Raiffeisen Bk In Unsp/Adr

Good afternoon, ladies and gentlemen, and welcome to the Q1 Results 2026 conference call of Heisenbank International. Today's conference is being recorded. At this time, I would like to turn the conference over to Mr. Johan Strobel, Chief Executive Officer. Please go ahead, sir.

Thank you. Good afternoon, ladies and gentlemen. Thank you for joining us today for our first quarter update. Hannes and I are delighted to be joined by Camilla Makhmudova, our CFO and board member since January this year. This is a very exciting time for RBI, and we are very fortunate to have her on board. Let me start with an overview of our key figures in the first quarter, and I refer to slide number four in our presentation. The operating result of the group excluding Russia came in at 760 million, up 3.2% versus the last quarter, and up 12% versus the same period last year. This speaks to the strength of our core rating business, driven by decent loan demands, stable margins, and a strong fee business. Consolidated profit stands at 209 million, largely impacted by effects below the operating result. A large portion of the 2026 bank levies booked in the first quarter, and we will not see the same effect in the coming quarters. Risk costs came up 36 basis points, and our guidance for 2026 is confirmed around these levels. Provision in Poland in Q1 ran a bit above assumed yearly run rate. Nevertheless, our full-year guidance here is unchanged for now. We confirm our return on equity target for the group excluding Russia at around 10.5% despite an optical low 5.2% this quarter. Finally, our CST1 ratio, assuming a full loss of the Russian equity, stands at 14.9%, reflecting decent long growth in the quarter. In recent weeks, we have announced two strategic transactions which have the potential to improve our market position in two key markets and which comfortably fit in our capital plan. Let's take a closer look at each of these. I'm turning to Slate 5 and want to talk about Romania, the acquisition of Garanti in Romania. We announced at the end of March that we intend to acquire this bank in Romania and merge with our own business there. The rationale is straightforward. We are very positive about the Romanian market and our teams there have done remarkable jobs for many years, consistently delivering a market-leading return on equity. We have witnessed some consolidation in the market and we clearly see the benefits of scaling up. With this transaction, we break into the top three or four in Romania and add over 200,000 new active customers. The business case is also straightforward. Whereas the integration costs will largely be booked in 2027, the profit accretion will be visible as early as 2028 at around $90 million and increasing thereafter. The impact on RBI-CAT1 ratio excluding Russia is around minus 60 basis points and will materialize in Q4 later this year. We believe that we are paying a reasonable price for a good asset. and which our teams in Romania will do an excellent job integrating it. My colleagues will update you on the progress in coming quarters, and with that, let us now move to my next slide, 6, ADICO. Let's take a closer look at the voluntary tender offer for ADICO, which we announced in early April. First of all, I am pleased to announce that our offer is being reviewed by the Austrian Takeover Commission, and we expect it to be made public at the latest on the 19th of May. We intend to acquire any and all article shares for Euro 23.05, subject to achieving a minimum of more than 75% of shares outstanding. We commissioned an independent valuation and our 23 Euros The purchase offer represents a 20% premium over the intrinsic value determined by Ernst & Young on the basis of public available information. We also announced that we plan to enter into a transaction agreement with one of Adico's shareholders, Altagroup, based in Serbia. Under the terms of this agreement, if the voluntary tender offer is successful, RBI is committed to selling four of Adico's subsidiaries to Altagroup. These are the banks in Serbia, Montenegro, and two banks in Bosnia and Herzegovina. For completeness, I should mention that this agreement does not require Alta Group to participate in the tender offer. It's only binding on RBI if the tender offer is successful. Alta Group owns just under 10% of Adico directly and has entered into share purchase agreements covering another close to 20% or so. although these shares purchase agreements have not been completed. For the purpose of this transaction, it is our understanding that a total of 29.59 of Adico shares are attributed to Alta Group. We appreciate that this tender and envisaged carve-out is uncommon, and I would like to spend a few words on the pricing mechanism, including in the carve-out. This mechanism has been designed to ensure that all Adico shareholders are treated equally. The carve-out price for the four non-EU banking subsidiaries will be floored at the level which reflects the same price-to-book multiple for which