SUrvEy of kEy dAtA raiffeisen International Group Monetary values in € mn 2007 Change 20061 2005 2004 2003
Loans and advances to banks 11,053 34.8% 8,202 5,794 4,779 3,521
Loans and advances to customers 48,880 39.5% 35,043 24,714 16,242 11,707
Equity (including minorities and profit) 6,622 44.3% 4,590 3,277 2,177 1,379 key ratios
Return on equity after tax 20.2% (0.8) PP 21.0% 17.6% 17.6% 19.8%
Return on assets before tax 1.98% 0.08 PP 1.90% 1.68% 1.40% 1.61%
raiffeisen International Group Monetary values in € mn 2007 Change 20061 2005 2004 2003
Risk-weighted assets (including market risk) 53,964 31.5% 41,052 29,914 19,638 12,802
Core capital ratio (Tier 1), banking book 11.4% 1.6 PP 9.8% 9.0% 11.8% 10.0%
Market capitalization on 31 December in € mn 16,024 (2.8)% 16,492 7,931
Proposed dividend per share in € 0.93 0.22 0.71 0.45 0.16 0.33 resources
Number of employees on balance sheet date 58,365 10.7% 52,732 43,614 22,851 18,386 1 Excluding one-off effects from the sale of Raiffeisenbank Ukraine and a minority stake in Bank TuranAlem. 2 Calculated according to the Austrian Banking Act (Bankwesengesetz, BWG). As part of the RZB Group, Raiffeisen International is not subject to the provisions of the BWG. 3 25 April (IPO) to 31 December 2005
Preface by the Chairman of the Managing Board .................................................. 40 Managing Board of Raiffeisen International ............................................................ 44 Preface and report of the Supervisory Board ........................................................... 46 Overview of Raiffeisen International ........................................................................ 50 Interview with the Chairman of the Managing Board ............................................ 54 Stock & investor relations .............................................................................................. 58 Corporate governance report ...................................................................................... 65
Auditor’s report and certificate ............................................................................ 280 List of fully consolidated companies .................................................................... 284
We bank on solid management in partnership with the local people.
To be successful long term in the markets of the future, it is necessary to speak the language of the local people. And this is why our business has 15 mother tongues. They are the key to success in strongly growing markets.
I.: Take the line 175, it will take you right to the centre.
Forma porównawcza: drogi – droższy, tani – tańszy, szybki – szybszy, piękny – piękniejszy; ale: dobry – lepszy!
I.: Would you prefer to take the bus or a taxi?
K.: In times of a limited travel budget I prefer to travel by bus. Where is the stop?
I.: To całkiem proste. Miejsce dla taksówek i autobusów jest oznaczone. Z tyłu za sobą zobaczy Pan znaki.
Mr Kacper lands at Warsaw Airport for the first time. He asks at the information desk for a transfer to Sobieski Hotel in the city centre: Lesson
Vocabulary: Grammar: The possessive pronoun: my coat, your coat, his coat, her coat, our coat, your coat, their coat.
Přivlastňovací zájmeno: můj plášť, tvůj plášť, jeho plášť, její plášť, náš plášť, váš plášť, jejich plášť.
Mr H.: The opposite for me, please: I will have Bramboracka, but no Pardubitz gingerbread.
Pan H: Pro mne přesně totéž, ale obráceně: Dám si bramboračku, zato si ale nedám pardubický perník.
The Hovorkas are spending a long weekend in Prague on business. They have booked a table in the famous Mucha restaurant in the old town. The Chef de Rang shows them to their table.
Ch.: Please take a seat. My colleague will be right round with the menu.
Vrchní číšník: Posaďte se prosím. Můj kolega vám hned přinese jídelní lístek.
package – paušál offer – ponuka to pay – (za)platiť hotel – hotel excursion – výlet weekend – víkend directions – príjazd description – opis double room – dvojlôžková izba travel agency – cestovná kancelária
Priama a nepriama reč: Pani Z. hovorí: „Mne sa ten hotel veľmi páči.“ Pani Z. hovorí, že sa jej ten hotel veľmi páči. / Pán Z. povedal: „Pôjdeme autom.“ Pán Z. povedal, že pôjdu autom.
A.: You stay from Thursday to Sunday, but only pay for two nights.
Ms Z.: Please book a double room for the next weekend.
CK: Zostanete od štvrtku do nedele, ale zaplatíte len za dve noci!
CK: Máte šťastie, už je voľná len jedna izba. Tu je vaše potvrdenie o rezervácii. Pôjdete vlastným autom?
Mr and Ms zabavnik are planning an excursion to the high Tatra. They go to a travel agency in bratislava to arrange everything.
Ms Z.: That looks nice. What offer can you make us?
A.: That would be helpful. I can then draw up a suggestion for a lease structure for you by tomorrow.
A.: And do you know how big it is to be?
Ü.: Igen. Már nyolc éve sikeresen jelen vagyunk a magyar piacon. Eddig Bécsből szolgáltuk ki ügyfeleinket.
Ü.: A szükségletek középtávú kielégítésére legalább 10.000 négyzetméter raktározási területre van szükségünk. Legalábbis a jelen állás szerint.
I arrived back in Milan safely and would like to again take the opportunity to thank you for the pleasant days in Slovenia.
Thanks to your help I managed to gain many impressions of your country in the few days.
Spoštovani gospod Krivko, potem ko sem se varno vrnil v Milano, bi se vam rad ponovno zahvalil za prijetne dni, ki sem jih preživel v Sloveniji. Z vašo prijazno pomočjo sem v nekaj dneh zbral zelo veliko vtisov o vaši deželi. Zelo sem prevzet nad tem, s kakšnim tempom se razvija vaše gospodarstvo. O takšnih stopnji rasti lahko na zasičenem trgu seveda le sanjamo. Mislim, da ima naše novo partnerstvo odlično perspektivo v prihodnosti.
Lesson business – poslovni partner partner economy – gospodarstvo growth rate – stopnja rasti saturated – zasičen trg market prospect – perspektiva budget – proračun figures – številke help – pomoč impression – vtis country – država hospitality – gostoljubje future – prihodnost
B.: U redu, napravit ću Vam dvije simulacije izračuna iznosa kredita. Prva je bazirana na sadašnjoj plaći a druga na očekivanom povećanju.
Vocabulary: Adverbs: today, immediately, with, there, never, often, always, where, when, here.
Prilozi: danas, odmah, pri tome, tamo, nikada, često, uvijek, gdje, kada, ovdje.
H.: Hello. I would like to take out a mortgage with you.
H.: HRK 4,700, but I have been promised a rise for next year.
B.: Dajete li prednost dugoročnom kreditu sa manjom, ili kratkoročnom kreditu sa većom mjesečnom ratom?
A.: Da bi Vas prehlada popustila potrebno je da prođe određeno vrijeme. Vidjet ćete, za dva dana ćete se osjećati puno bolje. Naravno, ukoliko Vas već ne čeka sljedeći let!
business trip – poslovno putovanje drugstore – apoteka cold – prehlada cough – kašalj cold – hunjavica drops – kapi vitamins – vitamini nose – nos mouth – usta time – vrijeme to soothe – smiriti to aggravate – nadražiti to help – pomoći
Vocabulary, Bosnian: Adjectives: strong – weak, big – small, old – young, beautiful – ugly, fat – thin, long – short, loud – quiet, a lot – a little, soft – rough.
Pridjevi: jako – slabo, veliko – malo, staro – mlado, lijepo – ružno, debelo – mršavo, dugo – kratko, glasno – tiho, puno – malo, nježno – grubo.
Z.: Dobar dan! Prehladila sam se. Najvjerovatnije u avionu. Nažalost nemam vremena da odležim.
A.: Propisat ću Vam jedno dobro sredstvo sa vitaminom C za jačanje Vaše otpornosti.
Vocabulary, Serbian: Adjectives: strong – weak, big – small, old – young, beautiful – ugly, fat – thin, long – short, loud – quiet, a lot – a little, soft – rough.
Z.: Dobar dan! Prehladila sam se. Najvjerovatnije u avionu. Najverovatnije u avionu. Nažalost nemam vremena da odležim.
L.: Da bi Vas prehlada popustila potrebno je da prođe određeno vrijeme. Vidjet ćete, za dva dana ćete se osjećati puno bolje. Naravno, ukoliko Vas već ne čeka sljedeći let.
bank – bankë exchange – zyrë kembim office valute, ndërrim parash desk – arka, sporteli euros – Euro lek – Lek note – kartëmonedhë exchange rate – kursi i këmbimit wallet – portofol business trip – udhëtim pune today – sot to leave – lë, largohem, iki customer – klient
Vocabulary: Grammar: Singular – plural: receipt – receipts, bank – banks, note – notes, problem – problems, day – days, customer – customers.
Njëjës – shumës: llogari – llogaritë, bankë – bankat, kartëmonedhë – kartëmonedhat, problem – problemet, ditë – ditët, klient – klientët.
S.: I would like to exchange euros. What is the current exchange rate?
S.: Please give me half in big notes and the rest in small ones.
K.: Five thousand, ten thousand, twenty thousand and the remaining 17,236 lek in small notes ...
A.: Në regull, me kursin* e sotëm vlera është 37,236 Lek. A i doni në kartëmonedha të mëdha?
*A pp ro xi m at e ra te a t t he ti m e of p rin tin g.
Mrs K.: That is why we decided to renovate and not to rebuild from scratch. But I’m not sure that I would make the same decision again today.
to invest – investoj refurbishment – kredi për loan rinovim repayment – këste house – shtëpi taste – shije compliment – kompliment, lavdërim meal – darkë
Vocabulary, Albanian: Grammar: Subjunctive: he says – he would say, she stays – she would stay, I go – I would go, she lies – she would lie, she has – she would have, I give – I would give, he comes – he would come.
Mrs K.: Thank you for the compliment. But you should have seen it before. We renovated it for a whole year.
Mr K.: Thankfully we had a refurbishment loan from Raiffeisenbank with very good conditions. The repayment rates are not a great strain on our household budget.
Mrs G.: You have shown a lot of good taste for the renovation. Old houses always have a very special charm.
Znj. G: Rinovimin e keni bërë me shije. Shtëpitë e vjetra gjithmonë kanë diçka të veçantë.
Gospodin K.: Dobro veče! Izvolite ući! Ovde možete da ostavite stvari.
Gospođa K.: Hvala na komplimentu. Trebalo je da je vidite pre. Godinu dana smo je renovirali!
Gospođa K.: Zbog toga smo se i odlučili za renoviranje a ne za novu gradnju. Ali ne znam da li bih i danas odlučila tako.
Vocabulary, Serbian: Grammar: Subjunctive: he says – he would say, she stays – she would stay, I go – I would go, she lies – she would lie, she has – she would have, I give – I would give, he comes – he would come.
Konjunktiv: on kaže – on bi rekao, ona ostaje – ona bi ostala, ja idem – ja bih otišao, ona leži – ona bi ležala, ona ima – ona bi imala, ja dajem – ja bih dao/la, on dolazi – on bi došao.
V.: That is a great service. In that case I will do some shopping and come back around 11am. Thank you for the information.
Vocabulary: The time: one o’clock, two o’clock, ten o’clock (in the morning), ten o’clock (in the evening), half past seven, a quarter past eight, twenty past eight, a quarter to eleven, midnight, noon.
V.: Oh dear, how did I miss the notice? This is unbelievable: Raiffeisenbank is even open here on Saturdays. And is there no lunch break?
Ms vuković is standing outside a Raiffeisenbank branch in belgrade. It is early in the morning. She speaks to a passer-by on his way to work.
V.: Do you know when this bank opens? I would like to withdraw money from my account and make a transfer.
V.: Znate li kada se otvara banka? Želela bih da podignem pare sa moga računa i da uradim transfer.
S.: It shouldn’t be older than three years and have more than 50,000 km on the clock by any means.
S.: Asking price? Well, for 9,000 lev I would take the car.
D.: Right, in that case I think we can finalize the purchase.
Т.: Малка кола ли търсите? Може ли да не е нова?
Т.: Не забравяйте, че колата е с гаранция от първа ръка! Днес такова нещо почти не се намира.
Vocabulary: Grammar: Prepositions: to the car, into the car, at the car, on the car, in front of the car, behind the car.
T.: Yes, the butter is very expensive, too. They have good butter in this store from local production, 200 g only cost 2.50 lei.
S.: Sometimes I buy butter and milk on the market at the farmer’s. Prices are about a third lower there.
S.: Câteodată cumpăr unt şi lapte de la un ţăran din piaţă. Acolo preţurile sunt cu o treime mai mici!
S.: Dar oferta din piaţă nu este la fel de variată.
S.: Atunci o să cumpăr şi eu şi o să fac din ea sarmale.
Vocabulary: The numbers: one, two, three, four, five, six, seven, eight, nine, ten; twenty.
Numerele: unu, doi, trei, patru, cinci, şase, şapte, opt, nouă, zece; douăzeci.
S.: The milk has gone up. One litre now costs 3 lei.
T.: Da, e chiar ieftin! Un pachet de 5 kilograme pentru numai 25 de lei.*
*A pp ro xi m at e pr ic es a t t he ti m e of p rin tin g.
passport – паспорт reception – стійка реєстрації pen – ручка form – бланк
Vocabulary: Phrases: We wish you a pleasant stay. Many thanks! Here you are. As you wish. Please be so kind ...
R.: I’m sorry, we have no reservations under the name Bazenko.
R.: Oh sorry, there we are. Four nights are reserved in your name. I see, your company has a 20 per cent discount on the room price.
T.: Такi час вельмi зручны для мяне. Прыходзьце да нас у галаўны офiс па вулiцы Харужай 31-A.
trade chain – Гандлёвая сетка branch – Фiлiял account – Супрацоўнiк manager corporate – Карпаратыўны client клiент
financing – Фінансаванне telephone call – Тэлефонная размова appointment – сустрэча to connect – злучыць moment – момант to help – дапамагчы
Lesson 14 Mr Sokolov would like to set up the first branch of a trade chain in Minsk. He makes a telephone call to arrange an appointment with the bank.
PB.: You should speak to Mr Tarasov. One moment, I will connect you.
T.: It would be better if you came to see us.
С.: Добры дзень! Маё iмя Сакалоў, злучыце мяне, калi ласка, з супрацоўнiкам, якi можа пракансультаваць карпаратыўнага клiента?
С.: Я хацеў бы заснаваць у Мiнску фiлiял для маёй гандлёвай сеткi i абмеркаваць тэму фінансавання.
S.: Everything worked great. But where have I put my card?
Выберите валюту: Рубли/доллары США/Евро – Введите желаемую сумму денег – Печать квитанции: да/нет – Заберите, пожалуйста, карточку и деньги.
Vocabulary: Directions: left, right, above, below, straight ahead, in front of, behind, right next to.
В.: Пойдёмте со мной к машине, ближайший банкомат находится на пути к стоянке. Вот там, слева от журнального киоска.
Ms Sobolewa has arrived in Moscow at Leningrad Station. She is met by her business partners’ chauffeur. before she goes to the meeting, she wants to withdraw money from a cash machine.
B.: Welcome! – Please insert card for new order. – Please select your language – Enter your PIN code – Press OK – Press Cancel if incorrect – Please select currency roubles/US dollars/ euros – enter requested amount –
б.: Добро пожаловать! – Для новой транзакции вставьте, пожалуйста, Вашу банковскую карточку – Выберите, пожалуйста, язык – Введите код PIN – Нажмите клавишу подтверждения – При неправильном вводе нажмите клавишу „Отмена“ –
The year 2007 will go down in the com­ pany’s history as one of record earnings and the largest capital increase to date.
Utilizing the dynamic development of our core markets in Central and Eastern Europe, we have again achieved record earnings despite worldwide turmoil on the financial and credit markets. For the first time in the company’s history, we are reporting an operating profit before tax of more than € 1 billion. That is due to significantly increased income in customer­ related business segments across all regions, which underscores the efficiency of our company and our business model.
It is our declared goal to expand our market position particularly in the regions of the Commonwealth of Independent States
We continued our success in the retail business last year, an area that is rich in opportunities for the long term. That is impressively documented by a monthly increase of more than 100,000 new customers – and that without acquisitions. We now serve a total of more than 13.7 million customers. Our huge capital in­ vestments in organic expansion of our distribution network are already starting to pay off today. Thus, the still quite young retail customer segment is already contributing 39 per cent to profit before tax. That is all the more remarkable inasmuch as this segment made its first positive earnings contribution in 2004.
