The FINANCIAL -- Raiffeisen Bank International AG (RBI) generated a profit before tax of € 240 million in the first three months of 2014, a decrease of € 11 million or 4.6 per cent versus the comparable period of the previous year.
The FINANCIAL -- Raiffeisen Bank International AG (RBI) generated a profit before tax of € 240 million in the first three months of 2014, a decrease of € 11 million or 4.6 per cent versus the comparable period of the previous year. This decline was due, on the one hand, to higher net provisioning for impairment losses in Ukraine and Russia because of currency devaluations, and to a notable decrease in net trading income (also resulting to a large extent from exchange rate related valuation losses from foreign exchange positions in Ukraine), on the other. General administrative expenses decreased by 4.2 per cent to € 755 million. As the operating income remained practically stable year-on-year, the operating result rose by 5.8 per cent to € 590 million, according to Raiffeisen Bank Aval.
"Despite a very challenging political and economic environment, we were able to keep our income stable, while significantly reducing costs and thus achieving a respectable operating result," said Karl Sevelda, RBI's CEO. Regarding the business in Ukraine, Sevelda emphasized the strong capitalization of Raiffeisen Bank Aval. The corporate loan portfolio of the 32 closed Crimean branches was transferred to Raiffeisenbank in Russia, the branches themselves sold. In the Donetsk and Lugansk regions, the situation is unclear and requires quick and flexible reactions. "Business in Russia was relatively normal, although the economic development was weaker than in the previous year, and we therefore had to apply stricter standards in extending loans", Sevelda added. He considers a significant toughening of the sanctions unlikely, as these would also have severe impacts on the EU.
In the past few days, RBI registered a pleasing development regarding the participation capital: "Following the successful capital increase in the first quarter of 2014, RBI expects to receive approval from the Financial Market Authority for full repayment of the participation capital in the near future. As a first step, we intend to repay the total amount or at least a substantial part of the state-held tranche. The FMA has notified us that the approval will be granted promptly, enabling repayment to take place in the next three to four weeks," Sevelda said.
Income tax expense fell by € 10 million to € 67 million compared to the previous year's period, thus profit after tax for the reporting period at € 173 million was almost on par with the level recorded for Q1 2013 (minus 0.7 per cent). As a result of the capital increase carried out at the start of 2014, the average number of shares outstanding rose to 268.1 million in the first quarter of 2014 (Q1 2013: 194.9 million). After deducting profit attributable to non-controlling interests, consolidated profit for the reporting period amounted to € 161 million (Q1 2013: € 157 million). This resulted in earnings per share of € 0.41 (down € 0.14 against € 0.55 in Q1 2013), according to Raiffeisen Bank Aval.
Compared to the same period last year, net provisioning for impairment losses rose 28 per cent, or € 62 million, to € 281 million. Ukraine posted overall significantly higher net provisioning for impairment losses (up € 65 million), above all related to the devaluation of the hryvnia and the resulting need for provisioning for secured US dollar loans in the amount of € 30 million. In Russia, the growing retail portfolio and the devaluation of the rouble led to higher net provisioning for impairment losses (up € 41 million). However, this was still at a moderate level in the first three months of 2014, particularly as net releases of impairment losses were posted in the comparable period of the previous year.
Net provisioning for impairment losses in the Group Corporates segment showed a decline of € 39 million, following a need for higher provisioning in the same period of the previous year. Hungary posted a year-on-year decline of € 17 million.
In the reporting period, the NPL ratio (non-performing loans in relation to total customer loans) was 10.6 per cent compared to 10.7 per cent at the end of 2013 and 9.9 per cent in Q1 2013. The NPL coverage ratio (risk provisions for customer loans in relation to non-performing loans to customers) improved by 2.1 percentage points since year-end 2013 to 65.2 per cent, according to Raiffeisen Bank Aval.