Group management report Market development 38 Performance and financials 42 Detailed review of income statement items 44 Comparison of results with the previous quarter 48 Statement of financial position 50 Research and development 52 Internal control and risk management system 53 Capital, share, voting and control rights 55 Funding 58 Risk management 59 Human resources 63 Outlook 65 Organizational changes 66 Events after the reporting date 67
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 15 markets.
In CEE, approximately 55,000 employees in around 3,000 business outlets serve some 14.6 million customers. In Austria, RBI is one of the top corporate and investment banks. It is also represented in the world’s financial centers, as well as in branches and representative offices in Asia.
Own funds ratio 15.9% 0.3 PP 15.6% 13.5% Stock data 1/1–31/12 1/1–31/12 1/1–31/12
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
Mr. Sevelda, you have been RBI’s CEO since June 2013. did your appointment come as a surprise to you? It certainly did. All the signs pointed to a medium-term planned succession for Herbert Stepic and me in 2015. After Mr. Stepic offered to resign, I was asked, as his deputy, whether I wanted to assume this position until mid-2017. After considering the matter briefly, I wholeheartedly accepted. It is a great honor, but also a challenging task in view of the environment, and one that involves a great deal of responsibility. So far, Mr. Stepic, my colleagues on the Management Board and I, have steered the company well through this ongoing crisis and period of transition. While we expect the overall economic conditions to improve, we – like nearly all other banks – will still have to clear a number of hurdles in 2014, and beyond.
How would you assess the first few months in your new position? They have been very positive. I have become even better acquainted with the organization and many employees, and have got involved in many interesting topics. I have been very impressed by the qualifications and commitment, as well as the team spirit of our staff. This makes me feel very confident about the upcoming projects and challenges. Moreover, we are in the fortunate position of having a sustainable strategy, which is based on a properly functioning and demonstrably successful business model. Furthermore, our Group’s origins, support, and head office are in Austria, a country with a top rating. Compared to many competitors, we are therefore in a very good starting position. However, we must keep on improving, by critically examining what we can do better, or more efficiently, and also what we should no longer be doing.
How many focus markets have you defined and how were they selected? We want to concentrate on six markets: Russia, Poland, the Czech Republic, Slovakia, Romania, and Austria. We carried out a very thorough study of all the markets in which we are represented with banks. Criteria such as market size, growth potential, our own market position, the contribution to Group earnings, as well as the strength and quality of our customer relationships, were assessed. The defined markets are either stable or large markets. Poland meets both criteria. It is the biggest country in Central Europe and has emerged from the crisis better than all other states in the EU. This is why the integration of Polbank, where we made considerable progress in 2013, is so important. The two other large markets are Russia and Romania, where the performance of our banks has been extremely satisfactory. While the economies of Austria, the Czech Republic and Slovakia are smaller, they are stable due to strong export rates and high GDP per capita. We are willing to invest additional resources in these six markets, if the demand for financial products picks up.
You carried out a large capital increase in January 2014. What are the next steps? We were very satisfied with the almost 2.8 billion euro result of the capital increase. Also the fact that RZB, our core shareholder, enlisted 750 million euros in the pre-placement was positively viewed. The positive outcome of the transaction confirms that our business mod el remains promising, and that we have correctly identified the areas in which we want to further improve. Furthermore, the resulting higher free float after the capital increase has made our shares more attractive. The shares are now more heavily weighted in important international indexes and again included in the ATX five. As a result, the shares will be more interesting to both private and large institutional investors. A key reason for the capital increase was to strengthen RBI‘s equity base to comply with the new Basel III rules, under which participation capital counts towards common equity tier 1 (CET 1) during the transition period only. The capital increase has improved the fully phased-in CET 1 ratio to 10.1 per cent. I also want to emphasize that, at 5.7 per cent, our leverage ratio is very good compared to that of many other banks.
What products will you focus on in 2014? Our positioning remains unchanged. We continue to be a reliable provider of sustainable, high-quality financial products for corporate customers, private customers, and financial institutions. Our corporate customer business is based on the relationship approach, as well as on Group-wide planning, with a focus on distributing capital-light products, for example in treasury and cash management. In private customer business, we are concentrating on introducing further products in the premium and private banking segment. In addition, we are working on further standardizing mass market products. As for the capital market business, our focus is on capital-light products such as equities, bonds, structured products, and hedging. We conduct such business for corporate customers and financial institutions.
does optimism nevertheless prevail? Certainly. My optimism is based on five points, some of which I have already mentioned: firstly, our business model, the re silience of which was once again demonstrated by an increased operating result in 2013; secondly, the noticeably improving economic environment in the majority of our focus markets; thirdly, the support of our shareholders – private, institu tional and of course our core shareholder RZB and the Raiffeisen Banking Group; fourthly, the high reputation that the Raiffeisen brand enjoys in all markets in which we operate; and finally, the quality and commitment of our employees. I would like to, also on behalf of my Management Board colleagues, express my sincerest gratitude to our staff of nearly 60,000. On the basis of these points, we should once again manage to be part of the group of successful banks at the end of 2014.
Overall, the Supervisory Board thus conscientiously fulfilled its supervisory duties and took all its decisions in a reasoned manner.
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. In December, the Supervisory Board setup two further committees in the form of the Nomination Committee and the Risk Committee, which will commence their work in 2014. Further information on the type and composition of the committees, and on the content of their decisions, can be found in the Corporate governance report.
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. Its final report gave no reason for objections.
Following an extensive audit and discussion of the consolidated financial statements, as well as the annual financial statements, in the Audit Committee and Supervisory Board, the Supervisory Board agreed with the proposed appropriation of profit and approved the annual financial statements of RBI AG. The annual financial statements have thus been adopted in accordance with Section 96 (4) of the Austrian Stock Corporation Act.
In Austria, RBI is one of the top corporate and investment banks. It primarily serves Austrian customers, but also international customers as well as major multinational clients operating in CEE. Moreover, RBI is represented in the world‘s financial centers and operates branches and representative offices in Asia. All in all, RBI employs about 58,000 staff and has total assets of approximately € 131 billion.
RBI’s markets Total assets Business number 2013 in € million Change1 outlets of staff
Long-term success story RZB was founded in 1927 as “Genossenschaftliche Zentralbank”. The RZB founded its first subsidiary bank in Central and Eastern Europe already back in 1987. Since then, further own subsidiaries have been established. From 2000 onward, Raiffeisen‘s expansion into CEE countries has mainly been achieved by acquiring existing banks. These were subsequently combined into a holding company that from 2003 operated under the name Raiffeisen International. In April 2005 Raiffeisen International was listed on the stock exchange in order to finance its future growth efficiently. Today’s RBI was established in 2010 through the merger of Raiffeisen International with the principal business areas of Raiffeisen Zentralbank Österreich AG (RZB).
Deposit protection through the Raiffeisen customer guarantee association RBI is a member of the Raiffeisen customer guarantee association of Austria (Raiffeisen-Kundengarantiegemeinschaft, RKÖ), established in 2000, which made RBG a pioneer in deposit protection in Austria. Supplementing the statutory Austrian deposit guarantee scheme, the Raiffeisen customer guarantee association of Austria, guarantees up to 100 per cent of customer deposits, depending on the financial strength of the member institutions. Unlike the statutory deposit guarantee scheme, it covers all deposits, regardless of whether they belong to private individuals or businesses. The guarantee also applies to all foreign currency deposits and to claims related to issues of senior bonds.
RBI segments RBI is managed via seven segments. Its main focus in the Central Europe, Southeastern Europe, Russia and CIS Other segments is on retail and corporate banking, while mass market and premium retail strategies are developed on a country-specific basis.
Central Europe Retail and corporate customers in the Czech Republic, Hungary, Poland, Slovakia, and Slovenia
Group Corporates Austrian and primarily Western European business customers as well as large corporate customers from CEE
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 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 (with a focus on Russia, Poland, the Czech Republic, Slovakia, Romania, and 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 retail customers. ■ Financial services are provided cost-efficiently, notwithstanding high standards of quality. ■ The balanced distribution of business activities in RBI‘s home market contributes to the diversification of risk in the business portfolio. ■ A strong market position, especially in its focus markets, safeguards RBI‘s long-term profitability. ■ Group-wide uniform risk management, corresponding to the bank’s risk-taking capacity and aimed at avoiding concentration risks (loans, liquidity, etc.) safeguards the company’s independence.
■ The business model and balance sheet structure are designed in such a way, as to ensure a rating comparable with European peer banks.
In each of the countries of the Central Europe segment (the Czech Republic, Hungary, Poland, Slovakia, and Slovenia) RBI is represented by a bank, leasing companies and other specialized financial institutions, respectively. Due to different economic conditions , the specific business focus in individual countries differs. In principle, RBI‘s aim in Central Europe is to position itself as the leading universal bank in the region. The range of premium and private banking services is continuously being extended due to increased demand among affluent retail customers for higher-end financial and advisory services.
In the Czech Republic, the main focus is also on business with affluent retail customers. In order to improve the way these customers are addressed via the existing branch network, various projects have been launched. Alternative sales alliances, e.g., joint credit card issuance with mobile provider vodafone (”AQUA“), are being expanded. In the corporate customer business, RBI promotes capital and liquidity-light products. In the Czech Republic, as in other countries, RBI generally prefers to lend to existing customers with good credit ratings. Process improvements are also being developed to supplement the market-related measures.
In Slovakia, RBI possesses one of the best known and most valuable brands in the Slovak banking sector through Tatra banka , which focuses on the affluent customer business. Its innovation leadership with regard to new technologies (e.g., internet and mobile banking, instant card issuance services or contactless payment services) is set to be further extended. Workflows are constantly being optimized in Slovakia, as they are throughout the entire network. In addition to the Tatra banka brand, the Raiffeisen brand was also introduced in Slovakia via a franchising model with initially twelve branches. Its aim is to specifically reach families and retail customers in the middle-income business. RBI plans to open additional branches. The establishment of a center of competence for asset management in Slovakia – under the umbrella of Tatra Asset Management – ensures growth in mutual fund and pension fund business.
In Slovenia, the business model was adjusted to the difficult market environment and saturated banking landscape. The structures of the bank and leasing subsidiary are being adapted in accordance with this strategy.
RBI operates as a universal bank in the countries of the Southeastern Europe segment (Albania, Bosnia and Herzegovina, Bulgaria , Croatia, Kosovo, Romania, and Serbia). It has a bank and a leasing company in each country and in certain markets is also represented through investment and asset management companies, as well as through pension funds. The target customer group, however, varies according to country.
In Bulgaria, RBI’s strategic objective is to further strengthen existing business relationships with selected corporate and retail customers . The partial withdrawal of Greek and Western European banks has created an opportunity here to become the main bank for customers with good credit ratings. The lending policy focuses on good credit ratings and collateral, as well as on cost management and – linked to this – on increasing productivity.
In Croatia, the focus is on large and medium-sized corporate customers, as well as on retail customers. The strategic center of attention in the corporate customer business is financial services in connection with EU structural and cohesion funds linked to Croatia’s accession to the EU. The affluent retail customer business is focused on end-to-end product solutions (cross-selling), as well as on the sale of investment products (e.g., pension funds and mutual funds). The branch network is also 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 sole trader/small entrepreneur business are increasingly being addressed.
RBI’s objective in Russia is to secure its role as one of the leading foreign banks. Business development is predominantly organic , in particular through utilization and optimization of RBI’s presence in the various regions of the country. In the corporate customer business – where RBI holds a strong position – the bank is supporting the expansion of Russian companies into other RBI markets . RBI’s strategic orientation as a service provider for customized treasury solutions (e.g., currency and interest rate hedging) and investment banking (e.g., capital market issues, mergers & acquisitions), as well as its general advisory activities with regard to financial services, helps to strengthen this position. In the private individual business, processes were and will be optimized in order to increase sales strength. Seven regional competence and management centers in addition to an operations and call center ensure customer-focused and efficient product processing. RBI’s strong brand position is used to expand the affluent private individual business. This also includes expanding the network of branches in selected, attractive locations. High-end services (e.g., online and mobile banking services; offered insurance, asset management, and pension solutions, as well as intensified advising) support this.
As the largest foreign bank in Belarus, RBI is the first point of contact for investors and international corporate customers. The aim is to further consolidate its pioneering role in the field of affluent retail banking by expanding alternative sales and service channels (e.g., through internet and mobile banking, as well as call centers). The economic environment (high inflation, potential further devaluation of the currency) continues to call for a prudent business policy and selective lending policy. This means avoiding loans in foreign currencies, to a large extent, and granting loans subject to strict conditions.
In Ukraine, RBI offers the full range of financial services products through a dense branch network. Close cooperation exists with supranational financial institutions (EBRD, IFC, etc.) with the focus on medium-sized companies, the agricultural sector and heavy industry . Here too, RBI provides sophisticated treasury and investment banking services. In the retail customer business, existing customer relationships are being strengthened and sales of credit cards, consumer loans and insurance products are being promoted.
In the countries of the CIS Other segment, as elsewhere, RBI focuses on strict cost management. In Ukraine, centralization and efficiency projects are being implemented regarding the organizational structure and processes (seven regional competence and management centers), as well as in the entire IT and operations area, through relocation to a new operations and call center. In Belarus, sales channels are being further optimized via a branch network in order to enhance cost structure efficiency.
The Group Markets segment mainly covers capital market trading, as well as business with institutional customers of RBI AG, branch offices and Raiffeisen Centrobank. The customer margin with corporate and retail customers exceeding pure trading income is reported in the corresponding customer segments. Capital market trading, as well as business with institutional customers of network banks, is reported in the respective geographic segment.
In principle, RBI‘s trading activities are defensive in nature and mainly serve to support the business with customers. Furthermore , the division capital market trading in vienna fulfills important service functions for the entire network of RBI (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 further strengthen the market position in the next several years.
Business with institutional customers such as banks, insurance companies, investment companies and sovereigns is principally managed out of the Group head office in vienna. The focus of its business activity is the sale of capital and liquidity-light products. Financing instruments such as secured and unsecured bonds have benefited to a significant extent from the current market environment. Key strategic objectives for this customer segment include the expansion of non-bank business throughout the entire target region and further promotion of business with capital market and investment banking products.
The Corporate Center segment encompasses various services provided by the Group head office (e.g., Group strategy, strategic risk management, Group accounting, Group-wide HR management and development, Group audit) that assist in the implementation of the Group’s overall strategy and are assigned to this segment in order to ensure comparability. This segment also includes the following areas: liquidity management by means of the funds transfer pricing concept (internal liquidity management at conditions comparable to those found on the external market) and balance sheet structure management, as well as participations (particularly in subsidiaries in the CEE region), income from banking operations carried out by the Group head office and by the Maltese subsidiary for refinancing Group units, in addition to the Austrian transaction services business, which comprises processing and other services for financial service providers and also income from the holding and other companies that is not directly assigned to a segment.
RBI stock Equity markets benefit from expansive monetary policy The start of 2013 was marred with concerns for the eurozone countries. In addition to generally weak economic performance, the European sovereign debt crisis, in particular – with issues such as Cyprus‘ imminent insolvency, and the debate about using citizens‘ assets to balance state budgets – weighed on sentiment. However, this had little impact on the euro equity markets and the majority of them remained flat with low volatility. Whereas, the US stock markets consid erably rose in the first quarter.
This positive trend initially continued in the second quarter, despite a global economic slowdown. Italy’s successful formation of a government, as well as the ECB’s announced cut in interest rates at the beginning of May, from 0.75 per cent to 0.5 per cent, both reassured the markets. Nevertheless, the US Federal Reserve (Fed) announcement in June, that it might move away from its loose mon etary policy before the end of the year, triggered considerable uncertainty among investors resulting in falling prices in numerous equity markets.
Performance of RBI stock After starting 2013 at € 31.46, RBI’s stock hit its peak in January at € 33.59, before entering a downward trend until the middle of the year. On 11 July, it closed at € 19.96, its low for 2013, but recovered to € 25.62 by the end of the year. Over the full year this amounts to a share price loss of 18.6 per cent. It therefore underperformed compared to both the ATX (up 6.1 per cent) and the EURO STOXX Banks (up 25.9 per cent).
As of the editorial deadline on 11 March 2014, RBI stock was priced at € 21.61. The shares therefore recorded a loss of 12 per cent versus 31 December 2013. The positive price performance, in course of the capital increase at the beginning of 2014, however, followed a considerable decline due to developments in Ukraine.
RBI EURO STOXX Banks (relative to RBI) ATX (relative to RBI)
Shareholder structure As of the editorial deadline on 11 March 2014, Raiffeisen Zentralbank Österreich AG (RZB) held approximately 60.7 per cent of RBI’s shares, with the remaining balance in free float. RZB‘s share, which was roughly 78.5 per cent at year-end 2013, was reduced in the course of the capital increase at the beginning of 2014; thus supporting the free float, which increased from around 21.5 per cent to about 39.3 per cent. The broad geographical spread of investors – as of the editorial deadline – as well as their diverse investment objectives, resulted in a balanced shareholder structure. Thus, the investors included institutional investors, mainly from the USA and UK, as well as a large number of Austrian private investors. Sovereign wealth funds and supranational organizations, which promise stability by virtue of their preferred long-term investment strategies, were amongst those institutional investors.
Stock data and details Price as of 31 December 2013 € 25.62
Free float as of editorial deadline (11 March 2014) approximately 39.3%
Furthermore, in July, RBI repurchased a senior bond due to mature in 2014 – which it issued in 2009 at a volume of € 1.5 billion – at a total par value of € 562 million. In line with expectations, almost 40 per cent of bondholders accepted the buy-back offer. RBI‘s last large bond transaction in 2013, was the offer to exchange a subordinated bond valued at € 500 million for a new bond maturing in 2024. The acceptance of the exchange offer, at just less than 50 per cent, was also high.
Capital market communications RBI offered international investors numerous opportunities to obtain first-hand information at over 50 road shows and conferences, in 2013. For this purpose, representatives of RBI, in some cases accompanied by members of the Management Board, traveled to Amsterdam, Boston, Brussels, Cologne, Copenhagen, Dusseldorf, Frankfurt, Geneva, Hamburg, Helsinki, Hong Kong, London, Luxembourg, Milan, New York, Paris, Singapore, Stockholm, The Hague, Tokyo, Utrecht, Warsaw, Zurich, as well as to the Austrian towns of Stegersbach and Zürs. At one of these events in September, in London, Karl Sevelda introduced himself as the new Chief Executive Officer for the first time at an international conference.
