Raiffeisen Bk Intl Ag Ord

Good afternoon, ladies and gentlemen. Sorry for the delay. Thank you for taking the time out of your day to join us for our Q1 update. We can report consolidated profit of Euro 260 million in the quarter in the core of the group, excluding Russia, for a return on equity of 7.3%. As is the case every year, we have booked a large portion, but not all, of expected governmental measures and other contributions in the first quarter. Now I see the one ratio also excluding Russia comes in at 15.9% with the implementation of the CRR3, some relief on operational risk and very modest loan growth. I will cover all of these in just a minute. Looking at the main revenues, net interest income was stable in the quarter whereas fees were modestly weaker As we usually see it in the first quarter, compared to quarter one of last year, fees are up 8%. The cost-income ratio has increased compared to Q1 last year in part due to pressure on OPEX, but also due to some effects on the revenue side. Income from associates was lower, although this effect is offset by release of impairments in other results, and therefore neutral in the bottom line. and therefore neutral trading income was lowered due to tightening of our own credit spreads in the first quarter. But this has already partially reversed in April. Nevertheless, we remain committed to cost discipline, especially in head office, and we have kept our cost income ratio target unchanged for 2025. Let's now move to our Russia de-risking slide on page six. In the first quarter, we have shrunk the loan book by a further 4%. We remain ahead of the schedule agreed with ECB and generally fully compliant with the requirements. The different measures taken to reduce deposits are starting to show now results and we can report a 9% drop in the quarter. I would like to draw your attention to the 23% ruble appreciation versus the The Q1, so in the Q1 versus last year, and this means that our reported balance sheet figures have increased. What is important, of course, is that our business reduction and de-risking continues regardless of any political geopolitical developments. In parallel, To this, we continue to work on a sale or partial sale of our Russian business. It remains to be seen if recent geopolitical developments might facilitate an exit from Russia. Finally, let me address the Rasperia court case. Two weeks ago, our appeal was rejected. The appeals court confirmed the initial verdict, including that damages could be enforced against our Russian subsidiary. Russian colleagues have filed an appeal with the next instance. In the meantime, the verdict was partially enforced last week, and the CPR has withdrawn the ruble equivalent of 1.9 billion Euro from our subsidiary's account and transferred this to Rasperia. The amount covers the damages, while the remainder Around 170 million, which covers the accrued interest, may be withdrawn at any time. Once the interest part of the verdict has also been enforced, we expect the ban on the transfer of the shares to be lifted. We are also finalizing our claim in Austria and will take legal actions against Raspere in the near future. Please understand there is little more that I can say about the next steps. Both from an accounting financial perspective or in terms of legal strategy. Let's now move to the following slides, starting with the core revenues, which is slide seven. Net interest income is again very stable despite the rate cuts in recent quarters and slow loan growth. We have benefited to some extent from hedges as well as on the liability side from high deposit volumes, especially in retail. Fees are down versus Q4 2024, but as you know well by now, this is largely seasonal. For both NINV income, our guidance for 2025 is unchanged. On slide 8, where loan growth was muted, demand in particular has been very sluggish, whereas retail demand is still resilient. On the liability side, I just mentioned retail deposit inflows, which continued in Q1. As mentioned a minute ago, deposits in Russia decreased not a splint of quarters. On the next slide, liquidity ratios remain very prudent. In head office specifically, we continue to run a very conservative asset and liability matching. I'm referring to the second bullet. And as you might recall, our ability to maintain very high liquidity even in extreme scenarios. The slight drop in LCR is explained by a shift of liquidity from reverse repos to ECB deposits and to some extent net interest income optimization. There are some costly surplus deposits which we were able to eliminate which lowered LCR but do not affect our prudent liquidity profile. On slide 10, capital ratios for the group including Russia Improves to almost 19%. The two main drivers are the implementation of CRR3, which Hannes will address, and the 23% ruble appreciation in the quarter. More important to you, however, is the price book zero scenario, where we show the CET1 ratio for the group excluding Russian, assuming that the Russian business has been deconsolidated with a full loss to the equity. This worst case CT1 scenario now stands at 15.9%, with again CRR3 as a main driver, together with slow long growth. I would simply flag that for the rest of the year, the Russian operational risk component was capped at 2.8 billion, which equals 61 basis points. Guidance for this scenario. Pricebook Zero C to 1 ratio is unchanged at 15.2%. Please understand that we are early in the year and have not changed profitability or loan growth. I will skip our capital requirements on slide 13 with nothing noteworthy to report and move to MREL on slide 14. For Resolution Group Austria, our buffer remains very comfortable, and all of our other resolution groups remain above the requirements. We issued a senior preferred note in February, and we still aim to issue a senior non-preferred this year. You probably are aware that we announced the call of one of our outstanding 81 notes, the 8.67 coupon notes. Together with the decision not to call the 4.5 Cuban notes. Here I can simply say that we remain committed to refinancing these instruments at the first possible window, subject to the usual conditions, not least of which include a stable market window. Let's now move to our macro outlook on slide 15. Despite the divisions, which you can see marked with red arrows, Thank you very much. Thank you. Perhaps here I would only flag that over the past six months we have cut our Euro rate estimates while increasing our estimates in key CE markets. Let us now turn to my last slide with our guidance for 2025, which is unchanged. There have been some moving parts since this was published, including headwinds which add some downside risk. These include the bank tax in Austria, a slow start to the year for loan growth. At the same time, we still have three quarters and we will adjust the guidance later if necessary. With that, I now hand over to Hannes. Thank you.

