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Public relations section
Raiffeisen International Bank-Holding AG, which is part of the Raiffeisen Zentralbank Österreich AG (RZB) Group, recorded a strong growth of its profits during the first semester 2006. The consolidated profit (after taxes and minorities) for the first six months of the year amounted to € 289.2 million, which is an increase of 55.6 per cent (1-6/2005: € 185.8 million). For the period under review, the profit before tax amounted to € 421.0 million
(1-6/2005: € 273.3 million, plus 54.0%), and the profit after tax was € 333.5 million
(1-6/2005: € 221.1 million, plus 50.9%). Earnings per share went up by € 0.61 to € 2.03 (1-6/2005: € 1.42). All figures are based on International Financial Reporting Standards (IFRS).
Once again the best quarterly result in the Group's history
With a consolidated quarterly profit (after tax and minorities) of € 165.0 million, which Raiffeisen International records for the second quarter 2006, the company achieved the best quarterly result in its history. This tops the result for the first quarter 2006 (€ 124.2 million), which had previously been the best result, by 32.9 per cent. For the same period of the expired business year, the result amounted to € 93.0 million; the growth is therefore 77.4 per cent on a yearly basis. The quarterly profit before tax amounted to € 227.2 million, which is an increase of € 33.3 million (plus 17.2 per cent) over the first quarter 2006 and a growth of € 87.2 million (plus 62.3 per cent), compared to the same quarter of the previous year.
Herbert Stepic, CEO of Raiffeisen International, explained the new record result by saying, "We continued our growth strategy with consistency, especially in the CIS and Southeastern Europe. The very good mid-year result confirms our position on these promising markets. We are benefiting from the fact that they have the biggest pent-up demand for financial products and that we began to serve this demand earlier than other banks. This is above all true for retail banking, which shows an increase in its result of more than 120 per cent."
During the first half of 2006, Raiffeisen International acquired JSC Impexbank in Russia and thus became the biggest international banking group on the Russian market, which has a strong growth potential with its more than 140 million inhabitants. Impexbank was first consolidated into the Group on 1 May 2006. At the end of July, the acquisition of eBanka a.s. was announced. With this entity, Raiffeisen International will expand its customer base in the Czech Republic by more than 70 per cent to about 300,000. The legally effective completion of the deal (closing) is expected for the next months.
Further expansion of volume – balance sheet total rises by 14 per cent
Raiffeisen International has exploited the strong demand for bank products on the Central and Eastern European markets with consistency and expanded its customer business significantly. Loans and advances to customers grew by 17.4 per cent to € 29.0 billion, as compared to year-end 2005, and deposits from customers showed an increase of 12.7 per cent to € 28.0 billion. The balance sheet total for the first semester 2006 grew by 13.9 per cent or € 5.6 billion to € 46.3 billion; two thirds of this increase is due to organic growth.
Further expansion of distribution network, number of customers exceeds 11 million
"Also during the first half of 2006, we have stepped up the expansion of our branch network and broadened our local presence organically by 78 outlets", said Martin Grüll, CFO of Raiffeisen International. In addition, there are the 204 business outlets that Impexbank contributed to the network. As a result, the total number of business outlets amounted to 2,725 (2005: 2,443), which represents an increase by 282 or 11.5 per cent.
The number of employees grew primarily on account of the Impexbank acquisition (5,414 staff members) and amounted to 50,513 (2005: 43,614). At mid-year 2006, Raiffeisen International serviced a total of 11.3 million customers with its banking network. This constitutes a rise of 1.6 million, as compared to year-end 2005.
Strong profit growth in the Retail Customers segment
In addition to segments according to regions, Raiffeisen International also divides its business according to customer segments.
During the period under review, the Retail Customers1 segment recorded the strongest growth in profit (122.1 per cent). With an amount of € 128.4 million (1-6/2005: € 57.8 million), it already contributed 30 per cent (1-6/2005: 21 per cent) to the pre-tax result. ROE before tax therefore improved considerably to 25.1 per cent (1-6/2005: 17.1 per cent). The cost/income ratio sank to 71.2 per cent (1-6/2005: 77.7 per cent).
The Corporate Customers2 segment recorded a pre-tax profit for the period of € 238.7 million (1-6/2005: € 155.8 million), which is an increase of 53.2 per cent, and it contributed 57 per cent to the pre-tax result (1-6/2005: 57 per cent). ROE before tax went up to 31.5 per cent
(1-6/2005: 27.0 per cent), and the cost/income ratio improved to 35.8 per cent (1-6/2005: 40.7 per cent).
Transformation of Bank Aval fully on schedule
On 1 June 2006, Raiffeisen International signed an agreement with Hungarian OTP Bank Ltd. regarding the sale of JSCB Raiffeisenbank Ukraine. The closing of this transaction is still forthcoming, and the proceeds from this sale, amounting to € 650 million, are not yet contained in the present results. JSPP Bank Aval, which was bought in October 2005, was consolidated into the Group's results for the first time for a full reporting period. The transformation measures, which serve to achieve the complete integration (adaptation of systems, implementation of uniform Group standards) of one of Ukraine's leading retail banks into the Group, are fully on schedule. Bank Aval has 1,342 business outlets. With the sale of Raiffeisenbank Ukraine, costs for a merger with Bank Aval, which would otherwise be necessary, will not be incurred. In addition, this accelerates Bank Aval's transformation process. The brand name Raiffeisen was not part of the transaction, but will become part of Bank Aval's name. In the future, it will sign as Raiffeisen Bank Aval.
As Raiffeisen International is no longer participating in the privatization process for Romanian Casa de Economii si Consemnatiuni (CEC), it will fully focus on the organic growth of Raiffeisen Bank S.A., which has a balance sheet total of € 3,193 million and a market share of about 8 per cent and is thus the third-largest bank in Romania. Until year-end 2008, its branch network, which currently comprises 227 outlets, is to be expanded to 350 branch offices.
The Raiffeisen International management expects strong earnings growth for the medium term in the CIS countries and above all in Ukraine and Russia. However, restructuring measures in Ukraine and Russia, due to the acquisition of Bank Aval and Impexbank, will burden earnings in the short term. Raiffeisen International continues to judge the potential for the countries of Southeastern Europe optimistically, but somewhat more cautiously because of restrictions on credit growth prescribed by supervisory authorities. In Central Europe, the company is increasingly focusing on the fast-growing segment of asset management and insurance products in addition to traditional business.
By management's estimates, the balance sheet total will grow by at least 20 per cent annually in the period to 2008. We see the strongest increases in the CIS countries, partly because of the acquisitions made there. In view of the positive business development in the past few months, the management expects consolidated profit for 2006 of at least € 500 million, excluding the gain from the sale of Raiffeisenbank Ukraine.
1 The Retail Customers segment comprises business activities with private individuals, self-employed persons, as well as small and medium-sized enterprises with annual sales of generally less than € 5 million.
2 The Corporate Customers segment comprises business activities with medium-sized and large companies in Central and Eastern Europe, but also with companies from other countries, especially multi-national groups that operate in the region.