
|---|---|---|
| Net income from hedge accounting | 3,373 | (605) |
| Net income from credit derivatives | 31,669 | 2,348 |
| Net income from other derivatives | 194,231 | (63,384) |
| Net income from liabilities designated at fair value | 183,555 | (22,544) |
| Total | 412,828 | (84,185) |
Net income from hedge accounting includes on the one hand, a valuation gain from derivatives of € 87,529 thousand (2010: minus € 15,312 thousand) and on the other hand, changes in the carrying amount of the fair value hedged items of minus € 84,156 thousand (2010: plus € 14,707 thousand).
Net income from other derivatives includes valuation results from those derivatives, which are held to hedge against market risks (except trading assets/liabilities). They are, however, based on an inhomogeneous portfolio and do not satisfy the requirements for hedge accounting according to IAS 39.
Net income from liabilities designated at fair value comprises a profit from changes in own credit risk amounting to € 248,491 thousand (2010: € 33,000) and a negative effect from changes in market interest rates.
The position net income from financial investments comprises valuation results and net proceeds from securities of the financial investment portfolio (held-to-maturity), from securities at fair value through profit and loss, and equity participations which include shares in affiliated companies, companies valued at equity, and other companies.
| € 000 | 2011 | 2010 |
|---|---|---|
| Net income from financial investments held-to-maturity | 92,195 | 6,153 |
| Net valuations of financial investments held-to-maturity | (2,169) | 1,143 |
| Net proceeds from sales of financial investments held-to-maturity | 94,364 | 5,010 |
| Net income from equity participations | (97,844) | 11,024 |
| Net valuations of equity participations | (111,595) | (4,704) |
| Net proceeds from sales of equity participations | 13,752 | 15,728 |
| Net income from securities at fair value through profit and loss | (135,430) | 120,046 |
| Net valuations of securities at fair value through profit and loss | (124,630) | 57,869 |
| Net proceeds from sales of securities at fair value through profit and loss | (10,800) | 62,177 |
| Total | (141,077) | 137,223 |
As a result of the material increase in regulatory own capital required by the European Banking Authority (EBA) use was made of IAS 39 AG22e in 2011 which allowed for the sale of parts of the held-to-maturity portfolio in the amount of € 2,551,102 thousand without triggering the sanctions concerning the premature sale of securities from the held-to-maturity-portfolio. As a result a gain of € 94,364 thousand was realized. Due to the requirements set by the EBA, the RZB credit institute group is required to have a 9 per cent core tier 1 capital ratio as at 30 June 2012.
General administrative expenses of the Group contain staff expenses, other administrative expenses and depreciation on tangible and intangible fixed assets. They break down as follows:
| € 000 | 2011 | 2010 |
|---|---|---|
| Staff expenses | (1,539,615) | (1,452,948) |
| Wages and salaries | (1,192,361) | (1,115,001) |
| Social security costs and staff-related taxes | (281,294) | (265,055) |
| Other voluntary social expenses | (42,928) | (40,656) |
| Expenses on severance payments, retirement benefits and anniversary payments | (15,822) | (26,761) |
| Expenses on share incentive program (SIP) | (7,210) | (5,475) |
| Other administrative expenses | (1,209,106) | (1,186,515) |
| Office space expenses | (331,113) | (332,055) |
| IT expenses | (222,533) | (202,026) |
| Communication expenses | (92,992) | (94,886) |
| Legal, advisory and consulting expenses | (118,699) | (117,535) |
| Advertising, PR and promotional expenses | (112,967) | (109,662) |
| Deposit insurance fees | (84,994) | (73,422) |
| Office supplies | (31,668) | (32,605) |
| Car expenses | (20,848) | (20,724) |
| Security expenses | (50,530) | (45,382) |
| Traveling expenses | (25,200) | (25,080) |
| Training expenses for staff | (18,803) | (17,915) |
| Sundry administrative expenses | (98,760) | (115,223) |
| Depreciation of intangible and tangible fixed assets | (371,718) | (340,282) |
| Tangible fixed assets | (194,297) | (180,354) |
| Intangible fixed assets | (142,934) | (128,093) |
| Leased assets (operating lease) | (34,488) | (31,835) |
| Total | (3,120,440) | (2,979,745) |
Legal, advisory and consulting expenses include audit fees of the Group companies which comprise expenses for the audit of financial statements amounting to € 8,018 thousand (2010: € 7,345 thousand) and tax advisory as well as other additional consulting services provided by the auditors amounting to € 5,035 thousand (2010: € 2,977 thousand). Thereof, € 2,312 thousand (2010: € 1,651 thousand) are accounted for the group auditor for the audit of the consolidated financial statement and the individual financial statement and € 346 thousand (2010: € 670 thousand) is accounted for the other consulting services.
Amortization of intangible fixed assets capitalized in the course of initial consolidation amounted to € 5,854 thousand (2010: € 5,994 thousand). This relates to scheduled amortization of the acquired customer base.
The depreciation of tangible and intangible fixed assets includes an impairment of € 20,040 thousand (2010: € 5,332 thousand).
The position other net operating income contains, among other things, sales revenues and expenses from non-banking activities, income and expenses from disposal as well as income from the revaluation of tangible and intangible fixed assets.
| € 000 | 2011 | 2010 |
|---|---|---|
| Net income arising from non-banking activities | 30,730 | 35,232 |
| Sales revenues from non-banking activities | 715,015 | 834,260 |
| Expenses arising from non-banking activities | (684,285) | (799,028) |
| Net income from additional leasing services | (6,438) | (2,607) |
| Revenues from additional leasing services | 82,958 | 91,823 |
| Expenses from additional leasing services | (89,396) | (94,430) |
| Rental income from operating lease (vehicles and equipment) | 38,086 | 36,468 |
| Rental income from investment property incl. operating lease (real estate) | 21,037 | 12,616 |
| Net proceeds from disposal of tangible and intangible fixed assets | (9,421) | (9,233) |
| Other taxes | (130,883) | (73,810) |
| hereof special bank levies | (93,429) | (41,439) |
| Impairment of goodwill | (187,318) | 0 |
| Income from release of negative goodwill | 299 | 0 |
| Net expense from allocation and release of other provisions | (11,558) | (27,208) |
| Sundry operating income | 69,628 | 77,174 |
| Sundry operating expenses | (46,329) | (42,335) |
| Total | (232,167) | 6,297 |
The other net operating income includes impairment of goodwill amounting to € 187,318 thousand from the Ukraine, Hungary and Slovenia.
In the reporting period, four subsidiaries were excluded from the consolidated group due to materiality reasons. One subsidiary was excluded due to the end of operations. Net income from this disposal of group assets amounted to minus € 2,575 thousand (2010: € 4,734 thousand).
Income taxes break down as follows:
| € 000 | 2011 | 2010 |
|---|---|---|
| Current income taxes | (340,730) | (357,066) |
| Austria | (24,519) | (41,338) |
| Foreign | (316,211) | (315,728) |
| Deferred taxes | (58,512) | 246,905 |
| Total | (399,243) | (110,161) |
RBI AG and eight of its domestic subsidiaries are members of a joint tax entity headed by Raiffeisen Zentralbank Österreich Aktiengesellschaft.
The following reconciliation shows the relation between profit before tax and the effective tax burden:
| € 000 | 2011 | 2010 |
|---|---|---|
| Profit before tax | 1,373,355 | 1,287,322 |
| Theoretical income tax expense in the financial year based on the domestic income | ||
| tax rate of 25 per cent | (343,339) | (321,830) |
| Effect of divergent foreign tax rates | 92,334 | 60,901 |
| Tax decrease because of tax-exempted income from equity participations and other | ||
| income | 156,585 | 102,649 |
| Tax increase because of non-deductible expenses | (132,282) | (55,781) |
| Other tax deductions and tax increases | (172,540) | 103,900 |
| Effective tax burden | (399,243) | (110,161) |
| Tax rate in per cent | 29.1 | 8.6 |
Other tax deductions and tax increases include mainly deferred tax assets built on tax loss carry-forwards and belated tax payments.
| € 000 | 2011 | 2010 |
|---|---|---|
| Consolidated profit | 967,663 | 1,087,475 |
| Less dividend for participation capital | (200,000) | (200,000) |
| Adapted consolidated profit | 767,663 | 887,475 |
| Average number of ordinary shares outstanding in thousand | 194,552 | 194,530 |
| Earnings per share in € | 3.95 | 4.56 |
There were no conversion or option rights outstanding, so undiluted earnings per share are equal to diluted earnings per share. The capital increase of 40.837.624 ordinary shares issued, due to the merger of the prinical business areas of the RZB with Raiffeisen International in the year 2010, was considered retrospectively with regard to the calculation of the average number of outstanding common shares.
The following table shows the statement of financial position according to IAS 39 measurement categories:
| Assets according to measurement categories € 000 |
2011 | 2010 |
|---|---|---|
| Trading assets | 11,595,130 | 8,631,020 |
| Positive fair values of derivative financial instruments | 8,271,215 | 4,187,176 |
| Shares and other variable-yield securities | 209,935 | 430,428 |
| Bonds, notes and other fixed-interest securities | 3,107,108 | 4,013,416 |
| Call/time deposits from trading purposes | 6,872 | 0 |
| Financial assets at fair value through profit or loss | 7,359,794 | 8,070,267 |
| Shares and other variable-yield securities | 254,094 | 279,787 |
| Bonds, notes and other fixed-interest securities | 7,105,700 | 7,790,480 |
| Investments in associates | 5,017 | 4,961 |
| Financial assets available-for-sale | 3,866,077 | 393,620 |
| Investments in other affiliated companies | 291,473 | 233,011 |
| Other interests | 152,535 | 160,609 |
| Bonds, notes and other fixed-interest securities | 3,422,069 | 0 |
| Loans and advances | 115,807,124 | 99,267,608 |
| Loans and advances to banks | 37,148,037 | 26,338,989 |
| Loans and advances to customers | 81,538,596 | 75,617,601 |
| Other non-derivative financial assets | 2,173,703 | 2,066,890 |
| Impairment losses on loans and advances | (5,053,212) | (4,755,872) |
| Financial assets held-to-maturity | 5,348,485 | 11,206,783 |
| Bonds, notes and other fixed-interest securities | 5,309,092 | 11,167,015 |
| Purchased loans | 39,393 | 39,768 |
| Derivatives (hedging) | 426,350 | 925,409 |
| Positive fair values of derivatives (hedging) | 426,350 | 925,409 |
| Other assets | 2,577,025 | 2,673,446 |
| Intangible and tangible fixed assets | 2,577,025 | 2,673,446 |
| Total assets | 146,985,003 | 131,173,114 |
| Equity and liabilities according to measurement categories € 000 |
2011 | 2010 |
|---|---|---|
| Trading liabilities | 10,463,944 | 6,528,355 |
| Negative fair values of derivative financial instruments | 9,154,948 | 5,317,680 |
| Short-selling of trading assets | 565,628 | 425,730 |
| Certificates issued | 743,369 | 784,945 |
| Financial liabilities | 121,425,703 | 110,534,766 |
| Deposits from banks | 37,991,809 | 33,659,182 |
| Deposits from customers | 66,747,234 | 57,633,113 |
| Debt securities issued | 11,020,903 | 13,997,986 |
| Subordinated capital | 4,150,733 | 4,001,098 |
| Other non-derivative financial liabilities | 1,515,024 | 1,243,387 |
| Liabilities at fair value through profit and loss | 3,345,911 | 2,557,396 |
| Debt securities issued | 3,345,911 | 2,557,396 |
| Derivatives (hedging) | 42,702 | 476,763 |
| Negative fair values of derivatives (hedging) | 42,702 | 476,763 |
| Provisions for liabilities and charges | 770,957 | 671,909 |
| Equity | 10,935,786 | 10,403,925 |
| Total equity and liabilities | 146,985,003 | 131,173,114 |
| € 000 | 2011 | 2010 |
|---|---|---|
| Cash in hand | 2,054,026 | 1,639,507 |
| Balances at central banks | 9,347,721 | 3,167,384 |
| Total | 11,401,747 | 4,806,891 |
| € 000 | 2011 | 2010 |
|---|---|---|
| Giro and clearing business | 2,482,117 | 1,516,736 |
| Money market business | 19,177,856 | 14,789,329 |
| Loans to banks | 3,079,250 | 3,766,415 |
| Purchased loans | 120,374 | 34,510 |
| Leasing claims | 414 | 754 |
| Claims evidenced by paper | 888,032 | 1,424,662 |
| Total | 25,748,044 | 21,532,406 |
Of the purchased loans amounting to € 120,374 thousand, € 118,620 thousand are assigned to the measurement category loans and advances (2010: € 34,203 thousand) and € 1,754 thousand to held-to-maturity (2010: € 307 thousand).
Loans and advances to banks classified regionally (counterparty's seat) are as follows:
| € 000 | 2011 | 2010 |
|---|---|---|
| Austria | 13,126,727 | 10,794,273 |
| Foreign | 12,621,316 | 10,738,133 |
| Total | 25,748,044 | 21,532,406 |
Loans and advances to banks break down into the following bank segments:
| € 000 | 2011 | 2010 |
|---|---|---|
| Central banks | 1,817,016 | 1,483,988 |
| Commercial banks | 23,925,437 | 20,038,435 |
| Multilateral development banks | 5,591 | 9,983 |
| Total | 25,748,044 | 21,532,406 |
| € 000 | 2011 | 2010 |
|---|---|---|
| Credit business | 53,945,245 | 48,763,542 |
| Money market business | 4,883,948 | 5,000,582 |
| Mortgage loans | 17,944,342 | 16,887,910 |
| Purchased loans | 1,234,357 | 1,138,650 |
| Leasing claims | 3,064,394 | 3,108,925 |
| Claims evidenced by paper | 503,949 | 757,452 |
| Total | 81,576,235 | 75,657,061 |
Purchased loans amounting to € 1,196,718 thousand (2010: € 1,099,190 thousand) are assigned to the measurement category loans and advances. Purchased loans classified as held-to-maturity totaled € 37,639 thousand (2010: € 39,460 thousand).
Loans and advances to customers break down into asset classes according to Basel II definition as follows:
| € 000 | 2011 | 2010 |
|---|---|---|
| Sovereigns | 1,356,087 | 1,493,464 |
| Corporate customers – large corporates | 55,222,286 | 49,201,202 |
| Corporate customers – mid market | 3,674,424 | 3,828,783 |
| Retail customers – private individuals | 19,004,397 | 18,548,815 |
| Retail customers – small and medium-sized entities | 2,291,056 | 2,441,270 |
| Other | 27,986 | 143,527 |
| Total | 81,576,235 | 75,657,061 |
Loans and advances to customers classified regionally (counterparty's seat) are as follows:
| € 000 | 2011 | 2010 |
|---|---|---|
| Austria | 7,854,741 | 7,913,930 |
| Foreign | 73,721,494 | 67,743,131 |
| Total | 81,576,235 | 75,657,061 |
Provisions for impairment losses are formed in accordance with uniform Group standards and cover all recognizable credit risks. A table with the development of the impairment losses on loans and advances can be found in the risk report on page 209. Provisions for impairment losses are allocated to the following asset classes according to the Basel II definition:
| € 000 | 2011 | 2010 |
|---|---|---|
| Banks | 227,643 | 255,020 |
| Sovereigns | 5,912 | 996 |
| Corporate customers – large corporates | 2,619,090 | 2,431,647 |
| Corporate customers – mid market | 427,176 | 407,459 |
| Retail customers – private individuals | 1,524,426 | 1,417,968 |
| Retail customers – small and medium-sized entities | 248,965 | 242,782 |
| Total | 5,053,212 | 4,755,872 |
31/12/2011 € 000 Fair value Carrying amount Individually impaired assets Individual loan loss provisions Portfoliobased provisions Net carrying amount Banks 25,499,535 25,748,044 231,069 208,591 19,052 25,520,401 Sovereigns 1,263,107 1,356,087 11,277 5,912 0 1,350,175 Corporate customers – large corporates 51,244,569 55,250,272 4,075,045 2,245,407 373,682 52,631,183 Corporate customers – mid market 3,277,301 3,674,424 643,956 394,552 32,624 3,247,248 Retail customers – private individuals 18,080,500 19,004,397 2,306,586 1,281,724 242,701 17,479,972 Retail customers – small and mediumsized entities 2,117,024 2,291,056 333,803 217,414 31,551 2,042,091 Total 101,482,036 107,324,280 7,601,736 4,353,600 699,610 102,271,070
Loans and advances and loan loss provisions according to Basel II asset classes are shown in the following table:
| 31/12/2010 | Fair value | Carrying amount |
Individually impaired |
Individual loan loss |
Portfolio based |
Net carrying amount |
|---|---|---|---|---|---|---|
| € 000 | assets | provisions | provisions | |||
| Banks | 21,270,497 | 21,532,406 | 271,087 | 236,579 | 18,440 | 21,277,387 |
| Sovereigns | 1,404,555 | 1,493,464 | 12,489 | 996 | 0 | 1,492,468 |
| Corporate customers – large corporates |
46,229,254 | 49,344,729 | 3,597,547 | 2,025,674 | 405,973 | 46,913,082 |
| Corporate customers – mid market |
3,468,804 | 3,828,783 | 670,167 | 375,802 | 31,657 | 3,421,324 |
| Retail customers – private individuals |
17,918,352 | 18,548,815 | 1,789,377 | 1,115,494 | 302,474 | 17,130,847 |
| Retail customers – small and medium sized entities |
2,379,029 | 2,441,270 | 319,913 | 192,749 | 50,033 | 2,198,488 |
| Total | 92,670,491 | 97,189,467 | 6,660,580 | 3,947,294 | 808,577 | 92,433,596 |
The following table shows the carrying amount of individually impaired assets, the amount of individually allocated provisions and the corresponding net value of available collaterals:
| 31/12/2011 | Impairments and collaterals | |||||||
|---|---|---|---|---|---|---|---|---|
| € 000 | Individually impaired assets |
Individual loan loss provisions |
Individually impaired assets after deduction of ILLP |
Collaterals for individually impaired assets |
Interest on individually impaired assets |
|||
| Banks | 231,069 | 208,591 | 22,478 | 0 | 1,514 | |||
| Sovereigns | 11,277 | 5,912 | 5,365 | 5,224 | 118 | |||
| Corporate customers – large corporates |
4,075,045 | 2,245,407 | 1,829,638 | 1,272,792 | 110,715 | |||
| Corporate customers – mid market |
643,956 | 394,552 | 249,404 | 221,291 | 24,752 | |||
| Retail customers – private individuals |
2,306,586 | 1,281,724 | 1,024,862 | 800,645 | 58,958 | |||
| Retail customers – small and medium sized entities |
333,803 | 217,414 | 116,389 | 80,951 | 8,902 | |||
| Total | 7,601,736 | 4,353,600 | 3,248,136 | 2,380,903 | 204,960 |
ILLP: individual loan loss provisions
| 31/12/2010 | Impairments and collaterals | ||||||
|---|---|---|---|---|---|---|---|
| € 000 | Individually impaired assets |
Individual loan loss provisions |
Individually impaired assets after deduction of ILLP |
Collaterals for individually impaired assets |
Interest on individually impaired assets |
||
| Banks | 271,087 | 236,579 | 34,508 | 0 | 4,623 | ||
| Sovereigns | 12,489 | 996 | 11,493 | 32 | 853 | ||
| Corporate customers – large corporates |
3,597,547 | 2,025,675 | 1,571,872 | 1,114,480 | 104,469 | ||
| Corporate customers – mid market |
670,167 | 375,802 | 294,365 | 288,731 | 26,233 | ||
| Retail customers – private individuals |
1,789,377 | 1,115,494 | 673,883 | 638,964 | 87,960 | ||
| Retail customers – small and medium sized entities |
319,913 | 192,749 | 127,164 | 95,020 | 10,664 | ||
| Total | 6,660,580 | 3,947,295 | 2,713,285 | 2,137,228 | 234,803 |
ILLP: individual loan loss provisions
The trading assets consist of the following securities and derivative instruments held-for-trading:
| € 000 | 2011 | 2010 |
|---|---|---|
| Bonds, notes and other fixed-interest securities | 3,107,108 | 4,013,416 |
| Treasury bills and bills of public authorities eligible for refinancing | 889,762 | 1,083,173 |
| Other securities issued by the public sector | 430,402 | 870,387 |
| Bonds and notes of non-public issuers | 1,786,944 | 2,059,856 |
| Shares and other variable-yield securities | 209,935 | 430,428 |
| Shares | 155,296 | 267,613 |
| Mutual funds | 41,818 | 72,323 |
| Other variable-yield securities | 12,821 | 90,492 |
| Positive fair values of derivative financial instruments | 7,292,755 | 3,624,549 |
| Interest-based transactions | 6,391,197 | 2,818,894 |
| Currency-based transactions | 717,528 | 642,939 |
| Equity-/index-based transactions | 81,985 | 95,885 |
| Credit derivatives business | 89,123 | 47,789 |
| Other transactions | 12,923 | 19,042 |
| Call/time deposits from trading purposes | 6,872 | 0 |
| Total | 10,616,671 | 8,068,393 |
Pledged securities ready to be sold or repledged by transferee are allocated to the appropriate securities category in the table above. Further details are shown under note (40) genuine sale and repurchase agreements.
| € 000 | 2011 | 2010 |
|---|---|---|
| Positive fair values of derivatives in fair value hedges (IAS 39) | 426,350 | 360,827 |
| Interest-based transactions | 426,350 | 360,827 |
| Positive fair values of derivatives in cash flow hedges (IAS 39) | 0 | 564,583 |
| Interest-based transactions | 0 | 564,583 |
| Positive fair values of credit derivatives | 74,723 | 9,472 |
| Positive fair values of other derivatives | 903,736 | 553,154 |
| Interest-based transactions | 724,937 | 453,263 |
| Currency-based transactions | 178,682 | 98,547 |
| Equity-/index-based transactions | 117 | 1,344 |
| Total | 1,404,809 | 1,488,036 |
As long as the conditions for hedge accounting according to IAS 39 are fulfilled, derivative financial instruments are measured at their fair values (dirty prices) in their function as hedging instruments. The hedged items in connection with fair value hedges are loans and advances to customers and debt securities issued which are to be hedged against interest rate risks. The changes in carrying amount of the hedged underlying transactions in IAS 39 fair value hedges are included in the respective items of the statement of financial position.
This item also includes the positive fair values of derivative financial instruments that are neither held for trading nor constitute fair value hedging instruments under IAS 39.
This position consists of securities available-for-sale, financial assets at fair value through profit or loss, and securities held-tomaturity as well as strategic equity participations held on a long-term basis.
| € 000 | 2011 | 2010 |
|---|---|---|
| Bonds, notes and other fixed-interest securities | 15,836,862 | 18,957,495 |
| Treasury bills and bills of public authorities eligible for refinancing | 7,675,075 | 9,886,294 |
| Other securities issued by the public sector | 3,856,656 | 3,687,021 |
| Bonds and notes of non-public issuers | 4,284,813 | 5,363,862 |
| Other | 20,318 | 20,318 |
| Shares and other variable-yield securities | 254,094 | 279,787 |
| Shares | 85,302 | 93,917 |
| Mutual funds | 165,452 | 182,532 |
| Other variable-yield securities | 3,340 | 3,338 |
| Equity participations | 444,008 | 393,620 |
| Interest in affiliated companies | 291,474 | 233,012 |
| Other interests | 152,535 | 160,608 |
| Total | 16,534,964 | 19,630,902 |
Pledged securities ready to be sold or repledged by the transferee are allocated to the appropriate securities category in the table above. Further details are shown under note (40) genuine sale and repurchase agreements.
The carrying amount of the securities reclassified into the category held-to-maturity amounted at the date of reclassifications to € 452,188 thousand. Thereof, reclassifications in 2008 amounted to € 371,686 thousand and in 2011 to € 80,502 thousand. As of 31 December 2011, the carrying amount was € 304,247 thousand and the fair value totaled € 305,775. In 2011, a result from the reclassified securities of € 13,955 thousand (2010: € 16,343 thousand) was shown in the income statement. If the reclassification had not been made, a gain of € 4,812 thousand (2010: € 9,042 thousand) would have arisen.
The carrying amount of the securities reclassified into the category loans and advances amounted to € 1,559,682 thousand at the date of reclassification in 2008. The carrying amount as of 31 December 2011 totaled € 806,491 thousand and the fair value was € 795,978 thousand. In 2011, a result from the reclassified securities of € 27,306 thousand (2010: € 41,306) was shown in the income statement. If the reclassification had not been made, a loss of € 36,298 thousand (2010: € 69,648) would have arisen.
The carrying amount of the securities that were reclassified from held-to-maturity into the category of financial assets availablefor-sale at 31 December 2011 was € 3,193,708 thousand.
Equity participations valued at amortized cost for which fair values could not be measured reliably amounted to € 87,946 thousand (2010: € 80,549 thousand).
For the following subsidiaries syndicate contracts between RBI AG and the respective shareholders exist: Raiffeisenbank a.s. (Czech Republic), Tatra banka a.s. (Slovakia), Raiffeisen Bank Zrt. (Hungary), and Raiffeisen-RBHU Holding GmbH (Austria), and Raiffeisen Banka d.d. (Slovenia), respectively, as well as Raiffeisenbank Austria d.d. (Croatia). These syndicate contracts regulate especially purchase options between direct and indirect shareholders.
The syndicate contracts expire automatically if control over the company changes – also in the case of a takeover bid. The following agreement has been made with the European Bank for Reconstruction and Development (EBRD) regarding Priorbank, OAO (Belarus): If control over the company changes, EBRD has the option to sell all shares held in Priorbank to the company.
The shares in companies valued at equity are as follows:
| € 000 | 2011 | 2010 |
|---|---|---|
| Investments in associates | 5,017 | 4,961 |
Financial information on associated companies is as follows:
| € 000 | Total assets | Total revenues | Profit/loss after taxes |
Shareholders´ equity |
|---|---|---|---|---|
| Raiffeisen Banca pentru Locuinte S.A., Bucharest (RO) | 75,112 | 4,168 | 102 | 15,054 |
Further information regarding associated companies is stated on page 260.
| € 000 | 2011 | 2010 |
|---|---|---|
| Goodwill | 408,456 | 613,681 |
| Software | 530,859 | 479,826 |
| Other intangible fixed assets | 126,234 | 126,309 |
| Total | 1,065,548 | 1,219,816 |
The item "software" comprises acquired software amounting to € 471,627 thousand (2010: € 424,611 thousand) and developed software amounting to € 59,232 thousand (2010: € 55,215 thousand).
The carrying amount of goodwill breaks down on the following cash generating units as follows:
| € 000 | 2011 | 2010 |
|---|---|---|
| ZAO Raiffeisenbank, Moscow | 257,171 | 263,124 |
| Raiffeisen Bank Sh.a., Tirane | 52,650 | 52,711 |
| Raiffeisenbank a.s., Prague | 39,697 | 42,443 |
| Raiffeisen Bank Aval JSC, Kiev | 29,138 | 220,606 |
| Ukrainian Processing Center PJSC, Kiev | 15,377 | 14,977 |
| Other | 14,424 | 19,820 |
| Total | 408,456 | 613,681 |
Goodwill impairment of € 187,318 thousand was made at the Group units in the Ukraine, Hungary and Slovenia. Information about the impairment tests can be found in the chapter business combinations on page 153.
| € 000 | 2011 | 2010 |
|---|---|---|
| Land and buildings used by the Group for own purpose | 610,056 | 553,590 |
| Other land and buildings (investment property) | 121,006 | 112,730 |
| Office furniture, equipment and other tangible fixed assets | 448,876 | 507,331 |
| Leased assets (operating lease) | 331,539 | 279,979 |
| Total | 1,511,477 | 1,453,630 |
The fair value of investment property totaled € 122,804 thousand (2010: € 110,630 thousand).
