Tier 1 ratio (fully loaded) 15.7% 15.4% 0.3 PP 14.9% 13.6% 13.6%
In the 2020 financial year, the members of the Supervisory Board and its Committees held meetings as detailed in the table below. The members of the Supervisory Board and the Committees demonstrated an extremely high level of commitment in carrying out their responsibilities and this, among other things, is reflected in an average attendance rate of around 96 per cent. No member of the Supervisory Board was unable to personally attend more than half of the meetings of the Supervisory Board.
Another important topic in 2020 was the self-evaluation and efficiency audit of the Supervisory Board as part of a project in cooperation with the Vienna University of Economics and Business. Generally, the Supervisory Board’s work was rated as very good and suggestions for improvement were drawn up based on a high starting level. A number of the recommendations were already implemented in 2020. These included the aforementioned formation of a Digitalization Committee at the Supervisory Board meeting on 16 September 2020 and the establishment of joint strategy workshops with the Management Board, the first of which took place on 28 September 2020.
As at the editorial deadline for this report on 26 February 2021, RBI’s share price was € 16.82. The share price was therefore relatively unchanged compared to the end of 2020. The ATX and the EURO STOXX Banks were up 8 per cent and 14 per cent respectively over the same period.
In addition to the regulatory requirements, and also building on them, RBI has its own internal CCooddee ooff CCoonndduucctt (CoC). The CoC - and the values laid out in 2019, described further below, to achieve the Vision & Mission - forms the bedrock of a corporate culture based on integrity and ethical principles. According to the CoC, RBI commits itself to sustainable corporate management and the associated social and environmental responsibilities. All employees are required to abide by the CoC in internal dealings and when in contact with customers or other stakeholders. The CoC thus safeguards that RBI’s high standards for employees’ business and ethical conduct are met. To ensure this, all
The WWoorrkkiinngg CCoommmmiitttteeee deals with general focus reports on individual industries in the corporate customer business and financial institutions area in relation to loan and limit applications. It takes these opportunities to discuss selected customer groups and financial institutions, as well as material positive and negative changes in customer creditworthiness. The Working Committee also looks at developments with respect to the 20 largest groups of connected customers in the corporate customer business in the course of the year and reviews special reports on certain customers or industries in response to current events. The Working Committee discusses and decides on limit applications for companies and financial institutions and, following discussion, forwards to the Supervisory Board limit applications that fall within the decision-making authority of the entire Supervisory Board. It also discusses reports written for the Supervisory Board, such as the annual report on all significant investments under § 28b of the BWG, before they are addressed by the entire Supervisory Board.
In addition to the loan and limit applications, the Working Committee also considered and approved capital contributions for Group subsidiaries as well as the delegation of Management Board members to serve on the governing bodies of non-Group companies in the financial year. The Working Committee discussed the new allocation of duties in the Management Board and associated questions relating to the organizational changes prompted by Martin Grüll’s departure from the Management Board in great detail. During the decision-making process, the members of the Working Committee also gave particular consideration to the remarks made by the supervisory authority regarding the reallocation of duties in the Management Board.
 Official targets for minimum requirements for own funds and eligible liabilities (MREL targets) are set annually for each resolution group (the next notification is expected in the second quarter of 2021)
Net trading income and the fair value result declined € 35 million compared to the previous quarter to minus € 2 million. The change was largely the result of market-driven valuations of currency derivatives, mainly used in hedging relationships, and credit derivatives at head office. This was partly offset by increases from valuations of issued certificates following losses in the previous quarter resulting from movements in own credit spread. Furthermore, income increased from the valuation of loans and advances measured at fair value in Hungary.
