Raiffeisen Bank International (RBI) posts a consolidated profit of € 114 million in first quarter 2016

First quarter 2016: RBI posts a consolidated profit of € 114 million (press release):

– Net interest income decreases 12.5 per cent year-on-year to € 718 million (Q1/2015: € 820 million)
– Operating income decreases 1.2 per cent to € 1,104 million (Q1/2015: € 1,118 million)
– General administrative expenses increase 3.9 per cent to € 718 million (Q1/2015: € 691 million)
– Net provisioning for impairment losses decreases 59.5 per cent to € 106 million (Q1/2015: € 260 million)
– Profit before tax increases 22.0 per cent to € 229 million (Q1/2015: € 188 million)
– Profit after tax increases 37.9 per cent to € 138 million (Q1/2015: € 100 million)
– Consolidated profit increases 37.1 per cent to € 114 million (Q1/2015: € 83 million)
– Non-performing loan ratio decreases 0.5 percentage points to 11.4 per cent compared to year-end 2015
– Common equity tier 1 ratio (transitional) decreases 0.1 percentage points to 12.0 per cent compared to year-end
– Common equity tier 1 ratio (fully loaded) of 11.5 per cent unchanged compared to year-end 2015
– Earnings per share increases 36.8 per cent to € 0.39 (Q1/2015: € 0.29)

All figures are based on International Financial Reporting Standards (IFRS).

In the first quarter of 2016 the Raiffeisen Bank International AG Group (RBI) generated a profit before tax of € 229 million, which represents a year-on-year increase of 22 per cent. The profit after tax increased 38 per cent to € 138 million year-on-year, while the consolidated profit increased 37 per cent to € 114 million.

“The result is overall satisfying, as the first quarter continued to be characterized by the ongoing low interest rate environment. A turnaround of the interest rate policy is currently not in sight. The reduction of our cost base is all the more important. Unfortunately, the regulatory costs are increasing year after year. The majority of the regulatory costs for the financial year 2016 have been booked in the first quarter. The positive results in Hungary and Ukraine are especially encouraging. I expect that both countries have made the turnaround and will deliver positive results for the full year 2016”, said Karl Sevelda, RBI’s CEO.
With a number of shares of 292.98 million as at 31 March 2016 (previous year: 292.98 million) earnings per share stood at € 0.39, which represents an increase of 36.8 per cent (Q1/2015: € 0.29).

Net interest income decreased 13 per cent

Operating income was down 1 per cent year-on-year, or € 14 million, to € 1,104 million.

In the first three months of 2016, net interest income fell 13 per cent, or € 102 million, to € 718 million. This was primarily attributable to continuing low market interest rates in many of the Group’s countries and to the existing excess liquidity. A volume-based decline at Group head office and in Asia also contributed to the decline in net interest income.

Due to the currency devaluations in Eastern Europe and to lower sales in Central Europe, net fee and commission income fell 4 per cent year-on-year, or € 13 million, to € 347 million.

Net trading income increased € 90 million year-on-year to € 28 million.

General administrative expenses increased 4 per cent

Compared to the same period last year, general administrative expenses climbed € 27 million to € 718 million. The cost/income ratio increased 3.2 percentage points to 65.0 per cent, not least due to the lower net interest income.

At 48 per cent, the largest component in general administrative expenses was staff expenses, which increased 1 per cent, or € 2 million, to € 347 million.

Net provisioning for impairment losses decreased 59 per cent

Compared to the same period of the previous year, net provisioning for impairment losses fell by a total of 59 per cent, or € 155 million, to € 106 million. This was due to a € 102 million reduction in individual loan loss provisioning to € 117 million.

In the reporting period, the NPL ratio fell 0.5 percentage points to 11.4 per cent compared to year-end 2015. Non-performing loans compared to loan loss provisions of € 5,688 million, resulting in a NPL coverage ratio of 70.2 per cent, down from 71.3 per cent at the year-end.

Common equity tier 1 ratio (fully loaded) of 11.5 per cent

Total capital under Capital Requirements Regulation (CRR) amounted to € 10,858 million as at 31 March 2016. This represents a decline of € 129 million compared to the 2015 year-end figure, resulting mostly from the changed transitional provisions for 2016.

Based on total risk, the common equity tier 1 ratio (transitional) was 12.0 per cent while the total capital ratio (transitional) was 17.2 per cent.

Excluding the transitional provisions as defined within the CRR, the common equity tier 1 ratio (fully loaded) amounted to 11.5 per cent.

Comparison of results with the previous quarter

Compared to the fourth quarter of 2015, net interest income fell 14 per cent, or € 114 million, to € 718 million in the first quarter of 2016.

Net fee and commission income decreased 11 per cent, or € 44 million, to € 347 million compared to the fourth quarter of 2015, primarily due to exchange rate movements.

Net trading income remained at € 28 million almost unchanged on the previous quarter (€ 29 million).

At € 718 million in the first quarter of 2016, general administrative expenses were down 12 per cent, or € 95 million, from € 813 million in the previous quarter.

Compared to the previous quarter, net provisioning for impairment losses declined 77 per cent, or € 364 million, to € 106 million. The large difference is seasonally related, as lower provisioning is to be expected in the first quarter due to the adjusting events after the reporting period for the annual financial statement. The reduction was mainly attributable to the developments in corporate customer business in Asia (€ 208 million decline) and to developments in Ukraine (€ 48 million decline).

In the first quarter of 2016, the consolidated profit amounted to € 114 million, which is an increase of € 197 million, compared to the fourth quarter 2015, where RBI posted a consolidated loss of € 83 million.

Outlook

RBI targets a CET1 ratio (fully loaded) of at least 12 per cent and a total capital ratio (fully loaded) of at least 16 per cent by the end of 2017.

After the implementation of the strategic measures defined at the beginning of 2015, the cost base should be approximately 20 per cent below the level of 2014 (general administrative expenses 2014: € 3,024 million).

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 bank further aims to achieve a cost/income ratio of between 50 and 55 per cent in the medium term.

RBI expects net provisioning for impairment losses for 2016 to be below the level of 2015 (€ 1,264 million).

General administrative expenses for 2016 should be slightly below the level of the previous year (2015: € 2,914 million).