Consolidated financial statements Statement of comprehensive income 89 Statement of financial position 91 Statement of changes in equity 92 Statement of cash flows 93 Segment reporting 95 Notes 102 Notes to the financial instruments 142 Risk report 178 Other disclosures 211 Regulatory information 244 Recognition and measurement principles 248 Key figures 272 Events after the reporting date 274 Statement of all legal representatives 275 Auditor‘s report 276
The consistency check of the Corporate Governance Report according to Section 243c of the Austrian Commercial Code (UGB) was performed by KPMG. For RBI, an independent consolidated non-financial report pursuant to Section 267a UGB, which also contains the disclosures pursuant to Section 243b UGB for the parent company, was prepared and audited by KPMG. This report was reviewed by the Supervisory Board in accordance with Section 96 (1) of the Austrian Stock Corporation Act (AktG). There were no grounds for objections to either the Corporate Governance Report or the non-financial report.
RBI carries out an important role as the central institute of Raiffeisen Banking Group Austria and collaborates with the institutes of Raiffeisen Banking Group Austria in special areas and on select projects.
In view of the change in the legal and regulatory framework and implementation of Institutional Protection Schemes, the RKÖ and its respective member institutions have decided to discontinue the scheme for new transactions. Accordingly, the supplementary protection by RKÖ will only be granted to protected transactions entered until 30 September 2019. The rights of customers with regard to statutory deposit insurance are not affected and remain fully in place.
In response to the profound and fast-paced industry dynamics and ever-changing customer expectations, RBI has determined a new strategic direction: the Mission & Vision 2025. RBI believes in strong growth through customer centricity and digital transformation, which is reflected in the Vision to be “the most recommended financial services group” in 2025 by “transforming continuous innovation into superior customer experience”, RBI’s new Mission statement, which consists of four key dimensions:  Customers: We constantly strive to improve customer experience and enable our clients to achieve more in their lives and businesses
 Data & analytics capabilities: Leveraging Artificial Intelligence and Advanced Analytics to develop new business opportunities and improve existing processes
Based on the overarching Vision & Mission, each client segment is following individual business strategies aimed at differentiating RBI in terms of customer experience, which are to support RBI’s aim to be the most recommended financial services group. Based on its Vision, RBI aims to be the most recommended bank in most of its markets already by the end of 2021, in retail and corporate banking business and in servicing institutional clients, as measured by the Net Promoter Score (NPS).
Junior Subordinated (Legacy Tier 1) Ba3 BB+ 1 Rating was upgraded on 3 March 2020 (after editorial deadline).
The first benchmark issue of a Pfandbrief (covered bond) with a 10-year maturity and a nominal amount of € 500 million on 25 November 2019, was also met with considerable interest among investors. The issue was oversubscribed by a factor of two at 11 basis points over the mid-swap rate. The underlying mortgage portfolio is internationally broadly diversified which was reflected in the spread at which the bond was issued.
According to § 63a (4) of the BWG, one member of the Audit Committee must be a financial expert. This requirement is fulfilled by Eva Eberhartinger as Chairman of the Audit Committee. Three other members of the Audit Committee also have relevant expertise from their positions as senior executives of banks.
The responsibility of free float representatives has been further strengthened by the appointment of Eva Eberhartinger as Chairman of the Audit Committee and Birgit Noggler as Chairman of the Risk Committee.
The responsibilities of the Risk Committee include advising the Management Board on current and future risk propensity and risk strategy, monitoring the implementation of this risk strategy with regard to the controlling, monitoring and limitation of risk in accordance with the BWG, as well as the observing of capitalization and liquidity. To fulfill these responsibilities, the Risk Committee obtains quarterly reports on issues such as credit, liquidity and market risk, the Internal Capital Adequacy Assessment Process (ICAAP) and non-performing loans. The Committee also looks at current risk aspects, including selected country reports on current political changes as well as reports on regulatory developments and their repercussions for RBI. In addition, the Risk Committee discusses relevant metrics and tolerances regarding the Group’s risk appetite, with due consideration given to budgeting and strategy.
In addition, the Remuneration Committee supervises and regularly reviews 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 capitalization and liquidity. To this end, reports from Human Resources, Internal Audit, Compliance and Risk Management are presented to the Remuneration Committee and the associated findings and measures are discussed. The Remuneration Committee further reviews the remuneration of executives responsible for risk management and compliance.
