Statement of comprehensive income 112 Profit development 115 Statement of financial position 116 Statement of change in equity 117 Statement of cash flows 118 Segment reporting 120 Notes 124 Auditor’s report 222
Unsurprisingly, 2009 was also shaped by the sharp rise of non-performing loans and the related increase of provisioning for impairment losses. However, the upward momentum of non-performing loans slowed significantly in the second half of the year, and overall economic conditions improved. Many market observers share our view that this trend will continue in 2010.
The Supervisory Board joined in the Audit Committee ’s proposal to appoint Vienna-based KPMG Austria GmbH, Wirtschaftsprüfungs- und Steuerberatungsgesellschaft as (Group) auditor for the fiscal year 2009. It therefore submitted that proposal to the Annual General Meeting.
M A N A G I N G B OA R D S U P E R V I S O R Y B OA R D O V E R V I E W I N T E R V I E W S T O C K
Equal treatment of institutional and private shareholders Raiffeisen International relies primarily on the internet to ensure that institutional and private shareholders are simultaneously informed about important developments. For that purpose, it offers investors and other interested parties the possibility of signing up for an e-mail information service on its website at www.ri.co.at → Investor Relations → Ordering and E-mail Service.
About 800 participants at the Annual General Meeting Raiffeisen International’s Annual General Meeting on 9 June 2009, held at the Austria Center Vienna, was likewise geared to private shareholders. With about 800 participants, it was one of the best-attended shareholder’s meetings in Austria. The Annual General Meeting approved an unchanged dividend of € 0.93 per share and an anticipatory resolution for the issuance of participation rights with equity characteristics totaling up to € 2 billion within five years.
Stewart D. Gager 1940 24 January 2005 Regular Annual Gen- eral Meeting 2013
Members of the Supervisory Board have the following supervisory board seats or comparable functions in domestic and foreign companies: ■ Walter Rothensteiner: UNIQA Versicherungen AG ■ Karl Sevelda: Bene AG ■ Kurt Geiger: Raiffeisen Bank Aval JSC.
The Audit Committee monitors the accounting process and the effectiveness of the Company’s internal control system, the internal auditing system, and the risk management system. The Committee ’s tasks include monitoring the audit of the financial statements and the audit of the consolidated financial statements and examining and monitoring the independence of the auditor of the consolidated financial statements, particularly in respect to additional services rendered to the audited company. The Committee examines the annual financial statements, the management report, the consolidated financial statements, and the Group management report as well as the preparation of its ratification; it furthermore examines the proposal concerning the distribution of profit and the corporate governance report. It reports to the Supervisory Board concerning the results of its examinations. It is furthermore its duty to prepare the Supervisory Board’s proposal for the selection of the auditor of the annual and consolidated financial statements. The content of the management letter is also discussed in the Audit Committee.
The following amounts of remuneration were paid to the Managing Board of Raiffeisen Inter national: Fixed and performance-based remuneration 4,876 9,219
If there is no important reason for the termination of these contracts then these are to be paid out in the event that a member of the Managing Board is dismissed.
Directors and officers (D & O) property damage and liability insurance was taken out again last year for the Managing Board and Supervisory Board with UNIQA Sachversicherung AG.
As owners of the Company, the shareholders exercise their rights by voting at the Annual General Meeting. The voting proceeds according to the one-share-one-vote principle. Accordingly, there are no voting right restrictions, and all shareholders have entirely equal rights. Every unit share issued confers one vote, and no registered shares have been issued. The shareholders can exercise their voting right themselves or through proxies.
contracts between the Company and members of the Supervisory Board that obligate the members to performance in relation to the Company or a subsidiary (Section 228 (3)), apart from their activity in the Supervisory Board, for more than merely negligible compensation. That also applies to contracts with enterprises in which a Supervisory Board member has a considerable economic interest.
Accounting and financial statement auditing The Raiffeisen International Group’s accounting is performed according to the provisions of the International Financial Reporting Standards (IFRS). The annual financial statements of Raiffeisen International are prepared according to the provisions of the Austrian Commercial Code. The consolidated financial statements are published within the first 3 months of the financial year following the reporting period, and interim reports at the latest 45 days after the end of the respective reporting period.
