Consolidated fi nancial statements Statement of comprehensive income 86 Statement of fi nancial position 89 Statement of changes in equity 90 Statement of cash fl ows 91 Segment reporting 93 Notes 100 Risk report 148 Auditor‘s report 233
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Common equity tier 1 ratio (fully loaded) 13.6% 2.1 PP 11.5% 10.0% – –
Dividend per share in € – – – – 1.02 1.17
And what will the new bank’s role be in the Raiffeisen Banking Group? STROBL: Like RZB, the new RBI will be the central institution of the Raiffeisen Banking Group. Its main responsibilities as the central institution include the administration and investing of liquidity reserves as well as the reconciliation of liquidity within the Raiffeisen Banking Group. In addition, RBI will offer selected services to the regional Raiffeisen banks. These services will, of course, be provided on an arm’s length basis. This means that external market prices must be charged for such services.
■ Secondly, the internal and external transparency of the Group will be increased: the harmonization of shareholder interests and regulatory requirements will become much simpler. At the same time, transparency is improved for all stakeholders by reducing the previously high complexity of the Group structure.
To mark the occasion of the publication of its financial results, RBI regularly invites Austrian investors to an investor lunch in vienna.
Walter Rothensteiner 1953 11 May 2001 Annual General Meeting Chairman 20173
Susanne Unger7 1 As of 15 March 2016; until 15 March 2016, Walter Rothensteiner 2 As of 15 March 2016; until 15 March 2016 Erwin Hameseder 3 As of 15 March 2016; until 15 March 2016 Heinrich Schaller 4 As of 15 March 2016; until 15 March 2016 Martin Schaller 5 As of 15 March 2016 7 As of 1 February 2016; until 31 January 2016 Martin Prater
The RBI AG Management Board manages the company according to clearly defined goals, strategies and guidelines on its own authority, with a focus on future-oriented business management and in line with modern business principles. In doing so, the Management Board pursues the good of the company at all times and considers the interests of shareholders and employees. Management Board members’ areas of responsibility have been defined by the Supervisory Board, without prejudice to the general responsibility of the Management Board, as follows (as at 31 December 2016): In the 2016 financial year, the following significant organizational changes, among others, took place at Tier 2 management level (B-1): ■ Management Board division Corporate Banking: As a result of the inclusion of employees of RLI Holding Gesellschaft m.b.H. in RBI AG, the new area “Leasing, Steering & Product Management” was created under Peter Lennkh.
The Management Board is aware of the need to continue to pursue the existing initiatives as well as to maintain its openness to new initiatives in order to further increase the percentage of women in highly qualified positions. To achieve this end, it encourages women to take advantage of these opportunities and to actively participate in further development.
Transparency The internet, particularly the company website, plays an important role for RBI with regard to open communication with shareholders, their representatives, customers, analysts, employees, and the interested public. Therefore, the website offers regularly updated information and services, including the following: annual and interim reports, company presentations, telephone conference webcasts, ad-hoc releases, press releases, investor relations releases, share price information and stock data, information for debt investors, financial calendar with advance notice of important dates, information on securities transactions of the Management Board and Supervisory Board that are subject to reporting requirements (directors’ dealings), RBI’s Articles of Association, the corporate governance report, analysts’ research and recommendations, as well as an ordering service for written information and registration for the automatic receipt of investor relations news by e-mail.
Negotiations with Alior Bank S.A. on the sale of the core banking business of Raiffeisen Bank Polska S.A. (Raiffeisen Polbank) were terminated on 7 December 2016. As agreed with the regulator, RBI is now preparing to list a 15 per cent stake in Raiffeisen Polbank in an initial public offering, while also working on rightsizing the business model.
The significant credit risk improvement is also reflected in the portfolio of non-performing loans, which fell € 1,843 million to € 6,486 million during the year. The reduction was primarily attributable to sales of non-performing loans (€ 1,187 million), while the remainder of the decline was largely due to the derecognition of uncollectible loans. Currency effects resulted in a € 52 million rise. The largest declines occurred in Group Corporates (down € 587 million), Ukraine (down € 299 million), Hungary (down € 252 million), Group Markets (down € 233 million), Russia (down € 152 million), Slovenia (down € 121 million as a result of the sale of the Slovenian subsidiary bank), Bulgaria (down € 77 million) and Croatia (down € 72 million). The NPL ratio declined 2.7 percentage points year-on-year to 9.2 per cent. Non-performing loans compared to loan loss provisions amounting to € 4,905 million. Despite the sales and write-offs, the NPL coverage ratio improved from 71.3 per cent to 75.6 per cent.
