Overview of RBI Interview with the CEO 8 Report of the Supervisory Board 11 Raiffeisen at a glance 18 RBI‘s strategy 20 RBI in the capital markets 22 Corporate Governance Report 26
Consolidated financial statements Statement of comprehensive income 99 Statement of financial position 101 Statement of changes in equity 102 Statement of cash flows 103 Segment reporting 104 Notes 112 Notes to the financial instruments 154 Risk report 196 Other disclosures 228 Regulatory information 263 Recognition and measurement principles 268 Key figures 293 Events after the reporting date 295 Statement of all legal representatives 296 Auditor‘s report 297
Monetary values in € million 2020 2019 Change 2018 2017 2016
Net fee and commission income 1,738 1,797 (3.3)% 1,791 1,719 1,497
Impairment losses on financial assets (630) (234) 169.1% (166) (312) (754)
Net interest margin (average interest-bearing assets) 2.15% 2.44% (0.29) PP 2.50% 2.48% 2.78%
Provisioning ratio (average loans to customers) 0.68% 0.26% 0.42 PP 0.21% 0.41% 1.05%
Total capital ratio (fully loaded) 18.4% 17.9% 0.5 PP 18.2% 17.8% 18.9%
Due to the adoption of IFRS in the year 2018, the figures for previous periods are only to a limited extent comparable.
RBI Management Board 6 Interview with the CEO 8 Report of the Supervisory Board 11 Raiffeisen at a glance 18 RBI‘s strategy 20 RBI in the capital markets 22 Corporate Governance Report 26 Anti-Money Laundering Declaration 46
Legal Services2 1 Reports to the entire Management Board and Supervisory Board 2 Data Protection Officer for RBI and its Austrian subsidiaries – reports to the Management Board
What priorities did you set as a bank in this context? For RBI, as a relationship bank, our focus is on our customers. Following the transition of almost all of our employees to remote working – which was rapid and seamless thanks to the high degree of dedication of our employees and the bank’s proactive investment in digitalization – the key question was how we could best serve our customers during these difficult times. Our support ranged from extending maturities and adjusting loan terms to providing advice on coronavirus state aid packages in different markets and helping customers to complete their applications. In several countries, we had already granted our customers repayment holidays before their governments declared loan repayment moratoriums. For us, it was important to quickly provide customers with the funds needed in this situation.
How can you support companies in coming through the crisis? If we want to go a step further than securing liquidity for businesses, then capitalization is certainly an issue. To enable companies to access equity capital, we set up, for example, an equity fund for Austrian small and medium-sized firms in October together with the Vienna-based asset management company C-Quadrat. It’s called the Austrian Growth Fund and targets rapidly growing medium-sized firms as these companies often suffer from a lack of capital even though they play a significant role in terms of investment, innovation and jobs. The coronavirus crisis has exacerbated this problem. With the fund, which has a target size of 200 million euros, we aim to address this problem.
What does this mean for developments in terms of risk costs? We entered this crisis from a position of strength. I am confident overall, even though the restrictions caused by the pandemic have clearly led to higher risk costs. The proportion of non-performing loans in the total lending volume, for which provisions have to be made, has of course increased. Accordingly, our provisioning ratio of 0.68 per cent for the financial year 2020 is 42 basis points higher than in the year prior. As our risk costs were particularly low in recent years, this development is very manageable.
And how is digitalization being utilized in the corporate customer business? The corporate customer business is often more intensive with respect to advisory services. We have therefore focused on digitalizing processes and have already developed several products such as eSignature to digitally sign contracts and eKYC for faster identity verification. We also offer corporate customers our eAccount Opening function for opening accounts online and eSpeedtrack for digital export financing. 2020 has shown that the digital offering has been a success with our customers – in 2020, 39 per cent of the new accounts in Austria were digitally initiated and 42 per cent were verified using the fully digitalized KYC process. We will continue to invest heavily in this area because we can see that it is paying off. We are capitalizing on the opportunities from digitalization!
In general, digitalization has benefited from the crisis. Does this apply to RBI? Absolutely! We already had an attractive digital offering before the crisis and the market launch of RaiConnect – an app that enables customers and account managers to hold video calls and exchange documents – in the first quarter of 2020 was unrelated to the pandemic. While in lockdown, many of our retail customers discovered the benefits of mobile banking and managing their banking business on a smartphone.
Digital offerings are now used by 43 per cent of our customers, in Russia and Slovakia it’s even above 60 per cent. This has encouraged us to further expand these services and set ambitious targets in this area, such as complete digitalization of the key retail products by 2025. As the level of customer satisfaction is very high, I expect that customers will continue to use the online channels following the pandemic.
How do you ensure that profitability is maintained in this situation? Many central banks have cut benchmark rates to combat the recession – in some cases extensively – and again stepped up bond purchases. We will have to operate in this environment for a while yet. For this reason, our net interest margin has come under pressure and part of the traditional banking business has become markedly less profitable than in the past. However, digitalization offers not only potential savings but also new income generation opportunities. Through digital innovation we are addressing new customer groups and needs and developing new income sources while offering attractive terms and conditions for customers at the same time. One example of this is eSpeedtrack for export finance. Thanks to optimization and standardization, the application process could be digitalized; we are now also able to offer the product for smaller amounts, for example to medium -sized companies. I also see growth, above all organic growth, in order to generate positive scale effects, as an important aspect for our long-term profitability.
ESG matters are gaining in importance, how is RBI positioned here? We have already been concentrating on the various aspects of sustainability for many years. Our aim is to go beyond the guidelines and standards set. Accordingly, among other things, we have developed an internal ESG score, i.e. sustainability rating criteria, for the classification of corporate customers. The model is currently being further developed so that, in future, individual customers also receive an expert appraisal of ESG performance. In future, we will develop and market even more sustainable financial products and services to support our customers in the transition to a sustainable future. For example, we offer preferential conditions for green loans if the defined criteria are fulfilled. On the prevention of money laundering, RBI has long been advocating for a much needed and urgent change to the legal framework, for example, to make it possible for information to be exchanged between banks and also between the banks and supervisory authorities. Against this backdrop, RBI decided to publish its Anti-Money Laundering Declaration in this report, and so provide weight behind our efforts to improve the current legal situation. Furthermore, at the beginning of 2021, we were the first Austrian bank to become a signatory of the Principles for Responsible Banking, a financial initiative of UNEP, in which we have been a member for many years, thereby committing ourselves to implementing its principles. We also continue to be the largest issuer of green bonds in Austria.
As far as the dividend is concerned, we took the view from the beginning that our shareholders should share in RBI’s success in 2019. One aspect that should not be overlooked, with respect to the decision of whether to pay a dividend or not, is that shareholders – for example pensioners – are reliant on these amounts to meet their own obligations. The regional Raiffeisen banks also require the payout in order to grant loans in the local economy through the Raiffeisen banks. Nevertheless, we ultimately decided to follow the ECB’s strong recommendation to exercise extreme prudence with regard to dividend policy and to carry forward the 2019 financial year profit. In consideration of the ECB’s most recent recommendation shortly before Christmas, we decided to propose a dividend in the amount of 48 cents per share to the Annual General Meeting planned for 22 April 2021. We will certainly consider additional dividends as soon as the ECB has lifted its recommendation.
COVID-19 has also led to noticeable changes in working practices within RBI. On the basis of §§ 1 et seq. of the Austrian COVID-19 Company Law Act (COVID-19-GesG) in combination with § 2 of the Austrian COVID-19 Company Law Regulation (COVID-19-GesV) and in accordance with § 94 of the Austrian Stock Corporation Act (AktG) and the provisions in RBI AG’s Memorandum and Articles of Association, the meetings of the Supervisory Board and its Committees were held both in the form of “qualified” video conferences (i.e. meeting the prerequisites specified under Austrian law) and also in hybrid form. The format of each meeting was at all times in accordance with Austrian Federal Government stipulations. During these challenging times, the Supervisory Board continuously maintained its capacity to carry out its activities effectively and to address decisions; the Board and its Committees adopted important decisions by circular resolution, especially in urgent cases. In this difficult phase especially, the Supervisory Board and the Management Board, under the leadership of its Chairman Johann Strobl, worked together closely and constructively to successfully manage the challenges being faced. For the first time in our company’s history, RBI AG’s Annual General Meeting on 20 October 2020 was held in virtual form in accordance with §§ 1 et seq. of the COVID-19-GesG in combination with § 3 of the COVID-19-GesV and § 102 (4) of the AktG.
In the 2020 financial year, RBI generated a consolidated profit of € 804 million. Although this is a year-on-year decline of around one-third, it must be seen against the backdrop of the exceptional challenges presented by the COVID-19 pandemic. Net interest income and net fee and commission income were 5 and 3 per cent, respectively, below the previous year’s level. While net interest income was adversely affected by key rate cuts and substantial currency depreciation in some countries, the greatest impact from lockdown measures was reflected in the development of net fee and commission income. In contrast, net trading income – which was negative in the previous year – increased significantly. The key rate cuts and a significantly higher level of short-term investments reduced the net interest margin. The increase in customer loans on a local currency basis in most countries is encouraging, reflecting confidence in RBI as a strong brand and reliable partner even in difficult times. Starting from a very low level in 2019, impairment losses on financial assets increased to € 630 million. Contributory factors included the credit moratoriums introduced in numerous countries, additional expected provisioning for impairment losses, and structural consequences for specific sectors triggered by the pandemic. The NPE ratio and NPE coverage ratio slightly improved to 1.9 per cent and 61.5 per cent respectively. The common equity tier 1 ratio fell only slightly to 13.6 per cent despite the very difficult underlying conditions, thus continuing to reflect the Group’s sound capitalization. Costs fell 5 per cent, which was due on the one hand to currency movements and, on the other, to lower expenses as a result of the lockdowns.
RBI would like to enable its owners to share in the company’s success and therefore would welcome the possibility to allow shareholders to benefit from the company’s achievements through dividend payments, albeit subject always to the condition that regulatory levels for key indicators, such as sound capitalization, are met. In line with the ECB’s recommendation, the planned dividend for the 2019 financial year was not distributed and the net profit was carried forward. Although this is purely a recommendation in formal legal terms, in practical terms it is of considerable significance. In consideration of the ECB’s most recent recommendation at the end of 2020, the Management Board has decided to propose a dividend of € 0.48 per share to the Annual General Meeting planned for 22 April 2021.
Within the context of the meetings of the Supervisory Board and its Committees, the members of the Management Board informed the Supervisory Board continuously, comprehensively and promptly of all relevant matters relating to business performance and risk trends, including the development of capitalization and liquidity. Based on comprehensive reports, discussions were held on important matters pertaining to business and risk strategy, taking into account business policy and risk-specific considerations. The members of the Management Board also provided detailed reports on regulatory developments for banks and discussed measures to implement regulatory requirements with the Supervisory Board. In addition, the Management Board provided regular reports on performance in the different business areas and in relation to individual customer groups, thereby providing information forming a sound basis for proposals to the Supervisory Board. The Supervisory Board placed particular emphasis on adherence to all relevant laws and standards relating to compliance with anti-money laundering and sanctions provisions.
As a result of the COVID-19 pandemic, the work of the Supervisory Board and its Committees during the 2020 financial year was especially focused on successfully managing the economic impact of the pandemic on RBI. The Supervisory Board and Management Board maintained constant, close contact. In addition to its reports for the various Committee meetings, the Management Board provided the Supervisory Board with eleven extensive special reports detailing the development of the financial, risk, capital and liquidity position, and the Supervisory Board and Management Board jointly took important business policy decisions related to risk management. The members of the Supervisory Board, especially the members of the Risk Committee, looked in detail at background considerations relating to the pandemic as well as sector and customer-specific assumptions relating to scenarios and trends, and planned portfolio-based risk management countermeasures within the context of the corona playbook. In this connection, the Management Board discussed with the Supervisory Board the likely development of risk costs, and measures were taken to safeguard RBI against the high level of currency volatility caused by COVID-19. In addition, the members of the Audit Committee addressed in detail the effects of the COVID-19 pandemic on RBI’s annual financial statements. The members took decisions on customer-related proposals to the Supervisory Board and its Committees while giving careful consideration to capital and liquidity-related parameters and taking into account a conservative risk appetite due to the current challenging crisis situation. Furthermore, each meeting of the Supervisory Board in the 2020 financial year included extensive COVID-19 reports, which, in addition to the effects on the business, also addressed changes in the number of cases within RBI as well as crisis management measures.
In order to sustainably increase corporate value, the Supervisory Board focused intensively in the 2020 financial year on current cost trends and the goal of ensuring RBI’s long-term profitability. The members of the Supervisory Board acted in an advisory capacity to the Management Board in order to sustainably optimize the cost structure.
In implementation of the European Shareholder Rights Directive, RBI’s remuneration policy was drafted, under the guidance of the Remuneration Committee and in accordance with the framework conditions relating to stock corporation and banking law, and following discussions in the Supervisory Board, was finally adopted on 16 March 2020.
The members of the Supervisory Board were also in regular contact with the Management Board between meetings, enabling necessary decisions to be taken swiftly, especially in the challenging period amid the COVID-19 crisis. The working relationship with the Management Board was at all times open, constructive and based on mutual confidence, and a critical exchange of ideas laid the groundwork for optimum solutions.
In accordance with §§ 1 et seq. of the Austrian COVID-19 Company Law Act (COVID-19-GesG) in combination with § 3 of the Austrian COVID-19 Company Law Regulation (COVID-19-GesV) and also § 102 (4) of the Austrian Stock Corporation Act (AktG), RBI’s Annual General Meeting on 20 October 2020 was held in purely virtual form due to the COVID-19 pandemic, in order to protect the participants and for the well-being of the company. In the 2020 financial year, Günther Reibersdorfer and Johannes Ortner resigned from their Supervisory Board positions. In accordance with its assigned responsibilities, the Nomination Committee addressed the filling of the vacant Supervisory Board positions and – following a review – confirmed the personal and professional aptitude of the two candidates Reinhard Mayr and Heinz Konrad. During the Annual General Meeting and in accordance with the Supervisory Board’s recommendation, Reinhard Mayr and Heinz Konrad were newly elected to RBI’s Supervisory Board for five years. The Supervisory Board also appointed Reinhard Mayr to the Audit Committee and the Digitalization Committee. In addition, at the Annual General Meeting, Erwin Hameseder and Klaus Buchleitner were re-elected to RBI’s Supervisory Board for five further years, also on the basis of a structured succession process. At the inaugural Supervisory Board meeting following the Annual General Meeting, Erwin Hameseder was again elected as Chairman of RBI’s Supervisory Board from among the Supervisory Board members.
Taking into account the potential consequences of the COVID-19 pandemic for RBI and its markets, the Supervisory Board focused on the strategic direction of the Group. Together with the Management Board, an open and constructive exchange of ideas was held during a workshop on 28 September 2020 on RBI’s overall strategy, with a review of the transformation process to date. Here, the members of the Supervisory Board held intensive discussions with the Management Board on strategic options for strengthening digital capability and addressed the business policy initiatives of the respective business areas. In addition, growth opportunities were discussed extensively with the Management Board, and in particular potential inorganic growth opportunities were evaluated, always based on a balanced risk and profitability assessment. To ensure a regular and focused discussion of RBI’s strategy and close and continuous collaboration between the Supervisory Board and the Management Board, the Supervisory Board will in future hold half-yearly strategy workshops with the Management Board in order to consistently implement RBI’s very important goal of sustainably increasing corporate value.
Continuous monitoring of measures to strengthen Compliance at RBI has been a particular priority of the Management Board and the Supervisory Board for a number of years and was also given proportionate consideration in 2020. The Supervisory Board was regularly informed about the implementation of internal compliance rules, mechanisms and procedures to comply with the relevant laws and standards. In this context the members of the Supervisory Board dealt extensively with the effectiveness of the internal compliance processes and systems, particularly in connection with anti-money laundering. In addition to anti-money laundering measures, the members focused intensively on measures to comply with legal provisions relating to financial sanctions. In particular, the Risk Committee focused on current developments in connection with changes to RBI’s operating environment arising from sanctions and discussed the risk management measures with the Management Board in keeping with the pursuit of a conservative risk strategy.
As part of their advisory and supervisory activities, the members of the Supervisory Board maintained regular contact with key internal function holders, particularly within Compliance, Internal Audit and Risk Management. In addition, the Chairman of the Supervisory Board and the Chairmen of the Risk and Audit Committees held open discussions with the European banking supervisory authority on current and strategic matters relating to RBI.
The interesting topics and practical talks resulted in a consistently high number of Supervisory Board members participating in the Fit & Proper training courses, with an average attendance rate of around 89 per cent.
The annual financial statements and the management report of Raiffeisen Bank International AG for the 2020 financial year were audited by KPMG Austria GmbH Wirtschaftsprüfungs- und Steuerberatungsgesellschaft Vienna (KPMG). According to the final results of the audit, the auditor had no reason for objections and issued an unqualified auditor’s report.
The reports of the auditor of the financial statements and of the auditor of the consolidated financial statements were submitted to the Supervisory Board. The Audit Committee reviewed the 2020 annual financial statements including the management report and the 2020 consolidated financial statements and the consolidated management report and undertook preparations for the adoption of the annual financial statements by the Supervisory Board. The Supervisory Board reviewed all documents and also the Audit Committee’s report. The Supervisory Board concurred with the 2020 annual financial statements and consolidated financial statements and approved the 2020 annual financial statements, which were thus adopted in accordance with § 96 (4) of the Austrian Stock Corporation Act (AktG).
The consistency check of the Corporate Governance Report according to § 243c of the UGB was performed by KPMG. For RBI, an independent consolidated non-financial report pursuant to § 267a UGB, which also contains the disclosures pursuant to § 243b UGB for the parent company, was prepared and audited by KPMG. This report was reviewed by the Supervisory Board in accordance with § 96 (1) of the AktG. There were no grounds for objections to either the Corporate Governance Report or the non-financial report.
 The Fit & Proper training course in June 2020 focused on the regulatory developments necessitated due to COVID-19 and also on data governance and data protection. In addition, RBI’s measures in the field of artificial intelligence were presented in detail and measures to implement the recommendations from the program for the evaluation and further development of efficiency and effectiveness in the Supervisory Board were discussed and specified.
Focusing the product and service offering on customer needs is a key factor in ensuring that customer expectations are met at all times against a backdrop of dynamic competition. The transformational steps already underway will be consistently pursued in 2021 in line with RBI’s strategic objective of becoming the most frequently recommended financial services provider by 2025. To support the digital transformation, RBI is investing in the expansion of an efficient and sustainable IT infrastructure. The Supervisory Board and Management Board are placing particular emphasis on the resilience and stability of RBI’s IT systems, so that it is also able to successfully overcome future crisis scenarios.
On behalf of the Supervisory Board, I would like to thank the Management Board, under the leadership of Johann Strobl, and all employees of RBI for their exceptional commitment in managing the COVID-19 crisis in difficult circumstances. With its outstanding employees and the support of its shareholders, RBI will emerge stronger from the current crisis and in the spirit of solidarity of Raiffeisen’s founder, Friedrich Wilhelm Raiffeisen, act as a reliable partner in assisting its customers in successfully overcoming these challenging times.
RBI’s markets 2020 Total assets in € million Change1 Business outlets Employees
From 2013, it has been possible to establish new mutual support structures on the basis of the new – henceforth European – banking legislation. Therefore, various institutional protection schemes have been established within the RBG since the end of 2013. Contractual or statutory liability arrangements were also entered into, under which the parties ensure one another’s security and, in particular, join forces to ensure liquidity and solvency when required. The institutional protection schemes are based on uniform, joint risk monitoring within an early warning system pursuant to Article 113 (7) CRR (Capital Requirements Regulation of the European Union). The institutional protection schemes were designed with two levels (currently one federal IPS and six regional IPS) to reflect RBG’s organizational structure.
The regional Raiffeisen banks hold approximately 58.8 per cent of RBI shares, with the remaining approximately 41.2 per cent in free float.