Business with corporate customers con­ tinued to make by far the greatest con­ tribution to profit before tax, at 54 per cent. Although this segment has already reached a significantly more mature stage in most markets, it still shows very attractive growth rates. Not least, our consistent focus on the mid­market and the rapidly growing host of small and medium­sized enterprises is positively reflected in our earnings. In the corporate customer segment, our earnings increased in 2007 by € 201 million, or 43 per cent, on the previous year.
Last year’s major event was undoubtedly the capital increase that we successfully completed in early October, amid the global crisis of confidence on the financial markets. That our offering of about € 1.2 billion was doubly subscribed despite the difficult environment reflects the high confidence that we have earned in the worldwide financial community. That rests mainly on our having completely attained the goals set at the time of our IPO. That applies both to the company’s strategic orientation and to the financial goals that we communicated.
The inflow of fresh funds has further improved our already solid capital base. The foundation has thus been laid for financing our dynamic growth. It also gives us the necessary maneuvering room to react quickly to market opportunities that may arise.
We are pleased to report that our success­ ful efforts were acknowledged again in 2007 by a number of awards from inter­ nationally recognized financial maga zines and institutions. Those awards are, on the one hand, a gratifying confirmation of our strategy and tribute to the achievements of our staff. On the other hand, they serve as an incentive for us in meeting future challenges.
Herbert Stepic Chairman of the Managing Board Raiffeisen International Bank­Holding AG
As usual, there was open dialogue in the reporting period between the Managing Board and the Supervisory Board and within those bodies. The Managing Board of Raiffeisen International regularly informed the members of the Supervisory Board and the Committees in a timely and comprehensive manner about all issues relevant to business development, including the company’s risk situation and risk management and that of material
Group entities. Furthermore, the Managing Board consulted with the Supervisory Board about the company’s strategic orientation and discussed the status of strategy implementation at regular intervals. The Managing Board provided information to the Supervisory Board in a timely manner and thus enabled it to make well­founded decisions and fulfill its supervisory duties. The discussions and exchange of information took place both during and between the meetings.
The Supervisory Board held five meetings during the year under review, and all members of the Supervisory Board participated in more than half of the meetings. At all of the meetings, the Supervisory Board performed the tasks prescribed to it by law in observance of the Austrian Code of Corporate Governance.
The Supervisory Board already adopted clear criteria in the preceding year that comply with the Austrian Corporate Governance Code in order to ensure transparency and independence. It remains committed to those criteria, which are also published on the company’s website. All members of the Supervisory Board have declared themselves independent in the meaning of the independence criteria.
The Supervisory Board appointed Rainer Franz as Managing Board member for another year. Peter Woicke has left the Supervisory Board at his own request as of 31 December 2007. He will devote himself in the future to a new challenge in a non­governmental organization that will demand a great deal of constructive input and is not compatible with his duties on the Supervisory Board. On behalf of my colleagues, I thank Mr. Woicke for his work on the Supervisory Board. The upcoming regular Annual General Meeting will decide on a new appointment to the Supervisory Board.
KPMG Austria GmbH, Wirtschaftsprü­ fungs­ und Steuerberatungsgesellschaft, Vienna, has audited the accompanying consolidated financial statements (income statement, balance sheet, and notes) and the consolidated management report as well as the annual financial statements and management report of Raiffeisen
M an ag in g Bo ar d overview of raiffeiSen internationaL
A well­functioning financial infrastructure is one of the reasons underlying the success of European economic develop­ ment. Distinctively geared to customers and with more than 20 years of ex­ perience in Central and Eastern Europe, Raiffeisen is a key player in that context. The starting point of this success story was a subsidiary bank founded in Hungary in 1986. That was followed by other new companies and acquisitions, which have ultimately formed one of the most important bank networks in Central and Eastern Europe.
fully conducted a capital increase in October 2007. The offering was doubly subscribed despite a relatively uncertain market environment. The proceeds of about € 1.2 billion improve the Group’s already good capital base and will support, above all, its strong organic growth.
What successes Raiffeisen has already achieved in this area, and what challenges it faces, is now being thoroughly docu­ mented. This documen tation will result in an autonomous sustain ability report, the publication of which is planned for 2008.
Other/consolidation 1,638 – – 256 *Change of balance sheet total versus 31 December 2006. Growth in local currencies differs due to euro exchange rates.
Compared with previous years, 2007 was less spectacular for Raiffeisen Inter­ national. You did not buy a bank for the first time since your acquisition drive began in 2000. Why was that? We focused mainly on organic growth. After buying three banks in only 14 months in 2005 and 2006, we made organic expansion of our business, and especially our distribution network, the emphasis for 2007. We opened our 3,000th branch last fall. That is remarkable when you consider we did not even have 1,000 business outlets three years ago. We also made significant progress in integrating and transforming the acquired banks, and completed large parts of those activities according to plan. So, if you look at our earnings for the year and consider we successfully carried out a capital increase, you can see there is a great deal going on at Raiffeisen International even in a year without acquisitions. We have not only vaulted to the top among Austrian companies listed on the stock exchange, but are also in good shape to continue growing strongly in the future.
QuaLity PrevaiLS temporary phenomena. Current account deficits are very high in some cases, but one should not forget GDP growth rates and foreign direct investments are also high. Of course, we have kept a close eye on this development and are keenly aware of the risks in our business. We regularly carry out stress tests and steer our business activities accordingly.
How do you intend to use the more than 1.2 billion euros in proceeds from the capital increase? The capital increase proceeds will ensure our growth in the years ahead. We have grown in terms of balance sheet total by about 40 per cent per year in the last five years. This transaction improves our already solid capital base again significantly, which is certainly no disadvantage in view of the continuing crisis of confidence in interbank business. The capital increase also en ables us to react quickly to ac­ quisition opportunities that may arise. But we are under no pressure to buy another bank. We are so broadly based and have such great potential to grow vertically that most competitors envy our position.
How does the crisis of confidence caused by the subprime turmoil in the United States affect Raiffeisen International’s business? We see hardly any effects in customer business because the crisis of confidence has not had an impact on the real economy in Central and Eastern Europe yet. I expect we will experience an in­
M an ag in g Bo ar d development also has positive effects. If there were tendencies toward overheating, some of the hot air has been released. The market has generally become much more risk­conscious, and the wheat is being separated from the chaff. Quality continues to prevail, and we stand for quality.
You also founded a charitable initiative in 2007. What is that about? My life and career have been so enriched by my activity in Central and Eastern Europe that I would like to give something back to the region. So, on my 60th birthday, I set up the H. Stepic CEE Charity, whose aim is to provide assistance to children, youth, and young women. The first relatively large project has started in Western Ukraine, and it would be great if we could initiate further charitable projects in 2008.
What are your goals for 2008? Apart from leveraging potential for im­ provement and efficiency, we intend to enhance our mid­market approach in corporate customer business and gene­ rally expand cross­selling activities. The same applies to the retail segment. We want to push our insurance and asset management products even more. We will also complete our take­off in personal banking business for affluent customers. Another priority is strong expansion on the deposit­taking side. For that reason, we intend to increase our branch network substantially. That is also important with a view to the crisis of confidence and to becoming less sensitive to developments on the international financial markets. We continue to explore the markets for favorably priced acquisition opportunities. But we do not have to make acquisitions to continue our dynamic growth. We are represented in 16 markets of the region with our own banks, leasing companies, and other financial service providers. We are thus in extremely good shape and optimally positioned for future challenges.
M an ag in g Bo ar d high volatility: uS mortgage crisis has far-reaching effects
global economic growth continued at the end of 2007 and beginning of 2008, and reached a preliminary climax in January. At the beginning of 2008, the economic indicators for the USA pertaining to the fourth quarter of 2007, which were much worse than expected, as well as other negative economic data combined to further accelerate the downward trend on global stock markets.
raiffeisen international one of the three largest listed companies in austria
The price of Raiffeisen International shares was subject to high volatility throughout 2007, ranging between about € 92.00 and € 123.90. On 19 July, Raiffeisen International shares reached their highest level to date at € 123.90. Though already anticipated by the market, the company’s capital increase probably still had a dampening effect on the share price in the first half of the year, and negative news from the financial sector caused the environment to worsen during the second half. Nevertheless, Raiffeisen International ranked as one of Austria’s three largest listed companies. At the beginning of November, it even had the highest market capitalization of all listed companies in the country.
Raiffeisen International ATX (relative to RI) DJ Euro Stoxx Banks (relative to RI)
Raiffeisen International announced plans for a capital increase with the release of its report on the first half of 2007. The details of the transaction were then announced on 17 September. The two­ week subscription period for the capital increase started on 19 September with the beginning of the roadshow in Vienna. In that framework, about 50 individual talks and 10 group presentations were held with more than 250 investors in 9 different cities in Europe and the United States, as well as several telephone and video conferences.
By the end of the subscription period on 3 October 2007, a total of 11,897,500 new shares had been placed as planned at a subscription price of € 104. That brings the issue proceeds for Raiffeisen International to about € 1.2 billion and thus makes this one of the largest transactions of its kind in Austrian stock market history. The number of shares issued rose to 154.67 million as a result of the capital increase. This strengthening of the company’s capital base forms the foundation for further or­ ganic growth in Central and Eastern Europe and for selected acquisitions.
The offering consisted of an offer for subscription and an offer of those new shares from the capital increase for which subscription rights were not exercised. The new shares were offered for purchase in the framework of a public offering in Austria and by way of private placements with national and international investors. The issue volume offered was about doubly subscribed despite the difficult market environment.
The new shares were traded for the first time on 5 October 2007 in the Prime Standard segment of the Vienna Stock Exchange.
Of the shares from the capital increase not subscribed by RZB, about 3 per cent were allotted to private investors, and the remaining 97 per cent to institutional investors.
The greatest demand was registered from British investors, who accounted for about one­third of the issue volume not tied to subscription rights. About 57 per cent of the free issue volume was allotted to institutional investors in Austria, Germany, and other continental European countries. The remaining shares not tied to subscription rights went to investors in the United States and other countries worldwide.
The share of – primarily Austrian – private shareholders after the capital increase amounts to 3.2 per cent. Institutional investors hold 28.3 per cent of the stock.
About one quarter of the shares which are in institutional hands are in the United Kingdom (UK), and another quarter in the index (selection) number of stocks weighting of ri in index in index
ATX Five 5 18% ATX Prime 58 10% Dow Jones Euro Stoxx 312 0.14% Dow Jones Euro Stoxx Banks 40 0.70% Dow Jones Stoxx 600 600 0.07% MSCI World 1,959 0.03%
The investor relations efforts of Raiffeisen International were further expanded again in the year under review. The activities surrounding the capital increase were one focal point. They were especially aimed at the general public and private investors in Austria. The great importance that Raiffeisen International assigns to investor relations is also shown by last year’s annual report, which received numerous awards.
When business figures for 2006 and last year’s interim results were released, telephone conference calls and press con­ ferences were held on each publi cation date. Analysts and investors were thus kept informed in a timely and detailed manner about the company’s busi ness develop­ ment. In addition, the target group of analysts and institutional investors was informed in depth in the context of road­ shows in Europe, the United States, and Asia and in numerous individual talks. As a result of close contact with the financial community, awareness of Raiffeisen Inter­ national was further in creased, exis ting investors received affir mation of their investment decision, and new investors were convinced of the attractiveness of Raiffeisen International stock.
One of the goals of Raiffeisen Inter natio nal’s email service is to ensure that institutional and private investors receive information simultaneously. Online registration for this information service is possible at any time at www.ri.co.at ▸ Investor Relations ▸ Ordering and Email Service.
The second regular Annual General Meeting of Raiffeisen International since its IPO was held on 5 June 2007 at the Austria Center in Vienna. More than 600 people attended and were informed directly by the Managing Board and Supervisory Board about the company’s business successes in the past year, as well as future strategies. About 75 per cent of the voting capital was represented at the Annual General Meeting. On all items on the agenda, the shareholders voted in favor of the proposed resolutions with a clear majority of more than 98.9 per cent in each case.
ISIN AT0000606306 Ticker symbols RIBH (Vienna Stock Exchange) RIBH AV (Bloomberg) RIBH.VI (Reuters) Market segment Prime Market Issue price per share at the IPO (25 April 2005) € 32.50 Issue price per share at the capital increase (5 October 2007) € 104.00 Number of shares issued as of 31 December 2007 154,667,500 Average number of shares in 2007 144,987,033 corPorate governance rePort
Corporate governance promotes the confidence of all stakeholders in the company, and long­term successes arise from mutually trusting interaction. For that reason, Raiffeisen International volun­ tarily agrees to comply with the Austrian Corporate Governance Code (ACGC) as amended in June 2007. The ACGC is publicly available at the websites of the Austrian Working Group for Corporate Governance (www.corporate­
For Raiffeisen International transparency in corporate governance is of high im­ portance. As evidence of that, it observed all the L rules (legal requirements) and C rules (comply­or­explain requirements) of the ACGC in the reporting period. The L rules are based on mandatory legal regulations. The C rules are supposed to be observed, and any divergences must be explained and justified for conduct to be in compliance with the code.
financial calendar 2008 27 February Start of Quiet Period 27 March 2007 Annual Report, Analyst Conference, Conference Call 24 April Start of Quiet Period 8 May First Quarter Report, Conference Call 10 June Annual General Meeting 18 June Ex Dividend and Dividend Payment Date 24 July Start of Quiet Period 7 August Semi­Annual Report, Conference Call 26 September Capital Markets Day in St. Petersburg, Russia 23 October Start of Quiet Period 6 November Third Quarter Report, Conference Call
M an ag in g Bo ar d management and control structure
Raiffeisen International has a managing board that performs the tasks of managing the company, and a board that acts in a supervisory and advisory capacity. These two bodies, the Managing Board and Supervisory Board, work together for the good of the company and maintain an intensive dialogue with one another.
Raiffeisen International’s Managing Board currently consists of six members, who manage the company’s business according to clear objectives, plans, and guidelines. The members are Herbert Stepic, Aris Bogdaneris, Rainer Franz, Martin Grüll, Peter Lennkh, and Heinz Wiedner. Responsibilities are divided into areas and accordingly assigned to the individual board members. Taking into account the interests of shareholders and employees, the Managing Board runs the company on its own responsibility with a forward­ looking view geared to the principles of modern entrepreneurship.
The Supervisory Board had six members in 2007. Four of them, Walter Rothensteiner, Manfred Url, Patrick Butler, and Karl Sevelda, are members of the Managing Board of RZB. Other members were Stewart D. Gager and Peter L. Woicke. The Supervisory Board’s bylaws govern the organization of the Supervisory Board and assign certain duties to the Working, Audit, and Personnel Committee. The Working and Personnel Committee is composed of Walter Rothensteiner and Manfred Url, and the Audit Committee of Walter Rothensteiner, Manfred Url, and Karl Sevelda. The bylaws of the Managing Board, the Supervisory Board, and their committees regulate what measures require the consent of the Supervisory Board or the relevant committee. The Supervisory Board held five meetings in the reporting period, and the Managing Board informed the Supervisory Board in a timely and comprehensive manner concerning all relevant questions of business development, and in particular any events of major significance. An open dialogue took place between the Managing Board and the Supervisory Board and within each of those bodies.
As owners of the company, the share­ holders exercise their rights by voting at the Annual General Meeting. The voting proceeds according to the one­share­one­ vote principle in which all shareholders have equal rights without voting right restrictions. Every unit share issued confers one vote, and no registered shares have been issued. The shareholders can exercise their voting right themselves or through a proxy. Unless different voting majorities are prescribed by law, the Annual General Meeting’s resolutions are ratified by a simple majority of the capital stock in attendance at the time of ratification. In addition to voting on the discharge of the Managing Board and Supervisory Board, the election of Supervisory Board members and on proposals they have submitted, the shareholders vote on the use of profit and hence on the amount of the dividend. To ensure maximum trans par­ ency of the Annual General Meeting, the opening comments and the speech by the Managing Board are broadcasted live on the internet at www.ri.co.at ▸ Investor Relations ▸ Events ▸ Annual General Meeting and may also be viewed there later. That gives shareholders who were unable to attend the Annual General Meeting in person the opportunity to obtain the information first hand.