Tangible and intangible fixed assets developed in the financial year 2011 as follows:
| Cost of acquisition or conversion | |||||||
|---|---|---|---|---|---|---|---|
| As of 1/1/2011 |
Change in consolidated |
Exchange differences |
Additions | Disposals | Transfers | As of 31/12/2011 |
|
| € 000 | group | ||||||
| Intangible fixed assets |
1,836,783 | (1,360) | (31,801) | 215,748 | (19,407) | 21 | 1,999,984 |
| Goodwill | 639,234 | 0 | (2,355) | 0 | (1,624) | 0 | 635,255 |
| Software | 1,017,529 | 60 | (30,576) | 200,914 | (16,450) | 10,952 | 1,182,429 |
| Other intangible fixed assets |
180,020 | (1,420) | 1,130 | 14,834 | (1,333) | (10,931) | 182,300 |
| Tangible fixed assets |
2,443,714 | 29,579 | (34,124) | 364,557 | (215,749) | (21) | 2,587,956 |
| Land and buildings used by the Group for own purpose |
737,325 | 0 | (12,731) | 102,208 | (32,472) | 16,206 | 810,536 |
| Other land and buildings |
119,812 | 29,482 | 2,355 | 44,569 | (1,714) | (56,306) | 138,198 |
| of which land value of developed land |
13,901 | 0 | 146 | 7 | (384) | 0 | 13,670 |
| Office furniture, equipment and other tangible fixed assets |
1,234,854 | 97 | (15,861) | 141,490 | (111,856) | (18,287) | 1,230,437 |
| Leased assets (operating lease) |
351,723 | 0 | (7,887) | 76,290 | (69,707) | 58,366 | 408,785 |
| Total | 4,280,497 | 28,219 | (65,925) | 580,305 | (235,156) | 0 | 4,587,940 |
| Write-ups, amortization, depreciation, impairment | Carrying amount |
|||
|---|---|---|---|---|
| hereof | hereof | |||
| € 000 | Cumulative | Write-ups | Depreciation | 31/12/2011 |
| Intangible fixed assets | (934,436) | 0 | (330,149) | 1,065,548 |
| Goodwill | (226,799) | 0 | (187,215) | 408,456 |
| Software | (651,570) | 0 | (135,436) | 530,859 |
| Other intangible fixed assets | (56,066) | 0 | (7,498) | 126,234 |
| Tangible fixed assets | (1,076,479) | 1,395 | (228,785) | 1,511,477 |
| Land and buildings used by the Group for own purpose |
(200,480) | 643 | (31,653) | 610,056 |
| Other land and buildings | (17,192) | 0 | (13,444) | 121,006 |
| of which land value of developed land | (6) | 0 | (7) | 13,664 |
| Office furniture, equipment and other tangible fixed assets |
(781,561) | 226 | (149,200) | 448,876 |
| Leased assets (operating lease) | (77,246) | 526 | (34,488) | 331,539 |
| Total | (2,010,915) | 1,395 | (558,934) | 2,577,025 |
Intangible and tangible fixed assets developed in the financial year 2010 as follows:
| Cost of acquisition or conversion | |||||||
|---|---|---|---|---|---|---|---|
| € 000 | As of 1/1/2010 |
Change in consolidated group |
Exchange differences |
Additions | Disposals | Transfers | As of 31/12/2010 |
| Intangible fixed assets |
1,337,153 | 273,842 | 46,985 | 203,413 | (28,322) | 3,713 | 1,836,783 |
| Goodwill | 611,140 | 22 | 29,152 | 0 | (1,080) | 0 | 639,234 |
| Software | 573,774 | 268,071 | 7,132 | 182,583 | (25,852) | 11,822 | 1,017,529 |
| Other intangible fixed assets |
152,239 | 5,749 | 10,701 | 20,830 | (1,390) | (8,109) | 180,020 |
| Tangible fixed assets |
2,032,101 | 120,079 | 37,011 | 415,293 | (157,057) | (3,713) | 2,443,714 |
| Land and buildings used by the Group for own purpose |
673,711 | 19,167 | 17,255 | 38,625 | (15,536) | 4,103 | 737,325 |
| Other land and buildings |
32,669 | 4,757 | 1,445 | 83,923 | (1,222) | (1,760) | 119,812 |
| of which land value of developed land |
8,826 | 4,617 | 421 | 37 | 0 | 0 | 13,901 |
| Office furniture, equipment and other tangible fixed assets |
1,054,926 | 96,155 | 19,493 | 170,601 | (102,628) | (3,693) | 1,234,854 |
| Leased assets (operating lease) |
270,795 | 0 | (1,182) | 122,144 | (37,671) | (2,363) | 351,723 |
| Total | 3,369,254 | 393,921 | 83,996 | 618,706 | (185,379) | 0 | 4,280,497 |
| Write-ups, amortization, depreciation, impairment | Carrying amount |
|||
|---|---|---|---|---|
| hereof | hereof | |||
| € 000 | Cumulative | Write-ups | Depreciation | 31/12/2010 |
| Intangible fixed assets | (616,967) | 1,258 | (128,093) | 1,219,816 |
| Goodwill | (25,553) | 0 | 0 | 613,681 |
| Software | (537,703) | 0 | (118,977) | 479,826 |
| Other intangible fixed assets | (53,711) | 1,258 | (9,115) | 126,309 |
| Tangible fixed assets | (990,084) | 636 | (212,189) | 1,453,630 |
| Land and buildings used by the Group for own purpose |
(183,735) | 0 | (33,304) | 553,590 |
| Other land and buildings | (7,082) | 0 | (4,923) | 112,730 |
| of which land value of developed land | 0 | 0 | 0 | 13,901 |
| Office furniture, equipment and other tangible fixed assets |
(727,523) | 432 | (142,127) | 507,331 |
| Leased assets (operating lease) | (71,744) | 204 | (31,835) | 279,979 |
| Total | (1,607,051) | 1,894 | (340,282) | 2,673,446 |
Additions to intangible and tangible assets did not include major individual investments.
| € 000 | 2011 | 2010 |
|---|---|---|
| Tax assets | 417,630 | 494,235 |
| Current tax assets | 59,608 | 31,547 |
| Deferred tax assets | 358,021 | 462,688 |
| Receivables arising from non-banking activities | 107,529 | 140,216 |
| Prepayments and other deferrals | 260,535 | 263,197 |
| Clearing claims from securities and payment transfer business | 457,827 | 356,015 |
| Lease in progress | 51,340 | 82,319 |
| Assets held for sale (IFRS 5) | 26,564 | 5,293 |
| Inventories | 174,278 | 146,973 |
| Valuation fair value hedge portfolio | 6,987 | 0 |
| Any other business | 671,014 | 578,641 |
| Total | 2,173,704 | 2,066,889 |
Deferred taxes break down as follows:
| € 000 | 2011 | 2010 |
|---|---|---|
| Deferred tax assets | 358,021 | 462,688 |
| Provisions for deferred taxes | (17,358) | (8,368) |
| Net deferred taxes | 340,663 | 454,320 |
The net deferred taxes result from the following items:
| € 000 | 2011 | 2010 |
|---|---|---|
| Loans and advances to customers | 71,701 | 97,391 |
| Impairment losses on loans and advances | 123,428 | 120,723 |
| Tangible and intangible fixed assets | 14,137 | 20,339 |
| Other assets | 26,333 | 5,079 |
| Provisions for liabilities and charges | 53,904 | 56,852 |
| Trading liabilities | 18,111 | 4,684 |
| Other liabilities | 62,021 | 77,922 |
| Tax loss carry-forwards | 240,419 | 269,811 |
| Other items of the statement of financial position | 48,858 | 43,715 |
| Deferred tax assets | 658,912 | 696,516 |
| Loans and advances to banks | 209 | 3,170 |
| Loans and advances to customers | 30,541 | 37,397 |
| Impairment losses on loans and advances | 56,219 | 23,326 |
| Trading assets | 6,360 | 17,690 |
| Tangible and intangible fixed assets | 71,925 | 67,451 |
| Deposits from customers | 13,527 | 887 |
| Provisions for liabilities and charges | 43 | 9,808 |
| Other liabilities | 11,799 | 12,236 |
| Other items of the statement of financial position | 127,627 | 70,231 |
| Deferred tax liabilities | 318,249 | 242,196 |
| Net deferred taxes | 340,663 | 454,320 |
In the consolidated financial statements, deferred tax assets are recognized for unused tax loss carry-forwards which amounted to € 240,419 thousand (2010: € 269,811 thousand). The tax loss carry-forwards are mainly without any time limit. The Group did not recognize deferred tax assets of € 78,414 thousand (2010: € 22,074 thousand) because from a current point of view there is no prospect of realizing them within a reasonable period of time.
| € 000 | 2011 | 2010 |
|---|---|---|
| Giro and clearing business | 2,290,776 | 2,326,285 |
| Money market business | 26,923,561 | 21,168,107 |
| Long-term refinancing | 8,777,471 | 10,164,790 |
| Total | 37,991,809 | 33,659,182 |
RBI refinances itself periodically with international commercial banks and multinational development banks. These credit contracts contain ownership clauses normally used in business. These clauses give permission to an exceptional termination in the case of change in direct or indirect control over RBI AG, e.g. if Raiffeisen Zentralbank Österreich Aktiengesellschaft loses the majority shareholding in RBI AG. This can lead to increased refinancing costs for RBI in the future.
Deposits from banks classified regionally (counterparty's seat) break down as follows:
| € 000 | 2011 | 2010 |
|---|---|---|
| Austria | 20,648,519 | 16,046,386 |
| Foreign | 17,343,289 | 17,612,796 |
| Total | 37,991,809 | 33,659,182 |
Deposits from banks break down into the following bank segments:
| € 000 | 2011 | 2010 |
|---|---|---|
| Central banks | 837,458 | 1,399,269 |
| Commercial banks | 35,236,763 | 30,948,498 |
| Multilateral development banks | 1,917,587 | 1,311,415 |
| Total | 37,991,809 | 33,659,182 |
| € 000 | 2011 | 2010 |
|---|---|---|
| Sight deposits | 27,472,114 | 23,780,971 |
| Time deposits | 37,994,210 | 32,382,372 |
| Savings deposits | 1,280,910 | 1,469,770 |
| Total | 66,747,234 | 57,633,113 |
Deposits from customers break down analog to Basel II definition as follows:
| € 000 | 2011 | 2010 |
|---|---|---|
| Sovereigns | 1,318,407 | 1,722,770 |
| Corporate customers – large corporates | 33,187,082 | 26,924,075 |
| Corporate customers – mid market | 2,438,661 | 2,489,184 |
| Retail customers – private individuals | 25,422,490 | 22,122,522 |
| Retail customers – small and medium-sized entities | 3,722,779 | 3,672,733 |
| Other | 657,814 | 701,829 |
| Total | 66,747,234 | 57,633,113 |
Deposits from customers classified regionally (counterparty's seat) are as follows:
| € 000 | 2011 | 2010 |
|---|---|---|
| Austria | 6,102,123 | 5,718,613 |
| Foreign | 60,645,111 | 51,914,500 |
| Total | 66,747,234 | 57,633,113 |
| € 000 | 2011 | 2010 |
|---|---|---|
| Bonds and notes issued | 12,761,801 | 15,917,240 |
| Money market instruments issued | 828,722 | 51 |
| Other debt securities issued | 776,291 | 638,091 |
| Total | 14,366,814 | 16,555,382 |
The following table contains debt securities issued exceeding € 200,000 thousand nominal value:
| Issuer | ISIN | Type | Currency | Nominal value in € 000 |
Coupon | Due |
|---|---|---|---|---|---|---|
| RBI AG | XS0412067489 | senior government guaranteed | EUR | 1,500,000 | 3.6% | 5/2/2014 |
| RBI AG | XS0417093753 | senior government guaranteed | EUR | 1,250,000 | 3.0% | 13/3/2012 |
| RBI AG | XS0584381544 | senior public placements | EUR | 1,000,000 | 3.6% | 27/1/2014 |
| RBI AG | XS0597215937 | senior public placements | EUR | 1,000,000 | 2.4% | 4/3/2013 |
| RBI AG | XS0305474461 | senior public placements | EUR | 500,000 | 4.8% | 15/6/2012 |
| RBI AG | XS0284781431 | senior public placements | GBP | 440,180 | 1.1% | 2/2/2012 |
| RBI AG | XS0307006436 | senior public placements | EUR | 350,000 | 1.5% | 25/6/2012 |
| RBI AG | QOXDBA005028 | senior private placements | PLN | 213,728 | 0.0% | 30/11/2015 |
| RBI AG | AT000B011804 | senior private placements | EUR | 200,000 | 3.1% | 30/1/2012 |
| RBI AG | AT000B012000 | senior private placements | EUR | 200,000 | 5.0% | 16/10 /2012 |
| RBI AG | XS0341159316 | senior public placements | EUR | 200,000 | 2.3% | 21/1/2013 |
| $1$ uge $1/3$ | |
|---|---|
| € 000 | As of 1/1/2011 |
Change in consolidated group |
Allocation | Release | Usage | Transfers, exchange differences |
As of 31/12/2011 |
|---|---|---|---|---|---|---|---|
| Severance | |||||||
| payments | 60,770 | 0 | 13,557 | (12,021) | (2,325) | (14) | 59,968 |
| Retirement | |||||||
| benefits | 13,879 | 0 | 9,202 | (2) | (25) | 259 | 23,313 |
| Taxes | 107,131 | (238) | 128,489 | (11,957) | (49,291) | (682) | 173,451 |
| Current | 98,763 | 0 | 116,135 | (9,307) | (49,134) | (363) | 156,093 |
| Deferred | 8,368 | (238) | 12,354 | (2,650) | (157) | (319) | 17,358 |
| Contingent liabilities and commitments |
132,419 | 0 | 96,020 | (66,977) | (2,839) | (7,639) | 150,984 |
| Pending legal issues |
107,755 | 0 | 13,681 | (15,243) | (14,443) | (1,305) | 90,446 |
| Overdue vacation |
50,236 | (10) | 7,680 | (5,311) | 0 | (840) | 51,756 |
| Bonus payments | 148,413 | (15) | 141,443 | (11,661) | (97,485) | (3,646) | 177,050 |
| Restructuring | 5,037 | 0 | 0 | (2,643) | (469) | (273) | 1,653 |
| Other | 46,270 | (1,075) | 31,229 | (14,167) | (21,514) | 1,595 | 42,337 |
| Total | 671,910 | (1,338) | 441,303 | (139,981) | (188,391) | (12,546) | 770,957 |
RBI is involved in pending legal issues, which may occur in the banking business. RBI does not expect that these legal cases will have a material impact on the financial position of the Group.
In the reporting period, provisions for pending legal issues amounted to € 90,446 thousand (2010: € 107,755 thousand). In a Russian network unit, a provison of € 15,834 thousand was built in connection with the cancellation of a rent agreement by Raiffeisenbank Moscow. In RBI AG, a provision of € 12,000 thousand was built for a legal issue regarding the law suit of customers of a funds management company in connection with the payment transfer done by the former RZB. Beyond that, there were no single cases exceeding € 10,000 thousand.
Provisions for severance payments and similar obligations developed as follows:
| € 000 | 2011 | 2010 |
|---|---|---|
| Defined benefit obligation (DBO) as of 1/1 | 60,770 | 9,404 |
| Exchange differences | 10 | (285) |
| Changes in consolidated group | 0 | 42,464 |
| Service cost | 3,934 | 3,107 |
| Interest cost | 2,333 | 1,915 |
| Payments | (5,950) | (4,378) |
| Actuarial gain/loss | (1,129) | 8,543 |
| Defined benefit obligation (DBO) as of 31/12 (=provision) | 59,968 | 60,770 |
Provisions for retirement benefits developed as follows:
| € 000 | 2011 | 2010 |
|---|---|---|
| Defined benefit obligation (DBO) as of 1/1 | 24,873 | 4,960 |
| Change in consolidated group/transfer | 8,956 | 16,798 |
| Current service cost | 1,044 | 886 |
| Past service costs | 500 | 0 |
| Interest cost | 1,080 | 1,039 |
| Benefit payments | (120) | (31) |
| Actuarial gain/loss | (346) | 1,221 |
| Defined benefit obligation (DBO) as of 31/12 | 35,986 | 24,873 |
Plan assets developed as follows:
| € 000 | 2011 | 2010 |
|---|---|---|
| Plan assets at fair value as of 1/1 | 10,994 | 0 |
| Change in consolidated group/transfer | 1,952 | 9,945 |
| Expected return on plan assets | 476 | 433 |
| Contributions to plan assets | 446 | 483 |
| Plan payments | (63) | 0 |
| Actuarial gain/loss | (1,132) | 133 |
| Plan assets at fair value as of 31/12 | 12,673 | 10,994 |
The reconciliation of DBO to provision is as follows:
| € 000 | 2011 | 2010 |
|---|---|---|
| Defined benefit obligation (DBO) | 35,986 | 24,873 |
| Plan assets at fair value | 12,673 | 10,994 |
| Provision as of 31/12 | 23,313 | 13,879 |
The structure of plan assets breaks down as follows:
| Per cent | 2011 | 2010 |
|---|---|---|
| Bonds | 55% | 46% |
| Equities | 26% | 38% |
| Alternative investments | 7% | 9% |
| Property | 4% | 1% |
| Cash | 8% | 6% |
| € 000 | 2011 | 2010 |
|---|---|---|
| Actual return on plan assets | (656) | 566 |
The partition of DBO into wholly/partly funded or wholly unfunded is as follows:
| € 000 | 2011 | 2010 |
|---|---|---|
| Wholly funded | 11,585 | 10,122 |
| Partly funded | 17,624 | 9,066 |
| Wholly unfunded | 6,776 | 5,685 |
| Defined benefit obligation (DBO) | 35,986 | 24,873 |
| € 000 | 2011 | 2010 |
|---|---|---|
| Negative fair values of derivative financial instruments | 8,405,930 | 4,530,916 |
| Interest-based transactions | 6,390,887 | 3,019,044 |
| Currency-based transactions | 1,366,865 | 923,460 |
| Equity-/index-based transactions | 566,323 | 525,677 |
| Credit derivatives business | 67,530 | 43,920 |
| Other transactions | 14,325 | 18,815 |
| Short-selling of trading assets | 565,628 | 425,730 |
| Certificates issued | 743,369 | 784,945 |
| Total | 9,714,926 | 5,741,591 |
| 2011 | 2010 |
|---|---|
| 37,315 | 23,487 |
| 37,315 | 23,487 |
| 5,387 | 453,276 |
| 5,387 | 453,276 |
| 12,967 | 18,332 |
| 736,050 | 768,433 |
| 653,304 | 479,373 |
| 58,437 | 245,169 |
| 24,309 | 43,891 |
| 791,720 | 1,263,528 |
As long as the conditions for hedge accounting according to IAS 39 are fulfilled, derivative financial instruments are measured at their fair values (dirty prices) in their function as hedging instruments. The hedged items in connection with fair value hedges are loans and advances to customers,deposits from banks and debt securities issued, which are taken to hedge against interest rate risk.
Due to a change in the hedging strategy, cash-flow hedging was ended in the second quarter 2011 and replaced by portfolio hedges.
| € 000 | 2011 | 2010 |
|---|---|---|
| Liabilities from non-banking activities | 123,942 | 114,581 |
| Accruals and deferred items | 187,569 | 189,719 |
| Liabilities from dividends | 478 | 541 |
| Clearing claims from securities and payment transfer business | 416,961 | 405,518 |
| Valuation fair value hedge portfolio | 22,432 | 0 |
| Any other business | 763,641 | 533,028 |
| Total | 1,515,024 | 1,243,387 |
| € 000 | 2011 | 2010 |
|---|---|---|
| Hybrid tier 1 capital | 819,010 | 819,077 |
| Subordinated liabilities | 2,729,183 | 2,576,374 |
| Supplementary capital | 602,540 | 605,647 |
| Total | 4,150,733 | 4,001,098 |
The following table contains borrowings that exceed 10 per cent of the subordinated capital:
| Issuer | ISIN | Type | Currency | Nominal value in € 000 | Coupon1 | Due |
|---|---|---|---|---|---|---|
| RBI AG | XS0619437147 | Subordinated capital | EUR | 500,000 | 6.625% | 18/5/2021 |
| RFJ4 | XS0253262025 | Hybrid tier 1 capital | EUR | 500,000 | 5.169% | – |
| RBI AG | XS0289338609 | Subordinated capital | EUR | 500,000 | 4.500% | 5/3/2019 |
| RBI AG | XS0326967832 | Supplementary capital | EUR | 600,000 | 5.770% 29/10/2015 | |
1 Current interest rate, interest clauses are agreed.
RFJ4 … RZB Finance (Jersey) IV Limited, St. Helier
In the reporting period, expenses on subordinated capital totaled € 215,149 thousand (2010: € 193,147 thousand).
| € 000 | 2011 | 2010 |
|---|---|---|
| Consolidated equity | 8,825,228 | 8,250,759 |
| Subscribed capital | 593,412 | 593,323 |
| Participation capital | 2,500,000 | 2,500,000 |
| Capital reserves | 2,570,778 | 2,567,874 |
| Retained earnings | 3,161,038 | 2,589,562 |
| Consolidated profit | 967,663 | 1,087,475 |
| Non-controlling interests | 1,142,894 | 1,065,690 |
| Total | 10,935,786 | 10,403,925 |
The statement of changes in equity is shown on page 139.
As of 31 December 2011, the subscribed capital of RBI AG as defined by the articles of incorporation amounted to € 596,291 thousand. The subscribed capital consists of 195,505,124 non-par bearer shares. After deduction of own shares of 943,771, the stated subscribed capital totaled € 593,412 thousand.
The participation capital according to Section 23 (4) and (5) of the Austrian Banking Act (BWG) issued by Raiffeisen Zentralbank Österreich Aktiengesellschaft and transferred during the merger into Raiffeisen Bank International AG amounted to € 2,500,000 thousand. The participation capital is available for the life of the corporation and the participation issuer may not request redemption. The payment of the first tranche amounting to € 750,000 thousand was made as of 30 December 2008. The payment of the second tranche amounting to € 1,750,000 thousand was carried out as of 6 April 2009. The participation certificates were issued at 100 per cent of par value. The participation certificates are linked to an 8 per cent profit entitlement from par value per year. For the business years 2014 and 2015, the profit entitlement will be raised by 50 basis points each year, for the business year 2016 by 75 basis points and for every following business year by 100 basis points. The upper limit is 12 month EURIBOR plus 1,000 basis points.
The Annual General Meeting held on 8 July 2010 authorized the Management Board to acquire own shares, pursuant to Section 65 (1), item 8 of the Austrian Joint Stock Companies Act (AktG), during a period of 30 months as of the date of the resolution, of up to 10 per cent of the subscribed capital of the company and to withdraw if applicable. This authorization may be exercised in one or several installments by the company, by affiliated companies or, for their account, by third parties. The Management Board was further authorized to decide, with the approval of the Supervisory Board, on the sale of own shares by means other than the stock exchange or a public tender excluding the subscription rights of shareholders. This authorization replaces the authorization to buy back and use own shares that was granted in the Annual General Meeting of 10 June 2008.
The acquisition of own shares mainly serves to cover the obligation of RBI within the framework of the share incentive program (SIP) towards the members of the Management Board and executive employees. These bonus payments are carried out in the form of company shares. In fiscal year 2011 29,138 own shares were allocated to eligible executives and board members on 12 April 2011.
The Annual General Meeting held on 8 July 2010 also authorized the Management Board to acquire own shares for the purpose of securities trading in accordance with Section 65 (1), item 7 of the Austrian Joint Stock Companies Act (AktG) during a period of 30 months from the date of the resolution, of up to a maximum of 5 per cent of the respective subscribed capital of the company. The consideration for each share to be acquired must not be less than half the closing price at the Vienna Stock Exchange on the last day of trading preceding the acquisition and must not exceed twice the closing price at the Vienna Stock Exchange on the last day of trading preceding the acquisiton. This authorization may be exercised in one or several installments by the company, by affiliated companies or, for their account, by third parties.
The Management Board was authorized by the Annual General Meeting held on 8 June 2011, within 5 years after registration of the respective change in the articles of incorporation in the Company Register, to increase the share capital up to € 298,145 thousand against contribution in cash and/or in kind by issuing 97,752,562 new common bearer shares with voting rights while preserving the subscription rights of the shareholders, including the indirect subscription by way of a bank pursuant to Section 153 (6) of the Austrian Joint Stock Companies Act (AktG), and to determine the offering price and terms of the issue with the approval of the Supervisory Board. The Supervisory Board or a committee authorized for this purpose by the Supervisory Board is entitled to adopt amendments to the articles of association that arise upon issuing shares from the authorized capital.
In the Annual General Meeting held on 10 June 2008, the Management Board was given the authorization pursuant to Section 174 (2) of the Austrian Joint Stock Companies Act (AktG) to issue – with the approval of the Supervisory Board – convertible bonds, also in several tranches, within 5 years as of the date of the resolution, for a maximum total nominal amount of € 2,000,000 thousand, to which attaches a conversion or subscription right to obtain a maximum of 15,466,750 ordinary bearer shares of the company with a corresponding pro-rata share in the subscribed capital of a maximum of € 47,174 thousand – and to do so also indirectly by means of a guarantee for an issue of convertible bonds by a subsidiary company, of which the company holds 100 per cent directly, or indirectly, that entails conversion rights to obtain shares of that company – as well as to determine all further conditions (including the currency of the issue), the issue and the conversion procedure for the convertible bonds. The subscription right of shareholders is excluded.
Pursuant to Section 159 (2) item 1 of the Austrian Joint Stock Companies Act (AktG), the subscribed capital has been increased contingently by a maximum of € 47,174 thousand by issuing a maximum of 15,466,750 common bearer shares (contingent capital). The contingent capital increase would only be carried out to the extent that holders of convertible bonds issued under the resolution of the Annual General Meeting of 10 June 2008 make use of their right to convert such bonds into shares of the Company. No convertible bonds have been issued to date, however.
The Annual General Meeting of 9 June 2009 authorized the Management Board of the Company to issue, in one or more tranches, participation rights having equity characteristics pursuant to Section 174 of the Austrian Joint Stock Corporation Act (AktG) in a total nominal amount of up to € 2 billion within 5 years as of the date of the resolution with the approval of the Supervisory Board in accordance with the terms for participation rights to be set by the Management Board and to the exclusion of shareholders' subscription rights. It should be noted that, under the provisions of the relevant laws, participation rights confer no voting rights or other membership rights. Issuing participation rights therefore entails no change of ownership structure from the standpoint of stock corporation law and shareholders' voting rights. The Company decided on 15 July 2009 to strengthen its capital by issuing participation rights in the amount of € 600 million based on the authorizing resolution of June 2009. In the course of the merger with effect from 10 October 2010, the mutual loans and liabilities of the receiving and the transferring company were wiped out. The same is true of the participatory rights in the amount of € 600 million, which had been subscribed in full by RZB. No further participation rights have been issued to date.
The Management Board intends to propose at the Annual General Meeting that a dividend of € 1.05 per share be distributed from Raiffeisen Bank International AG's profit for the financial year 2011, which represents a maximum distribution of € 205,280 thousand, and the remaining amount be carried forward.
The number of shares outstanding developed as follows:
| Number of shares | 2011 | 2010 |
|---|---|---|
| Number of shares issued as of 1/1 | 195,505,124 | 154,667,500 |
| New shares issued | 0 | 40,837,624 |
| Number of shares issued as of 31/12 | 195,505,124 | 195,505,124 |
| Own shares as of 1/1 | (972,909) | (984,511) |
| Purchase of own shares | 0 | 0 |
| Sale of own shares | 29,138 | 11,602 |
| Less own shares as of 31/12 | (943,771) | (972,909) |
| Number of shares outstanding as of 31/12 | 194,561,353 | 194,532,215 |
In 2011, the third allotment of the share incentive program (SIP – SIP allotment 2008) matured. In accordance with the terms and conditions (published in euro adhoc on 29 May 2008) the number of shares shown in the table below was actually transferred:
| Share incentive program (SIP) 2008 Group of persons |
Number of due shares |
Amount with share price of € 39.00 at the allotment day (12/4/2011) |
Number of effective distributed shares |
|---|---|---|---|
| Members of the management board of the company | 11,839 | 461,721 | 7,866 |
| Members of the management boards of bank subsidiaries affiliated with the company |
21,348 | 832,572 | 18,244 |
| Executives of the company and other affiliated companies | 5,515 | 215,085 | 3,028 |
In order to avoid legal uncertainties and in accordance with the program's terms and conditions, eligible employees in 2 countries were given a cash settlement instead of an allotment of shares. In Austria the eligible parties were granted the option of accepting a cash settlement instead of half of the matured shares in order to offset the wage tax payable at the time of transfer. Therefore, the number of actually transferred shares is lower than the number of due shares. The portfolio of own shares was subsequently reduced by the lower number of actually transferred shares.
Under the SIP, a new tranche was previously issued each year – so also in 2011. However, because of the merger of Raiffeisen International with the principal business areas of RZB, no SIP tranche was issued in 2010. This means that on the reporting date contingent shares for 2 allotments were assigned. As of 31 December 2011, the contingent allotment of shares came to 608,964 shares (of which 370,092 shares were attributable to the 2009 allotment and 238,872 shares to the 2011 allotment). The originally announced number of contingently allotted shares changed due to various personnel changes within Group units and due to the maturation of the SIP allotment 2008. This is shown on an aggregated level in the following table:
| Share incentive program (SIP) 2009 (2011) Group of persons |
Number of contingently alloted shares as of 31/12/2011 |
Minimum of allotment of shares |
Maximum of allotment of shares |
|---|---|---|---|
| Members of the management board of the company | 197,135 | 59,141 | 295,703 |
| Members of the management boards of bank subsidiaries affiliated with the company |
287,754 | 86,326 | 431,631 |
| Executives of the company and other affiliated companies | 124,075 | 37,223 | 186,113 |
In the financial year 2011, no own shares were bought back for the share incentive program.
| 31/12/2011 | Due at call or | Up to | More than | More than | More than |
|---|---|---|---|---|---|
| € 000 | without maturity |
3 months | 3 months, up to 1 year |
1 year, up to 5 years |
5 years |
| Cash reserve | 11,401,747 | 0 | 0 | 0 | 0 |
| Loans and advances to banks | 2,918,155 | 17,467,034 | 2,246,951 | 2,074,937 | 1,040,966 |
| Loans and advances to customers | 7,149,662 | 15,713,952 | 14,023,158 | 28,383,105 | 16,306,358 |
| Impairment losses on loans and advances | (5,053,212) | 0 | 0 | 0 | 0 |
| Trading assets | 285,826 | 585,897 | 1,103,401 | 4,416,329 | 4,225,218 |
| Financial investments | 628,842 | 3,494,911 | 2,569,972 | 7,170,697 | 2,670,542 |
| Investments in associates | 5,017 | 0 | 0 | 0 | 0 |
| Sundry assets | 3,047,575 | 1,239,553 | 502,560 | 806,366 | 559,483 |
| Total assets | 20,383,612 | 38,501,348 | 20,446,043 | 42,851,433 | 24,802,567 |
| Deposits from banks | 2,180,314 | 20,490,714 | 4,179,972 | 8,769,752 | 2,371,055 |
| Deposits from customers | 26,688,689 | 22,323,240 | 11,200,812 | 4,302,527 | 2,231,966 |
| Debt securities issued | 0 | 3,282,638 | 2,495,268 | 8,238,888 | 350,020 |
| Trading liabilities | 506,363 | 904,648 | 628,585 | 3,683,967 | 3,991,363 |
| Subordinated capital | 0 | 5,364 | 9,243 | 822,521 | 3,313,605 |
| Sundry liabilities | 1,842,399 | 669,463 | 72,870 | 182,570 | 310,400 |
| Subtotal | 31,217,765 | 47,676,067 | 18,586,749 | 26,000,225 | 12,568,410 |
| Equity | 10,935,786 | 0 | 0 | 0 | 0 |
| Total equity and liabilities | 42,153,551 | 47,676,067 | 18,586,749 | 26,000,225 | 12,568,410 |
| 31/12/2010 | Due at call or | Up to | More than | More than | More than |
|---|---|---|---|---|---|
| € 000 | without maturity |
3 months | 3 months, up to 1 year |
1 year, up to 5 years |
5 years |
| Cash reserve | 4,806,891 | 0 | 0 | 0 | 0 |
| Loans and advances to banks | 2,370,629 | 14,035,006 | 2,004,712 | 2,266,223 | 855,836 |
| Loans and advances to customers | 6,843,035 | 12,583,218 | 13,704,026 | 26,393,446 | 16,133,336 |
| Impairment losses on loans and advances | (4,755,872) | 0 | 0 | 0 | 0 |
| Trading assets | 472,371 | 898,824 | 1,479,581 | 3,194,900 | 2,022,717 |
| Financial investments | 651,756 | 2,947,111 | 2,383,399 | 8,040,134 | 5,608,501 |
| Investments in associates | 4,961 | 0 | 0 | 0 | 0 |
| Sundry assets | 3,100,924 | 1,080,104 | 562,630 | 1,120,381 | 364,334 |
| Total assets | 13,494,695 | 31,544,263 | 20,134,348 | 41,015,084 | 24,984,724 |
| Deposits from banks | 2,160,974 | 14,808,693 | 6,290,949 | 7,954,354 | 2,444,212 |
| Deposits from customers | 24,396,045 | 19,402,108 | 8,648,147 | 3,115,763 | 2,071,050 |
| Debt securities issued | 0 | 1,637,796 | 4,958,046 | 9,134,666 | 824,874 |
| Trading liabilities | 412,115 | 495,096 | 510,551 | 2,381,893 | 1,941,936 |
| Subordinated capital | 0 | 193,923 | 4,607 | 790,090 | 3,012,478 |
| Sundry liabilities | 223,768 | 812,496 | 245,627 | 770,423 | 1,126,509 |
| Subtotal | 27,192,902 | 37,350,112 | 20,657,927 | 24,147,189 | 11,421,059 |
| Equity | 10,403,925 | 0 | 0 | 0 | 0 |
| Total equity and liabilities | 37,596,827 | 37,350,112 | 20,657,927 | 24,147,189 | 11,421,059 |
Companies can carry out business with related parties that may affect the entity's asset, financial and earnings position. Information about related parties refers to the top ot the consolidated group of Raiffeisen-Landesbanken-Holding GmbH. Parent companies are Raiffeisen-Landesbanken-Holding GmbH, Vienna, and Raiffeisen Zentralbank Österreich Aktiengesellschaft, Vienna. Disclosures on Raiffeisen Bank International's relations to key management are reported under note (53) relations to key management.
