Overview of RBI Interview with the Chairman of the Management Board 6 Management Board of RBI 9 Report of the Supervisory Board 10 RBI at a glance 12 RBI‘s strategy 13 RBI in the capital markets 15 Corporate Governance Report 18 Sustainability management 29
Consolidated financial statements Statement of comprehensive income 78 Statement of financial position 81 Statement of changes in equity 82 Statement of cash flows 83 Segment reporting 85 Notes 92 Risk report 144 Auditor’s report 224
All in all, RBI employs about 51,000 employees and has total assets of approximately € 114 billion.
Net provisioning for impairment losses (1,264) (27.8) % (1,750) (1,716) (1,149) (1,009) (1,064)
Net fee and commission income 1,519 (4.2) % 1,586 1,586 1,626 1,516 1,490
Loans and advances to customers 69,921 (10.3) % 77,925 77,925 80,635 83,343 81,576
Return on assets before tax 0.60% – – 0.02% 0.63% 0.73% 0.98%
Common equity tier 1 ratio (transitional) 12.1% 1.3 PP 10.8% 10.9% 10.7% 10.7% –
Common equity tier 1 ratio (fully loaded) 11.5% 1.5 PP 10.0% 10.0% – – –
Total capital ratio (transitional) 17.4% 1.4 PP 16.0% 16.0% 15.9% 15.6% 13.5%
Total capital ratio (fully loaded) 16.8% 1.7 PP 15.1% 15.2% – – –
Dividend per share in € – – – – 1.02 1.17 1.05
Employees as at reporting date (full-time equivalents) 51,492 (5.9) % 54,730 54,730 57,901 60,084 59,261 2014 figures restated (please refer to the consolidated financial statements for details).
Interview with the Chairman of the Management Board 6 Management Board of RBI 9 Report of the Supervisory Board 10 RBI at a glance 12 RBI‘s strategy 13 RBI in the capital markets 15 Corporate Governance Report 18 Sustainability management 29
Can you describe the transformation program’s goals and measures in detail? More than ever before, a bank today needs a focus – and ours is on CEE and Austria. We consequently needed to examine all operations unrelated to that focus, even when, in some cases, they have been highly successful in the past. We also reviewed our footprint in CEE and determined that our presence in Poland in its current form is not ideal from our standpoint and that our exposure in Russia and Ukraine was too high on a relative basis. All of this took place against the backdrop of higher regulatory capital ratio requirements, which we took into account while defining our targets.
– i.e. of our Polish and Slovenian subsidiary banks – are also part of this strategy review. Moreover, we will reduce costs to around 20 per cent below the level of 2014.
The first measures have already been implemented. How are you progressing? We have significantly strengthened our capital base, with our fully loaded CET1 ratio standing at 11.5 per cent at the end of 2015. In December 2015, we were able to announce the sale of our Slovenian subsidiary bank – I expect this to close in the first half of 2016. In Asia, the rescaling is on schedule and we plan to completely withdraw from the US.
Did the transformation program in Ukraine also have to be adjusted in view of the geopolitical crisis? The program’s main focus remains on the centralization of the regional functions. We have closed numerous branches. In addition, in the Corporate Customers area we are mostly only undertaking new business with exporters in the agricultural and food sectors, as well as multinational corporations. In the retail business, we are now concentrating on premium and so-called salary account customers, whose employers have set up salary accounts at our Raiffeisen Bank Aval for their entire workforce. The measures we have taken have already considerably reduced risk-weighted assets. Our partnership with the European Bank for Reconstruction and Development, which became a 30 per cent shareholder in the Aval bank, also demonstrates that in the challenging environment within Ukraine we are on the right path.
You have talked a lot about reducing the business. How does your acquisition in the Czech Republic fit in with this? Scaling back the business is not in itself the goal of the transformation program. Instead, we are seeking to achieve our overriding target of a CET1 ratio of at least 12 per cent by the end of 2017. We are facing ever higher capital requirements. However, the goal of a high capital ratio must not stop us from optimizing our business. From the very start, we have said that our aim is business growth in selected markets despite a reduction in risk-weighted assets. This means that our plan to significantly reduce risk-weighted assets – in order to achieve our capital target – deliberately gives us sufficient leeway for growth in promising countries. For this reason, in September 2015, we decided to buy Citibank’s Czech retail customer and credit card business with its five branches.
You have granted loans in Swiss francs not only in Poland, but also in other countries. How is the situation developing in these countries? In the autumn of 2015, the Croatian parliament – where elections again turned banks into a political football – passed a law requiring banks to compensate customers for losses they incurred on Swiss franc loans due to exchange rate movements. Numerous legal experts, however, consider the law to be unconstitutional. Moreover, it violates a number of bilateral investment protection treaties between Croatia and the respective home countries of the banks operating there. For this reason, we – like several other banks – have already filed a complaint with the constitutional court in Croatia. At 31 December 2015, we had a Swiss franc portfolio of 260 million euros in Croatia. Swiss franc loans granted in Poland amounted to around 3 billion euros. In addition, Swiss franc loans in Romania and Serbia amounted to 326 million euros and 71 million euros respectively. In Hungary, we reduced our Swiss franc portfolio to 53 million euros as a result of the mandatory conversion at the start of last year. I would also point out that these positions are generally, almost without exception, hedged by matched-maturity funding or swaps.
Are you planning to pay a dividend given this full-year profit? At the time of the IPO of Raiffeisen International – as it was then known – we said that we wanted our shareholders to participate in our success. This has always been the case – whenever our results have permitted – and will remain the case in the future. However, I also hope our shareholders will understand that no dividends will be distributed for the 2015 financial year. While we produced a good result last year, it would be wrong for us to distribute the profit while regulators continue to raise the bar for capital ratios. Instead, we want to retain our earnings and thereby strengthen our equity capital. Against this backdrop, I would like to thank RZB, our main shareholder, and our institutional as well as private investors, for their patience and the trust they have placed in RBI.
During the 2015 financial year, the members of the Supervisory Board and its Committees were informed in a timely and comprehensive manner by the Management Board, in the course of meetings, about the different business areas, risk developments and relevant business developments in RBI and the material subsidiaries. Information was provided verbally as well as in written form and enabled the Supervisory Board to fulfill its duty to supervise and advise the Management Board.
In addition to the regular meetings, the Chairman of the Supervisory Board also held numerous discussions with the Management Board. This further strengthened open communication and the regular exchange of information between the members of the Supervisory Board and the members of the Management Board.
Besides the ordinary Supervisory Board meetings, the Supervisory Board also met, on a situation-specific basis and for strategic planning purposes, for two extraordinary meetings in order to discuss corporate courses of action and to take corresponding decisions at the earliest possible time.
At the second extraordinary meeting on 20 May 2015, Andreas Gschwenter was appointed as a member of the Management Board with effect from 1 July 2015, thus succeeding Aris Bogdaneris, who had resigned with effect from 31 March 2015. At this meeting, the Management Board also informed the Supervisory Board about the current implementation status of the new strategy, which had been determined at the start of the year.
As in previous years, the members of the Supervisory Board also had the opportunity to hold expert discussions in advance of the meetings, in order to obtain detailed information about the content of the items on the agenda for the forthcoming meeting. Overall, the members of the Supervisory Board were thereby able to diligently fulfill their supervisory duties and form a sound basis on which to take decisions.
The Chairman of the Working, Audit, Remuneration, Personnel, Risk and Nomination Committees regularly reported to the Supervisory Board on the respective Committee’s work.
In 2015, the Supervisory Board also conducted an efficiency review, on the basis of a self-evaluation, to examine its organizational structure and working methods in order to enable it to properly carry out its duties in the interests of the shareholders and all other stakeholders. The self-evaluation and efficiency review were analyzed by an external party. The results of the self-evaluation were discussed and suggestions for improvement were implemented accordingly. Priority is being given to ensuring open communication and to the prompt and adequate provision of information.
Annual financial statements and consolidated financial statements The consolidated financial statements (income statement, statement of financial position, statement of changes in equity, cash flow statement and notes) as well as the annual financial statements for RBI have been audited by KPMG Austria GmbH Wirtschaftsprüfungs- und Steuerberatungsgesellschaft (KPMG). Representatives of the auditing company presented the results of the audit at the respective meeting of the Audit Committee and Supervisory Board which dealt with the financial statements.
The consistency check of the corporate governance report according to § 243b of the Austrian Commercial Code (UGB) was performed by KPMG. Its final report gave no reason for objections.
Following an extensive audit and discussion of the consolidated financial statements, as well as of the annual financial statements, in the Supervisory Board meeting and the preceding Audit Committee meeting, the Supervisory Board approved the annual financial statements of RBI. The annual financial statements were thus adopted in accordance with § 96 (4) of the Austrian Stock Corporation Act (AktG). The consolidated financial statements were noted by the Supervisory Board.
RBI at a glance Raiffeisen Bank International AG regards Central and Eastern Europe (including Austria) as its home market. For over 25 years, RBI has been operating in Central and Eastern Europe (CEE), where today it maintains a closely knit network of subsidiary banks, leasing companies and numerous specialized financial service providers. As a universal bank, RBI ranks among the top five banks in several countries. This role is supported by the Raiffeisen brand, which is one of the most widely recognized brands in the region. RBI has positioned itself in CEE as a fully integrated corporate and retail banking group with a comprehensive product offering. In CEE, at the end of 2015, around 48,000 RBI employees served some 14.9 million customers in around 2,700 business outlets. In Austria, RBI is one of the top corporate and investment banks. It primarily serves Austrian customers, but also international customers and major multinational clients operating in CEE. All in all, RBI employs about 51,000 employees and has total assets of approximately € 114 billion.
RBI’s markets Total assets 2015 in € million Change1 Business outlets Number of staff
RZB was founded in 1927 as “Genossenschaftliche Zentralbank”. The RZB founded its first subsidiary bank in CEE already back in 1987. Since then, further own subsidiaries have been established. From 2000 onward, Raiffeisen’s expansion into CEE countries has mainly been achieved by acquiring existing banks. These were subsequently combined into a holding company that operated under the name Raiffeisen International from 2003. In April 2005, Raiffeisen International was listed on the Vienna Stock Exchange in order to finance its future growth efficiently. Today’s RBI was established in 2010 through the merger of Raiffeisen International with the principal business areas of RZB. At year-end 2015, RZB – which functions as the central institution of the Austrian Raiffeisen Banking Group (RBG) – held approximately 60.7 per cent of RBI’s stock, with the remaining shares in free float.
The following core competencies form the foundation of RBI’s business: ■ RBI positions itself as a diversified universal banking group with clearly defined central control elements.
■ RBI distinguishes itself through its strong local presence and customer-centric focus.
Released capital and risk-bearing capacity will be allocated to those markets that sustainably contribute to RBI’s value enhancement (e.g. Slovakia, Czech Republic and Romania). Capital efficiency improvement measures are accompanied by Group-wide cost management.
RBI currently provides services to over 14 million retail customers in around 2,700 branches in Central and Eastern Europe. The business model focuses on long-term relationships with retail and private banking customers, as well as small businesses with revenues of up to € 6 million.
The broad product offering (e.g. current account packages, payment transfer business, consumer financing, mortgage loans), top-quality advisory services and innovative banking solutions (e.g. video and telephone advisory services, state-of-the-art mobile banking options) are key building blocks for ensuring high customer satisfaction and client loyalty. The systematic further development of our product and service offering (with special focus on transparent and customer-friendly solutions, as well as a fast flow of information and short decision-making processes) will further strengthen RBI’s position. Alongside this strategy, internal processes are being standardized and the risk rating process improved.
RBI in the capital markets Performance of RBI stock After starting 2015 at € 12.54, RBI’s shares reached their lowest closing price of € 9.01 in January. The decline was mainly caused by the situation in Ukraine and Russia as well as the oil price drop, which hit the Russian economy particularly hard. Following the announcement of a review of the company strategy and signs of geopolitical easing in the further course of the year, the share price recovered and reached a high of € 15.69 for the year on 23 November. RBI’s shares were trading at € 13.61 at the end of the year. Over the full year this amounts to a share price gain of 9 per cent. It therefore slightly underperformed the ATX (up 11 per cent), however outperformed the Euro Stoxx Banks (down 5 per cent).
In 2015, 213 million RBI shares were traded, amounting to a total value of € 2.8 billion and an average daily volume of 859,727 shares.
Shareholder structure As at the end of 2015, Raiffeisen Zentralbank Österreich AG (RZB) held approximately 60.7 per cent of RBI’s shares, with the remaining balance in free float. The broad geographical spread of investors as well as their diverse investment objectives resulted in a balanced shareholder structure. RBI’s owners included institutional investors, mainly from the US, UK, and continental Europe, as well as a large number of Austrian private investors. The institutional investor base included sovereign wealth funds and supranational organizations, which indicate stability by virtue of their preferred long-term investment strategies.
RBI EURO STOXX Banks (relative to RBI) ATX (relative to RBI) Index basis = € 12.54
Stock data and details Price as at 31 December 2015 € 13.61
RBI‘s rating Last year, RBI was rated by Moody’s Investors Service and Standard & Poor’s. In order to ensure an accurate assessment, RBI maintains regular contact with rating agency analysts and informs them about trends in RBI’s business development on a regular basis.
Annual General Meeting and dividend proposal On 17 June 2015, RBI’s ordinary Annual General Meeting approved all of the proposed resolutions relating to the individual agenda items. The next ordinary Annual General Meeting will take place on 16 June 2016. No dividends will be distributed for the 2015 financial year.
At the end of September, RBI invited analysts to its annual talk in London, attended by nearly all equity analysts who regularly report on RBI. An international conference, also in London, followed the next day: The Management Board presented the company to around 100 participants and answered questions from investors. Subsequently, the Management Board took part in group meetings with a total of 45 high-profile institutional investors. As in previous years, RBI continued to hold debt investor calls.
A total of 28 equity analysts and 22 debt analysts regularly provide investment recommendations on RBI, making RBI the Austrian company on which the greatest number of analyst teams regularly report. In 2015, over 550 analyst reports on RBI were published.
RBI continuously strives to keep market participants fully informed. In the interest of making its communications as easily accessible and widespread as possible, RBI makes conference call presentations and other important events available as online webcasts. These can be viewed at any time at www.rbinternational.com → Investor Relations → Presentations & Webcasts.
Financial Calendar 2016 16 March 2016 Annual Report 2015, Conference Call 17 March 2016 RBI Investor Presentation, London 28 April 2016 Start of Quiet Period 12 May 2016 First Quarter Report, Conference Call 6 June 2016 Record Date Annual General Meeting 16 June 2016 Annual General Meeting 4 August 2016 Start of Quiet Period 18 August 2016 Semi-Annual Report, Conference Call 27 October 2016 Start of Quiet Period 10 November 2016 Third Quarter Report, Conference Call
Transparency is a key corporate governance issue and is therefore of particular importance to RBI. This corporate governance report is structured according to the legal guidelines of § 243b of the Austrian Commercial Code (UGB) and is based on the structure set forth in Appendix 2a of the ACGC.
In accordance with C Rule 62 of the ACGC, the company commissioned KPMG Austria GmbH Wirtschaftsprüfungs- und Steuerberatungsgesellschaft (KPMG) to conduct an external evaluation on compliance with the C and R Rules of the Code. The report on this external evaluation is publicly available at www.rbinternational.com → Investor Relations → Corporate Governance → External Evaluation of the CG Code.
Composition of the Management Board In the 2015 financial year, the Management Board consisted of the following members: Management Board member Year of birth Original appointment End of term
Martin Grüll 1959 3 January 2005 30 June 2017 1 Effective as of 10 October 2010
Composition of the Supervisory Board During the 2015 financial year, the Supervisory Board comprised: Supervisory Board member Year of birth Original appointment End of term
Erwin Hameseder 1956 8 July 2010 1 Annual General Meeting 2020 1st Deputy Chairman
Natalie Egger-Grunicke 2 1973 18 February 2016 Until further notice 1 Effective as of 10 October 2010 2 Delegated by the Works Council
■ The Supervisory Board member shall not have, or have had in the previous year, any significant business relationships with the company or a subsidiary of the company. This also applies to business relationships with companies in which the Supervisory Board member has a significant financial interest, albeit not with regard to carrying out executive functions within the company. The approval of individual transactions by the Supervisory Board according to L Rule 48 of the ACGC does not automatically lead to a qualification of ”not independent”.
Bettina Selden and Kurt Geiger, as members of the Supervisory Board, are neither shareholders with a shareholding of greater than 10 per cent, nor do they represent the interests of such shareholders. They are therefore ”free float representatives” according to C Rule 54 of the ACGC.
Members of the Committees The procedural rules of the Supervisory Board govern its organization and allocate particular tasks to the Working, Audit, Remuneration, Risk, Nomination and Personnel Committees. These Committees comprise the following members: Functions of the Management Board and the Supervisory Board Division of responsibilities and functions of the Management Board
With his appointment to the position of Chief Information Officer and Chief Operating Officer, effective as of 1 July 2015, Andreas Gschwenter took over responsibility for Operations, Lean, Project Portfolio & Security, Group & Austrian IT and also Procurement & Cost Management from Johann Strobl.
The internal regulations of the Management Board, as well as the Supervisory Board and its Committees, outline the business management measures that require the approval of the Supervisory Board or of the appropriate Committee.
The Working Committee is responsible for all matters referred to it by the Supervisory Board. These include, in particular, the approval of the establishment, closure and liquidation of subsidiaries, as well as the acquisition or disposal of participations where the change in the capitalized book value of the investment resulting from the transaction exceeds a certain amount (up to the ceiling amount for overall Supervisory Board responsibility). Moreover, the Working Committee deals with the execution of functions in the management bodies of other companies by members of the Management Board. Furthermore, the Working Committee approves the assumption of risks arising from banking business and risk limits to third parties above a certain level up to the ceiling amount for overall Supervisory Board responsibility.
The responsibilities of the Risk Committee include advising the Management Board on current and future risk propensity and risk strategy, monitoring the implementation of this risk strategy with regard to the controlling, monitoring and limitation of risk in accordance with the BWG, as well as the observing of capitalization and liquidity. It is also responsible for checking whether the pricing of the services and products offered, the business model as well as risk strategy are given adequate consideration and where applicable for submitting a plan with corrective measures. The Risk Committee also monitors whether the incentives offered by the internal remuneration system give adequate consideration to risk, capital, liquidity and probability as well as timing of realized gains.