Thank you, Johann. Good afternoon, ladies and gentlemen. Thank you for joining us today. Well, it has been a busy start to the year for risk managers everywhere. and I'm happy to report that we have made good progress in Q1. We have further increased our overlays and have started an internal stress test on dairy sensitivities. We have brought our MP ratio back below 2% and cleared up some of exposures in the head office. Given the volatility in currencies and rates, we have conducted reviews of our market risk exposure. On the regulatory side, we have now implemented CRR3, and I'm making good progress on the 2025 ECB stress test. On operational risk specifically, we have obtained relief on the Russian component in the price book zero scenario. Allow me to run you through these one by one, but first let me simply state that I'm satisfied that we are well prepared for interesting times ahead. Credit risk in Q1 was very benign. We saw virtually no defaults and accordingly, Almost no state free risk costs. Clearly, the outlook remains uncertain and we have used Q1 to book additional overlays. The macroeconomic and geopolitical uncertainty also leads us to leaving the risk cost guidance at the moment unchanged up to 50 basis points. Since the reciprocal tariffs were announced early April, we have launched an internal stress test on tariffs. On my next slide, I will share with you our initial thoughts and findings. For now, it appears that the impact is fairly limited. But as we go through individual exposures, we may decide to recognize some further overlays in Q2. Our stock of overlays now stands at 451 million euros, available to us in Russia. Also on the subject of credit risk, we make good progress on some of our non-performing exposures in head office. The MPE ratio for the group excluding Russia is now back below 2%. As some of the write-offs came from well-provisioned exposure, the coverage ratio decreased in the first quarter. We remain satisfied with our provisioning levels, not least because of our substantial stock of overlays. Away from credit risk, we have seen big moves in currency and rates, especially in the US dollar. We have been busy reviewing our exposure here and anticipating what these moves could mean to our balance sheets, our clients, and to our business model. For now, we are comfortable with our positioning and exposure and have not required any meaningful adjustments. Nevertheless, we continue to monitor these developments very closely. With the beginning of the year, we have implemented CRR3, and this has provided around €6 billion of relief to credit risk RWA's, excluding Russia, partially offset by a €2.1 billion increase in operational risk-weighted assets. The day one impact is therefore around minus €3.9 billion, whereas the transitional benefits are worth around €1.2 billion. This means, after some countermeasures, the fully loaded impact of CR3 On credit risk and operational risk would be a net relief of an estimated 2.7 billion euros in 2032. We have excluded market risk for now as the fundamental review of the trading book was postponed. Let's now move on to the next slide where we can share with you our first thoughts on the potential impact on the U.S. reciprocal tariffs announced and suspended in early April. First of all, we have assumed A blanket 25 rate on all exports from the EU to the United States. Secondly, we looked at the sensitivity of export volumes to the US, including elasticity and possible substitution effects. We have done this on both on industry and on a country level. This allows us to capture cases where for a given industry's exposure may be more sensitive to a country versus another. And finally, we have quantified this estimated drop in volumes Thank you very much. We are reviewing our exposures going line by line. So far, we have reviewed over 10 billion years, and this has led to a very few rating downgrades. Nevertheless, we are designing and conducting an internal stress test specifically on theories and trade disruptions. Depending on the outcome, this may be a driver for further overlay bookings in Q2. Dear all, having said all this, we are now happy to take your questions.

