entire set of measures to adjust our costs to the new business environment, including a staff reduction of about one fourth of the peak level in 2008 to below 3,000 employees. However, we had high profits in Hungary over the years, which helped us to partially offset the losses from the 1998 crisis in Russia. Today, Russia generates enough profit to more than offset the losses in Hungary.
In conclusion I would like to express, on behalf of the Supervisory Board, our gratitude to the Management Board, the Works Council and all employees for their high commitment in the past year.
At the end of 2012, RBG, Austria‘s largest banking group, managed € 86 billion in domestic customer deposits (excluding building society savings), of which around € 51 billion was held in savings deposits. With a market share of 32 per cent, RBG has kept its role as market leader among Austria‘s banks. RBG’s strong market position was achieved through healthy organic growth.
Deposit protection through the Raiffeisen deposit 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.
Corporate Center Services performed by Group head office, such as liquidity and balance sheet structure management o v er v ie w o f rB i
■ The effects on profitability and risk are always taken into account when using finite resources such as capital and liquidity.
Strategic business focus ■ RBI concentrates primarily on financial services relating to CEE as the region of origin of the service or relationship. Further available resources are allocated to the coverage of selected markets in Asia, where RBI acts as a niche player. An expansion of this sphere of operation is generally not planned.
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.) in order to further develop the Ukrainian market. The focus here is on mediumsized 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 and insurance products are being promoted.
Transparency is central to corporate governance and thus of particular importance to RBI. The Corporate Governance Report is structured following the legal guidelines of Section 243b of the Austrian Commercial Code (UGB) and is based on the structure set forth in Appendix 2 of the ACGC.
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 Versicherungen AG (chairman)
The Personnel Committee dealt with remuneration matters of Management Board members as well as their employment contracts. In particular, it was responsible for approving bonus allocation and stock allocation to members of the Management Board through the Share Incentive Program.
2010 bonus payments to three members of the Management Board, who had transferred from RZB to RBI, were 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; € 297,000 were paid in 2012 and € 643,500 are due for payment in 2013. The actual payment amount is determined at the discretion of RBI’s Personnel Committee.
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 apply to bonus payments for 2011 and subsequent years.
The Annual General Meeting selected KPMG Austria AG Wirtschaftsprüfungs- und Steuerberatungsgesellschaft, Vienna as its external auditor and bank auditor for the 2012 financial year. KPMG 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.
Living the sustainability strategy RBI’s sustainability strategy is based on three pillars that equally define the responsibility of and the standards set by the company itself: ■ Responsible banker ■ Fair partner ■ Dedicated corporate citizen
High debts and high budget deficits, as well as significant overall economic problems, led to a further loss of confidence in the government finances of other Southern European countries. In light of the structural problems in several euro countries and the institutional deficits of the Eurozone as a whole, some market participants temporarily questioned whether the Eurozone would even continue to exist. When financing conditions deteriorated even further for Italy and Spain in the summer of 2012, the European Central Bank (ECB) seized the initiative. The ECB announced its willingness to intervene in the secondary markets for sovereign bonds in order to lower interest rates. This commitment was made under the condition of economic reforms as well as an austerity program for public finances, both subject to monitoring by external authorities. Once the prospect of central bank intervention became apparent, the situation on the financial markets eased and refinancing rates for Italy and Spain declined to manageable levels.
In 2012, an impairment totaling € 38 million (2011: € 187 million) was recorded on goodwill. As in the previous year, prospects for Ukraine and the higher discount rate used for valuation purposes at Raiffeisen Bank Aval made a goodwill impairment of € 29 million (2011: € 183 million) necessary. The goodwill of Raiffeisen Bank Aval has therefore been completely written off as of yearend 2012. Additional other smaller goodwill impairments at various different Group units totaled € 9 million.
Net interest income Net fee and commission income Net trading income Other net operating income1 1 Excl. impairment of goodwill
Other results net income from derivatives and liabilities Net income from derivatives and liabilities fell from plus € 413 million to minus € 127 million in 2012. Liabilities designated at fair value (fair value option), which had generated a gain of € 184 million in 2011, caused a loss of € 312 million in the reporting year. This loss consisted of an interest component totaling minus € 167 million and valuation losses on lower credit spreads of € 145 million. However, liabilities were countered by positive valuation gains from other derivatives in the same amount. Net income from other derivatives declined € 135 million to € 59 million. The repurchase of liabilities generated income of € 110 million in the reporting year, which included the repurchase of hybrid bonds totaling € 113 million.
