Group management report Market development 32 Performance and financials 35 Statement of financial position 44 Funding 47 Research and development 48 Internal control and risk management system 48 Capital, share, voting and control rights 50 Risk management 52 Human Resources 53 Outlook 54 Events after the reporting date 55
In Central and Eastern Europe (CEE), it operates as a universal bank through a closely knit network of subsidiary banks, leasing companies and numerous specialized financial service providers.
In CEE, approximately 48,000 employees in around 2,700 business outlets serve some 14.9 million customers. In Austria, RBI is one of the top corporate and investment banks.
Overview Raiffeisen Bank International (RBI) Monetary values 2014 2014 in € million 2015 Change restated published 2013 2012 2011
Loans and advances to banks 10,837 (30.4) % 15,573 15,573 22,243 22,323 25,748
Return on equity before tax 8.5% – – 0.2% 7.8% 9.7% 13.7%
Net interest margin (average interest-bearing assets) 3.00% (0.23) PP 3.24% 3.24% 3.11% 2.66% 2.90%
Provisioning ratio (average loans and advances to customers) 1.64% (0.53) PP 2.17% 2.13% 1.39% 1.21% 1.34%
Risk-weighted assets (total RWA) 63,272 (7.9) % 68,721 68,721 79,897 82,822 95,302
Number of shares in million (31/12) 292.98 0.0% 292.98 292.98 195.51 195.51 195.51
Mr. Sevelda, at the start of 2015 you announced a review of the corporate strategy. How did the market react? The market’s response was positive. This means that our plan to become a more focused universal bank with strong customer relationships by reducing complexity and risk as well as through bolstering our equity capital is valued by market participants. The emphasis on markets in which we can generate sustainable returns due to a strong position is generally welcomed, as is the action we are taking to achieve these goals. The dissatisfactory development of our share price certainly mirrors – aside from factors such as the oil price or rouble developments – unfounded doubts about the implementation.
You have also planned several changes in Hungary, where you have made losses in recent years. Can you give us an update? In Hungary, we have already achieved a great deal: We have restructured our local network bank by strengthening the corporate business and focusing on affluent retail customers. This restructuring also involved consolidating the branch network, which we completed in 2015 after closing 42 branches. As a result, we generated a profit in Hungary in 2015.
Selling Polbank would generate a large amount of capital. Have recent developments caused you to drop your plans for the unit? Not at all, even if the government’s plan to pass a law requiring the mandatory conversion of Swiss franc loans in the context of the election campaign has led to uncertainty and delays. To counter this uncertainty from the political side, we plan to separate the Swiss franc loans from the bank. This gives us further options in the negotiations and means we can also address a broader group of buyers. We are currently coordinating this step with the Polish financial market authority. In addition to our efforts to sell the bank, we are at the same time preparing the IPO of Raiffeisen Polbank. Of course, it would make sense for the bank to go public after the sale, once the new owner is known. As for the precise timetable, we will take market conditions into account to achieve the best possible result. Our overriding principle is to proceed in a commercially appropriate manner at all times – we will also respond rapidly to changes in the environment to attain the results that make the most financial sense for the Group.
What progress have you made in Russia? In October, we sold our Russian pension fund business, which resulted in a positive effect before taxes of approximately 87 million euros. The exit from automobile financing has also already noticeably eased the pressure on risk-weighted assets. Furthermore, we are pursuing a selective lending policy in Russia. Our main focus there is on affluent clients in the retail business and primarily on export-oriented businesses in the granting of US dollar loans. In addition, we are optimizing our local branch network. We are focusing more on Moscow and Saint Petersburg in future. Moreover, we plan to further streamline and simplify head office structures. At the same time, the total capital requirement is being reduced as planned.
You reported a consolidated profit of 379 million euros for 2015 – that came as a pleasant surprise to a lot of market participants! The primary reason for the result being so positive was lower net provisioning for impairment losses. Furthermore, we are on a cost cutting drive and reduced general administrative expenses by 4 per cent compared to 2014. In addition, the outlook for the full year 2015 included a goodwill impairment charge and risk costs amounting to 124.1 million euros, which were reallocated in the course of a restatement to the 2014 financial year. Consequently, these charges are not reflected in the 2015 consolidated statements. Overall, we produced an encouraging result in 2015, which had to be earned the hard way in a challenging environment. I would therefore like to express my deep gratitude to all of our employees for their outstanding work and tireless efforts.
At the Supervisory Board meetings, the Management Board was given specific assignments and asked to report on the results at subsequent meetings. The Supervisory Board also asked the Management Board to provide regular reports on matters relating to the current market environment, such as the effects of the crisis in Russia on the development of the network banks in Russia and Ukraine, and the effects of legislative reforms relating to bank taxes and the mandatory conversion of foreign currency loans. The Management Board was also asked to provide regular reports on matters which were of priority for the Supervisory Board due to their importance for the company or their strategic significance. For example, it provided regular information on the status of the strategy project’s implementation, the largest IT projects and the cost reduction program. In addition, the newly appointed member of the Management Board with responsibility for Retail presented a report on the reorganization of this business area. This form of regular reporting on particularly important matters enabled the Supervisory Board to form a comprehensive view of developments within RBI throughout the entire financial year.
At the extraordinary meeting on 28 January 2015, the Supervisory Board was informed of the developments in Ukraine and Russia as well as of the effects of the decoupling of the Swiss franc. A further focus of this meeting was RBI’s capital situation and the outlining of possible strategic scenarios for bolstering capital buffers.
A detailed breakdown of the type and composition of the Committees as well as their fields of activity is contained in the Corporate Governance Report.
At the Annual General Meeting on 17 June 2015, Erwin Hameseder, Johannes Schuster and Klaus Buchleitner were re-elected as members of the Supervisory Board. In addition, Michael Höllerer was elected as a new member of the Supervisory Board.
The audit revealed no reason for objections. All legislative provisions were fully satisfied and the unqualified auditor’s report was thus issued.
In the last financial year, the company recorded a good consolidated result despite extremely challenging market conditions. This was made possible by the high level of commitment shown by the Management Board and by employees, and on behalf of the Supervisory Board, I would like to express my deep gratitude for this.
■ Winding down of operations in the US and rescaling in Asia by end-2017. Focus on European markets and reduction of complexity within the Group.
■ A reduction of approximately 20 per cent in the risk-weighted assets of the Russian unit by end-2017. In Russia, RBI has a profitable bank with an outstanding reputation, as well as customers with excellent credit standing. However, the macroeconomic environment, as well as Group-wide risk management considerations, necessitate a reduction in business volumes and risk in this market.
■ Additional short- to medium-term optimization measures: Risk reduction in Ukraine, as well as adjustments to leasing units.
Particular attention is paid to the Group-wide further development of sales planning and controlling tools (account planning), with a focus on capital- and liquidity-light products (e.g. trade finance, payment transfer business, capital market transactions, etc.). These tools are specifically and successfully implemented in markets that are of particular importance to earnings (Russia, Romania, Slovakia, Czech Republic, and Austria). Furthermore, Group-wide product competence centers facilitate access to complex financing products (e.g. in the project, real estate and export financing areas) and the enhancement of internal efficiency through the transfer of know-how and bundling.
As at the editorial deadline for this report on 2 March 2016, RBI’s stock was priced at € 12.89. The shares therefore posted a loss of 5.3 per cent versus 31 December 2015, which was in line with the ATX (down 7.9 per cent), however noticeably outperformed Euro Stoxx Banks (down 15.8 per cent). The main reason for this development was the weak overall start to the year for international stock markets due to disappointing growth figures for China and the further declining oil price.
At year-end 2015, the number of shares issued remained unchanged from the start of the year at around 293 million while the market capitalization was € 4.0 billion. At the editorial deadline, the market capitalization stood at € 3.8 billion.
Price performance since 1 January 2015 compared to ATX and EURO STOXX Banks in €
Capital market communications RBI offered institutional investors numerous opportunities to obtain first-hand information at 26 road shows and conferences in 2015. Over the course of the year, representatives of RBI and, in some cases, members of the Management Board traveled internationally to Frankfurt, London, Los Angeles, Milan, New York, Paris and Zurich, as well as to Stegersbach and Zürs in Austria.
RBI announced initial details of its transformation program at the start of 2015. Over 1,100 participants took part in the subsequent conference call. Two days later, the RBI Management Board held an investor lunch for around 100 guests in London to personally present the strategic measures and to answer questions from investors and analysts.
As in previous years, RBI invited institutional investors and analysts to its investor day in London following the publication of the company’s full-year results. The event was met with keen interest among the approximately 80 participants. On reporting dates, RBI continued to hold regular presentations for Austrian equity and debt investors at its head office. These were followed by conference calls, each involving several hundred participants.
The ACGC is subdivided into rules L, C and R. L Rules (Legal Requirements) 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 Code. R Rules (Recommendations) have the characteristics of guidelines; non-compliance does not need to be reported or justified.
RBI deviates from the C Rule below, but conducts itself in accordance with the Code through the following explanation and justification: C Rule 45: non-competition clause for members of the Supervisory Board RBI is a company forming part of the Austrian Raiffeisen Banking Group (RBG), which is also a majority shareholder through its central institution, RZB. Some members of the Supervisory Board therefore also hold executive roles in RBG banks. Moreover, a number of members of the Supervisory Board hold executive roles at other banks and financial services institutions. Consequently, know-how and experience specific to the industry can be applied in exercising the control function of the Supervisory Board, to the benefit of the company.
Heinrich Schaller 1959 20 June 2012 Annual General Meeting 2017 2nd Deputy Chairman
Martin Schaller 1965 4 June 2014 Annual General Meeting 2019 3rd Deputy Chairman
Members of the Supervisory Board had the following additional supervisory board mandates or comparable functions in domestic and foreign stock exchange listed companies: ■ Walter Rothensteiner UNIQA Insurance Group AG (Chairman)
■ Erwin Hameseder AGRANA Beteiligungs-AG (Chairman), STRABAG SE, UNIQA Insurance Group AG, Südzucker AG
Following the departure of Aris Bogdaneris, the Operations, Lean, Project Portfolio & Security, Group & Austrian IT, and Procurement & Cost Management areas were transferred to Johann Strobl, and Consumer Banking and the Small Business & Premium Banking areas to Klemens Breuer, in each case effective as of 1 April 2015. “Workout” was also renamed “Special Exposures Management” in April of the financial year.
Decision-making authority and activities of the Committees (of the Supervisory Board)
The Audit Committee monitors the accounting process and the effectiveness of the company’s internal control, audit and risk management systems. The tasks of the Audit Committee include the supervision of the annual audit of the financial statements and consolidated financial statements, as well as checking and supervising the independence of the Group’s auditors, particularly with respect to additional work performed for the audited company. The Committee examines the annual financial statements, the management report, the consolidated financial statements and the Group management report, and is responsible for the preparation of their statement. It also examines the proposal for earnings appropriation and the corporate governance report. The Audit Committee presents a report on the results of its audits to the Supervisory Board. The Committee is also responsible for preparing the Supervisory Board recommendation for the selection of the Group’s auditor and bank auditor. Moreover, the Audit Committee discusses the content of the management letter as well as the report on the effectiveness of the risk management system and the internal control system. Internal Audit must provide the Audit Committee with quarterly reports on the areas audited and on any audit findings resulting from audits performed, taking into account § 42 (3) of the Austrian Banking Act (BWG).
The Nomination Committee attends to the filling of any posts on the Management Board and the Supervisory Board that have become vacant. Consideration is given to the balance and diversity of knowledge, skills and experience of all members of the governing body in question. The Nomination Committee also specifies a target ratio for the under-represented gender on the Management Board and the Supervisory Board, as well as a strategy for achieving the defined target. In its decision-making process, it ensures that the Management Board and the Supervisory Board are not dominated by one individual person, or a small group of persons, in a way which is contrary to the company’s interests. The Nomination Committee’s other responsibilities include: ■ regular evaluation, and in all cases where events indicate a need for re-evaluation, of the structure, size, composition, and performance of the Management Board and Supervisory Board, as well as submission of proposals for changes to the Supervisory Board where necessary.
The Working Committee held seven meetings in the 2015 financial year. The Audit Committee met twice, the Personnel Committee three times, the Remuneration Committee four times, the Risk Committee twice, and the Nomination Committee five times.
The following total amounts were paid to the Management Board of RBI: Fixed remuneration 5,007 5,101
Fixed remuneration, as shown in the above table, includes salaries and benefits in kind. Performance-based components of the Management Board’s remuneration basically consist of bonus payments and share-based remuneration under the Share Incentive Program (SIP).
There was no allocation of share-based payments in 2015, as no SIP tranche had been issued in 2010 owing to the merger between Raiffeisen International with the principal business areas of Raiffeisen Zentralbank Österreich AG. Moreover, the term of the program was extended to five years in accordance with legal regulations. Therefore, the next SIP tranche will not mature before 2016.
The measurement of bonuses is linked to the achievement of company goals in relation to profit after tax, return on risk-adjusted capital (RORAC) and cost/income ratio, as well as to annually-agreed personal goals. Payment of bonuses is deferred as set forth in the BWG and implemented according to internal regulations.
In addition to the amounts listed above, deferred bonus amounts totaling € 420 thousand were paid to Herbert Stepic and Patrick Butler on account of their previous work on the Management Board.
Principles of remuneration policy and practices in accordance with § 39 (2) in conjunction with § 39b of the BWG In accordance with § 39 (2) in conjunction with § 39b of the BWG including annexes, RBI’s Supervisory Board approved the “General Principles of the Remuneration Policy and Practice“ in 2011. Remuneration of all employees, including the Management Board and other “risk personnel”, must comply with these principles. These principles also apply to bonus payments for 2011 and all subsequent years. The Remuneration Committee is responsible for the regular monitoring of these policies and practices and their implementation. Taking the current version of § 39 (2) in conjunction with § 39b of the BWG including annexes into account, which was updated in implementation of Directive 2013/36/EU, the Remuneration Committee of RBI’s Supervisory Board approved a new version of the “General Principles of the Remuneration Policy and Practice“ in 2014, which was applied as of 2014. This was most recently amended in 2015.
In doing so, the variable component may fall away completely for positions with minimal or only indirect influence on the business results. Role based fixed compensation was implemented in various forms according to respective local conditions. When determining the bonus for specific business and management functions, more weight was placed on RBI’s and the respective organizational units’ results and less on the functional area in order to promote teamwork.
Due to the enormous increase in the complexity of the regulatory provisions for variable remuneration, the Management Board was prompted to review the benefits and meaningfulness of share-based remuneration. Originally intended as a variable long-term remuneration element geared to market and corporate success, the SIP has since lost this meaning because the annual bonus for the same target group of top executives is now deferred for 3 to 5 years, and half must be paid in instruments (e.g. shares). It was therefore decided that no further SIP tranches would be issued from the 2014 financial year onwards.
Under the SIP, new tranches were last issued in 2011, 2012 and 2013. This means that on the reporting date, contingent shares for these three tranches were allocated. At 31 December 2015, the number of these contingent shares was 900,223 (of which 198,258 were attributable to the 2011 allocation, 370,857 to the 2012 allocation, and 331,108 to the 2013 allocation). The number of contingently allocated shares originally announced changed due to various personnel changes in Group units. It is shown on an aggregated basis in the following table: No shares were repurchased for the SIP in 2015.
The same rules essentially apply for the members of the Management Board as for employees. They provide for a basic contribution to a pension fund by the company and an additional contribution when the employee makes their own contributions in the same amount. Additional individual pension benefits, which are financed by a reinsurance policy, apply to three members of the Management Board.
In the event of a function or contract termination, one member of the Management Board is entitled to severance payments in accordance with the Salaried Employees Act and the Bank Collective Agreement, one member in accordance with contractual agreement and four members in accordance with the Company Retirement Plan Act. In principle, the severance payment claims under the Salaried Employees Act or contractual agreements expire if the Management Board member resigns.
Members of the management boards of bank subsidiaries and branches affiliated to RBI 372,176 111,653 558,264
Supervisory Board remuneration for the 2015 fiscal year was apportioned to individual Supervisory Board members as follows. The amounts provided are provisional amounts from the statement of financial position, subject to the approval of the Annual General Meeting 2016. Attendance fees were not paid. Depending on the duration of the respective Supervisory Board mandate, the provision for 2015 was booked on a pro rata basis or in its entirety.
In the 2015 financial year, a D&O (directors and officers) financial loss and liability insurance policy was signed with UNIQA Sachversicherung AG for the Supervisory Board, the Management Board and key executives, the cost of which is borne by the company.
Proportion of women Proportion of women of the total of the total Supervisory Management Tier 2 Tier 3 Year number of employees number of executives Board Board management management
To complete the picture, the next table shows the proportion of women among all employees, in Management Board positions and tier 2 and tier 3 management levels, for RBI as a whole (including subsidiaries).
The Management Board is aware of the need to continue to pursue the existing initiatives as well as to maintain its openness to new initiatives in order to further increase the percentage of women in highly qualified positions. To achieve this end, it encourages women to take advantage of these opportunities and to make specific calls for such initiatives.
Members of the Supervisory Board must immediately report any potential conflicts of interest to the Chairman of the Supervisory Board. In the event that the Chairman himself should encounter a conflict of interest, he must report this immediately to the Deputy Chairman. Company agreements with members of the Supervisory Board that require members to perform a service for the company or for a subsidiary outside of their duty on the Supervisory Board (§ 228 (3) of the UGB) in exchange for not-insignificant compensation require the approval of the Supervisory Board. This also applies to agreements with companies in which a member of the Supervisory Board has a significant financial interest. Furthermore, related party transactions as defined by § 28 of the BWG require the approval of the Supervisory Board.
The Annual General Meeting selected KPMG Austria GmbH Wirtschaftsprüfungs- und Steuerberatungsgesellschaft as its external Group auditor and bank auditor for the 2015 financial year. KPMG has confirmed to RBI 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.