In 1999, the Raiffeisen Customer Guarantee Scheme Austria (Raiffeisen-Kundengarantiegemeinschaft Österreich – RKÖ) was established as a sign of mutual support within the RBG. The members of the RKÖ at federal level consist of six regional customer guarantee associations and RBI AG. Currently, local Raiffeisen banks from six federal states, six regional Raiffeisen banks and RBI AG have joined forces in the RKÖ. If required, the economic reserves of the participating banks will be drawn upon in a legally binding manner. From such funds, the customers are then offered recoverable claims against other RBG institutions.
On 21 December 2020, RBI, the regional Raiffeisen banks and Raiffeisen banks filed applications with the Austrian Financial Market Authority and the ECB to: (i) create a new institutional protection scheme (Raiffeisen IPS) consisting of RBI, the regional Raiffeisen banks and the Raiffeisen banks and (ii) accede to a cooperative under the name of "Österreichische RaiffeisenSicherungseinrichtung eGen" for the purpose of the statutory (Austrian) deposit guarantee scheme within the meaning of the Austrian Deposit Guarantee and Investor Protection Act (Einlagensicherungs- und Anlegerentschädigungsgesetz). In order to be able to form a separate deposit guarantee scheme it is required that all members of the scheme are also direct members of a single institutional protection scheme, such as, in this case, the Raiffeisen IPS yet to be founded. The Raiffeisen IPS is intended to ultimately replace the existing Federal IPS. However, as of the editorial deadline for the 2020 Annual Report, it is not possible to predict whether such approval will be received or whether additional conditions will be imposed or whether such additional conditions would be agreed. Should the approval be received, and conditions agreed, the above-mentioned applicants will subsequently leave the Einlagensicherung Austria (ESA) according to the provisions of the Austrian Deposit Guarantee and Investor Protection Act.
Pursuant to Section 27a of the Austrian Banking Act (Bankwesengesetz - BWG), credit institutions affiliated to a central institution are required to hold a liquidity reserve with that central institution in order to protect financial market stability. There are liquidity groups established at both state and federal level; RBI is the central institution at federal level. There are corresponding contractual arrangements, in place for the respective liquidity groups, which cover potential utilization for in the event that this is necessary, as well as liquidity contingency plans which are also subject to regular tests.
RBI’s Vision is based on growth through customer centricity and digital transformation, with the goal of becoming the most recommended financial services group by 2025. This is to be achieved by making customers’ lives easier through continuous innovation and a superior customer experience (RBI’s Mission) and providing a stress-free, effortless banking experience, as well as excellent products and services. In addition to leveraging RBI’s established competitive strengths (customer focus and long-term relationships, extensive local presence in the CEE region, strong brand, as well as a comprehensive product and service offering across all channels), efforts are being intensified in the following strategic areas:  Sales and service model: Transformation of branches and expansion of digital acquisition of retail and small business customers, redesign of sales and service models for large corporate and institutional clients, development of dedicated customer experience management across business lines
 IT architecture: Transformation of core IT into a modular and scalable architecture, evaluation of new infrastructure options, especially for digital retail banking
Based on the overall Group strategy, each client segment is following its own individual business strategy aimed at differentiating RBI in terms of customer experience, in order to contribute step by step towards RBI’s goal of being the most recommended financial services group. In the context of its Vision, RBI aims to already be the most recommended bank in the majority of its markets by the end of 2021, in retail and corporate banking business and in servicing institutional clients, as measured by the number of recommendations (Net Promoter Score (NPS)).
In 2020, RBI achieved the number one position in the NPS survey in 6 of its 13 markets. This constitutes a significant step towards RBI’s goal of being the most recommended bank in the majority of its markets by the end of 2021.
In addition, strategic focus is placed on developing new cross-border financial services for clients across the CEE region; improving the customer experience across all processes by redesigning the most important customer touchpoints (e.g. KYC, account opening, online banking); expanding the convenient digital product and service offering; faster information flows and shorter decision-making processes; as well as focusing on responsible businesses/strengthening the sustainability concept as an important factor for success (including respective products and advisory services).
In response to the profound and rapid developments within the industry and changing customer expectations, RBI defined a new strategic direction in 2019, which it set out in its Mission & Vision 2025. Although the financial sector is currently faced with an extremely challenging market environment, RBI is convinced all the more that the focus areas identified in the determination of the strategic direction in 2019 are the right ones.
 Group-wide innovation and scalable product solutions: Pooling of Group-wide development resources to strengthen the digital product offering
 Data and analytics capabilities: Utilization of artificial intelligence and advanced analytics to develop new business opportunities and optimize processes
RBI provides services to around 17.1 million retail, private banking and small business customers in CEE, offering a broad product range (e.g. account packages, clearing, settlement and payment services, consumer finance, mortgage loans and investment products).
As a result of changes in customer behavior, demand for digital solutions is increasing and consequently distribution channels must be optimized and adapted to the changed customer requirements. Therefore, the strategic focus of RBI’s retail banking area is on further expansion of digital banking capabilities in order to realize the ambition of solid retail customer growth. In addition, a new initiative was launched to drive digitization forwards in the area of investment products including funds, bonds and certificates and enhance the retail client experience.
The optimization of the capital markets trading and sales architecture, as well as the investment banking setup, also remain areas of high strategic importance. The investment banking division recorded good results in the reporting year, arranging 53 Eurobonds and improving its CEE Eurobond league table ranking.
Performance of RBI stock While European and US stock markets were still posting gains at the beginning of the year, with some even reaching new all-time highs, the trend came to an abrupt end in the middle of February due to the rapid spread of COVID-19 across Europe and the US. The expansion of the pandemic led to panic selling and losses of historic proportions in the financial markets. It was only after the implementation of severe restrictions on public activities and an extensive shutdown of non-essential shops and businesses with customer footfall that the rate of new cases started to gradually decline. The measures intended to contain the rate of infection were accompanied by unprecedented monetary support and aid programs, which were initiated by governments in order to mitigate the worst economic consequences for companies and private individuals. This eventually reassured the financial markets and from the middle of March, following the sharp falls in stock markets, a broad-based recovery began and the losses incurred in the interim were significantly reduced. The main drivers were the significant reduction in the growth rate of new COVID-19 cases and the subsequent easing of economic lockdown restrictions.
Book value per share as at 31 December 2020 € 35.98
Price performance since 1 January 2020 compared to ATX and Euro Stoxx Banks in €
Although European banks, for the most part, have come through the crisis well so far given the challenging environment, their share prices were negatively impacted by the significant rise in risk costs during the year. The imposition of new EU sanctions against Russia and concerns over an associated worsening of mutual relations also weighed on RBI’s share price. After starting 2020 at € 22.39, the first day of trading saw the high for the year of € 22.92. The share price then moved in line with other European banks for the remainder of the year, recovering in particular towards the end of the year compared to its annual low of € 11.25 on 18 March 2020. At year-end, the share price closed down 25.5 per cent at € 16.68. The Austrian Stock Exchange (ATX) was down 12.8 per cent and the European bank index (EURO STOXX Banks) was down 23.7 per cent.
At year-end 2020, the market capitalization was € 5.5 billion. The number of shares issued remained unchanged at 328,939,621.
A total of 20 equity analysts and 22 debt analysts (as of 31 December 2020) regularly provide investment recommendations on RBI.
Strong demand from institutional investors led to a significant level of over-subscription, with an order volume in excess of € 1 billion. The successful transaction had a positive impact on RBI’s tier 2 and total capital ratios in terms of the regulatory capital requirements.
Contact for equity and debt investors E-mail: ir@rbinternational.com www.rbinternational.com → Investors Telephone: +43 1 71 707 2089
RBI attaches great importance to responsible and transparent business management in order to maintain the understanding and confidence of its various stakeholders – not least of capital market participants. Hence, RBI is committed to adhering to the Austrian Corporate Governance Code (ACGC) as laid out in the version dated January 2020. The ACGC is publicly available on the Austrian Working Group for Corporate Governance website (www.corporate-governance.at) and on the RBI website (www.rbinternational.com → Investors → Corporate Governance and Remuneration Policy). In addition to RBI, its subsidiary bank Tatra banka, a.s., as a listed company, is obliged to publish a corporate governance report due to local statutory requirements. This report is published with the annual report and can be downloaded from the Tatra banka website (www.tatrabanka.sk → About bank → Economic results → Annual Reports). RBI has no further subsidiaries which are required to publish a corporate governance report.
The SSttrraatteeggiicc RRooaaddmmaapp was developed from the Mission statement in a comprehensive process involving many employees. This multi-year roadmap categorizes the main strategic goals in concrete and measurable individual initiatives. These are each set for a period of two years with their progression evaluated on a quarterly basis and discussed at senior management level. The roadmap ensures that all employees can have a clear picture of contributions to be made towards achieving the overarching goal (Vision 2025).
Andreas Gschwenter 1969 1 July 2015 30 June 2023 Lukasz Januszewski 1978 1 March 2018 28 February 2026 Peter Lennkh 1963 1 October 2004 31 December 2025 Hannes Mösenbacher 1972 18 March 2017 28 February 2025 Andrii Stepanenko 1972 1 March 2018 28 February 2026 1 Effective as of 10 October 2010
Building on the regulatory requirements and CoC, the GGrroouupp iinntteerrnnaall ppoolliicciieess && pprroocceesssseess ensure compliant behavior. The policies and processes make up RBI Group’s company law and their documentation and review are essential prerequisites for compliance with legal requirements. Through the Group Policy Framework, which targets all RBI employees, governance across the Group is also assured. The Group Policy Framework lays out necessary rules for this, provides an overview of roles and responsibilities, and sets standards for the monitoring and implementation of the policies.
In 2019, to further continue RBI’s success story, RBI set an ambitious goal in its VViissiioonn 2025 – we are the most recommended financial services group – to be fulfilled by following its MMiissssiioonn – we transform continuous innovation into superior customer experience. The Mission has four VVaalluueess - collaboration, proactivity, learning, and responsibility – which were defined as an especially important part of the implementation and achievement of the goal of RBI’s Vision.
The ACGC is subdivided into L, C and R Rules. L Rules are based on compulsory legal requirements. C Rules (Comply or Explain) should be observed; any deviation must be explained and justified in order to ensure conduct that complies with the ACGC. R Rules (Recommendations) have the characteristics of guidelines; non-compliance does not need to be reported or justified. RBI deviates from the C Rules below, but conducts itself in accordance with the ACGC on the basis of the following explanations and justifications: CC RRuullee 4455:: nnoonn--ccoommppeettiittiioonn ccllaauussee ffoorr mmeemmbbeerrss ooff tthhee SSuuppeerrvviissoorryy BBooaarrdd RBI AG is the central institution of the Raiffeisen Banking Group Austria (RBG). Within RBG, RBI AG serves as the central institution (as defined by § 27a of the BWG) of the regional Raiffeisen banks and other affiliated credit institutions. Some members of the Supervisory Board in their function as shareholder representatives also hold executive roles in RBG banks. Consequently, comprehensive know-how and extensive experience specific to the industry can be applied in exercising the control function of the Supervisory Board, to the benefit of the company.
CC RRuullee 5522aa:: TThhee nnuummbbeerr ooff mmeemmbbeerrss oonn tthhee SSuuppeerrvviissoorryy BBooaarrdd ((wwiitthhoouutt eemmppllooyyeeeess’’ rreepprreesseennttaattiivveess)) sshhaallll bbee tteenn aatt mmoosstt The Supervisory Board currently consists of twelve members: nine core shareholder representatives for RBG and three free float representatives. This higher number of members was based on a resolution passed by the Annual General Meeting on 22 June 2017. It provides the Supervisory Board with additional industry knowledge, more diversity, and further strengthens its ability to exercise its control function.
In accordance with C Rule 62 of the ACGC, RBI AG commissioned KPMG Austria GmbH Wirtschaftsprüfungs- und Steuerberatungsgesellschaft, Vienna (KPMG) to conduct an external evaluation of compliance with the C Rules of the ACGC. The report on this external evaluation is publicly available at www.rbinternational.com → Investors → Corporate Governance and Remuneration Policy → External Evaluation of the CG Code.
As at 31 December 2020, the Management Board consisted of the following members: MMaannaaggeemmeenntt BBooaarrdd mmeemmbbeerr YYeeaarr ooff bbiirrtthh OOrriiggiinnaall aappppooiinnttmmeenntt EEnndd ooff tteerrmm
Raiffeisen Centrobank AG, Austria, Deputy Chairman AO Raiffeisenbank, Russia, Member Raiffeisen Bank S.A., Romania, Member Raiffeisenbank a.s., Czech Republic, Member Tatra banka, a.s., Slovakia, Member
Johannes Ortner resigned from his function with effect from 18 June. Günther Reibersdorfer resigned from his Supervisory Board function with effect from the end of the company’s Annual General Meeting on 20 October 2020. They were succeeded by Reinhard Mayr and Heinz Konrad.
The Supervisory Board of RBI AG, in accordance with and taking into consideration C Rule 53 and Appendix 1 of the ACGC, has 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 exercise of functions within the Group or merely exercising the function of a management board member or senior executive by a Supervisory Board member does not, as a rule, lead to the company concerned being regarded as a company in which a Supervisory Board member has a significant financial interest, to the extent that circumstances do not support the presumption that the Supervisory Board member derives a direct personal advantage from doing business with the company.
Andreas Gschwenter RSC Raiffeisen Service Center GmbH, Austria, Deputy Chairman Raiffeisen Informatik Geschäftsführungs GmbH, Deputy Chairman
In addition to the management and governance of RBI AG, the members of the Management Board performed supervisory and managerial duties at the following material subsidiaries as supervisory board members in the 2020 financial year: SSuuppeerrvviissoorryy BBooaarrdd mmaannddaattee
Raiffeisenbank Austria d.d., Croatia, Chairman Raiffeisen Bank Zrt., Hungary, Chairman RSC Raiffeisen Service Center GmbH, Austria, Deputy Chairman Raiffeisen Informatik Geschäftsführungs GmbH, Austria, Deputy Chairman AO Raiffeisenbank, Russia, Member Raiffeisen Bank S.A., Romania, Member Raiffeisenbank a.s., Czech Republic, Member Tatra banka, a.s., Slovakia, Member
Members of the Supervisory Board had the following additional supervisory board mandates or comparable functions in domestic and foreign stock exchange listed companies from 1 January to 31 December 2020: Erwin Hameseder AGRANA Beteiligungs-Aktiengesellschaft, Austria, Chairman STRABAG SE, Austria, Deputy Chairman Südzucker AG, Germany, 2nd Deputy Chairman UNIQA Insurance Group AG, Austria, 2nd Deputy Chairman (until 25 May 2020)
The Supervisory Board, both in its entirety and in its committees, has the necessary knowledge and experience commensurate with the type, scope and complexity of RBI’s business and its risk structure.
The procedural rules of the Supervisory Board govern its organization and allocate particular tasks to the Working, Risk, Audit, Remuneration, Nomination, Personnel and Digitalization Committees. These committees comprised the following members as at 31 December 2020: WWoorrkkiinngg-- CCoommmmiitttteeee
There are seven Committees. The Audit Committee, Remuneration Committee and Risk Committee, all consist of one-third core shareholder representatives, one-third free float representatives, and one-third employee representatives. There are women in all of the Committees, and three of the Committees are chaired by women.
Birgit Noggler, as the Chairman of the Risk Committee, satisfies the legal standards, expert qualifications and independence requirements set out in § 39d (3) of the BWG. In addition to serving as the Chairman of the Risk Committee, her principal occupation is the provision of tax advisory services. She was the Chief Financial Officer of Immofinanz AG from 2011 to 2016 and held management positions at Immofinanz AG from 2007 to 2011. Birgit Noggler has worked in accounting from the beginning of her professional career and therefore has extensive expertise in this field. In addition to her mandate at Semperit Aktiengesellschaft Holding, Birgit Noggler also holds supervisory board mandates at B & C Industrieholding GmbH and NOE Immobilien Development GmbH.
The decision was taken in the 2020 financial year to establish the Digitalization Committee and the Supervisory Board elected Andrea Gaal as the Chairman of the committee. During her career, Andrea Gaal has held several key positions within British and American high-tech start-ups and served in a managing role at Sony and Sony Ericsson with responsibility for the DACH (Germanspeaking countries), Central European and North American (Canada) regions. Furthermore, Andrea Gaal is engaged on the advisory council of AI 42.cx, a market data company which specializes in the analysis and identification of intellectual property and intangible assets; she is also a member of the AI-42 INDEX™ committee, which determines the index constituents and weightings. The index comprises the leading listed companies globally with expertise in the area of artificial intelligence and is published through Refinitiv (Thomson Reuters). Aside from the aforementioned roles, Andrea Gaal also teaches as an adjunct professor in the Department of Business & Management at Webster Vienna Private University, where her lectures cover subjects such as Business & Global Issues, Global Competitive Strategies, Corporate Responsibility and Society, and Women in Management.
The Advisory Council consists of the seven Chairmen of the supervisory boards of the regional Raiffeisen banks and the Chairman of Raiffeisenverband Salzburg. It met three times in 2020. Out of the eight members of the Advisory Council, eight members attended all the meetings in 2020. Member attendance at each meeting was thus 100 per cent.
 For every other member of the Advisory Council: € 15,000 each (excl. VAT)
In addition, each member of the Advisory Council is paid an attendance fee of € 1,000 (excl. VAT) for each meeting.
Management Board members’ areas of responsibility have been defined by the Supervisory Board, without prejudice to the general responsibility of the Management Board, as follows (as at 31 December 2020): Markets & Investment Banking
Sector Risk Controlling Services 1 Reports to the entire Management Board and Supervisory Board 2 Data Protection Offi cer for RBI and its Austrian subsidiaries – reports to the Management Board
 The CFO now reports to the CEO  Former Plenipotentiary, Michael Höllerer, as CFO, took over responsibility for Group Planning & Finance, Group Tax
 Group Regulatory Affairs & Data Governance and Group Compliance will report to the CRO from March 2020, due to the reduction in size of the Management Board.
The 2020 financial year was largely dominated by the COVID-19 crisis. A variety of measures were taken by the Management Board in this respect, all of which placed the health of employees and customers first. As a result of years of preparations and regular crisis scenario training, the company was very well-prepared and banking operations were successfully transferred from the physical office to remote working within a few days. This made it possible to continue to serve customers fully and seamlessly despite the challenging situation. The company’s business activities were not limited at any point in time.
The Supervisory Board (SB) held six meetings during the reporting period. In addition, the Management Board fully informed the Supervisory Board on a prompt and regular basis of all relevant matters pertaining to the company’s performance, including the risk position and risk management of the company and material Group companies, particularly in relation to important issues.
Management, Group Treasury and Active Credit Management.  The Group Investor Relations division has reported directly to the CEO since the reduction in size of the Management
Board.  The B-1 divisions International Banking Units and Group Participations have been merged into a single B-1 division,
 The two divisions International Retail Business Management & Steering and International Mass Banking, Sales & Distribution were combined into a single division, International Mass Banking, Sales & Distribution, in order to streamline the organizational structure. Since the two divisions were each relatively small in terms of staff, the merger aimed to produce a leaner, simpler structure and leverage synergies.
 In the past, the Retail Payments business was handled by multiple departments from different Management Board areas. The Management Board therefore decided to combine the various units and establish International Retail Payments, a new separate B-1 division. This will drive the further expansion of the strategically important Digital Payments business line. The division is responsible for the merchant acquiring business, improving profitability, expanding this business line in the online environment and developing the e-commerce business. The division can thereby provide the requisite attention to the area of digital payments for consumers and between consumers and business customers. These areas play an important role in realizing the Vision & Mission and Strategic Roadmap.
Management Board area of the Chief Operating Officer / Chief Information Officer (COO/CIO)
A key objective in the expansion of sustainable business is the Vision to become the most recommended bank in Austria and in RBI’s markets in the CEE region by 2025, including in terms of Environment, Social, Governance (ESG) focus. This is to be achieved by executing a defined five-point plan. In addition, specific action is to be taken to support customers so they can more easily access the market for sustainable financing while taking their respective particular situation in terms of sustainability into account.