After minus € 135 million in the previous year, net income from securities at fair value through profit and loss improved to plus € 155 million in 2012. The valuation of securities in the fair-value portfolio led to a gain of € 73 million after causing a loss of € 124 million in 2011. There were considerable valuation gains on bonds and municipal bonds at Group head office and in Hungary, while Ukraine posted valuation losses on bonds. Sales of securities from the fair-value portfolio, mainly recorded at Group head office, generated income of € 82 million (2011: minus € 11 million).
The non-performing loans to customers portfolio fell € 157 million quarter-on-quarter to € 8,183 million, with currency movements accounting for € 64 million of the decline. The organic reduction was mainly attributable to Ukraine; Group head office, Slovenia and Poland recorded the largest increases in non-performing loans.
Other results net income from derivatives and liabilities Net income from derivative financial instruments improved € 68 million to minus € 20 million in the fourth quarter, mainly due to the fair value option. Net income from own issues at fair value through profit or loss also stood at minus € 44 million following minus € 102 million in the previous quarter.
Statement of financial position RBI’s total assets declined 7 per cent or € 10.9 billion to € 136.1 billion during the course of 2012. The impact on statement of financial position was due to measures taken in compliance with stricter EBA requirements.
Supranational institutions (e.g., EBRD and IFC) and their contributions to refinancing support SME and energy efficiency projects in CEE. Thus, they are important partners for the Group, particularly because their financing has a positive influence on the development of the loan to local stable funding ratio. RBI cooperates with these institutions not only in financing but also in other areas such as risk-sharing programs that optimize risk-weighted assets.
Capital requirements The first six months of 2012 were primarily dedicated to implementing the steps necessary to reach a core tier 1 capital ratio of 9 per cent as required by the EBA. The largest European banks, including RZB Group, were assigned this target in the fall of 2011 in order to fortify the banking system against the volatile market environment and to improve the stability of the financial markets. RBI itself was not part of the EBA stress tests, therefore there are no detailed results for RBI. Nevertheless, RBI, functioning as part of RZB, has worked on several initiatives to achieve the stipulated ratio. The implementation of these measures was initiated in 2011. This time frame enabled RBI to not only meet the core tier 1 target set by the EBA by June 2012 but also to surpass it considerably.
In 2012, the Group Corporates segment recorded a 15 per cent decrease in profit before tax to € 319 million, attributable largely to lower operating income combined with higher administrative expenses. Total assets declined 17 per cent year-on-year to € 19.0 billion.
Net provisioning for impairment losses (75) (79) (4.9)% (40) (15) 166.8%
Return on equity before tax 14.2% 21.0% (6.7) PP 10.2% 12.3% (2.1) PP
Net interest margin (average interest-bearing assets) 4.21% 4.41% (0.20) PP 4.27% 3.94% 0.33 PP
Net provisioning for impairment losses (20) (14) 41.7% (8) (6) 34.5%
Net trading income was up 82 per cent year-on-year to € 69 million. Net income from currency-based transactions improved by € 64 million to € 57 million, primarily due to revaluation gains on currency swaps held for proprietary trading as well as on foreign currency positions. In contrast, net income from interest-based transactions declined € 33 million to € 12 million due to a reduced portfolio in the trading book.
Net provisioning for impairment losses 18 (18) – 20 (1) –
Unrealized net gains (losses) of the period (302,230) 31,321 (46,904) 153,967 83,486 (44,556)
Loans and advances to banks [15, 35, 36] 22,323,301 25,748,044 (13.3)%
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 Corporate Customers and Network Corporate Customers & Support 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, Malaysia and Malta 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.
The Corporate Center segment encompasses all of the services provided by Group head office in various divisions that serve to implement the Group’s overall strategy and that are allocated to this segment to ensure comparability. Moreover, this segment includes the following areas: Liquidity management and balance sheet structure management as part of proprietary trading, participations (in particular those of subsidiaries in CEE), income from banking operations carried out by Group head office and by the Maltese subsidiary for refinancing Group units, the Austrian transaction services business, which offers a wide range of order processing products and services for financial services providers, as well as income from the holding and other companies that do not fall directly under another segment.