General economic environment Worst recession since 1945 The world economy was hit in 2009 by the most severe recession since 1945. The starting point was the collapse of US investment bank Lehman Brothers in September 2008 and the resulting disruptions on global financial markets. World trade and industry were also hugely affected by the crisis in 2009. The euro area’s real gross domestic product (GDP) dropped sharply in the first quarter of 2009 by 2.4 per cent on the previous quarter, and by 5 per cent on the same period of the previous year. The decrease for 2009 as a whole was 4 per cent year-on-year. After GDP declines over three consecutive quarters, however, the euro area overcame the recession in the third quarter of 2009 with real GDP growth of 0.4 per cent in quarterly comparison. Extensive government programs to stimulate the economy and expansive monetary policy from the European Central Bank (ECB) contributed decisively to that.
Assistance from IMF and EU stabilizes financial markets in Central and Eastern Europe
The considerable worsening of many borrowers ’ creditworthiness and financial strength necessitated a significant increase of net allocations to provisioning for impairment losses to € 1,738 million in 2009. While net allocation to individual provisions climbed by 212 per cent due to the increase of non-performing loans, portfolio-related provisions decreased by 33 per cent due to volume effects. Consequently, the risk/earnings ratio rose significantly, from 24.1 per cent to 59.2 per cent.
From a segment perspective, the largest contributions to net trading income were € 89 million from Central Europe, including especially Hungary and Poland, and € 88 million from Southeastern Europe, particularly Romania and Croatia. Net trading income of € 17 million was achieved in the CIS Other segment. On the other hand, the Russia segment registered a net trading loss of € 13 million.
Set against own funds was an own funds requirement of € 5,117 million, which was 11 per cent, or € 650 million, below the preceding year’s level due to exchange rate movements and reduced business volume. The own funds requirement consists of requirements for credit risk of € 4,007 million (2008: € 4,831 million), for market risk of € 136 million (2008: € 152 million), for open foreign exchange positions of € 399 million (2008: € 343 million), and for operational risk of € 574 million (2008: € 440 million). The last-mentioned of these grew in the reporting year due to the increased assessment base.
Monitoring The Managing Board and the controlling department are responsible for continuous companywide monitoring. Furthermore, the department heads are responsible for monitoring their respective areas. Inspections and plausibility checks are conducted at regular intervals.
(2) The articles of association contain no restrictions concerning the voting rights or transfer of shares. The Managing Board is not aware of any restrictions arising from agreements among shareholders.
The system developed should be viewed as supplementing the stress tests, which have been conducted for a long time in accordance with regulations, and used both at the level of business subdivisions (private individuals and small and medium-sized enterprises) and at the product level (for example, mortgage loans, overdrafts, installment loans, and credit cards). The scenario analyses were conducted several times in the past year, and the results obtained made a valuable contribution to the planning and management of the entire Group. At the same time, an important foundation was thus laid for the scenario analyses required by Basel II in those countries where the launch of the Advanced Internal Ratings Based (Advanced IRB) approach is to move forward in 2010.
Payment transfers More than 80 per cent of the Group’s total payment transfers are already being processed completely electronically. That is a result of process optimization measures and incentives for customers to switch to electronic banking. In the shared service center in Bucharest, active preparations are now under way to manage the international payment transfers of five network banks through one centralized software solution.
This adjustment of the training provision enabled 79 per cent of the employees to participate in at least one continuing educational measure in the reporting period.
thereof depreciation on intangible and tangible fixed assets (75) (86) (12.0)%
The region’s other net operating income came to minus € 22 million and mainly consisted of tax expenses not dependent on income in the amount of € 31 million, incurred primarily in the Hungarian and Slovakian units. Operating leasing business made a positive contribution of € 8 million.
Poland Poland was the only national economy in the EU to register positive real GDP growth overall for 2009 (plus 1.7 per cent year-on-year). A relatively large domestic economy compared with most other CEE countries and consequently lower dependence on export demand as well as a robust banking sector contributed to that. According to the latest data available at this report’s editorial deadline, the Polish banking sector’s total lending business increased slightly in the period to 30 September 2009. Set against an expansion of lending to private individuals was a slight decline of lending to corporate customers. After sharp devaluation of the zloty against the euro in the first half of the year, the Polish currency recovered strongly in the second half.
Raiffeisen International in Albania has a countrywide distribution network with 104 branches. It had 1,326 employees serving around 575,000 customers at the end of 2009.
thereof foreign currency loans in per cent 74.1% 73.3% 0.8 PP
thereof foreign currency loans in per cent 66.3% 63.7% 2.6 PP
Total deposits were up as of 31 December 2009 by 10.6 per cent year-on-year to € 548 million, while the loan portfolio shrank by 12.5 per cent to € 372 million. The cost-income ratio in Kosovo amounted to 53.1 per cent, and profit after tax to € 7 million.
