Provisioning ratio (average loans to customers) 0.21% 0.41% (0.20) PP 1.05% 1.64% 2.17%
Interview with the CEO 6 Management Board of RBI 8 Report of the Supervisory Board 10 Raiffeisen at a glance 14 RBI‘s strategy 16 RBI in the capital markets 17 Corporate Governance Report 21 Human Resources 40
Institutional protection schemes (IPS) From 2013, it has been possible to establish new mutual support structures on the basis of the new – henceforth European – banking legislation. Therefore, various institutional protection schemes have been established within the RBG since the end of 2013. Contractual or statutory liability arrangements were also entered into, under which the parties ensure one another’s security and, in particular, join forces to ensure liquidity and solvency when required. The institutional protection schemes are based on uniform, joint risk monitoring within an early warning system pursuant to Article 113 (7) CRR (Capital Requirements Regulation of the European Union). The institutional protection schemes were designed with two levels (currently one federal IPS and six regional IPS) to reflect RBG’s organizational structure.
Composition of the Management Board As at 31 December 2018, the Management Board consisted of the following members: Management Board member Year of birth Original appointment End of term
Special reports are compiled on current Audit Committee issues; at the end of each year, the Audit Committee also defines core issues for the upcoming year.
The Nomination Committee also specifies a target ratio for the under-represented gender on the Management Board and the Supervisory Board, consults on the strategy for achieving the defined target and regularly discusses the adoption of planned development programs. The Nomination Committee is also responsible for evaluating decision-making within the Management Board and Supervisory Board, ensuring that the Management Board and the Supervisory Board are not dominated by one individual person or a small group of persons in a way which is contrary to the company’s interests. The Nomination Committee verifies and makes this assessment based on the meeting processes and communication lines within each board (e.g. minute-
The Management Board’s remuneration paid in 2018 is shown in detail as follows: Raif feisen Bank Internat ional | Annual Repor t 2018
The RBI Group Diversity Policy was published in June 2018. It describes the relevance of this issue for RBI, defines the various responsibilities and also describes how to implement a diversity strategy in the Group.
RBI knows that increasing the proportion of women in management is good for the results generated by the company. Female empowerment is therefore strategically embedded in its diversity management and supported by numerous programs.
Banking sector in Austria In 2018 the Austrian banking sector continued its solid performance from the previous year, underpinned by the positive macroeconomic trend. The corporate customer business in particular put in a robust performance in 2018 – also for longer loan maturities.
Regulatory compliance (§ 39 (6) of the Austrian Banking Act (BWG))
Net gains/losses from hedge accounting declined € 13 million, due to the recalibration of fair value hedges at head office.
The 7 per cent, or € 743 million, decline in loans to banks to € 9,998 million, mainly resulted from a decrease in loans to the Czech and Hungarian central banks.
Despite the sale of the Polish core banking operations, loans to customers rose 4 per cent, or € 3,121 million, to € 80,866 million. Without the sale, they would have increased by 10 per cent, or € 7,754 million. A significant rise was recorded at head office (up € 3,596 million), due to short-term (utilization of loan commitments) and long-term loans. In addition, loans to households (mortgage loans) and non-financial corporations (investment financing) in particular increased; in the Czech Republic (up € 991 million or 10 per cent), in Romania (up € 898 million, or 19 per cent, in all product groups mainly to non-financial corporations and to a lesser extent households), in Slovakia (up € 717 million, or 8 per cent, mainly mortgage loans to households ) and in Russia (up € 568 million, or 7 per cent, despite the strong currency devaluation, mainly to non-financial corporations and households). In Central, Southeastern and Eastern Europe, loans to households increased by € 2,371 million and loans to non-financial corporations by € 1,921 million.
The Group’s funding from banks, which mainly relates to short-term funding at head office, increased 7 per cent, or € 1,602 million, to € 23,980 million.
Slovakia (up € 891 million or 9 per cent), the Czech Republic (up € 738 million or 6 per cent), Romania (up € 679 million or 11 per cent), Hungary (up € 621 million or 12 per cent), and Croatia (up € 346 million or 10 per cent).