The responsibilities of the RRiisskk CCoommmmiitttteeee 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 monitoring 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 uncollectable loans. The Committee also looks at current risk factors, 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 to its regular auditing and monitoring activities, the Audit Committee focused on discussing issues related to the valuation of equity investments and questions associated with the accounting treatment of legal risks.
The Audit Committee establishes key issues for the upcoming year at the end of each year.
The RReemmuunneerraattiioonn CCoommmmiitttteeee’s responsibilities include, first and foremost, establishing general principles for the company’s remuneration policies and practices, particularly on the basis of the BWG, as well as relevant sections of the ACGC. In doing so, the company’s interests along with the long-term interests of shareholders, investors and employees of the company are taken into account, as are the economic interests of maintaining a functioning banking system and financial market stability. The Remuneration Committee issues detailed internal remuneration policies for the Management Board and employees of RBI and makes changes as required as part of a regular review process. On that basis, the Remuneration Committee selects the companies within the RBI Group that are subject to the remuneration principles. This selection and the underlying selection process are reviewed at regular intervals. The Remuneration Committee is also responsible for approving the proposed list of employees and functions which have a material impact on the risk profile of the Group and/or company. The Remuneration Committee conducts regular reviews of these identified staff.
In addition, the Remuneration Committee supervises and regularly reviews remuneration policies, remuneration practices and relevant incentive structures in the context of risk control, monitoring and limitation 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 accordance with the new provisions of §§ 78a et seq. of the AktG, which incorporates the remuneration requirements of the second Shareholder Rights Directive, the responsibility for the preparation of Supervisory Board resolutions relating to remuneration policy for the Management Board and Supervisory Board as well as the corresponding Remuneration Report has been added to the rules of procedure for the Remuneration Committee. The remuneration policy principles for the Management Board and the Supervisory Board were prepared by the Remuneration Committee on the basis of the current remuneration guidelines and in consideration of the long-term goals and risk strategy. The principles describe, among other things, the remuneration components, the definitive criteria for awarding and paying an annual performance bonus along with the payment methods and information on how remuneration and employment conditions for RBI employees factor into the remuneration determined for the Management Board. The Supervisory Board approved the remuneration policy for members of the Management Board and Supervisory Board at the Remuneration Committee’s recommendation. The remuneration policy was presented to the Annual General Meeting for vote and resolution on 20 October 2020. In accordance with the remuneration policy for the Management Board, the Remuneration Committee defined the key elements of the performance management process. The members of the Remuneration Committee defined the specifications for structuring individual performance-based step-in criteria based on a performance management process for individual Management Board members, taking their respective duties and responsibilities into account.
Giving due consideration to the European Banking Authority’s statements regarding potential risks that may result from the COVID19 situation, the Remuneration Committee reviewed the remuneration policy and practices at RBI to ensure that they support and are consistent with solid, effective risk management, also in light of the COVID-19 crisis. In the process, the Remuneration Committee examined whether RBI’s remuneration policy, particularly the variable remuneration components set out within it, was conservative. The Remuneration Committee ultimately confirmed that no modifications to the remuneration guidelines, practices and allocations were needed. Furthermore, the Remuneration Committee acknowledged the allocation and payment of the 2019 bonus as well as outstanding amounts due from previous years for identified staff, as their payment was not detrimental to the maintenance of RBI’s solid capital base and all other step-in criteria for allocating the 2019 bonus were also met.
It also sets targets for the Management Board based on applicable rules and regulations and makes any required changes. It discusses whether the Management Board has attained its targets and approves bonus allocations on that basis. The Personnel Committee then decides whether to pay amounts from bonus payments that were deferred as required by law. During the financial year, the Personnel Committee set the 2020 targets for the Management Board, determined whether the Management Board attained its 2019 targets and approved bonus allocations to the Management Board members, taking account of the supervisory authority’s remarks and compliance with the rules and regulations related to the COVID-19 pandemic.
The Supervisory Board decided at its meeting on 16 September 2020 to establish a DDiiggiittaalliizzaattiioonn CCoommmmiitttteeee and adopted rules of procedure for the Committee. At its meeting on 2 December 2020, the Supervisory Board decided on the delegation of Supervisory Board members to the Committee, which would consist of 6 members. The Committee should meet twice a year.
The Digitalization Committee’s duties are to advise the Management Board and the Supervisory Board regarding the current and future digitalization strategy (including IT, new technologies, data analysis and innovation) and the related strategic investment decisions. It is also responsible for monitoring the execution of the digitalization strategy as well as the progress made in RBI’s digitally transformation and for regularly reporting on this to the Supervisory Board.
The Nomination Committee is committed to gender-neutral staffing policies in its activities. The members of the Nomination Committee reviewed the progress made toward achieving the target quota for the underrepresented gender and discussed the measures presented for achieving the target.
Erwin Hameseder 6/6 9/9 3/3 4/4 3/3 4/4 3/3 32 Martin Schaller 5/6 9/9 3/3 n/a 3/3 4/4 3/3 27 Heinrich Schaller 4/6 7/9 3/3 2/4 2/3 3/4 2/3 23 Klaus Buchleitner 5/6 n/a n/a n/a n/a n/a n/a 5 Peter Gauper 6/6 n/a n/a n/a n/a n/a n/a 6 Wilfried Hopfner 6/6 n/a n/a n/a n/a n/a n/a 6 Rudolf Könighofer 6/6 n/a n/a n/a n/a 4/4 3/3 13 Johannes Ortner1 2/2 n/a n/a 2/2 n/a n/a n/a 4 Reinhard Mayr2 3/3 n/a n/a 1/1 n/a n/a n/a 4 Günther Reibersdorfer3 2/3 n/a n/a n/a n/a n/a n/a 2 Heinz Konrad4 3/3 n/a n/a n/a n/a n/a n/a 3 Eva Eberhartinger 6/6 n/a 3/3 4/4 3/3 n/a n/a 16 Andrea Gaal 6/6 9/9 3/3 4/4 3/3 4/4 3/3 32 Birgit Noggler 6/6 9/9 3/3 4/4 3/3 4/4 3/3 32 Rudolf Kortenhof 6/6 9/9 3/3 4/4 3/3 4/4 n/a 29 Peter Anzeletti-Reikl 6/6 9/9 3/3 4/4 3/3 4/4 n/a 29 Gebhard Muster 6/6 n/a n/a n/a n/a n/a n/a 6 Natalie Egger-Grunicke 6/6 n/a n/a n/a n/a n/a n/a 6 Helge Rechberger 6/6 n/a n/a n/a n/a n/a n/a 6 Susanne Unger 6/6 9/9 3/3 4/4 3/3 4/4 n/a 29
Going beyond the minimum requirement for the self-evaluation and efficiency review pursuant to C Rule 36 of the ACGC, the Supervisory Board, in partnership with the Vienna University of Economics and Business (WU Vienna), conducted a comprehensive evaluation of the Supervisory Board’s activities beginning in 2019 in order to achieve a sustainable improvement in the efficiency and effectiveness of the Supervisory Board’s work.
In addition, the Chairman of the Supervisory Board met with representatives of the ECB and FMA in the 2020 financial year for an open exchange of views in which key supervisory issues and current topics relevant to RBI were discussed.
As required by C Rule 36 of the ACGC, the Supervisory Board of RBI AG conducted a year-to-year self-evaluation and efficiency review covering the 2019 and 2020 financial years.
Following the ECB’s recommendation to suspend distributions until 1 January 2021, no vote was taken on the originally proposed distribution of dividends. Although the financial strength of RBI would have enabled a dividend to be paid in 2020, the Management Board and Supervisory Board jointly decided to follow the ECB’s recommendation and carry forward the planned dividend.
The Annual General Meeting for the 2020 financial year will take place on 22 April 2021. The convening notice will be published in the Wiener Zeitung’s official journal and in electronic form a minimum of 28 days before the Annual General Meeting.
For the entire RBI Group, the Nomination Committee has set a target of filling 35 per cent of the positions on the Supervisory Board, Management Board and in Tier 2 management with women by no later than 2024. The following figures include RBI AG and 13 network banks in CEE, as well as Raiffeisen Bausparkasse Gesellschaft m.b.H., Raiffeisen Kapitalanlage-Gesellschaft m.b.H., Raiffeisen-Leasing Gesellschaft m.b.H, as well as Valida Holding AG, Kathrein Privatbank Aktiengesellschaft and Raiffeisen Centrobank AG. As at 31 December 2020, the corresponding proportion of female employees totaled 31 per cent (2019: 30 per cent). In RBI Group, female employees make up 65 per cent (2019: 66 per cent) of the total workforce. Women held 14 per cent of Management Board positions (2019: 14 per cent), and 37 percent of Tier 2 management positions (2019: 35 per cent). The proportion of women in Supervisory Board positions was 24 per cent (2019: 24 per cent).
The second set of measures targets the work with female employees and aims specifically to support this. Bias can already begin in the talent selection process. Female employees are also treated differently in some instances during their careers because they, for example, express specific needs or have these attributed to them.
Prejudice and discrimination have no place in RBI. This is also clearly stated in the Code of Conduct which applies across the entire Group. RBI instead advocates equality, and in keeping with its corporate identity, it offers equal opportunities for equal performance within the company, regardless of gender or other factors. This begins with staff selection, which must be done without prejudice and where the same standards must always be applied.
The key components of this policy include RBI’s diversity vision and mission statement and the daily implementation guidelines. In them, RBI presents its stance on this issue: “RBI believes that diversity adds value. Capitalizing on the opportunities of diversity provides long-term benefits to the company and its employees, as well as to the economy and society as a whole. RBI is continuing Raiffeisen’s 130-year success story as it embraces diversity. RBI actively and professionally harnesses the potential of diversity to give clients the best possible service as a strong partner and to position itself as an attractive employer.”
Women are underrepresented in management for various reasons based on individual circumstances and the social environment as well as the company. Therefore, a strategy to increase the representation of women must encompass a wide variety of measures and recognize that certain reasons cannot be addressed by organizational measures. Based on a large-scale corporate analysis, the Nomination Committee adopted measures in three areas that approach the issue from different angles. The first set of measures focuses on the work culture and aims to achieve a healthy work-life balance as well as a gender-sensitive organization of the New World of Work. This included conducting the first-ever work and family audit at RBI AG in 2020, and the promotion of active parental leave management. The work and family audit is a customized certification process for companies, which is supervised by qualified advisors and designed to provide support for the defining, evaluating and planning of familyfriendly measures. The objective is to create a work environment that opens up equal career opportunities for both women and men.
This bundle of measures provides medium- and long-term impetus to bring about cultural change and thus permanently establish gender diversity at the company.
Both the Management Board and the Supervisory Board of RBI AG are required to disclose any potential conflicts of interest.
Independent consolidated non-financial report (§ 267a of the UGB) as well as disclosures for the parent company according to § 243b of the UGB
RBI’s consolidated financial statements are prepared in accordance with the International Financial Reporting Standards (IFRS) as applied in the EU. They also comply with the regulations of the BWG in conjunction with the UGB to the extent that these are applicable to the consolidated financial statements. The consolidated annual financial statements are published within the first four months of the financial year following the reporting period. Interim reports are published no later than two months after the end of the respective reporting period pursuant to IFRS.
The Annual General Meeting on 13 June 2019 selected KPMG as external Group auditor and bank auditor for the 2020 financial year. KPMG has confirmed to RBI AG that it has the certification of a quality auditing system. It has also declared that there are no reasons for disqualification or prejudice. The Supervisory Board is informed of the result of the audit by a statutory report regarding the audit of the consolidated financial statements by the auditor, as well as by the report of the Audit Committee. Furthermore, the auditor assesses the effectiveness of the company’s risk management in accordance with the ACGC, based on the documents submitted to the auditor and otherwise available. The resulting report is presented to the Chairman of the Supervisory Board, who is responsible for ensuring the report is addressed in the Audit Committee and presented to the Supervisory Board.
These and other requirements and rules of conduct are covered by a corporate policy that contains the duties required by law and by the ACGC. The policy also gives due consideration to the European Banking Authority’s (EBA) guidelines on internal governance, the joint European Securities and Markets Authority/EBA guidelines to assess the suitability of members of management bodies and key function holders, the European Central Bank’s guide to fit and proper assessments, and the Basel Committee on Banking Supervision’s corporate governance principles for banks.
The company prepared an independent consolidated non-financial report according to § 267a of the UGB for the 2020 financial year for RBI, which also contains the disclosures for the parent company according to § 243b of the UGB. The report was reviewed by the Supervisory Board according to § 96 (1) of the AktG. In addition, KPMG Austria GmbH (KPMG) was appointed by the Management Board to audit the consolidated non-financial report and will report its findings to the Supervisory Board at its March 2021 meeting. The Supervisory Board will report on the results of the audit at the Annual General Meeting.
"What one can't do alone, many can." Friedrich Wilhelm Raiffeisen’s motto particularly applies to the fight against money laundering and crime in international payment transactions. Since the 1990s, the EU has been regulating money laundering prevention with directives that the member states implement into different national laws. Most credit and financial institutions in Europe have invested a lot of money and resources in money laundering prevention in recent years. Despite comprehensive regulatory and organizational efforts at all levels, credit and financial institutions are still too often misused for the purpose of money laundering and terrorist financing, especially in international payment transactions.
c. Customers with a high reputational risk: We will consistently accomplish our portfolio clean-up and will not enter new business relationships with customers without a flawless reputation.
d. Investment in compliance: We have already invested substantial amounts of resources into our compliance systems and we will continue to do so. State-of-the-art compliance system and their continuous improvement help to meet legal and societal expectations by remaining trustworthy and secure.
3. The signatories obviously commit themselves to comply with all international and national laws and regulations to combat money laundering and terrorist financing and to further expand their own money laundering prevention measures. They also commit themselves to actively participate in the national and international discourse and legislative processes regarding improving anti-money laundering systems.
Market development 50 Significant events in the reporting period 56 Earnings and financial performance 58 Comparison of results with the previous year 58 Comparison of results with the previous quarter 61 Statement of financial position 63 Total capital pursuant to the CRR/
For Europe, the global economic environment was comparatively benign in 2020. Although the US economy also slid into a deep recession in the first half of the year, over the year as a whole GDP in the US contracted by only half as much as in the euro area. The rapid recovery in private consumption in the US was a result in particular of far-reaching fiscal measures despite continued high infection dynamics and political turbulence related to the transition of power in the White House. China managed to bring the pandemic under control significantly faster than Western democracies, which resulted in positive economic growth of 2.3 per cent in 2020. Although this corresponds to China’s lowest GDP growth in decades, the economic momentum, bolstered by government infrastructure projects, provided for a positive surprise.
GDP in the euro area fell by around 15 per cent on a cumulative basis in the first half of 2020. Even though some parts of the economy were able to recover to pre-pandemic levels during the summer, overall economic output in the third quarter was still around 4 per cent below end-2019 levels. GDP declined again in the fourth quarter of 2020 but to a significantly lesser extent than in the first half of the year. Over the year as a whole, GDP decreased by around 7 per cent.
In the wake of the spring lockdown, the Austrian economy recorded a marked decline in GDP, which decreased by 2.8 per cent in the first quarter of 2020 compared to the fourth quarter of 2019 and by 11.6 per cent in the second quarter relative to the prior quarter. In the third quarter there was a significant increase in economic output, driven by easing restrictions, which was however followed by renewed business closures in the last two months of the year, leading to another drop in economic output in the final quarter (down 4.3 per cent). In contrast to the spring, industry showed a certain degree of resilience during the second lockdown, resulting in a noticeably smaller decline in GDP during the fourth quarter than in the second quarter. In 2020 as a whole, GDP declined 7.4 per cent (2019: up 1.4 per cent). On the demand side, this was due primarily to private consumption and at sector level due mainly to consumer-related services.
Economic activity in CE recorded a marked decline of 4.0 per cent in 2020 (2019: up 3.8 per cent). The region was hit by a particularly severe second wave of the virus, which led to another drop in economic output in the fourth quarter, albeit by less than expected. The region’s high dependency on the automotive sector and the temporary slump in foreign demand were also negative factors in the past year. The CE economies were, however, well-positioned at the outset of the crisis, with 2020 following a number of years of uninterrupted and dynamic economic growth, low unemployment rates and prudent fiscal policy. This positioning enabled governments to adopt appropriately scaled fiscal measures to mitigate the effects of the crisis.
According to the EBA Call for Advice on the implementation of Basel IV, the new internal ratings-based (IRB) approach and related reduction in risk-weighted assets is expected to provide relief in terms of capital requirements. However, this assumption does not include the impact of the output floor. These effects are in any event dependent on the concrete implementation by European legislators.
Banking sector in Austria The Austrian banking sector was also presented with challenges in 2020. Not least due to support from numerous monetary and fiscal policy measures taken by both the Austrian and European authorities, the Austrian banking sector was able to continue to fulfill its important function for both the corporate sector and private households. In the corporate customer business, the previously dynamic loan growth weakened only slightly, with government guarantees having a significant supportive effect. Lending to households also proved comparatively resilient despite declining growth rates in the outstanding volume of consumer loans. Banks’ asset quality generally improved, with the sector’s NPL ratio (non-performing loans) reaching around 2 per cent (2019: 2.2 per cent). The domestic loan portfolio had an even lower NPL ratio of around 1.5 per cent. Loan repayment deferrals are one of the many measures adopted as a result of the COVID-19 crisis. The peak in loan volumes subject to repayment deferral was reached in June at € 30.6 billion; since then, they have declined by half (October: € 15.6 billion). Banks’ profitability suffered as a result of increased provisioning requirements for potential non-performing loans. These rose significantly during the year and put additional pressure on the profitability of the banking sector. While the results of the Austrian banking sector for the first half of 2020 were 75 per cent below the previous year's level, the CE and SEE subsidiaries of Austrian banks saw their results decline by only around 32 per cent over the same period. The sector's capitalization remained stable over the course of the 2020 financial year.
Development of the banking sector in CEE In retrospect, 2019 proved to be the culmination of a five-year path of steady improvement in asset quality and recovery in profitability in CE/SEE banks’ core markets, which was interrupted by the COVID-19 outbreak in 2020. It should be emphasized that the CEE banking sector entered the crisis with sound fundamentals. Extensive policy support has also helped the banks to manage the crisis relatively well to date. While the pandemic diverted CEE banking markets from their path of ongoing loan growth, the fiscal and monetary policy response as well as regulatory easing kept lending growth momentum in positive territory (single digit per cent growth rates for the most part). Residential mortgages stand out as particularly robust (Czech Republic, Slovakia, Romania, Croatia and Russia). However, the moderate releveraging trend (increase in loan-to-deposit ratio) that began in 2019 was halted by the pandemic, which caused the average loan-to-deposit ratio to fall back to around 80 per cent in some markets due to an increased propensity to save, resulting from the decline in consumption, and the inflow of government deposits. Overall, the transformation of the deposit base towards shorter maturities continued. An increase in loan loss provisions was seen in the region as a whole, which was mainly the result of the migration of loans to IFRS Stage 2 while the rate of actual non-performing loans barely changed thanks to repayment deferrals for borrowers and government guarantee schemes. Higher risk costs brought ROE levels in most CE/SEE markets down to between 4 and 8 per cent, while certain EE markets (Russia, Ukraine) still had double-digit returns.
The Basel Committee’s targeted implementation date was extended by one year to 1 January 2023 due to the COVID-19 pandemic. As there is still no legal implementation of the standards for the EU, there are currently no binding requirements with respect to the expected implementation date.
Furthermore, the European Commission presented its proposal in February 2020 for a European data strategy as well as a white paper on artificial intelligence including concepts for a possible regulatory framework. The EBA also regularly addresses developments in digitalization and new technologies and conducted, for example, surveys on regtech and digital platforms during 2020. On a national level, the Austrian Financial Market Authority’s regulatory sandbox, which was established last year, was a notable development.