As in previous years, the investor day in London, which followed the publication of the 2012 results, was very well attended. In 2013, RBI began holding regular presentations for Austrian equity and debt investors at its head office, on reporting dates, which struck a chord. These were followed by the established conference calls, each involving 100 to 200 participants.
RBI attaches great importance to responsible and transparent business management in order to deepen and maintain understanding and trust with its various stakeholders, in particular capital market participants. Hence, RBI is committed to complying with the Austrian Corporate Governance Codex (ACGC, or “the Codex”) as amended in July 2012. The ACGC is publicly available from the website of the Austrian Working Group for Corporate Governance (www.corporate-governance.at) and from the RBI website (www.rbinternational.com → Investor Relations → Corporate Governance).
The ACGC is organized into rules L, C and R. L Rules (Legal Requirements) are based on compulsory legal requirements. C Rules (Comply or Explain) should be observed; any deviation must be explained and justified in order to ensure conduct that complies with the Codex. R Rules (Recommendations) have the characteristics of recommendations; non-compliance does not need to be reported or justified.
Composition of the Management Board In the 2013 financial year, the Management Board consisted of the following members: Management Board member Year of birth Original appointment End of term
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: ■ Karl Sevelda Oesterreichische Kontrollbank AG (supervisory board member since 8 October 2013) BENE AG (supervisory board member until 18 April 2013)
■ Peter Lennkh Raiffeisen-Leasing Management GmbH (supervisory board member since 3 December 2013)
Erwin Hameseder 1956 8 July 2010 1 Annual General Meeting 2015 First Deputy Chairman
Stewart D. Gager 1940 24 January 2005 Annual General Meeting 2014
Johannes Schuster 1970 8 July 2010 1 Annual General Meeting 2015
Christian Teufl 1952 8 July 2010 1 Annual General Meeting 2015
Members of the Supervisory Board had the following additional Supervisory Board mandates or comparable functions in domestic and foreign companies listed on the stock exchange: ■ Walter Rothensteiner UNIQA Insurance Group AG (chairman)
Erwin Hameseder First Deputy Chairman First Deputy Chairman First Deputy Chairman First Deputy Chairman
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 (as at 1 January 2014): Retail Banking, Operations & IT Aris Bogdaneris
After acceptance of the resignation offer of Herbert Stepic, Karl Sevelda assumed responsibility for the former‘s area of operation as well as for the areas of Participations and International Banking Units from Peter Lennkh, who in turn assumed responsibility for the areas of Corporate Customers, Corporate Sales Management & Development, Group Products and Network Corporate Customers & Support from Karl Sevelda.
The Audit Committee monitored the accounting process and the effectiveness of the company’s internal control, audit and risk management systems. Its tasks included the supervision of the financial statements and the consolidated financial statements annual audit, as well as checking and supervising the independence of the Group’s auditors, in particular with respect to additional work performed for the audited company. The Committee audited the annual financial statements, the management report, the consolidated financial statements and the Group management report, and was responsible for the preparation of its approval. It also audited the proposal for earnings appropriation and the Corporate Governance Report. The Audit Committee presented to the Supervisory Board a report on the results of its audits. The Committee was also responsible for preparing the recommendation of the Supervisory Board for the selection of the external auditor and bank auditor. Furthermore, the Audit Committee discussed the content of the management letter as well as the report on the effectiveness of the risk management system and the internal control system.
The Remuneration Committee’s responsibilities included establishing guidelines for the company’s general remuneration policies, and practices, in compliance with the Austrian Banking Act (BWG), as well as relevant sections of the Austrian Corporate Governance Codex. This included establishing guidelines for ensuring executives’ participation in profits, revenues and pension benefits expressed within the meaning of the Austrian Stock Corporation Act, as well as approving the granting of options on shares in the company and a program for the preferential transfer of company shares, respectively. The Remuneration Committee supervised and regularly reviewed the remuneration policies, remuneration practices, and relevant incentive structures to ensure that all related risks were controlled, monitored, and limited in accordance with the BWG, as well as the company’s capitalization and liquidity, whereby the long-term interests of shareholders, investors and employees of the company were taken into account. The Remuneration Committee directly reviewed the remuneration of executives responsible for risk management and compliance.
The Working Committee held seven meetings in the 2013 financial year. The Audit Committee met twice, the Personnel Committee four times and the Remuneration Committee three times.
The following total amounts were paid to the Management Board of RBI: Fixed remuneration 5,477 5,752
Fixed remuneration, as shown in the above table, includes salaries and benefits in kind. Performance-based components of the Management Board’s remuneration basically consist of bonus payments and share-based remuneration under the Share Incentive Program (SIP). There was, however, no allocation of share-based payments in 2013, as no SIP tranche had been issued in 2010 due to the merger of Raiffeisen International with the principal business areas of Raiffeisen Zentralbank Österreich AG (RZB). Moreover, the maturity of the program was extended to five years in accordance with legal regulations. Therefore, the next SIP tranche will not mature before 2016.
2010 bonus payments to three members of the Management Board, who had transferred from RZB to RBI, were still based on return on equity (ROE) criteria defined by RZB. In regards to contractual provisions applicable to these persons up until the end of 2010, bonus commitments were made, of which the final portion of € 643,500 was disbursed in 2013.
The figures shown for the fixed and performance-based remuneration are, when compared to 2012, distorted by one-off effects. Patrick Butler continued to receive his remuneration up until 30 June 2013, in spite of his resignation from the Management Board. Herbert Stepic resigned from his post as Chairman of the Management Board but will nevertheless continue to receive his remuneration up until 30 June 2014 for his activity as consultant, and as member of the supervisory board in a number of network banks.
The Management Board’s remuneration paid in 2013 is shown in detail as follows: in € thousands Fixed remuneration Bonuses Other Total 1 In addition to the amounts listed above, an amount of € 911 thousand in fixed remuneration, as well as € 2 thousand in other remuneration, were paid to Herbert Stepic in the period 8 June to 31 December 2013, on the basis of contractual agreements. Furthermore, as of 8 June, he received no more variable remuneration, or allotments from the SIP. Herbert Stepic returned an amount of € 2,000 thousand to the company from remuneration received for financial year 2012. In addition to the amounts listed above, € 300 thousand in fixed remuneration, as well as € 10 thousand in other remuneration, were disbursed to Patrick Butler as a Management Board member, following his resignation in 2012, due to contractual agreements in the period between 1 January 2013 and 30 June 2013.
Principles of remuneration policy and practices in accordance with Section 39 (2) in conjunction with Section 39b of the Austrian Banking Act (BWG) In accordance with Section 39 (2) in conjunction with Section 39b of the Austrian Banking Act (BWG) including annexes (Austrian provisions for the implementation of Article 22 (2) in conjunction with Annex v Part 11 of Directive 2006/48/EC in the version enacted by Directive 2011/89/EU), RBI’s Supervisory Board approved the “General Principles of the Remuneration Policy and Practice” in 2011. The Remuneration Committee is responsible for monitoring and implementation of these policies and practices. Remuneration of the Management Board and other “risk personnel” must comply with these principles. The principles also apply to bonus payments for 2011 and subsequent years.
Members of the Management Boards of bank subsidiaries and branches affiliated to RBI 422,217 126,665 633,325
For the six members of the Management Board the same rules essentially apply as for employees, which provide for a basic contribution to a pension fund on the part of the company and an additional contribution when the employee makes his/her own contributions in the same amount. One member of the Management Board has a defined benefit pension plan. Additional individual pension benefits, which are financed by pension liability insurance, apply to four members of the Management Board.
Furthermore, protection against occupational disability risk is provided by a pension fund and/or on the basis of an individual pension benefit, which is secured by pension liability insurance. Contracts for Management Board members are limited to the duration of their term in office or a maximum of five years. Regulations regarding severance payments in the case of early termination of Management Board activities are based on the principles stipulated by the Austrian Corporate Governance Codex, as well as on the stipulated maximum limits (a maximum of two years’ total annual remuneration for early termination without serious cause, and in any case no longer than the remaining term. No remuneration is given for terminations for serious reasons caused by the Management Board member).
Supervisory Board remuneration was apportioned to individual Supervisory Board members as follows. Provided, are provisional amounts from the statement of financial position subject to the approval by the Annual General Meeting 2014. Attendance fees were not paid.
In the 2013 financial year, a D&O (directors and officers) financial loss and liability insurance was signed with UNIQA Sachversicherung AG for the Supervisory Board, the Management Board and key executives, the cost of which will be carried by the company.
Annual General Meeting The Annual General Meeting for financial year 2012 was held on 26 June 2013 in vienna. The Annual General Meeting for financial year 2013 will take place on 4 June 2014. 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 fundamental principle of “one share one vote“ applies. Accordingly, there are no restrictions on voting rights and all shareholders have equal rights. Every share confers one vote; registered shares have not been issued. Shareholders may exercise their voting rights themselves or by means of an authorized agent. RZB has not exercised its right to nominate up to one third of the Supervisory Board members to be elected by the Annual General Meeting, as per Articles of Association, with the result that the share structure complies with the principle of “one share one vote“.
The following table shows the total proportion of women in managerial positions (positions with staff responsibility) as well as classified by Management Board, tier 2 and tier 3 management levels. Changes can mostly be explained by fluctuations in total headcount (e.g. the integration of Polbank, reduction measures) as well as organizational adjustments (number of organizational units or hierarchical levels) in various Group units.
The Management Board is aware of the need to continuously promote the existing initiatives as well as to maintain its openness to new initiatives in order to further increase the percentage of women in highly qualified positions as well as encouraging women to take advantage of these opportunities.
In order to build-on management skills, RBI offers targeted training and continuing education programs, which also proved popular among female employees. Approximately 40 per cent of participants in the Group-wide top-management program “Execute” were women. In 2013 female employees accounted for 33 per cent of participants in the restructured Advanced Leadership Training program for middle management.
Transparency The company website, as well as websites of its network units, plays an important role for RBI with regard to open communication with shareholders, their representatives, customers, analysts, employees, and the interested public. For this reason, the website offers regularly updated information and services on the following topics: annual and interim reports, company presentations, telephone conference webcasts, ad-hoc releases, press releases, investor relations releases, share price information and stock data, information for debt investors, financial calendar with advanced notice of important dates, information on 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.
Members of the Supervisory Board must immediately report any potential conflicts of interest to the Chairman of the Supervisory Board. In the event that the Chairman himself should encounter a conflict of interest, he must report this immediately to the Deputy Chairman. Company agreements with members of the Supervisory Board that require members to perform a service for the company or for a subsidiary outside their duty on the Supervisory Board (Section 228(3) UGB) in exchange for not-insignificant compensation require the approval of the Supervisory Board. This also applies to agreements with companies in which a member of the Supervisory Board has a significant financial interest. Furthermore, related party transactions as defined by Section 28 of the Austrian Banking Act (BWG) require the approval of the Supervisory Board.
The Annual General Meeting selected KPMG Austria AG Wirtschaftsprüfungs- und Steuerberatungsgesellschaft, vienna as its external auditor and bank auditor for the 2013 financial year. KPMG Austria AG Wirtschaftsprüfungs- und Steuerberatungsgesellschaft has confirmed to RBI that it has the certification of a quality auditing system. It has also declared that there are no reasons for disqualification or prejudice. The Supervisory Board is informed of the result of the audit by a statutory report regarding the audit of the consolidated financial statements by the auditor, as well as by the report of the Audit Committee. Furthermore, the auditor assesses the efficiency of the company’s risk management in accordance with the Austrian Corporate Governance Codex, based on the documents submitted to him and otherwise available. The resulting report is presented to the Chairman of the Supervisory Board, who is responsible for addressing the report in the Audit Committee and for reporting thereon in the Supervisory Board.
For more than 125 years, Raiffeisen has combined economic success with socially responsible activities. Similarly corporate responsibility and sustainability are a natural and integral part of RBI‘s business activities. It therefore plays a decisive part in realizing RZB Group‘s sustainability vision of becoming a leader in sustainability and corporate responsibility in the medium term.
■ RBI acts as a fair business and dialog partner in its dealings with stakeholders such as customers, shareholders, employees, and civil society. Engaging in respectful dialog with its principal stakeholders ensures that RBI can incorporate their expectations into its business practices.
Social commitment RBI‘s social commitment, which is based on tolerance and humanism, is reflected in corporate volunteering programs and partnerships with non-profit organizations. For example, RBI conducted the Christmas charity “Surprise in a Box“ for the sixth time in 2013. This event involves employees at Group head office contributing and packing presents for children in need at the Caritas asylum center in vienna.
RBI also supports the H. Stepic CEE Charity, which was established in 2006 and carries out charitable projects in Central and Eastern Europe. In recent years, the employees of RBI who work at the H. Stepic CEE Charity, on a purely honorary basis, have realized 27 projects in cooperation with local non-government organizations, including, for example, fund-raising for a Romanian education project.
RBI held its fourth Stakeholder Council meeting at the end of November 2013. In the previous year, external and internal stakeholders were invited to prioritize selected subjects for effective sustainability management. During the reporting period, the focus was on those topics that were identified as being in need of development, following an online stakeholder survey conducted at the start of the year. At the “responsible banker“ dialog table, small groups discussed the issues of “expectations for sustainable products“ and “opportunity, innovation and risk management“. The “fair partner“ field of action included the topics of “wishes regarding future stakeholder involvement“, “developing an awareness of sustainability among employees“, and “work-life balance“. For the role of “engaged citizen”, the themes of “bringing sustainable development to society“ and “sustainability and entrepreneurship “ were highlighted. The event produced many constructive ideas and suggestions which will be incorporated in the sustainability program for 2014, following detailed analysis.
Sustainability ratings and sustainability indexes Alongside financial indicators, investors also base their investment decisions on sustainability criteria. Guidance in this is offered by analyses and ratings from rating agencies specializing in sustainability, as well as from index providers. The following provides a short overview of the ratings and indexes of relevance for RBI: Improvement in oekom research AG‘s rating
In terms of corporate ratings, oekom research evaluates a company‘s social and ecological performance using over 100 selected industry-specific social and ecological criteria. Extensive measures have helped improve RBI‘s sustainability rating.
In 2013 all ecological data submitted to the CDP also underwent an external audit.
The Sustainability Report can be found at www.rbinternational.com → About us → Sustainability Management → Sustainability Report /CoC.
Market development 38 Development of the banking sector 41 Performance and financials 42 Detailed review of income statement items 44 Comparison of results with the previous quarter 48 Statement of financial position 50 Equity 51 Research and development 52 Internal control and risk management system 53 Capital, share, voting and control rights 55 Funding 58 Risk management 59 Human resources 63 Outlook 65 Organizational changes 66 Events after the reporting date 67
CEE profits from recovery in the eurozone The marked economic slowdown, observed in Central and Eastern Europe (CEE) since 2012, continued in 2013. While the region recorded economic growth of 2.2 per cent in 2012, it will probably post just 1.2 per cent in 2013. Export growth continued to be moderate and domestic demand also remained weak. Economic growth in CEE was still driven by the eurozone as the region’s main export market. In addition, generally stagnating commodity prices, and ongoing consolidation efforts of the public sector, negativly impacted economic growth in several markets.
Further subdued growth in Asia China posted robust growth of roughly 7.7 per cent throughout 2013, with public infrastructure investments contributing significantly. Foreign trade also reported higher growth rates compared to 2012, whereas the pace of private investment slowed significantly. Private consumption again supported economic growth. Since November, considerable attention has centered on China’s plans to open up further to the outside world, as well as to liberalize many economic sectors. In India, economic growth for 2013 (the Indian fiscal year runs from April to March) is expected to reach 4.5 per cent – driven primarily by high government spending and a recovery in exports – with only minor stimuli coming from private consumption and investment. In 2013, Singapore once again recorded significantly higher economic growth, up 3.5 per cent. This was mainly attributable to improved global economic conditions, notably within Southeast Asia, as reflected in considerably higher exports.
Global currencies As in 2012, the euro to US dollar exchange rate continued to move within a narrow range of only EUR 0.10 in 2013 – between EUR/USD 1.28 and EUR/USD 1.38. The exchange rate stood at EUR/USD 1.36 at year-end, a mere EUR 0.04 above the level at year-end 2012. Exchange rates were again principally driven by the monetary policies of ECB and US central bank. Sustained speculation of a possible reduction in bond purchases by the Federal Reserve has flared up since mid-year, occasionally leading to marked exchange rate fluctuations.
Continued banking sector growth in CEE Supported by improved economic indicators and heightened economic expectations, the CEE banking sector enjoyed somewhat stronger overall activity in the past year. This trend initially manifested itself in an increase in domestic loans which tended to stabilize in the second half of 2013. A sustained, stable level of lending growth (observed in the CEE region as of the third quarter of 2013), as well as regional credit growth activity (which has continued to be supported by solid growth in the Russian banking sector), increasingly benefitted from the upward trend in the Central European banking sector. Moreover, with the exception of Southeastern Europe, non-performing loans (NPL) in the CEE region have shown visible signs of stabilization.
Continuing the previous year’s trend, growth in deposits has outpaced credit growth in nearly all CEE markets. However, the gap between the growth of credit and deposits has narrowed slightly – notably in countries of the CE region. Due to the solid loan/deposit ratio in nearly all CEE markets, this is viewed positively, as deposits are gradually being transformed into interestbearing loans. Only in the SEE region have deposits once again significantly outpaced loans, with no improvement in the unfavorable ratio as a result.
In terms of asset quality, the CEE banking sector witnessed further divergence in 2013. On the one hand, the level of NPLs in Russia and the CE region noticeably stabilized – albeit with the situation in Hungary negatively influencing the average. On the other, asset quality remained problematic in SEE as NPL ratios deteriorated further – mostly due to the unfavorable economic environment.
Overall solid growth in CEE resulted in an increase in the CEE banking sector’s total assets, from roughly € 2,350 billion in 2012 to nearly € 2,500 billion in 2013. Accordingly, CEE banks accounted for approximately 9 per cent of total bank assets in the eurozone. This continues to indicate the potential to catch-up in many CEE markets.