Moreover, in 2015, the Multilateral Investment Guarantee Agency (MIGA), an institution of the World Bank Group, made guarantees totaling € 457 million available in five network banks (Raiffeisen Bank Sh.a. in Albania, Priorbank JSC in Belarus, Raiffeisen BANK d.d. in Bosnia and Herzegovina, Raiffeisen Bank Kosovo J.S.C. and Raiffeisen banka a.d. in Serbia) to support local lending. MIGA‘s involvement is based on the implementation of an ESMS at the respective network banks, if one is not yet in place.
The adoption of the Green Bond Principles of the International Capital Market Association marks another positive development. The principles are voluntary guidelines which have been developed for the fast-growing green bonds market and which promote transparency and disclosure.
As a result of the extensive measures, RBI gained an improved overall ESG performance rating in 2015 and was again listed in the STOXX Global ESG Leaders Index. This family of indices contains a group of sustainability indices which are determined using a transparent and structured process and in which RBI ranks among the “industry leaders“ in the areas of “environment“ and “governance“.
The Sustainability Report, which is published in accordance with the G4 Global Reporting Initiative, contains detailed information on how RBI, as part of the RZB Group, has fulfilled its sustainability mandate in the period under review and how it will realize and improve its sustainability performance in the future. The 2014 Sustainability Report “Fit for the future through sustainability“ was rated as one of the best reports in Austria in the “large companies“ category of the 16th Austrian Sustainability Reporting Awards.
In line with expectations, China's economic growth weakened to just below 7 per cent in 2015. Excess capacity needs to be absorbed in heavy industry, as well as in the real estate market. At the same time, external demand remains weak.
Divergent economic trends in CEE Most central banks in CEE further cut their key and money market rates in 2015. This monetary policy stance was supported by low domestic inflation rates, as well as by the monetary policies of leading western central banks. The latter increased the scope of CE and SEE central banks, which also expanded monetary policy by using unconventional monetary and liquidity policy measures (e.g. in Hungary and Romania).
SEE recovered in 2015, with year-on-year economic growth of 2.8 per cent. Serbia overcame the 2014 downturn and Croatia posted 1.6 per cent GDP growth in 2015, ending a five-year recessionary period. With 2.7 per cent GDP growth, Bulgaria caught up slightly with Romania, where economic growth increased to 3.7 per cent due to structural reforms. Overall, however, economic growth in SEE remains moderate, mainly due to outstanding structural adjustments and to the high level of private sector debt that is only slowly coming down.
All three countries in the Eastern European (EE) region remained mired in recession in 2015. GDP fell in Russia and Belarus by 3.7 and 4 per cent respectively, while it slumped 10 per cent in Ukraine. The severe adjustment recessions following the huge currency devaluations and necessary structural adjustments in 2015, were mainly driven by sharp declines in private consumption and investment spending. Although there was a massive reduction in imports, the foreign trade positions of EE countries stabilized thanks to improved exports.
Currencies CE and SEE currencies remained largely stable against the euro during 2015. The Czech koruna gained against the euro and neared the upper limit to the euro, as defined by the foreign exchange regime. As a result of oil market weakness, the Russian rouble – despite a temporary recovery – came under more overall downward pressure against the US dollar over the course of 2015. Towards the end of 2015, the renewed downward movement of the Russian rouble against the US dollar resulted from the falling oil price. In turn, this reduced the Russian central bank’s potential to carry out further cuts to key rates. Compared to the euro, the loss in value was significantly lower. Although there were no notable year-on-year losses in value compared to the euro, the depreciation of the rouble against the US dollar was however consistent with other currencies of commodity-exporting nations and emerging markets. For instance, currencies of other countries in the Eastern European region, such as the Ukrainian hryvnia and the Belarus rouble, weakened against the euro and US dollar in 2015. In Ukraine, the hryvnia's weakness was cushioned by restrictive foreign exchange measures. With the exception of the EE region, major currency market turbulence was avoided in CEE in 2015.
Development of the banking sector The CEE banking sector saw a subdued performance in 2015. As in previous years, positive trends in new lending or in asset growth were moderate and limited to a few countries (e.g. Czech Republic, Poland, Romania, Russia and Slovakia). Nevertheless, a number of previously challenging banking markets managed to post sector level profits in 2015 (e.g. Hungary and Romania). At the same time, however, restructuring costs in Croatia, continued high levels of non-performing loans in SEE, restructuring and recapitalization requirements in Ukraine, and a further increase in non-performing loans, as well as a decline in profitability in Russia, dampened the general performance. Mainly driven by Russia, return on equity in the CEE banking sector fell in 2015 below the comparable level for the euro area. In Austria, the banking sector also had a sub-par performance in 2015, as measured against the trends in the euro area, with credit growth and profitability both coming in below the comparable levels. This trend was caused by several complex challenges, including restructuring needs in the, not very profitable, domestic business, weak real economic growth and the low capitalization levels of major banks in the European context, as well as high tax and regulatory burdens.
Earnings and financial performance The consolidated financial statements of RBI are prepared in accordance with the International Financial Reporting Standards (IFRS) as applied in the EU. RBI AG also prepares individual financial statements in accordance with the Austrian Commercial Code (UGB) in conjunction with the Austrian Banking Act (BWG), which provide the formal basis of assessment for calculating dividend distributions and taxes. For more information on disclosures required by the UGB and BWG, please see the notes under point (46).
Low interest rate level The already low interest rate level continued to weaken, not only in the euro area, but also in many markets in Central and Southeastern Europe in the reporting period. At RBI – as at other banks – the net interest margin in the credit business declined and deposit margins remained under pressure. In addition, the low discount rates in many countries negatively affected the investment options for excess liquidity. Although interest margins in CEE largely remained at a high level compared to Western European countries, the higher volatility of a number of currencies – in some cases significantly higher – weighed on net interest income.
In the area of deposit guarantees, the goal is also to establish a harmonized guarantee system in Europe. The target size of the deposit guarantee fund is based on 0.8 per cent of the deposits covered, and is expected to be reached by 2024.
Currency turbulence Exchange rates continued to fluctuate substantially in 2015. On the one hand, the US dollar appreciated by nearly 12 per cent year-on-year against the euro as a result of interest rate expectations, and the Swiss franc appreciated 11 per cent due to the abandonment of the fixed minimum exchange rate set by the Swiss National Bank. On the other hand, some CEE currencies depreciated against the euro. For example, the Russian rouble fell 10 per cent year-on-year in line with falling oil prices, while the Ukrainian hryvnia depreciated 27 per cent and the Belarusian rouble was down 29 per cent. Currency volatility not only impacted the statement of financial position and risk-weighted assets, but also triggered considerations and measures aimed at converting foreign currency loans at exchange rates that are unfavorable to banks.
Overview of the financial year After RBI – due to a number of non-recurring effects (goodwill impairment charges in Poland and Russia, deferred taxes, implementation of the Hungarian Settlement Act) – ended a financial year with a negative consolidated result for the first time in 2014 (minus € 617 million after restatement), it returned to profitable territory in 2015. Consolidated profit amounted to € 379 million. This increase was attributable not only to the absence of the mentioned non-recurring effects, but also to an improvement in the credit risk situation in nearly all of RBI’s markets. Accordingly, net provisioning for impairment losses fell 28 per cent year-on-year, or € 486 million, to € 1,264 million. The largest declines occurred in Ukraine, in Hungary and at Group head office. Continued high provisions had to be set aside for units in Asia, where business volumes were significantly reduced as planned.
Transformation costs associated with the strategic realignment – that was decided upon in February 2015 – amounted to € 88 million.
Operating income declined 8 per cent year-on-year, or € 421 million, to € 4,929 million. This was mainly attributable to the above described sharp currency devaluations. Net interest income fell 12 per cent, or € 462 million, to € 3,327 million. In addition to the currency effect, the falling market interest rate level in Central and Southeastern Europe, as well as loan defaults occurring in the previous year in Asia, also had a negative impact on the net interest margin (calculated based on interest-bearing assets), which decreased 23 basis points to 3.00 per cent. Despite the currency effects in Eastern Europe, net fee and commission income was down by only 4 per cent, or € 67 million, to € 1,519 million. Net trading income improved € 46 million to plus € 16 million, driven by valuation gains on derivatives in Russia.
Equity including capital attributable to non-controlling interests recorded an increase of € 323 million to € 8,501 million. Equity increased as a result of profit after tax in the amount of € 435 million; other comprehensive income had an impact of minus € 53 million. Exchange rate differences, which amounted to minus € 194 million in the reporting period (2014: minus € 1,335 million), constituted the largest item in other comprehensive income. In contrast, the capital hedge had a positive impact (€ 90 million), as did valuation changes in assets available for sale (€ 82 million).
Detailed review of income statement items restated Change absolute Change published
2014 figures restated (please refer to the consolidated financial statements for details). 1 Prior year figures adjusted due to changes in allocation.
In 2015, net interest income declined 12 per cent, or € 462 million, to € 3,327 million. This was primarily attributable to currency devaluations in Eastern Europe, which reduced net interest income in Russia by € 188 million and in Ukraine by € 96 million. At Group head office, net interest income declined € 78 million, primarily due to lower interest rates and volumes.
In the Central Europe segment, net interest income fell 6 per cent, or € 40 million, to € 654 million. In Hungary, net interest income declined € 33 million as a result of reduced interest income from derivatives and the low level of market interest rates. In Slovakia, lower interest rates also led to a € 17 million reduction in net interest income, whereas in the Czech Republic, a rise in interest income from derivatives, lower interest rates in the deposit business and higher lending volumes increased net interest income by € 10 million. In the Southeastern Europe segment, net interest income fell 7 per cent, or € 55 million, to € 780 million. All countries in this segment – with the exception of Kosovo – reported declines in net interest income, which were also mainly attributable to the continuing low level of interest rates. The Eastern Europe segment – which was the main driver of the negative trend – reported a 22 per cent, or € 272 million, decline in net interest income to € 949 million. As a result of the currency devaluations, net interest income in Russia declined 23 per cent, or € 188 million, to € 647 million, and in Ukraine by 35 per cent, or € 96 million, to € 176 million. In Belarus, in contrast, net interest income increased 11 per cent, or € 13 million, to € 125 million, driven by higher interest income from securities and leasing claims. In the Non-Core segment, net interest income fell 22 per cent, or € 111 million, to € 385 million. In Poland, the continuing low level of market interest rates and repricing measures in the deposit business reduced net interest income by 18 per cent, or € 54 million, to € 253 million. In Asia, net interest income fell 38 per cent, or € 51 million, to € 84 million, due to volumes and loan defaults.
The Group’s net interest margin declined 23 basis points year-on-year to 3.00 per cent, primarily as a result of the further reduction in the level of market interest rates in many countries in the Central and Southeastern Europe segments and in Poland. In the Eastern Europe segment, the interest margin fell mainly due to currency effects. In contrast, higher current income from shares in affiliated companies (up € 59 million) made a positive contribution to the development of the net interest margin.
Ukraine declined (down € 37 million). Net income from other transactions improved € 30 million, after the lower interest rate level had a negative impact on the valuation of a guarantee product in the previous year.
Other administrative expenses decreased 2 per cent, or € 20 million, to € 1,173 million. The reduction in Russia (down € 68 million) and Ukraine (down € 13 million) was largely attributable to currency effects. In contrast, expenditures relating to the bank resolution fund of € 41 million, which were incurred at Group head office (€ 24 million) and in other EU countries (€ 17 million), increased expenses. Poland posted a € 15 million rise in other administrative expenses due to higher deposit insurance fees of € 27 million and contributions to a fund to protect mortgage borrowers of € 8 million, whereas legal, advisory and consulting expenses as well as IT expenses each fell by € 6 million. In Hungary, increased office space expenses of € 4 million were reported in connection with branch closures as a result of the strategic realignment. Compared to year-end 2014, the number of business outlets was down 161 to 2,705. The most significant declines in the number of business outlets occurred in Ukraine (down 93), Hungary (down 42), Russia (down 26), and Romania (down 17).
The Group invested € 347 million in fixed assets in the reporting period. Of that amount, 33 per cent (€ 114 million) was invested in own tangible assets. Investments in intangible assets – mainly related to software projects – amounted to 45 per cent. The remainder was invested in operating leasing business assets.
The majority of net provisioning for impairment losses in the reporting year, which totaled € 887 million, was attributable to corporate customers, while the figure for retail customers was € 407 million. Loan loss provisions for sovereigns resulted in releases of € 22 million.
The provisioning ratio – net provisioning for impairment losses in relation to the average volume of loans and advances to customers – fell 0.53 percentage points to 1.64 per cent.
Net income from derivatives and liabilities amounted to minus € 4 million, compared to € 88 million in the previous year. This reduction was primarily due to net income from changes in credit spreads for own liabilities, which fell € 169 million to minus € 3 million. In contrast, net income from the valuation of derivatives entered into for hedging purposes improved € 76 million.
The disposal of 28 subsidiaries resulted in net income of € 41 million in the reporting year, while a loss of € 10 million was recorded in the previous year as a result of the exclusion of 18 subsidiaries from the consolidation group (primarily from the sale of the trading group F.J. Elsner). Of the 28 excluded subsidiaries, 22 companies were excluded due to immateriality and six companies were sold. The companies were predominantly active in leasing, trade and financing business.
The sale of the 75 per cent stake in the Russian pension fund ZAO NPF Raiffeisen in October 2015 resulted in net income from disposal of group assets of € 86 million in the year under review. In 2015, an impairment of € 52 million was recognized in relation to assets available for sale in connection with the sale of the 99.8 per cent stake in the Slovenian subsidiary bank Raiffeisen Banka d.d. The sales contract was signed in December 2015 and closing is expected to take place in the first half of 2016.
Income taxes declined € 207 million year-on-year to € 276 million. The decline was predominantly the result of a non-recurring effect in the previous year related to impairments of deferred tax assets of € 196 million at Group head office and in Asia. At 39 per cent, the effective tax rate in the reporting year was significantly above the Austrian income tax rate of 25 per cent. This was largely attributable to expenses non-deductible for tax purposes mainly at Group head office and in Ukraine, the Czech Republic, Romania, Slovakia, and Russia, as well as to loss carryforwards which cannot be capitalized for tax purposes at Group head office and in Hungary.
Comparison of results with the previous quarter in € million Q4/2015 Q3/2015 restated Change absolute Change in % Q3/2015 published
Q3/2015 figures restated (please refer to the consolidated financial statements for details).
Compared to the third quarter, net fee and commission income was up 2 per cent, or € 6 million, to € 390 million. Net income from the payment transfer business posted the largest increase – up 6 per cent or € 10 million, to € 174 million – driven by higher fee and commission income from the credit card business in Russia. Net income from the sale of own and third-party products rose € 4 million to € 16 million, mainly in Poland and Hungary, but was offset by net income from other banking services. Net income from both securities trading and from the foreign currency, notes/coins and precious metals business each declined € 2 million, due to lower volumes and margins, with the strongest reductions occurring in Romania and Russia.
Net trading income improved € 43 million quarter-on-quarter to € 29 million. Interest-based business rose € 83 million to € 36 million, primarily driven by valuation gains on derivatives and securities positions in Poland. The € 33 million decline in net income from currency-based transactions to € 5 million was triggered by lower valuation gains on foreign currency positions, predominantly in Poland, a currency depreciation-driven decline in Belarus and costs for the capital hedge in the amount of € 9 million. This contrasted with valuation gains on foreign currency positions at Group head office. As a result of the difficult market environment, net income from equity- and index-based transactions fell € 12 million to minus € 13 million; however, this loss is covered by hedging instruments. Net income from other transactions increased as a result of a valuation gain on a guarantee product.
General administrative expenses amounted to € 813 million in the fourth quarter of 2015 – 14 per cent, or € 100 million, above the previous quarter’s level of € 713 million.
Staff costs rose € 29 million to € 381 million in the fourth quarter of 2015. This rise was mainly due to higher wages and salaries, as well as bonus provisions, predominantly at Group head office, in Russia, Hungary, Slovakia, and Bosnia and Herzegovina; whereas staff expenses in Poland decreased owing to a release of provisions for an employee retention program.
Depreciation of tangible and intangible fixed assets increased € 39 million quarter-on-quarter to € 118 million, mainly attributable to a brand impairment in Poland and impairment charges relating to buildings in Ukraine, Russia and Slovakia.
Compared to the third quarter, net provisioning for impairment losses rose € 278 million to € 469 million. This was attributable to developments in the corporate customer business, notably in Asia (increase of € 174 million) and at Group head office (increase of € 35 million). In Bulgaria and Albania, higher net provisioning for impairment losses of € 15 million was needed in each country. In addition, there were small increases in net provisioning for impairment losses in most of the other countries. Net provisioning for individual loan loss provisions increased € 274 million overall to € 502 million; whereas net releases of portfolio-based loan loss provisions remained nearly flat at € 31 million. Proceeds from the sale of impaired loans were € 6 million lower quarter-onquarter, particularly due to devleopments in Poland.
The portfolio of non-performing loans to customers decreased € 606 million compared to the previous quarter to € 8,328 million, with a decline of € 662 million on a currency-adjusted basis. Nearly all countries posted declines: Hungary (€ 130 million), Russia (€ 118 million), Poland (€ 76 million), Asia (€ 66 million), Slovenia (€ 64 million), and Bulgaria (€ 42 million). The NPL ratio decreased from 12.2 per cent to 11.9 per cent quarter-on-quarter. The NPL coverage ratio increased 4.4 percentage points to 71.3 per cent.
Net income from derivatives was down € 35 million in the fourth quarter to minus € 15 million, primarily attributable to the valuation result from the change in the credit spread of own issues (down € 31 million).
In Hungary, the implementation of the Settlement Act, adopted by the government in the previous year, resulted in the partial release of a provision formed for this purpose in the previous year of a further € 29 million, compared to a release of € 4 million booked in the third quarter.
Deposits from banks Deposits from customers Other liabilities Equity and subordinated capital
Loans and advances to banks before deduction of impairment losses on loans and advances (€ 120 million) fell 30 per cent, or € 4,736 million, to € 10,837 million. This was primarily attributable to a € 4,375 million decline, mainly at Group head office, in short-term receivables from money market business to € 6,547 million, in favor of a higher cash reserve. This decline included a € 3,654 million reduction in receivables from sales and repurchase agreements and securities lending to € 1,180 million.