In the SEE region, economic growth in 2019 was 3.6 per cent, roughly on par with the previous year (3.7 per cent) and driven mainly by strong domestic demand. In the region’s smaller markets, momentum slowed; especially in Serbia, where the growth rate recorded a sharp decline of 1.4 percentage points to 3.0 per cent, compared to 2018. Romania, the largest economy in the region, maintained its strong growth rate of around 4.1 per cent, making it the main growth engine in SEE.
The Basel Committee is aiming for an implementation date of 1 January 2022. However, there is still no full legal implementation of the standards for the EU, which also means there are currently no detailed guidelines with respect to the expected implementation date.
An optimization program entitled “TOM – Target Operating Model” was launched at head office and the specialized subsidiaries in Austria in 2019. The transformation processes will not only focus on cost reduction but also on transparency, simplicity and efficiency.
The NPE ratio continued to improve in 2019: From the beginning of the year, it fell 0.5 percentage points, primarily due to sales of non-performing loans and the derecognition of uncollectible loans, and stood at 2.1 per cent at year-end. The NPE coverage ratio improved 2.7 percentage points to 61 per cent.
In the fourth quarter of 2019, impairment losses on financial assets rose € 86 million to € 154 million, principally due to higher risk costs in the Group Corporates & Markets segment (€ 33 million increase) for various individual cases in the large corporate customer business, in the Czech Republic (€ 18 million increase) primarily due to the application of the revised default definition, and in Russia (€ 14 million increase) due to strong credit growth.
For information relating to funding, please refer to note (53) Liquidity management, in the risk report section of the consolidated financial statements.
Capital, share, voting, and control rights The following disclosures satisfy the provisions of § 243a (1) of the Austrian Commercial Code (UGB): (1) As at 31 December 2019, the company’s share capital amounted to € 1,003,265,844.05 and was divided into 328,939,621 voting common bearer shares. As at 31 December 2019, 322,204 (31 December 2018: 322,204) of those were own shares, and consequently 328,617,417 shares were outstanding at the reporting date. Please see note (31) equity for further disclosures.
The Austrian economy is likely to continue to show only moderate momentum in the first quarters of 2020. Consequently, expected GDP growth of 0.8 per cent for the entire 2020 year, will again be lower than recorded in 2019 (1.6 per cent), though should be at the cyclical trough. While the impetus from foreign trade is likely to fall away, this also shouldn’t turn out to be a significant negative factor. At the same time, the highly robust and sustained capital investment cycle is forecast to come to an end, albeit likewise without weighing on the general economy. Consumer spending is expected to be much more of a mainstay for the economy, benefiting from the ongoing solid growth of real disposable household income (also supported by fiscal easing measures).
Current income from investments in associates1 5 5 (3.7)% 1 1 (37.9)%
Net fee and commission income 441 549 (19.7)% 112 111 1.1%
Net gains/losses from hedge accounting 0 0 207.8% 0 0 –
Impairment losses on financial assets (70) (61) 13.8% (25) (33) (26.1)%
Income taxes of € 71 million were € 3 million lower than the tax expense in the comparable period of the previous year. The tax expense in Croatia declined € 8 million as a result of the utilization of loss carry forwards acquired in connection with a merger. However, in Bosnia and Herzegovina the tax expense was up € 4 million due to higher non-tax deductible expenses. The segment ’s tax rate climbed 1 percentage point to 15 per cent.
Detailed results of the individual countries in the segment: Albania Bosnia and Herzegovina Bulgaria
Return on equity after tax 32.3% 35.3% (2.9) PP 31.4% 34.2% (2.8) PP
Net fee and commission income (14) (9) 68.0% (13) (2) 461.5%
Customers in million 0.0 0.0 (23.3)% 0.0 0.0 (12.7)% 1 The current income from investments in associates previously reported in other result is now shown in a separate item.
Items which are not reclassified to profit or loss 75,736 19,233
Deferred taxes on items which may be reclassified to profit or loss [22, 29] (4,510) 1,919
Regarding the transitional arrangements, IFRS 16 grants RBI as lessee an accounting option concerning transitioning to the new lease standard. Lessees may choose to apply IFRS 16 through either a full retrospective approach in which the standard is applied retrospectively to each prior reporting period presented in accordance with the provisions of IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors, or through a modified retrospective approach where the right- of-use asset is recognized in the same amount as the leasing liability and consequently no impact on the equity.
