1 Change of total assets versus figures from 31 December 2014 expressed in local currencies varies due to fluctuations in euro exchange rates. 2 Allocation of employees to Group Corporates, Group Markets and Corporate Center is not possible.
The primary objective is long-term value creation RBI’s primary strategic objective is to create long-term value for its shareholders. RBI focuses on its activities as an international bank for corporate customers, a leading financial services provider for retail customers, and as a business partner for select institutional clients that have a link to the CEE region (including Austria).
The challenges in the business environment (notably tighter supervisory requirements, bank-specific taxes, etc.) demand ongoing adjustments to the business model. In February 2015, therefore, RBI decided to undertake a transformation program to strengthen its capital base (CET1 ratio of at least 12 per cent and a total capital ratio of at least 16 per cent by end-2017, both fully loaded) and to reduce risk in order to create capacity for growth in its most promising markets. Some of the measures were already successfully implemented by the end of the 2015 financial year (e.g. sale of the Slovenian subsidiary bank – subject to supervisory approval – as well as restructuring in Hungary), with the remaining measures expected to be fully implemented by end-2017: ■ Sale of the Polish unit: Poland is an attractive market for banks. Following the successful integration of Polbank, RBI currently owns a top 10 institution in a rapidly consolidating market. Substantial capital resources would be required in order to benefit from this market consolidation. In line with the focus of capital resources in select markets, a decision was made to withdraw from this market.
RBI strives to establish long-term partnerships with corporate customers that have a link to CEE (including Austria). Other regions are serviced on a selective basis only. RBI currently acts as financial advisor to around 89,000 corporate customers – mediumsized businesses, major local companies and international corporations – and supports them with crossborder financial services. Its customers‘ needs are a top priority, and RBI is committed to supporting them with high-quality products and services.
This area encompasses support services for institutional customers (notably banks, insurance companies, asset managers, sovereigns and public-sector institutions), as well as Group-wide trading activities. Core competencies include the strategic hedging of currency, interest rate and credit risks, intermediation between capital providers and local investment opportunities, and supporting companies in the areas of IPOs and takeovers. A particular focus is placed on capital market and investment banking products. To expand our customer offering, we continue to develop innovative products (e.g. green bonds), establish Groupwide support services and drive the harmonization of IT platforms/trading venues forward.
■ Aris Bogdaneris1 Visa Worldwide Pte. Limited (advisory council) 1 Left RBI on 31 March 2015
Independence of the Supervisory Board In accordance with and taking into consideration C Rule 53 and Appendix 1 of the ACGC, the RBI Supervisory Board specified the following criteria for the independence of the members of the company’s Supervisory Board: ■ The Supervisory Board member shall not have been a member of the Management Board or a senior executive of the company or one of its subsidiaries in the past five years.
The Management Board manages the company’s business in accordance with the law, the Articles of Association and the Management Board’s rules of procedure. The Management Board’s weekly meetings are convened and led by the chairman. The meetings facilitate mutual gathering and exchange of information, consultation and decision-making with respect to all matters requiring the board’s approval. The internal regulations of the Supervisory Board and the Management Board describe the duties of the Management Board in terms of information and reporting, as well as a catalog of measures that require the approval of the Supervisory Board.
The Remuneration Committee’s responsibilities include establishing guidelines for the company’s remuneration policies and practices, particularly on the basis of the BWG, as well as relevant sections of the ACGC. In addition, the Remuneration Committee supervises and regularly reviews the remuneration policies, remuneration practices and relevant incentive structures to ensure that all related risks are controlled, monitored and limited in accordance with the BWG, as well as with respect to the company’s capitalization and liquidity. In doing so, the longterm interests of shareholders, investors and employees of the company are also taken into account, as are the economic interests of maintaining a functioning banking system and the stability of the financial market. The Remuneration Committee also directly reviews the remuneration of executives responsible for risk management and compliance.
Report on measures taken by the company to promote women to the Management Board, the Supervisory Board and into executive positions (§ 80 of the AktG) as laid down in § 243b (2) 2 of the UGB
Market development 32 Performance and financials 35 Events in the financial year 36 Detailed review of income statement items 37 Comparison of results with the previous quarter 42 Statement of financial position 44 Equity 46 Funding 47 Research and development 48 Internal control and risk management system 48 Capital, share, voting and control rights 50 Risk management 52 Human Resources 53 Outlook 54 Events after the reporting date 55
The CE region enjoyed very solid economic performance in 2015, with GDP growth of 3.5 per cent. CE generally benefits from solid economic growth in Germany and from the recovery in the euro area, as well as from expansionary monetary policies in some CE countries. In a number of countries, such as the Czech Republic and Hungary, the current cyclical recovery likely peaked over the course of the year. At the same time, key domestic economic activity indicators remain at solid, high levels or point to increasingly balanced growth with sound export performance and momentum in the domestic economy.