Performance RBI realized profit before tax of € 835 million in 2013. The year-on-year decrease of € 203 million was primarily attributable to one-off effects in 2012, such as the sale of bonds and the hybrid tier 1 capital buyback totaling € 276 million. Operating result improved significantly by 17 per cent, or € 351 million. This pleasing result contrasted with higher net provisioning for impairment losses (up € 140 million), increased bank levies, and a negative result from derivatives and liabilities. Profit after tax for the reporting period was 20 per cent, or € 149 million, below the value for the previous year. The tax rate remained unchanged at 28 per cent. As a result of the decline in profit after tax, return on equity after tax decreased 1.3 percentage points to 5.7 per cent. After deducting profit attributable to non-controlling interests, which increased € 23 million to minus € 46 million, consolidated profit amounted to € 557 million. This resulted in earnings per share of € 1.83 (2012: € 2.72) based on an average of 194.9 million shares outstanding.
Operating income increased 8 per cent, or € 432 million, to € 5,729 million year-on-year. There was a favorable development in net interest income, which recorded growth of 7 per cent, or € 257 million, to € 3,729 million despite lower volumes. This was due to the improved net interest margin, which (calculated on average interest-bearing assets) increased 46 basis points to 3.11 per cent thanks to repricing measures and the optimization of liquidity. In addition, net fee and commission income recorded an increase of 7 per cent to € 1,626 million owing to repricing measures and higher volumes. Net trading income in the reporting period increased € 106 million to € 321 million due to growth in currency-based transactions.
The portfolio of non-performing loans to customers increased € 0.5 billion to € 8.7 billion over the year. Currency effects caused a decline of € 0.2 billion. As a result, currency-adjusted growth, almost exclusively attributable to corporate customers, amounted to € 0.7 billion. Group Corporates segment reported the largest increases (up € 0.5 billion), together with Slovenia (up € 0.1 billion) and Romania (up € 0.1 billion), while the portfolio of non-performing loans fell € 0.1 billion in Ukraine. The NPL ratio – i.e., the ratio of non-performing loans to total customer loans – was 10.7 per cent in the reporting year after 9.8 per cent in the previous year. Non-performing loans were covered by provisions totaling € 5.6 billion. This resulted in an NPL coverage ratio of 63.1 per cent, which was 3.9 percentage points below the previous year's figure. This was attributable to the higher level of collateralization and resulting lower provisions for new non-performing loans.
The core tier 1 ratio (without taking hybrid capital into account) remained stable year-on-year at 10.7 per cent. The tier 1 ratio relating to total risk remained unchanged at 11.2 per cent. The own funds ratio increased 0.3 percentage points to 15.9 per cent.
lower interest income from derivatives, due to the reclassification of the interest portion of new business to the trading book, led to a fall in net interest income.
Net fee and commission income increased € 110 million year-on-year and therefore contributed 28 per cent of operating income. In particular, net income from the payment transfer business, as well as from the securities business, increased. The € 68 million increase arising from the payment transfer business, is mainly attributable to: higher fees in Hungary following the introduction of the financial transaction tax, a volume-driven increase in income from the credit card business in Russia, and the Polbank consolidation. Income from the securities business’s volume-based growth of 25 per cent, or € 30 million, was primarily due to positive performance at Group head office and in Hungary.
The foreign currency, notes/coins and precious metals business revealed volume- and margin-related growth of 2 per cent, or € 6 million, primarily in Romania, the Czech Republic and Poland. Higher fund volumes – mainly in Slovakia and Croatia – also contributed to an 18 per cent or € 4 million increase in net income from the management of investment and pension funds. Net income from the loan and guarantee business – mainly due to the development in Russia and Group head office – increased 1 per cent, or € 3 million, while net income from the sale of own and third party products fell € 3 million, predominantly due to business performance in Russia, and net income from the credit derivatives business remained virtually unchanged. Net income from other banking services revealed the highest increases in the Czech Republic, as a result of structured financing, as well as in Hungary.
While interest-based transactions predominantly increased in Hungary, Poland and the Czech Republic, due to valuation gains on derivatives, net income from interest swaps declined at Group head office due to a decrease in volumes.
Net income from currency-based transactions grew 25 per cent, or € 53 million, to € 262 million. With € 90 million and € 51 million respectively, both Russia and Hungary posted positive net interest income from derivative transactions for hedging purposes, while Poland revealed a decline – albeit measured against extraordinarily high earnings in 2012. This income item was extensively influenced by the application of
IAS 29 in connection with hyperinflation accounting in Belarus, straining net trading income by a virtually unchanged € 22 million year-on-year.
The significant increase in net income from other business stemmed largely from capital guarantees issued by Group head office. It improved from minus € 25 million to plus € 1 million due to the lower level of long-term interest rates. Net income from equity and index-based transactions improved considerably, by € 21 million to € 29 million, as a result of portfolio restructuring from fixed-interest securities to variable-yield securities due to changed market conditions.
Net interest income Net fee and commission income Net trading income Other net operating income
Staff expenses, the largest component in general administrative expenses at 49 per cent, rose 2 per cent, or € 31 million, to € 1,632 million in 2013. This increase mainly resulted from the consolidation of Polbank and from salary increases in Russia. It was partially offset by lower costs and staff reductions – with the largest cutbacks in the Czech Republic and Ukraine.
The average number of staff (full-time equivalents) fell by 1,857 year-on-year to 59,067. The biggest declines occurred in Ukraine (down 1,210), Romania (down 411), Hungary (down 173), and Bulgaria (down 128).
Other administrative expenses also rose 2 per cent, or € 20 million, to € 1,277 million. While reductions occurred in some countries, the consolidation of Polbank and increased IT expenses – especially in Poland and Russia – as well as the intensification of advertising campaigns in Russia and other administrative expense increases in Romania, led to a rise in this item.
The provisioning ratio – i.e., net provisioning for impairment losses versus average loans and advances to customers – increased 0.18 percentage points to 1.39 per cent.
Net income from derivatives and liabilities fell to minus € 257 million versus minus € 127 million the previous year. This was due in part to valuation losses on other derivatives and in part to prior year profits from the partial repurchase of hybrid bonds (€ 113 million). This was countered by improved net income from liabilities designated at fair value. The increased interest rates led to a positive valuation result for own issues. At minus € 126 million, the negative effect of the credit spread valuation was less than the previous year (minus € 145 million). This was attributable to continuing calming of the financial markets, leading to a reduction in RBI's premiums for credit default swaps.
Net income from equity participations amounted to € 29 million, an improvement of € 30 million year-on-year. Gains of € 51 million – primarily from the sale of VISA and MasterCard shares in Russia and Ukraine – were countered by unchanged valuation losses (write-downs on investments) of € 22 million.
In the reporting year, the disposal of seven subsidiaries resulted in a loss of € 6 million, while positive net income of € 12 million was generated due to the exclusion of ten subsidiaries from the prior year scope of consolidation. Three companies were excluded due to immateriality, one company was sold and two companies were excluded as a result of end of operations and liquidation respectively. The companies were primarily active in leasing, investment and securities services.
Income taxes fell € 54 million to € 232 million year-on-year. This decline was due to income of € 45 million arising from a tax allocation with RZB AG and a one-off effect – release of a deferred tax liability of € 12 million – in Romania. The effective tax rate remained unchanged at 28 per cent.
1 Excl. impairment on goodwill and bank levies. 2 Incl. impairment on goodwill and bank levies.
Net fee and commission income rose € 6 million to € 424 million compared to the third quarter of 2013. The most significant increase, at € 7 million, was reported in net income from loan and guarantee business – due to higher volumes in Romania and Russia – followed by a rise in net income of € 4 million from securities business. Net income from other banking services and income from payment transfer business both improved by € 2 million. In contrast, net income from the management of investment and pension funds declined € 5 million, while net income from the sale of own and third party products decreased € 2 million, and net income from foreign currency, notes/coins and precious metals business was down € 1 million.
General administrative expenses amounted to € 910 million in the fourth quarter, up € 97 million from the previous quarter’s level. While staff expenses decreased € 6 million to € 405 million, other administrative expenses were up € 53 million to € 357 million, as a result of the seasonally adjusted increase in advertising, PR and promotional, as well as IT, expenses. Depreciation of fixed assets amounted to € 147 million in the fourth quarter, € 50 million above the previous quarter. This was due to impairment on a software project in the Czech Republic.
Net provisioning for impairment losses rose € 19 million to € 350 million compared to the third quarter, which had already shown a considerably higher level than in previous quarters, at € 330 million. Significant increases were booked in Hungary, the Czech Republic, Bulgaria, and Slovenia. Owing to individual cases among large corporate customers, net provisioning for impairment losses in the Group Corporates segment came to € 50 million, which was, however, significantly below the previous quarter's level of € 105 million.
Net income from derivative financial instruments improved € 42 million to minus € 14 million in the fourth quarter. Net income from own issues measured at fair value posted a gain, with increases in interest rates leading to a positive valuation result. In addition, the valuation on the credit spread for own issues improved € 13 million in the fourth quarter. Valuation gains on other derivatives also increased.
Net income from financial investments totaled minus € 15 million in the fourth quarter of 2013 (third quarter of 2013: plus € 9 million). This was attributable, on the one hand, to higher valuation losses on the fair-value portfolio of securities and, on the other, to lower net proceeds from sales of equity participations and securities from the fair-value portfolio.
Statement of financial position RBI’s total assets declined 4 per cent, or € 5.5 billion, to € 130.6 billion during 2013. Currency effects accounted for around € 3.4 billion of this decline, predominantly due to the US dollar (down 3 per cent), as well as some CEE currencies (Russian rouble: down 12 per cent; Czech koruna: down 9 per cent; and the Ukrainian hryvnia: down 5 per cent). Optimization of liquidity was continued in the reporting year.
Loans and advances to customers (before provisioning) fell 3 per cent, or € 2.7 billion, to € 80.6 billion in 2013. Receivables from repurchase and securities lending transactions declined € 1.4 billion. Credit business with corporate customers decreased € 3.2 billion to € 52.2 billion, especially due to the development in Austria, Russia and Hungary. In contrast, credit business with the public sector was up € 0.3 billion, especially in Hungary. Credit business with retail customers also reported slight increases, while there was a significant increase in retail business in Russia (up € 0.8 billion), whereas credit volumes fell € 0.5 billion in Poland.
Loan loss provisions remained unchanged at € 5.6 billion in 2013, of which € 5.5 billion pertained to loans and advances to customers and € 0.1 billion to loans and advances to banks.
Other liabilities – excluding subordinated capital – declined € 5.2 billion to € 19.6 billion. This decrease included a € 1.8 billion net reduction in debt securities issued to € 11.5 billion. This was attributable to the reduced refinancing requirement, which also resulted in early redemptions. For example, a government-guaranteed bond with a date of maturity in 2014 was offered for early redemption within the framework of a tender, with € 0.6 billion repaid early. Trading derivatives decreased € 3.4 billion, mainly at Group head office, as a result of close-out netting with contract partners.
In June 2013, RBI AG’s Annual General Meeting approved the payment of a dividend of € 1.17 per share for the financial year 2012, which equated to a distribution totaling € 228 million. In addition, a dividend of € 200 million was paid on the participation capital.
Additional own funds were up € 47 million year-on-year at € 3,387 million. This item consists essentially of long-term subordinated capital, of which the largest part pertained to RBI AG at € 2,977 million, and the provision excess of IRB positions of € 221 million.
The tier 1 ratio – based on the credit risk – was 13.7 per cent. Based on total risk, the core tier 1 ratio was 10.7 per cent and the tier 1 ratio 11.2 per cent. The own funds ratio totaled 15.9 per cent.
An internal control system has been in place for many years at RBI and its parent, RZB, which includes directives and instructions on key strategic topics. It includes:  The hierarchical decision-making process for approving Group and company directives, as well as departmental and divisional instructions.
The financial statement data, which are examined by an external auditor, are mostly entered directly in, or automatically transferred to, the IBM Cognos Controller consolidation system by the end of January of the subsequent year. The IT system is kept secure by limiting access rights.
The plausibility of each Group unit’s financial statements is initially checked by the relevant key account manager within the Group Financial Reporting department. Group-wide control activities comprise the analysis and, where necessary, modification of the financial statements which are submitted by the Group units. In this process, the reports submitted by the auditor and the results of meetings with the representatives of the individual companies where the financial statements are discussed, are taken into account. The discussions cover the plausibility of the individual financial statements as well as critical matters pertaining to the Group unit.
The subsequent consolidation steps are then performed using the IBM Cognos Controller consolidation system, including capital consolidation, expense and income consolidation, as well as debt consolidation. Finally, possible intra-Group gains are eliminated. At the end of the consolidation process, the notes to the financial statements are prepared in accordance with IFRS, the BWG and the UGB.
Each year the annual report shows the consolidated results in the form of a complete set of consolidated financial statements. These consolidated financial statements are examined by an external auditor. In addition, the Group management report provides verbal comments on the consolidated results in accordance with the statutory requirements.
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 forecast Group figures at regular intervals. The financial and capital budgeting system, prepared by the Planning & Finance department, includes a three-year Group budget.
Regarding the capital increase, which was carried out at the beginning of 2014, please see the chapter “Events after the balance sheet date".
(3) As of reporting date 31 December 2013 RZB AG held around 78.5 per cent of the capital stock in the company indirectly through its wholly owned subsidiary Raiffeisen International Beteiligungs GmbH and other subsidiaries; the remaining shares of RBI AG were in free float. The Management Board knows of no direct or indirect participations in the capital amounting to 10 per cent or more.
(4) Pursuant to the company’s articles of association, RZB AG is granted the right to delegate up to one third of the Supervisory Board members to be elected by the Annual General Meeting, as long as it holds a participation in the capital stock. Beyond that, there is no special right of control associated with holding shares.
(7) Pursuant to Section 169 of the Austrian Stock Corporation Act (AktG), the Management Board has been authorized, since the Annual General Meeting of 26 June 2013, to increase the capital stock with the approval of the Supervisory Board – in one or more tranches – by up to € 298,145,314.10 through issuing up to 97,752,562 new common bearer shares with voting rights against contributions in cash and/or in kind (including by way of the right of indirect subscription by a bank pursuant to Section 153 (6) of AktG) by 26 July 2018 at the latest and to fix the offering price and terms of the issue with the approval of the Supervisory Board. The Management Board is further authorized to exclude shareholders' subscription rights, with the approval of the Supervisory Board, (i) if the capital increase is carried out by contributions in kind or (ii) if the capital increase is carried out by contributions in cash and the shares issued under the exclusion of subscription rights do not exceed 10 per cent of the company's capital stock (exclusion of subscription rights).
Pursuant to Section 159 (2) 1 of AktG, the capital stock has been increased contingently by up to € 119,258,123.20 through the issue of up to 39,101,024 common bearer shares (contingent capital). The contingent capital increase will only be performed if and when use is made of an irrevocable right of exchange or subscription granted on shares by the company to creditors holding convertible bonds issued on the basis of the resolution of the Annual General Meeting on 26 June 2013 and the Management Board does not decide to issue own shares. Pursuant to Section 174 (2) of AktG, the Annual General Meeting of 26 June 2013 authorized the Management Board to issue, in one or more tranches, convertible bonds in a total nominal amount of up to € 2,000,000,000 which grant conversion or subscription rights for up to 39,101,024 common bearer shares of the company with a pro rata amount of the capital stock of up to € 119,258,123.20, 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 20 June 2012 authorized the Management Board to acquire own shares, under the provisions of Section 65 (1) 8 of AktG, during a period of 30 months from the date of the resolution, up to a maximum of 10 per cent of the company’s respective capital stock and, if deemed appropriate, to retire them. The authorization may be exercised in one or more installments, for one or more purposes – with the exception of securities trading – by the company, by affiliated enterprises or, for their account, by third parties. The acquisition price for repurchasing the shares may be no lower than € 1.00 per share and no higher than 10 per cent above the average unweighted closing price over the 10 trading days prior to exercising this authorization. The Management Board was further authorized to decide, with the approval of the Supervisory Board, on the sale of own shares by means other than the stock exchange or a public tender, to the exclusion of shareholders’ subscription rights. Shareholders ’ subscription rights may only be excluded if the own shares are used to pay for a contribution in kind, to acquire enterprises, businesses or branches of activity of one or several companies in Austria or abroad, or for the purpose of implementing the company’s Share Incentive Program (SIP) for executives and members of the Management Boards of the company and affiliated enterprises. In addition, if convertible bonds are issued in accordance with the Annual General Meeting’s resolution of 10 June 2008, shareholders’ subscription rights may be excluded in order to issue (own) shares to the holders of these convertible bonds who exercise the conversion or subscription rights granted them under the terms of the convertible bonds to shares of the company. This authorization replaces the authorization to buy back and use own shares that was granted in the Annual General Meeting of 8 July 2010. No own shares have been bought since the authorization was issued in June 2012.
The company's 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 Raiffeisen International with RZB AG’s principal business areas to form RBI AG, 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 AG. No further participation rights have been issued to date. Please consult the notes on equity (34) for more information.
In the course of the merger of Raiffeisen International with RZB AG’s principal business areas, as of 10 October 2010, the RZB AG issue “Raiffeisen-Partizipationskapital 2008/2009” in the amount of € 2.5 billion was transferred to RBI AG on unchanged terms.
Pursuant to Section 102a of the Austrian Banking Act (BWG), the company's Annual General Meeting of 8 June 2011 authorized the Management Board of the company, 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 exist, to which the company is a party and which take effect, change, or come to an end upon a change of control in the company as a result of a takeover bid:  The company’s D&O insurance provides that, if RBI AG 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.
 Furthermore, the syndicate agreement concluded by RBI AG in relation to a subsidiary bank with the relevant shareholder will automatically be terminated upon a change of control.
 The company’s refinancing agreements and financing guarantees granted to subsidiaries provide for the right of early termination upon a change of control with negative material ramifications.
Stable basis for refinancing RBI’s refinancing is based on two key elements: firstly, on customer deposits, which at the end of 2013 accounted for € 66.4 billion, or 59 per cent, of refinancing; and secondly, on wholesale funding which totaled € 45.8 billion, or the remaining 41 per cent. The high share of customer deposits creates a stable refinancing basis, making RBI less vulnerable to turbulence on the financial markets.
