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Public relations section
Raiffeisen International Bank-Holding AG, which is part of the Raiffeisen Zentralbank Österreich AG (RZB) Group, once again achieved a record result for the first three quarters of 2006, with a consolidated profit (after tax and minorities) of 539.3 million euros. This result is higher by 93.3 per cent, compared to the figure for the previous year. Even when discounting the one-off effect of selling the share of almost eight per cent in Kazakh JSC Bank TuranAlem (BTA), the amount of 437.3 million euros would still exceed the respective figure for the same period of 2005 by nearly 57 per cent. As in the previous quarters, profit before tax (752.6 million euros, plus 80.7 per cent) and profit after tax (611.3 million euros) are also on a record level. Earnings per share went up by 1.72 euros to 3.78 euros. All figures are based on International Financial Reporting Standards (IFRS).
In the third quarter, Raiffeisen International achieved a consolidated quarterly profit (after tax and minorities) of 250.1 million euros. This amount includes the sale of the minority share in BTA, with a net gain of 102.0 million euros, as a one-off effect. Without this factor, the result for the quarter would be in the range of the second quarter.
For Herbert Stepic, CEO of Raiffeisen International, this confirms Raiffeisen International's strategy: "Orienting our business policy to the retail business and continuing our regional expansion in the CIS both pay off. We currently have more than 11.7 million customers and continue to grow by 100,000 customers per month. The CIS already contributes one third to the consolidated result, when leaving aside extraordinary effects."
Balance-sheet total exceeds 50 billion euros
With the strong growth of the balance-sheet total during the third quarter, the mark of 50 billion euros was exceeded in September 2006. Since year-end 2005, the balance-sheet total of Raiffeisen International has expanded by 23.7 per cent or 9.6 billion euros to 50.33 billion euros. Loans and advances to customers make up the lion's share of this growth (plus 31.6 per cent or 7.8 billion euros to 32.5 billion euros). Almost 60 per cent of the increase comes from retail customers. Deposits from customers went up by 20.9 per cent and amounted to 30.1 billion euros.
Clear increase of operating income, further improvement of cost/income ratio
Operating income grew by 54.5 per cent or 717.1 million euros to 2,033.6 million euros. Net interest income rose by 48.7 per cent to 1,250.7 million euros, which is higher than the growth in business volume. Net commission income improved the most, namely by 135.0 per cent or 379.6 million euros, amounting to 660.9 million euros. A large part of this growth derives from the reclassification of income from customer margins, begun in 2006, which had previously been entered as trading profit. "We are very pleased with the development of our income structure. It reflects the expansion of our customer base and the success of our cross-selling initiatives," said Martin Grüll, CFO of Raiffeisen International.
Return on equity improved again
At 30.6 per cent, return on equity (ROE) before tax is 8.8 percentage points above the value of year-end 2005, without the mentioned one-off effect it would still amount to 26.5 per cent (plus 4.7 percentage points). Average equity rose by 25 per cent to 3,276 million. Consolidated ROE (after tax and minorities) reached 26.1 per cent, which is 8.9 percentage points higher than at year-end 2005.
The Tier 1 ratio, banking book, which is of significance for assessing financial strength, amounts to 7.2 per cent (year-end 2005: 9.0 per cent). The Tier 1 ratio, including market risk, amounts to 6.5 per cent (year-end 2005: 8.0 per cent) and is thus clearly above the minimum ratio of four per cent required by law. The profit retained for 2006, as well as the proceeds from the sales of JSC Raiffeisenbank Ukraine and the participation in BTA, will significantly increase both ratios at the end of this year.
Raiffeisen International has structured its business activities according to customer segments and regions:
Retail customers show biggest growth dynamics
When presenting the result according to business sectors, the most important element is the growth of profit before tax deriving from the Retail Customers segment by as much as 157 per cent to 219.4 million euros. This clearly reflects the economies of scale that were targeted by investing into products and market presence in the past years. The share in the overall result is thus 29 per cent, which is an increase by 8 percentage points over the comparable period of the previous year. The return on equity before tax of this segment was 27.8 per cent, compared to 16.2 per cent for the same period last year.
The result of the Corporate Customers segment improved by 51 per cent and amounted to 350.1 million euros. Its contribution to the overall result is 47 per cent, which still makes it the most important customer segment. Moderate increases in administrative expenses and growth in interest income above the level of the business volume contributed to this development. This segment's ROE was 31.7 per cent, compared to 25.2 per cent for the same period of the previous year.
The Treasury segment recorded below-average growth. Its pre-tax profit went up by 7 per cent to 143.1 million euros, which is mainly due to the slacker income from interest. The ROE went down from 40.1 per cent in 2005 to 33.1 per cent this year.
The CIS contributes one third to the result
From a regional perspective, the CIS showed the largest increase by far in profit before tax (up by 228 per cent to 315.9 million euros). The mentioned one-off effect of the sale of the minority share in BTA accounted significantly for this increase. Discounting this effect, the CIS contributed one third to the pre-tax result (up ten percentage points against September 2005). The ROE before tax (net of the one-off effect), as recorded for this region, amounted to 31.4 per cent (after 30.6 per cent for the same period last year). The cost/income ratio went up from 41.2 to 54.9 per cent on account of the focus of Raiffeisen Bank Aval and Impexbank on retail customers.
The other regions also clearly increased their results. The pre-tax result of the Group units in Central Europe grew by 28 per cent to 231.2 million euros and accounted for 35 per cent of the overall result disregarding the one-off effect (down by 8 percentage points). The ROE improved by 4.3 percentage points and amounted to 22.9 per cent, and the cost/income ratio went up by 5.9 percentage points to 58.6 per cent.
The Group companies in Southeastern Europe improved their performance by 47 per cent and recorded a profit before tax of 205.4 million euros, contributing 32 per cent to the overall result disregarding the one-off effect (down by 2 percentage points). This region's ROE improved by 3.4 percentage points to 26.8 per cent, and the cost/income ratio went down by 5.1 percentage points to 57.1 per cent.
In view of the positive business development in the past few months, the management now expects consolidated profit for 2006 of about 550 million euros excluding the proceeds from the sale of Raiffeisenbank Ukraine and the proceeds from the sale of the minority stake in Bank TuranAlem in Kazakhstan.
The management expects annual growth of the balance sheet total by at least 20 per cent annually in the period to 2008. The largest increases are anticipated in the CIS, partly because of the acquisitions made there.
The company forecasts an ROE before tax of more than 25 per cent for the year 2009. The cost/income ratio is expected to be below 58 per cent. The management has set the target for the risk/earnings ratio at about 15 per cent.
You can download the quarterly report at http://www.ri.co.at.
Raiffeisen International operates one of the leading banking networks in CEE with subsidiary banks and leasing companies in 16 markets. More than 11.7 million customers are attended to at more than 2,775 business outlets. Representative offices in Lithuania and Moldova complement the Group's presence in the region. Raiffeisen International is a fully consolidated subsidiary of Raiffeisen Zentralbank Österreich AG (RZB), which owns 70 per cent of the common stock. The remaining 30 per cent is free float. The shares are traded on the Vienna Stock Exchange. RZB is a leading corporate and investment bank in Austria and the central institution of the Austrian Raiffeisen Banking Group, the country's largest banking group.