Depreciation of tangible and intangible fixed assets fell € 1 million quarter-on-quarter to € 94 million. An impairment charge for the Polbank brand was recognized in the previous quarter, while depreciation of tangible fixed assets was higher in the fourth quarter, largely in Slovakia.
Internal audits are the third line of defense in the monitoring process. Responsibility for auditing lies with Group Internal Audit at RZB and also the respective internal audit departments of the Group units. All internal auditing activities are subject to the Group Audit standards, which are based on the Austrian Financial Market Authority’s minimum internal auditing requirements and international best practices. Group Audit’s internal rules also apply (notably the Audit Charter). Group Audit regularly and independently verifies compliance with the internal rules within the RZB Group units. The head of Group Internal Audit reports directly to the Management Boards.
This resolution, any repurchase program based on it, or any resale program must be published along with the applicable duration. This authorization replaces the authorization granted at the Annual General Meeting of 4 June 2014 pursuant to § 65 (1) 4 and 8 of the AktG to purchase and use own shares and, with regard to their use, extends to the own shares already purchased by the company. No own shares have been bought since the authorization was issued in June 2016.
A reduction in the variable compensation components of remuneration packages also led to new, non-financial concepts for recognizing special achievements by employees being established. For example, a non-financial motivation program (starting with a system of medical services) was launched in Belarus to improve employee commitment and reward long-serving employees, while the “Success Celebration System”, which aims to strengthen team cooperation and collaboration between business areas, was established in Hungary.
In Russia, moderate economic growth of 1.0 per cent is expected following the easing of the recession; a positive trend in oil prices would further support the Russian economy. In Ukraine, a continuation of last year’s weak recovery process is anticipated whereas the economy in Belarus is still expected to shrink slightly. In general, Eastern Europe currently lacks strong external and internal growth drivers, as a result of which the region is not able to replicate the higher growth rates of the past. In addition, event risk remains considerable.
Outlook for RBI As a result of the merger with RZB, to be entered in the commercial register on 18 of March 2017, the following outlook applies to the combined bank.
Net provisioning for impairment losses in the Central Europe segment declined 71 per cent year-on-year, or € 95 million, to € 38 million in the reporting period. This included a € 79 million decrease in net allocations to individual loan loss provisions to € 38 million, while net allocations to portfolio-based loan loss provisions fell € 14 million to € 2 million. Most of this reduction was in Hungary, where a net total of € 7 million of provisions were released during the reporting year. A decrease of € 63 million was primarily attributable to sales of non-performing loans that were collateralized with real estate, as well as to rating improvements and lower defaults in the corporate customer business. In Slovakia, net provisioning for impairment losses declined € 23 million to € 13 million due to loan sales and repayments in the corporate customer business. In the Czech Republic, net provisioning for impairment losses decreased € 9 million year-on-year to € 32 million. Significantly lower portfolio-based loan loss provisions for retail customers, due to new default probability rates implemented in the previous year, as well as improvements in the economic environment and loan sales, were offset by higher individual loan loss provisions due to several defaults on the part of large corporate customers.
Other results improved € 91 million to € 8 million. Net income from financial investments increased € 41 million year-on-year to € 46 million. This mainly reflected proceeds of € 38 million from the sale of Visa Europe Ltd. shares to Visa Inc. in the reporting year (€ 21 million in Romania, € 10 million in Croatia and € 7 million in Bulgaria), as well as a € 6 million increase in valuation gains on securities in the fair value portfolio, primarily in Romania and Croatia.
Net interest income was down 9 per cent year-on-year, or € 82 million, to € 866 million. This was mainly due to a decrease in net interest income in Russia of 12 per cent, or € 80 million, to € 567 million. Apart from foreign currency effects, the decline was primarily caused by a € 175 million decrease in interest income from derivative financial instruments entered into for hedging purposes. This was a consequence of the lower interest rate level in 2016 (interbank interest rates in Russia were exceptionally high in the first half of 2015) as well as lower volumes of USD swaps. In addition, interest income from loans and advances to customers fell as a result of volume effects. In contrast, new retail business resulted in considerable margin-driven increases, particularly due to the focus on local currencies. In Ukraine, the 3 per cent, or € 5 million, decline in net interest income to € 171 million was entirely currency-related; in local currency, net interest income increased 14 per cent. In Belarus, net interest income rose just € 3 million to € 128 million, despite better margins, as a result of currency devaluations. The segment’s net interest margin improved 46 basis points year-on-year to 6.60 per cent.
Return on equity before tax 12.6% 9.3% 3.2 PP 17.0% 18.9% (1.9) PP
Recurring other net operating income 0 19 – (7) 7 –
Net gains (losses) on derivatives hedging fluctuating cash flows1 5,788 (436) 6,449 1,478 (661) (1,914)
in € thousand 2016 2015 Cash and cash equivalents at the end of previous period1 [12, 13] 13,482,547 6,768,685
Cash and cash equivalents include the cash reserve recognized in the statement of financial position, which consists of cash in hand and balances at central banks due at call. It does not include loans and advances to banks that are due on demand, which belong to operating activities.