Reporting entity Raiffeisen Bank International AG (RBI AG) is registered at the Vienna Commercial Court (Handelsgericht Wien) under Companies Register number FN 122.119m. The company is domiciled at Am Stadtpark 9, 1030 Vienna. The consolidated financial statements are lodged in the Companies Register in accordance with Austrian disclosure regulations and published in the official register of the Wiener Zeitung. Raiffeisen-Landesbanken-Holding GmbH indirectly holds the majority stake in Raiffeisen Bank International AG and therefore RBI is entered into the consolidated financial statements of Raiffeisen-Landesbanken-Holding GmbH. Raiffeisen Zentralbank Österreich Aktiengesellschaft, Vienna, is the superordinated credit institution and RBI forms part of this credit institution group.
IFRIC 20 applies to waste removal costs that are incurred in surface mining activity during the production phase of the mine (“production stripping costs”). Under the interpretation, the costs from this waste removal activity (“stripping”) which provide improved access to ore is recognized as a non-current asset (“stripping activity asset”) when certain criteria are met, whereas the costs of normal ongoing operational stripping activities are accounted for in accordance with IAS 2 “Inventories.” 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 existing asset of which it forms part. These amendments will have no impact on the consolidated financial statements.
Included for the first time in the financial period 15 8 0 0
RBI LGG Holding GmbH, Vienna (AT) 100.0 % 1/2 Start of operations
Park City real estate Holding d.o.o., Belgrade (RS) 100.0 % 1/6 Start of operations
On 30 April 2012, the formal closing of the acquisition of a 70 per cent stake in Polbank EFG S.A., Warsaw, took place. Polbank was included in the consolidated financial statements for the first time as of 1 May 2012. The provisional cash consideration for the 70 per cent stake amounted to € 460,000 thousand. Immediately after the closing, the seller Eurobank EFG exercised the put option for the 30 per cent stake in Polbank and sold it for at least € 176,350 thousand to RBI. In addition, a value adjustment amounting to € 30,000 thousand in favour of RBI was agreed and the capital increase of Polbank amounting to € 210,300 thousand – carried out by the seller and taken over by RBI at nominal value – was included. The final total consideration transferred depends on the equity in the audited closing balance as of 30 April 2012 of Polbank or Raiffeisen Bank Polska. Amounts above equity guaranteed in the purchase contract are to be paid 1:1.
The individual financial statements of RBI subsidiaries in Belarus are adjusted before translation into the group currency and before consolidation, so that all assets and liabilties are stated with the same level of purchasing power. Amounts in the statement of financial position which are not stated in the valid measuring unit as of the reporting date, are adjusted according to a general price index. All non-monetary items in the statement of financial position carried at cost of acquisition or cost of acquisition less depreciation are adjusted by changes in the index between the transaction date and the reporting date. Monetary items are not adjusted. All components of equity are adjusted at the time of inflow according to a general price index. The gain or loss on the net monetary position is shown in the income statement under item net trading income, subitem currency-based transactions.
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.
The resulting gain or loss from the sale of any asset is determined as the difference between the proceeds and the carrying value of the asset and is recognized in other net operating income. When assets are retired, the remaining carrying amount is also recognized there.
Interest and interest-like income mainly includes interest income on loans and advances to banks and customers and from fixedinterest securities. In addition, current income from shares and other variable-yield securities (especially dividends), income from equity participations and from investments accounted for at equity, and similar income calculated as interest are also reported under net interest income. Dividend income is recognized if the entitlement of the owner for payment exists. Interest expenses and interest-like expenses mainly include interest paid on deposits from banks and customers and on debt securities issued and subordinated capital. Interest income and interest expenses are accrued in the reporting period.
Information about risks arising from financial instruments is disclosed in the explanatory notes. The risk report in particular contains detailed information on the issue of credit risk, country risk, concentration risk, market risk and liquidity risk.
Negative fair values of derivatives in cash flow hedges (IAS 39) 2,903 5,387
The participation capital according to Section 23 (4) and (5) of the Austrian Banking Act (BWG) issued by Raiffeisen Zentralbank Österreich Aktiengesellschaft and transferred during the merger into Raiffeisen Bank International AG amounted to € 2,500,000 thousand. The participation capital is available for the life of the corporation and the participation issuer may not request redemption. The payment of the first tranche amounting to € 750,000 thousand was made as of 30 December 2008. The payment of the second tranche amounting to € 1,750,000 thousand was carried out as of 6 April 2009. The participation certificates were
The Management Board was authorized pursuant to Section 169 of the Austrian Joint Stock Companies Act (AktG) by the Annual General Meeting held on 8 June 2011, 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.