■ regularly conducting, but at least once a year, an evaluation of the knowledge, skills and experience of the individual members of both the Management Board and Supervisory Board, and also of the respective governing body as a whole, and informing the Supervisory Board of the results; and
No member of the Supervisory Board was unable to personally attend more than half of the sittings of the Supervisory Board.
Only deferred bonus amounts from 2013 and previous years were paid out in 2015, no bonus was paid for 2014.
Management Board members’ contracts specify a maximum bonus. Similarly, the SIP includes a cap amounting to three times the allocation value. A maximum limit is thus in place for all variable compensation components. Other remuneration consists of compensation for board-level functions in associated companies, payments to pension funds and reinsurance policies, as well as other insurance and benefits.
The Management Board’s remuneration paid in 2015 is shown in detail as follows: 1 Compensation from 1 July 2015 2 Compensation until 31 May 2015
No tranche of the Share Incentive Program matured in 2015, as no SIP tranche was issued in 2010 and the term of the program was extended to five years in 2011 in accordance with legal regulations. Consequently, the next SIP tranche will not mature until 2016.
Group of persons Number of contingently allocated shares at 31/12/ 2015 Minimum allocation of shares Maximum allocation of shares
For the 2014 financial year, the Members of the Supervisory Board received remuneration totalling € 550,000 in accordance with the resolution of the Annual General Meeting. This amount included: € 70,000 for the Chairman of the Supervisory Board, € 60,000 each for the Deputy Chairmen of the Supervisory Board, € 50,000 each for the other members of the Supervisory Board. Depending on the duration of the respective Supervisory Board Member’s term, the remuneration for 2014 was paid on a pro rata basis or in its entirety.
Annual General Meeting The Annual General Meeting for financial year 2014 was held on 17 June 2015 in Vienna. The Annual General Meeting for financial year 2015 will take place on 16 June 2016. The convening notice will be published in the Wiener Zeitung’s official journal and in electronic form a minimum of 28 days before the Annual General Meeting.
At the Annual General Meeting the shareholders, as owners of the company, can exercise their rights by voting. The fundamental principle of “one share, one vote“ applies. Accordingly, there are no restrictions on voting rights and all shareholders have equal rights. Every share confers one vote; registered shares have not been issued. Shareholders may exercise their voting rights themselves or by means of an authorized agent. RZB has not exercised its right to nominate up to one third of the Supervisory Board members to be elected by the Annual General Meeting, as per the Articles of Association, so that the share structure complies with the principle of “one share, one vote“.
For RBI, it has always been important to offer equal opportunities for equal performance within the company, regardless of gender or other factors. This begins with staff selection, which must be without prejudice, and where the same standards must always be applied irrespective of gender. The 45 per cent proportion of female employees at RBI AG underscores the effectiveness of these initiatives.
The following table shows the total proportion of women in managerial positions (positions with staff responsibility) at RBI AG, classified by Supervisory Board, Management Board, tier 2, and tier 3 management levels.
Proportion of women Proportion of women of the total of the total Management Tier 2 Tier 3 Year number of employees number of executives Board management management
To promote the advancement of women within the company, RBI makes ongoing efforts to improve and continually develop the corresponding framework. Measures to improve the family-work balance are very important in this respect; these include flexible working hours, and part-time and home office options, which are offered in almost all countries in accordance with the local statutory provisions, and also company kindergartens with employee-friendly operating hours. Among other things, these framework conditions aim to facilitate effective management of maternity leave, which should encourage women to return to work.
Transparency The Internet, particularly the company website, plays an important role for RBI with regard to open communication with shareholders, their representatives, customers, analysts, employees, and the interested public. Therefore, the website offers regularly updated information and services, including the following: annual and interim reports, company presentations, archived telephone conference webcasts, ad hoc releases, press releases, investor relations releases, share price information and stock data, information for debt investors, financial calendar with advance notice of important dates, information on securities transactions of the Management Board and Supervisory Board that are subject to reporting requirements (directors’ dealings), RBI’s Articles of Association, the corporate governance report, analysts’ research and recommendations, as well as an ordering service for written information and registration for the automatic receipt of investor relations news by e-mail.
The business activities of RZB (of which RBI is a substantial part) serve to create comprehensive added value while combining economic, ecological and social responsibilities. Since the Group was founded by Friedrich Wilhelm Raiffeisen, sustainable action and corporate responsibility have been part of the Group‘s policy and identity and form integral components of its business activities.
In its sustainability management practices, RBI focuses on adherence to the ten principles of responsible business in the United Nations Global Compact. These principles address the key areas of human rights, labor standards, environmental protection and anti-corruption. The associated globally responsible approach is expected from all employees and managers as well as from partners and suppliers.
Following the commitment to introduce the Environmental and Social Management System (ESMS) in accordance with the exclusion criteria and performance standards of the International Finance Corporation in 2014, implementation of the standards was continued in several RBI network banks in 2015.
For the third time in succession, RBI was recognized by the Carbon Disclosure Project in the Carbon Performance Leadership Index and is the best rated company in Austria. The first ever Group-wide report on emissions data was issued. The large reductions in CO2 were achieved, among other factors, by moving to energy-efficient locations.
Continuous dialog with stakeholders is a cornerstone of sustainability management. This dialog includes the annual Stakeholder Council and regular surveys. At the end of 2015, a comprehensive survey of managers and sustainability officers from RBI, RZB and network banks, as well as external stakeholders from Austria and CEE, was conducted in order to assess different sustainability issues with respect to the materiality of their effects.
The sixth Stakeholder Council, held in November 2015, was organized around the theme of “Sustainability in the core business“. Dialog groups discussed issues ranging from society‘s demands on the banking sector in terms of sustainability and the sustainable influence of a bank‘s value creation process through to the realization of global sustainable development objectives in core business areas.
As of 2014, RZB (including RBI) publishes its sustainability report annually. The 2015 report will be published in summer 2016.
The current report can be found at www.rbinternational.com → About Us → Sustainability Management.
Markets swayed by monetary policy Developments in the money and capital markets were once again dominated by international central banks’ policies last year. The European Central Bank (ECB) decided in early 2015 on an asset purchase program of € 60 billion per month, largely for government bonds, in addition to setting a negative interest rate for the first time on bank deposits at the ECB. The central bank followed this up in December with a deposit facility rate cut to minus 0.3 per cent and an expansion of its bond purchase program to include regional and local issuers, as well as a half-year extension of the program to March 2017. The expanded monetary policy measures resulted in a further decline in money market rates over the course of 2015. Euribor interest rates (money market deposits) out to six months were in negative territory by the end of the year. Even the two-year German government bond carried a negative yield for the entire year and ten-year German government bonds were yielding consistently well below 1 per cent over the course of the year. In the US, after seven years of pursuing a zero interest rate policy, the US Federal Reserve (Fed) hiked its key rate for the first time since 2007. The key rate range was raised 25 basis points to 0.25 to 0.50 per cent in December. In 2015, the euro versus US dollar exchange rate was driven by divergent Fed and ECB monetary policies. In light of the US rate hike expected by market participants, the euro lost considerable value over the course of the year, approached parity with the US dollar on an intermittent basis and ultimately closed at the end of December somewhat higher at 1.09 EUR/USD.
The US economy grew 2.4 per cent in 2015, on a par with the previous year's rate, with the low oil price boosting private consumer spending to 3.1 per cent – a stronger increase than at any time since 2006. Residential construction investment also showed strong growth. Conversely, the oil price decline severely dampened investment in the energy sector while the notable appreciation of the dollar curbed export growth. The labor market recovery continued thanks to solid growth in economic output. Nearly 3 million new jobs were created versus 2014, with the unemployment rate dropping 0.6 of a percentage point to 5.0 per cent.
Significant events Strategic realignment In February 2015, RBI announced that it would review its strategy due to the significantly changed environment. Complexity and risk are to be reduced and the equity position strengthened. The fully loaded common equity tier 1 (CET1) ratio and total capital ratio are to reach at least 12 per cent and 16 per cent, respectively, by the end of 2017. To achieve these targets, the subsidiary banks in Poland and Slovenia will be sold, as will the direct bank Zuno. Moreover, RBI’s presence in Asia and in the US will either be reduced or completely wound down. These units have already been grouped together in the Non-Core segment. In addition, risk-weighted assets are being reduced, particularly in Russia and in Ukraine. In Raiffeisen Bank in Hungary, the business model has been adjusted to place particular focus on the corporate customer business in the future. Despite the reduction in riskweighted assets, RBI plans to grow in select markets.
Restatement of prior year financial results In 2015, RBI underwent a routine examination by the Austrian Financial Reporting Enforcement Panel. The examination covered RBI’s 2014 consolidated financial statements and its 2015 Semi-Annual Report. The reallocation of charges in the amount of € 124 million led to a revision of the 2014 consolidated loss to € 617 million and consequently these charges are not reflected in the 2015 consolidated financial statements. The total amount of € 124 million consists of two factors: a € 93 million goodwill impairment relating to Raiffeisen Polbank and € 34 million in costs for net provisioning for impairment losses, which also resulted in deferred tax income of € 3 million. The impact of this restatement on the regulatory capital ratios is negligible.
Regulatory changes RBI was again confronted with regulatory changes in the past financial year. Since November 2014, the European Central Bank (ECB) has been responsible for the supervision of banks in the euro area under the Single Supervisory Mechanism (SSM). Accordingly, RBI has come under the ECB’s direct supervision since the fourth quarter of 2014. The Single Resolution Mechanism (SRM) was also implemented in the euro area in 2015, which is designed to enable an orderly winding down of failing banks. In addition to drawing up resolution plans, banks must also pay contributions to finance a Single Resolution Fund (SRF), which resulted in additional expenses of € 41 million for RBI in 2015. The amount banks are required to contribute to the resolution fund is determined on the basis of business volumes and a bank-specific risk assessment. The target size of the SRF (at least 1 per cent of covered customer deposits of eligible banks in participating member states) is to be reached by 2024.
The Group's financial results continued to be affected by high currency volatility in 2015. For example, the average exchange rate of the Russian rouble and of the Ukrainian hryvnia against the euro was 26 per cent and 35 per cent, respectively, below the comparable level of the previous year. In contrast, the US dollar and Swiss franc appreciated 19 per cent and 13 per cent, respectively, against the euro.
In the course of the year, total assets fell 6 per cent, or € 7,073 million, to € 114,427 million. This was primarily the result of a 10 per cent reduction in lending to customers, which was largely attributable to a decline in loans to large corporate customers in connection with restrictive lending policies in some markets and the strategic realignment. The largest declines in total assets were posted at Group head office, in Asia, and in Russia (currency-driven).
In terms of regulatory capital, the key metrics changed as follows: Common equity tier 1 (after deductions) stood at € 7,671 million at the end of the year. The increase over the 2014 comparable level came to € 226 million. RBI’s total capital pursuant to the CRR amounted to € 10.987 million, which corresponds to an increase of € 17 million compared to the 2014 year-end figure. Riskweighted assets (total) were reduced by € 5,449 million to € 63,272 million. In addition to the reduction in credit volumes in the Non-Core segment, due to the strategic realignment, stronger declines also occurred at Group head office, and in Russia, Ukraine, and the Czech Republic. Based on total risk, the common equity tier 1 ratio (transitional) and the total capital ratio (transitional) stood at 12.1 per cent and 17.4 per cent, respectively. Excluding the transitional provisions as defined within the CRR, the common equity tier 1 ratio (fully loaded) amounted to 11.5 per cent and the total capital ratio (fully loaded) came to 16.8 per cent.
Net trading income rose € 46 million year-on-year to € 16 million. Interest-based business grew € 27 million to € 68 million, primarily due to valuation gains on derivatives and securities positions in Russia and the Czech Republic, whereas Group head office and Poland reported valuation losses on interest-based derivatives and lower income from securities positions. Currency-based transactions fell € 9 million to minus € 60 million. This was mainly due to a loss from a hedging transaction related to Russian rouble-denominated dividend income (minus € 70 million), net investment hedge costs of € 34 million and valuation losses at Group head office. In contrast, Belarus posted a significant increase, caused by positive effects from a strategic currency position and the discontinuation of hyperinflation accounting, which had resulted in a loss of € 29 million in the previous year. Net income from proprietary trading had also increased. Exchangerate related valuation losses on foreign currency positions in
Staff expenses, which constituted the largest item within general administrative expenses (48 per cent), declined 4 per cent in the reporting period, or € 60 million, to € 1,389 million. In Ukraine and Russia, the sharp decline in staff expenses was mainly due to currency effects; the release of bonus provisions and staff departures as a result of ongoing cost reduction programs also reduced expenses. On the other hand, there were increases in staff expenses due to higher bonus provisions and also severance payments in connection with the strategic review. The average number of staff (full-time equivalents) fell 2,304 year-onyear to 54,092. The largest declines occurred in Ukraine (down 1,186), Russia (down 412) and Hungary (down 284).
Depreciation of tangible and intangible fixed assets fell 8 per cent year-on-year, or € 30 million, to € 351 million. The most significant decline occurred in Ukraine (down € 34 million) after impairments to the brand and the customer base were recognized in the previous year. Romania also posted a reduction in expenses (down € 11 million) after an impairment charge relating to a land valuation in the previous year. In Poland it was necessary to recognize an impairment of € 21 million in relation to the Polbank brand due to an adjustment of business planning caused by a deterioration of underlying conditions.
Net provisioning for impairment losses declined 28 per cent year-on-year, or € 486 million, to € 1,264 million. This resulted from a € 542 million reduction in individual loan loss provisions to € 1,324 million, while net releases of portfolio-based loan loss provisions rose 3 per cent to € 50 million. Proceeds from the sale of impaired loans fell € 57 million to € 11 million, after € 68 million in the previous year, notably due to the sale of non-performing loans in Poland.
Net income from financial investments improved 10 per cent year-on-year, or € 6 million, to € 68 million. The valuation result for securities in the fair value portfolio increased € 38 million to € 76 million, primarily due to bonds in Russia. In contrast, net proceeds from the disposal of securities from the fair value portfolio fell € 30 million to € 22 million. This decline was primarily attributable to a partial repayment in the previous year of fixed-income government bonds in Ukraine (down € 53 million), a € 19 million increase in gains on sales at Group head office and a reduction of € 11 million in losses from sales in Russia. Higher impairment charges and lower proceeds from the sale of equity participations were responsible for the € 12 million decline in net income from equity participations to minus € 45 million. The sale of impaired securities held-to-maturity at Group head office increased net income by € 8 million.
The expense for bank levies fell € 58 million year-on-year to € 119 million. This reduction resulted from the release of a provision formed in 2014 in connection with the payment of bank levies in Hungary (which accounted for € 43 million of the year-on-year reduction), as well as lower expenses in Slovakia (down € 7 million) and Austria (down € 8 million).
In addition, there were goodwill impairments totaling € 7 million in relation to a subsidiary in Ukraine and in Serbia. In the previous year, goodwill impairments totaling € 399 million were recorded for subsidiaries in Poland (€ 194 million), Russia (€ 148 million), and Albania (€ 51 million).
Compared to the third quarter of 2015, net interest income rose 2 per cent, or € 18 million, to € 832 million in the fourth quarter. The net interest margin (calculated based on interest-bearing assets) improved 9 basis points quarter-on-quarter to 3.07 per cent. This positive development was mainly attributable to a € 65 million increase in current income from shares in affiliated companies, predominantly from a real estate holding company in Austria, which fully offset a decline in interest income from derivatives and from loans and advances to banks and customers.
Recurring other net operating income was down € 15 million in the fourth quarter to € 18 million. Net income from the allocation and release of other provisions declined € 15 million in total, predominantly in Russia, Albania, Hungary, and Romania. Net income from the disposal of tangible and intangible fixed assets fell € 10 million, driven by declines in Hungary, Ukraine, Croatia, and Poland.
Other administrative expenses increased € 32 million to € 314 million. This was attributable to higher deposit insurance fees in Poland and in Slovakia, contributions to a fund for the protection of mortgage borrowers in Poland, as well as higher advertising expenses in nearly all countries. This contrasted with a reduction in the contribution to the bank resolution fund at Group head office and lower legal, advisory and consultancy expenses.
Net income from financial investments declined in the fourth quarter from € 7 million to almost zero. The € 39 million increase in impairment charges for equity participations (mainly for an Austrian real estate holding company) was largely offset by higher net proceeds from sales of securities held in the fair value portfolio (up € 26 million) and of securities held to maturity (up € 10 million) at Group head office.
Bank levies remained nearly unchanged at € 26 million in the fourth quarter.
In Croatia, the parliament passed a law in September 2015 on the compulsory conversion of Swiss franc loans at the historical rates prevailing at the time of lending. The resulting losses were entirely borne by the lending banks. This led to a non-recurring effect in the form of a provision of € 75 million in sundry operating expenses in the third quarter of 2015. This had a negative effect of € 61 million on the consolidated profit. There was a negative effect of € 2 million in the fourth quarter of 2015.
In addition, goodwill impairment charges of € 4 million for Group units in Ukraine and in Serbia were recorded in the fourth quarter of 2015.
Statement of financial position In the course of 2015, RBI’s total assets declined 6 per cent, or € 7,073 million, to € 114,427 million. Currency developments – predominantly the 12 per cent appreciation of the US dollar against the euro – resulted in a rise of around € 1.5 billion. In organic terms, total assets declined by around € 8.5 billion; on balance, the effects from additions to and removals from the scope of consolidation were negligible.
Loans and advances to customers before deduction of impairment losses on loans and advances (€ 5,935 million) fell 10 per cent, or € 8,004 million, to € 69,921 million in the reporting period. Loans and advances to large corporate customers fell € 6,897 million to € 41,685 million, with the largest declines recorded at Group head office and in Asia, Russia (due to currency effects), and Poland. In contrast, the Czech Republic and Slovakia posted increases. Loans and advances to retail customers (private individuals and small and medium-sized enterprises) totaled € 24,635 million, a decline of € 300 million. Whereas the lending volume in Hungary declined due to the implementation of the Settlement Act, which was adopted in the previous year, it fell in Russia due to both currency effects and on an organic basis. The Czech Republic and Slovakia also reported increases in lending in the retail customer business. Loans and advances to sovereigns fell € 637 million to € 814 million, notably in Hungary.