Open and transparent communication with shareholders and their representatives, customers, analysts, employees, and the the structure of raiffeisen international, as of 1 January 2008 ceo Herbert Stepic cfo/cro Martin Grüll board member retail banking
visory Board members ■ Forms for ordering printed materials and registering to automatically distributed “Investor Relations News” by email conflicts of interest
The Managing Board members of Raiff­ eisen International must disclose material personal interests in transactions of the company and Group enterprises and other conflicts of interest to the Supervisory Board. They must also inform the other Managing Board members.
The Supervisory Board’s consent is required for contracts between the company and members of the Supervisory Board that obligate the members to performance in relation to the company or a subsidiary apart from their activity in the Supervisory Board for more than merely negligible compensation. That also applies to contracts with enterprises in which a Supervisory Board member has a considerable economic interest. The company did not enter into any such contracts in 2007.
The Raiffeisen International Group’s accounting is performed according to the provisions of the International Financial Reporting Standards (IFRS). The annual financial statements of Raiffeisen Inter­ national Bank­Holding AG are prepared according to the provisions of the Austrian Commercial Code (UGB). The consolidated financial statements are published within the first three months of the financial year following the reporting period, and interim reports at the latest 45 days after the end of the respective reporting period.
Good corporate governance also includes responsible managing of risks. For this reason, systematic risk management imple­ mented at Raiffeisen International ensures that risks can be identified and assessed early, and appropriate countermeasures are taken. Identifying, analyzing, meas­ uring, controlling, and managing risks is one of Raiffeisen International’s core competencies and forms the basis of its successful operating business.
In the European countries of the Common­ wealth of Independent States (Russia, Ukraine, and Belarus), real GDP growth accelerated from an average 6.9 per cent in 2006 to 7.5 per cent in 2007. Set against an increase in Russia was a slight slowing of growth in Ukraine and Belarus.
Apart from country­specific differences, si­ milar growth factors were at work in 2007 as in the preceding year. At the fore were lively consumer demand, supported by a significant rise of real wages and lending, and a robust increase of gross capital formation. Continuing strong economic growth in the “old” EU countries, by far the most important trading partners and for­ eign investors for CEE countries, also had a positive effect on the region’s economic development. Against this background, economic momentum in the new EU mem­ ber states, candidate countries, and states seeking candidate status continued to increase steadily. This trend also benefits foreign direct investment, which remained at a high level and increased further in Southeastern Europe, in particular.
Only net exports had a generally dam­ pening effect on growth (exceptions: Slovakia, Slovenia, and Hungary) in the reporting period.
Consolidated profit (after tax and minority interests) rose significantly in 2007, by 42 per cent, or € 248 million, on the preceding year’s value, excluding one­
Raiffeisen International’s scope of con­ solidation includes network banks and leasing companies in 16 markets and a number of financial companies and bank­related service providers. For more information on changes in the scope of consolidation, please see the relevant section of the notes on page 284.
For the sake of better comparability, the two one­off effects from the preceding year are not taken into account (as far as this is possible) in the relevant comparative figures of the presentation of performance below. Those effects were due to the sales of Raiffeisenbank Ukraine (€ 486 million) and the minority stake in Kazakhstan­ based Bank TuranAlem (€ 102 million)
and brought in a total of € 588 million in 2006.
The Raiffeisen International Group grew significantly in 2007. The balance sheet total increased from € 55.9 billion to € 72.7 billion, which means growth of more than 30 per cent, or € 16.9 billion, and nearly all that was organic. Average growth of the balance sheet in the past five years amounted to 38 per cent. As in the preceding year, the main part of the increase in 2007 was due to growth of lending, which increased by 40 per cent, or € 13.8 billion.
The number of retail customers rose to more than 13.6 million at the end of the year. Average annual growth in the number of retail customers of 53 per cent in the past four years has grown in parallel with the continuous expansion of the distribution network. The Group had 3,015 business outlets in Central and Eastern Europe on 31 December 2007.
C on so lid at ed fi na nc ia l s ta te m en ts
M an ag in g Bo ar d million in 2007. Changes in the scope of consolidation were responsible for € 55 million of that. Staff expenses, which rose by 32 per cent to € 1,085 million were the strongest cost driver, while the average number of employees increased by 13 per cent to 55,550. The largest increase in the average number of employees was registered in Southeastern Europe at 20 per cent.
Cost/income ratio further improved by 1.5 percentage points With an increase of 27 per cent to € 877 million, other administrative expenses rose somewhat more moderately than staff expenses. That is primarily due to invest ments in the distribution network, e.g., establishing new branches.
The increase in operating expenses last year was again lower than operating income. This had a positive impact on the cost/income ratio, an important measure of efficiency. This is calculated as the ratio of general administrative expenses to operating income, and it improved from 59.1 per cent in 2006 to 57.6 per cent in 2007.
Expansion of retail activities was the main reason for the increase of net interest income by 37 per cent, or € 655 million, to € 2,419 million. A higher proportion of retail customers led to a slight improvement in the interest margin. However, regional differences should be taken into account here, as higher margins were achievable in the less developed markets. The share of operating income attributable to net interest income came to 64 per cent and was 3 percentage points above the level of the preceding year.
M an ag in g Bo ar d fell by 36 per cent. The risk/earnings ratio improved from 17.5 per cent to 14.8 per cent.
eisen International forms a tax group. On the other hand, lower income tax rates in Hungary and Bulgaria had a beneficial effect.
Profit after tax rose by 42 per cent from € 686 million to € 973 million and there­ fore increased at a higher rate than income from operating activities. The main rea sons for this were the less than propor tional increases in provisioning for impair ment losses and income taxes. The item other valuation results presented in the table was negative in the amount of € 13 million (after a positive € 26 million in the pre ce ­ ding year). That was largely due to val ­ uation losses on derivative financial instru­ ments used to hedge interest rate positions.
Development of consolidated profit on an annual basis profit from operating activities 1,607,477 36.9% 1,174,059 724,754
*Excluding one-off effects due to the sales of Raiffeisenbank Ukraine and the minority stake in Bank TuranAlem.
Earnings per share rose to € 5.80 Earnings per share (EPS) improved by € 1.63 from € 4.17 before to € 5.80. Including the one­off effects, earnings per share in the preceding year amounted to € 8.29. The capital increase in October 2007 saw the issuance of 11.9 million new shares. The average number of shares excluding treasury shares grew to 145.0 million.
ROE remains above 25 per cent Return on equity (ROE) before tax declined in 2007 from 27.3 per cent to 25.7 per cent. The average equity on which the calculation is based increased by 48 per cent to € 4,810 million because of high profit retention resulting from the preceding year’s one­off effects and because of the capital increase which took place in the fourth quarter.
Raiffeisen International made increases in its customer segments last year. The success of its strategy of expanding retail activities is reflected in a clear improvement of results from that business area.
Retail customers As expected, the retail customer segment had the strongest growth of earnings before tax of all segments in the reporting year with a plus of 85 per cent, or € 223 million, to € 487 million. Investments in new business outlets and products made in the last few years contributed to that good result. However, that this investment program is still not complete is also reflected in 30 per cent higher general administrative expenses. For that reason, the cost/income ratio of 68.3 per cent in the reporting period was still relatively high, but was 4.0 percentage points below the preceding year’s figure. The risk assets allocable to retail customers rose by 34 per cent to € 19.0 billion. The higher volume also required more extensive provisioning for impairment losses, which nevertheless only increased by 14 per cent to € 218 million. The return on equity rose significantly, from 24.8 per cent to 29.5 per cent. The average number of employees in this segment increased, from 38,677 to 44,582.
Treasury Earnings in the treasury segment declined in the reporting period. At € 188 million, earnings before tax were 22 per cent, or € 53 million, below the preceding year’s high level. This had been influenced by a favorable currency environment for the Group and by a special effect of € 33 million due to a positive valuation result from an open position taken in connection with the Impexbank acquisition. Derivative instruments were used to reduce yield curve risk. That gave rise to a valuation result of minus € 30 million in 2007. Excluding those effects, earnings development in the treasury segment would be positive.
Risk assets in the segment increased by 10 per cent to € 5.9 billion. General administrative expenses grew moderately by only 19 per cent. The return on equity fell by 11.8 percentage points on the preceding year to 32.9 per cent. The average number of employees rose by 17 per cent in the reporting year to 1,244.
A table of the segments by business areas may be found in the consolidated financial statements on page 142.
Corporate customers Retail customers Treasury Participations & other in € mn
bilities, instruments which are necessary mainly for regulatory reasons, climbed by 62 per cent from € 52 million to € 83 million.
On the other hand, net new allocations to portfolio-based provisions declined by 36 per cent to € 76 million. That mainly resulted from lower allocations in the CIS, which amounted to € 19 million. They were even lower in Southeastern Europe at € 10 million. The highest allocations to portfolio­based provisions were registered in Central Europe at € 47 million.
Net commission income Net commission income from banking ser vices rose significantly in all business areas in 2007, with an overall plus of 34 per cent, or € 317 million, to € 1,250 million. Newly consolidated enterprises accounted for 21 per cent, or about € 65 million, of that growth. That is attributable to newly consolidated asset management companies, on the one hand, whose in come from managing investment and pension funds amounted to € 44 million, and to Czech eBanka, on the other, that was consolidated in November 2006.
The most important contribution again came from payment transfers, which ac­ counted for 45 per cent of net commission income. Income from this area rose altogether by 37 per cent to € 563 million. The largest increase of 39 per cent was in Central Europe.
The Group also generated higher income with other products. In the foreign ex­ change and notes/coins business, which ranks second in importance with a 29 per cent share, the Group earned € 363 million, or 25 per cent more than in the preceding year. Increases came primarily from Central Europe and
Southeastern Europe. Net commission income from loan and guarantee business grew by 44 per cent to € 158 million. An increase of 41 per cent to € 50 million resulted from commissions on securities business. Finally, the contribution from other banking services to net commission income rose to € 116 million.
Net income from currency-related business is the mainstay of trading profit with a 70 per cent share. Also due to the special effect from the preceding year, it declined in 2007 by 37 per cent to € 90 million. Foreign exchange earnings fell significantly because of valuation losses from hedging in Croatia, while substantial changes in this earnings contribution were not observed in the other markets. Very different developments were observed in 2007 among exchange rates in the countries of Central and Eastern Europe. In markets of the CIS determined by the US dollar, the local currencies fell accordingly, and the Romanian leu fell significantly. On the other hand, some currencies of Central Europe saw significant gains.
About 41 per cent of trading profit came from Central Europe. The share of the CIS declined from 47 per cent to 32 per cent due to the effects described above.
Net income from derivative instruments Net income from derivative instruments of the banking book developed negatively in the reporting year. It amounted to minus € 30 million in 2007 compared to € 5 million in the preceding year.
Net income from financial investments, which comprises net revaluations of securities held to maturity and net proceeds from sales of securities held to maturity, amounted to minus € 1 million (preceding year: € 2 million). Small impairments on equity holdings (minus € 3 million) were set against net proceeds from sales of minority stakes (€ 2 million).
General administrative expenses General administrative expenses grew in the reporting year by 29 per cent, or € 490 million, to € 2,184 million. Changes in the scope of consolidation contributed € 55 million to that. The organic increase of general administrative expenses ac­ counted for more than one­fourth.
General administrative expenses grew less strongly than operating income (32 per cent), which caused the cost/ income ratio to improve further. The ratio, which is calculated from the operating earnings components, came to 57.6 per cent in 2007 and was 1.5 percentage points below the previous year’s level of 59.1 per cent. 2003 2004 2005 2006 2007 in € mn trading profit by geographic segments
The largest increase in 2007 came from staff expenses, which rose by 32 per cent, or € 260 million, to € 1,085 million. Of that plus, € 24 million are attributable to changes in the scope of consolidation. The organic increase therefore came to 29 per cent.
Finally, the inclusion of three asset man­ agement companies in Croatia, Hungary, and Slovakia yielded income of € 13 million from releases of negative goodwill on initial consolidation. Negative goodwill from the initial consolidation of new com­ panies was reported in the preceding year in the amount of € 8 million.
In the preceding year, there was a deconsolidation of two project companies belonging to Raiffeisen Real Estate Management, whose core business consisted in the development and sale of real estate in € mn in € mn 35%46%53%57%
At the end of the reporting period, there were also only small changes on the liabilities side of the Group’s balance sheet compared with the end of 2006. Deposits from customers continued to dominate with a share of 56 per cent. But that represents a decline on the preceding year by almost 3 percentage points.
projects in Hungary. In addition, another € 486 million was reported in 2006 from the one­off sale of Raiffeisenbank Ukraine.
Raiffeisen International’s strong growth in 2007 is also reflected in the development of its balance sheet. The consolidated balance sheet total rose on the preceding year by 30 per cent, or € 16.9 billion, to € 72.7 billion, a result almost entirely of organic growth. The increase in the balance sheet total due to changes in the scope of consolidation had a negligible impact, since no initial consolidation or deconsolidation material for the balance sheet occurred in 2007. The currency effect, i.e., the net effect of exchange rate changes in the CEE currencies, was negative in the amount of € 0.5 billion. The Group’s organic growth came to € 17.4 billion.
The share of the balance sheet total attributable to own funds, which consist of equity and subordinated capital, was unchanged at 11 per cent. The subordinated capital included in own funds rose by 8 per cent to € 1.5 billion because of new issues at individual network banks. Of these additional own funds, mainly needed for local regula­ tory purposes of subsidiary banks, 89 per cent was financed by the RZB Group, and 11 per cent by supranational institutions.
Raiffeisen International increased equity including consolidated profit and minority interests in the reporting year by 44 per cent, or € 2,033 million. It amounted to € 6,622 million as of the balance sheet date (2006: € 4,590 million).
Opening a cash flow hedge position to hedge variable interest rate positions at a network bank led, for the first time in 2007, to recognition of the hedging instrument’s market value changes in retained earnings amounting to minus € 8 million.
In June 2007, the Annual General Meet­ ing of Raiffeisen International approved a dividend payment of € 0.71 per share, which makes a total payout of € 101 million. Minority interests rose by 32 per cent, or € 191 million, to € 795 million. This increase resulted from the share of minority shareholders in current earnings of € 132 million, from capital contributions by those shareholders to various group units in the amount of € 85 million, and from share changes in the scope of consolidation (€ 12 million). Dividend payments of € 38 million reduced this item.
M an ag in g Bo ar d own funds according to the austrian Banking act
Consolidated own funds pursuant to the BWG amounted to € 6,684 million at year’s end (plus 48 per cent, or € 2,171 million).
Set against own funds is an own funds requirement pursuant to the BWG of € 4,317 million, which is steadily growing due to rapid expansion. That corresponds to an increase of 31 per cent, or € 1,033 million. Excess cover at year’s end came to 54.8 per cent, or € 2,367 million. In particular, the own funds requirement consists of requirements for the banking book (€ 3,984 million), the trading book (€ 146 million), and open foreign ex­ change positions (€ 187 million).
Raiffeisen International’s outstanding ex­ per tise in risk management is the basis for sound growth in Central and Eastern European markets given their varying degrees of development. By permanently integrating its network banks into the pro­ cesses of risk management, the Group will continue its growth trend in awareness of the risks.
■ Management of credit, country, market, liquidity, and operational risks is per­ formed at all levels of the Group.
■ Group­wide directives ensure a con­ sistent and coherent approach to risk management, which is coordinated with parent company RZB.
■ The credit guidelines are revised and approved annually during the budgeting and planning process.
■ In addition to individual loan loss provisions portfolio based loan loss provisions are formed in the corporate customer segment. Loan loss provisions in the retail segment are generally formed on the portfolio approach.
The ability to implement the principles of risk management in daily business requires well­founded, relevant knowledge as its first pillar. A pioneer with over 20 years of successful operation in Central and Eastern Europe, Raiffeisen International has valuable experience in active risk management. That forms the basis for establishing a strong risk management team in the Vienna head office and reliable teams in the network banks, reinforced by local chief risk officers.
Group­wide standardization is the second pillar of Raiffeisen International’s profes­ sional risk management. That primarily involves defining a uniform credit decision process based on a Group­wide credit manual. The rating used is likewise tied to methods formulated uniformly for the entire Group. There are also binding standards for the subsequent reporting. A Group­ wide policy for loan loss provisioning and training courses for employees at network banks and the head office ensure a Group­ wide consistent approach.