The true sale transactions (Warehousing) ROOF Bulgaria 2008-1 and ROOF Romania 2008-1 closed in 2008 were entirely placed to Group internal investors in 2012. As of year-end 2012, the non-derecognized loans of ROOF Bulgaria 2008-1 amounted to € 41,231 thousand (2011: € 73,099 thousand), those of ROOF Romania 2008-1 totaled € 55,878 thousand (2011: € 103,899 thousand). Thus both warehousing structures are going to phase out.
Bonds, notes and other fixed-interest securities 205,783 0 205,783 200,000 0 200,000
(41) Assets pledged as collateral The following liabilities are secured by assets shown in the statement of financial position: Deposits from banks 4,955,878 5,092,553
The following assets are provided as collateral for the obligations: Loans and advances to banks 437,377 3,569,940
The Credit Committees are staffed by front office and back office divisions with different participants depending on the customer segment (corporate customers, financial institutions, sovereigns and retail). They decide upon the specific lending criteria for different customer segments and countries. And they approve all credit decisions concerning them according to the credit approval authority (depending on rating and exposure size).
Quality assurance with respect to risk management refers to ensuring the integrity, soundness, and accuracy of processes, models, calculations, and data sources. This should make sure that the Group adheres to all legal requirements and that it can achieve the highest standards in risk management related operations.
The maximum credit exposure to corporates in 2012 amounted to € 80,895,816 thousand (2011: € 89,165,748 thousand). At € 31,657,885 thousand (2011: € 37,283,636 thousand) Group Corporates is the largest segment, followed by Central Europe with € 17,986,250 thousand (2011: € 18,649,280 thousand) and Southeastern Europe with € 10,370,446 thousand (2011: € 11,230,092 thousand). Russia with € 10,237,258 thousand (2011: € 10,795,370 thousand), CIS Other with € 3,681,640 thousand (2011: € 4,093,986 thousand), Group Markets with € 5,968,080 thousand (2011: € 6,185,496 thousand) and Corporate Center with € 994,257 thousand (2011: € 927,888 thousand) complete the picture.
Loans with good credit standing up to minimal risk increased from 34.6 per cent to 38.4 per cent. On the one hand, this improvement resulted from rating upgrades of existing customers, where the positive economic development compared to the previous year lead to an improvement in the internal rating. On the other hand, this also reflects active credit portfolio management, which directs credit growth mainly to economically successful markets like e.g. Russia; and the high lending standards demand that new loans are extended mainly to customers with good credit ratings. Segment Group Corporates shows the highest exposure decrease with minus € 5,625,751 thousand compared to year-end 2011. Decreases in credit business in China and Austria as well as guarantees given in Austria led to a decline of € 5,111,492 thousand. The share of loans with marginal credit standing, weak and very weak credit standing declined by 0.9 percentage points to 24.6 per cent.
Central Europe Southeastern Europe Russia CIS Other Group Corporates Group Markets Corporate Center
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.
Loans and advances to banks 18,440 0 634 (41) 0 19 19,052
Sensitivity limits shall ensure that concentrations are avoided in normal market situations and are the main steering instrument under extreme market situations and in illiquid markets or in markets that are structurally difficult to measure.
Operational risk reduction is initiated by business managers who decide on preventive actions like risk mitigation or risk transfer. Progress and success of these actions is monitored by risk controlling. The former also define contingency plans and nominate responsible persons or departments for initiating the defined actions if losses in fact occur. In addition, several dedicated organizational units provide support to business units for reducing operational risks. An important role is taken on by fraud management which reduces potential fraud related losses through proactive monitoring and preventive actions. RBI also executes an extensive staff training program and has different emergency plans and back-up systems in place.
Positive fair values of derivatives1 99,561 7,327,349 92,712 166,781 8,001,726 102,707
Bonds, notes and other fixed-interest securities 0 0 0 3,422,069 0 0
Raiffeisen Compulsory Pension Fund Management Company, joint stock comp., Zagreb (HR) 110,000,000 HRK 75.0% FI
RZB Finance (Jersey) IV Limited, St. Helier (JE) 2,000 EUR 100.0% FI
(57) List of equity participations The following tables show a selection of equity participations. The complete list of the equity participations of RBI AG is deposited with the Group parent’s headquarters.
1 Company type: BA…Bank, BR…Company rendering banking-related ancillary services, FI…Financial institution, OT…Other companies, VV…Insurance, WP…Securities firms
Management Office, Head Office Operations, International Operations & IT, IT - Markets & Treasury,