Raiffeisen Bk In Unsp/Adr

International. Today's conference is being recorded. At this time, I would like to turn the conference over to Mr. Johann Stobel, Chief Executive Officer. Please go ahead, sir.

Thank you very much. Ladies and gentlemen, welcome to our second quarter results presentation. Thank you for taking the time to join us today. Well, we are, of course, pleased to report record results. I appreciate that there is a lot to digest in our numbers. In the most recent quarter, we have seen an unusual high contribution out of Russia and an unprecedented appreciation of the ruble against the euro. But I will do my best to walk you through the moving parts. Nevertheless, there are some positive underlying developments in the quarter which are worth highlighting. Core revenues continue to improve and I am satisfied that this is not solely driven by Russia. excluding Russia and Belarus, NII and NFCI have grown nicely in the past 12 months. Loans to customers are, of course, distorted by Russia, with, on the one hand, a 22% reduction in local currency of the loan book, but a significantly stronger ruble rate, which then we will digest later on in details. We have again seen good loan growth in many of our core CE markets, including Romania, Slovakia, the Czech Republic, Serbia, even before accounting for the recent acquisition. And most importantly, our CT1 ratio is now at 13.4% after deducting 30 basis points for dividend accruals. If we now move to the next slide, You know that we have been focusing on growing in Central Europe for some time now. And despite all that is going on in our Eastern Europe segment, I'm very pleased to report that our core CE markets have continued to grow nicely. In Czechoslovakia, loans to customers grew by 3.5%, in Romania by 9%, in Serbia by around 5%, and we added another $1 billion through the acquisition of Kretiak Rekors Serbia. Czech Republic grew by around 1.5%, or so this is closer to 3% in local currency terms. We have executed our M&A plans with the successful closing of Kretiak Rekors Serbia acquisition and the disposal of our Bulgarian business. We have made good progress on capital this quarter. The disposal of Bulgaria helps as to the strong retained earnings. We have also accrued 30 basis points for dividends as required by the regulator. It should be clear, however, that we will only decide at the end of the year on any dividends and that our dividend policy and guidance remains suspended. Our CET1 ratio remains strong under all scenarios in Russia. Even if we are forced to deconsolidate with no consideration for our equity, the impact on the CET1 ratio is very limited. As we de-risk the business in Russia, while also generating substantial retained earnings there, we are careful not to reallocate the higher Russian CET1 into RWA growth elsewhere in the group. In effect, this means that we ring-fence the Russian capital for our planning purposes. This also means that the CETV1 of the group excluding Russia will not be materially impacted by whatever happens in Russia. As I just mentioned, we are de-risking in Russia and can report loans to custom and local currencies down 22% in the quarter. At the same time, we are seeing large inflows of deposits which means that the balance sheet is not shrinking. Moving to the next slide, I think here a couple of points which I could highlight, and this is one of the many moments where I have to stress the strong rubble, which, for example, in the second quarter in NII had a positive impact on 82 million only by this FX impact. We have seen higher liability margins in the Austrian business, in Hungary, Romania, and also in the Ukraine. We have seen higher liability volumes, as I mentioned before, in Russia. Asset margin, we have seen some improvements compared to the other numbers, relatively small amount of 9 million, Russia, Slovakia, partly compensated in Czech and in Austria. The asset volume effect in Czechia, Romania, and Slovakia accounts for 7 million. And in the treasury activities, we had a, 21 million net. Here comes the bigger part of the Russian business. Um, and when we look at the NFCI here again, of course, uh, uh, the Russian business with the ethics, uh, in Russia, you know, this environment there, this was of course a strong contributor. And, uh, and also the mandatory conversion obligation. Also, this was somehow loosened in the course of the second quarter, still is part of this strong contribution. Moving to the next slide, and I have touched already the overall development in the NII and then the NFCI. Some of you might be interested what is the result, the impact outside of the eastern part of Europe. So here we can report the continued long growth. I have mentioned the Czechia, Slovakia, Hungary, Romania, the 5 to 7%. And this all leads to an also I think impressive improvement in the year and year comparison if you look at the business without Russia with 30% increase in the net interest income or the 12% increase in the NFCI. I think I have mentioned many other topics already. And you can read it. What I probably want to address already here is that the recent ECB hike will contribute also to our NII mainly in Slovakia, whereas in Austria that's