Konzern-Lagebericht Entwicklung der Märkte Finanz- und Ergebnisentwicklung Posten der Erfolgsrechnung im Detail Das Ergebnis im Quartalsvergleich Bilanz Forschung und Entwicklung Internes Kontroll- und Risikomanagement-System Kapital-, Anteils-, Stimm- und Kontrollrechte Funding Risikomanagement Human Resources Ausblick Ereignisse nach dem Bilanzstichtag
In Central and Eastern Europe (CEE) it operates as a universal bank through a closely knit network of subsidiary banks, leasing companies and numerous specialized financial service providers in 17 markets.
In CEE, approximately 57,000 employees in around 3,100 business outlets serve some 14.2 million customers. In Austria, RBI is one of the top corporate and investment banks. It is also represented in the world’s financial centers and also operates branches and representative offices in Asia.
All in all, RBI employs about 60,000 employees and has total assets of approximately € 136 billion.
Overview Raiffeisen Bank International Group Monetary values in € million 2012 Change 2011 2010 Income statement 1/1–31/12 1/1–31/12 1/1–31/12
Statement of financial position 31/12 31/12 31/12 Loans and advances to banks 22,323 (13.3)% 25,748 21,532 Loans and advances to customers 83,343 2.2% 81,576 75,657
Key ratios 1/1–31/12 1/1–31/12 1/1–31/12 Return on equity before tax 9.7% (4.0) PP 13.7% 13.7% Return on equity after tax 7.0% (2.7) PP 9.7% 12.5% Consolidated return on equity 7.4% (3.4) PP 10.8% 13.0% Cost/income ratio 63.5% 6.5 PP 57.0% 55.1% Return on assets before tax 0.73% (0.25) PP 0.98% 0.90% Net interest margin (average assets) 2.37% (0.23) PP 2.61% 2.51% Net interest margin (average interest-bearing assets) 2.66% (0.24) PP 2.90% –
Provisioning ratio (average loans and advances to customers) 1.21% (0.13) PP 1.34% 1.51% Bank-specific information1 31/12 31/12 31/12 Risk-weighted assets (credit risk) 68,136 (11.7)% 77,150 75,601
Own funds ratio 15.6% 2.1 PP 13.5% 13.3% Stock data 1/1–31/12 1/1–31/12 1/1–31/12
Über die RBI Interview mit dem Vorstandsvorsitzenden Vorstand der RBI Bericht des Aufsichtsrats RBI im Überblick Strategie der RBI RBI auf dem Kapitalmarkt
Interview with the chairman of the management board 8 Management board of RBI 11 Report of the supervisory board 12 RBI at a glance 14 RBI’s strategy 16 RBI in the capital markets 20 Corporate governance report 24 Sustainability at RBI 34
Consolidated financial statements Statement of comprehensive income X Statement of financial position X Statement of changes in equity X Statement of cash flows X Segment reporting X Notes X Auditor’s report X
From an overall economic perspective, 2012 was a challenging year. What’s your view on the operating environment in the Eurozone and in CEE? The environment was indeed challenging in both regions, but for completely different reasons. After the ongoing sovereign debt crisis, the Eurozone slid into a deep systemic crisis. This crisis extends from political disagreements over the means to overcome the huge debt to the growing social unrest in the European peripheral countries. The political elite’s inability on both the national and European level to communicate their decisions to the public in a transparent and comprehensible manner also contributes to the crisis. CEE, in part, also suffers from the consequences of the euro crisis, for example from declining exports due to lower demand in the West. On the other hand, the region is now much less vulnerable to external shocks than it was before the start of the crisis in 2008.
does this mean that prospects for the banking industry in CEE are quite good in the long term? Yes, but not without limitation! The overall economic situation is not quite how we and the people in the region would like to have it. Especially banks that entered the market relatively late and without a sustainable business model feel this. Indeed, several of these institutions have already withdrawn from the region, and others will follow. RBI, which has been anchored in CEE for quite some time with a clear strategic and geographic focus, has admittedly seen better times; just to mention Hungary and bank levies. In contrast to many competitors, however, we are a traditional customer-oriented bank. This means we can be sure our business model – i.e. diversification by markets, customers, and products – will enable us to benefit from the next recovery and the differences in growth to the Eurozone. We expect market recovery to begin in the second half of 2013.
The key words you just mentioned touched the banking sector’s main challenges in CEE. What is the situation in Hungary? Hungary is a special case, economically and above all politically. It will be very difficult for the current government to overcome its self-imposed exile and find its way back into the middle of Europe. With regard to provisions for impairment losses, 2012 was clearly better for us than the previous year because of the mandated loan conversions necessitating enormously large provisioning. However, the overall level of provisioning is naturally still a source of pain. Immediately after the crisis began, we implemented an
This fall, you announced a considerable reduction in your business capacity in Slovenia. What is the current situation? We recognized that with our market position in Slovenia, the country’s high banking density and the deep economic crisis, we will be unable to achieve any meaningful progress as a universal bank in the foreseeable future. We will therefore reduce our assets and staff to about a third of the 2012 status by 2015, and instead focus on the business segments where we can generate added value, particularly multinational corporate customers and affluent private individuals.
How has the overall risk situation developed? After all, the economic situation in 2012 was more difficult than in the previous year. That’s correct. Therefore, we are pleased that net provisioning for impairment losses – although high at 1 billion euro – was slightly lower than in the previous year. Numbers alone don’t adequately depict the status of a company, the soft facts also play a role. For instance, the increase in the NPL ratio – i.e. the share of non-performing loans in relation to the total customer loan portfolio – is naturally also attributable to the crisis-driven environment. But that’s only one side of the story. Part of the other side is the fact that with the reduction in risk-weighted assets, to meet the stricter EBA capital requirements in the first two quarters, the customer loan portfolio and therefore also the basis for this metric, declined as well. Naturally, that resulted in an increase in the NPL ratio from a purely mathematical perspective. Finally, public discussions about CEE tend to overlook the fact that loans are largely secured by collaterals. Hence, the actual risk of default is ultimately less than the NPL ratio would suggest at first glance. I feel it’s also very important to emphasize that the focus of our exposure is on the less risky business with corporate customers. As I said, there has been an increasing number of signs in the second half of the year that point towards economic recovery. I am therefore not completely satisfied with our risk profile, but not concerned about it either. We have taken all necessary precautions.
Which are your strategic growth markets? Russia, Poland, the Czech Republic, Slovakia, Romania and Austria are countries where we intend to grow in the future, keeping in mind the best possible resource allocation. Austria is where our Group originated from and a source of significant earnings. Our relationship banking approach with its clear focus on sustainable and first-class customer relationships, is very helpful in this respect. Asia is a niche market for us, where we specialize on local and international corporate customers and financial institutions. Compared to local banks from the region, we are a small-time player. For our international customers, however, we are quite flexible and beneficial, especially in doing business between East and West. From an Asian perspective, the West naturally includes Eastern Europe.
At each meeting, the Management Board reported to the Supervisory Board on business developments in the various business divisions and explained current risk developments. In addition to regular meetings, the Supervisory Board had many opportunities to hold discussions with the Management Board. The collaboration between Management Board and Supervisory Board was characterized by open and active communication.
The new and stricter capital ratio requirements for banks announced in 2011 necessitated an adjustment of strategy and business policy, which the Management Board discussed with the Supervisory Board. Several reports were prepared and resolutions were approved on the new regulation under banking law concerning remuneration policy.
The Chairman of the Working Committee, Audit Committee, Remuneration Committee and Personnel Committee regularly reported to the Supervisory Board on the relevant committee’s work.
The consistency check of the Corporate Governance Report according to Section 243b of the Austrian Commercial Code (UGB) was performed by Univ.Prof.DDr. Waldemar Jud Corporate Governance Forschung CGF GmbH, and its final results yielded no significant grounds for objections.
On behalf of the Supervisory Board Walter Rothensteiner, Chairman o v er v ie w o f rB i
RBI at a glance A leading bank in Central and Eastern Europe as well as Austria Raiffeisen Bank International AG regards Central and Eastern Europe (including Austria) as its home market. For around 25 years, RBI has been operating in Central and Eastern Europe (CEE), where today it maintains a closely knit network of subsidiary banks, leasing companies and numerous specialized financial service providers in 17 markets. As a universal bank, RBI ranks among the top five banks in thirteen countries. Its powerful role is supported by the Raiffeisen brand, which is one of the most widely recognized brands in the region. RBI has positioned itself in CEE as a fully integrated corporate and retail banking group with a comprehensive product offering. The CEE markets offer interesting opportunities in this direction due to their higher economic growth compared with that of Western Europe. RBI benefits from this growth, which is a result of the region’s need to catch up in terms of banking services. At the end of 2012, around 57,000 employees served approximately 14.2 million customers in around 3,100 business outlets in CEE.
Total assets Business number 2012 in € million Change1 outlets of staff
RBI has been listed on the Vienna stock exchange since 25 April 2005 (as Raiffeisen International up until 12 October 2010). It is represented in several leading national and international indices, including the ATX and the EURO STOXX Banks. RZB, which functions as the central institution of the Austrian Raiffeisen Banking Group (RBG), remained the majority shareholder following the merger, holding approximately 78.5 per cent of the shares as of 31 December 2012. The remaining 21.5 per cent of RBI’s shares are in free float.
Long-term value creation is the primary objective RBI‘s primary strategic objective is to create long-term value for its shareholders who, in addition to free float shareholders, include the Raiffeisen Zentralbank Österreich AG (RZB) as a strong core shareholder and central institution of the Austrian Raiffeisen Banking Group. The objective of generating long-term value is to be achieved first and foremost through a strong focus on customers and a full line of services. Taken together, these two factors lead to high customer satisfaction. Balanced portfolio and risk diversification in RBI‘s home market of Central and Eastern Europe (including Austria) as well as sustainable risk management ensure that these objectives remain valid for the long term.
Specifically, RBI‘s actions are based on the following principles: ■ The focus of business activities is on providing financial services to corporate customers and private individuals. ■ Notwithstanding high standards of quality, financial services are provided cost-efficiently. ■ The balanced distribution of business activities in RBI‘s home market contributes to the diversification of risk in the business portfolio.
The overall environment for banks is subject to a highly dynamic development. This applies particularly to the markets in which RBI operates. Changes in the market environment (introduction of bank-specific taxes, competitors withdrawing, economic dynamics easing, supervisory regulations becoming more stringent, etc.) call for constant adaptation of the business focus. Strong, Groupwide coordination and collaboration among the individual corporate units is therefore of great importance. Consistent focus on customers and transparent decision-making processes determine the bank‘s success in the market. The open corporate culture embodied at RBI contributes to employee motivation and thereby to the achievement of the bank‘s strategic objectives. RBI‘s role is supported by the Raiffeisen brand, with its high level of brand recognition.
■ As a universal bank, RBI directs its focus toward corporate customers and private individuals. The respective market environment or relative market position may require specialization in order to ensure a sustainable and profitable market presence.
In Hungary, where RBI also operates as a universal bank, its business model has been adapted to the difficult market environment. Corporate customers, for instance, were segmented more strongly by industrial sector in order to better serve customers’ different needs. The focus is on international corporate customers with good credit ratings, who – as in other countries – are increasingly being targeted with capital and liquidity-light products, as well as on domestic small and medium-sized enterprises (SMEs). For the latter, the emphasis is increasingly on advisory and transaction-driven services such as cash management solutions. In the retail customer business, the sales network was streamlined. In principle, lending is governed by strict rules with regard to credit ratings. Lending (particularly in foreign currencies) is defensively oriented, while the main focus for affluent retail customers is on deposit business. The streamlining of the organization is being driven forward, e.g., by the creation of a central operation, back office, and call center business.
In Poland, the acquisition of Polbank has strengthened RBI’s retail banking business in particular, making it one of the country’s strongest universal banks in terms of market share and local presence. In corporate banking, decreasing interest income in Poland is to be offset by expanding relationships with major customers, which is wholly in line with RBI‘s strategy of promoting capital and liquidity-light products. This also includes a targeted focus on cash management, which should at the same time help to strengthen customer relationships. In retail banking, the main focus is on the acquisition of affluent private individuals and on the marketing of integrated financial products (e.g., insurance solutions). The merger of Polbank and Raiffeisen Bank Polska generates synergies in sales and processing.
In Croatia, the focus is on large and medium-sized corporate customers and on retail customers. The strategic center of attention in the corporate customer business is financial services in connection with the EU structural and cohesion funds that are linked to Croatia’s accession to the EU on 1 July 2013. The affluent retail customers business is focused on end-to-end product solutions (cross-selling) as well as on the sale of pension funds. In addition, the branch network is being optimized to increase efficiency.
The main focus in Kosovo, besides maintaining existing relationships with corporate customers, is on the sale of financial service products (cross-selling). On the retail side, affluent customers from the sole trader/small entrepreneur segment are increasingly being addressed. Moreover, factoring services are being tested in this market. An additional area of focus is optimizing processes and boosting productivity. An expansion of the branch network is not planned at present, due to the strict cost management measures in place.
In Romania, the focus is also on large- and medium-sized corporate customers and on retail customers. The ongoing optimization of processes (e.g., loan processing for retail customers, other processing in the branches, regional centralization) allows costs to be reduced while maintaining or even improving the quality of service.
RBI’s objective in Russia is to consolidate its role as one of the leading foreign banks. Business development in Russia is predominantly organic, in particular through the continuous strengthening of RBI’s existing presence in the various regions of the country. In the corporate customer business – where RBI holds a strong position – the bank is increasingly supporting Russian companies to expand into other RBI markets. RBI’s strategic orientation as a service provider for complex treasury (e.g., currency hedging) and investment banking (e.g., capital market issues) products – and also its general advisory activities with regard to financial services – helps to strengthen this position. In the affluent retail customer business, the aim is to consolidate and develop RBI’s position by expanding high-end services (e.g., expanded online banking and insurance solutions, as well as improved advisory services). The establishment of regional competence centers and a central operations, back office and call center ensures efficient and customer-focused product processing.
This segment comprises Belarus and Ukraine as well as Kazakhstan, where RBI has a leasing company.
In the countries of the CIS Other segment, as elsewhere, RBI focuses on strict cost management. In Ukraine, centralization and efficiency projects regarding the organizational structure and processes (regional centers), the IT and operations area, as well as accounting, are undertaken.
The Group Markets segment covers capital market trading and business with institutional customers. The customer margin with corporate and retail customers exceeding pure trading income is reported in the corresponding customer segments.
In principle, RBI‘s trading activities are defensive in nature and mainly serve to support the business with customers. Furthermore, capital markets trading fulfills important service functions for the entire network of RBI Group (e.g., access to international financial markets, center of expertise to complement the local service offering). Ongoing optimization of the product range and transnational utilization of synergy effects are expected to strengthen the market position further in the next several years.
RBI stock posts strong gains RBI stock price surged in the first quarter of 2012 and continued this positive trend throughout the course of the year. With a gain of 57 per cent in the full-year 2012, the RBI share was not only ranked as one of the best-performing securities in the ATX index, but also outperformed many other bank stocks.
Price performance since 1 January 2012 compared to ATX and EURO STOXX Banks in € Index Basis = € 20,07
RBI’s market capitalization at the end of 2012 – with the number of outstanding shares unchanged at 195.5 million – stood at € 6.1 billion.
RBI rating Last year, RBI was rated by Moody’s Investors Service, Standard & Poor’s and Fitch Ratings. In order to ensure accurate assessment, RBI maintained regular contact with rating agency analysts and informed them on a regular basis about trends in RBI’s business developments – similar to other market players.
In addition, the Management Board provided an update at the end of September on current company developments to institutional investors at an investors’ conference in London. Following the conference, RBI held an analysts’ meeting attended by 21 of the 29 equity analysts that currently cover the bank. Besides these 29 equity analysts, 17 bond analysts cover RBI, making it the most widely covered company in Austria.
Besides direct meetings with analysts and investors, additional events include telephone conference calls and webcasts, each occasion involving around 200 participants, which regularly take place to present the quarterly results.
RBI continuously strives to keep market participants fully informed. In the interest of making its communications easily accessible and as widespread as possible, RBI holds teleconference presentations and other important events as online webcasts. These can be viewed at any time at www.rbinternational.com → Investor Relations → Reports & Presentations → Presentations & Webcasts.
Composition of the management board In the 2012 financial year, the Management Board consisted of seven members: Management Board member Year of birth Original appointment End of term
Martin Grüll 1959 3 January 2005 31 December 2015 1 Patrick Butler resigned as member of the Management Board as of 15 April 2012. 2 After the resignation of Patrick Butler, the Supervisory Board appointed Klemens Breuer as his successor for the period of 16 April 2012 to 31 December 2015.
Members of the Management Board held seats on the Supervisory Board or comparable functions in the following domestic and foreign companies that are not included in the consolidated financial statements: ■ Herbert Stepic OMV AG (Supervisory Board member) Oesterreichische Kontrollbank AG (Supervisory Board member)
■ Karl Sevelda BENE AG (Supervisory Board member) Raiffeisen Leasing Management GmbH (Supervisory Board member)
■ Patrick Butler Wiener Börse AG (Supervisory Board member) CEESEG AG (Supervisory Board member)
Composition of the supervisory board During the 2012 financial year, the Supervisory Board comprised of: Supervisory Board member Year of birth Original appointment End of term
Erwin Hameseder, 1956 8 July 20101 Annual First Deputy Chairman General Meeting 2015
Ludwig Scharinger, 1942 8 June 20101 20 June 2012 Second Deputy Chairman (until 20 June 2012)
Helge Rechberger2 1967 10 October 2010 Until further notice 1 Effective as of 10 October 2010 2 Delegated by the Works Council o v er v ie w o f rB i
Independence of the supervisory board In accordance with C Rule 53 of the ACGC, the RBI Supervisory Board prescribed the following criteria for the independence of the members of the company’s Supervisory Board: ■ The Supervisory Board member shall not have been a member of the Management Board or a senior executive of the company or one of its subsidiaries in the past five years.
■ The Supervisory Board member shall not have, or have had in the previous year, any significant business relationships with the company or a subsidiary of the company. This also applies to business relationships with companies in which the Supervisory Board member has a significant financial interest, albeit not with regard to carrying out executive functions within the company. The approval of individual contracts by the Supervisory Board according to L Rule 48 of the ACGC does not automatically lead to a qualification of ‘not independent’.
■ Company circumstances and the mere exercise of the function of a Board member or leading employee by a Supervisory Board member does not, as a rule, lead to the company concerned being regarded as a “company in which a Supervisory Board member has a significant financial interest,” to the extent that circumstances do not support the presumption that the Supervisory Board member derives a direct personal advantage from doing business with the company.
In accordance with the criteria listed above for the independence of Supervisory Board members, all RBI Supervisory Board members are considered independent.
Stewart D. Gager and Kurt Geiger, as members of the Supervisory Board, are neither shareholders with a shareholding of greater than 10 per cent, nor do they represent the interests of such shareholders. They are therefore ‘free float representatives’ according to C Rule 54 of the ACGC 2012.
Members of the committees The rules of procedure of the Supervisory Board govern its organization and allocate particular tasks to the Working, Audit, Remuneration and Personnel Committees. These committees are comprised of the following members: Supervisory Board Working Audit Personnel Remuneration member Committee Committee Committee Committee
Ludwig Scharinger1 Second Deputy Second Deputy Second Deputy Second Deputy Chairman Chairman Chairman Chairman
Heinrich Schaller² Second Deputy Second Deputy Second Deputy Second Deputy Chairman Chairman Chairman Chairman
Markus Mair Third Deputy Third Deputy Third Deputy Third Deputy Chairman Chairman Chairman Chairman
The RBI Management Board leads the company according to clearly defined goals, strategies and guidelines on its own authority, with a focus on future-oriented business management and in line with modern business principles. In doing so, the Management Board pursues the good of the company at all times and considers the interests of shareholders and employees.