As of 31 December 2011, the transactions with related parties were as follows:
| 31/12/2011 | Parent | Affiliated | Companies | Other |
|---|---|---|---|---|
| companies | companies | valued at | interests | |
| € 000 | equity | |||
| Loans and advances to banks | 11,017,455 | 222,519 | 234,676 | 213,899 |
| Loans and advances to customers | 0 | 1,237,346 | 406,106 | 356,152 |
| Trading assets | 0 | 29,249 | 16,861 | 3,229 |
| Financial investments | 0 | 292,440 | 2,477 | 300,771 |
| Investments in associates | 0 | 0 | 5,017 | 0 |
| Other assets including derivatives | 842 | 9,270 | 177 | 616 |
| Deposits from banks | 13,005,726 | 3,027 | 6,002,400 | 156,443 |
| Deposits from customers | 942 | 442,173 | 243,325 | 562,534 |
| Debt securities issued | 51,779 | 391 | 0 | 0 |
| Provisions for liabilities and charges | 0 | 64 | 0 | 51 |
| Trading liabilities | 0 | 16,197 | 37,355 | 2,178 |
| Other liabilities including derivatives | 3,573 | 770 | 636 | 95 |
| Guarantees given | 0 | 61,451 | 70,789 | 23,019 |
| Guarantees received | 0 | 414,494 | 145,720 | 2,605 |
As of 31 December 2010, the transactions with related parties were as follows:
| 31/12/2010 | Parent | Affiliated | Companies | Other |
|---|---|---|---|---|
| companies | companies | valued at | interests | |
| € 000 | equity | |||
| Loans and advances to banks | 7,892,302 | 224,153 | 274,313 | 243,860 |
| Loans and advances to customers | 0 | 1,113,360 | 437,453 | 353,544 |
| Trading assets | 0 | 17,113 | 20,260 | 18,554 |
| Financial investments | 0 | 233,975 | 2,483 | 351,572 |
| Investments in associates | 0 | 0 | 4,961 | 0 |
| Other assets including derivatives | 4,943 | 19,497 | 28 | 52 |
| Deposits from banks | 7,151,497 | 3,386 | 6,908,279 | 115,182 |
| Deposits from customers | 1,038 | 527,263 | 1,950 | 112,294 |
| Debt securities issued | 0 | 974 | 0 | 0 |
| Provisions for liabilities and charges | 0 | 345 | 0 | 10 |
| Trading liabilities | 0 | 23,476 | 25,840 | 17,756 |
| Other liabilities including derivatives | 0 | 57,305 | 25 | 42 |
| Guarantees given | 0 | 73,637 | 264,031 | 4,937 |
| Guarantees received | 0 | 389,086 | 142,505 | 998 |
The consolidated financial statements consist of the following volumes of assets and liabilities denominated in foreign currencies:
| € 000 | 2011 | 2010 |
|---|---|---|
| Assets | 63,743,917 | 59,512,105 |
| Liabilities | 53,369,512 | 45,622,385 |
Assets and liabilities with counterparties outside Austria are as follows:
| € 000 | 2011 | 2010 |
|---|---|---|
| Assets | 107,453,372 | 105,181,063 |
| Liabilities | 86,575,711 | 75,992,302 |
Securitization is the packaging of designated portfolios of loans or leasing claims with an appropriate level of credit enhancement and the redistribution of these portfolios to investors. The objective of RBI's securitization transactions is to ease the strain relief on the Group's regulatory own funds and to use additional refinancing sources.
In the financial year 2011 no new securitizations were made. Both true sale transactions (Warehousing) ROOF Bulgaria 2008- 1 and ROOF Romania 2008-1 already closed in 2008 have not yet been transferred to final securitization. The reason for this is the developments on the international capital markets, and the resulting narrow liquidity. Instead, the warehousing has been prolonged and the current warehousing structures kept alive by the placement of notes to Group internal investors until further notice. Hence, the portfolio's significant chances and risks remain within the Group as well. At year-end 2011 the nonderecognized loans of ROOF Bulgaria 2008-1 amounted to € 73,099 thousand (2010: € 104,031 thousand), those of ROOF Romania 2008-1 came to € 103,899 thousand (2010: € 140,747 thousand).
Regarding true sale transaction ROOF Poland 2008-1 consisting of car leasing contracts, the total volume of the loans amounts to € 84,574 thousand as of 31 December 2011 (2010: € 195,020 thousand). The decline in volume is due to the maturing of the portfolio and to fluctuating exchange rates.
From a Group view, the non-derecognized loans arising from the true sale transaction ROOF Russia 2007-1 amounted to € 18,764 thousand at year-end 2011 (2010: € 53,178 thousand). In this case, the decrease of the carrying value is mainly explained by the maturity of the consumer loan volume in original currency as well as the currency translation effect resulting from conversion from USD to euro. Within the space of a year, the consumer loan volume in original currency matured by € 34.414 thousand. The possibility to replenish already redeemed volumes were no longer perceived.
Within the scope of synthetic securitizations ROOF CEE 2006-1, the non-derecognized loans amounted to € 162,480 thousand at year-end 2011 (2010: € 392,616 thousand). The differences compared to the volumes at the beginning of the transactions are due to maturing volumes and to changes in currency exchange rates.
| € 000 | Seller of claims or secured party | Date of contract |
End of maturity |
Volume Portfolio | Junior tranche |
|
|---|---|---|---|---|---|---|
| True sale transaction ROOF Poland 2008(1) |
Raiffeisen-Leasing Polska S.A., Warsaw (PL) |
January 2008 |
December 2014 |
290,000 | Car leasing contracts |
1.3% |
| True sale transaction ROOF Russia 2007(1) |
ZAO Raiffeisenbank, Moscow (RUS) | May 2007 |
May 2017 |
297,000 Car loans | 1.9% | |
| Synthetic transaction ROOF CEE 2006(1) |
Raiffeisen Bank Polska S.A., Warsaw (PL) Raiffeisenbank a.s., Prague (CZ) |
March 2006 |
March 2019 |
450,000 | Company loans |
1.8% |
Up to now the following transactions have been executed with external contractual partners (the indicated amounts represent the transaction volumes at the closing date):
Besides the above-mentioned refinancing and packaging of designated portfolios of loans or leasing claims, RBI also acts as an investor in ABS-structures. Essentially, this is about investments in Structured Credit Products. During the financial year 2011 market value changes led to a negative valuation result of about € 2 million (2010: positive valuation result of € 9 million).
As of 31 December 2011, RBI reported the following investment exposure (excluding CDS):
| € 000 | Outstanding notional amount | Carrying amount |
|---|---|---|
| Asset-backed securities (ABS) | 88,081 | 88,070 |
| Mortgage-backed securities (MBS) | 255,093 | 250,939 |
| Collateralized debt obligation (CDO) | 143,843 | 26,243 |
| Other | 29,504 | 1,004 |
| Total | 516,521 | 366,255 |
As of 31 December 2010 the corresponding exposure of Structured Credit Products composed as stated in the below table:
| € 000 | Outstanding notional amount | Carrying amount |
|---|---|---|
| Asset-backed securities (ABS) | 145,907 | 145,725 |
| Mortgage-backed securities (MBS) | 190,193 | 180,618 |
| Collateralized debt obligation (CDO) | 394,519 | 148,477 |
| Other | 29,203 | 1,466 |
| Total | 759,821 | 476,285 |
The following repurchase and redelivery commitments are shown as of 31 December:
| € 000 | 2011 | 2010 |
|---|---|---|
| Genuine repurchase agreements as borrower | ||
| Deposits from banks | 1,548,670 | 4,976,815 |
| Deposits from customers | 3,719,912 | 1,342,934 |
| Total | 5,268,582 | 6,319,750 |
| € 000 | 2011 | 2010 |
|---|---|---|
| Genuine repurchase agreements as lender (reverse repurchase agreement) | ||
| Loans and advances to banks | 3,577,362 | 1,457,117 |
| Loans and advances to customers | 1,468,720 | 110,791 |
| Total | 5,046,083 | 1,567,908 |
| € 000 | 2011 | 2010 |
|---|---|---|
| Securities sold in genuine sale and repurchase agreement | 4,801,503 | 5,415,578 |
| hereof sold or repledged | 4,742,840 | 5,355,684 |
| hereof bonds, notes and other fixed-interest securities | 4,607,688 | 5,355,684 |
| Securities purchased in a genuine sale and repurchase agreement | 4,851,646 | 1,483,131 |
| hereof sold or repledged | 1,485,715 | 57,059 |
| hereof bonds, notes and other fixed-interest securities | 1,453,894 | 56,433 |
| hereof shares and other variable-yield securities | 31,326 | 0 |
| hereof loans and advances | 495 | 626 |
Within the framework of securities lending, borrowed securities amounted to € 1,053,999 thousand (2010: € 973,283 thousand) and loaned securities amounted to € 2,335,047 thousand (2010: 3,912,527 thousand).
The following liabilities are secured by assets shown in the statement of financial position:
| € 000 | 2011 | 2010 |
|---|---|---|
| Deposits from banks | 5,092,553 | 8,145,418 |
| Deposits from customers | 157,652 | 111,290 |
| Debt securities issued | 0 | 21,802 |
| Other liabilities | 154,992 | 157,208 |
| Contingent liabilities and commitments | 1,266 | 2,232 |
| Total | 5,406,464 | 8,437,949 |
The following assets are provided as collateral for the obligations:
| € 000 | 2011 | 2010 |
|---|---|---|
| Loans and advances to banks | 3,569,940 | 4,126,775 |
| Loans and advances to customers | 1,366,315 | 2,632,093 |
| Trading assets | 285,047 | 647,692 |
| Financial investments | 2,581,263 | 2,032,816 |
| Total | 7,802,565 | 9,439,376 |
| € 000 | 2011 | 2010 |
|---|---|---|
| Gross investment value | 3,469,649 | 3,466,303 |
| Minimum lease payments | 3,469,649 | 3,463,930 |
| Up to 3 months | 425,202 | 437,505 |
| More than 3 months, up to 1 year | 840,204 | 882,153 |
| More than 1 year, up to 5 years | 1,852,608 | 1,769,251 |
| More than 5 years | 351,635 | 375,021 |
| Non-guaranteed residual value | 0 | 2,373 |
| Unearned finance income | 476,184 | 407,330 |
| Up to 3 months | 48,394 | 49,796 |
| More than 3 months, up to 1 year | 116,918 | 114,246 |
| More than 1 year, up to 5 years | 249,014 | 203,685 |
| More than 5 years | 61,858 | 39,603 |
| Net investment value | 2,993,465 | 3,058,973 |
As of 31 December 2011, write-offs on unrecoverable minimum lease payments outstanding totaled € 61,205 thousand (2010: € 39,958 thousand).
Assets under finance leases break down as follows:
| € 000 | 2011 | 2010 |
|---|---|---|
| Vehicles leasing | 1,791,830 | 1,814,022 |
| Real estate leasing | 581,392 | 587,099 |
| Equipment leasing | 620,242 | 657,852 |
| Total | 2,993,465 | 3,058,973 |
Future minimum lease payments under non-cancelable operating leases are as follows:
| € 000 | 2011 | 2010 |
|---|---|---|
| Up to 1 year | 41,670 | 46,961 |
| More than 1 year, up to 5 years | 66,907 | 64,388 |
| More than 5 years | 66,499 | 84,068 |
| Total | 175,075 | 195,417 |
Future minimum lease payments under non-cancelable operating leases are as follows:
| € 000 | 2011 | 2010 |
|---|---|---|
| Up to 1 year | 81,047 | 92,936 |
| More than 1 year, up to 5 years | 163,769 | 167,327 |
| More than 5 years | 14,618 | 22,356 |
| Total | 259,434 | 282,619 |
Active risk management is a core competency of RBI. In order to effectively identify, measure, and manage risks the Group continues to develop its comprehensive risk management system. Risk management is an integrated part of overall bank management. In particular, in addition to legal and regulatory requirements, it takes into account the nature, scale, and complexity of the business activities and the resulting risks. The risk report describes the principles and organization of risk management and explains the current risk exposures in all material risk categories.
RBI has a system of risk principles and procedures in place for measuring and monitoring risk, which is aimed at controlling and managing material risks at all banks and specialist companies in the Group. The risk policies and risk management principles are laid out by the Management Board of RBI. The principles include the following risk policies:
Ex ante and ex post control: Risks are consistently measured within the scope of product selling and in risk-adjusted performance measurement. Thereby it is ensured that business in general is conducted only under risk-return considerations and that there are no incentives for taking high risks.
Individual risk management units of the Group create detailed risk strategies, which set more concrete risk targets and specific standards in compliance with these general principles. The overall Group risk strategy is derived from the Group's business strategy and adds risk relevant aspects to the planned business structure and strategic development. These aspects include e.g. structural limits and capital ratio targets which have to be met in the budgeting process and which frame upcoming business decisions. More specific targets for individual risk categories are set in detailed risk strategies. The credit risk strategy of RBI, for instance, sets credit portfolio limits for individual countries and segments and defines the credit approval authority for limit applications.
The Management Board of RBI ensures the proper organization and ongoing development of risk management. It decides which procedures are to be employed for identifying, measuring, and monitoring risks, and makes steering decisions according to the created risk reports and analyses. The Management Board is supported in implementing these tasks by independent risk management units and special committees.
Risk management functions are performed on different levels in the Group. RBI AG develops and implements the relevant concepts in coordination with RZB AG as the parent credit institution and in cooperation with its subsidiaries. The central risk management functions are responsible for the adequate and appropriate implementation of the Group's risk management processes. In particular, they establish common group directives and set business-specific standards, tools, and practices for all Group entities.
In addition, local risk management units are established in the different Group entities of RBI. They implement the risk policies for specific risk types and take active steering decisions within the approved risk budgets in order to achieve the targets set in the business policy. For this purpose, they monitor resulting risks using standardized measurement tools and report them to central risk management units via defined interfaces.
The central Risk Controlling division assumes the independent risk controlling function required by banking law. Amongst others, this division is responsible for developing the Group-wide framework for overall bank risk management (integrating all risk types) and preparing independent reports on the risk profile for the Management Board and the heads of individual business units. It also measures required risk coverage capital for different business units and calculates the utilization of the allocated risk capital budgets in the internal capital adequacy framework,.
The Risk Management Committee is responsible for ongoing development and implementation of methods and parameters for risk quantification models and for refining steering instruments. The committee also analyzes the current risk situation with respect to internal capital adequacy and the corresponding risk limits. It approves risk management and controlling activities (like the allocation of risk capital) and advises the Management Board in these matters.
The Market Risk Committee controls market risks of trading and banking book transactions of RBI and establishes corresponding limits and processes. In particular, it relies on profit and loss reports, the amount of risks taken and the limit utilization, as well as the results of scenario analyses and stress tests with respect to market risks for controlling.
The Credit Committees are staffed by front office and back office divisions with different participants depending on the customer segment (corporate customers, financial institutions and sovereigns, and retail). They decide upon the specific lending criteria for different customer segments and countries. And they approve all credit decisions concerning them according to the credit approval authority (depending on rating and exposure size).
The Group Asset/Liability Committee assesses and manages balance sheet and liquidity risks and defines the standards for internal funds transfer pricing. In this context it plays an important role for the Group's long-term funding planning and the hedging of structural interest rate and foreign exchange risks.
The Credit Portfolio Committees define the credit portfolio strategies for different customer segments. In these committees, representatives from business and risk management divisions together discuss the risks and opportunities of different customer segments (e.g. industries, countries, retail products). Based on the discussion, credit portfolio management then develops lending policies and sets limits steering the future credit portfolio.
Quality assurance with respect to risk management refers to ensuring the integrity, soundness, and accuracy of processes, models, calculations, and data sources. This should make sure that the Group adheres to all legal requirements and that it can achieve the highest standards in risk management related operations.
All these aspects are coordinated by the central division Organization & Internal Control System which continuously analyzes the internal control system and – if actions are necessary for closing any deficiencies – is also responsible for tracking their implementation.
Two very important functions in assuring independent oversight are performed by the divisions Audit and Compliance. Independent internal auditing is a legal requirement and a central pillar of the internal control system. Audit periodically assesses all business processes and contributes considerably to securing and improving them. It sends its reports directly to the Management Board of RBI which discusses them on a regular basis in its board meetings.
The Compliance Office is responsible for all issues concerning compliance with legal requirements. It is supplementary to and at the same time an integral part of the internal control system and helps to prevent any shortcomings in daily operations.
Moreover, an independent and objective audit, free of potential conflicts, is carried out during the audit of the annual financial statements by the auditing companies. Finally, RBI is continuously supervised by the Austrian Financial Markets Authority and by local supervisors in those countries, where RBI is represented by branches or banking subsidiaries.
Maintaining an adequate level of capital is a core objective of risk management at RBI. Capital requirements are monitored regularly based on the actual risk level as measured by internal models, and inchoosing appropriate models the materiality of risks is taken into account. This concept of overall bank risk management provides for capital requirements from a regulatory point of view (sustainability and going concern perspective) and from an economic point of view (target rating perspective). Thus it covers the quantitative aspects of the internal capital adequacy assessment process (ICAAP) as required by Basel II (Pillar 2) regulations. The full ICAAP process of RBI is audited during the supervisory review process for RZB Group of Credit Institutions by the Austrian Financial Markets Authority on an annual basis.
| Objective | Description of risk | Measurement technique | Confidence level |
|---|---|---|---|
| Target rating per spective |
Risk of not being able to satisfy claims of the Group's senior debt holders |
Unexpected losses on an annual basis (economic capital) must not exceed the present value of equity and subordinated liabilities |
99.95 per cent as derived from the default probability implied by the target rating |
| Going-Concern Perspektive |
Risk of not meeting the regulatory capital require ment |
Risk-taking capacity (projected earnings plus capital exceeding regulatory re quirements) must not fall below the annualized value-at-risk of the Group |
99 per cent reflecting the owners' willingness to inject additional own funds |
| Sustainability per spective |
Risk of falling short of a sustainable core capital ratio over a full business cycle |
Capital and loss projection for a three year planning period based on a severe macroeconomic downturn scenario |
70-90 per cent based on the management decision that the Group might be required to tem porarily reduce risks or raise additional core capital |
Risks in the target rating perspective are measured based on economic capital which represents a comparable measure across all types of risks. It is calculated as the sum of unexpected losses stemming from different Group units and different risk categories (credit, participation, market, and operational risk). In addition, a general buffer for other risks not explicitly quantified is held on Group level.
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 event.
In total, economic capital has been reduced by 6 per cent compared to last year. It shows – as in the previous year – that credit risk of asset class corporate customers remains the dominant risk category for RBI. Its share in total risk is 39 per cent; credit risks in total accounts for 74 per cent of economic capital. Market risk accounts for 7 per cent and operational risk for 9 per
cent. In addition a general risk buffer is allocated for other risks as well.
The economic capital is compared to internal capital, which mainly denotes equity and subordinated capital of the Group. This capital form serves as a primary provision for risk coverage, for servicing claims of senior debtors if the bank should incur losses. Total utilization of available risk capital (the ratio of economic capital to internal capital) was 62.7 per cent at year end (2010: 74.2 per cent).
In the regional break down of economic capital as of 31 Decmber 2011 the largest share, at around 30 per cent (2010: 26 per cent), is allocated to Group units located in Central Europe. Network units in the Czech Republik and Slovakia contribute most to this total risk potential, due to their high credit exposure.
Economic capital is an important instrument in overall bank risk management. Economic capital limits are allocated to individual business segments during the annual budgeting process and are complemented for day-to-day management by volume, sensitivity, or valueat-risk limits. In RBI this planning is done on a revolving basis for the upcoming three years and incorporates the future development of economic capital as well as
available internal capital. Economic capital thus substantially influences the plans for future lending activities and the overall limit for taking market risks.
Risk-adjusted performance measurement also is based on this risk measure. The profitability of business units is set in relation to the amount of economic capital attributed to these units (risk-adjusted return on risk-adjusted capital, RORAC), which yields a comparable performance measure for all business units of the Group. This measure is used in turn as a key figure for overall bank management, for future capital allocations to business units, and influences the compensation of the Group's executive management.
Parallel to that procedure, internal capital adequacy also is assessed with focus on the uninterrupted operation of the Group on a going concern basis. In this perspective, risks again are compared to risk taking capacity – now with a focus on regulatory capital and minimum capital requirements.
In line with this target, risk taking capacity is calculated as the amount of planned profits, expected risks costs, and the excess of own funds (taking into account various limits on eligible capital). This capital amount is compared to the overall value-at-risk (including expected losses). Quantitative models used in the calculation thereof are mostly comparable to the target rating perspective, (albeit on a lower 99 per cent confidence level). Using this perspective the Group ensures adequate regulatory capitalization (going concern) with the given probability.
Internal targets for regulatory capital ratios consequently are intentionally set higher than the legal minimum, in order to be able to fulfill regulatory capital requirements at all times and to account for other risks, which are not considered in the regulatory requirements. In this process, regulatory capital requirements are calculated on Group level according to Austrian regulations. Additional local regulatory capital requirements for individual Group units can be met by adequate structural balance sheet measures.
In the year 2011 this objective has been continuously met on Group level. The slight reduction of the risk taking capacity during the first three quarters is mainly explained by the regulatory treatment of accrued profits. They are counted (net of planned dividend payments) to eligible own funds only after the annual report has been audited and thus only increase risk taking capacity as of December. Regulatory capital requirements, on the other hand, have increased already during the year, in particular due to higher lending volumes.
The main goal of the sustainability perspective is to ensure that RBI can maintain a sufficiently high core capital ratio at the end of a multi-year planning period also in a severe macroeconomic downturn scenario. This analysis is based on a multi-year macroeconomic stress test where hypothetical market developments in a severe but realistic economic downturn scenario are simulated. The risk parameters considered are amongst others: interest rates, foreign exchange rates and securities prices, as well as changes in default probabilities and rating migrations in the credit portfolio.
The main focus of this integrated stress test is the resulting core capital ratio at the end of the multi-year period. It should not fall below a sustainable level and thus neither require the bank to substantially increase capital nor to significantly reduce business activities. The current minimum amount of core capital thus is determined by the size of the potential economic downturn. In this downturn scenario the need for allocating loan loss provisions, potential procyclical effects that increase minimum regulatory capital requirements, the impact of foreign exchange fluctuations as well as other valuation and earnings effects are incorporated.
This perspective thus also complements traditional risk measurement based on the value-at-risk concept (which is in general based on historic data). Therefore it can incorporate exceptional market situations that have not been observed in the past and it is possible to estimate the potential impact of such developments. The stress test also allows for analyzing risk concentrations (e.g. individual positions, industries, or geographical regions) and gives insight into the profitability, liquidity situation, and solvability under extreme situations. Based on these analyses risk management in RBI enhances portfolio diversification, for example via limits for the total exposure of individual industry segments and countries and through ongoing updates to its lending standards.
In RBI, credit risk stems mainly from default risks that arise from business with retail and corporate customers, other banks and sovereign borrowers. It is by far the most important risk category in RBI, as also indicated by internal and regulatory capital requirements. Credit risk thus is analyzed and monitored both on an individual loan and customer basis as well as on a portfolio basis in the Group. Credit risk management and lending decisions are based on the respective credit risk policies, credit risk manuals, and the corresponding tools and processes which have been developed for this purpose.
The internal control system for credit risks includes different types of monitoring measures, which are tightly integrated into the work flow – from the customer's initial credit application, to the bank's credit approval, and finally to the repayment of the loan.
No lending transaction is performed in the non-retail segments without running through the limit application process beforehand. This process is also consistently applied – besides new lending – to increases in existing limits, roll-overs, overdrafts, and if changes in the risk profile of a borrower occur (e.g. with respect to the financial situation of the borrower, the terms and conditions, or collateral) compared to the time the original lending decision was made. In addition it is used when setting counterparty limits in treasury and investment banking operations, other credit limits, and for equity participations.
Credit decisions are made within the context of a hierarchical competence authority scheme depending on the type and size of a loan. It always requires the approval of the business and the credit risk management divisions for individual limit decisions or when performing regular rating renewals. If the individual decision-making parties disagree, the potential transaction will have to be decided upon by the next higher-ranking credit authority.
The whole limit application process is based on defined uniform principles and rules. Account management for multinational customers, who do business simultaneously with more than one member of RBI, is supported by the Global Account Management System, for example. This is made possible by Group-wide unique customer identification in non-retail asset classes.
The limit application process in the retail segment is stronger automated due to the high number of applications and lower exposure amounts. Limit applications often are assessed and approved in central processing centers based on credit score cards. This process is facilitated by the respective IT systems.
Credit portfolio management in RBI is, amongst others, based on the credit portfolio strategy. This strategy limits the exposure amount in different countries, industries or product types and thus prevents undesired risk concentrations. On top of that, analyzing the long-term potential of different markets is a routine activity. This allows for an early strategic repositioning of future lending activities.
The following table translates balance sheet items (bank and trading book positions) into the maximum credit exposure, which is used in portfolio management. It includes on-balance exposures and off-balance sheet exposures before the application of credit-conversion factors and thus represents the total credit exposure. It is not reduced by the effects of credit risk mitigation like 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 different values used for internal portfolio management and external financial accounting are the different scope of consolidation (regulatory vs. accounting rules according to IFRS), other definitions for the loan exposure and different valuation rules.
| € 000 | 2011 | 20101 |
|---|---|---|
| Cash reserve | 9,347,721 | 4,806,891 |
| Loans and advances to banks | 25,748,044 | 21,532,406 |
| Loans and advances to customers | 81,576,235 | 75,657,061 |
| Trading assets | 10,616,671 | 8,068,393 |
| Derivatives | 1,404,809 | 1,488,036 |
| Financial investments | 15,836,862 | 19,246,754 |
| Other assets | 239,822 | 227,152 |
| Contingent liabilities | 13,280,487 | 11,855,528 |
| Commitments | 12,624,734 | 11,755,884 |
| Revocable credit lines | 14,847,947 | 11,992,462 |
| Valuation and disclosure differences | 1,176,923 | 1,683,746 |
| Total | 186,700,256 | 168,314,313 |
1 Adjustments of previous year figures due to different mapping.
2 Balance positions containing 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 1.5, 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 10 classes. 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).
The internal rating model for corporates takes into account qualitative factors as well as several business and performance figures (e.g. interest cover, EBT margin, EBTDA margin, equity ratio, return on assets, debt amortization period), which are tailored to the various industries and financial reporting standards.
The following table provides a breakdown of the maximum credit exposure according to the internal rating of corporates (large corporates and small business) in € thousand. In the overall assessment of credit risk collateral and recovery rates must also be taken into account:
| € 000 | 2011 | Share | 2010 | Share | |
|---|---|---|---|---|---|
| 0.5 | Minimal Risk | 1,266,170 | 1.4% | 1,171,229 | 1.4% |
| 1.0 | Excellent credit standing | 7,899,653 | 8.9% | 7,642,774 | 9.4% |
| 1.5 | Very good credit standing | 8,938,731 | 10.0% | 7,729,205 | 9.6% |
| 2.0 | Good credit standing | 12,745,701 | 14.3% | 9,959,642 | 12.3% |
| 2.5 | Sound credit standing | 15,629,626 | 17.5% | 11,205,972 | 13.8% |
| 3.0 | Acceptable credit standing | 14,551,590 | 16.3% | 12,313,993 | 15.2% |
| 3.5 | Marginal credit standing | 12,505,943 | 14.0% | 13,182,943 | 16.3% |
| 4.0 | Weak credit standing/sub-standard | 6,384,399 | 7.2% | 7,663,581 | 9.5% |
| 4.5 | Very weak credit standing/doubtful | 3,803,250 | 4.3% | 4,282,039 | 5.3% |
| 5.0 | Default | 4,609,661 | 5.2% | 4,287,339 | 5.3% |
| NR | Not rated | 831,022 | 0.9% | 1,472,076 | 1.8% |
| Total | 89,165,748 | 100.0% | 80,910,794 | 100.0% |
The maximum credit exposure to corporates in 2011 amounted to € 89.165.748 thousand. Group Corporates (€ 37.283.636 thousand) is the largest segment, followed by Central Europe (€ 18.649.280 thousand) and Southeastern Europe (€ 11.230.092 thousand). Russisa (€ 10.795.370 thousand), CIS Other (€ 4.093.986 thousand), Group Markets (€ 6.185.496 thousand) and Corporate Center at € 927.888 thousand complete the picture.
The average credit portfolio quality in the corporate credit book improved significantly during the reporting period. The share of loans with weak or lower credit standing has been reduced by 5.6 percentage points to 25.5 per cent. Vice versa loans with good credit standing up to minimal risk increased from 32.8 per cent to 34.6 per cent. On the one hand, this improvement resulted from rating upgrades of existing customers, where the positive economic development compared to the previous year (e.g. in the Ukraine) lead to an improvement in the internal rating. On the other hand, this also reflects active credit portfolio management, which directs credit growth mainly to economically successful markets like e.g. Russia or Asia; and the high lending standards demand that new loans are extended mainly to customers with good credit ratings. Segment Group Corporates shows the highest exposure increase compared to last year and at the same time has the lowest average default probability. Due to the economic and political development in Hungary (bank tax and foreign currency conversion) the exposure of corporate customers in Hungary decreased by € 282.051 thousand.
All in all the credit exposure in targeted industries (e.g. consumer non-cyclical, energy) increased strongly whereas credit growth in restricted industries such as real estate and construction was much weaker in comparison.
Defaulted exposures according to Basel II (rating 5.0) amounted to 5.2 per cent of the total credit exposure (€ 4,609,661 thousand), with the segment Central Europe affected most with € 1,234,996 thousand. Slightly less than half of the unrated credit exposure is due to small loans. The share of unrated exposure against corporates, which increased in 2010 due to the merger, has been strongly reduced again.