In Austria, the Bank Recovery and Resolution Directive (BRRD) was transposed into Austrian law by the Bank Recovery and Resolution Act (BaSAG). The review of the BRRD was negotiated up until the end of 2018 as part of the trilogue process and had to be implemented by 28 December 2020 through an amendment to the BaSAG.
 The resolution authority decides which resolution tools (sale of business, bridge institution, asset separation and bail-in) should be used; the preferred instrument in the event of an RBI resolution would be bail-in
Due to its classification as a systemically important institution, RBI will comply with these principles. It has developed a comprehensive Group-wide action and implementation plan that ensures compliance with the BCBS 239 principles and is currently being executed in consultation with the relevant supervisory authorities.
Many governments attempted to control the impact of the pandemic in the financial year through various measures to restrict contact, which led to a partial or near total lockdown of national economies. The adverse effect on the economic situation, particularly in certain sectors, cannot be fully quantified at present due to diverse governmental support measures and interventions in the legal framework.
Many of RBI’s markets saw the introduction of various moratoriums that can essentially be summarized as payment moratoriums. Borrowers were granted a temporary deferral of obligations to make principal repayments as well as payments for interest and fees. The payment moratoriums were structured differently depending on local legislation or the regulatory guidelines in the respective banking sector. Borrowers in some countries (such as Croatia, Romania and Austria) could choose whether to make use of a payment moratorium, while those in other countries (such as Hungary and Serbia) were automatically granted payment moratoriums. Countries implemented different approaches to both the duration of the payment moratorium and to the capitalization of interest during the moratorium period (with or without compound interest). At the peak, up to € 11 billion of loans were subject to a moratorium. While moratoriums in some countries have already expired, there was still a volume of almost € 3 billion at the balance sheet date, mostly in Hungary where the moratorium was extended to the middle of 2021.
To counter the economic downturn caused by the COVID-19 pandemic, many countries adopted various support measures for the economy and to protect jobs. The measures include various forms of direct financial support for individuals, households and businesses, as well as bridge loans extended by banks and guaranteed by governments to ensure that companies have sufficient liquidity during the COVID-19 pandemic.
In order to strengthen the capital base of banks and financial institutions during the COVID-19 pandemic, many countries introduced restrictions on dividend payments for the 2019 and 2020 financial years, either through recommendations from supervisory authorities or through enacted legislation for the duration of the COVID-19 pandemic. In contrast to many EU countries, however, there were dividend payments from Russia and Ukraine totaling € 535 million.
The economic shutdown caused by the COVID-19 pandemic in March 2020 has had unprecedented economic repercussions. In rapid succession, countries where RBI is active imposed restrictions to limit the transmission of COVID-19. In order to alleviate the economic consequences caused by these restrictions, policy interventions were enacted to assist individuals, households and businesses, as well as provide temporary supervisory relief measures for banks. Stabilization measures which affect RBI include payment moratoriums, direct government assistance programs and subsidies to mitigate the economic impact, as well as restrictions on cross-border capital movements and dividend payments.
In June 2020, the Slovakian government decided to completely abolish the bank levy which had initially been doubled at the beginning of 2020 from the second half of 2020. In 2020, RBI paid € 26 million in bank levies in Slovakia (previous year: € 24 million).
In this environment, operating income decreased 5 per cent, or € 280 million, and was influenced in particular by a 5 per cent decline in net interest income and a 3 per cent decline in net fee and commission income. The lockdown measures resulted in revenue-related reductions, especially in the second quarter, while net interest income was affected by lower interest rates, primarily as a result of key interest rate cuts in some markets. On the other hand, the currency effect was also reflected in general administrative expenses. Combined with reductions in other administrative expenses, this resulted in a decrease of 5 per cent or € 144 million.
The recession caused by COVID-19 negatively impacted RBI primarily through impairment losses on financial assets in the amount of € 630 million, corresponding to an increase of € 396 million, two-thirds of which related to corporate customers. The main portion of new provisions is attributable to the stage transfer to stage 2 in the ECL calculation (€ 301 million net), while impairment losses on defaulted loans (stage 3) increased only € 123 million.
Net trading income and the fair value result improved € 111 million year-on-year to € 94 million. In the previous year, there was a one-off effect from valuation losses on unhedged portfolios that have been incorporated into a hedge relationship since mid2019. At head office, positive changes were recorded in the financial year from the valuation of loans and advances carried at fair value as well as interest rate and credit derivatives. In contrast, gains/losses from companies valued at equity decreased € 131 million, mainly due to a one-off effect in the previous year, whereby RBI benefited from income at Raiffeisen Informatik related to the IPO of SoftwareONE.
General administrative expenses declined € 144 million yearon -year to € 2,949 million. Currency translation resulted in a positive effect of € 113 million in the reporting period, mainly due to the devaluation of the Belarusian ruble (down 19 per cent), the Russian ruble (down 14 per cent) and the Hungarian forint (down 8 per cent) on an average basis for the period.
This was primarily due to an increase in short-term investments as a result of excess liquidity. Consequently, the net interest margin decreased 29 basis points to 2.15 per cent. On a currency-adjusted basis, lending grew around 5 per cent.
Net fee and commission income declined 3 per cent, or € 59 million, to € 1,738 million, primarily due to volume reductions related to COVID-19 in the second quarter, especially in the area of clearing, settlement and payments services, and due to currency devaluations.
Comparison of results with the previous quarter Quarterly results in € million Q4/2019 Q1/2020 Q2/2020 Q3/2020 Q4/2020
At 1.9 per cent, the NPE ratio was 0.2 percentage points lower than the previous year, primarily as a consequence of the increase in loan volumes, while non-performing loans remained almost stable due to sales and derecognition. The NPE coverage ratio improved 0.5 percentage points to 61.5 per cent due to the additional impairment losses.
Net trading income and fair value result 70 37 25 33 (2)
Development of fourth quarter of 2020 compared to third quarter of 2020
Net fee and commission income improved 8 per cent or € 33 million to € 466 million due to one-off effects and higher volumes than in the previous quarter. As a result, income from clearing, settlement and payment services rose € 18 million to € 195 million primarily in Russia, where the fourth quarter saw remuneration from payment systems service providers and volume-related growth.
Growth in lending to customers was limited by the sharp currency devaluations and consequently declined slightly overall, by 1 per cent or € 533 million. Many markets continued to record growth in the customer business on a currency-adjusted basis. The € 1,098 million or 4 per cent increase at head office related to loans to corporate customers (€ 856 million), primarily in project and real estate financing and short-term lending to governments and the public sector (€ 867 million), whereas there was a decrease in loans to other financial corporations – mainly repo transactions. In Slovakia, loans to customers grew € 371 million or 3 per cent, predominantly driven by mortgage loans to households and real estate financing for corporate customers. Hungary and Russia recorded – on a currency-adjusted basis – increases of € 676 million or 18 per cent and € 561 million or 5 per cent respectively.
Deposits from customers grew 6 per cent or € 5,899 million despite strong currency depreciation. The largest increases occurred at head office (up € 2,051 million or 10 per cent), primarily driven by short-term deposits from non-financial corporations, in Romania (up € 1,434 million or 19 per cent), in the Czech Republic (up € 1,343 million or 10 per cent), and in Hungary (up € 727 million or 12 per cent).
Income from asset management also rose € 17 million to € 67 million due to higher volumes, especially at Raiffeisen Kapitalanlage -Gesellschaft m.b.H. and the Valida Group.
General administrative expenses increased 14 per cent, or € 95 million, to € 785 million in the fourth quarter, mainly as a result of seasonal factors.
The other result totaled € 6 million in the fourth quarter compared to minus € 38 million in the previous quarter. The main driver of this improvement was the valuation of investments in associates. In the third quarter, impairments on investments in associates were recognized in the amount of € 32 million. However, in the fourth quarter there were reversals of impairment losses totaling € 41 million, mainly stemming from the valuation of the investment in UNIQA Insurance Group AG. Impairments on non-financial assets rose € 17 million compared to the previous quarter, primarily on real estate in Russia and Slovakia. In Romania, credit-linked provisions in the amount of € 14 million were released in the third quarter due to a change in the estimated repayment rate with respect to fees, while the fourth quarter saw no further effects. At € 15 million, net modification losses were € 11 million above the previous quarter’s level.
Levies and expenses from special governmental measures in the fourth quarter mainly comprised bank levies and declined € 1 million compared to the third quarter to € 6 million. The bank levies were primarily related to current payments in Austria.
At € 133 million, impairment losses on financial assets were € 52 million below the level of the previous quarter. At head office, a € 71 million reduction was recorded, relating to post-model adjustments (subsequent model adjustments to estimates of expected credit losses) and stage 3 impairments (defaults). In the fourth quarter, the post-model adjustments mainly related to real estate and project finance, while in the third quarter significantly higher provisions were recognized for the hotel and leveraged finance portfolios. The € 20 million reduction in Russia resulted primarily from lower provisions for retail customers due to positive changes in the risk parameters. In contrast, the Czech Republic reported higher impairments than in the previous quarter (increase: € 19 million) due to a change in macroeconomic parameters for the retail and corporate customer portfolios and to defaults in the retail customer business. In Romania, the € 15 million increase was mainly driven by post-model adjustments to the office property portfolio and updates to macroeconomic data for the retail portfolio.
Securities, which largely consist of debt securities, increased € 2,623 million, primarily due to the investment of liquidity in government bonds, mainly comprising an increase of € 1,117 million at head office, € 694 million in the Czech Republic, € 445 million in Slovakia and € 376 million in Romania.
The Group’s funding from banks, which mainly relates to short-term deposits at head office, rose 23 per cent or € 5,514 million.
For information relating to funding, please refer to note (53) Liquidity management in the risk report section of the consolidated financial statements.
Total comprehensive income of € 103 million comprised profit after tax of € 910 million and other comprehensive income of minus € 806 million. The main contribution to other comprehensive income came from currency exchange rate differences, particularly for the Russian ruble (minus € 625 million), the Ukrainian hryvnia (minus € 135 million) and the Belarusian ruble (minus € 104 million). The partial hedge of the net investment resulted in a positive contribution of € 183 million.
No dividend was distributed to RBI’s shareholders in 2020 due to the ECB’s recommendations. A total of € 47 million was paid out to holders of non-controlling interests in Group companies, particularly in Ukraine. Dividend payments of € 74 million were also made on AT1 capital.
This resulted in a (fully loaded) CET 1 ratio of 13.6 per cent (down 0.3 percentage points). The dividend originally proposed for 2019 remains deducted (effect of 0.4 percentage points), as does the dividend proposal for 2020 (0.2 percentage points). The tier 1 ratio stood at 15.7 per cent (up 0.3 percentage points) and the total capital ratio at 18.4 per cent (up 0.6 percentage points).
In financial engineering, customized solutions in connection with investments, financing and hedging are developed for customers. Financial engineering encompasses not only structured investment products, but also structured financing, i.e. financing concepts that go beyond the use of standard instruments and are employed in areas such as acquisition or project financing. RBI also develops individual solutions for its customers to hedge a broad spectrum of risks, from interest rate risk and currency risk through to commodity price risk. Besides financial engineering, RBI is also actively working on the further development of integrated product solutions for international clearing, settlement and payment services in the area of cash management.
Furthermore, there are plans to develop more products and individual product components centrally and to make these available to all of the Group’s banks. RBI also expects lower costs a result of this initiative. Aside from the financial benefits, this should lead to a substantial reduction in the time required for the full digitalization of the 5 most important products across the entire Group.
The € 1,824 million increase in debt securities issued and other liabilities related mainly to head office (up € 1,722 million) as a result of the issuance of new debt securities (increase of € 1,330 million). Among the debt securities issued by RBI were a € 500 million tier 2 bond as well as a € 500 million subordinated bond.
Total capital pursuant to the CRR/Austrian Banking Act (BWG) Common equity tier 1 (CET1) after deductions amounted to € 10,762 million, representing a € 100 million reduction compared to the 2019 year-end figure. While currency effects and loan loss provisioning recognized directly in equity had a negative impact, the profit for the year increased CET1. Following the recommendation from the ECB, the Management Board proposed to the Annual General Meeting on 20 October 2020, for the entire net profit for the 2019 financial year to be carried forward. This proposal was adopted by the Annual General Meeting. However, the proposed dividend for 2020 of € 0.48 per share, as well as the dividend proposal originally announced for the 2019 financial year of € 1 per share are deducted from CET1. Tier 1 capital after deductions increased € 397 million to € 12,489 million. The increase was primarily attributable to an only slight reduction in CET1 and the issuance of € 500 million of additional tier 1 capital in July 2020. Tier 2 capital rose € 161 million to € 2,101 million. The increase was driven by the issuance of a tier 2 bond in June 2020, offset by regulatory amortization of outstanding issues. Total capital amounted to € 14,590 million, representing an increase of € 558 million compared to the 2019 year-end figure.
In its product range for retail customers and small businesses, RBI places a strong focus on the full end-to-end digitalization of the core products (accounts, cards and loans). With this and the branch network optimization which is taking place in parallel (down 300 branches by 2022), RBI expects to achieve yearly cost savings as well as additional income by 2025.
An internal control system pertaining to financial reporting has been in place for many years in the Group, which includes directives and instructions on key strategic issues. It incorporates:  The hierarchical decision-making process for approving Group and company directives, as well as departmental and divisional instructions,
 process descriptions for the preparation, quality control, approval, publication, implementation and monitoring of directives, and instructions including related controls, as well as
As the control measures were carried out on an electronic basis, the COVID-19 pandemic and associated lockdown and partial physical absence (home office) had no impact on the internal control system.
All control measures constitute part of the day-to-day business processes and are used to prevent, detect and correct any potential errors or inconsistencies in the financial reporting. Control measures range from managerial reviews of the results for the period, as well as the specific reconciliation of accounts, through to analyzing ongoing accounting processes.
The consolidated financial statements are prepared using Group-wide standardized data requirements. The accounting and valuation standards are defined and explained in the RBI Group Accounts Manual and must be applied when preparing the financial statements. Detailed instructions for the Group units on measuring credit risk and similar issues are provided in the Group directives. The relevant units are kept abreast of any changes to the instructions and standards through regular training courses.
(2) The Articles of Association contain no restrictions concerning voting rights or the transfer of shares. The regional Raiffeisen banks and direct and indirect subsidiaries of the regional Raiffeisen banks are parties to a syndicate contract (syndicate agreement ) regarding RBI AG. The terms of this syndicate agreement include not only a block voting agreement and preemption rights, but also a prohibition on sales of the RBI shares held by the regional Raiffeisen banks (with few exceptions) since the expiration of a period of three years (lock-up period) from the effective date of the merger between RZB AG and RBI AG, i.e. from 18 March 2020, if the sale would reduce the regional Raiffeisen banks’ aggregate shareholding in RBI AG (direct and/or indirect) to less than 40 per cent (previously 50 per cent) of the share capital plus one share.
(7) Pursuant to § 169 of the Austrian Stock Corporation Act (AktG), the Management Board has been authorized since the Annual General Meeting of 13 June 2019 to increase the share capital with the approval of the Supervisory Board – in one or more tranches – by up to € 501,632,920.50 through issuing up to 164,469,810 new voting common bearer shares in exchange for contributions in cash and/or in kind (including by way of the right of indirect subscription by a bank pursuant to § 153 (6) of the AktG) by 2 August 2024 at the latest and to fix the offering price and terms of the issue with the approval of the Supervisory Board. The Management Board is further authorized to exclude shareholders’ subscription rights with the approval of the Supervisory Board (i) if the capital increase is carried out in exchange for contributions in kind, or (ii) if the capital increase is carried out in exchange for contributions in cash and the shares issued under the exclusion of subscription rights do not exceed 10 per cent of the company’s share capital (exclusion of subscription rights). The (i) utilization of authorized capital with exclusion of the statutory
subscription right in the event of a capital increase in return for a contribution in cash, and the (ii) implementation of the conditional capital resolved upon in the Annual General Meeting on 20 October 2020 in order to grant conversion or subscription rights to convertible bond creditors may in total not exceed 10 per cent of the share capital of the company. The utilization of the authorized capital in the form of a capital increase in return for a contribution in kind is not covered by this restriction.
The Management Board was further authorized pursuant to § 174 (2) of the AktG by the Annual General Meeting on 20 October 2020, within 5 years from the date of the resolution, i.e. until 19 October 2025, with the consent of the Supervisory Board, to issue also in several tranches, convertible bonds with rights to convert into or subscribe to shares of the company or convertible bonds with conversion obligations (contingent convertible bonds pursuant to § 26 of the Banking Act), including convertible bonds that meet the requirements for Additional Tier 1 capital instruments pursuant to Regulation (EU) No. 575/2013 of the European Parliament and the Council of 26 June 2013 on supervisory requirements for credit institutions and investment firms, as amended, with full exclusion of shareholders’ subscription rights. The authorization includes the issuance of convertible bonds in a total nominal amount of up to € 1,000,000,000 with rights to convert into or subscribe to up to 32,893,962 ordinary bearer shares of the company with a proportionate amount of the share capital up to € 100,326,584. The issue price and the conversion ratio are to be calculated in accordance with recognized quantitative financial methodologies and the price of the company shares in a recognized pricing procedure (calculation basis of the issuance price); the issue price of the convertible bonds may not be below the proportionate amount of the share capital. In this respect, the Management Board is authorized to determine all further issuance and structural features as well as the issuance terms and conditions of the convertible bonds, in particular the interest rate, issue price, term of validity and denomination, provisions protecting against dilution, conversion period, conversion rights and obligations, conversion ratio and conversion price. The convertible bonds may also be issued – observing the limit of the corresponding equivalent value in euros – in the currency of the United States of America and in the currency of any other Organization for Economic Cooperation and Development (OECD) member state. The convertible bonds may also be issued by a company which Raiffeisen Bank International AG owns 100 per cent of, directly or indirectly. For this event, the Management Board is authorized to provide, with the consent of the Supervisory Board, a guarantee for the convertible bonds on behalf of the company and to grant the holders of the convertible bonds conversion rights into ordinary bearer shares of Raiffeisen Bank International AG and, if a conversion obligation is stipulated in the convertible bonds’ issuance terms, to enable the obligation of conversion into ordinary bearer shares of Raiffeisen Bank International AG to be fulfilled; with the exclusion of the rights of shareholders to subscribe to the convertible bonds.
convertible bonds’ issuance conditions in order to fulfil this conversion obligation. This authorization may be exercised in whole, in part or in several partial amounts for one or more purposes by the company, a subsidiary (§ 189a 7 UGB) or by third parties for the account of the company or a subsidiary and remains in force for five years from the date of this resolution, i.e. until 19 October 2025. This authorization replaces the authorization granted by the Annual General Meeting of 21 June 2018 pursuant to § 65 (1) 8 of the AktG to acquire and utilize own shares and refers also to the utilization of own shares already acquired by the company. Since that time, there were no own shares purchased on the basis of the lapsed authorization from June 2018 nor on the basis of the current authorization from October 2020.
 RBI AG is a member of the Professional Association of Raiffeisen Banks. Upon a change in control of RBI AG which results in the attainment of control by shareholders outside of the Raiffeisen Banking Group Austria, membership of the Professional Association of Raiffeisen Banks and of the Raiffeisen Customer Guarantee Scheme Austria may be terminated. RBI AG also serves as the central institution of the Raiffeisen Banking Group at a national level. Upon a change in control of RBI AG, related contracts (central institution of the liquidity group pursuant to § 27a of the BWG; membership of the federal IPS pursuant to Art. 113 (7) of the CRR) may end or change.
Raiffeisen Bank International | Annual Report 2020 subscription right in the event of a capital increase in return for a contribution in cash, and the (ii) implementation of the conditional capital resolved upon in the Annual General Meeting on 20 October 2020 in order to grant conversion or subscription rights to convertible bond creditors may in total not exceed 10 per cent of the share capital of the company. The utilization of the authorized capital in the form of a capital increase in return for a contribution in kind is not covered by this restriction.
No use has been made to date of the authority granted in June 2019 to utilize the authorized capital.