The Management Board’s fields of activity have been defined by the Supervisory Board, without prejudice to the general responsibility of the Management Board, as follows: Retail Banking, Operations & IT Aris Bogdaneris
Business Management & Development o v er v ie w o f rB i
The internal regulations of the Management Board and the Supervisory Board as well as its committees outline the business management measures that require the approval of the Supervisory Board or of the appropriate committee.
In the period under review, the Supervisory Board held four meetings. In addition, the Management Board informed the Supervisory Board promptly and on a regular basis of all relevant matters of the company’s performance, including the risk position and risk management of the company and key Group companies, in particular at important and special events.
The following total amounts were paid to the Management Board of RBI: Fixed remuneration 5,752 5,431
The presentation of total remuneration in 2012 was restructured and for the purpose of comparison, 2011’s presentation was also adapted to the new model. Fixed remuneration, as shown in the above table, includes salaries and benefits in kind.
Performance-based components of the Management Board’s remuneration consist of actual bonus payments and the allocation of shares under the Share Incentive Program (SIP), tranche 2009 to 2011 (see note [34]). These are based on claims from the previous years and were actually paid out or carried over in the 2012 financial year. The Management Board’s performancebased remuneration for 2012 will be paid out in the following years.
Measurement of bonuses is linked to the achievement of company goals related to profit after tax, return on risk-adjusted capital (RORAC) and cost/income ratio, as well as to consented annually agreed personal goals. Payment of bonuses is deferred as set forth in the Austrian Banking Act and implemented according to internal RBI regulations (see note [53]).
The figures shown for the fixed and performance-based remuneration are, when compared to 2011, distorted by several nonrecurring items. They are: Performance criteria results well above expectations as well as share price development between issuing the SIP tranche in 2009 (issuing price: € 17.05) and allocation in 2012 (allocation price: € 26.17), resulted in an unusually high amount of share-based compensation (for details, see the subchapter SIP, as well as note [34]). On average, € 290,000 was paid out per Management Board member and year from the SIP tranches to date. Because of a valuation loss of those shares which have to be held as the personal investment for SIP, a loss arose in three tranches. Due to the merger of Raiffeisen International with the principal business areas of RZB, no SIP tranche was issued in 2010, therefore no share-based payment transactions will take place in 2013. Moreover, the maturity of the programs was extended to five years. Therefore the next SIP tranche will not mature before 2016. A distortion also occurred, because Patrick Butler will receive remuneration until 30 June 2013, despite having resigned from his position on the Management Board. In addition, Klemens Breuer, who joined RBI in April 2012, received a sign-on bonus of € 950,000 (to offset the loss of pension benefits from his previous employment). Martin Grüll received an “other” payment in the amount of € 173,338 in 2012, because a 2011 payment owed had been wrongly omitted.
Members of the RBI Management Board in € thousands in € thousands in € thousands
Executives of RBI and other affiliated companies 99,758 52,483 2,610 215 70
To avoid legal uncertainties and in accordance with the program’s terms and conditions, eligible employees in two countries were given a cash settlement instead of an allocation of shares. In Austria, eligible parties were granted the option of accepting a cash settlement in lieu of half of the matured shares in order to offset the wage tax payable at the time of transfer. Therefore, fewer shares were actually transferred than the number that had matured. The portfolio of own shares was subsequently reduced by the lower number of shares actually transferred.
Under the SIP, new tranches have been issued each year – including also in 2011 and 2012. However, because of the merger of Raiffeisen International with the principal business areas of RZB, no SIP tranche was issued in 2010. There will therefore be no share-based remuneration transactions in 2013. This means that on the reporting date, contingent shares for only two tranches were allocated. As of 31 December 2012, the number of these contingent shares was 675,059 (of which 227,161 were attributable to the 2011 allocation and 447,898 to the 2012 allocation). The number of contingently allocated shares originally announced changed due to various personnel alterations within Group units and maturing of the 2009 SIP tranche. It is aggregated in the following table: SIP 2011 and 2012 number of contingently Minimum Maximum allocated shares allocation allocation Group of persons as of 31/12/2012 of shares of shares
Members of the Management Boards of bank subsidiaries and branches affiliated to RBI 282,218 84,665 423,327
The Annual General Meeting on 20 June 2012 passed a resolution concerning the annual remuneration for members of the Supervisory Board for financial year 2011 totaling € 550,000. Attendance fees were not paid.
Annual general meeting The Annual General Meeting for financial year 2011 was held on 20 June 2012 at the Austria Center Vienna. The Annual General Meeting for the financial year under review will take place on 26 June 2013. The convening notice will be published in electronic form and in the Wiener Zeitung’s official register a minimum of 28 days before the Annual General Meeting.
At the Annual General Meeting the shareholders, as owners of the company, can exercise their rights by voting. The principle of ‘one share one vote’ applies on principle. Accordingly, there are no restrictions on voting rights and all shareholders have equal rights. Every share confers one vote; registered shares have not been issued. Shareholders may exercise their voting rights themselves or by means of an authorized agent. RZB has not exercised its right to nominate up to one third of the Supervisory Board members to be elected by the Annual General Meeting, as per Articles of Association. As a result, the principle of ‘one share one vote’ applies. The opening session and the Management Board’s speeches are streamed live on the Internet at www.rbinternational.com → Investor Relations → Events → Annual General Meeting, and can also be replayed at a later time. This creates maximum transparency also for those shareholders who are unable to attend the Annual General Meeting in person.
Transparency The company website as well as websites of its network units play an important role for RBI with regard to open communication with shareholders, their representatives, customers, analysts, employees, and the interested public. As a result, the website, among other information, offers regularly updated information on the following topics: annual and interim reports, company presentations, archived telephone conference webcasts, ad-hoc releases, press releases, investor relations releases, share price information and stock data, information for external creditors, financial calendar with advanced notice of important dates, securities transactions of Management Board and Supervisory Board subject to reporting requirements (directors’ dealings), RBI’s Articles of Association, the Corporate Governance Report, analysts’ research and recommendations, as well as ordering services for written information and registration for the automatic delivery of investor relations news by e-mail.
One indication that corporate responsibility and sustainability are integral and self-evident aspects of RBI’s daily business is the fact that RBI is one of only 21 companies included in the VÖNIX – the first Austrian sustainability index of the Vienna Stock Exchange. The challenges that RBI sets itself in regard to sustainability and the progress made can be found in the Corporate Responsibility Report, which will be published in 2013.
RBI’s Code of Conduct (CoC), which is binding Group-wide, is based on the Raiffeisen core values and oriented toward the specific needs of the daily business, both domestically and abroad. At the same time, it does not constitute only legal requirements, but also provides standards of behavior that give all employees a clear reference point for their actions in a business, ethical and social respect. The CoC is available on RBI’s website as well as on the website of each of the associated companies in the respective language.
RBI is a signatory of the UN Global Compact (UNGC), thus committing itself to strict compliance with the ten UNGC principles of responsible business conduct and documents its progress on a yearly basis in the so-called “Communication on Progress” notification. It also expects corresponding, responsible behavior from its employees and managers, as well as partners and suppliers.
Employees are RBI’s most important asset, representing a large stakeholder group. Because RBI’s employees originate from more than 50 countries, equal opportunity and integration are two of the key features of the bank’s corporate culture. As an employer, RBI is not only committed to the principle of merit, but also creates an environment that enables both professional and personal development. Please see the Human Resources section for more information on the numerous initiatives.
Operational ecology Compared to companies of other sectors, the direct environmental impact of RBI’s business activities is limited. Nevertheless, RBI’s goal is to minimize the negative environmental impact at all of its locations. This frequently exceeds a mere compliance with statutory regulations and requirements. Last year, for example, a new company building that was constructed in a lowest energy manner, “space2move,” was newly occupied in Vienna. The innovative structure combines optimally air-conditioned office space with low energy costs and a presentable ecological footprint. The certification of the environmental systems for all locations in Vienna in accordance with ISO 14001 has been a matter of course for RBI since 1998. Since 2011, RBI also voluntarily discloses information on its CO2 emissions as part of the “Carbon Disclosure Project,” achieving third place in 2012 among the companies participating from Austria.
Market development 38 Development of the banking sector 41 Performance and financials 42 Detailed review of income statement items 45 Comparison of results with the previous quarter 50 Statement of financial position 52 Equity 53 Research and development 54 Internal control and risk management system 55 Capital, share, voting and control rights 57 Funding 59 Risk management 61 Human resources 64 Outlook 66 Events after the reporting date 67
After growing by 4 per cent in the fourth quarter of 2011 compared to prior quarter, the US economy slowed considerably in 2012, achieving a plus of 2.2 per cent. Growth therefore remained below average for US standards, primarily due to declining government spending and a very subdued increase in private consumer spending. As in 2010 and 2011, consumer spending was dampened by weak trends in the US labor market and stagnating real wages. In the second half of the year, limited corporate investment activity slowed economic growth even further.
The countries of Southeastern Europe (SEE), which had achieved GDP growth of 1.7 per cent in 2011, exhibited economic showdown with minus 0.3 per cent in 2012. On the one hand, political conflicts slowed the reform process, and on the other hand, austerity measures already taken curbed domestic demand. Moreover, the region’s central banks were confronted with conflicting priorities as a result of looming inflation pressure and were unable to support the economy with interest rate reductions.
Subdued trends in Austria The economy in Austria has performed only moderately since the second half of 2011. GDP in real terms increased 0.8 per cent in 2012, following growth of 2.7 per cent in 2011. Compared to 2011, 2012 government consumption decreased slightly. Private consumption recorded a lower growth rate than 2011 despite favorable trends in employment and wages. Investments as well as imports and exports also grew considerably slower in 2012.
The decline in real GDP on a quarterly basis in the fourth quarter of 2012 should signify the economic trough; an economic recovery – even if not particularly dynamic – in the course of 2013 is the most likely scenario. For 2013, GDP growth of 0.5 per cent is expected.
Although inflation in Austria, at 2.6 per cent during 2012, remained above long-term trends, it was still considerably below the level of 2011 (3.6 per cent). For 2013, a decline to 2.2 per cent is expected.
dampening effect on the economy. However, infrastructure projects were started as of the second quarter of 2012 and targeted tax incentives as well as subsidies were granted. The cyclical low point in the economic cycle was thus reached in the third quarter of 2012 and the fourth quarter saw a pick-up in the economy. All in all, China achieved economic growth of 7.7 per cent in 2012, following 9.2 per cent in 2011. Against the backdrop of lower volatility in food and oil prices, the inflation rate declined noticeably and amounted to just 2.5 per cent at the end of 2012.
Sovereign debt crisis becomes a euro crisis Even though there was a considerable decline during 2012 in market interest rates on the outstanding bonds of both Ireland and Portugal – two countries supported by funding from the European Financial Stability Facility (EFSF) – the financing problems for both the new and old debts of many European countries was a defining element of the trends on the financial markets in the year just concluded.
In March 2012, there was a debt haircut on Greek government bonds that were issued in accordance with Greek law and not held by central banks. Nevertheless, even after this debt relief provided by creditors totaling about € 100 billion, the country’s level of indebtedness still did not reach sustainable levels. At the end of 2012, further debt relief was necessary, this time involving a repurchase of bonds by the Greek government at on average 35 per cent of the bond’s nominal value. The funding for this measure was provided by the EU and the IMF.
The Eurozone’s institutional framework was further improved in 2012. For instance, the decision was made to implement a European banking supervisor, and public finances were monitored more effectively as part of the stability pact. In addition, regular reporting was implemented to identify economic imbalances, from which appropriate countermeasures for individual countries must be derived.
Following the announcement in September 2011 by the Swiss National Bank (SNB) that it intended to take unrestricted steps against further appreciation of the Swiss franc, there was initially no further need for action as market participants quickly accepted the exchange rate floor. In April 2012, the euro exchange rate versus the Swiss franc broke through the € 1.20 level for the first time – albeit only for a few seconds. The SNB had to actually take action only in May with the resurgence of the euro crisis. As a consequence of its intervention in the foreign exchange markets, the SNB’s currency reserves rose from CHF 296 billion in April to CHF 430 billion in September. Since then, a noticeable easing is apparent again thanks to the declining levels of intervention by the SNB. The ECB’s bond purchasing program had an impact too, contributing to relaxation in the Eurozone that resulted in a considerable decline in the pressure on the Swiss franc. The currency traded weaker for the first time and in September 2012 exceeded the €/CHF 1.21 level, a level the Swiss franc was able to stay close to until the end of the year.
The majority of RBI is indirectly held by Raiffeisen Zentralbank Österreich AG (RZB), which makes it part of the RZB Group. RZB held a stake of around 78.5 per cent at the end of 2012; the remaining shares were free float. As of 31 December 2012, RBI’s scope of consolidation comprised of 137 Group units, including 21 banks and a number of financial institutions and bank-related service providers.
At the end of April 2012, RBI acquired 100 per cent of Polbank EFG S.A., Warsaw. At the time of initial consolidation, this acquisition increased total assets by € 6.2 billion, which influences the comparability of various items in the statement of financial position and income statement. For information about other changes in the scope of consolidation, please refer to the relevant sections in the notes.
Despite the prevailing difficult economic environment and measures taken to achieve European Banking Authority (EBA) capital requirements, RBI realized profit before tax of € 1,032 million in 2012. However, this represents a 25 per cent or € 342 million decline compared to the previous year. Pre-tax profit was impacted by a considerably lower operating result (decrease of 20 per cent or € 479 million after goodwill impairment adjustments) as well as by valuation results due to easing on the financial markets. Furthermore, one-off effects from the sale of high-quality securities portfolio (gain of € 163 million) and the repurchase of hybrid bonds (€ 113 million) offset the decline by € 276 million.
Net trading income fell by € 149 million to € 215 million. This decline was attributable to net income from interest-based transactions and net income from capital guarantees, where a statutory requirement for valuation model change had led to a valuation gain in the previous year. Hyperinflation accounting led to valuation losses in Belarus.
General administrative expenses rose 5 per cent or € 143 million to € 3,264 million year-on-year. This increase was due almost exclusively to the consolidation and integration of Polbank, which accounted for € 137 million of the increase. Otherwise, expenses were flat year-on-year. The cost/income ratio (excluding impairment of goodwill) rose 6.5 percentage points to 63.5 per cent. When compared to the previous year, staff expenses increased 4 per cent or € 67 million to € 1,606 million. The average number of employees also rose by 903 to 60,924, primarily due to the inclusion of Polbank, which had 3,065 employees at the time of
initial consolidation. Other administrative expenses increased 4 per cent or € 48 million to € 1,257 million year-on-year, largely attributable to higher IT expenses (up € 35 million) and office space expenses (up € 21 million). Compared to year-end 2011, the number of business outlets rose on balance by 178 locations to 3,106, of which 327 relate to Polbank.
Net provisioning for impairment losses declined € 55 million to € 1,009 million in 2012. This decline was attributable to higher releases of portfolio-based loan loss provisions; individual loan loss provisions remained nearly flat year-on-year. The prevailing difficult economic environment especially in the second half of 2012 led to a considerably higher net provisioning, particularly in the fourth quarter. In Hungary, net provisioning for impairment losses decreased by half to € 241 million year-on-year (2011: € 478 million). In Poland, however, net provisioning for impairment losses increased € 69 million to € 127 million. There was a higher need for provisioning mainly related to corporate customers at Group head office, in Slovakia and in Romania. All in all, the provisioning ratio declined from 1.34 per cent to 1.21 per cent. The non-performing loans portfolio increased € 1,127 million to € 8,183 million, of which € 508 million relate to the consolidation of Polbank.
Equity Equity including non-controlling interests remained largely stable at € 10,873 million (down € 63 million). Total comprehensive income amounted to € 838 million, of which € 748 million was profit after tax. Dividend distributions for 2011 reduced equity by a total of € 463 million. Of this amount, € 204 million was attributable to shareholders of RBI, € 200 million to the participation capital and € 58 million to non-controlling interests.
The acquisition of non-controlling interests had a € 405 million effect on equity, primarily resulting from the purchase of a 24 per cent non-controlling stake in Raiffeisenbank a.s., Prague and 13 per cent in Tatra banka, a.s., Bratislava.
The measures introduced in order to comply with EBA requirements led to a € 998 million reduction in own funds requirement to € 6,626 million. The decline was caused primarily by own funds requirements for credit risk (minus € 721 million) and position risk in bonds, equities and commodities (minus € 247 million).
Loans and advances to customers increased 2 per cent as a result of the Polbank consolidation. Despite the impact from Polbank, deposits from customers remained unchanged year-on-year due to a decline in deposits from corporate customers (particularly in the repo business). As a result, the loan/deposit ratio increased 4 percentage points to 126 per cent.
Interest income from loans and advances to banks in particular registered a significant decline of € 145 million to € 297 million due to a reduction in excess liquidity at Group head office. Interest income from securities also fell € 161 million to € 609 million, partially impacted by sales of securities at Group head office. On the other hand, net interest income in Russia performed well, posting a plus of € 159 million as a result of increased credit business combined with an improved net interest margin as well as higher interest income from derivatives. Furthermore, net interest income was positively impacted by the Polbank consolidation.
Net income from the payment transfer business increased € 52 million to € 663 million, which – at 44 per cent – makes it the largest component of net fee and commission income. The significant improvement is attributable to a higher number of transactions and increased transaction volumes. At € 19 million, Russia made the largest contribution to the increase, followed by Ukraine with € 18 million.
At € 19 million, net income from the foreign currency, notes/coins and precious metals business exhibited the second largest increase year-on-year. This rise was attributable primarily to better results in Russia (up € 8 million) and in Belarus (up € 7 million) due to increased turnover and improved margins.
Net income from the management of investment and pension funds decreased € 4 million, impacted primarily by lower business activity in Croatia.
RBI’s net trading income declined 41 per cent or € 149 million to € 215 million. On the one hand, currency-based transactions as well as equity and index-based transactions increased € 102 million and € 4 million, respectively. On the other hand, interestbased business (down € 137 million), credit derivatives business (down € 15 million) and other business (down € 103 million) posted reductions.
Net income from interest-based transactions decreased 80 per cent or € 137 million to € 34 million. Partly responsible for this decline was lower net income in Russia, resulting from valuation losses on derivatives. Net valuation income from interest swaps at Group head office was also lower, due in part to a change in the assessment of the counterparty credit risk.
General administrative expenses rose 5 per cent or € 143 million to € 3,264 million in the reporting period. The cost/income ratio thus increased to 63.5 per cent (2011: 57.0 per cent).
Other administrative expenses Other administrative expenses increased 4 per cent or € 48 million to € 1,257 million. IT expenses (up 16 per cent), deposit insurance fees (up 10 per cent) and office space expenses (up 6 per cent) recorded the largest increases. In contrast, advertising, PR and promotional expenses (down 10 per cent), security expenses (down 8 per cent) and communications expenses (down 4 per cent) all decreased.
The increase in IT expenses was primarily the result of the Polbank consolidation and the outsourcing of IT services at Group head office. Likewise, Poland and Group head office, due to their relocations, were the main reasons for higher office space expenses.
The number of business outlets increased by 178 to 3,106 compared to year-end 2011. Poland recorded an increase of 300 business outlets; Ukraine (down 84), Romania (down 24) and Hungary (down 9) posted the largest declines.
During the reporting year, Group investment totaled € 531 million, of which 52 per cent (€ 276 million) was in fixed assets. Investments in intangible assets, mainly related to software systems, equaled 38 per cent of investment. Assets of the operating leasing business accounted for the rest.
