RBI first quarter results carry the signs of high FX volatility
The average number of shares outstanding in the reporting period totaled 292.4 million (comparable period from the previous year: 268.1 million). This resulted in earnings per share of 0.29 Euro.
“In the first quarter, our operative business developed in line with our expectations. The first months of this year, however, were driven by an extraordinary high FX volatility. In particular, the development of Swiss franc, rouble, hryvnia, and US dollar had a strong impact on our results. The significant devaluation of the hryvnia, for instance, had a strong negative effect on our net trading income. The appreciation of rouble, US dollar, and Swiss franc led to a rise in our RWA. At the same time, our tier 1 capital increased significantly due to the strong rouble resulting in an almost stable CET1 ratio. The implementation of our strategy adjustment is on track,” said Karl Sevelda, CEO of Raiffeisen Bank International AG (RBI).
RBI’s operating income declined 17 per cent, or 227 million Euro, year-on-year to 1,118 million Euro. This was primarily attributable to valuation losses from strong currency fluctuations (notably in the Russian rouble and Ukrainian hryvnia).
In the first three months of 2015, net interest income fell 16 per cent, or 158 million Euro, to 820 million Euro year-on-year. Aside from being attributable to a reduced net interest margin, this was also due to currency-related declines in interest income in Russia and Ukraine and to loan defaults in Asia. Group head office also recorded a volume-based decline in net interest income.
Net fee and commission income fell four per cent, or 16 million Euro, to 360 million Euro year-on-year, largely due to currency-related effects.
Compared to the same period last year, net trading income declined 43 million Euro to minus 62 million Euro, largely due to a 109 million Euro decline in currency-based transactions to minus 149 million Euro. RBI pointed out that this was largely attributable to exchange rate-related valuation losses on foreign currency positions in Ukraine, where net trading income reduced due to the sharp depreciation of the Ukrainian hryvnia (down 64 million Euro) and to a valuation loss on a hedging transaction for dividend income in Russian roubles (down 53 million Euro) at Group head office.
Compared to the same period last year, general administrative expenses declined 64 million Euro to 691 million Euro. The cost/income ratio increased 5.7 percentage points to 61.8 per cent, notably due to the currency effects which reduced net trading income.
At 50 per cent, the largest component in general administrative expenses was staff expenses, which fell 11 per cent, or 45 million Euro, to 345 million Euro.
Net provisioning for impairment losses fell by a total of seven per cent, compared to the same period last year, to 260 million Euro. This was predominantly due to a 50 million Euro reduction in individual loan loss provisions to 220 million Euro, while portfolio-based provisioning increased 29 million Euro to 42 million Euro.
In the reporting period, the NPL ratio rose 0.5 percentage points to 11.9 per cent compared to year-end 2014. Non-performing loans were set against loan loss provisions of 6,306 million Euro, resulting in a NPL coverage ratio of 65.9 per cent compared to 67.4 per cent at the year-end.
RBI’s total capital amounted to 11,271 million Euro at the end of March, representing an increase of 267 million Euro compared to the 2014 year-end figure.
Based on total risk, the common equity tier 1 ratio (transitional) was 10.4 per cent, with a total capital ratio (transitional) of 15.3 per cent.
Compared to the fourth quarter of 2014, net interest income declined eight per cent, or 75 million Euro, to 820 million Euro in the first quarter of 2015, while the net fee and commission income dropped 14 per cent to 360 million Euro. The decline was due to both currency-related and seasonal factors.
RBI is planning an aggregate gross risk-weighted asset (total RWA) reduction of 16 billion Euro in selected markets by the end of 2017 (based on December 2014 RWA: 68.7 billion Euro). The bank intends to partly offset the reduction with growth in other business areas.
After the implementation of the new strategic measures, the cost base should be 20 per cent below the level of 2014 (at constant prices and foreign exchange rates; general administrative expenses 2014: 3,024 million Euro). RBI targets a cost/income ratio of between 50 and 55 per cent in the medium term.
RBI aims for a return on equity before tax of approximately 14 per cent and a consolidated return on equity of approximately 11 per cent in the medium term. The full year 2015 consolidated result may be negative as the majority of the restructuring costs (around 550 million Euro in total) are expected to be booked in 2015.
The bank expects net provisioning for impairment losses to remain elevated in 2015; however, RBI anticipates that the requirement will be below the level of the previous year (2014: 1,716 million Euro).