The following table provides a breakdown by county of risk of the maximum credit exposure for corporate customers structured by regions:
| € 000 | 2011 | Share | 2010 | Share |
|---|---|---|---|---|
| Central Europe | 18,649,280 | 20.9% | 18,410,566 | 20.6% |
| Western Europe | 11,658,129 | 13.1% | 10,911,767 | 12.2% |
| Southeastern Europe | 11,230,092 | 12.6% | 11,330,339 | 12.7% |
| Russia | 10,795,370 | 12.1% | 9,614,875 | 10.8% |
| Austria | 17,215,202 | 19.3% | 16,332,452 | 18.3% |
| CIS Other | 4,093,986 | 4.6% | 4,398,099 | 4.9% |
| Asia | 8,547,278 | 9.6% | 5,690,192 | 6.4% |
| Other | 6,976,412 | 7.8% | 4,222,704 | 4.7% |
| Total | 89,165,748 | 100.0% | 80,910,994 | 90.7% |
The table below provides a breakdown of the maximum credit exposure for corporates and project finance selected by industries:
| Share | |||
|---|---|---|---|
| 23,672,410 | 24.2% | 20,892,193 | 24.0% |
| 21,157,256 | 21.7% | 19,552,703 | 22.4% |
| 10,417,753 | 10.7% | 12,387,219 | 14.2% |
| 9,300,475 | 9.5% | 6,832,519 | 7.8% |
| 7,323,572 | 7.5% | 4,906,941 | 5.6% |
| 3,680,616 | 3.8% | 4,799,418 | 5.5% |
| 22,079,483 | 22.6% | 17,739,102 | 20.4% |
| 97,631,564 | 100.0% | 87,110,094 | 100.0% |
| 2011 | Share | 2010 |
in € million
| € 000 | 2011 | Share | 2010 | Share | |
|---|---|---|---|---|---|
| 6.1 | Excellent project risk profile – very low risk | 2,846,811 | 33.6% | 2,459,758 | 39.7% |
| 6.2 | Good project risk profile – low risk | 3,265,276 | 38.6% | 2,035,163 | 32.8% |
| 6.3 | Acceptable project risk profile – average risk | 1,241,476 | 14.7% | 912,439 | 14.7% |
| 6.4 | Poor project risk profile – high risk | 675,624 | 8.0% | 369,901 | 6.0% |
| 6.5 | Default | 419,125 | 5.0% | 365,215 | 5.9% |
| NR | Not rated | 17,504 | 0.2% | 56,824 | 0.9% |
| Total | 8,465,817 | 100.0% | 6,199,300 | 100.0% |
The rating model for project finance has five different grades which provide both individual default probabilities and collateral. The project finance volume is composed as shown in the table below:
The maximum credit exposure in project finance amounted to € 8,465,817 thousand at year end 2011. Projects rated either in categories Excellent project risk profile – very low risk (rating 6.1) or Good project risk profile – low risk (rating 6.2) account for 72 per cent and thus represent the highest share of the portfolio. This reflects mainly the high level of collateralization in specialized lending transactions. Unrated projects decreased to 0.2 per cent (€ 17,504 thousand) year-on-year.
Retail customers are subdivided into private individuals and small and medium-sized enterprises (SME). 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 the maximum retail credit exposure of RBI:
| € 000 | 31.12.2011 | Share | 31.12.2010 | Share |
|---|---|---|---|---|
| Retail customers – private individuals | 20,778,317 | 89.0% | 20,301,385 | 88.3% |
| Retail customers – small and medium-sized entities | 2,567,762 | 11.0% | 2,687,265 | 11.7% |
| Total | 23,346,079 | 100.0% | 22,988,650 | 100.0% |
| hereof non-performing loans | 2,451,979 | 10.5% | 2,399,036 | 10.4% |
| hereof individual loan loss provision | 1,498,552 | 6.4% | 1,308,243 | 5.7% |
| hereof portfolio based loan loss provision | 274,839 | 1.2% | 353,230 | 1.5% |
The total credit exposure of retail customers breaks down by RBI segments as follows:
| Central Europe |
Southeastern Europe |
Russia | CIS Other | Group Markets |
|---|---|---|---|---|
| 9,659,418 | 6,614,983 | 2,781,432 | 1,710,895 | 11,589 |
| 1,527,542 | 845,700 | 48,052 | 146,376 | 92 |
| 11,186,960 | 7,460,683 | 2,829,484 | 1,857,271 | 11,681 |
| 929,489 | 576,045 | 211,753 | 729,067 | 1,403 |
| 457,106 | 371,882 | 184,542 | 480,336 | 126 |
| 173,915 | 65,334 | 7,433 | 28,156 | 0 |
| Central Europe |
Southeastern Europe |
Russia | CIS Other | Group Markets |
|---|---|---|---|---|
| 9,793,983 | 6,292,846 | 2,092,568 | 2,061,706 | 9,651 |
| 1,673,386 | 802,226 | 20,035 | 190,823 | 0 |
| 11,467,369 | 7,095,072 | 2,112,603 | 2,252,529 | 9,651 |
| 918,913 | 544,086 | 212,068 | 717,988 | 196 |
| 332,314 | 346,625 | 177,951 | 445,441 | 196 |
| 198,742 | 100,996 | 8,846 | 44,646 | 0 |
Compared to year end 2010 the retail credit portfolio increased by € 357,429 thousand to € 23,346,079 thousand. The highest amount (€ 11,186,960 thousand) is booked in segment Central Europe. This is a reduction by € 280,409 thousand compared to last year, mainly caused by negative exchange rate developments of the Hungarian forint and the Polish zloty. The second largest segment is Southeastern Europe with € 7,258,423 thousand. Compared to the previous year the exposure increased by € 163,351 thousand in this segment. This is mainly due to higher exposure against private individuals in Romania.
Another strong increase was achieved in the asset class private individuals in Russia which rose by approximately one third mainly due to consumer loans. On the other hand in segment CIS Other, the retail credit portfolio declined due to hyperinflation in Belarus..
In the table below the retail exposure selected by products is shown:
| € 000 | 2011 | Share | 2010 | Share |
|---|---|---|---|---|
| Mortgage loans | 10,678,823 | 46% | 11,308,761 | 49% |
| Personal loans | 5,708,251 | 24% | 5,217,686 | 23% |
| Car loans | 2,149,028 | 9% | 2,055,963 | 9% |
| Credit cards | 2,036,026 | 9% | 1,635,330 | 7% |
| Overdraft | 1,754,043 | 8% | 1,922,619 | 8% |
| SME financing | 1,019,907 | 4% | 848,291 | 4% |
| Total | 23,346,079 | 100% | 22,988,650 | 100% |
| 2011 € 000 |
Central Europe |
Southeastern Europe |
Russia | CIS Other | Group Markets |
|---|---|---|---|---|---|
| Mortgage loans | 6,063,036 | 2,770,691 | 935,647 | 909,450 | 0 |
| Personal loans | 1,589,928 | 2,651,948 | 900,104 | 564,619 | 1,653 |
| Car loans | 1,116,266 | 477,156 | 466,680 | 88,926 | 0 |
| Overdraft | 1,098,658 | 524,903 | 75,607 | 54,875 | 0 |
| Credit cards | 682,203 | 696,144 | 451,446 | 206,233 | 0 |
| SME financing | 636,869 | 339,842 | 0 | 33,168 | 10,028 |
| Total | 11,186,960 | 7,460,684 | 2,829,484 | 1,857,271 | 11,681 |
| 2010 € 000 |
Central Europe |
Southeastern Europe |
Russia | CIS Other | Group Markets |
|---|---|---|---|---|---|
| Mortgage loans | 6,716,428 | 2,538,609 | 665,593 | 1,373,135 | 160 |
| Personal loans | 1,500,020 | 2,610,339 | 739,796 | 330,943 | 0 |
| Car loans | 942,930 | 452,550 | 438,858 | 221,624 | 0 |
| Overdraft | 1,362,217 | 536,725 | 42 | 16,637 | 6,998 |
| Credit cards | 649,646 | 548,257 | 255,602 | 179,332 | 2,493 |
| SME financing | 296,128 | 408,593 | 12,713 | 130,857 | 0 |
| Total | 11,467,369 | 7,095,072 | 2,112,603 | 2,252,529 | 9,651 |
The share of foreign currency loans in retail portfolios provides an indication for the potential change in default rates if the exchange rate of the domestic currency changes. The internal risk assessment thus takes into account the share of foreign currency loans but also the usually stricter lending criteria at loan distribution and – in several countries – the customers' matching foreign currency income.
| € 000 | 2011 | Share | 20101 | Share |
|---|---|---|---|---|
| Euro | 3,321,774 | 42.3% | 3,011,385 | 35.3% |
| Swiss franc | 2,903,199 | 37.0% | 3,539,300 | 41.4% |
| US-Dollar | 1,444,798 | 18.4% | 1,740,966 | 20.4% |
| Other foreign currencies | 187,252 | 2.4% | 250,566 | 2.9% |
| Loans in foreign currencies | 7,857,024 | 100.0% | 8,542,217 | 100.0% |
| Share of total loans | 33.7% | 37.2% |
1 Adjustments of previous year figures due to different mapping
While loans in Swiss franc and US-Dollar decreased, euro loans showed a slight increase.
The following table shows the maximum credit exposure of this asset class by segment:
| Group Markets |
|---|
| 0 |
| 613 |
| 981 |
| 5,440 |
| 7,034 |
| 60.2% |
| 2010 € 000 |
Central Europe | Southeastern Europe |
Russia | CIS Other | Group Markets |
|---|---|---|---|---|---|
| Euro | 317,662 | 2,423,713 | 10,143 | 14,298 | 0 |
| US-Dollar | 5,007 | 2,122 | 382,613 | 1,348,334 | 435 |
| Swiss franc | 2,410,560 | 638,081 | 0 | 104 | 1,273 |
| Other foreign currencies | 27,701 | 222,612 | 0 | 248 | 0 |
| Loans in foreign currencies | 2,760,930 | 3,286,528 | 392,756 | 1,362,984 | 1,708 |
| Share of total loans | 24.1% | 46.3% | 18.6% | 60.5% | 17.7% |
The financial institutions asset class mainly contains banks and securities firms. The internal rating model for these 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. Credit porftolio – Financial Institutions
The following table shows the maximum credit exposure by internal rating for financial institutions. Due to the small number of customers (or number of defaults respectively), default probabilities of individual rating grades in this asset class are estimated based on a combination of internal and external data.
| € 000 | 2011 | Share | 2010 | Share | |
|---|---|---|---|---|---|
| A1 | Excellent credit standing | 85,187 | 0.2% | 245,698 | 0.8% |
| A2 | Very good credit standing | 3,409,172 | 8.8% | 2,172,623 | 6.7% |
| A3 | Good credit standing | 24,221,051 | 62.4% | 18,250,722 | 56.4% |
| B1 | Sound credit standing | 5,233,225 | 13.5% | 4,497,943 | 13.9% |
| B2 | Average credit standing | 2,992,969 | 7.7% | 3,526,746 | 10.9% |
| B3 | Mediocre credit standing | 1,276,922 | 3.3% | 1,603,434 | 5.0% |
| B4 | Weak credit standing | 620,881 | 1.6% | 892,881 | 2.8% |
| B5 | Very weak credit standing | 370,186 | 1.0% | 474,075 | 1.5% |
| C | Doubtful/high default risk | 184,310 | 0.5% | 128,145 | 0.4% |
| D | Default | 352,391 | 0.9% | 383,262 | 1.2% |
| NR | Not rated | 83,273 | 0.2% | 184,876 | 0.6% |
| Total | 38,829,566 | 100.0% | 32,360,405 | 100.0% |
The maximum credit exposure of these customers was € 38,829,566 thousand at year end 2011. With respect to the rating distribution in this asset class, the rating class A3 contributed € 24,221,051 thousand or 62.4 per cent. The strong increase in this rating class results mainly from segment Group Markets. Taking all rating classes together, segment Group Markets accounts for the largest portfolio share (€ 32,490,734 thousand or 83.7 per cent) followed by the segment Group Corporates at € 2,444,968 thousand or 6.3 per cent.
The share of not rated financial institutions was 0.2 per cent at year end 2011. This exposure was mainly caused by short-term loans to small banks, where the rating process had not yet been completed.
Part of this credit exposure is held against financial institutions that are indirect shareholders of RBI. Due to the multi-layered structure of the Austrian Raiffeisen Banking Group, exposure resulting from liquidity management within the Austrian Banking Group is shown in this asset class as well. Bilateral netting-agreements and joint risk monitoring systems are used as risk mitigation techniques by the Group.
Time deposits, repurchase agreements, potential future exposures from derivatives, sight deposits, and bonds are the main product categories in this asset class. These exposures therefore have high collateralization grades (e.g. in repo transactions or through netting-agreements) depending on the type of product.
RBI continues to reduce the unsecured exposure in this asset class according to its strategy. New business in this asset class thus mainly stems from repurchase agreements, counterparty credit exposure from derivatives and short-term money market deposits. Credit business with other financial institutions in the Raiffeisen Banking Group which are participating in a joint risk monitoring system of course is not restricted.
The table below shows the maximum credit exposure to financial institutions (excluding central banks) selected by products:
| € 000 | 2011 | Share | 2010 | Share |
|---|---|---|---|---|
| Money market | 13,126,781 | 33.8% | 11,301,592 | 34.9% |
| Derivatives | 12,464,006 | 32.1% | 6,307,713 | 19.5% |
| Loans | 4,984,158 | 12.8% | 5,010,547 | 15.5% |
| Bonds | 4,450,385 | 11.5% | 6,166,179 | 19.1% |
| Repo | 2,681,168 | 6.9% | 589,936 | 1.8% |
| Other | 1,123,069 | 2.9% | 2,984,437 | 9.2% |
| Total | 38,829,566 | 100.0% | 32,360,405 | 100.0% |
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 credit exposure to sovereigns (including central banks) by internal rating. Since defaults in this asset class are historically very rare, default probabilities are estimated using full data sets provided by external rating agencies.
| € 000 | 31.12.2011 | Share | 31.12.2010 | Share | |
|---|---|---|---|---|---|
| A1 | Excellent credit standing | 9,567,285 | 35.6% | 8,386,362 | 32.4% |
| A2 | Very good credit standing | 465,012 | 1.7% | 624,248 | 2.4% |
| A3 | Good credit standing | 4,518,891 | 16.8% | 3,927,021 | 15.2% |
| B1 | Sound credit standing | 1,785,503 | 6.6% | 1,639,803 | 6.3% |
| B2 | Average credit standing | 758,451 | 2.8% | 1,398,508 | 5.4% |
| B3 | Mediocre credit standing | 5,513,313 | 20.5% | 5,951,377 | 23.0% |
| B4 | Weak credit standing | 2,253,625 | 8.4% | 2,097,273 | 8.1% |
| B5 | Very weak credit standing | 1,658,844 | 6.2% | 1,691,510 | 6.5% |
| C | Doubtful/high default risk | 155,561 | 0.6% | 39 | 0.0% |
| D | Default | 139,390 | 0.5% | 60,035 | 0.2% |
| NR | Not rated | 77,172 | 0.3% | 78,988 | 0.3% |
| Total | 26,893,046 | 100.0% | 25,855,164 | 100.0% |
The maximum credit exposure to sovereigns amounted to € 26,893,046 thousand at year-end and represents 14.4 per cent of the bank's total credit exposure. The highest portfolio share with 35.6 per cent is held in rating class Minimal Risk (rating A1), which results mainly from new securities investments in government bonds.
The medium rating grades Good credit standing (rating A3) to Mediocre credit standing (rating B3) form 46.7 per cent of the portfolio. The high exposure in these rating categories mainly results from deposits of network banks at local central banks in Central and Southeastern Europe. They were mandatory for meeting the respective minimum reserve requirements or used in order to manage excess liquidity on a short-term basis and therefore were intrinsically linked to the banking business in these countries. The exposure in rating class B4 remained stable compared to the previous year, at € 2,253,625 thousand or 8.4 per cent and results mainly from short-term deposits at the central banks in the Russia and in CIS Other segments.
The lower credit rating grades (rating C and D) has increased, due to local government financing in Hungary and higher exposures at the central bank in Belarus.
The table below shows the credit exposure to sovereigns (including central banks) selected by products:
| € 000 | 2011 | Share | 2010 | Share |
|---|---|---|---|---|
| Bonds | 13,105,606 | 48.7% | 15,633,532 | 60.5% |
| Loans | 9,023,119 | 33.6% | 8,038,685 | 31.1% |
| Derivatives | 1,028,086 | 3.8% | 979,587 | 3.8% |
| Other | 3,736,234 | 13.9% | 1,203,361 | 4.7% |
| Total | 26,893,046 | 100% | 25,855,164 | 100.0% |
The table below shows the credit exposure to the public sector in non-investment grade (rating B3 and below):
| € 000 | 2011 | Share | 2010 | Share |
|---|---|---|---|---|
| Romania | 2,000,334 | 20.4% | 2,242,595 | 22.7% |
| Hungary | 1,911,614 | 19.5% | 2,016,987 | 20.4% |
| Croatia | 1,303,903 | 13.3% | 1,226,787 | 12.4% |
| Albania | 1,218,253 | 12.4% | 1,144,440 | 11.6% |
| Ukraine | 992,915 | 10.1% | 1,072,953 | 10.9% |
| Other | 2,370,885 | 24.2% | 2,175,459 | 22.0% |
| Total | 9,797,904 | 100.0% | 9,879,222 | 100.0% |
The credit exposure to the public sector in non-investment grade (rating B3 and below) was to year end 2011 with € 9,809,234 thousand virtually unchanged from 2010 and resulted primarily from deposits of group units with the local central banks in Central and Southeastern Europe. They were used for completion of the minimum reserve requirements, and the shortterm investment of excess liquidity, and were therefore inextricably linked to the business activities in these countries.
Collateralization is one of the main strategies and an actively pursued measure for reducing potential credit risks. The value of collateral and the effect of other risk mitigation techniques are determined within each limit application. The risk mitigation effect taken into account is the value that RBI expects to receive when selling the collateral within a reasonable liquidation period. Eligible collaterals are defined in the Group's collateral catalog and evaluation guidelines for collateral. The collateral value is calculated according to specified methods which include standardized calculation formulas based on market values, predefined minimum discounts, and expert assessments.
Collateral is divided into pledges (e.g. guarantees) and physical collateral. In RBI liens on residential or commercial properties are the main types of collateral used.
Loans and advances to banks and customers net of allocated loan loss provisions (net exposure), the additional offbalance sheet exposure (contingent liabilities, commitments, and revocable credit lines), and the the market prices (fair value) of collateral pledged in favor of RBI are shown in the following table:
| 31/12/2011 | Maximum credit exposure | Fair value of collateral | |
|---|---|---|---|
| Net exposure | Commitments/ | ||
| € 000 | guarantees issued | ||
| Banks | 25,520,401 | 2,020,872 | 5,292,895 |
| Sovereigns | 1,350,175 | 257,206 | 275,271 |
| Corporate customers – large corporates | 52,631,182 | 34,804,357 | 42,004,417 |
| Corporate customers – mid market | 3,247,248 | 898,882 | 2,610,682 |
| Retail customers – private individuals | 17,479,971 | 2,402,307 | 11,078,089 |
| Retail customers – small and medium-sized | |||
| entities | 2,042,090 | 369,784 | 1,424,577 |
| Total | 102,271,067 | 40,753,408 | 62,685,931 |
| 31/12/2010 | Maximum credit exposure | Fair value of collateral | |
|---|---|---|---|
| € 000 | Net exposure | Commitments/ guarantees issued |
|
| Banks | 21,277,387 | 1,926,281 | 4,126,777 |
| Sovereigns | 1,492,468 | 260,259 | 577,893 |
| Corporate customers – large corporates | 46,913,082 | 29,969,898 | 35,232,395 |
| Corporate customers – mid market | 3,421,324 | 898,743 | 2,683,142 |
| Retail customers – private individuals | 17,130,847 | 2,201,819 | 11,294,349 |
| Retail customers – small and medium-sized entities |
2,198,479 | 347,148 | 1,553,402 |
| Total | 92,433,587 | 35,604,148 | 55,467,958 |
Collateral ready to be sold or repledged in the absence of default of the debtor amounted to € 24,047,224 thousand (2010: € 16,820,440 thousand).
The credit portfolio and individual borrowers are subject to constant monitoring. The main purpose of monitoring is to ensure that the borrower meets the terms and conditions of the contract, as well as following the obligor's economic development. Such a review is conducted at least once annually in the non-retail asset classes corporates, financial institutions, and sovereigns. This includes a rating review and the re-evaluation of financial and tangible collateral.
Problem loans (where debtors might run into material financial difficulties or a delayed payment is expected) need special treatment. In non-retail divisions, problem loan committees in individual Group units make decisions on problematic exposures. If the need for intensified treatment and workout is identified, then problem loans are assigned either to a designated specialist or to a restructuring unit (workout department). Employees of the workout units are specially trained and have extensive experience. They typically handle medium-sized to large cases and are assisted by in-house legal departments and/or by external specialists as well. Work-out units play a decisive role in accounting and analyzing as well as booking provisions for impairment losses (write-offs, value adjustments, provisioning). Their early involvement can help reduce losses resulting from problem loans.
Problem loan management standards in the retail area comprise the whole restructuring and collection process for private individuals and small enterprises. A restructuring guideline defines the Group's restructuring framework including uniform strategy, organization, methods, monitoring and controlling. In the workout process customers are classified into three categories "early," "late," and "recovery," for which a standardized customer handling process is defined.
The assessment of the expected recovery value is heavily influenced by the number of days payments are late. The following table shows the amount of overdue – not impaired – credit exposure of banks and customers for different time bands.
| 31/12/2011 | Current | Overdue | Collaterals | ||||
|---|---|---|---|---|---|---|---|
| € 000 | Up to 31 days |
More than 31 days, up to 90 days |
More than 91 days, up to 180 days |
More than 181 days, up to 1 year |
More than 1 year |
received for assets which are past due |
|
| Banks | 25,511,384 | 5,567 | 12 | 11 | 0 | 0 | 0 |
| Sovereigns | 1,227,571 | 113,325 | 2,318 | 1,090 | 409 | 97 | 1,945 |
| Corporate customers – large corporates |
49,266,382 | 1,386,511 | 384,682 | 35,783 | 32,085 | 69,784 | 771,902 |
| Corporate customers – mid market |
2,796,533 | 138,788 | 65,798 | 7,724 | 5,878 | 15,747 | 165,846 |
| Retail customers – private individuals |
14,903,347 | 1,273,137 | 272,541 | 126,934 | 22,331 | 99,520 | 791,279 |
| Retail customers – small and medium sized entities |
1,667,764 | 203,741 | 47,978 | 16,979 | 9,385 | 11,405 | 217,041 |
| Total | 95,372,981 | 3,121,068 | 773,329 | 188,522 | 70,088 | 196,554 | 1,948,012 |
| 31/12/2010 | Current | Overdue | Collaterals | ||||
|---|---|---|---|---|---|---|---|
| Up to 31 days |
More than 31 days, |
More than 91 days, |
More than 181 days, |
More than 1 year |
received for assets which |
||
| € 000 | up to 90 days |
up to 180 days |
up to 1 year |
are past due | |||
| Banks | 21,258,320 | 235 | 5 | 0 | 0 | 2,759 | 37 |
| Sovereigns | 1,468,988 | 5,967 | 5,734 | 177 | 0 | 109 | 498 |
| Corporate customers – large corporates |
44,258,902 | 1,002,845 | 401,880 | 17,470 | 30,215 | 35,871 | 696,622 |
| Corporate customers – mid market |
2,850,135 | 182,714 | 91,671 | 10,287 | 6,401 | 17,408 | 207,729 |
| Retail customers – private individuals |
14,659,312 | 1,446,949 | 337,421 | 198,674 | 39,278 | 77,804 | 1,107,6561 |
| Retail customers – small and medium sized entities |
1,778,858 | 231,361 | 63,091 | 21,500 | 12,034 | 14,513 | 255,929 |
| Total | 86,274,515 | 2,870,071 | 899,802 | 248,108 | 87,928 | 148,464 | 2,268,4701 |
1 Adjustments of previous year figures due to different mapping.
As of 31 December 2011 the carrying amount of loans for which terms were renegotiated in connection with a substantial and immediate loss that would otherwise be past due or impaired amounted to € 811,108 thousand (2010: € 588,276 thousand). Split by asset classes € 317,269 thousand is attributable to corporate customers and € 493,213 thousand to retail customers.-
A default and thus non-performing loan (NPL) is internally defined as the event where a specific debtor is unlikely to pay its credit obligations to the bank in full, or the debtor is overdue more than 90 days on any material credit obligation. RBI has defined twelve default indicators which are used to identify a default event in the non-retail
segment. These include the insolvency or similar proceedings of a customer, if an impairment provision has been allocated or a direct write-off has been carried out, if credit risk management has judged a customer account receivable to be not wholly recoverable, or the workout unit is considering stepping in to help a company restore its financial soundness.
Within the RBI a Group-wide default database has been created for collecting and documenting customer defaults. The database tracks defaults and the reasons for defaults, which enables the calculation and validation of own default probabilities.
Provisions for impairment losses are formed on the basis of Group-wide standards according to IFRS accounting principles and cover all identifiable credit risks. In the non-retail segments, problem loan committees from each Group unit decide on allocating individual loan loss provisions. In the retail area, provisioning is performed by retail risk departments in individual Group units. They compute loan loss provisions according to defined calculation schemes on a monthly basis. The provisioning amount is then approved by local accounting departments.
The following table shows the exposure of non-performing loans in the defined asset classes loans and advances to banks and loans and advances to customers (excluding off-balance sheet positions) as reported in the statement of financial position for the reporting period:
| € 000 | As of 1/1/2011 |
Change in consolidated group |
Exchange differences |
Additions | Disposals | As of 31/12/2011 |
|---|---|---|---|---|---|---|
| Corporate | ||||||
| customers | 4,381,436 | (335) | (88,103) | 1,667,432 | (1,369,134) | 4,591,296 |
| Retail customers | 2,396,213 | (73) | (56,706) | 891,115 | (778,570) | 2,451,979 |
| Sovereigns | 12,098 | 0 | (215) | 3,935 | (3,544) | 12,274 |
| Total nonbanks | 6,789,747 | (408) | (145,025) | 2,562,483 | (2,151,248) | 7,055,549 |
| Banks | 267,834 | 0 | 1,904 | 97,172 | (125,634) | 241,276 |
| Total | 7,057,581 | (408) | (143,121) | 2,659,655 | (2,276,882) | 7,296,825 |
| As of 1/1/2010 |
Change in consolidated |
Exchange differences |
Additions | Disposals | As of 31/12/2010 |
|
|---|---|---|---|---|---|---|
| € 000 | group | |||||
| Corporate customers | 2,576,245 | 938,592 | 124,761 | 1,698,860 | (957,021) | 4,381,436 |
| Retail customers | 1,850,220 | 5,434 | 62,691 | 981,084 | (503,215) | 2,396,213 |
| Sovereigns | 15,898 | 0 | (136) | 19,921 | (23,585) | 12,098 |
| Total nonbanks | 4,442,363 | 944,026 | 187,316 | 2,699,864 | (1,483,821) | 6,789,747 |
| Banks | 4,233 | 572,507 | 3,470 | 18,772 | (331,147) | 267,834 |
| Total | 4,446,596 | 1,516,533 | 190,785 | 2,718,636 | (1,814,968) | 7,057,581 |
The following table shows the share of non-performing loans in the defined asset classes from financial statement of position items loans and advances to banks and loans and advances to customers (excluding off-balance sheet positions), as well as the corresponding collateraland loan loss provisions provided:
| 2011 € 000 |
Central Europe |
Southeastern Europe |
Russia | CIS Other | Group Corporates |
Group Markets |
|---|---|---|---|---|---|---|
| Corporate customers | ||||||
| Non-performing loans | 1,536,008 | 1,149,787 | 312,359 | 776,591 | 648,651 | 167,900 |
| of which collateralized | 592,362 | 631,340 | 75,893 | 226,813 | 103,671 | 14,977 |
| Impairment losses on loans and advances |
867,863 | 571,833 | 332,971 | 518,713 | 510,998 | 174,929 |
| Loans | 14,962,818 | 7,799,131 | 6,533,679 | 3,371,684 | 21,745,289 | 3,727,457 |
| NPL ratio | 10.3% | 14.7% | 4.8% | 23.0% | 3.0% | 4.5% |
| Coverage ratio | 56.5% | 49.7% | 106.6% | 66.8% | 78.8% | 104.2% |
| Retail customers | ||||||
| Non-performing loans | 929,489 | 576,045 | 211,753 | 729,067 | 4,222 | 1,403 |
| of which collateralized | 411,722 | 162,724 | 22,144 | 401,603 | 500 | 100 |
| Impairment losses on loans and advances |
631,021 | 437,216 | 191,975 | 508,492 | 4,480 | 126 |
| Loans | 10,041,331 | 6,916,882 | 2,533,061 | 1,704,574 | 0 | 42,594 |
| NPL ratio | 9.3% | 8.3% | 8.4% | 42.8% | – | 3.3% |
| Coverage ratio | 67.9% | 75.9% | 90.7% | 69.7% | 106.1% | 9.0% |
| Sovereigns | ||||||
| Non-performing loans | 12,210 | 0 | 0 | 64 | 0 | 0 |
| of which collateralized | 720 | 0 | 0 | 0 | 0 | 0 |
| Impairment losses on loans and advances |
5,848 | 0 | 0 | 64 | 0 | 0 |
| Loans | 376,738 | 605,089 | 5,842 | 273 | 0 | 147 |
| NPL ratio | 3.2% | – | – | 23.6% | – | – |
| Coverage ratio | 47.9% | – | – | 99.4% | – | – |
| Banks | ||||||
| Non-performing loans | 2,627 | 596 | 1,149 | 191 | 1,065 | 235,648 |
| of which collateralized | 0 | 0 | 0 | 0 | 0 | 55,671 |
| Impairment losses on loans and advances |
2,164 | 598 | 967 | 191 | 1,951 | 212,506 |
| Loans | 2,045,995 | 2,334,777 | 2,824,827 | 626,994 | 1,810,243 | 19,204,697 |
| NPL ratio | 0.1% | 0.0% | 0.0% | 0.0% | 0.1% | 1.2% |
| Coverage ratio | 82.4% | 100.3% | 84.2% | 99.7% | 183.2% | 90.2% |
| 2010 € 000 |
Central Europe | Southeastern Europe |
Russia | CIS Other | Group Corporates |
Group Markets |
|---|---|---|---|---|---|---|
| Corporate customers | ||||||
| Non-performing loans | 1,356,775 | 785,401 | 450,382 | 709,630 | 872,866 | 206,382 |
| of which collateralized |
496,324 | 442,635 | 128,265 | 232,683 | 238,920 | 0 |
| Impairment losses on loans and advances |
687,381 | 458,922 | 443,391 | 502,867 | 563,264 | 183,281 |
| Loans | 14,762,049 | 7,305,091 | 5,620,499 | 3,247,838 | 20,156,890 | 3,583,612 |
| NPL ratio | 9.2% | 10.8% | 8.0% | 21.8% | 4.3% | 5.8% |
| Coverage ratio | 50.7% | 58.4% | 98.4% | 70.9% | 64.5% | 88.8% |
| Retail customers | ||||||
| Non-performing loans | 916,596 | 543,776 | 217,852 | 717,988 | 0 | 0 |
| of which collateralized |
422,755 | 165,987 | 62,240 | 406,271 | 0 | 0 |
| Impairment losses on loans and advances |
530,350 | 447,609 | 186,797 | 490,083 | 5,716 | 196 |
| Loans | 10,158,568 | 6,713,652 | 1,942,586 | 2,058,060 | 2,032 | 42,271 |
| NPL ratio | 9.0% | 8.1% | 11.2% | 34.9% | – | – |
| Coverage ratio | 57.9% | 82.3% | 85.7% | 68.3% | – | – |
| Sovereigns | ||||||
| Non-performing loans | 11,917 | 0 | 182 | 0 | 0 | 0 |
| of which collateralized |
0 | 0 | 0 | 0 | 0 | 0 |
| Impairment losses on loans and advances |
958 | 0 | 38 | 0 | 0 | 0 |
| Loans | 296,344 | 762,106 | 38,339 | 0 | 331 | 294 |
| NPL ratio | 4.0% | – | 0.5% | – | – | – |
| Coverage ratio | 8.0% | – | 20.9% | – | – | – |
| Banks | ||||||
| Non-performing loans | 2,759 | 0 | 1,175 | 187 | 1,031 | 262,682 |
| of which collateralized |
0 | 0 | 0 | 0 | 0.0% | 0.0% |
| Impairment losses on loans and advances |
2,275 | 9 | 421 | 187 | 762 | 251,366 |
| Loans | 1,386,771 | 2,587,424 | 1,821,233 | 861,178 | 2,596,822 | 14,124,823 |
| NPL ratio | 0.2% | 0.0% | 0.1% | 0.0% | 0.0% | 1.9% |
| Coverage ratio | 82.5% | – | 35.8% | 100.0% | 73.9% | 95.7% |
In asset class corporate customers, non-performing loans increased by 5 per cent (€ 209,860 thousand) to € 4,591,296 thousand. Segment Southeastern Europe where NPLs increased by 46 per cent and Central Europe where NPLs increased by 13 per cent were especially affected. In contrast NPLs have been reduced in Russia by 31 per cent and in Group Corporates by 26 per cent. Loan loss provisions have been stocked up by 7 per cent (€ 207,160 thousand) to € 3,046,266 thousand which increased the coverage ratio by 1.6 percentage points to 66.3 per cent.