We may now start the Q&A session. If you wish to ask a question today, you will need to press pound key 5 on your telephone keypad. Please ensure that the mute function on your telephone is turned off, otherwise we will not be able to hear your signal. Once again, if you wish to ask a question, please press pound key 5. If you would like to withdraw your question, please press pound key 6. We will give it a moment just for the queue to assemble.

Yeah, dear ladies and gentlemen, as you see, I'm not sure if we totally have fixed the technical difficulties which we experienced today. Please apologize for that. What we kindly ask you is to send also questions by email, which we then can read and answer. And once again, please apologize and thank you for your understanding and patience. And yeah, we see some questions coming in. Okay. So I understand there is one question by Robert Prosser from, and I'm sorry if my pronunciation is not that good, so from PKO. And it's a question on Rasperia, whether the forfeited funds are in a blocked account or gone. No, they are gone. They have been withdrawn from the accounts of this 1.9 billion as this was a second instance ruling. And I think like in most other frameworks as well, the money is gone. How does this affect the sales process is a question which relates to that. Yeah, this is a very difficult question as we are preparing a claim for damages. So this is the one element and the way this develops and also the, let's call it the appetite of the potential buyers, how to treat with this to keep it within the perimeter or take it out. This is still open. As I indicated, the biggest part of the damage, 1.9 billion, but the interest on it, which had been also decided by the court was, and I don't know why, have not been withdrawn. And so I have no news that the shares have been unblocked, but we assume that in a reasonable But we assume, I have to repeat that, that over some time the interest will also be withdrawn and then the ban will lift it. That's my basic assumption. We kept, and there was then a question also on the value in Austria. So this is a valuation which is linked not to the Thank you very much. Timeline was also a question for legal proceedings, quite difficult. It will take a couple of weeks till we have all the elements together and start proceedings. But here we will keep you updated as soon as we have significant steps achieved. Thank you for your questions. Now there is some questions from Gabor Kemeny from Autonomous Research. And I will share these questions and answers with Hannes. And one was how much conservatism is built in the core NII guidance of 4.15 in light of NII analyzing close to 4.2 billion in Q1 I think, Gabor, that's a fair question. As I expressed there, we see some headwind from the loan growth, which was built in, and the core question is to what extent rates will come down. You're aware that in In Euro currency, this is usually a big impact and we assume that the rate cuts will come as shown in the presentation. Yeah, I somehow touched it that maybe less will come in the CE countries. So, yeah. And then I hand over, no, no, there is one more which was geopolitically The question is, who is the potential to get quite a number of approvals? And here the question is, if a ceasefire and less of sanctions will happen, if this could also Facilitate the approval of a buyer. And the third question, Hannes, about the CD1 deconsolidation. What I understand is the question is the waterfall from 15.8 or 9, what we have at Q1 to 15.2, I guess this was the question, right? The technical part of it, the deconsolidation impact of the current Russian equity and the RWAs are shown in the slide on the Russian part.

Well, I can take this over, Johann. Thank you very much. So I'm referring to page 12. Here you see what are the main reasons for the change, RWA increase. Johann was talking about the organic growth. Market risk and operational risk as a potential updrift. The one is looking at the current volatility on the FX market. We would believe that we need more risk weights for market risk, open position out of our structurally fixed position with our subsidiaries. That's the number one. And number two is, of course, usually by the year end, We have these op-risk bookings we had in the last three years, very strong and benign across income figures. And also on the way how the op-risk is being calculated, we have to incorporate a little bit more so that the underlying substance, what needs to be incorporated in the op-risk has changed. And that is the reason for us to believe that an optimizing loan growth, but also more volatility on the market risk side and the way how op risk is being calculated leading to a consumption on the CET1 quota of 137 basis points. Thank you for the question. I appreciate it.