probably rather neutral. So the impact from this last hike is about 20 million per annum. Moving to the next slide, the assets and loan growth development. Once again, we have to stress here that in ruble terms, we have reduced the loan book by 22%, but in euro terms, it's an increase of 3 billion. We have seen a loan growth in the southeast And here you would also then add the inorganic consolidation of the Crudia-Krikol Serbia. And of course, there had been some positive impacts, as I mentioned before, in Czechia, Slovakia, and Hungary. If we move to the next slide, here it's important again to mention two things. mainly russian driven the one is that of course the the strong ruble overall leads to on group wide perspective denominated in euros to a huge increase in deposits from customers but also in russia per se we have seen a strong inflow We had seen some outflows at the beginning of the war. These are to a large extent already compensated, so the deposits are back, and therefore also the liquidity ratios improved substantially all over the countries. Moving to the next slide, which is the CT1 ratio development. Here this needs a couple of maybe additional information to the many points which are mentioned here. What my colleagues in preparing this slide for you tried to achieve is to separate the various impacts. So the FX impact, the M&A impact, and the net loan growth impact, and then also some other factors. Important to mention here is that one strong contribution came from Russia. with the buildup of equity in Euro terms with an amount of almost 1.5 billion and a reduction in RWAs. So this was overall very positive. I mean, what's also important here to mention is that if we're heading or looking at the further regulatory developments, We see some discussions in markets that the counter cyclical buffer might be increased. So we expect that this would lead to a CT1 requirement, which is now already at 1050 to further increase to 1060 in the course of this year. Uncertain what in Austria we should expect, but if the counter cyclical buffer would be increased here, this could add another 7 to 15 basis points in the capital requirement if the counter-cyclical buffer would be at 50 basis points or 100 basis points respectively. And as I mentioned, the 30 basis points in the CET1. And as I said before, this is a regulatory requirement. base for that is that if no policy, then the average of the last three years as a payout ratio has to be assumed, which in our case is 17 basis points, 17% of the consolidated profit, which is 285 million euros. And if we now move to the Next slide, which is an answer to the potential question, what could be the CET1 ratio by the end of the year? Here, of course, there are a couple of drivers like when you look then at our outlook and an ROA of 15%. This could add another 30 basis points CT1 equivalent till year-end. Loan growth, we will explain, could be overall group-wide rather flattish. And then the question is what would be the ruble rate and what can we achieve by using different ways of liquidity management in Russia, which simply means can we reallocate some of the liquidity, which is now with the Russian Central Bank, which has under IFRS requirements 170% risk weight, if we can manage this more capital efficient. We also are regularly approached by one question. What would it mean, so the worst case scenario, if we would have to deconsolidate the Russian activity without any contribution? You are aware that we overall currently have, and when I say all together, then I mean the IFRS equity, which is around 3.9 billion plus 10 billion. subordinated instruments, which, if I round it up, is about 4.3 billion, which might be lost in the worst case. On the other hand, then, of course, with such a big loss, we won't pay the crude dividend, so this 0.3 billion, and we then would have some further corrections, like a reduction of the ERP shortfall, and an increased effectiveness in the IRP transactional arrangement. So if we net this all, we would end up at 3.6 billion euros capital impact. And if we then look at the 27 billion of RWAs, this would have slightly minus impact. five basis points impact on the CT one ratio. So in essence, we are the Russian activities are to a large extent ring fenced. I think the next slide, the regulatory requirements I touched already with also the counter cyclical buffer developments. So I would like to move them to the next page which is the MREL and our issuance plans. What you can easily see from this page number 13 is that the current bottleneck is the MREL and here of course issuances in the second half of this year would help to create a little bit bigger buffer than what we have now and what we would like to achieve. So it could be up to two issues in the course of this year. And then, of course, there will be some activities. You know that we have this multi-point of entry concept, which then also requires emerald issuance in the Czech Republic, Slovakia, Hungary, Croatia, and Romania. And these requirements are split between 22 and 23. And in this table, you see the requirements, what we have, and the split over the time.

Moving to the next slide, some information on Russia.