Raiffeisen Bk Intl Ag Ord

Good afternoon, ladies and gentlemen, and welcome to the Q3 2025 conference call of Raytheisen 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.

Thank you very much. Good afternoon, ladies and gentlemen. Thank you for being with us this afternoon. We are pleased to report a good set of results this morning. and in particular Lund, growth across the region which continued to pace in the third quarter. We can report the consolidated profit of 1 billion and 27 million euros for the first nine months of the year, excluding Russia, equal to a return on equity of 10% in line with our guidance for 2025. When we think about the future of RBI and exclude both Russia and Poland, we have achieved a 13.5 RBI in the first nine months. We can confirm our ambition to earn around 13% on this basis in 2025 and beyond. We will discuss this again on the Outlook slide. Finally, our city...

This meeting is being transcribed.

...stable at 15.7%. On slide 5, we can report 3% loan growth in the first nine months of this year. And the positive momentum that we have seen across our network in Q3 leads us to conforming our 6% to 7% loan growth guidance for 2025. NIRI and NFCI have performed well, and the guidance is unchanged here as well. OPEX have increased 7% year-on-year to September 2025, which combined to some headwinds in trading income, mainly from the moves in our own credit spreads, lead to a slight deterioration of our cost-income ratio target to 53%. Let's now move to our slide on the rundown in Russia. First of all, I can confirm that we are ahead of schedule when measured against the milestones agreed with our supervisor. It is worth taking a step back to see how significantly we have shrunk our business in Russia. Since the start of the war, the loan book in ruble terms is down nearly 60% and deposits from customers are down almost 40%. Our payments business out of Russia is merely a fraction of what it was. and this is entirely reported to our supervisor. The balance sheet of our Russia business now carries more equity than loans to customers. Our corporate loan book specifically is down nearly 85% in ruble terms since the start of the war and is now under 1 billion euros. There is little I can share with you by way of an update on our claim against Raspberry in Austria. To be precise, on our right to file a claim in Austria to seek compensation for the damages that our Russian subsidiary has suffered there. I hope you will understand that we cannot discuss our litigation strategy here. But I would also like to reconfirm our belief in the strength of our claim and our intention to file it at the appropriate moment. Thank you for your understanding. Moving to slide 7, I am happy to report the decent NII result in the third quarter, largely driven by better volumes on both the asset and liability side, and we are seeing less headwinds from rate cuts across our market. As mentioned, I can confirm our guidance for NI in 2025 at around $4.15 billion. Fee income was stable in the quarter, driven by good FX volumes in the third quarter, good inflows in asset management, and encouragingly fees from loan commitments and guarantees in the group corporates and markets. On my next slide, let's take a closer look at loan growth in the quarter. With 3-5% loan growth in our key CE and SCE markets, a positive momentum which we observed early in the year is confirmed. Notably, retail lending in Czechia and Slovakia was strong, and across most of our markets we could grow above market average. Corporate activity is improving across most markets, While Group GCNM remains sluggish, impacted by some repayments in the quota as well as low repo volumes. On the bright side, we are starting to see a healthy pipeline in our GCNM segment, which will help us to meet our 6% or so guidance for 2025. On the liability side, we are seeing strong retail deposit inflow, which further strengthens liquidity but also will support NRI. Speaking of liquidity, let's flip to slide 9, where our ratios are all very stable, both on group level but also for each major unit, including head office. I won't spend much time on slide 10 and 11. Showing stable CT1 development for the group excluding Russia and our price book zero scenario where we assume a worst case out of Russia and what this would mean for a CT1 and our full capital stack including 81 and tier 2. On slide 12. Our City-One ratio outlook excluding Russia is unchanged with the strong credit growth explaining most of the RWA increases expected in Q4. Let's jump to slide 14. We found Emerald ratios above target in all countries. On the funding side 2025 plan is complete and 2026 has started. I should mention We are generally encouraged by the growth trends ahead. Of course, the environment remains uncertain, not least from trade policy and geopolitics. Finally, our outlook is broadly unchanged. with slightly better risk cost expected but the cost income ratio a Dutch hell. Overall we can confirm our ROE for the group excluding Russia at 10% and looking through the future into the future of about 13% excluding Russia and Poland. And with this I turn to Hannes.

