Net fee and commission income 1,497 (1.5)% 1,519 1,586 1,626 1,516
Besides the ordinary Supervisory Board meetings, the Supervisory Board also met, on a situation-specific basis, for five extraordinary meetings: ■ At the extraordinary meeting on 22 January 2016, the Supervisory Board discussed and/or decided on the following matters: the preliminary result for 2015, the budget of the RBI Group and medium-term planning, the status of the transformation and the cost reduction programs, and the status of the planned sales process for Raiffeisen-Leasing Polska S.A. (RLPL) and Raiffeisen Bank Polska S.A. (RBPL).
The consolidated fi nancial statements (income statement, statement of fi nancial position, statement of changes in equity, cash fl ow statement and notes) as well as the annual fi nancial statements for RBI have been audited by KPMG Austria GmbH Wirtschaftsprüfungs- und Steuerberatungsgesellschaft (KPMG). Representatives of the auditing company presented the results of the audit at the respective meeting of the Audit Committee and Supervisory Board which dealt with the fi nancial statements.
In this context, the Management Board believes more than ever that it has a responsibility to continuously evaluate the company’s position and prospects, as well as to identify options for adjusting to the changed market environment and resulting challenges for optimal positioning in the future. The evaluation of the merger of RBI and RZB and the potential benefits resulting for the entire Group also formed part of these considerations.
Raiffeisen Bank International RBI regards CEE (including Austria) as its home market. For over 30 years, RBI has been operating in CEE, where today it maintains a closely-knit network of subsidiary banks, leasing companies and numerous specialized financial service providers. As a universal bank, RBI ranks among the top five banks in several countries. This role is supported by the Raiffeisen brand, which is one of the most widely recognized brands in the region. RBI has positioned itself in CEE as a fully integrated corporate and retail banking group with a comprehensive product offering. In CEE, at the end of 2016, around 46,000 RBI employees served some 14.1 million customers in around 2,500 business outlets. In Austria, RBI is one of the top corporate and investment banks. It primarily serves Austrian customers, but also international customers and large multinational corporate customers operating in CEE. All in all, RBI employs about 49,000 people and has total assets of approximately € 112 billion.
The federal IPS relies on uniform, joint risk monitoring as part of the early warning system of the ÖRE. The IPS hence supplements the RBG system of mutual assistance that comes into effect if a member experiences economic difficulties.
At year-end 2016, the number of shares issued remained unchanged from the start of the year at around 293 million while the market capitalization was € 5.1 billion. At the editorial deadline, the market capitalization stood at € 6.1 billion.
Annual General Meeting and dividends RBI’s Annual General Meeting on 16 June 2016 approved all of the proposed resolutions relating to the individual agenda items. On 24 January 2017, an Extraordinary General Meeting was held and the merger of RBI and RZB was passed by a clear majority. The next Annual General Meeting will take place on 22 June 2017. There will be no dividends distributed for the 2016 financial year.
RBI continuously strives to keep market participants fully informed. In the interest of making its communications as easily accessible and widespread as possible, RBI makes conference call presentations and other important events available as webcasts online. These can be viewed at any time at www.rbinternational.com → Investor Relations → Presentations & Webcasts.
Raiffeisen Bank International AG Group Investor Relations Am Stadtpark 9 1030 vienna, Austria
Management Board members’ contracts specify a maximum bonus. Similarly, the SIP includes a cap amounting to 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 affiliated companies, payments to pension funds and for reinsurance policies, as well as other insurance and benefits.
In spring 2016, RBI launched the diversity initiative “Diversity 2020”. The project’s primary focus is on the empowerment of women (for details, please refer to the Corporate Governance Report). In organizational terms, this involved formation of a diversity committee, establishing diversity ambassadors and appointing a diversity officer.