Equity on the statement of financial position RBI’s equity on the statement of financial position, consisting of consolidated equity, consolidated profit/loss and non-controlling interests, increased 4 per cent, or € 323 million, to € 8,501 million compared to year-end 2014. No dividends were paid out to RBI’s shareholders for the financial year 2014.
The Group’s total comprehensive income of € 329 million comprises consolidated profit of € 379 million and other comprehensive income of minus € 49 million. Exchange-rate differences represented the largest item in other comprehensive income and amounted to minus € 185 million in the reporting year (2014: minus € 1,314 million). A key driver was the devaluation of the Belarus rouble (minus € 107 million) and the Russian rouble (minus € 94 million). In contrast, the capital hedge of € 90 million and the valuation changes in assets available-for-sale of € 76 million generated a positive effect.
Capital of non-controlling interests rose € 40 million to € 535 million. On the one hand, this was due to the profit attributable to non-controlling interests of € 56 million, a capital increase of € 63 million as a result of the entry of the European Bank for Reconstruction and Development (EBRD) at Raiffeisenbank Aval JSC, and some additional smaller capital movements. On the other hand, dividends of € 51 million were paid to minority shareholders in Group units during the reporting period.
The following consolidated figures have been calculated in accordance with the provisions of the Capital Requirements Regulation (CRR). Pursuant to Article 11 of the CRR, RBI is supervised by the ECB on a subconsolidated basis and is subject to the CRR provisions not only as an individual credit institution but also as a subgroup. RBI remains part of the RZB Group for regulatory purposes. In addition to the minimum capital requirements defined by the CRR, RBI is also obliged to comply with the capital requirements imposed by the ECB under the SREP process. With respect to this, please refer to note (47) Capital management and total capital according to CRR/CRD IV and the Austrian Banking Act (BWG).
Total capital stood against a total capital requirement of € 5,062 million. This declined mainly due to a reduction in the credit exposure to corporate customers; as well as – to a lesser extent – due to new securitization transactions and the decline in retail business in Hungary and Russia. The total capital requirement for credit risk amounted to € 4,117 million, the total capital requirement for position risk in bonds, equities, commodities and currencies came to € 241 million, and the total capital requirement for operational risk stood at € 704 million.
Based on total risk, the common equity tier 1 ratio (transitional) was 12.1 per cent, with a total capital ratio (transitional) of 17.4 per cent.
Excluding the transitional provisions as defined in the CRR, the common equity tier 1 ratio (fully loaded) stood at 11.5 per cent and the total capital ratio (fully loaded) was 16.8 per cent.
On the one hand, RBI’s financing is based on customer deposits, which accounted for € 69.0 billion, or 71 per cent of funding, at the end of 2015; and on the other, on wholesale funding, which contributed the remaining 29 per cent or € 28.0 billion. The high proportion of customer deposits creates a stable funding basis and reduces the exposure of the Group to turbulence in the financial markets. Additional retail deposits (up € 2.7 billion) were generated in some markets, thereby further increasing stability. In other markets, such as Russia and Southeastern Europe, deposits remained stable despite some partly significant reductions in deposit interest rates. There was a slight decline of € 0.4 billion in deposits from corporate customers.
For medium to long-term refinancing, RBI used instruments such as the “EUR 25,000,000,000 Debt Issuance Programme”, which enables bonds to be issued in different currencies and structures. At the end of 2015, a total of € 8.4 billion in bonds were outstanding. RBI implemented its funding plan again in 2015 with primarily low-volume private placements in an amount of around € 2.2 billion with a weighted maturity of around 4 years. Of this, approximately € 0.6 billion was placed in the form of bonds, with the remaining amount raised in the form of long-term deposits.
Research and development As a universal bank, RBI is generally not involved in research and development in the strictest sense of the term.
The management in each Group unit is responsible for implementing Group-wide instructions. Compliance with Group rules is monitored as part of the audits performed by internal and local auditors.
The preparation of individual financial statements is decentralized and carried out by each Group unit in accordance with the RZB or RBI guidelines. The Group unit employees and managers responsible for accounting are required to provide a full presentation and accurate valuation of all transactions. Differences in local accounting standards can result in inconsistencies between the individual financial statements and the figures submitted to RBI. The local management is responsible for ensuring implementation of mandatory internal control measures, such as the separation of functions and the principle of dual control.
The plausibility of each Group unit’s financial statements is initially checked by the responsible key account manager within Accounting & Reporting. Group-wide control activities comprise the analysis and, where necessary, modification of the financial statements submitted by Group units. In this process, the reports submitted by the auditor and the results of meetings with the representatives of the individual companies where the financial statements are discussed are taken into account. The discussions cover the plausibility of the individual financial statements as well as critical matters pertaining to the Group unit.
The consolidated financial statements are prepared using Group-wide standardized forms. The accounting and valuation standards are defined and explained in the RZB Group Accounts Manual and must be applied when preparing the financial statements. Detailed instructions for the Group units on measuring credit risk and similar issues are provided in the Group directives. The relevant units are kept abreast of any changes to the instructions and standards through regular training courses.
The Management Board and the Controlling department are responsible for ongoing internal monitoring. In addition, the department heads are responsible for monitoring their business areas, including the undertaking of regular control and plausibility checks.
Capital, share, voting, and control rights The following disclosures cover the provisions of § 243a (1) of the Austrian Commercial Code (UGB): (1) As at 31 December 2015, the company’s share capital amounts to € 893,586,065.90 and is divided into 292,979,038 voting common bearer shares. As at 31 December 2015, 557,295 of those were own shares and consequently 292,421,743 shares were outstanding at the reporting date.
(2) The Articles of Association contain no restrictions concerning voting rights or the transfer of shares. The Management Board is not aware of any restrictions arising from agreements between shareholders.
(6) Pursuant to the Articles of Association, a person who is aged 68 years or older may not be appointed as a member of the Management Board or be reappointed for another term in office. The rule for the Supervisory Board is that a person who is aged 75 years or older may not be elected as a member of the Supervisory Board or be re-elected for another term in office. Moreover, no person who already holds eight supervisory board mandates in publicly traded companies may become a member of the Supervisory Board. Holding a position as chairman of the supervisory board of a publicly traded company would count twice for this purpose. The Annual General Meeting may choose to waive this restriction through a simple majority of votes if permitted by law. Any candidate who has more mandates for, or chairman positions on, supervisory boards in publicly traded companies must disclose this to the Annual General Meeting. There are no further regulations regarding the appointment or dismissal of members of the Management Board, and the Supervisory Board, beyond the provisions of the relevant laws (with regard to RZB AG's right to delegate members, please see note (4) above). The Articles of Association stipulate that the resolutions of the Annual General Meeting are, notwithstanding any mandatory statutory provisions or Articles of Association to the contrary, adopted by a simple majority of the votes cast. Where the law requires a capital majority, in addition to the voting majority, resolutions are adopted by a simple majority of the share capital represented in the votes. As a result of this provision, members of the Supervisory Board may be dismissed prematurely via a simple majority. The Supervisory Board is authorized to adopt amendments to the Articles of
Association that only affect the respective wording. This right may be delegated to committees. Furthermore, there are no regulations regarding amendments to the company Articles of Association beyond the provisions of the relevant laws.
The Annual General Meeting of 4 June 2014 authorized the Management Board to acquire own shares, under the provisions of § 65 (1) 4 and 8 of the AktG, during a period of 30 months from the date of the resolution (i.e. by 3 December 2016), in an amount equating to up to a maximum of 10 per cent of the company’s respective share capital and, if deemed appropriate, to retire them. The authorization may be exercised in full or in part or also in several partial amounts, for one or more purposes – with the exception of securities trading – by the company, by affiliated enterprises or, for their account, by third parties. The acquisition price for repurchasing the shares may be no lower than € 1 per share and no higher than 10 per cent above the average unweighted closing price over the 10 trading days prior to exercising this authorization. The Management Board was further authorized – pursuant to § 65 (1b) of the AktG – 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 offer, 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, operations or stakes in 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. This authorization replaces the authorization to purchase and use own shares that was granted in the Annual General Meeting of 20 June 2012. No own shares have been purchased since the authorization was issued in June 2014.
(8) The following material agreements exist, to which the company is a party and which take effect, change or come to an end upon a change of control in the company as a result of a takeover bid:  As a subsidiary of RZB, RBI AG is insured under RZB’s group-wide D&O insurance. Insurance cover remains in place in the event of a merger with another legal entity of the RZB Group. In the event of a merger with a legal entity outside the RZB Group, RBI AG will no longer be covered under RZB’s group-wide insurance from the date of the merger. In such cases, insurance cover only exists for claims for damages arising from breaches of obligations that occurred before the merger, which are reported to the insurance underwriter prior to any termination of RZB’s group-wide D&O insurance and thereafter within the agreed notification period of five years.
In accordance with the strategic realignment, the Management Board initiated the introduction of a new compensation structure in 2015. In putting this into effect, it was important to maintain RBI's good market position as an attractive employer.
Despite higher pressure on costs, RBI again placed great value on ensuring and continually improving the professional skills of its employees during the year under review. Key areas included, for example, risk management, sales, affluent retail customer business and IT. Further development of managers also remained an important focus: The largest Group-wide training initiative to date for managers within sales was continued under the “Branch Management Academy” project. By the end of 2015, 22 per cent of all branch managers within the network had already participated in the initiative. The Group-wide “GoIT” program for top IT executives was carried out successfully for the third time. Some areas such as the corporate and retail businesses and risk management also run extremely successful rotation programs in order to exchange expert knowledge. In addition, training measures were intensified in order to meet regulatory and compliance requirements and to continue to develop the qualifications of key personnel.
The annual standard processes to identify and develop talent – with areas of emphasis adapted to the needs of the respective Group unit –were carried out again in 2015. As a result, it was again possible to fill 100 per cent of the vacant management board positions in the network banks with internal candidates during the period under review.
In July 2015, an agreement on establishing a European Works Council was signed at RBI. This created an information and consultation platform where employee representatives and central management exchange information on transnational issues. After the formal process to elect the members of the European Works Council, it convened in Vienna at the beginning of November 2015 for its inaugural meeting and for the first exchange of information with central management.
During the last financial year, numerous local Human Resources initiatives were again launched and implemented in the network banks. Last year, many network banks focused on improving internal and external customer satisfaction. The taken measures included related workshops, management events, training courses, and surveys.
In the CE region, GDP growth is set to moderately weaken in the Czech Republic and Hungary in 2016. In contrast, growth in 2016 should remain at the high level of 2015 in Slovakia. Together with fiscal easing in Poland (which will provide short-term growth stimulus), economic growth for the entire region ought to remain above the 3 per cent mark in 2016.
The SEE region is expected to gradually return to solid growth. After GDP growth of 2.8 per cent in 2015, the region’s economic output should again be able to reach its current potential growth rate of over 3 per cent in 2016. Romania, in particular, could remain on a solid growth trajectory with GDP growth of 4 per cent; however, its fiscal policies run the risk of excessively extending the budget deficit and increasingly overheating the economy. Serbia should be able to start following Romania’s positive development in 2016 after several years of slow growth. Croatia should no longer be in a recessionary phase, but it may take some time until the growth is sustainable.
In Russia, a renewed year of recession is expected in 2016. Ukraine, which showed signs of levelling out in 2015, is likely to finally come out of recession in 2016. Belarus, as a result of its interrelation with Russia, is expected to deal with a further GDP decrease in 2016. In general, Russia, Ukraine, and Belarus, show no indications of entering a sustained economic upswing in 2016 and significant event risks still remain.
In Austria, the moderate economic rebound – that began in 2015 – will probably gain some momentum in 2016, but will remain weaker overall than in previous upturns. The income tax relief, which entered into force in January 2016, is expected to pull private consumption out of a long-running period of stagnation. The ongoing pick-up in investment should also help to stimulate the economy.
Solid economic growth in CE and SEE, and the levelling-out in Eastern Europe, should have a positive impact on the CEE banking sector in 2016. Favorable developments in (new) operating business in 2016, however, could be overshadowed by the negative consequences of previous foreign-currency lending expansion in CE and SEE, as well as by the resolution of non-performing loan portfolios in CEE (particularly in SEE, Russia and Ukraine). As such, profitability in the CEE banking sector may not recover quite as fast as regional lending and asset growth, which is already increasing.
We further aim to achieve a cost/income ratio of between 50 and 55 per cent in the medium term.
Central Europe 59 Southeastern Europe 62 Eastern Europe 66 Group Corporates 69 Group Markets 70 Corporate Center 71 Non-Core 73
The segment reporting section in the consolidated financial statements contains details on the division of the segments, particularly in respect to changes made during the reporting period to the segmentation.
Recurring other net operating income (25) (52) (51.5)% (6) 1 –
Net fee and commission income in the segment increased 3 per cent year-on-year, or € 11 million, to € 388 million. This included a rise of 34 per cent, or € 11 million, to € 42 million in net income from the loan and guarantee business, which was primarily driven by an increase in new business in Slovakia. Net income from the foreign currency, notes/coins, and precious metals business also increased – by € 5 million to € 81 million – as a result of higher volumes in Slovakia and Hungary. Net income from other banking services and net income from the securities business each increased € 1 million. In contrast, net income from the payment transfer business fell 4 per cent, or € 7 million, to € 196 million, due to lower volumes and margins, predominantly in the Czech Republic and Hungary.
The segment’s net trading income rose 107 per cent, or € 16 million, to € 31 million. This included a € 12 million year-on-year increase in net income from currency-based transactions to € 24 million, attributable to valuation gains on foreign currency positions in the Czech Republic and Hungary. Net income from interest-based transactions increased from minus € 2 million in the previous year to € 8 million, primarily as a result of gains from the valuation of securities and interest-based derivatives in the Czech Republic. In contrast, net income from other transactions fell € 6 million, primarily due to the development in Hungary.
The segment’s general administrative expenses rose 2 per cent year-on-year, or € 12 million, to € 636 million. The increase was mainly driven by regulatory requirements, particularly the new bank resolution funds in Slovakia (€ 8 million) and Hungary (€ 3 million). Staff expenses dropped 1 per cent, or € 3 million, largely due to lower staff levels in Hungary. Other administrative expenses not only included the contributions to the bank resolution funds, but also higher legal, advisory and consulting expenses, office space expenses, as well as IT expenses. Deposit insurance fees declined in Slovakia. Depreciation of tangible and intangible fixed assets rose 5 per cent, or € 4 million, primarily due to higher depreciation resulting from the relocation of a data center to a new building in Slovakia. The number of business outlets in the segment fell 23 to 395 during the year. This included the closure of 42 business outlets in Hungary, as part of the realignment of the business model, and the addition of 17 business outlets in Slovakia, where the Raiffeisen brand continued to be rolled out as planned. The cost/income ratio in the region increased 0.3 percentage points to 60.7 per cent.
In the reporting period, there was a partial release of € 67 million of the provisions for liabilities and charges that were recognized in Hungary in the previous year in connection with the implementation of changes required by the Settlement Act. A provision of € 251 million was recognized in the previous year’s period after the government’s plan was announced; in the course of the implementation the calculations proved to be less stringent than expected. The law related to the foreign exchange margins, which can be applied to foreign currency loan disbursement and installments, as well as to unilateral rate changes on consumer loans.
The bank levies contained in the other results fell € 50 million to € 35 million. A reduction in the tax rate lowered bank levies by € 7 million in Slovakia, while the decline in Hungary was attributable to the release of € 43 million in provisions for liabilities and charges. In 2014, the provisions had been recognized following a tax audit and were released after a positive decision was taken by the tax authority.
Net income from derivatives and liabilities decreased from plus € 7 million in the previous year’s period to minus € 3 million in the reporting period. This change was primarily due to net income from hedging to adjust the currency and interest rate structure in the Czech Republic.
Net income from financial investments declined € 12 million year-on-year to minus € 4 million. This included a € 2 million loss from the valuation and sale of securities from the fair value portfolio, mainly as a result of government bonds in Hungary. In the previous year, also primarily attributable to Hungary, there was a gain of € 7 million. The impairment charges of € 3 million largely related to equity participations in Hungary.
The segment’s income taxes remained unchanged year-on-year at € 66 million. The tax rate was 21 per cent in the reporting period. Higher taxes, due to higher net income in the Czech Republic and Slovakia, were offset by lower taxes in Hungary.
Net fee and commission income 380 358 6.1% 99 103 (4.6)%
Net provisioning for impairment losses (191) (254) (24.8)% (66) (42) 59.2%
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 profit before tax. In contrast, the marked improvement in the credit risk situation in the majority of markets had a positive effect.
Net interest income decreased 7 per cent year-on-year, or € 55 million, to € 780 million. All countries in the segment – with the exception of Kosovo – reported a decline. The steepest decline of € 15 million was in Croatia, where besides lower loan volumes, reduced market interest rates in particular led to a fall in net interest income. Lower interest rates were also mainly responsible for the negative developments in the other countries of the region. Accordingly, the net interest margin also fell – by 43 basis points to 3.84 per cent.
General administrative expenses declined 1 per cent year-on-year, or € 8 million, to € 681 million. Staff expenses increased slightly – by 2 per cent, or € 5 million, to € 301 million – largely as a result of higher salaries in Romania. In contrast, staff expenses in Bosnia and Herzegovina and Serbia fell due to staff reductions. The segment’s other administrative expenses remained almost unchanged at € 305 million. While operating expenses (office space and advertising expenses) declined, Bulgaria and Croatia reported higher contributions to the bank resolution fund (€ 6 million). Depreciation of tangible and intangible fixed assets was down € 13 million, as an impairment charge was taken in relation to a property in Romania in the comparable period in 2014. The cost/income ratio increased 2.4 percentage points to 56.1 per cent.
Net provisioning for impairment losses amounted to € 191 million, which was 25 per cent, or € 63 million, lower than in the previous year. The largest declines were reported in Bulgaria, Croatia and Romania. In Bulgaria, net provisioning for impairment losses fell € 20 million to € 32 million, after higher loan loss provisioning for corporate customers was reported in the previous year. In Croatia, increased collection activity and restructuring measures resulted in a € 14 million decline in net provisioning for impairment losses (€ 36 million), above all in the large corporate customers business. In Romania, net provisioning for impairment losses was € 11 million lower (€ 74 million), reflecting the improvement in the risk profile of retail customers. Serbia and Bosnia and Herzegovina also reported decreases, while a slight increase was reported in Albania due to two corporate customer defaults.