Staff expenses rose € 24 million quarter-on-quarter to € 391 million. The principal causes of this increase were the allocation to provisions for staff in Romania, as well as higher bonuses and salary adjustments, mainly in Russia. Compared to the previous quarter, other administrative expenses increased € 58 million to € 284 million due to seasonal factors, primarily as a result of a € 19 million rise in advertising expenses – especially in Russia, at head office and in Romania – in addition to a € 17 million rise in legal, advisory and consulting expenses, mainly at head office, in Romania and in the Czech Republic. Depreciation of tangible and intangible fixed assets increased € 13 million in the fourth quarter to € 110 million, mostly in Hungary and at head office.
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; the calculation of parts of the impairment charges under IFRS 9 is, however, carried out centrally. The Group unit employees and the 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 embedded 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
Capital, share, voting, and control rights The following disclosures satisfy the provisions of § 243a (1) of the Austrian Commercial Code (UGB): (1) As at 31 December 2020, the company’s share capital amounted to € 1,003,265,844.05 and was divided into 328,939,621 voting common bearer shares. As at 31 December 2020, 322,204 (31 December 2019: 322,204) of those were own shares, and consequently 328,617,417 shares were outstanding at the reporting date. Please see note (31) equity for further disclosures.
The Annual General Meeting held on 20 October 2020 authorized the Management Board pursuant to § 65 (1) 8, § 65 (1a) and § 65 (1b) of the AktG to purchase own shares and to retire them if appropriate without requiring any further prior resolutions to be passed by the Annual General Meeting, though with the approval of the purchase by the Supervisory Board can also be effected off-exchange under the exclusion of the shareholders’ pro rata tender right. Own shares, whether already purchased or to be purchased, may not collectively exceed 10 per cent of the company’s share capital. The authorization to purchase own shares expires 30 months after the date of the Annual General Meeting resolution, i.e. until 19 April 2023. The acquisition price for repurchasing the shares may be no lower than € 3.05 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 authorization may be exercised in full or in part or also in several partial amounts, for one or more purposes – with the exception of securities trading – by the company, by a subsidiary (§ 189a 7 of the UGB) or by third parties for the account of the company or a subsidiary.
Net fee and commission income 410 441 (7.0)% 107 101 6.2%
Profit after tax in the Central Europe segment was down € 110 million year-on-year to € 180 million, mainly due to higher impairment losses resulting from COVID-19. The decrease in profit after tax amounted to € 101 million in the Czech Republic, € 33 million in Slovakia and € 22 million in Hungary. In Poland, the after-tax loss reduced by € 46 million.
The expense for levies and special governmental measures rose € 4 million year-on-year to € 63 million. At the end of June, the bank levy in Slovakia was abolished for the second half of 2020, after being doubled at the start of the year. The bank levy in Slovakia in the first half of 2020 amounted to € 26 million. In Hungary, the € 13 million expense for the bank levy was booked in the first quarter for the entire year, as in the previous year. Contributions to the resolution fund rose € 3 million to € 20 million.
Expenses for levies and special governmental measures fell € 6 million year-on-year to € 19 million. One reason for the decline was the new banking levy introduced in Romania in the previous year (€ 10 million), which was abolished in 2020. In addition, in the previous year a loss from banking business due to governmental measures of € 3 million was reported due to the conversion of Swiss franc loans in Serbia. The contributions to the resolution fund increased € 7 million, above all in Bulgaria and Romania.
NPE coverage ratio 57.0% 60.0% (3.0) PP 57.0% 56.3% 0.7 PP
Net trading income and fair value result 93 35 168.1% 11 36 (69.8)%
Net fee and commission income was up 6 per cent, or € 23 million, to € 417 million, mostly because of a volume-related increase in income from investment fund management. Additionally, higher fee and commission income was recorded at head office, primarily in investment banking, in the institutional investor business, in cash management and corporate lending, and in the securities business.
Impairment losses on financial assets increased € 70 million year-on-year to € 134 million. The higher risk costs were primarily incurred at head office due to industry-specific adjustments related to COVID-19 on portfolios such as hotels, leveraged finance, corporate finance and project finance, to the updating of macroeconomic data and to defaults on the part of non-financial corporations.