In 2015, the European Commission proposed a European Deposit Insurance Scheme (EDIS) designed to support the banking union, strengthen the protection of depositors, increase financial stability, and further weaken the link between banks and sovereigns. The EDIS is part of the European SRB and covers all national deposit guarantee systems (including IPS) and is to be developed incrementally in three stages by 2024. In the first stage it is to comprise a reinsurance scheme of the national deposit guarantee systems and subsequently become a co-insurance scheme after three years, under which the contribution of the EDIS is to progressively increase over time. A fully comprehensive EDIS is planned as the last stage, which is scheduled for 2024. The final adoption and publication of the law is lined up for the fourth quarter of 2017 at the earliest.
The Group has drawn up a recovery plan that meets the requirements of the BaSAG. The recovery plan describes potential measures for ensuring the capacity to act in financial stress situations. With the help of material key performance indicator (KPI) monitoring for early detection, the recovery plan establishes a comprehensive governance structure for stress situations. The recovery plan is drawn up by the Group, updated on a regular basis and reviewed by the supervisory authority (ECB).
Following the merger, the Group’s risk-weighted assets (total RWA) would increase 13 per cent to € 68 billion (pro forma as at the end of 2016). The common equity tier 1 ratio (transitional) of the merged entity, based on a pro forma calculation, would be 12.7 per cent as at the end of 2016, with a common equity tier 1 ratio (fully loaded) of 12.4 per cent.
In July 2016 the Austrian government reached an agreement to amend the bank levy regulation from 2017 onwards. The amendment includes a reduction in the annual bank levy; at the same time, Austrian banks are to make a one-off payment. For the merged Group this will amount to around € 163 million. This payment will be spread over a four-year period, starting in 2017. The Austrian bank levy came to approximately € 85 million for RBI in 2016 (€ 1 million less than in 2015). Starting in 2017, the amount will be around € 58 million per year for the merged Group, including the proportional share of the one-off payment, until 2020.
Recurring other net operating income fell € 28 million in the fourth quarter to minus € 4 million. This was primarily attributable to net income from the allocation and release of other provisions, which was down € 8 million due to a provision made for litigation in Slovakia, and net proceeds from the disposal of tangible and intangible fixed assets, which declined € 7 million, largely driven by sales completed in Slovakia in the previous quarter.
Net fee and commission income 383 388 (1.3)% 100 95 4.5%
The increase of € 7 million in net trading income was the result of the above-mentioned reclassification.
General administrative expenses increased 7 per cent, or € 20 million, to € 326 million. This was largely driven by higher staff expenses and the allocation of the contribution to the bank resolution fund to the segment.
The negative development of net income from derivatives and liabilities, as a result of the valuation of bank book derivatives and own issues, contrasted with improved net income from financial investments.
Tax income of € 32 million was posted in the segment in the reporting period after € 22 million in the previous year.
Changes in assets and liabilities arising from operating activities after corrections for noncash positions: Loans and advances to banks and customers [12, 14, 15] (1,213,085) 11,775,004
With a holding of just over 60 per cent, Raiffeisen Zentralbank Österreich AG (RZB AG) is the majority owner of RBI; the remaining shares are held in free float and are traded on the Vienna Stock Exchange. RZB AG is the central institution of the Austrian Raiffeisen Banking Group (RBG), the head of the RZB Group and also the service unit for RBG. At the end of September 2016, the ultimate parent company of RZB AG, Raiffeisen-Landesbanken-Holding GmbH, Vienna, and its 100 per cent subsidiary R-LandesbankenBeteiligung GmbH, Vienna, in which 82.4 per cent of the shares in RZB AG were pooled, were merged into RZB AG. Accordingly, RZB AG serves, until its merger into RBI AG, as the ultimate parent company, and forms a consolidated group.
(1) Income statement according to measurement categories in € thousand 2016 2015 Net gains (losses) on financial assets and liabilities held-for-trading 214,447 105,649
Amortization of intangible fixed assets capitalized in the course of initial consolidation amounted to € 4,719 thousand (2015: € 5,747 thousand) which relates to scheduled amortization of customer relationship intangibles.