we are acquiring Adico Group. We will also ensure that Adico Bank obtains an independent and individual valuation of each of the four banking subsidiaries to be carved out. The purchase price offered to Alta will be the higher of the two, the independent valuation or the pricing using the flawed price book multiple. The applicable mechanism will be determined jointly for all the carved-out subsidiaries. If any of the four subsidiaries is sold and transferred at the independent valuation and additional payment to Adico shareholders, who tendered their shares in the takeover offer will be made to compensate for the difference. We believe that with this mechanism, all shareholders of Artico will benefit equally from an increased fair market value of the carved-out subsidiaries. Let's now look at the rationale and impact on RBI. We have communicated an initial impact of around 40 five basis points on the CETI-1 ratio excluding Russia. I should mention that this impact will depend on the opening balance valuation. This means that in the event of any fair value adjustments, the initial CETI-1 impact could be higher. The final impact is expected to be much lower, however, following the calf out of Serbia, Montenegro and Bosnia-Herzegovina. Viewed comprehensively and assuming a successful completion of the carve-out, this transaction would lead RBI to become the fourth largest bank in Croatia and re-enter Slovenia for a very modest 10 basis points impact on RBI C1 ratio excluding Russia. Similar to the acquisition in Romania, we expect the bulk of the integration cost to be booked in 2027 and visible profit accretion in 2028. In the coming days, we expect to sign the transaction agreements and to publish our voluntary tender offer. We also look forward in the coming days to engaging with ADECO shareholders. We believe that our takeover offer comes with a rather high transaction certainty and that for many stakeholders, our proposal provides a solution to our long-standing problems. Once the offer is published, the acceptance period lasts 10 weeks. By end of July, we should have a good idea if we are successful in achieving more than 75% participation. If we reach the minimum acceptance quota, the acceptance window will be extended by three months. In parallel, we will seek the necessary regulatory approvals. According to this timeline, we expect settlement and closing in Q4 this year. Let me stop here for now, and I'm sure you will have questions on these topics in a few minutes. Let's move to slide 7, Russia. We're making progress in reducing the business in Russia, and first of all, I think you might have noticed that we adjusted our reporting, and especially in the loans to customers. We now exclude loans to general government, which are in fact placements with the Russian Deposit Insurance Agency. These are so-called C-accounts and refer to coupons and dividends paid by Russian corporates and blocked for investors located in what the Russian authorities define as unfriendly countries. Raiffeisen Russia acts as a paying agent and receives the coupons and dividends from Russian corporate customers. and is required to place this with the Russian Deposit Insurance Agency. They are reported as loans to general governments and the loans to customers on the balance sheet. Since June 2024, these have increased from zero to almost two billion today. DC accounts volumes are excluded from the rundown targets agreed with ECB. I believe that this adjustment reveals the true scale of rundown. Since the start of the war, our loan book is down 78% in ruble terms, and we now have less than 2 billion, 2.5 billion in euro terms loans remaining. More generally, all the restrictions which have been introduced to Russia will remain in place for the foreseeable future. I'm sure you will also ask for an update on our claim for damages against Rosferia. First of all, allow me to repeat what I told you last time. We have not filed our claim yet, but we will absolutely do so at the time of our choosing. We continue to explore solutions which limit the risk of retaliation on our business and equity in Russia. Progress has been slow. But we believe it is our duty to explore all possibilities. If we now move to slide eight, the macro development, what you find here is that we have adjusted our forecast due to the geopolitical conflicts. And with that, I would also move to slide nine, inflation and rate. And you see here also some few adjustments. We believe that in the core of our regions, the non-Euro countries, there is no rush to increase rates, but maybe rate decreases will slow down a little bit. We have built in a little rate hike from the ECB, maybe two steps of each 25. Let me now move to slide 10, our outlook, and we confirmed the 2026 outlook largely unchanged since last time. Of course, the CT1 ratio is adjusted as this reflects the two acquisitions which we plan to do. And Camilla will discuss our CT outlook, CT1 outlook, in more detail. And with that, let me hand over to Camilla. Camilla, please.

