Consolidated financial statements Statement of comprehensive income 102 Statement of financial position 105 Statement of changes in equity 106 Statement of cash flows 107 Segment reporting 109 Notes 116 Risk report 176 Auditor’s report 224
And how do you rate the 2013 fiscal year? Although my assessment is mixed, the positive aspects do predominate. Due to a considerably higher interest margin, we were able to raise our net interest income by 7 per cent. As other income components also increased, while our general administrative expenses were only slightly higher, our operating result rose by 17 per cent. I consider this a success, given the subdued state of the econ omy and the low interest rate environment, which is unfavorable for banks. However, there were also some developments that we are not fully satisfied with. These include the increase in risk costs. Our net provisioning for impairment losses rose by 14 per cent to 1.1 billion euros in 2013, and our NPL ratio deteriorated by 0.9 percentage points to 10.7 per cent. Both developments are mainly attribut able to problematic cases in the corporate customer business. These lowered our net profit, as did the negative valuation results of our own issues, though we performed quite well at the operating level. It was foreseeable, however, in view of the positive one-off effects in 2012, that it would be extremely difficult to achieve as good a result in 2013. All in all, our consolidated profit of 557 million euros was 24 per cent lower than in 2012. However, despite the above-mentioned positive underlying trend in our operating business, we must take the right steps for the future now. If we do not, we will be unable to continue to sustainably strengthen our Group, as well as secure RBI’s long-term independence and autonomy. The Management Board has therefore defined three strategic priorities: focus markets, cost cutting, and capital strengthening.
With total assets of € 281.6 billion as of 31 December 2013, RBG is Austria’s largest banking group. By mid-year 2013, RBG managed € 90.7 billion in domestic customer deposits (excluding building society savings), of which € 49.9 billion were held in savings deposits. RBG has thus maintained its market share of around 30 per cent and, once more, its role as market leader among Austria‘s banks. RBG’s strong market position was achieved through healthy organic growth.
Market capitalization as of editorial deadline (11 March 2014) € 6.3 billion
Transparency is central to corporate governance and thus of particular importance to RBI. This corporate governance report is structured 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.
Number of meetings of the Supervisory Board and of the committees
Management Board members’ contracts specify a maximum bonus. Likewise, SIP includes a cap at three times the allocation value. A maximum limit is thus in place for all variable compensation components. Other remuneration consists of compensation for board-level functions in associated companies, payments to pension funds and pension liability insurance, as well as other insurance and benefits. The item also includes one-off retention bonuses for those members of the Management Board who previously worked for Raiffeisen International. These bonuses were awarded in the context of the merger of Raiffeisen International with the principal business areas of RZB.
In September 2013, RBI was included in the STOXX Global ESG Leaders Indexes. This index family contains a group of sustainability indexes whose members are determined from 1,800 STOXX Global companies using a transparent, structured process. Evaluation is based on three categories: environmental, social, and governance.
As expected, US economic growth was significantly weaker this past year when compared to 2012. Real gross domestic product was up just 1.9 per cent, following 2.8 per cent in the previous year. This was primarily due, not only to noticeable tax increases at the beginning of the year, which weighed on private consumer spending, but also to further cutbacks in government spending. These factors, as well as the prolonged debate over the budget and debt ceiling – which culminated in a two-week government shutdown in October – contributed to a considerable level of uncertainty among consumers and companies. As a result, corporate investment growth dramatically slowed. However, in spite of restrained economic activity, the labor market continued to recover. In the US, 2.2 million new jobs were created in 2013, with unemployment falling from 7.9 per cent to 6.7 per cent over the course of the year.
The economy in Southeastern Europe (SEE), which stagnated in the previous year, rebounded in 2013 with growth of 2.1 per cent. Croatia was the only country to remain in recession while economic output in all other countries in the region picked up. The economic trend in Romania has been particularly positive. Following 0.6 per cent growth in 2012, its economy has grown 3.5 per cent in the reporting period. The upswing is attributable, amongst other things, to successful consolidation efforts, as well as to the improved competitive position of Romania's economy. Bosnia and Herzegovina, as well as Serbia posted growth rates of around 2 per cent in 2013, while Bulgaria’s economy, at less than 1 per cent, grew less.