The preparation of financial information on an individual Group unit level is decentralized and carried out by each Group unit in accordance with the RBI guidelines, with the calculation of parts of the impairment charges under IFRS 9 carried out centrally. The Group unit employees and managers responsible for accounting are required to provide a full presentation and accurate valuation of all transactions. Differences in local accounting standards can result in inconsistencies between local individual financial statements and the financial information submitted to RBI. The local management is responsible for ensuring implementation of mandatory internal control measures, such as the separation of functions and the principle of dual control. The reconciliation and validation controls are imbedded in the aggregation, calculation and accounting valuation activities for all financial reporting processes. Particular focus is placed on the controls for the core processes that play a fundamental role in the preparation of the financial statements. This primarily relates to processes which are relevant for valuations, the results of which have a significant impact on the financial statements (such as credit risk provisions, derivatives, equity participations, provisions for personnel expenses and market risk).
Net fee and commission income 49 52 324 317 92 93
Net gains/losses from hedge accounting 0 0 0 (20) 0 0
Items which are not reclassified to profit or loss 19,233 (135,962)
Non-trading financial assets - mandatorily fair value through profit/loss [15, 31, 44] 559,782 – –
As a general rule, only those fees and charges that are not to be regarded as an integral part of the effective interest rate and are therefore not directly related to the granting of the loan or the creation of the financial instrument fall within the scope of IFRS 15. Therefore, the fees and charges to be recognized in net interest income in accordance with IFRS 9 do not fall within the scope of IFRS 15, as they are components of the effective interest rate and are to be amortized over the term of the financial instrument, irrespective of whether they are agreed in advance or in arrears.
Financial liabilities - held for trading 157,931 0 0 0 4,414,477
Financial assets - designated fair value through profit/loss 5,370,028 (853,669) 0 4,516,359
Non-trading financial assets - mandatorily fair value through profit/loss – 563,486 7,277 570,763
The carrying amount of assets reclassified from the categories financial assets – designated fair value through profit / loss, financial assets – held for trading and financial assets – available for sale (IAS 39) to financial assets – fair value through other comprehensive income amounted to € 521,685 thousand at the date of reclassification. As of 31 December 2018, the fair value was € 326,512 thousand. If no reclassification had been applied, this would have led to a profit contribution of minus € 537 thousand in the income statement. For financial assets reclassified from financial assets – designated fair value through profit/loss to financial assets – fair value through other comprehensive income, the weighted effective interest rate at the time of reclassification was 4.24 per cent. The interest income recognized amounted to € 29,832 thousand.
The changes in debt securities – designated fair value through profit/loss of € 62,677 thousand and debt securities issued – designated fair value through profit/loss of minus € 32,826 thousand resulted mainly from valuation changes at head office. These changes are offset by opposite valuations of derivatives held for economic hedge purposes in the position net gains/losses on financial assets and liabilities - held for trading.
Net trading income was down € 18,583 thousand year-on-year. While net gains on derivatives of € 181,425 thousand were reported in the previous year, net losses of € 199,038 thousand were booked in the reporting year. This was largely based on valuation changes from foreign exchange derivatives at head office and in Russia and Poland. In the reporting year, losses of € 131,797 thousand from derivatives were recognized in connection with economic hedges (2017: gains of € 291,687 thousand). In addition to the above amounts, the position included net gains/losses on derivatives - held for trading.
Gains/losses on derecognition of non-financial assets held for sale 42 (4,607)
Staff expenses increased 2 per cent to € 1,579,673 thousand. Currency effects reduced expenses. In contrast, salary adjustments and higher bonuses increased staff expenses, mainly in Russia, Ukraine, Romania and Slovakia. A change in the law in Romania also resulted in a neutral shift between the items wages and salaries and social security costs and staff-related taxes. Due to the sale of the Polish core banking operations, average headcount decreased 394 full-time equivalents year-on-year to 49,745 employees. On an adjusted basis, an increase of 759 full-time equivalents, or 2 per cent, arose.