Thank you. Good afternoon, ladies and gentlemen. I'm delighted to join you today, and I look forward to meeting many of you in person in the coming months. Let's run through the key P&L and balance sheet developments this quarter, stating with the overview slide on slide number 12. Loans to customers are up around 3.5% in the quarter, driven by encouraging trends across most of our markets, and in line with a good momentum which we experienced in the second half of the last year. Net interest income up 2% quarter-on-quarter, whereas fee income was down 2%. On fees, there is always an element of seasonality in Q1. When comparing to the same period last year, we see an improvement of more than 11%, and we expect another decent increase this year. OPEX were stable quarter-on-quarter in most of our markets, except for Austria. In Q1, head office suffered from a base effect in Q4 last year, which included few positive effects in Q4. There is also a small one-off from the higher deferred bonus provision. More importantly, we can confirm our guidance for financial year 2026, offered at around 3.6 billion euros, slightly above 5% year-on-year increase, and improvement of cost-income ratio to around 52.5%. Let's take a closer look at each of these, starting with NRI on slide 15. As mentioned, NRI is up 2% on the quarter, driven by further balance sheet growth in the core market. Rates and margins remain broadly stable. Looking ahead to the rest of the year, we should expect less headwinds from the coming key rates, with perhaps an exception in Hungary. More encouragingly, The rate development has changed noticeably since the beginning of the March. Curves have stiffened, which means that we will be rolling our model books into the vector rates. And we might even see some rate hikes, which were not expected earlier this year. So now we have chosen to keep our NRI guidance unchanged at around 4.4 billion, excluding Russia, with an upside between 50 to 100 million euros, depending on how rates, volumes, as well as customer behavior will develop. Moving to the fee and commission income. As I mentioned, we saw a 2% decrease in the quarter, but 11.4% increase over the Q1 last year. I'm happy to report that the increase is broad-based, coming from all key products across all markets. Also here we confirm our guidance of 2.1 billion euros. Moving to the balance sheet. The long growth specifically, the good trends which we observed at the end of last year continued first quarter with 3.5% growth in the quarter. Loan portfolio is now 9% larger than at this point last year. In retail, we see 2% growth in the quarter with very good trends in consumer loans in all of our markets. Personal and consumer loans are up 16% compared to the March last year. And in the first quarter, new business was particularly strong in Czech Republic, Slovakia, and Romania. In mortgages, we see 7% growth year-on-year, while new business generation Q1 was a little bit slower than Q4. It remains to be substantially higher than in all of the previous quarters last year. Here, I would like to highlight the Czech Republic, where Q1 origination is up 15% versus Q4. The corporate book is up 2% in the quarter and 8% year-on-year, with all products contributing very nicely. In Austria, I should flag that a large portion of the reported loan growth is coming from repos and other short-term non-strategic business. In the core of the business, the actual growth is closer to 1%. Focusing on countries, clearly the Czech Republic stands out with 2.7% growth, and if you consider the weaker Czech Karuna in the quarter, loan growth is actually closer to 4%. Likewise, Slovakia, Romania, and Hungary grew at similar rates. Looking ahead to the remainder of the 2026, our loan growth guidance is confirmed at 7%, and this excludes any of the announced acquisitions. Some of the short-term business will revert, and we will sense that the tourist growth rates in retail might ease up a little bit. Finally, the macro uncertainty cannot be ignored. On our macro outlook slide, you see that we have revised GDP for 2026, and we cannot exclude that this must fit to our corporate loan demand. Let's briefly jump to the slide 16 and take a look at the deposits from customers, which continue to pick up nicely into the quarter. Included is the 5%, which you see here. In this 5%, we have some effects from repo and short-term activities, especially in head office in Czech Republic. More relevant, however, is retail deposits, which are between 1% to 2% up in all of our markets. Considering how much these have contributed to our margin and NRI improvements, we are encouraged to see these times continue. And with that, let's now take a look at the CET1. Slide 17. We can report a core CET1 ratio excluding Russia at just inside 15%. As reported last time, there was a change in the Russian operational risk treatment on January 1st with an impact of 29 basis points. So from starting point of 15.2, the development in the quarter is largely coming from the long growth and the dividend accrual. Moving to my next slide and the assumptions for the worst-case scenario in Russia. At this