The € 5,309 million rise in other assets was mainly the result of the € 6,443 million increase in the cash reserve to € 13,212 million, notably at Group head office and in the Czech Republic and Slovakia; offset by a € 1,636 million decline in trading derivatives, predominantly at Group head office.
Deposits from customers increased 4 per cent, or € 2,897 million, to € 68,991 million in the course of the year. In particular, deposits from retail customers and sovereigns posted increases. The € 2,718 million rise in deposits from retail customers to € 33,644 million was mainly attributable to Poland, Slovakia, the Czech Republic, Russia, and Romania. Higher deposits from sovereigns (an increase of € 563 million) were attributable to Group head office in particular. Deposits from large corporate customers declined € 645 million to € 30,644 million; the largest reductions were in Asia and in Russia, while Slovakia and the Czech Republic reported increases.
Other liabilities fell € 4,233 million to € 16,401 million. Debt securities issued fell € 3,091 million, primarily due to the reduced financing requirement. Trading liabilities declined € 1,786 million, mainly at Group head office.
Common equity tier 1 after deductions stood at € 7,671 million. The increase from the 2014 comparable level totaled € 227 million, mainly due to the inclusion of the net profit for 2015. In contrast, exchange rate differences, primarily the devaluation of the Belarus rouble, the Russian rouble and the Ukrainian hryvnia, had a negative impact of € 194 million on total capital. In addition, the changed transitional provisions of the CRR resulted in a decline due to deductions and the reduced allowance of minority interests. Tier 2 capital declined € 210 million compared to the previous year and totaled € 3,316 million. The decline was mainly attributable to loan loss provisions. Total capital under CRR amounted to € 10,987 million. This corresponds to an increase of € 17 million compared to the 2014 year-end figure.
Funding Banks essentially finance themselves using their own funds, customer deposits, as well as through various capital and interbank market instruments. Refinancing opportunities for banks in the international capital markets remained largely stable in 2015; however, access to the capital markets was more difficult for Austrian banks due to the moratorium on HETA bonds. For RBI, in particular, use of the international capital markets was limited due to the gradual implementation of the strategy review, the conflict between Ukraine and Russia, as well as the decline in the price of oil. However, this was manageable, as RBI had a lower funding requirement and other financing options.
The US Federal Reserve – after having prepared the markets for the end of its zero-interest rate policy – finally initiated the interest-rate turnaround in December 2015. However, the effects of the ECB’s bond-buying programs, as well as further interestrate cuts (increase in the negative deposit rate for commercial banks), were appreciable for the funding of banks in the euro area. As a result, the additional liquidity in the markets reduced financing costs for banks in 2015. Therefore, excess liquidity remained in the money market and government bond yields as well as risk premiums remained at a historically low level over the course of the year.
The diversification of sources for financing in wholesale funding, is achieved, on the one hand, by using local markets through the independent sale of bonds, certificates and deposits. On the other hand, long-term funding is used from sources that are less susceptible to changes on the international capital markets. This is an area in which the Group actively collaborates with supranational institutions. For example, in 2015, a securitization of Raiffeisen Leasing Poland with a volume of € 130 million was completed in cooperation with the European Investment Bank (EIB). These supranational institutions support banks that are active in Eastern Europe by providing bilateral loans and also through developing the local capital markets. RBI cooperates with these institutions not only in terms of financing, but also in other areas such as risk-sharing programs to optimize total risk-weighted assets.
Internal control and risk management system in relation to the Group accounting process Balanced and comprehensive financial reporting is a priority for RBI and its governing bodies. Compliance with all relevant statutory requirements is of course a basic prerequisite. The Management Board is responsible for establishing and defining a suitable internal control and risk management system that encompasses the entire accounting process while adhering to company requirements.
The internal control system is intended to provide management with the information needed to ensure effective and continuously improving internal controls for accounting. The control system is designed to comply with all relevant guidelines and regulations and to optimize the conditions for specific control measures.
The consolidated financial statements are prepared in accordance with the relevant Austrian laws, above all the Austrian Banking Act (BWG) and Austrian Commercial Code (UGB), which govern the preparation of consolidated annual financial statements. The accounting standards used to prepare the consolidated financial statements are the International Financial Reporting Standards (IFRS) as adopted by the EU.
An internal control system has been in place for many years at RBI, and its parent company RZB, 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.
Significant risks relating to the Group accounting process are evaluated and monitored by the Management Board. Complex accounting standards can increase the risk of errors, as can the use of inconsistent valuation standards, particularly in relation to the Group’s principal financial instruments. A difficult business environment can also increase the risk of significant financial reporting errors. For the purpose of preparing the consolidated financial statements, estimates have to be made for asset and liability items for which no market value can be reliably determined. This is particularly relevant for credit business, social capital and the intrinsic value of securities, participations, trademark rights and goodwill.
The financial statement data, which are examined by an external auditor or undergo an audit review, are mostly entered directly in, or automatically transferred to, the IBM Cognos Controller consolidation system by the end of January of the subsequent year. The IT system is kept secure by limiting access rights.
Throughout the year, consolidated monthly reports are produced for Group management. Statutory interim reports are produced that conform to the provisions of IAS 34 and are also published quarterly in accordance with the Austrian Stock Exchange Act. Before publication, the consolidated financial statements are presented to senior managers and the Chief Financial Officer for final approval and then submitted to the Supervisory Board’s Audit Committee. Analyses pertaining to the consolidated financial statements are also provided for the management, as are forecast Group figures at regular intervals. The financial and capital budgeting process, undertaken by Planning & Finance, includes a three-year Group budget.
Internal audits also constitute an integral part of the monitoring process. Group Audit at RZB is the area responsible for auditing. All internal auditing activities are subject to the Group Audit standards, which are based on the Austrian Financial Market Authority ’s minimum internal auditing requirements and international best practices. Group Audit’s internal rules also apply (notably the Audit Charter).
Group Audit regularly and independently verifies compliance with the internal rules within the RZB Group units. The head of Group Audit reports directly to the Management Boards of RZB AG and RBI AG.
(3) RZB AG holds around 60.7 per cent of the share capital of the company indirectly through its wholly owned subsidiary Raiffeisen International Beteiligungs GmbH. The remaining shares of RBI AG are held in free float, with no direct or indirect shareholdings amounting to 10 per cent or more known to the Management Board.
The ultimate parent company is Raiffeisen-Landesbanken-Holding GmbH, holding around 82.4 per cent of the shares of RZB AG, directly and indirectly. The direct stake amounts to around 3.9 per cent and the indirect stake is approximately 78.5 per cent and held by the wholly owned subsidiary R-Landesbanken-Beteiligung GmbH.
(4) Pursuant to the company’s Articles of Association, RZB AG is granted the right to delegate up to one third of the Supervisory Board members to be elected by the Annual General Meeting, as long as it holds an interest in the share capital. Beyond that, there are no special rights of control associated with holding shares.
(7) Pursuant to § 169 of the Austrian Stock Corporation Act (AktG), the Management Board has been authorized since the Annual General Meeting of 4 June 2014 to increase the share capital with the approval of the Supervisory Board – in one or more tranches – by up to € 446,793,032.95 through issuing up to 146,489,519 new common bearer shares with voting rights 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 25 August 2019 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).
 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 a shareholder outside of the Raiffeisen Banking Group Austria, membership of the Professional Association of Raiffeisen Banks and of the Raiffeisen Customer Deposit Guarantee Association Austria may be terminated.
Human Resources deals with the key corporate processes for managing personnel resources within the Group, taking into account the needs of employees and corporate interests. As at 31 December 2015, RBI had 51,492 employees (full-time equivalents), 3,238 or 6 per cent fewer than at the end of 2014. The majority of this reduction is attributable to developments in Ukraine, Russia and Poland. The average age of employees remained relatively low at 36 years and women accounted for 67 per cent of the workforce. Graduates make up 73 per cent of employees, indicating a highly skilled workforce.
In line with the clear trend within the European banking industry, the weighting of the variable compensation components was reduced. For roles which have very little or only an indirect influence on financial results, the variable component may also be entirely dispensed. Depending on local conditions positionrelated fixed allowances were introduced in various forms. When determining bonuses for certain business and management roles, greater weight is placed on the financial results of the RBI Group and the respective organizational unit and less on functional components in order to encourage teamwork.
Overall, the changes make it easier for employees to estimate their income and provide a higher level of income security. For the company, it creates greater transparency and improves compensation planning.
In Russia, improving customer satisfaction was defined as one of the annual targets. Similarly, Croatia launched a project on the subject of customer orientation which included a survey of all managers within the bank. These interviews were conducted by employees from an internal talent pool made up of 400 local network bank staff in order to identify the strengths and best examples of successful implementation within the bank. The project has already prompted significant changes. In Bosnia and Herzegovina, the ongoing initiative to improve customer relationships has already become an internal trademark. In 2015, managers there had several opportunities to present their units including their key areas of responsibility and expertise and their principal tasks. Interfaces with other units were also examined and solutions for mutual support and cooperation were developed. In Bulgaria, a second customer survey was carried out in 2015. The noticeably improved result demonstrated that the measures implemented – as a consequence of the first survey to improve internal communication and cooperation – are starting to produce positive effects.
Outlook for RBI We target a CET1 ratio (fully loaded) of at least 12 per cent and a total capital ratio (fully loaded) of at least 16 per cent by the end of 2017.
After the implementation of the strategic measures defined at the beginning of 2015, the cost base should be approximately 20 per cent below the level of 2014 (general administrative expenses 2014: € 3,024 million).
We aim for a return on equity before tax of approximately 14 per cent and a consolidated return on equity of approximately 11 per cent in the medium term.
We expect net provisioning for impairment losses for 2016 to be below the level of 2015 (€ 1,264 million).
Sale of Zuno to the Alfa Banking Group will not be concluded On 1 March 2016, RBI announced that the sale of its direct bank ZUNO BANK AG to the Alfa Banking Group, as announced by RBI in September 2015, will not be concluded. ABH Holdings S.A., the Luxembourg-based parent company of the Alfa Banking Group, with which RBI had reached an agreement last year, withdrew from the contract of sale.
The effect of the transaction on RBI’s regulatory capital ratios would have been negligible. The reasoning for selling Zuno was to reduce complexity and minimize overlap within the group. RBI is examining the next steps which could be either external or internal, primarily the full sale of Zuno, but also the full integration of Zuno into other RBI group entities, or partial sale.
Segmentation principles Segment reporting at RBI is based on the current organizational structure pursuant to IFRS 8. A cash generating unit within the Group is either a country or a business activity. Markets in Central and Eastern Europe are thereby grouped together into regional segments comprising countries with comparable economic profiles and similar long-term economic growth expectations. Business activities outside the CEE region are divided according to business area.
Central Europe in € million 2015 2014 Change Q4/2015 Q3/2015 Change
Net fee and commission income 388 377 2.9% 98 93 4.5%
Net provisioning for impairment losses (133) (222) (40.1)% (43) (25) 69.7%
Return on equity before tax 18.3% – – 12.7% 21.4% (8.7) PP
After the previous year’s loss, RBI returned to generating a significant level of profit before tax in Central Europe, posting an increase of € 443 million to € 310 million, particularly due to negative non-recurring effects in Hungary in the previous year (Settlement Act), as well as lower bank levies and lower net provisioning for impairment losses.
The Central Europe segment’s net interest income fell 6 per cent year-on-year, or € 40 million, to € 654 million, largely due to historically low market interest rates. This included declines in Hungary and Slovakia, as well as an increase in the Czech Republic. Net interest income in Hungary decreased € 33 million, as a result of lower interest income from derivatives and low level of market interest rates. In Slovakia, lower interest rates also reduced net interest income by € 17 million, despite an increase in volumes; whereas in the Czech Republic – which continued on its growth trajectory – higher interest income from derivatives and lower interest rates in the deposit business increased net interest income by € 10 million. The segment’s net interest margin dropped 42 basis points year-on-year to 2.67 per cent, due to the continued low interest rates in all of the segment's markets.
Recurring other net operating income for the region improved 52 per cent, or € 27 million, to minus € 25 million, primarily due to a € 9 million increase in rental income in Hungary, a € 7 million increase in net income from the disposal of tangible fixed assets and a € 9 million increase in net income from the release of other provisions, especially in Hungary.
The portfolio of non-performing loans fell € 600 million over the course of the year to € 1,331 million, primarily due to a reduction of € 527 million in Hungary, which was mostly related to retail loans following the adoption of the Settlement Act. The decline amounted to € 48 million in the Czech Republic and € 25 million in Slovakia. The proportion of non-bank non-performing loans in the Central Europe segment’s loan portfolio decreased 3.3 percentage points to 7.1 per cent. The NPL coverage ratio rose 1.5 percentage points to 75.3 per cent.
The Central Europe segment’s other results increased € 352 million year-on-year to € 31 million.
Detailed results of individual countries in the segment: 2015 in € million Czech Republic Hungary Slovakia
Southeastern Europe in € million 2015 2014 Change Q4/2015 Q3/2015 Change
Recurring other net operating income 3 28 (88.4)% (9) 4 –
Return on equity before tax 15.0% 16.7% (1.7) PP 8.9% 6.0% 2.9 PP
Net fee and commission income increased 6 per cent year-on-year, or € 22 million, to € 380 million. Net income from the loan and guarantee business was up € 7 million to € 22 million, as a result of lower defaults of given guarantees, primarily in Romania. Net income from the foreign currency, notes/coins and precious metals business improved 9 per cent, or € 6 million, to € 81 million, mainly due to higher volumes and margins in Romania. As a result of the first-time consolidation of a business in Croatia, which focuses on private pension recipients, net income from the management of investment and pension funds increased 50 per cent to € 16 million. Net income from the securities business was positively impacted by higher income, mainly in Romania, and was also up 37 per cent to € 19 million. In contrast, net income from other banking services fell € 4 million to € 21 million, primarily due to developments in Romania.
Net trading income was down 11 per cent year-on-year, or € 6 million, to € 50 million in Southeastern Europe. Lower income in Croatia, Romania, and Bulgaria, was mainly responsible for the € 8 million decrease in interest-based business to € 20 million. Lower volumes and interest rates resulted in declines. Net income from currency-based transactions improved € 2 million to € 30 million.
Recurring other net operating income declined 88 per cent year-on-year, or € 25 million, to € 3 million. The main factors for the decrease were lower net income from non-banking activities in Romania and Croatia, as well as higher allocations to other provisions for litigation in Romania and Albania.
Net provisioning for impairment losses (422) (712) (40.8)% (102) (81) 25.5%
The Eastern Europe segment was again affected by a high level of currency volatility in 2015, as in the previous year. The average exchange rate of the Russian rouble was 26 per cent lower year-on-year, while the Ukrainian hryvnia and the Belarus rouble were down 35 and 23 per cent year-on-year, respectively. The risk situation improved markedly in Ukraine after very high provisions for loan losses were still necessary in the previous year due to the political situation in the Donbass region. Despite the currency-related decline in net interest income, Russia posted a 16 per cent increase in profit before tax. In Belarus, profit more than doubled as a result of the good overall earnings situation, a valuation gain from a capital hedge transaction, and the discontinuation of hyperinflation accounting.
Net fee and commission income fell 19 per cent year-on-year, or € 94 million, to € 404 million. Net income from the payment transfer business dropped 19 per cent, or € 43 million, to € 184 million, mainly as a result of currency movements in Ukraine and Russia. Net income from the foreign currency, notes/coins and precious metals business declined 19 per cent, or € 28 million, to € 116 million, as a result of exchange rate and volume effects, primarily in Ukraine and Russia. The € 25 million fall in net income from the loan and guarantee business to € 58 million was also primarily driven by currency effects and the exit from the automobile finance business in Russia.
Net trading income improved from minus € 177 million to plus € 31 million. Net income from currency-based transactions was up € 170 million to € 21 million. Belarus reported a considerable increase of € 69 million and was attributable to positive effects from a strategic currency position, the discontinuation of financial reporting for hyperinflationary economies, and improved net income from proprietary trading. Furthermore, valuation gains from derivative financial instruments and foreign currency positions were booked in Russia; whereas in Ukraine, valuation losses from foreign currency positions reduced by € 37 million to € 75 million. As in the previous year, these losses arose due to the currency position following the devaluation of the Ukrainian hryvnia. Net income from interest-based transactions was up € 37 million to € 9 million on the back of valuation gains on securities positions and interest-based derivatives in Russia.
Recurring other net operating income was down 146 per cent year-on-year, or € 13 million, to minus € 22 million. This was mainly due to an increase of € 10 million in provisions, primarily in Russia, as well as business outlet closures and a € 3 million drop in net income from leasing.
Net provisioning for impairment losses fell 41 per cent year-on-year, or € 291 million, to € 422 million. In Ukraine, net provisioning for impairment losses was down € 321 million to € 212 million. The decline was to some extent currency-related, though amounted to 39 per cent in local currency, as lower provisioning requirements for loans and advances to retail and corporate customers - in particular in connection with the Donbass region - more than offset the rise in net allocations for foreign currency loans. The latter was based on the bank’s voluntary offer to convert foreign currency loans into local currency at a rate below the official exchange rate and on the adjustment of loan amounts in relation to collateral held in local currency. For currency-related reasons, net provisioning for impairment losses rose by only € 11 million to € 181 million in Russia; the increase in local currency, however, was 43 per cent. The economic conditions in Russia (recession, sanctions, commodity price and currency trends) resulted in higher net provisioning for impairment losses in the retail business. Higher risk costs also resulted from new non-performing loans to large corporate customers and loan sales. In Belarus, net provisioning was up € 18 million to € 26 million as a result of increased lending to large corporate customers.