Net income from securities held-to-maturity declined € 91 million to € 1 million. The previous year’s high figure had included gains from the sale of high-quality securities in the amount of € 94 million, resulting from measures taken to meet the stricter EBA capital requirements.
net income from disposal of Group assets In 2012, net income from the disposal of Group assets was € 12 million. Ten subsidiaries were no longer consolidated, eight of them on the grounds of immateriality. One subsidiary was excluded from the consolidation group following closure and another subsidiary was sold. The companies were primarily active in leasing and investment services.
Broken down by segment, Russia displayed an increase in the net interest margin by 48 basis points to 5.45 per cent. This development was influenced by an improved interbank business as well as a reduction in interest expenses on deposits from customers. In contrast, the net interest margin in CIS Other fell from 7.31 per cent to 6.96 per cent, mostly due to hyperinflation in Belarus. In Southeastern Europe, net interest margin rose 33 basis points to 4.27 per cent, mainly in Serbia where net interest income in the fourth quarter was driven by higher interest income from loans and securities. Central Europe posted a slight 8 basis points increase in the net interest margin to 2.81 per cent.
Net trading income fell by € 59 million to minus € 6 million quarter-on-quarter. This development can be attributed primarily to a decline in interest-based transactions owing to valuation losses. Furthermore, the valuation result of interest-based transactions was adversely influenced by a change in the assessment of counterparty credit risk.
Net income from currency-based transactions also slipped in the fourth quarter, declining € 3 million. One of the main causes here was the drop in net income in Belarus following the application of IAS 29 (hyperinflation accounting). It was offset by valuation gains on a strategic currency position.
In the credit derivatives business, an increase of € 3 million was recorded quarter-on-quarter.
Net income from other business rose € 3 million due to valuation of issued capital guarantees.
Other net operating income (excluding impairment of goodwill) was minus € 12 million in the fourth quarter 2012; in the third quarter, it had been minus € 16 million.
General administrative expenses in the fourth quarter 2012 totaled € 928 million, up € 109 million quarter-on-quarter. Staff expenses increased due to adjustments to future bonuses and the establishment of a restructuring provision in Poland in the amount of € 18 million. Furthermore, other administrative expenses rose € 62 million to € 373 million, resulting from a seasonal increase of legal, advisory and consulting expenses, IT expenses as well as advertising, PR and promotional expenses in the fourth quarter. Depreciation on tangible assets totaled € 126 million in the fourth quarter, up € 29 million from the previous quarter. The main cause here were software systems write-downs in Ukraine and in the Czech Republic as well as write-downs of tangible fixed assets in Hungary following the closure of business outlets. At Group head office, depreciation in the fourth quarter increased due to an adjustment in the useful lives of tangible assets.
Compared to previous quarters, net provisioning for impairment losses in the fourth quarter 2012 was significantly higher at € 385 million; compared to the third quarter, this represents an increase of € 162 million. Due to a few individual cases among large corporate customers, net provisioning rose particularly in Hungary (up € 55 million quarter-on-quarter); Group head office also increased provisioning by € 48 million. Further marked increases were reported in the Czech Republic, Poland and Slovenia.
Impairment of goodwill Other net income was adversely affected by goodwill impairment – primarily for the Ukrainian subsidiary bank – in the amount of € 37 million in the fourth quarter of 2012.
Assets Loans and advances to customers (before provisioning) rose 2 per cent or € 1.8 billion to € 83.3 billion in the reporting period. The retail customer business recorded growth of € 5.1 billion, primarily in Poland because of Polbank consolidation, and in Russia as a result of new business. Central and Eastern Europe showed moderate decline, especially in Ukraine, Croatia, and Hungary. The corporate customer business declined € 3.4 billion, primarily driven by Group head office (on account of lower new business and sales of receivables), business outlets in Asia and the finance company in New York.
Capital of non-controlling interests declined € 424 million to € 719 million in 2012, attributable principally to purchases of non-controlling interests, which include 24 per cent in Raiffeisenbank a.s., Prague, 13 per cent in Tatra banka, a.s., Bratislava, 30 per cent in Raiffeisen Bank Zrt., Budapest, 12 per cent in Raiffeisen Banka d.d., Maribor, and 3 per cent in Raiffeisen Bank d.d. Bosna i Hercegovina, Sarajevo. Furthermore, dividends of € 58 million were paid to minority shareholders in the reporting year.
Own funds pursuant to the Austrian Banking Act (BWG) During the reporting period, the calculation of eligible own funds according to Section 29a BWG was changed to international accounting standards. The comparable figures are based on BWG/UGB and have not been modified. RBI does not form an independent credit institution group (Kreditinstitutsgruppe) as defined by the BWG and therefore is not subject to the regulatory provisions on a consolidated basis as it is part of the RZB Group. The consolidated values shown below have been calculated in accordance with the provisions of the BWG and are assumed in calculations of the RZB credit institution group.
Credit risk is predominantly calculated according to the internal ratings-based approach (foundation IRB approach) in accordance with Section 22 BWG. This affects most non-retail business at RBI AG and its subsidiaries in Croatia, the Czech Republic, Hungary, Malta, Romania, Russia, Slovakia and the USA. A large portion of the loans and advances to retail customers in the Czech Republic, Hungary and Slovakia are measured using the advanced IRB approach. Market risk is predominantly measured using the standardized approach; RBI AG carries out the calculation in part according to the internal model.
Consolidated own funds pursuant to BWG amounted to € 12,885 million as of 31 December 2012, which represents an increase of € 27 million for the reporting year.
Additional own funds were down € 28 million year-on-year at € 3,340 million. This item consists of long-term subordinated capital, of which the largest part pertained to RBI AG at € 2,878 million, and the provision excess of IRB positions of € 226 million. Short-term subordinated capital increased € 202 million to € 302 million as a result of maturing tier 2 issuances. The deduction items related to participations, securitizations and insurance companies came to € 36 million (2011: € 44 million).
The tier 1 ratio – based on credit risk – was 13.6 per cent. Based on total risk, the core tier 1 ratio was 10.7 per cent, with a tier 1 ratio of 11.2 per cent. The own funds ratio totaled 15.6 per cent.
In the fall of 2011, the EBA decided to implement stricter capital requirements for about 70 system-relevant banks in the EU, in order to fortify the financial system. As part of this initiative, a core capital ratio (core tier 1 ratio as per EBA definition) of 9 per cent was defined as a target value to be reached by 30 June 2012. For RZB Group – RBI itself was not covered in the EBA analysis – this decision resulted in an additional capital requirement of about € 2.1 billion pursuant to EBA calculations. Following the implementation of numerous internal measures by the bank itself, this amount was well exceeded without government support. At the set date, the figure for RZB Group was 10.0 per cent, and even 10.6 per cent including net profit.
■ process descriptions for the preparation, quality control, approval, publication, implementation and monitoring of directives and instructions,
Throughout the year the Group produces consolidated monthly reports for Group management. Statutory interim reports are produced that conform to the provisions of IAS 34 and are also published quarterly in accordance with the Austrian Stock Corporation Act. Before publication, the consolidated financial statements are presented to senior managers and the Chief Financial Officer for final approval and then submitted to the Supervisory Board’s Audit Committee. Analyses pertaining to the consolidated financial statements are also provided for the management, as are preliminary Group figures at regular intervals. The financial budgeting system prepared by the Planning & Finance department includes a three-year Group budget.
(6) Pursuant to the articles of association, a person who is 68 years or older may not be appointed as a member of the Management Board or be reappointed for another term in office. The rule for the Supervisory Board is that a person who is 75 years or older may not be elected as a member of the Supervisory Board or be re-elected for another term in office. Moreover, no person who holds already eight supervisory board mandates in a publicly traded company may become a member of the Supervisory Board. Holding a position as chairman of the supervisory board of a publicly traded company counts twice for this purpose. The Annual General Meeting may choose to waive this restriction through a simple majority of votes if permitted by law. Any candidate who has more mandates to, or chairman positions in, supervisory boards in publicly traded companies must disclose this to the Annual General Meeting. Beyond that, there are no regulations regarding the appointment or dismissal of members of the Management Board and the Supervisory Board beyond the provisions of the relevant laws. The articles of association stipulate that the resolutions of the Annual General Meeting are, notwithstanding any mandatory statutory provisions or articles of association to the contrary, adopted by a simple majority of the votes cast. Where the law requires a capital majority in addition to the voting majority, resolutions are adopted by a simple majority of the share capital represented in the votes. As a result of this provision, members of the Supervisory Board may be dismissed prematurely via a simple majority. The Supervisory Board is authorized to adopt amendments to the articles of association that only affect the respective wording. This right may be delegated to committees. Furthermore, there are no regulations regarding amendments to the company articles of association beyond the provisions of the relevant laws.
(7) Pursuant to Section 169 of the Austrian Stock Corporation Act (AktG), the Management Board has been authorized since the Annual General Meeting of 8 June 2011 to increase the capital stock – in one or more tranches – by up to € 298,145,314.10 by issuing up to 97,752,562 new common bearer shares with voting rights against contributions in cash and/or in kind within five years after recording the relevant amendment to the articles of association in the commercial register, while preserving the right of subscription to which the law entitles shareholders, including the right of indirect subscription by way of a bank pursuant to Section 153 (6) of AktG, and to fix the offering price and terms of the issue with the approval of the Supervisory Board. The Supervisory Board or a committee authorized for this purpose by the Supervisory Board is authorized to adopt amendments to the articles of association that arise upon issuing shares from the authorized capital.
Pursuant to Section 159 (2) 1 of AktG, the capital stock has been increased contingently by up to € 47,173,587.50 through the issue of up to 15,466,750 common bearer shares (contingent capital). The capital increase would only be carried out to the extent that holders of convertible bonds issued under the resolution of the Annual General Meeting of 10 June 2008 make use of their right to convert such bonds into shares of the company. Pursuant to Section 174 (2) of AktG, the Annual General Meeting of 10 June 2008 authorized the Management Board to issue, in one or more tranches, convertible bonds in a total nominal amount of up to € 2 billion, which grant owners conversion or subscription rights for up to 15,466,750 common bearer shares of the company with a pro rata amount of the capital stock of up to € 47,173,587.50, within five years from the date of resolution adopted by the Annual General Meeting, with the approval of the Supervisory Board. Shareholders’ subscription rights to the convertible bonds are excluded. No convertible bonds have been issued to date.
The Annual General Meeting of 9 June 2009 authorized the Management Board of the company to issue, in one or more tranches, participation rights having equity characteristics pursuant to Section 174 of AktG in a total nominal amount of up to € 2 billion within five years from the date of the resolution, with the approval of the Supervisory Board in accordance with the terms for participation rights to be set by the Management Board and to the exclusion of shareholders’ subscription rights. It should be noted that, under the provisions of the relevant laws, participation rights confer no voting rights or other membership rights. Issuing participation rights therefore entails no change of ownership structure from the standpoint of stock corporation law and shareholders’ voting rights. The company decided on 15 July 2009 to strengthen its capital by issuing participation rights in the amount of € 600 million based on the authorizing resolution of June 2009. In the course of the merger of RZB’s principal business areas with Raiffeisen International to form RBI with effect from 10 October 2010, the mutual loans and liabilities of the receiving and transferring company were wiped out. The same is true of the participatory rights in the amount of € 600 million, which had been subscribed in full by RZB. No further participation rights have been issued to date. Please consult the notes on equity (34) for more information.
Pursuant to Section 102a of the Austrian Banking Act (BWG), the Annual General Meeting of 8 June 2011 authorized the Management Board, within five years of recording the relevant amendment to the articles of association in the commercial register, to retire either the participation capital in its entirety or the participation capital of individual tranches that were differentiated on issue, with the approval of the Supervisory Board and taking into account the terms of issue. Partial retirement of participation capital of individual issues or tranches is permissible, provided the equal treatment of eligible holders of participation capital is ensured.
(8) The following material agreements to which the company is a party and which take effect, change or come to an end upon a change of control in the company as a result of a takeover bid exist: ■ The company’s D&O insurance provides that, if RBI comes under new control due to a merger, the insurance contract automatically terminates without notice and the insurance will only cover events of loss due to breach of duty occurring prior to the merger. In the event of multiple insurance policies resulting from the change in control, the insurance contract also only covers events of loss due to breach of duty occurring prior to the change in control.
■ The company’s SIP provides the following upon change in corporate control: “If a change in corporate control or a merger occurs during the vesting period without the combination being exclusively concerned with subsidiaries, all contingent shares will lapse without replacement at the time of acquiring the shares of RBI and the investor’s actual possibility of disposing of them, or at the time of the merger. An indemnification payment will be made for these contingent shares. The indemnity sum calculated will be paid out with the next possible salary payment.”
Stable basis for refinancing RBI’s refinancing need is based on two key elements. First, there are customer deposits, which at the end of 2012 accounted for € 66.3 billion or 58 per cent of refinancing. Second, there is wholesale funding, which totaled € 47.4 billion, or the remaining 42 per cent. The high share of customer deposits creates a stable refinancing basis, making RBI less vulnerable to the financial markets volatility.
Before the summer break, RBI took advantage of the friendlier market environment to issue a second benchmark bond for € 750 million. This issue was also oversubscribed. The bond which has a five-year maturity was placed with a coupon of 2.75 per cent.
In addition to senior bonds, RBI successfully raised subordinated funding as well. In October, the Group was the first Austrian bank to issue a subordinated bond in Swiss francs. Due to high demand, the bond raised CHF 250 million, thereby greatly surpassing expectations. The bond’s maturity is ten years with a 4.75 per cent coupon.
Further refinancing measures For short-term funding, RBI used both the interbank market and its program for short-term issues (commercial paper), the European Commercial Paper Program. Under this program, RBI issued commercial papers in various currencies, therefore enabling it to refinance itself outside the interbank market.
Senior government guaranteed Senior public placements Senior private placements Other Subordinated Supplementary
Risk management also employs firmly established stress tests to assist with capital planning and budgeting. In addition to the regulatory stress tests carried out by the supervisory authorities, internal analyses for further scenarios and potential risk drivers were also conducted in 2012. Market risks, operational risks, increased financing costs and numerous other capital and income components were included in the integrated approach, in addition to the increased capital requirement and high write-downs on the loan portfolio in case of stress.
Due to the steady improvement in available liquidity on the financial markets and RBI’s favorable access to refinancing opportunities, the increased liquidity buffer of 2011 was reduced again over the course of the year under report. At the same time, the structure of the assets contained was optimized. These steps should assist in the strengthening of the net interest margin over the long term, while maintaining an adequate liquidity buffer.
Market risk Since January 2010, market risk management has been based on the figures from an internal model. The model uses a hybrid approach – i.e. a combination of historical and Monte Carlo simulations with 5,000 scenarios – to calculate value at risk (VaR) for changes in the risk factors of foreign exchange, interest rate development, bonds credit spreads, credit default swaps and equity indices. To improve the modeling of risk factors where the probability of extreme price changes exceeds the probability given by the normal distribution, numerous approaches were integrated into the model. These include the enhancement of scenarios to include extreme events or the consideration of the current volatility levels in generating scenarios and different time horizons in the volatility estimate. This model already forms the basis for implementing the strict Basel III requirements into internal models. The model was expanded to include a stressed VaR module, to include current regulatory requirements since 31 December 2011. An additional model was established in 2012 to improve the measurement of option risks.
The daily scope of management includes RBI’s trading and banking books based on VaR on a holding period of 1 day and a confidence interval of 99 per cent as well as sensitivity limits. The market risk position, the limit process and the presentation of all capital market activities on the income statement are among the items on the fixed agenda for the weekly Market Risk Committee meeting.
To ensure model quality, daily back testing is performed. The results of these tests were always within the limits of the model expectations. Based on these good results, the internal model is to be allocated to the best class (“green light”) from a regulatory perspective.
Management of non-performing loans The fact that 2012 was a difficult year for the CEE region, and thus for RBI’s home market, was reflected in the increase in nonperforming loans to non-banks (up 16 per cent or € 1,127 million compared to 2011) whereof € 508 million resulted from the integration of Polbank at the time of its first-time consolidation.
The allocation of corresponding loan loss provisions was, however, partly offset by high returns from reorganization measures. In doing so, adequate coverage was ensured through allowances. Workout management will remain one area of focus in 2013.
RBI achieved improvements in 2012 in the early recognition and treatment of troubled loans, thereby preventing a further increase in non-performing loans to a great extent. The improved process efficiency, ongoing steps to improve employee training in this area and continuous exchange of experience among the individual members of the Group are significant cornerstones here.
Basel II and III – regulatory environment RBI kept up with the current and the upcoming regulatory developments in 2012. The majority of the expected changes resulted from preparations for the introduction of the EU CRD IV/CRR directive, particularly the legislation with regard to capital requirements, key liquidity figures and deductions for minority interests. The potential impact on RBI of new and amended legislation has been analyzed in detail. The corresponding internal guidelines were adopted where necessary.
The following table gives an overview of the current status of these projects. The implementation of the IRB approach in subsidiaries in the CEE region will be continued in 2013.
As of 31 December 2012, RBI had 60,084 employees (fulltime equivalents), 823 people or 1 per cent more than at the end of 2011. This is based on the first inclusion of Polbank personnel figures; without this effect, a reduction of 5 per cent would have been achieved. Measured on the country’s total number of employees, the largest absolute reduction occurred in Ukraine. The average age of employees was relatively low at 36 years, making RBI a young and dynamic bank. Graduates accounted for 68 per cent of employees, indicating a highly skilled workforce. 67 per cent of employees were women.
Performance management RBI’s current performance management was adapted in 2012 to the statutory requirements of the BWG. Furthermore, the coordination of target-setting and the budgeting processes were improved from both a timing and content perspective, and performance indicators were revised. In the individual network units, the focus was directed on efficient processing of these requirements and further improvement of the target and development agreements.
Talent management and management development In the 2012 reporting year, a Group-wide initiative was started to further improve the quality of the bank’s talent management system; the objective of this was to optimize the implementation of the talent management system in practice. Following an analysis of talent management processes in the network banks, an international project team consisting of HR experts from the Group head office and the network, together with external specialists, identified best practices, which were then shared with other Group units. When needed, these Group units were also supported with their implementation of the measures derived from these best practices. Building on the results of the analysis, opportunities for employees to switch between divisions and countries within the company will be expanded in 2013.
Professional development In accordance with the Group’s strategy, the focus of training activities in 2012 was on professional topics such as capital market products, business with affluent retail customers, risk management and collections. Extensive training initiatives on the subject of “lean” organizations support managers and employees with the streamlining of processes and the associated improvements in efficiency. Basic knowledge is provided via eLearning, while practical implementation takes place primarily during visits to Group units where the lean methodology has already been successfully implemented.
Local initiatives The focus in all network banks during the reporting period was on cost optimization initiatives. Several banks, such as Tatra banka in Slovakia, closely scrutinized the structure of their voluntary fringe benefits and optimized their organization and processes as part of the Lean project. In Raiffeisen Bank Aval in Ukraine, an extensive project was started to restructure the entire network in order to create simpler management structures and reduce the number of full-time equivalents in the regions. Hence, 25 regional centers were combined into 7 macro-centers, enabling the number of regional managers and full-time equivalents to be reduced by 78 and 408, respectively.
Developments in human resources Additional focal points of Group-wide Human Resources activities in 2012 included further development and implementation of HR Group guidelines and policies, promoting communication, as well as cooperation and experience-sharing between HR experts on the subject of best HR practices in the Group.
In addition, the growing number of branches and employees in Southeast Asia and China made it necessary to expand on-site Human Resources activities there.
As part of the performance management process, increased attention was paid to granting salary increases or bonuses only to strong performers on the basis of differentiated performance evaluations.
