Raiffeisen Bk Intl Ag Ord

Good afternoon, ladies and gentlemen, and welcome to the Q2 2024 results conference call of Raiffeisen Bank International. Today's conference is being recorded. At this time, I'd like to turn the conference over to Mr. Johann Strobl, Chief Executive Officer. Please go ahead, sir.

Good afternoon, ladies and gentlemen, and welcome to our half year 24 update call. Thank you for taking the time to join us today and I hope that you will enjoy your summer break once the current reporting window is over. In the first half of the year we can report a consolidated profit of 1.3 billion and more importantly 604 million excluding the profits in Russia and Belarus. Our return on equity stands at 15% for the group and around 10 or 9% sorry for The CETV-1 ratio improves to 17.8% for the group, largely driven by the repression in the quarter and remains stable for the perimeter, excluding Russia and Belarus. On slide 5, we can report that Lone Grove is picking up, confirming the green shoots observed in the first quarter. In our core, Customer Business, The Good Dynamics in Retail, Unsecured Improved Further, Various Mortgages, and Corporate Lending, which were quite in Q1, have also accelerated. NII is again slightly down this quarter, mainly in Hungary and head office, which are the two areas where we expect the most pressure. Elsewhere across the group, NII is very stable. Fees have rebounded in the quarter after the seasonally weak first quarter, but also reflecting the pickup in landing activities. OPEX are 5% higher in the first half of 22 compared to the first half of 23, but up less than 2% in Q2 24 versus Q2 23. We will discuss all these a bit further on. For now, let's move to the next slide and focus on the substantial business reduction measures which we're implementing to de-risk our presence in Russia. Until we find a way to exit Russia, we will accelerate the business reduction plans for the bank there with the clear aim to make sanction compliance as simple and verifiable as possible. As you know, we restricted business in Russia immediately at the start of the war. Thank you very much. and all related products. As a result, this has transformed the Russian balance sheet as you can see on the left hand side of this page. The Russian loan to deposit ratio now stands at 37% and the liquidity coverage ratio is above 300%. Local CO2 ratio is above 48%, meaning Over and excess 4.5 billion of equity above local requirements. More importantly, we believe that these measures significantly reduce the risk of our continued presence in Russia until we find a way to exit. As I told you on our last quarterly call, the business reduction and de-risking strategy will accelerate in coming months and you can assume that the business model of the Russia Bank will be further simplified. In essence, it means the loan book will shrink even faster. To a large extent, there will be no new lending or rolling of existing loans. Very few exceptions will be allowed and we now expect a loan book reduction of around 55% by 2026. In the medium term, this means that excess liquidity will increase for Ubers. All cash and excess liquidity placements are expected to be placed with the Central Bank of Russia. This means no more deposits with MOEX or with Russian banks. For foreign currency placements, this will all go to subsidiaries of Western parents. On the liability side, This means broad measures to reduce deposits, including no longer exacting term deposits, pricing all current accounts, both in rubble and in foreign currency at zero, and charging high maintenance fees on all current accounts. While there are certain products which we cannot legally terminate, our goal is to make these as unappealing as possible. Another restriction on deposit taking relates to business with other financial institutions. Going forward, only subsidiaries of Western parents may place deposits with Raiffeisen Bank Russia. In the medium term, you can expect to see the balance sheet shift to a higher share of equity on the liability side and liquidity placements on the other side as loans to customers and deposits from customers continue to shrink. As a side note, we should be aware that RWAs at the Russian Central Bank will rise as the risk weighting of CPR deposits is higher than the previous alternatives. This is already visible in Q2, as you can see on the graph. This increase in RWAs will continue as we move more deposits to the CPR and away from MOECs and local banks. For the business with corporate clients, only very small number of pre-approved customers will still be offered borrowing facilities. These pre-approved customers will be large and internationally active customers from a selected list of sectors and for each of these and individual compliance assessments will be made. Overall, These pre-approved customers will be a very small fraction of our existing customer base. This very small list of pre-approved customers will also apply to payments leaving Russia. From 45,000 monthly payments on average in Q1-24, we expect to process less than 15,000 per month in Q4, mainly in Euro and the Chinese Yuan. Dollar payments have all but ceased. And here the list of pre-approval customers is even much more restricted. We are all discussing the final restrictions for the retail business, but also there you can assume that at least 90% reduction in landing and payments, with very strict limits and restrictions across the board. More importantly, these many measures materially reduce the compliance risk for the Russian Bank and for RBI Group as a whole. We have aligned these measures with the ECP and briefed the US Treasury on our plans as well. Both of these authorities were in constant and transparent dialogue. In parallel to this de-risking approach, we are fully committed to finding a way to exit Russia, including via a sale or partial sale of Russia Bank. We have so far not found a solution which satisfies the requirement of all parties, but we will continue to work on this until we do. Let me be clear, however, any exit from Russia will be orderly and in alignment with local requirements. Even as we seek to disengage, we have a responsibility to our employees and our customers to ensure a smooth handover. Let us now Look at the core revenues on slide 7. As you can see, and as we have guided for, net interest income has likely peaked at the end of last year. On the other hand, the decline is very moderate and we do not expect a collapse. The rate cuts across the regions are, of course, the obvious driver for the trend downwards. In some areas, we have also seen increased pricing competition which has added some pressure as well. On the other hand, I'm satisfied that we have hedged our NRI about as much as possible and the big up in loan growth should also help offset some of the headwinds. In most of our markets, NRI was stable with the drop largely coming from Hungary. Their rates continues to come down and where we have very little room to reprice current accounts. And in the head office, where our deposits are largely from corporate accounts and therefore more sensitive. Overall, however, NI development is probably better than we might have expected and we have slightly increased our guidance for the fiscal year, the full year 2024 to around 4.1 billion. Net fees and commission income has peaked up and we can confirm our guidance at around 1.8 billion. Let's move to slide eight. On the lending side, we continue to see an increase in demand for new lending. Retail unsecured products are another record quarter for new lending driven by the Czech Republic, Romania, and Serbia. Retail mortgages are up 1% in the quarter but with good new volume trends in our two largest mortgage markets, Slovakia and the Czech Republic. Margins are stable at Q1 levels, which is good news after the very narrow margins what we had to accept in 2023. On the corporate side, demand for long-term loans has picked up nicely driven by Austria, Slovakia, Romania and Hungary. In Austria, there was also some further growth in repo and short-term facilities, as we highlighted it last quarter. On the deposit side, we continue to see inflows across most of our countries with these higher liability volumes probably helping to offset some of the margin pressure from lower rates. Let's move to slide nine where you can see the liquidity ratios very stable at very high levels. And now with this,

I can do the short let move to slide 10, the capital.