Issues In 2013, RBI AG's resources for medium to long-term refinancing included, amongst other things, two issuance programs: the "EUR 25,000,000,000 Debt Issuance Program; and the "EUR 20.000.000.000 Emissionsprogramm der Raiffeisen Bank International AG." For reasons of efficiency, these were merged halfway through the year to form one issuance program – the "EUR 25,000,000,000 Debt Issuance Programme". Under this program, bonds can be issued in different currencies and different structures. The total volume of outstanding bonds under this program may not exceed € 25 billion. At the end of 2013, a total of € 13 billion had been drawn on.
In mid-October, RBI issued a subordinated bond for € 500 million with a ten-year maturity and a coupon of 6 per cent to strengthen its capital basis. This was followed shortly afterwards by a senior benchmark bond, again for € 500 million but with a five-year maturity.
In December, shortly after this senior benchmark bond, RBI issued an offer to exchange existing subordinated capital with new subordinated capital (tier 2) with a volume of € 233 million. This offer was accepted by almost half of the investors, thus sustainably strengthening RBI's capital structure in the long term.
For short-term funding, RBI used both the interbank market and its program for short-term issues (commercial papers), “EuroCommercial Paper and Certificate of Deposit Programme“, in 2013. Under this program, RBI issued commercial papers in various currencies, thereby enabling it to refinance itself outside of the interbank market.
In an effort to diversify its funding sources, RBI also actively works on developing additional secured refinancing options where existing assets can be used to generate long-term funding.
Risk management The taking of risks and their transformation are an integral component of the banking business. This makes active risk management as much of a core competence of overall bank management as capital planning and management of the bank’s profitability. In order to effectively recognize, classify and contain risks, RBI utilizes comprehensive risk management and controlling.
In line with RBI's strategic orientation, credit exposure to sovereigns is kept at a low level. It serves primarily to meet the minimum reserve and liquidity management requirements. The credit portfolio in this segment remained largely stable throughout 2013 and totaled € 19,284 million at year-end, up € 363 million year-on-year.
At RBI, dedicated credit portfolio committees determine the credit portfolio strategy for the various customer business areas. Analyses by internal research departments, and portfolio management, form the basis of the definition of the loan portfolios’ lending guidelines and limits. Credit portfolio strategies are regularly adapted to match changing market outlooks.
Although reassurances by the ECB have served to calm the European government bond market, loans and advances to governments, municipalities and banks have remained one of the main focal points of portfolio management in previous quarters. Outstanding exposure was continuously reassessed and – when necessary – limits were reduced. Besides regulatory requirements in the home market, government securities mainly serve to strengthen the liquidity buffer.
Interest rate risk RBI’s net interest income significantly contributes to earnings. To do this significance justice, risk management of interest rate flows is treated as its own entity by a separate unit which is independent from liquidity risk. In particular, the impact of different interest rate scenarios on net interest income is simulated. In close cooperation with the front office, preparations for various developments in the markets are undertaken, so that RBI can react quickly in the case of negative trends. In 2013, the emphasis in this area was on further developing the available analytical and reporting tools as well as on harmonizing these systems within the Group.
Market risk Since January 2010, RBI’s 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. The model was expanded to include a stressed VaR module and refined measurement of option risks.
The daily scope of management includes the trading and banking books based on VaR with a holding period of 1 day and a confidence interval of 99 per cent, as well as sensitivity limits. The market risk position, limit process and 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.
Operational risk Internal risk factors, e.g., unauthorized actions, theft and fraud, clearing and process errors, operational disturbances and system failures, as well as external risk factors, such as damage to physical assets and fraudulent acts, are both controlled and managed within the area of operational risk. These risks are analyzed, managed and controlled on the basis of the Group's own historic loss data collection, as well as the results of risk assessments.
Early warning indicators for operational risks are intended to ensure that possible losses can be recognized and prevented early on. Standardized scenario analyses are used to ascertain the effects of possible events, which have a low probability of occurrence but lead to extensive damage.
Operational risk controlling implements both a central and a decentralized management system. The basic principles and minimum standards are defined by the central operational risk controlling, while the local units are responsible for detailed implementation.
Human resources At RBI, human resources (HR) is responsible for ensuring that personnel resources are deployed throughout the Group in a sustainable manner, thereby harmonizing corporate interests and the needs of employees. As of 31 December 2013, RBI had 57,901 employees (full-time equivalents), 2,183 people, or 4 per cent, fewer than at the end of 2012. The largest absolute reduction (measured on the country’s total number of employees) occurred in Ukraine. The average age of employees remained relatively low at 36 years, making RBI a young and dynamic bank. Moreover, graduates accounted for 72 per cent of employees, indicating a highly skilled workforce. 67 per cent of employees were women.
Talent management and management development During the reporting year 2013, HR also worked intensively on the further development and implementation of talent management across all Group units. Key areas included the further qualification of managers on this issue, ensuring high standards in the identification of talent (especially through calibration meetings), and an improvement in the quality of individual development plans. Alongside existing cross-functional development programs for executives, a Group-wide program was launched within IT aimed at the customized strengthening of executives’ specialist and management expertise.
Professional development Despite intensive efforts to reduce costs, the professional training of employees was still considered of great importance in 2013. Training centered on the key strategic fields of risk management, project management and compliance. Attention was also focused on the Group-wide project “Lean”, a standardized method for the analysis and optimization of processes and procedures which anticipates significant improvements in efficiency. Group-wide training initiatives were launched in the fields of Controlling /Accounting and Procurement/Cost Management.
Compared to 2012, knowledge transfer sharply shifted from on-site training towards e-learning. The transfer of know-how was achieved through cross-functional and, in particular, international rotation/exchange programs, e.g., in the retail area, investment banking, collections and IT. In addition, the “International Young Potentials” program, to encourage high-potential employees from network banks by providing them with targeted trainee assignments in other network units, was launched for the third time in 2013.
Local initiatives in the network banks The network banks also focused on cost reductions in 2013. Consequently, many network banks adopted measures to reduce personnel costs, for example by optimizing structures for a resulting reduction in management levels. A large number of network banks also started optimization processes in accordance with the “Lean” method.
As before, a significant portion of the HR capacity in 2013 was channeled towards implementing special regulations for compensation systems in the banking sector. In the reporting period, all companies associated with RBI were assessed using risk criteria in order to determine to what extent remuneration rules apply, and to identify the positions subject to the restrictive remuneration provisions of the Austrian Banking Act (BWG).
Focus on health Since the health of employees plays a major role for RBI, the following section outlines a selection of health-related measures, which reflect the different needs in the various countries. In Austria, for example, RBI supports various sporting activities. An annual “health week” is also organized in which employees can undergo a full preventive health check-up as well as have their fitness status professionally assessed in the “UNIQA VitalTruck”. Sports-related offers and specialist talks complete the health week. Cooperation is also maintained with an external consulting company which assists employees and their families with both professional issues (dealing with stress, mediation, etc.) as well as personal matters (family consulting, bereavement support, etc.). RBI also cooperates with an institute specialized in burnout and stress management, where employees can (if required) undergo five therapy units for which the majority of the costs are borne by the company.
Around 1,500 employees within Raiffeisen Bank Aval are insured under the “Health Insurance Program”, the costs of which are assumed by the Bank. In the event of illness, employees who do not participate in the program are entitled to a subsidy for medical treatment for themselves, or for family members. In Russia, all Raiffeisenbank employees have access to free health insurance that includes extensive medical services at the best hospitals. In 2013, the initiative “Health and Productivity at Work” was launched within the Croatian Raiffeisenbank Austria, aimed at reducing work overload while at the same time increasing productivity. For a number of years, Priorbank in Belarus has organized a weekend for its employees each summer with various sports and leisure activities in which teams from the Russian and Ukrainian network banks also participate. A similar initiative, albeit focusing on a work-life balance, was launched by Raiffeisen Bank in Romania during the reporting period.
Positive growth trends, from the second half of 2013, should continue to strengthen in the Central Europe region in 2014. The economic turnaround seems to have taken hold, and improved growth in the eurozone should positively support export momentum. Domestic demand is also expected to pick up, which would further underpin the sustainability of the economic recovery. Following GDP growth of 0.8 per cent in 2013, the forecast for 2014 is currently at 2.5 per cent. Poland is likely to remain the top performing country, with GDP growth of 3.1 per cent, while the Czech Republic, whose GDP shrank 0.9 per cent in 2013, could well achieve 2.3 per cent growth in 2014, marking the strongest improvement. Slovenia is the only economy that is still expected to slightly contract. In terms of monetary policy, the reins will likely continue to be kept loose, with restrictive action not expected until the second half of 2014, at the earliest. The consolidation of government budgets is well advanced in Central Europe. The Czech Republic, Hungary and Slovakia, should be able to keep their budget deficits below the Maastricht-defined ceiling of 3 per cent of GDP. Poland may slightly exceed this level and Slovenia even significantly so. Overall, Central Europe is poised to develop from the weakest to the most dynamic CEE region in 2014.
The Southeastern Europe region passed through the economic low sooner than Central Europe. The significant upswing, already experienced in 2013, reduced the potential for further economic recovery in the region in 2014. Moreover, owing to its weaker export positioning, Southeastern Europe stands to benefit less from the recovery in the eurozone. Aggregate economic growth in the region is projected at 1.7 per cent for 2014, slightly below the previous year, albeit with strong diversity among individual countries. Thus, Romania should continue its growth trajectory with an increase of 2.3 per cent, as strong export growth is expected to spread to domestic demand, as in Central Europe. In contrast, Croatia continues to grapple with a five-year-long recession and will at best transition to a period of stagnation in 2014. In Serbia, much-needed reforms and austerity measures may even ultimately lead to a weakening of the economy. In addition, Croatia and Serbia have the largest budget deficits in Southeastern Europe, whereas the Romanian budget deficit is unlikely to exceed 2.5 per cent of GDP.
Outlook for RBI We aim to slightly increase loans and advances to customers in 2014.
We aim for a return on equity before tax of approximately 15 per cent in the medium term.
Organizational changes On 24 May 2013, RBI's longstanding CEO, Herbert Stepic, announced he was offering to resign from his position due to personal reasons. He left RBI's Management Board on 7 June 2013. On the same date, the former Deputy CEO, Karl Sevelda, who until then held Management Board responsibility for global corporate customer business, was appointed as RBI's new CEO. Chief Risk Officer, Johann Strobl, was appointed as RBI's new Deputy CEO.
At a subscription and offer price of € 28.50 per new share, gross proceeds from the deal amounted to roughly € 2.78 billion. As a result of the capital increase, RBI’s free float increased significantly to roughly 39.3 per cent as of the reporting date on 11 February 2014. RZB remains the indirect majority shareholder with some 60.7 per cent of the shares. RBI intends to use the proceeds from the capital increase to redeem participation capital in the amount of € 2.5 billion.
During the first few weeks of 2014, the political and economic situation in Ukraine deteriorated considerably. In combination with the tensions in the region, this turbulence led to an increase in Ukraine’s budgetary deficit, a reduction in the Ukrainian national bank’s currency reserves and a rating downgrade for Ukrainian government bonds. Up to the time of completion of RBI’s annual financial statements on March 11, 2014, the Ukrainian hryvnia devalued 11 per cent against the US dollar. The national bank subsequently implemented tighter currency controls and changed its exchange rate policy. The impacts on Raiffeisen Bank Aval’s financial and asset position could not yet be assessed at the editorial deadline of this report. However, devaluation of the hryvnia resulted in negative exchange differences in RBI’s equity.
The tensions in the region also had an impact on Russia, where uncertainties resulted in double-digit slides on the Moscow stock exchange and devaluation of the Russian rouble against the US dollar of around 10 per cent. This devaluation resulted in negative exchange differences in RBI’s equity.
Net provisioning for impairment losses (403) (517) (22.1)% (143) (91) 57.1%
Net trading income in the segment improved € 20 million year-on-year to € 28 million. Net income from interest-based transactions rose € 29 million to € 39 million year-on-year. This was attributable to the higher net income from interest-based derivatives in Hungary and Poland. In contrast, net income from currency-based transactions posted a decline from minus € 3 million to minus € 12 million year-on-year. The reduction was particularly significant in Poland, where one-off gains relating to transactions at Polbank, prior to its first-time consolidation in May 2012, led to a positive one-off effect last year. At the same time, Hungary recorded a substantial increase owing to gains from currency swaps.
General administrative expenses in the segment increased 6 per cent to € 1,098 million year-on-year. This development is largely attributable to depreciation on software in the Czech Republic, as well as the consolidation of Polbank and its continuing operational merger with the structures and systems of Raiffeisen Bank Polska S.A. In addition, staff expenses increased in Slovakia due to a change in statutory social security costs. This was set against reductions in the Czech Republic, Hungary, and Slovenia, resulting from cost saving programs. Other administrative expenses showed a slight € 1 million increase to € 436 million, primarily due to Polbank consolidation. In contrast, there were reductions in Hungary, the Czech Republic, Slovakia and Slovenia. The € 49 million year-on-year rise in depreciation was largely attributable to the € 57 million impairment of a core banking software system in the Czech Republic. The segment’s number of business outlets decreased by 51 to 802 year-on-year, largely as a result of the optimization of local presence in Poland. The cost/income ratio rose 0.8 percentage points to 66.3 per cent.
The share of non-bank non-performing loans in the loan portfolio in the Central Europe segment rose 0.7 percentage points to 12.2 per cent, while the NPL coverage ratio improved slightly to 64.3 per cent.
Net income from financial investments fell by € 43 million overall to € 9 million, with the valuation of the fair-value portfolio of securities declining € 32 million to € 17 million. A significantly weaker valuation of municipal bonds in Hungary resulted in a decline of € 24 million. Net proceeds from sales of equity participations remained below € 1 million during the reporting period, following prior year net proceeds of € 9 million primarily as a result of the sale of VISA shares in Croatia, Serbia, as well as Bosnia and Herzegovina.
The segment posted net income from derivatives of minus € 4 million (2012: plus € 16 million) for the reporting period, mainly due to valuation losses from various hedging transactions, carried out to adjust the currency and interest-rate structure in the Czech Republic.
Income taxes for the segment were down 14 per cent to € 58 million. The tax rate remained extraordinarily high at 89 per cent. As in the previous year, the high tax rate was the result of the situation in Hungary, where incurred losses could not be deducted for tax purposes through the recognition of corresponding tax loss carry-forwards. Similarly, tax loss carry-forwards relating to the Polbank consolidation could not be fully utilized due to tax restrictions.
Loans and advances to customers 5,983 6,380 (6.2)% 5,983 6,289 (4.9)%
Return on equity before tax 7.6% 16.3% (8.7) PP – 9.4% –
Return on equity after tax 6.5% 12.8% (6.4) PP – 6.9% –
hereof foreign currency % 60.5% 63.3% (2.8) PP 60.5% 61.7% (1.1) PP
Net fee and commission income 161 154 4.2% 38 42 (9.7)%
Net provisioning for impairment losses (86) (127) (32.2)% (12) (30) (59.6)%
Return on equity before tax 3.7% 0.6% 3.2 PP 2.5% 3.5% (1.0) PP
Return on equity after tax 2.8% 0.1% 2.7 PP 1.8% 2.7% (0.9) PP
Employees as of reporting date 5,985 6,656 (10.1)% 5,985 6,124 (2.3)%
Net provisioning for impairment losses (48) (41) 18.7% (19) (11) 70.2%
hereof foreign currency % 0.6% 0.9% (0.2) PP 0.6% 0.6% 0.0 PP
Employees as of reporting date 3,853 3,827 0.7% 3,853 3,844 0.2%
Return on equity after tax – – – – – –
Southeastern Europe In Southeastern Europe, profit before tax fell 8 per cent to € 277 million year-on-year as a result of higher net provisioning for impairment losses. Return on equity before tax declined 1.0 percentage point to 13.7 per cent.
Return on equity before tax 13.7% 14.7% (1.0) PP 6.2% 17.9% (11.7) PP
Net trading income for the Southeastern Europe segment was virtually unchanged year-on-year at € 53 million. A decline in income from interest-based transactions was largely offset by higher net income from currency-based transactions. The reduction in income from interest-based transactions was mainly the result of business performance in Croatia, where lower spreads led to higher valuation gains from bonds in the trading portfolio in the previous year. During the reporting period, changes in the market environment caused RBI to pursue a more defensive strategy. The rise in net income from currency-based transactions, in 2013, was largely the result of positive market valuations of forward exchange contracts following currency appreciation in Romania and Serbia.
Other net operating income fell € 17 million to € 22 million year-on-year. Allocations to other provisions and losses on the sale of tangible and intangible fixed assets in some of the region’s countries weighed on the result. Income from operating leasing business also decreased – above all in Croatia.
General administrative expenses fell 1 per cent to € 698 million year-on-year. Staff expenses declined € 2 million to € 302 million as a result of lower bonus payments. The € 5 million rise in other administrative expenses to € 309 million was primarily due to higher expenses for deposit insurance fees, increased advertising, PR and promotional, as well as higher IT expenses. Depreciation decreased 7 per cent, or € 7 million, to € 87 million, mainly as a result of lower depreciation on tangible fixed assets in Croatia and Romania, as well as leased assets in Croatia. The cost/income ratio improved 0.4 percentage points to 54.3 per cent.
Net provisioning for impairment losses in the Southeastern Europe segment increased 13 per cent, or € 38 million, to € 326 million year-on-year. Net allocations for individual loan loss provisions increased 10 per cent, or € 29 million, to € 335 million. All countries except for Bosnia and Herzegovina contributed to the rise. The largest increases were reported in Bulgaria and Croatia. In Bulgaria, this was due to higher direct write-downs of loans to major customers, while in Croatia higher provisions were required in the leasing business and for loans to private customers (home and car loans, overdrafts). In the case of portfolio-based loan loss provisions, there were net releases of € 7 million in the reporting year – predominantly in Bulgaria, Croatia and Serbia. However, they were € 9 million lower than in the previous year. The share of non-bank non-performing loans in the segment’s loan portfolio increased 1.4 percentage points to 13.9 per cent, while the NPL coverage ratio improved 0.9 percentage points to 62.9 per cent.