Corporate Governance The Corporate Governance Report can be found on the RBI website (www.rbinternational.com → Investors → Corporate Governance and Remuneration Policy), as well as in the Corporate Governance Report chapter of the Annual Report.
Consolidated non-financial report Pursuant to the Sustainability and Diversity Improvement Act (NaDiVeG), the consolidated non-financial statement, which has to be prepared in accordance with § 267a of the Austrian Commercial Code (UGB), is issued as an independent non-financial report (Sustainability Report). The report containing detailed information on sustainability management developments, will be published online – at www.rbinternational.com → Who we are → Sustainability– and also contains the disclosure for the parent company in accordance with § 243b of the UGB.
Another core issue was the management of the complicated situation resulting from COVID-19. Close coordination both within and with the crisis team enabled in some cases for over 95 per cent of employees at head office to work remotely from the middle of March. The P&OI division was responsible for preparing RBI for the constantly evolving legal framework, regularly updating the employees, carrying out the corresponding adminisitrative changes, as well as to consider the needs of employees and – when possible and practical – responding to these.
Outlook for RBI We expect modest loan growth in the first half of 2021, accelerating in the second half of the year.
The provisioning ratio for FY 2021 is expected to be around 75 basis points, as moratoria and government support programs expire.
On 6 February 2021, Raiffeisen Bank International AG (RBI) announced that it had signed an agreement on the acquisition of 100 per cent of the shares of Equa bank (Equa bank a.s. and Equa Sales and Distribution s.r.o.) from AnaCap Financial Partners (AnaCap), a specialist financial services private equity investor, through its Czech subsidiary Raiffeisenbank a.s. The transaction is subject to a successful closing and regulatory approvals.
Equa bank focuses on consumer lending and serves just under 480,000 customers. The proposed acquisition is part of RBI’s strategy to expand its presence in selected focus markets. The business models of Equa bank and Raiffeisenbank are very complementary, which is why the transaction would ultimately lead to strategic synergies as well as enhanced digital capabilities. As of year-end 2020, Equa bank had total assets of more than € 2.8 billion, while Raiffeisenbank a.s. reported total assets of € 15.7 billion.
The following changes to the segmentation were applied from the first quarter 2020, in order to align the segments more closely with internal management:  Joint service providers have been allocated to the Corporate Center segment from the first quarter 2020. These were previously allocated to the regional segments.
Provisioning ratio (average loans to customers) 0.60% 0.13% 0.46 PP 0.76% 0.39% 0.37 PP
 Group Corporates & Markets (business booked in Austria): operating business at head office divided into subsegments: Austrian and international corporate customers, Markets, Financial Institutions & Sovereigns, business with the Raiffeisen Banking Group (RBG), as well as specialized financial institution subsidiaries, e.g. Raiffeisen Centrobank AG, Kathrein Privatbank Aktiengesellschaft, Raiffeisen Leasing Group, Raiffeisen Factor Bank AG, Raiffeisen Bausparkasse Österreich Gesellschaft mbH, Valida Group (pension fund business) and Raiffeisen Kapitalanlage-Gesellschaft mit beschränkter Haftung. Furthermore, companies valued at equity with banking activities are allocated to this segment.
 Corporate Center: central control functions at head office (e.g. Treasury) and other group units (equity investments and joint service providers), minority interests as well as non-banking companies valued at equity.
These effects have not been adapted in the prior periods due to immateriality.
Net trading income and fair value result 19 26 (28.4)% 13 (1) –
Net gains/losses from hedge accounting 0 0 >500.0% (1) 1 –
Return on equity after tax 5.4% 9.2% (3.8) PP 2.7% 6.3% (3.7) PP
Net interest income declined 5 per cent year-on-year, or € 43 million, to € 787 million. This mainly reflected a decrease of € 65 million in net interest income in the Czech Republic because of changes in key interest rates that led to lower interest income from repo transactions and customer loans. In Slovakia, net interest income declined € 3 million, also due to a margin-related decrease in interest income from customer loans. In Hungary, lower interest expenses led to a € 22 million increase in net interest income. The segment’s net interest margin declined 22 basis points to 1.87 per cent, primarily driven by a reduction of 49 basis points in the margin in the Czech Republic.
Net fee and commission income fell 7 per cent year-on-year, or € 31 million, to € 410 million. Net fee and commission income in Slovakia declined primarily due to a change in the segment allocation of a Group unit, while in Hungary – mainly as a result of pandemic-related volume decreases in clearing, settlement and payment services – there was a decline of € 10 million to € 139 million. In the Czech Republic, income decreased € 10 million to € 121 million, principally due to a change in the regulations relating to clearing, settlement and payment services.
Other net operating income improved € 20 million, largely due to the release of a provision for litigation in Slovakia (€ 18 million ).
General administrative expenses decreased 8 per cent year-on-year, or € 57 million, to € 674 million, primarily as a result of a change in the segment allocation of a Group unit (down € 19 million) and lower staff and advertising expenses in Slovakia due to the COVID-19 pandemic. In Hungary, staff expenses declined € 8 million due to COVID-19 short-time work schemes, while other administrative expenses fell € 5 million, primarily because of a reduction in office space expenses, advertising expenses and deposit insurance fees. In the Czech Republic, staff expenses decreased € 11 million due to a decline in the average number of staff, while other administrative expenses reduced € 8 million as a result of declines in advertising and IT expenses.
The other result amounted to minus € 61 million, compared to minus € 57 million in the same period of the previous year. The change was mainly driven by net modification losses of € 17 million related primarily to payment moratoriums in Hungary, the Czech Republic and Slovakia. This was in contrast to a € 7 million decrease in impairment losses on non-financial assets. Impairment losses of € 4 million were booked for a building in Slovakia in the reporting period, whereas the impairment losses of € 11 million in the previous year mainly related to software in the Czech Republic. The allocation of € 44 million (previous year: € 49 million) to credit-linked and portfolio-based provisions for litigation in Poland in the reporting period related to mortgage loans, denominated in or indexed to a foreign currency, and was the result of changes in the parameters for the model calculation.
Net trading income and fair value result 1 1 15 32
Net trading income and fair value result (6) (7) 8 0
Net trading income and fair value result 39 39 (0.2)% 10 11 (5.9)%
Levies and special governmental measures (19) (25) (23.6)% 0 (1) –
Impairment losses on financial assets (178) (70) 155.5% (45) (34) 34.7%
Dividend income was down € 5 million to € 3 million due to lower distributions in Bulgaria and Romania.
Net trading income and the fair value result remained almost unchanged year-on-year at € 39 million. Decreases from loans, derivatives, other financial liabilities and the valuation of debt securities were offset by higher income from currency translation.
General administrative expenses declined 1 per cent, or € 6 million, year-on-year to € 714 million. Staff expenses increased moderately by 2 per cent, or € 7 million, to € 330 million, driven mainly by restructuring provisions relating to branch closures in Romania. Other administrative expenses were down € 18 million to € 267 million, in part as a result of lower deposit insurance fees in Romania (€ 6 million) and Serbia (€ 3 million). Further pandemic-related decreases in other administrative expenses were reported in advertising and consulting expenses. The fall in the average number of employees of 112 to 14,435 was driven mainly by developments in Bosnia and Herzegovina (down 65) and Croatia (down 48). The number of business outlets in the segment was down 30 year-on-year to 864, largely because of 18 branch closures in Romania. The cost/income ratio increased from 53.9 to 56.5 per cent.
The other result improved € 14 million to minus € 26 million. The main drivers were a decrease of € 18 million in net allocations to credit-linked and portfolio-based provisions for litigation in Romania and Croatia. In Romania, the allocations to provisions in connection with proceedings with the consumer protection authority were down € 11 million to € 3 million. In Croatia (proceedings relating to loan agreement clauses), they were € 6 million lower than the previous year’s level of € 20 million. In the reporting period, impairment losses on non-financial assets declined € 4 million, primarily in Romania. In contrast, net modification losses due to COVID-19 measures were up € 7 million, mostly in Romania and Serbia.
NPE coverage ratio 70.8% 69.9% 0.8 PP 70.8% 71.0% (0.2) PP
Net interest income fell 2 per cent, or € 18 million, year-on-year to € 849 million. The strongest decline of € 7 million was seen in Croatia, due to lower interest rates, especially for corporate customers. Albania reported a decrease of € 4 million as a result of lower volumes and interest rates. In Bosnia and Herzegovina, net interest income was also down € 4 million, reflecting lower interest income from customer loans. In Serbia, lower market interest rates were responsible for a € 3 million decline in net interest income. The segment’s net interest margin fell 37 basis points to 3.26 per cent. All the countries in Southeastern Europe contributed to the decrease. Serbia reported the largest reduction (down 75 basis points), which was attributable to changes in key interest rates.
Other net operating income decreased € 10 million to minus € 4 million, primarily as a result of the changed segment allocation of several Group units (€ 17 million).
Impairment losses on financial assets amounted to € 178 million in the reporting period compared to € 70 million in the same period of the previous year. Net impairments of € 100 million (increase of € 84 million) were recognized in stage 1 and stage 2 in the reporting period. Forward-looking information and estimates relating to the impact of the COVID-19 pandemic on industries and individuals working in those industries in RBI’s customer portfolio were taken into account. The impairments totaled € 54 million for loans to households, mainly in Romania (€ 35 million), and € 45 million for loans to non-financial corporations, especially in Bulgaria (€ 14 million), and Romania (€ 9 million). In stage 3 (defaulted loans), net impairments of € 64 million were recognized (increase of € 12 million). Of that amount, € 56 million related to loans to households, predominantly in Romania (€ 23 million), Bulgaria (€ 12 million) and Croatia (€ 9 million).
Net fee and commission income 12 16 40 42 50 55
Levies and special governmental measures (1) (1) 0 0 (9) (5)
Provisioning ratio (average loans to customers) 1.28% 0.51% 1.89% 1.06% 1.03% 0.07%
Impairment losses on financial assets (138) (59) 134.5% (15) (38) (61.9)%
Provisioning ratio (average loans to customers) 1.08% 0.44% 0.64 PP 0.51% 1.24% (0.73) PP
Impairment losses on financial assets (27) (3) (65) (39) (12) (3)
Return on equity before tax 3.1% 9.3% 16.1% 23.2% 10.2% 12.2%
Eastern Europe in € million 2020 2019 Change Q4/2020 Q3/2020 Change
Net fee and commission income 519 557 (7.0)% 147 126 16.7%
The segment’s profit after tax declined € 96 million, or 13 per cent, year-on-year to € 639 million. While general administrative expenses were down largely as a result of currency effects, net interest income and net fee and commission income decreased and impairments on financial assets rose. As in the previous year, the Eastern Europe segment was affected by currency volatility in the reporting period. The average exchange rate of the Belarus ruble and Russian ruble depreciated 19 per cent and 14 per cent respectively, while that of the Ukrainian hryvnia fell 7 per cent.
Net fee and commission income likewise decreased 7 per cent, or € 39 million, to € 519 million. Russia reported a volume- and currency-related reduction of € 20 million in net fee and commission income to € 374 million, mainly in clearing, settlement and payment services. Ukraine posted a decline, largely as a result of a change in the segment allocation of a Group unit.
The other result was minus € 25 million in the reporting period (comparable period: minus € 17 million). This included € 14 million (increase of € 12 million) related to the effects of modifications to contractual terms, of which Ukraine accounted for € 10 million in connection with restructuring measures for loans to households and non-financial corporations. Impairments on non-financial assets – primarily on real estate in Russia – totaled € 15 million, which was slightly lower than in the previous year.
Net interest income in the Eastern Europe segment was down 7 per cent, or € 83 million, year-on-year to € 1,060 million. In Russia, net interest income declined € 48 million as a result of currency and margin effects, although in local currency a rise of 7 per cent was reported due to higher loan volumes. In Belarus, lower market interest rates and higher refinancing costs in local currency led to a fall of € 21 million in net interest income. In Ukraine, lower market interest rates were also responsible for a decrease of € 14 million in net interest income. The segment’s net interest margin declined 51 basis points year-on-year to 5.33 per cent.
The segment’s general administrative expenses declined € 70 million year-on-year to € 651 million mainly due to currency developments in Russia and Belarus. The average number of employees decreased 983 to 17,733, which was driven largely by branch closures in Ukraine (down 99) and Russia (down 23). In addition, the change in the segment allocation of a Group unit led to a decline in the average number of employees (down 283). Currency developments in Russia and Belarus were responsible for the reduction of € 26 million in staff expenses. Other administrative expenses fell 11 per cent, or € 27 million, to € 210 million. The decline was primarily attributable to currency developments and a € 14 million decrease in deposit insurance fees in Russia as a consequence of governmental support measures in connection with the COVID-19 pandemic. The main reasons for the decline of € 13 million in other administrative expenses in Ukraine, were currency movements as well as office space and IT expenses. Depreciation was down from € 98 million to € 80 million, largely as a result of lower amortization of intangible assets and right-of-use assets in Russia. The cost/income ratio improved from 41.5 per cent to 40.1 per cent.
Impairment losses on financial assets amounted to € 138 million in the reporting period compared to € 59 million in the same period of the previous year. Net impairments of € 31 million (increase of € 19 million) were recognized in stage 1 and stage 2 in the reporting period. The increase reflected the worsening macroeconomic outlook and sector-specific effects in connection with COVID-19. Loans to non-financial corporations and loans to households accounted for € 17 million and € 7 million respectively of the impairments. In stage 3 (defaulted loans), net impairments were up € 78 million year-on-year to € 111 million, of which € 78 million related to loans to households and € 33 million to loans to non-financial corporations. Russia was the driver of the increases in both customer groups.
The NPE ratio was 2.1 per cent (2019: 2.0 per cent). The NPE coverage ratio decreased to 57.0 per cent (down 3.0 percentage points year-on-year) due to an increase in non-performing loans.
Net gains/losses from hedge accounting 0 0 (1) 0 0 0
Return on equity after tax 8.5% 9.8% (1.3) PP 7.6% 5.9% 1.7 PP
Provisioning ratio (average loans to customers) 0.42% 0.57% (0.15) PP 0.25% 0.96% (0.70) PP
Profit in the Group Corporates & Markets segment rose € 5 million year-on-year to € 288 million. The main factors behind the improvement in profit were a € 54 million increase in the operating result and a decrease in impairment losses on non-financial assets, primarily real estate (€ 27 million reduction). These were offset by € 70 million higher risk costs, mainly caused by the COVID-19 pandemic.
Main profit contributions by sub-segment: in € million 2020 2019 Change Q4/2020 Q3/2020 Change
Specialized financial institution subsidiaries and other 106 66 59.2% 25 41 (38.4)%
Net fee and commission income 417 394 5.8% 118 100 18.2%
Net gains/losses from hedge accounting 3 0 >500.0% 3 2 20.7%
NPE coverage ratio 53.4% 55.9% (2.5) PP 53.4% 60.0% (6.6) PP
The Group Corporates & Markets segment encompasses RBI’s operating business booked in Austria. The contributions to profit come from the corporate customer and markets business of head office, with further significant contributions from the Austrian specialized financial institution subsidiaries.
The other result amounted to minus € 8 million, compared to minus € 31 million in the comparable period. There were only small impairment losses on non-financial assets in the reporting period, whereas € 27 million in impairment losses were recognized in the previous year’s period on property owned by an Italian leasing company.
Corporate Center in € million 2020 2019 Change Q4/2020 Q3/2020 Change
Net trading income and fair value result (78) (80) (1.8)% (42) 1 –
Net gains/losses from hedge accounting 4 7 (44.6)% 2 2 21.1%
Impairment losses on financial assets (2) (2) 13.9% 3 (3) –
Current income from investments in associates 36 166 (78.1)% (3) 22 –
This segment essentially comprises net income from the Group head office’s management functions and other Group units. Its results are therefore generally more volatile, with the vast majority relating to intra-Group transactions and having no impact on consolidated profit. The € 264 million decrease in profit in the reporting period mainly related to lower intra-Group dividend income. In the comparable period, there was also a large contribution to profit from Raiffeisen Informatik GmbH & Co KG (accounted for at equity) originating from the sales proceeds from a listed equity interest. There was also an increase in impairments on investments in associates.
Since the company’s shares are traded on a regulated market as defined in § 1 (2) of the Austrian Stock Market Act (BörseG) (prime market of the Vienna Stock Exchange) and numerous RBI AG issues are listed on a regulated market in the EU, RBI AG is required by § 59a of the Austrian Banking Act (BWG) to prepare consolidated financial statements in accordance with the International Financial Reporting Standards (IFRSs). The eight regional Raiffeisen banks are core shareholders that collectively hold approximately 58.8 per cent of the shares, with the remaining shares in free float.
As a credit institution within the meaning of § 1 of the Austrian Banking Act, RBI AG is subject to regulatory supervision by the Financial Market Authority located at Otto-Wagner-Platz 5, A-1090 Vienna (www.fma.gv.at) and the European Central Bank located at Sonnemannstraße 22, D-60314 Frankfurt am Main (www.bankingsupervision.europa.eu).
Fair value changes due to changes in credit risk of financial liabilities [25] 12,765 (21,766)
Share of other comprehensive income from companies valued at equity [20] 8,387 29,306
Deferred taxes on items which are not reclassified to profit or loss [22, 29] 2,953 (9,885)
Cash, cash balances at central banks and other demand deposits [13, 44] 33,660,024 24,289,265
Financial assets - fair value through other comprehensive income [15, 32, 44] 4,769,186 4,781,356
Financial assets - designated fair value through profit/loss [17, 32, 44] 457,167 2,275,832
Financial liabilities - designated fair value through profit/loss [25, 32, 44] 1,506,835 1,842,725
Items which are not reclassified to profit or loss 11,184 75,736
Deferred taxes on items which may be reclassified to profit or loss [22, 29] 1,001 (4,510)
Financial assets - held for trading [18, 32, 44] 4,399,750 4,182,372
Adjustments for the reconciliation of profit/loss after tax to the cash flow from operating activities: Depreciation, amortization, impairment and reversal of impairment on non-financial assets [8, 9] 444,848 448,191
Investing activities: Cash and cash equivalents from disposal of subsidiaries (903) (28,521)
This segment encompasses the most advanced banking markets in Central and Eastern Europe, namely the EU members, Czech Republic, Hungary, Poland, Slovakia and Slovenia. In Poland, RBI is present with a reduced portfolio of retail foreign currency mortgage loans. In Slovakia, RBI is active in the corporate and retail customer business, leasing, asset management and building society business. In retail business, Tatra banka is pursuing a multibrand strategy. In Slovenia, the Group has one leasing company. The business volume of the Slovenian leasing company has been reduced as scheduled. In the Czech Republic, RBI is engaged in the real estate leasing and building society business in addition to offering traditional banking services to corporate and retail customers. The focus is on broadening relationships with affluent customers. In Hungary, the Group provides services to retail and corporate customers via the bank's countrywide network. The focus is based on corporate customers and affluent retail customers.
The following key performance indicators are relevant in ensuring a reasonable and sustainable business structure, whereby the composition of the results and the underlying portfolio parameters are of significance. The structure of the primary funding basis for loans and advances to customers is measured using the loan/deposit ratio. The net interest margin is calculated based on average interest-bearing assets.
The presentation of segment performance is based on the income statement and geared to the reporting structure internally used. Income and expenses are attributed primarily to the country and secondary to business area in which they are generated. The segment reporting is thus shown by country and region, respectively. The segment result is shown up to the profit/loss after deduction of non-controlling interests.
The following changes to the segmentation were applied from the first quarter 2020, in order to align the segments more closely with internal management:  Joint service providers have been allocated to the Corporate Center segment. These were previously allocated to the regional segments.
The segment reporting according to IFRS 8 shows the segment performance based on internal management reporting, supplemented with the reconciliation of the segment results to the consolidated financial statements. In principle, RBI’s management reporting is based on IFRS. Therefore, no differences occur in the recognition and measurement principles between segment reporting and consolidated financial statements.