Every year, all companies associated with RBI Credit Institution Group are assessed based on risk criteria in order to determine on this basis to what extent the remuneration rules apply. In addition, the positions subject to the restrictive provisions of the BWG are likewise identified each year for all companies.
Outlook Economic prospects Central Europe 2012 brought a decline in economic output in the CE region, mainly caused by the weak trend in the Eurozone, as the main consumer of exports from Central Europe, as well as by the decreasing leeway left to public authorities, for example in Poland and Slovakia, to fight the economic downswing in Western Europe. While the economy contracted in the Czech Republic, Hungary and Slovenia, Poland and Slovakia continued to report positive growth rates in 2012, despite the cooldown. Following this cooldown – particularly noticeable in the second half of 2012 – moderate economic recovery is expected for 2013, especially during the second half of the year. It is, however, probable that in the Czech Republic (forecast: minus 0.2 per cent), Hungary (forecast: minus 0.5 per cent) and Slovenia (forecast: minus 1.0 per cent), GDP will decrease again slightly in 2013, whereas it may continue to exhibit slight growth in Poland (forecast: plus 1.2 per cent) and Slovakia (forecast: plus 0.9 per cent). This will remain largely dependent on export demand from the Eurozone, however.
The economic situation in Southeastern Europe also suffered from the decline in exports caused by the Eurozone’s difficulties. Ongoing weak investment activity in the region further weighed on economic performance. As a result, growth could be very low in some countries, or even not occur at all. It is also likely that consumer spending in the region will remain modest due to subdued credit growth, a decline in transfers from Southeastern Europeans working abroad and ongoing high unemployment. Although exemplary, the austerity measures undertaken by Southeastern European governments have inhibited growth and created political risks at times. Nonetheless, first indicators already suggest a slight economic recovery. Hence, forecasts project GDP growth of 0.9 per cent for the overall region in 2013, though economic activity is unlikely to gain momentum before the second half of the year.
Following an increase of 3.4 per cent in 2012, experts forecast real GDP growth of about 3 per cent for the current year in Russia. This slight decline results from expectations of slower investment momentum, on the one hand, and limited growth potential in the export sector, which is strongly dominated by commodities, on the other. Furthermore, household demand, so far the main growth driver, is likely to lessen to some degree amid weaker credit growth. This should, however, be limited to the first half of 2013, before the economy will start to brighten up again in the second half of the year. Ukraine, in turn, is struggling not only with a weak economy, but also with high foreign economic imbalances. Although its current account deficit should decline somewhat in 2013, it, in combination with a high refinancing need in the public sector, weighs on the country’s external liquidity situation. At the beginning of 2013, Ukraine began negotiations with the International Monetary Fund (IMF) regarding a new aid package. During the second half of 2012, Belarus also recorded a deterioration in external conditions. Nevertheless, GDP is expected to rise here 3.0 per cent in 2013, thereby posting a year-on-year increase in economic growth.
Following the continued recession in the fourth quarter of 2012, several leading indicators are showing the first signs of a stabilizing economy. Particularly trend indicators, usually the first indicators of a change in economic momentum according to experience, displayed considerable improvement. However, the picture still varies widely in individual countries. Currently Germany and Southern Europe are primarily responsible for the improvement in prospects. Although the recession is slowing in Southern Europe and the reduction in economic imbalances is progressing, it is difficult to assess exactly when improved export performance and increasing private sector investment will in fact lead to recovery. Thus, the expected economic revival in the Eurozone during the first half of 2013 still has a narrow base and depends on exports in particular, since domestic demand will likely remain weak. All in all, an economic recovery in 2013 is not guaranteed. It does appear possible, however, that the Eurozone can work its way out of recession during the first half of 2013 and that a moderate recovery will follow.
Outlook for RBI In the context of the expected overall economic developments, particularly in CEE, we are aiming for a return on equity before tax of around 15 per cent in the medium term. This is excluding any capital increases, as well as unexpected regulatory requirements from today’s perspective.
In 2013, we plan to slightly increase loans and advances to customers. Given the outlook for interest rates, we aim to maintain the net interest margin at the level of the previous year. From the customer standpoint, we plan to retain our Corporate Customers division as the backbone of our business and in the medium term to expand the proportion of business volume accounted for by our Retail Customers division.
Against the backdrop of a permanently changing regulatory environment and further strengthening of our balance sheet structure we are continuously evaluating the level and structure of our regulatory capital to be able to act promptly and flexibly. Depending on market developments, a capital increase also continues to be a possible option.
Events after the reporting date There were no events after the reporting date that require disclosure.
Profit before tax in the Group Markets segment fell 3 per cent to € 258 million compared to the previous year, mainly due to lower operating income while other results increased because of the sale of securities. Total assets decreased 21 per cent to € 20.2 billion year-on-year.
Net provisioning for impairment losses (517) (646) (20.0)% (224) (94) 138.6%
Net interest margin (average interest-bearing assets) 2.85% 3.36% (0.50) PP 2.81% 2.73% 0.08 PP
Net interest income in the region decreased 5 per cent to € 1,043 million year-on-year. The most pronounced decline was in Hungary, primarily due to the premature repayment of foreign-currency loans to retail customers and higher interest expense for customer deposits. Most of these had been financed by more favorable bank deposits in the previous year. In the Czech Republic, retail business decline due to general economic conditions was the main cause for lower net interest income. In Slovakia, the competitive banking environment led to higher interest expense for client deposits, leading to a reduction in net interest income. In contrast, net interest income in Poland surged by 41 per cent due to Polbank consolidation. The segment’s profitability declined year-on-year as net interest margin fell 50 basis points to 2.85 per cent. Total assets rose 17 per cent or € 5.9 billion to € 40.8 billion year-on-year due to Polbank consolidation. Credit risk-weighted assets increased 2 per cent from € 21.5 billion to € 22.0 billion.
Net trading income for the Central Europe segment dropped 90 per cent to € 8 million year-on-year. Net income from currencybased transactions in particular decreased, dropping from € 62 million to minus € 3 million. The most pronounced decline was recorded in Hungary, attributable to the valuation result from derivatives. Net income from interest-based transactions decreased € 4 million to € 10 million compared to the previous year. Hungary was again the reason for this decline as its valuation result from interest-rate derivatives was considerably lower.
The region’s other net operating income declined from minus € 2 million to minus € 18 million despite income from the release of other provisions in Hungary, which had primarily been established for legal disputes. The introduction of a bank levy in Slovakia adversely impacted net income with € 29 million. The bank levy in Hungary totaling € 24 million also had a stronger negative impact on net income than in the previous year. In 2012, fewer losses resulting from the early repayment of foreign currency loans permitted under the legal framework in Hungary could be offset when compared to 2011.
General administrative expenses in the Central Europe segment increased 11 per cent year-on-year to € 1,037 million. This increase is exclusively due to Polbank consolidation and its operational merger with Raiffeisen Bank Polska. There were cost reductions in other countries, particularly in Hungary, where a decrease in business outlets and headcount reduction considerably reduced staff expenses. The segment’s other administrative expenses increased to € 435 million, primarily due to Polbank consolidation. Depreciation also increased 26 per cent to € 121 million during the reporting year, largely caused by the Polbank consolidation in combination with higher depreciation on IT software in Slovakia as well as depreciation related to the branch network in Hungary. The number of business outlets in the segment increased by 301 to 853 year-on-year, once again mainly on account of the inclusion of 327 business outlets from Polbank. Despite the ongoing improvement in the segment’s cost structure, the region’s cost/income ratio rose 11.6 percentage points to 67.8 per cent because of lower operating income.
The segment’s net provisioning for impairment losses declined 20 per cent to € 517 million. The decline was attributable mostly to Hungary, where the political and economic environment in the comparable period had required additional individual loan loss provisions. This was particularly due to the legally defined right to premature repayment of foreign currency loans at an exchange rate below the market rate. In total, net allocations to individual loan loss provisions decreased 13 per cent year-on-year to € 582 million. While allocations declined in Hungary, higher allocations were necessary, especially in Poland as a result of increased defaults in the construction sector and in the Czech Republic due to higher mortgage loans allocations. Portfolio-based loan loss provisions in the region increased € 40 million to € 61 million year-on-year. The largest change occurred in the Czech Republic, where it was necessary to provide a net allocation to individual loan loss provisions in the same amount as net releases in portfoliobased provisions. The share of non-performing loans from non-banks in the Central Europe segment’s loan portfolio totaled 11.5 per cent at the end of the period under review (up 1.8 percentage points).
Income taxes for the segment rose 3 per cent to € 68 million. The tax rate thus remained at a relatively high level because of Hungary where, as in the previous year, incurred losses could not be fully deducted for tax purposes through the recognition of corresponding tax loss carry-forwards. Furthermore, tax loss carry-forwards for Polbank could likewise not be fully utilized due to tax restrictions.
Net fee and commission income 125 127 (1.4)% 33 31 7.9%
Loans and advances to customers 6,380 6,538 (2.4)% 6,380 6,368 0.2%
hereof foreign currency % 7.1% 6.9% 0.2 PP 7.1% 6.8% 0.3 PP
Net provisioning for impairment losses (241) (478) (49.5)% (94) (39) 142.2%
Number of employees as of reporting date 2,865 2,977 (3.8)% 2,865 2,904 (1.3)%
Net fee and commission income 154 138 11.5% 42 43 (2.6)%
Net provisioning for impairment losses (127) (58) 119.0% (50) (28) 77.4%
Loans and advances to customers 10,451 5,340 95.7% 10,451 10,561 (1.0)%
Return on equity before tax 0.6% 15.8% (15.2) PP – – –
Return on equity after tax 11.2% 16.9% (5.7) PP 9.0% 9.3% (0.3) PP
Net provisioning for impairment losses (34) (15) 121.3% (25) (4) >500.0%
Number of employees as of reporting date 310 323 (4.0)% 310 321 (3.4)%
Net provisioning for impairment losses (287) (258) 11.5% (87) (72) 21.3%
At € 319 million, net fee and commission income was also 13 per cent below the previous year’s figure. Income from payment transfer business was unchanged year-on-year and thus remained the biggest contributor with € 178 million. Income from loan and guarantee business fell 67 per cent to € 20 million. This was mainly due to developments in Romania where – in addition to the reclassification previously mentioned – net fee and commission income was also down due to lower prices, especially in the retail business. In contrast, income from foreign currency, notes/coins and precious metals business, generated mainly in Croatia and Romania, remained unchanged year-on-year at € 69 million. Income from management of investment and pension funds declined 30 per cent to € 8 million due to an increase in government fees for pension funds in Croatia as well as lower transaction volumes.
Other net operating income remained virtually unchanged year-on-year at € 40 million. Although the release of other provisions had a positive impact in several countries within the region, income from operating lease business decreased, primarily due to lower new business volume in Croatia.
The segment’s general administrative expenses edged down 6 per cent to € 702 million year-on-year. Staff expenses decreased as a result of headcount reduction, especially in Romania, and due to lower bonus payments in Croatia. Other administrative expenses also declined 6 per cent to € 304 million, due to a reduction in legal, advisory and consulting expenses in Romania as well as advertising, PR and promotional expenses, particularly in Croatia and Romania. Depreciation in the region decreased 13 per cent as well to € 94 million, largely due to depreciation on tangible fixed assets and leased assets in Croatia and Serbia. Write-ups on previously impaired assets in Romania provided further improvement. At 54.8 per cent, the cost/income ratio remained virtually unchanged year-on-year.
Income taxes for the region dropped 23 per cent to € 36 million year-on-year, with the tax rate falling 1 percentage point to 12 per cent.
Below please find the detailed results of the individual countries in the segment: Albania in € million 2012 2011 Change Q4/2012 Q3/2012 Change
Net fee and commission income 8 8 (0.7)% 2 2 17.1%
hereof foreign currency % 64.6% 57.6% 7.0 PP 64.6% 67.8% (3.2) PP
Return on equity before tax 22.7% 29.6% (6.9) PP 9.2% 17.8% (8.6) PP
Return on equity after tax 20.8% 26.4% (5.6) PP 10.4% 15.8% (5.4) PP
Number of employees as of reporting date 1,388 1,427 (2.7)% 1,388 1,419 (2.2)%
Bosnia and Herzegovina in € million 2012 2011 Change Q4/2012 Q3/2012 Change
hereof foreign currency % 73.5% 74.2% (0.7) PP 73.5% 74.7% (1.2) PP
Number of employees as of reporting date 1,561 1,569 (0.5)% 1,561 1,558 0.2%
Net fee and commission income 37 37 0.2% 10 10 1.1%
Net provisioning for impairment losses (76) (79) (4.4)% (24) (22) 8.9%
Loans and advances to customers 2,883 2,974 (3.1)% 2,883 2,893 (0.4)%
hereof foreign currency % 75.0% 78.3% (3.3) PP 75.0% 75.6% (0.6) PP
Return on equity after tax 2.1% 6.9% (4.8) PP – – –
Net fee and commission income 57 66 (13.8)% 13 16 (16.5)%
Return on equity after tax 6.2% 5.3% 0.9 PP 0.9% 6.2% (5.3) PP
Net fee and commission income 8 8 (0.2)% 2 2 (12.3)%
Net provisioning for impairment losses (5) (6) (19.4)% (1) (1) (38.3)%
Return on equity before tax 16.8% 15.7% 1.1 PP 13.3% 18.2% (4.9) PP
Net fee and commission income 143 179 (20.4)% 34 42 (20.4)%
Loans and advances to customers 4,226 4,428 (4.6)% 4,226 4,217 0.2%
Return on equity before tax 20.5% 23.1% (2.6) PP 13.3% 21.4% (8.1) PP
Net provisioning for impairment losses (15) (18) (16.6)% (6) (2) 178.5%
hereof foreign currency % 66.6% 66.2% 0.4 PP 66.6% 67.7% (1.0) PP
Number of employees as of reporting date 1,769 1,765 0.2% 1,769 1,776 (0.4)%
Net interest margin (average interest-bearing assets) 5.29% 5.18% 0.11 PP 5.45% 4.97% 0.48 PP
Return on equity before tax 39.2% 34.0% 5.1 PP 29.9% 40.3% (10.4) PP
Compared to 2011, the segment’s net fee and commission income improved 20 per cent or € 47 million to € 285 million. Income from payment transfer business was 23 per cent higher than the previous year’s figure and – with € 102 million – once again provided the largest contribution to the segment’s net fee and commission income. Income from foreign currency, notes/coins and precious metals business as well as net income from loan and guarantee business contributed a further € 60 million and € 76 million, respectively.
The segment’s general administrative expenses climbed 5 per cent to € 511 million. The increase was attributable primarily to higher staff expenses as a result of salary increases at the end of the previous year, which could not be entirely offset by a simultaneous 4 per cent decrease in the total number of employees. Deposit insurance fees were also higher, as were legal, advisory and consulting expenses. In contrast, depreciation decreased due to higher impairment in the previous year’s period relating to a property. Compared to 2011, the number of business outlets declined slightly by 5 to 186 locations. The cost/income ratio improved 10.6 percentage points to 46.5 per cent year-on-year due to a significant increase in operating income.
Net provisions for impairment losses again reported a net release, which – at € 16 million – was € 26 million lower than the previous year’s figure, however. Net allocations to individual loan loss provisions – primarily established in connection with private individuals – totaled € 2 million, while the previous year’s net release had been € 9 million. A net release of € 15 million was posted in portfolio-based loan loss provisions because of an increase in the quality of the loan portfolio; this improvement was due to the fact that new business was primarily concluded with customers with a better rating, and old loans with a poorer customer rating matured. The share of non-performing loans in the loan portfolio decreased 0.7 percentage points to 5.0 per cent year-on-year.
Compared to the same period last year, other results in the Russia segment fell from plus € 26 million to minus € 5 million. The primary cause of this decrease was lower net income from derivatives, which declined from plus € 27 million to minus € 9 million mainly due to valuation losses on interest rate swap transactions concluded to mitigate interest rate structure risk. Furthermore, the termination of a hedging transaction as part of hedge accounting impacted net income negatively. Net income from financial investments – which primarily stemmed from the sale and valuation of securities – increased to € 4 million.
The table below provides an overview of the country results for Russia. Any discrepancies with regard to the values specified for the Russia segment are the result of equity being allocated differently: The income figures in the country overview are based on balance sheet equity; at segment level, the equity used in the calculation is based on actual equity used.
Net fee and commission income 285 238 20.0% 74 76 (2.8)%
Net provisioning for impairment losses 16 42 (62.1)% 2 (1) –
Loans and advances to customers 9,669 9,073 6.6% 9,669 9,113 6.1%
Number of employees as of reporting date 8,155 8,475 (3.8)% 8,155 8,018 1.7%
Net interest margin (average interest-bearing assets) 7.12% 6.77% 0.35 PP 6.96% 7.31% (0.34) PP
Return on equity before tax 13.7% 15.1% (1.5) PP 13.5% 13.7% (0.3) PP
At € 418 million, net interest income in the segment remained virtually unchanged year-on-year. Net interest income in Ukraine increased 2 per cent despite higher expenses for customer deposits and lower interest income from securities. This was primarily helped by higher income from customer loans thanks to better margins on assets as well as the appreciation of the Ukrainian hryvnia. In contrast, net interest income in Belarus declined year-on-year due to an increase in interest expense for customer deposits. Total assets in the segment decreased 7 per cent to € 6.3 billion compared to the previous year. Net interest margin – significantly impacted by currency trends – improved 35 basis points to 7.12 per cent. Credit risk-weighted assets decreased 6 per cent to € 5.1 billion.
The segment’s other net operating income improved by € 2 million to minus € 5 million year-on-year due to several smaller expense and income items.
Other results declined from minus € 15 million to minus € 21 million year-on-year, primarily due to a decrease in net income from the valuation of financial investments. Valuation losses resulted from mainly the widening of spreads from the portfolio of fixed-income Ukrainian government bonds recognized at fair value.
Income taxes in the segment decreased to € 47 million, mainly on account of a lower tax rate in Belarus. The tax rate thus fell 5 percentage points to 44 per cent. Net profit after deduction of non-controlling interests rose 7 per cent to € 55 million.
Net fee and commission income 60 45 33.6% 16 16 1.1%
Return on equity before tax 25.8% 16.6% 9.2 PP 29.7% 26.5% 3.2 PP
Return on equity after tax 14.4% 2.8% 11.6 PP 13.1% 17.2% (4.1) PP
Net fee and commission income 150 131 14.5% 41 40 1.1%
Loans and advances to customers 3,715 4,248 (12.6)% 3,715 3,932 (5.5)%
hereof foreign currency % 51.6% 56.8% (5.2) PP 51.6% 53.5% (2.0) PP
Return on equity before tax 7.5% 9.3% (1.8) PP 5.8% 6.8% (1.0) PP
Return on equity after tax 4.1% 6.2% (2.0) PP – 4.9% –
Number of employees as of reporting date 13,849 15,267 (9.3)% 13,849 14,493 (4.4)%
Group Corporates Profit before tax in the Group Corporates segment declined 15 per cent year-on-year to € 319 million. The main reason for this decline was lower operating income combined with higher general administrative expenses. The segment’s return on equity before tax decreased 4.4 percentage points to 18.0 per cent.