Eastern Europe in € million 2015 restated Change Q4/2015 Q3/2015 restated Change
Net fee and commission income 404 498 (18.9)% 109 101 8.9%
Net interest income was down 22 per cent year-on-year, or € 272 million, to € 949 million. This was mainly due to a currencyrelated decrease in net interest income in Russia (down 23 per cent, or € 188 million, to € 647 million) and in Ukraine (down 35 per cent, or € 96 million, to € 176 million). In contrast, net interest income in Belarus rose 11 per cent, or € 13 million, to € 125 million, due to volume-driven higher interest income from securities and leasing claims. The segment’s net interest margin declined 49 basis points year-on-year to 6.14 per cent.
General administrative expenses fell 27 per cent year-on-year, or € 210 million, to € 563 million. Russia and Ukraine accounted for most of the reduction, which largely reflected the depreciation of the Russian rouble and the Ukrainian hryvna. Staff expenses in the segment decreased € 86 million as a result of the release of bonus provisions for 2014 and a 12 per cent reduction in the level of staff. Depreciation fell € 39 million after an impairment charge of € 30 million had been taken in the previous year in relation to the brand and customer base in Ukraine. The number of business outlets in the segment fell by 119 to 862; of which, 93 were in Ukraine and 26 were in Russia (where the number of outlets in the eastern part of the country was reduced). The cost/income ratio improved 9.0 percentage points to 41.4 per cent.
Non-performing customer loans increased € 139 million to € 1,902 million. Of that amount, € 60 million related to Russia, while Ukraine and Belarus accounted for € 55 million and € 24 million, respectively. The proportion of non-performing loans to nonbanks in the segment’s loan portfolio rose 4.4 percentage points year-on-year to 18.9 per cent. The NPL coverage ratio was up 3.0 percentage points to 86.4 per cent.
The tax expense increased 97 per cent, or € 63 million, to € 128 million. This was mainly due to the € 49 million reduction in deferred tax assets as a result of the tax earnings forecasts in Ukraine and a € 10 million increase in the tax expense (higher tax rate) in Belarus. The segment’s tax rate amounted to 23 per cent.
Detailed results of individual countries: 2015 in € million Belarus Russia Ukraine
Net fee and commission income 74 121 (38.8)% 19 18 5.9%
Net provisioning for impairment losses (141) (196) (28.0)% (34) 15 –
Return on equity before tax 9.3% 6.9% 2.4 PP 5.6% 23.7% (18.1) PP
Net fee and commission income decreased 39 per cent year-on-year, or € 47 million, to € 74 million. Aside from the abovementioned reclassification, lower fee and commission income from bond issues, real estate and project financing transactions, as well as from export and investment financing, also had a negative effect on profit, while cash management, capital markets sales, and the guarantee business, reported higher fee and commission income. In addition, customer-specific earnings components relating to equity capital markets and mergers and acquisitions were included for the first time.
Net trading income declined 89 per cent, or € 6 million, due to interest-based derivative financial instruments at Group head office.
General administrative expenses increased 16 per cent, or € 20 million, to € 143 million. Staff and other administrative expenses increased due to salary increases and the segment’s proportional cost allocation. The cost/income ratio increased 7.8 percentage points to 35.5 per cent.
creased 0.7 percentage points to 9.4 per cent. The NPL coverage ratio reached 56.7 per cent compared to 50.3 per cent in the previous year.
Group Markets in € million 2015 2014 Change Q4/2015 Q3/2015 Change
Net fee and commission income 122 111 9.8% 31 24 30.9%
Recurring other net operating income 14 20 (31.2)% 5 3 64.3%
Net provisioning for impairment losses 7 1 >500.0% 7 1 453.6%
Profit before tax in the Group Markets segment declined 10 per cent, or € 11 million, mainly due to lower business volumes and the difficult market environment.
Net interest income in the Group Markets segment decreased 40 per cent, or € 49 million, to € 74 million, primarily due to the reduction in interest income from securities as a result of lower volumes. The net interest margin declined 22 basis points to 0.77 per cent.
Net trading income declined 23 per cent, or € 23 million, to € 78 million. The reduction was caused by lower turnover in banknote trading, currency losses following the appreciation of the Swiss franc, valuation losses on securities, and the partial reclassification of calculative net trading income items as net fee and commission income. These factors were only partially offset by the improved valuation of a guarantee product.
Net releases of individual loan loss provisions amounted to € 6 million in the reporting period. The volume of non-performing loans (including to banks) rose € 20 million to € 415 million. The proportion of non-performing loans in the segment’s total credit exposure was 5.7 per cent.
The tax expense declined slightly, by 7 per cent, or € 2 million, to € 23 million.
Recurring other net operating income 154 134 15.0% 44 48 (7.9)%
Net interest income in the Corporate Center segment rose 7 per cent year-on-year, or € 75 million, to € 1,124 million. This was mainly due to € 113 million higher dividend income, primarily from a real estate holding company in Austria. This contrasted with lower interest income from the refinancing business due to falling intra-Group financing volumes. In addition to income from the predominantly short-term investment of free liquidity, interest expenses of € 76 million (2014: € 73 million) for the subordinated capital of RBI AG were also reported in this segment.
Net fee and commission income improved € 26 million year-on-year to € 17 million, predominantly as a result of the partial reclassification of expenses for guarantee fees and commissions to net interest income, where they were treated as a component of interest income.
Recurring other net operating income rose 15 per cent, or € 20 million, to € 154 million, with the majority of this income stemming from intra-Group service charges.
In the reporting period, net provisioning for impairment losses for corporate customers of Group head office amounted to € 23 million, compared to € 10 million in the previous year.
Net fee and commission income 172 171 0.3% 44 45 (2.8)%
Net provisioning for impairment losses (375) (361) 3.9% (227) (52) 336.5%
Net interest income fell 22 per cent year-on-year, or € 111 million, to € 385 million. This was primarily attributable to an 18 per cent, or € 54 million, decline in net interest income in Poland to € 253 million, caused by continuing low market interest rates and repricing measures in the deposit business. In Asia, net interest income fell 38 per cent, or € 51 million, to € 84 million, due to loan defaults and a planned reduction in volumes. The net interest margin declined 31 basis points to 2.01 per cent year-on-year.
Net fee and commission income remained virtually unchanged year-on-year at € 172 million. This included a € 17 million decline in net income from the payment transfer business to € 32 million, due above all to lower income from the credit card and giro business in Poland after a change in legislation. In contrast, net income from other banking services rose € 14 million to € 2 million and was also due to developments in Poland. Likewise driven by activities in Poland, net income from the foreign currency, notes/coins, and precious metals business increased € 6 million to € 73 million, while net income from the sale of own and third party products decreased € 2 million to € 23 million.
General administrative expenses increased 7 per cent year-on-year, or € 29 million, to € 462 million, with most of the increase occurring in Poland. Staff expenses were up 4 per cent, or € 7 million, to € 198 million: Declines were recorded due to the release of bonus provisions, especially in Poland, while transformation costs – particularly severance payments – resulted in an increase in Asia and the US. Other administrative expenses rose 6 per cent, or € 11 million, to € 197 million, due primarily to an increase of € 27 million in deposit insurance fees, including € 17 million for a special payment relating to the default of a Polish bank and contributions to a mortgage borrowers’ support fund in Poland (€ 8 million). Depreciation of tangible and intangible fixed assets increased 21 per cent, or € 12 million, to € 67 million. This increase was caused by an impairment charge of € 21 million relating to the Polbank brand. The number of business outlets rose by 4 to 378. The cost/income ratio rose 15.7 percentage points to 80.2 per cent.
Net provisioning for impairment losses rose 4 per cent year-on-year, or € 14 million, to € 375 million. In Asia, net provisioning for loans to large customers fell € 10 million, yet still remained high at € 297 million. Net provisioning for impairment losses in Poland rose € 19 million to € 45 million, as the proceeds from impaired loans were higher in the previous year (decline of € 54 million). Net provisioning would have been € 35 million lower year-on-year without this effect. In the US, net provisioning for impairment losses rose € 8 million to € 12 million.
Detailed results of individual countries and sub-segments: 2015 in € million Asia Poland Slovenia USA
Statement of comprehensive income 78 Statement of financial position 81 Statement of changes in equity 82 Statement of cash flows 83 Segment reporting 85 Notes 92 Risk report 144 Auditor‘s report 224 Statement of all legal representatives 226
Net income from disposal of group assets [10] 41,111 (9,755) –
Previous year figures were restated according to IAS 8.41. This affected net provisioning for impairment losses by minus € 34,129 thousand and other net operating income by minus € 93,403 thousand, reduced by the resulting deferred tax income of € 3,422 thousand. Details can be found in the notes in the section principles underlying the preparation of financial statements.
Earnings per share are obtained by dividing consolidated profit/loss by the average number of common shares outstanding. In the reporting year, the number of common shares outstanding was 292,414 thousand compared with 284,898 thousand in the previous year.
Total Group equity Non-controlling interests in € thousand 2015 restated 2015
Items which are not reclassified to profit and loss 2,205 (9,774) 2,205 (9,774) 0 0
Remeasurements of defined benefit plans 2,941 (13,033) 2,941 (13,033) 0 0
Deferred taxes on income and expenses directly recognized in equity (33,708) 2,081 (32,103) 2,081 (1,606) 0
According to IAS 19R revaluations of defined benefit plans are to be shown in other comprehensive income. This resulted in other comprehensive income of € 2,941 thousand in the reporting year (2014: minus € 13,033 thousand).
Exchange rate differences are derived primarily from changes in the value of the euro in relation to the Belarus rouble, Russian rouble and Ukrainian hryvnia. Moreover, a loss of € 4,018 thousand was reclassified to the income statement due to the sale of ZAO NPF Raiffeisen, Moscow. In the previous year, no profit or loss was reclassified to the income statement.
Capital hedge comprises hedges for investments in economically independent sub-units. The partial hedging of the net investments in Russia and Poland led to the positive result of € 90,316 thousand shown under this item.
The item net gains (losses) on financial assets available-for-sale directly shown in equity, contains net valuation results from financial investments. The increase mainly resulted from the revaluation of shares in a credit card company. In the reporting year, minus € 15 thousand (2014: minus € 10 thousand) was reclassified to the income statement.
The components of retained earnings developed as follows: in € thousand Remeasurements reserve Exchange differences Capital hedge
Unrealized net gains (losses) of the period (13,033) (1,314,018) 2,041 34,361 (10,241) 21,567 5,341
Unrealized net gains (losses) of the period 2,941 (189,089) 90,316 0 (1,515) 75,624 (32,835)
Quarterly results in € thousand Q1/2015 Q2/2015 restated Q3/2015 restated Q4/2015
Net income from disposal of group assets 588 (2,989) 9,638 33,874
The figures for second and third quarter 2015 were restated according to IAS 8.41. In the second quarter this affected net provisioning for impairment losses by minus € 11,705 thousand, reduced by the resulting deferred tax income of € 93 thousand. In the third quarter, other net operating income was restated by € 93,403 thousand.
In the fourth quarter 2014, net provisioning for impairment losses was restated by minus € 34,129 thousand, reduced by the resulting deferred tax income of € 3,422 thousand and other net operating income was restated by minus € 93,403 thousand.
Equity and liabilities in € thousand Notes 2015 2014 restated Change
Provisions for liabilities and charges [27, 33, 49] 813,823 968,913 (16.0)%
Further details about the above shown changes are reported in the notes under (32) Equity.
Non-cash positions in profit/loss and transition to net cash from operating activities: Write-downs/write-ups of tangible fixed assets and financial investments 325,974 775,035
Proceeds from sale of: Tangible and intangible fixed assets 173,022 110,400
Payments for purchase of: Tangible and intangible fixed assets (328,070) (415,279)
restated Cash and cash equivalents at the end of previous period 6,768,685 6,674,226
In order to achieve the maximum possible transparency and clear lines of reporting, seven segments were defined in accordance with the IFRS 8 thresholds. IFRS 8 establishes a 10 per cent threshold for the key figures of operating income, profit after tax and segment assets.
In February 2015, RBI decided to implement a range of measures to increase its regulatory capitalization. These are intended to improve the CET1 ratio (fully loaded) to at least 12 per cent by the end of 2017. The operational areas designated for sale or rescaling of the business in order to significantly strengthen capital ratios were selected based on strategic considerations such as contribution to earnings/profitability, capital requirement, contribution to risk and importance in terms of the bank’s strategic core business. The measures include the sale of the operations in Poland and Slovenia, as well as the online bank Zuno AG. In line with the Group’s focus on Central and Eastern Europe, business activities in Asia and the USA will be significantly reduced or exited by the end of 2017. For this reason, internal management reporting and therefore segment reporting was adapted at the start of the year. A separate Non-Core segment encompasses those business areas which are to be disposed of or reduced. Additionally, the units in Russia, Ukraine, Belarus and Kazakhstan were combined in the Eastern Europe segment.
This segment comprises Russia, Ukraine, Belarus and Kazakhstan. Raiffeisenbank Russia is one of the leading foreign banks in Russia and services both corporate and retail customers. The branch network also offers products tailored for affluent retail customers and small and medium-sized entities. In the course of the strategy review, the presence in large parts of the country was reduced and at the same time, the focus was placed on large cities. Furthermore, RBI is active in the new issuance business. The product range in Russia is rounded off by leasing business. In Ukraine RBI is represented by a bank, a leasing and a cardprocessing company and provides a full range of financial services and products via a tightly knit branch network. In Belarus, RBI is represented by a bank and a leasing company, whilst in Kazakhstan it is represented in the leasing business.
The Group Corporates segment covers business with Austrian and international corporate customers of RBI AG, which are managed from Vienna and grouped within the Corporate Customers profit center. These customers include Austria's largest companies and Western European multinational customers. The segment also contains the large corporate business with Central and Eastern European customers as well multinationals with CEE business, included in the Network Corporate Customers & Support profit center.
The Group Markets segment covers RBI AG’s customer and proprietary business related to the capital market. Net income from currency, interest-based and securities trading as well as from trading in structured products for financial institutions is also allocated to this segment, as is proprietary business. The same applies to proprietary trading and market maker activities in Vienna. This segment includes net income from customer business, sales of all banking products and business relationships with banks, institutional customers, governments and local authorities. Furthermore, net income from Raiffeisen Centrobank arising from equity trading and capital market financing and from Kathrein Privatbank is also booked under this segment.
The Corporate Center segment encompasses services provided by Group head office in various areas that serve to implement the Group’s overall strategy and that are allocated to this segment to ensure comparability. Therefore, this segment includes the following areas: Liquidity management and balance sheet structure management as part of proprietary trading, equity participation management, the banking operations carried out by Group head office for financing Group units, the Austrian transaction and services business for financial services providers, as well as other companies outside the financial service provider business that do not fall directly under another segment.
The Non-Core segment includes all business activities which are to be sold, rescaled or exited as a result of the strategic review decided upon in February 2015. These include the countries Poland and Slovenia as well as the online bank Zuno AG and the business activities in Asia and the USA.
In Poland, in addition to the credit business with corporate customers and small and medium-sized enterprises (including leasing and factoring), the focus is also on retail banking and on business with affluent customers. Although the sales process was started, it has been delayed because of the current political conditions. In Slovenia, the Group provides universal banking services and also leasing, with Group units concentrating in particular on local corporate customers. In December 2015, the sale of the Slovenian bank was agreed, the closing of the transaction is expected in the first half of 2016. The business volume of the Slovenian leasing company is being reduced as scheduled. Corporate customer business in Asia is operated via the outlets in Singapore and China (including Hong Kong); here too, a rescaling of business activities is in progress. In the USA, the business activities will be wound down by 2017. In addition, RBI is represented in Slovakia and the Czech Republic with its online bank Zuno which is up for sale.
Assessment of segment profit and loss The segment reporting according to IFRS 8 shows the segment performance on the basis of internal management reporting, supplemented with the reconciliation of the segment results to the consolidated financial statements. In principle, RBI´s management reporting is based on IFRS. Therefore, no differences occur in the recognition and measurement principles between segment reporting and consolidated financial statements.
The cost/income ratio represents the cost efficiency of the segment. The cost/income ratio shows general administrative expenses in relation to operating income, which is the sum of net interest income, net fee and commission income, net trading income and other net operating income (less bank levies, impairment of goodwill, release of negative goodwill and any nonrecurring effects recorded in sundry operating expenses).
The presentation of segment performance is based on the income statement and geared to the reporting structure internally used. Income and expenses are attributed to the country and/or business area in which they are generated. Operating income positions are the net interest income, net fee and commission income, net trading income and the recurring other net operating income. The other results include the net income from financial investments, the net income from derivatives and liabilities, the net income from disposal of group assets, the bank levies, the impairment of goodwill, the release of negative goodwill and the charges resulting from the Settlement Act in Hungary and the mandatory conversion of Swiss franc-denominated loans into euro loans in Croatia and Serbia which are shown in sundry operating expenses. The segment result is shown up to the profit/loss after deduction of non-controlling interests. The segment assets are represented by the total assets and the risk-weighted assets. The item liabilities includes all positions from the liabilities side of the statement of financial position except the equity. The reconciliation includes mainly the amounts resulting from the elimination of intra-group results and consolidation between the segments. This is supplemented with financial ratios conventionally used within the industry to evaluate performance. The values shown in the segment reporting are for the most part taken from the IFRS individual financial statements which are also used for the compilation of the consolidated financial statements. In some units profit center results are taken from the internal management income statement.
Profit/loss after deduction of non-controlling interests 186,755 226,307 417,153 76,092 71,661
Net interest margin (average interest-bearing assets) 2.67% 3.84% 6.14% 2.08% 0.77%
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, also driven by the sale of the Russian pension fund business. 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.
The Corporate Center segment essentially comprises net income from Group head office’s governance functions and from other Group units. As a result, its net income (in particular dividends from other segments) is generally more volatile. Profit before tax improved 39 per cent, or € 163 million, year-on-year. Declines of € 180 million in income from derivatives and securities were more than offset by a reduction of € 391 million in goodwill impairments.
Provisioning ratio (average loans and advances to customers) – 1.58% – 2.17%
Raiffeisen Bank International (RBI) is a universal bank focusing on corporate and retail customers in Central and Eastern Europe (CEE) and exclusively on corporate customers in Austria. In CEE, RBI has a closely-knit network of subsidiary banks, leasing companies and numerous specialized financial service providers with around 2,700 business outlets. In Austria, RBI specializes in corporate banking and investment banking business. It is Austria’s corporate finance bank and provides services to the country’s top 1,000 companies. Numerous major international and multinational customers and financial firms also trust in its comprehensive service offering.