Net income from financial investments came to € 4 million. Positive influences in this regard came, on the one hand, from valuation gains on securities holdings recognized at fair value and, on the other hand, from results of selling fixed-income securities in Ukraine.
Because of the difficult economic situation in Ukraine, Raiffeisen Bank Aval took extensive crisis management measures in the period under review. Provisioning for impairment losses was increased greatly, which primarily affected business with private individuals. Furthermore, restructuring programs were implemented in all customer groups: corporate customers, small and medium-sized enterprises, and private individuals. Parallel to that, activities in customer relationship management were pushed forward to tap existing customer potential further. Moreover, an optimization program for the branch network was started, which led to the closing of 181 business outlets. At the same time, the number of employees was reduced by 12.3 per cent. A capital increase amounting to about € 73 million was conducted at the end of 2009 to strengthen Raiffeisen Bank Aval’s capital base. Subordinated loans in the value of USD 150 million were also received from the EBRD.
The company’s business model based on close customer relationships and quick reaction to changed conditions formed the basis for targeted management of customer business. Regular customer contact and an internally defined early warning system enabled us to make timely adjustments to financing arrangements as needed together with customers. The intensive cooperation between corporate customer advisers and risk management staff was essential to that and was expanded further. Increased need for optimal credit management was met with additional resources in risk management.
The product range for bancassurance provided jointly with strategic partner UNIQA Versicherungen AG was promoted further in 2009. Additional business related to credit, e.g., involving payment protection insurance policies, was also affected by the lending volume decline. However, thanks to joint sales programs with UNIQA in Slovakia, Croatia, Poland, the Czech Republic, and Bulgaria, sales of stand-alone life insurance products increased by 46 per cent. Altogether, however, commission income from insurance policy sales declined in 2009 by 13 per cent compared with the preceding year.
Net cash from operating activities comprises inflows and outflows from loans and advances to banks and customers, from deposits from banks and customers as well as debt securities issued. Further, inflows and outflows from trading assets and liabilities, from derivatives, as well as from other assets and other liabilities are shown in operating activities. The interest, dividend and tax payments from operating activities are separately stated.
Generally, internal management reporting in Raiffeisen International is carried out based on its matrix organizational structure. Under this organizational structure, members of the Managing Board are responsible for both specific countries and certain business areas. The highest decision making bodies, Raiffeisen International’s Managing and Supervisory Boards, make important decisions, such as the allocation of resources, according to geographical considerations. The same applies to the appraisal of financial strength and profitability, which is why this has been identified as the substantial reporting criterion.
The figures stated are derived from the financial statements prepared in accordance to the International Financial Reporting Standards (IFRS) that underlie the consolidated financial statements. Divergences from locally published data are possible, as the latter may be based on different measurement rules and on different dates of preparation.
• The risk-weighted assets are an important indicator for the change in business volume. The risk-weighted assets according to Austrian Banking Act (based on Basel II) presents sector-specific additional information to the segment assets of which the own funds requirement of 8 per cent is based.
Raiffeisen International specializes in providing banking and financial services in Central and Eastern Europe (CEE). The Group includes universal banks in 15 countries that operate a broad network of local business outlets. Raiffeisen International provides a comprehensive range of banking and financial services through these banks and other financial institutions. These services range from account management, payment transfer, depositbusiness, lending, trade finance, and credit card services to mortgages, leasing, syndicated loans, and capital market transactions. The Group’s diversified client base comprises multinational and large local customers, small and medium-sized enterprises, public sector institutions, and retail customers.
Financial investments X Held-to-maturity thereof financial investments not traded on an active market At Cost Available-for-sale
In a genuine sale and repurchase transaction, the transferor sells assets to a third party and agrees at the same time to repurchase these assets at an agreed price and time. The assets remain on the statement of financial position of the transferor and are measured like the item in the statement of financial position where they are shown. Cash inflows arising from a sale and repurchase transaction are recognized in the statement of financial position as deposits from banks or deposits from customers depending on the counterparty.
According to IAS 39, a financial guarantee is a contract under which the guarantor is obliged to make payments that compensate the party to whom the guarantee is issued for a loss arising in the event a particular debtor does not meet payment obligations on time as stipulated in the original terms of the debt instrument. At the date of recognition of a financial guarantee, the initial fair value corresponds under market conditions to the premium at the date of signature of the contract. For subsequent valuations the credit commitment has to be presented as provision according to IAS 37.