In the retail portfolio, non-performing loans grew by 2 per cent (€ 55,767 thousand) to € 2,451,979 thousand. The main increase took place in Southeastern Europe by 6 per cent, whereas Russsia reported a decline by 3 per cent. The total NPL ratio in the retail asset class increased by 0.1 percentage points to 11.5 per cent. Loan loss provisions have been increased for retail customers to € 1,773,391 thousand which improves the coverage ratio by 3.0 percentage points to 72.3 per cent.
In the asset class financial institutions non-performing loans amount to € 241,276 thousand at year-end, for which loan loss provisions of € 227,643 thoausand were allocated.
The following table summarizes the development of impairment losses on loans and advances and off-balance sheet transactions during the fiscal year and the corresponding items from the statement of financial position:
| As of | Change in | Allocation1 | Release | Usage 2 | Transfers, | As of | |
|---|---|---|---|---|---|---|---|
| € 000 | 1/1/2011 | consolidated group |
Exchange differences |
31/12/2011 | |||
| Individual loan loss provisions |
4,000,292 | (182) | 1,735,331 | (558,699) | (653,749) | (81,575) | 4,441,418 |
| Loans and advances to banks |
236,579 | 0 | (3,666) | (4,540) | (21,540) | 1,758 | 208,591 |
| Loans and advances to customers |
3,710,716 | (182) 1,673,030 | (531,357) | (629,370) | (77,827) | 4,145,010 | |
| Off-balance sheet obligations |
52,997 | 0 | 65,966 | (22,802) | (2,839) | (5,506) | 87,817 |
| Portfolio-based loan loss provisions |
887,999 | (15) | 280,577 | (385,510) | 0 | (20,275) | 762,777 |
| Loans and advances to banks |
18,440 | 0 | 634 | (41) | 0 | 19 | 19,052 |
| Loans and advances to customers |
790,137 | (15) | 249,889 | (341,293) | 0 | (18,160) | 680,558 |
| Off-balance sheet obligations |
79,422 | 0 | 30,054 | (44,176) | 0 | (2,134) | 63,167 |
| Total | 4,888,291 | (197) | 2,015,908 | (944,209) | (653,749) | (101,849) | 5,204,195 |
1 Allocation including direct write-downs and income on written down claims. 2 Usage including direct write-downs and income on written down claims.
| As of 1/1/2010 |
Change in consolidated |
Allocation1 | Release | Usage 2 | Transfers, Exchange |
As of 31/12/2010 |
|
|---|---|---|---|---|---|---|---|
| € 000 | group | differences | |||||
| Individual loan loss provisions |
2,383,348 | 983,277 | 1,726,950 | (530,849) | (687,742) | 125,308 | 4,000,292 |
| Loans and advances to banks |
3,430 | 403,133 | 7,932 | (4,733) | (177,363) | 4,180 | 236,579 |
| Loans and advances to customers |
2,354,579 | 568,304 | 1,665,236 | (507,066) | (491,432) | 121,095 | 3,710,716 |
| Off-balance sheet obligations |
25,339 | 11,840 | 53,782 | (19,050) | (18,947) | 33 | 52,997 |
| Portfolio-based loan loss provisions |
770,512 | 88,880 | 390,664 | (389,803) | 0 | 27,746 | 887,999 |
| Loans and advances to banks |
8 | 0 | 18,438 | (76) | 0 | 71 | 18,440 |
| Loans and advances to customers |
726,006 | 88,880 | 315,170 | (367,013) | 0 | 27,094 | 790,137 |
| Off-balance sheet obligations |
44,498 | 0 | 57,056 | (22,714) | 0 | 581 | 79,422 |
| Total | 3,153,860 | 1,072,157 | 2,117,614 | (920,652) | (687,742) | 153,054 | 4,888,291 |
1 Allocation including direct write-downs and income on written down claims.
2 Usage including direct write-downs and income on written down claims.
| € 000 | As of 1/1/2011 |
Change in consolidated group |
Allocation1 | Release | Usage 2 | Transfers, Exchange differences |
As of 31/12/2011 |
|---|---|---|---|---|---|---|---|
| Individual loan loss provisions |
4,000,292 | (182) 1,735,331 | (558,699) | (653,749) | (81,575) | 4,441,418 | |
| Central Europe | 979,605 | 1,249 | 880,668 | (210,113) | (233,327) | (91,687) | 1,326,396 |
| Southeastern Europe | 722,948 | (117) | 436,869 | (121,623) | (146,507) | (9,734) | 881,836 |
| Russia | 536,126 | 0 | 106,810 | (115,988) | (65,290) | (10,411) | 451,247 |
| CIS Other | 858,566 | 0 | 184,505 | (22,471) | (105,571) | 16,891 | 931,920 |
| Group Corporates | 664,733 | (1,315) | 111,005 | (26,166) | (80,756) | (19,229) | 648,272 |
| Group Markets | 238,314 | 0 | 15,377 | (4,847) | (21,870) | (41,936) | 185,039 |
| Corporate Center | 0 | 0 | 97 | (57,491) | (430) | 74,533 | 16,709 |
| Portfolio-based loan loss provisions |
887,999 | (15) | 280,577 | (385,510) | 0 | (20,275) | 762,777 |
| Central Europe | 286,415 | 0 | 128,239 | (149,428) | 0 | (10,802) | 254,424 |
| Southeastern Europe | 205,800 | (15) | 39,117 | (93,136) | 0 | (993) | 150,773 |
| Russia | 134,771 | 0 | 32,953 | (64,264) | 0 | (2,484) | 100,976 |
| CIS Other | 142,795 | 0 | 35,398 | (69,746) | 0 | (6,777) | 101,670 |
| Group Corporates | 100,118 | 0 | 39,619 | (8,936) | 0 | 1,361 | 132,162 |
| Group Markets | 18,100 | 0 | 3,014 | 0 | 0 | (580) | 20,534 |
| Corporate Center | 0 | 0 | 2,237 | 0 | 0 | 0 | 2,237 |
| Total | 4,888,291 | (197) 2,015,908 | (944,209) | (653,749) | (101,849) | 5,204,195 |
The following table shows the breakdown of loan loss provisions according to business segments:
1 Allocation including direct write-downs and income on written down claims.
2 Usage including direct write-downs and income on written down claims.
| As of | Change in | Allocation1 | Release | Usage 2 | Transfers, | As of | |
|---|---|---|---|---|---|---|---|
| € 000 | 1/1/2010 | consolidated group |
Exchange differences |
31/12/2010 | |||
| Individual loan loss | |||||||
| provisions | 2,383,348 | 983,277 | 1,726,950 | (530,849) | (687,742) | 125,308 | 4,000,292 |
| Central Europe | 759,283 | (743) | 628,490 | (222,897) | (199,275) | 14,747 | 979,605 |
| Southeastern Europe | 485,439 | (43) | 437,706 | (102,020) | (100,793) | 2,659 | 722,948 |
| Russia | 481,877 | 0 | 229,929 | (143,368) | (59,711) | 27,399 | 536,126 |
| CIS Other | 656,749 | 0 | 240,763 | (4,547) | (84,817) | 50,418 | 858,566 |
| Group Corporates | 0 | 583,457 | 173,182 | (54,035) | (55,243) | 17,372 | 664,733 |
| Group Markets | 0 | 400,606 | 16,878 | (3,982) | (187,903) | 12,715 | 238,314 |
| Corporate Center | 0 | 0 | 0 | 0 | 0 | 0 | 0 |
| Portfolio-based | |||||||
| loan loss provisions | 770,512 | 88,880 | 390,664 | (389,803) | 0 | 27,746 | 887,999 |
| Central Europe | 274,395 | 0 | 165,388 | (161,973) | 0 | 8,605 | 286,415 |
| Southeastern Europe | 198,561 | (26) | 69,906 | (69,015) | 0 | 6,374 | 205,800 |
| Russia | 136,492 | 0 | 67,113 | (76,746) | 0 | 7,912 | 134,771 |
| CIS Other | 161,064 | 0 | 57,456 | (79,275) | 0 | 3,550 | 142,795 |
| Group Corporates | 0 | 88,906 | 12,701 | (2,794) | 0 | 1,305 | 100,118 |
| Group Markets | 0 | 0 | 18,100 | 0 | 0 | 0 | 18,100 |
| Corporate Center | 0 | 0 | 0 | 0 | 0 | 0 | 0 |
| Total | 3,153,860 | 1,072,157 | 2,117,614 | (920,652) | (687,742) | 153,054 | 4,888,291 |
1 Allocation including direct write-downs and income on written down claims.
2 Usage including direct write-downs and income on written down claims.
Country risk includes transfer and convertibility risks as well as political risk. It arises from cross-border transactions and direct investments in foreign countries. RBI is exposed to this risk due to its strong business activities in the Central and Eastern European markets. In these markets political and economic risks to some extent are still seen as comparatively significant.
Active country risk management in RBI is based on the country risk policy which is set by the Management Board. This policy is part of the credit portfolio limit system and sets a strict limitation on cross-border risk exposure to individual countries. Consequently. in day-to-day work,
business units have to submit limit applications for the respective countries for all cross-border transactions in addition to the limit applications for a customer. The limit size for individual countries is set by using a model which takes into account the internal rating for the sovereign, the size of the country, and RBI's own capitalization.
Country risk also is reflected via the internal funds transfer pricing system in product pricing and in risk-adjusted performance measurement. Business units therefore can benefit from country risk mitigation by seeking insurance (e.g. from export credit insurance organizations) or guarantors in third countries. The insights gained from country risk analysis are not only used for limiting the total cross border exposure, but also for limiting the total credit exposure in each individual country (i.e. including the exposure that is funded by local deposits). Thereby RBI realigns its business activities according to the macro-economic development within different markets and enhances the broad diversification of its credit portfolio.
The credit portfolio of RBI 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 sum of the ten largest corporate credit exposures of the corporate customer division (before taking into account risk mitigation effects) corresponds to 62.7 per cent of core capital. In line with the credit risk policy these customers all have excellent ratings or – in exceptional cases and given high collateralization (and high fungibility of collateral) – acceptable credit standing.
The regional breakdown of the loans reflects the broad diversification of credit business in RBI's markets. The following table shows the regional distribution of the credit exposure of all asset classes by the borrower's home country grouped by regional segments.
| € 000 | 2011 | Share | 20101 | Share |
|---|---|---|---|---|
| Austria | 43,686,612 | 23.4% | 39,318,974 | 23.4% |
| Central Europe | 42,629,955 | 22.8% | 41,525,314 | 23.8% |
| Slovakia | 11,862,258 | 6.4% | 11,833,966 | 7.0% |
| Czech Republic | 10,936,576 | 5.9% | 10,031,591 | 6.0% |
| Hungary | 8,882,980 | 4.8% | 9,938,056 | 5.9% |
| Poland | 8,807,810 | 4.7% | 8,232,270 | 4.9% |
| Other | 2,140,331 | 1.1% | 1,489,432 | 0.0% |
| European Union | 26,501,393 | 14.2% | 20,392,970 | 12.1% |
| Germany | 7,492,208 | 4.0% | 5,708,349 | 3.4% |
| Great Britain | 7,365,436 | 3.9% | 3,999,797 | 2.4% |
| Netherlands | 2,951,067 | 1.6% | 2,137,477 | 1.3% |
| Other | 8,692,683 | 4.7% | 8,547,347 | 5.1% |
| Southeastern Europe | 23,186,616 | 12.4% | 25,436,398 | 15.1% |
| Romania | 8,558,494 | 4.6% | 8,046,808 | 4.8% |
| Croatia | 6,163,001 | 3.3% | 6,189,578 | 3.7% |
| Bulgaria | 4,327,667 | 2.3% | 3,958,753 | 2.4% |
| Serbia | 2,549,271 | 1.4% | 2,557,240 | 1.5% |
| Other | 1,588,183 | 0.9% | 4,684,019 | 2.8% |
| Russia | 18,484,518 | 9.9% | 14,452,671 | 8.6% |
| Far East | 12,277,528 | 6.6% | 7,721,888 | 4.6% |
| China | 6,555,672 | 3.5% | 3,348,754 | 2.0% |
| Other | 5,721,856 | 3.1% | 4,373,134 | 2.6% |
| CIS Other | 7,787,066 | 4.2% | 7,882,562 | 4.7% |
| Ukraine | 4,657,059 | 2.5% | 6,156,235 | 3.7% |
| Other | 3,130,008 | 1.7% | 1,726,327 | 1.0% |
| USA | 5,230,635 | 2.8% | 4,368,637 | 2.6% |
| Rest of the world | 6,915,932 | 3.7% | 7,214,900 | 5.1% |
| Total | 186,700,256 | 100.0% | 168,314,313 | 100.0% |
1 Adjustments of previous year figures due to different mapping.
RBI does not own any banking subsidiaries that are incorporated in the so-called European periphery countries. Nonetheless, some of the bank's customers are domiciled in these countries, resulting from credit financing and capital market activities. All in all, the bank has almost no exposure to government bonds in these countries (except for the Republic of Italy).
Risk policies and credit portfolio management in RBI take into account the industry class of customers as well. Banking and insurance represents the largest industry class, which, however, is mostly attributed to exposures to members of the Austrian Raiffeisen Sector (central liquidity balancing function). The second largest industry class is private households, primarily consisting of loans to retail customers in Central and Eastern European countries. The following table shows the maximum credit exposure of the Group by the customers' industry classification:
| € 000 | 2011 | Share | 20101 | Share |
|---|---|---|---|---|
| Banking and insurance | 60,073,254 | 32.2% | 48,146,001 | 28.6% |
| Private households | 21,922,149 | 11.7% | 22,554,206 | 13.4% |
| Wholesale trade and commission trade (except car | ||||
| trading) | 17,893,915 | 9.6% | 15,217,496 | 9.0% |
| Other manufacturing | 13,651,445 | 7.3% | 11,900,352 | 7.1% |
| Public administration and defence and social | ||||
| insurance institutions | 13,267,030 | 7.1% | 16,182,139 | 9.6% |
| Real estate activities | 10,875,944 | 5.8% | 12,346,591 | 7.3% |
| Construction | 7,280,578 | 3.9% | 4,949,963 | 2.9% |
| Other business activities | 6,355,789 | 3.4% | 6,708,734 | 4.0% |
| Retail trade except repair of motor vehicles | 5,315,068 | 2.8% | 4,087,343 | 2.4% |
| Manufacture of basic metals | 3,643,075 | 2.0% | 2,939,420 | 1.7% |
| Electricity, gas, steam and hot water supply | 3,448,995 | 1.8% | 3,516,158 | 2.1% |
| Manufacture of food products and beverages | 2,535,234 | 1.4% | 2,986,865 | 1.8% |
| Land transport, transport via pipelines | 2,218,839 | 1.2% | 2,231,069 | 1.3% |
| Other transport | 1,998,082 | 1.1% | 2,606,332 | 1.5% |
| Extraction of crude petroleum and natural gas | 1,580,433 | 0.8% | 1,277,371 | 0.8% |
| Sale of motor vehicles | 1,577,151 | 0.8% | 1,796,372 | 1.1% |
| Manufacture of machinery and equipment | 1,547,073 | 0.8% | 1,729,813 | 1.0% |
| Other industries | 11,516,203 | 6.2% | 7,138,089 | 4.2% |
| Total | 186,700,256 | 100.0% | 168,314,313 | 100.0% |
1 Adaption of previous year figures due to a new codex for industries (ÖNACE 2008)
RBI's strategy for the structured credit portfolio is to reduce these investments step-by-step. This will be achieved either through repayment at maturity date or through assest sales depending on the market situation. The size of the structured credit portfolio is shown on page 206. Around 95 per cent of this portfolio is rated A or better by external rating agencies. The pools mainly contain exposures to European customers.
The default of a counterparty in a derivative, repurchase, securities or commodities lending or borrowing transaction can lead to losses from re-establishing the contract with another counterparty. In RBI this risk is measured by the mark-to-market approach where a predefined add-on is added to the current positive fair value of the contract in order to account for potential future changes. For internal management purposes potential price changes, which affect the fair value of an instrument, are calculated specifically for different contract types based on historical market price changes.
For derivative contracts the standard limit approval process applies, where the same risk classification, limitation, and monitoring process is used as for traditional lending. In doing so, the weighted nominal exposure of derivative contracts is added to the customers' total exposure in the limit application and monitoring process as well as in the calculation and allocation of internal capital.
An important strategy for reducing counterparty credit risk is credit risk mitigation techniques such as netting agreements and collateralization. In general, RBI strives to establish standardized ISDA master agreements with all major counterparties for derivative transactions in order to be able to perform close-out netting and credit support annexes (CSA) for full risk coverage for positive fair values on a daily basis.
RBI defines market risk as the risk of possible losses arising from changes in market prices of trading and banking book positions. Market risk estimates are based on changes in exchange rates, interest rates, credit spreads, equity and commodity prices, and other market parameters (e.g. like implied volatilities).
Market risks are transferred to the Treasury division by closing internal contracts with customer divisions. Treasury is responsible for managing structural market risks and for complying with the Group's overall limit. The Capital Markets division comprises proprietary trading, market making, and customer business with money market and capital market products.
RBI measures, monitors, and manages all market risks on Group level.
The Market Risk Committee is responsible for strategic market risk management issues. It is responsible for managing and controlling all market risks in the Group. The Group's overall limit is set by the Management Board on the basis of the risktaking capacity and income budget. This limit is apportioned to sub-limits in coordination with business divisions according to the strategy, business model and risk appetite.
The Market Risk Management department ensures that the business volume and product range comply with the defined and enacted strategy of the Group. It is responsible for implementing and enhancing risk management processes, manuals, measurement techniques, risk management infrastructure and systems for all market risk categories and secondary credit risks arising from market price changes in derivative transactions. Furthermore this department independently measures and reports market risks on a daily basis.
All products in which open positions can be held are listed in the product catalog. New products are added to this list only after completing the product approval process successfully. Product applications are investigated thoroughly for any risks. They are approved only if the new products can be implemented in the bank's front- and back-office (and risk management) systems respectively.
RBI uses a comprehensive risk management approach for both the trading and banking book (total-return approach). Market risks are managed consistently in the trading and banking book. The following values are measured and limited on a daily basis in the market risk management system:
Value-At-Risk (confidence level 99%, risk horizon 1 day)
Value-at-risk (VaR) is the main steering instrument in liquid markets and normal market situations. VaR is measured based on a hybrid simulation approach, where 5000 scenarios are calculated. The approach combines the advantages of a historical simulation and a Monte Carlo simulation and derives market parameters from 500 days historical data. Distribution assumptions include modern features like volatility declustering, random time change, and extreme event containers. This helps in reproducing fat-tailed and asymmetric distributions accurately. The Austrian Financial Market Authority has approved this model such that it can be used for calculating own funds requirements for market risks. Value-at-risk results are not only used for limiting risk but also in the internal capital allocation.
This limit strengthens the discipline of traders such that they do not allow losses to accumulate on their own proprietary positions but strictly limit them instead.
A comprehensive stress testing concept complements this multi-level limit system. It simulates potential present value changes of defined scenarios for the total portfolio. The results on market risk concentrations shown by these stress tests are reported to the Market Risk Committee and taken into account when setting limits. Stress test reports for individual portfolios are included in daily market risk reporting.
The following table shows the VaR (99%, 1d, in € thousand) for individual markets risk categories of the trading and banking book. RBI's VaR mainly results from exchange rate risk out of long-termed equity positions, structural interest rate risks, and credit spread risks of bonds, which are held as liquidity buffer.
| Trading book VaR 99% 1d | VaR as of | Average VaR | Minimum VaR | Maximum VaR | VaR as of |
|---|---|---|---|---|---|
| € 000 | 31/12/2011 | 31/12/2010 | |||
| Currency risk1 | 63,564 | 53,959 | 37,119 | 82,891 | 53,021 |
| Interest rate risk | 6,715 | 8,154 | 5,656 | 16,022 | 11,187 |
| Credit spread risik | 877 | 3,369 | 845 | 9,145 | 2,049 |
| Share price risk | 2,328 | 1,973 | 1,345 | 2,958 | 1,399 |
| Total | 48,039 | 56,623 | 40,817 | 81,800 | 60,073 |
1 Exchange rate risk on total bank level also includes equity positions of subsidiaries denominated in foreign currency.
| Banking book VaR 99% 1d | VaR as of | Average VaR | Minimum VaR | Maximum VaR | VaR as of |
|---|---|---|---|---|---|
| € 000 | 31/12/2011 | 31/12/2010 | |||
| Interest rate risk | 46,571 | 53,717 | 27,884 | 112,909 | 69,753 |
| Credit spread risik | 10,613 | 29,263 | 9,894 | 47,608 | 29,949 |
| Total | 29,756 | 55,982 | 29,756 | 113,502 | 66,081 |
| Total VaR 99% 1d | VaR as of | Average VaR | Minimum VaR | Maximum VaR | VaR as of |
|---|---|---|---|---|---|
| € 000 | 31/12/2011 | 31/12/2010 | |||
| Currency risk1 | 63,564 | 53,961 | 37,119 | 82,891 | 53,021 |
| Interest rate risk | 46,284 | 54,191 | 26,462 | 116,618 | 70,163 |
| Credit spread risik | 10,662 | 31,336 | 9,417 | 47,787 | 31,065 |
| Share price risk | 2,328 | 1,973 | 1,345 | 2,958 | 1,399 |
| Total | 51,278 | 81,158 | 49,800 | 125,988 | 86,932 |
1 Exchange rate risk on total bank level also includes equity positions of subsidiaries denominated in foreign currency.
The risk measurement approaches employed are verified – besides analyzing returns qualitatively – on an ongoing basis through backtesting and statistical validation techniques. If model weaknesses are identified, then they are improved accordingly. In the reporting period, there were two backtesting violations for RBI's trading book (including equity positions in network banks) as shown in the backtesting chart. This chart compares VaR and theoretical profits and losses on a daily basis. VaR denotes the maximum loss that will not be exceeded with 99 per cent confidence level on the next day. It is compared to the theoretical profits and losses, which shows the hypothetical returns that the bank would have realized due to the actual changes in market parameters on the next day. It is possible to see that the model correctly reproduces market volatility regimes and quickly reacts to changed market conditions. Starting with the year 2012, the Stressed VaR as defined by regulatory requirements will be reported in addition to the VaR.
in € million
Market risk in RBI results primarily from exchange rate risk, which stems from foreign-currency denominated equity investments made in non-domestic Group units and the corresponding hedging positions entered into by the Group Asset/Liability Committee. The following table shows all material open foreign exchange rate positions as of 31 December 2011 and the corresponding values for the previous year. Those numbers include both trading positions as well as equity stakes in subsidiaries with foreign currency denominated statements of financial position.
| 31/12/2011 | 31/12/2010 |
|---|---|
| 244,810 | 187,135 |
| 217,268 | 167,305 |
| (59,632) | 90,655 |
| 109,977 | 137,443 |
| 97,353 | 94,341 |
| 678,626 | 133,831 |
| 755,662 | 811,689 |
| 290,401 | 526,303 |
| 765,891 | 781,200 |
| 636,767 | 538,897 |
| 518,498 | 475,253 |
| 2,280,107 | 2,132,097 |
| 1,733,777 | 1,537,677 |
| (616,156) | (707,173) |
In a narrow sense, exchange rate risk denotes the risk that one suffers losses due to open foreign exchange positions. Exchange rate fluctuations also influence current revenues and expenses. However, they also influence regulatory capital requirements of assets denominated in foreign currencies, even if they are refinanced in the same currency and thus do not create an open foreign exchange position.
RBI holds several large participations located outside of the European Monetary Union with their equity denoted in the corresponding local currency. Also, a significant share of risk weighted assets in RBI is denominated in foreign currencies. Changes in foreign exchange rates thus lead to a change of consolidated capital in RBI and they influence own funds requirement for credit risks as well.
Basically, there are two different approaches for managing exchange rate risks:
RBI aims at stabilizing its core capital ratio when managing exchange rate risks. Changes in foreign exchange rates thus lead to changes in the consolidated equity amount; however, the regulatory capital requirement for credit risks stemming from assets denoted in foreign currencies also changes correspondingly. This risk is managed on a monthly basis in the Group Asset/Liability Committee based on historical foreign exchange volatilities, exchange rate forecasts, and the sensitivity of the core capital ratio to changes in individual foreign exchange rates.
The following two tables show the largest present value changes for the trading book of RBI given a one-basis-point interest rate increase for the whole yield curve in € thousand for the reporting dates 31 December 2011 and 31 December 2010. Currencies where the total interest rate sensitivity exceeds € 10 thousand are shown separately. There are only minor changes in the risk factors compared to the previous year.
| 31/12/2011 € 000 |
Total | > 3 m | 3-6 m 6-12 m | 1-2 y | 2-3 y | 3-5 y | 5-7 y | 7-10 y | 10-15 y 15-20 y | >20y | ||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| ALL | (31) | 0 | (1) | (8) | (10) | (10) | (1) | 0 | 0 | 0 | 0 | 0 |
| BGN | (10) | (1) | 0 | 0 | (2) | (1) | (4) | 0 | 0 | 0 | 0 | 0 |
| CHF | 17 | 4 | 12 | (2) | 2 | 4 | (3) | 3 | (3) | 1 | (1) | (1) |
| CZK | (27) | (1) | 1 | (3) | (8) | (11) | 16 | (14) | (1) | (6) | 0 | 0 |
| EUR | 426 | 1 | 11 | 39 | 12 | (8) | 181 | 132 | 130 | (50) | 5 | (27) |
| HRK | (14) | 0 | 0 | 0 | 0 | (1) | (10) | (2) | 0 | 0 | 0 | 0 |
| RUB | (185) | (1) | (14) | (22) | (38) | (59) | (28) | (21) | (2) | 0 | 0 | 0 |
| USD | 87 | 9 | (45) | 26 | (2) | (44) | (5) | (9) | 32 | (65) | (18) | 207 |
| Other | 1 | 7 | (11) | 9 | (2) | (3) | 7 | (2) | (3) | 0 | 0 | 0 |
1 The representation of currencies has changed year on year depending on the absolute value of the interest rate sensitivity
| 31/12/2010 € 000 |
Total | > 3 m | 3-6 m 6-12 m | 1-2 y | 2-3 y | 3-5 y | 5-7 y | 7-10 y | 10-15 y 15-20 y | >20y | ||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| ALL | (30) | (1) | (1) | (10) | (4) | (11) | (4) | 0 | 0 | 0 | 0 | 0 |
| BGN | (10) | (1) | 0 | 0 | (1) | (1) | (5) | 0 | 0 | 0 | 0 | 0 |
| EUR | 453 | 6 | (7) | (7) | (95) | 35 | 208 | 161 | 219 | 7 | 21 | (94) |
| GBP | (19) | 0 | 0 | 0 | (1) | 0 | 0 | 0 | (5) | (1) | (1) | (11) |
| HUF | 5 | 4 | (1) | 24 | (23) | 10 | (15) | (8) | 13 | 3 | 0 | 0 |
| RUB | (177) | (4) | (5) | (16) | (38) | (25) | (88) | (1) | (1) | 0 | 0 | 0 |
| USD | (32) | 0 | (9) | (4) | (7) | (6) | (4) | 1 | (1) | 0 | 0 | (1) |
| Other | (11) | (2) | (1) | (7) | 2 | (5) | 9 | 0 | (10) | (1) | 0 | 0 |
Different maturities and repricing schedules of assets and the corresponding liabilities (i.e. deposits and refinancing on debt and capital markets) cause interest rate risk in RBI. This risk arises in particular from different interest rate sensitivities, rate adjustments, and other optionality of expected cash flows. Interest rate risk in the banking book is material for euro and US-dollar as major currencies as well as for local currencies of Group units located in Central and Eastern Europe.