The consolidated financial statements were signed by the Management Board on March 2, 2016 and subsequently submitted for the notice of the Supervisory Board.
The consolidated financial statements for the 2015 financial year and the comparative figures for the 2014 financial year were prepared in accordance with the International Financial Reporting Standards (IFRS) published by the International Accounting Standards Board (IASB) insofar as they were adopted by the EU on the basis of IAS Regulation (EC) 1606/2002. The interpretations of the International Financial Reporting Interpretations Committee (IFRIC/SIC) that are already applicable have been considered. All standards published by the IASB as International Accounting Standards and adopted by the EU have been applied to the financial statements for 2015. The consolidated financial statements also satisfy the requirements of Section 245a of the Austrian Commercial Code (UGB) and Section 59a of the Austrian Banking Act (BWG) regarding exempting consolidated financial statements that comply with internationally accepted accounting principles. IAS 20, IAS 41 and IFRS 6 have not been applied as there were no relevant business transactions in the Group.
The consolidated financial statements are based on the reporting packages of all fully consolidated Group members, which are prepared according to IFRS rules and uniform Group standards. All fully consolidated companies prepare their annual financial statements as of and for the year ended December 31. Figures in these financial statements are stated in € thousand. The following tables may contain rounding differences.
The consolidated financial statements are based on the going concern principle.
RBI was subject to an examination under Section 2 (1) 2 of the Accounting Control Act (RL-KG). The examination covered the 2014 consolidated financial statements and 2015 semi-annual consolidated financial statements. The examination results are taken into account in the present consolidated financial statements.
 Within the context of individual examinations, it was established on the basis of loan valuations of two groups of affiliated customers, that as at 31 December 2014 the amount reported for loans and advances to customers was at least € 34,129 thousand too high; this was because contrary to IAS 39.59, insufficient account had in particular been taken of macroeconomic changes such as the devaluation of the Russian rouble and the collapse in raw material prices in China. This means that a higher individual loan loss provision (by an amount of € 36,820 thousand) should have been recorded in profit/loss in the 2014 reporting year. This resulted in a release of portfolio-based provisions of € 2,691 thousand. After considering the deferred taxes of € 3,422 thousand, the restatement requirement, affecting profit/loss, was € 30,707 thousand.
Non-cash positions in profit/loss and transition to net cash from operating activities: Write-downs/write-ups of tangible fixed assets and financial investments 681,632 93,403 681,632
Net provisioning for liabilities and charges and impairment losses 2,377,572 30,707 2,346,865
Gains (losses) from disposals of tangible fixed assets and financial investments (57,539) 0 (57,539)
Proceeds from sale of: Tangible and intangible fixed assets 110,400 0 110,400
The consolidated financial statements of RBI are prepared in euro which is the functional currency of RBI AG. The functional currency is the currency of the principal economic environment in which the company operates. Each entity within the Group determines its own functional currency taking all factors listed in IAS 21 into account.
In the case of two subsidiaries headquartered outside the euro area, the US dollar was the reporting currency for measurement purposes given the economic substance of the underlying transactions, as both the transactions and the financing were undertaken in US dollars. In the case of four subsidiaries headquartered in the euro area, the Russian rouble was the reporting currency for measurement purposes given the economic substance of the underlying transactions.
The relevant provisions for accounting in hyperinflationary economies according to IAS 29 were applied for two subsidiaries in Belarus until December 31, 2014. Due to the changes in the general purchasing power of the functional currency, it was necessary to retrospectively adjust all historical acquisition and production costs arising since 2011 and they were disclosed in the prevailing measuring unit as at December 31 2014. From January 1, 2015, accounting for hyperinflationary economies was discontinued because the relevant parameters indicating hyperinflation were no longer given. The carrying values in 2015 were based on all carrying values stated in the prevailing measuring unit as at December 31, 2014. Expense and income items were again translated using the average exchange rate for the consolidated financial statements, whereas the application of IAS 29 required period-end exchange rates.
If estimates or assessments are necessary for accounting and measuring under IAS/IFRS rules, they are made in accordance with the respective standards. They are based on past experience and other factors such as planning and expectations or forecasts of future events that appear likely from the current perspective. The estimates and underlying assumptions are reviewed on an ongoing basis. Alterations to estimates that affect only one period will be taken into account only in that period. If the following reporting periods are also affected, the alterations will be taken into consideration in the current and following periods. The critical accounting judgments and key sources of estimation uncertainty are as follows: Risk provisions for loans and advances
Deferred taxes are not reported separately in the income statement and statement of financial position. Details are provided in the statement of comprehensive income and in the notes under (11) Income taxes, (23) Other assets, and (27) Provisions for liabilities and charges.
The cost of the defined benefit pension plan is determined using an actuarial valuation. The actuarial valuation involves making assumptions about discount rates, expected rates of return on assets, future salary increases, mortality rates and future pension increases. The interest rate used to discount the Group’s defined benefit obligations is determined on the basis of the yields obtained in the market at the balance sheet date for top-rated fixed-income corporate bonds. Considerable discretion has to be exercised in this connection in setting the criteria for the selection of the corporate bonds representing the universe from which the yield curve is derived. The main criteria for the selection of such corporate bonds are the issuance volumes of the bonds, the quality of the bonds and the identification of outliers, which are not taken into account. Mercer’s recommendation is used to determine the interest rate. Assumptions and estimates used for the defined benefit obligation calculations are described in the section on pension obligations and other termination benefits. Quantitative data for long term employee provisions are disclosed in the notes under (27) Provisions for liabilities and charges.
Financial assets and liabilities at fair value through profit or loss 370,614 305,518
Net realized gains (losses) on financial assets not measured at fair value through profit and loss 10,724 67,953
Write-ups/impairment on financial assets not measured at fair value through profit and loss 21 (8)
(2) Net interest income Net interest income includes interest income and interest expenses from banking business, dividend income, and fees and commissions with interest-like characteristics.
Interest and interest-like income, total 4,916,202 5,615,587 from balances at central banks 35,420 38,992 from loans and advances to banks 162,985 204,055 from loans and advances to customers 3,656,077 4,325,780 from financial investments 314,268 394,608 from leasing claims 172,598 180,583 from derivative financial instruments – economic hedge 279,689 313,285 from derivative financial instruments – hedge accounting 194,763 109,116 from shares and other variable-yield securities 198 1,274 from shares in affiliated companies 76,110 17,077 from other interests 11,541 3,179
Moreover, the disclosure of negative interest has been changed: to date this has been shown under the item “other net operating income”. Previous year figures have not been reclassified due to materiality reasons.
(3) Net provisioning for impairment losses Net provisioning for impairment losses on items reported on and off the statement of financial position is as follows: restated
Net income from securities at fair value through profit and loss 97,147 89,405
Legal, advisory and consulting expenses include audit fees in relation to RBI AG and its subsidiaries which comprise expenses for the audit of financial statements amounting to € 6,172 thousand (2014: € 6,742 thousand) and tax advisory as well as other additional consulting services provided by the auditors amounting to € 5,747 thousand (2014: € 4,462 thousand). Thereof, € 2,157 thousand (2014: € 1,914 thousand) relates to the Group auditor for the audit of the financial statements and € 1,450 thousand (2014: € 792 thousand) accounts for the other consulting services.
The depreciation of tangible and intangible fixed assets includes impairments of € 50,246 thousand (2014: € 49,090 thousand). The impairments comprise impairment losses for buildings and land of € 17,850 thousand and impairment losses for intangible assets of € 31,993 thousand, mainly for the brand Polbank and software.
Moreover, protection against the risk of occupational disability exists which is covered by a pension fund and/or by individual pension agreements secured through reinsurance. The contracts of the members of the Management Board run for the functional duration or are limited to a maximum of five years. Severance payments in the event of early termination of function without good cause amount to a maximum of two years total remuneration.
Net proceeds from disposal of tangible and intangible fixed assets 1,196 (5,179)
Net expense from allocation and release of other provisions (4,470) (24,702)
The reduction in sales revenues and expenses from non-banking activities primarily resulted from the disposal of Centrotrade Group and F.J. Elsner Trading Ges.m.b.H., Vienna.
Other net operating income includes impairments of goodwill amounting to € 6,954 thousand which were made in relation to Group units in Ukraine and in Serbia. In the previous year, impairments of goodwill totaling € 399,066 thousand for Group units in Russia, Poland and Albania were included.
The item ”profit/loss from banking business due to governmental measures” comprises provisions in Croatia of € 81,987 thousand and in Serbia of € 3,951 thousand. In contrast, in Hungary part of the provision in the amount of € 251,308 thousand formed in the previous year was released (€ 66,689 thousand).
RBI AG and 25 of its domestic subsidiaries are members of a joint tax entity headed by Raiffeisen Zentralbank Österreich Aktiengesellschaft. In the reporting year, the existing tax compensation agreement was expanded with a supplementary agreement. If RBI AG has a negative result in the tax accounts which cannot be used in the group, the group parent is not obliged to pay negative tax contributions to RBI AG. However, the amount is to be settled in the event of a withdrawal from the tax group. The obligation of the tax group head to pay a negative tax contribution to RBI AG for usable losses remains.
Tax decrease because of tax-exempted income from equity participations and other income 38,059 42,095
In the reporting year, impairment of deferred tax assets from tax loss carryforwards amounting to € 3,151 thousand (2014: € 196,370 thousand) was recognized because the tax losses cannot be used based on the current medium-term tax planning. Other changes in the previous year mainly derive from tax losses that cannot be capitalized.
Financial assets at fair value through profit or loss 5,363,032 3,853,910
Equity and liabilities according to measurement categories in € thousand 2015 2014 restated
The purchased loans amounting to € 49,781 thousand (2014: € 290,807 thousand) are fully assigned to the measurement category “loans and advances”.
(16) Impairment losses on loans and advances Provisions for impairment losses are formed in accordance with uniform Group standards and cover all recognizable credit risks. A table showing the development of the impairment losses on loans and advances can be found in the risk report. Provisions for impairment losses are allocated to the following asset classes: restated
Treasury bills and bills of public authorities eligible for refinancing 1,029,632 1,658,097
Pledged securities which are permitted to be sold or repledged by the transferee shown under the item “trading assets” amounted to € 1,079,590 thousand (2014: € 679,017 thousand).
The table below shows the expected hedged cash flows from assets and the effect on the statement of comprehensive income by period: More than 1 year, up to 5 years 1,577,255 1,174,058
The item software comprises acquired software amounting to € 411,138 thousand (2014: € 422,154 thousand) and internally developed software amounting to € 120,027 thousand (2014: € 109,044 thousand).
At the end of each financial year, goodwill is reviewed by comparing the recoverable value of each cash generating unit for which goodwill is recognized with its carrying value. The carrying value is equal to net assets including goodwill and other intangible assets which are recognized within the framework of business combinations. In line with IAS 36, impairment tests for goodwill are carried out during the year if a reason for impairment occurs.
RBI generally identifies the recoverable amount of cash generating units on the basis of the "value-in-use" concept using a dividend discount model. The dividend discount model reflects the characteristics of the banking business including the regulatory framework. The present value of estimated future dividends that can be distributed to shareholders after taking into account relevant regulatory capital requirements represents the recoverable value.
Reduction of the growth rates in phase III Not meaningful 2014 Maximum sensitivity1 RBCZ RBPL
Reduction of the growth rates in phase III Not meaningful Not meaningful 1 The respective maximum sensitivity refers to the change of the perpetuity. RBCZ: Raiffeisenbank a.s., Prague (CZ) RBPL: Raiffeisen Bank Polska S.A., Warsaw (PL)
Group companies use brands to differentiate their services from the competition. According to IFRS 3, brands of acquired companies have been recognized separately under the item “intangible fixed assets”. Brands have an indeterminable useful life and are therefore not subject to scheduled amortization. Brands are tested annually in the course of the impairment test of goodwill per cash generating unit and additionally whenever indications of impairment arise.
Cumulative impairment2 (23,137) 0 (23,137) 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 brand value of the Raiffeisen Bank Aval JSC, Kiev (AVAL), was determined using the comparable historical cost approach, because neither immediately comparable transactions nor a market with observable prices was available at the time of purchase price allocation. Documentation of brand-related marketing expenses in the previous years was taken as the basis for the historical cost approach. In 2015, the impairment test led to an impairment of € 1,102 thousand.
The Group has capitalized customer relationship intangibles only in relation to Raiffeisen Bank Polska S.A., Warsaw (RBPL) and Raiffeisen Bank Aval JSC, Kiev (AVAL). In the reporting year the book values of the customer relationships as well as the gross amounts and cumulative impairments developed as follows: 2015 in € thousand AVAL RBPL Total
The impairment test of customer relationships of Raiffeisenbank Aval JSC, Kiev (AVAL), recognized for the business division retail customers at the date of initial consolidation, identified an impairment loss of € 324 thousand in the reporting year. The impairment test of customer relationships of Raiffeisen Bank Polska S.A., Warsaw (RBPL), identified no impairment need in 2015.
Land and buildings used by the Group for own purpose 486,684 568,482
Cost of acquisition or conversion in € thousand As at 1/1/2015
Office furniture, equipment and other tangible fixed assets 1,086,895 2,113 (76,148) 77,452 (107,763) (14,945) 967,604
Write-ups, amortization, depreciation, impairment Carrying amount hereof hereof As at in € thousand Cumulative Write-ups Depreciation 31/12/2015
Land and buildings used by the Group for own purpose (267,094) 2,919 (41,901) 486,684
The item "assets held for sale" mainly comprises Raiffeisen Banka d.d., Maribor, and ZUNO BANK AG, Vienna.
In the consolidated financial statements, deferred tax assets are recognized for unused tax loss carry-forwards which amounted to € 48,824 thousand (2014: € 35,947 thousand). The tax loss carry-forwards are mainly without any time limit. The Group did not recognize deferred tax assets of € 476,384 thousand (2014: € 379,427 thousand) because from a current point of view there is no prospect of realizing them within a reasonable period of time.
Deposits from customers classified regionally (customer domicile) are as follows: (26) Debt securities issued
(27) Provisions for liabilities and charges in € thousand As at 1/1/2015
Severance and similar payments include provisions for service anniversary bonuses and other payments in the amount of € 26,600 thousand (2014: € 21,191 thousand) and obligations from other benefits due to termination of employment according to IAS 19R amounting to € 63,070 thousand (2014: € 60,186 thousand). The item “assets held for sale” includes provisions for severance payments and similar of € 367 thousand.
The item ”provision for banking business charges due to governmental measures” comprises provisions in Croatia of € 81,987 thousand and in Serbia of € 3,951 thousand. In contrast, in Hungary part of the provision in the amount of € 251,308 thousand formed in the previous year was released (€ 66,689 thousand).
 Legal steps were taken against Raiffeisen Bank International AG, Vienna, in connection with the early repayment of Icelandic claims.
 In Slovakia, a customer has taken legal action in relation to a disputed amount of approximately € 71 million against Tatra banka a.s., Bratislava, in connection with agreed credit facilities and non-execution of payment transfer orders, which ultimately led to the termination of the customer's business activities.
The Group contributes to the following defined benefit pension plans and other post-employment benefits:  Defined benefit pension plans in Austria and other countries
For pensions there are different plans: unfunded, partly funded and fully funded. The partly and fully funded plans are all placed by Valida Pension AG. Valida Pension AG is a pension fund, and is subject in particular to the provisions of the PKG (Pension Act) and BPG (Company Pension Act).
The return on plan assets for 2015 was € 311 thousand (2014: € 1,023 thousand). The fair value of rights to reimbursement recognized as an asset was € 15,519 thousand (2014: € 17,210 thousand) as at year-end 2015.
The following table shows the longevity assumptions used to calculate the net defined benefit obligation: Longevity at age 65 for current pensioners – males 20.9 20.8
Longevity at age 65 for current pensioners – females 23.5 24.4
The weighted average duration of the net defined benefit obligation was 16.0 years (2014: 17.0 years).
Future pension increase (0.25 per cent change) 1,464 (1,398) 1,666 (1,588)
Changes at the reporting date to one of the relevant actuarial assumptions, holding other assumptions constant, would have affected the defined benefit obligation by the amounts shown below: 2015 2014 in € thousand Addition Decrease Addition Decrease
The following table contains subordinated borrowings that exceed 10 per cent of the total subordinated capital: Issuer ISIN Type Currency Nominale in € Tausend Kupon1 Fälligkeit
As of 31 December 2015, the subscribed capital of RBI AG as defined by the articles of incorporation amounted to unchanged € 893,586 thousand. The subscribed capital consists of 292,979,038 non-par bearer shares. After deduction of own shares of 557,295, the stated subscribed capital totaled € 891,886 thousand.
The Annual General Meeting held on 4 June 2014 also authorized the Management Board, in accordance with Section 65 (1), item 7 of the Austrian Joint Stock Companies Act (AktG), to acquire own shares for the purpose of securities trading, which may also be conducted off-market, during a period of 30 months from the date of the resolution (i.e. until 3 December 2016), of up to a maximum of 5 per cent of the respective subscribed capital of the company. The consideration for each share to be acquired must not be less than half the closing price at the Vienna Stock Exchange on the last day of trading preceding the acquisition and must not exceed twice the closing price. This authorization may be exercised in full or in part or also in several installments by the company, by affiliated companies or, for their account, by third parties.
In the Annual General Meeting held on 26 June 2013, the Management Board was authorized pursuant to Section 174 (2) of the Austrian Joint Stock Companies Act (AktG) to issue – with the approval of the Supervisory Board – convertible bonds in a total nominal amount of up to € 2,000,000 thousand, also in several tranches, within five years from the date of the resolution, which grant holders conversion or subscription rights for up to 39,101,024 common bearer shares of the company with a pro-rata share in the subscribed capital of up to € 119,258 thousand. Shareholders` subscription rights to the convertible bonds are excluded. No convertible bonds have been issued to date, however.
Pursuant to Section 159 (2) item 1 of the Austrian Joint Stock Companies Act (AktG), the subscribed capital has been increased contingently by a maximum of € 119,258 thousand by issuing a maximum of 39,101,024 common bearer shares (contingent capital). The contingent capital increase will only be performed if and when use is made of an irrevocable right of exchange or subscription granted on shares by the company to creditors holding convertible bonds issued on the basis of the resolution of the Annual General Meeting on 26 June 2013 and the Management Board does not decide to issue own shares.