Levies and special governmental measures (72) (57) 26.2% 2 1 193.8%
Net fee and commission income improved € 35 million to € 20 million, primarily because of a change in the segment allocation of several Group units.
Financial liabilities - held for trading [26, 32, 44] 5,980,342 5,788,811
Financial assets - designated fair value through profit/loss [17, 32] 1,804,752 915,884
Profitability is measured by the return on equity (ROE) and return on risk-adjusted capital (RORAC) based on the internal management systems. The return on equity shows the profitability of a CGU and is calculated as the ratio of profit/loss after deduction of profit/loss attributable to non-controlling interests to average consolidated equity employed. The return on equity reflects the yield of the capital employed of each segment. The calculation of the RORAC incorporates risk-adjusted capital, which reflects the capital necessary in case of possible unexpected losses. In RBI, this capital requirement is calculated within the economic capital model for credit, market and operational risk. This ratio shows the yield on the risk-adjusted equity (economic capital), but it is not an indicator pursuant to IFRS. Within the different countries and business lines the actual RORAC generated is compared with the respective predetermined minimal value (RORAC hurdle), which reflects appropriate market yield expectations.
Net trading income and fair value result 25,849 39,268 32,179 34,682
Net gains/losses from hedge accounting amounted to minus € 421 thousand (2019: € 3,166 thousand) in the reporting year. Despite the dynamic interest rate environment, hedging efficiency remains high. In order to counter fluctuations in interest rates, hedge accounting is increasingly being used at RBI.
Gains/losses on derecognition of non-financial assets held for sale 2,014 (258)
At Raiffeisen Bausparkasse Gesellschaft m.b.H., portfolio hedge accounting was introduced in the second quarter of 2019. The fair value changes of hedging instruments covered four quarters in 2020 with minus €75,597 thousand and just three quarters in 2019 with minus € 42,065 thousand. The negative valuation effects of the hedging instruments were recognized in net trading income of Raiffeisen Bausparkasse Gesellschaft m.b.H. in the first quarter of 2019, as at the start of the year hedging was still economic and not under IAS 39 hedge accounting. The further devaluation of the hedging instruments in the reporting year 2020 was attributable to the negative trend in long-term interest rates and is reflected by the appreciation of the hedged loans.
The following reconciliation shows the relationship between profit/loss before tax and the effective tax burden: Profit/loss before tax 1,233,442 1,766,786
Other leased assets (operating lease) 228,752 (542) (3,399) 25,899 (48,818) (9,731) 192,160
At the end of each financial year, goodwill is tested for impairment by comparing the recoverable value of each cash generating unit for which goodwill is recognized with its carrying value. The carrying amount value is equal to net assets including goodwill and other intangible assets which are recognized within the framework of business combinations. In line with IAS 36, impairment tests for goodwill are carried out during the year if a reason for impairment occurs.
The assumptions are based on internal and external sources. Macroeconomic assumptions of the research department were compared with external data sources and the five-year plan, presented to the Management Board and approved by the Supervisory Board.
The item liabilities from insurance activities contains obligations under insurance contracts resulting from contractual relationships between Raiffeisen Pension Insurance d.d. and the policyholders that were reported under financial liabilities – amortized cost in 2019. The reported liability is based on actuarial calculations.
Parallel shift of the yield curve by 100 basis points − − −
Taking the ECB’s recommendation on dividend payments into account, the Management Board of RBI AG will propose to the Annual General Meeting (planned for 22 April 2021) to pay a dividend of € 0.48 per share. The total dividend paid based on shares issued would be no more than € 157,891 thousand. The Management Board reserves the right to consider a possible additional dividend payment as soon as the ECB withdraws its recommendation.