This risk is mainly hedged by a combination of on- and off-balance sheet transactions where in particular interest rate swaps and – to a smaller extend – also interest rate forwards and interest rate options are used. Balance sheet management is a core task of the central Treasury division and of individual network banks, which are supported by asset/liability management committees. They base their decisions on various interest income analyses and simulations that ensure proper interest rate sensitivity in line with expected changes in market rates and the overall risk appetite.
Interest rate risk in the banking book is not only measured in a value-at-risk framework but also managed by the traditional tools of nominal and interest rate gap analyses. Since 2002, interest rate risk is subject to quarterly reporting in the context of the interest rate risk statistic submitted to the banking supervisor. This report shows the change in the present value of the banking book as a percentage of own funds in line with the requirements of Basel II. Maturity assumptions needed in this analysis are defined as specified by regulatory authorities or based on internal statistics and empirical values. In 2011, the changes in present value of banking book positions after an interest rate shock of 200 basis points were always lower than the regulatory reporting threshold of 20 per cent of eligible own funds.
The following table shows the change in the present value of RBI's banking book given a one-basis-point interest rate increase for the whole yield curve in € thousand for reporting dates 31 December 2011 and 31 December 2010. Currencies with total interest rate sensitivity exceeding € 10 thousand are shown separately. Interest rate risk in the banking book decreased mainly due to a reduction of holdings in government bonds.
| 31/12/2011 € 000 |
Total | > 3 m | 3-6 m 6-12 m | 1-2 y | 2-3 y | 3-5 y | 5-7 y | 7-10 y 10-15 y 15-20 y | >20y | |||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| ALL | (45) | 3 | (4) | 6 | (33) | (13) | (1) | (4) | 0 | 0 | 0 | 0 |
| BGN | 16 | 0 | 3 | 9 | 0 | 5 | (1) | 0 | 0 | 0 | 0 | 0 |
| CHF | (154) | 8 | (5) | (1) | (16) | (2) | (11) | (19) | (37) | (49) | (23) | 0 |
| CNY | 37 | (10) | 16 | 32 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 |
| CZK | 12 | 8 | (4) | 19 | 0 | (2) | 3 | (10) | (4) | 2 | (1) | 0 |
| EUR | (607) | 84 | 121 | 177 | 185 | 12 | (130) | (629) | (202) | (118) | (8) | (98) |
| HRK | (16) | (1) | 0 | 4 | (5) | (4) | (3) | (4) | (3) | 0 | 0 | 0 |
| HUF | (88) | (5) | (7) | (8) | (7) | (21) | (25) | (11) | (5) | 1 | 0 | 0 |
| RON | (108) | 1 | (2) | 2 | (8) | (31) | (11) | (35) | (23) | 0 | 0 | 0 |
| RSD | (25) | (1) | (1) | (5) | (7) | (7) | (3) | (1) | 0 | 0 | 0 | 0 |
| RUB | 66 | (36) | 2 | (7) | 13 | 68 | 113 | (6) | (28) | (40) | (13) | 0 |
| UAH | (248) | (6) | (5) | (26) | (60) | (57) | (65) | (11) | (10) | (6) | (1) | 0 |
| USD | (755) | 26 | (12) | 24 | (25) | (98) | (115) | (157) | (151) | (211) | (32) | (4) |
| Other | (7) | (9) | (1) | (8) | 2 | 5 | 9 | (1) | (3) | 0 | 0 | (1) |
1 The representation of currencies has changed year on year depending on the absolute value of the interest rate sensitivity
| 31/12/2010 € 000 |
Total | > 3 m | 3-6 m 6-12 m | 1-2 y | 2-3 y | 3-5 y | 5-7 y | 7-10 y 10-15 y 15-20 y >20y | ||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| BGN | 17 | 2 | 3 | 13 | (1) | 2 | (1) | 0 | 0 | 0 | 0 | 0 |
| BYR | 30 | (2) | (11) | 6 | 1 | 1 | 34 | 0 | 0 | 0 | 0 | 0 |
| CHF | (101) | 2 | (14) | (20) | (2) | 3 | (1) | (14) | (16) | (22) | (16) | 0 |
| CNY | 25 | (14) | 3 | 36 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 |
| CZK | (42) | (12) | 9 | 39 | (82) | (34) | 55 | 16 | (17) | (16) | 0 | 0 |
| EUR | (2,026) | 189 | 177 | 33 | (38) | 50 | (155) | (767) (1,244) | (210) | 35 | (96) | |
| HUF | (88) | (22) | (1) | 6 | 2 | (12) | (36) | (29) | 2 | 2 | 0 | 0 |
| PLN | (17) | (14) | 5 | (5) | (2) | (1) | 0 | 0 | 0 | 0 | ||
| RON | (167) | 5 | (4) | (10) | (22) | (29) | (72) | (24) | (11) | 0 | 0 | 0 |
| RUB | 58 | (4) | (20) | 14 | 51 | 45 | 43 | (12) | (16) | (22) | (14) | (7) |
| UAH | (123) | (1) | 5 | 7 | (38) | (31) | (40) | (11) | (7) | (6) | (1) | 0 |
| USD | (288) | (23) | 30 | 27 | (6) | 99 | (87) | (98) | (56) | (124) | (35) | (14) |
| Other | (34) | (18) | (13) | 16 | (22) | (22) | (28) | 47 | 3 | 1 | 1 | (1) |
The market risk management framework uses time-dependent bond and CDS-spread curves as risk factors in order to measure credit spread risks. This market risk category thus captures the specific interest rate risk of all securities in the trading and banking book. The value-at-risk report covers RBI AG in this risk category, where a major part of securities positions of the Group are booked. The rollout of this system to all Group units is being planned.
Banks perform maturity transformation as an important role for international financial markets. The need for maturity transformation arises from the needs of depositors to access their funds within short notice and the opposite need of borrowers for longterm loans. This function constantly results in positive or negative liquidity gaps for different maturities that are managed through transactions with other market participants under normal market conditions.
Liquidity management, i.e. ensuring that the Group maintain its ability to pay at all times, is performed both centrally by the Treasury division in Vienna and on a decentralized basis by local banking subsidiaries. Cash flows are calculated and analyzed by currency on a weekly basis in an internal monitoring system. Based on this data, the Group creates liquidity balances, and analyzes whether the Group conforms to legal regulations on liquidity positions and defined internal liquidity limits. Liquidity analyses also include simulations on defined market or name specific liquidity crises in scenario-based cash flow forecasts. All these analyses are discussed in the Group Asset/Liability Committee of the bank.
The Austrian liquidity risk management directive, which implements the principles developed by the Committee of European Banking Supervision (CEBS) in Austria, became effective on 31 December 2010. RBI had already established the now mandatory instruments for liquidity risk management (amongst others a sufficiently large liquidity buffer, stress tests based on different scenarios, and liquidity contingency plans). Additional regulatory changes in the liquidity risk area will be defined in Basel III. As far as it is possible to estimate the new liquidity ratios based on the still preliminary rules, RBI appears to be well prepared for the new regulations.
The following table shows excess liquidity and the ratio of expected cash inflows plus counterbalancing capacity to cash outflows (liquidity ratio) for select maturities on a cumulative basis, taking into account balance sheet items and off-balance-sheet transactions. 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). Excess liquidity has been further increased in all maturity buckets. In particular the ongoing effort to acquire stable customer deposits and the prudential management of available liquidity lead to the high liquidity ratio.
| € 000 | 2011 | 2010 | ||||
|---|---|---|---|---|---|---|
| Maturity | 1 week | 1 month | 1 year | 1 week | 1 month | 1 year |
| Liquidity gap | 20,692,286 | 17,937,132 | 7,093,711 | 15,996,552 | 13,132,935 | 5,994,321 |
| Liquidity ratio | 175% | 130% | 105% | 172% | 126% | 105% |
Internal limits have been established 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 short-term liquidity needs (also with regard to the publicity impact) exist for all major Group units.
Funding liquidity risk is mainly driven by changes in the risk strategy of lenders or by a rating downgrade of a bank that needs external funding. Funding rates and supply rise and fall with credit spreads, which change due to the market- or bank-specific situation.
As a consequence, long-term funding depends on restoring confidence in banks and the increased effort in collecting customer deposits. RBI's banking activities are refinanced by combining wholesale funding and the retail franchise of deposit-taking network banks. RBI is the central liquidity balancing agent for the local Group units in Central and Eastern Europe.
In RBI's funding plans, special attention is paid to a diversified structure of funding to mitigate funding liquidity risk. In the Group, funds are not only raised by RBI as the Group's parent institution, but also individually by different banking subsidiaries. Those efforts are coordinated and optimized through a joint funding plan. Moreover, RBI arranges medium-term and long-term funding for its subsidiaries through syndicated loans, bilateral funding agreements with banks, and financing facilities of supranational institutions. These funding sources are based on long-term business relationships.
For managing and limiting liquidity risks, the targets for loan-/deposit ratios (the ratio of customer loans to customer deposits) have been revised for individual network banks taking into account expected Basel III regulations. The limits incorporate planned future business volumes as well as the feasibility for increasing customer deposit in different countries. On the one hand, this initiative reduces external funding requirements. On the other hand, it also reduces the need for internal funding operations and the risk associated with such liquidity transfers.
The following table shows a breakdown of cash flows according to the contractual maturity of financial liabilities:
| 31/12/2011 | Carrying amount |
Contractual cash flows |
Up to 3 months |
3-12 months | More than 1 year, up |
More than 5 years |
|---|---|---|---|---|---|---|
| € 000 | to 5 years | |||||
| Non-derivative liabilities | 126,080,611 | 137,989,157 | 77,555,375 | 20,574,411 | 26,714,055 | 13,145,319 |
| Deposits from banks | 37,991,809 | 42,071,887 | 22,361,668 | 5,482,472 | 11,368,842 | 2,858,906 |
| Deposits from customers | 66,747,234 | 70,263,681 | 48,917,920 | 12,265,438 | 4,602,652 | 4,477,671 |
| Debt securities issued | 14,366,814 | 17,010,194 | 3,504,640 | 2,562,491 | 9,404,260 | 1,538,805 |
| Other liabilities | 2,824,021 | 3,862,737 | 2,747,897 | 188,588 | 809,046 | 117,206 |
| Subordinated capital | 4,150,733 | 4,780,658 | 23,250 | 75,422 | 529,255 | 4,152,731 |
| Derivative liabilities | 9,197,649 | 17,903,100 | 7,568,858 | 2,878,354 | 6,152,849 | 1,303,039 |
| Derivatives in the trading | ||||||
| book | 8,405,930 | 15,818,157 | 6,605,117 | 2,610,327 | 5,449,666 | 1,153,048 |
| Hedging derivatives | 42,702 | 49,372 | 541 | 4,782 | 13,065 | 30,984 |
| Other derivatives | 736,050 | 1,979,476 | 959,303 | 242,754 | 658,502 | 118,917 |
| Credit derivatives | 12,967 | 56,095 | 3,897 | 20,491 | 31,616 | 90 |
| 31/12/2010 | Carrying | Contractual | Up to | 3-12 months | More than | More than |
|---|---|---|---|---|---|---|
| amount | cash flows | 3 months | 1 year, up | 5 years | ||
| € 000 | to 5 years | |||||
| Non-derivative liabilities | 114,302,837 | 126,753,218 | 65,467,730 | 22,721,280 | 26,830,333 | 11,733,874 |
| Deposits from banks | 33,659,182 | 38,603,453 | 17,055,997 | 7,762,122 | 10,830,875 | 2,954,459 |
| Deposits from customers | 57,633,113 | 60,580,197 | 43,865,734 | 9,123,427 | 3,736,599 | 3,854,435 |
| Debt securities issued | 16,555,382 | 18,891,313 | 1,486,420 | 5,551,382 | 9,741,404 | 2,112,107 |
| Other liabilities | 2,454,062 | 4,193,176 | 3,009,533 | 181,791 | 853,683 | 148,170 |
| Subordinated capital | 4,001,098 | 4,485,079 | 50,046 | 102,558 | 1,667,772 | 2,664,703 |
| Derivative liabilities | 5,794,444 | 13,341,347 | 6,259,396 | 2,671,943 | 2,924,899 | 1,485,107 |
| Derivatives in the trading | ||||||
| book | 4,530,916 | 10,751,156 | 5,200,176 | 2,130,544 | 2,320,808 | 1,099,627 |
| Hedging derivatives | 476,764 | 574,063 | 12,979 | 19,907 | 219,898 | 321,278 |
| Other derivatives | 768,432 | 1,998,047 | 1,044,143 | 516,696 | 373,679 | 63,529 |
| Credit derivatives | 18,332 | 18,081 | 2,098 | 4,796 | 10,514 | 673 |
Operational risk is defined as the risk of unexpected losses resulting from inadequate or failed internal processes, people and systems or from external events, including legal risk. In this risk category internal risk drivers like unauthorized activities, fraud or theft, execution and process errors, or business disruption and system failures are managed. External factors such as damage to physical assets or consciously conducted human fraud are managed and controlled as well.
This risk category is analyzed and managed on the basis of own historical loss data and the results of self assessments. Another management tool is the incentive system implemented in internal capital allocation. This system rewards high data quality and low expected operational risk costs of individual business units. Generally speaking, RBI implements a centralized - decentralized system for operational risk management. In this process, a central operational risk management function defines all basic principles and minimum requirements, which then are implemented risk type specific in the individual local units.
As with other risk types the principle of firewalling between risk management and risk controlling is also applied to operational risk in RBI. Operational risk controlling units are mainly responsible for the implementation and refinement of methods for operational risk management in different Group units (e.g. performing self assessment, defining and monitoring key risk indicators, etc.) and for reporting to the central operational risk controlling function. Business line managers are responsible for controlling and mitigating operational risks. They decide on pro-active operational risk steering actions, such as buying insurance, and the use of further risk mitigating instruments.
Identifying and evaluating risky areas that might endanger the Group's existence if a loss occurs (but where losses are highly unlikely to be realized) and also areas where losses are more likely to happen frequently (but cause only smaller losses) are important tasks for controlling operational risks.
Operational risk self-assessment is executed in a structured and Group-wide uniform manner, where all operational risk categories and business functions are assessed in a two--dimensional matrix by generic business processes and event types (per business line or product group). This applies to new products as well. All Group units grade the impact of high probability/low impact events and low probability/high impact incidents according to their estimation of the loss potential for the next year and in the next ten years in relation to profits. Low probability/high impact events are quantified by a Group-wide analytical tool with specific scenarios. Individual Group units furthermore run additional scenarios depending on their individual risk profile and local specifics. In 2011 RBI also participated in an exchange of scenario definitions within the ORX consortium, of which it is a member since 2010.
In order to monitor operational risks, key risk indicators (KRIs) are used that allow promptly identifying and mitigating operational risks. These are also specifically tailored to individual Group units.A common cataloge of key risk indicators, which is defined by the head office for internal benchmarking purposes, is mandatory for all Group units.
Loss data is collected in a central database called ORCA (Operational Risk Controlling Application) in a structured manner and on a Group-wide basis according to the event type and the business line. Collecting losses stemming from operational risks is a prerequisite for implementing a statistical loss distribution model and a minimum requirement for implementing the regulatory Standardized Approach. Furthermore, loss data (and near misses) is used to create and validate operational risk scenarios and for exchange with international data pools to further develop advanced operational risk management tools.
The results of analyses as well as loss events resulting from operational risks are reported in a comprehensive manner to the Group Risk Committee on a regular basis. The distribution of losses in the Group by event type shows an increase in category Clients, Products & Business Practices in the year 2011, which is mainly caused by losses stemming from foreign currency loan conversions in Hungary.
RBI currently calculates regulatory capital requirements for operational risks according to Basel II using the Standardized Approach. This approach applies to all major Group units.
Operational risk reduction is initiated by business managers who decide on preventive actions like risk mitigation or risk transfer. Progress and success of these actions is monitored by risk controlling. The former also define contingency plans and nominate responsible persons or departments for initiating the defined actions if losses in fact occur. In addition, several dedicated organizational units provide support to business units for reducing operational risks. An important roleis taken on by fraud management which reduces potential fraud related losses through proactive monitoring and preventive actions. RBI also executes an extensive staff training program and has different emergency plans and back-up systems in place.
The total volume of unsettled financial instruments as of 31 December 2011 breaks down as follows:
| Nominal amount by maturity Fair values |
|||||||
|---|---|---|---|---|---|---|---|
| Up to 1 year | More than | More than | Total | Positive | Negative | ||
| € 000 | 1 year, up to 5 years |
5 years | |||||
| Total | 122,281,901 | 145,038,007 | 82,455,387 | 349,775,296 | 8,697,565 | (9,197,650) | |
| Interest rate contracts | 67,754,329 | 132,690,032 | 79,386,786 | 279,831,147 | 7,542,484 | (7,086,893) | |
| OTC products | |||||||
| Interest rate swaps | 54,278,011 | 126,661,289 | 74,347,901 | 255,287,201 | 7,334,004 | (6,901,548) | |
| Interest rate futures | 10,138,796 | 824,586 | 0 | 10,963,382 | 17,509 | (12,836) | |
| Interest rate options – purchased | 799,522 | 2,536,276 | 2,188,593 | 5,524,391 | 181,485 | 0 | |
| Interest rate options – sold | 1,137,239 | 2,667,881 | 2,689,606 | 6,494,726 | 0 | (167,279) | |
| Products trading on stock exchange | |||||||
| Interest rate futures | 1,138,261 | 0 | 10,686 | 1,148,947 | 5,824 | (1,975) | |
| Interest rate options | 262,500 | 0 | 150,000 | 412,500 | 3,662 | (3,255) | |
| Foreign exchange rate and gold contracts |
51,886,998 | 8,971,521 | 1,894,690 | 62,753,209 | 896,210 | (1,425,303) | |
| OTC products | |||||||
| Cross-currency interest | |||||||
| rate swaps | 2,533,555 | 7,584,615 | 1,867,979 | 11,986,149 | 267,410 | (593,889) | |
| Forward foreign exchange contracts |
46,624,332 | 1,187,839 | 0 | 47,812,171 | 578,005 | (682,160) | |
| Currency options – purchased |
1,247,261 | 60,005 | 1,519 | 1,308,785 | 48,138 | 0 | |
| Currency options – sold | 1,311,728 | 132,279 | 1,645 | 1,445,652 | 0 | (120,046) | |
| Other similar currency contracts | 10 | 0 | 0 | 10 | 10 | 0 | |
| Gold commodity contracts | 8,305 | 6,783 | 23,547 | 38,635 | 930 | (25,154) | |
| Products trading on stock exchange | |||||||
| Currency contracts (futures) | 161,807 | 0 | 0 | 161,807 | 1,717 | (4,054) | |
| Equity/index contracts | 1,453,433 | 1,144,659 | 382,450 | 2,980,542 | 82,102 | (590,632) | |
| OTC products | |||||||
| Equity-/index-based options - purchased |
177,063 | 344,239 | 201,960 | 723,262 | 33,306 | 0 | |
| Equity-/index-based | |||||||
| options - sold | 233,653 | 321,498 | 57,226 | 612,377 | 0 | (172,634) | |
| Other similar equity/index contracts |
181,165 | 405,559 | 121,965 | 708,689 | 4,980 | (369,640) | |
| Products trading on stock exchange | |||||||
| Equity/index futures - | |||||||
| forward pricing | 596,579 | 458 | 1,299 | 598,336 | 26,881 | (31,793) | |
| Equity/index futures | 264,973 | 72,905 | 0 | 337,878 | 16,935 | (16,565) | |
| Commodities | 155,274 | 83,595 | 24,645 | 263,514 | 12,924 | (9,623) | |
| Credit derivatives | 1,017,437 | 2,127,287 | 753,226 | 3,897,950 | 163,845 | (80,498) | |
| Precious metals contracts | 14,430 | 20,913 | 13,590 | 48,934 | 0 | (4,701) |
The surplus of negative market values for security-based transactions is offset by shares purchased for hedging purposes. These shares are recorded under trading assets and are not shown in the above table.
The total volume of unsettled financial instruments as of 31 December 2010 breaks down as follows:
| Nominal amount by maturity | Fair values | |||||
|---|---|---|---|---|---|---|
| Up to 1 year | More than | More than | Total | Positive | Negative | |
| € 000 | 1 year, up to 5 years |
5 years | ||||
| Total | 89,949,792 | 109,694,268 | 70,929,143 | 270,573,203 | 5,112,586 | (5,794,443) |
| Interest rate contracts | 44,859,461 | 98,821,793 | 67,760,699 | 211,441,953 | 4,197,567 | (3,975,179) |
| OTC products | ||||||
| Interest rate swaps | 37,810,244 | 93,944,351 | 62,697,041 | 194,451,636 | 4,106,879 | (3,866,061) |
| Interest rate futures | 4,980,163 | 269,833 | 0 | 5,249,996 | 4,726 | (5,330) |
| Interest rate options – purchased | 743,393 | 2,236,711 | 1,738,547 | 4,718,651 | 81,841 | 0 |
| Interest rate options – sold | 672,707 | 2,107,298 | 2,170,300 | 4,950,306 | 0 | (103,388) |
| Products trading on stock exchange | ||||||
| Interest rate futures | 652,954 | 263,600 | 1,154,811 | 2,071,364 | 4,121 | (400) |
| Foreign exchange rate and gold contracts |
42,618,739 | 7,734,681 | 1,794,526 | 52,147,948 | 741,486 | (1,168,629) |
| OTC products | ||||||
| Cross-currency interest rate swaps |
2,992,522 | 6,362,482 | 1,766,434 | 11,121,439 | 263,086 | (654,385) |
| Forward foreign exchange contracts |
36,965,659 | 932,590 | 0 | 37,898,249 | 436,796 | (446,719) |
| Currency options – purchased | 1,150,438 | 197,053 | 1,476 | 1,348,968 | 39,095 | 0 |
| Currency options – sold | 1,318,885 | 238,606 | 1,599 | 1,559,091 | 0 | (42,389) |
| Other similar currency contracts | 0 | 0 | 0 | 0 | 1 | 0 |
| Gold commodity contracts | 5,290 | 3,950 | 25,017 | 34,256 | 899 | (23,982) |
| Products trading on stock exchange | ||||||
| Currency contracts (futures) | 185,945 | 0 | 0 | 185,945 | 1,609 | (1,154) |
| Equity/index contracts | 1,550,606 | 699,170 | 240,233 | 2,490,007 | 97,230 | (569,568) |
| OTC products | ||||||
| Equity-/index-based options - purchased |
135,052 | 333,586 | 125,799 | 594,437 | 72,764 | 0 |
| Equity-/index-based options - sold |
132,693 | 138,419 | 37,224 | 308,336 | 0 | (148,200) |
| Other similar equity/index contracts |
376,439 | 186,508 | 75,912 | 638,858 | 3,803 | (408,641) |
| Products trading on stock exchange | ||||||
| Equity/index futures - | ||||||
| forward pricing | 498,142 | 0 | 1,298 | 499,439 | 11,316 | (1,319) |
| Equity/index futures | 408,280 | 40,657 | 0 | 448,937 | 9,347 | (11,408) |
| Commodities | 404,694 | 100,657 | 15,276 | 520,627 | 17,398 | (3,024) |
| Credit derivatives | 495,178 | 2,337,967 | 1,102,740 | 3,935,885 | 57,261 | (62,252) |
| Precious metals contracts |
21,114 | 0 | 15,669 | 36,783 | 1,644 | (15,791) |
Fair values which are different from the carrying amount are calculated for fixed-interest loans and advances to and deposits from banks or customers, if the remaining maturity is more than 1 year. Variable-interest loans and advances and deposits are taken into account if they have an interest rollover period of more than 1 year. The fair value of loans and advances is calculated by discounting future cash flows and using interest rates at which similar loans and advances with the same maturities could have been granted to customers with similar creditworthiness. Moreover, the specific credit risk and collaterals are considered for the calculation of fair values for loans and advances.
| 2011 | 2010 | |||||
|---|---|---|---|---|---|---|
| Fair value | Carrying | Difference | Fair value | Carrying | Difference | |
| € 000 | amount | amount | ||||
| Assets | ||||||
| Cash reserve | 11,401,747 | 11,401,747 | 0 | 4,806,891 | 4,806,891 | 0 |
| Loans and advances to banks | 25,499,535 | 25,520,401 | (20,866) | 21,270,497 | 21,532,406 | (6,890) |
| Loans and advances to | ||||||
| customers | 75,982,501 | 76,750,667 | (768,165) | 71,399,994 | 71,156,209 | 243,785 |
| Financial investments | 5,849,430 | 5,693,528 | 155,902 | 11,641,567 | 11,485,536 | 156,032 |
| Intangible and tangible fixed | ||||||
| assets | 2,578,823 | 2,577,025 | 1,798 | 2,671,347 | 2,673,446 | (2,100) |
| Other assets | 2,173,704 | 2,173,704 | 0 | 2,066,890 | 2,066,890 | 0 |
| Liabilities | ||||||
| Deposits from banks | 37,908,510 | 37,991,809 | (83,298) | 33,774,445 | 33,659,182 | 115,263 |
| Deposits from customers | 66,699,404 | 66,747,234 | (47,830) | 57,934,072 | 57,633,113 | 300,959 |
| Debt securities issued | 14,032,278 | 14,366,814 | (334,536) | 16,646,729 | 16,555,382 | 91,347 |
| Subordinated capital | 3,677,219 | 4,150,733 | (473,514) | 3,866,338 | 4,001,098 | (134,760) |
| Other liabilities | 1,515,024 | 1,515,024 | 0 | 1,243,387 | 1,243,387 | 0 |
| 2011 | 2010 | |||||
|---|---|---|---|---|---|---|
| € 000 | Level I | Level II | Level III | Level I | Level II | Level III |
| Trading assets | 2,861,986 | 8,630,262 | 102,882 | 3,599,448 | 5,031,317 | 255 |
| Positive fair values of derivatives1 |
166,781 | 8,001,726 | 102,707 | 69,408 | 4,117,769 | 0 |
| Shares and other variable yield securities |
198,196 | 11,739 | 0 | 320,380 | 110,048 | 0 |
| Bonds, notes and other fixed interest securities |
2,497,009 | 609,924 | 175 | 3,209,660 | 803,501 | 255 |
| Call/time deposits from trading purposes |
0 | 6,872 | 0 | 0 | 0 | 0 |
| Financial assets at fair value through profit or loss |
5,056,336 | 2,268,679 | 34,780 | 5,613,367 | 2,301,548 | 155,352 |
| Shares and other variable yield securities |
130,371 | 118,978 | 4,745 | 146,778 | 131,714 | 1,294 |
| Bonds, notes and other fixed-interest securities |
4,925,965 | 2,149,701 | 30,035 | 5,466,589 | 2,169,834 | 154,058 |
| Financial assets available for-sale |
3,486,659 | 0 | 0 | 80,060 | 0 | 0 |
| Other interests2 | 64,589 | 0 | 0 | 80,060 | 0 | 0 |
| Bonds, notes and other fixed interest securities |
3,422,069 | 0 | 0 | 0 | 0 | 0 |
| Derivatives (hedging) | 0 | 426,350 | 0 | 0 | 925,409 | 0 |
| Positive fair values of derivatives from hedge accounting |
0 | 426,350 | 0 | 0 | 925,409 | 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
| 2011 | 2010 | |||||
|---|---|---|---|---|---|---|
| € 000 | Level I | Level II | Level III | Level I | Level II | Level III |
| Trading liabilities | 670,907 | 9,680,705 | 112,332 | 1,575,769 | 4,952,538 | 48 |
| Negative fair values of derivatives financial instruments1 |
105,421 | 8,992,319 | 57,208 | 555,680 | 4,761,952 | 48 |
| Short-selling of trading assets | 565,486 | 142 | 0 | 424,912 | 818 | 0 |
| Certificates issued | 0 | 688,244 | 55,125 | 595,177 | 189,769 | 0 |
| Liabilities at fair value through profit and loss |
0 | 3,345,911 | 0 | 2,557,396 | 0 | |
| Debt securities issued | 0 | 3,345,911 | 0 | 0 | 2,557,396 | 0 |
| Derivatives (hedging) | 0 | 42,702 | 0 | 0 | 476,764 | 0 |
| Negative fair values of derivatives from hedge |
||||||
| accounting | 0 | 42,702 | 0 | 0 | 476,764 | 0 |
1 Including other derivatives.
Level I Quoted market prices
Level II Valuation techniques based on market data
Level III Valuation techniques not based on market data
The following tables show the changes in the fair value of financial instruments whose valuation models are based on unobservable parameters.
| As of | Change in | Exchange | Purchases | Sales, | |
|---|---|---|---|---|---|
| € 000 | 1/1/2011 | consolidated group |
differences | repayment | |
| Trading assets | 255 | 0 | 7 | 0 | (4,251) |
| Financial assets at fair value through profit or loss |
155,352 | 0 | (1,090) | 697 | (126,089) |
| Gains/loss in P/L |
Gains/loss in other comprehensive |
Transfer to level III |
Transfer from level III |
As of 31/12/2011 |
|
| € 000 | income | ||||
| Trading assets Financial assets at fair value through profit or loss |
103,843 2,565 |
0 0 |
3,027 3,507 |
0 (161) |
102,882 34,780 |
| € 000 | As of 1/1/2011 |
Change in consolidated group |
Exchange differences |
Purchases | Sales, repayment |
| Trading liabilities | 48 | 0 | 0 | 2,236 | 0 |
| € 000 | Gains/loss in P/L |
Gains/loss in other comprehensive income |
Transfer to level III |
Transfer from level III |
As of 31/12/2011 |
Gains and losses resulting from financial instruments of the level III fair value hierarchy amounted to a gain of € 106,408 thousand (2010: € 20,196 thousand).
Trading liabilities 2,678 0 107,418 (48) 112,332
| € 000 | 2011 | 2010 |
|---|---|---|
| Contingent liabilities | 13,280,487 | 11,855,528 |
| Acceptances and endorsements | 43,693 | 32,119 |
| Credit guarantees | 7,417,798 | 6,662,119 |
| Other guarantees | 2,698,867 | 2,266,742 |
| Letters of credit (documentary business) | 3,072,307 | 2,875,765 |
| Other contingent liabilities | 47,821 | 18,782 |
| Commitments | 12,624,734 | 11,992,462 |
| Irrevocable credit lines and stand-by facilities | 12,624,734 | 11,992,462 |
| Up to 1 year | 4,842,840 | 4,546,505 |
| More than 1 year | 7,781,894 | 7,445,957 |
The following table contains revocable credit lines which are unweighted according to Basel II:
| € 000 | 2011 | 2010 |
|---|---|---|
| Revocable credit lines | 14,847,947 | 11,755,884 |
| Up to 1 year | 11,965,514 | 9,686,820 |
| More than 1 year | 2,882,434 | 2,069,064 |
RBI AG is a member of Raiffeisen-Kundengarantiegemeinschaft Austria. The members of this association have a contractual obligation to guarantee jointly the punctual fulfillment of the entirety of an insolvent association member's commitments arising from customer deposits and its own issues up to the limit of the sum of the individual capacities of the remaining association members. The individual capacity of an association member is measured on the basis of its freely available reserves subject to the pertinent provisions of the Austrian Banking Act (BWG).
