Raiffeisen Bk Intl Ag Ord

Good afternoon ladies and gentlemen and welcome to the conference call of Reifeisen Bank International. Today's conference is being recorded and at this time I would like to turn the conference over to Mr. Johann Strobl, Chief Executive Officer. Please go ahead sir.

Good afternoon ladies and gentlemen and thank you for taking the time to join us today for our Q3 update. I'm pleased to be reporting on a strong third quarter today. The Consolidated Profit is now 76% higher year-on-year, driven not only by lower risk costs but also by strong recovery in lending volumes, interest rates and fee business. Net interest income for the first nine months is almost even compared to 2020. We are very encouraged by considering that this year's first quarter was significantly lower than last year's. Higher volumes and rates are of course the driver here and we expect this to continue into next year. We are also encouraged by another record quarter in fee and commission income which are 538 million euros, mainly driven by excellent business trends and with no significant one-offs included here. Long growth accelerated in the quarter with almost 5% higher volumes before ECWA and 7% including ECWA. Our CT1 ratio is down 10 basis points in the quarter to 13.2%. ECWA is now fully reflected as is the additional proposed dividend which we will have or talk about A couple of moments or I can do it now. You know, we have the extraordinary shareholder meeting on the 10th of November and there we propose this 75 cents per share. Good news is also that Moody's upgraded RBI's long-term ratings to A2 and Hannes will talk about the Adjusted Outlook, where we first time speak about risk costs in 2022. I think what's also important is that we have an M&A update here today, which is Cartier Agricole Serbia is on track and we expect a closing in Q1 2022. Equa Bank, as I mentioned before, is consolidated for the first time. and Bosch Perkast integration and ING customer referrals are completed. And one more where we are not working on it is the financial calendar for next year. We work to be much faster and we intend to give you Very deep insight to the total year already on the 2nd February in 2022. Moving to the next slide, which is slide 6. Here you have all the details about the third quarter, the income statement. and I think what we see here is a slight improvement in the net interest margin also here I repeat that as long as the over liquidity is part of our business I think this is a volatile KPI. Cost-income ratio is now at 53.3 for the first nine months and it was 52.1 in Q3. But as you know, there is always some seasonality in invoicing and the way we then have ultimately our OPEX. So we target the 55% for the full year 21. I will discuss a little bit more the... Revenues on the next slide and on the costs I would like to make a statement now which is that for the first time ECWA is also consolidated and as you know we started from the first of July so it's the full quarter which we do have now in the numbers. and one more element which I want to outline here as well. We come to that on a later slide. Also, we took another 40 million provisions for litigation relating mainly to the Swiss franc portfolio in Poland. But there, as I said, we have a separate slide. Moving to the next slide, now talking a little bit about the core revenue trends. You see why we are happy with the current trend what we have. And I think one important thing is that with the 875 million net interest income in Q3, we are almost at the levels what we have pre-pandemic in Q4 19 and Q1 20. I also have to mention here that ECWA contributed €16 million in Q3 on the revenue side. As we are aware that usually there is always a question also to the TLTRO impact on NII. In Q3 this was just over €2 million and this means in total for 2021 €11 million. We're still not recognizing any bonus for the second special interest rate period as the observation date is the 31st of December 21 and should we achieve the second bonus both at head office and in Slovakia it would be worth 43 million which would be recognized over the coming years. Currently, we are confident that we can achieve this bonus as well. Net fiend commission income generation was again very strong in the third quarter. This is reflecting the continued pickup in activity that we saw in the overall business. The result was driven by a turnover in payment transactions and affects business across most markets. We are also seeing sustained increase in retail investment products. Overall, the product lines are growing and to a large extent we believe that these levels are sustainable. Moving to the next slide, here it's about the loan growth as this is one key driver for our revenues. What you see here is the very good development which I have mentioned already throughout the various regions. And this is an important impact also to the net interest income as I stated before. I think what you should be aware that from the overall increase About 2 billion come from the EQA loan portfolio, which, as I said before, is first time consolidated. What we also share with you is the sensitivity of key rate hikes. And I have to stress this just to be very clear and well understood what we show here, the numbers. These are Sensitivity numbers, which like usually in a simplified sensitivity analysis we assume that assets and liabilities are relative constant and that also the margins to a large extent do not have a structural change. which means that in the sensitivity area what we give here, so 50 basis points in some of the markets or 100 basis points in some other markets, it's a reasonable assumption what you see here. Of course, if the rate would increase significantly more, then you do also have to expect some adjustments In the margins which are allocated mainly in the liability area where usually if you start from zero or very low, then the first one or two moves, you don't have to adjust the deposit rates, but at the later level, if a higher level, then of course this comes also with this... And for your comfort, we have estimated the NII impact from these rate hikes, what we have seen so far, and this is about 33 million for the total year in 2021. If we move to the next slide, number nine, It's a short update on the developments in the Czech Republic, so the Raiffeisen, sorry, the developments of Raiffeisen Czech Republic. And here I think we can show a very good picture, the focus what we had over the last quarters in the, In our activities in the Czech Republic are now progressing substantially. What we see here is, and you are aware of it, we integrated the Poshpa Kasse in the Czech Republic, which was already within the group, but now it's fully integrated into Raiffeisen Czechia. I think this was an important move as this now improves our opportunities to offer additional products to our customers there and the customer base what we have here and what we speak about is more than 400,000. We also can report here that the referral project with ING We have added 144,000 new customers successfully. We will provide