Net valuations of securities at fair value through profit and loss 22,588 (44,997)
Net proceeds from disposal of tangible and intangible fixed assets (3,080) (2,716)
Land and buildings used by the Group for own purpose 627,967 (7) (96,149) 115,443 (48,617) 21,641 620,278 thereof land value of developed land 7,429 0 (2,366) 1,249 (8) 0 6,304
As of 31 December 2009, variable-interest refinancing of ZAO Raiffeisenbank, Moscow, was hedged against the risk of changes in future cash flows by applying interest rate swaps, which are reported as cash flow hedge. The effective part of this hedge amounted to € 9,834 thousand (2008: € 40,346 thousand) and was recognized in other comprehensive income.
As of 31 December 2009, future cash flows from hedged liabilities amounting to € 332,621 thousand (2008: € 114,177 thousand) are to be expected, this is € 4,471 thousand (2008: € 42,678 thousand) for the next year and € 328,151 thou-
Dividend proposal The Managing Board intends to propose at the Annual General Meeting that a dividend of € 0.20 per ordinary share be distributed from Raiffeisen International Bank-Holding AG´s profit for the financial year 2009, which represents a maximum distribution of € 30,934 thousand, and that the remaining amount be carried forward.
Economic capital is used as an important instrument in overall bank risk management and is used for allocating risk budgets. Economic capital budgets are allocated to business segments during the annual budgeting process and transformed for operative steering into volume, sensitivity, or value-at-risk limits. In Raiffeisen International this sort of planning is done on a revolving basis for the upcoming three years and it incorporates the future development of economic capital as well as the available internal capital. Economic capital thus influences the plans for future lending activities and the overall limit for taking market risks.
The following charts show the regional breakdown of non-performing loans and provisions.
• Stable capital ratio: Goal of this hedging strategy is to balance core capital and risk-weighted assets in all currencies according to the target core capital ratio (i.e. reduce excess capital or deficits in relation to the risk-weighted assets for each currency) such that the core capital ratio remains stable as foreign exchange rates change.
The following table contains revocable credit lines that currently bear no credit risk: Quoted market prices
Fiduciary business not recognized in the statement of financial position was concluded with the following volumes: Fees income from fiduciary business amounted to € 4,066 thousand (2008: € 8,391 thousand). Fee expenses totaled € 962 thousand (2008: € 2,487 thousand).
Raiffeisen International Bank-Holding AG, a subsidiary of Raiffeisen Zentralbank Österreich Aktiengesellschaft, does not have its own credit institution group as defined by the Austrian Banking Act (BWG). Therefore, it is not itself subject to the relevant regulatory requirements. However, the following figures are accounted for within the scope of RZB-Kreditinstitutsgruppe and are provided for information purposes only.
Moreover, no contracts subject to approval in the meaning of Section 95 (5) items 12 Austrian Joint Stock Companies Act (AktG) were concluded with members of the Supervisory Board in the financial year 2009.
The members of the Managing Board have mandates in the Supervisory Board or similar functions in companies at home and abroad which are not included in the consolidated group: • Herbert Stepic: OMV AG, Österreichische Kontrollbank AG, Raiffeisen Centrobank AG
Raiffeisen International Direct Bank AG, Vienna (AT) 5,000,000 EUR 100.0% BA
Fiduciary business – Transactions which are carried out by a trustee, often banks, on own name but on account of the beneficiary.
Net provisioning ratio (average risk-weighted assets credit risk) – Risk valuation ratio. Is calculated by provisioning for impairment losses divided by average credit risk-weighted assets.
Albania Raiffeisen Bank Sh.a. European Trade Center Bulevardi “Bajram Curri” Tiranë Tel.: +355-4-238 1000 Fax: +355-4-2275 599 SWIFT/BIC: SGSBALTX www.raiffeisen.al
Russia ZAO Raiffeisenbank Smolenskaya-Sennaya, 28 119002 Moskwa Tel.: +7-495-721 9900 Fax: +7-495-721 9901 SWIFT/BIC: RZBMRUMM www.raiffeisen.ru
Czech Republic Raiffeisen Leasing Real Estate s.r.o. Hvezdova 1716/2b 14078 Praha 4 Tel.: +420-221-5116 10 Fax: +420-221-5116 41 www.realestateleasing.cz