Release Date: July 30, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Raiffeisen Bank International AG (RAIFF, Financial) reported a consolidated profit of EUR1.3 billion for the first half of 2024.
- The CET-1 ratio improved to 17.8% for the Group, driven by appreciation in the quarter.
- Loan growth is picking up, with good dynamics in retail unsecured, mortgages, and corporate lending.
- Net fees and commission income rebounded, confirming guidance at around EUR1.8 billion.
- The bank's liquidity ratios remain very stable at high levels.
Negative Points
- Net interest income (NII) is slightly down this quarter, particularly in Hungary and the head office.
- Operational expenses (OpEx) increased by 5% in the first half of 2024 compared to the first half of 2023.
- The bank is facing significant challenges in de-risking and potentially exiting its operations in Russia.
- The CET-1 ratio excluding Russia and Belarus is lower at 14.7%, with potential volatility due to ruble fluctuations.
- The bank is dealing with increased provisions for litigation related to FX mortgage portfolios, particularly in Poland.
Q & A Highlights
Q: Could you clarify the increase in RWAs due to reserves at the Central Bank of Russia?
A: The increase in RWAs is due to the higher risk weight for reserves at the Russian Central Bank, which is above 100%. This shift from other placements like MICEX, which had lower risk weights, significantly increases our RWAs. The impact will depend on customer behavior and the reduction in the loan book.
Q: Can you explain the increase in CHF provisions and the future trajectory?
A: The increase in CHF provisions is due to FX appreciation and utilization of provisions for experienced losses. The total coverage has changed due to these factors and the inclusion of Euro lenders seeking settlements. The future trajectory will depend on ongoing litigation and settlement acceptance rates.
Q: What are the latest interest rate sensitivities for the Group?
A: A 100 basis point reduction across various currencies would impact NII by approximately EUR 220 million for the Group and EUR 150 million excluding Russia and Belarus. This includes hedged positions.
Q: What are the main obstacles in the Russian exit strategy?
A: The main obstacle is obtaining approval from multiple authorities, including the Russian Central Bank, Russian administration, European Central Bank, Austrian FMA, and AFAD. The highest probability scenario is selling around 60% of the Russian business, with the remaining 40% kept by RBI.
Q: How will the deconsolidation of the Russian business impact the overlay provisions?
A: The overlay provisions in Russia will remain within the bank and will be part of the final valuation and negotiation with potential buyers. These provisions may be released by the new policy of the buyer.
Q: What is the impact of the Hungarian windfall tax and other regulatory changes in the region?
A: The Hungarian windfall tax is expected to be slightly lower than last year, around EUR 44 million. The transaction tax impact is estimated at EUR 5-8 million. In the Czech Republic, discussions are ongoing regarding potential new sector taxes.
Q: What is the outlook for loan growth in key geographies?
A: Loan growth is expected in Slovakia, Romania, and the Czech Republic, particularly in unsecured loans and mortgages. The margins in the mortgage business are improving, which may drive growth in the coming years.
Q: If a sale of the Russian business is not achieved, what is the end game for the Russian bank?
A: If a sale is not achieved, the Russian bank will continue to reduce its loan book and increase cash placements with the Central Bank of Russia. The bank will have a high CET1 ratio and will seek to pay dividends, although this depends on regulatory approvals and geopolitical conditions.
Q: How will Basel IV impact RBI's capital requirements?
A: Basel IV is expected to reduce credit risk RWAs by EUR 3.5-3.8 billion and increase operational risk RWAs by EUR 2 billion. The fundamental review of the trading book, postponed to 2026, is expected to provide further relief of EUR 1-1.5 billion.
Q: What is the impact of the potential downgrade of the Russian subsidiary from systemically important status?
A: The downgrade is based on the size of the business and other qualitative metrics. While it may have some consequences, the buyer is aware of the situation, and it is not expected to significantly impact the sale process.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