Net income from financial investments fell € 9 million to € 9 million. On the one hand, net proceeds from the sale of equity participations declined € 7 million after prior year gains had been reported from the sale of VISA shares in Croatia, Serbia, as well as Bosnia and Herzegovina. On the other hand, securities valued at fair value through profit and loss declined € 2 million to € 8 million. The valuation result contained therein fell from plus € 3 million in the previous year to minus € 3 million in the reporting year, as a result of a changed statement of interest in Serbia. Net proceeds were up € 4 million to € 11 million, mostly as a result of the sale of government bonds in Romania.
Net provisioning for impairment losses (29) (20) 43.7% (11) (7) 67.2%
Loans and advances to customers 916 974 (6.0)% 916 899 1.9%
Return on equity after tax 16.6% 20.8% (4.1) PP 3.4% 19.2% (15.8) PP
Net provisioning for impairment losses (15) (21) (28.2)% (8) (1) >500.0%
Loans and advances to customers 1,223 1,259 (2.9)% 1,223 1,258 (2.8)%
hereof foreign currency % 73.4% 73.5% (0.1) PP 73.4% 74.6% (1.2) PP
Return on equity before tax 12.0% 9.6% 2.4 PP – 18.4% –
Return on equity after tax – 2.1% – – – –
Net fee and commission income 56 57 (1.3)% 13 17 (20.4)%
Loans and advances to customers 3,436 3,525 (2.5)% 3,436 3,468 (0.9)%
Return on equity before tax 19.6% 16.8% 2.9 PP 15.4% 21.4% (6.1) PP
Employees as of reporting date 699 688 1.6% 699 701 (0.3)%
Net provisioning for impairment losses (106) (99) 6.8% (31) (28) 10.7%
Loans and advances to customers 4,266 4,226 1.0% 4,266 4,396 (3.0)%
Return on equity before tax 19.2% 20.5% (1.3) PP 15.8% 20.5% (4.7) PP
Return on equity after tax 18.4% 17.5% 0.9 PP 13.4% 17.3% (3.9) PP
Net fee and commission income 36 35 1.4% 9 9 (2.4)%
Net provisioning for impairment losses (23) (15) 47.7% (8) (5) 66.5%
Loans and advances to customers 1,105 1,204 (8.2)% 1,105 1,167 (5.3)%
Return on equity before tax 38.7% 39.2% (0.5) PP 27.0% 39.7% (12.7) PP
Net fee and commission income rose 8 per cent, or € 23 million, year-on-year to € 308 million. Income from loan and guarantee business increased € 17 million to € 93 million, due mainly to higher volumes in new retail business. Income from payment transfer business was up € 12 million to € 113 million, driven primarily by volume-related higher revenues in the credit card business. In contrast, net income from the sale of own and third party products declined € 4 million, as did net income from the management of investment and pension funds.
The segment’s general administrative expenses increased 8 per cent, or € 42 million, to € 552 million. This was mainly attributable to a rise in staff expenses (up € 16 million) as a result of salary increases at year-end 2012. Other administrative expenses increased € 14 million due to higher advertising and IT expenses. However, savings were achieved in communications, legal, advisory, and consulting expenses. Depreciation expenses were up € 12 million, attributable to impairments in respect of branch buildings. The number of business outlets rose by 9 to 195 year-on-year. The cost/income ratio increased 0.1 percentage points to 46.6 per cent.
The segment’s income taxes rose 16 per cent to € 146 million, as a result of higher non-deductible expenses, while the tax rate increased 3 percentage points to 24 per cent.
The table below provides an overview of the country results for Russia. Any discrepancies with regard to values specified for the Russia segment are the result of equity being allocated differently: The figures in the country overview are based on equity reported on the statement of financial position, while at the segment level equity is based on the actual equity used.
Net fee and commission income 308 285 8.2% 77 76 1.8%
Loans and advances to customers 9,967 9,669 3.1% 9,967 10,173 (2.0)%
hereof foreign currency % 33.5% 44.2% (10.7) PP 33.5% 34.3% (0.9) PP
Return on equity after tax 24.2% 25.2% (1.1) PP 18.0% 25.0% (7.0) PP
Employees as of reporting date 8,542 8,155 4.7% 8,542 8,572 (0.3)%
Net provisioning for impairment losses (108) (89) 21.3% (14) (37) (63.4)%
General administrative expenses declined 7 per cent year-on-year to € 358 million. Cost savings were achieved in Ukraine due to a slight depreciation of the US dollar and the Ukrainian hryvna. Staff expenses fell € 6 million to € 148 million as a result of staff reductions. Other administrative expenses declined € 3 million to € 89 million and involved almost all expenses categories. The biggest decrease of € 23 million related to depreciation of intangible and tangible fixed assets, and was mainly the result of higher depreciation charges on software in Ukraine in the previous year. In Belarus, in contrast, general administrative expenses increased € 7 million to € 74 million due to higher inflation-index-based staff expenses, as well as salary increases agreed in the previous year. The cost/income ratio improved 7.7 percentage points to 56.0 per cent.
Net fee and commission income 62 60 4.0% 15 16 (2.1)%
Net provisioning for impairment losses 13 18 (30.8)% 13 0 –
Loans and advances to customers 910 869 4.8% 910 1,013 (10.1)%
hereof foreign currency % 72.4% 70.9% 1.5 PP 72.4% 70.6% 1.8 PP
Return on equity before tax 44.7% 25.8% 19.0 PP 64.7% 46.3% 18.3 PP
Return on equity after tax 34.3% 14.4% 19.9 PP 47.6% 35.9% 11.7 PP
Employees as of reporting date 2,216 2,190 1.2% 2,216 2,228 (0.5)%
Net fee and commission income 148 150 (1.1)% 39 39 0.0%
Loans and advances to customers 3,599 3,715 (3.1)% 3,599 3,619 (0.6)%
Return on equity before tax 16.1% 7.5% 8.6 PP 17.9% 14.7% 3.2 PP
Return on equity after tax 12.8% 4.1% 8.6 PP 14.6% 11.4% 3.2 PP
Group Corporates Profit before tax in the Group Corporates segment decreased 46 per cent year-on-year to € 174 million. This was primarily due to the higher net provisioning for impairment losses on loans and advances to large corporate customers. The return on equity before tax declined 8.4 percentage points to 9.6 per cent.
Net provisioning for impairment losses (258) (113) 128.2% (50) (105) (51.9)%
Return on equity before tax 9.6% 18.0% (8.4) PP 12.6% – –
The segment’s net trading income declined from plus € 16 million in the previous year to minus € 16 million in the reporting period. This was mainly attributable to the valuation loss from a swap transaction in Group head office in the fourth quarter. In addition, a decline in net income from derivatives was reported within interest rate and currency hedges following weaker demand, as well as reduced income from structured investment and finance products due to lower margins and spreads.
The segment’s other net operating income fell € 11 million and was thus balanced. The main reason for this was improved net income in the previous year due to the release of provisions in connection with a legal dispute at the Group unit in Malta.
The segment’s general administrative expenses increased € 14 million, or 8 per cent, year-on-year to € 191 million – predominantly as a result of higher overhead costs that were allocated to the segment. The segment consisted of 9 business outlets at the end of the reporting period. The cost/income ratio rose 0.9 percentage points to 30.7 per cent.
The segment’s other results decreased year-on-year from € 14 million to € 1 million. This decline was primarily due to a € 14 million lower valuation result of securities. In the previous year a positive result of € 15 million was reported due to a one-off effect resulting from the sale of shares.
In line with the decline in profits, income taxes halved year-on-year to € 36 million, and the tax rate declined 1 percentage point to 21 per cent.
Group Markets Profit before tax in the Group Markets segment fell 52 per cent year-on-year to € 125 million. The main reason for the decline was lower net income from financial investments due to a positive one-off effect in the previous year. The segment’s return on equity before tax thus decreased 5.7 percentage points to 18.9 per cent.
The segment’s net interest income fell 7 per cent year-on-year to € 148 million. In the second half of the year, the bank started with the set-up of a high-quality securities portfolio. As a result of the year-on-year decline in holdings of securities, the net interest margin decreased 11 basis points to 0.74 per cent. In contrast, the segment’s total assets remained relatively constant at € 20.3 billion. Credit risk-weighted assets increased 18 per cent to € 3.9 billion, mainly due to the renewed increase in securities exposures.
In contrast, net fee and commission income was up 15 per cent to € 121 million year-on-year. In particular, the Financial Institutions profit center – benefiting from the improved situation in the financial markets – significantly raised income from cash management, custody and fund services. Whereas, income generated from the securities business in the private banking and asset management business declined.
The segment’s net trading income increased 7 per cent to € 84 million. This was mainly the result of volume-related higher interest income and valuation results from fixed income securities.
General administrative expenses of the Group Markets segment fell 1 per cent to € 253 million year-on-year. One reason was the declining business volume which led to lower cost allocation at Group head office to this segment. The cost/income ratio improved 4.6 percentage points to 67.3 per cent.
Corporate Center The Corporate Center segment’s loss before tax, for the reporting period, reduced two-thirds to € 130 million. This was possible due to significantly improved net interest and dividend income, despite high valuation losses from derivatives.
Net provisioning for impairment losses 6 (1) – 11 (6) –
The segment’s net interest income increased 33 per cent to € 665 million year-on-year. The improvement was mainly due to higher intra-Group dividend income. Higher income from optimized liquidity management and lower refinancing costs also had a positive impact on net interest income. In contrast, interest expenses for the subordinated capital of RBI AG was higher, at € 60 million (2012: € 38 million), owing to higher spreads for new issues. The segment’s total assets declined 27 per cent to € 34.7 billion compared to the same period last year, due especially to the optimization of the liquidity position. Credit risk-weighted assets contracted 18 per cent to € 15.6 billion.
Net fee and commission income improved 4 per cent to minus € 40 million year-on-year, and was primarily possible due to higher fee and commission income from intra-Group securitization transactions and the acceptance of guarantees.
The segment's net trading income increased € 46 million to € 10 million year-on-year. This was mainly due to significantly lower valuation losses on various foreign currencies and interest rate-based instruments held for management purposes.
General administrative expenses totaled € 329 million and thus remained on the previous year’s level.
Net income from derivatives decreased € 132 million to minus € 265 million. On the one hand, the decline in net income was due to valuation losses on other derivatives; on the other, the partial repurchase of hybrid bonds resulted in a gain (€ 113 million) in the same period in the previous year. This contrasted with an improvement in net income from liabilities designated at fair value, with increases in interest rates leading to a positive valuation result on own issues. In addition, the credit spread resulted in a lesser negative effect on valuation (minus € 126 million) compared to the same period in the previous year (minus € 145 million).
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 Risk report 176 Auditor’s report 224 Statement of all legal representatives 226
Earnings per share1 [12] 1.83 2.72 (0.89) 1 Adaption of previous year figures due to the retrospective application of IAS 19R.
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 2013, the number of common shares outstanding was 194,948 thousand compared with 194,859 thousand in the previous year.
There were no conversion rights or options outstanding, so undiluted earnings per share are equal to diluted earnings per share.
Total Group equity Non-controlling interests € 000 2013 2012 2013 2012 2013 2012
Deferred taxes on items which are not reclassified to profit and loss (958) 1,437 (958) 1,437 0 0
Items that may be reclassified subsequently to profit or loss (468,461) 90,626 (452,781) 69,361 (15,680) 21,265 hereof unrealized net gains (losses) of the period (460,210) 167,401 (439,938) 150,303 (20,272) 17,097 hereof net gains (losses) reclassified to income statement 0 0 0 0 0 0
Net gains (losses) on financial assets available-for-sale (34,552) (147,375) (35,324) (147,375) 772 0 hereof unrealized net gains (losses) of the period 7,943 15,670 6,429 15,670 1,514 0 hereof net gains (losses) reclassified to income statement (42,494) (163,045) (41,752) (163,045) (742) 0
Deferred taxes on income and expenses directly recognized in equity 6,626 37,620 6,626 37,620 0 0 hereof unrealized net gains (losses) of the period 1,076 (3,142) 1,076 (3,142) 0 0 hereof net gains (losses) reclassified to income statement 5,550 40,761 5,550 40,761 0 0
Sundry income and expenses directly recognized in equity 0 0 0 0 0 0
Since the reporting year, cash flow hedging has been applied in two Group units to hedge the changes in interest rate risk.
Net gains (losses) reclassified to income statement 0 0 0 0 0 (163,045) 40,761
Net gains (losses) reclassified to income statement 0 0 0 0 0 (41,752) 5,550
Net income from disposal of group assets (6,487) 19 6 (3)
Net income from disposal of group assets (65) (1,514) 27 13,690
Loans and advances to banks [15, 35, 53] 22,243,221 22,323,301 (0.4)%
Provisions for liabilities and charges [29, 35, 53] 733,116 720,996 1.7%
Own shares/share incentive program 0 0 1,057 0 0 0 1,057 1 Adaption of previous year figures due to retrospective application of IAS 19R.
Other changes in equity are mainly due to the purchase of a non-controlling interest of 25 per cent in Raiffeisenbank Austria d.d., Zagreb. In the previous year, other changes in equity resulted largely from purchases of non-controlling interests, namely of a share of 24 per cent in Raiffeisenbank a.s., Prague, a share of 13 per cent in Tatra banka a.s., Bratislava, a share of 30 per cent in Raiffeisen Bank Zrt., Budapest, a share of 12 per cent in Raiffeisen Banka d.d., Maribor and a share of 3 per cent in Raiffeisen Bank d.d. Bosna I Hercegovina, Sarajevo.
Non-cash positions in profit and transition to net cash from operating activities: Write-downs/write-ups of tangible fixed assets and financial investments 484,022 453,334
Net provisioning for liabilities and charges and impairment losses 1,449,536 1,111,417
Proceeds from sale of: Tangible and intangible fixed assets 64,193 88,240
€ 000 2013 2012 Cash and cash equivalents at the end of previous period 6,556,723 11,401,747
Cash and cash equivalents at the end of period 6,674,226 6,556,723
The Southeastern Europe segment comprises Albania, Bosnia and Herzegovina, Bulgaria, Croatia, Kosovo, Romania and Serbia. In these countries, RBI is represented by banks, leasing companies, as well as, in some markets, by separate capital management and asset management companies and pension funds. In Albania and Bulgaria, financial services are offered across all business divisions. In Kosovo, RBI also offers a comprehensive product range. In Bosnia and Herzegovina the emphasis is on small and medium-sized enterprises, while also boasting a wide range of products for retail customers. In Croatia the focus is on large and medium-sized corporate customers and also on retail customers (pension funds business). In Romania a broad range of financial services is offered via its tightly knit branch network. Moreover, the Moldovan corporate customer market is also served from Romania. In Serbia, the market is serviced by a universal bank and a leasing company.
This segment comprises Belarus, Kazakhstan and Ukraine. In Belarus, RBI is represented by a bank and a leasing company, whilst in Kazakhstan it is represented in the leasing business. In Ukraine RBI is represented by a bank, a leasing and a card-processing company and provides a full range of financial services and products via a tightly knit branch network.
The Group Corporates segment covers business with Austrian and international – notably Western European – corporate customers of the RBI AG, which are managed from Vienna and grouped within the Corporate Customers profit center. These customers include Austria's largest companies and multinational customers. The segment also comprises the large corporate business with Central and Eastern European customers as well multinationals with CEE-business, included in the Network Corporate Customers & Support profit center. The named profit centers also include net income from structured trade financing for commodity traders, documentary business, project financing and a range of cofinancing solutions. Corporate customer business in further countries is operated via the Singapore, China and Malaysia branches, which are also included in this segment. Financing companies in USA and Hong Kong, which focus on niche market customers with selected products, are also allocated to this segment.
Provisioning ratio (average loans and advances to customers) 0.47% – – 1.39%
Profit/Loss after deduction of non-controlling interests (12,774) 251,224 467,833 54,551 247,439
Business outlets 3 1 – 3,106 1 Excl. impairment of goodwill and bank levies. 2 Adaptation of previous year's values due to retrospective application of IAS 19R. 3 Incl. impairment of goodwill and bank levies.
The consolidated financial statements are based on the going concern principle. A financial asset is recognized when it is probable that the future economic benefits will flow to the company and the acquisition or conversion costs or another value can be reliably measured. A financial liability is recognized when it is probable that an outflow of resources embodying economic benefits will result from the settlement of the obligation and the amount at which the settlement will take place can be measured reliably. Revenue is recognized if the conditions of IAS 18 are met and if it is probable that the economic benefits will flow to the group and the amount of revenue can be measured reliably.
IFRS 1 (Government loans; entry into force on January 1, 2013)
IAS 1 (Presentation of items of other comprehensive income; entry into force on July 1, 2012)
As a result of changes to IAS 1, a new terminology was introduced for the income statement previously referred to as the “statement of comprehensive income”. The latter term has been replaced by “statement of profit and loss and other comprehensive income”. However, this is not mandatory. The new terminology has not been adopted.
Under IAS 1 as amended, a reporting entity may present the statement of profit and loss and other comprehensive income in one income statement or in two statements, one directly followed by the other. Nevertheless, the changes to IAS 1 require that the items of other comprehensive income must be grouped into two categories: (a) Items that will not be reclassified subsequently to profit and loss, and
(b) Items that will be classified subsequently to profit and loss if specific conditions are met.
The impact of the application of IAS 19R on earnings per share is € 0.01 per share (2012: € 0.02 per share).
IFRIC 20 (Stripping costs in the production phase of a surface mine; entry into force on January 1, 2013)
IFRIC 20 applies to stripping costs that are incurred in surface mining activity during the production phase of the mine. According to the interpretation, the costs of removal (stripping activity), which improves access to ore, are recognized as non-current assets if certain criteria are met. By contrast, current removal costs must be recognized in accordance with IAS 2. The stripping activity asset is accounted for as an addition to, or as an enhancement of, an existing asset and classified as tangible or intangible according to the nature of the asset whose benefit is enhanced by the stripping activity. These amendments have no impact on RBI’s consolidated financial statements.
Annual Improvements to IFRS – 2009–2011 cycle (entry into force on January 1, 2013)
New and revised standards and interpretations that are not yet applicable (already endorsed by the EU)
The revised IAS 27 will only be relevant for separate financial statements. The application of the revised version of IAS 27 will have no impact on the consolidated financial statements.