Main driver of the result of deconsolidation was the loss resulting from the sale of the Polish core banking operations end of October 2018 amounting to € 119,848 thousand. Moreover, a negative effect of € 63,650 thousand derived from the recycling of cumulative currency differences formerly recognized in other comprehensive income.
Fair value changes of the hedged items in portfolio hedge of interest rate risk (43,485) 74,604
Provisions for banking business due to governmental measures 14,503 0 0 (13,440) (836) (227) 0
The Group contributes to the following defined benefit pension plans and other post-employment benefits:  Defined benefit pension plans in Austria and other countries  Other post-employment benefits in Austria and other countries  These defined benefit plans and other post-employment benefits expose the Group to actuarial risks, such as longevity risk, currency risk, interest rate risk and market (investment) risk.
No funding value adjustment (FVA) was considered to measure OTC derivatives. RBI is observing market developments and will develop a method to calculate the FVA where appropriate.
RBI Group considers a financial instrument to have experienced a significant increase in credit risk when one or more of the following quantitative, qualitative or backstop criteria have been met: Quantitative criteria
The criteria above have been applied to all financial instruments held by RBI and are consistent with the definition of default used for internal credit risk management purposes. The default definition has been applied consistently to model the Probability of Default (PD), Exposure at Default (EAD) and Loss given Default (LGD) throughout RBI’s expected loss calculations.
Loans and debt securities are written off (either partially or fully) where there is no reasonable expectation of recovery. This happens when the borrower does not have income from operations anymore and collateral values cannot generate sufficient cash flows to repay amounts subject to the write-off. For the exposure of companies in bankruptcy, loans are written down on the value of the collateral if the company no longer generates cash flows from its operating business. The retail business takes into account qualitative factors. In cases where no payment has been made for one year, the outstanding amounts are derecognised whereby depreciated assets can continue to be subject to enforcement activities.
Changes due to change in credit risk (net) (26,761) 61,602 328,213 363,053
The following table shows the development of provisions for loan commitments, financial guarantees and other commitments given: Stage 1 Stage 2 Stage 3 Total in € thousand 12 month ECL Lifetime ECL Lifetime ECL
Financial assets - fair value through other comprehensive income 119,858 5,209 255,060 55,189
The Group Asset/Liability Committee assesses and manages the statement of financial position structure and liquidity risk and defines the standards for internal funds transfer pricing. In this context it plays an important role in planning long-term funding and hedging structural interest rate and foreign exchange risks. The Capital Hedge Committee is a sub-committee of the Group Asset /Liability Committee and manages the currency risk inherent in the Group’s capital position.
Maintaining an adequate level of capital is a core objective of the Group. Capital requirements are monitored regularly based on the risk level as measured by internal models, and in choosing appropriate models the materiality of risks annually assessed is taken into account. This concept of overall bank risk management provides for meeting capital requirements from both a regulatory perspective (sustainability and going concern perspective) and from an economic point of view (target rating). Thus it covers the quantitative aspects of the internal capital adequacy assessment process (ICAAP) as legally required. The full ICAAP process of the Group is audited during the supervisory review process for RBI credit institution group (RBI-Kreditinstitutsgruppe) on an annual basis.
The Group Operational Risk Management & Control Committee comprises representatives of the business areas (retail, market and corporate customers) and representatives from Compliance (including financial crime), Internal Control System, Operations, Security and Risk Controlling, under chairmanship of the CRO. This committee is responsible for managing the Group’s operational risk (including conduct risk). It derives and sets the operational risk strategy based on the risk profile and the business strategy and also makes decisions regarding actions, controls and risk acceptance.
portfolio diversification, for example via limits for the total exposure to individual industry segments and countries and through ongoing updates to lending standards.
in € thousand 2018 Share 2017 Share 8 Weak credit standing / sub-standard 1,133,628 1.5% 1,163,247 1.7%
6.2 Good project risk profile – low risk 968,352 13.7% 1,947,891 23.5%
Czech Republic. Rating grade 6.2 registered a decline of € 979,539 thousand to € 968,352 thousand, primarily due to the sale of the bank’s core banking operations in Poland. Rating improvements, expired project financing in Germany and Russia and the depreciation of the Russian ruble also resulted in a decline. Expired project financing in Russia, rating shifts, and the sale of the core banking operations in Poland also led to a reduction of € 403,231 thousand in rating grade 6.3 to € 113,598 thousand.