Profit before tax in the Group Markets segment declined 29 per cent. This was mainly due to higher net provisioning for impairment losses. In contrast, operating income increased 32 per cent due to improved net trading income resulting from higher business volumes.
Interest and interest-like income, total 4,043,862 4,916,202 from balances at central banks 20,766 35,420 from loans and advances to banks 151,333 162,985 from loans and advances to customers 3,159,065 3,656,077 from financial investments 277,277 314,268 from leasing claims 153,773 172,598 from derivative financial instruments - economic hedge 100,653 279,689 from derivative financial instruments - hedge accounting 160,449 194,763 from shares and other variable-yield securities 78 198 from shares in affiliated companies 24,640 76,110 from other interests 3,661 11,541
Retail customers – small and medium-sized entities 378,288 250,229 128,059 123,087 16,965
In 2016, new customer relationships were capitalized following the purchase of Citibank’s retail and credit card business in the Czech Republic (RBCZ). The Group also capitalized customer relationship intangibles in relation to Raiffeisen Bank Polska S.A., Warsaw (RBPL), and Raiffeisen Bank Aval JSC, Kiev (AVAL). In the reporting year the carrying amount of the customer relationships as well as the gross amounts and cumulative impairments developed as follows: 2016 in € thousand AVAL RBPL RBCZ Total
Cost of acquisition or conversion in € thousand As at 1/1/2016
Land and buildings used by the Group for own purpose (267,094) 2,919 (41,901) 486,684 of which land value of developed land (529) 0 (578) 10,920
In the consolidated financial statements, deferred tax assets are recognized for unused tax loss carry-forwards which amounted to € 24,047 thousand (2015: € 48,824 thousand). The tax loss carry-forwards are mainly without any time limit. The Group did not recognize deferred tax assets of € 347,016 thousand (2015: € 476,384 thousand) because from a current point of view there is no prospect of realizing them within a reasonable period of time.
Dividends paid to non-controlling interests during the year 1 0 9,659 28,861 3,231 1 Included in net cash from financing activites
(38) Offsetting of financial assets and liabilities The disclosures set out in the tables below include financial assets and financial liabilities that are offset in the Group’s statement of financial position or are subject to an enforceable/unenforceable master netting arrangement or similar agreement that covers similar financial instruments, irrespective of whether they are offset in the statement of financial position or not.
Bonds, notes and other fixed-interest securities 3,748,871 15,465 70,865 2,929,009 95,835 78,586
The economic capital is compared to internal capital, which mainly comprises equity and subordinated capital of the Group. This capital form serves as a primary means of risk coverage for servicing claims of senior lenders if the bank should incur losses. As at year-end 2016, total utilization of available risk capital (the ratio of economic capital to internal capital) amounted to 46 per cent (2015: 51 per cent).
The rating model for project finance has five different grades which take both individual default probabilities and collateral into consideration. The project finance volume is composed as shown in the table below: in € thousand 2016 Share 20151 Share 6.1 Excellent project risk profile – very low risk 4,530,210 56.0% 3,907,386 48.3%
The rating grade excellent credit standing (rating A1) showed a decrease of € 6,404,344 thousand. This mainly resulted from the decrease in deposits at the Austrian National Bank. As a result of the internal rating downgrade of the Republic of Austria, the remaining deposits at year-end 2016 were classified in the rating grade A2 very good credit standing which showed an increase of € 1,912,333 thousand.
2015 Current Overdue Collateral in € thousand Up to 30 days 31 days, up to 90 days 91 days, up to 180 days 181 days, up to 1 year
Market risk in the Group results primarily from exchange rate risk, which stems from foreign-currency denominated equity investments in foreign Group units and the corresponding hedging positions entered into by the Group Asset/Liability Committee. In a narrow sense, exchange rate risk denotes the risk that losses are incurred due to open foreign exchange positions. However, exchange rate fluctuations also influence current revenues and expenses. They also affect regulatory capital requirements for assets denominated in foreign currencies, even if they are financed in the same currency and thus do not create an open foreign exchange position.
The Group’s funding structure is highly focused on retail business in Central and Eastern Europe. In addition, as a result of the Austrian Raiffeisen Banking Group’s strong local market presence, the Group also benefits from funding through the Raiffeisen Landesbanken. Different funding sources are secured in accordance with the principle of diversification. These include the issue of international bonds by RBI AG, the issue of local bonds by the Group units and the use of third-party financing loans (including supranationals). The Group units also use interbank loans with third-party banks, partly due to tight country limits and partly due to beneficial pricing.
