The FINANCIAL — The Raiffeisen Zentralbank Österreich AG (RZB) Group made despite the difficult economic environment profit in the first half-year of 2015. RZB is composed of the parent institution of the Raiffeisen Banking Group (RBG) and its participations, including the sub-group Raiffeisen Bank International (RBI), the affiliated companies (also known as “Raiffeisen-Verbundunternehmen”) and UNIQA.
Consolidated profit for the first half-year was € 222 million; year-on-year the figure of the first half-year 2014 was a little higher (€ 249 million). Profit before tax was € 560 million, which is clearly positive, but represents a € 30 million decline compared to the previous year’s period. Profit after tax totals € 393 million, according to Raiffeisen Zentralbank.
“It is pleasing that despite the challenging economic environment, the RZB Group generates positive results for the first half-year. We have attained this respectable result due to our strategic focus and the stable base of our proven business model. Still, the strong currency fluctuations in the foreign currency markets and the recession in Russia and Ukraine will be continuing challenges. In contrast to this, we see a positive development and strong profit contribution by the affiliated companies as well as other successful participations“, comments CEO Walter Rothensteiner on the development of the first half-year 2015. Depending on the development of RZB’s most significant participation RBI, and the expected restructuring costs due to its strategic review, the consolidated result of the RZB Group for full year 2015 may be negative.
Solid level of capitalisation
The Common Equity Tier 1 Ratio (transitional) in the first half-year 2015 was 10 per cent. Taking into consideration all Basel III transitional regulations, the Common Equity Tier 1 Ratio (fully loaded) was 8.7 per cent. The total capital ratio (fully loaded) rose year-to-date by 0.2 percentage points to 13.6 per cent. The total capital ratio (transitional) was 14.8 per cent. By 30 June 2015, RZB’s total capital following Basel III resulted by € 11,811 million.
“Against the backdrop of constantly changing regulatory requirements as well as the strengthening of the balance sheet structure, we are currently reviewing the amount and structure of our capital resources, to be able to act promptly and flexible“, states Rothensteiner.
Total assets stabilised
Balance sheet total declined 1 per cent year-to-date, or € 1,847 million, to € 143,082 million (31.12.2014: € 144.929). Operating income declined 11 per cent compared to the previous year, or € 324 million, to € 2,637 million. Compared to the same period last year, general administrative expenses declined 8 per cent to € 1,502 million. This reduction is mainly caused by a release of bonus provisions and the strong currency fluctuations of eastern European currencies – especially the Russian rouble and Ukrainian hryvnia.
Decrease of net interest margin
Reduced margins in many countries in the Central Europe and Southeastern Europe segments caused by the continued decline in market interest rates in those regions had a negative impact on the net interest margin. The net interest margin declined 37 basis points year-on-year to 2.70 per cent.
Net interest income fell 13 per cent, or € 270 million, to € 1,827 million year-on-year. The cost/income ratio increased 1.8 percentage points to 57.0 per cent. Net fee and commission income fell € 22 million, to € 783 million. Compared to the same period last year, net trading income declined € 13 million to minus € 6 million.
Higher net provisioning for impairment losses
Net provisioning for impairment losses rose 1 per cent year-on-year, or € 8 million, to € 594 million. As a result of the underlying economic conditions, net provisioning increased for multinational corporate customers at Group head office and in Asia, as well as for retail and corporate customers in Russia. The NPL Ratio, which expresses the ratio of non-performing loans (NPLs) to average loans to customers, rose in the reporting period 0.5 percentage points to 11.2 per cent compared to year-end 2014.
Added value through moving closer together at federal level
To ensure that RZB can, among other things, achieve its targets for cost savings and creating added value, it will continue to focus on strengthening the core competencies of the affiliated companies. With more than € 30 million the affiliated companies made a stable contribution to the group’s result.
“The new common location in 1190 Vienna, in which parts of RZB and most of the affiliated companies reside since this summer, leads to a new quality of cooperation and communication“, says Rothensteiner.
The steering measures implemented so far, have already led to continuing positive effects in the past years. This trend can also be seen for the current year. In general, all affiliated companies can look back on a successful first half-year 2015. Despite the challenging conditions results according to plan, or even above, were achieved. Leveraging synergies and exploiting potential efficiency in the specialised companies shall also be ensured in the future.
The contribution to earnings by companies valued at equity represented (before minority interests) € 71 million in the first half-year. Compared to the previous year, this is a rise of € 12 million. The result is driven by higher contributions of UNIQA (plus 5 million) and LEIPNIK-LUNDENBURGER INVEST (plus 9 million).