Thank you, Hannes. We have questions from Benoit Petrac at Kepler. So there was one question which is referring to what I mentioned in the presentation, a negative impact in the net trading income. And here it's not the core of our capital markets business, but the impact comes from our own credit spreads. I should have mentioned that in the certificates business we have Thank you very much. And the second question of Benoit goes to Hannes. It's the question to the Basel IV fully loaded impact on RWAs.

Hannes, please. Thank you. Please follow me to the page 22. You know, we have, I think, two or three components. The go-live, the day-zero impact is the minus six billion euros on the credit risk RWAs. Here... As we shared with you in our last calls, we have three main components why this is such a big amount. On the one hand side, DLGD has been reduced from 45 to 40%. The second one, since RBI Group is an IRBF bank, a foundation bank, there was always this scaling factor. Whatever you calculated on RWA, it was multiplied by 106. This scaling factor has also been taken away. and there have been some adjustments on the conversion factor, on the credit conversion factor. So that's the main reasons why we have seen or why we see this drop on T0 of minus 6 billion euros. I indicated and shared with you that at the same time, given the new definition of the op risk, we see an updrift of 2.1 billion euros. So the updrift on the one hand side, Anyway, the classic calculation when it comes to the when it comes to operates gross income. But nowadays we also have to incorporate provisions. And what are the big provisions we had to incorporate in 24, 25? This is because of the change of the new environment. This is on the one hand side, the legal provisions we have created for our Polish Swiss franc situation. But also for our Raspberry situation. And that's the reason why you see this updrift of 2.1 billion euros on the op risk side. Means that the zero net defect is 3.1 billion release. At the same time, we all know that there is a transitional period. And in a do nothing scenario, we would believe that only some 1.2 billion euros would remain. But, you know, of course, you would also assume Thank you very much. Thank you for the question. I appreciate it. Thank you, Hannes. We have three new questions by Martin Emes. And I start with one which was

Question to the interest sensitivity of the group for the main currencies and a question about the duration of the euro hedges. So what do we have? What do we have? And talking about sensitivity in many ways to model it, let's take the one of the interest rate shock of minus and plus 100 basis points. So we would have for minus 100 basis points a A 12-month NII sensitivity, to be very precise, of around 32 million in head office for the Euros. And in the other current countries, and this is all without Russia, around 51 in total. So Romania, Croatia, the local currency is similar. Hungary and Czechia so all these are around 7 to 10 million per country and then we have Slovakia where it's around 24 so if I add up everything excluding Russia then it's around 66 million for 100 basis point drop and if you take then the sensitivity in the local currencies the biggest one is of course Czechia with around 30 million, Hungary 7 Serbia 16 minus Romania minus 6 Ukraine minus 14 I don't know if Russia at all is relevant but there it's around 70 million as you know on the deposits and on the account so in total 140 million in the So if you add up everything, then it would be around 190 million. If we exclude Russia, as I mentioned before, this is a big amount, around 140. In the other way around, so rate increase, it's not linear in the same way. So here it would be Thank you very much. And if I may answer the third question of Mathe before handing to Hannes, it was the question of downside risk on the guidance for this year. Is it only costs or also NII? Well, I have not mentioned it, but what is for sure and where we Thank you very much. The credit spreads on our own issues. We will see if we see a widening again to the level what we had been used before this narrowing and see if the 30 million will revise. The good thing I think you could hear from Hannes was that he is rather optimistic on the risk costs as far as we relate to the guidance. So this is rather here we hope for a positive surprise. And then relating also to risk costs, there was a question to the sensitivity of risk costs to weaker GDP growth. And this I hand over to Hannes.

Johann Singh here. Well, you anyway know how our models are being built, but just to reiterate for the big audience, our macro models, of course, comprise GDP, GDP changes, what is the level of interest, and of course, unemployment rate on the retail side. And looking at the adjustments, as we have demonstrated on one of the previous slides, As of today, we would believe that adjusting our models and including and using these new wearables, these updated wearables, the impact could be between 30 to 50 million euros. Thank you for the question.