Other results increased € 57 million year-on-year to € 173 million. In the reporting year, the deconsolidation of the Russian pension fund business, following its sale, led to a net gain of € 86 million. Net income from derivative financial instruments fell € 30 million to minus € 3 million in the reporting year. This resulted from the valuation of interest rate swaps carried out to mitigate interest rate structure risk and changes in the market values of banking book derivatives, above all in Russia. In contrast, net income from financial investments was almost unchanged year-on-year at € 90 million. Valuation gains on securities in the fair value portfolio – mainly on bonds in Russia – rose € 46 million to € 93 million. However, net proceeds from disposals of securities in that category declined € 42 million to minus € 3 million, after positive net income of € 39 million in the previous year primarily due to the partial repayment of fixed-income government bonds in Ukraine. Net proceeds from the sale of equity participations declined € 3 million, as VISA shares were sold in Belarus in the previous year.
Group Corporates in € million 2015 2014 Change Q4/2015 Q3/2015 Change
Recurring other net operating income 1 0 – 0 0 80.0%
Profit before tax in the Group Corporates segment fell 15 per cent, or € 18 million, to € 103 million, mainly as a result of lower net fee and commission income and increased general administrative expenses; however, this was largely offset by lower net provisioning for impairment losses.
Net interest income in the segment increased year-on-year by 3 per cent, or € 9 million, to € 326 million. Lower loan volumes and declining margins in new business at Group head office (Austrian and multinational corporate customers serviced from Vienna) were offset by the positive impact of the partial reclassification of net fee and commission income items as net interest income. The segment’s net interest margin increased 52 basis points to 2.08 per cent.
Net provisioning for impairment losses declined 28 per cent year-on-year, or € 55 million, to € 141 million. Net provisioning for impairment losses in the reporting period predominantly related to individual provisions for losses on loans to large corporate customers, especially in the multinational corporate customer business. The portfolio of non-performing loans rose € 28 million over the course of the year to € 1,268 million. The proportion of non-bank non-performing loans in the segment’s portfolio in-
Other results declined € 10 million to minus € 15 million due to higher expenses for bank levies.
Income tax expense posted an earnings-related decline of 16 per cent, or € 5 million, to € 25 million.
Return on equity before tax 17.2% 16.1% 1.1 PP 37.8% 3.9% 33.9 PP
Net fee and commission income increased 10 per cent year-on-year, or € 11 million, to € 122 million. This was mainly due to positive developments in the areas of custody and fund brokerage, capital markets institutionals business, as well as guarantee business. In addition, an increase resulted from the partial reclassification of calculative net trading income items as net fee and commission income.
General administrative expenses declined 9 per cent year-on-year, or € 22 million, to € 216 million, due to the release of bonus provisions for the 2014 financial year and significantly lower security expenses. The cost/income ratio rose 8.0 percentage points year-on-year to 74.9 per cent.
Other results increased € 29 million year-on-year to € 15 million. This increase was attributable to a € 32 million improvement in the valuation of bonds and a € 9 million increase in income from derivative financial instruments due to interest rate developments. This contrasted with a € 12 million higher pro-rata allocation of bank levies.
Net fee and commission income 17 (9) – 5 13 (57.4)%
Net provisioning for impairment losses (23) (10) 137.7% (14) (8) 73.4%
The segment’s net trading income decreased significantly – by 169 per cent year-on-year, or € 92 million, to minus € 147 million – primarily due to a loss of € 70 million from a hedging transaction for dividend income in Russian roubles.
The segment’s other results improved € 204 million to minus € 226 million.
The development of net income from derivatives and liabilities was negative, declining € 91 million to minus € 3 million, as a result of the valuation of bank-book derivatives and own issues. Net income from financial investments also declined – by € 88 million – primarily due to impairments relating to various equity participations.
In contrast, the € 49 million in expenses for bank levies reported in the segment was € 30 million lower than in the comparable period of the previous year. The allocation method for the bank levy was adjusted in the reporting period.
A net loss of minus € 49 million was reported from the disposal of Group assets, mainly because of a provision for the sale of Raiffeisen Banka d.d., Maribor (€ 52 million) that was booked in the reporting period. In the previous year, minus € 11 million was posted, mainly as a result of the disposal of the trading group F.J. Elsner, Vienna.
Recurring other net operating income 19 6 222.7% 5 5 8.9%
The Non-Core segment encompasses those business areas which are to be sold or reduced in line with RBI’s strategic review. The loss before tax increased 109 per cent to € 263 million, largely due to a decline in operating income in Poland as a result of the planned reduction in volumes and low interest rates. In Poland, general administrative expenses rose as a result of higher deposit insurance fees and the impairment of the Polbank brand. As in the previous year, net provisioning for impairment losses remained elevated due to loans in Asia.
Net trading income rose from minus € 1 million to plus € 1 million, with net income from interest-based transactions decreasing € 26 million year-on-year to € 8 million. The decrease was attributable to lower income from interest-based derivatives in Poland. Net income from currency-based transactions, in contrast, rose from minus € 35 million in the previous year to minus € 7 million, largely due to valuation gains in Poland.
Recurring other net operating income was up 223 per cent year-on-year, or € 13 million, to € 19 million, due to the release of other provisions in Slovenia, higher net income arising from non-banking activities, as well as higher net proceeds from the disposal of tangible and intangible fixed assets in Poland.
The portfolio of non-performing loans rose € 35 million to € 1,903 million. While the portfolio increased by a further € 215 million to € 987 million in Asia, it declined € 129 million to € 731 million in Poland. In Slovenia, it fell € 75 million to € 134 million, due to the sale of non-performing loans. The proportion of non-performing loans to non-banks in the segment’s loan portfolio increased 3.2 percentage points year-on-year to 15.4 per cent. The NPL coverage ratio rose 4.6 percentage points to 62.4 per cent.
Other results were up € 2 million year-on-year. This included a € 4 million increase in net income from financial investments in Poland and a € 2 million decline in net financial income in Asia.
Tax expense decreased 67 per cent year-on-year, or € 48 million, to € 24 million. The decline resulted predominantly from a deferred tax asset impairment of € 35 million from the previous year in Asia, as well as a lower tax expense in Poland and the US due to lower net income in the reporting year.
Customers 87 733,392 56,736 118 Asia: Some Asian entities are operated as branches; therefore no equity available.
Deferred taxes on items which are not reclassified to profit and loss (735) 3,258 (735) 3,258 0 0
Items that may be reclassified subsequently to profit or loss (55,474) (1,280,800) (51,654) (1,264,199) (3,820) (16,601)
Net gains (losses) on derivatives hedging fluctuating cash flows (436) (10,241) (436) (10,241) 0 0
Net gains (losses) on financial assets available-for-sale 82,418 21,411 75,640 21,577 6,778 (166)
As of 1 January 2015, the application of hyperinflation accounting in Belarus was discontinued as the relevant parameters indicating hyperinflation no longer existed. In the previous year, € 39,162 thousand was recognized in other comprehensive income in Belarus due to the application of IAS 29 (hyperinflation accounting).
Cash flow hedging has been applied in two Group units to hedge against interest rate risk. In the current reporting year, € 1,079 thousand was reclassified to the income statement. In the previous year, no profit or loss was reclassified to the income statement.
Net gains (losses) reclassified to income statement 0 0 0 0 0 10 (2)
Net gains (losses) reclassified to income statement 0 4,018 0 0 1,079 15 (3)
Loans and advances to banks [14, 33, 49] 10,837,209 15,573,241 (30.4)%
Loans and advances to customers [15, 33, 49] 69,921,365 77,925,416 (10.3)%
Impairment losses on loans and advances [16, 33] (6,055,134) (6,103,362) (0.8)%
Statement of changes in equity in € thousand Subscribed capital Participation capital Capital reserves Retained earnings
Own shares/share incentive program 144 0 2,604 0 0 0 2,748
The capital increases related to non-controlling interests concern mostly Raiffeisen Bank Aval JSC, Kiev.
The other changes in equity are mainly due to the purchase of a 25 per cent interest in RLI Holding Gesellschaft m.b.H., Vienna.
Gains (losses) from disposals of tangible fixed assets and financial investments (78,297) (57,539)
Changes in assets and liabilities arising from operating activities after corrections for non-cash positions: Loans and advances to banks and customers 11,775,004 6,273,080
This segment encompasses the most advanced banking markets in Central and Eastern Europe, namely the EU members Czech Republic, Hungary and Slovakia. They are also the markets in which RBI has been operating the longest. In each of the countries, RBI is represented by a bank, leasing companies and other specialized financial institutions. In Slovakia, RBI is active in Corporate and Retail Customers business, including leasing. In retail business Tatra Banka is pursuing a multibrand strategy; besides the existing business outlets, outlets carrying the Raiffeisen brand are being further rolled out, with a focus on particular retail client groups. In the Czech Republic, RBI offers real estate leasing in addition to traditional banking services to corporate and retail customers. The focus is on broadening relationships with existing affluent customers. In Hungary, the Group provides services to private and corporate customers via the bank's countrywide network and also through leasing companies. As part of the strategy review, the focus now rests on corporate customers and affluent retail customers.
The Southeastern Europe segment comprises Albania, Bosnia and Herzegovina, Bulgaria, Croatia, Kosovo, Romania and Serbia. In these markets, RBI is represented by banks and leasing companies, as well as separate capital management and asset management companies and pension funds in some markets. In Albania and Bulgaria, financial services are offered across all business areas. In Kosovo, RBI also offers a comprehensive product range. In Bosnia and Herzegovina the emphasis is on small and medium-sized enterprises, while also including a wide range of products for retail customers. In Croatia the focus is on large and medium-sized corporate customers and also on retail customers (including pension funds business). In Romania a broad range of financial services is offered via a tightly knit branch network. Moreover, the Moldovan corporate customer market is also served from Romania. In Serbia, the market is serviced by a universal bank and a leasing company.
Significant changes in profit/loss are described below: After the previous year’s loss, RBI returned to generating a significant level of profit before tax in Central Europe, posting an increase of € 443 million to € 310 million, particularly due to negative non-recurring effects in Hungary in the previous year (Settlement Act), as well as lower bank levies and lower net provisioning for impairment losses.
In Southeastern Europe, the law on the mandatory conversion of Swiss franc loans in Croatia, as well as declining interest margins due to low market interest rates, had a negative impact on profit before tax. In contrast, the marked improvement in the credit risk situation in the majority of markets had a positive effect.
Profit before tax in the Group Corporates segment fell 15 per cent, or € 17 million, to € 103 million, mainly as a result of lower net fee and commission income and increased general administrative expenses; lower net provisioning for impairment losses positively impacted the result.
The Non-Core segment encompasses those business areas which are to be sold or reduced in line with the strategic review. The loss before tax increased 45 per cent to € 263 million, largely due to a decline in operating income as a result of the reduction in volumes and low interest rates in Poland. In Poland, general administrative expenses rose as a result of higher deposit insurance fees and the impairment of the Polbank brand. As in the previous year, net provisioning for impairment losses remained elevated primarily due to loans in Asia.
Reconciliation comprises consolidation adjustments to reconcile segments with Group results. The financials of the reportable segments are shown after elimination of intra-segment items. However, the inter-segment items are eliminated in the reconciliation. The main eliminations are dividend payments to head office and inter-segment revenues charged and expenses carried by the head office.
Profit/loss after deduction of non-controlling interests (241,981) 295,747 111,971 89,900 80,779
Net interest margin (average interest-bearing assets) 3.09% 4.27% 6.63% 1.56% 0.98%
Provisioning ratio (average loans and advances to customers) 1.23% 1.85% 3.52% 1.53% (0.04)%
Business outlets 418 1,087 981 1 5 1 Adaptation of previous year figures due to change of segment reporting. 2 2014 figures restated.
Business outlets 0 374 – 2,866 1 Adaptation of previous year figures due to different allocation. 2 2014 figures restated.
Raiffeisen Bank International AG (RBI AG) is registered at the Vienna Commercial Court (Handelsgericht Wien) under Companies Register number FN 122.119m. The company address is at Am Stadtpark 9, 1030 Vienna. The consolidated financial statements are lodged with the Companies Register in accordance with Austrian disclosure regulations and published in the official register of the Wiener Zeitung.
With a holding of just over 60 per cent, Raiffeisen Zentralbank Österreich AG (RZB) is the majority owner of RBI; the remaining shares are held in free float and are traded on the Vienna Stock Exchange. RZB is the central institution of the Austrian Raiffeisen Banking Group (RBG), the head of the RZB Group and also the service unit for RBG. A majority stake in RBI and RZB is indirectly held by Raiffeisen-Landesbanken-Holding GmbH and they are therefore included in its consolidated financial statements.
Formally, the examination is deemed completed on notification of the decision. This notification had not yet been issued at the time the consolidated financial statements were prepared. RBI expects the confirmation of the examination result in the second quarter of 2016. The examination identified a need for the following restatements:  Contrary to the provisions of IAS 36.33(a) in conjunction with IAS 36.34, the intrinsic value of the goodwill of Raiffeisen Polbank of € 93,403 thousand as at 31 December 2014 and 30 June 2015 could not be sufficiently substantiated. The examination led to different assumptions being employed for cash-flow planning with regard to the budgeted net interest income (a key driver for the company’s profit/loss), in light of the assessment of underlying economic conditions. This means that an impairment of € 93,403 thousand should have been recorded in profit/loss in the 2014 reporting year.
 Contrary to IAS 7.27, the cash flows of foreign subsidiaries were calculated using the exchange rate on the reporting date instead of an approximation of the actual exchange rate. In particular, this has an impact if foreign currencies are subject to marked fluctuations. As foreign currencies are used to a significant extent within the Group, individual positions within the consolidated cash flow statement are affected accordingly.
According to IAS 8.41, earlier periods must be restated retrospectively. All figures from previous years have been shown in the consolidated financial statements as if the restatement requirement from earlier periods had never occurred. For the consolidated 2014 financial statements, therefore, the restatements described above have been applied retrospectively. The effects on the income statement, the statement of financial position and the consolidated equity are as follows: Income statement restated Restatements 2014 published
Equity and liabilities in € thousand 2014 restated Restatements 2014 published
Statement of cash flows restated Restatements 2014 published Profit/loss after tax (587,189) (124,110) (463,079)
Changes in assets and liabilities arising from operating activities after corrections for noncash positions: Loans and advances to banks and customers 6,273,080 (207,463) 6,480,543
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 are offset against equity (retained earnings). According to IAS 21, in cases of significantly fluctuating exchange rates, the transaction rate is applied instead of the average rate.
The following exchange rates were used for currency translation: 2015 2014 As at Average As at Average Rates in units per € 31/12 1/1-31/12 31/12 1/1-31/12
(1) Income statement according to measurement categories restated Net gains (losses) on financial assets and liabilities held-for-trading 105,649 326,186
Net gains (losses) on financial assets and liabilities at fair value through profit or loss 208,506 72,578
Impairment on financial assets not measured at fair value through profit and loss (1,274,243) (1,817,982)
Net realized gains (losses) on financial assets not measured at fair value through profit and loss 11,750 4,156
Details on risk provisions are shown under note (16) Impairment losses on loans and advances.
1 Adaptation of previous year figures due to change in earnings allocation to sub-items.
Net income from hedge accounting includes a valuation result from derivatives used in fair value hedges of minus € 112,615 thousand (2014: plus € 399,401 thousand) and changes in the carrying amount of the fair value hedged items of plus € 118,812 thousand (2014: minus € 374,195 thousand).
Net income from other derivatives includes valuation results from derivatives held to hedge against market risks (except trading assets/liabilities). They relate to a non-homogeneous portfolio and therefore do not satisfy the requirements for hedge accounting according to IAS 39.
Net income from liabilities designated at fair value comprises a loss from changes in own credit risk amounting to € 2,572 thousand (2014: profit of € 166,210 thousand) and a positive effect from changes in market interest rates totaling € 114,215 thousand (2014: negative effect of € 183,037 thousand).
Net proceeds from sales of securities held-to-maturity resulted exclusively from sales of bonds which were close to their maturity date.
Amortization of intangible fixed assets capitalized in the course of initial consolidation amounted to € 5,747 thousand (2014: € 3,204 thousand) which relates to scheduled amortization of customer relationship intangibles.
The same regulations for employees are in principle valid for the members of the Management Board. These regulations provide a basic contribution to a pension fund from the company and an additional contribution if the employee pays own contributions of the same amount. Three members of the Management Board additionally have individual retirement benefits, which are funded by a reinsurance policy.
In the event of termination of function or employment contract and departure from the company, one member of the Management Board is entitled to severance payments according to the Salaried Employees Act (Angestelltengesetz) in connection with the Bank Collective Agreement (Bankenkollektivvertrag), one member of the Management Board according to contractual agreements and four members of the Management Board according to the Company Retirement Plan Act (Betrieblichen Mitarbeitervorsorgegesetz ). The entitlement to receive severance payments according to the Salaried Employees Act or according to contractual agreements lapses in the case of termination by the employee.
Rental income from investment property incl. operating lease (real estate) 47,498 35,684
Moreover, the disclosure of negative interest has been changed: this is now shown under the item “interest income”. Previous year figures have not been reclassified due to materiality reasons.
A provision of € 51,772 thousand has been recognized for the expected loss from the sale of Raiffeisen Banka d.d., Maribor. The contract was signed in December 2015. After receipt of regulatory approvals, the closing is expected in the first half-year 2016.
The following reconciliation shows the relationship between profit before tax and the effective tax burden: restated
Theoretical income tax expense in the financial year based on the domestic income tax rate of 25 per cent (177,736) 26,162
Purchased loans amounting to € 1,774,747 thousand (2011: € 1,805,454 thousand) are assigned to the measurement category “loans and advances”.
Loans and advances to customers classified regionally (counterparty domicile) are as follows: Details on leasing claims are shown in the notes under (44) Finance leases.
Loans and advances and loan loss provisions according to asset classes are shown in the following table: 2015 in € thousand Fair value
Retail customers – small and medium-sized entities 2,613,887 2,756,567 378,288 250,229 28,218 2,478,120 2014 restated in € thousand Fair value
Positive fair values of derivatives in fair value hedges (IAS 39) 691,539 941,453
Positive fair values of derivatives in net investment hedge (IAS 39) 16,711 0
As long as the conditions for hedge accounting according to IAS 39 are fulfilled, derivative financial instruments are reported at their fair values (dirty prices) in their function as hedging instruments. The items hedged by fair value hedges are loans and advances to customers, deposits from banks and debt securities issued, which are hedged against interest rate risks. The changes in carrying amount of the hedged underlying transactions in IAS 39 fair value hedges are included in the respective items of the statement of financial position.