Fiduciary business not recognized in the statement of financial position was concluded with the following volumes on the balance sheet date:
| € 000 | 2011 | 2010 |
|---|---|---|
| Loans and advances to banks | 9,509 | 9,442 |
| Loans and advances to customers | 342,863 | 385,666 |
| Financial investments | 7,262 | 31,285 |
| Other fiduciary assets | 45,741 | 48,891 |
| Fiduciary assets | 405,374 | 475,284 |
| Deposits from banks | 113,085 | 143,303 |
| Deposits from customers | 239,457 | 276,545 |
| Other fiduciary liabilities | 52,832 | 55,436 |
| Fiduciary liabilities | 405,374 | 475,284 |
Fiduciary income and expenses break down as follows:
| € 000 | 2011 | 2010 |
|---|---|---|
| Fiduciary income | 7,019 | 8,723 |
| Fiduciary expenses | 827 | 1,489 |
The following table contains the funds managed by RBI:
| € 000 | 2011 | 2010 |
|---|---|---|
| Retail investment funds | 4,976,007 | 5,148,417 |
| Equity-based and balanced funds | 3,004,068 | 3,031,164 |
| Bond-based funds | 1,700,639 | 1,684,183 |
| Money market funds | 232,330 | 373,362 |
| Other | 38,970 | 59,708 |
| Special funds | 992,300 | 922,181 |
| Property-based funds | 69,699 | 63,286 |
| Total | 6,038,006 | 6,133,884 |
Capital was and is an integral part of bank management. RBI as an international Group considers several control parameters. From a regulatory view, RBI is part of the RZB credit institution group. Moreover, RBI – on an individual basis – has to adhere to the legal own funds regulations.
Regulatory values are defined for RBI on a partly consolidated and on an individual basis by the Austrian Banking Act based on adequate guidelines of the EU. There are also – often deviating with regard to content – guidelines in the several countries in which RBI operates. Such guidelines have to be adhered to by the local Group units.
RBI uses target values for internal regulation, which comprise all risk types (including trading book, currency risk and operational risk). The current planning/budgeting is shaped by the developments in Basel and Brussels regarding the advancement and harmonising of own funds regulations. Parallel to the development of these regulations, RBI will introduce new target values, which are sufficiently above the 7 per cent tier 1 capital (full expansion stage Basel 3) in order to avoid regulatory limitations regarding management decisions (e.g. amount of dividend). An additional dimension has been added with the requirements of the European Banking Authority (EBA). Here the underlying rules differ from the previously valid BWG, as well as from the draftscontained in the CRR/CRD 4.
Control on a Group level is exerted in cooperation between the departments Treasury, Planning & Finance and Group Strategy. The individual Group units are responsible for the observation of the targets in coordination with central departments responsible for the participation management of the respective unit.
The main focus in the control is on the core tier 1 ratio (common-equity Tier 1). Besides that, the risk taking capacity is calculated in the framework of regulatory limits. It is defined as the maximum loss, which the bank or the banking group may encounter during the current calendar year without falling short of the regulatory minimum capital values. Accordingly, the mixture of capital instruments (several kinds of tier-1, tier-2 andtier 3 capitals) has an important role due to the complex mutual consideration limits. Tier 3 capital, however, plays a minor role, since this kind of capital will no longer be eligible under Basel 3 and CRR I/CRD IV. Furthermore the use of Tier 2 under the regulations becoming effective in 2013 (Basel 3) will be more limited than under Basel 2.
The current regulatory discussions and publications of the Basel Committee, EU Committees and the Austrian Regulatory Authority in connection with the new regulatory guidelines (Basel 3) are demonstrated in scenario calculations by Planning & Finance and Risk Controlling. The effects are immediately considered in planning and control in case of a certain occurrence probability.
The determination of the target values in relation to the compulsory minimum requirements needs additional internal control calculations. The department Risk Controlling calculates the value-at-risk in comparison with the above defined risk taking capacity. Moreover, a balance between economic capital and the respective cover is drawn. The economic capital is integral part of the planning and control of RBI. Further details regarding this calculation are stated in the risk report.
RBI is no credit institution group on its own according to the Austrian Banking Act (BWG) and is thus not subject to regulatory provisions on a consolidated basis, as it is part of the RZB credit institution group. The following figures are for information purposes only.
The own funds of RBI according to Austrian Banking Act (BWG) 1993/Amendment 2006 (Basel II) break down as follows:
| € 000 | 2011 | 2010 |
|---|---|---|
| Paid-in capital | 4,933,077 | 4,913,878 |
| Earned capital | 3,031,101 | 2,958,229 |
| Non-controlling interests | 1,171,016 | 1,003,313 |
| Hybrid tier 1 capital | 800,000 | 800,000 |
| Intangible fixed assets | (501,178) | (469,346) |
| Core capital (tier 1 capital) | 9,434,016 | 9,206,074 |
| Deductions from core capital | (18,591) | (14,845) |
| Eligible core capital (after deductions) | 9,415,426 | 9,191,229 |
| Supplementary capital according to Section 23 (1) 5 BWG | 598,742 | 599,792 |
| Provision excess of internal rating approach positions | 233,696 | 230,555 |
| Hidden reserves | 0 | 55,400 |
| Long-term subordinated capital | 2,535,571 | 2,480,171 |
| Additional own funds (tier 2 capital) | 3,368,009 | 3,365,918 |
| Deduction items: participations, securitizations | (18,591) | (14,845) |
| Eligible additional own funds (after deductions) | 3,349,419 | 3,351,073 |
| Deduction items: insurance companies | (7,075) | (3,817) |
| Tier 2 capital available to be redesignated as tier 3 capital | 100,079 | 69,078 |
| Total own funds | 12,857,848 | 12,607,563 |
| Total own funds requirement | 7,624,128 | 7,584,851 |
| Excess own funds | 5,233,720 | 5,022,712 |
| Excess cover ratio | 68.6% | 66.2% |
| Core tier 1 ratio, total | 9.0% | 8.9% |
| Tier 1 ratio, credit risk | 12.2% | 12.2% |
| Tier 1 ratio, total | 9.9% | 9.7% |
| Own funds ratio | 13.5% | 13.3% |
The total own funds requirement is as follows:
| € 000 | 2011 | 2010 |
|---|---|---|
| Risk-weighted assets according to section 22 BWG | 77,150,488 | 75,601,318 |
| of which 8 per cent minimum own funds for the credit risk according to sections 22a to | ||
| 22 h BWG | 6,172,039 | 6,048,105 |
| Standardized approach | 3,056,099 | 2,974,035 |
| Internal rating approach | 3,115,940 | 3,074,070 |
| Settlement risk | 7 | 27 |
| Own funds requirement for position risk in bonds, equities and commodities | 519,912 | 326,655 |
| Own funds requirement for open currency positions | 140,139 | 385,622 |
| Own funds requirement for operational risk | 792,031 | 824,442 |
| Total own funds requirement | 7,624,128 | 7,584,851 |
Risk-weighted assets for the credit risk according to asset classes break down as follows:
| € 000 | 2011 | 2010 |
|---|---|---|
| Risk-weighted assets according to section 22 BWG on standardized approach | 38,201,238 | 37,175,443 |
| Central governments and central banks | 3,518,188 | 3,712,388 |
| Regional governments | 99,000 | 95,175 |
| Public administration and non-profit organizations | 22,250 | 41,638 |
| Banks | 699,488 | 1,013,263 |
| Corporate customers | 21,186,063 | 18,800,172 |
| Retail customers | 9,443,875 | 10,088,583 |
| Covered bonds | 1,313 | 0 |
| Mutual funds | 117,575 | 124,513 |
| Securitization position | 0 | 18,050 |
| Other positions | 3,113,488 | 3,281,663 |
| Risk-weighted assets on internal rating approach | 38,949,250 | 38,425,875 |
| Central governments and central banks | 38,838 | 878,513 |
| Banks | 4,378,813 | 5,047,688 |
| Corporate customers | 32,097,350 | 29,586,425 |
| Retail customers | 2,170,575 | 2,464,663 |
| Equity exposures | 225,725 | 313,500 |
| Securitization position | 37,950 | 135,088 |
| Total | 77,150,488 | 75,601,318 |
The average number of staff employed during the financial year (full-time equivalents) breaks down as follows:
| Full-time equivalents | 2011 | 2010 |
|---|---|---|
| Salaried employees | 59,046 | 58,148 |
| Wage earners | 975 | 1,040 |
| Total | 60,021 | 59,188 |
| Full-time equivalents | 2011 | 2010 |
|---|---|---|
| Austria | 2,709 | 2,637 |
| Foreign | 57,312 | 56,551 |
| Total | 60,021 | 59,188 |
| € 000 | 2011 | 2010 |
|---|---|---|
| Members of the management board and senior staff | 7,033 | 4,129 |
| Other employees | 14,267 | 20,624 |
| Total | 21,299 | 24,753 |
The same regulations for employees are in principle valid for six members of the Management Board. These regulations provide a basic contribution to a pension fund from the company and an additional contribution if the employee pays own contributions of the same amount. One member of the Management Board has a defined benefit plan. Four members of the Management Board additionally have individual retirement benefits, which are funded by a reinsurance policy. For one member of the Management Board a further individual retirement benefit which is being funded by a single premium, in the amount of € 1,500 thousand m under a reinsurancepolicy thausand was made.
In the event of termination of function or employment contract and retirement from the company, two members of the Management Board are in principle entitled to severance payments according to the Salaried Employees Act (Angestelltengesetz) or Bank Collective Agreement (Bankenkollektivvertrag), two members of the Management Board according to contractual agreements and three members of the Management Board according to the Company Retirement Plan Act (Betrieblichen Mitarbeitervorsorgegesetz). The entitlement to receive severance payments according to the Salaried Employee Act or according to contractual agreements lapses with the exemption of one member of the Management Board in case of termination by the employee. For one member of the Management Board entitlement to severance payments has been converted in the course of merger-related changes of existing contracts. Corresponding payments are made in the years 2011 and 2012, in the financial year 2011 these amounted to € 2,022 thousand.
Moreover, protection against the risk of occupational invalidity exists which is covered by a pension fund and/or by individual pension agreements secured through reinsurance. The contracts are concluded for the functional duration or limited to a maximum of five years. The severance payments in case of premature termination of office without good cause shall not exceed more than two years total remuneration.
Key management refers to the members of the Management Board and the Supervisory Board of Raiffeisen Bank International AG, the parent company and Raiffeisen Zentralbank Österreich Aktiengesellschaft, the major shareholder. Relations of key management to Raiffeisen Bank International are as follows (respective fair values):
| € 000 | 2011 | 2010 |
|---|---|---|
| Sight deposits | 155 | 26 |
| Bonds | 1,184 | 1,291 |
| Shares | 4,250 | 6,032 |
| Time deposits | 54 | 101 |
| Leasing claims | 71 | 67 |
The following table shows relations of close family members of key management to Raiffeisen Bank International:
| € 000 | 2011 | 2010 |
|---|---|---|
| Shares | 45 | 92 |
| Time deposits | 25 | 0 |
Moreover, as of 31 December 2011 guarantees for a loan granted to a member of the Management Board amounted to € 765 thousand (2010: € 765 thousand). There is no compensation agreed between the company and their members of the Management Board and Supervisory Board or employees in the case of a takeover bid.
The members of the Management Board of Raiffeisen Bank International AG are remunerated as follows:
| € 000 | 2011 | 2010 |
|---|---|---|
| Fixed and performance-based remunerations | 7,545 | 8,191 |
| Payments to pension funds and business insurances | 1,703 | 183 |
| Share-based payments (performance-based) | 373 | 156 |
| Total | 9,621 | 8,530 |
The table contains fixed and performance-based remuneration, remunerations for membership of boards of affiliated subsidiaries, bonus payments, and benefits in kind. In the financial year, the share of performance-based remuneration components was 10.0 per cent (2010: 1.9 per cent).
Performance-based remuneration components of the Management Board normally consist of bonus payments of the year 2010 that are linked to the achievement of the Group objectives regarding profit after tax, return on risk adjusted capital (RORAC), cost/income ratio, to the personal objectives that are agreed upon annually and to the amount of allotment regarding SIP (see page 168 share-based remuneration). For three members of the Management Board who changed from RZB to RBI the bonus calculation for 2010 was performed according to RZB return on equity (ROE). According to the contractual provisions applicable to these persons until the end of 2010 bonus payments were granted in the amount of € 941 thousand, which will be due in 2012 (€ 297 thousand) and 2013 (€ 644 thousand). The actual payment is at the discretion of the Personel Committee of RBI.
The members of the RI Management Board that had waived their rights to the bonus payments in 2010 were awarded a onetime voluntary gratuity in the amount of € 1,400 thousand which was processed by the system according to displaced bonus payments described in note (34) Equity.
It should be noted that the figures of the remuneration of the Management Board for 2011 are not directly comparable with those of 2010, because two board members resigned during the year 2010.
For one member of the Management Board liabilities existed as of 31 December 2011 in the amount of € 765 thousand (2010: € 765 thousand).
The members of the Supervisory Board are remunerated as follows:
| € 000 | 2011 | 2010 |
|---|---|---|
| Remunerations supervisory board | 423 | 380 |
The Annual General Meeting held on 8 June 2011 decided an annual remuneration for the members of the Supervisory Board of € 423 thousand and transferred the distribution to the Board itself. The members of the Supervisory Board settled the distribution in their meeting on 8 June 2011 as follows: Chairman € 70 thousand, Deputy Chairman € 60 thousand, members of the Supervisory Board € 50 thousand. Session fees are not paid.
Thus, in the financial year, € 423 thousand was paid to the members of the Supervisory Board. In the previous year, the members of the Supervisory Board received remunerations of € 380 thousand.
Moreover, no contracts subject to approval in the meaning of Section 95 (5) items 12 Austrian Joint Stock Company Act (AktG) were concluded with members of the Supervisory Board in the financial year 2011.
The Management Board of Raiffeisen Bank International AG is as follows:
| First assignment | End of period | |
|---|---|---|
| Herbert Stepic, Chairman | 14 June 2001 | 31 December 20151 |
| Karl Sevelda, Deputy Chairman | 22 September 2010 | 31 December 20151 |
| Aris Bogdaneris | 1 October 2004 | 31 December 20151 |
| Patrick Butler | 22 September 2010 | 15 April 20122 |
| Martin Grüll | 3 January 2005 | 31 December 20151 |
| Peter Lennkh | 1 October 2004 | 31 December 20151 |
| Johann Strobl | 22 September 20103 | 31 December 20151 |
1 In the board meeting on 7 June 2011 the renewal ot mandates of the board was decided to 31 December 2015.
2 After the retirment of Patrick Butler – at his own request – the Management Board appinted Klemens Breuer as successor for this function for the duration from 16 April 2012 until 31 December 2015.
3 Assignment effective with registration of the merger in the Companies Register as of 10 October 2010. The members of the Management Board had mandates in the Supervisory Board or similar functions, board functions, business management mandates and interest in companies at home and abroad which are not included in the consolidated group:
The Supervisory Board of Raiffeisen Bank International AG is as follows:
| First assignment | End of period | |
|---|---|---|
| Walter Rothensteiner, Chairman | 11 May 2001 | AGM 2016 |
| Erwin Hameseder, 1st Deputy Chairman | 8 July 20101 | AGM 2015 |
| Ludwig Scharinger, 2nd Deputy Chairman | 8 July 20101 | AGM 2015 |
| Markus Mair, 3rd Deputy Chairman | 8 July 20101 | AGM 2015 |
| Stewart D. Gager | 24 January 2005 | AGM 2014 |
| Kurt Geiger | 9 June 2009 | AGM 2014 |
| Hannes Schmid | 8 July 20101 | AGM 2015 |
| Johannes Schuster | 8 July 20101 | AGM 2015 |
| Friedrich Sommer | 8 July 20101 | AGM 2015 |
| Christian Teufl | 8 July 20101 | AGM 2015 |
| Martin Prater2 | 10 October 2010 | Until further notice |
| Rudolf Kortenhof2 | 10 October 2010 | Until further notice |
| Peter Anzeletti-Reikl2 | 10 October 2010 | Until further notice |
| Sabine Chadt2 | 10 October 2010 | Until further notice |
| Helge Rechberger2 | 10 October 2010 | Until further notice |
1 Assignment effective as of 10 October 2010
2 Staff council delegates
The members of the Supervisory Board had further mandates in the Supervisory Board or similar functions in quoted companies at home and abroad:
The committees of the Supervisory Board of Raiffeisen Bank International AG are as follows:
| Members of the Supervisory Board | Working Committee | Audit Committee | Personnel Committee |
|---|---|---|---|
| Walter Rothensteiner | Chairman | Chairman | Chairman |
| Erwin Hameseder | 1st Deputy Chairman | 1st Deputy Chairman | 1st Deputy Chairman |
| Ludwig Scharinger | 2nd Deputy Chairman | 2nd Deputy Chairman | 2nd Deputy Chairman |
| Markus Mair | 3rd Deputy Chairman | 3rd Deputy Chairman | 3rd Deputy Chairman |
| Johannes Schuster | Member | Member | Member |
| Martin Prater | Member | Member | – |
| Rudolf Kortenhof | Member | Member | – |
| Peter Anzeletti-Reikl | Member | Member | – |
RBI signed an agreement with the Greek EFG Eurobank Ergasias S.A. (Eurobank EFG) on 3 February 2011 for the acquisition of a majority share of 70 per cent in its business unit Polbank EFG (Polbank) as a first step. With its strong focus on private customers, Polbank would complement Raiffeisen Bank Polska ideally, which mainly focuses on corporate customers.
Significant steps towards acquiring Polbank – for example the approvals by the European Commission and the transition to an independently licensed bank – as well as the preparations for the future organizational structure of the merged bank were successfully carried out in the 2011 financial year. Closing the transaction now depends on the regulatory approval in Poland.
The tender offer period for buying back several RBI hybrid bonds ended on 5 March 2012. In total, RBI bought back securities with a total nominal value and at a liquidation preference amount of € 358 million. The buyback increases the core tier 1 capital by approximately € 113 million (the difference between the nominal and redemption amount) or the core tier 1 ratio by 0.12 percentage points. This strengthens the capital structure accordingly against the backdrop of the changes in the regulatory requirements.
In the course of its measures to prepare for the Basel III guidelines that will be in force as of 2013, Raiffeisen Bank International AG (RBI) is currently optimizing its structure of participations. The European implementation of Basel III will limit the recognition of the capital contributions provided by minority shareholders. In order to avoid this effect, RBI will acquire the minority shareholdings that Raiffeisen Zentralbank Österreich AG (RZB) holds in the Slovak Tatra banka a.s. and the Czech Republic's Raiffeisenbank a.s. By doing so, RBI will increase its already existing majority shareholdings in these network banks and will further simplify the shareholder structure.
On the completion of this measure -- which is still subject to approval from the relevant regulatory authorities -- RBI's equity share in Tatra banka in Slovakia will increase from 65.8 per cent to 78.6 per cent and from 51.0 per cent to 75.0 per cent in Raiffeisenbank in the Czech Republic. The purchase price for the shares will total approximately € 344 million, which will initially impact RBI's core tier 1 ratio by around 0.35 percentage points.
The following table shows a selection of companies of the consolidated group. The complete list of the equity participations of RBI AG is deposited with the Group parent's headquarters.
| Company, domicile (country) | Subscribed capital in local currency |
Share | Type1 | |
|---|---|---|---|---|
| Centralised Raiffeisen International Services & Payments S.R.L., | ||||
| Bucharest (RO) | 19,800,000 | RON | 100.0% | BR |
| Centrotrade Chemicals AG, Zug (CH) | 5,000,000 | CHF | 100.0% | OT |
| Centrotrade Deutschland GmbH, Eschborn (DE) | 1,000,000 | EUR | 100.0% | OT |
| Centrotrade Minerals & Metals Inc., Chesapeak (US) | 3,002,000 | USD | 100.0% | OT |
| Centrotrade Singapore Pte. Ltd., Singapore (SG) | 500,000 | SGD | 100.0% | OT |
| F.J. Elsner & Co. Gesellschaft mbH, Innsbruck (AT) | 436,037 | EUR | 100.0% | OT |
| F.J. Elsner Trading Gesellschaft m.b.H., Vienna (AT) | 35,000 | EUR | 100.0% | OT |
| Golden Rainbow International Limited, Tortola (VG) | 1 | USD | 100.0% | FI |
| JLLC "Raiffeisen-leasing", Minsk (BY) | 4,300,250,000 | BYR | 83.9% | FI |
| Kathrein & Co. Vermögensverwaltung GmbH, Vienna (AT) | 125,000 | EUR | 80.0% | FI |
| Kathrein Privatbank Aktiengesellschaft, Vienna (AT) | 20,000,000 | EUR | 100.0% | BA |
| OOO Raiffeisen-Leasing, Moscow (RU) | 1,071,000,000 | RUB | 87.5% | FI |
| Priorbank JSC, Minsk (BY) | 412,279,277,350 | BYR | 87.7% | BA |
| Raiffeisen Bank Aval JSC, Kiev (UA) | 3,002,774,908 | UAH | 96.2% | BA |
| Raiffeisen Bank d.d. Bosna i Hercegovina, Sarajevo (BA) | 237,388,000 | BAM | 97.0% | BA |
| Raiffeisen Bank Kosovo J.S.C., Pristina (RS) | 58,000,000 | EUR | 100.0% | BA |
| Raiffeisen Bank Polska S.A., Warsaw (PL) | 1,250,893,080 | PLN | 100.0% | BA |
| Raiffeisen Bank S.A., Bucharest (RO) | 1,200,000,000 | RON | 99.5% | BA |
| Raiffeisen Bank Sh.a., Tirana (AL) | 9,926,093,000 | ALL | 100.0% | BA |
| Raiffeisen Bank Zrt., Budapest (HU) | 165,023,000,000 | HUF | 70.3% | BA |
| Raiffeisen banka a.d., Belgrade (RS) | 27,466,157,580 | RSD | 100.0% | BA |
| Raiffeisen Banka d.d., Maribor (SI) | 17,578,052 | EUR | 86.4% | BA |
| Raiffeisen Centrobank AG, Vienna (AT) | 47,598,850 | EUR | 100.0% | BA |
| Raiffeisen Compulsory Pension Fund Management d.d., Zagreb (HR) | 110,000,000 | HRK | 75.0% | FI |
| Raiffeisen Energy Service Ltd., Budapest (HU) | 20,000,000 | HUF | 72.7% | OT |
| Raiffeisen Equipment Leasing Kft., Budapest (HU) | 50,400,000 | HUF | 69.0% | FI |
| Raiffeisen Factoring Ltd., Zagreb (HR) | 15,000,000 | HRK | 75.0% | FI |
| Raiffeisen Insurance Agency Sp.z.o.o, Warsaw (PL) | 200,000 | PLN | 87.5% | BR |
1 Company type: BA…Bank, BR…Company rendering banking-related ancillary services, FI…Financial institution, OT…Other companies
| Company, domicile (country) | Subscribed capital in local | currency | Share | Type1 |
|---|---|---|---|---|
| RAIFFEISEN INSURANCE BROKER EOOD, Sofia (BG) | 5,000 | BGN | 100.0% | BR |
| Raiffeisen Investment Aktiengesellschaft, Vienna (AT) | 730,000 | EUR | 100.0% | FI |
| Raiffeisen Leasing Aval LLC, Kiev (UA) | 180,208,527 | UAH | 93.4% | FI |
| Raiffeisen Leasing Bulgaria OOD, Sofia (BG) | 5,900,000 | BGN | 81.1% | FI |
| Raiffeisen Leasing d.o.o., Belgrade (RS) | 226,389,900 | RSD | 87.5% | FI |
| Raiffeisen Leasing d.o.o., Ljubljana (SI) | 3,738,107 | EUR | 75.0% | FI |
| Raiffeisen Leasing d.o.o., Sarajevo (BA) | 17,191,063 | BAM | 85.8% | FI |
| Raiffeisen Leasing IFN S.A., Bucharest (RO) | 14,935,400 | RON | 87.2% | FI |
| Raiffeisen Leasing Kosovo LLC, Pristina (RS) | 642,857 | EUR | 92.5% | FI |
| Raiffeisen Leasing sh.a., Tirana (AL) | 208,031,014 | ALL | 93.8% | FI |
| Raiffeisen Lizing Zrt., Budapest (HU) | 50,600,000 | HUF | 72.7% | BA |
| Raiffeisen Malta Bank plc., Sliema (MT) | 340,000,000 | EUR | 100.0% | BA |
| Raiffeisen Property International GmbH, Vienna (AT) | 40,000 | EUR | 100.0% | OT |
| Raiffeisenbank (Bulgaria) EAD, Sofia (BG) | 603,447,952 | BGN | 100.0% | BA |
| Raiffeisenbank a.s., Prague (CZ) | 7,511,000,000 | CZK | 51.0% | BA |
| Raiffeisenbank Austria d.d., Zagreb (HR) | 3,621,432,000 | HRK | 75.0% | BA |
| Raiffeisen-Leasing d.o.o., Zagreb (HR) | 30,000,000 | HRK | 75.0% | FI |
| Raiffeisen-Leasing Polska S.A., Warsaw (PL) | 150,003,800 | PLN | 87.5% | FI |
| Raiffeisen-Leasing Real Estate, s.r.o., Prague (CZ) | 10,000,000 | CZK | 69.0% | FI |
| Raiffeisen-Leasing, spolecnost s.r.o., Prague (CZ) | 50,000,000 | CZK | 63.0% | FI |
| RB International Finance (Hong Kong) Ltd., Hong Kong (HK) | 10,000,000 | HKD | 100.0% | FI |
| RB International Finance (USA) LLC, New York (US) | 1,510,000 | USD | 100.0% | FI |
| Regional Card Processing Center s.r.o., Bratislava (SK) | 539,465 | EUR | 100.0% | BR |
| RI Eastern European Finance B.V., Amsterdam (NL) | 400,000 | EUR | 100.0% | FI |
| RSC Raiffeisen Service Center GmbH, Vienna (AT) | 2,000,000 | EUR | 51.9% | BR |
| RZB Finance (Jersey) II Ltd, St. Helier (JE) | 100,000,002 | EUR | *2 | FI |
| RZB Finance (Jersey) III Ltd, St. Helier (JE) | 200,001,000 | EUR | *2 | FI |
| RZB Finance (Jersey) IV Limited, GBJ-St. Helier JE4 8PX, St. Helier (GBJ) | 500,002,000 | EUR | *2 | FI |
| Tatra Asset Management sprav.spol., a.s., Bratislava (SK) | 1,659,700 | EUR | 65.8% | FI |
| Tatra banka a.s., Bratislava (SK) | 64,326,228 | EUR | 65.8% | BA |
| Tatra Leasing s r.o., Bratislava (SK) | 6,638,784 | EUR | 70.6% | FI |
| TOO Raiffeisen Leasing Kazakhstan, Almaty (KZ) | 85,800,000 | KZT | 75.0% | FI |
| Ukrainian Processing Center PJSC, Kiev (UA) | 180,000 | UAH | 100.0% | BR |
| ZAO Raiffeisenbank, Moscow (RU) | 36,711,260,000 | RUB | 100.0% | BA |
| ZUNO BANK AG, Vienna (AT) | 5,000,000 | EUR | 100.0% | BA |
1 Company type: BA…Bank, BR…Company rendering banking-related ancillary services, FI…Financial institution, OT… Other companies 2 Companies, that are consolidated based on the economic control according to the IFRS framework
The following tables show a selection of equity participations. The complete list of the equity participations of Raiffeisen Bank International AG is deposited with the Group parent's headquarters.
| Company, domicile (country) | Subscribed capital in local currency |
Share | Type1 | |
|---|---|---|---|---|
| Raiffeisen Banca pentru Locuinte S.A., Bucharest (RO) | 131,074,560 | RON | 33.3% | BA |
1 Company type: BA…Bank, BR…Company rendering banking-related ancillary services, FI…Financial institution, OT…Other companies, , VV… Insurance, WP … Securities firms
| Subscribed capital in | Share | Type1 | ||
|---|---|---|---|---|
| Company, domicile (country) | local currency | |||
| CEESEG Aktiengesellschaft, Vienna (AT) | 18,620,720 | EUR | 7.0% | SC |
| ELIOT, s. r. o., Bratislava (SK) | 1,613,556 | EUR | 100.0% | BR |
| Fondul de Garantare a Creditului Rural S.A., Bucharest (RO) | 10,930,530 | RON | 33.3% | FI |
| LLC "Insurance Company 'Raiffeisen Life", Moscow (RU) | 60,000,000 | RUB | 25.0% | VV |
| OOO "Raiffeisen Capital", Moscow (RU) | 225,000,000 | RUB | 100.0% | FI |
| Österreichische Raiffeisen-Einlagensicherung eGen, Vienna (AT) | 3,100 | EUR | 9.7% | OT |
| Raiffeisen Asset Management (Bulgaria) EAD, Sofia (BG) | 250,000 | BGN | 100.0% | FI |
| Raiffeisen Capital & Investment S.A., Bucharest (RO) | 1,600,000 | RON | 100.0% | FI |
| Raiffeisen consulting d.o.o., Zagreb (HR) | 14,900,000 | HRK | 100.0% | FI |
| Raiffeisen Factoring Ltd., Sofia (BG) | 1,000,000 | BGN | 100.0% | FI |
| Raiffeisen Financial Services Polska Sp. z o.o., Warsaw (PL) | 3,847,500 | PLN | 100.0% | FI |
| RAIFFEISEN FUTURE AD, Belgrade (RS) | 143,204,921 | RSD | 100.0% | FI |
| Raiffeisen Insurance and Reinsurance Broker S.R.L, Bucharest (RO) | 180,000 | RON | 100.0% | BR |
| Raiffeisen Invest a.d., Belgrade (RS) | 56,207,706 | RSD | 100.0% | FI |
| Raiffeisen Invest d.o.o., Zagreb (HR) | 8,000,000 | HRK | 100.0% | FI |
| Raiffeisen Investment (Bulgaria) EOOD, Sofia (BG) | 60,050 | BGN | 100.0% | FI |
| Raiffeisen Investment Fund Management JSC, Budapest (HU) | 100,000,000 | HUF | 100.0% | FI |
| Raiffeisen Non-Government Pension Fund, Moscow (RU) | 353,000,000 | RUB | 100.0% | FI |
| Raiffeisen Pension Insurance d.o.o., Zagreb (HR) | 14,400,000 | HRK | 100.0% | FI |
| Raiffeisen Pensions Sh.A., Tirana (AL) | 90,000,000 | ALL | 100.0% | FI |
| Raiffeisen Research GmbH, Vienna (AT) | 55,000 | EUR | 51.0% | BR |
| Raiffeisen stavebni sporitelna, a.s., Prague (CZ) | 650,000,000 | CZK | 10.0% | BA |
| RAIFFEISEN TRAINING CENTER LTD., Zagreb (HR) | 20,000 | HRK | 100.0% | BR |
| Raiffeisen Voluntary Pension Funds Management d.o.o., Zagreb (HR) | 33,445,300 | HRK | 100.0% | FI |
| RLKG Raiffeisen-Leasing GmbH, Vienna (AT) | 40,000 | EUR | 12.5% | FI |
| Tatra Group Servis, s.r.o., Bratislava (SK) | 12,281,750 | EUR | 100.0% | BR |
| The Zagreb Stock Exchange joint stock company, Zagreb (HR) | 40,408,000 | HRK | 3.3% | SC |
1 Company type: BA…Bank, BR…Company rendering banking-related ancillary services, FI…Financial institution, OT…Other companies, , VV… Insurance, WP … Securities firms
Vienna, 12 March 2012
The Management Board
Herbert Stepic Karl Sevelda
Aris Bogdaneris Patrick Butler
Martin Grüll Peter Lennkh Johann Strobl
We have audited the accompanying consolidated financial statements of Raiffeisen Bank International AG, Vienna, for the year from 1 January 2011 to 31 December 2011. These consolidated financial statements comprise the consolidated balance sheet as of 31 December 2011, the consolidated statement of comprehensive income, the consolidated cash flow statement and the consolidated statement of changes in equity for the year ended 31 December 2011 and a summary of significant accounting policies and other explanatory notes.