The increase was attributable to Raiffeisen Informatik GmbH & Co KG, whose current income (up € 108,305 thousand) was positively influenced by a valuation gain relating to the performance of a listed investment. Card complete Service Bank AG, which posted a positive one-off effect in the previous year, was responsible for a reduction (down € 13,255 thousand).
Other net operating income was down € 9,255 thousand year-on-year to € 78,298 thousand. The net expense from allocation and release of other provisions resulted in a decrease of € 38,588 thousand, mainly due to net releases in connection with litigation at head office in the previous year and the allocation of a provision for litigation in connection with state subsidies for building society savings in Romania. The gains/losses on derecognition of financial assets and liabilities were primarily attributable to sales of debt securities at head office amounting to € 497,734 thousand. The increase in sundry operating income mainly affected the Czech Republic, Croatia, Serbia, and Poland as a result of the sale of the Polish core banking operations in the previous year.
Depreciation of tangible and intangible fixed assets increased 34 per cent, or € 98,891 thousand. Due to the application of IFRS 16 (capitalization of right-of-use assets), depreciation of tangible fixed assets increased € 83,878 thousand while other administrative expenses (especially office space expenses) decreased similarly. These expenses relate almost entirely to leases of buildings for own purposes. Amortization of intangible assets increased € 9,060 thousand, mainly due to head office and Russia.
Result from non-current assets and disposal groups classified as held for sale and deconsolidation 50,224 (181,662)
Net income from non-current assets and disposal groups classified as held for sale (1,824) 1,819
FX reserve reclassified to income statement 0 (129) 8,084 122 0 8,077
Since 1 January 2019, RBI has applied the IFRIC 23 interpretation (Uncertainty over Income Tax Treatments). No material effects on the consolidated financial statements of RBI have resulted from current and completed tax audits.
The carrying amount of financial assets – fair value through other comprehensive income decreased € 1,707,660 thousand compared to year-end 2018. The decrease was chiefly caused by the redemption of Russian government bonds and debt securities issued by the Russian central bank, the reduction of the liquidity portfolio in Romania and a reduction of government bond portfolio at head office.
Group's interest in net assets of investee as at 1/1 25,523 6,747 150,907 9,003 64,435 10,502
Office furniture, equipment and other tangible fixed assets (683,293) 0 (80,789) 329,587
Fair value measurement in the Group is based primarily on external data sources (mainly stock exchange prices or broker quotations in highly liquid markets). Financial instruments measured on the basis of quoted market prices are mainly listed securities and derivatives as well as liquid bonds traded on OTC markets. These financial instruments are assigned to Level I of the fair value hierarchy.
The shares of financial assets classified as Level I and as Level II both decreased compared to year-end 2018, mainly as a result of the sale of debt securities.
Other financial liabilities 0 0 491,814 491,814 491,814 0 1 Leasing deposits are not included according to IFRS 7. Level I Quoted market prices Level II Valuation techniques based on market data Level III Valuation techniques not based on market data 2018 in € thousand Level I Level II Level III Fair value Carrying amount Difference
2018 Maximum exposure to credit risk in € thousand Not subject to impairment1 Subject to impairment hereof loans and advances non-trading, loan commitments, financial guarantees and other commitments
RBI is also exposed to other credit risks arising from investments in debt securities and from its trading activities (trading credit risks) including trade in non-equity trading portfolio assets and derivatives as well as settlement balances with market counterparties and reverse repurchase agreements.
Different models have been used to estimate the default profile of outstanding lending amounts and these can be grouped into the following categories:  Sovereign, local and regional governments, insurance companies and collective investment undertakings: The default profile is generated using a transition matrix approach. Forward-looking information is incorporated into the probability of default using the Vasicek one factor model.
The most significant assumptions affecting the sensitivity of the expected credit loss allowance are as follows:  Gross domestic product (all portfolios)  Unemployment rate (all portfolios)  Long term government bond rate (non-retail portfolios especially)  Real estate prices (retail portfolios especially)
Loans and debt securities are written off (either partially or fully) where there is no reasonable expectation of recovery. This happens when the borrower does not have income from operations anymore and collateral values cannot generate sufficient cash flows to repay amounts subject to impairment. For the exposure of companies in bankruptcy, loans are written down to the value of the collateral if the company no longer generates cash flows from its operating business. The retail business takes into account qualitative factors. In cases where no payment has been made for one year, the outstanding amounts are derecognized whereby depreciated assets can continue to be subject to enforcement activities.
