Consolidated Profit up by 33.4 per cent to € 279.1 million; total assets up 20.2 per cent to € 34.7 billion. Return on equity at 22.1 per cent and cost/income ratio at 59.5 per cent. Market leader in Ukraine after acquisition of Bank Aval.

Raiffeisen International Bank-Holding AG (Raiffeisen International) has again reached record results for the 3rd quarter endorsing its growth trend. Profit before tax came to € 416.4 million, representing an increase of 28.3 per cent or € 91.8 million compared with the same reporting period 2004. Profit after tax amounted to € 334.9 million (28.3 per cent or € 73.8 million more than in the first nine months of 2004). Consolidated profit (after minorities) for the first three quarters registered the strongest growth with 33.4 per cent or € 70 million to € 279.1 million. Profit before tax for the third quarter amounted to € 143.1 million, slightly higher than the second quarter’s good result of € 140 million. All figures according to International Financial Reporting Standards (IFRS).

“Our good quarterly results endorse the positive trend of the recent months. We have increased volumes and our customer base in all business segments, justifying the trust of our investors”, commented Herbert Stepic, CEO of Raiffeisen International.

Significant increase in volumes of loans and deposits

Compared to year-end 2004, Raiffeisen International’s total assets grew by 20.2 per cent to € 34.7 billion in the first three quarters of 2005. Loans and advances to customers increased by 28.8 per cent to € 20.9 billion, which is primarily attributable to the steep growth of the Retail Customers segment. Loans and advances to banks grew by 16.7 per cent to € 5.6 billion.

Deposits from customers rose by 18.8 per cent to € 21.6 billion, while deposits from banks grew by 18.2 per cent to € 7.8 billion.

The recently acquired JSPP Bank Aval is not included in this statement as it will only be consolidated into Raiffeisen International Group in the fourth quarter 2005.

Operating income surged

Operating income increased by 37.8 per cent or € 361 million to € 1,316.5 million in the first three quarters compared with the same reporting period of the previous year. The position growing most significantly was net interest income, which rose by 44.3 per cent from € 582.7 million to € 841.1 million. ”We bring in the harvest of our pioneer role in Southeastern Europe and the CIS”, said Martin Grüll, CFO of Raiffeisen International. “Our strong position in these two regions resulted in an improvement of the consolidated interest margin.” The latter mentioned margin improved by 19 basis points to 3.53 per cent. Net interest income after provisioning surged by 42.0 per cent to € 721.6 million compared with the same reporting period of 2004. This resulted in an improvement of the risk/earnings ratio from 17.13 per cent at year-end 2004 to 14.21 per cent.

Compared with the year-earlier period, net commission income grew by 30.1 per cent or € 65.0 million to € 281.3 million. The increase in the Retail Customers segment (individuals and small and medium-sized enterprises) was mainly responsible for that growth. Significant income gains were achieved in all product areas. Especially fees from payment transactions, which accounted for 54 per cent of net commission income, rose by 28 per cent, or € 33.1 million, to € 150.7 million.

Trading profit was also significantly up again, with an increase of 24.8 per cent, or € 39.4 million, to € 198.2 million. By far the largest part of this profit, € 183.1 million (an increase of 27 per cent or € 39.3 million), represented currency business, of which in turn the majority derived from customer-related trading in foreign exchange and notes and coin business.

General administrative expenses rose by 40 per cent, or € 223.7 million, to € 782.8 million. Consequently the cost/income ratio improved from 63.5 per cent (full year 2004) to 59.5 per cent at the end of September 2005.

“We are very satisfied with our development. Despite massive investments in the expansion and modernisation of our branch network, our profitability is dynamic. Part of the reason was again a powerful boost in our Retail Customers segment”, said Grüll.