The very important function of the Group’s head office as a management and control entity is the third pillar of structured risk management. The head office’s role is discernible, for example, in the fact that new product launches are only possible with its approval. The head office also performs the task of a reporting platform for risk management, and locally kept scorecards are likewise monitored there. Finally, to strengthen local expertise, several teams from the head office are deployed for credit monitoring locally.
With those in mind, more than 50 retail products were evaluated and approved by the head office last year. The key aspects of the evaluations were product standardization, pricing, risk identification and minimization, and basic profitability of the individual products measured against the budget and the Group’s expectations.
More efficient risk management process The risk evaluation tool introduced in 2006 became established in the reporting period as a valuation and planning instrument in the Raiffeisen International Group’s entire retail risk management system. The standard tool not only makes it possible to compare the network banks and thus ensured healthy competition, but it also leads to the development of performance best practices.
The definition of specific goals by the organizational units and the employees of the risk management team is carried out on the basis of standardized guidelines. It is divided into three levels of complexity, depending on the particular area of application.
Further optimization planned Within the context of the existing retail risk management concept, Raiffeisen International plans to implement a series of measures in 2008. The bank will strengthen its impact in risk management for small and medium­sized enterprises above all by expanding capacities in the head office. That will also make it possible to intensify local support in the individual countries.
In the area of portfolio management, Raiff eisen International will concentrate on checking for observance of objectives set by the budget and expected risk profile. That applies both to individual portfolios and to Raiffeisen International’s retail portfolio overall and concerns the entire life cycle of a portfolio, including debt collection. Also, a concept for portfolio loan loss provisioning for small and medium­sized enterprises is to be developed in this framework. Parallel to that, the implementation of a newly developed package of measures to detect and prevent credit fraud in the entire Raiffeisen International Group is planned.
Credit application process in the corporate customer segment travel diary of a russian credit application
Day 1: Departure! After much preparation work and inten­ sive discussion with the borrower, my account officer in Moscow, whose name is Pavel, sends me traveling today. He spent a good deal of time packing interesting and extensive content for my trip. He researched that on the internet, in data­ bases, and via information agencies. Pavel has already given me market data, statements about the management, peer group analysis, and profitability calcu­ lations to take along. My travel documents, incidentally, are standardized for use in the entire Raiffeisen International Group. Every credit application has that feature. The standards are exactly described in the corporate limit application manual. Even the travel route is already set. We have the credit manual for that. But somehow, I still don’t feel complete.
Group. Sergej is already looking forward to the update coming to his bank in 2008. The program will then be available as an internet application and offer many new ways of analyzing and comparing balance sheet ratios. The new version, called “COALA Web”, has been wholly designed and programmed at Raiffeisen International. Sergej especially likes the fact that the program will allow him the choice of communicating in Russian or English, beginning in 2008. He under­ stands the technical terms better in his native language, of course.
Day 4: Off we go again! The rating is very important for my travel agents. They all work very carefully on it! Sergej’s colleague authorizes the suggested rating, and the head of the corporate analysis department finally approves it. Sergej is glad because neither of his two superiors changed anything in his suggestion. But that’s not always what happens. There can be a big debate. And that’s a good thing. After all, we do have the four eyes principle, or sometimes even the six eyes principle, security control! I’m glad things went so fast in my case. The newly printed rating sheet makes me feel well­prepared for the rest of my journey. Pavel picks me up and takes me to the department of credit risk management.
Day 5: Another hurdle to clear! There, I’m received by Julia, who puts me through another critical review. Julia is a credit risk manager and decides she can’t let me go on so easily. She thinks I need some additional collateral for the journey ahead. But Pavel is there and after a detailed discussion between Julia and Pavel and between Pavel and the borrower, they finally agree to a few changes in my travel documents. A mortgage as additional collateral and a shorter repayment period are agreed, which improves the loan structure. My progress is now guaranteed. Fortunately, Julia agreed with my rating. Otherwise, my stay would have lasted even longer.
Day 6: On the safe side! I make a quick stop at Oleg’s office. He figures the value of all the collateral that Pavel and Julia have sent along. He is a collateral manager and is very well­ versed in such matters. As it turns out, the mortgage is worth a lot. Oleg gives me a collateral valuation sheet. Now nothing more can go wrong, right? Pavel quickly notes the value of the mortgage in my travel documents.
sory board members talk about me only briefly and then give me the long­awaited signatures. Outfitted with the necessary approvals, I can begin my trip back to Russia right away.
Day 10: Destination reached! I have finally reached my destination. The credit administration in Russia receives me. It will continue to look after me until the loan amount can be transferred to the borrower. Looking back, this has all been an exciting experience for me. I will rest for a while in the archive, but Pavel, the others, and I will see each other again in 12 months at the latest. That’s when they will send me traveling again – for the purpose of the annual review!
The declared aim of all of Raiffeisen Inter national’s activities in the area of Basel II and data quality management is to establish uniform credit standards and valuation methods. They will serve to further the strategic positioning of risk management in the Group.
The first phase of Basel II implementation activities was successfully completed in that sense in 2007 and enables all Group units, both in banking and in leasing, to calculate risk assets first on the basis of the standard approach. Parallel to that, the acceptance procedure for the internal rating­based approach (IRB)
The integration of Raiffeisenbank and eBanka in the Czech Republic progressed according to plan. After a joint orga ni­ zational structure was created, the sys­ tems were adapted to fuse the advan tages from both banks into an improved overall range. The legal merger into a single bank will take place in 2008.
Raiffeisen International carried out about 100 projects in 2007 to improve its oper­ ational and IT processes with overall cost savings of about € 50 million. The focus continued to be on high­volume areas like credit processing, payments, and call center activities. Major progress was achieved in centralizing functions to enable branch offices to concentrate on sales and customer service. For example, all credit processing has been centralized in Romania, which has raised quality and reduced costs.
In the treasury area, the Global Treasury System (GTS) already implemented in several group units has now been put into operation for Croatia and Romania. Implementation in other countries is planned for 2008.
A centralized purchasing and admi ni stra­ tion system (i­procurement) was success­ fully introduced in 2007 to en able even better guidance of the entire process. The
The average age of employees in all subunits is comparatively low at 34 years and underscores Raiffeisen International’s youthful and dynamic character. However, the personnel structure also confirms how highly qualified the staff is. Raiffeisen International’s ratio of university graduates was an impressive 70 per cent at the end of 2007. However, because conditions in Raiffeisen International’s markets vary greatly, some countries diverge from the average. That has to do, in particular, with differing labor market structures, educational systems, and macroeconomic conditions. The situation is similar with respect to the ratio of women on the staff, which for the Group as a whole was 69 per cent at the end of 2007.
The most important parameters for that are transparent goals for individual em­ ployees, regular feedback and recogni­ tion, an objective evaluation system for individual performance, and a clearly­ defined connection to advancement and compensation. Key cultural competencies are also incorporated into the perform­ ance management system to firmly instill Raiffeisen International’s vision and values
ment systems to the Group­wide stan dard in the top three management levels of all network banks (in many banks even area­wide for all executives and staff)
■ Design of performance­oriented com­ pen sation systems on that basis
■ Incorporation of six key cultural com­ pe tencies defined Group­wide into per­ formance management for the first and second management levels
M an ag in g Bo ar d in Belarus and Ukraine have now also begun e­learning programs.
To support these national projects and further develop staff members at the international level, the head office launched a project in 2007 to create a central e­learning infrastructure.
Raiffeisen International’s Managing Board therefore started a company­wide ini­ tia tive in 2007 for talent management and succession planning in the top management level of the network banks. Called “Spot! – Grow! – Lead!”, the project has the following objectives: ■ Acquire and gain the loyalty of top talent with leadership potential for the company
It is planned for 2008 that the “Spot! – Grow! – Lead!” initiative be further expanded and positioned as a central tool for systematically guiding development of management capacities and career planning. Establishing a company­wide international acceleration pool is another emphasis. Its aim is to improve opportunities for motivated and ambitious individuals with talent to pursue an international career. That will make it easier in future to fill vacancies in key positions quickly, even across borders.
After record growth in 2006 and 2007, there is probably some cooling off in store for CEE economies in 2008. However, while real GDP growth in the CEE region last year was 6.8 per cent, a still robust 5.3 per cent may be expected this year. The business cycle’s passing its peak is likely to be one reason for the slowing of growth by about 1.5 percentage points. On the other hand, the slowdown anticipated for the euro area – and hence for the region’s most important trading partners and investors – from 2.7 per cent in 2007 to 1.6 per cent in 2008 is probably also contributing to this. The economic downswing in the euro area is probably intensified by the US real estate crisis and its effects on the US economy, while the direct negative influence of those developments on the economies of the CEE region is relatively low.
Besides foreign demand and corporate capital spending, private demand gained in importance last year for economic growth in the CEE region. Private consumption was fueled by rising employment, accel­ erating wage growth, and the ongoing strong increase of personal loans. In view of the expected advance of inflation, however, real wage growth is likely to be somewhat smaller in 2008, even though the economies continue to create additional jobs. Moreover, the cost of personal loans will increase. That is attributable to higher refinancing costs for banks and less availability of refinancing via the capital market than before the outbreak of the US mortgage crisis.
Our goal for consolidated profit in 2008 is about € 1 billion.
Raiffeisen International classifies its busi­ ness primarily according to customer groups: ■ Corporate customers ■ Retail customers ■ Treasury ■ Participations and other
You will find a detailed description of the individual segments beginning on page 139. The figures stated are derived from the financial statements prepared accord­ ing to the International Financial Reporting Standards (IFRS) that underlie the con­
Strong growth in the CIS, largest profit contribution from Southeastern Europe
The region of Southeastern Europe made the largest contribution to profit before
We aim to grow the balance sheet total by at least 20 per cent per year in the period to 2010, with the strongest increases targeted in the retail customer segment.
In Central Europe, the Group likewise achieved a significant increase in profit before tax of 36 per cent, or € 112 million, to € 428 million. The segment was the second-largest earnings contributor with a share of 34 per cent.
Central Europe 41% (+/-0 PP) Southeastern Europe 32% (-2 PP) CIS 27% (+2 PP)
*Excluding one-off effects from the sales of Raiffeisenbank Ukraine and the minority stake in Bank TuranAlem
Risk-weighted assets (including market risk) 21,645,778 17,247,333 25.5% Average number of staff 12,165 11,223 8.4%
Group assets in Central Europe rose on the preceding year by 28 per cent, or € 6.5 billion, to € 29.7 billion. Volume growth was somewhat lower than the increase of net interest income by 36 per cent to € 821 million. The net interest margin rose
M an ag in g Bo ar d by 3 basis points to 3.17 per cent despite the competitive market environment. The risk-weighted assets increased less than balance sheet assets, by 26 per cent from € 17.2 billion to € 21.6 billion.
Overall, general administrative expenses rose on the comparable year by 35 per cent, or € 211 million, to € 813 million. Excluding changes in the scope of consolidation, particularly the inclusion of eBanka from November 2006 onward, the increase would come to about 26 per cent. Overall, the higher administrative expenses primarily reflect the greater number of employees. Staff expenses amounted to € 397 million, and the average number of employees rose by 8 per cent to 12,165. Of that number, eBanka, which was first consolidated in the fourth quarter of 2006, accounted for 975. Other administrative expenses increased by € 75 million to € 318 million. Contributing to that were higher expenses connected with implementing various IT projects (e.g., the conversion to euros in Slovakia) and expansion of the business network. The number of business outlets increased by 3 per cent, or 16, to 532, although some branches of eBanka in the Czech Republic were closed due to location overlaps with Raiffeisenbank. At € 82 million, depreciation/amortization/
write-downs turned out € 23 million higher than in the comparable year. The reasons for that included the amortization of the eBanka brand (€ 4 million), and the replacement and upgrade of IT systems in Slovakia. Nevertheless, the cost/income ratio decreased slightly, by 0.5 percentage points to 60.5 per cent.
Other operating profit amounted to € 2 million and largely consisted of other tax expenses, mainly in Hungarian and Slovakian group units. Set against those expenses was income from immediate releases of negative goodwill resulting from newly integrated companies.
The country’s sixth-largest bank increased its balance sheet total by 33 per cent on the year before to € 5.4 billion, and its customer deposits by 31 per cent to € 3.5 billion. The customer loan portfolio grew by 42 per cent to € 4.1 billion. Raiffeisenbank thus benefited from the boom in the Czech housing finance market. Total mortgage loans in personal customer business more than doubled in 2007 and came to € 1.3 billion at year’s end. Products from both banks were offered to 344,500 customers in 99 business outlets at the end of 2007.
Raiffeisen Bank also occupies a leading position in the corporate customer segment. In terms of customer deposits, whose total increased by 40 per cent last year to € 2.1 billion, the bank has the largest market share of all at just under 13 per cent. It occupies second place with a market share of about 12 per cent in loans to corporate customers, whose total rose in 2007 by 26 per cent to € 3.4 billion.
Raiffeisen Bank Polska S.A. was founded in 1991. Its emphasis is on personal customers and small and medium-sized enterprises. It is the country’s Number 1 in factoring. As in the preceding year, the bank registered a record result in 2007. Total customer lending rose by 34 per cent to € 3.6 billion, while an increase of deposits by 19 per cent to € 3.3 billion was posted. The balance sheet total gained 20 per cent on 2006 and amounted to € 4.8 billion at year’s end.
The bank had 270,000 customers and 94 outlets at the end of 2007. Sales of the
Founded in 1991, Tatra banka a.s. ranked third on the Slovakian market in 2007 with a balance sheet total of € 7.5 billion at year’s end. That represents an increase of 24 per cent on the preceding year. The branch network was expanded last year by 8 outlets to a total of 153 at year’s end. Despite enormous competition, the number of corporate customers rose by 13 per cent to 3,624. Deposits in that segment increased by 26 per cent to € 2.1 billion, and the loan portfolio grew by 26 per cent to € 2.5 billion.
In a continuing real estate boom, especially in the region around Bratislava, the bank positioned itself as a financer of numerous real estate projects last year. Subsidiaries in the areas of fund management and leasing round out the bancassurance group’s product range. Through a subsidiary, the bank opened Slovakia’s first capital-protected pension fund in November 2007. Investment company Tatra Asset Management maintained its leading position with a market share of about one-third.
Raiffeisen Banka d.d. was founded in 1992 as Krekova banka and was taken over by Raiffeisen International in 2002. After five years of Raiffeisen presence in Slovenia, its name was changed together with an extensive marketing campaign that signaled a clear step towards image updating in addition to confirming stability and safety as traditional Raiffeisen values.
Raiffeisen Leasing d.o.o. successfully con tinued its emphasis on real estate develop ment projects in 2007. It started new projects in that area with total invest- ments worth about € 65 million.
Southeastern Europe registered the highest earnings growth of all three regional segments in the reporting period. Thanks to the good market position of group units in this region, profit before tax grew by 55 per cent to € 442 million. The return on equity before tax likewise improved significantly from 28.2 per cent before to 30.2 per cent.
Risk-weighted assets (incl. market risk) 16,443,296 12,625,681 30.2% Average number of staff 15,112 12,636 19.6%
The region’s net commission income rose strongly, by 44 per cent from € 268 million before to € 386 million. The largest increase was achieved by the group unit in Romania thanks to a pronounced retail orientation and solid customer base. Good development in payment transfers and account services at € 167 million and in foreign exchange and notes/coins business at € 82 million were critical for this increase. The asset management unit in Croatia newly consolidated in the reporting year contributed € 12 million to net commission income. Assets under management reached € 0.6 billion.
The Southeastern Europe segment made trading profit of € 35 million. That result is largely based on currency-related business and was 31 per cent below the preceding year’s value. Valuation losses of about € 10 million from hedging transactions in Croatia, used to minimize the currency risk of certain credit portfolios, were the main reason for that. Income from interest-related business likewise declined due to the rising interest rate level in the region.
Raiffeisen Bank increased its total lending last year by 69 per cent to € 511 million. By extending small and micro loans to personal customers, the bank especially took account of the Albanian population’s greater financing needs. It was the only bank represented in all regions of the country and served a total of 549,000 retail cus tomers in 2007 with 97 business outlets.