Thank you, Johann. Good afternoon, ladies and gentlemen. Thank you for joining us today. Allow me to briefly run you through a few risk items before we open up the call for Q&A. Johann has just mentioned the positive trends in the new business generation, both in retail and in corporate. And I'm also encouraged by these dynamics. Growth in the region appears to be well established, and I'm glad to see that we are capturing our share. and I am satisfied that the new business that we are underwriting is comfortable within our risk appetite. At the same time, the risks from trade restrictions and of course geopolitical developments have not disappeared. On Dares specifically, we continue to review our portfolio and besides minor rating adjustments, there has been no deterioration in our assessment. We booked overlays earlier in the year. These remain available to us and we do not see the need to add to them. Risk costs were again very low this quarter. Defaults and insolvency remain very low, leading to a very few state-free provisions. Furthermore, we made minor changes to our models and benefited from some of our securitizations. After nine months this year, our provisioning ratio for the year stands at 14 basis points. We currently do not foresee the need to aid overlays in the fourth quarter, and we can therefore bring our risk-cost guidance down to around 30 basis points. Asset quality continues to improve, and our MPI ratio has reached a new low for us at 1.7%, with a State 3 coverage ratio stable around 50%. In Poland, we have booked a further 66 million euros of provision for litigation on FX mortgages, bringing us to a 295 million euro year date. In the fourth quarter, we do not expect significant model changes, and on the positive side, we expect to be able to release some of the provisions for BnLT interest. Accordingly, we can confirm our guidance of around 300 million euros for 2025, or perhaps a touch above. Well, ladies and gentlemen, this was my very brief update and we are now more than happy to take your questions.

Thank you. Ladies and gentlemen, we may now start the Q&A session. If you wish to ask a question today, you will need to press star 1 on your telephone keypad. Please ensure that the mute function on your telephone is turned off or we will not receive your signal. Once again, if you wish to ask a question, you will need to press star one. If for any reason you need to remove yourself from the queue, you can do so by pressing star two. We will pause for a moment in order to allow us to allow a queue to assemble. Our first question comes from Benoit Petrucu with Kapler Chevroux.

Yes, good afternoon. So a few questions on my side. The first one will be maybe just to get an update on this European Commission process to size Russian assets, especially the Strabag shares. I think behind the screen there have been a lot of political negotiations. I just wanted to get the latest on that, what is the intention from, let's say, Europe The second question will be on Poland, if you think the 300 million will be kind of enough, or do you expect still some remaining losses or litigation provisions in 26? So that's the second question. The third one is actually on the CT1 ratio expected at 15.2% by year-end. You know, that suggests very important growth, low growth in the fourth quarter. So just trying to understand the moving part between the 15.7% to, you know, 15.2%. And then just lastly, just on BNI, a few questions on Czech Republic, which was very strong. Just wondering here if it's just a very strong growth in the Czech Republic or the other items. And on the contrary, the corporate and market division on NI was a bit weak. We were down 20 million quarter on quarter. I just wanted to understand what happened there. Thank you.

Thank you. So I agreed with Hannes that we share the questions and, of course, the answers. and I start with the Raspberries-Strabag and the sanction package. I assume you were referring to the 19th sanction package. Our way of viewing it is that sanctions follow several goals and we had assumed that within these goals it would be reasonable to suggest and promote the idea To unfreeze the sanctioned Strabag shares. So if this would have happened, I now have to say, then we would very quickly could recover a big part of the damages, depending then on some results. We have to, I understand that the whole Our topic is viewed on a large broader scale than we have thought. So with this many, many discussions in general about sanctioned assets, again, I see the connects, but it has happened during that discussion. We will see if we can make progress maybe in the future, potentially around the... Thank you very much for your attention. Yeah, with some challenges, of course, in moving along the procedures what we have. So that would be my view on your first question. I hand over to Hannes for your Poland question.

Well, Poland, just to reconfirm the guidance for 2025, it says I said this round about 300 maybe a touch above. When thinking about 2026, I think you have to keep in mind that we now see also a little bit more dynamic when it comes to inflows towards zero. So we believe that 2026 guidance should be lower than the 300 million euros which were needed for the year 2025. At the same time, usually we give detailed guidance on the Q4 call, but at this moment, I think you could think a bit Lower than the 300 could be in the range of 220 to 250, somewhere around these numbers. This is our current thinking. We will be more precise or confirming this range by the Q4 call. Thanks for the question, Johann.