Joint ventures are added to the scope of the revised IAS 28, since, under IFRS 11, joint ventures may only be included in the consolidated financial statements according to the equity method. The revised version of IAS 28 is not expected to have any impact on the consolidated financial statements.
IFRS 12 is a disclosure standard regarding statements in the notes and is applicable to entities that have interests in subsidiaries, joint arrangements (joint ventures or joint operations), associates and/or unconsolidated structured entities. In general, the disclosure requirements in IFRS 12 are far more extensive than those in the current standards. We assume that the future application of IFRS 12 will have no impact on the consolidated financial statements.
These amendments provide an exception to the consolidation requirements of subsidiaries in IFRS 10 (Consolidated Financial Statements). This applies if the parent company meets the definition of an “investment company“ (for example, certain mutual funds). These entities measure their investments in particular subsidiaries at fair value through profit or loss in accordance with IFRS 9 (Financial Instruments) or IAS 39 (Financial Instruments: Recognition and Measurement). These amendments will have no impact on the consolidated financial statements.
The published version of IFRS 9 no longer includes an effective date, as the completion of the outstanding project phases is still pending. In February 2014, the IASB decided that the mandatory date of the initial application of IFRS 9 will be January 1, 2018.
The Annual Improvements to IFRS 2011–2013 cycle include numerous amendments to various IFRS. The amendments are effective for annual periods beginning on or after January 1, 2014. These amendments will have no impact on RBI’s consolidated financial statements.
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 requires judgments and assumptions to be made by 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 section on business combinations. Additionally, the carrying amounts of goodwill are presented in note (22) intangible assets.
Special purpose entities (SPE) which are controlled by the Group from an economic point of view, are fully consolidated according to SIC-12. To determine whether a special purpose entity is controlled from an economic perspective, a number of factors are to be taken into consideration. These include an investigation into whether the activities carried out by the SPE for the benefit of the Group are in accordance with its specific business needs so that it can take advantage of the SPE’s activities, whether the Group has the decision-making powers to obtain the majority of the benefits from the SPE, whether in fact the Group receives the majority of the benefits of the activities of the SPE, or whether the Group retains the majority of the assets associated with the residual or ownership risks in order to benefit from its activities.
All financial statements of fully consolidated companies prepared in another functional currency than Euro were translated into the reporting currency Euro 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) are 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 are offset against equity (retained earnings).
In the case of four subsidiaries not headquartered in the euro-area, the US-Dollar was the reporting currency for measurement purposes given the economic substance of the underlying transactions, as both the transactions and the refinancing were undertaken in US-Dollars.
The following exchange rates were used for currency translation: 2013 2012 As of Average As of Average Rates in units per € 31/12 1/1 – 31/12 31/12 1/1 – 31/12
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 2013, as well as the financial statements of subsequent periods.
Of the 143 entities in the Group, 36 are domiciled in Austria (2012: 32) and 107 abroad (2012: 105). They comprise 21 banks, 62 financial institutions, 27 companies rendering bank-related ancillary services, 13 financial holding companies and 20 other companies. Because of their minor importance in giving a view of the Group’s assets, financial and earnings position 252 subsidiaries were not included in the consolidated financial statements (2012: 220). They are recognized at cost under financial investments. The total assets of the companies not included came to less than 1 per cent of the Group’s aggregated total assets. A list of fully consolidated companies, companies valued at equity and other equity participations may be found under note (57) List of fully consolidated companies and under note (58) List of equity particpations.
Floreasca City Center Verwaltung Kft., Budapest (HU) 100.0% 1/1 Start of operations
CJSC Mortgage Agent Raiffeisen 01, Moscow (RU) 0.0% 1/6 Start of operations
As of 1 January 2013, Central Eastern European Finance Agency B.V., Amsterdam (NL), was merged into RI Eastern European Finance B.V., Amsterdam (NL).
Net income from disposal of group assets (4,686) (1,814) 35 (6,465)
JULIUS: Julius Baer Multiflex SICAV-SIF Verto Recovery Fund, Luxembourg (LU) POLDYS: EFG Poldystrybucja SP. Z.o.o., Warsaw (PL)
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. As option price formulas Black-Scholes 1972, Black 1976 or Garman-Kohlhagen are applied depending on the kind of option. The measurement for complex options is based on a binominal tree model and Monte-Carlo simulations.
In 2013, as in 2012, observable market prices were used for the valuation of liabilities of subordinated emissions measured at fair value. The financial liabilities are mostly structured bonds. The fair value of these financial liabilities is calculated by discounting the contractual cash flows with a credit-risk-adjusted yield curve, which reflects the level at which the Group could issue similar financial instruments at the reporting date. The market risk parameters are evaluated according to similar financial instruments that are held as financial assets. Valuation results for liabilities that are designated as a financial instrument at fair value are recognized in income from derivative financial instruments and liabilities.
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.
For equity instruments impairment exists, among other things, if the fair value is either significantly or for a prolonged period of time below cost. In the Group, equity instruments classified as available-for-sale are written-off when the fair value over the last six months before the reporting date was consistently more than 20 per cent below carrying value, or in the last twelve months, on average, more than 10 per cent below carrying value. In addition to these quantitative indications (trigger events), qualitative indications from IAS 39.59 are considered. It is not permitted to include the appreciation in value in the income statement for
The Group derecognizes a financial liability if the obligations of the Group have been paid, expired or revoked. The net income or expense from the repurchase of own liabilities is shown in note (6) Net income from derivatives and liabilities. The repurchase of own bonds also falls under derecognition of financial liabilities. Differences on repurchase between the carrying value of the liability (including premiums and discounts) and the purchase price are reported through profit and loss in net income from derivatives and liabilities.
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 in (20) Financial investments.
In the case of identity of borrower and lender, offsetting of loans and liabilities with matching maturities and currencies occurs only if a legal right, by contract or otherwise, exists and offsetting is in line with the actually expected course of the business. Information on offsetting of financial instruments is provided in (41) Offsetting financial assets and liabilities.
Derivatives, which are used for hedging against market risk (excluding trading assets/liabilities) for a non-homogeneous portfolio, do not meet the conditions for IAS 39 hedge accounting. These are recognized as follows: the dirty price is booked under "derivatives " in the statement of financial position (positive fair values on the asset side and negative fair values on the liability side). The change in value of these derivatives, on the basis of the clean price, is shown in net income from derivatives and interest is shown in net interest income.
Additional information on derivatives is provided in the notes (43) derivative financial instruments.
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.
Hedge accounting according to IAS 39 applies for those derivatives that are used to hedge the fair values of financial assets and liabilities. The credit business is especially subject to such fair value risks if it deals with fixed-interest loans. Interest-rate swaps that satisfy the prerequisites for hedge accounting are contracted to hedge against the interest-rate risks arising from individual loans or refinancing. Thus, hedges are formally documented, continuously assessed, and rated to be highly effective. In other words, throughout the term of a hedge, it can be assumed that changes in the fair value of a hedged item will be nearly completely offset by a change in the fair value of the hedging instrument and that the actual outcome will lie within a band of 80 to 125 per cent.
Derivative instruments held to hedge the fair values of individual items in the statement of financial position (except trading assets /liabilities) are recognized at their fair values (dirty prices) under "derivatives" (on the assets side: positive dirty prices; on the liabilities side: negative dirty prices). Changes in the carrying amounts of hedged items (assets or liabilities) are allocated directly to the corresponding items of the statement of financial position and reported separately in the notes.
In the Group, foreign exchange hedges of investments in economically independent sub-units (IAS 39.102) are made in order to reduce differences arising from the foreign currency translation of equity. Currency swaps are mainly used as hedging instruments. Where the hedge is effective the resulting gains or losses from foreign currency translation are recognized and shown separately in other comprehensive income. Any ineffective part of this hedge relation is recognized in net trading income. The related interest components are shown in net interest income. There are no deferred taxes calculated for the income from capital hedge due to the applied exception regulations according to IAS 12.39.
If market prices are available, the fair value is reflected best by the market price. This category contains equity instruments traded on the stock exchange, debt instruments traded on the interbank market, and derivatives traded on the stock exchange. The valuation is mainly based on external data sources (stock exchange prices or broker quotes in liquid market segments).
In 2013 and as a consequence of the change in market standards, RBI changed the valuation method for collateralized OTC derivatives from Euribor discounting to EONIA/OIS discounting.
If no observable stock exchange prices or prices are available, the fair value will be measured by adequate measurement models. The utilization of these models requires assumptions and estimates of the management. The scope of assumptions and estimates depends on the price transparency of the financial instrument, the market and the complexity of the instrument.
The effective interest rate method is a method of calculating the amortized cost of a financial instrument and allocating interest income to the relevant periods. The effective interest rate is the interest rate used to discount the forecast future cash inflows (including all fees which form part of the effective interest rate, transaction costs and other premiums and discounts) over the expected term of the financial instrument or a shorter period, where applicable, to arrive at the carrying amount.
Objective evidence for an impairment may exist when the issuer or the counterparty face considerable financial difficulties, a breach of contract occurs (for example, default or delay in interest or redemption payments) or it can be assumed with high probability that insolvency or other restructuring proceedings will be instituted against the borrower.
In a genuine sale and repurchase transaction, the Group sells assets to a third party and agrees at the same time to repurchase these assets at an agreed price and time. The assets remain on the statement of financial position of the Group and are measured like the item in the statement of financial position where they are shown. The securities are not derecognized since all the risks and rewards associated with the ownership of the repurchased securities are retained. Cash inflows arising from a sale and repurchase transaction are recognized in the statement of financial position as deposits from banks or deposits from customers depending on the counterparty.
When nearly all the risks and rewards of a leased asset are transferred to the lessee, the Group as lessor recognizes a loan to banks or a loan to customers. The loan amount is the amount of the net investment. The proceeds from the finance lease are distributed at a constant periodic rate of the outstanding net investment in the leases. Interest income is reported under "Net interest income".
The cash reserve includes cash in hand and balances at central banks that are due on call. They are shown with their nominal value.
 The capability exists to use or to sell the intangible fixed asset. The intangible fixed asset is likely to generate future economic benefit.
Intangible fixed assets acquired in a business combination are reported separately from goodwill and measured at fair value. Goodwill and other intangible fixed assets without definite useful lives are tested for impairment at each reporting date. Impairment tests are performed whenever special events (trigger events) occur during the year. Whenever circumstances indicate that the expected benefit no longer exists, impairment must be made pursuant to IAS 36.
Intangible fixed assets with a definite useful life are amortized over the period during which the intangible fixed asset can be used. The useful life of the acquired customer base was set at 20 years in the retail segment of Raiffeisen Bank Aval JSC. For the customer base of Polbank EFG S.A. a useful life of 10 years based on the purchase price allocation was set.
Group companies use brands to differentiate their services from the competition. According to IFRS 3, brands of acquired companies are recognized separately under the item "intangible fixed assets." Brands have an indeterminable useful life and are therefore not subject to scheduled amortization. Brands have to be tested annually for impairment and additionally whenever indications of impairment arise. Details on impairment testing can be found under item (22) Intangible fixed assets
The land and buildings as well as office furniture and equipment reported under tangible fixed assets are measured at cost of acquisition or conversion less scheduled depreciation. Depreciation is recorded under item "General administrative expenses". The straight-line method is used for depreciation and is based on the following useful life figures: Useful life Years
Expected useful lives, residual values and depreciation methods are reviewed annually. Any necessary future change of estimates is taken into account. Any anticipated permanent depreciation is reported in the income statement and shown under item "General administrative expenses". In the event that the reason for the write-down no longer applies, a write-up will take place up to the amount of the amortized cost of the asset.
Investment property is derecognized on retirement or when it is no longer to be used and no future economic benefit can be expected from retirement. The resulting gain or loss from the retirement is determined as the difference between the proceeds from the disposal and the carrying value of the asset and is recognized in other net operating income in the relevant reporting period.
In the event that the Group has committed to a sale involving the loss of control over a subsidiary, all assets and liabilities of the subsidiary concerned are classified as held for sale provided the aforementioned conditions for this are met. This applies irrespective of whether the Group retains a non-controlling interest in the former subsidiary after the sale or not. Results from discontinued business operations are reported separately in the income statement as result from discontinued business operations.
Provisions are recognized when the Group has a present obligation from a past event, where it is likely that it will be obliged to settle, and a reliable estimate of the amount is possible. The level of provisions is the best possible estimate of expected outflow of economic benefits at the reporting date while taking into account the risks and uncertainties underlying the commitment to fulfill the obligation. Risks and uncertainties are taken into account in the estimate. If a provision is made based on cash flows estimated to fulfill an obligation, the cash flows must be discounted if the interest effect is substantial.
These types of provision are reported in the statement of financial position under item "Provisions". Allocation to the various types of provision is performed by means of various items in the income statement. Loan loss provisions for contingent liabilities are recorded under net provisioning for impairment losses, restructuring provisioning, provisioning for legal risks and other employee benefits in general administrative expenses. Provision allocations that are not assigned to a corresponding general administrative expense are as a matter of principle booked against other net operating income.
Please refer to Provisions for pensions and similar obligations in note (29) Provisions for liabilities and charges.
The allocation, the claim and the payment of the variable remuneration (including the payment of a portion of the deferred bonus) depend on the following criteria:  earning a net profit,
 the achievement of the legally required core tier 1 ratio of the RBI Group,
Except for 2010 the Management Board, with approval by the Supervisory Board, of RBI AG has approved the existence of a share incentive program (SIP) which offers performance based allotments of shares to eligible employees at home and abroad for a given period. Eligible employees are current board members and selected executives of RBI AG, as well as executives of its affiliated bank subsidiaries and other affiliated companies.
The number of ordinary shares of RBI AG which will ultimately be transferred depends on the achievement of two performance criteria: the targeted return on equity (ROE) and the performance of the share of the RBI AG compared to the total shareholder return of the shares of companies in DJ EURO STOXX Banks index after a five-year holding period.
All expenses related to the share incentive program are recognized in staff expenses in accordance with IFRS 2 (share-based payment) and charged to equity. They are described in greater detail in note (34) Equity.
RBI AG and eight of its domestic subsidiaries are members of a tax group for which Raiffeisen Zentralbank Österreich Aktiengesellschaft acts as group parent. Current taxes are calculated on the basis of taxable income for the current year taking into account the tax group (in terms of a tax group allocation). 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.
Current and deferred taxes are recognized as profit or loss. In case that they are linked to items which are recognized in other comprehensive income, current and deferred taxes are also directly recognized in other comprehensive income.
Other comprehensive income comprises all income and expenses directly recognized in equity according to IFRS standards. Income and expenses recognized directly in equity that are reclassified in the income statement are reported separately from income and expenses recognized directly in equity that are not reclassified in the income statement. This applies to currency differences resulting from the translation of equity held in foreign currency, changes resulting from the hedging of net investments in a foreign entity (capital hedge), the effective part of a cash flow hedge, changes resulting from valuation of available-for-sale financial assets as well as deferred taxes on the mentioned items. Revaluations of defined benefit plans are reported in income and expenses recognized directly in equity that are not reclassified in the income statement.
Net gains (losses) on financial assets and liabilities held-for-trading 276,555 537,374
Net gains (losses) on financial assets and liabilities at fair value through profit or loss 47,200 (156,639)
Net realized gains (losses) on financial assets not measured at fair value through profit and loss 14,127 8,894
Net realized gains (losses) on financial assets not measured at fair value through profit and loss 2,562 1,062
Write-ups/impairment on financial assets not measured at fair value through profit and loss 321 (174)
Interest and interest-like income, total 6,083,730 6,478,884 from balances at central banks 38,364 75,645 from loans and advances to banks 244,302 296,742 from loans and advances to customers 4,632,765 4,875,061 from financial investments 537,367 608,961 from leasing claims 192,416 216,663 from derivative financial instruments (non-trading), net 402,677 361,967 from shares and other variable-yield securities 1,248 4,347 from shares in affiliated companies 8,860 10,269 from other interests 3,994 4,523
Details on risk provisions are shown under note (17) Impairment losses on loans and advances.
(5) Net trading income The position net trading income includes interest and dividend income, refinancing costs, commissions and any changes in fair value of trading portfolios.
In 2012, income from the repurchase of liabilities included income from the repurchase of hybrid bonds amounting to € 113,291 thousand less transaction costs (nominal value of € 357,806 thousand).
Legal, advisory and consulting expenses include audit fees of the RBI AG and its subsidiaries which comprise expenses for the audit of financial statements amounting to € 8,801 thousand (2012: € 8,427 thousand) and tax advisory as well as other additional consulting services provided by the auditors amounting to € 4,840 thousand (2012: € 4,682 thousand). Thereof, € 2,556 thousand (2012: € 2,418 thousand) account for the Group auditor for the audit of the financial statements and € 1,222 thousand (2012: € 1,885 thousand) account for the other consulting services.
Amortization of intangible fixed assets capitalized in the course of initial consolidation amounted to € 3,916 thousand (2012: € 7,352 thousand) which relates to scheduled amortization of the customer base.
Rental income from investment property incl. operating lease (real estate) 34,086 22,952
Net proceeds from disposal of tangible and intangible fixed assets (15,574) (8,979)
Net expense from allocation and release of other provisions 4,195 19,374
Theoretical income tax expense in the financial year based on the domestic income tax rate of 25 per cent (208,664) (259,341)
Tax rate in per cent1 27.8 27.5 1 Adaption of previous year figures due to the retrospective application of IAS 19R.
Other tax deductions and tax increases mainly result from tax losses which are not recognized as deferred tax assets and Group taxation (“Steuerumlage”).
There were no conversion or option rights outstanding, so undiluted earnings per share are equal to diluted earnings per share.
Purchased loans amounting to € 1,442,344 thousand (2012: € 1,028,844 thousand) are assigned to the measurement category loans and advances. There were no purchased loans classified as held-to-maturity (2012: € 44,941 thousand).
Retail customers – small and medium-sized entities 2,822,092 2,945,655 1 Adaption of previous year figures due to different allocation.