Pledged securities permitted to be sold or repledged by the transferee shown under financial investments amounted to € 259,526 thousand (2014: € 351,868 thousand).
The carrying amount of the securities reclassified into the category “held-to-maturity” amounted at the date of reclassifications to € 452,188 thousand. Thereof, reclassifications in 2008 amounted to € 371,686 thousand and in 2011 € 80,502 thousand. As of 31 December 2015, the carrying amount totaled € 13,614 thousand and the fair value totaled € 14,208 thousand. In 2015, a result from the reclassified securities of € 557 thousand (2014: € 1,414 thousand) was shown in the income statement. If the reclassification had not been made, a loss of € 355 thousand (2014: loss of € 1 thousand) would have arisen.
The carrying amount of the securities reclassified into the category “loans and advances” amounted to € 1,559,682 thousand at the date of reclassification in 2008. As of 31 December 2015, none of the securities that had been reclassified into the category “loans and advances” remained. In the previous year, the carrying amount was € 17,928 thousand.
Equity participations valued at amortized cost for which fair values could not be measured reliably amounted to € 231,869 thousand (2014: € 426,111 thousand).
Other intangible fixed assets 50,162 87,657 hereof customer relationships 12,643 19,872
The following overview shows the development of the book value of goodwill, gross amounts and cumulative impairments of goodwill, by cash generating units. The main goodwill position relates to Raiffeisenbank a.s., Prague (RBCZ).
Development of goodwill 2015 in € thousand RBAL RBCZ RBPL RBRU Other Total 2014 in € thousand RBAL RBCZ RBPL RBRU Other Total
Cumulative impairment1 (56,428) 0 (192,826) (148,482) (159,227) (556,962) 1 Calculated with average exchange rates RBAL: Raiffeisen Bank Sh.a., Tirana (AL) RBCZ: Raiffeisenbank a.s., Prague (CZ) RBPL: Raiffeisen Bank Polska S.A., Warsaw (PL) RBRU: AO Raiffeisenbank, Moscow (RU)
In the financial year 2015, impairment of goodwill on Group level amounted to € 6,954 thousand (2014: € 399,066 thousand) and related to Group units in Ukraine and Serbia. The gross amount and cumulative impairments relating to Raiffeisen Bank Aval JSC, Kiev, is now shown in the column Other. The changes in the amounts are a result of exchange rate movements.
Contrary to the provisions of IAS 36.33(a) in conjunction with IAS 36.34, the intrinsic value of the goodwill of Raiffeisen Polbank of € 93,403 thousand as at 31 December 2014 and 30 June 2015 could not be sufficiently substantiated. The assumptions used for cash-flow planning with regard to the budgeted net interest income as a key driver for the company’s profit/loss did not comply with the specifications for impairment tests which state that cash-flow forecasts have to be based on reasonable and justifiable assumptions with regard to the estimated underlying economic conditions. This means that an impairment in the amount of € 93,403 thousand should have been recognized in the 2014 financial year profit/loss.
In the course of impairment testing the carrying amount of each cash generating unit (CGU) is compared with the recoverable amount. If the recoverable amount of a cash generating unit is below its carrying amount, the difference is recognized as impairment in the income statement under other net operating income.
Key assumptions that have been made for the individual cash generating units: 2015 Cash generating units RBCZ
Planning period 5 years 5 years RBCZ: Raiffeisenbank a.s., Prague (CZ) RBPL: Raiffeisen Bank Polska S.A., Warsaw (PL)
The use value of a cash generating unit is sensitive to various parameters: primarily to the level and development of future dividends, to the discount rates as well as the nominal growth rate in the stabilization phase. The applied discount rates have been calculated using the capital asset pricing model: they are composed of a risk-free interest rate and a risk premium for entrepreneurial risk taking. The risk premium is calculated as the market risk premium that varies according to the country in which the unit is registered multiplied by the beta factor for the indebted company. The values for the risk-free interest rate and the market risk premium are defined using accessible external market data sources. The risk measure beta factor is derived from a peer group of financial institutions operating in Western and Eastern Europe. The above-mentioned interest rate parameters represent market assessments; therefore they are not stable and could in the event of a change affect the discount rates.
Brand rights are only recognized for Raiffeisen Bank Polska S.A., Warsaw (RBPL) and for Raiffeisen Bank Aval JSC, Kiev (AVAL). The carrying values of the brands as well as gross amounts and cumulative impairment losses have developed as shown below: 2015 in € thousand AVAL RBPL Total
According to IAS 36.9 at the end of each reporting period, an entity is required to assess whether there is any indication that an asset may be impaired based on a list of external and internal indicators of impairment. In the fourth quarter, there were such indicators due to increased political uncertainty and higher refinancing costs in Poland. As a result, an impairment of € 20,731 thousand was recognized for the brand Polbank.
Cumulative impairment2 (14,394) (6,993) (21,387) 1 Calculated with average exchange rates. 2 Calculated with period-end exchange rates. AVAL: Raiffeisen Bank Aval JSC, Kiev (UA) RBPL: Raiffeisen Bank Polska S.A., Warsaw (PL)
The fair value of investment property totaled € 474,098 thousand (2014: € 276,658 thousand).
Details about leasing claims are shown in the notes under (44) Finance leases.
Other land and buildings (76,024) 667 (19,023) 470,603 of which land value of developed land (529) 0 (578) 10,920
Leased assets (operating lease) (136,830) 282 (30,896) 285,172 2014 restated Cost of acquisition or conversion in € thousand
Office furniture, equipment and other tangible fixed assets 1,274,129 (3,197) (185,361) 92,287 (90,389) (574) 1,086,895 2014 restated Write-ups, amortization, depreciation, impairment Carrying amount hereof hereof As at in € thousand Cumulative Write-ups Depreciation 31/12/2014
In the consolidated financial statements of RBI, these companies are reported on the statement of financial position as of 31 December 2015 as assets held for sale under the items "other assets" and "other liabilities", on the basis of IFRS 5 application criteria. In accordance with IFRS 5 disclosure requirements, the statement of financial position items (assets and liabilities) relating to the above companies have been neither reclassified nor otherwise changed for prior periods. As the sales do not meet any of the criteria set out in IFRS 5.32, they are not classified as discontinued operations.
In December 2015, RBI signed the contract for the sale of its 100 per cent stake in Raiffeisen Banka d.d., Maribor, to Biser Bidco. Biser Bidco is a company managed by Apollo Global Management, LLC and is not a related party of RBI. Due to procedural aspects in respect to formal approval of the transaction by the financial market regulatory authorities, closing of the transaction is expected in the first half of 2016.
In September 2015, Raiffeisen Bank International signed the contract for the sale of its 100 per cent stake in ZUNO BANK AG, Vienna, to ABH Holdings S.A., the parent company of Alfa Banking Group, domiciled in Luxembourg. ABH Holdings S.A. is not a related party of Raiffeisen Bank International. During the period in which the financial statements were being prepared, ABH Holdings S.A., the entity with which RBI had reached an agreement in 2015, withdrew from the purchase contract. The reasons for the withdrawal are not connected with the company for sale. RBI 's intention to sell remains unchanged and negotiations with potential buyers are being resumed. On a consolidated basis, the asset held for sale in accordance with IFRS 5 is valued at the lower of carrying amount and fair value less disposal costs. As the sales contract was signed before the end of the third quarter, the agreed purchase price has been used as the best indicator of the fair value of the asset held for sale. Despite the withdrawal of the buyer, it is assumed that the sales price will be higher than the equity of the company, which amounted to € 19,471 thousand as of 31 December 2015.
The carrying amounts of the assets and liabilities as at 31 December 2015 are as follows: Assets held for sale in € 000 ZUNO RBSI Others Total
The Group refinances itself periodically with international commercial banks and multinational development banks. These credit contracts contain ownership clauses normally used in business. These clauses grant permission to the parties to the contracts for exceptional termination in the event of a change in direct or indirect control of RBI AG, e.g. if Raiffeisen Zentralbank Österreich Aktiengesellschaft ceases to be a majority shareholder of RBI AG. This could lead to increased refinancing costs for the Group.
Deposits from banks classified regionally (counterparty domicile) break down as follows: Deposits from banks break down into the following segments: Multilateral development banks 1,898,085 1,875,779
Deposits from customers break down as follows: Corporate customers – large corporates 30,643,854 31,288,909
The following table contains debt securities issued amounting to or exceeding € 200,000 thousand nominal value: Issuer ISIN Type Currency Nominal value in €
Provisions for banking business due to governmental measures 251,308 0 81,987 (67,258) (163,319) 12,044 114,762
RBI is involved in litigation arising from the undertaking of banking business. RBI does not expect that these legal cases will have a material impact on the financial position of the Group. As of 31 December 2015, Group-wide provisions for pending legal issues amounted to € 80,770 thousand (2014: € 94,285 thousand). Single cases exceeding € 10,000 thousand occurred in Austria and Slovakia (2014: in Austria, Slovakia and Ukraine).
RBI expects to pay € 278 thousand in contributions to its defined benefit plans in 2016. In the financial year 2015, RBI’s contribution to its defined benefit plans was € 382 thousand.
The defined benefit obligations developed as follows: DBO as at 1/1 48,117 38,206
Plan assets developed as follows: Plan assets at fair value as at 1/1 14,687 12,904
The following table shows the actuarial assumptions used to calculate the net defined benefit obligation: Per cent 2015 2014
Longevity at age 65 for current members aged 45 – males 24.5 23.4
Longevity at age 65 for current members aged 45 – females 26.7 26.6
Future salary growth (0.5 per cent change) 496 (474) 679 (650)
Future salary growth (0.5 per cent change) 3,545 (3,333) 3,638 (3,362)
Negative fair values of derivatives in fair value hedges (IAS 39) 194,932 137,379
Negative fair values of derivatives in cash flow hedges (IAS 39) 239,858 63,171
The table below shows the expected hedged cash flows from liabilities by periods affecting the statement of comprehensive income: More than 1 year, up to 5 years 385,701 0
Net losses of € 435 thousand (2014: net loss € 10,241 thousand) relating to the effective portion of cash flow hedges were recognized in other comprehensive income.
RBI AG XS1034950672 Subordinated capital EUR 500,000 4.500% 21.02.2025 1 Current interest rate, interest clauses are agreed.
In the reporting period, expenses on subordinated capital totaled € 186,615 thousand (2014: € 208,224 thousand).
The development of equity is shown under the section statement of changes in equity.
The Annual General Meeting held on 4 June 2014 authorized the Management Board to acquire own shares, pursuant to Section 65 (1), item 4 and 8 of the Austrian Joint Stock Companies Act (AktG), during a period of 30 months as of the date of the resolution (i.e. by 3 December 2016), up to 10 per cent of the subscribed capital of the company and to withdraw if applicable. This authorization may be exercised in full or in part or also in several installments and for one or more purposes – with the exception of securities trading – by the company, by affiliated companies or, for their account, by third parties. The acquisition price for repurchasing the shares may be no lower than € 1.00 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 Management Board was further authorized pursuant to Section 65 (1b) of the Austrian Joint Stock companies Act, to decide, with the approval of the Supervisory Board, on the sale of own shares by means other than the stock exchange or a public tender, to the full or partial exclusion of shareholders’ subscription rights. This authorization applies for a period of five years from the date of the resolution (i.e. until 3 June 2019). Shareholders’ subscription rights may only be excluded if the own shares are used to pay for a contribution in kind, to acquire enterprises, businesses or branches of activity of one or several companies in Austria or abroad, or for the purpose of implementing the company’s Share Incentive Program (SIP) for executives and members of the Management Boards of the company and affiliated enterprises. In addition, if convertible bonds are issued in accordance with the Annual General Meeting resolution of 26 June 2013, shareholders’ subscription rights may also be excluded in order to issue (own) shares to the holders of these convertible bonds who exercise the conversion or subscription rights granted them under the terms of the convertible bonds to shares of the company. No own shares have been bought since the authorization was issued in June 2014.
Pursuant to Section 169 of the Austrian Stock Corporation Act (AktG), the Management Board has been authorized since the Annual General Meeting of 4 June 2014 to increase the capital stock – in one or more tranches – by up to € 446,793,032.95 by issuing up to 146,489,519 new common bearer shares with voting rights against contributions in cash and/or in kind (including by way of the right of indirect subscription by a bank pursuant to Section 153 (6) of AktG) by 25 August 2019 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 by contributions in kind or (ii) if the capital increase is carried out by contributions in cash and the shares issued under the exclusion of subscription rights do not exceed 10 per cent of the company’s capital stock (exclusion of subscription rights).
Raiffeisen Bank Aval JSC, Kiev (UA) 31.8% 74,814 (2,660) (2,232) (4,892)
The European Bank for Reconstruction and Development (EBRD) participated in the capital increase of Raiffeisen Bank Aval JSC, Kiev, which took place in December 2015. The non-controlling interests changed by 28 percentage points to 31.8 per cent.
Dividends paid to non-controlling interests during the year 1 0 9,659 28,861 3,231 1 Included in net cash from investing activites.
Executives of the company and other affiliated companies 238,981 71,694 358,472
(33) Breakdown of remaining terms to maturity 2015 Short-term assets/liabilities Long-term assets/liabilities in € thousand Due at call or without maturity Up to 3 months
Impairment losses on loans and advances (6,055,134) 0 0 0 0 2014 restated Short-term assets/liabilities Long-term assets/liabilities in € thousand Due at call or without maturity Up to 3 months
Impairment losses on loans and advances (6,103,362) 0 0 0 0
The following transactions for all or at least individual tranches were executed with external contractual partners and are still active in the reporting year. The stated amounts represent the volumes of the underlying portfolios and the junior tranche at the transaction closing date. Three of the transactions shown in the table in 2014 were terminated early, in the course of 2015, and are shown in a separate table: in € thousand Seller of claims or secured party Date of contract
Synthetic Transaction ROOF Real Estate 2015 Raiffeisen Bank International AG, Vienna July 2015 May 2025 719,628
Synthetic Transaction (JEREMIE) ROOF Romania SME 2011(1) Raiffeisenbank S.A., Bucharest (RO)
WB EDIF First Loss Portfolio Guarantee Raiffeisenbank Austria d.d., Zagreb (HR)
In the reporting year some new securitization programs with external investors were initiated. They are described briefly as follows: The synthetic securitization “ROOF Real Estate 2015” is composed of real estate loans and advances to corporate customers from Austria and Germany originated by RBI AG and was concluded in July 2015. The transaction was split into a senior and a junior tranche. The junior tranche was externally placed and includes a portfolio guarantee amount of up to € 55,000 thousand.
In December 2015 a synthetic securitization of € 1,000,000 thousand in loans and advances to corporate customers and project finance loans originated by Raiffeisenbank a.s., Prague, was concluded. This synthetic securitization is referred to as “ROOF RBCZ 2015” and was split into a senior, a mezzanine and a junior tranche. The mezzanine tranche was sold to two institutional investors, while Raiffeisenbank a.s. holds the credit risk of the junior and senior tranches.
In addition to the securitizations with investors external to the Group as shown in the table, a true sale securitization program in relation to a retail mortgage loans portfolio of AO Raiffeisenbank, Moscow, rolled out in 2013 and amounting to approximately € 125,000 thousand is still active and in place within the Group. The senior tranche as well as the junior tranche are held within the Group. Due to portfolio amortization and repayments, the carrying amount of the outstanding loans and advances of this transaction amounted to € 30,666 thousand at year-end 2015 (2014: € 44,106 thousand).
Synthetic transaction ROOF WESTERN EUROPE CLO (2012)(1) Raiffeisen Bank International AG, Vienna July 2012 early termination July 2015 996,076
Future Flow Securitization ROOF Russia DPR Finance Company S.A. ZAO Raiffeisenbank, Moscow (RU) June 2012 early termination June 2015 126,894
In July 2015 RBI AG exercised the contractually foreseen early call option for the synthetic securitization closed in 2012 (“ROOF WESTERN EUROPE CLO - 2012- 1”) with an underlying portfolio of corporate customer assets originated by RBI AG. With the exception of the mezzanine tranche which amounted to € 47,000 thousand, the other tranches had been placed within the Group.
(36) Transferred assets The Group enters into transactions that result in the transfer of trading assets, financial investments and loans and advances to customers. The transferred financial assets continue to be recognized in their entirety or to the extent of the Group’s continuing involvement, or are derecognized in their entirety. The Group transfers financial assets that are not derecognized in their entirety or for which the Group has continuing involvement primarily through sale and repurchase of securities, securities lending and securitization activities.
The Group currently has no securitization transactions in which financial assets are partly derecognized.
The following table shows securities and other financial assets accepted as collateral: Securities and other financial assets accepted as collateral which can be sold or repledged 1,780,968 6,538,220 hereof which have been sold or repledged 307,566 1,744,451
The Group received collaterals which can be sold or repledged if no default occurs in the course of reverse repo business, securities lending business, derivative and other transactions.
Some of the agreements are not set-off in the statement of financial position. This is because they create, for the parties to the agreement, a right of set off of recognized amounts that is enforceable only following an event of default, insolvency or bankruptcy of the Group or the counterparties or following other predetermined events. In addition, the Group and its counterparties do not intend to settle on a net basis or to realize the assets and settle the liabilities simultaneously. The Group receives and gives collaterals in the form of cash and marketable securities.
Related amounts not setoff in the statement of financial position Net amount in € thousand of recognized liabilities set-off in the statement of financial position of recognized assets set-off in the statement of financial position of recognized liabilities set-off in the statement of financial position
In 2015, assets which were not subject to legally enforceable netting agreements amounted to € 109,067,016 thousand (2014: € 105,480,048 thousand), of which an immaterial part was accounted for by derivative financial instruments and cash balances from reverse repo business. Moreover, liabilities which are not subject to legally enforceable netting agreements totaled € 102,392,574 thousand in 2015 (2014: € 106,962,257 thousand), of which an immaterial part was accounted for by derivative financial instruments and cash deposits from repo business.