Employees as at reporting date (full-time equivalents) 9,244 14,344 16,982 3,099
Significant changes in profit/loss are described below: SSeeggmmeenntt CCeennttrraall EEuurrooppee:: Profit after tax in the Central Europe segment was down € 110 million year-on-year to € 180 million, mainly due to higher impairment losses resulting from COVID-19. The decrease in profit after tax amounted to € 101 million in the Czech Republic, € 33 million in Slovakia and € 22 million in Hungary. In Poland, the after-tax loss reduced by € 46 million.
Net trading income and fair value result 18,516 39,171 56,249 92,988
SSeeggmmeenntt CCoorrppoorraattee CCeenntteerr:: This segment essentially comprises net income from the Group head office’s management functions and other Group units. Its results are therefore generally more volatile, with the vast majority relating to intra-Group transactions and having no impact on consolidated profit. The € 264 million decrease in profit in the reporting period mainly related to lower intra-Group dividend income. In the comparable period, there was also a large contribution to profit from Raiffeisen Informatik GmbH & Co KG (accounted for at equity) originating from the sales proceeds from a listed equity interest. There was also an increase in impairments on investments in associates.
Raiffeisen Bank International | Annual Report 2020 2019 in € thousand Central Europe
The consolidated financial statements are prepared in accordance with the International Financial Reporting Standards (IFRS) published by the International Accounting Standards Board (IASB) and the international accounting standards adopted by the EU on the basis of IAS Regulation (EC) 1606/2002 including the applicable interpretations of the International Financial Reporting Interpretations Committee (IFRIC/SIC). All standards published by the IASB as International Accounting Standards and adopted by the EU have been applied to the financial statements. The consolidated financial statements also satisfy the requirements of § 245a of the Austrian Commercial Code (UGB) and § 59a of the Austrian Banking Act (BWG) regarding exempting consolidated financial statements that comply with internationally accepted accounting principles. IAS 41 and IFRS 6 have not been applied as there were no relevant business transactions in the Group.
The consolidated financial statements are based on the reporting packages of all fully consolidated Group members, which are prepared according to IFRS rules and uniform Group standards. All material subsidiaries prepare their annual financial statements as at and for the year ended 31 December. Some IFRS details which are made outside the notes form an integral part of the consolidated financial statements. These are mainly explanations on net income from segments, which are included in the notes on segment reporting. In addition to the disclosures pursuant to IFRS 7 which are included in the notes, the risk report section particularly contains detailed information on credit risk, concentration risk, market risk and liquidity risk. This information is presented in accordance with IFRS 8 Operating Segments and IFRS 7 Financial Instruments Disclosures.
If estimates or assessments are necessary for accounting and measuring under IAS/IFRS rules, they are made in accordance with the respective standards. They are based on past experience and other factors, such as planning and expectations or forecasts of future events that appear likely. The estimates and underlying assumptions are reviewed on an ongoing basis. Alterations to estimates that affect only one period will be taken into account only in that period. If the following reporting periods are also affected, the alterations will be taken into consideration in the current and following periods. The critical assumptions, estimates and accounting judgments are as follows: Impairment in the lending business
The application of RBI's accounting policies requires accounting judgments of the management. RBI assesses on a forward-looking basis the expected credit losses associated with its debt instrument assets carried at amortized cost and FVOCI and with the exposure arising from loan commitments, leasing receivables and financial guarantee contracts. The calculation of expected credit losses (ECL) requires the use of accounting estimates that by definition rarely match actual results. The amount of impairment to be allocated depends on the change in the default risk of a financial instrument after it was added. In order to determine the amount of the impairment, significant credit risk parameters such as PD (Probability of Default), LGD (Loss Given Default) and EAD (Exposure at Default) as well as future-oriented information (economic forecasts) are to be estimated by management. The provision for credit risks is adjusted for this expected loss at each reporting date. The methods for determining the amount of the impairment are explained in the section Impairment general (IFRS 9). Quantitative information and sensitivity analyses are presented in the notes under (36).
To counter the economic downturn caused by the COVID-19 pandemic, many countries have prepared and, in some cases, already adopted various economic support measures to protect jobs. The measures include various forms of direct financial support for individuals, households and businesses, as well as bridge loans extended by banks and guaranteed by governments to ensure that companies have sufficient liquidity during the COVID-19 pandemic.
In addition to the significant accounting judgments and main sources of estimation uncertainty mentioned above, the following section on accounting policies related to COVID-19 explains in more detail impairment testing of goodwill and of companies valued at equity.
Payment moratoriums are not considered to automatically trigger a significant increase in credit risk (SICR). RBI will instead continue to apply its defined assessment criteria consisting of qualitative information and quantitative thresholds. Additional details on the estimation of expected credit losses (ECL) related to the COVID-19 pandemic can be found under (34) Credit quality analysis and (36) Expected credit losses.
Hungary until year-end 2020/until mid of 2021 opt-out/opt-in principal, interest, fees
The income statement items were translated at the average exchange rates during the year calculated on the basis of month-end rates. Differences arising between the exchange rate as of the reporting date and the average exchange rate applied in the income statement were offset against equity (retained earnings). According to IAS 21, in cases of significantly fluctuating exchange rates, the transaction rate was used instead of the average rate.
The following exchange rates were used for currency translation: 2020 2019 As at Average As at Average Rates in units per € 31/12 1/1-31/12 31/12 1/1-31/12
Financial assets - fair value through other comprehensive income 10,982 14,896
Dividend income fell € 9,161 thousand to € 22,121 thousand. The item investments in subsidiaries and associates, which includes dividend income from subsidiaries not fully consolidated and associates not valued at equity, showed a decline of € 4,432 thousand. Lower income in Bulgaria and Group Corporates & Markets were primarily responsible for this decline. The item financial assets – fair value through other comprehensive income decreased by € 3,914 thousand, mainly due to distributions from investments in the Czech Republic in the previous year, while no dividends were paid in the reporting period.
Net income from clearing, settlement and payment services reduced by € 55,395 thousand to € 701,184 thousand, largely due to currency effects, the COVID-19 measures imposed and consequently lower customer activity in almost all countries, but most strongly in Russia, Croatia, Romania, and Hungary. In addition, the change in payment transaction regulations led to a decline in earnings in the Czech Republic and Bulgaria. Net income from foreign exchange business also decreased by € 16,594 thousand to € 358,379 thousand due to volume-related factors, primarily in Russia and Romania. Net income from loan and guarantee business fell € 15,722 thousand to € 201,842 thousand, with the largest decline at head office resulting from guarantee business and lower fees due to unused credit lines. In contrast, net income from custody business increased € 25,637 thousand to € 74,397 thousand due to higher volumes and income in Russia and at head office. Similarly, net income from asset management registered a volume-related increase of € 21,169 thousand to € 243,300 thousand at Raiffeisen Kapitalanlage-Gesellschaft m.b.H., in Valida Group and in Romania. In contrast, net income from customer resources distributed but not managed fell by € 8,228 thousand and other net income by € 7,790 thousand, primarily in Russia, as a result of lower volumes of insurance products, lower income from collection services, and from coin and banknote trading.
Net gains/losses on financial assets and liabilities - held for trading 81,050 (331,130)
Net gain/losses on financial assets and liabilities - designated fair value through profit/loss 7,859 31,361
The decrease was attributable to Raiffeisen Informatik GmbH & Co KG, whose extraordinarily high current income of the previous year resulted from a valuation gain of and sales proceeds from a listed investment (SoftwareONE).
from derivatives. In this context, economic hedges for interest rate risk were entered into in the second half of 2019. As a result, corresponding valuation losses in the reporting period were almost entirely neutralized. A further positive change resulted from the valuation of economic hedging relationships pertaining to a building society portfolio that had generated a loss of € 53,566 thousand in the comparable period of the previous year, but was incorporated into a hedge accounting relationship according to IAS 39 in the second quarter of 2019, which led to valuation changes being largely neutralized from then on. In addition, head office reported a positive change of € 26,528 thousand, mainly in connection with the valuation of interest rate and credit derivatives as well as loans and advances carried at market value.
The deposits held for trading were mainly affected by losses on spot transactions in Russia. The losses were incurred in connection with the hedging of foreign currency transactions with customers; corresponding commission income is included in net fee and commission income. Opposite valuations or realized net gains/losses on the foreign exchange derivatives that are used in this context and held for economic hedge purposes are included in the derivatives item.
The changes of minus € 23,584 thousand in debt securities – designated fair value through profit/loss were primarily caused by valuation changes at head office as a result of movements in the interest rate environment and in credit spreads. These changes are set against opposite valuations of derivatives held for economic hedge purposes that are included in the net gains/losses on financial assets and liabilities – held for trading item.
Fair value changes of the hedged items attributable to the hedged risk 124,195 51,314
The fair value changes of hedging instruments of minus € 125,019 thousand compared to € 48,137 thousand in the previous year and the fair value changes of the hedged items attributable to the hedged risk of € 124,195 thousand compared to € 51,314 thousand in the previous year were mainly attributable to Raiffeisen Bausparkasse Gesellschaft m.b.H. and the Czech Republic.
Raiffeisen Bank International | Annual Report 2020 from derivatives. In this context, economic hedges for interest rate risk were entered into in the second half of 2019. As a result, corresponding valuation losses in the reporting period were almost entirely neutralized. A further positive change resulted from the valuation of economic hedging relationships pertaining to a building society portfolio that had generated a loss of € 53,566 thousand in the comparable period of the previous year, but was incorporated into a hedge accounting relationship according to IAS 39 in the second quarter of 2019, which led to valuation changes being largely neutralized from then on. In addition, head office reported a positive change of € 26,528 thousand, mainly in connection with the valuation of interest rate and credit derivatives as well as loans and advances carried at market value.
The € 26,070 thousand decrease in equity instruments – mandatorily fair value through profit/loss mainly resulted from a one-off effect in the comparable period of the previous year, during which a one-off gain was booked from the sale of equity instruments in Slovakia.
Ineffectiveness of cash flow hedge recognized in profit or loss 403 (11)
Net gains/losses from hedge accounting amounted to minus € 421 thousand (2019: €3,166 thousand) in the reporting year. Despite the dynamic interest rate environment, hedging efficiency remains high. In order to counter fluctuations in interest rates, hedge accounting is increasingly being used at RBI.
The fair value changes of hedging instruments of minus € 125,019 thousand compared to €48,137 thousand in the previous year and the fair value changes of the hedged items attributable to the hedged risk of € 124,195 thousand compared to € 51,314 thousand in the previous year were mainly attributable to Raiffeisen Bausparkasse Gesellschaft m.b.H. and the Czech Republic.
Swap contracts in euros and US-dollars have already been changed to ESTR and SOFR. This transition had no material impact on the values of hedge accounting at RBI. In coordination with the IASB project Interest Rate Benchmark Reform, Phase 1, the prospective efficiency measurement of hedge relationships was calculated under the assumption that the expected cash flows will not be changed by the IBOR reform.
General administrative expenses declined € 144,440 thousand year-on-year to € 2,948,625 thousand. Currency developments led to a decrease in general administrative expenses of € 113,111 thousand during the period under review, mainly due to the devaluation of the Belarus ruble of 19 per cent, the Russian ruble of 14 per cent and the Hungarian forint of 8 per cent (based on the average rate for the period).
Staff expenses decreased 3 per cent, or € 44,534 thousand, to €1,565,507 thousand, the average headcount fell year-on-year by 828 full-time equivalents to 46,345 employees. The currency development in the Eastern European countries and COVID-19 related staff reductions as well as COVID-19 short-time work were responsible for the decrease. In addition, there was a positive effect of € 22,348 thousand at head office due to a restructuring provision for an optimization program built in the previous year. Regular salary adjustments provided a boost in some markets.
Moreover, there is an individual pension commitment through a pension fund which is secured by reinsurance. The Management Board members’ contracts either run for the duration of their term of office or are limited to a maximum of five years. In the event of early termination of a Management Board member’s contract without good cause, the severance payment is limited to a maximum of two years’ total annual remuneration (except for one member of the Management Board covered by previous contractual arrangements).
Deposit insurance fees decreased € 16,383 thousand with the reduction in Russia being a temporary measure in support of credit institutions during the pandemic. Due to the compensation payout for Commerzialbank Mattersburg im Burgenland AG and Anglo Austrian AAB AG depositors from the deposit insurance scheme (Einlagensicherung AUSTRIA Ges.m.b.H.) and the resulting reduction in scheme funds, RBI expects about € 5 million higher annual contribution payments to ensure the statutory target level from the deposit insurance scheme.
Result from non-current assets and disposal groups classified as held for sale and deconsolidation 5,605 50,224
In the reporting period, impairment on investments in associates amounted to € 67,574 thousand (previous year period: € 96,147 thousand) and mainly concerned impairment on shares in UNIQA Insurance Group AG due to lower value in use (€ 48,618 thousand ) and LEIPNIK-LUNDENBURGER INVEST Beteiligungs AG (€ 29,207 thousand), mostly due to the poorer economic outlook caused by COVID-19 pandemic. Further details can be found under (20) Investments in subsidiaries and associates.
The result of deconsolidation amounted to € 1,194 thousand in the reporting period after € 52,048 thousand in the previous year (positive effects from the sale of real estate in Slovakia of € 49,812 thousand and in the Czech Republic of € 8,198 thousand). In the reporting period, four subsidiaries were excluded from the consolidated group due to immateriality and one subsidiary was sold.
Bank levies affected Austria with the fourth and last part of an one-off payment of € 40,750 thousand as well as current payments of € 18,596 thousand (2019: € 57,080 thousand in total), Hungary of € 12,842 thousand (2019: € 12,708 thousand), Slovakia of € 25,550 thousand (2019: € 23,881 thousand) and Poland of € 5,364 thousand (2019: € 6,200 thousand). The bank levy in Slovakia was abolished for the second half of 2020 at the end of June. At the beginning of 2020, the bank levy was doubled (increase from 0.2 per cent to 0.4 per cent of the assessment basis). In Romania, the bank levy was introduced for the first time in 2019 leading to a payment of € 9,908 thousand. In 2020, the bank levy was abolished again.
Impairment losses on loans and advances and debt securities rose year-on-year by € 424,016 thousand to € 616,098 thousand. Of this, € 314,838 thousand was accounted for loans to non-financial corporations and € 255,483 thousand for loans to households. Compared to the previous year, however, impairment on loan commitments, financial guarantees and other commitments decreased € 28,413 thousand to € 13,478 thousand.
In Stage 3 (defaulted loans), net impairments of € 301,529 thousand were allocated (2019: € 178,512 thousand). This included € 152,167 thousand for households, primarily in Russia (€ 72,756 thousand), Romania (€ 22,977 thousand) and Slovakia (€ 16,896 thousand), as well as € 138,580 thousand for non-financial corporations, predominantly in Austria (€ 50,270 thousand ), Russia (€ 30,881 thousand), in the Czech Republic (€ 30,754 thousand) and in Slovakia (€ 25,692 thousand).
Net income from non-current assets and disposal groups classified as held for sale 6,799 (1,824)
At € 47,353 thousand, impairment on non-financial assets were lower by € 11,928 thousand. In the reporting period, the goodwill of Raiffeisen Kapitalanlage-Gesellschaft was impaired by € 26,864 thousand. The impairment was related to the poorer economic outlook caused by the COVID-19 pandemic, which on the statement of financial position side reduced the expected volume of growth of Raiffeisen Kapitalanlage-Gesellschaft in future years and thus the profit expectations due to the associated decline in the achievable fee and commission income. Raiffeisen KapitalanalgeGesellschaft`s reduced growth and profit prospects were accompanied by a reduction in the return on equity expected in the future. Impairment on other non-financial assets of € 20,489 thousand (previous year period: € 59,281 thousand) was made on real estate in Russia and Slovakia. In the previous year, impairment concerned real estate in Russia and Italy as well as software in the Czech Republic.
Due to COVID-19 pandemic adjustments of € 282,075 thousand were booked, with non-financial coporations accounting for € 235,882 thousand and households for € 46,193 thousand. The increased impairments were primarily due to post-model adjustments (€ 262,507 thousand) and adjustments to forward-looking information (€ 19,568 thousand).
The effective tax rate increased 3.5 percentage points to 26.3 per cent. This was due to the lower profit contribution from head office, among other things due to impairments on loans, on companies valued at equity and on the goodwill of Raiffeisen Kapitalanlage -Gesellschaft.
Tax decrease because of tax-exempted income from equity participations and other income 42,521 86,658
The item impairment on loss carry forwards improved mainly due to the impairment on deferred tax assets in Poland of € 25,060 thousand in the previous year. Other large effects resulted from non-recognized deferred taxes arising from net investment hedge of € 45,698 thousand (2019: € 12,772 thousand), non-recognized deferred taxes arising from impairments on companies valued at equity of € 16,893 thousand (2019: minus € 24,037 thousand) and on the goodwill of Raiffeisen Kapitalanlage-Gesellschaft of minus € 6,716 thousand. These deferred taxes were not capitalized because the updated medium-term tax planning did not provide usability.
Information on current and open tax proceedings can be found under (55) Pending legal issues. Furthermore, there are no material tax interpretations that would require disclosure within the meaning of IFRIC 23.
(14) Financial assets – amortized cost in € thousand Gross carrying amount Accumulated impairment Carrying amount Gross carrying amount Accumulated impairment Carrying amount
(13) Cash, cash balances at central banks and other demand deposits
This item also included € 194,116 thousand (2019: € 157,430 thousand) in cash securities, mainly for borrowed securities.
The item equity instruments in financial assets – fair value through other comprehensive income comprised the following items: Visa Inc., San Francisco (US), Class C Common Stock and Series C Preferred Shares − 58,530
(15) Financial assets – fair value through other comprehensive income in € thousand Gross carrying amount1 Accumulated impairment Carrying amount Gross carrying amount1 Accumulated impairment Carrying amount 1 Gross carrying amount is defined according to FINREP Annex V 1.34(b).
DZ BANK AG, Frankfurt am Main (DE), Deutsche Zentral-Genossenschaftsbank, ordinary shares 12,047 12,816
The dividends paid on equity instruments – fair value through other comprehensive income amounted to € 10,982 thousand (2019: € 14,896 thousand).
Securities under financial assets – held for trading provided as collateral, which the recipient is entitled to sell or pledge, amounted to € 50,836 thousand (2019: € 125,789 thousand).
Positive fair values of derivatives in micro fair value hedge 212,151 278,154
Raiffeisen Informatik GmbH & Co KG, Vienna (AT) 47.6% 133,042 147,076
Significant influence over UNIQA Insurance Group AG exists as a result of a syndicate agreement with the other core shareholders that governs the right to appoint members of the Supervisory Board, among other things. Significant influence over Oesterreichische Kontrollbank Aktiengesellschaft exists as a result of two permanent positions on the Supervisory Board.
Fair value adjustments of the hedged items in portfolio hedge of interest rate risk 160,612 (4,909)
The carrying amount of the item positive fair value adjustments of the hedged items in portfolio hedge of interest rate risk changed year-on-year from minus € 4,909 thousand to € 160,612 thousand. This increase was primarily the result of the further increase in value of the loans and advances in the portfolio hedge of Raiffeisen Bausparkasse Gesellschaft m.b.H. (up € 69,819 thousand) and the decrease in interest rates in the Czech Republic for fixed-rate loans in portfolio fair value hedges (up € 93,098 thousand).
Investments in associates valued at equity are as follows: in € thousand Share in %
The carrying amount of investments in associates valued at equity decreased from € 836,406 thousand to € 747,861 thousand. The decreases relating to card complete Service Bank AG, LEIPNIK-LUNDENBURGER INVEST Beteiligungs Aktiengesellschaft and UNIQA Insurance Group AG are mainly due to the pandemic and its economic effects.