Despite a decline in interest-bearing assets, net interest income increased 7 per cent, or € 257 million, to € 3,729 million in 2013. This was attributable to the 46 basis point increase in the net interest margin to 3.11 per cent compared to the previous year. The main reasons for this were the positive effects of repricing measures in loans and deposits, as well as optimization of the liquidity situation (i.e., the reduction or restructuring of liquidity), which primarily took place at Group head office. The decline in interest income, due to lower lending volumes, was thus fully compensated through lower interest expenses for customer deposits. Interest income from derivatives grew 11 per cent, or € 41 million, to € 403 million (primarily at Group head office). Net interest income in Belarus and Slovakia developed positively, due especially to favorable trend in the credit business. Net interest income also increased in Poland, although comparison with the previous year is limited in this case, due to the different allocation of individual interest-bearing transactions resulting from the integration of Polbank. In the Czech Republic, however, net interest income declined due to lower volumes and margins resulting from the strongly competitive environment with private individuals and corporate customers. In Hungary, a reduction in lending volumes and market interest rates as well as lower interest income from derivatives and securities led to a decline in net interest income. The reduction in net interest income in Romania was primarily attributable to a fall in market interest rates and a decline in interest income from securities. In Russia,
In 2013, net trading income grew 50 per cent, or € 106 million, to € 321 million. Thereby significant net income growth was achieved in currency-based transactions (up € 53 million), other business (up € 26 million), as well as equity and index-based transactions (up € 21 million). Net income from interest-based transactions also rose € 1 million. Although the credit derivatives business improved by € 6 million, it remained negative.
Depreciation of tangible and intangible assets rose € 30 million to € 431 million year-on-year (2012: € 401 million). The largest increase occurred in depreciation of intangible assets, which rose € 40 million to € 219 million. This was attributable to impairment of a core banking system in the Czech Republic.
Comparison of results with the previous quarter in € million Q4/2013 Q3/2013 Change absolute Change in %
(2) The articles of association contain no restrictions concerning voting rights or the transfer of shares. The Management Board is not aware of any restrictions arising from agreements among shareholders.
RBI promptly implemented its funding plan again in 2013, primarily with low-volume private placements. In order to take advantage of the friendly market environment before the summer break, RBI AG issued a tier 2 bond in Swiss francs for CHF 250 million in the second quarter, with a ten-year maturity and a coupon of 4 per cent.
Retail business is undertaken exclusively in Central and Eastern European markets and grew € 268 million to € 29,402 million year-on-year. This increase is primarily attributable to higher lending volumes in Russia, where a rise of € 990 million was achieved despite currency devaluations. In Central Europe, however, retail exposure declined, mainly as a result of lower volumes in Poland (subdued credit demand), and in Hungary (selective lending).
The underlying cash flow models are periodically adjusted to the observed portfolio dynamics trend. In 2013, particular attention was paid to modeling non-performing loans and finalizing the calculation of liquidity ratios according to Basel III.
Segment overview At € 835 million, RBI’s profit before tax declined 20 per cent, or € 203 million, compared to the previous year, and was heavily influenced by positive one-off effects of € 276 million.
Net fee and commission income 125 125 0.3% 29 30 (4.4)%
Net provisioning for impairment losses (152) (241) (36.9)% (55) (25) 122.6%
Net fee and commission income was up 9 per cent, or € 29 million, to € 348 million. Income from payment transfer business increased 7 per cent year-on-year, again delivering the largest contribution with € 191 million – above all in Romania and Serbia. Income from loan and guarantee business, which increased mainly in Romania due to higher volumes, rose 35 per cent to € 28 million. Increases of € 4 million each were reported in net income from the sale of own and third party products, as well as in income from securities business – predominantly the result of the development in Romania and Croatia.
