- Net interest income of € 2,596 million (down 4.7 per cent y-o-y)
- Operating income of € 3,885 million (down 5.2 per cent y-o-y)
- General administrative expenses increased to € 2,336 million (up 2.2 per cent y-o-y)
- Net provisioning for impairment losses fell to € 623 million (down 20.2 per cent y-o-y)
- One-off items of € 272 million in Q1
- Profit before tax improved to € 1,115 million (up 8.1 per cent y-o-y)
- Consolidated profit considerably increased to € 842 million (up 13.0 per cent y-o-y)
- NPL Ratio increased to 10.0 per cent (up 1.4 percentage points compared to FY 2011)
- Coverage Ratio declined to 65.8 per cent (down 2.6 percentage points compared to FY 2011)
- Core Tier 1 Ratio (total risk) significantly increased to 10.2 per cent (up 1.1 percentage points compared to FY 2011), includingretained earnings, it was 10.9 per cent
- Tier 1 ratio (total risk) increased to 10.7 per cent (up 0.8 percentage points compared to FY 2011'
'We achieved a pleasing result in the first three quarters despite the weak economic growth in Europe, the measures to improve our capital ratio and the low interest rate environment weighing on our net interest income. This is on the one hand the result of our diversification, which enables us to counterbalance weaker developments in some markets with good developments in others, such as Russia and Romania.
On the other hand, numerous efficiency efforts are taking effect, and we have our costs well under control,' said CEO Herbert Stepic.
Net interest income down almost 5 per cent
In the first nine months of 2012, net interest income contracted by 5 per cent or € 128 million t € 2,596 million year-on-year. At 67 per cent (up 1 percentage point) of total operating income, it remains the largest earnings component. The decrease compared to the same period in the previous year was primarily attributable to lower interest income as a result of sales of securities, lower interest margins – primarily on loans and advances to banks – as well as low returns generated on the investment of excess liquidity at Group head office. Year-on-year, the net interest margin (the ratio of net interest income to average total assets) fell by 29 basis points to 2.32 per cent Net fee and commission income decreased slightly compared to the same period of the previous year, by € 4 million to € 1,120 million. Net trading income declined by 25 per cent or € 72 million to € 220 million. Regarding the development of profit before tax, the regional segments showed different trends compared to the first three quarters of 2011.
Russia increased its profit before tax significantly by 69 per cent to € 485 million, already coming from a high starting point. In Southeastern Europe, profit before tax remained almost unchanged at € 261 million. In Central Europe, in which high losses in Hungary had led to unusual low earning contributions in the previous year, profits before tax increased significantly to € 152 million. CIS Other posted a decline in results by more than 40 per cent to € 82 million, which was mainly attributable to a positive one-off item in Belarus in the second quarter of 2011. Despite higher provisions, pre-tax profit of corporate business managed by Vienna head office and comprised in the Group Corporates segment, decreased only by 7 per cent to € 288 million year-on-year. The Group Markets segment, which covers RBI's customer and proprietary business related to the capital market, doubled its profit before tax to € 238 million compared to the first three quarters of 2011.
Net provisioning for impairment losses down to € 623 million
Compared to the same period last year, net provisioning for impairment losses contracted by € 158 million to € 623 million in the first nine months of 2012. Sharp declines were recorded primarily in Hungary (minus € 226 million) where loan loss provisions are, however, still at a high level. Russia posted a significant contraction of € 34 million compared to the same period last year. Various individual cases resulted in new allocations to loan loss provisions for corporate customers in Slovakia, Romania, Poland, China and at Group head office. The rise in Poland resulted from the first time consolidation of Polbank, among other factors.
Non-performing loans (NPL) to non-banks have grown by € 1,285 million to € 8,340 million since the beginning of the year. At initial consolidation, non-performing loans held by Polbank amounted to € 478 million. At this point, Polbank had a coverage ratio (loan loss provisions in relation to NPL without taking collateral into account) of 89 per cent. Currency effects caused a further € 159 million growth in the NPL portfolio. The € 621 million in growth in NPL – adjusted for Polbank and currency effects – occurred mainly because of individual cases among large customers. Accordingly, the NPL ratio rose by 1.6 percentage points year to date to 10.0 per cent. The coverage ratio declined by 2.6 percentage points to 65.8 per cent.
Return on Equity before tax increases to 14.1 per cent
The return on equity (ROE) before tax for the first nine months of 2012 was 14.1 per cent, based on profit before tax of € 1,115 million (up 8 per cent) and average equity of € 10.6 billion (up 5 per cent). ROE was therefore 0.4 percentage points higher than in the same period in the previous year.