Other financial instruments (legally enforceable) 4,848,030 447,840 4,400,190 1,316,599 0 3,083,591 2014 Gross amount Net amount
Repurchase, securities lending & similar agreements (legally enforceable) 406,086 0 406,086 399,175 0 6,911
(39) Derivative financial instruments 2015 Nominal amount by maturity Fair values in € thousand Up to 1 year
More than 1 year, up to 5 years More than 5 years Total Positive Negative
Equity/index futures – forward pricing 626,012 55 0 626,067 1,081 (2,082)
To determine the fair value a credit value adjustment (CVA) is also necessary to reflect the counterparty risk associated with OTC derivative transactions, especially of those contractual partners with whom hedging via credit support annexes has not yet been conducted. This amount represents the respective estimated market value of a security which could be used to hedge against the credit risk of the counterparties to the Group's OTC derivative portfolios.
The DVA is determined by the expected negative exposure and by RBI's credit quality and represents the value adjustment for own probability of default. The method of calculation is similar to that for the CVA, but the expected negative market value is used instead of the expected positive market value. Instead of the expected positive exposures, expected negative exposures are calculated from the simulated future aggregated counterparty market values; these represent the expected debt which the Group has to the counterparty at the respective future points in time. Values implied by the market are also used to calculate the own probability of default. Direct CDS quotations are used where available. If no CDS quotation is available, the own probability of default is calculated by assigning the own rating to a sector and rating-specific CDS curve.
A change in the probability of default for the counterparty risk led to a net result of minus € 12,021 thousand (2014: net result of minus € 9,620 thousand) in the interest-based business.
Bonds, notes and other fixed-interest securities 2,497,378 259,210 21,657 2,634,264 424,350 41,677
Financial assets at fair value through profit or loss 2,224,975 3,072,102 65,955 3,434,961 332,688 86,261
Shares and other variable-yield securities 2,560 0 1,191 4,042 0 3,702
Liabilities at fair value through profit and loss 0 1,226,965 0 0 2,595,682 0
The increase in the item bonds and other fixed-income securities shown in Level II of approximately € 2.7 billion mainly resulted from additions during the year.
in € thousand Gains/loss in P/L Gains/loss in other comprehensive income Transfer to level III Transfer from level III As at 31/12/2015
Financial assets at fair value through profit or loss 27,183 0 2,432 0 65,955
2015 in € thousand Level I Level II Level III Fair value
The Management Board of the Group ensures the proper organization and ongoing development of risk management. It decides which procedures are to be employed for identifying, measuring, and monitoring risks, and makes steering decisions according to the risk reports and analyses. The Management Board is supported in undertaking these tasks by independent risk management units and special committees.
The Problem Loan Committee is the most important committee in the evaluation and decision-making process concerning problem loans. It comprises primarily decision making authorities; its chairman is the Chief Risk Officer (CRO) of RBI. 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 (workout).
The Securitization Committee is the decision-making committee for limit requests in relation to securitization positions within the specific decision-making authority framework and develops proposals for modifications to the securitization strategy for the Management Board. In addition, the Securitization Committee is a platform for exchanging information regarding securitization positions and market developments.
All these aspects are coordinated by the division Organization & Processes which analyzes the internal control system on an ongoing basis and – if actions are necessary for addressing any deficiencies – is also responsible for tracking their implementation.
The Compliance Office is responsible for all issues concerning compliance with legal requirements in addition to and as integral part of the internal control system. Thus, compliance with existing regulations in daily operations is monitored.
Moreover, an independent and objective audit, free of potential conflicts of interest, is carried out during the audit of the annual financial statements by the auditing companies. Finally, the Group is continuously supervised by the Austrian Financial Markets Authority and by local supervisors in those countries where the Group is represented by branches or subsidiaries.
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 taken into account. This concept of overall bank risk management provides for capital requirements from a regulatory point of view (sustainability and going concern perspective) and from an economic point of view (target rating perspective). Thus it covers the quantitative aspects of the internal capital adequacy assessment process (ICAAP) as legally required. The full ICAAP process of the Group is audited during the supervisory review process for RZB credit institution group (RZB-Kreditinstitutsgruppe) on an annual basis.
Risk of falling short of a sustainable tier 1 ratio over a full business cycle
The economic capital is compared to internal capital, which mainly comprises equity and subordinated capital of the Group. This capital form serves as a primary provision for risk coverage for servicing claims of senior lenders if the bank should incur losses. As at year-end 2015, total utilization of available risk capital (the ratio of economic capital to internal capital) amounted to 50.1 per cent (2014: 70.2 per cent).
Risk-adjusted performance measurement is also based on this risk measure. The profitability of business units is examined in relation to the amount of economic capital attributed to these units (risk-adjusted profit in relation to risk-adjusted capital, RORAC), which yields a comparable performance measure for all business units of the Group. This measure is used in turn as a key figure for overall bank management, for future capital allocations to business units, and influences the remuneration of the Group’s executive management.
Risk distribution of individual risk types to economic capital in € thousand 2015 Share 2014 Share
In line with this target, risk taking capacity is calculated as the amount of expected profits, expected impairment losses, and the excess of total capital (taking into account various limits on eligible capital). This capital amount is compared to the overall valueat -risk (including expected losses). Quantitative models used in the calculation thereof are mostly comparable to the target rating perspective, (albeit on a lower 95 per cent confidence level). Using this perspective the Group ensures adequate regulatory capitalization (going concern) with the given probability.
The Bank Recovery and Resolution Directive (BRRD) which already passed on 15 May 2014 constitutes the framework of standardized and harmonized guidelines and instruments for the recovery and the resolution of banks.
The directive provides a three-stage structure:  Preparation and prevention  Early intervention – early intervention of supervisory authorities  Resolution
By the implementation of the BRRD into national law, the previous Bank Intervention and Restructuring Directive (BIRG) expired. The Bank Recovery and Resolution Act (BaSAG) became effective as of 1 January 2015.
With regard to the Single Resolution Mechanism (SRM), all 28 EU member states had to establish a national resolution fund (BRRD) as of 1 January 2015. As of 1 January 2016, the national resolution funds of 18 euro-zone states are transferred into a EU standardized resolution fund.
The following table shows the total credit exposure according to internal corporate ratings (large corporates and mid-market). For presentation purposes, the individual grades of the rating scale are summarized into the nine main rating grades.
9 Very weak credit standing / doubtful 971,191 1.5% 1,566,013 2.1%
The maximum credit exposure to corporates amounted to € 66,701,672 thousand (2014: € 74,842,411 thousand) at year-end 2015. At € 22,578,528 thousand (2014: € 29,194,614 thousand) Group Corporates was the largest segment. Compared to year-end 2014, the segment Group Corporates reported a decline of € 6,616,085 thousand mainly due to a decrease in credit financing, facility financing and letters of credit. In the segment Central Europe, the credit exposure decreased € 3,251,055 thousand to € 12,692,639 thousand mainly due to a decline in credit financing.
The decrease of € 2,373,443 thousand in the Austrian region resulted mainly from credit financing. The region Eastern Europe recorded a decrease of 3,699,648 thousand resulting primarily from facility and project financing and letters of credit. The decrease in Asia of € 1,517,704 thousand to € 3,477,786 thousand was due to the changed strategy in Asia. Therefore, China recorded a decrease in facility and project financing and Singapore a decrease in in project financing and letters of credit.
The table below provides a breakdown of the maximum credit exposure for corporates and project finance by industries: in € thousand 2015 Share 2014 Share
The total credit exposure of retail customers breaks down by Group segments as follows: in € thousand Central Europe Southeastern
Retail customers – small and medium-sized entities 1,095,471 902,940 446,912 778,107 1,736 hereof individual loan loss provision 268,798 319,446 805,949 232,657 60 hereof portfolio-based loan loss provision 79,524 51,134 48,359 23,328 0 in € thousand Central Europe Southeastern
In the table below the retail maximum credit exposure by products is shown: in € thousand 2015 Share 2014 Share
Southeastern Europe Eastern Europe Non-Core Group Markets 20141 in € thousand Central Europe
Southeastern Europe Eastern Europe Non-Core Group Markets 1 Adaptation of previous year figures due to change in segments.
Compared to year-end 2014, loans denominated in Swiss francs, US dollars and euros decreased. The decrease in foreign currency loans denominated in Swiss francs was mainly due to loan conversion into Hungarian forint as result of the Settlement Act in Hungary. In contrast, the credit exposure increased due to appreciation of the US dollar and Swiss franc.
The following table shows the maximum credit exposure of this asset class by segment: 2015 in € thousand Central Europe Southeastern Europe Eastern Europe Non-Core Group Markets 20141 in € thousand Central Europe Southeastern Europe Eastern Europe Non-Core Group Markets 1 Adaptation of previous year figurs due to change in segments.
The maximum credit exposure to banks amounted to € 16,996,536 thousand (2014: € 21,414,009 thousand) at year-end 2015. At € 9,294,803 thousand or 54.7 per cent, the bulk of this customer group was in the rating grade B1, which increased € 2,930,384 thousand compared to year-end 2014. This resulted mainly from a rating downgrade of domestic banks from A3 to B1. Compared to year-end 2014, the rating grade A3 showed the largest decrease of € 6,125,067 thousand. The increase in rating grade B4 mainly resulted from a rating downgrade of banks in Turkey from B3 to B4.
The Group continues to reduce the unsecured exposure in this asset class according to its strategy. New business in this asset class thus mainly stems from counterparty credit exposure from derivatives and short-term money market deposits. Credit business with other banks in the Austrian Raiffeisen Banking Group which are participating in a joint risk monitoring system is not restricted.
The maximum credit exposure to sovereigns amounted to € 29,294,291 thousand (2014: € 21,754,066 thousand) at year-end 2015. It accounted for 19.8 per cent (2014: 14.0 per cent) of the total credit exposure.
The table below shows the credit exposure to sovereigns (including central banks) by products: in € thousand 2015 Share 06.07.1905 Share
The table below shows the credit exposure to sovereigns in non-investment grade (rating B3 and below): in € thousand 2015 Share 20141 Share 1 Separate presentation of Slovenia in previous year. Due to rating upgrade of Slovenia to B2, reclassification to Other.
2015 Maximum credit exposure Fair value of collateral in € thousand Net exposure Commitments/guarantees issued
Retail customers – small and medium-sized entities 2,363,326 514,639 1,697,514 1 Adaptation of previous year figures.
The credit portfolio and individual borrowers are subject to ongoing monitoring. The main purpose of monitoring is to ensure that the borrower meets the terms and conditions of the contract, as well as following the obligor’s economic development. Such a review is conducted at least once annually in the non-retail asset classes corporates, banks, and sovereigns. This includes a rating review and the re-evaluation of financial and tangible collateral.
Problem loan management standards in the retail area comprise the whole restructuring and collection process for private individuals and small and medium-sized entities. A restructuring guideline defines the Group’s restructuring framework including uniform strategy, organization, methods, monitoring and controlling. In the workout process customers are classified into three categories “early,” “late,” and “recovery,” for which a standardized customer handling process is defined.
More than 1 year received for assets which are past due
2014 restated Current Overdue Collateral in € thousand Up to 30 days 31 days, up to 90 days 91 days, up to 180 days 181 days, up to 1 year
This section refers exclusively to exposure without grounds for default according to Article 178 CRR. In the corporate division, when loan terms or conditions are altered in favor of the customer, the Group distinguishes between modified and forborne loans according to the applicable definition of the EBA document "Implementing Technical Standard (ITS) on Supervisory Reporting (Forbearance and non-performing exposures)".
The crucial aspect in deciding whether a loan is forborne is the financial situation of a customer at the time the terms and conditions are altered. Loans are defined as forborne loans if at the time of altering the terms and conditions of a loan the customer, due to its creditworthiness (considering the internal rating and other information available at this point in time), is assessed to be in financial difficulties and the modification is assessed as a concession. If such a modification for a loan previously considered as non-performing is carried out, then the loan is assessed as non-performing exposure independent of whether a reason for default according to Article 178 CRR exists. The classification as forborne/NPE does not lead to an individual loan loss provision; this is based on the default definition of CRD IV/CRR.
In the division retail customers restructured loans are subject to an observation period of at least three months in order to be sure that the customer meets the newly agreed terms. In those cases where the customer concerned meets the newly agreed terms and credit exposure was not overdue for 180 days before the new agreement, it is transferred from the portfolio in observation to the living portfolio. Those credit exposures already overdue for 180 days before the new agreements or those customers who did not meet the newly agreed terms remain in the portfolio which is fully impaired.
As of 18 March 2015, an amended definition of non-performing exposure was published on the EBA homepage (Article 179). This amendment led to a considerable decline of the non-performing exposure according to CRR/CRD IV definition. Only those exposures which were classified as non-performing loans in the past, but recovered in the meantime, are automatically classified as non-performing exposure due to a repeated restructuring. Exposures not classified as non-performing loans in the past are to be re-assessed in the course of a further restructuring and are not automatically classified as non-performing exposure. This explains the strong decrease compared to year-end 2014.
The following table shows the non-performing exposure according to segments: in € thousand 2015 Share 2014 Share
In the Group, the regulations for forbearance pursuant to EBA/ITS/2013/02 from 21 October 2013 (final EBA draft of ITS for the regulatory reporting for forbearance and non-performing loans pursuant to Article 99/4, number 575/2013 CRR) are implemented. The first-time reporting to the Authority was carried out in the course of FINREP reporting in the third quarter 2014. For non-retail customers, financial difficulties are measured by means of an internal early warning system which is based on numerous representative and accepted input factors for customer risk classification (e.g. overdue days, rating downgrade etc.). IAS 39 requires that impairments must be derived from an incurred loss event; defaults according to Article 178 CRR are still the main indicators for individual and portfolio-based loan loss provisions. The transfer of forborne exposure to the living portfolio is not automatically carried out after the determined monitoring period. Additionally, expertise has to be obtained confirming that the circumstances of the customers concerned have improved.
The following table shows the development of non-performing loans in the defined asset classes loans and advances to banks and loans and advances to customers as reported in the statement of financial position (excluding items off the statement of financial position): in € thousand As at 1/1/2015 restated Change in consolidated group/
In 2015, in the asset class corporate customers, non-performing loans decreased € 213,641 thousand to € 6,051,344 thousand (2014: € 6,264,985 thousand). The ratio of non-performing loans to credit exposure rose 0.3 percentage points to 12.5 per cent, partly due to the strongly decreased credit exposure. The NPL coverage ratio increased 5.5 percentage points to 68.1 per cent. In the retail portfolio, non-performing loans sank 12.9 per cent, or € 337,256 thousand, to € 2,273,515 thousand (2014: € 2,610,770 thousand) resulting mainly from the Settlement Act in Hungary. The ratio of non-performing loans to credit exposure decreased 1.3 percentage points to 9.2 per cent, the NPL coverage ratio increased 1.0 percentage point to 80.0 per cent. The portfolio of non-performing loans in the division banks decreased € 2,413 thousand to € 127,496 thousand (2014: € 129,909 thousand) at year-end, the NPL coverage ratio increased 5.9 percentage points to 94.1 per cent.
Non-performing loans decreased significantly in the segment Central Europe by 31.1 per cent, or € 600,463 thousand, to € 1,331,017 thousand (2014: € 1,931,480 thousand) due to the Settlement Act in Hungary. The ratio of non-performing loans to credit exposure sank 2.6 percentage points to 6.4 per cent, the NPL coverage ratio increased 1.7 percentage points to 75.3 per cent. In the segment Southeastern Europe, non-performing loans declined 10.3 per cent, or € 182,358 thousand, to € 1.587.178 thousand (2014: € 1,769,536 thousand). Non-performing loans in Romania and Bulgaria decreased, while those in Croatia increased. The ratio of non-performing loans to credit exposure declined 0.9 percentage points to 10.7 per cent, the NPL coverage ratio increased 5.1 percentage points to 71.6 per cent. In the segment Eastern Europe, non-performing loans increased 7.9 per cent, or € 138,585 thousand, to € 1,902,359 thousand (2014: € 1,763,773 thousand), mainly resulting from Russia and Ukraine. The ratio of non-performing loans to credit exposure rose 2.5 percentage points to 15.1 per cent, die NPL coverage ratio rose 3.0 percentage points to 86.4 per cent. In the segment Non-Core, non-performing loans increased 1.9 per cent, or € 34,928 thousand, to € 1,902,879 thousand (2014: €1,867,951 thousand). This was due to an increase in Asia, whereas Poland and Slovenia recorded declines. The ratio of non-performing loans to credit exposure rose 3.6 percentage points to 14.1 per cent, the NPL coverage ratio rose 14.8 percentage points to 62.4 per cent.
Portfolio-based loan loss provisions 438,106 588 194,730 (244,421) (1,120) (5,901) 381,982 1 Allocation including direct write-downs and income on written down claims. 2 Usage including direct write-downs and income on written down claims.
Portfolio-based loan loss provisions 529,379 1,190 271,338 (319,463) (39) (44,285) 438,119 1 Allocation including direct write-downs and income on written down claims. 2 Usage including direct write-downs and income on written down claims.
The regional breakdown of the loans reflects the broad diversification of credit business in the Group’s markets. The following table shows the distribution of the credit exposure of all asset classes by the borrower’s home country grouped by regional segments: in € thousand 2015 Share 20141 Share 1 Adaptation of previous year figures due to change in the disclosure of regions. As of second quarter 2015, Far East is mapped to Asia.
The Group does not own any banking subsidiaries that are incorporated in the so-called European periphery countries. Nonetheless, some of the bank’s loans and advances are to customers domiciled in these countries and result from credit financing and capital market activities. The Group holds no material volumes of government bonds issued by these countries.