Then there are two questions from Krishnendra. I hope I spell it again right at Barclays. Where would the loan growth come from and what is the competition for liabilities like? So talking about the loan growth and what we see, it should come as it is stronger in countries where we have a good retail business, so Slovakia, Czechia, Romania. Here probably we can achieve with the buff market in Austria, which is also part of the retail. If it's the building societies account where we also see some good inflow. And yeah, probably as I tried to guide you is maybe six to seven. Rather, I would be very positively surprised if we can come close to the seven. Now to the liabilities competition. So what we see is competitors, and I will not exclude ourselves, had been and are still going to offer special products with a nice interest rate. And of course, this has then Thank you very much. Thank you very much. The restructuring of the liabilities by the corporates and more so by the retail is an issue. And we see this in almost all the markets. Thank you for the questions. Then there are questions from Ben from KPV. And these are questions for Hannes. The one was overlays. Poland, Guidance for FX Mortgages, and then the further regulatory CT1 impacts this year. Hannes, please.

Thank you, Johann. Ben, as I announced when walking through the presentation, I think we have to see how the entire geopolitical situation round about tariffs is working out itself. The 90 days would run off on the 4th of July. Use the term interesting times ahead. We would like to deep dive also on the second round effects on the affected portfolios. This is automotive, this is machinery, this is chemicals. And then in Q2 or Q3, we might be tempted to further increase our overlays. But what for me is very important, as Johann said, we really clearly stick to our up to 50 basis points guidance. Thank you very much for your time. We gave a guidance of round about 300 million euros. At this period in time, we would still confirm this guidance. And then the last topic, what you raised as a question, Ben, is are there further regulatory CD1 impacts this year? So here on the one hand side, we could see the introduction of sector-specific counter-cyclical buffer. which might be applicable with the beginning of July 2025. Here we would assume that this is maybe a two basis points impact coming forward and at the same time I would like to share with you that we are finishing some of our IRB model approvals and here also in total we would expect that we would maybe see an RWA relief Thank you, Ben. I see an incoming question from Jill. And this is referring maybe, Hannes, also for you.

What did you do with the non-performing lounge? Did you sell it or write it down?

Well, what we have done in UANY, we would notice these are the typical toolbox deployed. You know, we had, there was one bigger case making its way to the Austrian news late last year. And the insolvency procedure I applied for is this 30% minimum quota, but in a self-administrative way. So means as soon as the client defaulted, we have created a provision level of up to 70%. And then as soon as the court was confirming it, this provision level, the remaining outstanding exposure. This gives you quite a big lever on the, Thank you very much. Thank you very much. Austria has been experiencing two years of GDP contraction and forecasting a third one in Austria. You only have overlays in Q1 and no Stage 3. That's an obvious question, Gilles, I accept. But I think on the one hand side, I think the companies have been very much challenged in 2022, 2023, 2022 because of the soaring interests. We have then seen the challenges and defaults in 2023. Some others have been challenged in 24 because of this much more expensive liquidity. Many other companies have adjusted early on. Indeed, we have, of course, reviewed our portfolio. We also made use of our overlays in these two years I was referring to. And well, if we would see that the third year, the third year of GDP contraction, Now also would give us more stress on downgrades or even maybe defaults. Of course, we might be tempted in Q2 to think about overlays. But at this period of time, again, for me, important to reiterate, we feel comfortable with the level of overlays. We will look who is being impacted by the dairies in the first round and second round effect. And we would like to take it from there. So the last one, what is the trend of loans going from performing to non-performing, corporate insolvency trend? Sorry, let me allow you to make one more statement on the second question. What is also very important, Gilles, when we talk about Q1, as long as you did not come up with the official publication of your numbers, you have this extended period. We have a certain seasonality in our risk cost guidance. Well, I think at this moment in time, I think this is the best I can give as an answer to the questions you have raised. Thank you very much.

Thank you, Hannes. Ladies and gentlemen, I see that there are no more questions. So let me thank you for your patience. And please accept our apologies for the technical challenges. Sorry for that. Thank you for joining us today, and we wish you a nice afternoon. Bye-bye.

Thank you. Bye.