General administrative expenses slightly up
General administrative expenses rose by € 49 million to € 2,336 million compared to the same period in the previous year. Excluding Polbank, a reduction would have been achieved. The cost/income ratio rose by 4.4 percentage points to 60.1 per cent due to lower income. The largest item under general administrative expenses was staff expenses, accounting for 50 per cent, and rising in total by 3 per cent or € 37 million to € 1,178 million. While staff expenses grew in Russia due to salary increases, they declined in Hungary, the Czech Republic and Romania.
Other administrative expenses remained on the same level as the previous year's period at € 884 million. The largest declines were in advertising, PR and promotional expenses (minus 26 per cent), legal, advisory and consulting expenses (minus 11 per cent) and communications expenses (minus 4 per cent). By contrast, the largest increases were in IT expenses (up 12 per cent) and office space expenses (up 4 per cent). The consolidation of Polbank also resulted in an increase in other administrative expenses in Poland.
Total assets constant
RBI's total assets amounted to € 147.1 billion as of 30 September 2012, slightly above the value at year-end 2011. The loan/deposit ratio (i.e. loans and advances to customers divided by customer deposits) improved by 4 percentage points to 118 per cent compared to year-end 2011.
Tier 1 ratio near 11 per cent
RBI's equity on the statement of financial position, consisting of consolidated equity, consolidated profit and the capital of non-controlling interests, rose by 2 per cent or € 200 million to € 11,136 million compared with year-end 2011. As of 30 September 2012, RBI's core tier 1 ratio (total risk) was 10.2 per cent. Including retained earnings and less pro rata dividends for the first three quarters (based on the dividend for 2011), it was 10.9 per cent. The tier 1 ratio (total risk) amounted to 10.7 per cent. The own funds ratio increased to 14.8 per cent.
Number of business outlets grew due to acquisition of Polbank
The number of business outlets as of 30 September 2012 was 3.115, an increase of 6.4 per cent compared with 31 December 2011. This increase was mainly caused by the acquisition of Polbank. The average number of staff increased year-on-year by 1,639 to 61,645. Excluding Polbank, a reduction of staff of 1,671 would have been achieved. As of 30 September 2012, the customer base stood at around 14.1 million.
Declining consolidated profit in Q3
Compared to the second quarter 2012, net interest income decreased by 6 per cent or € 52 million to € 834 million in the third quarter. The net interest margin contracted quarter-on-quarter by 12 basis points to 2.23 per cent. This was attributable to lower interest income as a result of the sale of securities at Group head office as well as lower interest income from loans and advances to customers in Romania. However, margins in Russia improved. Net fee and commission income increased compared to the second quarter of 2012 by € 25 million to € 400 million. Increasing volumes led to a rise in payment transfer business of € 8 million and in net income from agency services for own and third-party products of € 4 million. Net trading income fell by 37 per cent or € 31 million to€ 54 million compared to the second quarter. This was primarily due to valuation losses on foreign currency swaps at Group head office and in Hungary. At € 818 million, general administrative expenses in the third quarter 2012 were € 54 million higher than in the previous quarter at € 764 million. Compared to the previous quarter, consolidated profit declined by 11.5 per cent or € 18 million to € 141 million.
Outlook
In the context of the expected overall economic developments, particularly in CEE, RBI is aiming, with the inclusion of the acquisition of Polbank, for a return on equity before tax of around 15 per cent in the medium term. This is excluding future acquisitions, any capital increases, as well as unexpected regulatory requirements from today's perspective.
In 2012, RBI expects a stable business volume due to the economic environment and restrictive regulatory requirements. From the customer standpoint, the bank plans to retain its Corporate Customers division as the backbone of its business and in the medium term to expand the proportion of business volume accounted for by the Retail Customers division. Against the backdrop of a permanently changing regulatory environment and further strengthening of the balance sheet structure, RBI is continuously evaluating the level and structure of its regulatory capital to be able to act promptly and flexibly. Depending on market developments, a capital increase also continues to be a possible option.
In light of the economic prospects, the situation remains tense in several markets. RBI therefore expects a slight increase in the volume of non-performing loans in the next months, driven primarily by higher defaults in Hungary, but also in the Southeastern European countries. Overall, the net provisioning ratio is expected to remain stable or increase slightly.
In 2012, RBI expects higher bank levies than in the previous year. In Austria and CEE, this will presumably result in a negative earnings effect of some € 160 million. The funding requirement for 2012 is fully covered. In 2012, RBI will once again pay increased attention to cost development and has therefore implemented Group-wide cost efficiency programs. Without taking Polbank into account, the bank expects a flat cost development at Group level, whilst including Polbank it expects a slight cost increase.