Risk policies and credit portfolio management in the Group take into account the industry class of customers as well. Banking represents the largest industry class, which, however, is mostly attributed to exposures to members of the Austrian Raiffeisen Sector (central liquidity balancing function). The second largest class is private households, primarily consisting of loans and advances to retail customers in Central and Eastern European countries. The following table shows the maximum credit exposure of the Group by the customers’ industry classification:
The Group uses a comprehensive risk management approach for both the trading and banking book (total-return approach). Market risks are managed therefore consistently in all trading and banking books. The following values are measured and limited on a daily basis in the market risk management system:  Value-at-Risk (VaR) – (confidence level 99 per cent, risk horizon one day)
Value-at-risk is the main market risk steering instrument in liquid markets and normal market situations. VaR is measured based on a hybrid simulation approach, where 5,000 scenarios are calculated. The approach combines the advantages of a historical simulation and a Monte-Carlo simulation and derives market parameters from 500 days historical data. Distribution assumptions include modern features like volatility declustering, random time change, and extreme event containers. This helps in reproducing fat-tailed and asymmetric distributions accurately. The Austrian Financial Market Authority approved this model so that it can be used for calculating total capital requirements for market risks. Value-at-risk results are not only used for limiting risk but also in the internal capital allocation.
 Sensitivities (to changes in exchange rates and interest rates, gamma, vega, equity and commodity prices)
The following tables show the VaR (99 per cent, one day) for individual market risk categories of the trading and banking book. The Group’s VaR mainly results from long-term equity positions, structural interest rate risks, and credit spread risks of bonds, which are held as liquidity buffer. As of 2015, the equity positions including hedges are allocated to the banking book instead of the trading book.
The strong decline in VaR related to currency risk was mainly due to the decreased volatility of the Russian rouble and the Belarus rouble. The devaluation and the hedging strategy implemented was a further reason for the decrease of the Russian rouble position from € 760,000 thousand to € 368,000 thousand.
Trading book VaR 99% 1d VaR as at Average VaR Minimum VaR Maximum VaR VaR as at in € thousand 31/12/2015 31/12/2014
Total 9,164 18,860 8,122 42,759 108,495 1 Currency risk of equity positions of subsidiaries denominated in foreign currency was shown in banking book in 2015 and in trading book in 2014.
Banking book VaR 99% 1d VaR as at Average VaR Minimum VaR Maximum VaR VaR as at in € thousand 31/12/2015 31/12/2014
Total 30,728 30,971 17,760 52,642 69,281 1 Currency risk of equity positions of subsidiaries denominated in foreign currency was shown in banking book in 2015 and in trading book in 2014. 2 As at 31 December 2015, the credit spread modeling was converted to an improved methodology considering negative interest.
Total VaR 99% 1d VaR as at Average VaR Minimum VaR Maximum VaR VaR as at in € thousand 31/12/2015 31/12/2014
Market risk in the Group results primarily from exchange rate risk, which stems from foreign-currency denominated equity investments in foreign Group units and the corresponding hedging positions entered into by the Group Asset/Liability Committee. The following table shows all material open foreign exchange rate positions as of 31 December 2015 and the corresponding values for the previous year. The numbers include both trading positions as well as equity stakes in subsidiaries with foreign currency denominated statements of financial position.
The open currency positions in the most material currencies were significantly reduced by hedging strategy year-on-year: In a narrow sense, exchange rate risk denotes the risk that losses are incurred due to open foreign exchange positions. However, exchange rate fluctuations also influence current revenues and expenses. They also affect regulatory capital requirements for assets denominated in foreign currencies, even if they are financed in the same currency and thus do not create an open foreign exchange position.
There are two different approaches for managing exchange rate risks:  Preserve equity: With this hedging strategy an offsetting capital position is held on Group level for local currency denominated equity positions. However, the necessary hedging positions cannot be established in all currencies in the required size. Moreover, these hedges might be inefficient for some currencies if they carry a high interest rate differential.
In 2015, the changes in present value of banking book positions in the Group after an interest rate shock of 200 basis points were always lower than the regulatory reporting threshold of 20 per cent of eligible total capital.
Liquidity management, i.e. ensuring that the Group maintains its ability to pay at all times, is performed both centrally by the Treasury division in Vienna and on a decentralized basis by local banking subsidiaries. Cash flows are calculated and analyzed by currency on a periodic basis Group-wide in an internal monitoring system. Based on this data, the Group creates liquidity balances, and analyzes Group conformity to legal regulations on liquidity positions and to defined internal liquidity limits. Liquidity analyses also include simulations of defined market or bank-specific liquidity crises in scenario-based cash flow forecasts. All these analyses are discussed in the Group Asset/Liability Committee. The Group possesses all instruments for liquidity risk management required by the credit institutions risk management directive (including a sufficiently large liquidity buffer, stress tests based on different scenarios, and liquidity contingency plans).
in € thousand 2015 2014 Maturity 1 week 1 month 1 year 1 week 1 month 1 year
The liquidity coverage ratio (LCR) supports the short-term resilience of banks by ensuring that they have an adequate stock of unencumbered high-quality liquid assets (HQLA) to meet potential liability run offs that might occur in a crisis, which can be converted into cash to meet liquidity needs for a minimum of 30 calendar days in a liquidity stress scenario. As of October 2015, a regulatory minimum ratio for the LCR of 60 per cent is applicable which will be raised to 100 per cent by 2018.
As a consequence, long-term funding depends on restoring confidence in banks and increased efforts in collecting customer deposits. RBI AG’s banking activities are financed by combining wholesale funding and the retail franchise of deposit-taking network banks. It is the central liquidity balancing agent for the local Group units in Central and Eastern Europe.
Letters of credit (documentary business) 1,237,908 676,857 401,977 167,689 107,191 0
Derivatives in the trading book 5,686,468 12,643,716 3,188,336 2,071,561 3,422,150 3,961,669
As with other risk types the principle of firewalling of risk management and risk controlling is also applied to operational risk in the Group. Operational risk controlling units are mainly responsible for the implementation and refinement of methods for operational risk management in different Group units (e.g. performing risk assessments, defining and monitoring key risk indicators, etc.) and for reporting to the central operational risk controlling function. Business line managers are responsible for controlling and mitigating operational risks. They decide on pro-active operational risk steering actions, such as buying insurance, and the use of further risk mitigating instruments.
Operational risk assessment is executed in a structured and Group-wide uniform manner according to risk categories such as business processes and event types. Moreover, risk assessment applies to new products as well. All Group units grade the impact of high probability/low impact events and low probability/high impact incidents according to their estimation of the loss potential for the next year and in the next ten years. Low probability/high impact events are quantified by a Group-wide analytical tool with specific scenarios. Individual Group units furthermore run additional scenarios depending on their individual risk profile and local specifics.
In order to monitor operational risks, key risk indicators (early warning indicators) are used that allow prompt identification and mitigation of operational risks. These are also specifically tailored to individual Group units. A common catalog of key risk indicators, which is defined by the Group head office for internal benchmarking purposes, is mandatory for all Group units.
Loss data is collected in a central database called ORCA (Operational Risk Controlling Application) in a structured manner and on a Group-wide basis according to the event type and the business line. Collecting data on losses stemming from operational risks is a prerequisite for implementing a statistical loss distribution model and a minimum requirement for implementing the regulatory Standardized Approach. Furthermore, loss data is used to create and validate operational risk scenarios and for exchange with international data pools to further develop advanced operational risk management tools as well as to track measures and control effectiveness. Since 2010, The Group has been a participant in the ORX data pool, whose data are currently used for internal benchmark purposes and analyses. The results of the analyses as well as events resulting from operational risks are reported in a comprehensive manner to the Group Risk Committees on a regular basis.
The Group currently calculates regulatory capital requirements for operational risks according to CRR using the Standardized Approach (TSA). This approach applies to all Group units of the credit institution group. Operational risk reduction is initiated by business managers who decide on preventive actions like risk mitigation or risk transfer. Progress and success of these actions is monitored by risk controlling. The former also define contingency plans and nominate responsible persons or departments for initiating the defined actions if losses in fact occur. In addition, several dedicated organizational units provide support to business units for reducing operational risks. An important role is taken on by financial crime management which reduces potential fraud related losses through proactive monitoring and preventive actions. The Group also conducts an extensive staff training program and has different contingency plans and back-up systems in place.
Property-based funds 242,143 255,768 1 Adaptation of previous year figures due to different allocation.
Assets under finance leases break down as follows: Vehicles leasing 1,869,112 1,785,280
Future minimum lease payments under non-cancelable operating leases are as follows: Up to 1 year 35,552 40,458
Future minimum lease payments under non-cancelable operating leases are as follows: Up to 1 year 77,938 91,158
(46) Other disclosures according to BWG Geographical markets 2015 Monetary values in € thousand
Securities admitted for trading on a stock exchange 2015 2014 in € thousand listed unlisted listed unlisted
The Group uses target values for internal regulation, which comprise all relevant risk types. Control on a Group level is undertaken by Planning & Finance. The individual Group units are responsible for the observation of their own capital targets in coordination with central departments responsible for the equity participation management of the respective unit.
As of 1 January 2014, the CRR is directly applicable law for all EU member states. The CRD IV became effective on 17 July and had to be transposed into local law by 31 December 2013. As of the beginning of 2014, the new regulations – CRR and CRD IV – are therefore to be applied and are subject to distinct transitional periods.
Moreover, an additional buffer, the so-called countercyclical buffer can be implemented by member states in order to curb excessive lending growth. This countercyclical buffer was set at 0 per cent for Austria due to restrained lending growth and the stable macroeconomic environment.
Total capital requirement for position risk in bonds, equities, commodities and open currency positions 240,924 253,783
The following table provides an overview of the calculation methods that are applied to determine total capital requirements in the subsidiaries: Credit risk Market risk Operational Unit Non-Retail Retail risk
Raiffeisen Bank International AG, Vienna (AT) IRB1 n.a. Internal model2 STA3
RBI Finance (USA) LLC, New York (USA) IRB STA3 STA STA
All other units STA STA STA STA 1 IRB: internal ratings-based approach. 2 Only for risk of open currency positions and general interest rate risk in the trading book. 3 STA: standardized approach. 4 Only on consolidated level.
Parent companies are Raiffeisen-Landesbanken-Holding GmbH, Vienna, and Raiffeisen Zentralbank Österreich Aktiengesellschaft, Vienna. Disclosures on RBI’s relations to key management are reported in the notes under (50) Relations to key management.
Other liabilities including derivatives 5,511 3,400 0 247 2014 in € thousand Parent companies
Share-based payments comprises adjustments for the SIP tranches launched up to 2013 (see share-based remuneration in the notes under (32) Equity).
To former members of the Management Board and to their surviving dependants € 207 thousand (2014: € 103 thousand) was paid.
The Annual General Meeting held on 17 June 2015 decided an annual remuneration for the members of the Supervisory Board of € 550 thousand and transferred the distribution to the Board itself. The members of the Supervisory Board settled the distribution via resolution on 7 May 2015 under the condition of approval in the Annual General Meeting held on 17 June 2015 as follows: Chairman € 70 thousand, Deputy Chairman € 60 thousand, members of the Supervisory Board € 50 thousand. Session fees are not paid.
Thus, in the financial year, € 550 thousand (2014: € 550 thousand) was paid to the members of the Supervisory Board.
In the financial year 2015, no contracts subject to approval in the meaning of Section 95 (5) item 12 Austrian Joint Stock Company Act (AktG) were concluded with members of the Supervisory Board.
Aris Bogdaneris 1 October 2004 31 März 2015 1 Effective as of 10 October 2010.
Helge Rechberger2 10 October 2010 Until further notice 1 Effective as of 10 October 2010. 2 Staff council delegates.
State Commissioners:  Alfred Lejsek, State Commissioner (since 1 January 2011)  Anton Matzinger, Deputy State Commissioner (since 1 April 2011)
Included for the first time in the financial period 15 10 0 0
Of the 120 entities in the Group, 37 are domiciled in Austria (2014: 35) and 83 abroad (2014: 100). They comprise 20 banks, 58 financial institutions, 21 companies rendering bank-related ancillary services, nine financial holding companies and twelve other companies.
Centrotrade Commodities Malaysia Sdn Bhd, Kuala Lumpur (MY) 100.0% 1/1. Sale
Additionally, a provision of € 51,722 thousand was built for the planned sale of Raiffeisen Banka d.d., Maribor.
The above entities are consolidated as the Group has de facto control over the entities arising due to the Group’s ability to elect members of the management of the entity without contractual agreements and to govern the entity by concluding material business.
BAILE Handels- und Beteiligungsgesellschaft m.b.H., Vienna (AT) 40,000 EUR 100.0% FI
Baumgartner Höhe RBI Leasing-Immobilien GmbH, Vienna (AT) 35,000 EUR 81.3% FI
Bulevard Centar BBC Holding d.o.o., Belgrade (RS) 63,708 RSD 100.0% BR
Eastern European Invest Holding GmbH, Vienna (AT) 35,000 EUR 100.0% FI
Infrastruktur Heilbad Sauerbrunn RBI-Leasing GmbH & Co.KG., Bad Sauerbrunn (AT) 0 EUR 81.3% FI
Raiffeisen International Invest Holding GmbH, Vienna (AT) 35,000 EUR 100.0% FH
Raiffeisen SEE Region Holding GmbH, Vienna (AT) 35,000 EUR 100.0% FH
RB International Investment Asia Limited, Labuan (MY) 1 USD 100.0% FI
Regional Card Processing Center s.r.o., Bratislava (SK) 539,465 EUR 100.0% BR
RI Eastern European Finance B.V., Amsterdam (NL) 400,000 EUR 100.0% FI
1 Less own shares. 2 Company type: BA Bank, BR Company rendering banking-related ancillary services, FH Financal holding, FI Financial institution, OT Other companies, SC Securities firms.
Liabilities 2015 in € thousand Deposits Equities Debt securities issued Derivatives
The maximum exposure to loss is determined by considering the nature of the interest in the non-consolidated structured entity. The maximum exposure for loans and trading instruments is reflected by their carrying amounts in the consolidated statement of financial position. The maximum exposure for derivatives and instruments off the statement of financial position such as guarantees, liquidity facilities and loan commitments under IFRS 12, as interpreted by the Group, is reflected by the notional amounts. Such amounts do not reflect the economic risks faced by the Group because they do not take into account the effects of collateral or hedges nor the probability of such losses being incurred. At December 31, 2015, the notional related replacement values of derivatives and instruments off the statement of financial position were € 29,064 thousand and € 104,682 thousand respectively. Size information of structured entities is not always publically available therefore the Group has determined that its exposure is an appropriate guide to size.
The gross revenues from sponsored entities for the year ending December 31, 2015 amounted to € 21,923 thousand.
"Immobilien Invest" Limited Liability Company, Moscow (RU) 10,000 RUB 100.0% BR
Abies Handels- und Beteiligungs GmbH, Vienna (AT) 35,000 EUR 100.0% OT
Aspius Immobilien Holding International GmbH, Vienna (AT) 35,000 EUR 100.0% OT
BUXUS Handels- und Beteiligungs GmbH, Vienna (AT) 35,000 EUR 100.0% OT
CP Linzerstraße 221(227) Projektentwicklungs GmbH, Vienna (AT) 37,000 EUR 100.0% OT
Kathrein & Co. I Vermögensverwaltungs GmbH – in liquidation, Munich (DE) 25,000 EUR 100.0% OT
Limited Liability Company REC GAMMA, Kyiv (UA) 49,015,000 UAH 100.0% BR
MORHUA Handels- und Beteiligungs GmbH, Vienna (AT) 36,336 EUR 100.0% OT
Onyx Energy Projekt II s.r.o., Prague (CZ) 210,000 CZK 100.0% OT
PILSENINEST, uzavreny investicni fond, a.s., Prague (CZ) 212,000,000 CZK 100.0% OT
Pro Invest da Vinci e.o.o.d., Sofia (BG) 5,000 BGN 100.0% OT
R LUX IMMOBILIEN LINIE S.R.L., Timisoara (RO) 50,000 RON 1.0% OT
Raiffeisen Asset Management (Bulgaria) EAD, Sofia (BG) 250,000 BGN 100.0% FI
Raiffeisen Insurance Broker Kosovo L.L.C., Pristina (KO) 5,000 EUR 100.0% BR
Raiffeisen Investment Ukraine TOV – in liquidation, Kyiv (UA) 3,733,213 UAH 100.0% FI
Raiffeisen Property Management Bulgaria EOOD, Sofia (BG) 80,000 BGN 100.0% OT
Real Estate Rent 4 DOO, Belgrade (RS) 40,310 RSD 100.0% FI
SCT Kárász utca Ingatlankezelő Kft., Budapest (HU) 3,000,000 HUF 100.0% FI
SORANIS Raiffeisen Portfolio Management GmbH, Vienna (AT) 35,000 EUR 100.0% OT
Accession Mezzanine Capital II L.P., Bermuda (BM) 2,613 EUR 5.7% OT
Accession Mezzanine Capital III L.P., Hamilton (BM) 134,125,000 EUR 3.7% OT
Accession Mezzanine Capital L.P. in Liquidation, Bermuda (BM) 1,147 EUR 2.6% OT
ARR Rail Rent Transportmittel Vermietungs Gesellschaft m.b.H. in Liqu, Perchtoldsdorf (AT) 500,000 ATS 50.0% OT
Belarussian currency and stock exchange JSC, Minsk (BY) 90,065,837,400 BYR 0.0% SC
Central Depository and Clearing Company, Inc., Zagreb (HR) 86,925,000 HRK 0.0% FI
D. Trust Certifikačná Autorita, a.s., Bratislava (SK) 331,939 EUR 10.0% OT
LLC "Insurance Company 'Raiffeisen Life", Moscow (RU) 240,000,000 RUB 25.0% VV
Open Joint Stock Company Volodymyr-Volynskyi Sugar Refinery, Vladimir-Volynsky City (UA) 13,068,010 UAH 2.6% OT
Polish Real Estate Investment Limited, Limassol (CY) 911,926 EUR 11.2% OT
Private Joint Stock Company First All-Ukrainian Credit Bureau, Kyiv (UA) 11,750,000 UAH 5.1% OT
Private Joint Stock Company Ukrainian Interbank Currency Exchange, Kyiv (UA) 36,000,000 UAH 3.1% SC
Public Joint Stock Company National Depositary of Ukraine, Kyiv (UA) 103,200,000 UAH 0.1% BR
Public Joint Stock Company Stock Exchange PFTS, Kyiv (UA) 32,010,000 UAH 0.2% SC
Raiffeisen-Leasing Mobilien und KFZ GmbH, Vienna (AT) 35,000 EUR 31.0% FI
Registry of Securities in FBH, Sarajevo (BA) 2,052,300 BAM 1.4% OT
REPEF Holding GmbH in Liquidation, Vienna (AT) 400,000 EUR 3.5% OT
RL Flussschifffahrts GmbH & Co KG, Vienna (AT) 5,000 EUR 5.0% FI
Society for Worldwide Interbank Financial Telekommunication scrl, La Hulpe (BE) 13,788,750 EUR 0.5% FI
Trimo inzeniring in proizvodnja montaznih objektov, d.d., Trebnje (SI) 9,138,625 EUR 1.4% OT
UNIQA Raiffeisen Software Service Kft., Budapest (HU) 19,900,000 HUF 40.0% OT
Recognition and measurement principles Financial instruments: Recognition and measurement (IAS 39)
Trading assets/liabilities are acquired or incurred principally for the purpose of generating profit from short-term fluctuations in market prices. Securities (including short selling of securities) and derivative financial instruments held-for-trading are recognized at their fair values. If securities are listed, the fair value is based on stock exchange prices. Where such prices are not available, internal prices based on present value calculations for originated financial instruments and futures or option pricing models for options are applied. Present value calculations are based on an interest rate curve which consists of money market rates, future rates and swap rates. Option price formulas Black-Scholes 1972, Black 1976 or Garman-Kohlhagen are applied depending on the kind of option. The measurement for complex options is based on a binominal tree model and Monte Carlo simulations.