Net interest margin (average interest-bearing assets) 1.93% 1.97% (0.04) PP 1.96% 1.83% 0.13 PP
Return on equity before tax 18.0% 22.4% (4.4) PP 35.5% 16.9% 18.7 PP
Net interest income for the segment declined 6 per cent to € 404 million versus the previous year. Despite lower lending volumes and an increase in margins on assets, net interest income remained relatively unchanged at Group head office. In the Corporate Customers profit center (Austrian and multinational corporate customers managed out of Vienna) it also remained unchanged at € 166 million. In the Network Corporate Customers & Support profit center (international corporate customers with a CEE relationship) net interest income even improved 9 per cent to € 76 million and at the Maltese subsidiary by 15 per cent to € 23 million, aided by improved margins and lower refinancing costs. However, business outlets in Asia posted a considerable decline due to lower lending volumes. The segment’s net interest margin declined 4 basis points to 1.93 per cent. Lower loan volumes resulted in a decrease in total assets of 17 per cent or € 3.8 billion year-on-year to € 19.0 billion. Credit risk-weighted assets also decreased 16 per cent to € 13.2 billion.
The segment’s other net operating income doubled year-on-year to € 12 million due to the release of other provisions in connection with a legal dispute at the Group unit in Malta.
The segment’s general administrative expenses increased 26 per cent to € 177 million, mainly the result of an optimization of the cost allocation process at Group head office in 2012, as well as of an increase in the overhead costs allocated to the segment. The Group Corporates segment consisted of eight business outlets at the end of the reporting period. The cost/income ratio increased 7.6 percentage points to 29.8 per cent.
Income taxes declined 6 per cent to € 72 million year-on-year, while the tax rate rose 2 percentage points to 22 per cent.
The segment’s net interest income fell 31 per cent to € 159 million year-on-year, mainly the result of the maturity and sale of portions of the so-called high-quality securities portfolio. Consequently, the portfolio’s income dropped € 64 million to € 17 million compared to the previous year. Moreover, further reduction in business volume in highly liquid bonds from financial institutions as well as continued cautious risk positioning also weakened net interest income. The segment’s total assets contracted 21 per cent year-on-year to € 20.2 billion. Net interest margin decreased 15 basis points to 0.85 per cent, credit risk-weighted assets also decreased 35 per cent to € 3.3 billion.
Net fee and commission income for the segment fell 8 per cent to € 105 million year-on-year. Net fee and commission income of the Financial Institutions profit center remained unchanged thanks to solid net income from services in cash management and guarantees in the export/foreign trade business. Fee and commission income of the Capital Markets and the Credit Investments profit centers fell, primarily because of lower business volume. The Private Banking and Asset Management division of the subsidiary Kathrein Privatbank AG in Vienna provided a stable contribution of € 12 million from its securities business, while net fee and commission income of Raiffeisen Centrobank Group declined 18 per cent to € 14 million. This decrease resulted from lower income from advisory services provided to corporate customers for primary market transactions as well as from the mergers & acquisitions business.
Other net operating income fell by half to € 13 million year-on-year. Raiffeisen Centrobank Group’s income, which was generated predominantly from commodity trading from special companies in the USA and Germany, declined 13 per cent to € 8 million. In 2011, the segment’s other net operating income had also included € 10 million from F.J. Elsner Trading GmbH, which has meanwhile been reclassified into the Corporate Center segment.
General administrative expenses of the Group Markets segment declined 3 per cent to € 256 million year-on-year, primarily due to lower business volume that was used, among other factors, for the cost allocation at Group head office. The decrease in operating income led to an increase of 24.0 percentage points to 72.1 per cent in the cost/income ratio.
Income taxes declined to € 68 million, while the tax rate dropped considerably to 26 per cent.
Net provisioning for impairment losses (1) 55 – (4) 0 –
Net interest margin (average interest-bearing assets) – – – – – –
The segment’s net interest income climbed 38 per cent year-on-year to € 501 million. This increase in net interest income was achieved despite higher costs for own issues and by using a market-based internal financing rate to charge Group units for liquidity costs. The decline in income from internal financing within the RBI network resulted in a somewhat lower intra-Group dividend income year-on-year. The € 38 million in interest expense for RBI AG’s subordinated capital is also reported in this segment. The segment’s assets decreased 12 per cent to € 47.3 billion year-on-year, mainly due to the decrease in liquidity reserves. Credit riskweighted assets fell 3 per cent to € 19.0 billion.
The segment’s other net operating income increased from € 20 million to € 44 million. The increase is related to several smaller expense and income items as well as to a positive contribution of € 8 million from commodity trading by F.J. Elsner Trading GmbH. The bank levy had a negative effect of € 103 million on profit, € 21 million more than in the previous year.
Net provisioning for impairment losses generally plays a minor role in this segment due to the intra-Group nature of its business activities. However, there was one net allocation totaling € 1 million; in the comparable period last year, the conversion of a loan had led to a net release of € 60 million.
The segment’s other results fell € 380 million to minus € 537 million year-on-year. Net income from financial investments was markedly negative at minus € 404 million due to the impairment of Group-internal equity participations. Furthermore, valuation losses on own issues (€ 145 million) and lower valuation of other derivatives had a negative effect on net income. However, net income was positively impacted by € 57 million from interest rate hedging transactions concluded with the Capital Markets profit center (Group Markets segment) as well as from a € 113 million net gain from the repurchase of a portion of hybrid capital.
Statement of comprehensive income 102 Statement of financial position 105 Statement of changes in equity 106 Statement of cash flows 107 Segment reporting 109 Notes 116 Auditor’s report 211 Statement of all legal representatives 213
Changes in equity of companies valued at equity 5 39 5 39 0 0
Net gains (losses) on financial assets available-for-sale (147,375) 150,824 (147,375) 150,824 0 0 hereof unrealized net gains (losses) of the period 15,670 153,967 15,670 153,967 0 0 hereof net gains (losses) reclassified to income statement (163,045) (3,143) (163,045) (3,143) 0 0
Deferred taxes on income and expenses directly recognized in equity 37,620 (44,556) 37,620 (44,556) 0 0 hereof unrealized net gains (losses) of the period (3,142) (45,342) (3,142) (45,342) 0 0 hereof net gains (losses) reclassified to income statement 40,761 786 40,761 786 0 0
Due to a change in hedging strategy cash flow hedging of RBI AG was ended in 2011 and replaced by fair value portfolio hedges.
Net gains (losses) reclassified to income statement 0 0 953 (3,143) 0 0
Unrealized net gains (losses) of the period 150,303 225 (1,245) 15,670 29,827 (3,142)
Net gains (losses) reclassified to income statement 0 0 0 (163,045) 0 40,761
Earnings per share are obtained by dividing adjusted consolidated profit (less dividend for participation capital) by the average number of common shares outstanding. In the fiscal year 2012, the number of common shares outstanding was 194,859 thousand compared with 194,552 thousand in the previous year.
Loans and advances to customers [16, 35, 36] 83,343,269 81,576,235 2.2%
Net provisioning for liabilities and charges and impairment losses 1,111,417 1,316,152
Gains (losses) from disposals of tangible fixed assets and financial investments (13,667) (98,695)
Changes in assets and liabilities arising from operating activities after corrections for non-cash positions: Loans and advances to banks and customers 6,756,715 (9,666,520)
€ 000 2012 2011 Cash and cash equivalents at the end of previous period 11,401,747 4,806,891
The statement of cash flows shows the structure and changes in cash and cash equivalents during the financial year and is broken down into three sections:  net cash from operating activities
Cash and cash equivalents include the cash reserve recognized in the statement of financial position, 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.
This segment encompasses the most advanced banking markets in the EU-countries in Central and Eastern Europe, namely the Czech Republic, Hungary, Poland, Slovakia and Slovenia. They are also the markets in which RBI has been operating the longest. In each of the countries, RBI is represented by a bank, leasing companies and other specialized financial institutions. In Poland, in addition to the main activity of the credit business with corporate customers and small and medium-sized enterprises (also via leasing and factoring), the focus is also on retail banking and on affluent customers, especially since the acquisition of Polbank. In Slovakia, RBI is likewise active in its business divisions of Corporate and Retail Customers, including leasing, while at the same time expanding banking services for affluent customers. In Slovenia, the Group provides universal banking services and also leasing, with Group units concentrating in particular on local corporate customers. In the Czech Republic, RBI offers real estate leasing in addition to traditional banking services with corporate and retail customers. In Hungary, the Group provides services to private and corporate customers via the Bank's tightly knit network and also through leasing companies. In addition, RBI is represented in Slovakia and the Czech Republic through branches of its direct bank ZUNO.
Raiffeisenbank is one of the leading foreign banks in Russia and services both corporate and retail customers. The national branch network also offers products tailored for affluent private individuals. The product range in Russia is rounded off by leasing business. In view of the size of the banking market and its high natural and industrial potential, the Russia segment is of key significance for RBI.
The control of the separate segments is based on key indicators, which are assembled of several parameters like profitability, growth, efficiency, constraints and the business mix. The target values of the separate key indicators are determined according to the specific market environment and adapted on demand.
Growth is a very important indicator. Within risk management certain limits are set for each segment. For this measurement the growth rates of the profit after non-controlling interests and operating income are considered. The diversification of the result is very crucial for the quality and the compliance with the strategic targets.
The following key performance indicators are relevant for a reasonable and effective business structure, whereby the composition of the results and the indicators are significant. The structure of the prime funding basis for loans and advances to customers are measured using the loan/deposit ratio (proportion of loans and advances to customer to deposits from customers). The share of the result derived from the core business is relevant as well. The proportion of the net fee and commission income to the operating income is also a key performance indicator, which is included in the target setting for the business mix.
The presentation of segment performance is based on the income statement and geared to the reporting structure internally used. Income and expenses are attributed to the country and/or business division in which they are generated. Operating income positions are the net interest income, net fee and commission income, net trading income and the other net operating income. The other results include the net income from financial investments, the net income from derivatives (hedging) and liabilities and the net income from disposal of group assets. The segment result is shown till the profit/loss after deduction of non-controlling interests. The segment assets are represented by the total assets and the risk-weighted assets. The item liabilities includes all positions of the liabilities side expect the equity. The reconciliation implies mainly the amounts resulting from the elimination of intra-group results and consolidation between the segments. Finally, financial ratios – usual in the line of business – are added to evaluate the results. The values shown in the segment reporting are retrieved from the IFRS individual financial statements and also used for the compilation of the consolidated financial statements and. In some units profit center results are taken from the internal management income statement.
Provisioning ratio (average loans and advances to customers) 1.82% 1.93% (0.17)% 1.83% 0.56%
Provisioning ratio (average loans and advances to customers) 1.38% 1.66% 0.11% 2.81% 0.20%
Financial year 2011 € 000 Group Markets Corporate Center Reconciliation Total
The consolidated financial statements for the financial year 2012 and the comparative figures for the financial year 2011 were prepared in accordance with the International Financial Reporting Standards (IFRS) published by the International Accounting Standards Board (IASB) as far as they were adopted by the EU on the basis of IAS Regulation (EC) 1606/2002. The interpretations of the International Financial Reporting Interpretations Committee (IFRIC/SIC) that were already applicable have been considered. All standards published by the IASB as International Accounting Standards to be applied to financial statements for 2012 and adopted by the EU, have been applied. The consolidated financial statements satisfy the requirements of Section 245a of the Austrian Commercial Code (UGB) and Section 59a of the Austrian Banking Act (BWG) regarding exempting consolidated financial statements that comply with internationally accepted accounting principles. IAS 20, IAS 31, IAS 41and IFRS 6 have not been applied as there were no relevant business transactions in the Group.
If estimates or assessments are necessary for accounting and measuring under IAS/IFRS rules, they are made in accordance with the respective standards. They are based on past experience and other factors such as planning and expectations or forecasts of future events that appear likely from our current perspective. The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods. The critical accounting judgments and key sources of estimation uncertainty are as follows:
Deferred tax assets are recognized only to the extent that it is probable that sufficient taxable profit will be available against which those unused tax losses, unused tax credits or deductible temporary differences can be utilized. This assessment requires significant management judgments and assumptions. In determining the amount of deferred tax assets, the management uses historical tax capacity and profitability information and, if relevant, forecasted operating results based upon approved business plans, including a review of the eligible carry-forward period.
Deferred taxes are not separately shown in the income statement and on the statement of financial position. Details are provided in the statement of comprehensive income and in notes (11) income taxes, (25) other assets and (29) provisions for liabilities and charges.
Certain non-financial assets, including goodwill and other intangible assets, are subject to an annual impairment review. Goodwill and other intangible assets are tested more frequently if events or changes in circumstances, such as an adverse change in business climate, indicate that these assets may be impaired. The determination of the recoverable amount needs judgments and assumptions made by the management. Because these estimates and assumptions could result in significant differences to the amounts reported if underlying circumstances were to change, the Group considers these estimates to be critical. Details concerning the impairment review of non-financial assets are disclosed in the chapter “Business Combinations.” Additionally, the carrying amounts of the goodwill are presented in note (22) intangible assets.
For the first time in the current reporting period RBI applies the amendments to IFRS 7 which increase the disclosure requirements for transactions involving transfers of financial assets. The amendments provide greater transparency of the risk exposures of such transactions. The respective information on the transfer of financial assets was made with regard to the application of the revised IFRS 7 in note (40). In accordance with the transitional provisions of IFRS 7, RBI does not present comparative information in the notes.
IAS 12 (Income taxes: recovery of underlying assets; entered into force on January 1st, 2012
For the first time in the current reporting period RBI applies the amendments relating to income taxes on recovered underlying assets. Accordingly, it is assumed for the purpose of recognizing deferred taxes that the economic benefits from investment properties, which in accordance with the option in IAS 40, are measured at fair value, will be realized through sale. For this treatment not to apply the assumption must be rebutted. The amendments do not have an impact on the consolidated financial statements of 2012 due to the fact that all investment properties are measured at amortized cost according to IAS 40.
No early adoption of the following new and amended standards and interpretations that have been adopted, but whose use is not mandatory, was made.
IAS 1 (Presentation of items of other comprehensive income; entered into force on July 1st, 2012)
The revised IAS 27 will only be relevant for individual financial statements. The revised version will have no impact on the consolidated financial statements.
IAS 32 (Offsetting financial assets and liabilities; entry into force on January 1st, 2014)
The amendments clarify existing application issues relating to the offset of financial assets and financial liabilities. Specifically, the amendments clarify the meaning of ‘currently has a legally enforceable right to set off’ and ‘simultaneous realization and settlement ’. It is expected that the revised version of IAS 32 will have no impact on the consolidated financial statements.
The amendments to IFRS 7 require entities to disclose information about rights to offset and related arrangements for financial instruments under an enforceable master netting agreement or similar arrangement. It is expected that the revised version of IFRS 7 will have no impact on the consolidated financial statements.
IFRS 11 (Joint arrangements; entry into force on January 1st, 2014)
IFRS 11 replaces IAS 31 “Interests in Joint Ventures” and SIC-13 “Jointly Controlled Entities – Non-Monetary Contributions by Ventures”. IFRS 11 deals with how a joint arrangement should be classified. Joint arrangements are classified as a contractual agreement in which two or more parties practice joint management. Joint management can extend to a joint venture or a joint operation. In contrast to IAS 31, in IFRS 11 the accounting for jointly controlled assets is not addressed separately anymore; here the rules for joint ventures are applied. The classification of a joint arrangement as joint operations or joint ventures depends on the rights and obligations of the parties to the agreement. In addition, joint ventures under IFRS 11 are required to be accounted for using the equity method of accounting, whereas jointly controlled entities under IAS 31 can be accounted for using the equity method of accounting or proportional consolidation. We assume that the future application of IFRS 11 will have no impact on the consolidated financial statements.
IFRS 13 establishes a single source of guidance for fair value measurements and disclosures about fair value measurements. The standard defines fair value, establishes a framework for measuring fair value, and requires disclosures about fair value measurements. The scope of IFRS 13 is broad; it applies to both financial instrument items and non-financial instrument items for which other IFRSs require or permit fair value measurements and disclosures about fair value measurements, except in specified circumstances. In general, the disclosure requirements in IFRS 13 are more extensive than those required in the current standards. For example, quantitative and qualitative disclosures based on the three-level fair value hierarchy currently required for financial instruments only, under IFRS 7, will be extended by IFRS 13 to cover all assets and liabilities within its scope. We assume that application of IFRS 13 will have an impact on the presentation of financial assets and financial liabilities of the Group.
IFRIC 20 (Stripping costs in the production phase of a surface mine; entered into force on January 1st, 2013)
New and revised IFRSs not yet applicable (not yet endorsed by the EU)
The Annual Improvements include a variety of amendments to different IFRSs. The amendments are effective for annual periods beginning on or after 1 January 2013. These amendments will have no impact on the consolidated financial statements.
IFRS 9, issued in November 2009, introduced new requirements for the classification and measurement of financial assets. IFRS 9 was amended in October 2010 to include requirements for the classification and measurement of financial liabilities and for derecognition. Key requirements of IFRS 9 are: All recognized financial assets are to be subsequently measured at amortized cost or fair value. Specifically, debt investments that are held within a business model whose objective is to collect the contractual cash flows, and that have contractual cash flows that are solely payments of principal and interest on the principal outstanding are generally measured at amortized cost at the end of subsequent accounting periods. All other debt investments and equity investments are measured at their fair value at the end of subsequent accounting periods.
In addition, under IFRS 9, entities may make an irrevocable election to present subsequent changes in the fair value of an equity investment (that is not held for trading) in other comprehensive income, with only dividend income recognized in profit or loss. With regard to the measurement of financial liabilities designated as at fair value through profit or loss, IFRS 9 requires that the amount of change in the fair value of the financial liability, that is attributable to changes in the credit risk of the entity, is presented in other comprehensive income, unless the recognition of the effects of changes in the liability’s credit risk in other comprehensive income would create or enlarge an accounting mismatch in profit or loss. Changes in fair value attributable to a financial liability’s credit risk are not subsequently reclassified to profit or loss. RBI anticipates that the application of IFRS 9 in the future may have a significant impact on amounts reported in respect of the Group’s financial assets and financial liabilities. However, it is not practicable to provide a reasonable estimate of the effect of IFRS 9 until a detailed review has been completed.
These amendments move the mandatory effective date of IFRS 9 to reporting periods beginning on or after 1 January 2015. In addition, exceptions are granted with respect of the adjustment of prior periods and the corresponding IFRS 7 disclosures.
All material subsidiaries in which RBI AG directly or indirectly, holds either more than 50 per cent of the voting rights or otherwise has control over the financial and operating policies are fully consolidated. In principle, these subsidiaries are firstly integrated in the consolidated group on the date when RBI AG obtains control of the company and are excluded from the date on when it no longer has control of the company. The Group reviews the adequacy of previously made decisions on which companies to consolidate at least every quarter. Accordingly, any organizational changes are immediately taken into account. These include, apart from changes in ownership, also changes due to existing or newly signed contractual obligations by a unit with the Group. Subsidiaries with deviating reporting dates are accounted for with their interim financial statements. The results from subsidiaries that were acquired or disposed of during the year are recorded in the consolidated income statement, either from the actual date of acquisition or up to the actual date of disposal.
Material interests in associated companies – where the Group exerts a significant influence on financial and operating polices of these companies – are valued at equity and reported under the item “investments in associates.” Profit or losses occurring in companies valued at equity are shown net in “current income from associates.” The same rules apply to companies valued at equity (offsetting acquisition costs against proportional fair net asset value) as apply to fully consolidated companies. On principle, IFRS financial statements of associated companies are used. Changes in equity of companies valued at equity are shown in the consolidated accounts in other comprehensive income.
Shareholdings in subsidiaries not included in the consolidated financial statements because of their minor significance and shareholdings in companies that have not been valued at equity are shown under the item “financial investments” and are measured at acquisition cost.
Intra-group income and expenses are also eliminated and temporary differences resulting from bank business transactions are shown partly in net interest income and partly in net trading income. Other differences were shown in the item “other net operating income.”
Intra-group results are eliminated insofar as they had a material effect on the income statement items. Bank business transactions between Group members are usually executed in arm’s length transaction.