The same regulations for employees are in principle valid for the members of the Management Board. These regulations provide for a basic contribution to a pension fund from the company and an additional contribution if the employee pays own contributions of the same amount. Three members of the Management Board additionally have individual retirement benefits, which are funded by a reinsurance policy.
RBI AG, 22 of its domestic subsidiaries and eleven of its other affiliated companies are members of a joint tax entity headed by Raiffeisen Zentralbank Österreich Aktiengesellschaft. In the previous year, the existing tax compensation agreement was expanded with a supplementary agreement. If RBI AG has a negative result in the tax accounts which cannot be used in the group, the group parent is not obliged to pay negative tax contributions to RBI AG. However, the amount is to be settled in the event of a withdrawal from the tax group. The obligation of the tax group head to pay a negative tax contribution to RBI AG for usable losses remains.
Negative fair values of derivatives not designated as hedging instruments according to IAS 39 hedge accounting are reported in the measurement category “trading liabilities”.
Impairments and collateral according to asset classes are shown in the following table: in € thousand
Pledged securities permitted to be sold or repledged by the transferee shown under financial investments amounted to € 598,309 thousand (2015: € 259,526 thousand).
The item software comprises acquired software amounting to € 416,656 thousand (2015: € 411,138 thousand) and internally developed software amounting to € 114,471 thousand (2015: € 120,027 thousand).
The impairment test of customer relationships of Raiffeisen Bank Polska S.A., Warsaw (RBPL), Raiffeisenbank a.s., Prague (RBCZ), and Raiffeisenbank Aval JSC, Kiev (AVAL) identified no impairment need in 2016.
The defined benefit obligations developed as follows: DBO as at 1/1 44,143 48,117
The pension provider Valida established an asset/risk management process (ARM process). According to this process, the riskbearing capacity of each fund is evaluated once a year based on the liability structure of investment and risk associations. Based on this risk-bearing capacity, the investment structure of the fund is derived. When determining the investment structure, defined and documented customer requirements are also taken into account.
Longevity at age 65 for current members aged 45 - females 26.8 26.7
As at 31 December 2016, the subscribed capital of RBI AG as defined by the articles of incorporation amounted to unchanged € 893,586 thousand. The subscribed capital consists of 292,979,038 non-par bearer shares. After deduction of own shares of 509,977, the stated subscribed capital totaled € 892,031 thousand.
Sale and repurchase agreements are transactions in which the Group sells a security and simultaneously agrees to repurchase it at a fixed price on a future date. The Group continues to recognize the securities in their entirety in the statement of financial position because it retains substantially all of the risks and rewards of ownership. The cash consideration received is recognized as a financial asset and a financial liability is recognized for the obligation to pay the repurchase price. Because the Group sells the contractual rights to the cash flows of the securities, it does not have the ability to use the transferred assets during the term of the arrangement.
Statutory, contractual or regulatory requirements as well as protective rights of non-controlling interests might restrict the ability of the Group to access and transfer assets freely to or from other Group entities and settle liabilities. As at the reporting date, the Group hasn’t granted any material protective rights associated with non-controlling interests and therefore these were not a source of significant restrictions.
The banks asset class mainly contains banks and securities firms. The internal rating model for banks was revised in 2015. Both internal and external data were used and the same statistical methods that were applied to develop the successful rating models for corporate customers were used. The revised internal rating model for banks was approved by the ECB in October 2016 and has been used in all risk management processes since November 2016.
Group funding is founded on a strong customer deposit base supplemented by wholesale funding (mainly at Group head office and the Group units). Funding instruments are appropriately diversified and are used regularly. The ability to procure funds is precisely monitored and evaluated by the Treasury ALM units and the ALCOs.