The table below shows the impact of staging on RBI's accumulated impairment for financial assets by comparing the reported amounts accumulated for all performing assets subject to impairment with the special case where all accumulated impairment is measured based on twelve-month expected losses (Stage 1). As no complete historical data on stage transfers during credit cycles is available, it is currently not possible to estimate what a reasonable increase would be. However we do not expect the percentage of Stage 1 assets to ever reach 100 per cent. This information is provided for illustrative purposes.
Movement from 12 month ECL to lifetime ECL (4,454,153) 4,454,153 (31,543) 301,094 0.7% 6.8%
The Group executed a new synthetic transaction, ROOF CRE 2019, which was split into a senior, a mezzanine and a junior tranche. The credit risk of the mezzanine tranche in the amount of € 94,700 thousand is guaranteed by an institutional investor, while the credit risk of the junior and senior tranche is retained.
Financial assets - designated fair value through profit/loss 27,925 0 0 0
The Credit Committees are staffed by front office and back office representatives, with the staff assignments depending on the type of customer (corporate customers, banks, sovereigns and retail). The committees decide upon the specific lending criteria for the different customer segments and countries and make all credit decisions concerning those segments and countries in connection with the credit approval process (depending on rating and exposure size).
The Group uses a confidence level of 99.90 per cent (2018: 99.92 per cent) to calculate economic capital as at year-end 2019. In compliance with the ICAAP Directive published by the European Central Bank, the tier 2 capital will no longer be used to calculate the internal capital as at year-end 2019.
The analysis of the stress scenarios in the normative perspective of the ICAAP is intended to ensure that the Group has a sufficiently high tier 1 ratio at the end of the multi-year planning period, even in a severe macroeconomic downturn scenario. The 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 used include interest rates, foreign exchange rates and securities prices, as well as changes in default probabilities and rating migrations in the credit portfolio.
Retail customers – small and medium-sized entities 3,194,329 7.6% 2,781,173 7.3%
Loans and advances (NPL) 4,920,272 (389,644) (16,374) 759,025 (1,873,717) 3,399,562 Bonds 13,150 0 0 52 (4,198) 9,004 1 Previous year’s figures adjusted due to reclassification of small and medium-sized entities to non-financial corporations
Refinancing Instruments with modified time and modified conditions Total in € thousand 2019 2018 2019 2018 2019 2018
The following table shows the breakdown of the non-performing exposure with restructuring measures by segments: in € thousand 2019 Share 2018 Share
Banking book VaR 99% 1d VaR as at Average VaR Minimum VaR Maximum VaR VaR as at in € thousand 31/12/2019 31/12/2018
The cornerstones of the economic liquidity risk framework are the Going Concern (GC) and the Time to Wall (TTW) scenario. The Going Concern report shows the structural liquidity position. It covers all main risk drivers which could detrimentally affect the group in a business-as-usual scenario. The Going Concern Models are important input factors for the liquidity contribution to the internal Funds transfer pricing model. On the other hand, the Time to Wall report shows the survival horizon for defined adverse scenarios and stress models (market, reputational and combined crisis) and determines the minimum level of the liquidity buffer (and/or the counter-balancing capacity) of the Group and its individual units.
In June 2012, a client (the Slovak claimant) of Tatra banka, a.s. (Tatra banka) filed a petition for compensation of damage and lost profits in the amount of approximately € 71 million. The lawsuit is connected with certain credit facilities entered into between Tatra banka and the Slovak claimant. The Slovak claimant claims that Tatra banka breached its contractual obligations by refusing to execute payment orders from the Slovak claimant’s accounts without cause and by not extending the maturity of facilities despite a previous promise to do so, which led to non-payment of the Slovak claimant’s obligations towards its business partners and the termination of the Slovak claimant’s business activities. In February 2016, the Slovak claimant filed a petition for increasing the claimed amount by € 50 million but the court refused this petition. A constitutional appeal was filed regarding this court’s decision. The constitutional court refused this appeal and rejected the proposed increase of the claimed amount. In December 2017, Tatra banka was delivered a new claim amounting to € 50 million, based on the same grounds as the petition from February 2016. This new claim was joined to the original claim. Thus, the Slovak claimant in this lawsuit demanded compensation of damage and lost profits in the amount of approximately € 121 million. In February 2018, the first-instance court rejected the petition in full. The Slovak claimant, which by law is now the trustee in the Slovak claimant’s bankruptcy proceedings, as the Slovak claimant has become bankrupt, launched an appeal against the rejection. In September 2018, the appellate court upheld the decision of the firstinstance court and confirmed the rejection of the claim in full. In January 2019, the Slovak claimant filed an extraordinary appeal with the Supreme Court of the Slovak Republic but the extraordinary appeal was refused by the Supreme Court in April 2019. The Slovak claimant filed a constitutional appeal with respect to the Supreme Court ruling in July 2019.