In the 2015 financial year, RBI worked intensively on the implementation of all of these measures. Substantial headway was made in reducing risk-weighted assets in Russia and in Ukraine. The repositioning in Hungary has been largely completed and the sale of the network bank in Slovenia has been contractually agreed. The regulatory approval process is currently under way, and the closing of the transaction is expected to occur in the first half of 2016. In Asia, rescaling of the business volumes is already at an advanced stage (49 per cent reduction of risk-weighted assets compared to the previous year). In the US, the winding down of operations has begun. In Poland, preparations for the Bank’s IPO have commenced. The intended sale is no longer expected to take place in 2016, due to the changed political environment. The plan to sell remains in place.
The volume of Group financing from banks (chiefly commercial banks) decreased 27 per cent, or € 6,039 million, to € 16,369 million. Long-term and short-term deposits declined, notably at Group head office and in Asia, Russia, and Poland.
In the context of financial engineering, it does however develop customized investment, financing and risk hedging solutions for its customers. Financial engineering encompasses not only structured investment products, but also structured financing, i.e. financing concepts that go beyond the application of standard instruments and are used in areas such as acquisition or project financing. RBI also develops individual solutions to hedge a broad spectrum of risks, from interest rate risk and currency risk through to commodity price risk. Besides financial engineering, RBI is actively working on the further development of integrated product solutions for international payment transfers within the cash management area.
Consolidated financial statements are prepared by Accounting & Reporting, which reports to the Chief Financial Officer. The associated responsibilities are defined Group-wide within the framework of a dedicated Group function.
Each year the Annual Report shows the consolidated results in the form of a complete set of consolidated financial statements. These consolidated financial statements are examined by an external auditor. In addition, the Group management report contains comments on the consolidated results in accordance with the statutory requirements.
 The company’s SIP provides the following upon change in corporate control: “If a change in corporate control or a merger occurs during the vesting period, and the combination does not exclusively concern subsidiaries, all contingent shares will lapse without replacement at the time of acquiring the shares of RBI AG and the investor’s effective power to dispose of them, or at the time of the merger. An indemnification payment will be made for these contingent shares. The indemnity sum calculated will be paid out with the next possible salary payment.”
Corporate Governance The Corporate Governance Report can be found in the Annual Report as well as on the RBI website (www.rbinternational.com → Investor Relations → Corporate Governance).
RBI, like many international companies, is also working on the further development of their Performance Management System. In 2015, a new model for Group Executives was developed, which will be implemented in 2016 and will serve as the basis for adjustments for all other employee groups.
General administrative expenses for 2016 should be slightly below the level of the previous year (2015: € 2,914 million).
Other results amounted to minus € 82 million in the reporting year after plus € 13 million in the previous year. Government measures in Croatia and Serbia were largely responsible for the decrease. In Croatia, this involved a consumer protection law on the fixing of rates for foreign currency loans for one year, as well as the law passed by the Croatian parliament in September 2015 on the mandatory conversion of Swiss franc-denominated loans at the historical rates prevailing at the date of the loan. Provisions totaling € 82 million were formed to take account of these laws; after deduction of taxes the negative effect on consolidated profit was € 66 million. In Serbia, a new regulation on unilateral changes in interest rates for consumer loans linked to foreign currencies resulted in a negative effect of € 4 million. In addition, the deconsolidation of a Bulgarian group unit led to a loss of € 2 million. The € 3 million decline in net income from financial investments to € 5 million was attributable to valuation losses and lower proceeds from the sale of securities in the fair value portfolio, above all in Romania. The sale of VISA shares in Romania had a positive effect of € 2 million.
The tax expense decreased 38 per cent year-on-year, or € 20 million, to € 33 million, while the tax rate fell 2 percentage points to 13 per cent. The decline was mainly due to the recognition of deferred tax assets for expenses in connection with Swiss franc loans as a result of the legislative changes in Croatia described above.
Recurring other net operating income (22) (9) 146.4% (13) 0 –
Return on equity before tax 33.5% 7.2% 26.3 PP 38.1% 34.8% 3.4 PP
This segment essentially comprises net income from Group head office’s governance functions and from other Group units. As a result, its net income is generally more volatile. Profit before tax improved 42 per cent, or € 177 million, year-on-year. Declines of € 180 million in income from derivatives and securities were more than offset by a reduction of € 391 million in goodwill impairments.