Retail customers – small and medium-sized entities 2,518,638 2,822,092 462,536 309,813 26,604 2,485,675
Impaired financial assets 2013 Impairments and collaterals impaired assets Individual loan loss provisions
ILLP: individual loan loss provisions 2012 Impairments and collaterals impaired assets Individual loan loss provisions
Positive fair values of derivatives in net investment hedge (IAS 39) 23,101 21,324
The time periods in which the hedged cash flows from assets are expected to occur and affect the statement of comprehensive income are as below: (20) Financial investments This position consists of securities available-for-sale, financial assets at fair value through profit or loss, and securities held-tomaturity as well as strategic equity participations held on a long-term basis.
The carrying amount of the securities reclassified into the category loans and advances amounted to € 1.559.682 thousand at the date of reclassification in 2008. As of 31 December 2013, the carrying amount was € 89,006 thousand.
Financial information on associated companies is as follows: € 000 Total assets Total revenues Profit/loss after tax Shareholders´ equity
The dividend discount model uses dividend forecasts and respective capitalization measures based on a five-year period. Expected results that go beyond the five-year period are determined via the present value of a perpetuity taking into account a longterm growth rate. In case the recoverable value of a cash generating unit is lower than the carrying value an impairment is measured in the amount of the difference between the two values. The impairment loss is recognized in the income statement under other net operating income.
The following table shows key assumptions that have been made for the individual cash generating units: 2013 Cash generating units RBAL RBCZ RBPL RBRU
Growth rates in phase I and II 7.8% n.a. n.a. 15.1%
In 2012, RBI determined the recoverable value on the basis of the net realizable value; using the following parameters: 2012 Cash generating units RBAL RBCZ RBPL RBRU
The use value of a cash generating unit is sensitive to various parameters, primarily to the level and development of future dividends, to the discount rates as well as the nominal growth rate in the steadying phase. The applied discount rates have been calculated using the capital asset pricing model: they are composed of a risk-free interest rate and a risk premium for entrepreneurial risk taking. The risk premium is calculated as the market risk premium that varies according to the country in which the unit is registered multiplied by the beta factor for the indebted company. The values for the risk-free interest rate and the market risk premium are defined using external information sources. The risk measure beta factor has been derived from a peer group of financial institutions operating in Western and Eastern Europe. The above-mentioned interest rate parameters represent market assessments; therefore they are not stable and could in case of a change affect the discount rates.
RBPL Poland is a key market for the Group where it pushes for stronger growth, taking into account the risk policy. After the merger with Polish Polbank EFG
S. A. (Polbank), establishment as a strong universal bank on the Polish market. Strict cost management to make the merged bank more efficient.
Russia is a key market for the Group where it pushes for stronger growth, taking into account the risk policy. Stronger engagement in the retail sector. Strengthening revenue by using higher net interest margin in the retail sector and cross-selling initiatives. Simultaneous focus on efficiency and cost management.
Improvement through increased use of alternative distribution channels and additional consulting services. Stable costs are assumed.
RBPL: Raiffeisen Bank Polska S.A., Warsaw RBRU: ZAO Raiffeisenbank, Moscow RBAL: Raiffeisen Bank Sh.a., Tirana RBCZ: Raiffeisenbank a.s., Prague
A sensitivity analysis was carried out based on the above-mentioned assumptions in order to test the stability of the impairment test for goodwill. From a number of options for this analysis, two parameters were selected, namely, the cost of equity and the reduction of the growth rate. The following overview demonstrates to what extent an increase in the cost of equity or a reduction in the long-term growth rate could be made without the value in use of cash generating units declining below the respective carrying value (equity capital plus goodwill) in 2013.
Reduction of the growth rates in phase III 1.3 PP 3.8 PP 1.2 PP 17.0 PP 1 The respective maximum sensitivity refers to the change of the perpetuity.
The reference values for 2012 based on the net realizable value were as follows: 2012 Maximum sensitivity1 RBAL RBCZ RBPL RBRU
Increase in discount rate 5.3 PP 1.5 PP 0.8 PP 2.8 PP
The value of the Polbank brand was determined using the relief from royalty method, because neither immediately comparable transactions nor a market with observable prices was available at the time of purchase price allocation. Underlying premise of this method is that the brand has a fair value equal to the present value of the royalty income attributable to it. In 2013, impairment tests showed no impairment of the brand.
The fair value of investment property totaled € 209,414 thousand (2012: € 151,657 thousand).
Change in consolidated group Exchange differences Additions Disposals Transfers As of 31/12/2013
Write-ups, amortization, depreciation, impairment Carrying amount hereof hereof € 000 Cumulative Write-ups Depreciation 31/12/2013
In 2013, additions to intangible and tangible fixed assets include single investments exceeding € 10,000 thousand in Russia and in Group head office.
The net deferred taxes result from the following items: Loans and advances to customers 135,478 141,848
In the consolidated financial statements, deferred tax assets are recognized for unused tax loss carry-forwards which amounted to € 189,493 thousand (2012: € 206,749 thousand). The tax loss carry-forwards are mainly without any time limit. The Group did not recognize deferred tax assets of € 155,766 thousand (2012: € 111,132 thousand) because from a current point of view there is no prospect of realizing them within a reasonable period of time.
Deposits from banks classified regionally (counterparty’s seat) break down as follows:
RBI contributes to the following defined benefit pension plans and other post-employment benefits:  Defined benefit pension plans in Austria and other countries
The return on plan assets for 2013 was € 526,670 thousand (2012: € 718,179 thousand). For 2013, the fair value of rights to reimbursement recognized as an asset was € 12,537 thousand (2012: € 11,375 thousand).
Alternative Investments 4 4 hereof own financial instruments 6 1 hereof property occupied or other assets used by the Group or other related parties 0 0
The pension provider Valida has an asset/risk management process (ARM process). According to this process, the risk-bearing capacity of each fund is evaluated once a year. Based on this risk-bearing capacity, the investment structure of the fund is derived. When defining the investment tolerance of the customer, defined and documented requirements are also taken into account.
The following table shows the longevity assumptions used to calculate the net defined benefit obligation.
Longevity at age 65 for current members aged 45 – males 23.1 23.2
The weighted average duration of the net defined benefit obligation was 16.0 years in 2013.
The other termination benefits developed as follows: DBO as of 1/1 50,153 46,569
Reasonably possible changes at the reporting date to one of the relevant actuarial assumptions, holding other assumptions constant, would have affected the defined benefit obligation by the amounts shown below.
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: Net losses of € 16,364 thousand (2012: minus € 1,245 thousand) relating to the effective portion of cash flow hedges were recognized in other comprehensive income.
Valuation fair value hedge portfolio 39,393 47,939 1 Adaption of previous year figures due to different allocation.
RBI Group’s insurance business consists of pension products in Russia. Due to the existence of mortality risk and discretionary participation features in these products it is necessary to apply IFRS 4 for the accounting of the resulting liability. All assets related to the provision of pensions products are accounted for under IAS 39.
Other risks – Based on federal demography statistics data annuity rates are determined by Russian legislation and therefore subject to a degree of uncertainty.
Non-controlling interests 484,824 719,143 1 Adaption of previous year figures due to the retrospective application of IAS 19R.
As of 31 December 2013, 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 Management Board has been authorized pursuant to Section 169 of the Austrian Joint Stock Companies Act (AktG) by the Annual General Meeting held on 26 June 2013, within 5 years after registration of the respective change in the articles of incorporation in the Company Register, to increase the share capital up to € 298,145 thousand – also in several tranches – against contribution in cash and/or in kind by issuing 97,752,562 new common bearer shares with voting rights while preserving the subscription rights of the shareholders, including the indirect subscription by way of a bank pursuant to Section 153 (6) of the Austrian Joint Stock Companies Act (AktG), and to determine the offering price and terms of the issue with the approval of the Supervisory Board. The Supervisory Board or a committee is authorized for this purpose to adopt amendments to the articles of association that arise upon issuing shares from the authorized capital.
Pursuant to Section 159 (2) item 1 of the Austrian Joint Stock Companies Act (AktG), the subscribed capital has been increased contingently by a maximum of € 119,258 thousand by issuing a maximum of 39,101,024 common bearer shares (contingent capital). The contingent capital increase would only be carried out to the extent that holders of convertible bonds issued under the resolution of the Annual General Meeting of 26 June 2013 make use of their right to convert such bonds into shares of the company.
The Management Board decided on February 17, 2014 to propose at the Annual General Meeting that a dividend of € 1.02 per share be distributed from Raiffeisen Bank International AG’s profit for the financial year 2013, which represents a maximum distribution of € 298,839 thousand. This takes the 97,473,914 new shares issued at the beginning of 2014 and entitled for dividend into account. The remaining amount is to be carried forward.
In 2013, no tranche of the share incentive program matured. Due to the merger of Raiffeisen International with the principal business areas of RZB, no tranche of the SIP program was issued in 2010. Moreover, in 2011 the maturity of the SIP program was extended to five years in accordance with legal regulations. Therefore the next tranche will not mature before 2016.
Since 2011, new tranches under the SIP program have been issued annually – so also in 2013. On the reporting date, contingent shares for three allotments were assigned. As of 31 December 2013, the contingent allotment of shares amounted to 987,740 (of which 215,032 shares were attributable to the 2011 allotment, 406,040 shares to the 2012 allotment and 366,668 shares to the 2013 allotment). The originally announced number of contingently allotted shares changed due to various personnel changes within Group units. This is shown on an aggregated level in the following table: Share incentive program (SIP) 2011 - 2013 Group of persons
Executives of the company and other affiliated companies 233,817 70,145 350,726
Impairment losses on loans and advances (5,641,897) 0 0 0 0
(37) Foreign assets/liabilities Assets and liabilities with counterparties outside Austria are as follows: (38) 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 on the Group’s regulatory own funds and to use additional refinancing sources.
True Sale Transaction Raiffeisen Leasing Polska Auto Lease Securitisation (WestLB sponsored Compass ABCP Program) Raiffeisen-Leasing Polska S.A., Warsaw (PL)
Synthetic Transaction (JEREMIE) ROOF Romania SME 2011-1 Raiffeisenbank S.A., Bucharest (RO)
Synthetic Transaction (JEREMIE) ROOF Slovakia SME 2013-1 Tatra banka a.s., Bratislava (SK)
Besides the above-mentioned refinancing and packaging of designated portfolios of loans or leasing claims, RBI also acts as an investor in ABS-structures. Essentially, this is about investments in Structured Credit Products, Asset Based Financing and partly also Diviersified Payment Rights. During the financial year 2013 market value changes led to a negative valuation result of about € 286 thousand (2012: minus € 4 million) and to a realized result from sale of € 2,180 thousand (2012: € 658 thousand).
Financial assets at fair value through profit or loss 578,981 5,566 573,415 423,637 423 423,214
As in the previous year, there were no transferred financial assets which were derecognized to the extent of the institution's continuing involvement in the financial year 2013.
Repurchase, securities lending & similar agreements 1,862,597 0 1,862,597 1,862,758 0 (161)
 Standardized methodologies: Risk measurement and risk limitation methods are standardized Group-wide in order to ensure a consistent and coherent approach to risk management. This is efficient for the development of risk management methods and it forms the basis for consistent overall bank management across all countries and business segments in RBI.
The Management Board of RBI ensures the proper organization and ongoing development of risk management. It decides which procedures are to be employed for identifying, measuring, and monitoring risks, and makes steering decisions according to the created risk reports and analyses. The Management Board is supported in implementing these tasks by independent risk management units and special committees.
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 Group units and calculates the utilization of the allocated risk capital budgets in the internal capital adequacy framework.
The Credit Portfolio Committees define the credit portfolio strategies for different customer segments. In these committees, representatives from business and risk management divisions together discuss the risks and opportunities of different customer segments (e.g. industries, countries, retail products). Based on the discussion, credit portfolio management then develops lending policies and sets limits steering the future credit portfolio.
The Problem Loan Committee (PLC) is the most important committee in the judgment and decision-making process concerning problem loans. It comprises first-class decision making bodies (members of the Management Board of RBI and RZB) and its chairman is the Chief Risk Officer (CRO) of RBI. Further members with voting rights are those members of the Management Board responsible for the customer divisions, the Chief Financial Officer (CFO) and the relevant division and department managers from risk management and workout.
The Operational Risk Management Committee comprises representatives of the business divisions (retail, market and corporate customers) and representatives from Compliance, Fraud Management, IKS, Operations, HR, Security and Risk Controlling, under chairmanship of the CRO. This committee is responsible for controlling operational risk of RBI. It derives and sets the operational risk strategy from the risk profile and the business strategy and also makes decisions regarding measures and risk acceptance.
Risk of not meeting the capital requirement as defined in the Basel III regulations
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 64.3 per cent at year-end (2012: 73.8 per cent).
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 2013 this objective has been continuously met on Group level.
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 pro-cyclical effects that increase minimum regulatory capital requirements, the impact of foreign exchange fluctuations as well as other valuation and earnings effects are incorporated.
In RBI, credit risk stems mainly from default risks that arise from business with retail and corporate customers, other banks and sovereign borrowers. It is by far the most important risk category in RBI, as also indicated by internal and regulatory capital requirements. Credit risk thus is analyzed and monitored both on an individual loan and customer basis as well as on a portfolio basis in the Group. Credit risk management and lending decisions are based on the respective credit risk policies, credit risk manuals, and the corresponding tools and processes which have been developed for this purpose.
At year-end 2013, the two existing internal rating models for corporate customers were converted into three new statistically optimized internal models. The intensive regulatory examination preceding the implementation of these models was passed successfully by the new models. Like the old models, the improved models take into account qualitative factors as well as several performance figures and figures regarding the statement of financial position which cover the different aspects of customer creditworthiness for various industries and countries. In addition, the model for smaller corporates also includes an account behavior component.
The model for large corporate customers was replaced by two models which separated large corporates and mid market customers in order to enable a better risk differentiation in this division. Due to the fact that large corporates show a measurably lower default probability in comparison to mid market customers, the separation of both rating divisions lead to a shift to better rating grades for large corporates while the larger number of mid market customers inclines to inferior rating grades. A further impact leading to systematic customer mitigations comes from the country specific calibration of models for mid market and smaller corporates. Customers from countries and regions with comparably lower historical default rates are allocated to better rating grades, while customers from countries with higher default rates are assigned to inferior rating grades. This also results in a better risk differentiation.
Together with the new models a new rating scale was also installed for these customers. On the one hand it offers a more precise risk assessment due to the larger given granularity (25 instead of 9 living grades). On the other hand, it enables a comparison between the rating segments and over time, due to the fact that the classes of the new scale are defined by an accurate range of probability of defaults.
For a better readability, the 25 grades of the new rating scale are summarized to the 9 main rating grades in the following presentation. It has to be noted that due to the completely other construction logic (given PD curve with constantly increasing rate versus cohort approach), the models cannot be compared also in verbal description. This become especially apparent in inferior rating grades where PDs are considerably higher than it was in the former rating scale.
The following table provides a breakdown of the maximum credit exposure according to the internal rating of corporates (large corporates and mid market) for 2012. Due to the change of internal rating models for corporate customers it is not possible to make a direct comparison with the reporting year.
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 3,388,198 38.7% 3,734,268 44.3%
6.4 Poor project risk profile – high risk 615,521 7.0% 391,268 4.6%
The maximum credit exposure in project finance amounted to € 8,748,547 thousand (2012: € 8,421,433 thousand) at year-end 2013. Projects rated either in categories Excellent project risk profile – very low risk (rating 6.1) or Good project risk profile – low risk (rating 6.2) account for 72.7 per cent and thus represents the highest share of the portfolio. This reflects mainly the high level of collateralization in specialized lending transactions. The decline of € 346,070 thousand in rating category 6.1 resulted on the one hand from finished project financing and on the other hand from a rating worsening in a project finance in Canada. The increase in rating category 6.2 is due to new business and expansion of existing credit financings. Unrated projects decreased to 0.1 per cent (€ 10,102 thousand) year-on-year.
The following table provides a breakdown by country of risk of the maximum credit exposure for corporate customers and project finance structured by regions: 1 Adaption of previous year figures due to different mapping.
Electricity, gas, steam and hot water supply 4,124,123 4.7% 3,400,299 3.8%
1 Adaption of previous year figures due to more detailled presentation.
In the course of the integration of Polbank, the allocation of loan loss provisions for private individuals was unified. As a consequence, a reclassification from portfolio-based loan loss provisions to individual loan loss provisions in the amount of around € 330,000 was made.
The total credit exposure of retail customers breaks down by RBI segments as follows: 2013 € 000 Central Europe Southeastern Europe Russia CIS Other Group Markets Retail customers – private individuals 13,460,771 6,672,299 4,633,303 1,413,648 14,307
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
The second largest segment was Southeastern Europe with € 7,411,917 thousand (2012: € 7,380,448 thousand). Compared to the previous year the exposure increased slightly by € 31,469 thousand.
2013 € 000 Central Europe Southeastern Europe Russia CIS Other Group Markets
The share of not rated financial institutions was unchanged at 0.1 per cent at year-end 2013. This exposure was mainly caused by short-term loans to small banks, where the rating process had not yet been completed.
Another asset class is formed by central governments, central banks, and regional municipalities as well as other public sector entities. The table below provides a breakdown of the credit exposure to sovereigns (including central banks) by internal rating. Since defaults in this asset class are historically very rare, default probabilities are estimated using full data sets provided by external rating agencies.
The table below shows the credit exposure to sovereigns (including central banks) selected by products: The table below shows the credit exposure to the public sector in non-investment grade (rating B3 and below): Here, the credit exposure increased to € 9,205,016 thousand (2012: € 8,704,260 thousand) year-on-year. It resulted primarily from deposits of Group units with the local central banks in Central and Southeastern Europe. They are used for meeting the respective minimum reserve requirements and for managing the short-term investment of excess liquidity, and are therefore inextricably linked to the business activities in these countries.
Collateralization is one of the main strategies and an actively pursued measure for reducing potential credit risks. The value of collateral and the effect of other risk mitigation techniques are determined within each limit application. The risk mitigation effect taken into account is the value that RBI expects to receive when selling the collateral within a reasonable liquidation period. Eligible collaterals are defined in the Group’s collateral catalog and corresponding evaluation guidelines for collateral. The collateral value is calculated according to specified methods which include standardized calculation formulas based on market values, predefined minimum discounts, and expert assessments.