Dividends paid to non-controlling interests during the year1 46,858 8122 0 0 0 1 Included in net cash from financing activities 2 Dividend for AT1
The following tables show the changes in the fair value of financial instruments whose fair value cannot be calculated on the basis of observable market data and are therefore subject to other measurement models. Financial instruments in this category have a value component which is unobservable directly or indirectly on the market and which has a material impact on the fair value. A net increase of € 33,285 thousand in the total portfolio of Level III assets was reported in 2020. While there was in particular a net increase of € 89,810 thousand in the volume of loans subject to mandatory fair value recognition, there was a net decrease of € 51,086 thousand in securities in the measurement category financial assets – fair value through other comprehensive income. In 2020, certificates totaling € 6,838 thousand were reclassified from Level III to Level II, as they can only be measured on the basis of observable market data.
Retail: DCF method (incl. prepayment option, withdrawal option etc.) Non Retail: DCF
 Corporate customers, project finance and financial institutions: The default profile is generated using a parametric survival regression (Weibull) approach. Forward-looking information is incorporated into the probability of default using the Vasicek one factor model. The default rate calibration is based on Kaplan Maier methodology with withdrawal adjustment.
Czech Republic Base 1.3% 1.1% (0.2) PP 1.8% 1.4% (0.5) PP 1.7%
in € thousand Accumulated impairment if 100% in Stage 2 Weighted average
As part of the JEREMIE initiative, the participating subsidiaries (Raiffeisenbank S.A., Bucharest, and Tatra banka a.s., Bratislava) have received guarantees from the European Investment Fund (EIF) to support lending to small and medium-sized enterprises. Since 2016 the Slovakian JEREMIE transaction has been converted into a funded credit guarantee via a Slovakian state-owned fund, EIF is no longer part of the transaction.
Capital and earnings projection for a three-year planning period based on assumptions of a significant downturn in the economy
The analysis of the stress scenarios in the normative perspective of the ICAAP is intended to ensure that the Group has sufficiently high capital ratios at the end of the multi-year planning period, even in a severe macroeconomic downturn scenario. The analysis is based on a multi-year macroeconomic stress test where hypothetical market developments in a severe but realistic economic downturn scenario are simulated. The risk parameters used include interest rates, foreign exchange rates and securities prices, as well as changes in default probabilities and rating migrations in the credit portfolio.
Credit exposure by country of risk grouped into regions: in € thousand 2020 Share 2019 Share
Raiffeisen Bank International | Annual Report 2020 2019 in € thousand Central Europe Southeastern Europe Eastern Europe Group Corporates & Markets
Retail trade except repair of motor vehicles 5,559,626 2.7% 5,099,390 2.7%
The rise in the VaR is largely attributable to the significant increase in credit spread risk in the euro financial sector as a result of COVID-19 and to the spread of Slovakian and Czech sovereign bonds. The introduction of new ruble hedges made it possible to offset the negative performance of other currencies such as the Czech koruna. The reduction in the interest rate risk was mainly driven by the euro yield curve.
Internal liquidity management is an important business processes within general bank management, because it ensures the continuous availability of funds required to cover day-to-day demands.
At the end of December 2020, the Chair of the Polish Financial Supervisory Authority (PFSA) – which is referred to by its Polish abbreviation, KNF – launched an initiative to resolve the ongoing public system debate and the related rising tide of litigation surrounding FX-indexed or FX-denominated (mainly Swiss franc) mortgages. At the suggestion of KNF, Polish banks were asked to evaluate a proposal for a possible settlement with CHF mortgage customers where the customers’ mortgages would be treated as if granted in zloty at a WIBOR-based interest rate (plus a margin historically applied to zloty-based mortgages). Financially, the proposed resolution scheme would thus not only remove a controversial element from the CHF mortgages – the basis for setting the exchange rate – but also retroactively eliminate all FX risk and transfer the related financial burden to the bank. RBI ultimately decided to withdraw from the working group established to analyze KNF’s proposal as RBI considered that it would not lead to a socially and economically equitable solution; in particular, the proposed resolution scheme – being on a voluntary basis – would not provide adequate legal certainty and would not be capable of ruling out further litigation on the same or related matters.