Founded in May 2006, leasing company Raiffeisen Leasing Sh.a. reported assets amounting to € 10 million at the end of its first full financial year on 31 December 2007. It is thus already one of the country’s leading leasing companies and has an excellent distribution network for its entire product range with the business outlets of Raiffeisen Bank.
Global Finance and Euromoney magazines awarded Raiffeisen Bank the title Best Bank in Albania in 2007.
Founded as Market banka in 1992 and merged with Hrvatska Postanska Banka in 2002, Raiffeisen Bank d.d. Bosna i Hercegovina continues to occupy a leading position on the local banking market as measured by its balance sheet total, which increased in 2007 by 23 per cent to € 2.0 billion.
Business with private individuals as well as with small and medium-sized enterprises con tributed considerably to Raiffeisen Bank’s success with new lending of € 199 million. The bank had more than 700,000 personal customers as well as small- and medium-sized enterprises and 92 business outlets as of the balance sheet date. It thus increased the number of outlets last year by 17.
At the same time, lending to corporate customers rose by € 123 million to € 455 million. Raiffeisen Bank had about 2,400 customers in this segment at the end of 2007. Furthermore, successful cooperation with Group company Raiffeisen Leasing d.o.o. was expanded. It was one of the country’s leading leasing providers with a market share of more than one-fifth. Subsidiary Raiffeisen Brokers d.o.o. was also one of the largest brokerage houses in Bosnia and Herzegovina in 2007.
As in 2006, the bank was again the leader in the bond market in the reporting period. It acted as lead manager for new issues worth a total of € 136 million and thus had a market share of 50 per cent.
Raiffeisenbank’s foreign currency bank deposit rating from Moody’s is Baa3 with a positive outlook. The bank is thus rated on a par with Bulgaria as an issuer of foreign currency bonds.
Raiffeisen Bank Kosovo J.S.C. was founded as American Bank of Kosovo in November 2001 and then fully taken over and renamed by Raiffeisen International as of 2003. It is the second-largest bank in Kosovo with a market share of 35 per cent and a balance sheet total that increased by 27 per cent on the pre ceding year to € 473 million at the end of 2007. The branch network expanded by 5 outlets in 2007 to 38. Mobile bankers completed the distribution network on this small, but dynamic market. A leasing company will be founded in 2008 to strengthen the presence even more.
The bank’s total customer lending rose in the reporting period by 50 per cent to € 339 million, and total customer deposits grew by 27 per cent to € 393 million. Also, the number of customers increased by 43 per cent on the preceding year to about 173,000. The bank’s positioning is especially strong in the area of small and medium-sized enterprises, where it has a market share of 35 per cent.
The emphasis in corporate customer business was on informing customers about changes and new financing and subsidy possibilities connected with accession to the European Union. This segment grew again on both the asset and liability sides. Total lending rose by 33 per cent to € 1.7 billion, and deposits increased by 9 per cent to € 1.5 billion.
Raiffeisen Bank’s foreign currency bank deposit rating from Moody’s is Baa3 with a stable outlook and thus matches the rating of the Romanian state as an issuer of foreign currency bonds.
The bank received numerous awards last year, including Bank of the Year from Business Press and Corporate Bank of the Year from Piata Financiara.
The CIS segment registered strong growth of its loan portfolio and income, in line with strategy. Profit before tax increased in the reporting year by 27 per cent, or € 78 million, to € 369 million despite the deconsolidation of Raiffeisenbank Ukraine in the preceding year. The return on equity fell by 5.6 percentage points to 26.7 per cent because of the significantly larger equity base (plus 53 per cent) and absence of Raiffeisenbank Ukraine, which did not tie up very much capital. Regarding the region’s development, it should be noted that Impexbank was only included for five months of the comparable period and some special effects were also registered.
The region’s net interest income was the highest of all the segments. It rose by 47 per cent, or € 280 million, to € 880 million and thus developed even more dynamically than balance sheet assets, which increased more than usual by € 6.0 billion to € 19.9 billion thanks to a significant growth of lending business. The group unit in Russia achieved especially strong expansion. That led to improvement of the net interest margin by 13 basis points to 5.13 per cent. The risk-weighted assets developed analogously to the growth of balance sheet assets and rose by 42 per cent to € 15.9 billion.
Provisioning for impairment losses increased in the reporting period from € 127 million before to € 169 million. This increase by one-third was a result of the strong expansion of business volume in both the retail and corporate customer segments and was largely attributable to the two already merged Russian banks. The risk/earnings ratio improved by 2.0 percentage points to 19.2 per cent. The ratio of non-performing loans to total lendings remained stable in 2007, and the coverage ratio (provisioning for impairment losses to non-performing loans) remained high at 186 per cent.
Net income (loss) from derivative financial instruments (30,600) 1,327 – Net income (loss) from financial investments and current financial assets (2,880) 636 – General administrative expenses (721,656) (572,720) 26.0% Other operating profit (loss) (24,129) (16,082) 50.0% Income from disposal of group assets 2,711 – – Profit before tax 368,532 290,694 26.8%
Priorbank OAO was founded in 1989 as Minsk Innovation Bank. Raiffeisen International successively acquired the majority of its shares in 2002 and 2003 and held 63 per cent of the shares by the end of 2007. With a balance sheet total of € 1.1 billion, it was again the country’s third-largest bank, as in the year before.
Priorbank also enlarged its branch network last year by 20 outlets to 82. Besides traditional branch business, the bank established additional distribution channels in 2007. It thus met continuing high demand for housing finance by opening Mortgage Centers. Distribution cooperation with post offices where simple savings products can be obtained proved successful for deposit business. This distribution channel gave Priorbank access to new customer groups. The bank also has an efficient network of mobile bankers.
The merger of the two banks was a milestone in 2007. The bank that emerged from the combination unites Raiffeisen’s tradition with Impexbank’s outstanding distribution network. While the bank used to concentrate on large corporate customers and investment banking in the past, today it also serves personal customers with a wider product portfolio that includes pension fund offers.
The bank again lived up to its reputation in 2007 as a dependable partner in corporate customer business. Total lending to enterprises rose by 50 per cent to € 6.2 billion, and the bank is one of Russia’s market leaders in corporate bonds. Since 2001, it has acted as lead manager or co-lead manager in 129 issues worth a total of about € 400 billion.
VAT Raiffeisen Bank Aval was founded in 1992 as Joint Stock Post-Pension Bank Aval and developed in a few years into one of Ukraine’s leading retail banks. Raiffeisen International acquired 93.5 per cent of the bank in October 2005 and increased its stake to 95.7 per cent by December 2007.
The product range for affluent customers was extended by the founding of Asset
Management Company Raiffeisen Aval in September 2007. LLC Raiffeisen Leasing Aval surpassed all expectations with new business amounting to almost € 115 million already in its first full year. The company has been on a continuous growth track since its founding in summer 2006 and now offers a broad product range.
The Banker honored Raiffeisen Bank Aval in 2007 as Bank of the Year.
Net interest income (2) 2,418,849 1,763,881 37.1% Provisioning for impairment losses (3) (356,977) (308,877) 15.6%
Net commission income (4) 1,249,835 933,289 33.9% Trading profit (5) 127,891 174,823 (26.8)%
Quarterly results €000 Q1/2007 Q2/2007 Q3/2007 Q4/2007 Net interest income 505,009 573,764 625,012 715,063 Provisioning for impairment losses (75,948) (77,319) (88,835) (114,875)
€000 Q1/2006 Q2/2006 Q3/2006 Q4/2006 Net interest income 378,236 411,584 460,912 513,149 Provisioning for impairment losses (55,407) (69,631) (104,283) (79,556)
Profit after tax 151,466 182,079 277,801 663,027 Minority interests in profit (27,220) (17,119) (27,658) (20,249)
Deposits from customers (27,35,36) 40,457,266 33,156,349 22.0% Liabilities evidenced by paper (28,35,36) 2,320,428 1,421,706 63.2%
As of 1 January 2006, retained earnings amounting to € 36,780 thousand were transferred to capital reserves due to an inaccurate reporting in the past periods.
Equity as of 1/1/2006 434,228 1,432,406 552,251 382,334 475,144 3,276,363 Capital increases – – – – 73,335 73,335
Equity as of 1/1/2007 433,719 1,426,575 943,307 1,182,126 603,856 4,589,583 Capital increases 36,287 1,183,546 – – 85,496 1,305,329
Sundry income and expenses directly recognised in equity (346) (687) – –
Gains (losses) from disposals of tangible fixed assets and financial investments 2,648 (825)
Subtotal 1,193,089 1,625,020 Changes in assets and liabilities arising from operating activities after corrections for non-cash items: Loans and advances to banks and customers (20,652,322) (14,871,493)
Net cash from investing activities shows inflows and outflows from financial investments, tangible and intangible assets, proceeds from disposal of group assets, and payments for acquisition of subsidiaries.
Cash and cash equivalents include the cash reserve recognised in the balance sheet, which consists of cash in hand and balances at central banks due at call. It does not include loans and advances to banks that are due at call, which belong to operating activities.
The corporate customers segment comprises business with large corporates and mid market companies from Central and Eastern Europe (CEE) as well as with companies from other countries that are operating in the CEE region, including especially multinationals. The criteria are key ratios like revenues, profit and number of employees. Small and medium-sized companies belong to corporate customers if their annual sales are at least € 5 million or clearly relate to project or trade finance. All other small and medium-sized enterprises are included in the small entities sub-segment of the retail segment.
Because of the minor importance of public sector and financial institutions for the consolidated results of Raiffeisen International, their results are included in the segment corporate customers.
The retail customers segment includes private individuals (consumers) and small and medium-sized enterprises, that is, companies with an annual turnover of less than € 5 million (with minor deviations in some countries), other than thoseengaged in project or trade finance related activities (small entities), and micro customers, whose annual revenues areless than 1 million and where exposure is lower than € 100 thousand. They are offered standardised products such as saving books and saving deposits, time deposits, current and salary accounts, consumer credits, overdraft lines, credit cards, and mortgages as well as other earmarked loans.
Earnings arising from private banking provided by a number of Group units are also included in this customer segment. For high-net-worth individuals an individualised advisory approach is applied and asset management services are offered.
Proprietary trading in financial instruments is centrally controlled and subject to strictly monitored limits. In addition, Raiffeisen International has a portfolio of medium-term and long-term financial investments.
Net interest income 798,339 1,440,687 151,323 28,499 2,418,849 Provisioning for impairment losses (134,391) (217,759) (488) (4,338) (356,977)
Profit before tax 668,622 486,651 187,979 (105,648) 1,237,604 Risk-weighted assets (incl. market risk) 24,742,496 18,978,160 5,941,968 4,301,369 53,963,993 Own funds requirement 1,979,400 1,518,253 475,357 344,109 4,317,119 Average number of staff 8,089 44,582 1,244 1,635 55,550 Cost/income ratio 35.8% 68.3% 27.6% – 57.6% Average equity 2,215,485 1,648,674 571,829 374,206 4,810,194
Profit before tax 467,201 263,540 241,469 507,402 1,479,612 Risk-weighted assets (incl. market risk) 19,067,850 14,143,395 5,407,497 2,433,068 41,051,810 Own funds requirement 1,525,428 1,131,472 432,600 194,645 3,284,145 Average number of staff 7,390 38,677 1,064 2,042 49,173 Cost/income ratio 36.7% 72.3% 22.8% – 59.1% Average equity 1,475,965 1,064,790 540,168 177,781 3,258,704
• Commonwealth of Independent States (CIS) This segment contains the members of the Commonwealth of Independent States – created from parts of the former Soviet Union – where Raiffeisen International is active, namely Belarus, Kazakhstan, Russia and Ukraine.
Net interest income after provisioning 698,305 652,457 711,110 2,061,872 Net commission income 470,539 386,100 393,195 1,249,834
Profit before tax 427,530 441,542 368,532 1,237,604 Total assets 29,692,577 23,155,679 19,894,549 72,742,805
Net interest income after provisioning 510,045 471,731 473,228 1,455,004 Net commission income 343,220 268,481 321,587 933,289
These consolidated financial statements were signed by the Managing Board on 3 March 2008 and subsequently submitted to the Supervisory Board for review and approval (ascertainment).
already applicable. All standards published by the IASB to be applied to financial statements for 2007 and adopted by the EU, have been applied.
The consolidated financial statements 2007 are based on the IASB framework and on the following relevant IAS/IFRS: IAS 1 Presentation of Financial Statements IAS 2 Inventories IAS 7 Cash Flow Statements IAS 8 Net Profit or Loss for the Period, Fundamental Errors and Changes in Accounting Policies IAS 10 Events after the Balance Sheet Date IAS 12 Income Taxes IAS 14 Segment Reporting IAS 16 Property, Plant and Equipment IAS 17 Leases IAS 18 Revenue IAS 19 Employee Benefits IAS 21 The Effects of Changes in Foreign Exchange Rates IAS 23 Borrowing Costs IAS 24 Related Party Disclosures IAS 26 Accounting and Reporting by Retirement benefit Plans IAS 27 Consolidated and Separate Financial Statements IAS 28 Investments in Associates IAS 29 Financial Reporting in Hyperinflationary Economies IAS 32 Financial Instruments: Presentation IAS 33 Earnings per Share IAS 34 Interim Financial Reporting IAS 36 Impairment of Assets IAS 37 Provisions, Contingent Liabilities and Contingent Assets IAS 38 Intangible Assets IAS 39 Financial Instruments: Recognition and Measurement IAS 40 Investment Property IFRS 1 First-time Adoption of International Financial Reporting Standards IFRS 2 Share-based Payment IFRS 3 Business Combinations IFRS 5 Non-current Assets Held for Sale and Discontinued Operations IFRS 7 Financial Instruments: Disclosures
IAS 11, IAS 20, IAS 31, IAS 41, IFRS 4 and IFRS 6 are not applied as there were no relevant business transactions in the Group.
IFRS 8 will be effective for annual periods beginning on or after 1 January 2009 and will lead to changes in external reporting as IFRS 8 is superseding completely IAS 14. IFRS 8 has not been applied yet in the consolidated financial statements. IFRIC 11, also adopted by the EU, will have no material effects on future consolidated financial statements.
statements of associated companies are used. Changes in equity of companies valued at equity are also treated in the consolidated accounts as changes in equity.
Shareholdings in subsidiaries not included in the consolidated financial statements because of their minor significance and shareholdings in companies which have not been valued at equity are shown under financial investments and are measured at amortised cost.
Intra-group balances between parent company and subsidiaries and intra-group balances between subsidiaries are eliminated in the consolidated accounts. Remaining temporary differences are recognised under other assets/other liabilities.
Intra-group income and expenses are off-set and timing differences resulting from bank business transactions are shown in net interest income. Other differences were shown in other operating profit/loss.
The number of fully consolidated companies and companies valued at equity changed as follows: Fully consolidated Equity method Number of units 2007 2006 2007 2006
Because of their minor importance in giving a view of the Group’s assets, and financial and earnings position, 84 subsidiaries were not included in the consolidated financial statements (2006: 75). They were recognised at amortised cost under financial investments as interests in affiliated companies. The balance sheet total of the companies not included in the Group came to less than 2 per cent of the Group’s aggregated balance sheet total.
Raiffeisen Equipment Leasing Company Limited by Shares, Budapest (HU) 72.7% 1/3 Foundation
The following table shows the assets and liabilities revalued as of the acquisition date: €000 RIARO* RLRECP** Total
The effect of acquired subsidiaries on liquidity corresponds to the acquisition cost as there were no liquid funds in the acquired subsidiaries.
As of 1 January 2007, the following three fund management companies were included in the consolidated financial statements for the first time due to the increasing importance to Raiffeisen International: Tatra Asset Management sprav.spol., a.s., Bratislava, Raiffeisen Invest d.o.o., Zagreb, Raiffeisen Investment Fund Management Zrt., Budapest. Due to an accurate reporting of commission income arising from insurance agency services, two insurance brokers rendering services to network companies and external customers were integrated as of 1 January 2007: Raiffeisen Insurance Agency Sp.z.o.o., Warsaw, and Raiffeisen Biztosításközvetítö Kft., Budapest. As of 1 April 2007, an insurance broker, Raiffeisen Insurance and Reinsurance Broker S.R.L., Bucharest, was acquired and firstly integrated.