Yeah, thank you. Coming to your next question, which is the explanation, where is the loan growth? Indeed, why is the CD1, where comes the RWA growth and therefore the drop in the CD1 compared to end of Q3? Yeah, a bigger part of that, of course, comes from The Increasing Loan Book. I mean, we have said that having now reached either 3% and we are aiming for 6% or maybe a little bit more. So this will come with additional RWAs. But you're right, there are some elements also from rating migrations in it. So still some corporates are feeling some difficulties. Some pressure with all this geopolitical and trade developments and whatever you have. So we have built in some migration impact as well. Moving to your fourth question, which is the NII in Czechia. Indeed, we see in some countries, especially in Czechia, also in the recent quarters, a significant increase In the loan growth, mainly in the retail area, so we had seen picking up the mortgage business, but also what we saw is a good consumer loan growth. So both were more than happy what we have seen there. And one has to say that also liability on liability in this normal rate environment, you can earn a little bit. But the average volume, if you compare Q3 with Q2, then it was a nice, nice growth. When talking about the second part of your question, GCNM, so the Austrian business, if I may say so, why is the NII down? The report here, I agree it's a little bit difficult to read because it's not only the entity level, but it's also built on funds transfer pricing and similar. But of course, we have seen also a low loan book as well. So it's both elements which needs to be considered. Thank you for your questions.

Thank you.

We'll take our next question from Gabor Kemeny with Autonomous Research.

Hi. My first question is on NII, please. Decent growth in your core NII in Q3 together with loans and you even expanding your net interest margin a bit. Can you share your initial thoughts on the NII as you're going into 2026? Shall we model NII growth which is kind of aligned with loan growth, for example? That's the first one. Second one on the overlay provisions you select from Ukraine. I believe the wording is that you increase the risk zone Ukraine. Can you elaborate a little bit further on this? Why this triggered additional, how this triggered additional provisions and was the likelihood of recurrence in the coming period? And my final question is on Czechia. A new government is being formed with some maybe more populistic measures on its agenda. What do you think is the likelihood of a bank tax, maybe a more effective bank tax being introduced in the near future? Thank you.

Thank you, Gabor. Coming to your first question, At this point in time, we do not speak too much about the outlook in 2026. So I'm sure as you're following so long, you're not that much disappointed or surprised. What we can share is that in all the markets, we expect long growth in 2020. Retail area, because the employment rate is good in all the markets, which means in combination with wage increases, this gives a higher potential for customers to also take more loans. So this is the one, and as indicated before, also in corporates. We see some adjustments. You have seen our assumptions in the presentation on the rate development. Okay, there we see some negative impact on the NII, but we still assume now, I would say, as of today, a slightly improvement in the NII and, of course, also in the NFCI. Yes.

Gabor, I was once sharing with you that when we look at Ukraine, we look at Ukraine in sort of three regions. Green, where there's almost no war-related activity. Yellow, where there is war-related activity. And red, where there is really intense Thank you very much. Thank you. Thanks for the question. Yeah, and then there is a question which is difficult for me to answer.

It's about Czech politics. Let us observe the coming weeks and then come to a final comment on that. I would agree with you that we are in a situation that every country feels encouraged to increase bank tax, but I hope this is more speak than real action. Thank you.

Yes, fine. Thank you.

We'll take our next question from Riccardo Revere with Mediobanca.

Thanks a lot for taking my questions. Two or three, if I may. The first one is on, again, sorry, in loan growth. RBI core, including Russia and Belarus, year-on-year, the book is up just a little less than 4%, according to your Excel file. And what could bring, why that should go to kind of six to seven percent in only three months? This is the first question. The second question I have is on deposit growth, which is honestly amazing, because it's doubling, double that of the loan book at the moment, more than seven percent, if I'm not mistaken. We're just wondering what is driving that and if you think this will We'll have to slow down at some point. The other question I had is on NIMH. It was 231 in Q1, then fell a little bit to 227 in Q2. Now it's back to 2.3%. So basically, you're not suffering any kind of margin pressure over the past six months. And given that rate cuts should be more or less done, not everywhere, but in most of the countries where you operate or affecting most of your loan book, it is fair to assume that it is hard to believe that severe margin pressure should be visible in the next medium term. Thank you.

Thank you, Ricardo. So to your first question, loan growth, indeed, that's given where we are and what is ahead of us, it's very optimistic. I agree. On the other hand, how do we judge it? We have seen that the retail is still doing fine and so they will contribute their part. But of course, the bigger the bigger Volume now has to come from the corporate books and we have a strong pipeline. This does not mean that the end of the day we will get all what we have now in the pipeline as competition is significant in this area as well. But the best what we can say is it seems to be possible. and this is of course a bigger part has to come from head office in absolute volume for sure but also we see quite good buy plans in most of the corporate areas of our retail of our network banks now to the deposit growth yeah we see we see that customers are earning nicely and they put quite a lot of their wages on their accounts. So this is the drivers, quite good liquidity in many of the markets. So forward looking, is there some risk that in one or the other market the central bank might reduce a little bit the liquidity and thus putting also On the pricing of deposits, some pressure, this can happen. And we also see now an increasing competition even without the special impact what I have mentioned. So to your third question, NIM very stable. Can there be, the way I understood it, could there be pressure coming from somewhere? Indeed, as I said, competition could be one pressure. The other is, yeah, we compare. Then, you know, banks have their model books, have their historic run rates in the books. So probably you always have a combination of all these. But, yeah, it looks positive as of today. Thank you.