Share in the capital increase 0 0 0 0 0 0
Total comprehensive income attributable to the Group (12) 2,747 11,030 2,665 7,430
At the end of each reporting period an assessment is made whether there is any indication that the carrying amount of an equity investment is higher than its recoverable amount. IAS 36 has a list of external and internal indicators of impairment. If there is an indication that a company valued at equity may be impaired, then the asset's recoverable amount is calculated. The following key assumptions have been made for the impairment test: 2020 2019 Cash generating units OeKB PSS UNIQA OeKB PSS UNIQA
Financial information on associates valued at equity is as follows: 2020 OeKB2 in € thousand CCSB EMCOM LLI1 NTB 31/12/2019 OEHT
Group's interest in net assets of investee as at 31/12 10,360 6,745 149,787 12,057 65,231 12,470 1 Consolidated financial statements: Profit and equity is after deduction of non-controlling interests. 2 Values as at 31 December 2019 since more recent data is not available CCSB: card complete Service Bank AG, Vienna (AT) EMCOM: EMCOM Beteiligungs GmbH, Vienna (AT) LLI: LEIPNIK-LUNDENBURGER INVEST Beteiligungs Aktiengesellschaft, Vienna (AT) NTB: NOTARTREUHANDBANK AG, Vienna (AT) OeKB: Oesterreichische Kontrollbank Aktiengesellschaft, Vienna (AT) OEHT: Österreichische Hotel- und Tourismusbank Gesellschaft m.b.H., Vienna (AT)
Prva stavebna sporitelna a.s. has operated building society business in the Slovak market since 1992. It has a 73 per cent market share.
The UNIQA Group is one of the leading insurance groups in its core markets of Austria and CEE. The group has approximately 40 companies in 18 countries and serves about 15.5 million customers. The Brand UNIQA and Raiffeisen Versicherung are two strong insurance brands in Austria and are well positioned in the CEE markets.
Planning assumptions reflect actual external framework conditions and were approved by the Supervisory Board.
The new strategy UNIQA 3.0 is a positive response to the challenges arising along megatrends such as: low interest rates and the shift of economic power, demographic and social change, innovation and digitalization, climate change. The core markets remain Austria and CEE. UNIQA will invest in IT, digitalization and innovation. There will be a customerfocused Group reorganization and cost cuts in Austria.
A reasonable possible downside scenario would not materially impair the valuation of Raiffeisen Informatik GmbH & Co KG since most of this company’s assets consist of cash, which is not sensitive to changes in planning assumptions.
The fair value of investment property was € 391,916 thousand (2019: € 331,243 thousand).
In the two core areas of milling and vending (hot and cold beverages and food from vending machines), the LLI companies are market leaders in Austria and in some EU countries (Eastern Europe and Germany). The group is growing continuously - both through the expansion of existing subsidiaries and through acquisitions.
Planning assumptions take into account the development of volumes in export finance and show net loan expansion to continue leveling off in subsequent years. From 2022, a decrease is assumed due to the expiry of the special Kontrollbank Credit Line (KRR) framework credit. OeKB also assumes a stable, low interest rate level. The current planning assumptions were approved as such by the Supervisory Board.
Change in consolidated group Exchange differences Additions Disposals Transfers As at 31/12/2020
A sensitivity analysis of material properties recognized as assets in the Group found that the recoverable amounts estimated using the replacement cost method were much higher overall than the carrying amounts. The analysis demonstrated that the recoverable amount exceeds the carrying amounts of the material properties.
The RBI Group IT landscape consists of dedicated business solutions to support and process products and services offered to our customer segments, to ensure compliance and to support bank steering and reporting needs on local and on Group level. The main functionalities are covered either by core banking systems or dedicated business solutions. The main functionalities are customer relationship management, retail banking management, credit management, other product management, clearing systems, treasury and markets. Other dedicated business solutions are data warehouses, risk management, accounting, tax, regulatory reporting, compliance, internal controls, digital services, cyber security, collateral management and other non-core services.
Write-ups, amortization, depreciation, impairment Carrying amount in € thousand Cumulative hereof write-ups hereof depreciation/impairment As at 31/12/2020
Office furniture, equipment and other tangible fixed assets (652,047) 0 (90,112) 326,561
Acquired and internally developed software in € thousand Gross carrying amount Accumulated impairment Carrying amount Gross carrying amount Accumulated impairment Carrying amount
At the end of each reporting period an assessment is made as to whether there is any indication that the carrying amount of a software asset is higher than its recoverable amount. IAS 36 has a list of generic external and internal indicators of impairment which been adapted to identify potential impairment in software in use and in development. If there is an indication that a soft
ware asset may be impaired, then the asset's recoverable amount is calculated. In 2020 impairment losses of € 4,793 thousand were booked for software recognized in Hungary.
The carrying amount of properly maintained computer software declines on a linear basis whereas the recoverable amount does not become obsolete in any predictable way and tends to vary over time by a relatively small amount. Changes in the recoverable amount tend to be driven by the increasing productivity of software, technological advances, increasing labor costs and software enhancements as well as decisions about replacement.
Substantial past interest rate cut by CNB and rates that are expected to remain close to zero result in a low contribution to liability margins.
Net deferred taxes were derived from the following items: Financial assets - amortized cost 90,793 76,684
Financial assets and liabilities - designated fair value through profit/loss 1,083 18,768
Key assumptions that have been made for the individual cash generating units: 2020 2019 Cash generating units RBCZ RKAG RBCZ RKAG
Growth rates in phase I and II 55.3% 10.0% 2.1% 1.8%
RKAG RKAG is one of the leading Austrian fund enterprises, has been active in international markets for years and is a well-known player in numerous European countries.
Financial assets - fair value through other comprehensive income 15,156 26,619
In the consolidated financial statements, deferred tax assets are recognized for unused tax loss carry forwards which amounted to € 12,824 thousand (2019: € 16,664 thousand). The tax loss carry forwards are mainly without any time limit. The Group did not recognize deferred tax assets from tax loss carry forwards of € 560,001 thousand (2019: € 595,563 thousand) because from a current point of view there is no prospect of realizing them within a reasonable period of time.
Merchandise inventory and suspense accounts for services rendered not yet charged out 168,433 286,759
Non-current assets and disposal groups classified as held for sale 22,269 20,588
Merchandise inventory and suspense accounts for services rendered not yet charged out included property under construction or not yet sold of Raiffeisen Leasing Group in Austria and Italy of € 93,511 thousand (2019: € 136,935 thousand).
Deposits from customers revealed a clear preference for short-term deposits starting mid-year. Current accounts/overnight deposits recorded steep rises at head office (up € 2,820,228 thousand) and in the Czech Republic, Russia, Romania and Hungary (up € 5,380,457 thousand). The increase was mainly driven by households and non-financial corporations, although it was offset by large exchange rate effects, especially in Russia and Hungary. Deposits with agreed maturity decreased € 5,507,291 thousand year-on-year. The reduction was particularly pronounced in Russia (down € 2,285,675 thousand). This decrease was attributable to declining volumes among households and non-financial corporations as well as large exchange rate effects. The Czech Republic (down € 989,088 thousand) and Slovakia (down € 545,138 thousand) also contributed to the decrease.
The story was very different for deposits from non-financial corporations. In this case, head office contributed heavily to the increase (up € 3,238,509 thousand). Russia also recorded an increase in local currency terms, but this was more than offset by currency effects and ended up as a decline of € 951,331 thousand. Regarding deposits from households (up € 3,085,569 thousand ), deposits with agreed maturity decreased in favor of short-term deposits. The largest gains were reported in Romania (up € 888,798 thousand), the Czech Republic (up € 801,770 thousand) and Slovakia (up € 605,402 thousand). In Russia, large gains in local currency terms were offset by exchange rate effects, resulting in a small increase of € 94,010 thousand.
Change in carrying amount 102,198 hereof cash 87,765 hereof effect of exchange rate changes (3,168)
Other debt securities issued 1,225,724 1,514,704 hereof convertible compound financial instruments 4,424 9,828 hereof non-convertible 1,221,300 1,504,876 hereof subordinated financial liabilities 227,614 405,206
Fair value adjustments of the hedged items in portfolio hedge of interest rate risk 24,062 (35,616)
Negative fair values of derivatives in micro cash flow hedge 848 3,651
Negative fair values of derivatives in net investment hedge 8,787 6,706
Provisions decreased € 22,061 thousand to € 1,060,670 thousand. This decline was primarily attributable to bonus payments of € 38,720 thousand. Provisions for pending legal issues and tax litigation increased € 24,921 thousand. Provisions were used in Russia (€ 23,599 thousand), released in Slovakia (€ 18,204 thousand) and increased in connection with pending proceedings regarding Swiss franc loans in Poland (up € 39,822 thousand to € 89,188 thousand) and in Croatia (up € 13,201 thousand to € 34,422 thousand). Provisions were also increased due to pending proceedings with the consumer protection agency in Romania. These provisions for Raiffeisen Bank S.A. rose € 3,424 thousand to € 17,584 thousand. The provisions for Aedificium Banca pentru Locuinte S.A. rose € 8,974 thousand to € 18,815 thousand in connection with an audit by the Romanian tax court.
Provisions for off-balance sheet items 12,317 0 1,076 (10,117) 0 (2,072) 1,204
Other commitments and guarantees according to IAS 37 12,317 0 1,076 (10,117) 0 (2,072) 1,204
Other long-term employee benefits 42,066 453 16,430 (46) (535) 525 58,893
The return on plan assets for 2020 was minus € 1,475 thousand (2019: € 5,103 thousand). The fair value of rights to reimbursement recognized as an asset was € 14,659 thousand as at year-end 2020 (2019: € 14,560 thousand).
The following table shows the changes in provisions for liabilities and charges, although provisions for off-balance-sheet items pursuant to IFRS 9 are not included. These are shown under (38) Development of impairments.
For pensions there are different plans: unfunded, partly funded and fully funded. The partly and fully funded plans are all invested by Valida Pension AG. Valida Pension AG is a pension fund and is subject in particular to the provisions of the PKG (Pension Act) and BPG (Company Pension Act).
The defined benefit obligations developed as follows: Defined benefit obligation as at 1/1 153,345 144,811
In the reporting year, most of the plan assets were quoted on an active market; less than 20 per cent were not quoted on an active market.
The following table shows the longevity assumptions used to calculate the net defined benefit obligation: Longevity at age 65 for current pensioners - males 23.1 22.9
Changes at the reporting date to one of the relevant actuarial assumptions, holding other assumptions constant, would have affected the defined benefit obligation by the amounts shown below: 2020 2019 in € thousand Increase Decrease Increase Decrease
Future salary growth (0.5 per cent change) 1,178 (1,155) 762 (759)
The other termination benefits developed as follows: Defined benefit obligation as at 1/1 99,852 89,290
Details of employee benefit expenses (expenses for defined benefit pension plans, other benefits due to termination of employment ) are stated under (8) General administrative expenses.
Longevity at age 65 for current pensioners - females 25.5 25.4
Insurance contract liabilities must be regularly reviewed and subjected to a liability adequacy test (LAT). The adequacy test determines, on the basis of a comparison with estimated future cash flows, whether the carrying amount of insurance liabilities needs to be increased. In 2020 and 2019, there was no charges related to the liability adequacy test.
Reserve risk – The largest impact on the reserve risk is the regulatory reduction of the maximum allowable technical interest rate for the reserve calculation. Due to the longevity of the policies offered by the company, a small shift in the technical interest rate has a major impact on the amount of reserves.
Increase in the risk margin by 1.5 percentage points 126,339 120,543 5,796
The list of all companies which were included in the scope of consolidation for the first time can be found under (69) Group composition.
The Group’s return on equity amounted to 6.4 per cent in the financial year (2019: 11.0 per cent). It declined 3.6 percentage points due to the 7 per cent increase in the average equity base and lower consolidated profit.
The Annual General Meeting held on 20 October 2020 authorized the Management Board pursuant to § 65 (1) 8, § 65 (1a) and § 65 (1b) of the AktG to purchase own shares and to retire them if appropriate without requiring any further prior resolutions to be passed by the Annual General Meeting. Own shares, whether already purchased or to be purchased, may not collectively exceed 10 per cent of the company’s share capital. The authorization to purchase own shares expires 30 months after the date of the Annual General Meeting resolution, i.e. until 19 April 2023. The acquisition price for repurchasing the shares may be no lower than € 3.05 per share and no higher than 10 per cent above the average unweighted closing price over the ten trading days prior to exercising this authorization.
The other changes presented in retained earnings resulted mainly from the initial consolidation of two asset management companies in Russia and Romania and of a payment transaction company in Romania. In addition, the valuation reserve of financial assets was reclassified from cumulative other comprehensive income to retained earnings.
As at 31 December 2020, the subscribed capital of RBI AG as defined by the articles of incorporation amounted to € 1,003,266 thousand and the subscribed capital consisted of 328,939,621 non-par bearer shares. After deduction of own shares of 322,204, the stated subscribed capital totaled € 1,002,283 thousand.
Since that time, there were no own shares purchased on the basis of the lapsed authorization from June 2018 nor on the basis of the current authorization from October 2020.
The Annual General Meeting of 20 October 2020 also authorized the Management Board, under the provisions of § 65 (1) 7 of the AktG, to purchase own shares for the purpose of securities trading, which may also be conducted off-market, during a period of 30 months from the date of the resolution (i.e. until 19 April 2023), provided that the trading portfolio of shares purchased for this purpose does not at the end of any given day exceed 5 per cent of the company's respective share capital. The consideration for each share to be acquired must not be less than half the closing price at the Vienna Stock Exchange on the last day of trading preceding the acquisition and must not exceed twice the closing price at the Vienna Stock Exchange on the last day of trading preceding the acquisition.
On 5 July 2017, RBI AG issued perpetual additional tier 1 capital (AT1) with a nominal value of € 650,000 thousand. The interest rate is 6.125 per cent p.a. until December 2022 and will be reset thereafter. RBI placed another issue of perpetual additional tier 1 capital (AT1) with a volume of € 500,000 thousand on 24 January 2018. The discretionary coupon on this issue is 4.5 per cent p.a. until mid-June 2025, after which it will be reset. On July 29, 2020, RBI placed another perpetual additional tier 1 capital (AT1) instrument in the amount of € 500,000 thousand. The discretionary coupon on this issue is 6 per cent p.a. until December 2026, after which point it will be reset. Due to the terms and conditions of issue, the additional tier 1 capital is classified as equity under IAS 32. Own shares, which have a carrying amount of € 4,969 thousand, were also deducted from the capital. The nominal value per security for all tranches is € 200 thousand.
Items that may be reclassified subsequently to profit or loss 0 316,172 (51,089) 3,101
Items that may be reclassified subsequently to profit or loss 0 (953,446) 182,792 (2,363)
Reclassification of the valuation reserve of financial assets (27,617) 0 0 (27,617)
Remeasurements reserve acc. to IAS 19 665 767 1,432 259 1,691
The capital hedge for foreign activities comprises hedges for investments in economically independent sub-units. Such hedges posted a positive result of € 182,792 thousand in the reporting year, which was principally driven by the depreciation of the Russian ruble. In the previous year, a negative result of € 51,089 thousand was posted. Cash flow hedging was applied in addition to fair value hedging at five Group units to hedge against interest rate risk. In the financial year, this led to a negative result of € 2,815 thousand (2019: € 3,324 thousand).
As opposed to the above stated financial information which only relates to significant non-controlling interests, the following table contains financial information of the significant individual subsidiaries (including controlling interests): Raiffeisen Bank Aval JSC, Kiev (UA)
The following table shows the development of deferred taxes included in other comprehensive income: in € thousand 1/1/2019 Change 31/12/2019 Change 31/12/2020
The fair value changes of equity instruments recognized in other comprehensive income generated a negative contribution of € 8,920 thousand (2019: € 97,447 thousand), while the fair value changes of debt instruments resulted in a positive result of € 10,504 thousand (2019: minus € 49,388 thousand). Changes in equity from companies valued at equity of € 6,339 thousand (2019: minus € 30,634 thousand) mainly relate to UNIQA Insurance Group AG, Vienna. They largely consist of valuation changes in the securities portfolio used for liquidity management.
Raiffeisen Bank Aval JSC, Kiev (UA) 31.8% 153,680 52,197 21,722 73,919
Dividends paid to non-controlling interests during the year1 35,045 10,029 7,929 3,017 0 1 Included in net cash from financing activities
For OTC derivatives, credit value adjustments (CVA) and debit value adjustments (DVA) are used to cover expected credit losses. The CVA will depend on the expected future exposure (expected positive exposure) and the probability of default of the contractual partner. The DVA is determined on the basis of the expected negative exposure and on RBI’s credit quality. The expected positive exposure is calculated by simulating a large number of scenarios for future points in time, taking into account all available risk factors (e.g. currency and yield curves). OTC derivatives are measured at market values taking into account these scenarios at the respective future points in time and are aggregated at counterparty level in order to then ascertain the expected positive exposure for all points in time. Counterparties with CSA contracts (credit support annex contracts) are taken into account in the calculation. The expected exposures are not calculated directly from simulated market values, but from a future expected change in market values based on a margin period of risk of ten days.
If fair value cannot be measured using either sufficiently regularly quoted market prices (Level I) or using valuation models which are entirely based on observable market prices (Level II), then individual input parameters which are not observable on the market are estimated using appropriate assumptions. If parameters which are not observable on the market have a significant impact on the measurement of the underlying financial instrument, it is assigned to Level III of the fair value hierarchy. These measurement parameters, which are not regularly observable, are mainly credit spreads derived from internal estimates.
An examination is carried out for each financial instrument to determine whether quoted market prices are available on an active market. For financial instruments classified as Level I, the fair value valuation is based directly on quoted prices for identical financial instruments on active markets. A financial instrument is assigned to Level I only in the case of ongoing pricing based on transactions that take place with sufficient frequency and sufficient volumes.
As a result of lower market depth or the reclassification from market to theoretical valuation, securities totaling € 48,164 thousand were reclassified from Level I to Level II. This related mainly to securities of central governments (€ 21,162 thousand), securities of non-financial corporations (€ 17,780 thousand) and securities of financial institutions (€ 9,222 thousand).
Financial assets - held for trading 1,852,048 2,547,586 116 1,910,478 2,271,806 88
Financial assets - designated fair value through profit/loss 405,963 37,494 13,710 2,231,152 44,675 6
Financial liabilities - held for trading 495,278 5,485,022 41 404,913 5,376,631 7,268
Financial liabilities - designated fair value through profit/loss 0 1,506,835 0 0 1,842,725 0
Non-trading financial assets - mandatorily fair value through profit/loss 328,133 0 (20,770) 122,453 (32,643)
Financial assets - fair value through other comprehensive income 187,512 0 (1,023) 6,957 (57,534)
Non-trading financial assets - mandatorily fair value through profit/loss 3,693 0 0 0 400,866
Financial assets - fair value through other comprehensive income (1,892) 311 0 0 134,330
Financial liabilities - held for trading 7,268 0 (8) 0 0
Treasury bills, fixed coupon bonds 41 DCF method All base rate of last auction
Forward foreign exchange contracts 41 DCF method Interest rate curve 10 - 30%
2020 in € thousand Level I Level II Level III Fair value Carrying amount Difference
The following table shows the loan commitments given, financial guarantees and other commitments given: Loan commitments given 34,802,877 35,135,831
Provisions for off-balance sheet items according to IFRS 9 (174,455) (160,561)
 Good are exposures which demonstrate a good capacity to meet financial commitments, with low default risk (PD range 0.1878 - 1.1735 per cent).
Raiffeisen Bank International | Annual Report 2020 2020 in € thousand Level I Level II Level III Fair value Carrying amount Difference
Other financial liabilities 0 0 434,301 434,301 434,301 0 1 Lease liabilities 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 2019 in € thousand Level I Level II Level III Fair value Carrying amount Difference
Other financial liabilities 0 0 491,814 491,814 491,814 0 1 Lease liabilities 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
Carrying amounts of the financial assets – amortized cost by rating categories and stages: 2020 Stage 1 Stage 2 Stage 3 POCI Total in € thousand 12-month ECL Lifetime ECL Lifetime ECL Lifetime ECL
Carrying amount of financial assets – fair value through other comprehensive income, excluding equity instruments, by rating categories and stages: 2020 Stage 1 Stage 2 Stage 3 POCI Total in € thousand 12-month ECL Lifetime ECL Lifetime ECL Lifetime ECL
In the reporting year, no longer defaulted, purchased or originated credit-impaired financial assets (POCI) are shown in a separate column. In the previous year, they were reported in Stage 2 and Stage 3. The category unrated includes financial assets for households for whom no ratings are available. The rating is therefore based on qualitative factors. These are mainly a portfolio of mortgage loans to households in the Czech Republic.