Southeastern Europe and CIS-countries fuel growth

According to regional segmentation Southeastern Europe and the CIS-countries were the main growth drivers. Profit before tax rose by 36.5 per cent, or € 37.3 million, to € 139.5 million in the Southeastern European-segment and by 48.3 per cent, or € 31.3 million, to € 96.3 million in the CIS-segment. Central Europe contributed € 180.6 million (plus 14.7 per cent or € 23.2 million) to profit before tax. Compared with the third quarter of 2004, pre-tax profit allocation is becoming more and more evenly allocated across the regional segments: Central Europe 43 per cent (2004: 48 per cent), Southeastern Europe 34 per cent (32 per cent) and CIS-countries 23 per cent (20 per cent).

Retail business keeps developing favourably

The Retail Customers segment developed extremely favourably again. Profit before tax grew by 19.8 per cent, or € 14.1million, to € 85.4 million. The segment accounted for 21 per cent of the group’s pre-tax profit. The Corporate Customers segment’s result increased by € 18 million, or 8.4 per cent, to € 232.7 million. The pre-tax profit of the Treasury segment rose by € 66.4 million, or 99.4 per cent, to € 133.2 million.

Continued rapid expansion of the sales network

The expansion of the local branch networks is developing rapidly. With 89 new business outlets compared to year-end 2004 the total number reached 1,005. Consequently, the number of staff increased by 12.5 per from 22,851 to 25,712.

Including the corporate clients, about 6.1 million customers were served at the end of September 2005, a plus of more than one million compared with year-end 2004.

Acquisition of Bank Aval closed

On 20 August, Raiffeisen International announced the acquisition of Bank Aval, the second-largest bank in the growth country Ukraine. This deal was closed on 20 October after the granting of all necessary approvals by the relevant authorities. With this acquisition, Raiffeisen International became the country’s market leader. As of year-end 2004 Bank Aval had 1,378 business outlets and employed a staff of 17,933. With more than 3 million customers, the bank is by far the strongest retail bank in Ukraine, raising the total number of clients of Raiffeisen International to approximately 9.2 million.

Solid equity base

Equity (incl. minorities and profit) shown on the Raiffeisen International balance sheet increased by 41.8 per cent, or € 908 million, to € 3,085 million. Apart from the IPO’s proceeds, which amounted to € 555 million after issuing costs, the change was mainly due to three factors: Current profit for the period contributed € 335 million. Dividend payments to the shareholders of Raiffeisen International and other group companies decreased equity by € 60 million. Finally, movements in the exchange rates of CEE currencies increased it by € 49 million (net of the capital hedge result).

Regulatory own funds rose by € 661 million from € 2,360 million to € 3,021 million. The regulatory own funds requirement (according to the Austrian Banking Law) amounted to € 2,007 million, which resulted in an increase of excess of own funds by € 225 million to € 1,014 million. The own funds ratio was unchanged at 12.0 per cent. The core capital ratio without market risk was at 11.6 per cent, the core capital ratio including market risk remained unchanged at 10.1 per cent.

Outlook and targets

Raiffeisen International's management expects an increase of consolidated profit for the full year 2005 (profit after tax excluding minority interests) by at least 50 per cent compared with the 2004 level (€ 209 million). This forecast does not take into account possible effects of the Bank Aval acquisition. The management expects annual growth of the balance sheet total by about 20 per cent in 2006 and 2007.

The targets for 2007 are a return on equity (ROE) before tax above 25 per cent, a cost/income ratio below 60 per cent, and a risk/earnings ratio below 15 per cent.

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Raiffeisen International is in charge of steering the subsidiaries of Raiffeisen Zentralbank Österreich AG (RZB) in Central and Eastern Europe (CEE). Its shares are traded on the Vienna Stock Exchange. RZB owns 70 per cent, the balance is free-float.
Raiffeisen Zentralbank Österreich AG (RZB) is the central institution of the Austrian Raiffeisen Banking Group, the country's most powerful banking group. It is a leading corporate and investment bank and the third largest bank in Austria.