Thanks. Thanks a lot.

We'll take our next question from Mae Nems with UBS.

Yes, good afternoon, and thank you for taking my questions. I have three questions, please. The first one would be on overlays. Hannes, you mentioned that you see no reason to add overlays presently. Can I ask you about the approach to overlays in 2026? What would drive your decision to either add or potentially to relieve some of the substantial overlays for the ex-Russia business? The second one would be on corporate loan growth and the pipeline in GCNM. You clearly mentioned that the bulk of the corporate lending growth in Q4 has to come from there. Can you talk a little bit about the nature of the pipeline? What sort of deals? What sort of lending do you expect materializing? And the last question is on Poland and the Euro mortgages. The numbers I mentioned, you know, below the 300 million guidance for this year, so something around 220 or 250, if I'm not mistaken. Can you talk about the assumptions or the expectations for those provisions in 2026? What would drive them? Where do you feel the adequate provisions level would be?

Thank you.

Well, Matti, thanks for all the questions. I may start with the question number one when you're talking about the overlays on 2026. Just to remind the audience, you know, we have some 100 million euros of overlays for Ukraine and we have another 100 million euros of overlays for Russia, which remains for the whole group of RBI group, an overlay of around about 300 million euros. So when would we release and also before I go to the details on when and why we would release or why we would seek good motivation for releasing, I'm now referring to the financial stability report and I think you all have seen, you know, that of course some leading indicators, BMIs are looking constructive. At the same time, uncertainty index stays elevated. So when would we feel encouraged to release some of these overlays? This would be, of course, if we see materialization on stage three, if we see a clear change in the risk perception. And of course, whenever there is a substantial change towards sanctions and war-related risks, We would be more than eager to adjust our overlays and our overlay amounts what we have created. So this is our thinking when it comes to the overlays. If this is fine, I also would immediately take the number three question, Poland Euro, in our current way of thinking, how do we come to these 225, 200, a little bit up to 225, 250 maybe. The one is, you know, we always were sharing with you our Swiss franc guidance, and this was always around about 150, 170. And if I look at how you have modeled this number into your assessment, I think we have been well understood. And what has been now new, Mati, is that we see that the entire Local industry, when it comes to litigation provisions, have now moved on also on the Euro part of the portfolio. So we see not yet an elevated inflow, but we see a higher inflow of Euro litigation. And this was the reason for us not to leave you in the belief that the 150 is good enough for the next year, but that's the reason why we added this roundabout 80 on the Euro side and it could come Mainly from the active euro loans outstanding. Of course, here amounts would be less pronounced compared to the Swiss franc. First, the portfolio was a smaller one. And second one, the FX related devaluation part is a smaller one. But this is our way of thinking how we come to this guidance on 220 to 250. So confirming the The previous guided 150 for the Swiss rank, but being more prudent when talking about Europe. Hope this helps in understanding our thinking. Thanks for the question, Mate.

Yeah, and to your other question, now in GCM, where should it come from? I would say, broad over all sectors. With some larger tickets, of course, as well. So people will be busy, but I cannot in the head office here pick out a specific industry or so where we will see it. It's rather broadly and, of course... The corporate parties lining up and given the size what they have and some of them significantly. I mean, maybe I was not so precise enough that the retail recently had been growing above the market and I think this at least will continue till end of the year. So, from all areas positively supported. Thank you.

Thank you.

We'll go next to Ben Maher with KBW. Hi.

Thank you for taking my questions. I just got two. I think you mentioned you were growing ahead of the market in particularly retail lending. I was just interested to hear your thoughts on why that is, if that's around pricing or something else. And then my second question is just on fee growth. That's been very strong, particularly this quarter. Again, I just wanted to get a better understanding of what's driving that and whether you expect that momentum to continue into the final quarter. And I know you were reluctant to give any numbers for next year, but if there's any comment you think you can give for next year, that would be helpful. Thank you.