In the financial year 2007, the following companies were excluded from the Group: Name Share Excluded as of
SCT Milfav Ingatlanfejlesztö és Ingatlanhasznosito Kft., Budapest (HU) 73.6% 31/12 Sold
In the third quarter 2007, Raiffeisen Financial Services Company Zrt., Budapest, sold its shares in Arena Corner Ingatlan-fejleszt Kft., Budapest, to OROC Group Endurance Asset S.a r.l., Luxembourg. The company was excluded as of 1 July 2007 and the resulting profit amounted to € 14,559 thousand.
Income from disposal of group assets 11,038 14,559 25,597 * SINESCO Energiaszolgáltató Kft., Budapest (HU) ** Arena Corner Ingatlanfejleszt Kft., Budapest (HU)
Financial statements of fully consolidated companies prepared in foreign currencies were translated into euros employing the modified current rate method in accordance with IAS 21. Equity was translated at its historical exchange rates while all other assets, liabilities and the notes were translated at the prevailing foreign exchange rates as of the balance sheet date. Differences arising from the translation of equity (historical exchange rates) were offset against retained earnings and not recognised in income statement.
In the Group, hedges of investments in economically independent sub-units (IAS 39.102) were made in order to reduce differences arising from the translation of equity. Liabilities in foreign currency, currency options, currency futures and currency swaps are mainly used as hedging instruments. The resulting gains and losses from currency translation are shown in equity without affecting profit and are separately disclosed in the statement of changes in equity, insofar as the hedging relation is effective. The ineffective part of this hedge relation is recognised in profit. The related interest components are shown in net interest income. There were no deferred taxes calculated due to the applied exception regulations according to IAS 12.39.
A financial instrument is defined as any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity. In IFRS balance sheets, the following five categories are distinguished: 1. Financial assets or liabilities at fair value through profit and loss a. Trading assets/liabilities b. Designated financial instruments at fair value 2. Financial assets held-to-maturity 3. Loans and advances 4. Financial assets available-for-sale 5. Liabilities 1. Financial assets or liabilities at fair value through profit and loss 1 a. Trading assets/liabilities
Trading assets/liabilities are acquired or incurred principally for the purpose of generating profit from short-term fluctuations in market prices. Securities (including short selling of securities) and derivative financial instruments held for trading are recognised at their fair values. If securities are listed, the fair value is based on stock exchange prices. Where such prices are not available, internal prices based on present value calculations for originated financial instruments and futures or option pricing models for options are applied. Present value calculations are based on the zerocoupon curve. As option price formulas Black-Scholes 1972, Black 1976 or GarmanKohlhagen are applied depending on the kind of option.
Loans and advances are recognised at their nominal value without deduction of impairment losses. Accrued interest is recognised in the income statement if there is a high probability that it would be received. Moreover, debt instruments are also stated there if there is no active market. De-recognition of financial assets within the framework of securitisations is – after checking if the securitised special purpose vehicle has to be integrated in the consolidated accounts – done on a risk and rewards or control test according to IAS 39 however in case of loss of control over the contractual rights arising from the financial asset.
The category of financial assets available-for-sale contains those financial instruments (mainly equity participations for which there are no active market) that did not qualify for any of the other three categories. They are stated at fair value, if a fair value is reliably measurable. Valuation differences are shown directly in equity and only recognised in the income statement if there is an objective indication of impairment. Only in the case of debt instruments, a reversal of impairment is recognised in the income statement. In case of equity instruments, such reversals of impairment are booked versus equity. This kind of financial instruments is reported under financial investments.
Hedge Accounting according to IAS 39 applies for those derivatives which are used to hedge the fair values of financial assets and liabilities. Especially the credit business is subject to such fair value risks if it deals with fixed-interest loans.
Derivative instruments held to hedge the fair values of individual balance sheet items (except trading assets/liabilities) are recognised at their fair values (dirty prices) under derivatives (on the assets side: positive dirty prices; on the liabilities side: negative dirty prices). Changes in the carrying amounts of hedged items (assets or liabilities) are allocated directly to the corresponding balance sheet items 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 valuation result from derivatives (net result from hedge accounting ).
Interest rate swaps used to hedge against the risk of fluctuating cash flows arising from specific variable interest-rate items, were recognised as follows: The hedging instrument was recognised at fair value; changes in its clean price are recorded as separate item in equity without affecting income.
Credit risk is accounted for by making specific impairment provisions and portfoliobased impairment provisions. The latter comprise impairment provisions for portfolios of loans with identical risk profiles that may be compiled under certain conditions. In the retail segment, provisions are built according to product portfolio and past due days. Specific and portfolio-based impairment provisions are not netted against corresponding receivables but are stated separately in the balance sheet.
The entirety of the provision for impairment losses arising from on-balance-sheet loans (individual loan loss provisions and portfolio-based provisions) is shown as a separate item on the assets side of the balance sheet, below loans and advances to banks and customers. The provision for impairment losses arising from off-balance-sheet transactions is recorded under provisions for liabilities and charges.
Internally developed intangible fixed assets comprise without exemption software. Software is capitalised if it is probable that the future economic benefits attributable to the asset will accrue to the enterprise and the cost of the asset can be measured reliably. The useful life of software is between four and six years and may be longer for major software projects.
Inventories are measured at the lower of cost or net realisable value. Write-downs are made if the acquisition cost is above the net realisable value as of the balance sheet date or if limited usage or longer periods for storage have impaired the value of the inventory.
All defined benefit plans relating to so-called social capital (Provisions for pensions, provisions for severance payments provisions for anniversary bonuses) are measured using the Projected Unit Credit Method in accordance with IAS 19 – Employee Benefits.
Calculations are based on an assumed retirement age of 65 years and are subject to transitional statutory regulations and special arrangements in individual contracts. Actuarial gains or losses calculated for pension obligations are recognised immediately in profit. The right to vote according to IAS 19.92 (“corridor method”) was not applied.
The actuarial computation of severance payments and anniversary bonuses is based on the following assumptions: Average increase in salary 3.0 3.0
The biometrical basis for the calculation of provisions for pensions, severance payments and anniversary bonuses of Austrian companies is provided by AVÖ 1999-PRechnungsgrundlagen für die Pensionsversicherung (Computational Framework for Pension Insurance) – Pagler & Pagler, using the variant for salaried employees and considering a long-life factor. In other countries, similar actuarial parameters are used for calculation.
Interest and similar income mainly includes interest income on loans and advances to banks and customers and from fixed-interest 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 similar income calculated as interest are also reported under interest and similar income. Interest paid and similar charges mainly include interest paid on deposits from banks and customers and on liabilities evidenced by paper and subordinated capital. Interest income and interest expenses are accrued.
According to IAS 39, a financial guarantee is a contract under which the guarantor is obliged to make payments that compensate the party to whom the guarantee is issued for a loss arising in the event a particular debtor does not meet payment obligations on time as stipulated in the original terms of the debt instrument. At the date of recognition of a financial guarantee, the initial fair value corresponds under market conditions to the premium at the date of signature of the contract. For subsequent valuations, a check has to be performed if the credit commitment has to be designated at fair value through profit and loss or if it has to be presented as provision according to IAS 37. The higher of the two amounts has to be recognised.
Financial assets and liabilities at fair value through profit or loss 78,381 43,802 78.9% Net interest income 86,910 43,204 101.2%
Net gains (losses) on financial assets and liabilities at fair value through profit or loss (8,529) 598 –
Net realised gains (losses) on financial assets not measured at fair value through profit or loss 2,284 103,834 (97.8)%
Impairment on financial assets not measured at fair value through profit and loss (3,196) (1,255) 154.7%
Financial assets held-to-maturity 148,796 148,220 0.4% Net interest income 148,598 148,210 0.3%
Net realised gains (losses) on financial assets not measured at fair value through profit or loss 198 (1) –
Impairment on financial assets not measured at fair value through profit and loss – 11 (100.0)%
Provisioning for impairment losses on balance sheet and off-balance sheet items is made as follows: Individual loan loss provisions (281,430) (189,401) Allocation to provisions for impairment losses (505,296) (371,820)
Net provisioning ratio (Ø risk-weighted assets of the banking book) 0.84% 0.97%
Derivative instruments held to hedge against market risks (except trading assets /liabilities) that are based on an inhomogeneous portfolio do not satisfy the requirements for hedge accounting according to IAS 39. The item net result from other derivatives includes valuation results of this category of derivatives.
Net result from credit derivatives represents a realised result from credit derivatives.
The position net income from financial investments comprises valuation results and net proceeds from disposal of financial investment portfolio (held-to-maturity), from securities at fair value through profit and loss and equity participations which include shares in affiliated companies, companies valued at equity, and other equity investments.
Net proceeds from sales of securities at fair value through profit and loss 108 3,791
Depreciation on intangible and tangible fixed assets (222,558) (181,059) Tangible fixed assets (135,119) (118,823)
Legal, advisory and consulting expenses include audit fees of the group companies which comprise expenses paid for the audit of financial statements amounting to € 5,884 thousand (2006: € 4,409 thousand) and tax advisory as well as other additional consulting services provided by the auditors amounting to € 986 thousand (2006: € 805 thousand).
Amortisation of intangible fixed assets capitalised in the course of initial consolidation was € 11,998 thousand (2006: € 10,531 thousand).
Income taxes break down as follows: Current income taxes (246,900) (245,455)
Raiffeisen International Bank-Holding AG and three of its domestic subsidiaries form a joint tax entity headed by Raiffeisen Zentralbank Österreich Aktiengesellschaft. This enables them to allocate Group member losses to the Group parent’s tax income. As tax apportionment, Raiffeisen International Bank-Holding AG received a tax equalization of € 11,344 thousand (2006: € 1,781 thousand) from Raiffeisen Zentralbank Österreich Aktiengesellschaft.
The following transition shows the relation between profit before tax and the effective tax burden: Profit before tax 1,237,604 1,479,612 Theoretical income tax expense in the financial year based on the domestic income tax rate of 25 per cent (309,401) (369,903)
Tax deductions because of tax-exempted income from equity participations and other income 64,209 161. 911
Last year, the tax rate was influenced by tax-exempted income from the sale of equity participations. The tax rate would have been 23.0 per cent without consideration of this tax-exempted income.
Average number of ordinary shares outstanding (in 1,000 units) 144,987 142,585
The following table shows balance sheet according to IAS 39 valuation categories: Assets according to valuation categories €000 31/12/2007 31/12/2006 Change
Trading assets 2,901,687 2,719,441 6.7% Positive fair values of derivative financial instruments 620,694 349,233 77.7%
Financial assets at fair value through profit or loss 1,566,157 995,093 57.4% Shares and other variable-yield securities 101,726 40,391 151.9%
Equity and liabilities according to valuation categories €000 31/12/2007 31/12/2006 Change
Purchased loans belong to the valuation category “loans and advances at amortised cost”.
Loans and advances break down into the following bank segments: Multinational development banks (MDB) 19,444 12,357
Purchased loans amounting to € 45,042 thousand (2006: € 64,842 thousand) are assigned to the valuation category “held-to-maturity“. Purchased loans classified as “loans and advances at amortised cost” totalled € 519,389 thousand (2006: € 568,609 thousand).
Loans and advances to customers classified regionally (counterparty’s seat) are as follows: Central Europe (CE) 20,328,114 15,101,964
The trading assets consist of the following securities and derivative instruments held for trading: Bonds, notes and other fixed-interest securities 2,048,955 2,284,556 Treasury bills and bills of public authorities eligible for refinancing 745,719 701,667
Shares and other variable-yield securities 77,968 24,693 Shares and comparable securities 75,001 24,693
Positive fair values of banking book derivatives without hedge accounting 86,328 30,219
Bonds, notes and other fixed-interest securities 3,931,519 3,673,835 Treasury bills and bills of public authorities eligible for refinancing 1,692,911 1,789,510
Raiffeisenbank a.s. (Czech Republic), Tatra banka a.s. (Slovakia), Raiffeisen Bank, Zrt. (Hungary) respectively Raiffeisen-RBHU Holding GmbH (Austria), Raiffeisen Krekova banka d.d. (Slovenia), Raiffeisenbank Austria d.d. (Croatia). These syndicate contracts regulate especially options between direct and indirect shareholders.
Financial information on associated companies is shown in the following table €000 Total assets
Office furniture and equipment as well as other tangible fixed assets 450,195 450,788
Intangible and tangible fixed assets developed in the financial year 2007 as follows: Cost of acquisition or conversion
Other land and buildings (20,228) – (8,332) 15,592 of which land value of developed land – – – 7,429
Tangible fixed assets (579,863) 5,022 (132,034) 1,055,733 Land and buildings used by the Group for own purposes (112,812) 49 (17,512) 487,257
Other land and buildings (12,561) – (4,656) 12,769 of which land value of developed land – – – 7,510
Deferred taxes break down as follows: Deferred tax assets 70,274 73,051
The net deferred taxes result from the following items: Loans and advances to customers 69,339 43,763
Deferred tax assets 273,750 206,690 Loans and advances to banks 23,369 430
Deferred income tax assets are recognised for unused tax loss carry-forwards and amounted to € 7,858 thousand (2006: € 7,670 thousand). The tax loss carryforwards are mainly without any time limit. The Group did not recognise deferred income tax assets of € 2,484 thousand (2006: € 4,759 thousand) because from present point of view there is no prospect to realise them within a reasonable period of time.
Raiffeisen International refinances itself periodically with international commercial banks and multinational development banks. These credit contracts contain ownership clauses normally used in business. These clauses give permission to an exceptional termination if Raiffeisen Zentralbank Österreich Aktiengesellschaft loses the majority shareholding in Raiffeisen International. This would lead to increased refinancing cost for Raiffeisen International in the future.
Deposits break down as follows according to Basel II definition: Corporate customers – large 14,874,853 11,711,737
Deposits from customers classified regionally (counterparty’s seat) are as follows: Central Europe (CE) 17,005,537 14,197,545
Of total subordinated capital, Raiffeisen Zentralbank Österreich Aktiengesellschaft and other subsidiaries of RZB provided € 1,356,525 thousand (2006: € 1,251,160 thousand). The following table contains borrowings which exceed 10 per cent of the subordinated capital.
The Annual General Meeting held on 5 June 2007 authorised the Managing Board to acquire own shares, pursuant to Section 65 (1), items 4 and 8 of the Austrian Joint Stock Companies Act (AktG), during a period of 18 months as of the date of the resolution on the acquisition of new shares, up to 10 per cent of the subscribed capital of the company. The Managing Board was given the authorization to decide, with the approval of the Supervisory Board, on the sale of own shares by different means than the stock exchange or a public tender, to the exclusion of the shareholders´ subscription right. The present authorisation replaced the authorisation, adopted by the Annual General Meeting held on 7 June 2006, to buy back own shares.
The purchase of own shares mainly serves as a coverage for the liabilities of the company in connection with the share incentive program granted to the Managing Board and other executives of the group. These bonus payments are carried out by receiving shares of the company.
As of 5 October 2007, the subscribed capital was increased by issuing 11,897,500 new shares – subscription ratio was 1:12 – from € 435,449 thousand to € 471,736 thousand. The share price was € 104.00. The capital increased – after deduction of cost of issue and after consideration of the appropriate advantages arising from income taxes – to € 1,219,834 thousand. The new shares are fully entitled to dividend payments for 2007.
In the Annual General Meeting held on 5 June 2007, the authorization of the Managing Board (unused to date) pursuant to Section169 of the Austrian Joint Stock Companies Act to increase the subscribed capital by a maximum of € 217,259 thousand within five years after registration in the Company Register by issuing up to a maximum of 71,385,000 no-par bearer shares with voting rights was withdrawn. At the same time, the Managing Board was authorized to increase the subscribed capital by a maximum of € 217,724 thousand by issuing up to a maximum of 71,385,000 nopar bearer shares with voting rights within five years, after having the respective change in the Articles of Association recorded in the Company Register, against a contribution in cash and/or in kind, also by way of an indirect subscription right via a credit institute, pursuant to Section 153 (6) of the Austrian Joint Stock Companies Act, as well as to fix the offering price and the terms of the issue, with the approval of the Supervisory Board. The Supervisory Board or a committee thus autho-rized by the Supervisory Board was authorized to adopt amendments of the Articles of Association that result from utilizing the approved capital.