The Company's management is responsible for the group accounting system and for the preparation and fair presentation of these consolidated financial statements in accordance with International Financial Reporting Standards (IFRSs) as adopted by the EU. This responsibility includes: designing, implementing and maintaining internal control relevant to the preparation and fair presentation of the consolidated financial statements that are free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances.
Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted our audit in accordance with laws and regulations applicable in Austria and in accordance with International Standards on Auditing, issued by the International Auditing and Assurance Standards Board (IAASB) of the International Federation of Accountants (IFAC). Those standards require that we comply with professional guidelines and that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the Group's preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group's internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Our audit did not give rise to any objections. In our opinion, which is based on the results of our audit, the consolidated financial statements comply with legal requirements and give a true and fair view of the financial position of the Group as of 31 December 2011 and of its financial performance and its cash flows for the year from 1 January to 31 December 2011 in accordance with International Financial Reporting Standards (IFRSs) as adopted by the EU.
Pursuant to statutory provisions, the management report for the Group is to be audited as to whether it is consistent with the consolidated financial statements and as to whether the other disclosures are not misleading with respect to the Company's position. The auditor's report also has to contain a statement as to whether the management report for the Group is consistent with the consolidated financial statements and whether the disclosures pursuant to Section 243a UGB (Austrian Commercial Code) are appropriate.
In our opinion, the management report for the Group is consistent with the consolidated financial statements. The disclosures pursuant to Section 243a UGB (Austrian Commercial Code) are appropriate.
Vienna, 12 March 2012
KPMG Austria GmbH Wirtschaftsprüfungs- und Steuerberatungsgesellschaft
Mag. Rainer Hassler Wirtschaftsprüfer
Mag. Bernhard Mechtler Wirtschaftsprüfer
(Austrian Chartered Accountants)
We confirm to the best of our knowledge that the consolidated financial statements give a true and fair view of the assets, liabilities, financial position and profit or loss of the Group as required by the applicable accounting standards and that the Group management report gives a true and fair view of the development and performance of the business and the position of the Group, together with a description of the principlal risks and uncertainties the Group faces.
Vienna, 12 March 2012
The Management Board
Herbert Stepic
Chief Executive Officer responsible for Internal Audit, Legal & Compliance, Human Resources, Management Secretariat, Organization & Internal Control System, Group Strategy and PR, Marketing and Event Management
Aris Bogdaneris
Chief Operating Officer responsible for Credit Services, Collections, Consumer Banking, Group & Austrian IT, Group Project Management Office, International Operations & IT, IT - Markets & Treasury, Lean & Service Excellence, Small Business & Premium Banking and
Transaction Services
Martin Grüll
Chief Financial Officer responsible for Tax Management, Treasury, Planning and Finance and Investor Relations
Peter Lennkh
Member of the Management Board responsible for International Business Units and Participations
Karl Sevelda
Deputy to the Chief Executive Officer responsible for Corporate Customers, Group Products, Network Corporate Customers & Support and Corporate Sales Management & Develeopment
Patrick Butler
Member of the Management Board responsible for Credit Markets, Raiffeisen Research, Capital Markets and Institutional Clients
Johann Strobl
Chief Risk Officer responsible for Risk Controlling, Financial Institutions and Country Risk & Group Portfolio Management, Retail Risk Management, Credit Management Corporates, Workout and Risk Excellence & Projects
| Glossary | 268 | |
|---|---|---|
| Addresses | 272 | |
| Publication details | 274 | |
Affi liated companies – Entities over which the investor has applicable control (i.e. power to govern the fi nancial and operating policies).
Associated companies – Entities over which the investor has signifi cant infl uence.
Back testing – The backward comparison of VaR fi gures with actual results to test the quality of a model.
Basel II – The body of capital adequacy regulations proposed in recent years by the "Basel Committee," an international forum dedicated to improving bank supervision. According to EU Directives 2006/48/EC and 2006/49/EC, the regulations must be applied in the member states of the European Union from 1 January 2007 onwards to all banks and fi nancial service institutions. As in the case of the Basel I Accord, the goal is to ensure that banks have adequate capital resources and that uniform competitive conditions are created for both lending and credit trading. The main objective of the changes made by Basel II compared to Basel I is to orient capital adequacy requirements prescribed by regulators more eff ectively to actual risk and hence approximate the capital requirements internally ascertained by banks.
Basel III – Basel-II-regulatory broadened with the experiences and insights of the fi nancial and economic crisis to harmonize incurred risks and the banks risktaking capacity (deduced from the equity's amount and quality).
BIS – Bank for International Settlement. International organization supporting the cooperation between the monetary and fi nancial sector.
BWG – Austrian Banking Act.
Cash fl ow – Infl ows and outfl ows of cash and cash equivalents.
Cash fl ow hedge – Protection against the risk of variability in projected cash fl ows, resulting either from risk associated with a recognized asset or liability or risk associated with a forecasted transaction. While the eff ective portion of the hedge relating to changes in value of the hedging instruments can be directly recognized in equity, the ineff ective portion has an immediate eff ect on profi t and loss statement.
CE – Central Europe. For RBI this segment encompasses the Czech Republic, Hungary, Poland, Slovakia and Slovenia.
CEBS – Committee of European Banking Supervisors. Advisor of the European Commission regarding policy and regulatory issues in banking supervision and supporting the cooperation between supervisors in the European Union, especially in developing guidelines and recommendations for fi nancial institutions and supervisors.
CEE – Central and Eastern Europe.
CIS – Commonwealth of Independent States, consisting predominantly of territories of the former Soviet Union.
Clean price – Price of a fi nancial instrument without accrued interest.
Consolidated ROE – Return on Consolidated Equity, i.e. the equity attributable to the shareholders of RBI. It is calculated by consolidated profi t in relation to average equity on the statement of fi nancial position (excluding noncontrolling interests). Average equity is based on month-end fi gures excluding non-controlling interest and does not include current year profi t.
Country risk – This comprises transfer and convertibility risk as well as political risk.
Core capital – So called tier 1 capital, involves regulatory core capital as defi ned in Section 23 BWG.
Cost/income ratio – Indicator of an entity's cost effi ciency based on the ratio of expenses to earnings. It is calculated by comparing general administrative expenses (comprising staff expenses and other administrative expenses and depreciation on intangible and tangible fi xed assets) with operating income (net interest income, net fee and commission income, net trading income and other net operating income).
Credit derivatives – Instruments designed to transfer credit risk arising from loans, bonds and other risk assets or market risk items to another party.
Credit exposure – Comprises all exposures on the statement of fi nancial position (loans, debt securities) and all exposures off the statement of fi nancial position (guarantees, commitments) that expose RBI to credit risk.
Credit risk – See default risk.
Credit spread (or simply "spread") – Diff erence in yield between top-rated bonds (usually government bonds) and bonds with the same residual maturity but lower issuer quality.
Cross-selling – Marketing strategy in which additional products and services are actively off ered to existing customers.
DBO – Defi ned benefi t obligation, i.e. the present value, without deducting any plan assets, of expected future payments required to settle the obligation resulting from employee service in the current and prior periods.
Default risk – Risk that counterparties in a fi nancial transaction will not be able to fulfi l an obligation, causing the other party a fi nancial loss.
Deferred tax assets – The amounts of income taxes recoverable in future periods in respect of deductible temporary diff erences and the carry-forward of unused tax losses.
Deferred tax liabilities – The amounts of income taxes payable in future periods in respect of taxable temporary diff erences.
Derivatives – Financial instruments whose value changes in response to the change in a specifi ed interest rate, fi nancial instrument price, commodity price, foreign exchange rate, index of prices or rates, a credit rating or credit index, or other variable, that requires no initial net investment or small initial net investment and that is settled at a future date.
Dirty price – Price of a fi nancial instrument including accrued interest.
Earnings per share (EPS) – Adjusted consolidated profi t (after deduction of dividend for participation capital) divided by the weighted average number of ordinary shares outstanding.
EBRD (European Bank for Reconstruction and Development) – An institution that promotes the transition to an open market economy and to private and entrepreneurial action in the countries of Central and Eastern Europe. Through its investments, it supports activity of the private sector and strengthens fi nancial institutions, legal systems, and development of infrastructure needed by the private sector.
Excess cover ratio – Relation of excess own funds to total own funds requirement.
Fair value – The amount for which an asset can be exchanged or a liability settled, between knowledgeable, willing parties in an arm's length transaction.
Fair Value Level I – (quotation on an active market). If market prices are available, the fair value is refl ected by the market price.
Fair Value Level II – (measurement techniques based on observable parameters). When current bid and asking prices are unavailable, the price of the most recent transaction provides evidence of the current fair value as long as there has not been a signifi cant change in economic circumstances since the time of the transaction (in particular present value calculations and option price models). Alternately, they can be established through recognized evaluation models using observable prices or parameters.
Fair Value Level III – (measurement techniques not based on observable parameters). If observable parameters are not available; the fair value will be measured through valuation methods appropriate for the fi nancial instrument.
Fiduciary business – Transactions which are carried out by a trustee, often banks, on own name but on account of the benefi ciary.
Finance lease – A lease that transfers substantially all the risks and rewards incidental to ownership of an asset.
Funding – All means used by banks for the purpose of refi nancing.
Futures – Standardized forward contracts traded on a stock exchange under which a commodity traded in a money, capital, precious metal or currency market is to be delivered or accepted at a price fi xed in an exchange environment.
Goodwill – Any excess of the cost of the acquisition over the acquirer's interest in the fair value of the identifi able assets and liabilities acquired as at the date of the exchange transaction.
Gross investment value – The aggregate of minimum lease payments receivable by the lessor under a fi nance lease and any unguaranteed residual value accruing to the lessor.
Hedging – Designating one or more hedging instruments so that their change in fair value is an off set, in whole or in part, to the change in fair value or cash fl ows of a hedged item.
Held-for-trading – Securities held to take advantage of short-term market fl uctuations.
Held-to-maturity – Securities with fi xed or determinable payments and fi xed maturity that an entity has the positive intention and ability to hold to maturity.
IFRIC, SIC – International Financial Reporting Interpretations Committee – committee responsible for the offi cial interpretation of the International Financial Reporting Standards, formerly also SIC (Standing Interpretations Committee).
IFRS, IAS – The International Financial Reporting Standards or International Accounting Standards are reporting standards published by the IASB (International Accounting Standards Board) with the goal of achieving transparent and comparable accounting on an international basis.
Interest margin – Net interest income in relation to average total assets.
Investment property – Property (land or buildings – or part of buildings – or both) which are held to earn rentals or for capital appreciation or both.
IPO – Initial public off ering.
IRB (Internal Ratings-Based approach) – Approach to measure the own funds requirement for credit risks in accordance with Basel II. By applying the IRB approach, the own funds requirement is determined according to internal credit ratings. In the process, features specifi c to the borrower and the loan are taken into account. The ratings must be made by an independent source.
Liquidity risk – Risk that a bank could be unable to meet its current and future fi nancial obligations in full or in good time. This arises from the danger that, e.g. refi nancing can only be obtained at very disadvantageous terms or is entirely impossible.
Loss rate – Usage of previously allocated loan loss provisions plus direct writedowns and income received on written-down claims divided by credit exposure to customers.
Market capitalization – The number of issued shares multiplied by the share price.
Market risk – The risk that the value of a fi nancial instrument will fl uctuate because of changes in market prices whether those changes are caused by factors specifi c to the individual security or its issuer or factors aff ecting all securities traded in the market.
Monte-Carlo-Simulation – Numerical method to aggregate risks to evaluate specifi c risks concerning their infl uence on corresponding income statement items.
Net provisioning ratio (average risk-weighted assets credit risk) – Risk valuation ratio. Provisioning for impairment losses in relation to average credit risk-weighted assets.
Net provisioning ratio (total credit exposure) – Risk valuation ratio. Provisioning for impairment losses in relation to the total credit exposure.
Operating leasing – Lease under which commercial and legal ownership remains with the lessor, with the eff ect that the lessor must show the asset on its statement of fi nancial position.
Operating result – In IFRS-compliant fi nancial statements, it consists of operating income less general administrative expenses. Operating income comprises net interest income, net fee and commission income, net trading income and other net operating income. General administrative expenses comprise staff expenses and other administrative expenses and depreciation on intangible and tangible fi xed assets.
Operational risk – Risk of unexpected losses resulting from inadequate or failed internal processes, people and systems or from external events, including legal risk.
Options – Instruments that give the holder the right to purchase the underlying from a contracting party at an agreed price and at an agreed time or within an agreed period (call option) or to sell the underlying to a contracting party at an agreed price and at an agreed time or within an agreed period (put option).
OTC instruments – Financial instruments that are neither standardized nor traded on a stock exchange. They are traded directly between market participants "over-the-counter."
Own funds according to BWG – Consist of core capital (tier 1), additional and subordinated capital (tier 2) and short-term subordinated capital and rededicated tier 2 capital (tier 3).
Own funds ratio – The ratio's numerator is own funds within the meaning of the Austrian Banking Act (BWG) and its denominator is the own funds requirement multiplied by 12.5 per cent.
Own funds requirement according to BWG – Defi ned in Section 22 (1) BWG and involves the requirement for the credit risk, for position risk in bonds, equities and commodities and for position risk in foreign currency and for the operational risk.
Own shares – Repurchased equity instruments (shares) held by the issuing entity itself or by its subsidiaries.
Plan assets – Assets held by a long-term employment benefi t fund.
Portfolio-based loan loss provisions – Impairment provisions for portfolios of loans with identical risk profi les that may be compiled under certain conditions.
Portfolio rate – Total provisions for impairment losses divided by total credit exposure.
Premium banking – Support for wealthy customers that includes additional and above all more individually tailored products in comparison to the customary support for private customers.
Projected unit credit method – An actuarial valuation method defi ned by IAS 19 that sees each period of service as giving rise to an additional unit of benefi t entitlement and measures each unit separately to build up the fi nal obligation (sometimes known as the accrued benefi t method pro-rated on service or as the benefi t/years of service method).
Quarter-on-quarter – Compared to the quarter which precedes the quarter under consideration; for example, the third quarter of 2010 in comparison to the second quarter of 2010.
RBI – The Group of Raiff eisen Bank International.
Repurchase agreement – During a genuine repurchase transaction (repo), the enterprise sells assets to a counterparty and concurrently agrees to reacquire the assets at an agreed time and at an agreed price.
Risk-weighted assets (credit risk) – This is the sum of the weighted accounts receivable and includes receivables in the form of asset items, items off the statement of fi nancial position according to Annex 1 of Section 22 and derivatives according to Annex 2 of Section 22 BWG.
ROE (return on equity) – Return on the total equity including non-controlling interests, i.e. profi t before tax respectively after tax in relation to weighted average equity on the statement of fi nancial position. Average equity is calculated on month-end fi gures including non-controlling interest and does not include current year profi t.
RZB – The Group of Raiff eisen Zentralbank Österreich AG.
RZB-Kreditinstitutsgruppe – Pursuant to Section 30 of the Austrian Banking Act (BWG), RZB-Kreditinstitutsgruppe is made up of all banks, fi nancial institutions, securities companies and companies rendering banking related services in which RZB holds direct or indirect interests or has control as a superordinate institution.
Scorecard – A statistical tool in risk management for estimating risk parameters, typically used to determine probability of default or the loss-given defaultratio.
Securitization – Special type of refi nancing and the packaging of designated portfolios of loans or leasing claims with an appropriate level of credit enhancement and the redistribution of these portfolios to investors.
SEE – The Southeastern Europe segment. For RBI this segment comprises Albania, Bosnia and Herzegovina, Bulgaria, Croatia, Kosovo, Romania (incl. Moldova) and Serbia.
Segment reporting – Disclosure of earnings and asset data for segments representing the organizational structure (country and functional responsibility).
Share Incentive Program (SIP) – Performance-based allotments of company shares for eligible employees for a given period of time.
SPO – Secondary public off ering; capital increase.
Statement of cash fl ows – Statement of cash fl ows during the fi nancial year arising from operating activities, investing activities and fi nancing activities and a reconciliation of cash and cash-equivalents held at the beginning and the end of the fi nancial year.
Stress tests – Stress tests endeavor to simulate extreme fl uctuations in market parameters. They are used because such fl uctuations are usually inadequately captured by VaR models (VaR forecasts maximum losses under normal market conditions).
Swap – Exchange of interest obligations (interest swap) and/or currency positions (currency swap).
Tax rate – Relation of income taxes to profi t before tax.
Tier 1 ratio (credit risk) – This ratio's numerator is core capital (tier 1) and its denominator is the risk-weighted assets of credit risk.
Trading book – Bank regulators' term for assets held by a bank for short-term resale to exploit fl uctuations in prices and interest rates.
UGB – (Austrian) Commercial Code
VaR – Value at risk expresses the potential loss that will, with a 99 per cent probability, not be exceeded within the period for which an asset is held in the portfolio in question.
Watson Wyatt Global Grading System – Internationally approved, market-oriented method to evaluate the value of job positions, based on role and competence requirements within a company with the aim of gaining a consistent compensation structure.
Wholesale funding – Refi nancing of banks by way of external sources, i.e. not through their own funds or customer deposits.
Year-on-year – Compared to the point in time, or the time period, which occurs one year before the point in time, or the time period, under consideration; for example, the fi rst half year of 2011 in comparison to the fi rst half year of 2010, or 30 June 2011 in comparison to 30 June 2010.
Am Stadtpark 9 1030 Vienna Phone: +43-1-71707 0 Fax: +43-1-71707 1715 www.rbinternational.com [email protected] [email protected]
Raiff eisen Bank Sh.a. "European Trade Center" Bulevardi "Bajram Curri" Tirana Phone: +355-4-238 1000 Fax: +355-4-227 5599 SWIFT/BIC: SGSBALTX www.raiff eisen.al
Priorbank JSC 31-A, V. Khoruzhey Str. 220002 Minsk Phone: +375-17-289 9090 Fax: +375-17-289 9191 SWIFT/BIC: PJCBBY2X www.priorbank.by
Bosnia and Herzegovina Raiff eisen BANK d.d. Bosna i Hercegovina Zmaja od Bosne bb 71000 Sarajevo Phone: +387-33-287 101 Fax: +387-33-213 851 SWIFT/BIC: RZBABA2S www.raiff eisenbank.ba
Raiff eisenbank (Bulgaria) EAD 18/20 Gogol Str. 1504 Sofi a Phone: +359-2-9198 5101 Fax: +359-2-943 4528 SWIFT/BIC: RZBBBGSF www.rbb.bg
Raiff eisenbank Austria d.d. Petrinjska 59 10000 Zagreb Phone: +385-1-456 6466 Fax: +385-1-481 1624 SWIFT/BIC: RZBHHR2X www.rba.hr
Raiff eisenbank a.s. Hvezdova 1716/2b 14078 Prague 4 Phone: + 420-221-141 111 Fax: +420-221-142 111 SWIFT/BIC: RZBCCZPP www.rb.cz
Raiff eisen Bank Zrt. Akadémia utca 6 1054 Budapest Phone: +36-1-484 4400 Fax: +36-1-484 4444 SWIFT/BIC: UBRTHUHB www.raiff eisen.hu
Raiff eisen Bank Kosovo J.S.C. UÇK Str. No. 51 10000 Pristina Phone: +381-38-222 222
Poland Raiff eisen Bank Polska S.A. Ul. Piękna 20 00-549 Warsaw Phone: +48-22-585 2001 Fax: +48-22-585 2585 SWIFT/BIC: RCBWPLPW www.raiff eisen.pl
Raiff eisen Bank S.A. 15 Charles de Gaulle Square 011857 Bucharest 1 Phone: +40-21-306 1000 Fax: +40-21-230 0700 SWIFT/BIC: RZBRROBU www.raiff eisen.ro
ZAO Raiff eisenbank Smolenskaya-Sennaya Sq. 28 119020 Moscow Phone: +7-495-721 9900 Fax: +7-495-721 9901 SWIFT/BIC: RZBMRUMM www.raiff eisen.ru
Raiff eisen banka a.d. Bulevar Zorana Djindjića 64a 11070 Novi Beograd Phone: +381-11-320 2100 Fax: +381-11-220 7080 SWIFT/BIC: RZBSRSBG www.raiff eisenbank.rs
Tatra banka, a.s. Hodžovo námestie 3 81106 Bratislava Phone: +421-2-5919 1111 Fax: +421-2-5919 1110 SWIFT/BIC: TATRSKBX www.tatrabanka.sk
Raiff eisen Banka d.d. Zagrebeška cesta 76 2000 Maribor Phone: +386-2-229 3100 Fax: +386-2-303 442 SWIFT/BIC: KREKSI22 www.raiff eisen.si
Raiff eisen Bank Aval JSC 9, Leskova Street 01011 Kiev Phone: +38-044-490 8888 Fax: +38-044-285 3231 SWIFT/BIC: AVALUAUK www.aval.ua
Raiff eisen-Leasing International GmbH Am Stadtpark 3 1030 Vienna Phone: +43-1-71707 2966 Fax: +43-1-71707 762966 www.rli.co.at
Raiff eisen Leasing Sh.a. "European Trade Center" Bulevardi "Bajram Curri" Tirana Phone: +355-4-2274 920 Fax: +355-4-2232 524 www.raiff eisen.al
JLLC "Raiff eisen-leasing" 31-A, V. Khoruzhey Str. 220002 Minsk Phone: +375-17-289 9394 Fax: +375-17-289 9394 www.priorbank.by
Raiff eisen Leasing d.o.o. Sarajevo Zmaja od Bosne 11 71000 Sarajevo Phone: +387-33-254 354 Fax: +387-33-212 273 www.rlbh.ba
Bulgaria OOD Mladost 4, Business Park Sofi a Building 7B, 4th fl oor 1504 Sofi a Phone: +359-2-491 9191 Fax: +359-2-974 2057 www.rlbg.bg
Raiff eisen Leasing d.o.o. Radnicka cesta 43 10000 Zagreb Phone: +385-1-6595 000 Fax: +385-1-6595 050 www.rl-hr.hr
Raiff eisen-Leasing s.r.o. Hvezdova 1716/2b 14078 Prague 4 Phone: +420-221-511 611 Fax: +420-221-511 666 www.rl.cz
Raiff eisen Lízing Zrt. Hungaria krt. 40-44 1087 Budapest Phone: +36-1-298 8000 Fax: +36-1-298 8010 www.raiff eisenlizing.hu
Raiff eisen Leasing Kazakhstan LLP Shevchenko St. 146, No. 12 050008 Almaty Phone: +7-727-3785 430 Fax: +7-727-3785 447 www.rlkz.kz
Raiff eisen Leasing Kosovo Gazmend Zajmi n.n., Sunny Hill 10000 Pristina Phone: +381-38-222 222 Fax: +381-38-203 03011 www.raiff eisen-leasing-ks.com
I.C.S. Raiff eisen Leasing S.R.L. Alexandru cel Bun 51 2012 Chisinau Phone: +373-22-2793 13 Fax: +373-22-2283 81 www.raiff eisen-leasing.md
Raiff eisen-Leasing Polska S.A. Ul. Prosta 51 00-838 Warsaw Phone: +48-22-326 3666 Fax: +48-22-326 3601 www.rl.com.pl
Raiff eisen Leasing IFN S.A. Nusco Tower
Sos Pipera Nr. 42 Etaj 1A 020112 Bucharest Phone: +40-21-306 9696 Fax: +40-37-287 9998 www.raiff eisen-leasing.ro
OOO Raiff eisen-Leasing Stanislavskogo St. 21/1 109004 Moscow Phone: +7-495-721 9980 Fax: +7-495-721 9901 www.raiff eisen-leasing.ru
Raiff eisen Leasing d.o.o. Milutina Milankovića 134a 11000 Novi Beograd Phone: +381-11-201 7700 Fax: +381-11-313 0081 www.raiff eisen-leasing.rs
Tatra Leasing s.r.o. Hodžovo námestie 3 81106 Bratislava Phone: +421-2-5919 3168 Fax: +421-2-5919 3048 www.tatraleasing.sk
Raiff eisen Leasing d.o.o. Bleweisova cesta 30 1000 Ljubljana Phone: +386-1-241 6250 Fax: +386-1-241 6268 www.rl-sl.si
LLC Raiff eisen Leasing Aval 9, Moskovskiy Av. Corp. 5 Offi ce 101 04073 Kiev Phone: +38-044-590 2490 Fax: + 38-044-200 0408 www.rla.com.ua
Czech Republic Raiff eisen Leasing Real Estate s.r.o. Hvezdova 1716/2b 14078 Prague 4 Phone: +420-221-511 610 Fax: +420-221-511 641 www.rlre.cz
RBI Representative Offi ce Frankfurt Mainzer Landstraße 51 60329 Frankfurt Phone: +49-69-2992 1918 Fax: +49-69-2992 1922
RBI Representative Offi ce Paris 9-11 Avenue Franklin D. Roosevelt 75008 Paris Phone: +33-1-4561 2700 Fax: +33-1-4561 1606
Raiff eisen Malta Bank plc 52 "Il Piazzetta" Tower Road Sliema SLM 1607 Phone: +356-2260 0000 Fax: +356-2132 0954
RBI London Branch 10, King William Street London EC4N 7TW Phone: +44-20-7929 2288 Fax: +44-20-7933 8099
RBI Beijing Branch Beijing International Club 200 2nd fl oor Jianguomenwai Dajie 21 100020 Beijing Phone: +86-10-653 23388 Fax: +86-10-653 25926
Offi ce Hong Kong Unit 2106-08, 21st Floor, Tower One, Lippo Centre 89 Queensway, Hong Kong Phone: +85-2-2730 2112 Fax: +85-2-2730 6028
Offi ce Xiamen Unit 01-02, 32/F Zhongmin Building No 72 Hubin North Road Fujian Province 301012 Xiamen Phone: +86-592-2623 988 Fax: +86-592-2623 998
RBI Representative Offi ce Korea Leema Building, 8th fl oor 146-1 Soosong-dong Chongro-ku Seoul 110-755 Phone: +82-2-398 5840 Fax: +82-2-398 5807
RBI Labuan Branch Suite No. 28.02, Level 28 Johor Bahru City Square Offi ce Tower 106-108 Jalan Wong Ah Fook 80000 Johor Bahru Phone: +607-291 3800 Fax: +607-291 3801
RBI Singapore Branch One Raffl es Quay #38-01 North Tower Singapore 048583 Phone: +65-6305 6000 Fax: +65-6305 6001
RB International Finance (USA) LLC 1133 Avenue of the Americas, 16th Floor 10036 New York Phone: +01-212-845 4100 Fax: +01-212-944 2093
Offi ce New York 1133 Avenue of the Americas, 16th Floor 10036 New York Phone: +01-212-593 7593 Fax: +01-212-593 9870
RBI Representative Offi ce Ho Chi Minh City 6 Phung Khac Khoan Street, Room G6 District 1, Ho Chi Minh City Phone: +84-8-3829 7934 Fax: +84-8-3822 1318
Austria Am Stadtpark 9 1030 Vienna Phone: +43-1-71707 0 Fax: +43-1-71707 1715 www.rzb.at
F.J. Elsner Trading GmbH Am Heumarkt 10 1030 Vienna Phone: +43-1-797 36 0 Fax: +43-1-797 36 230 www.elsner.at
Wipplingerstraße 25 1010 Vienna Phone: +43-1-53 451 239 Fax: +43-1-53 451 233 www.kathrein.at
Tegetthoff straße 1 1050 Vienna Phone: +43-1-515 20 0 Fax: +43-1-513 43 96 www.rcb.at
1015 Vienna Phone: +43-1-710 5400 0 Fax: +43-1-710 5400 169 www.raiff eisen-investment.com
Am Stadtpark 3 1030 Vienna Phone: +43-1-71707 2691 Fax: +43-1-71707 762691 www.zuno.eu
Raiff eisen Bank International AG Am Stadtpark 9 1030 Vienna Austria Phone: +43-1-71707 0 Fax: +43-1-71707 1715 Internet: www.rbinternational.com
Editorial team: Group Investor Relations Editorial deadline: 12 March 2012
Concept, design: gantnerundenzi.at Proofreading: be.public Printed by: AV Astoria/Vienna
Phone: +43-1-71707 2089 E-mail: [email protected] Internet: www.rbinternational.com → Investor Relations
Phone: +43-1-71707 2828 E-mail: [email protected] Internet: www.rbinternational.com → Public Relations
The online issue of the annual report is available in German at http://gb2011.rbinternational.com. The English report is available online at http://ar2011.rbinternational.com.
The forecasts, plans and forward-looking statements contained in this annual report are based on the state of knowledge and assessments of Raiff eisen Bank International AG at the time of its preparation. Like all statements about the future, they are subject to known and unknown risks and uncertainties that could cause actual results to diff er materially from those expressed or implied by such statements. No guarantee can be provided for the accuracy of forecasts, plan values or forward-looking statements.
This annual 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 diff erences may occure. This annual report was prepared in German. The annual report in English is a translation of the original German report. The only authentic version is the German version.
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