The FINANCIAL -- In the first half of 2015, Raiffeisen Bank International AG (RBI) generated a profit before tax of € 467 million, which was 10 per cent or € 51 million below the comparable level of the previous year’s period.
While the operating result was 14 per cent below the previous year's level due to falling net interest income; higher valuation results from derivatives and lower one-off effects than in the previous year (provision for the Settlement Act in Hungary) resulted in an improvement in profit before tax. Profit after tax fell 12 per cent year-on-year to € 326 million. Consolidated profit for the first half-year was € 288 million, which corresponds to a decline of 16 per cent, or € 57 million, according to Raiffeisen Bank.
„The first half of 2015 was characterized by four factors: the high volatility on the foreign exchange markets, the prolonged environment of low interest rates, the recession in Russia and Ukraine as well as the economic recovery in Central Europe. All in all I am not entirely dissatisfied with our half year results. The significant improvement of our capital ratios is particularly satisfying,” Karl Sevelda, RBI’s CEO explained.
The average number of shares outstanding in the reporting period was 292.4 million (previous year: 278.5 million). This resulted in earnings per share of € 0.98.
Net interest income decreased 14 per cent
Operating income declined 11 per cent year-on-year, or € 303 million, to € 2,444 million. This was primarily attributable to strong currency fluctuations (notably in the Russian rouble and Ukrainian hryvnia). In the first six months of 2015, net interest income fell 14 per cent, or € 272 million, to € 1,682 million year-on-year. Aside from being attributable to a reduced net interest margin, this was also due to currency-related declines in net interest income in Ukraine (down € 65 million) and Russia (down € 50 million), as well as to loan defaults in Asia (down € 29 million). In addition, net interest income declined € 34 million in Poland due to the continuing low market interest rates.
Net fee and commission income fell 3 per cent, or € 20 million, to € 745 million year-on-year, and was largely currency related.
Compared to the same period last year, net trading income declined € 7 million to € 2 million.
General administrative expenses fell 9 per cent
Compared to the same period last year, general administrative expenses declined € 131 million to € 1,388 million. The cost/income ratio nevertheless increased 1.5 percentage points to 56.8 per cent, particularly due to the reduced net interest income.
At 47 per cent, the largest component in general administrative expenses was staff expenses, which fell 16 per cent, or € 120 million, to € 656 million.
Net provisioning for impairment losses rose 4 per cent
Compared to the same period last year, net provisioning for impairment losses rose by a total of 4 per cent, or € 24 million, to € 592 million. This was predominantly due to a € 28 million increase in individual loan loss provisioning to € 583 million, while portfolio-based provisioning fell € 3 million to € 12 million.
In the reporting period, the NPL ratio rose 0.6 percentage points to 11.9 per cent compared to year-end 2014. Non-performing loans were set against loan loss provisions of € 6,057 million, resulting in a NPL coverage ratio of 66.6 per cent compared to 67.4 per cent at year-end.
Common equity tier 1 ratio (fully loaded) of 10.7 per cent
As of 30 June 2015, total capital amounted to € 11,612 million. This represents an increase of € 608 million compared to the 2014 year-end figure.
Based on total risk, the common equity tier 1 ratio (transitional) was 11.4 per cent and the total capital ratio (transitional) was 16.6 per cent (including half-year results).
Excluding the transitional provisions as defined within the CRR, the common equity tier 1 ratio (fully loaded) amounted to 10.7 per cent (including half-year results).
Comparison of results with the previous quarter
Compared to the first quarter of 2015, net interest income rose 5 per cent, or € 41 million, to € 862 million in the second quarter of 2015.
Net fee and commission income rose 7 per cent, or € 25 million, compared to the first quarter of 2015 to € 385 million. The rise was due to both currency developments and seasonal factors.
Compared to the previous quarter, net trading income improved € 126 million to € 64 million. This was triggered by an increase in net income from currency-based transactions, primarily in Ukraine as a result of a reduction in foreign currency positions, where the significant hryvnia devaluation led to considerable valuation losses in the first quarter.
At € 697 million in the second quarter of 2015, general administrative expenses were up 1 per cent, or € 6 million, from € 691 million in the previous quarter.
Compared to the previous quarter, net provisioning for impairment losses rose 27 per cent, or € 71 million, to € 332 million. This was mainly attributable to the development of corporate customer business at Group head office and in Asia.
The consolidated profit for the second quarter was at € 204 million, which is an increase by € 121 million compared to the first quarter 2015.
RBI is planning an aggregate gross risk-weighted asset (total RWA) reduction of € 16 billion in selected markets by the end of 2017 (based on RWA as at 31 December 2014: EUR 68.7 bn). The bank intends to partly offset the reduction with growth in other business areas.
After the implementation of the new strategic measures, the cost base should be 20 per cent below the level of 2014 (at constant prices and foreign exchange rates; general administrative expenses 2014: € 3,024 million). RBI further aims to achieve a cost/income ratio of between 50 and 55 per cent in the medium term.
RBI aims for a return on equity before tax of approximately 14 per cent and a consolidated return on equity of approximately 11 per cent in the medium term. The full year 2015 consolidated result may be negative as the majority of the restructuring costs (around € 550 million in total) are expected to be booked in 2015.
The bank expects net provisioning for impairment losses to remain elevated in 2015; however, RBI anticipates that the requirement will be below the level of the previous year (2014: € 1,716 million).
RBI targets a CET1 ratio (fully loaded) of 12 per cent and a total capital ratio (fully loaded) of 16 per cent by the end of 2017.