The statement of changes in equity is shown on page 132. The number of shares outstanding developed as follows
Number of shares issued as of 31/12 154,667,500 142,770,000 Own shares as of 1/1 (262,260) (95,260)
The originally announced share allotment has changed as a result of various management changes in the Group units and is shown on an aggregated level in the table: Share Incentive Program (SIP) 2005-2007
Members of the managing boards of bank subsidiaries affiliated with Raiffeisen International Bank-Holding AG 129,307 32,327 194,961
The shares required for the SIP have been raised through share buybacks. In 2007, Raiffeisen International bought back 563,963 no-par shares at a weighted average price of € 51.19. The low average price is because an option on shares of Raiffeisen International was exercised. The expenses resulting from the program are recognised in income statement as staff expenses.
Total assets 12,750,476 15,860,258 12,103,667 19,894,994 12,133,409 Deposits from banks 1,587,903 3,569,576 5,542,348 8,504,989 722,154
Up to 3 months More than 3 months, up to 1 year
Total assets 11,082,635 12,240,668 9,545,438 15,922,152 7,076,102 Deposits from banks 1,391,468 2,932,150 2,426,945 6,553,260 509,745
Securitisation is the packaging of designated portfolios of loans or leasing claims with an appropriate level of credit enhancement and the redistribution of these portfolios to investors. The objective of Raiffeisen International’s securitisation is to ease the strain on the Group's regulatory own funds and to use additional refinancing sources.
In financial year 2007, the true sale transaction ROOF Russia 2007-1 with a volume of USD 400 million was executed for the ZAO Raiffeisenbank a.s., Moscow, as seller of claims. In this transaction, car loans of retail customers were securitised and transferred to Roof Russia S.A., Luxembourg (L). As the portfolio’s significant chances and risks remain within the Group, the special purpose vehicle is integrated into the consolidated group. Therefore both securitised loans and securitised loans towards external investors are disclosed in the consolidated financial statements.
From a Group view, the non-derecognised loans arising from the true sale transaction ROOF Poland 2006 amounted to € 178,149 thousand at year end (2006: € 164,517). In this case, the fluctuation is mainly due to currency fluctuations as matured volumes have been refilled during the period.
Regarding the true sale transaction ROOF Russia 2007-1, the non-derecognised loans from a Group view totalled € 254,199 thousand, whereas the decrease of the value in comparison to the original transaction value is due to the volumes matured meanwhile.
True Sale Transaction ROOF Poland 2006 Raiffeisen Leasing Polska S.A., Warsaw (PL)
Genuine repurchase agreements as lender (reverse repurchase agreement) Loans and advances to banks 1,480,250 943,862
Securities sold in a genuine sale and repurchase agreement amounted to € 317,037 thousand (2006: € 460,977 thousand). Securities purchased in a genuine sale and repurchase agreement totalled € 1,931,915 thousand (2006: € 1,345,289 thousand ). There were no sold or repledged securities-collaterals in the financial and previous year.
Gross investment value 4,065,461 2,651,603 Up to 3 months 381,908 265,438
Unearned finance income 634,327 347,308 Up to 3 months 59,934 37,484
Assets under finance leases break down as follows: Real estate leasing 436,104 306,807
Operating leases from view of Raiffeisen International as lessor: Future minimum lease payments under non-cancellable operating leases are as follows: More than 1 year, up to 5 years 57,246 69,884
Raiffeisen International to identify and measure risks, to monitor and to manage them is a decisive competitive factor. To ensure the long-term success of Raiffeisen International and to permit selective growth in the targeted markets, the Group’s risk management and risk controlling activities are designed to ensure the professional management of credit (including country), market, liquidity, and operational risks.
In order to ensure a consistent and coherent risk management approach, the Managing Board of Raiffeisen International Bank-Holding AG decides on the risk strategy and risk management within the framework laid down by RZB Group. They define the risk appetite, set limits for all material risks, and demand a minimum risk-adjusted return in the Group’s risk strategy. Special attention is paid to concentration risks, and thus they also define limits on large exposures, product/sector/industry weights, and regional concentrations. The Managing Board is also responsible for implementing these targets and for the adequate monitoring and controlling of the risks incurred.
Furthermore, the members of the Managing Board of Raiffeisen International ensure the proper organisation and ongoing development of effective internal risk management. They decide which procedures are to be employed in identifying, measuring, and monitoring risks, and make steering decisions according to risk reports and analyses. In all this the Managing Board is supported by independent risk management and risk controlling units and specially appointed committees.
The central risk management and controlling functions are accountable for the adequate and appropriate implementation of all aspects of the Group’s risk management process. In particular, they establish common risk management principles and set business-specific standards, tools, and practices which are followed in all Group entities. This serves the purpose of creating a common risk culture and fostering the use of state-of-the-art risk management tools in the Group. For example, Basel II calculations for credit risks in non-retail portfolios are performed centrally: this ensures that definitions, parameters, and processes are the same for all units and that knowledge gained from implementing advanced risk measurement approaches (i.e. the IRB approach ) is shared among different Group members.
Local risk management units are established in the different legal entities of RI Group. They implement the risk policies for specific risk types and take active risk steering decisions within the approved risk budgets in order to achieve the targets set in these policies. For this purpose, they monitor risks using standardized measurement tools and communicate them to central risk management units via defined reporting interfaces.
The Market Risk Committee (MACO) is responsible for controlling market risks of trading and banking book activities and for establishing appropriate limits and relevant processes. For this purpose, the committee evaluates daily results, the amount of risks taken and the limit utilisation, as well as the results from stress tests.
Risk of not being able to satisfy claims of senior debt holders
Raiffeisen International estimates economic capital as the amount of unexpected losses on an annual basis using a confidence interval of 99.95 per cent. This confidence level is based on the probability of default implied by the target rating. The purpose of calculating economic capital is to ensure that the bank has enough capital (so-called internal capital) which would be required for servicing the claims of customers and creditors even in the case of such an extremely rare event.
Risk contribution of individual risk types to economic capital at Raiffeisen International as of 31/12/2007
Based on these calculations, Raiffeisen International also carries out risk-adjusted performance measurement. The profitability of business units is set in relation to the amount of economic capital attributed to these units (risk-adjusted return on riskadjusted capital, RORAC) which yields a comparable performance measure for all business units of the bank. The RORAC measure in turn is a key figure for overall bank management and influences future capital allocations to business units.
In parallel to that procedure, risk is calculated as value-at-risk on the basis of a confidence interval of 99 per cent as well. This capital requirement is likewise weighed against a corresponding estimate of risk-taking capacity which is derived from the bank’s available capital based on a going concern basis (with respect to regulatory capital adequacy).
Raiffeisen International manages regulatory capital on Group level according to Austrian regulations whereas local regulatory capital requirements are met by adequate structural balance sheet measures. The target for regulatory capital is intentionally set higher than the minimum regulatory requirement in order to assure sufficient regulatory capital at all times and to account for other risks or higher risks which are not considered in the regulatory requirements. Thus the banking group ensures going-concern and the distribution of a minimum profit with a defined confidence level as well.
Credit risk within Raiffeisen International consists mainly of default risk that arises from business with personal banking and corporate customers, other banks and sovereign borrowers. Default risk is defined as the risk that a customer will not be able to fulfil contractually agreed financial obligations. Credit risks, however, also arise from migration risks (caused by deteriorations in customers’ creditworthiness), concentrations of creditors or in credit risk mitigation techniques, and country risk.
Raiffeisen International analyses and monitors credit risk both on an individual loan (and customer-by-customer basis respectively) and on a portfolio basis. Credit risk management and lending decisions are based on the respective credit risk manuals and policies and the corresponding tools and processes which have been developed for this purpose.
The internal credit risk controlling system includes different types of monitoring measures which are tightly integrated into the work processes that lead from the customer’s initial credit application, to the bank’s credit approval, and finally to the repayment of the loan. Against the background of the new capital adequacy framework for banks (Basel II), the seamless management, monitoring and control of credit risk is thus assured.
Limits are granted within the context of a hierarchical decision making process depending on the type and size of a loan. Limit decisions are handled by local units on behalf of the Managing Board of Raiffeisen International Bank-Holding AG or local supervisory boards according to this system of hierarchical competence. It always requires the approval of the business and the credit risk management divisions when granting new loans or when performing limit re-evaluations in the regular reassessments of counterparty risks. If the individual decision-making parties disagree, the potential transaction will have to be considered by the next decision-making level.
The internal rating model for corporate customers takes into account qualitative factors as well as several business and performance figures (e.g. interest cover, ordinary income margin, EBTDA margin, equity ratio, return on assets, debt amortisation period ), which are tailored to the various industries and financial reporting standards.
The following table provides a breakdown of the credit exposure (including offbalance sheet exposure) according to the internal rating in the business segment Corporate Customers in thousands of euros. These figures are based on the customer rating only. Collateral must also be taken into account in the overall assessment of credit risk:
In 2007, a new rating model for project finance has been introduced. Thus, we do not include their exposure in the table for corporate customers for the year 2007 any more, but show the exposure from project finance separately below in thousands of euros: Internal project rating 2007 Proportion 6.1 Excellent project risk profile – very low risk 409,248 26.1%
The following table shows the credit exposure (including off-balance sheet exposure) per rating class for financial institutions (excluding central banks) in thousands of euros: Internal rating 2007 Proportion 2006 Proportion
The rating distribution of financial institutions shows significant clustering in the rating class A3 (the proportion increased from 49 to 64 per cent from the previous year). This is caused by the fact that most banking institutions in developed markets (including RZB AG) have this rating assigned. The number and exposure of unrated financial institutions has been further decreased to below 2 per cent. This exposure is mainly due to short-term loans to small banks, where the rating process has not been completed yet, or stems from companies that have been added to the scope of consolidation recently.
Exposure to financial institutions (excluding central banks), by internal rating and region
Another rating model in this segment is used for central governments, central banks, and regional municipalities as well as other public sector entities. The table below provides a breakdown of the credit exposure to sovereigns (including central banks and off-balance sheet exposure) based on the internal rating in thousands of euros: Internal rating 2007 Proportion 2006 Proportion
Default is defined in Raiffeisen International as the event where a specific debtor is unlikely to pay its credit obligations to the Group from primary sources, or the debtor is overdue more than 90 days on any material credit obligation.
In the retail area, provisioning and intensive treatment is performed by retail risk departments of individual Group members. They compute loan loss provisions (mostly portfolio-based) according to defined calculation schemes on a monthly basis. The provisioning amount is then approved by local accounting departments.
The following charts show the regional breakdown of non-performing loans and provisions, where non-performing loans are defined analogous to Basel II default criteria. Provisions for impairment losses are formed on the basis of Group-wide standards according to IFRS accounting principles and cover all identifiable credit risks.
Impairment losses on loans 170 22 – 192 * Central banks have been disclosed 2006 as Financial Institutions, in 2007 these were correctly stated under Sovereigns. The above statement for 2006 has been adjusted.
The following table shows the geographic breakdown of provisioning by the customers ’ home country: * Allocation including direct write-downs and income on written down claims
Portfolio-based provisions 303,942 – 162,214 (86,118) – (12,674) 367,364 Loans and advances to banks – – 494 – – 5 499
Loans and advances as well as loan loss provisions according to Basel II asset classes are shown in the following table: 31/12/2007
The maximum credit risk exposure (including revocable and irrevocable credit lines) and the fair value of collaterals where reselling and/or repledging are allowed without default of debtor are shown in the following table: 31/12/2007 Maximum credit exposure Fair value of collaterals
Country risk includes transfer and convertibility risks as well as political risk. It arises from cross-border transactions and direct investments in foreign countries. As country risk is closely associated with the risk of sovereign institutions, it is measured based on the same ten-class rating model. This rating model includes a quantitative analysis of the economic risk of a particular country and a qualitative analysis of the political risk that a particular country represents. Country risk is of lower importance to Raiffeisen International because the network banks mainly do business within their own countries.
Raiffeisen International’s lending portfolio is broad and well diversified in terms of region and industry. The ten largest corporate exposures, with an average rating of 2.5, account for 2.2 per cent of the corporate portfolio.
Market risk is defined as the risk of possible losses arising from changes in the market due to fluctuating or changing interest rates, foreign exchange rates, share prices and prices in general. This risk category encompasses both trading book and banking book positions. Risky positions are the result either of business done for customers or of proprietary investments in such instruments.
All network banks of Raiffeisen International have market risk management departments. Those departments are responsible for day-to-day limit monitoring and weekly reporting to RZB.
Value-at-risk figures forecast maximum losses that will not be exceeded with a certain confidence level under normal market conditions but do not provide any specific information about the effects of exceptionally extreme market movements. To take such events into account, Raiffeisen International carries out weekly defined stress tests focusing on the biggest daily market movements in the preceding five years. With stress scenarios the Group simulates crisis situations and major fluctuations in market parameters and computes their effect on its current positions. Stress tests consequently deliver important results for the management of risks (especially on hidden market risk concentrations).
The change in the present value of Raiffeisen International’s banking book in the year ending 31 December 2007 is provided in thousands of euros, given a simultaneous one-basis-point increase in interest rates: Change of present value
The change in the present value of Raiffeisen International’s banking book in the year ending 31 December 2006 is provided in thousands of euros, given a simultaneous one-basis-point increase in interest rates: Change of present value
Internal limits have been established for each Group unit to limit liquidity risk. They require a positive short-term liquidity gap (subject to conservative assumptions regarding the saleability of liquid assets and withdrawals on the liabilities side of the balance sheet). The bank maintains extensive holdings of liquid securities to ensure its liquidity in various currencies. In the case of a liquidity shortage, emergency plans come into force. In particular, prioritized action lists for handling liquidity shortages (also with regard to the publicity impact) exist for all major Group members.
Structural liquidity risk is mainly driven by changes in the risk appetite of lenders or by rating migrations of a bank.
Raiffeisen International’s banking activities are refinanced by combining the wholesale strengths and know-how of RZB AG as parent credit institution and the retail franchise of deposit-taking network banks and their own issuing plans. Refinancing costs would rise when a rating downgrade of these banks occurs and Raiffeisen International would have to pay higher risk premiums to refinance its assets. Funding and long-term refinancing is also driven by money supply. Sometimes funds are available more cheaply as risk premiums are low. At other times they are more expensive as credit spreads have widened.
These risks are managed first of all by asset-liabilities committees of Raiffeisen International and RZB Group. Their main task is the coordination of funding plans for the year ahead and longer horizons. Moreover, Raiffeisen International coordinates the medium-term and long-term borrowing activities of Group members through syndicated loans, bilateral funding agreements with banks, and financing facilities of supranational institutions. These funding sources are based on long-term business relationships and provide much more stable conditions than bond or credit derivative markets.
Non-derivative liabilities 50,690,833 52,453,896 33,574,935 7,535,568 8,805,359 2,538,034 Liabilities to banks 13,813,569 14,848,258 5,178,394 2,961,728 6,102,175 605,961
Low probability/high impact events are quantified by a Group-wide scenario analysis framework that includes the simulation of up to ten specific scenarios. Each entity is furthermore required to run additional scenarios depending on the individual risk profile and local specifics.
Key Risk Indicators (KRIs) are measurable quantities which are used to monitor and predict operational risk events. Key risk indicators are specifically tailored to all network units, where a common catalogue of key risk indicators which has been derived from the KRI library (developed by RMA/RiskBusiness) is used throughout the Group. All network units then select relevant KRIs and define thresholds (two levels of thresholds have to be defined for implementing an early warning system) as most appropriate for their business.
Negative a) Interest rate contracts 6,261,521 8,844,863 610,936 15,717,320 86,447 (115,694) OTC products
Products trading on stock exchange b) Foreign exchange rate contracts 14,043,208 1,607,287 18 15,650,513 232,828 (237,425) OTC products
Products traded on stock exchange c) Equity/index contracts 487 16,300 – 16,787 3,433 (4,623) OTC products
Fair value is the amount for which an asset could be exchanged, or a liability settled, between knowledgeable, willing parties in an arm's length transaction. As far as market prices are available (mainly securities and derivatives quoted on stock exchange or active markets), this quotation represents the fair value.
Loans and advances to customers 48,394,102 48,879,806 (485,702) 35,130,782 35,042,749 88,033
Commitments 8,080,891 6,614,489 Irrevocable credit lines and stand-by facilities 8,080,891 6,614,489
The following table contains revocable credit lines which currently bear no credit risk: (48) Fiduciary business
Fiduciary business not recognised in the balance sheet was concluded with the following volumes: Loans and advances to banks 8,696 6,285
Fees income from fiduciary business amounted to € 11,565 thousand (2006: € 5,622 thousand). Fees expenses totalled € 1,839 thousand (2006: € 818 thousand).