This was mainly attributable to a € 391 million reduction in goodwill impairment charges. Goodwill impairments for a Group unit in Ukraine and Serbia totaled € 7 million in the financial year. In the previous year, goodwill impairments totaled € 399 million (Poland € 194 million, Russia € 148 million, Albania € 51 million).
Tax income of € 22 million was booked in the financial period, while there was a tax expense of € 173 million in the previous year’s period. The decline was mainly due to the impairment of deferred tax assets that occurred in the previous year as a result of Group head office’s budgeting.
There were no conversion rights or options outstanding, a dilution of earnings per share did not take place.
Net provisioning for liabilities and charges and impairment losses 1,515,939 2,377,572
Average number of ordinary shares outstanding in thousand 284,898 0 284,898
Interest income includes interest income (unwinding) from impaired loans to customers and banks in the amount of € 180,255 thousand (2014: € 204,653 thousand). Interest income from impaired loans and advances to customers and banks is recognized based on the rate of interest used to discount the future cash flows for the purpose of measuring the impairment loss.
In the reporting period, 22 subsidiaries were excluded from the consolidated group due to materiality reasons. Moreover, six subsidiaries were excluded due to sale and two subsidiaries due to merger. Net income from this disposal of group assets amounted to minus € 41,111 thousand (2014: minus € (9,755) thousand).
The sale of ZAO NPF Raiffeisen, Moscow, resulted in a gain of € 86,171 thousand. The currency effects of € 4,018 thousand that were realized from this transaction have been reclassified to the income statement.
Positive fair values of derivatives in cash flow hedges (IAS 39) 1,021 309
The recoverable values of all other units were either higher than the respective book values or are immaterial.
In the previous year, additions to intangible fixed assets include single investments exceeding € 10,000 thousand in Group head office.
On a consolidated basis, the asset held for sale in accordance with IFRS 5 is measured at the lower of carrying amount and fair value less disposal costs. As the sales contract was signed before the end of the fourth quarter, the agreed purchase price is the best indicator of the fair value of the asset held for sale. The agreed sales price is lower than the equity of Raiffeisen Banka d.d., Maribor, which amounted to € 43,550 thousand as of 31 December 2015. The resulting impairment loss was initially allocated to the non-current assets of the asset held for sale in accordance with IFRS 5. A provision for onerous contracts in accordance with IAS 37 was formed for the remaining impairment loss, as the contractual obligation already existed on 31 December 2015.
The impairment loss relating to the non-financial assets as well as the charge for the provision were reported under other net operating income: Impairment of tangible fixed assets (11,934)
The Contingency/Recovery Committee is a decision-making body convened by the Management Board. The composition of the committee varies depending on the intensity and focus of the specific requirements pertaining to the situation (e.g. capital and/or liquidity). The core task of the committee is to maintain or recover financial stability in accordance with BaSAG (Austrian Bank Recovery and Resolution Act) and BRRD (Banking Recovery and Resolution Directive) in the event of a critical financial situation.
The main goal of the sustainability perspective is to ensure that the Group can maintain a sufficiently high tier 1 ratio at the end of the multi-year planning period, also in a severe macroeconomic downturn scenario. This analysis is based on a multi-year macroeconomic stress test where hypothetical market developments in a severe but realistic economic downturn scenario are simulated. The risk parameters considered include: interest rates, foreign exchange rates and securities prices, as well as changes in default probabilities and rating migrations in the credit portfolio.
This perspective thus also complements traditional risk measurement based on the value-at-risk concept (which is in general based on historical data). Therefore it can incorporate exceptional market situations that have not been observed in the past and it is possible to estimate the potential impact of such developments. The stress test also allows for analyzing risk concentrations (e.g. individual positions, industries, or geographical regions) and gives insight into the profitability, liquidity situation, and solvency under extreme situations. Based on these analyses risk management in the Group enhances portfolio diversification, for example via limits for the total exposure of individual industry segments and countries and through ongoing updates to its lending standards.
The rating model for project finance has five different grades which take both individual default probabilities and collateral into consideration. The project finance volume is composed as shown in the table below: in € thousand 2015 Share 2014 Share 6.1 Excellent project risk profile – very low risk 3,328,044 44.6% 3,570,635 41.5%
The following table provides a breakdown by country of risk of the maximum credit exposure for corporate customers and project finance structured by regions: in € thousand 2015 Share 20141 Share 1 Adaptation of previous year figures due to change in the disclosure of regions.