Other results in the segment increased from € 11 million to € 16 million year-on-year. Primarily positive valuation results from interest rate swaps in Croatia, led to a result of € 8 million from derivative financial instruments, after valuation losses of € 6 million had been reported in the previous year.
hereof foreign currency % 68.5% 64.6% 3.9 PP 68.5% 65.5% 3.1 PP
Return on equity before tax 18.3% 22.7% (4.4) PP 2.6% 21.5% (18.9) PP
Bosnia and Herzegovina in € million 2013 2012 Change Q4/2013 Q3/2013 Change
Net provisioning for impairment losses (58) (52) 12.2% (10) (7) 40.1%
Other net operating income in the segment reported a slight year-on-year decline of € 1 million to minus € 6 million, the bulk of which was due to non-income-related taxes.
Net provisioning for impairment losses (15) (18) (13.3)% (22) 5 –
Remeasurements of defined benefit plans 3,820 (5,747) 3,820 (5,747) 0 0
In 2013, € 31,158 thousand (2012: € 33,995 thousand) was recognized directly in other comprehensive income through the application of IAS 29 (hyperinflation accounting) in Belarus.
Profit attributable to non-controlling interests (32,827) 108 (13,922) 24,340 1 Adaption of previous year figures due to the retrospective application of IAS 19R.
Gains (losses) from disposals of tangible fixed assets and financial investments (38,015) (13,667)
Julius Baer Multiflex SICAV-SIF Verto Recovery Fund, Luxembourg (LU) 100.0% 1/1 Immaterial
The following table shows the income arising from disposal of Group assets: € 000 JULIUS POLDYS Others Total
The measurement categories for financial instruments pursuant to IAS 39 do not equate to the principal items in the statement of financial position. Relationships between the principal items in the statement of financial position and the measurement standard applied are on the one hand described in the table "Categories of financial instruments according to IFRS7" and on the other hand in the notes under (1) income statement according to measurement categories and (13) statement of financial position according to measurement categories.
1. Financial assets or liabilities at fair value through profit and loss a. Trading assets/liabilities
Unquoted equity instruments, for which reliable fair values cannot be assessed regularly, are valued at cost of acquisition less impairment losses and it is not possible to show an appreciation in value. This kind of financial instrument is reported under the item "financial investments".
The entirety of the provision for impairment losses arising from loans reported in the statement of financial position comprising individual loan loss provisions and portfolio-based loan loss provisions is shown as a separate item "Impairment losses on loans and advances" on the assets side below loans and advances to banks and customers.
Under a finance lease the lessee holds assets that are shown under the relevant tangible fixed asset item, which corresponds to a lease liability. Interest expenditure is reported under "Net interest income".
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.
An internally developed intangible fixed asset resulting from development activities or from the development stage of an internal project is capitalized when the following evidence is provided:  The final completion of the intangible is technically feasible so that it will be available for use or sale.
An intangible fixed asset is derecognized on retirement or when no future economic benefit can be expected from the continued use of the asset. The resulting gain or loss from the sale or retirement 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.
As of the fiscal year 2011, the general and specific principles, as represented in the general HR part, for the allocation, the claim and 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 ("risk personnel") are applied:  60 per cent of the annual bonus will be paid out on a proportional basis as 50 per cent cash immediately (up-front), and 50 per cent through a phantom share plan (see details below), which will pay out after a holding period (retention period) of one year. An exception to this are the Group units in Bulgaria, with 40 percent up-front portion and a retention period of two years, and in the Czech Republic with a holding period of 1.5 years.
Financial assets and liabilities at fair value through profit or loss 402,012 232,167
Treasury bills and bills of public authorities eligible for refinancing 7,453,473 6,456,392
In 2013, most of the plan assets were quoted on an active market, less than 10 per cent were not quoted on an active market.