As a subsidiary of Raiffeisen Zentralbank Österreich Aktiengesellschaft, Raiffeisen International Bank-Holding AG does not have its own banking group as defined by the Austrian Banking Act (BWG). Therefore, it is not itself subject to the relevant regulatory requirements. However, the following figures are accounted for within the scope of RZB-Kreditinstituts-gruppe. In 2007, RZB made use of the transformation regulations for the calculation of own funds requirements according to Basel I. The following figures here are provided for information purposes only.
The risk-weighted assets (including market risk) amounted to € 53,963,993 thousand (2006: € 41,051,810 thousand).
Key management refers to the Managing Board of Raiffeisen International BankHolding AG, the parent company, and Raiffeisen Zentralbank Österreich Aktiengesellschaft, the majority shareholder. Relations of key management to Raiffeisen International are as follows (respective fair values): Other claims 18 –
The following table shows relations of close family members of key management to Raiffeisen International: Sight deposits – 138
In the previous year, bonus payments totalling € 4,750 thousand in connection with the acquisitions made were agreed. The planned payments are due not before 2009. These payments are mainly dependent on achieving the targeted objectives of these acquired companies (return on standard capital, cost/income ratio and profit after tax).
The Chairman of the Managing Board is furthermore still working for the board of Raiffeisen Zentralbank. Remuneration stated in the above table covers this position as well as his activities for Raiffeisen International.
The Annual General Meeting held on 5 June 2007 decided an annual remuneration for the members of the Supervisory Board in the amount of € 330 thousand and transferred the distribution to the Board itself. The members of the Supervisory Board settled the distribution in their meeting of 5 June, 2007 as follows: Chairman € 70 thousand, Deputy-Chairman € 60 thousand, members of the Supervisory Board € 50 thousand. Session fees were not paid.
Moreover, no contracts subject to approval in the meaning of Section 95 (5) items 12 Austrian Joint Stock Companies Act (AktG) were concluded with members of the Supervisory Board in the financial year 2007.
Individuals finishing the stage of life of 68 years are not able to be elected to a member of the Managing Board and may not be appointed for another functional period.
Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with International Financial Reporting Standards (IFRS) as adopted by the EU. This responsibility includes: designing, implementing and maintaining internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances.
In our opinion, the consolidated management report for the group is consistent with the consolidated financial statements
VAT Raiffeisen Bank Aval, Kiev (UA) 2,279,934,908 UAH 95.7% BA eBanka, a.s., Prague (CZ) 1,184,500,000 CZK 51.0% BA Raiffeisen Equipment Leasing Company Limited by Shares, Budapest (HU) 50,000,000 HUF 72.7% FI Raiffeisen International GROUP IT GmbH, Vienna (AT) 37,000 EUR 100.0% BR Raiffeisen Car Leasing Ltd., Budapest (HU) 20,000,000 HUF 72.7% FI Raiffeisen Bank Sh.a., Tirana (AL) 34,592,965 EUR 100.0% BA Raiffeisenbank (Bulgaria) EAD, Sofia (BG) 310,073,452 BGN 100.0% BA Raiffeisen Bank d.d. Bosna i Hercegovina, Sarajevo (BA) 168,933,750 BAM 97.0% BA OAO Priorbank, Minsk (BY) 102,801,217,650 BYR 63.0% BA Raiffeisenbank a.s., Prague (CZ) 4,889,000,000 CZK 51.0% BA Raiffeisenbank Austria d.d., Zagreb (HR) 2,156,632,000 HRK 73.7% BA Raiffeisen Bank Zrt., Budapest (HU) 45,129,140,000 HUF 70.3% BA Raiffeisen Bank Kosovo J.S.C., Prishtina (RS) 44,000,000 EUR 75.0% BA Raiffeisen Bank Polska S.A., Warsaw (PL) 661,161,150 PLN 100.0% BA Raiffeisen Bank S.A., Bucharest (RO) 1,196,258,639 RON 99.5% BA Raiffeisen banka a.d., Belgrade (RS) 24,702,667,580 RSD 100.0% BA ZAO Raiffeisenbank, Moscow (RU) 24,793,849,000 RUB 100.0% BA OOO “Raiffeisen Capital” Asset-Management Company, Moscow (RU) 150,000,000 RUB 100.0% FI Raiffeisen Banka d.d., Maribor (SI) 14,133,667 EUR 85.7% BA Raiffeisen Mandatory Pension Fund Management Company d.d., Zagreb (HR) 110,000,000 HRK 73.7% FI Raiffeisen Real Estate Management Zrt., Budapest (HU) 105,440,000 HUF 72.7% BR Raiffeisen Investment Fund Management Zrt., Budapest (HU) 100,000,000 HUF 70.3% FI Raiffeisen Invest d.o.o., Zagreb (HR) 8,000,000 HRK 73.7% FI RAIFFEISEN INSURANCE BROKER EOOD, Sofia (BG) 5,000 BGN 100.0% BR Raiffeisen Biztosításközvetítö Kft., Budapest (HU) 5,000,000 HUF 72.7% BR
Raiffeisen Insurance Agency Sp.z.o.o, Warsaw (PL) 200,000 PLN 87.5% BR Raiffeisen Insurance and Reinsurance Broker S.R.L, Bucharest (RO) 180,000 RON 75.0% BR RI Eastern European Finance B.V., Amsterdam (NL) 400,000 EUR 100.0% FI RI FINANCE (JERSEY) LIMITED, St. Helier (JE) 500,000,002 EUR 0.0% FI Raiffeisen Leasing sh.a., Tirana (AL) 123,000,000 ALL 93.8% FI Raiffeisen Leasing Bulgaria OOD, Sofia (BG) 5,900,000 BGN 81.1% FI Raiffeisen Leasing d.o.o., Sarajevo (BA) 3,008,000 BAM 85.8% FI JLLC "Raiffeisen-leasing", Minsk (BY) 4,300,250,000 BYR 66.6% FI Raiffeisen-Leasing, spolecnost s.r.o., Prague (CZ) 50,000,000 CZK 63.0% FI Raiffeisen-Leasing d.o.o., Zagreb (HR) 30,000,000 HRK 74.4% FI Raiffeisen Lízing Zrt., Budapest (HU) 225,620,000 HUF 72.7% BA TOO Raiffeisen Leasing Kazakhstan, Almaty (KZ) 85,800,000 KZT 75.0% FI ICS Raiffeisen Leasing s.r.l, Chisinau (MD) 8,349,281 MDL 87.2% FI Raiffeisen-Leasing Polska S.A., Warsaw (PL) 22,301,000 PLN 87.5% FI Raiffeisen-Leasing Real Estate, s.r.o., Prague (CZ) 10,000,000 CZK 69.0% FI Raiffeisen Leasing IFN S.A., Bucharest (RO) 14,935,400 RON 87.2% FI Raiffeisen Leasing d.o.o., Belgrade (RS) 226,544,550 RSD 87.5% FI OOO Raiffeisen-Leasing, Moscow (RU) 491,000,000 RUB 87.5% FI Raiffeisen Leasing d.o.o., Ljubljana (SI) 895,800,000 SIT 75.0% FI Limited liability company “ Raiffeisen Leasing Aval", Kiev (UA) 11,758,092 UAH 87.4% FI Raiffeisen Factoring Ltd., Zagreb (HR) 15,000,000 HRK 73.7% FI Tatra Asset Management sprav.spol., a.s., Bratislava (SK) 50,000,000 SKK 64.5% FI Tatra banka a.s., Bratislava (SK) 1,127,274,500 SKK 64.5% BA Tatra Leasing spol. s r.o., Bratislava (SK) 200,000,000 SKK 70.0% FI Ukrainian Processing Center, JSC, Kiev (UA) 180,000 UAH 100.0% BR
List of equity participations The following tables show a selection of equity participations. The complete list of Raiffeisen International’s equity participation is deposited with the Group parent’s headquarters.
Raiffeisen consulting Ltd., Zagreb (HR) 14,900,000 HRK 100.0% FI Raiffeisen Economic and Tax Consulting ZRt., Budapest (HU) 20,000,000 HUF 20.0% 10.0% FI Raiffeisen Energy Service Ltd., Budapest (HU) 20,000,000 HUF 100.0% OT Raiffeisen Factoring Ltd., Sofia (BG) 1,000,000 BGN 100.0% FI Raiffeisen Faktoring Sp. z.o.o., Warsaw (PL) 3,847,500 PLN 100.0% FI RAIFFEISEN FUTURE AD, Belgrade (RS) 1,700,000 EUR 100.0% FI RAIFFEISEN INVESTMENT FUND MANAGEMENT COMPANY, Belgrade (RS) 750,000 EUR 100.0% FI Raiffeisen Non-Government Pension Fund, Moscow (RU) 165,000,000 RUB 100.0% FI Raiffeisen Pensii - Broker de Pensii Private SRL, Bucharest (RO) 25,000 RON 100.0% BR Raiffeisen Pension Insurance d.o.o., Zagreb (HR) 14,400,000 HRK 100.0% FI Raiffeisen Property Lízing Rt., Budapest (HU) 55,000,000 HUF 100.0% BR RAIFFEISEN SERVICES EOOD, Sofia (BG) 3,000,000 BGN 100.0% BR Raiffeisen Services SRL, Bucharest (RO) 30,000 RON 100.0% 100.0% FI RAIFFEISEN SPECIAL ASSETS COMPANY d.o.o., Sarajevo (BA) 400,000 BAM 100.0% FI RAIFFEISEN TRAINING CENTER LTD., Zagreb (HR) 20,000 HRK 80.0% 20.0% BR Raiffeisen Voluntary Pension Fund Management d.o.o., Zagreb (HR) 33,445,300 HRK 100.0% FI S.A.I. Raiffeisen Asset Management S.A., Bucharest (RO) 5,670,000 RON 100.0% FI TATRA Residence, s.r.o., Bratislava (SK) 25,053,000 SKK 100.0% 100.0% BR
Legend 1 Equity participations held via companies that are not included in the consolidated financial statements (pro-rata share) 2 Company type BA Bank BR Company rendering banking-related ancillary services FI Financial institution OT Other company
Raiffeisen Banca pentru Locuinte S.A., Bucharest (RO) 96,000,000 RON 33.3% BA Raiffeisen stambena stedionica d.d., Zagreb (HR) 106,500,000 HRK 17.1% BA Raiffeisen stavebni sporitelna, a.s., Prague (CZ) 650,000,000 CZK 25.0% BA
Cash flow statement – Statement of cash flows during the financial year arising from operating activities, investing activities and financing activities and a reconciliation of cash and cash equivalents held at the beginning and the end of the financial year.
Consolidated ROE – Return on Consolidated Equity, i.e. the equity attributable to the shareholders of Raiffeisen International. It is calculated by consolidated profit in relation to average balance sheet equity (without minority interests). Average equity is based on monthend figures and does not include current year profit.
Country risk – This comprises transfer and convertibility risk and political risk.
Core capital – Paid-in capital and reserves less intangible fixed assets and balance sheet losses and material losses during the current financial year.
Cost/income ratio – Indicator of an enterprise’s cost efficiency based on the ratio of expenses to earnings. It is calculated by comparing general administrative expenses (comprising staff expenses and other administrative expenses and depreciation/amortisation of tangible and intangible fixed assets) with operating income (net interest income, net commission income, trading profit/loss and other operating profit/loss).
Credit exposure – Comprises all on-balance-sheet exposures (loans, debt securities) and off-balancesheet exposures (guarantees, commitments) that expose Raiffeisen International to credit risk.
DBO – Defined benefit obligation, i.e. the present value, without deducting any plan assets, of expected future payments required to settle the obligation resulting from employee service in the current and prior periods.
Derivatives – Financial instruments whose value changes in response to the change in a specified interest rate, financial instrument price, commodity price, foreign exchange rate, index of prices or rates, a credit rating or credit index, or other variable, that requires no initial
Dirty price – Price of a financial instrument including accrued interest.
Excess cover ratio – Relation of excess own funds to total own funds requirement.
Futures – Standardized forward contracts traded on a stock exchange under which a commodity traded in a money, capital, precious metal or currency market is to be delivered or accepted at a price fixed in an exchange environment.
liquidity risk – Risk that the bank could be unable to meet its current and future financial obligations in full or in good time. This arises from the danger that e.g. refinancing can only be obtained at very disadvantageous terms or is entirely impossible.
Net provisioning ratio (average risk-weighted assets banking book) – Risk valuation ratio. Is calculated by provisioning for impairment losses divided by average risk-weighted assets of the banking book.
Operating profit/loss – In IFRS-compliant financial statements, it consists of operating income net of general administrative expenses. Operating income comprises
net interest income, net commission income, trading profit/loss and other operating profit/loss. General administrative expenses comprise staff expenses and other administrative expenses and depreciation/amortisation of tangible and intangible fixed assets.
Options – Instruments that give the holder the right to purchase the underlying from a contracting party at an agreed price and at an agreed time or within an agreed period (call option) or to sell the underlying to a contracting party at an agreed price and at an agreed time or within an agreed period (put option).
Own funds ratio – The ratio’s numerator is own funds within the meaning of the Austrian Banking Act (BWG) and its denominator is the basis of assessment pursuant to section 22 BWG plus 12.5 times the own funds required as cover for the trading book and open currency positions.
Projected unit credit method – An actuarial valuation method defined by IAS 19 that sees each period of service as giving rise to an additional unit of benefit entitlement and measures each unit separately to build up the final obligation (sometimes known as the accrued benefit method pro-rated on service or as the benefit/ years of service method).
Raiffeisen International – The Group of Raiff eisen International Bank-Holding AG.
Risk-weighted assets of the banking book – According to the Austrian Banking Act (BWG) these are on-balancesheet assets, off-balance-sheet and special off-balancesheet banking book asset positions weighted by business and counterparty risk, respectively.
RZB-Kreditinstitutsgruppe – Pursuant to section 30 of the Austrian Banking Act (BWG), RZB-Kreditinstitutsgruppe is made up of all banks, financial institutions, securities companies and companies rendering bankingrelated services in which Raiffeisen Zentralbank holds direct or indirect interests or has control as a superordinate institution.
Splitting – A procedure that is particularly common in U.S. investment banking where equities that have become very highly priced are split into two or more shares or share certificates.
Russia ZAO Raiffeisenbank Smolenskaya-Sennaya pl., 28 119002 Moskwa Phone: +7-495-721 9900 Fax: +7-495-721 9901 SWIFT/BIC: RZBMRUMM www.raiffeisen.ru
Serbia Raiffeisen banka a.d. Bulevar Zorana Djindjica 64a 11070 Novi Beograd Phone: +381-11-320 2100 Fax: +381-11-220 7080 SWIFT/BIC: RZBSRSBG www.raiffeisenbank.co.yu
Slovakia Tatra banka, a.s. Hodžovo námestie 3 81106 Bratislava 1 Phone: +421-2-5919 1111 Fax: +421-2-5919 1110 SWIFT/BIC: TATRSKBX www.tatrabanka.sk
Slovenia Raiffeisen Banka d.d. Slovenska ulica 17 2000 Maribor Phone: +386-2-229 3100 Fax: +386-2-252 4779 SWIFT/BIC: KREKSI22 www.raiffeisen.si
Albania Raiffeisen Leasing Sh.a. Rruga Kavajes 44 Tiranë Phone: +355-4-274 920 Fax: +355-4-232 524
Moldova Raiffeisen Leasing SRL 65 Stefan cel Mare blvd. 2001 Chisinau
Romania Raiffeisen Leasing IFN SA Calea 13 Septembrie 90 Grand Offices Marriott Grand Hotel Sector 5 76122 Bucureşti Phone: +40-21-403 3300 Fax: +40-21-403 3298 www.raiffeisen-leasing.ro
Consulting/support/design: gantnerundenzi.at Copy editing support/proofreading: be.public Printer: AV+Astoria Druckzentrum GmbH Place of production: Vienna
You will find the online version of the annual report at ar2007.ri.co.at. The original German version of the report is available at gb2007.ri.co.at.
“Either you have a preference for figures or languages. If you don’t like either, I suggest you indulge in the delightful illustrations.”