Yeah. I think our We got it right in retail. Recently, I would say we had periods where we were holding back with the mortgage business as for a period of time, margins were very, very thin. And as the margins are now in an area where we are fine with it, so we can... We can now get to our market potential or slightly above. So I think what paid off is that we usually when you hold back then it takes quite some time till the customers perceive you that you are back again in the market and this we have achieved in the beginning of this year and we are building on that and with the margin in this business we are fine. The fees that you are referring in the Q3, indeed they were good for us and what can I say, I think credit card comes to some extent also in Q3 because of the tourism season which is good in some of our quarters and with this also some and some also from the tourism and therefore the effects. Yeah, and of course you always have to be aware that part of this is, how shall I say, A little bit higher than the core of it because of part of the transaction tax what you have in Hungary goes also in this line. But overall, we are very fine with the development. Thank you.

And if you have any more questions, please remember to press star 1 on your telephone keypad to place your question. The mute function on your telephone needs to be turned off so we can get your signal. We'll go next to Ricardo Rivera with Meteo Banca.

Thanks for taking my question. Two, if I may. The first one is on cutting Russian exposure. You mentioned at the beginning of the call that you're running ahead of a schedule that you have agreed with your supervisor. Still looks to me that over the past quarter at least, you know, the decline, especially in the deposit side, seems to have come to a sudden stop, if I may say so. So I was wondering what is driving that? This is the first question. The second question is on your capital, the way you see your capital at the end of 2020. What kind of target do you think the bank should have, assuming Russia one day will be solved? Thank you.

Thank you, Riccardo, to your first question, the development of deposits. One has to say, of course, this is always driven by opportunity costs, what customer face, and it's more than difficult to, I mean, if you look at the forecast, if you look at the reduction, 38% is huge. Thank you very much. and difficult to say what what keeps At this opportunity cost keeps customer with us. I would not make any forecast to this, how this develops further. I mean, we have done everything to incentivize and now I have to say the rest is in the hands of the customers. When talking about the capital at year end, so the $15,200, 15.2, we are comfortable with this. I think we are a little bit away from the scenario you outlined about Russia. And then of course it's also a question of how will then be the operational RWA impact from Russia be treated by the The first one, are you basically saying that what RBI is measured on is more the reduction of the loan book?

Then on the deposit side when it comes to cutting the Russian exposures because I understand at some point you know it's the customer decision to withdraw money from you or not while maybe you have more control on the loan side so is this the way the supervisor looks at things or do they want also you to bring the deposit down And the second question is, 15.2 is a high number. So I was wondering, do you think this is the target of the bank in normal conditions? Or could it be lower given the risk profile of RBI excluding Russia?

Coming to your first question, the whole story about Russia is always what is totally in our hands or let's say in the hands of the Russian bank and what is What is done, in other hands, being it by institutions who give us a framework where we can act in our customers. Now, in the loan book, we have the planned rundown, so the expected rundown. The quality of the portfolio is very good. Customers are repaying to a large extent as scheduled, but not more. I mean you might be you might remember that in the past we had quite a lot of fixed rate loans and whenever the the rate cycle went down then customers were very quick in refinancing at the lower rate now given the rate level where we have so this is not to be expected also not in the near future so We had seen in the corporate loan books some faster repays than were scheduled, but everything else is according to the schedule. And we don't grant new loans, so this is why this is falling dead. And as I said, we have to offer... In Russia, an account, and then it's the only thing we can do that we don't pay interest for none of the accounts. And then, as I said, it's the decision of the customers how much money they keep with us. And this is communicated, analyzed, and also shared by the ECPR supervisors. So this is now... Probably it's not the right point in time to think about the different CT1 ratio for the group without Russia as Russia is, the Russian bank is still with us. And yeah, you point us in a direction to adjust it somewhere in the future. And when we feel the point in time, we will then speak about it. Thank you.

Fair enough. Fair enough. Thank you.

And once again, to ask a question, that's star one on your telephone keypad. We'll go next to Simon Nellis with Citibank.

Thanks very much. Thanks for the opportunity. Just a quick one from me. Can you perhaps share some thoughts on the dividend that you were looking to pay out of this year's earnings in the negotiations or discussions with the regulator? Thank you. Yeah, I start with the second part.

1,20 € per share so in the first nine months so as this is a very mechanical thing you don't then see also that we just formally will accrue also till the end of the year another 40 cents so 160 this is what we have in our calculation and talks with at least on my level with the supervisor have not started yet so Yeah, that's always an interesting discussion. Again, what is the perimeter for this discussion group or core group or all this? So work in progress, starting at a later point in time.

Thank you. And once again, that is star one to ask a question. As there are no further questions at this time, we will now conclude today's conference call. Thank you for your participation.

Thank you moderator and thank you to all participants for showing interest, devoting some time I wish you a good afternoon.

Thank you. Goodbye.