In 2015, as in 2014, observable market prices were used for the valuation of liabilities of subordinated issues measured at fair value. The financial liabilities are mostly structured bonds. The fair value of these financial liabilities is calculated by discounting the contractual cash flows with a credit-risk-adjusted yield curve, which reflects the level at which the Group could issue similar financial instruments at the reporting date. The market risk parameters are evaluated according to similar financial instruments that are held as financial assets. Valuation results for liabilities that are designated as a financial instrument at fair value are recognized in income from derivatives and liabilities.
Non-derivative financial assets with fixed or determinable payment entitlements for which there is no active market are allocated to this category. These financial instruments are mainly recorded in the items "loans and advances to banks" and "loans and advances to customers". Moreover, loans and advances relating to finance lease business, which are recognized in accordance with IAS 17, are stated in the items "loans and advances to banks" and "loans and advances to customers".
Moreover, debt instruments are also allocated to this category if there is no active market for them. Derecognition of financial assets within the framework of securitizations is – after checking if the securitized special purpose vehicle has to be integrated into the consolidated accounts – undertaken on the basis of a risk and rewards or control test according to IAS 39 after identifying loss of control over the contractual rights relating to the asset.
The category of financial assets available-for-sale contains financial instruments including non-consolidated equity participations that were not allocated to any of the other three categories. They are stated at fair value, if a fair value is reliably measurable. Valuation differences are shown directly in equity in other comprehensive income and only recognized in the income statement under net income from financial investments if there is an objective indication of impairment or if the financial asset available-forsale is sold.
For equity instruments impairment exists, among other indicators, if the fair value is either significantly or permanently below cost. In the Group, equity instruments classified as available-for-sale are impaired when the fair value over the last six months before the reporting date was consistently more than 20 per cent below carrying value, or in the last twelve months, on average, more than 10 per cent below carrying value. In addition to these quantitative indications (trigger events), qualitative indications from IAS 39.59 are considered. It is not permitted to include any appreciation in value in the income statement for equity instruments classified as available-for-sale, but rather this should be recognized in other comprehensive income under the item fair value reserve (available-for-sale financial assets). This means that only impairments or disposals are to be shown in the income statement.
Interest and dividend income from financial assets available-for-sale are recorded in net interest income.
Additional information on derivatives is provided in the notes under (39) Derivative financial instruments.
In the Group, foreign exchange hedges of investments in economically independent sub-units (IAS 39.102) are executed in order to reduce differences arising from the foreign currency translation of equity components. Currency swaps are mainly used as hedging instruments. Where the hedge is effective the resulting gains or losses from foreign currency translation are recognized in other comprehensive income and shown separately in the statement of comprehensive income. Any ineffective part of the hedge is recognized in net trading income. The related interest components are shown in net interest income.
For financial instruments valued at amortized cost (this comprises loans and advances, deposits, other short-term borrowings and long-term liabilities), the Group publishes the fair value. In principle, there is low or no trading activity for these instruments, therefore a significant degree of assessment by the Management is necessary for determining the fair value.
At each reporting date an assessment is made as to whether there is any objective evidence that a financial asset or group of financial assets is impaired. A financial asset or a group of financial assets is impaired and impairment losses are incurred, when:
 there is objective evidence of impairment as a result of a loss event that occurred after the initial recognition of the financial asset up until the reporting date (a "loss event");  that loss event has an impact on the estimated future cash flows of the financial asset or group of financial assets, and
In a genuine sale and repurchase transaction, the Group sells assets to a third party and agrees at the same time to repurchase these assets at an agreed price and time. The assets remain on the statement of financial position of the Group and are measured according to the standards applied to the item in the statement of financial position under which they are shown. The securities are not derecognized since all the risks and rewards associated with the ownership of the repurchased securities are retained. Cash inflows arising from a sale and repurchase transaction are recognized in the statement of financial position as “deposits from banks” or “deposits from customers” depending on the counterparty.
An operating lease exists when the risks and rewards of ownership remain with the lessor. The leased assets are allocated to the Group under the item "tangible fixed assets" and depreciated in accordance with the principles applicable to the type of fixed assets. Rental income from the corresponding lease object is spread on a straight-line basis over the term of the leasing contract and reported in other net operating income. Expenses for operating leases are generally amortized on a straight-line basis over the term of the leasing contract and reported as administrative expenses.
 Another investor has the ability to control financial policy and operational activities of the equity participation due to legal provisions or an agreement,
In principle, subsidiaries are initially integrated into the consolidated group on the date when the Group obtains control of the company and are excluded from the date on when it no longer has control of the company. The results from subsidiaries acquired or disposed of during the year are recorded in the consolidated income statement, either from the actual date of acquisition or up to the actual date of disposal. The Group reviews the adequacy of previous decisions on which companies to consolidate at least every quarter. Accordingly, any organizational changes are immediately taken into account. Apart from changes in ownership, these also include any changes to the Group’s existing contractual arrangements or new contractual arrangements with a unit.
 the total amount of fair value of the received consideration and fair value of the shares retained and
Profit or losses of companies valued at equity are netted and recognized in the item “current income from associates”. The rules applicable to companies valued according to the equity method are the same as those for fully consolidated companies (offsetting acquisition costs against proportional fair net asset value). As a rule, the IFRS financial statements of associated companies are used. Changes in the equity of companies valued at equity are included in other comprehensive income in the consolidated financial statements.
 The ability exists to use or to sell the intangible fixed asset. The intangible fixed asset is likely to generate future economic benefit.
 The availability of adequate technical, financial and other resources required in order to complete development and to use or sell the intangible fixed asset is assured.
On each reporting date, goodwill is examined with a view to its future economic utility on the basis of cash generating units (CGUs). A cash generating unit is defined by the management and represents the smallest identifiable group of assets of a company that generates cash inflows from operations. Within RBI, all segments according to segment reporting are determined as cash generating units. Legal entities within the segments form their own CGU for the purpose of impairment testing of goodwill. The carrying value of the relevant entity (including any assigned goodwill) is compared with its recoverable amount. This is, as a general principle, defined as the amount resulting from its value in use and based on expected potential dividends discounted using a rate of interest reflecting the risk involved. The estimation of the future results requires an assessment of previous as well as future performance. The latter must take into account the likely development of the relevant markets and the overall macroeconomic environment.
 RBI has met the minimum requirements under applicable law for economic and regulatory capital and additionally neither the allocation, payment nor transfer of the variable remuneration is detrimental to the maintenance of a sound capital base for RZB/ RBI.
The Group fulfills the obligation arising from Clause 11 of the Annex to Section 39b of the Austrian Banking Act (BWG) which stipulates that at least 50 per cent of the variable remuneration of risk personnel must be paid out in the form of shares or similar non-cash instruments by means of a phantom share plan as follows: 50 per cent of the "up front" and 50 per cent of the "deferred " portion of the bonus are divided by the average closing price of the RBI share on trading days of the Vienna Stock Exchange in the payment year serving as the basis for calculating the bonus. Thereby, a certain amount of phantom shares is determined. This amount is fixed for the entire duration of the deferral period. After the expiration of the respective retention period, the amount of specified phantom shares is multiplied by RBI's share price for the previous financial year, calculated as described above. The resulting cash amount is paid on the next available monthly salary payment date.
These rules are valid unless any applicable local laws prescribe a different procedure (e.g. Poland).
This item mainly includes contingent liabilities from guarantees, credit guarantees, letters of credit and loan commitments recognized at face value. Guarantees are used in situations in which the Group guarantees payment to the creditor of a third party to fulfill the obligation of the third party. Irrevocable credit lines must be reported when a credit risk may occur. These include commitments to provide loans, to purchase securities or to provide guarantees and acceptances. Loan loss provisions for contingent liabilities and irrevocable loan commitments are reported under provisions for liabilities and charges.
Information on capital management, regulatory capital and risk-weighted assets is disclosed in the notes under (47) Capital management and regulatory total capital according to the BWG (Austrian Banking Act).
The amendments clarify the provisions that relate to the allocation of employee or third-party contributions linked to periods of service. In addition, a solution that simplifies accounting practice is permitted if the amount of the contributions is independent of the number of years of service performed.
The Annual Improvements to IFRS – 2010–2012 cycle include numerous amendments to various IFRS. The amendments are effective for annual periods beginning on or after January 1, 2014.
The amendments aim to remove obstacles encountered by those responsible for preparing the financial statements relating to the exercise of discretion in the presentation of financial statements.
According to these amendments, IAS 16 is applicable for bearer plants which are no longer subject to obvious biological changes; therefore they can be recognized as tangible fixed assets.
Amendments to IAS 27 (Equity method in separate financial statements; entry into force January 1, 2016)
Under these amendments, the option to use the equity method to measure investments in subsidiaries, joint ventures and associated companies in separate financial statements of investors is reinstated.
The amendments clarify that for transactions with an associate or joint venture, the extent of recognition of gains or losses depends on whether the sold or contributed assets constitute a business.
The amendments clarify that unrealized losses related to debt instruments measured at fair value but at cost for tax purposes can give rise to deductible temporary differences. This applies irrespective of whether the holder expects to recover the carrying amount by holding the debt instrument until maturity and collecting all contractual payments or by selling the debt instrument. In addition, the carrying amount of an asset does not represent the upper limit for the estimation of probable future taxable profits. When estimating future taxable profits tax deductions resulting from the reversal of deductible temporary differences must be excluded and a company must assess a deferred tax asset in combination with other deferred tax assets. If tax law restricts the
IFRS 9 (financial instruments) contains requirements for the classification, measurement, derecognition of and accounting for hedging relationships. The IASB published the final version of the standard within the context of completion of the various phases on July 24, 2014. Key requirements of IFRS 9 are: According to IFRS 9, all financial assets must be measured at amortized cost or fair value. Specifically, debt investments that are held within a business model whose objective is to collect the contractual cash flows, and that have contractual cash flows that are solely payments of principal and interest on the principal outstanding are measured at amortized cost at the end of subsequent accounting periods. All other instruments must be measured at fair value.
IFRS 9 also includes an irrevocable option to recognize subsequent changes in the fair value of an equity instrument (not held for trading purposes) in other comprehensive income and to recognize only dividend income in the profit and loss statement.
With regard to the measurement of financial liabilities (designated as measured at fair value through profit or loss), IFRS 9 requires that changes in fair value arising out of changes in the default risk of the reporting entity are to be recognized in other comprehensive income. Changes in fair value attributable to a reporting entity’s own credit risk may not be subsequently reclassified to profit or loss.
In addition to transitional provisions, IFRS 9 also includes extensive provisions on disclosure both during transition and during ongoing application. New provisions relate in particular to impairment.
New bank levy impacts earnings situation in Poland On 15 January 2016, the Polish president signed the law, which had already been passed by parliament, for a bank levy on Polish banks. The bank levy will impact total assets by 0.44 per cent on an annual basis and will be collected in monthly installments from February 2016. Not included in this impact, is a base amount of PLN 4 billion (roughly equal to € 1 billion), investments in Polish government bonds and total capital.
Our audit did not give rise to any objections. In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Group as of 31 December 2015, and its financial performance and its cash flows for the year then ended in accordance with International Financial Reporting Standards (IFRSs) as adopted by the EU and other legal or regulatory requirements.
Member of the Management Board responsible for Business Management & Development, Consumer Banking, Group Capital Markets, Institutional Clients, Investment Banking,
Procurement & Cost Management and Project Portfolio & Security 1 Outsourced to RZB/Reporting to the whole Board of Management.
Sales Management & Development, International Business Support and Trade Finance & Transaction Banking
CE – Central Europe. RBI’s Central Europe segment encompasses the Czech Republic, Hungary and Slovakia.
Common equity tier 1 ratio (fully loaded) – Common equity tier 1 as a percentage of risk-weighted assets (total RWA) according to CRR/CRD IV, without application of the transitional provisions set out in Part Ten of CRR and the accompanying CRR regulation of the FMA, respectively (425th regulation issued on 11 December 2013).
Cost/income ratio – General administrative expenses in relation to operating income (less bank levies, impairments of goodwill, releases of negative goodwill and any one-off effects reported under sundry operating expenses).
Default risk – Risk that a party to a financial transaction will not be able to fulfill its obligations, causing the other party a financial loss.
Funding – All means used by banks for the purpose of financing their operations.
Individual loan loss provisions – For credit risks related to loans and advances to customers and banks, provisions are made in the amount of the expected loss according to uniform Group-wide standards. Risk of loss is deemed to exist if the discounted projected repayment amounts and interest payments are below the carrying value of the loan, taking collateral into account.
LCR – Liquidity Coverage Ratio. The LCR supports the short-term resilience of banks by ensuring that they have an adequate stock of unencumbered highquality liquid assets (HQLA) to meet potential liability run offs that might occur in a crisis, which can be converted into cash to meet liquidity needs for a minimum of 30 calendar days in a liquidity stress scenario.
Liquidity risk – Risk that a bank could be unable to meet its current and future financial obligations in full or on a timely basis. This arises from the danger, for example, that refinancing can only be obtained at very disadvantageous terms or is entirely impossible.
Loan/deposit ratio (net) – Loans and advances to customers less impairment losses, in relation to deposits from customers (in each case less claims and obligations from (reverse) repurchase agreements and securities lending).
NPL coverage ratio – Impairment losses on loans and advances to customers in relation to non-performing loans to customers.
Risk-weighted assets (RWA credit risk) – The sum of the weighted accounts receivable including receivables in the form of items on and off the statement of financial position and CVA risk.
Risk-weighted assets (total RWA) – Risk-weighted assets (credit risk, CVA risk) plus market risk and operational risk.
ROE – Return on equity. Return on the total equity including non-controlling interests, i.e. profit before tax respectively after tax in relation to average equity on the statement of financial position. Average equity is calculated on monthend figures including non-controlling interests and does not include current year profit.
RZB credit institution group – Pursuant to Section 30 of the Austrian Banking Act (BWG), the RZB credit institution group is made up of all banks, financial institutions, securities companies and companies rendering banking related services in which RZB holds direct or indirect majority interests or has control as a superordinate institution.
Tax rate – Ratio of income taxes to profit before tax.
Trading book – Bank regulatory term for positions taken by a bank for the purpose of short-term resale to exploit price and interest rate fluctuations.
Wholesale funding – financing of banks by way of external sources, i.e. not through their own capital or customer deposits.
Bulgaria Raiffeisenbank (Bulgaria) EAD Nikola I. Vaptzarov Blvd. Business Center EXPO 200 PHAZE III, floor 5 1407 Sofia Phone: +359-2-91 985 101 Fax: +359-2-94 345 28 SWIFT/BIC: RZBBBGSF www.rbb.bg
Poland Raiffeisen Bank Polska S.A. Ul. Piękna 20 00-549 Warsaw Phone: +48-22-58 5-2000 Fax: +48-22-58 5-2585 SWIFT/BIC: RCBWPLPW www.raiffeisen.pl
Russia AO Raiffeisenbank Smolenskaya-Sennaya 28 119002 Moscow Phone: +7-495-72 1-9900 Fax: +7-495-72 1-9901 SWIFT/BIC: RZBMRUMM www.raiffeisen.ru
Belarus “Raiffeisen-Leasing” JLLC V. Khoruzhey 31-A 220002 Minsk Phone: +375-17-28 9-9394 Fax: +375-17-28 9-9974 www.rl.by
Kazakhstan Raiffeisen Leasing Kazakhstan LLP Shevchenko Str. 146, No. 12 050008 Almaty Phone: +7-727-378 54 30 Fax: +7-727-378 54 31 www.rlkz.at
Slovenia Raiffeisen Leasing d.o.o. Letališka cesta 29a SI-1000 Ljubljana Phone: +386-1-241-6250 Fax: +386-1-241-6268 www.rl-sl.si
Concept/design: gantnerundenzi.at Edited by: Capital Language Communications Ltd Printed by: AV Astoria, Vienna
The Annual Report is available online in German at The report is also available in English at
This Annual Report has been prepared and the data checked with the greatest possible care. Nonetheless, rounding, transmission, typesetting and printing errors cannot be ruled out. In the summing up of rounded amounts and percentages, rounding-off differences may occur. This Annual Report was prepared in German. The Annual Report in English is a translation of the original German report. The only authentic version is the German version.