Provisions for off-balance sheet items according to IFRS 9 (45,071) (58,710) (70,674) (174,455)
Provisions for off-balance sheet items according to IFRS 9 (43,715) (30,069) (86,777) (160,561)
Other - Credit contracts, commodities and other contracts 2,438,248 14,063 (98,116)
Financial assets - designated fair value through profit/loss 457,167 0 0
Non-trading financial assets - mandatorily fair value through profit/loss 774,809 0 327,384
RBI employs a range of policies to mitigate credit risk, the most common of which is the acceptance of collateral for loans and advances provided. The eligibility of collateral is defined by a Group directive to ensure uniform standards of collateral evaluation. A valuation of collateral is performed during the credit approval process. This is then reviewed periodically using various validation processes. The main types of collateral which are accepted in RBI Group are residential and commercial real estate collateral, financial collateral, guarantees and movable goods. Long-term financing is generally secured and revolving credit facilities are generally unsecured. Debt securities are mainly unsecured, and derivatives can be secured by cash or master netting agreements. Collateral from leasing business is also included in the table. Items shown in cash and cash equivalents are considered to have negligible credit risk. The Group directives regarding obtaining collateral were not significantly changed during the reporting period; however, they are updated on a yearly basis.
The following table contains details of the maximum exposure from financial assets not subject to impairment provisions and the financial assets subject to impairment provisions and reconciles these to the loans and advances non-trading which is the basis of the collateral disclosures below: 2020 Maximum exposure to credit risk in € thousand
Loan commitments, financial guarantees and other commitments 0 45,686,942 45,686,942 1 The gross carrying amount follows the definition under FINREP in Annex V 1.34(b).
Subject to impairment standards hereof loans and advances nontrading as well as loan commitments, financial guarantees and other commitments
Loan commitments, financial guarantees and other commitments 0 46,342,154 46,342,154 1 The gross carrying amount follows the definition under FINREP in Annex V 1.34(b).
Financial instruments in Stage 1 have their expected credit loss measured at an amount equal to the portion of lifetime expected credit losses that result from default events possible within the next twelve months. Instruments in Stages 2 or 3 have their expected credit losses measured based on expected credit losses on a lifetime basis. According to IFRS 9, when measuring expected credit losses it is necessary to consider forward-looking information. Purchased or originated credit-impaired financial assets (POCI) are those financial assets that are credit-impaired on initial recognition. Their expected credit loss is always measured on a lifetime basis.
For retail exposures on the other hand, the remaining cumulative PDs are compared as the logit difference between “Lifetime PD at reporting date” and “Lifetime PD at origination conditional to survival up to the reporting date”. A significant increase in credit risk is considered to have occurred once this logit difference is above a certain threshold. The threshold levels are calculated separately for each portfolio which is covered by individual rating-based lifetime PD models. Based on historical data, the thresholds are estimated as the 50th quantile of the distribution of the above-mentioned logit differences on the worsening portfolio. This way, 50 per cent of the worsening in the lifetime PDs with the highest magnitude is deemed significant. That usually translates to a PD increase between 150 and up to 300 per cent, dependent on the default behavior of the different portfolios.
Loan commitments, financial guarantees and other commitments 255,464 19,139 236,325 (70,674)
In selected cases for mostly sovereign debt securities RBI makes use of the low credit risk exemption. All securities which are presented as low credit risk have a rating equivalent to investment grade or better i.e. minimum S&P BBB-, Moody’s Baa3 or Fitch BBB-. RBI has not used the low credit risk exemption for any lending business.
nomic information is also included in determining the twelve -month and lifetime PD, EAD and LGD. These assumptions vary by product type. Expected credit losses are the discounted product of the probability of default (PD), loss given default (LGD), exposure at default (EAD) and discount factor (D).
 Retail lending and mortgage loans: The loss given default is generated by stripping the downturn adjustments and other margins of conservatism from the regulatory loss given default. Forward-looking information is incorporated into the loss given default using various satellite models.
Loss given default represents RBI’s expectation of the extent of loss on a defaulted exposure. Loss given default varies by type of counterparty and product. Loss given default is expressed as a percentage loss per unit of exposure at the time of default. Loss given default is calculated on a twelve-month or lifetime basis, where twelve-month loss given default is the percentage of loss expected to be made if the default occurs in the next twelve months and lifetime loss given default is the percentage of loss expected to be made if the default occurs over the remaining expected lifetime of the loan.
 Retail lending: Stage 3 provision is generated by calculating the statistically derived best estimate of expected loss which has been adjusted for indirect costs.
Almost all of the provisions under IFRS 9 are measured collectively. Only for non-retail Stage 3 are most of the provisions individually assessed. For expected credit losses provisions modelled on a collective basis a grouping of exposures is performed on the basis of shared credit risk characteristics so that the exposures within each group are similar. Retail exposure characteristics are grouped on country level, customer classification (households and SMEs), product level (e.g. mortgage, personal loans, overdraft facilities or credit cards), PD rating grades and LGD pools/loan-to-value bands. For each combination of the above characteristics an individual model was developed. Non-retail exposure characteristics are grouped on country and product level and are used as LGD and EAD parameters.
The most significant assumptions used as a starting point for the expected credit loss estimates at year-end are shown below (source: Raiffeisen Research, November 2020).
Real GDP Full-Year 2021 Full-Year 2022 Full-Year 2023 Scenario Q4 2019 Q4 2020 Change Q4 2019 Q4 2020 Change Q4 2020
Czech Republic Base 1.8% 1.0% (0.8) PP 2.2% 6.0% 3.9 PP 1.8%
Czech Republic Base 3.5% 6.4% 2.9 PP 3.8% 6.2% 2.4 PP 5.4%
Lifetime bond rate Full-Year 2021 Full-Year 2022 Full-Year 2023 Scenario Q4 2019 Q4 2020 Change Q4 2019 Q4 2020 Change Q4 2020
Real estate prices Full-Year 2021 Full-Year 2022 Full-Year 2023 Scenario Q4 2019 Q4 2020 Change Q4 2019 Q4 2020 Change Q4 2020
For the pessimistic and optimistic scenarios the methodology has been adapted due to the COVID-19 pandemic. RBI removed an additional adjustment for the position in the business cycle, as this adjustment would imply an even stronger recovery in 2021. In terms of interest rates, a return to previously higher rate levels looks unlikely, given continuously expansionary monetary policies. Therefore, interest rates also increase less in the pessimistic scenario. The deviation of the pessimistic scenario from the base scenario for GDP has been increased in comparison to the deviation of the optimistic scenario to reflect downside risks.
Due to the complexity of the expected credit loss calculation, and the dependency of variables on one another, the table below represents a best estimate of the included post-model-adjustments in the accumulated expected credit loss amounts in Stage 1 and 2 (balance sheet items and off-balance sheet items).
2020 Modelled ECL Post-model adjustments Total in € thousand COVID-19 related Other Total 2019 Modelled ECL Post-model adjustments Total in € thousand COVID-19 related Other Total
The post-model adjustments resulted in additional Stage 1 and 2 provisions of € 321,765 thousand (2019: € 92,560 thousand), of which € 260,507 thousand are COVID-19 related. In addition to Stage 1 and 2, post-model adjustments of € 2,000 thousand were taken into account in Stage 3.
To simulate a range for potential changes to estimates and the related changed impairments, the following sensitivity analyses of the most significant assumptions affecting the sensitivity of the expected impairments were performed as follows.
2020 Accumulated impairment (Stage 1 and 2) in € thousand Simulated scenario Point in time component Forward looking component 2019 Accumulated impairment (Stage 1 and 2) in € thousand Simulated scenario Point in time component Forward looking component 100 per cent weighted pessimistic scenario by country: 2020 Accumulated impairment (Stage 1 and 2) in € thousand Simulated pessimistic scenario Point in time component Forward looking component
The tables below show the impact of staging on accumulated impairment for financial assets on the assumption that all accumulated impairment is measured based on 12-month expected losses (Stage 1).
in € thousand Accumulated impairment if 100% in Stage 1 Weighted average
The sensitivity analysis involved a recalculation of the impairments for expected credit losses in the existing models. In cases in which the post-model adjustments were significant, the results of the recalculations were adjusted correspondingly in order to take account of that fact. As a result of the complexity of the model many drivers are not mutually exclusive.
The tables below provide a comparison between the reported accumulated impairment for expected credit losses for financial assets in Stages 1 and 2 (weighted by 25 per cent optimistic, 50 per cent base and 25 per cent pessimistic scenarios) and then each scenario weighted by 100 per cent on their own. The optimistic and pessimistic scenarios do not reflect extreme cases, but the average of the scenarios which are distributed in these cases. In general, IFRS 9-specific estimates of risk parameters take account of historical default information and in particular the current economic environment (point in time) without forward-looking information. The effects of the estimates based on macroeconomic forecasts are shown in the forward-looking component. This information is provided for illustrative purposes.
(25/50/25%) Additional amounts in Stage 2 due to staging 2019 Accumulated impairment (Stage 1 and 2)
The table below shows the impact of staging on accumulated impairment for financial assets on the assumption that all accumulated impairment is measured based on lifetime expected losses (Stage 2).
The table below provides a comparison between the reported accumulated impairment for expected credit losses for financial assets in Stage 3 and the pessimistic scenario weighted by 100 per cent. The pessimistic scenario does not reflect an extreme case, but the average of the scenarios which are distributed in this case.
The contractual amount outstanding on financial assets that were written off and are still subject to enforcement activity was € 1,423,001 thousand (2019: € 1,716,563 thousand).
In the previous year, Stage 2 and 3 contained purchased or originated credit-impaired financial assets (POCI) of € 347,010 thousand. These are shown in a separate column in the reporting year.
In the previous year, Stage 2 and 3 contained accumulated purchased or originated credit-impaired financial assets (POCI) of minus € 120,417 thousand. These are shown in a separate column in the reporting year.
The following breakdown of financial assets – amortized cost by region shows the high level of diversification of RBI’s credit business in the European markets: Gross carrying amount 2020 2019 in € thousand Stage 1 Stage 2 Stage 3 POCI Stage 1 Stage 2 Stage 3 1 Austria mainly includes the business of the head office and Raiffeisen Bausparkasse Gesellschaft m.b.H. Other also includes any consolidation effects.
ECL coverage ratio 2020 2019 Stage 1 Stage 2 Stage 3 POCI Stage 1 Stage 2 Stage 3 1 Austria mainly includes the business of the head office and Raiffeisen Bausparkasse Gesellschaft m.b.H. Other also includes any consolidation effects.
Movement from 12-month ECL to lifetime ECL (11,302,083) 11,302,083 (41,053) 507,686 0.4% 4.5%
Movement from 12-month ECL to lifetime ECL (4,454,153) 4,454,153 (31,543) 301,094 0.7% 6.8%
Stage 1 amounts include assets in the amount of € 12,876,640 thousand (2019: € 10,034,042 thousand), for which the low credit risk exemption has been used. RBI has financial instruments in the amount of € 1,707,204 thousand (2019: € 1,229,826 thousand) with no expected credit losses due to collateral.
The following table shows the contingent liabilities and other off-balance-sheet commitments by counterparties and stages. RBI’s focus was on non-financial corporations: 2020 Nominal amount Provisions for off-balance sheet items according to IFRS 9 ECL Coverage Ratio in € thousand Stage 1 Stage 2 Stage 3 Stage 1 Stage 2 Stage 3 Stage 1 Stage 2 Stage 3 2019 Nominal amount Provisions for off-balance sheet items according to IFRS 9 ECL Coverage Ratio in € thousand Stage 1 Stage 2 Stage 3 Stage 1 Stage 2 Stage 3 Stage 1 Stage 2 Stage 3
Increases due to origination and acquisition 100,731 53,916 49,805 9,282 213,734
Changes due to change in credit risk (net) (54,212) 310,145 459,999 34,815 750,747
Changes due to modifications without derecognition (net) (26) (109) 6,135 6,000
Changes due to change in credit risk (net) (13,105) 35,255 (1,345) 20,805
Changes due to change in credit risk (net) (18,069) (2,644) 26,279 5,566
Cash, cash balances at central banks and other demand deposits 61 1 1 0 62
Loan commitments, financial guarantees and other commitments given 43,715 30,069 86,777 160,561
The following table shows the development of impairments on loans and bonds in the measurement categories of financial assets – amortized cost and financial assets – fair value through other comprehensive income: Stage 1 Stage 2 Stage 3 POCI Total in € thousand 12-month ECL Lifetime ECL Lifetime ECL Lifetime ECL
Development of provisions for loan commitments, financial guarantees and other commitments given: Stage 1 Stage 2 Stage 3 Total in € thousand 12-month ECL Lifetime ECL Lifetime ECL
Breakdown of impairments and provisions by asset classes: 2020 Stage 1 Stage 2 Stage 3 POCI Total in € thousand 12-month ECL Lifetime ECL Lifetime ECL Lifetime ECL
Net modifications gains/losses of financial assets (2,881) (47) 826 164 (1,938)
Gross carrying amount of modified assets as of 31/12, which moved to Stage 1 during the year − 21,072 0 0 21,072
Repurchase, securities lending and similar agreements (legally enforceable) 11,142,163 0 11,142,163 11,100,094 0 42,068 2019 Gross amount Net amount
Net amount in € thousand recognized financial liabilities recognized financial assets set-off recognized financial liabilities Financial instruments Cash collateral received
In 2020, the Group executed a new synthetic transaction, ROOF MORTGAGES 2020, which was split into a senior, a mezzanine and a junior tranche. The credit risk of the mezzanine tranche in the amount of € 181,000 thousand is guaranteed by institutional investors, while the credit risk of the junior and senior tranches is retained.
The synthetic transaction, ROOF Slovakia 2017, is split into a senior, a mezzanine and a junior tranche. The credit risk of the mezzanine tranche in the amount of € 83,800 thousand was sold to institutional investors, while the credit risk of the junior and senior tranches is retained.
Carrying amounts of financial assets transferred, but not derecognized: 2020 Transferred assets Associated liabilities in € thousand Carrying amount hereof securitizations hereof repurchase agreements Carrying amount hereof securitizations hereof repurchase agreements
Financial assets - held for trading 8,045 0 8,045 8,045 0 8,045
Financial assets - held for trading 87,435 0 87,435 85,444 0 85,444
Financial assets - designated fair value through profit/loss 46,601 0 27,925 0
Cash, cash balances at central banks and other demand deposits 33,656,615 3,409 0 0 0
Financial liabilities - designated fair value through profit/loss 0 40,767 182,163 765,999 517,906
Financial liabilities - held for trading 138,082 360,027 536,300 2,790,501 2,155,432
Non-trading financial assets - mandatorily fair value through profit/loss 16,218 0 1,572 0
Financial assets - fair value through other comprehensive income 435,517 3,029 218,097 4,836
Financial assets - designated fair value through profit/loss 29,515 137,599 556,330 1,188,421 363,968
Financial liabilities - designated fair value through profit/loss 0 134,987 264,320 913,770 529,648
Cash, cash balances at central banks and other demand deposits 24,044,341 244,923 0 0 0
Financial assets - held for trading 756,830 400,250 287,987 1,704,315 1,032,989
The following table shows the breakdown of hedging instruments by type of hedge accounting at the level of nominal amounts, both in total and by contractual termination, and at the level of the carrying amounts.
Changes in Fair value of the hedged items1 in € thousand Assets Liabilities Assets Liabilities 1 Fair value changes in the underlying transactions which were used to calculate ineffectiveness
2020 Nominal amount Maturity Carrying amount in € thousand Up to 3 months
More than 5 years Assets Liabilities 2019 Nominal amount Maturity Carrying amount in € thousand Up to 3 months
The following table shows details of the underlying transactions for fair value hedges: Carrying amount of the hedged items
The Problem Loan Committee is the most important committee in the evaluation and decision-making process concerning problem loans. Its chairman is the Chief Risk Officer (CRO). Further members with voting rights are those members of the Management Board responsible for the customer divisions, the Chief Financial Officer (CFO), and the relevant division and departmental managers from risk management and special exposures management.
The risk report describes the principles and organization of risk management and describes current risk exposure in all material risk categories.
Risk management functions are performed on different levels in the Group. RBI AG develops and implements the relevant concepts as the parent credit institution and in cooperation with the subsidiaries of the Group. The central risk management units are responsible for the adequate and appropriate implementation of the Group’s risk management processes. Particularly, they establish common Group directives and set business-specific standards, tools, and practices for all Group entities.
Central and local risk management functions and committees for all risk categories for all Group units
Maintaining an adequate level of capital is a core objective of the Group. Capital requirements are monitored regularly based on the risk level as measured by internal models, and in choosing appropriate models the materiality of risks annually assessed is considered. This concept of overall bank risk management provides for meeting capital requirements from both a regulatory perspective (normative perspective) and from economic points of view (economic perspective). Thus it covers the quantitative aspects of the Internal Capital Adequacy Assessment Process (ICAAP) as legally required and as described in the ICAAP Directive published by the European Central Bank. The full ICAAP process of the Group is audited during the supervisory review process for RBI credit institution group (RBI-Kreditinstitutsgruppe) on an annual basis.
The unexpected loss for the risk horizon of one year (economic capital) may not exceed the current value of the tier 1 capital 99.90 per cent
Stress scenarios Risk of falling below a sustainable tier 1 ratio throughout an economic cycle
The Contingency/Recovery Committee is a decision-making body convened by the Management Board. The composition of the committee varies as circumstances require 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. Due to the COVID-19 situation, the Contingency Committee met regularly in the second quarter of the financial year under review.
The Compliance Office is responsible for all issues concerning compliance with legal requirements in addition to and as an integral part of the internal control system. Thereby compliance with existing regulations in daily operations is monitored.
Economic capital Risk that unexpected losses from the economic point of view exceed the internal capital
In this approach, risks are measured based on economic capital, which represents a comparable risk indicator across all risk types. Economic capital is calculated as the sum of unexpected losses stemming from different Group units and different risk categories. In addition, a general buffer is held to cover risk types not explicitly quantified.
Risk contribution of individual risk types to economic capital: in € thousand 2020 Share 2019 Share
The Group’s calculated economic capital decreased during the year to € 6,116,792 thousand. A key reason for the year-on-year change is a change in method – with effect from year-end 2020, the macroeconomic risk including the earnings risk (€ 1,014,667 thousand) is now deducted directly from the internal capital. The decrease in the credit risk of retail customers was due to the fact that legal risks in connection with foreign currency mortgage loans in Poland are no longer recognized in the credit risk. In the risk capital allocation as at 31 December 2020, the bulk of the economic capital of around 40 per cent was, as in the previous year, consumed by Group units located in Austria. The shift in the economic capital share from Eastern Europe to Central and Southeastern Europe was mainly attributable to exchange rates.
Reconciliation of figures from the IFRS consolidated financial statements to credit exposure (according to CRR)
Rating models in the non-retail asset classes – corporates and banks – are uniform in all Group units and rank creditworthiness in 27 grades. The rating models for sovereigns generally include ten grades, with Austrian customers representing the exception with 27 grades. For retail asset classes, country specific scorecards are developed based on uniform Group standards. Tools are used to produce and validate ratings (e.g. business valuation tools, rating and default databases).
Risk-adjusted performance measurement is also based on the indicator for economic capital. The profitability of a business unit is examined in relation to the amount of economic capital attributed to the unit in question (risk-adjusted profit in relation to risk-adjusted capital, RORAC), which yields a comparable performance indicator for all business units in the Group. That indicator is used in turn as a key figure in overall bank management and for future capital allocation, and influences the remuneration paid to the Group’s executive management.
Financial assets - fair value through other comprehensive income 4,615,934 4,555,355