a good offer for these customers also in the coming months and quarters. From the pure financial perspective, one might have Thank you very much. Thank you. This adds another more than 400, almost 250,000 new customers to the combined entities. And I have to say we are well on track with the integration. We assume that the legal merger can happen hopefully in January 2021 and the IT technical merger in the third quarter. But the more important thing than this integration is that the business, the loan origination in ECWA is still strong and we like this very much. Having said all this, our teams have prepared one more slide which I understand that from time to time you want to see also More details to some of our segments. We have chosen this time markets. And what we quite often explained also in the Q&As that our markets business is less one of capital markets trading, but it's to a large extent a customer-oriented business. This is what you can see on this slide. Thank you very much. and what I have mentioned before is also that you see that the asset growth like of course in the whole industry the asset growth be it in custody or in capital management in our RCM subsidiary is developing very good and we are also making progress with some of the products which We'll support our position in the FX business, providing more comfortable services for our customers. Moving to the next slide, it's 11. You are aware that the pain points, what we still have in our portfolio, in our business, the bigger one is the Swiss franc mortgagee Business in our Polish subsidiary, in our branch, I have to say now. And to give you a few ideas, the portfolio, so the Swiss franc part of the portfolio is at about 2 billion. It's close to 29,000 loans. Demortization is a long-term one, so 100 million per year. The number of litigation cases is increasing still with high number of cases. On average, we recently had about 300 cases per month and the total number is now more than 6,300. The provision I mentioned it already, we added around 40 million is now The capital usage of this portfolio is high. If you add all the various elements, the high RWAs, You know that, of course, also impairments go against capital and you know the high operational risk and the litigation provisions. This adds up to more than 900 million Euro. And from the capital perspective, someone might say it's already highly provisioned, but it's the capital allocation, it's not the BNL. I refer to the litigation provision once again about the 230 million. So a few words to slide 12, which is an overview of the balance sheet and loan growth. I think I don't have to comment. Maybe as we are proud of, I mentioned the loans to customers, which first time are now about 100 billion. So we like this number very much. And I think what I should also elaborate a little bit is the numbers below in the lower left-hand box where we speak about the origination of loans to customers. Here you see the good development, what we had in the third quarter. Well, I have to mention that in retail mortgages, we have more than a billion, so close to 1.1 billion. This is, of course, less than the 1.2 billion what we had in the second quarter. But be aware, the 1.1 billion is the second best quarter what we ever had. So it's... It's a very good development and of course we see the one or the other signs of reactions by regulators trying to put some brakes on the very strong development in some of the markets and also the margin pressure is felt here and there. So we are very happy with this development. Moving to the capital ratio, slide 13, it's 13.2. I think not much what I have to comment on slide 13, but we can turn to slide 14. And here what you see is the development. It's a 30 basis point AQUA first consolidation. We had 23 basis points from the loan growth. Here of course you immediately will say this is and I agree this is net because we have seen some improvements in the asset quality which had a positive impact by 16 basis points and the 23 is the net. We have some increases in market and operational risk not that big and the retained earnings plus those part of the dividend which we will not Thank you very much for your time. Loan demand in the region the way we see it. What I have reported already that the mortgage business is in a steady development and we also see a pickup in the consumer support for retail lending. What we also see is that now more and more corporate segment returns to long term. The first few months of this year had been dominated by rather short-term working capital financing. What we can report is that overall I think the development of loan demand in the coming two years, 2022 and 2023, is still a very supportive one for our future development. Moving to slide 16, this is an overview of the macro outlook what we see. For this year and the coming two years and I think we can be very happy with the development what we have seen throughout our region and overall I think it's also a very, very good outlook for the coming two years. Having said all this, we slightly adjust our outlook and our targets and With this good development in the loan demand, we now expect loan growth of around 11% for 2021. This is excluding the Equibank Equa I have mentioned separately. Hannes will talk about the risk costs in more detail. So here I just want to mention that we expect now a provisioning ratio for 2022 around 40 basis points. Cost-income ratio, 55%. Also in the midterm, it's a commitment. You are aware that we will have next year some special elements Profitability, I confirm the 11% for the mid-term and we also confirm that our mid-term CT1 Thank you, Johann.

Dear all, also a hello from my side. Happy talking to you and sharing some insights on the risk report with you. Due to the risk cost of 151 million euros, you have seen the split across the different categories on the IFRS terms. Stage 3, 1 in 6 million euros. We have still allocated the 27 million euros, 30 million euros we have allocated for the increased sanction risk in Belarus. and we have a reflected BOST model adjustment in the first quarter of 14 million years. In addition, we have an MPE ratio of 1.6%, having a coverage ratio of 62.2%. And I'm sure that there comes the question, what is my risk-cost guidance for the year end? Well, I've been now on page 19, and as already indicated, I think The way when we look at the credit cycle, of course, as usual, as everybody else would do, we look at the macro outlook, and this remains quite supportive for the coming two years to see, 22, 23. Having this strong macroeconomic dynamic, we also see in many of our countries that employment rates are recovering back to the 2019 level. In some region, we see really a super high Employment rate. I think also on the third bullet, the pandemic, of course, is nasty, is demanding. At the same time, I think a broad part of the society got used to how to handle it. And we see, again, an adjusted way of consumer spending. And if in 22, latest 23, we are beyond the pandemic, I think we also see a sort of normalization when it comes to the saving rates.