The material goodwill resulted from the following cash generating units: Raiffeisen Bank Aval JSC, Kiev (AVAL), Raiffeisen Bank Polska S.A., Warsaw (RBPL), ZAO Raiffeisenbank, Moscow (RBRU), Raiffeisen Bank Sh.a., Tirane (RBAL) and Raiffeisenbank a.s., Prague (RBCZ).
Method used to calculate the fair value FV less cost to sell FV less cost to sell FV less cost to sell FV less cost to sell FV less cost to sell
A sensitivity analysis was used to test the robustness of the impairment test for goodwill which was based on the above given assumptions. From a number of options for this analysis, two parameters were selected, namely, the cost of equity and the reduction in earnings. The table below shows to what extent an increase in the cost of equity or a reduction in earnings could be made without the fair value of the cash generating units sinking below the carrying value (equity plus goodwill): Maximum sensitivity1 AVAL RBAL RBCZ RBPL RBRU
Reduction in earnings – (39.0)% (17.0)% (9.0)% (27.0)% 1 Only change in terminal value assumptions.
Group companies use brands to differentiate their services from the competition. According to IFRS 3, brands of acquired companies have been recognized separately under the item “intangible fixed assets.” Brands have an indeterminable useful life and are therefore not subject to scheduled amortization. Brands have to be tested annually for impairment and additionally whenever indications of impairment arise.
The value of the Raiffeisen Bank Aval JC, Kiev brand was determined using the comparable historical cost approach, because neither immediately comparable transactions nor a market with observable prices were available at the time of purchase price allocation. Documentation of brand-related marketing expenses in the previous years was taken as the data base for the historical cost approach.
Number of units Fully consolidated Equity method 31/12/2012 31/12/2011 31/12/2012 31/12/2011
Building Business Center doo Novi Sad, Novi Sad (RS) 100.0 % 1/6 Start of operations
RBI Leasing GmbH, Vienna (AT) 75.0 % 1/2 Start of operations
Roof Russia DPR Finance Company S.A., Luxembourg (LU) 0.0 % 1 1/6 Start of operations
Raiffeisen SEE Region Holding GmbH, Vienna (AT) 100.0 % 1/1 Start of operations
Pointon Investment Limited, Limassol (CY) 100.0 % 1/6 Start of operations
Polbank operating in the retail business had a network of 327 business outlets and 3,065 employees and served more than 700,000 customers at the time of initial consolidation. At the time of initial consolidation total assets amounted to € 6,191,211 thousand, of which € 4,826,160 thousand represented loans and advances to customers (less impairment losses). Customer deposits totaled € 3,528,143 thousand and equity amounted to € 650,459 thousand.
In the course of the preliminary purchase price allocation in accordance with IFRS 3, the existing customer base of Polbank has been identified as separate intangible fixed assets. The cost of the existing customer base amounted to € 16,879 thousand as of 1 May 2012; the amortization period has been set with ten years. Additionally, in the course of the purchase price allocation, the existing brand of Polbank has been identified as separate intangible fixed assets. The cost of the brand amounted to € 47,951 thousand as of 1 May 2012.
Goodwill arose from the acquisition of Polbank because the cost of the business combination includes a control premium. In addition, the consideration paid includes amounts in relation to the benefit of expected synergies, for example cross selling, reduction of general administrative expenses and assets not recognized such as know-how of the workforce, etc.
In the financial year, three mergers took place: Centrotrade Investment AG, Zug was merged as of 30 September 2012 into Centrotrade Chemicals AG, Zug. Raiffeisen Equipment Leasing Kft., Budapest was merged as of 30 November 2012 into Raiffeisen Bank Zrt., Budapest. Polbank EFG S.A., Warsaw was merged as of 31 December 2012 into Raiffeisen Bank Polska S.A., Warsaw.
The following table shows the income arising from disposal of Group assets: € 000 Krautland RT Others Total
Net income from disposal of group assets 6,076 5,073 989 12,137
Krautland SCT Krautland Ltd., Budapest (HU) RT Raiffeisen Tower Ltd., Budapest (HU)
Foreign currency translation 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 reporting date. Differences arising from the translation of equity (historical exchange rates) were offset against retained earnings.
The income statement items were translated at the average exchange rates during the year calculated on the basis of month-end rates. Differences arising between the exchange rate as of the reporting date and the average exchange rate applied in the income statement were offset against equity.
The application of the relevant provisions in IAS 29 in connection with IFRIC 7 (Applying the restatement approach under IAS 29 Financial reporting in hyperinflationary economies) impacts the financial statements of RBI on 31 December 2012, as well as the financial statements of subsequent periods.
According to IAS 39, all financial assets, financial liabilities and derivative financial instruments are to be recognized in the statement of financial position. 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. Measurement of financial instruments is effected according to the measurement categories to which they belong. They are defined as follows: 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. Financial liabilities 1. Financial assets or liabilities at fair value through profit and loss 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 recognized at their fair values. If securities are listed, the fair value is based on stock exchange prices. Where such prices are not available, internal prices based on present value calculations for originated financial instruments and futures or option pricing models for options are applied. Present value calculations are based on an interest curve which consists of money market rates, future rates and swap rates and does not include risk premium. As option price formulas Black-Scholes 1972, Black 1976 or GarmanKohlhagen are applied depending on the kind of option. The measurement for complex options is based on a binominal tree model and Monte-Carlo simulations.
The valuation methodology for capital-guaranteed products is in accordance with the legal framework. The capital-guaranteed products (guarantee funds and pension plans) are shown as sold put options on the respective funds to be guaranteed. The valuation is based on a Monte-Carlo simulation. The RBI has provided capital guarantee obligations as part of the governmentfunded state-sponsored pension plans according to Section 108h (1) item 3 EStG. The bank guarantees that the retirement annuity, available for the payment amount, is not less than the sum of the amounts paid by the taxpayer plus credits for such taxable premiums within the meaning of Section 108g EStG.
This category comprises mainly all those financial assets that are irrevocably designated as financial instrument at fair value (socalled fair value option) upon initial recognition in the statement of financial position independent of the intention to trade. An entity may use this designation only when doing so results in more relevant information for the user of the financial statements. This is the case for those financial assets, which belong to a portfolio, which is managed and its performance evaluated on a fair value basis.
Non-derivative financial assets (securities with fixed or determinable payments and fixed maturities) purchased with the intention and ability to hold them to maturity are reported in the item “financial investments.” They are recognized at amortized cost and differences are amortized over the term to maturity and recognized in the income statement under net interest income. If impairment occurs it is taken account of when determining the amortized cost and shown in net income from financial investments. Coupon payments are also recognized under net interest income. A sale of these financial instruments is only allowed in cases explicitly stated in IAS 39.
Non-derivative financial assets with fixed or determinable payment for which there is no active market are allocated to this category. They are measured at amortized cost. If impairment occurs it is taken account of when determining the amortized cost. If there is a difference between the amount paid and face value – and this has interest character – the effective interest method is used and the amount is accrued as profit or loss. Profits from the sale of impaired loans are recognized in the income statement in the item “net provisioning for impairment losses.” Moreover, debt instruments are also stated here if there is no active market for them. Derecognition of financial assets within the framework of securitizations is – after checking if the securitized special purpose entity has to be integrated into the consolidated accounts – done on a risk and rewards or control test according to IAS 39 after identifying loss of control over the contractual rights arising from the financial asset.
In accordance with IAS 39.50, non-derivative financial instruments classified as trading assets and available-for-sale financial instruments can be reclassified as financial assets held-to-maturity and loans and advances in exceptional circumstances. The effects resulting from such reclassifications are shown in the notes under (20) financial investments.
The fair value is the amount for which an asset could be exchanged and liability settled between knowledgeable, willing parties in an arm's length transaction.
Measurement Category according Classes Fair Value Amortized Cost Others to IAS 391
Negative fair values of derivatives for hedge accounting (IAS 39) X n/a 1 AfS Available-for-sale HTM Held-to-maturity AFVTPL At fair value through LAR Loans and advances profit and loss TA Held-for-trading FL Financial liabilities TL Held-for-trading
If derivatives are held for the purpose of risk management and if the respective transactions meet specific criteria, the Group uses hedge accounting. The Group designates certain hedging instruments as fair value hedges, cash flow hedges or capital hedges. Most of these are derivatives. At the beginning of the hedging relationship, the relationship between underlying and hedging instrument, including the risk management objectives, is documented. Furthermore, it is necessary to regularly document from the beginning and during the hedging relationship that the fair value or cash flow hedge is effective to a large degree
Cash flow hedge accounting according to IAS 39 applies for those derivatives that are used to hedge against the risk of fluctuating future cash flows. Variable-interest liabilities, as well as expected transactions such as expected borrowing or investment, are especially subject to such cash flow risks. Interest rate swaps used to hedge against the risk of fluctuating cash flows arising from specific variable interest-rate items, are recognized as follows: The hedging instrument is recognized at fair value, changes in its clean price are recorded as separate item in other comprehensive income. The ineffective portion is recognized in profit or loss on the other hand, in the position derivative financial instruments and designated liabilities.
 there is objective evidence of impairment as a result of a loss event that occurred after the initial recognition of the asset until the reporting date (a ‘loss event’);  that loss event has an impact on the estimated future cash flows of the financial asset or group of financial assets and
Credit risk is accounted for by making individual impairment provisions and portfolio-based impairment provisions. The latter comprise impairment provisions for portfolios of loans with identical risk profiles that are compiled under certain conditions. In the retail segment, provisions are built according to product portfolio and past due days and partly taking historical default rates into account. Individual and portfolio-based impairment provisions are not netted against corresponding receivables but are stated separately in the statement of financial position.
For credit risks related to loans and advances to customers and banks, provisions are made in the amount of expected loss according to homogeneous Group-wide standards. Risk of loss is deemed to exist if the discounted projected repayment amounts and interest payments are below the carrying value of the loans, taking collateral into account. Portfolio-based impairments are calculated according to valuation models that estimate expected future cash flows for the loans in the respective loan portfolio based on loss experience history. This is carried out regularly by considering economic conditions. For non-retail portfolios without a documented loss history of their own, peer group benchmark figures serve as a comparative base.
A financial asset is derecognized when the contractual rights to the cash flows arising from a financial asset expire or when the Group has transferred the rights or if the Group has the obligation in case that certain criteria occur to transfer the cash flows to one or more receivers. A transferred asset is also derecognized if all material risks and rewards of ownership of the assets are transferred.
An operating lease occurs when the risks and rewards of ownership remain with the lessor. The leased assets are allocated to the Group under tangible fixed assets and depreciated in accordance with the principles applicable to the type of fixed assets. Rental income from the corresponding lease object is amortized on a straight-line basis over the term of the leasing contract and reported in other net operating income. Expenses for operating leases are generally amortized on a straight-line basis over the term of leasing contract and reported as administrative expenses.
Internally developed intangible fixed assets comprise exclusively of software. Software is capitalized 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. Expenses for research are recognized as an expense when they are incurred. The useful life of software is between four and six years and may be longer for major software projects. The useful life of the acquired customer base was set at 20 years in the retail segment of Raiffeisen Bank Aval JSC. For the acquired customer base of Polbank EFG S.A. a useful life of 10 years resulted from the purchase price allocation.
The actuarial computation of severance payments and anniversary bonuses is based on the following assumptions: Per cent 2012 2011
As of the fiscal year 2011, the general and specific principles, as represented in the general HR part, for the allocation, the claim and the payment of variable remuneration (including the payment of the deferred portion of the bonus) for board members of RBI AG and certain Group units and identified staff (“risk personnel”) are applied:  60 per cent of the annual bonus will be paid out on a proportional basis as 50 per cent cash immediately (up-front), and 50 per cent through a phantom share plan (see details below), which will pay out after a holding period (retention period) of one year. An exception to this are the banks in Bulgaria, with 40 percent up-front portion and a retention period of two years, and the Czech Republic with a holding period of 1.5 years.
 the achievement of the legally required hard core tier 1 ratio of the RBI Group,
The obligation from number 11 of the annex to Section 39b of the Austrian Banking Act, under which a proportion of at least 50 per cent of variable compensation for risk personnel should take the form of shares or equivalent non-cash payment instruments, is covered in the RBI Group by a stock phantom plan. Proportionally 50 per cent of the “Up-front” and “deferred” bonus section will be divided by the average closing price of RBI's shares on the Vienna Stock Exchange for that year serving as the basis for calculating the bonus. Thereby, a certain amount of phantom shares will be determined. This amount will be fixed for the entire duration of the deferral period. After the expiration of the respective retention period, the amount of specified phantom shares will be multiplied by RBI's share price for the previous fiscal year. The resulting cash amount will be paid when the next available monthly salary is paid.
Expenses related to the share incentive program are recognized in staff expenses in accordance with IFRS 2 (share-based payment ), charged to equity and shown in note (34) equity.
This item comprises subordinated capital and supplementary capital. Liabilities documented or undocumented are subordinated if, in the event of liquidation or bankruptcy, they can only be met after the claims of the other – not subordinated – creditors have been satisfied. Supplementary capital contains all paid-in own funds which are provided by a third-party and are available for the company for at least eight years, for which interest is paid only from the profit and which can be repaid in the case of solvency only after all other debtors are satisfied.
Current taxes are calculated on the basis of taxable income of the current year. The taxable income deviates from the profit of the statement of comprehensive income due to expenses and income which are taxable or tax-deductible in the following years or which are never taxable or tax-deductible. The liability of the Group for current taxes is recognized on the basis of the actual tax rate or the future tax rate which is enacted by the end of the reporting period.
Deferred taxes are recognized and calculated in accordance with IAS 12 applying the liability method. Deferred taxes are based on all temporary differences that result from comparing the carrying amounts of assets and liabilities in the IFRS accounts with the tax bases of assets and liabilities, and which will reverse in the future. Deferred taxes are calculated by using tax rates applicable in the countries concerned. A deferred tax asset should also be recognized on tax loss carry-forwards if it is probable that sufficient taxable profit will be achieved against which the tax loss carry-forwards can be utilized within the same entity. On each reporting date, the carrying amount of the deferred tax assets is reviewed and impaired if it is no longer probable that sufficient taxable income is available in order to partly or fully realize the tax assets. Deferred tax assets and deferred tax liabilities within the same entity are netted.
Own shares of RBI AG at the reporting date, are deducted directly from equity. Gains and losses on own shares have no impact on the income statement.
Information on capital management, regulatory own funds and risk-weighted assets are disclosed under note (50) capital management and regulatory own funds according to the Austrian Banking Act.
Net gains (losses) on financial assets and liabilities held-for-trading 537,374 778,573
Net gains (losses) on financial assets and liabilities at fair value through profit or loss (156,639) 48,540
Net realized gains (losses) on financial assets not measured at fair value through profit and loss 8,894 8,147
Impairment on financial assets not measured at fair value through profit and loss (1,017,724) (1,071,641)
Net realized gains (losses) on financial assets not measured at fair value through profit and loss 1,062 94,364
Impairment on financial assets not measured at fair value through profit and loss (174) (2,169)
(3) Net provisioning for impairment losses Net provisioning for impairment losses on items reported on and off the statement of financial position is as follows: Individual loan loss provisions (1,181,821) (1,176,630)
A change in the estimation of default probability for the counterparty risk led to a decrease of € 30,423 thousand in income from interest-based transactions.
Currency-based transactions contained an effect due to the application of IAS 29 hyperinflation in Belarus in the amount of minus € 20.648 thousand (2011: minus € 84.345 thousand).
In the reporting year, an income from the repurchase of liabilities of € 109,801 thousand was generated. This item includes income from the repurchase of hybrid bonds (nominal value of € 357,806 thousand) amounting to € 113,291 thousand less transaction costs.
Legal, advisory and consulting expenses include audit fees of the Group companies which comprise expenses for the audit of financial statements amounting to € 8.427 thousand (2011: € 8.018 thousand) and tax advisory as well as other additional consulting services provided by the auditors amounting to € 4.682 thousand (2011: € 5.035 thousand). Thereof, € 2.418 thousand (2011: € 2.312 thousand) account for the Group auditor for the audit of the financial statements and € 1.885 thousand (2011: € 1.942 thousand) account for the other consulting services.
The depreciation of tangible and intangible fixed assets includes an impairment of € 37.122 thousand (2011: € 20.040 thousand).
Rental income from investment property incl. operating lease (real estate) 22,952 21,037
Net expense from allocation and release of other provisions 19,374 (11,558)
The other net operating income includes impairment of goodwill amounting to € 38,463 thousand especially for Group units from Ukraine, Bosnia and Herzegovina, Croatia and Hungary. In 2011, impairment of goodwill amounted to € 187,318 thousand for Group units from the Ukraine, Hungary and Slovenia.
(10) Net income from disposal of group assets In the reporting period, eight subsidiaries were excluded from the consolidated group due to materiality reasons. Moreover, one subsidiary was excluded due to the end of operations and another one due to sale. Net income from this disposal of Group assets amounted to € 12.137 thousand (2011: minus € 2.575 thousand).
The following reconciliation shows the relation between profit before tax and the effective tax burden: Profit before tax 1,031,616 1,373,355
Theoretical income tax expense in the financial year based on the domestic income tax rate of 25 per cent (257,904) (343,339)
Tax decrease because of tax-exempted income from equity participations and other income 52,106 156,585
Financial assets at fair value through profit or loss 8,348,221 7,359,794
Of the purchased loans amounting to € 157.205 thousand, € 156.949 thousand are assigned to the measurement category loans and advances (2011: € 118.620 thousand) and € 255 thousand to the measurement category held-to-maturity (2011: € 1.754 thousand).
Purchased loans amounting to € 1.028.844 thousand (2011: € 1.196.718 thousand) are assigned to the measurement category loans and advances. Purchased loans classified as held-to-maturity totaled € 44.941 thousand (2011: € 37.639 thousand).
Loans and advances to customers classified regionally (counterparty’s seat) are as follows: (17) Impairment losses on loans and advances Provisions for impairment losses are formed in accordance with uniform Group standards and cover all recognizable credit risks. A table with the development of the impairment losses on loans and advances can be found in the risk report. Provisions for impairment losses are allocated to the following asset classes according to the Basel II definition: Corporate customers – large corporates 2,835,571 2,619,090
Retail customers – small and medium-sized entities 2,666,858 2,945,655 421,110 259,699 108,808 2,577,148 31/12/2011 € 000 Fair value
Retail customers – small and medium-sized entities 2,117,024 2,291,056 333,803 217,414 31,551 2,042,091
ILLP: individual loan loss provisions 31/12/2011 Impairments and collaterals impaired assets
Retail customers – small and medium-sized entities 333,803 217,414 116,389 80,951 8,902
Pledged securities ready to be sold or repledged by transferee are allocated to the appropriate securities category in the table above. Further details are shown under note (40) transferred assets, genuine sale and repurchase agreements.
Positive fair values of derivatives in cash flow hedges (IAS 39) 3,779 0
The carrying amount of the securities reclassified into the category held-to-maturity amounted at the date of reclassifications to € 452.188 thousand. Thereof, reclassifications in 2008 amounted to € 371.686 thousand and in 2011 € 80.502 thousand. As of 31 December 2012, the carrying amount was € 301.458 thousand and the fair value totaled € 310.419 thousand. In 2012, a result from the reclassified securities of € 12.074 thousand (2011: € 13.955 thousand) was shown in the income statement. If the reclassification had not been made, a gain of € 13.122 thousand (2011: € 4.812 thousand) would have arisen.
Securities that were reclassified from held-to-maturity into the category of financial assets available-for-sale in the previous year were sold in the reporting period (nominal value € 3,165,000 thousand).