Retail customers – small and medium-sized entities 2,485,675 418,657 1,835,553 20121 Maximum credit exposure Fair value of collateral € 000 Net exposure Commitments/guarantees issued
Retail customers – small and medium-sized entities 2,577,148 435,922 1,878,010 1 Adaption of previous year figures due to different mapping.
Collateral ready to be sold or repledged in the absence of default of the debtor amounted to € 21,617,052 thousand (2012: € 25,457,682 thousand).
RBI distinguishes between modified and restructured loans in the division corporates customers when terms or loan conditions are altered in favor of the customer.
In the division retail customers restructured loans are subject to an observation period of at least three months in order to be sure that the customer meets the newly agreed terms. In those cases where the concerned customer meets the newly agreed terms and was not overdue for 180 days before the new agreement, this customer is transferred from the portfolio in observation to the living portfolio. Those customers who were already overdue for 180 days before the new agreements or those who did not meet the newly agreed terms, remain in the portfolio which is fully impaired.
Due to the current conversion to the new regulations of Basel III no quantitative information is shown.
A default and thus non-performing loan (NPL) is internally defined as the event where a specific debtor is unlikely to pay its credit obligations to the bank in full, or the debtor is overdue more than 90 days on any material credit obligation. RBI has defined twelve default indicators which are used to identify a default event in the non-retail segment. These include the insolvency or similar proceedings of a customer, if an impairment provision has been allocated or a direct write-off has been carried out, if credit risk management has judged a customer account receivable to be not wholly recoverable, or the workout unit is considering stepping in to help a company restore its financial soundness.
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 1/1/2013 Change in consolidated group Exchange differences Additions Disposals As of 31/12/2013 € 000 As of 1/1/2012 Change in consolidated group Exchange differences Additions Disposals As of 31/12/2012
The following table shows the share of non-performing loans in the defined asset classes loans and advances to customers and loans and advances to banks as reported in the statement of financial position (excluding items off the statement of financial position) according to segments: NPL NPL ratio NPL coverage ratio € 000 31/12/2013 31/12/2012 31/12/2013 31/12/2012 31/12/2013 31/12/2012
Loans and advances to customers 891,076 (5,867) 298,915 (341,384) (7,663) (357,903) 477,173 1 Allocation including direct write-downs and income on written-down claims. 2 Usage including direct write-downs and income on written-down claims.
Portfolio-based loan loss provisions 762,777 337,897 361,008 (525,111) 0 13,192 949,763
Loans and advances to customers 680,558 336,759 340,796 (479,537) 0 12,500 891,076 1 Allocation including direct write-downs and income on written-down claims. 2 Usage including direct write-downs and income on written-down claims.
The following table shows the breakdown of loan loss provisions according to segments: Individual loan loss provisions 5,195,279 4,843,476
Active country risk management in RBI is based on the country risk policy which is set by the Management Board. This policy is part of the credit portfolio limit system and sets a strict limitation on cross-border risk exposure to individual countries. Consequently, in day-to-day work, business units have to submit limit applications for the respective countries for all cross-border transactions in addition to the limit applications for a customer. The limit size for individual countries is set by using a model which takes into account the internal rating for the sovereign, the size of the country, and RBI’s own capitalization.
Risk policies and credit portfolio management in RBI take into account the industry class of customers as well. Banking and insurance represents the largest industry class, which, however, is mostly attributed to exposures to members of the Austrian Raiffeisen Sector (central liquidity balancing function). The second largest industry class is private households, primarily consisting of loans to retail customers in Central and Eastern European countries. The following table shows the maximum credit exposure of the Group by the customers’ industry classification: Wholesale trade and commission trade (except car trading) 16,086,635 9.8% 16,411,674 9.6%
Retail trade except repair of motor vehicles 4,093,906 2.5% 4,756,928 2.8%
Electricity, gas, steam and hot water supply 4,163,444 2.5% 3,208,655 1.9%
Extraction of crude petroleum and natural gas 1,218,276 0.7% 1,414,478 0.8%
Market risks are transferred to the Treasury division by closing internal contracts with customer divisions. Treasury is responsible for managing structural market risks and for complying with the Group’s overall limit. The Capital Markets division comprises proprietary trading, market making, and customer business with money market and capital market products.
Trading book VaR 99% 1d VaR as of Average VaR Minimum VaR Maximum VaR VaR as of
Banking book VaR 99% 1d VaR as of Average VaR Minimum VaR Maximum VaR VaR as of
Total 56,961 74,367 52,623 116,303 70,725 1 Exchange rate risk on total bank level also includes equity positions of subsidiaries denominated in foreign currency.
The risk measurement approaches employed are verified – besides analyzing returns qualitatively – on an ongoing basis through backtesting and statistical validation techniques. If model weaknesses are identified, then they are improved accordingly. In the reporting period, there was no backtesting violation for RBI’s trading book as shown in the backtesting chart. This chart compares VaR and theoretical profits and losses on a daily basis. VaR denotes the maximum loss that will not be exceeded with 99 per cent confidence level on the next day. It is compared to the theoretical profits and losses, which shows the hypothetical returns that the bank would have realized due to the actual changes in market parameters on the next day. It is possible to see that the model correctly reproduces market volatility regimes and quickly reacts to changed market conditions. Additionally, since 2012 stressedVaR results have been limited. The material model change to integrate the vega risk in the internal model was approved by FMA in April 2013.
Market risk in RBI results primarily from exchange rate risk, which stems from foreign-currency denominated equity investments made in foreign Group units and the corresponding hedging positions entered into by the Group Asset/Liability Committee. The following table shows all material open foreign exchange rate positions as of 31 December 2013 and the corresponding values for the previous year. Those numbers include both trading positions as well as equity stakes in subsidiaries with foreign currency denominated statements of financial position.
RBI holds several large participations located outside of the European Monetary Union with their equity denoted in the corresponding local currency. Also, a significant share of risk-weighted assets in RBI is denominated in foreign currencies. Changes in foreign exchange rates thus lead to a change of consolidated capital in RBI and to changes in the own funds requirement for credit risks as well.
This risk is mainly hedged by a combination of transactions on and off the statement of financial position where in particular interest rate swaps and – to a smaller extent – also interest rate forwards and interest rate options are used. Management of the statement of financial position is a core task of the central Global Treasury division and of individual network banks, which are supported by asset/liability management committees. They base their decisions on various interest income analyses and simulations that ensure proper interest rate sensitivity in line with expected changes in market rates and the overall risk appetite.
The market risk management framework uses time-dependent bond and CDS-spread curves as risk factors in order to measure credit spread risks. This market risk category thus captures the specific interest rate risk of all securities in the trading and banking book. The Value-at-Risk report covers RBI AG in this risk category, where a major part of securities positions of the Group are booked.
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).
€ 000 2013 2012 Maturity 1 week 1 month 1 year 1 week 1 month 1 year
Internal limits have been established in each Group unit in order to limit liquidity risk. They require a positive short-term liquidity gap based on the internal liquidity model. The Group holds sizeable amounts of liquid securities and favors assets eligible in tender transactions in the lending business in order to ensure liquidity in various currencies. In the case of a liquidity shortage in the Group, contingency plans would come into force. Such prioritized action lists for handling short-term liquidity needs (also with regard to the publicity impact) exist for all major Group units.
Letters of credit (documentary business) 2,188,542 1,583,943 1,027,105 441,863 103,325 11,650
Irrevocable credit lines 10,609,130 9,321,561 2,442,556 1,893,849 4,529,347 455,809 Adaption of previous year figures due to higher detailing.
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 as well as to track further on measures and control efficiency. 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.
(43) Derivative financial instruments 2013 Nominal amount by maturity Fair values € 000 Up to 1 year More than 1 year up to 5 years More than 5 years Total Positive Negative
Other contracts on gold basis 0 0 0 0 125 0
2012 Nominal amount by maturity Fair values € 000 Up to 1 year More than 1 year up to 5 years More than 5 years Total Positive Negative
2013 € 000 Level I Level II Level III Fair value Carrying amount Difference
Loans and advances to banks 0 16,657,868 5,509,804 22,167,673 22,125,059 42,614
(45) Fair value of financial instruments reported at fair value 2013 2012 € 000 Level I Level II Level III Level I Level II Level III
Shares and other variable-yield securities 402,805 4,460 306 264,612 11,915 723
Bonds, notes and other fixed-interest securities 3,607,941 269,800 76,569 1,754,302 965,485 56
Call/time deposits from trading purposes 0 0 0 0 2 0
Bonds, notes and other fixed-interest securities 4,745,594 1,454,696 7,242 5,051,385 3,127,501 11,133
Liabilities at fair value through profit and loss 0 2,612,277 0 3,357,758 0
In 2013, mainly bonds and other fixed-income securities in the amount of € 142,337 thousand have been transferred from level I to level II driven by a reduced market liquidity of individual products.
Financial assets at fair value through profit or loss 16,205 0 (228) 19,911 (20,125)
Gains/loss in other comprehensive income Transfer to level III Transfer from level III As of 31/12/2013
Financial assets at fair value through profit or loss (2,781) (286) 5,022 (5,587) 12,131
Shares and other variable-yield securities Shares 5 Approximat ion method – –
Bonds, notes and other fixed-interest securities Fixed coupon bonds 95 Discounted cash flow Credit spread 10% – 20%
The following table contains revocable credit lines which are unweighted according to Basel II: Revocable credit lines 16,726,791 16,223,936
(47) Fiduciary business Fiduciary business not recognized in the statement of financial position was concluded with the following volumes on the reporting date: Loans and advances to banks 9,402 8,239
Fiduciary income and expenses break down as follows: The following table contains the funds managed by RBI: Retail investment funds 3,929,158 6,578,312
As of 31 December 2013, write-offs on unrecoverable minimum lease payments totaled € 61,592 thousand (2012: € 67,103 thousand).
Future minimum lease payments under non-cancelable operating leases are as follows: Up to 1 year 101,382 94,989
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.
Besides that, the risk taking capacity is calculated in the framework of regulatory limits. It is defined as the maximum loss which the bank or the banking group may encounter during the current calendar year without falling short of the regulatory minimum capital values.
Basel III was implemented in the European Union via a regulation and directive. The final regulation (CRR I) and the directive (CRD IV) was published on 27 June 2013 in the EU Official Journal.
After phase-out of the transitional period Basel III and CRR I/CRD IV respectively provides harder specifications for the regulatory capital with a minimum of core capital (common equity tier 1) of 4.5 per cent, core capital (tier 1) of 6 per cent and total capital of 8 per cent. Moreover, all banks are obliged to hold a so-called “capital conservation buffer” of 2.5 per cent comprising common equity tier 1 in addition to the new minimum requirements. This brings the requirement for total common equity tier 1 to 7 per cent, for core capital (tier 1) to 8.5 per cent and for total capital to 10.5 per cent.
Tier 2 capital available to be redesignated as tier 3 capital 357,016 302,070
The total own funds requirement is composed as follows: Risk-weighted assets according to section 22 BWG 65,334,163 68,136,388 of which 8 per cent minimum own funds for the credit risk according to sections 22a to 22 h BWG 5,226,733 5,450,911
Own funds requirement for position risk in bonds, equities and commodities 297,108 273,353
Risk-weighted assets for the credit risk according to asset classes break down as follows: Risk-weighted assets according to section 22 BWG on standardized approach 28,477,025 30,487,575
The following table provides an overview on the calculation methods that are applied to determine capital requirements in the subsidiaries: Credit risk Market risk Operational Unit Non-Retail Retail risk
Key management refers to the members of the Management Board and the Supervisory Board of RBI AG, the parent company and Raiffeisen Zentralbank Österreich Aktiengesellschaft, the major shareholder. Relations of key management to RBI are as follows (respective fair values): The following table shows relations of close family members of key management to RBI: There is no compensation agreed between the company and its members of the Management Board and Supervisory Board or employees in the case of a takeover bid.
The members of the Management Board of RBI AG are remunerated as follows: Fixed remunerations 5,478 5,752
Other remunerations 768 1,838 hereof remunerations of affiliated companies 155 568
For three members of the Management Board who changed from RZB to RBI the bonus calculation for 2010 was performed according to RZB return on equity. According to the contractual provisions applicable to these persons until the end of 2010 bonus payments were granted, of which € 634 thousand were paid in 2013 (2012: € 297 thousand).
Compared to 2012, 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 in the previous year and the retirement of one member of the Management Board in the year under review.
The Annual General Meeting held on 26 June 2013 decided an annual remuneration for the members of the Supervisory Board of € 550 thousand and transferred the distribution to the Board itself. The members of the Supervisory Board settled the distribution in their meeting on 26 June 2013 as follows: Chairman € 70 thousand, Deputy Chairman € 60 thousand, members of the Supervisory Board € 50 thousand. Session fees are not paid.
Herbert Stepic 14 June 2001 7 June 2013 1 Karl Sevelda was Deputy Chairman until 7 June 2013 and has been Chairman of the Management Board since 7 June 2013. 2 Effective as of 10 October 2010. 3 As of 7 June 2013, the Supervisory Board renewed the contract with Karl Sevelda until 30 June 2017. 4 Johann Strobl was a member of the Managemet Board until 7 June 2013 and has been Deputy Chairman since 7 June 2013. 5 Effective as of 10 October 2010. 6 As of 7 June 2013, the Supervisory Board renewed the contract with Johann Strobl until 30 June 2017. 7 As of 7 June 2013, the Supervisory Board renewed the contract with Martin Grüll until 30 June 2017.
Friedrich Sommer 8 July 20101 26 June 2013 1 Effective as of 10 October 2010. 2 Staff council delegates.
The committees of the Supervisory Board of RBI AG are as follows: Members of the Supervisory Board Working Committee Audit Committee Personnel Committee Remuneration Committee
On 21 January 2014, RBI announced that it intended to strengthen its capital base by issuing new shares. The first stage of this capital increase was an offering of new shares to selected qualified institutional investors by way of an accelerated bookbuilding (pre-placement), in which all of 97,473,914 new shares were placed on 22 January. RZB participated in the capital increase, through its wholly owned subsidiary Raiffeisen International Beteiligungs GmbH, with a commitment of € 750 million as part of the pre-placement. 21.3 per cent of the shares from the pre-placement were subject to clawback with deferred settlement. This should be applied to the extent that shareholders exercise their subscription rights in the second stage of the capital increase, a rights offering during the period from 24 January to 7 February 2014.
A key reason for the capital increase was to strengthen RBI’s equity base to comply with the new Basel III rules (CRR), under which participation capital counts towards common equity tier 1 (CET1) during the transition period only. The capital increase has improved the fully phased-in CET1 ratio by 3.2 percentage points, to 10.1 per cent.
(57) 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.
F.J. Elsner Trading Gesellschaft m.b.H., Vienna (AT) 35,000 EUR 100.0% OT
Raiffeisen Compulsory Pension Fund Management Company, joint stock comp., Zagreb (HR) 110,000,000 HRK 100.0% FI
RSC Raiffeisen Service Center GmbH, Vienna (AT) 2,000,000 EUR 51.9% BR
Raiffeisen Capital & Investment S.A., Bucharest (RO) 1,600,000 RON 100.0% FI
RAIFFEISEN TRAINING CENTER LTD. in liquidation, Zagreb (HR) 20,000 HRK 100.0% BR
The Company’s management is responsible for the Group accounting system and for the preparation and fair presentation of these consolidated financial statements in accordance with International Financial Reporting Standards (IFRSs) as adopted by the EU. This responsibility includes: designing, implementing and maintaining internal control relevant to the preparation and fair presentation of the consolidated financial statements that are free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances.
International Banking Units, Legal & Compliance, Management Secretariat, Marketing & Event Management, Organization & Internal Control System and Participations
Deputy to the Chief Executive Officer responsible for Credit Management Corporates, Financial Institutions, Country & Portfolio Risk Management, Retail Risk Management, Risk
Member of the Management Board responsible for Consumer Banking, Group & Austrian IT, Group Project Management Office, International IT, Lean, Operations, Procurement & Cost Management and Small Business &
Member of the Management Board responsible for Investor Relations, Planning & Finance, Tax Management and Treasury
BIS – Bank for International Settlement. International organization supporting the cooperation between the monetary and financial sectors.
CE – Central Europe. For RBI this segment encompasses the Czech Republic, Hungary, Poland, Slovakia, and Slovenia.
Core capital – Named tier 1 capital, this represents regulatory core capital as defined in Section 23 BWG.
Individual loan loss provisions – For credit risks related to loans and advances to customers and banks, provisions are made in the amount of expected loss according to uniform Group-wide standards. Risk of loss is deemed to exist if the discounted projected repayment amounts and interest payments are below the carrying value of the loans, taking collateral into account.
Interest bearing assets – Total assets less trading assets, derivatives, intangible fixed assets, tangible fixed assets, and other assets.
IRB (Internal Ratings-Based) – Approach to measure the own funds requirement for credit risks in accordance with Basel II. By applying the IRB approach, the own funds requirement is determined according to internal credit ratings. In the process, features specific to the borrower and the loan are taken into account. The ratings must be made by an independent source.
Loan to local stable funding ratio (LLSFR) – The sum of total loans and advances to customers less impairment losses on loans, divided by the sum of deposits from nonbanks, funding from supranational institutions, capital from third parties and the total outstanding bonds (with an original maturity of at least one year issued by a subsidiary bank to investors outside the bank’s consolidated group).
Loan/deposit ratio – Loans and advances to customers in relation to deposits from customers, less claims and obligations from (reverse) repurchase agreements and securities lending.
net interest margin (average interest bearing assets) – Net interest income in relation to average interest bearing assets.
non-performing loans (nPL) – Defined as the event where a specific debtor is unlikely to pay its credit obligations to the bank in full, or the debtor is overdue more than 90 days on any material credit obligation (RBI has defined 12 default indicators).
nPL coverage ratio – Risk provisions for loans and advances to customers in relation to non-performing loans to customers.
Operating result – Consists of operating income less general administrative expenses (operating expenses).
Own funds according to BWG – Consists of core capital (tier 1), additional and subordinated capital (tier 2), short-term subordinated capital and redesignated tier 2 capital (tier 3).
Provisioning ratio – Risk valuation ratio. Provisioning for impairment losses in relation to average loans and advances to customers.