The following table contains financial information of subsidiaries which are held by the Group and in which material noncontrolling interests exist. Intra-group transactions are not eliminated in the below reported amounts.
Net increase in cash and cash equivalents (1,242) 1,275,862 568,551 (14,990)
Dividends paid to non-controlling interests during the year 1 3,008 8,363 26,821 1 Included in net cash from investing activites.
The EBRD participated in the capital increase of Raiffeisen Bank Aval JSC, Kiev, which took place in December 2015. Within the course of this transaction, RBI agreed with EBRD to offer RBI shares to EBRD in exchange of AVAL shares held by EBRD after six years of its participation in a so-called share swap. The execution of this transaction is subject to approvals from regulatory authorities, the Annual General Meeting and Committees.
As at end of 2014, the Ukrainian National Bank launched foreign currency transfer controls. Besides other restrictions, a foreign investor is not able to carry out dividend payments and other capital transactions. First of all, this restriction is valid til first quarter 2016.
In 2014, the share incentive program (SIP) was terminated due to regulatory complexities. The last tranches of the SIP were issued in 2011, in 2012 and in 2013. The respective duration periods are five years, therefore the next tranche will not mature before 2016. As at the reporting date, contingent shares for three tranches were allotted. As at 31 December 2015, the number of these contingent shares was 900,223 (of which 198,258 shares were attributable to the 2011 allotment, 370,857 shares to the 2012 allotment and 331,108 shares to the 2013 allotment). The originally published number of contingently allotted shares changed due to various personnel changes within Group units. It is shown on an aggregated level in the following table: Share incentive program (SIP) 2011 – 2013 Group of persons
Members of the management board of the company 289,066 86,720 433,599
Members of the management boards of bank subsidiaries affiliated with the company 372,176 111,653 558,264
In the financial year 2015, no shares were bought back for the share incentive program.
True Sale Transaction ROOF Poland Leasing 2014 Ltd, Dublin (IE) Raiffeisen-Leasing Polska S.A. Warschau (PL)
Synthetic Transaction (JEREMIE) ROOF Bulgaria SME 2011(1) Raiffeisenbank (Bulgaria) EAD, Sofia (BG)
Another securitization transaction initially placed in 2014 by a leasing subsidiary in Poland with an underlying portfolio of car leasing contracts was tapped in December 2015. The original underlying transaction volume was raised from PLN 950,000 thousand to approximately PLN 1,500,000 thousand. The SPV established for this transaction is fully consolidated because the leasing subsidiary in Poland as the only transferor possesses decision-making rights in relation to the SPV that could significantly affect the value of the SPV’s assets and liabilities. It has the ability to direct the activities that most significantly affect the SPV’s returns, as it has the right to make decisions about the customer loans in the portfolio (i.e. the assets acquired by the SPV) and the refinancing of the SPV. Therefore, according to IFRS 10 effective control exists. The senior and mezzanine tranches of the notes are externally placed through supranational and institutional investors and the junior tranche of the notes amounting to PLN 383,500 thousand, or 26 per cent of the total transaction volume, is held internally by the originating leasing subsidiary in Poland.
In the reporting year, Raiffeisenbank Austria d.d., Zagreb, signed a portfolio guarantee agreement under the Western Balkan Enterprise Development and Innovation Facility (WB EDIF); the agreement is financed by the EU and aims to support small and medium-sized enterprises in accessing finance.
The following securitization programs concluded in former years were still active in the reporting year: A synthetic securitization of loans and advances to corporate customers essentially originated by RBI AG has been active since 2014 under “ROOF INFRASTRUCTURE 2014”. The junior tranche is externally placed and amounts to € 88,100 thousand.
Within the scope of further synthetic securitizations, the Group participated in the JEREMIE programs in Bulgaria and Romania (“ROOF Romania and Bulgaria SME 2011-1”), as well as in Slovakia since 2013 (“ROOF Slovakia SME 2013-1”). The European Investment Fund (EIF) provides guarantees from EIF under the JEREMIE initiative to network banks granting loans to small and medium-sized enterprises. The current volume of the portfolio under the JEREMIE first loss guarantees amounts to € 31,463 thousand (2014: € 71,436 thousand) for the utilized volume of Raiffeisenbank S.A., Bucharest, € 13,963 thousand (2014: € 64,845 thousand) for Raiffeisenbank (Bulgaria) EAD, Sofia, and € 45,699 thousand (2014: € 13,483 thousand) for Tatra banka a.s., Bratislava.
The following securitization programs from previous years were terminated in the reporting year: in € thousand Seller of claims or secured party Date of contract
True Sale Transaction Raiffeisen Leasing Polska Auto Lease Securitisation Raiffeisen-Leasing Polska S.A. Warsaw (PL)
The true sale transaction comprising Polish car leasing contracts was repaid early, in April 2015. It had been concluded in 2012 by transferring securitized receivables to a SPV called Compass Variety Funding Limited, Dublin (IE)
In June 2015 the externally placed “Diversified Payments Rights” transaction of AO Raiffeisenbank, Moscow (“Future Flow Securitization ROOF Russia DPR”) was repaid early.
Besides the above-mentioned refinancing and packaging of designated portfolios of loans or leasing claims, RBI also acts as an investor in ABS structures. Essentially, this relates to investments in Structured Credit Products, Asset Based Financing and partly also Diversified Payment Rights. During the financial year, market value changes led to a negative valuation result of € 12 thousand (2014: positive valuation result of € 28 thousand) and to a realized result from sales of € 811 thousand (2014: € 126 thousand).
Total exposure of structured products (excluding CDS): 2015 2014 in € thousand Outstanding nominal amount Carrying amount Outstanding nominal amount Carrying amount
Loans and advances to customers are sold by the Group to securitization vehicles that in turn issue notes to investors collateralized by the purchased assets. In the securitizations in which the Group transfers loans and advances to an unconsolidated securitization vehicle, it retains some credit risk while transferring some credit risk, prepayment and interest rate risk to the vehicle. The Group therefore does not retain or transfer substantially all of the risks and rewards of such assets.
The table below shows the carrying amounts of financial assets transferred: 2015 Transferred assets Associated liabilities in € thousand Carrying amount hereof securitizations hereof repurchase agreements
Carrying amount hereof securitizations hereof repurchase agreements 2014 Transferred assets Associated liabilities in € thousand Carrying amount hereof securitizations hereof repurchase agreements
(37) Assets pledged as collateral and received financial assets The Group pledges assets mainly for repurchase agreements, securities lending agreements as well as other lending arrangements and for margining purposes in relation to derivative liabilities. The table below contains assets from repo business, securities lending business, securitizations, debentures transferred as collateral of liabilities or guarantees (this means collateralized deposits).
Financial investments 572,848 711,713 1 Without loans and advances from reverse repo and securities lending business. 2 Without derivatives.
The following products restrict the Group in the use of its assets: repurchase agreements, securities lending contracts as well as other lending contracts for margining purposes in relation to derivative liabilities, securitizations and various insurance activities. The table below shows assets pledged as collateral and otherwise restricted assets with a corresponding liability. These assets are restricted from usage to secure funding, for legal or other reasons.
in € thousand Pledged Otherwise restricted with liabilities Pledged Otherwise restricted with liabilities 1 Without loans and advances from reverse repo and securities lending business. 2 Without derivatives.
Other financial instruments (legally enforceable) 100,985 14,427 86,558 0 0 86,558
Equity/index futures – forward pricing 436,540 0 0 436,540 24,803 (22,172)
2014 Nominal amount by maturity Fair values in € thousand Up to 1 year
Assigning certain financial instruments to the level categories requires regular assessment, especially if measurement is based on both observable parameters and also parameters which are not observable on the market. The classification of an instrument can also change over time because of changes in market liquidity and thus price transparency.
A further element of the CVA involves determining a probability of default for each counterparty. Where direct credit default swap (CDS) quotations are available, the Group calculates the market-based probability of default and, implicitly, the loss-given-default (LGD) for the respective counterparty. The probability of default for counterparties which are not actively traded on the market is calculated by assigning a counterparty's internal rating to a sector and rating-specific CDS curve.
Positive fair values of derivatives1 64,453 3,630,168 2,320 158,754 4,938,594 72,603
Shares and other variable-yield securities 202,603 449 237 345,500 2,086 237
Bonds, notes and other fixed-interest securities 2,929,009 95,835 78,586 1,853,178 0 82,242
Shares and other variable-yield securities 3 0 2,496 607 0 1
Positive fair values of derivatives from hedge accounting 0 709,272 0 0 941,575 187 1 Including other derivatives. 2 Includes securities traded on the stock exchange and also shares measured according to income approach.
2015 2014 in € thousand Level I Level II Level III Level I Level II Level III
Negative fair values of derivative financial instruments1 161,769 4,309,317 21,614 128,449 6,116,587 19,088
Negative fair values of derivatives from hedge accounting 0 434,791 0 0 200,549 0 1 Including other derivatives. 2 Adaptation of previous year figures.
For each financial instrument, a check is made whether quoted market prices are available on an active market (Level I). For financial instruments where there are no quoted market prices, observable market data such as yield curves are used to calculate fair value (Level II). Reclassification takes place if this estimate changes.
If at least one significant measurement parameter is not observable on the market, this instrument is assigned to Level III of the fair value hierarchy. The following tables show the changes in the fair value of financial instruments whose valuation models are based on unobservable parameters.
in € thousand As at 1/1/2015 Change in consolidated group Exchange differences Purchases Sales, repayment
Financial assets at fair value through profit or loss 86,261 0 (15) 47,921 (97,827)
in € thousand As at 1/1/2015 Change in consolidated group Exchange differences Purchases Sales, repayment 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
In the reporting year, gains resulting from financial instruments of the Level III fair value hierarchy amounted to € 34,227 thousand (2014: € 6,770 thousand).
Other investments Shares 89,436 Gross rental method Forecasted cash flows -
Negative fair value of banking book derivatives without hedge accounting OTC options 21,614 Option model
Loans and advances to banks 0 7,526,878 3,279,664 10,806,542 10,717,293 89,249
Liabilities 2014 in € thousand Level I Level II Level III Fair value
Subordinated capital1 0 4,238,844 409,948 4,648,792 4,185,108 463,684 1 Adaptation of previous year figures.
The following table contains revocable credit lines: Revocable credit lines 15,775,452 18,268,598
The Operational Risk Management Committee comprises representatives of the business divisions (retail, market and corporate customers) and representatives from Compliance, Fraud Management, Internal Control System, Operations, Human Resources, Security and Risk Controlling, under chairmanship of the CRO. This committee is responsible for controlling the operational risk of the Group. It derives and sets the operational risk strategy based on the risk profile and the business strategy and also makes decisions regarding measures and risk acceptance.
Capital and net income projection for a threeyear planning period based on a severe macroeconomic downturn scenario 70-90 per cent based on the management decision that the Group might be required to temporarily reduce risks or raise additional capital
Regional allocation of economic capital according to Group booking unit in € thousand 2015 Share 20141 Share 1 Adaptation of previous year figures due to change in the disclosure of regions.
The Group recovery and resolution plan established pursuant to the Bank Intervention and Restructuring Act was examined by taking the regulatory changes and harmonized requirements into account. Considering this changes and as part of the continuing development of the Group-wide recovery plan the governance organization was strengthened in case a critical financial situation should occur, and appropriate processes for monitoring the revised resolution indicators were implemented. The recovery plan is consistently supervised by the ECB by means of the Single Supervisory Mechanism (SSM) which became already effective in November 2014.
The whole limit application process is based on defined uniform principles and rules. Account management for multinational customers doing business simultaneously with more than one RBI Group unit is supported by the Global Account Management System, for example. This is made possible by Group-wide unique customer identification in non-retail asset classes.
The limit application process in the retail division is to a larger extent automated due to the high number of applications and lower exposure amounts. Limit applications often are assessed and approved in central processing centers based on credit score cards. This process is facilitated by the respective IT systems.
The following table translates items of the statement of financial position (bank and trading book positions) into the maximum credit exposure, which is used in portfolio management. It includes exposures on and off the statement of financial position before the application of credit-conversion factors and thus represents the total credit exposure. It is not reduced by the effects of credit risk mitigation such as guarantees and physical collateral, effects that are, however, considered in the total assessment of credit risks. The total credit exposure is used – if not explicitly stated otherwise – for showing exposures in all subsequent tables in the risk report. The reasons for different values used for internal portfolio management and external financial accounting are the different scope of consolidation (regulatory vs. accounting rules according to IFRS, i.e. corporate legal basis), different classifications and presentation of exposure volumes.
1 Items on the statement of financial position containing only credit risk amounts.
A more detailed credit portfolio analysis is based on individual customer ratings. Ratings are performed separately for different asset classes using internal risk classification models (rating and scoring models), which are validated by a central organization unit. Default probabilities assigned to individual rating grades are calculated for each asset class separately. As a consequence the default probability of the same ordinal rating grade (e.g. corporates good credit standing 4, banks A3, and sovereigns A3) is not directly comparable between these asset classes.
Rating models in the main non-retail asset classes – corporates, banks, and sovereigns – are uniform in all Group units and rank creditworthiness in 27 grades for corporate customers and ten grades for banks and sovereigns. For retail asset classes, country specific scorecards are developed based on uniform Group standards. Customer rating, as well as validation is supported by specific software tools (e.g. business valuation tools, rating and default database).
in € thousand 2015 Share 2014 Share 8 Weak credit standing / sub-standard 2,236,641 3.4% 2,693,793 3.6%
The remaining exposure is allocated to Southeastern Europe at € 8,902,131 thousand (2014: € 9,258,938 thousand), Eastern Europe at € 8,380,573 thousand (2014: € 11,304,675 thousand), Non-Core at € 8,230,298 thousand (2014: € 10,060,123 thousand), Group Markets at € 4,528,580 thousand (2014: € 5,540,054 thousand) and Corporate Center at € 1,388,923 thousand (2014: € 1,425,860 thousand). In the segment Eastern Europe, the decrease resulted from facility and credit financing and the devaluation of the Russian rouble.
6.2 Good project risk profile – low risk 2,141,404 28.7% 3,100,039 36.0%
6.3 Acceptable project risk profile – average risk 676,171 9.1% 734,303 8.5%
6.4 Poor project risk profile – high risk 414,076 5.5% 486,767 5.7%
The maximum credit exposure in project finance amounted to € 7,465,684 thousand (2014: € 8,608,620 thousand) at year-end 2015. At 73.3 per cent, projects rated in the two best rating grades, excellent project risk profile – very low risk (rating 6.1) or good project risk profile – low risk (rating 6.2), accounted for the highest share of the portfolio. This reflects mainly the high level of collateralization in specialized lending transactions. The decrease of € 958,635 thousand in rating grade 6.2 mainly resulted from finished project financing in Spain and Russia and rating movements.
Electricity, gas, steam and hot water supply 3,537,102 4.8% 3,236,002 3.9%
Retail customers – small and medium-sized entities 1,099,363 934,313 573,999 739,482 0 hereof individual loan loss provision 541,120 358,846 701,327 232,769 75 hereof portfolio-based loan loss provision 62,314 34,259 65,717 34,892 0 1 Adaptation of previous year figures due to change in segments.
Compared to year-end 2014, the retail credit portfolio decreased € 776,332 thousand to € 27,844,112 thousand. The highest volume of € 9,457,623 thousand (2014: € 9,396,264 thousand) was shown in the segment Central Europe. Compared to year-end 2014, this was an increase of € 61.359 thousand, mainly caused by a rise in loans to private individuals in Slovakia, while Hungary showed a strong decrease due to execution of Settlement Act. The second largest segment was Southeastern Europe at € 7,795,433 thousand (2014: € 7,985,585 thousand). Compared to the previous year, the exposure decreased € 190,152 thousand. This was mainly due to a decrease in Bulgaria. Compared to year-end 2014, the segment Non-Core reported an increase of € 397,346 thousand mainly resulting from increased credit exposure in Poland due to the development of the Swiss franc.
The segment Eastern Europe showed a decrease of € 1,047,608 thousand to € 3,858,367 thousand. This mainly derived from decreased credit exposure in Russia due to the exit of the car loan business and the business in the eastern part of the country, as well as the devaluation of the Russian rouble, Belarus rouble and Ukrainian hryvnia.
Car loans decreased € 311,558 thousand to € 1,251,341 thousand, as no new financing in this area was undertaken in Russia as a result of the strategy review. Also other segments recorded significant declines in this product category due to changes in business strategy.
The banks asset class mainly contains banks and securities firms. The internal rating model for these institutions is based on a peergroup approach that takes both qualitative and quantitative information into account. The final rating for banks is capped by the country rating of the respective home country.
The following table provides a breakdown of maximum credit exposure by country of risk grouped into regions: in € thousand 2015 Share 2014 Share
The following table shows the maximum credit exposure by internal rating for banks. Due to the small number of customers (and number of defaults respectively), default probabilities of individual rating grades in this asset class are estimated based on a combination of internal and external data.
Time deposits, securities lending business, potential future exposures from derivatives, sight deposits, and bonds are the main product categories in this asset class. These exposures therefore have high collateralization grades (e.g. in securities lending business or through netting agreements) depending on the type of product.
The table below shows the maximum credit exposure to banks (excluding central banks) by products: in € thousand 2015 Share 2014 Share
The rating grade excellent credit standing (rating A1) showed an increase of € 4,672,367 thousand. This mainly resulted from the rise in short-term deposits at the Austrian National Bank (up € 4,541,930 thousand), while the portfolio of Austrian and Netherland government bonds decreased (down € € 427.642 thousand). The decrease in rating grade A2 very good credit standing was mainly due to the decline in bonds of the Republic of France and the Central Bank of Singapore.