Internal liquidity management is an important business process within general bank management because it ensures the continuous availability of funds required to cover day-to-day demands.
Responsibility for ensuring adequate levels of liquidity lies with the overall Management Board. In terms of functions, the responsible Management Board members are the Chief Financial Officer (Treasury) and the Chief Risk Officer (Risk Controlling). Consequently, the processes relating to liquidity risk are mainly carried out by two areas within the bank. Firstly, Treasury units control the liquidity risk positions within the strategy, guidelines and parameters set by decision-making bodies. Secondly, these are monitored and supported by independent Risk Controlling units. The risk units measure and model liquidity risk positions, set limits and monitor their compliance. In addition to the aforementioned line functions, all Group units have Asset/Liability Committees (ALCOs). These committees act as decision-making bodies for all matters affecting management of a unit’s liquidity positions and the structure of its statement of financial position, including determining strategies and guidelines for handling liquidity risks. The ALCOs make decisions and report to the respective management boards on at least a monthly basis using standardized liquidity risk reports. At Group level, this function is assumed by the Group ALCO. The work performed by Treasury and the corresponding ALCO decisions are mainly based on Group-wide, standardized Group rules and their local supplements, which take specific regional factors into account.
Monitoring and reporting on compliance with the limits is regular and effective, and the corresponding escalation channels are functional and used as intended. The defined limits are generally complied with in a very disciplined manner throughout the Group, and any breach by Group units is reported to the Group ALCO and escalated. In such cases, appropriate steps are undertaken in consultation with the relevant unit or contentious matters are escalated to the next highest responsible body.
Generally, a haircut is applied to all liquidity buffer positions. These haircuts include a market-risk specific haircut and a central bank haircut. While the market risk haircut represents the potential price volatility of the securities held as assets as part of the liquidity buffer, the central bank haircut represents an additional haircut by the central bank for each individual relevant security that may be offered as collateral.
Fee and commission expense (6,125) (1,546) (5,960) (3,291) 1 Adaptation of previous year figures
Karl Sevelda, Chairman 22 September 20101 With entry of merger of RZB AG into RBI AG (expected on 18 March 2017)²
FORZA SOLE s.r.o., Prague (CZ) 200,000 CZK 100.0% OT 1 Company type: BA Bank, BR Company rendering banking-related ancillary services, FH Financal holding, FI Financial institution, OT Other companies, VV Insurance,
TAURUS Raiffeisen-Immobilien-Leasing Gesellschaft m.b.H. in Liqu., Vienna (AT) 36,336 EUR 100.0% FI
The Zagreb Stock Exchange joint stock company, Zagreb (HR) 46,357,000 HRK 2.9% SC
 This is tenable overall based on the financial position of RZB/ RBI and the financial position of RBI AG and is justified based on the performance of the Group, RBI AG, the business unit and the individual concerned.
This item comprises subordinated capital and supplementary capital. Assets are subordinated if, in the event of liquidation or bankruptcy, they can only be met after the claims of the other – not subordinated – creditors have been satisfied. Supplementary capital contains all paid-in capital provided by a third-party and available for the company for at least eight years, for which interest is paid only from profit and which can be repaid in the case of insolvency only after all other creditors are satisfied.
According to IAS 39, a financial guarantee is a contract under which the guarantor is obliged to make certain payments. These payments compensate the party to whom the guarantee is issued for losses arising in the event that a particular debtor does not fulfill payment obligations on time as stipulated in the original terms of a debt instrument. At the date of recognition of a financial guarantee, the initial fair value corresponds under market conditions to the premium at the date of signature of the contract. For subsequent measurement the credit commitment has to be presented as a provision according to IAS 37.
Own shares of RBI AG at the reporting date are deducted directly from equity. Gains and losses on own shares have no impact on the income statement.
For fair value instruments for which no quoted prices or only insufficient observable market data is available fair value is determined using internal models based on the assumptions and parameters within these models. Due to the leverage inherent in derivatives, market values of derivatives can be subject to significant fluctuation.
Loan to local stable funding ratio (LLSFR) – This ratio includes a wider range of refinancing considering further stable funding. LLSFR is used as a measure for the prudence of a bank indicating the local refinancing structure of subsidiary banks. It is calculated with the sum of total loans and advances to customers less impairment losses on loans and advances to customers, divided by the sum of deposits from non-banks, 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 s̀ consolidated group).
Ukraine LLC Raiffeisen Leasing Aval Moskovskyi Prospect 9 Build. 5 Office 101 04073 Kiev Phone: +380-44-590 24 90 Fax: +380-44-200 04 08 www.rla.com.ua