RBI was served with a lawsuit by the Romanian Ministry of Traffic against RBI and Banca de Export Import a Romaniei Eximbank SA (EximBank) regarding payment of € 10 million in May 2017. According to the lawsuit, in 2013, RBI issued a letter of credit on the amount of € 10 million for the benefit of the Romanian Ministry of Traffic at the request of a Romanian customer of Romanian Network Bank Raiffeisen Bank S.A., Bucharest, which is indirectly owned by RBI. EximBank acted as advising bank of RBI in Romania. The Romanian Ministry of Traffic had sent a payment request under the mentioned letter of credit in March 2014 which had been denied by RBI as having been received after the termination date thereof. In April 2018, the lawsuit was rejected as unfounded by the court of first instance, which was confirmed by the Bucharest Court of Appeal in October 2019.
In 2011, a client of Raiffeisenbank Austria, d.d., Croatia (RBHR) launched a claim for damages in the amount of approximately HRK 143 million (€ 19 million), alleging damages caused by an unjustified termination of the loan. In February 2014, the commercial court in Zagreb issued a judgment under which the claim was dismissed. The plaintiff launched an appeal, which remains pending. In the meantime, the plaintiff went through bankruptcy proceedings and the bankruptcy trustee has filed a request with the commercial court for the claim to be withdrawn. A ruling on the termination of the lawsuit against RBHR has not yet been issued by the commercial court in Zagreb.
In 2015, a former client of RBHR launched a claim for damages in the amount of approximately HRK 181 million (€ 24 million) based on the allegation that RBHR acted fraudulently by terminating loans, which had been granted for the financing of the client ’s hotel business, without justification. In previous court proceedings in respect of the termination of the loans as well as the enforcement over the real estate, all final judgments were in favor of RBHR. Several hearings were held as well as submissions exchanged. So far, no ruling has been issued.
Assets under operating leases (including unleased parts) break down as follows; the respective carrying amounts are presented in the statement of financial position under tangible fixed assets: Real estate leasing 129,564 153,999
Finance income from finance lease net investment, which is presented in profit or loss under net interest income, was € 124,964 thousand in the reporting period (2019: € 127,682 thousand). Income from operating leases, which is presented in profit or loss under other net operating income, was € 76,201 thousand (2019: € 76,128 thousand).
Assets and liabilities with counterparties outside Austria pursuant to § 64 (1) 2 of the Austrian Banking Act (BWG) were as follows: (62) Volume of the securities trading book
Natalie Egger-Grunicke2 18 February 2016 Until further notice 1 Effective as of 10 October 2010 2 Delegated by the Staff Council
Adipes Immobilienleasing GmbH & Co. Projekt Bremervörde KG, Frankfurt am Main (DE) 5,000 EUR 100.0% FI
RB International Investment Asia Limited, Labuan (MY) 1 USD 100.0% OT
Adoria Grundstückvermietungs Gesellschaft m.b.H., St. Pölten (AT) 36,360 EUR 24.5% FI
Die Niederösterreichische Leasing GmbH & Co KG, Vienna (AT) 72,673 EUR 40.0% FI
The recognition of financial liabilities according to IFRS 9 is largely in accordance with the rules of IAS 39, with the exception that changes in the fair value of liabilities measured at fair value which are caused by changes in RBI’s own default risk are to be booked in other comprehensive income.
RBI has developed a so-called quantitative benchmark test to assess whether the cash flow condition has been met. This test determines whether the undiscounted modified contractual cash flows differ significantly from the undiscounted cash flows of a benchmark instrument. The benchmark instrument is equivalent to the tested asset in all respects except for the modified interest components. At the time when the transaction is initially entered, the quantitative benchmark test is performed using 1,000 forward -looking simulations of future market interest rates over the life of the financial asset. The test assumes a normal distribution of interest rates using the single-factor Hull-White model when simulating the scenarios. To pass the quantitative benchmark test, the financial asset being tested must not exceed two significance thresholds. The significance thresholds are established as the quotient of the simulated cash flows from the modified interest rate components and the benchmark instrument. The quotient must not exceed 10 per cent over a reporting period (three months) or 5 per cent over the entire life of the financial asset being tested. If one of these two significance thresholds is exceeded, the financial asset will have failed the benchmark test and must be measured at fair value through profit or loss.