RBI targets a CET1 ratio (fully loaded) of 12 per cent and a total capital ratio (fully loaded) of 16 per cent by the end of 2017.
“In the first quarter, our operative business developed in line with our expectations. The first months of this year, however, were driven by an extraordinary high FX volatility. In particular, the development of Swiss franc, rouble, hryvnia, and US dollar had a strong impact on our results. The significant devaluation of the hryvnia, for instance, had a strong negative effect on our net trading income. The appreciation of rouble, US dollar, and Swiss franc led to a rise in our RWA. At the same time, our tier 1 capital increased significantly due to the strong rouble resulting in an almost stable CET1 ratio. The implementation of our strategy adjustment is on track,” said Karl Sevelda, CEO of Raiffeisen Bank International AG (RBI).
RBI’s operating income declined 17 per cent, or 227 million Euro, year-on-year to 1,118 million Euro. This was primarily attributable to valuation losses from strong currency fluctuations (notably in the Russian rouble and Ukrainian hryvnia).
In the first three months of 2015, net interest income fell 16 per cent, or 158 million Euro, to 820 million Euro year-on-year. Aside from being attributable to a reduced net interest margin, this was also due to currency-related declines in interest income in Russia and Ukraine and to loan defaults in Asia. Group head office also recorded a volume-based decline in net interest income.
Net fee and commission income fell four per cent, or 16 million Euro, to 360 million Euro year-on-year, largely due to currency-related effects.
Compared to the same period last year, net trading income declined 43 million Euro to minus 62 million Euro, largely due to a 109 million Euro decline in currency-based transactions to minus 149 million Euro. RBI pointed out that this was largely attributable to exchange rate-related valuation losses on foreign currency positions in Ukraine, where net trading income reduced due to the sharp depreciation of the Ukrainian hryvnia (down 64 million Euro) and to a valuation loss on a hedging transaction for dividend income in Russian roubles (down 53 million Euro) at Group head office.
Compared to the same period last year, general administrative expenses declined 64 million Euro to 691 million Euro. The cost/income ratio increased 5.7 percentage points to 61.8 per cent, notably due to the currency effects which reduced net trading income.
At 50 per cent, the largest component in general administrative expenses was staff expenses, which fell 11 per cent, or 45 million Euro, to 345 million Euro.
Net provisioning for impairment losses fell by a total of seven per cent, compared to the same period last year, to 260 million Euro. This was predominantly due to a 50 million Euro reduction in individual loan loss provisions to 220 million Euro, while portfolio-based provisioning increased 29 million Euro to 42 million Euro.
In the reporting period, the NPL ratio rose 0.5 percentage points to 11.9 per cent compared to year-end 2014. Non-performing loans were set against loan loss provisions of 6,306 million Euro, resulting in a NPL coverage ratio of 65.9 per cent compared to 67.4 per cent at the year-end.
RBI’s total capital amounted to 11,271 million Euro at the end of March, representing an increase of 267 million Euro compared to the 2014 year-end figure.
Based on total risk, the common equity tier 1 ratio (transitional) was 10.4 per cent, with a total capital ratio (transitional) of 15.3 per cent.
Compared to the fourth quarter of 2014, net interest income declined eight per cent, or 75 million Euro, to 820 million Euro in the first quarter of 2015, while the net fee and commission income dropped 14 per cent to 360 million Euro. The decline was due to both currency-related and seasonal factors.
RBI is planning an aggregate gross risk-weighted asset (total RWA) reduction of 16 billion Euro in selected markets by the end of 2017 (based on December 2014 RWA: 68.7 billion Euro). The bank intends to partly offset the reduction with growth in other business areas.
After the implementation of the new strategic measures, the cost base should be 20 per cent below the level of 2014 (at constant prices and foreign exchange rates; general administrative expenses 2014: 3,024 million Euro). RBI targets a cost/income ratio of between 50 and 55 per cent in the medium term.
RBI aims for a return on equity before tax of approximately 14 per cent and a consolidated return on equity of approximately 11 per cent in the medium term. The full year 2015 consolidated result may be negative as the majority of the restructuring costs (around 550 million Euro in total) are expected to be booked in 2015.
The bank expects net provisioning for impairment losses to remain elevated in 2015; however, RBI anticipates that the requirement will be below the level of the previous year (2014: 1,716 million Euro).
RBI targets a CET1 ratio (fully loaded) of 12 per cent and a total capital ratio (fully loaded) of 16 per cent by the end of 2017.
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