Equity participations valued at amortized cost for which fair values could not be measured reliably amounted to € 61.345 thousand (2011: € 87.946 thousand).
The above mentioned information is based on preliminary figures of the current financial year. Further information regarding associated companies is stated under note (57) list of equity participations.
The carrying amount of goodwill breaks down on the following cash generating units as follows: ZAO Raiffeisenbank, Moscow 266,325 257,171
In 2012, impairment of goodwill amounting to € 38,463 thousand was made in Ukraine, Bosnia and Herzegovina, Croatia and several other smaller Group units. Information about the impairment tests can be found in the chapter business combinations.
Cost of acquisition or conversion 1/1/2012 Change in consolidated group Exchange differences Additions Disposals Transfers As of 31/12/2012
Write-ups, amortization, depreciation, impairment Carrying amount hereof hereof € 000 Cumulative Write-ups Depreciation 31/12/2012
Land and buildings used by the Group for own purpose (238,556) 0 (40,590) 721,830 of which land value of developed land (6) 0 0 13,536
Land and buildings used by the Group for own purpose (200,480) 643 (31,653) 610,056 of which land value of developed land (6) 0 (7) 13,664
Additions to intangible and tangible assets include single investments exceeding € 10,000 thousand in Russia, the Czech Republic and Group head office.
Deferred taxes break down as follows: Deferred tax assets 453,492 358,021
The following table contains debt securities issued amounting to or exceeding € 200,000 thousand nominal value: Issuer ISIN Type Currency Nominal value in € 000 Coupon Due
(29) Provisions for liabilities and charges 1/1/2012 Change in consolidated group Allocation Release Usage Transfers, exchange differences As of 31/12/2012
RBI is involved in pending legal issues, which may occur in the banking business. RBI does not expect that these legal cases will have a material impact on the financial position of the Group. In the reporting period, Group-wide provisions for pending legal issues amounted to € 54,244 thousand (2011: € 90,446 thousand). Single cases exceeding € 10,000 thousand occurred in Croatia, Hungary and Ukraine.
Provisions for retirement benefits developed as follows: Defined benefit obligation (DBO) as of 1/1 35,986 24,873
Plan assets developed as follows: Plan assets at fair value as of 1/1 12,673 10,994
The structure of plan assets broke down as follows: Actual return on plan assets was as follows: Actual return on plan assets 718 (656)
Negative fair values of derivatives in fair value hedges (IAS 39) 117,030 37,315
The time periods in which the hedged cash flows from liabilties are expected to occur and affect the statement of comprehensive income are as below: More than 1 year, up to 5 years 6,185 12,500
The following table contains subordinated borrowings that exceed 10 per cent of the subordinated capital: Issuer ISIN Type Currency Nominal value in € 000 Coupon1 Due
In the reporting period, expenses on subordinated capital totaled € 231.807 thousand (2011: € 215.149 thousand).
As of 31 December 2012, the subscribed capital of RBI AG as defined by the articles of incorporation amounted to € 596,291 thousand. The subscribed capital consists of 195,505,124 non-par bearer shares. After deduction of own shares of 557,295, the stated subscribed capital totaled € 594,591 thousand.
The Annual General Meeting held on 20 June 2012 authorized the Management Board to acquire own shares, pursuant to Section 65 (1), item 8 of the Austrian Joint Stock Companies Act (AktG), during a period of 30 months as of the date of the resolution, of up to 10 per cent of the subscribed capital of the company and to withdraw if applicable. This authorization may be exercised in one or several installments and in pursuance of one or more purposes – with the exemption of securities trading – by the company, by affiliated companies or, for their account, by third parties. The Management Board was further authorized to decide, with the approval of the Supervisory Board, on the sale of own shares by means other than the stock exchange or a public tender excluding the subscription rights of shareholders. This authorization replaces the authorization to buy back and use own shares that was granted in the Annual General Meeting of 8 July 2010. Since this authorization from June 2012, no own shares were acquired.
The acquisition of own shares mainly serves to cover the obligation of RBI within the framework of the share incentive program (SIP) towards the members of the Management Board and executive employees. These bonus payments are carried out in the form of company shares. In fiscal year 2012, 386,476 own shares were allocated to eligible executives and board members on 30 March 2012.
In the Annual General Meeting held on 10 June 2008, the Management Board was given the authorization pursuant to Section 174 (2) of the Austrian Joint Stock Companies Act (AktG) to issue – with the approval of the Supervisory Board – convertible bonds, also in several tranches, within 5 years as of the date of the resolution, for a maximum total nominal amount of € 2,000,000 thousand, to which attaches a conversion or subscription right to obtain a maximum of 15,466,750 ordinary bearer shares of the company with a corresponding pro-rata share in the subscribed capital of a maximum of € 47,174 thousand. The subscription right of shareholders is excluded.
The Annual General Meeting of 9 June 2009 authorized the Management Board of the company to issue, in one or more tranches, participation rights having equity characteristics pursuant to Section 174 of the Austrian Joint Stock Corporation Act (AktG) in a total nominal amount of up to € 2,000,000 thousand within 5 years as of the date of the resolution with the approval of the Supervisory Board and in accordance with the terms for participation rights to be set by the Management Board and to the
The Management Board intends to propose at the Annual General Meeting that a dividend of € 1.17 per share be distributed from Raiffeisen Bank International AG’s profit for the financial year 2012, which represents a maximum distribution of € 228,741 thousand, and the remaining amount be carried forward.
In 2012, a further allotment of the share incentive program (SIP – SIP allotment 2009) matured. In accordance with the terms and conditions (published in euro adhoc on 20 June 2009) the number of shares shown in the table below was actually transferred: Share incentive program (SIP) 2009 Group of persons
Amount with share price of € 26.16 at the allotment day (2/4/2012)
Executives of the company and other affiliated companies 99,758 2,610,168 52,483
Under the SIP, a new tranche was previously issued each year – so also in 2012. However, because of the merger of Raiffeisen International with the principal business areas of RZB, no SIP tranche was issued in 2010. This means that on the reporting date contingent shares for two allotments were assigned. As of 31 December 2012, the contingent allotment of shares came to 675,059 shares (of which 227,161 shares were attributable to the 2011 allotment and 447,898 shares to the 2012 allotment). The originally announced number of contingently allotted shares changed due to various personnel changes within Group units and due to the maturation of the SIP allotment 2009. This is shown on an aggregated level in the following table: C o n so li d a te d
Executives of the company and other affiliated companies 147,636 44,291 221,454
Due at call or without maturity Up to 3 months 3 months to 1 year 1 year to 5 years
Impairment losses on loans and advances (5,053,212) 0 0 0 0
31/12/2012 € 000 Parent companies Affiliated companies Companies valued at equity Other interests
(38) Foreign assets/liabilities Assets and liabilities with counterparties outside Austria are as follows: (39) Securitization RBI as originator
Securitization 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 RBI’s securitization transactions is to ease the strain relief on the Group’s regulatory own funds and to use additional refinancing sources.
In the financial year 2012, several new securitization programs started:  The leasing subsidiary in Poland made a securitization for car leasing contracts of about € 122,730 thousand. The loans and advances were transferred to an external special purpose vehicle which is not under Group control in the context of a Compass Asset Backed Commercial Paper (ABCP) program sponsored by WestLB. The first loss piece remaining in the Group amounted to 15 per cent, the majority of chances and risks thus remain at the initiating Group unit. Therefore, the loans and advances are shown unchanged in the Group reporting so that additional refinancing sources can be mainly used through the securitization.
 A further new transaction – namely for the regulatory relief – was made in terms of a synthetic securitization of loans and advances to corporate customers, securities and guarantees of the Group head office. The tranches were mainly placed to Group internal investors and partly placed to external investors, with the latter amounting to € 47,000 thousand.
 Finally, an external placement of diversified payments rights of ZAO Raiffeisenbank, Moscow amounting to € 132,636 thousand is worth mentioning. The maturity of the tranche 2012-A ends in May 2017, those of 2012-B and 2012-C end in May 2019.
Regarding the true sale transaction ROOF Poland 2008-1 consisting of car leasing contracts, the total volume of the loans amounts as of 31 December 2012 to € 27,741 thousand (2011: € 84,574 thousand). The change in carrying amounts is due to the maturing of the portfolio (end of 2014) and fluctuating currency exchange rates.
Within the scope of synthetic securitizations ROOF CEE 2006-1, the non-derecognized loans amounted to € 63,098 thousand at year-end 2012 (2011: € 162,480 thousand). The differences compared to the volumes at the beginning of the transactions are due to maturing volumes and to changes in currency exchange rates.
Within the scope of further synthetic securitizations, RBI participated in the socalled JEREMIE programs in Bulgaria and Romania (ROOF Romania and Bulgaria SME 2011-1). By contract of the respective network banks with the European Investment Fund (EIF) the granting of loans to small and medium-sized enterprises is to be supported as they can receive guarantees from EIF under the JEREMIE initiative. The current volume of the portfolio under JEREMIE first loss portfolio guarantees amounts to € 83,049 thousand for the utilized volume of Raiffeisenbank S.A., Bucharest and € 19,571 thousand for Raiffeisenbank (Bulgaria) EAD.
Up to now the following transactions for all, or at least individual tranches have been executed with external contractual partners. The indicated amounts represent the volumes at the closing date: € 000 Seller of claims or secured party Date of contract
Guarantees up to € 20.5 million SME-loans up to € 102.5 million 25.0%
True Sale Transaction Raiffeisen Leasing Polska Auto Lease Securitisation (WestLB sponsored Compass ABCP Program)
As of 31 December 2012, RBI reported the following total exposure of structured products (excluding CDS): € 000 Outstanding notional amount Carrying amount
Securities sold in genuine sale and repurchase agreement 1,078,908 4,801,503 hereof sold or repledged 698,843 4,742,840 hereof bonds, notes and other fixed-interest securities 698,843 4,607,688
Within the framework of securities lending, borrowed securities amounted to € 2.729.932 thousand (2011: € 1.053.999 thousand) and loaned securities amounted to € 1.855.151 thousand (2011: € 2.335.047 thousand).
Bonds, notes and other fixed-interest securities 551,695 0 551,695 525,827 0 525,827
Bonds, notes and other fixed-interest securities 176,192 0 176,192 176,973 0 176,973
Transferred financial assets derecognized to the extent of the institution's continuing involvement
Future minimum lease payments under non-cancelable operating leases are as follows: Up to 1 year 43,021 41,670
(44) Risks arising from financial instruments Active risk management is a core competency of RBI. In order to effectively identify, measure, and manage risks the Group continues to develop its comprehensive risk management system. Risk management is an integral part of overall bank management. In particular, in addition to legal and regulatory requirements, it takes into account the nature, scale, and complexity of the business activities and the resulting risks. The risk report describes the principles and organization of risk management and explains the current risk exposures in all material risk categories.
Individual risk management units of the Group create detailed risk strategies, which set more concrete risk targets and specific standards in compliance with these general principles. The overall Group risk strategy is derived from the Group’s business strategy and adds risk relevant aspects to the planned business structure and strategic development. These aspects include e.g. structural limits and capital ratio targets which have to be met in the budgeting process and which frame upcoming business decisions. More specific targets for individual risk categories are set in detailed risk strategies. The credit risk strategy of RBI, for instance, sets credit portfolio limits for individual countries and segments and defines the credit approval authority for limit applications.
Risk management functions are performed on different levels in the Group. RBI AG develops and implements the relevant concepts in coordination with RZB AG as the parent credit institution and in cooperation with the subsidiaries of the Group. The central risk management units are responsible for the adequate and appropriate implementation of the Group’s risk management processes. In particular, they establish common Group directives and set business-specific standards, tools, and practices for all Group entities.
The central Risk Controlling division assumes the independent risk controlling function required by banking law. Amongst others, this division is responsible for developing the Group-wide framework for overall bank risk management (integrating all risk types) and preparing independent reports on the risk profile for the Management Board and the heads of individual business units. It also measures required risk coverage capital for different business units and calculates the utilization of the allocated risk capital budgets in the internal capital adequacy framework.
The Group Asset/Liability Committee assesses and manages statement of financial position structure and liquidity risks and defines the standards for internal funds transfer pricing. In this context it plays an important role for the long-term funding planning and the hedging of structural interest rate and foreign exchange risks.
Maintaining an adequate level of capital is a core objective of risk management at RBI. Capital requirements are monitored regularly based on the actual risk level as measured by internal models, and in choosing appropriate models the materiality of risks is taken into account. This concept of overall bank risk management provides for capital requirements from a regulatory point of view (sustainability and going concern perspective) and from an economic point of view (target rating perspective). Thus it covers the quantitative aspects of the internal capital adequacy assessment process (ICAAP) as required by Basel II (Pillar 2) regulations. The full ICAAP process of RBI is audited during the supervisory review process for RZB-Kreditinstitutsgruppe by the Austrian Financial Markets Authority on an annual basis.
RBI uses a confidence level of 99.95 per cent for calculating economic capital. This confidence level is derived from the probability of default implied by the target rating. The objective of calculating economic capital is to determine the amount of capital that would be required for servicing all of the claims of customers and creditors even in the case of such an extremely rare loss event.
The economic capital of RBI decreased by 1.9 per cent compared to last year. Due to the acquisition of Polbank, the highest risk of RBI is now in credit risk of the asset class retail customers which accounts for 27 per cent (2011: 21 per cent) of total risk. In total, credit risk is responsible for 66 per cent (2011: 74 per cent) of economic capital. Market risk and operational risk account for 17 per cent (2011: 17 per cent). In addition, a general risk buffer for other risks of 5 per cent (2011: 9 per cent) of the calculated economic capital is added.
The economic capital is compared to internal capital, which mainly denotes equity and subordinated capital of the Group. This capital form serves as a primary provision for risk coverage, for servicing claims of senior debtors if the bank should incur losses. Total utilization of available risk capital (the ratio of economic capital to internal capital) was 73.8 per cent at year-end (2011: 62.7 per cent).
Economic capital is an important instrument in overall bank risk management. Economic capital limits are allocated to individual business segments during the annual budgeting process and are complemented for day-to-day management by volume, sensitivity, or value-at-risk limits. In RBI this planning is done on a revolving basis for the upcoming three years and incorporates the future development of economic capital as well as available internal capital. Economic capital thus substantially influences the plans for future lending activities and the overall limit for taking market risks.
Risk-adjusted performance measurement also is based on this risk measure. The profitability of business units is set in relation to the amount of economic capital attributed to these units (risk-adjusted return on risk-adjusted capital, RORAC), which yields a comparable performance measure for all business units of the Group. This measure is used in turn as a key figure for overall bank management, for future capital allocations to business units, and influences the compensation of the Group’s executive management.
1 New items due to ongoing development of calculation of economic capital
Parallel to that procedure, internal capital adequacy also is assessed with focus on the uninterrupted operation of the Group on a going concern basis. In this perspective, risks again are compared to risk taking capacity – now with a focus on regulatory capital and minimum capital requirements. During the year 2012, the calculation was updated with regard to the regulations of Basel III in preparation.
In line with this target, risk taking capacity is calculated as the amount of expected profits, expected impairment losses, and the excess of own funds (taking into account various limits on eligible capital). This capital amount is compared to the overall value-atrisk (including expected losses). Quantitative models used in the calculation thereof are mostly comparable to the target rating perspective, (albeit on a lower 95 per cent confidence level). Using this perspective the Group ensures adequate regulatory capitalization (going concern) with the given probability. In 2012 this objective has been continuously met on Group level.
The main goal of the sustainability perspective is to ensure that RBI can maintain a sufficiently high core capital ratio at the end of the multi-year planning period also in a severe macroeconomic downturn scenario. This analysis is based on a multi-year macroeconomic stress test where hypothetical market developments in a severe but realistic economic downturn scenario are simulated. The risk parameters considered are amongst others: interest rates, foreign exchange rates and securities prices, as well as changes in default probabilities and rating migrations in the credit portfolio.
The main focus of this integrated stress test is the resulting core capital ratio at the end of the multi-year period. It should not fall below a sustainable level and thus neither requires the bank to substantially increase capital nor to significantly reduce business activities. The current minimum amount of core capital thus is determined by the size of the potential economic downturn. In this downturn scenario the need for allocating loan loss provisions, potential procyclical effects that increase minimum regulatory capital requirements, the impact of foreign exchange fluctuations as well as other valuation and earnings effects are incorporated.
The internal control system for credit risks includes different types of monitoring measures, which are tightly integrated into the work flows to be monitored – from the customer’s initial credit application, to the bank’s credit approval, and finally to the repayment of the loan.
Description differences (2,557,608) 1,176,923 1 Items on the statement of financial position containing only credit risk parts
A more detailed credit portfolio analysis is based on individual customer ratings. Ratings are performed separately for different asset classes using internal risk classification models (rating and scoring models), which are validated by a central organization unit. Default probabilities assigned to individual rating grades are estimated for each asset class separately. As a consequence the default probability of the same ordinal rating grade (e.g. corporates 1.5, financial institutions A3, and sovereigns A3) is different between these asset classes.
The following table provides a breakdown of the maximum credit exposure according to the internal rating of corporates (large corporates and mid market). In the overall assessment of credit risk collateral and recovery rates must also be taken into account: 4.0 Weak credit standing/sub-standard 5,223,169 6.5% 6,384,399 7.2%
The following table provides a breakdown by country of risk of the maximum credit exposure for corporate customers structured by regions: The table below provides a breakdown of the maximum credit exposure for corporates and project finance selected by industries: C o n so li d a te d
The rating model for project finance has five different grades which provide both individual default probabilities and collateral. The project finance volume is composed as shown in the table below: 6.1 Excellent project risk profile – very low risk 3,734,268 44.3% 2,846,811 33.6%
6.4 Poor project risk profile – high risk 391,268 4.6% 675,624 8.0%
Retail customers – small and medium-sized entities 3,278,328 11.3% 2,567,762 11.0%
Corporates: maximum credit exposure by internal rating and segment In € million
Retail customers – small and medium-sized entities 2,265,327 800,373 55,220 157,408 0 hereof individual loan loss provision 684,206 357,821 161,246 468,813 109 hereof portfolio-based loan loss provision 474,163 60,396 15,334 21,924 0 2011 Central Europe Southeastern Europe Russia CIS Other Group Markets € 000
The second largest segment was Southeastern Europe with € 7,380,448 thousand (2011: € 7,460,683 thousand). Compared to the previous year the exposure decreased slightly by € 80,235 thousand.
In Russia, the volumes in asset class private individuals increased by approximately one third resulting mainly from consumer loans. Within the segment CIS Other on the other hand, Ukraine reported a decline in the retail credit portfolio.
2011 € 000 Central Europe Southeastern Europe Russia CIS Other Group Markets
The share of foreign currency loans in retail portfolios provides an indication for the potential change in default rates if the exchange rate of the domestic currency changes. The internal risk assessment thus takes into account the share of foreign currency loans but also the usually stricter lending criteria at loan distribution and – in several countries – the customers’ matching foreign currency income.
Compared to the previous year, loans denominated in foreign currency increased by € 2,647,016 thousand due to the acquisition of Polbank. The highest increase was shown in loans in Swiss francs and Euro, while US-Dollar loans slightly declined.
The maximum credit exposure of these customers was € 32,724,896 thousand (2011: € 38,829,566 thousand) at year-end 2012. At € 19,974,122 thousand or 61.0 per cent, the bulk of this customer group was in the rating class A3, which decreased by € 4,246,929 thousand compared to year-end 2011. This resulted mainly from a decline in bond and money market businesses in the segment Group Markets (minus € 4,066,356 thousand) which was partly offset by the increase in repo business (€ 1,048,719 thousand).