Taking all rating grades together, the segment Group Markets accounted for the largest portfolio share at € 12,398,189 thousand (2014: € 16,628,085 thousand) or 72.9 per cent, followed by the segment Southeastern Europa at € 1,363,952 thousand (2014: € 1,337,205 thousand) or 8.0 per cent and Eastern Europe at € 1,066,124 thousand (2014: € 1,148,885 thousand) or 6.3 per cent.
All market risks are measured, monitored, and managed on Group level.
The following tables show the largest present value changes for the trading book of the Group given a one-basis-point interest rate increase for the whole yield curve in € thousand for the reporting dates 31 December 2015 and 31 December 2014. 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.
At year-end 2015, the liquidity coverage ratio was higher than during the course of the year. The reasons were funding activities in the fourth quarter of 2015 carried out in preparation for wholesale funding repayments in the first half of 2016 and short-term placements of call deposits from Zuno Bank. During the year 2016, a decrease of the liquidity coverage ratio is expected.
In addition, risk taking capacity is calculated within the framework of regulatory limits. It is defined as the maximum loss which the bank or the banking group may incur during the next twelve months without falling short of the regulatory minimum capital ratios.
RBI calculates the regulatory total capital and total capital requirement according to CRR. The implementation of these requirements in the European Union was carried out via a regulation (CRR) and a directive (CRD IV). Both regulations were published on 27 June 2013 in the EU Official Journal and thereby became effective.
Within the framework of CRR and in addition to the total capital requirements the leverage ratio was implemented as a new instrument to limit the risk of excessive indebtedness. According to Article 429 CRR, the leverage ratio is the ratio of capital to the leverage exposure. This means tier 1 capital in relation to unweighted exposure on and off the statement of financial position. The Basel Committee initially set a minimum ratio of 3 per cent. After a review to be undertaken by the Basel Committee in the first half of 2017 and possible modification of the minimum ratio, the leverage ratio will become effective as of 1 January 2018.
(49) Related parties Companies can carry out business with related parties that may affect the entity’s asset, financial and earnings position. Information about related parties refers to the top of the consolidated group of Raiffeisen-Landesbanken-Holding GmbH.
The committees of the Supervisory Board of RBI AG are as follows: Members of the Supervisory Board
Closed Joint Stock Company Non-state pension fund Raiffeisen, Moscow (RU) 75.0% 1/10 Sale
No assets have been transferred to sponsored non-consolidated structured entities in 2015.
Slovak Banking Credit Bureau, s.r.o., Bratislava (SK) 9,958 EUR 33.3% BR
Derivative financial instruments held-for-trading are shown under the item "trading assets" or "trading liabilities". Positive fair values including accrued interest (dirty price) are shown under trading assets. Negative fair values are recorded under trading liabilities. Positive and negative fair values are not netted. Changes in dirty prices are recognized in net trading income. Derivatives that are used neither for trading purposes nor for hedging purposes are recorded under the item "derivatives". Any liabilities from the shortselling of securities are shown in "trading liabilities".
Under reverse repurchase agreements, assets are acquired with the obligation to sell them in the future. The purchased securities on which the financial transaction is based are not reported in the statement of financial position and accordingly not measured. Cash outflows arising from reverse repurchase agreements are recorded in the statement of financial position under the item "loans and advances to banks" or "loans and advances to customers”.
If the Group holds assets under a finance lease as lessee, these are shown under the relevant tangible fixed asset item, which corresponds to a lease liability. Interest expenditure is reported under net interest income.
The amendments to IFRS 11 modify accounting for acquisitions of interests in joint operations in such a way that the acquirer of shares in a joint operation in which the activity constitutes a business operation as defined in IFRS 3 is required to apply all of the principles regarding the recognition of business combinations pursuant to IFRS 3 and other IFRS, provided they do not contradict the principles contained in IFRS 11.
Amendments to IAS 16/IAS 41 (Agriculture: bearer plants; entry into force January 1, 2016)
RBI anticipates that the application of IFRS 9 in the future may have an impact on amounts reported in respect of the Group's financial assets and financial liabilities. It is expected that overall, IFRS 9 will increase the level of risk provision. This estimate is based on the requirement to recognize a risk provision in the amount of the expected loan defaults for the first twelve months even for those instruments where the credit risk has not increased significantly since initial recognition. Moreover, it is based on the estimate that the volume of assets for which the “lifetime expected loss” is applied is probably larger than the volume of assets where loss events pursuant to IAS 39 have already occurred. The mandatory date of the initial application of IFRS 9 will be Janu-
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on our judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, we consider internal control relevant to the Group’s preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.