In 2011, a client of Raiffeisenbank Austria, d.d., Croatia (RBHR) launched a claim for damages in the amount of approximately HRK 143.5 million (€ 19 million) and alleged that damages have been caused by an unjustified termination of the loan.
In July 2019, a former corporate customer (claimant) of RBI filed a request for arbitration with the International Court of Arbitration of the International Chamber of Commerce, claiming from RBI payment of USD 25 million (€ 22 million) plus damages, interest and further costs. The dispute relates to a guarantee of a third party, which served as a security for a loan granted by RBI to the claimant in 1998. The claimant fell into arrears, whereupon RBI called in the guarantee. In 2015 a settlement was reached between RBI and the guarantor as to the claims of RBI under the guarantee. RBI applied all monies received from the guarantor towards payment by the claimant under the loan. In its request for arbitration, the claimant alleges (inter alia) that the settlement was detrimental to it, and that RBI would be obliged to transfer the monies received from the guarantor to the claimant. RBI takes the view that the claims raised by the claimant are baseless.
Furthermore, it also includes changes possibly arising from the difference between the bonus provision and the bonus later awarded. Post-employment benefits comprise payments to pension funds and payments according to Retirement Plan Act (Mitarbeitervorsorgegesetz ), severance payments, leave compensation as well as net allocations to provisions for retirement benefits and severance payments.
Remuneration Advisory Council 202 198 1 Adjustment of the previous year’s figure (€ 104 thousand) to the remuneration actually paid
Subsidiaries not fully consolidated where RBI holds more than 50 per cent of the ordinary voting shares Due to their negligible contribution to the Group’s assets, earnings and financial position, 309 subsidiaries were not included in the consolidated financial statements (2018: 312). Total assets of the companies not included came to less than 1 per cent of the Group’s total assets.
Austria Leasing GmbH & Co. Immobilienverwaltung Projekt Hannover KG, Eschborn (DE) 10,000 EUR 100.0% FI
As at 31 December 2019, RBI’s common equity tier 1 (CET1) after deductions amounted to € 10,861,965 thousand, representing an increase of € 1,159,949 thousand compared to the 2018 year-end figure. Material factors behind the improvement were the inclusion of eligible profit, foreign exchange effects directly recognized in equity and changes to qualifying minority interests. Tier 1 capital after deductions increased € 1,163,918 thousand to € 12,091,787 thousand primarily as a result of the increase in CET1. There was a € 417,814 thousand reduction in tier 2 capital to € 1,939,915 thousand, mainly due to early repayments and the regulatory amortization of outstanding issues. RBI’s total capital amounted to € 14,031,703 thousand, representing an increase of € 746,103 thousand compared to the 2018 year-end figure.
Total capital ratio (fully loaded) 17.9% 18.2% 1 Over the course of the regulatory reporting process, tier 2 capital was reduced due to the adjustment of an eligibility limit, which led to a change in own funds as at 31
These conditions are explained in more detail in the chapters business model assessment, analysis of contractual cash flow characteristics, and modification of the time value of money and the benchmark test.
Expected useful lives, residual values and depreciation methods are reviewed annually. Any necessary future change of estimates is taken into account. Any anticipated permanent impairment is reported in the income statement and shown under the item impairment on non-financial assets. In the event that the reason for the impairment no longer exists, a write-up will take place up to a maximum of the amount of the amortized cost of the asset.
The Management Board describes the process for determining the provision in the notes to the financial statements in the Recognition and Measurement Principles chapters as well as in point 28 and 55.
As at the Balance Sheet date, financial liabilities measured at fair value amount to about EUR 1.8 billion, of which EUR 0.4 billion are subordinated. In addition to the general market risk factors, their fair value is significantly influenced by the own credit risk of the issuing entity (credit spread).
Croatia Raiffeisenbank Austria d.d. Magazinska cesta 69 10000 Zagreb Tel: +385-72-626 262 SWIFT/BIC: RZBHHR2X www.rba.hr
Serbia Raiffeisen banka a.d. Djordja Stanojevica 16 11070 Novi Beograd Tel: +381-11-32 021 00 SWIFT/BIC: RZBSRSBG www.raiffeisenbank.rs