In accordance with IFRS 13, RBI uses the following hierarchy to determine and report the fair value for financial instruments: Quotation on an active market (Level I)
A financial asset is derecognized on account of a modification if the underlying contract is modified substantially. In RBI, terms are substantially modified if the discounted present value of the cash flows under the new terms using the original effective interest rate differs by at least 10 per cent from the discounted present value of the remaining cash flows of the original financial asset (present value test). In addition to the present value test further quantitative and qualitative criteria are considered in order to assess whether a substantial modification applies. These criteria consider the extension of the average remaining term, whereby in the case of Stage 3 loans which are restructured, this is often done to match the maximum expected payments. If this is the case, then additional judgement is required to determine whether the extension is a new instrument in economic terms. RBI has defined qualitative criteria for a significant change in the terms of the contract as a change in the underlying currency and also the introduction of clauses that would normally cause the contractual cash flow criteria according to IFRS 9 to fail, or a change in the type of instrument (e.g. a bond is converted to a loan).
Where the borrower and lender are the same, 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 the notes under (40) Offsetting financial assets and liabilities.
This section provides an overview of those aspects of the rules on impairment that involve a higher degree of judgement or complexity and major sources of estimation uncertainty. Quantitative information about each of these estimates and judgements is included in the related notes together with information about the basis of calculation for each affected line item in the consolidated financial statements.
RBI has introduced recognition and measurement methods in order to be able to assess at the end of every reporting period whether or not the credit risk for a financial instrument has significantly increased since initial recognition. Based on the method outlined above, RBI classifies its financial instruments into Stage 1, Stage 2, Stage 3 and POCI as follows:  Stage1 essentially includes all financial instruments whose credit default risk has not significantly increased since their initial recognition. Stage 1 also includes all transactions which show a low credit risk on the reporting date and where RBI has utilized the option available under IFRS 9 to waive the assessment of a significant increase in credit risk. A low credit risk exists for all debt securities whose internal credit rating on the reporting date is within the investment grade range. RBI did not make use of the exemption for low credit risks in the lending business. On initial recognition of loans, the bank records an impairment in the amount of the expected twelve-month loss. Stage 1 also includes loans where the credit risk has improved and which have thus been reclassified from Stage 2.
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 business of Raiffeisen Bank Aval JSC.
 40 per cent and 60 per cent of the annual bonus respectively will be deferred according to local law over a minimum period of three (in Austria, five) years (deferral period). Payment will be made on a proportional basis, 50 per cent cash and 50 per cent based on the phantom share plan.
The standard amendments represent the result of the second phase and address issues that could affect financial reporting following the reform of a benchmark interest rate, including its replacement by alternative benchmark interest rates. The amendments are effective for reporting periods beginning on or after 1 January 2021.
RReettuurrnn oonn aasssseettss ((RROOAA bbeeffoorree//aafftteerr ttaaxx)) is a profitability ratio and measures how efficiently a company can manage its assets to produce profits during a period. It is computed by dividing profit before tax/after tax by average assets (based on total assets, average means the average of year-end figure and the relevant month´s figures).
Procurement, Outsourcing & Cost Management, Group Security, Resilience & Portfolio Governance and Head Office Operations
The Management Board describes the processes for monitoring credit risk and the approach for determining impairments in Note 36 Expected Credit Losses. Also included in the notes to the financial statements are the topics Risk Report and Recognition and Measurement Principles.
We have conducted our audit in accordance with generally accepted standards on the audit of group management reports as applied in Austria.
Singapore RRBBII SSiinnggaappoorree BBrraanncchh 50 Raffles Place #31-03 Singapore Land Tower Singapore 048623 Tel: +65-63 05-6000
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