A1 A2 A3 B1 B2 B3 B4 B5 C D NR Central Europe Southeastern Europe Russia CIS Other Group Corporates Group Markets Corporate Center
The maximum credit exposure to sovereigns amounted to € 18,920,968 thousand (2011: € 26,893,046 thousand) at year-end 2012 and represented 11.1 per cent (2011: 14.4 per cent) of the bank’s total credit exposure.
The medium rating grades Good credit standing (rating A3) to Mediocre credit standing (rating B3) represented the highest share with 59.5 per cent (2011: 46.7 per cent). The high exposure in these rating categories mainly results from deposits of network banks at local central banks in Central and Southeastern Europe. They are mandatory for meeting the respective minimum reserve requirements or used in order to manage excess liquidity on a short-term basis and therefore are intrinsically linked to the banking business in these countries. The exposure in rating grade Weak credit standing (B4) increased to € 3,794,917 thousand or from 8.4 per cent to 20.1 per cent compared to the previous year, due to the rating deterioration of the Hungarian Central Bank from B3 to B4.
As of 31 December 2012, the carrying amount of loans for which terms were renegotiated in connection with a substantial and immediate loss that would otherwise be impaired or past due amounted to € 754,317 thousand (2011: € 474,473 thousand). Split by asset classes € 141,832 thousand (2011: € 79,615 thousand) is attributable to corporate customers and € 612,315 thousand (2011: € 394,350 thousand) to retail customers.
The following table shows the exposure of non-performing loans in the defined asset classes loans and advances to banks and loans and advances to customers as reported in the statement of financial position (excluding items off the statement of financial position) for the respective reporting period: € 000 As of 1/1/2012 Change in consolidated group Exchange differences Additions Disposals As of 31/12/2012 € 000 As of 1/1/2011 Change in consolidated group Exchange differences Additions Disposals As of 31/12/2011
The following table shows the share of non-performing loans (NPL) in the defined asset classes loans and advances to customers and loans and advances to banks as reported in the statement of financial position (excluding items off the statement of financial position) provided: NPL NPL ratio NPL coverage ratio € 000 2012 2011 2012 2011 2012 2011
In 2012 in the asset class corporate customers, non-performing loans increased by 10.5 per cent or € 481,971 thousand to € 5,073,267 thousand (2011: € 4,591,296 thousand), the ratio of non-performing loans to credit exposure rose by 1.3 percentage points to 9.1 per cent; the NPL coverage ratio went down by 2.8 percentage points to 63.5 per cent. In the retail portfolio, non-performing loans grew by 24.5 per cent or € 600,489 thousand to € 3,052,468 thousand (2011: € 2,451,979 thousand), of which € 430,405 thousand are attributable to the inclusion of Polbank. The ratio of non-performing loans to credit exposure remained unchanged at 11.5 per cent, the NPL coverage ratio improved by 1.4 percentage points to 73.7 per cent. The portfolio
Non-performing loans increased significantly in Central Europe by 39.0 per cent or € 966,683 thousand to € 3,447,016 thousand (2011: € 2,480,333 thousand). At the same time the ratio of non-performing loans to credit exposure rose by 1.8 percentage points to 10.8 per cent, the NPL coverage ratio improved by 3.3 percentage points to 64.0 per cent. Non-performing loans in Group Corporates went up by 41.1 per cent or € 269,018 thousand to € 922,956 thousand (2011: € 653,939 thousand), NPL ratio increased by 1.9 percentage points to 4.7 per cent and NPL coverage ratio sank by 18.5 percentage points to 60.6 per cent. In CIS Other, non-performing loans sank by 13.2 per cent or € 199,175 thousand to € 1,306,740 thousand (2011: € 1,505,914 thousand), NPL ratio sank by 1.7 percentage points to 24.7 per cent and the NPL coverage ratio improved by 2.0 percentage points to 70.2 per cent.
Loans and advances to banks 208,591 0 2,387 (5,967) (58,105) (1,101) 145,805
Loans and advances to banks 236,579 0 (3,666) (4,540) (21,540) 1,758 208,591
Loans and advances to customers 3,710,716 (182) 1,673,030 (531,357) (629,370) (77,827) 4,145,010
Portfolio-based loan loss provisions 887,999 (15) 280,577 (385,510) 0 (20,275) 762,777
Country risk also is reflected via the internal funds transfer pricing system in product pricing and in risk-adjusted performance measurement. Business units therefore can benefit from country risk mitigation by seeking insurance (e.g. from export credit insurance organizations) or guarantors in third countries. The insights gained from the country risk analysis are not only used for limiting the total cross-border exposure, but also for limiting the total credit exposure in each individual country (i.e. including the exposure that is funded by local deposits). Thereby RBI realigns its business activities according to the macro-economic development within different markets and enhances the broad diversification of its credit portfolio.
Retail trade except repair of motor vehicles 4,756,928 2.8% 5,315,068 2.8%
Electricity, gas, steam and hot water supply 3,208,655 1.9% 3,448,995 1.8%
Extraction of crude petroleum and natural gas 1,414,478 0.8% 1,580,433 0.8%
The default of a counterparty in a derivative, repurchase, securities or commodities lending or borrowing transaction can lead to losses from re-establishing an equivalent contract. In RBI this risk is measured by the mark-to-market approach where a predefined add-on is added to the current positive fair value of the contract in order to account for potential future changes. For internal management purposes potential price changes, which affect the fair value of an instrument, are calculated specifically for different contract types based on historical market price changes.
Total 59,096 60,892 43,796 83,990 48,039 1 Exchange rate risk on total bank level also includes equity positions of subsidiaries denominated in foreign currency. 2 October to December 2012
January February March April May June July August September October November December Profit and Loss VaR - hypothetical profit and loss
RBI aims at stabilizing its core capital ratio when managing exchange rate risks. Changes in foreign exchange rates thus lead to changes in the consolidated equity amount; however, the regulatory capital requirement for credit risks stemming from assets denoted in foreign currencies also changes correspondingly. This risk is managed on a monthly basis in the Group Asset/Liability Committee based on historical foreign exchange volatilities, exchange rate forecasts, and the sensitivity of the core capital ratio to changes in individual foreign exchange rates.
Other 8 2 3 (2) 2 1 3 (4) 5 0 (1) (1) 1 The presentation of currencies has changed year-on-year depending on the absolute value of the interest sensitivity.
banking book positions after an interest rate shock of 200 basis points were always lower than the regulatory reporting threshold of 20 per cent of eligible own funds.
The following table shows the change in the present value of RBI’s banking book given a one-basis-point interest rate increase for the whole yield curve in € thousand for reporting dates 31 December 2012 and 31 December 2011. Currencies with total interest rate sensitivity exceeding € 10 thousand are shown separately. Interest rate risk in the banking book decreased mainly due to a reduction of holdings in government bonds.
Liquidity management, i.e. ensuring that the Group maintain its ability to pay at all times, is performed both centrally by the Treasury division in Vienna and on a decentralized basis by local banking subsidiaries. Cash flows are calculated and analyzed by currency on a periodical basis in an internal monitoring system. Based on this data, the Group creates liquidity balances, and analyzes whether the Group conforms to legal regulations on liquidity positions and defined internal liquidity limits. Liquidity anal-
yses also include simulations on defined market or name specific liquidity crises in scenario-based cash flow forecasts. All these analyses are discussed in the Group Asset/Liability Committee of the bank.
The following table shows excess liquidity and the ratio of expected cash inflows plus counterbalancing capacity to cash outflows (liquidity ratio) for selected maturities on a cumulative basis, taking into account items on and transactions off the statement of financial position. Based on expert opinions, statistical analyses and country specifics, this calculation also incorporates estimates on the prolongation of defined assets, the so-called sediment of customer deposits, and the liquidity counterbalancing capacity (in particular, assets that are eligible for refinancing at central banks and that can be used as collateral in repo transactions). Through the acquisition of Polbank in the second quarter of 2012 compared to year-end 2011, there was a reduction in excess liquidity in the short-term maturity buckets. Especially the liquidity ratio of the maturity bucket for one week decreased significantly. This reflects the fact that the short-term liquid funds held for the take-over of Polbank were transferred at the date of take-over into longterm refinancing business.
€ 000 2012 2011 Maturity 1 week 1 month 1 year 1 week 1 month 1 year
Contractual cash flows Up to 3 months 3 to 12 months 1 year to 5 years More than 5 years
This risk category is analyzed and managed on the basis of own historical loss data and the results of self-assessments. Another management tool is the incentive system implemented in internal capital allocation. This system rewards high data quality and active risk management. Generally speaking, RBI implements a centralized and decentralized system for operational risk management. In this process, a central operational risk management function defines all basic principles and minimum requirements, which then are implemented risk type specific in the individual local units.
As with other risk types the principle of firewalling between risk management and risk controlling is also applied to operational risk in RBI. Operational risk controlling units are mainly responsible for the implementation and refinement of methods for operational risk management in different Group units (e.g. performing self-assessment, defining and monitoring key risk indicators, etc.) and for reporting to the central operational risk controlling function. Business line managers are responsible for controlling and mitigating operational risks. They decide on pro-active operational risk steering actions, such as buying insurance, and the use of further risk mitigating instruments.
Operational risk self-assessment is executed in a structured and Group-wide uniform manner, where all operational risk categories and business functions are assessed in a two-dimensional matrix by generic business processes and event types (per business line or product group). This applies to new products as well. All Group units grade the impact of high probability/low impact events and low probability/high impact incidents according to their estimation of the loss potential for the next year and in the next ten years in relation to profits. Low probability/high impact events are quantified by a Group-wide analytical tool with specific scenar-
In order to monitor operational risks, key risk indicators (KRIs) are used that allow promptly identifying and mitigating operational risks. These are also specifically tailored to individual Group units. A common catalog of key risk indicators, which is defined by the Group head office for internal benchmarking purposes, is mandatory for all Group units.
Loss data is collected in a central database called ORCA (Operational Risk Controlling Application) in a structured manner and on a Group-wide basis according to the event type and the business line. Collecting losses stemming from operational risks is a prerequisite for implementing a statistical loss distribution model and a minimum requirement for implementing the regulatory Standardized Approach. Furthermore, loss data is used to create and validate operational risk scenarios and for exchange with international data pools to further develop advanced operational risk management tools. Since 2010, RBI has been participant in the ORX data pool, whose data are currently used for internal benchmark purposes and analyses. The results of the analyses as well as events resulting from operational risks are reported in a comprehensive manner to the Group Risk Committee on a regular basis.
RBI currently calculates regulatory capital requirements for operational risks according to Basel II using the Standardized Approach (STA). This approach applies to all major Group units.
(45) Derivative financial instruments 31/12/2012 Nominal amount by maturity Fair values € 000 Up to 1 year 1 year to 5 years More than 5 years Total Positive Negative
Loans and advances to customers 77,989,722 77,859,090 130,631 75,982,501 76,750,667 (768,165)
Intangible and tangible fixed assets 2,919,614 2,917,907 1,707 2,578,823 2,577,025 1,798
(47) Fair value of financial instruments reported at fair value 2012 2011 € 000 Level I Level II Level III Level I Level II Level III
Shares and other variable-yield securities 264,612 11,915 723 198,196 11,739 0
Financial assets at fair value through profit or loss 5,099,215 3,232,801 16,205 5,056,336 2,268,679 34,780
Bonds, notes and other fixed-interest securities 5,051,385 3,127,501 11,133 4,925,965 2,149,701 30,035
Positive fair values of derivatives from hedge accounting 0 701,663 0 0 426,350 0 1 Including other derivatives. 2 Includes only securities traded on the stock exchange.
Negative fair values of derivatives financial instruments1 165,420 7,613,185 20,320 105,421 8,992,319 57,208
Negative fair values of derivatives from hedge accounting 0 119,933 0 0 42,702 0 1 Including other derivatives. 2 Includes only securities traded on the stock exchange. 3 Incuding subordinated capital.
Financial assets at fair value through profit or loss 34,780 0 (59) 335 (26,701)
€ 000 Gains/loss in P/L Gains/loss in other comprehensive income Transfer to level III Transfer from level III As of 31/12/2012
Financial assets at fair value through profit or loss (4,295) 0 12,145 0 16,205 € 000 As of 1/1/2012 Changes in consolidated group Exchange differences Purchases Sales, repayment € 000 Gains/loss in P/L Gains /loss in other comprehensive income Transfer to level III Transfer from level III As of 31/12/2012
Gains and losses resulting from financial instruments of the level III fair value hierarchy amounted in 2012 to minus € 7.434 thousand (2011: plus € 106.408 thousand).
Fiduciary income and expenses break down as follows: C o n so li d a te d
The following table contains the funds managed by RBI: Retail investment funds 6,578,312 4,976,007
Regulatory values are defined for RBI on an individual basis by the Austrian Banking Act based on adequate guidelines of the EU. There are also – often deviating with regard to content – guidelines in the several countries in which RBI operates. Such guidelines have to be adhered to by the local Group units.
RBI uses target values for internal regulation, which comprise all risk types (including trading book, currency risk and operational risk). The current planning/budgeting is shaped by the developments in Basel and Brussels regarding the advancement and harmonizing of own funds regulations. Parallel to the development of these regulations, RBI will introduce new target values, which are sufficiently above the 7 per cent core tier 1 capital (according to full expansion stage Basel III) in order to avoid regulatory limitations regarding management decisions (e.g. amount of dividend). An additional dimension has been added with the requirements of the European Banking Authority (EBA). Here the underlying rules differ from the previously valid regulations of the Austrian Banking Act (BWG), as well as from the drafts contained in the CRR I/CRD IV.
The main focus in the control is on the core tier 1 ratio (common equity tier 1) and the internal capital (total equity ratio) within the framework of ICAAP. Accordingly, the mixture of capital instruments (several kinds of tier 1, tier 2 and tier 3 capitals) has an important role due to the complex mutual consideration limits (currently under Basel II). Tier 3 capital, however, plays a minor role, since this kind of capital will no longer be eligible under Basel III and CRR I/CRD IV. Moreover, it is expected that the mutual consideration limits under Basel III and CRR I/CRD IV will be abandoned.
RBI is no credit institution group on its own according to the Austrian Banking Act (BWG) and is thus not subject to regulatory provisions on a consolidated basis, as it is part of the RZB credit institution group. The following figures are for information purposes only.
In the reporting year, the determination of eligible own funds in accordance with Section 29a of the Austrian Banking Act was changed to international accounting standards. The comparable figures are based on BWG / UGB and have not been adjusted. The own funds of RBI break down as follows: Paid-in capital 5,668,616 4,933,077
Tier 2 capital available to be redesignated as tier 3 capital 302,070 100,079
The total own funds requirement is as follows: Risk-weighted assets according to section 22 BWG 68,136,388 77,150,488 of which 8 per cent minimum own funds for the credit risk according to sections 22a to 22 h BWG 5,450,911 6,172,039
Own funds requirement for position risk in bonds, equities and commodities 273,353 519,912
The same regulations for employees are in principle valid for six members of the Management Board. These regulations provide a basic contribution to a pension fund from the company and an additional contribution if the employee pays own contributions of the same amount. One member of the Management Board has a defined benefit plan. Four members of the Management Board additionally have individual retirement benefits, which are funded by a reinsurance policy.
In the event of termination of function or employment contract and retirement from the company, two members of the Management Board are entitled to severance payments according to the Salaried Employees Act (Angestelltengesetz) or Bank Collective Agreement (Bankenkollektivvertrag), two members of the Management Board according to contractual agreements and three members of the Management Board according to the Company Retirement Plan Act (Betrieblichen Mitarbeitervorsorgegesetz). The entitlement to receive severance payments according to the Salaried Employee Act or according to contractual agreements lapses with the exemption of one member of the Management Board in case of termination by the employee. For one member of the Management Board entitlement to severance payments has been converted in the course of merger-related changes of exist-
The members of the Management Board of RBI AG are remunerated as follows: Bonus (performance-related) 2,153 793
The fixed remunerations shown in the table contain salaries and benefits in kind.
Performance-based remuneration components of the Management Board consist of bonus payments of the year 2012 actually paid and the amount of allotted shares regarding SIP (see share-based remuneration under note (34) equity).
2010 bonus payments were granted, of which € 297 thousand were paid in 2012 and € 644 thousand will be due in 2013. The actual payment is at the discretion of the Personel Committee of RBI AG.
The other remunerations comprise remunerations for membership of boards in affiliated subsidiaries, sign-in bonuses, payments to pension funds and business insurances, other insurances and grants.
Compared to 2011, the stated amounts of fixed and performance-based remunerations are distorted due to one-off effects caused by the retirement and new entry of one member of the Management Board.
Moreover, no contracts subject to approval in the meaning of Section 95 (5) item 12 Austrian Joint Stock Company Act (AktG) were concluded with members of the Supervisory Board in the financial year 2012.
Johann Strobl 22 September 2010 31 December 2015 1 Patrick Butler, resigned from membership of the Management Board as of 15 April 2012. 2 Due to the resignment of Patrick Butler the Supervisory Board appointed Klemens Breuer as successor for this function for the duration from 16 April 2012 until
The Supervisory Board of RBI AG is as follows: Members of the Supervisory Board First assignment End of period
Peter Anzeletti-Reikl Member Member – Member 1 End of the functional period on 20 June 2012 2 Assignment by the Supervisory Board on 20 September 2012
(55) Subsequent events There were no material subsequent events after the reporting date.
(56) List of fully consolidated companies The following table shows a selection of companies of the consolidated group. The complete list of the equity participations of RBI AG is deposited with the Group parent’s headquarters.
Centrotrade Minerals & Metals Inc., Chesapeak (US) 3,002,000 USD 100.0% OT
Kathrein & Co. Vermögensverwaltung GmbH, Vienna (AT) 125,000 EUR 80.0% FI
RZB Finance (Jersey) II Ltd, St. Helier (JE) 2 EUR 100.0% FI
Raiffeisen Financial Services Polska Sp. z o.o., Warsaw (PL) 3,847,500 PLN 100.0% FI
RAIFFEISEN INVEST AD DRUSTVO ZA UPRAVLJANJE INVESTICIONIM FONDOVIMA BEOGRAD, Belgrade (RS) 56,465,730 RSD 100.0% FI
Raiffeisen Voluntary Pension Funds Management d.o.o., Zagreb (HR) 33,445,300 HRK 100.0% FI
Report on the Consolidated Financial Statements We have audited the accompanying consolidated financial statements of Raiffeisen Bank International AG, Vienna, for the year from 1 January 2012 to 31 December 2012. These consolidated financial statements comprise the consolidated balance sheet as of 31 December 2012, the consolidated statement of comprehensive income, the consolidated cash flow statement and the consolidated statement of changes in equity for the year ended 31 December 2012 and a summary of significant accounting policies and other explanatory notes.
Our audit did not give rise to any objections. In our opinion, which is based on the results of our audit, the consolidated financial statements comply with legal requirements and give a true and fair view of the financial position of the Group as of 31 December 2012 and of its financial performance and its cash flows for the year from 1 January to 31 December 2012 in accordance with International Financial Reporting Standards (IFRSs) as adopted by the EU.
Legal & Compliance, Management Secretariat, Organization & Internal Control System and PR, Marketing & Event
Deputy to the Chief Executive Officer responsible for Corporate Customers, Corporate Sales Management & Development, Group Products and Network Corporate Customers & Support
Chief Operating Officer responsible for Consumer Banking, Group & Austrian IT, Group Project
Member of the Management Board responsible for International Banking Units and Participations
Financial Institutions, Country & Portfolio Risk Management, Retail Risk Management, Risk Controlling, Risk Excellence & Projects and Workout
Über die RBI Interview mit dem Vorstandsvorsitzenden Vorstand der RBI Bericht des Aufsichtsrats Service