Impairment losses on loans and advances (5,605,475) 0 0 0 0
A true sale securitization program regarding the retail loans portfolio of ZAO Raiffeisenbank, Moscow, rolled out in 2013 and amounting to about € 125,000 thousand is worth mentioning. The loans were sold to a special purpose vehicle which is held by the Group, where the senior tranch as well as the first loss piece are held by Group internal investors.
Up to now the following transactions for all, or at least individual tranches have been executed with external contractual partners. The indicated amounts represent the volumes at the closing date: € 000 Seller of claims or secured party Date of contract End of maturity Volume Portfolio
Future Flow Securitization ROOF Russia DPR Finance Company S.A. ZAO Raiffeisenbank, Moscow (RUS)
As of 31 December 2013, RBI reported the following total exposure of structured products (excluding CDS): € 000 Outstanding notional amount Carrying amount
Bonds, notes and other fixed-interest securities 578,981 5,566 573,415 423,637 423 423,214
Bonds, notes and other fixed-interest securities 67,784 10,987 56,797 65,289 834 53,588 31/12/2012 Transferred assets Associated Liabilities amount hereof securitizations hereof repurchase agreements
6.3 Acceptable project risk profile – average risk 1,225,163 14.0% 1,241,107 14.7%
Compared to year-end 2012, the retail credit portfolio increased € 267,995 thousand to € 29,402,323 thousand. The highest volume of € 15,545,687 thousand (2012: € 16,214,036 thousand) was booked in segment Central Europe. This was a decrease of € 668,349 thousand compared to the previous year, mainly caused by a decline in loans to private individuals in Poland.
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.
Retail customers – small and medium2012 Current Overdue Collaterals 30 days 31 days, up to 90 days 91 days, up to 180 days 181 days, up to 1 year
The following 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 2013 and 31 December 2012. Currencies where the total interest rate sensitivity exceeds € 1 thousand are shown separately. There are only minor changes in the risk factors within the reporting period.
Letters of credit (documentary business) 2,732,703 2,346,401 1,583,692 476,843 129,034 156,831
Equity/index futures – forward pricing 769,345 597 0 769,942 16,879 (28,816)
Current regulatory developments – Basel III and CRR I/CRD IV respectively
An additional buffer, the so called “countercyclical buffer“, can be implemented by the member states in order to stem excess lending growth. Moreover, national supervisors can determine systemic risk buffers (1 to 5 per cent) as well as additional capital add-ons for systemic banks (0 to 3.5 per cent). In case systemic risk buffers as well as add-ons for systemic banks are determined for a banking institute, only the higher of the two values is applicable.
Parent companies are Raiffeisen-Landesbanken-Holding GmbH, Vienna, and Raiffeisen Zentralbank Österreich Aktiengesellschaft, Vienna. Disclosures on RBI’s relations to key management are reported under note (54) Relations to key management.
Moreover, no contracts subject to approval in the meaning of Section 95 (5) item 12 Austrian Joint Stock Company Act (AktG) were concluded with members of the Supervisory Board in the financial year 2013.
ZUNO BANK AG, Vienna (AT) 5,000,000 EUR 100.0% BA 1 Less own shares. 2 Company type: BA Bank, BR Company rendering banking-related ancillary services, FI Financial institution, OT Other companies, VV Insurance, SC Securities firms.
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 financial institutions and supervisors.
Operating income – Comprises of net interest income, net fee and commission income, net trading income and other net operating income (less bank levies and impairments of goodwill).
SEE – The Southeastern Europe segment. For RBI this segment comprises Albania, Bosnia and Herzegovina, Bulgaria, Croatia, Kosovo, Romania (incl. Moldova), and Serbia.
Tax rate – Relation of income taxes to profit before tax.
Czech Republic Raiffeisen Leasing Real Estate s.r.o. Hvězdova 1716/2b 14078 Prague 4 Phone: +420-221-511-610 Fax: +420-221-511-641 www.rlre.cz
RZB Austria Representative Office new York 1133 Avenue of the Americas, 16th Floor 10036 New York