point, you're very familiar with the approach, and there is little for me to add. However, I would like to add in one point, circling back to the Russian operational risk, which I just mentioned. In Russia, worst-case scenario, we do not assume any immediate relief from the Oprey Scarveras coming from our Russian business. This is a very conservative assumption and has an impact of half a day. And I look forward to meeting many of you in person in the coming months. Let's run through the key P&L and balance sheet developments this quarter, stating with the overview slide on slide number 12. Loans to customers are up around 3.5% in the quarter, driven by encouraging trends across most of our markets, and in line with a good momentum which we experienced in the second half of the last year. Net interest income up 2% quarter-on-quarter, whereas fee income was down 2%. On fees, there is always an element of seasonality in Q1. When comparing to the same period last year, we see an improvement of more than 11%, and we expect another decent increase this year. OPEX were stable quarter-on-quarter in most of our markets, except for Austria. In Q1, head office suffered from a base effect in Q4 last year, which included few positive effects in Q4. There is also a small one-off from the higher deferred bonus provision. More importantly, we can confirm our guidance for financial year 2026, OPEX at around 3.6 billion euros, slightly above 5% year-on-year increase, an improvement of cost-income ratio to around 52.5%. Let's take a closer look at each of these, starting with NRI on slide 13. As mentioned, NRI is up 2% on the quarter, driven by further balance sheet growth in the core market. Rates and margins remain broadly stable. Looking ahead to the rest of the year, we should expect less headwinds from the coming key rates, with perhaps an exception in Hungary. More encouragingly, The rate development has changed noticeably since the beginning of the March. Curves have steepened, which means that we will be rolling our model books into a better rate. And we might even see some rate hikes, which were not expected earlier this year. So now we have chosen to keep our NII guidance unchanged at around 4.4 billion, excluding Russia, with an upside between 50 to 100 million euros, depending on how rates, volumes, as well as customer behavior will develop. Moving to the fee and commission income, as I mentioned, we saw a 2% decrease in the quarter, but 11.4% increase over the Q1 last year. I'm happy to report that the increase is broad-based, coming from all key products across all markets. Also here we confirm our guidance of 2.1 billion euros. Moving to the balance sheet. The long growth specifically, the good trends which we observed at the end of last year continues first quarter with 3.5% growth in the quarter. Loan portfolio is now 9% larger than this point last year. In retail, we see 2% growth in the quarter with very good trends in consumer loans in all of our markets. Personal and consumer loans are up 16% compared to the March last year. And in the first quarter, new business was particularly strong in Czech Republic, Slovakia, and Romania. In mortgages, we see 7% growth year on year. While new business generation Q1 was a little bit slower than in Q4, it remains to be substantially higher than in all of the previous quarters last year. Here, I would like to highlight the Czech Republic, where Q1 origination is up 15% versus Q4. The corporate book is up 2% in the quarter and 8% year-on-year, with all products contributing very nicely. In Austria, I should flag that a large portion of the reported loan growth is coming from repos and other short-term non-strategic business. In the core of the business, the actual growth is closer to 1%. Focusing on countries, clearly the Czech Republic stands out with 2.7% growth, and if you consider the weaker Czech Karuna in the quarter, loan growth is actually closer to 4%. Likewise, Slovakia, Romania, and Hungary grew at similar rates. Looking ahead to the remainder of the 2026, our loan growth guidance is confirmed at 7%, and this excludes any of the announced acquisitions. Some of the short-term business will revert, and we will sense that the torrid growth rates in retail might ease up a little bit. Finally, the micro uncertainty cannot be ignored. On our macro outlook slide, you see that we have revised GDP for 2026, and we cannot exclude that this might feed through to our corporate loan demand. Let's briefly jump to the slide 16 and take a look at the deposits from customers, which continue to tick up nicely into the quarter. Included is the 5%, which you see here. In this 5%, we have some effects from repo and short-term activities, especially in head office in Czech Republic. More relevant, however, is retail deposits, which are between 1% to 2% up in all of our markets. Considering how much these have contributed to our margin and NII improvements, we are encouraged to see these trends continue. And with that, let's now take a look at the CET1. Slide 17. We can report a core CET1 ratio excluding Russia at just inside 15%. As reported last time, there was a change