Rating grade 1 registered an increase of € 288,621 thousand to € 3,797,198 thousand due to an increase in the bond portfolio as well as money market transactions in Belgium, China, and Hungary and rating upgrades among Austrian and Chinese banks. However, the increase was partially offset by lower repo transactions in Germany. Shifts occurred in rating grades 2 and 3, essentially due to rating upgrates for certain regional Raiffeisen banks. The rise of € 107,358 thousand to € 1,346,752 thousand in rating grade 4 was the result of money market transactions in Russia. The decrease of € 166,823 thousand to € 31,239 thousand in rating grade 7 was attributable to a decline in documentary credits in Uzbekistan as well as guarantees issued and repo transactions in Russia. In addition, a Russian bank was upgraded to rating grade 6.
The volume of non-performing loans to non-banks fell € 1,427,113 thousand. The organic decrease of € 1,065,660 thousand was primarily attributable to the sale of the core banking operations of Raiffeisen Bank Polska S.A., sales and recoveries of non-performing loans, and the derecognition of commercially uncollectible loans at RBI AG, in Croatia, Ukraine, Hungary, and Russia. Currency losses were responsible for a decrease of € 13,732 thousand. The ratio of non-performing loans to total credit exposure (NPL ratio) decreased 1.5 percentage points to 2.9 per cent, and the NPL coverage ratio increased 10.5 percentage points to 77.7 per cent.
Wholesale trade and commission trade (except car trading) 12,794,317 7.3% 12,638,639 7.4%
In compliance with regulatory requirements for intraday liquidity management a daily stressed forecast of available intraday liquidity at defined critical times during a business day is calculated for RBI. This stressed forecast, which considers outflow assumptions analogous to the regular liquidity stress testing in the Group (see above), is quite conservative since inflows that are not final (revocable) are not considered at all. In case of limit breaches, the intraday contingency and escalation process is triggered. At Group Unit level the local intraday liquidity management process is within the responsibility of the local Treasury Unit which ensures that the following minimum standards are implemented locally: clear responsibilities and workflows for managing intraday liquidity; daily monitoring of available intraday liquidity; intraday liquidity forecasting model and limit; escalation and contingency processes and measures in case of limit breaches.
The uniform increase in average liquid assets and net outflows in the comparative period resulted in a 100 per cent convergence, as is the case with ratios of more than 100 per cent. The change was mostly driven by RBI AG, which saw an increase in average liquid assets due to an increase in holdings in a central bank account. The outflows related mainly to non-operational corporate deposits.
The following information was prepared pursuant to Section 48 (1) of the Austrian Banking Act (BWG).
Fiduciary business not recognized in the statement of financial position was concluded with the following volumes on the reporting date: Loans to customers 224,240 222,727
The following tables were prepared pursuant to Section 64 (1) 18 of the Austrian Banking Act (BWG).
Késmárk utca 11-13. Szolgáltató Korlátolt Felelősségű Társaság, Budapest (HU) 100.0% 1/11 Sale
Baumgartner Höhe RBI Leasing-Immobilien GmbH, Vienna (AT) 35,000 EUR 75.0% FI
Raiffeisen Kapitalanlage-Gesellschaft mit beschränkter Haftung, Vienna (AT) 15,000,000 EUR 100.0% FI
Below is a description of the Group’s investments in non-consolidated structured entities by type.
The Group establishes structured entities to accommodate client requirements to hold investments in specific assets. The Group also invests in funds that are sponsored by third parties. A Group entity may act as fund manager, custodian or in some other capacity and provide funding and liquidity facilities to both Group-sponsored and third-party funds. The funding provided is collateralized by the underlying assets held by the fund.