The medium rating grades good credit standing (rating A3) to mediocre credit standing (rating B3) represented the highest share at 49.6 per cent (2014: 53.3 per cent). The high exposure in the medium rating grades resulted amongst other factors from deposits of network banks in Central and Southeastern Europe and in the segment Non-Core at their local central banks. The deposits at local central banks are mandatory for meeting the respective minimum reserve requirements or used in order to manage excess liquidity on a short-term basis and therefore are intrinsically linked to the banking business in these countries. Furthermore, this high exposure also derived from bonds of central banks and central governments in Central and Southeastern Europe and in the Non-Core segment. The increase in rating grade B1 mainly resulted from an increase in the portfolio of Polish state bonds and bonds of the Polish Central Bank. The decline in rating grade B2 was mainly due to a rating downgrade of Russia from B2 to B3. In contrast, the volume of Romanian state bonds increased. Besides the rating downgrade of Russia the increased minimum reserve requirement in Bulgaria also led to an increase in rating grade B3. However, Slovenia recorded a rating upgrade from B3 to B2 at year-end 2015. The rating grades B4 and B5 accounted for € € 4,899,106 thousand, or 16.8 per cent, of total credit exposure. The credit exposure in rating grade C increased due to a rating downgrade of Ukraine from B5 to C.
Compared to year-end 2014, the credit exposure to sovereigns in non-investment grade increased € 1,384,841 thousand to € 8,191,468 thousand. This increase resulted primarily from a rating downgrade of Russia from B2 to B3 and an increase of the minimum reserve requirement at the Bulgarian National Bank.
Collateral is divided into pledges (e.g. guarantees) and physical collateral. In the Group liens on residential or commercial properties are the main types of collateral used.
Loans and advances to banks and customers net of allocated loan loss provisions (net exposure), the additional exposure off the statement of financial position (contingent liabilities, commitments, and revocable credit lines), and the market prices (fair value) of collateral pledged in favor of the Group are shown in the following table: Collateral types
Retail customers – small and medium-sized entities 2,478,120 495,495 1,843,926 20141 Maximum credit exposure Fair value of collateral in € thousand Net exposure Commitments/guarantees issued
The following table shows the non-performing exposure according to asset classes: Refinancing Instruments with modified time and modified conditions NPE total in € thousand 2015 2014 2015 2014 2015 2014
A default and thus a non-performing loan (NPL) is according to Article 178 CRR defined as the event where a specific debtor becomes unlikely to pay its credit obligations to the bank in full, or the debtor is overdue at least 90 days on any material credit obligation. The Group has defined twelve default indicators which are used to identify a default event in the non-retail segment. These include the insolvency or similar proceedings of a customer, if an impairment provision has been allocated or a direct writeoff has been carried out, if credit risk management has judged a customer account receivable to be not wholly recoverable, or the workout unit is considering stepping in to help a company restore its financial soundness.
Within the Group a Group-wide default database is used for collecting and documenting customer defaults. The database tracks defaults and the reasons for defaults, which enables the calculation and validation of default probabilities.
Provisions for impairment losses are formed on the basis of Group-wide standards according to IFRS accounting principles and cover all identifiable credit risks. In the non-retail segments, problem loan committees from each Group unit decide on allocating individual loan loss provisions. In the retail area, provisioning is determined by retail risk departments in individual Group units. They compute loan loss provisions according to defined calculation methods on a monthly basis. The provisioning amount is then approved by local accounting departments.
The following table shows the share of non-performing loans (NPL) in the defined asset classes loans and advances to customers and loans and advances to banks as reported in the statement of financial position (excluding items off the statement of financial position): NPL NPL ratio NPL coverage ratio in € thousand 2015 2014 restated 2015 2014 restated 2015 2014 restated
The following table shows the share of non-performing loans in the defined asset classes loans and advances to customers and loans and advances to banks as reported in the statement of financial position (excluding items off the statement of financial position) according to segments: NPL NPL ratio NPL coverage ratio in € thousand 2015 2014 restated 2015 2014 restated 2015 2014 restated
The following table shows the development of impairment losses on loans and provisions for liabilities off the statement of financial position and the corresponding items from the statement of financial position: in € thousand
The following table shows the breakdown of loan loss provisions according to segments: restated
Active country risk management in the Group is based on the country risk policy which is set by the Management Board. This policy is part of the credit portfolio limit system and sets a strict limitation on cross-border risk exposure to individual countries in order to avoid risk concentrations. Consequently, in day-to-day work, business units have to submit limit applications for the respective countries for all cross-border transactions in addition to complying with customer limits. The limit size for individual countries is set by using a model which takes into account the internal rating for the sovereign, the size of the country, and the Group’s own capitalization.
Wholesale trade and commission trade (except car trading) 12,728,512 8.6% 14,662,082 9.4%
Public administration and defence and social insurance institutions 11,773,630 7.9% 12,719,616 8.2%
Retail trade except repair of motor vehicles 3,606,759 2.4% 3,839,075 2.5%
Electricity, gas, steam and hot water supply 3,542,725 2.4% 3,158,525 2.0%
Extraction of crude petroleum and natural gas 686,746 0.5% 1,252,770 0.8%
The Group’s strategy for the structured credit portfolio is to progressively reduce these investments. This will be achieved either through repayment at maturity or through asset sales depending on the market situation. The size of the structured credit portfolio is shown under (35) Securitization. Around 67 per cent of this portfolio (2014: 72 per cent) is rated A or better by external rating agencies. The pools mainly contain exposures to European customers.
The Market Risk Management department ensures that the business volume and product range comply with the defined strategy of the Group. It is responsible for implementing and enhancing risk management processes, risk management infrastructure and systems, manuals and measurement techniques for all market risk categories and credit risks arising from market price changes in derivative transactions. Furthermore this department independently measures and reports market risks on a daily basis.
All products in which open positions can be held are listed in the product catalog. New products are added to this list only after completing the product approval process successfully. Product applications are investigated thoroughly for any risks. They are approved only if the new products can be implemented in the bank’s front- and back-office and risk management systems respectively.
Sensitivity limits are to ensure that concentrations are avoided in normal market situations and are the main steering instrument under extreme market situations and in illiquid markets or in markets that are structurally difficult to measure.
Total 33,075 46,343 22,940 127,880 134,630 1 Total currency risk inkl. equity positions of subsidiaries held in foreign currency was shown in banking book in 2015 and in trading book 2014. 2 As at 31 December 2015, the credit spread modeling was converted to an improved methodology considering negative interest.
The risk measurement approaches employed are verified – besides analyzing returns qualitatively – on an ongoing basis through backtesting and statistical validation techniques. If model weaknesses are identified, then they are improved accordingly. The following chart compares VaR and theoretical profits and losses on a daily basis. VaR denotes the maximum loss that will not be exceeded with a 99 per cent confidence level on the next day. It is compared to the theoretical profits and losses, which shows the hypothetical returns that the bank would have realized due to the actual changes in market parameters on the next day.
The Group holds several material equity participations located outside of the euro area with equity denominated in the corresponding local currency. Also, a significant share of risk-weighted assets in the Group is denominated in foreign currencies. Changes in foreign exchange rates thus lead to changes in the consolidated capital in the Group and to changes in the total capital requirement for credit risks as well.
 Stable capital ratio: The goal of this hedging strategy is to balance tier 1 capital and risk-weighted assets in all currencies according to the targeted tier 1 ratio (i.e. reduce excess capital or deficits in relation to risk-weighted assets for each currency) such that the tier 1 ratio remains stable even if foreign exchange rates change.
The presentation of currencies changed year-on-year depending on the absolute amount of interest rate sensitivity:
Interest rate risk in the banking book is not only measured within a value-at-risk framework but also managed by the traditional tools of nominal and interest rate gap analyses. Since 2002, interest rate risk is subject to quarterly reporting in the context of the interest rate risk statistic submitted to the banking supervisor. This report also shows the change in the present value of the banking book as a percentage of total capital in line with the CRR requirements. Maturity assumptions needed in this analysis are defined as specified by regulatory authorities and based on internal statistics and empirical values.
The following table shows the change in the present value of the Group’s banking book given a one-basis-point interest rate increase for the whole yield curve in € thousand for reporting dates 31 December 2015 and 31 December 2014. Currencies where the total interest rate sensitivity exceeds € 1 thousand are shown separately.
The market risk management framework uses time-dependent bond and CDS-spread curves as risk factors in order to measure credit spread risks. It captures all capital market instruments in the trading and banking book.
An important role of banks is maturity transformation in the international financial markets. The need for maturity transformation arises from the needs of depositors to access their funds at short notice and the opposing need of borrowers for long-term loans. This function constantly results in positive or negative liquidity gaps for different maturities that are managed through transactions with other market participants under normal market conditions.
RBI meets all regulatory requirements related to liquidity risk management. They are monitored on Group and on individual unit level and limited by a comprehensive limit system. The calculation of expected inflows and outflows of funds is based on a centrally steered and consistent model approach.
For managing and limiting liquidity risks, the targets for loan/deposit ratios (the ratio of customer loans to customer deposits) in the individual network banks take into account the planned future business volumes as well as the feasibility of increasing customer deposits in different countries. On the one hand, this initiative reduces external funding requirements. On the other hand, it also reduces the need for internal funding operations and the risk associated with such liquidity transfers.
Derivatives in the trading book 3,943,192 8,706,683 3,020,170 1,805,114 2,321,286 1,560,113
Letters of credit (documentary business) 1,396,379 862,100 449,256 307,236 105,608 0
Operational risk is defined as the risk of unexpected losses resulting from inadequate or failed internal processes, people and systems or from external events, including legal risk. In this risk category internal risk drivers such as unauthorized activities, fraud or theft, execution and process errors, or business disruption and system failures are managed. External factors such as damage to physical assets or consciously conducted human fraud are managed and controlled as well.
This risk category is analyzed and managed on the basis of own historical loss data and the results of self-assessments. Another management tool is the incentive system implemented in internal capital allocation. This system rewards high data quality and active risk management. Generally speaking, the Group implements a centralized and also decentralized system for operational risk management. In this process, a central operational risk management function defines all basic principles and minimum requirements, which then are implemented on a risk-type specific basis in the individual local units.
(43) Fiduciary business Fiduciary business not recognized in the statement of financial position was concluded with the following volumes on the reporting date: Loans and advances to banks 11,168 7,939
Fiduciary income and expenses break down as follows: The following table contains the funds managed by the Group: Retail investment funds 4,860,389 4,614,064
As at 31 December 2015, write-offs on unrecoverable minimum lease payments totaled € 65,618 thousand (2014: € 67,122 thousand).
The main focus of the control is on the regulatory (minimum) capital ratios and the economic capital within the framework of ICAAP (Internal Capital Adequacy Assessment Process, a quantitative method used to assess the adequacy of internal capital). Moreover, the optimal mixture of capital instruments (e.g. additional tier 1 capital and tier 2 capital) plays an important role and is continuously analyzed and optimized.
The determination of the target values in relation to the compulsory minimum requirements necessitates additional internal control calculations. The department Risk Controlling calculates the value-at-risk in relation to the above defined risk taking capacity. Moreover, a comparison between economic capital and internal capital is drawn. Further details regarding this calculation are contained in the risk report.
Moreover, based on the SSM (Single Supervisory Mechanism) regulation, the European Central Bank (ECB) took over supervision of large banks in the euro area in November 2014, whose total assets exceed € 30 billion or 20 per cent of a country’s economic output. Both RBI and RZB are defined as large banks. Based on an annually undertaken Supervisory Review and Evaluation Process (SREP), the ECB instructs RBI and also RZB by way of an official notification to hold additional common equity tier 1 capital to cover risks which are not or not adequately considered under pillar I. A draft proposal from the Basel Committee to more tightly define the basis for the calculation of risk-weighted assets is currently in preparation.
The so-called SREP minimum capital ratio contains a capital conservation buffer as well as the minimum requirements of the CRR and the SREP add-on. A breach of the capital conservation buffer would induce constraints, for example in relation to dividend distributions and coupon payments on certain capital instruments. The SREP minimum capital ratios applicable in the course of the year and including an adequate buffer were met on subgroup level.
Additionally, national supervisors can determine national systemic risk buffers (up to 5 per cent) as well as additional capital addons for systemic banks (up to 3.5 per cent). In the event that systemic risk buffers as well as add-ons for systemic banks are determined for a banking institution, only the higher of the two values is applicable. In September 2015, the responsible financial market stability committee of the FMA recommended the requirement of systemic risk buffers for twelve large banks located in Austria, including RBI and RZB. This came into force as of the beginning of 2016 through the FMA. The systemic risk buffer was set at 0.25 per cent for RBI and RZB as of 1 January 2016 and progressively increases to 2 per cent by 2019.
The determination of eligible total capital – including 2015 profit – in accordance with the applicable regulations is based on international accounting standards. Further details can be found in the regulatory disclosure report pursuant to Article 431 ff CRR.
Credit risk-weighted assets by asset class break down as follows: Risk-weighted assets according to standardized approach 21,884,143 23,321,745
Key management refers to the members of the Management Board and the Supervisory Board of RBI AG and Raiffeisen Zentralbank Österreich Aktiengesellschaft, the major shareholder. Relations of key management to RBI are as follows (respective fair values): The following table shows relations of close family members of key management to RBI: There is no compensation agreed between the company and its members of the Management Board and Supervisory Board or employees in the case of a takeover bid.
The following table shows total remuneration of the members of the Management Board according to IAS 24.17. The expenses according to IAS 24 were recognized on an accrual basis and according to the rules of the underlying standards (IAS 19 and IFRS 2): Short-term employee benefits 7,223 7,221
Post-employment beneifts comprise payments to pension funds, business insurances and payments according to Retirement Plan Act (Mitarbeitervorsorgegesetz) as well as net allocations to provisions for retirement benefits and severance payments.
Other long-term benefits contains portions of the provision for bonus payments regarding deferred bonus portions in cash and retained portion payable in instruments. For the latter, valuation changes due to currency fluctuations are taken into account.
Bonus calculation is linked to the achievement of the Group objectives regarding profit after tax, return on risk adjusted capital (RORAC), cost/income ratio and to the achievement of personal objectives that are agreed upon annually. Payment is done according to the current regulations of the Austrian Banking Act (BWG), executed in the internal regulations (see employee compensation plans under the section recognition and measurement principles).
Martin Schaller 3rd Deputy Chairman 3rd Deputy Chairman 3rd Deputy Chairman 3rd Deputy Chairman 3rd Deputy Chairman 3rd Deputy Chairman
Fully consolidated Equity method Number of units 07.7.1905 06.7.1905 07.7.1905 06.7.1905
RBI PE Handels- und Beteiligungs GmbH, Vienna (AT) 100.0% 1/1 Materiality
Sky Tower Immobilien- und Verwaltung Kft., Budapest (HU) 100.0% 1/5 Materiality
Raiffeisen Investment Romania LLC – in liquidation, Bucharest (RO) 100.0% 1/1 Immaterial
SCTAI Angol Iskola Ingatlanfejlesztő és Ingatlanhasznosító Kft., Budapest (HU) 90.3% 1/2 Immaterial
Raiffeisen Investment Financial Advisory Services Ltd. Co., Istanbul (TR) 99.0% 1/7 Immaterial
Income from disposal of Group assets in € thousand RNPF Others Total
Consolidated subsidiaries where RBI holds less than 50 per cent of the ordinary voting shares
Because of their minor importance in giving a view of the Group’s assets, financial and earnings position 224 subsidiaries were not included in the consolidated financial statements (2011: 222). They are recognized at cost under financial investments and are assigned to measurement category available-for-sale. Total assets of the companies not included came to less than 1 per cent of the Group’s aggregated total assets.
Expo 2000 Real Estate EOOD, Sofia (BG) 10,000 BGN 100.0% OT
Limited Liability Company Raiffeisen Leasing Aval, Kyiv (UA) 180,208,527 UAH 72.3% FI
Raiffeisen CEE Region Holding GmbH, Vienna (AT) 35,000 EUR 100.0% FH
Raiffeisen CIS Region Holding GmbH, Vienna (AT) 35,000 EUR 100.0% FH
Raiffeisen Property Holding International GmbH, Vienna (AT) 35,000 EUR 100.0% FI
RSC Raiffeisen Service Center GmbH, Vienna (AT) 2,000,000 EUR 50.0% BR
S.C. PLUSFINANCE ESTATE 1 S.R.L., Bucharest (RO) 13,743,340 RON 100.0% BR
Tatra Asset Management, správ. spol., a.s., Bratislava (SK) 1,659,700 EUR 89.1% FI
Tatra Residence, s. r. o., Bratislava (SK) 23,143,519 EUR 89.1% BR
Assets 2015 in € thousand Loans and advances Equities Debt instruments Derivatives 2014 in € thousand Loans and advances Equities Debt instruments Derivatives
A structured entity often has some or all of the following features or attributes:  Restricted activities;  A narrow and well defined objective;  Insufficient equity to permit the structured entity to finance its activities without subordinated financial support;  Financing in the form of multiple contractually linked instruments to investors that create concentrations of credit or other risks (tranches).
The Group provides funding to structured entities that hold a variety of assets. These entities may take the form of funding entities, trusts and private investment companies. The funding is collateralized by the asset in the structured entities. The group’s investment activity involves predominantly lending.
The Group establishes structured entities to accommodate client requirements to hold investments in specific assets. The Group also invests in funds that are sponsored by third parties. A group entity may act as fund manager, custodian or some other capacity and provide funding and liquidity facilities to both group sponsored and third party funds. The funding provided is collateralized by the underlying assets held by the fund.