in the Russian operational risk treatment on January 1st with an impact of 29 basis points. So from starting point of 15.2, the development in the quarter is largely coming from the long growth and the dividend accrual. Moving to my next slide and the assumptions for the worst-case scenario in Russia. At this point, you're very familiar with the approach, and there is little for me to add. However, I would like to add in one point, circling back to the Russian operational risk, which I just mentioned. In Russia, worst-case scenario, we do not assume any immediate relief from the opris carveras coming from our Russian business. This is very conservative assumption and has an impact of 114 basis points. And to put it differently, if we were to lose our Russian bank and obtain relief from the operational risk, our CET1 ratio would be 114 basis points higher than shown here. On my next slide, I'll spend a few minutes on our CET ratio going forward. On the left-hand side, this is how we think about the capital generation, larger agreement by earnings in the next nine months, as well as some balance sheet optimization, including further securitization. And on the right-hand side is how we think about capital allocation. Portfolio development is largely driven by loan growth, but also includes possible rating migration. We have, of course, included two acquisitions which we are targeting for the later this year. As Johan mentioned, there remains to be some uncertainty as to initial capital impact of the ADECO takeover. subject to the opening balance valuation. For 2026, despite strong long growth in M&A, we continue to assume a payout ratio of 40%, equal to roughly 1.8 euros per share. This is what we accrue in our CET1 ratio in Q1 through Q3. I'll give you a description review in Q4. More generally, at 14.3, we will dip slightly below our medium-term target of 14.5. Clearly, we intend to revert back to 14.5 in the following quarters. Solid capital buffers have been built up over the years, and I believe that the current opportunities warrant the expense. Some of you might know that I spent a large portion of my career in emergence and acquisition, leading RBI corporate developments. Building on this experience, I'm a firm believer in the merits of organic growth. I will be the first one to say that acquisitions needs to be opportunistic, always with a very careful eye on the valuation. Capital allocation will be one of my highest priorities at CFO, and you can count on me to pay very close attention on how we deploy it. There are no changes in our capital requirements shown on the slide 20, and I will skip ahead to slide 21. MREL and funding plan. Starting with the MREL resolution group Austria. From January, a subordination requirement has been added. Now it's a level of 26.69% of the three years. This subordination requirement will not materially change our funding plan. First of all, we currently run a comfortable buffer with eligible subordinated liabilities of 32.78%. Furthermore, our stock of our capital instruments CT1, AT1, and Tier 2, largely satisfy the subordination requirements. Structurally, this means that we will only require modest amounts of senior non-preferred. Moving to funding plans, it has been a busy start of the year, both in Vienna and in subsidiary level. Looking ahead for the rest of the year, Out of the head office, we are looking for a possible tier two ahead of the next year maturity and after summer possible senior preferred depending on the loan growth. In Slovakia, Satra Banka will look to issue senior preferred for MREL purposes in the coming months and the covered bonds after the summer. In Romania, scheduled maturities as well as acquisition of guarantee bank will drive issuance domestically and probably in Euro benchmark format also after the summer. Moving to the final slide and the legacy portfolio in Poland. In the first quarter, we booked 77 million euros of provisions. This is in part driven by temporary effects, which are expected to reverse later in the year. There is also an element of volatility as the model reflects changes in effects and Polish interest rates, which are used for discounting. This means that the provisions through the income statement will not be linear every quarter. And the trend of new litigation cases is very much in line with the downward assumptions in our model, both for active and repaid loans. In Europe, we do not have the same propensity model, and we base our provisions on the observed inflows. These have ticked up slightly, but we are still within the range of our expectations. Accordingly, our guidance for 2026 is unchanged at about 200 million euros. And this is what we have booked into ROE targets. With that being said, we have been rolling out a range of settlement offers across the portfolio, including in Europe. In the coming months, we will see to what extent this is possible to accelerate the resolution of this legacy portfolio. If we find it cost-effective and legally sound ways to bring forward an end to this issue, we certainly will consider that. I would like now to hand over to Hannes for the risk report. Thank you.