Austria Leasing GmbH & Co. KG Immobilienverwaltung CURA, Eschborn (DE) 10,000 EUR 100.0% FI
Nereus Property, s.r.o., Prague (CZ) 50,000 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,
Raiffeisen (Beijing) Investment Management Co., Ltd., Beijing (CN) 2,000,000 CNH 100.0% FI
RBI Real Estate Services Polska SP.z.o.o., Warsaw (PL) 400,000 PLN 100.0% FI
Raiffeisen Insurance and Reinsurance Broker S.R.L, Bucharest (RO) 180,000 RON 100.0% BR
"Zentrum Puntigam" Errichtungs- und Betriebsgesellschaft m.b.H. in Liqu., Vienna (AT) 35,000 EUR 50.0% OT
Closed Joint Stock Company Vinegar-yeast Factory, Uzyn (UA) 9,450,000 UAH 33.8% OT
NÖ Raiffeisen Kommunalprojekte Service Gesellschaft m.b.H., Vienna (AT) 50,000 EUR 26.0% FI
Joint Stock Company Stock Exchange PFTS, Kiev (UA) 32,010,000 UAH 0.2% OT
Steirische Leasing für Gebietskörperschaften Ges.m.b.H., Graz (AT) 36,336 EUR 50.0% FI
€ 13,290,788 thousand, representing an increase of € 398,930 thousand compared to the 2017 year-end figure.
The common equity tier 1 ratio (fully loaded) improved 0.6 percentage points to 13.4 per cent, with the sale of the Polish core banking operations accounted for 0.9 percentage points. The common equity tier 1 ratio (fully loaded) improved 1.3 percentage points to 14.9 per cent, and the total capital ratio (fully loaded) was up 0.3 percentage points to 18.2 per cent.
An asset is subsequently measured at fair value through other comprehensive income (FVOCI) if it is held within a business model whose objective is both collecting contractual cash flows and selling financial assets. In addition, the contractual terms of the
They are measured at amortized cost. If there is a difference between the amount paid and face value – and this has an interest character – the effective interest method is used and the amount is stated under net interest income. Interest income is calculated on the basis of the gross carrying amount provided the financial asset is not impaired. As soon as the financial asset is impaired,
When quoted prices for financial instruments are unavailable, the prices of similar financial instruments are used to determine the current fair value or accepted measurement methods utilizing observable prices or parameters (in particular present value calculations or option price models) are employed. These methods concern the majority of the OTC-derivatives and non-quoted debt instruments.
As outlined in the chapter application of new and revised standards, the application of IFRS 9 has fundamentally changed the way in which RBI reports impairment losses on loans and advances. From 1 January 2018, impairment losses for all debt instruments which are not measured at fair value and for loan commitments and financial guarantees (hereinafter referred to in this section as financial instruments) are recorded in the amount of the expected credit loss. Equity instruments are not subject to the impairment rules of IFRS 9.
Interest expense from sale and repurchase agreements and interest income from reverse sale and repurchase agreements is accrued in a straight line over their term to maturity and shown under RBI’s net interest income.
Shares in subsidiaries not included in the consolidated financial statements because of their minor significance and shares in associated companies that have not been valued at equity are included under the item investments in subsidiaries and associates and assigned to the measurement category financial assets available-for-sale. They are measured at acquisition cost.
IFRIC 23 (Uncertainty over income tax treatments; entry into force 1 January 2019)
Management is responsible for the preparation of the group management report in accordance with Austrian Company law.
Management is responsible for other information. Other information is all information provided in the annual report, other than the consolidated financial statements, the group management report and the auditor’s report.
Hungary Raiffeisen Corporate Lízing Zrt. Akadémia utca 6 1054 Budapest Phone: +36-1-477 8709 Fax: +36-1-477 8702 www.raiffeisenlizing.hu
Sweden RBI Representative Office Nordic Countries Drottninggatan 89, Plan 14/14th Floor