Athena Property, s.r.o. v likvidaci, Prague (CZ) 200,000 CZK 100.0% OT
Centrotrade Chemicals AG – in liquidation, Zug (CH) 5,000,000 CHF 100.0% OT
CP Logistikcenter Errichtungs- und Verwaltungs GmbH, Vienna (AT) 37,000 EUR 99.0% OT
CP Projekte Muthgasse Entwicklungs GmbH, Vienna (AT) 40,000 EUR 100.0% OT
FARIO Handels- und Beteiligungsgesellschaft m.b.H., Vienna (AT) 40,000 EUR 100.0% OT
Humanitarian Fund ''Budimir Bosko Kostic'', Belgrade (RS) 30,000 RSD 100.0% OT
Kathrein & Co. Vermögensverwaltung GmbH, Vienna (AT) 125,000 EUR 100.0% FI
KIWANDA Handels- und Beteiligungs GmbH, Vienna (AT) 35,000 EUR 100.0% OT
NAURU Handels- und Beteiligungs GmbH, Vienna (AT) 35,000 EUR 100.0% OT
R MORMO IMMOBILIEN LINIE S.R.L., Bucharest (RO) 50,000 RON 1.0% OT
RAIFFEISEN INVEST AD DRUSTVO ZA UPRAVLJANJE INVESTICIONIM FONDOVIMA BEOGRAD, Belgrade (RS) 47,662,692 RSD 100.0% FI
Raiffeisen Invest Drustvo za upravljanje fondovima d.o.o Sarajevo, Sarajevo (BA) 945,424 BAM 100.0% BR
Raiffeisen Solutions Spółka z ograniczoną odpowiedzialnością, Warsaw (PL) 550,000 PLN 100.0% FI
Raiffeisen Towarzystwo Funduszy Inwestycyjnych S.A., Warsaw (PL) 2,000,000 PLN 100.0% OT
RB Szolgáltató Központ Kft. – RBSC Kft., Nyíregyháza (HU) 3,000,000 HUF 100.0% BR
REAL ESTATE RENT 2 DOO, Belgrade (RS) 40,386 RSD 100.0% FI
Robert Károly Körút Irodaház Kft., Budapest (HU) 3,000,000 HUF 100.0% OT
S.A.I. Raiffeisen Asset Management S.A., Bucharest (RO) 10,656,000 RON 100.0% FI
VERMREAL Liegenschaftserwerbs- und -betriebs GmbH, Vienna (AT) 36,336 EUR 17.0% OT
VINAGRIUM Borászati és Kereskedelmi Kft., Eger (HU) 500,000 HUF 100.0% OT
A-Trust Gesellschaft für Sicherheitssysteme im elektronischen Datenverkehr GmbH, Vienna (AT) 5,290,013 EUR 13.6% OT
Bank of Slovenia, Bank Resolution Fund, Ljubljana (SI) 191,070,937 EUR 5.0% OT
FMK Fachmarktcenter Kohlbruck Betriebs GmbH, Eschborn (DE) 30,678 EUR 5.63119 FI
Open Joint Stock Company Kyiv Special Project and Design Bureau Menas, Kyiv (UA) 3,383,218 UAH 4.7% OT
Perun Capital GmbH in Liqu., Vienna (AT) 35,000 EUR 100.0% OT
Public Joint Stock Company Settlement Center for Servicing of Contracts in Financial Markets, Kyiv (UA) 153,100,000 UAH 0.0% FI
Raiffeisen Banca pentru Locuinte S.A., Bucharest (RO) 131,074,560 RON 33.3% BA
RC Gazdasági és Adótanácsadó Zrt., Budapest (HU) 20,000,000 HUF 22.2% FI
RL Hotel Palace Wien Besitz GmbH, Vienna (AT) 36,336 EUR 1.0% FI
1 Company type: BA Bank, BR Company rendering banking-related ancillary services, FH Financal holding, FI Financial institution, OT Other companies, SC Securities firms.
ZHS Office- & Facilitymanagement GmbH, Vienna (AT) 36,336 EUR 1.0% BR
The measurement categories for financial instruments pursuant to IAS 39 do not equate to the principal line items in the statement of financial position. Relationships between the principal line items in the statement of financial position and the measurement standard applied are described in the table "Categories of financial instruments according to IFRS7" and in the notes under (1) Income statement according to measurement categories and (13) Statement of financial position according to measurement categories.
On initial recognition, the Group categorizes certain financial assets and liabilities as held-for-trading or measured at fair value. These financial assets and liabilities are recognized at fair value and shown as financial assets and liabilities at fair value.
This category comprises mainly all those financial assets that are irrevocably designated as financial instruments at fair value (socalled fair value option) upon initial recognition in the statement of financial position independent of any intention to trade. An entity may use this designation only when doing so results in more relevant information for the user of the financial statements. This is the case for those financial assets, which belong to a portfolio, which is managed and its performance evaluated on a fair value basis.
For unquoted equity instruments, for which reliable fair values cannot be assessed regularly and are therefore valued at cost of acquisition less impairment losses, it is not permitted to show an appreciation in value. This kind of financial instrument is reported under the item "financial investments".
A financial asset is derecognized when the contractual rights to the cash flows arising from a financial asset have expired, when the Group has transferred the rights to the cash flows, or if the Group has the obligation, in case that certain criteria occur, to transfer the cash flows to one or more receivers. A transferred asset is also derecognized if all material risks and rewards of ownership of the assets are transferred.
Derivative instruments held to hedge the fair values of individual items in the statement of financial position (except trading assets /liabilities) are recognized at their fair values (dirty prices) under the item "derivatives" (for assets: positive dirty prices; for liabilities: negative dirty prices). Changes in the carrying amounts of hedged items (assets or liabilities) are allocated directly to the corresponding items of the statement of financial position and reported separately in the notes.
Both the effect of changes in the carrying values of positions requiring hedging and the effects of changes in the clean prices of the derivative instruments are recorded under “net income from derivatives and liabilities” (net income from hedge accounting).
Within the management of interest rate risks, the hedging of interest rate risk is also undertaken on the portfolio level. Individual transactions or groups of transactions with similar risk structures, divided into maturities according to the expected repayment and interest rate adjustment date in a portfolio, are hedged. Portfolios can contain assets only, liabilities only, or both. For hedge accounting, the change in the value of the hedged asset or liability is shown as a separate item in other assets/liabilities. The hedged amount of the hedged items is determined in the consolidated financial statements including sight deposits (the rules of the EU carve-out are therefore applied).
Measurement Category according Assets/liabilities Fair Value Amortized Cost Others to IAS 391
of which not traded on an active market At Cost AfS
Negative fair values of derivatives for hedge accounting (IAS 39) X n/a 1 AfS Available-for-sale HTM Held to maturity AFVTPL At fair value through profit and loss LAR Loans and advances FL Financial liabilities TA Trading assets TL Trading liabilities
Credit risk is accounted for by forming individual loan loss provisions and portfolio-based loan loss provisions. The latter comprise impairment provisions for portfolios of loans with the same risk profiles that are formed under certain conditions for IBNR losses (incurred but not reported). This involves cases where there is not yet any objective evidence of an individual impairment of a financial asset and for this reason groups of financial assets with a similar default risk profile are collectively examined for impairment. The underlying rating models for corporate customers are distinguished between “corporate large” and “corporate regular” as well as “SME large” and “SME regular”. Moreover, portfolios for which the “financial institutions” or “project finance” rating models are applied are separately evaluated. A Group-wide uniform approach is in place for calculation of portfolio-based provisions in that centrally calculated historical Group default rates for each rating class are evaluated and applied. In the retail segment, with the exception of two Group units, provisions are formed according to product portfolio and past due days and partly taking historical default rates into account; in the Group units in Poland and the Czech Republic, a PD/LGD-based calculation (probability of default/loss given default) is used. Individual and portfolio-based impairment provisions are not netted against corresponding receivables but are stated separately in the statement of financial position.
 if the Group has the ability to determine the relevant activity through its rights,
 if the Group is exposed to risks of or has rights to variable returns,
If voting rights are relevant, the Group has control over an entity in which it directly or indirectly holds more than 50 per cent of the voting rights; except when there are indicators that another investee has the ability to determine unilaterally the relevant activities of the entity. One or more of the following points may be such an indicator:  Another investor has control over more than half of the voting rights due to an agreement with the Group,
When judging control, also potential voting rights are considered as far as they are material.
An associated company is an entity over which the Group has significant influence. Significant influence is the power to participate in the financial and operating policy decisions of an entity in which shares are held. No control or joint management of decision making processes exists. As a rule, significant influence is assumed if the Group holds 20 to 50 per cent of the voting rights. When judging whether the Group has the ability to exert a significant influence on another entity, the existence and the effect of potential voting rights which are actually usable or convertible are taken into account. Further parameters for judging significant influence are, for example, the representation in executive committees and supervisory boards (Supervisory Board in Austrian Joint Stock companies) of the entity and material business transactions with the entity. Shares in associated companies are valued at equity and shown in the statement of financial position under the item “investments in associates”.
At each reporting date, the Group reviews to what extent there is objective evidence for impairment of an equity participation in an associated company. If there is objective evidence of impairment, an impairment test is carried out, in which the recoverable value of the participation – this is higher of the usable value and the fair value less selling costs – is compared to the carrying amount. An impairment made in previous periods is reversed only if the assumptions underlying the determination of the recoverable value have been changed since recognition of the last impairment. In this case the carrying amount is written up to the higher recoverable value.
An internally developed intangible fixed asset resulting from development activities or from the development stage of an internal project is capitalized when the following evidence is provided:  The final completion of the intangible fixed asset is technically feasible so that it will be available for use or sale.
 It is intended to finally complete the intangible fixed asset and to use or to sell it.
Capitalized development costs are generally amortized in the Group in a straight line over a useful life of five years. The normal useful life of software is between four and six years. The normal useful life for large software projects may extend over a longer period.
Group companies use brands to differentiate their services from the competition. According to IFRS 3, brands of acquired companies are recognized separately under the item "intangible fixed assets." Brands have an indeterminable useful life and are therefore not subject to scheduled amortization. Brands have to be tested annually for impairment and additionally whenever indications of impairment arise. Details on impairment testing can be found in the notes under (22) Intangible fixed assets.
 The legally required CET 1 ratio of RZB/ RBI is achieved, the capital and buffer requirements of the CRR and CRD IV for RZB/ RBI are complied with in full and additionally neither the allocation, payment or transfer of the variable remuneration is detrimental to the maintenance of a sound capital base for RZB/RBI.
The Management Board, with approval of the Supervisory Board, of RBI AG has approved a share incentive program (SIP) for the years 2011, 2012 and 2013 which provides performance based allotments of shares to eligible employees domestically and abroad for a given period. Eligible employees are current board members and selected executives of RBI AG, as well as executives of its affiliated bank subsidiaries and other affiliated companies. In 2014, it was decided not to continue the program due to the complexity of the regulatory rules regarding variable compensation.
Interest and interest-like income mainly includes interest income on loans and advances to banks and customers and from fixedinterest securities. In addition, current income from shares and other variable-yield securities (especially dividends), income from equity participations and from investments accounted for at equity, and interest-like income are also reported under net interest income. Dividend income is recognized if the entitlement of the owner for payment exists. Interest expenses and interest-like expenses mainly include interest paid on deposits from banks and customers and on debt securities issued and subordinated capital. Interest income and interest expenses are accrued in the reporting period. Negative interest from asset items is shown in interest income; negative interest from liability items is shown in interest expenses.
Liabilities arising from insurance contracts change depending on changes in interest rates, income from investments and expenses for pension agreements for which future mortality rates cannot be reliably predicted. IFRS 4 must be applied to the reporting of liabilities resulting from the existence of mortality rate risks and discretionary participation features. All assets associated with pension products are reported in accordance with IAS 39. Liabilities are recorded under other liabilities. Please refer to the notes under (30) Other liabilities for more information on insurance contracts.
Annual Improvements to IFRS – 2011–2013 cycle (entry into force January 1, 2015)
The Annual Improvements to IFRS – 2011–2013 cycle include numerous amendments to various IFRS. The amendments are effective for annual periods beginning on or after January 1, 2014. These amendments have no material impact on the consolidated financial statements of RBI.
Amendments to IAS 1 (Presentation of financial statements; entry into force January 1, 2016)
These amendments provide guidelines for methods of depreciation on tangible and intangible fixed assets to be used; especially related to revenue-based methods of depreciation.
realization of tax losses, a company must assess a deferred tax asset in combination with other deferred tax assets of the same (admissible) type.
For subsequent measurement of financial assets measured at amortized cost, IFRS 9 provides for three stages which determine the future amount of losses to be recognized and the recognition of interest. The first stage requires that at the time of initial recognition, expected losses must be shown in the amount of the present value of an expected twelve-month loss. If there is a significant increase in the default risk, the risk provision must be increased up to the amount of the expected full lifetime loss (stage 2). When there is an objective indication of an impairment, the interest in step 3 must be recognized on the basis of the net carrying amount.
IFRS 14 (Regulatory deferral accounts; entry into force January 1, 2016)
Only entities applying IFRS for the first time and who recognize regulatory deferrals according to their previous accounting standards are allowed to continue with regulatory deferrals after transition to IFRS. The standard is intended to be a short-term interim solution till the IASB concludes the long-term project relating to price-regulated business transactions.
The standard regulates when revenue is recognized and how much revenue is recognized. IFRS 15 replaces IAS 18 (Revenue), IAS 11 (Construction contracts) and a series of revenue-related interpretations. The application of IFRS 15 is obligatory for all IFRS users and is applicable to almost all contracts with customers – the material exemptions are leasing contracts, financial instruments and insurance contracts.
For lessees, the new standard establishes an accounting model which does not distinguish between financial leasing and operating leasing. In future, most lease agreements will have to be recognized in the statement of financial position. For lessors, the rules under IAS 17 (Leases) remain largely valid, meaning that in future it will still also be necessary to distinguish between financial and operating leasing with corresponding different accounting consequences.
Report on the Consolidated Financial Statements We have audited the accompanying consolidated financial statements of
Raiffeisen Bank International AG, Vienna, Austria, for the fiscal year from 1 January 2015 to 31 December 2015. These consolidated financial statements comprise the consolidated statement of financial position as of 31 December 2015, the consolidated statement of comprehensive income, the consolidated statement of cash flows and the consolidated statement of changes in equity for the fiscal year 2015 and a summary of significant accounting policies and other explanatory notes.
The Company’s management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with International Financial Reporting Standards (IFRSs) as adopted by the EU, and the additional requirements pursuant to § 245a UGB (Austrian Commercial Code) and 59a BWG (Austrian Banking Act) respectively, and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.
Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted our audit in accordance with Austrian Standards on Auditing. Those standards require that we comply with International Standards on Auditing – ISA. In accordance with International Standards on Auditing, we are required to comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement.
In our opinion, the management report is consistent with the consolidated financial statements. The disclosures pursuant to Section 243a UGB (Austrian Commercial Code) are appropriate.
Chief Executive Officer responsible for Compliance1, Group Communications, Group Strategy, Human Resources, Internal Audit, International Banking Units, Legal Services, Management Secretariat and Marketing & Event Management
Member of the Management Board responsible for Active Credit Management, Investor Relations, Planning & Finance,
Member of the Management Board responsible for Bereiche Group & Austrian IT, Lean, Operations,
Glossary Back testing – Comparison of historical calculated VaR figures with actual results to test the quality of a model.
[Consolidated ROE] Consolidated Return on Equity – consolidated profit in relation to average consolidated equity, i.e. the equity attributable to the shareholders of RBI. Average equity is based on month-end figures excluding non-controlling interests and does not include current year profit.
Credit exposure – Comprises all exposures on the statement of financial position (loans, debt securities) and all exposures off the statement of financial position (guarantees, commitments) that expose RBI to credit risk.
EE – Eastern Europe. RBI’s Eastern Europe segment encompasses Belarus, Kazakhstan, Russia and Ukraine.
General administrative expenses – Comprises staff expenses, other administrative expenses, and depreciation/amortization of intangible and tangible fixed assets.
IRB – Internal Ratings-Based. Approach to measure the total capital requirement for credit risks in accordance with Basel III. By applying the IRB approach, the total capital requirement is determined according to internal credit ratings. In the process, features specific to the borrower and the loan are taken into account. The ratings must be assigned by an independent area.
NPL – Non-performing loans. A loan is classified as non-performing when it is expected that a specific debtor is unlikely to pay its credit obligations to the bank in full, or the debtor is overdue by 90 days or more on any material credit obligation to the bank (RBI has defined 12 default indicators).
NPL ratio – Non-performing loans in relation to total loans and advances to customers.
Operating income – Comprises net interest income, net fee and commission income, net trading income and recurring other net operating income (less bank levies, impairments of goodwill, releases of negative goodwill and any non-recurring effects reported under sundry operating expenses).
Operating result – Consists of operating income less general administrative expenses.
Other results – Consist of net income from derivatives and liabilities, net income from financial investments, expenses for bank levies, impairment of goodwill, releases of negative goodwill, net income from disposal of Group assets and any non-recurring effects reported under sundry operating expenses.
Premium banking – Support for affluent customers that includes additional and above all more individually tailored products in comparison to the customary support for retail customers.
Provisioning ratio – Net provisioning for impairment losses in relation to average loans and advances to customers.
Quarter-on-quarter – Compared to the quarter which precedes the quarter under consideration; for example, the fourth quarter of 2015 in comparison to the third quarter of 2015.
ROTE – Return on tangible equity is consolidated profit less depreciation of intangible assets and less impairment of goodwill in relation to average consolidated equity less intangible assets. Average equity is calculated using month-end figures for the period.
SEE – Southeastern Europe. RBI’s Southeastern Europe segment comprises Albania, Bosnia and Herzegovina, Bulgaria, Croatia, Kosovo, Romania (incl. Moldova), and Serbia.
Year-on-year – Compared to the point in time, or the period, which occurred one year before the point in time or period under consideration; for example, the first half year of 2015 in comparison to the first half year of 2014, or 30 June 2015 in comparison to 30 June 2014.
Austria Am Stadtpark 9 1030 Vienna Phone: +43-1-71 707-0 Fax: +43-1-71 707-1715 www.rbinternational.com ir@rbinternational.com communications@rbinternational.com
Albania Raiffeisen Bank Sh.A. “European Trade Center” Bulevardi “Bajram Curri” Tirana
Croatia Raiffeisenbank Austria d.d. Petrinjska 59 10000 Zagreb Phone: +385-1-45 664 66 Fax: +385-1-48 116 24 SWIFT/BIC: RZBHHR2X www.rba.hr
Bosnia and Herzegovina Raiffeisen Leasing d.o.o. Sarajevo Zmaja od Bosne bb.
Hungary Raiffeisen Lízing Zrt. Vérmezö út. 4 1012 Budapest Phone: +36-1-477 8709 Fax: +36-1-477 8702 www.raiffeisenlizing.hu
Poland Raiffeisen-Leasing Polska S.A. Ul. Prosta 51 00-838 Warsaw Phone: +48-22-32 636-00 Fax: +48-22-32 636-01 www.rl.com.pl
Slovakia Tatra-Leasing s.r.o. Černyševského 50 85101 Bratislava Phone: +421-2-59 19-3053 Fax: +421-2-59 19-3048 www.tatraleasing.sk
India RBI Representative Office Mumbai 501, Kamla Hub, Gulmohar Road, Juhu Mumbai – 400049
Vietnam RBI Representative Office Ho-Chi-Minh-City 35 Nguyen Hue Str., Harbour View Tower Room 601A, 6th Floor, Dist 1 Ho-Chi-Minh-City
For Group Investor Relations inquiries Phone: +43-1-71 707-2089 E-mail: ir@rbinternational.com Internet: www.rbinternational.com → Investor Relations