Moreover, based on the SSM (Single Supervisory Mechanism) regulation, the European Central Bank (ECB) took over supervision of large banks in the euro area in November 2014, whose total assets exceed € 30 billion or 20 per cent of a country’s economic output. Both RBI and RZB are defined as large banks. Based on an annually undertaken Supervisory Review and Evaluation Process (SREP), the ECB instructs RBI and also RZB by way of an official notification to hold additional capital to cover risks which are not, or not adequately, considered under pillar I. A draft proposal from the Basel Committee to tighten up the definition of the basis for the calculation of risk-weighted assets is currently in preparation.
Liabilities 2016 in € thousand Deposits Equities Debt securities issued Derivatives 2015 in € thousand Deposits Equities Debt securities issued Derivatives
Transilvania LEASING SI CREDIT IFN S.A., Brasov (RO) 51,569,000 RON 0.6% FI
 the total amount of fair value of the received consideration and fair value of the shares retained and  the carrying amount of assets (including goodwill), liabilities of the subsidiary and all non-controlling interests
Group companies use brands to differentiate their services from the competition. According to IFRS 3, brands of acquired companies are recognized separately under the item "intangible fixed assets." Brands have an indeterminable useful life and are therefore not subject to scheduled amortization. Brands have to be tested annually for impairment and additionally whenever indications of impairment arise. Details on impairment testing can be found in the notes under (20) Intangible fixed assets.
The number of ordinary shares of RBI AG which will ultimately be transferred depends on the achievement of two performance criteria: the targeted return on equity (ROE) and the performance of the shares of RBI AG compared to the total shareholder return of the shares of companies in the DJ EURO STOXX Banks index after a five-year holding period.
Amendments to IAS 16/IAS 38 (Clarification of acceptable methods of depreciation and amortization; entry into force January 1, 2016)
Amendments to IFRS 2 (Share-based payment; entry into force January 1, 2018)
 IAS 28 Investments in associates and joint ventures: Clarification that the election to measure an investment in an associate or a joint venture that is held by an entity that is a venture capital organization, or other qualifying entity, is available for each investment on an investment-by-investment basis.
In the following we present the key audit matters from our point of view:  Recoverability of loans and advances to customers  Valuation of derivative financial instruments  Valuation of liabilites at fair value through profit and loss
We have examined the existence of hedging relationships by reviewing the hedge accounting documentation using a sampling approach and in particular whether the hedging intention and documentation were in place at inception of the hedging relationship. We also reviewed the effectiveness tests provided by the Group to ensure they have been calculated appropriately. In addition, we have reconciled on a sample basis the hedge accounting adjustments to the Statement of Financial Position and Statement of Comprehensive Income.
In our opinion, the group management report has been prepared in accordance with legal requirements and is consistent with the consolidated financial statements. The disclosures pursuant to Section 243a UGB (Austrian Commercial Code) are appropriate.
The legal representatives of the Company are responsible for the other information. Other information comprises all information provided in the annual report, with the exception of the consolidated financial statements, the group management report, and the auditor’s report thereon.
NPL ratio is an economic ratio to demonstrate the proportion of loans that have been classified as non-performing in relation to the entire loan portfolio. The definition of non-performing has been adopted from regulatory standards and guidelines and comprises in general those customers where repayment is doubtful, a realization of collaterals is expected and which thus have been moved to a defaulted customer rating segment. The ratio reflects the quality of the loan portfolio of the bank and provides an indicator for the performance of the bank’s credit risk management.
NPL coverage ratio describes to which extent non-performing loans have been covered by impairments thus expressing also the ability of a bank to absorb losses from its NPL. It is calculated with impairment losses on loans and advances to customers set in relation to non-performing loans to customers.
Slovakia Tatra banka, a.s. Hodžovo námestie 3 P.O. Box 42 85005 Bratislava 55 Phone: +421-2-59 19-1111 Fax: +421-2-59 19-1110 SWIFT/BIC: TATRSKBX www.tatrabanka.sk
Bulgaria Raiffeisen Leasing Bulgaria OOD 32A Cherni vrah Blvd. Fl.6 1407 Sofia www.rlbg.bg