Russia provision

“Only” one billion profit in 2024 for Raiffeisen

RBI Chairman of the Management Board Johann Strobl

(Bild: APA/HELMUT FOHRINGER)

The high provision in Russia weighed heavily on the results of Raiffeisen Bank International (RBI) in the previous year. Profit halved from around 2.39 billion euros to 1.16 billion euros. 

The provision is the result of a legal dispute between Strabag and its Russian co-owner Rasperia. RBI also has legal problems in Poland, for which the bank also had to book high provisions. Bank CEO Johann Strobl is nevertheless optimistic about the 2024 result.

"Things are actually going very, very well"
Apart from Poland, things are "actually going very, very well in all parts of RBI", said Group CEO Strobl at the annual press conference on Tuesday. This was also shown by the figures, which had absorbed a EUR 840 million provision in Russia, further provisions in Poland amounting to EUR 649 million and the exit from Belarus, which had a negative impact of EUR 824 million on the result. The high interest rates had been well utilized in all markets and the equity ratio had developed well. Net interest income will decrease in the future due to falling interest rates, "but that doesn't matter, because the quality of customers will improve and demand for credit will increase," said Strobl.

Excluding the business in Russia and Belarus, RBI posted a consolidated profit of just under EUR 975 million in 2024. This was 1 percent more than in the previous year. Net interest income fell by 1 per cent to EUR 4.16 billion, while net commission income increased by 5 per cent to EUR 1.85 billion. The hard core capital ratio was 15.1 percent. If Russia and Belarus are included, profit halved to EUR 1.16 billion, net interest income rose from EUR 5.6 billion to EUR 5.8 billion and net commission income fell from EUR 2.9 billion to EUR 2.6 billion. The core capital ratio fell from 17.3 percent (2023) to 17.1 percent.

Business in Russia further reduced
The bank further reduced its business in Russia in the previous year. According to the bank, the credit volume in Russia was reduced by a further 30 percent in 2024 and now stands at around 4.2 billion euros. Customer deposits were also reduced by 35 percent and foreign currency payments from Russia were further restricted. RBI does not intend to change its plan to reduce business for the time being, even if the war ends. "I would like the war to be over," says Strobl. However, it remains to be seen whether this will also have an impact on the framework conditions. At the moment, RBI does not want to change its strategy. It is not possible to estimate exactly when the bank will be able to reduce its exposure in Russia to zero, but it is quite conceivable that there will no longer be a loan portfolio in Russia in two to three years.

How the legal dispute between Strabag and Rasperia, which also involves Raiffeisen Russia and therefore RBI, will continue is also currently unclear. In a first-instance ruling, Rasperia was awarded damages of around 2 billion euros. If the judgment is upheld in the second instance and Raiffeisen in Russia suffers financial losses as a result, RBI intends to sue for damages in Austria. It could then "help itself" to Rasperia's assets in Austria - shares and dividend claims worth around 1.2 billion euros. However, RBI does not want to hold the Strabag shares; in the event of the case, these are to be realized in court and the proceeds transferred to Raiffeisen.

Second problem child Poland
Alongside Russia, Poland is a perennial problem child for RBI. The dispute, which has been ongoing for years, concerns thousands of Poles who took out loan agreements in Swiss francs to finance their homes before the financial crisis due to the low interest rates in Switzerland at the time. However, the Polish zloty subsequently depreciated massively against the franc, which placed a heavy burden on house builders. As a result, many borrowers took legal action against their banks to get out of the expensive loans.

In the 2024 financial year, the bank recognized EUR 649 million in provisions for Swiss franc and euro mortgage loans; in total, RBI has already made provisions of almost EUR 2 billion (EUR 1.965 billion) for the legal dispute. Swiss franc loans worth around EUR 1.6 billion are currently still outstanding. There are a further 106 million euros in provisions for euro mortgage loans, with loans worth 395 million euros still outstanding.

It remains to be seen whether further provisions will have to be made. In the meantime, many of the Swiss franc borrowers are already in court. Overall, the bank expects that 92 percent of those who have a loan in Poland will also go to court. Case law in Poland has provided great incentives for this, as the judgments would simply cancel the customers' contracts. As a result, customers would be granted an interest-free loan without negative exchange rate effects. Such rulings could lead to further lawsuits, for example from customers who have already repaid a Swiss franc loan and digested the exchange rate risk, but who might now try to fight for an interest-free loan. It is therefore difficult to say when the end will be reached. However, the bank is well prepared for the Swiss franc loans.

RBI customers as war profiteers?
The RBI boss was cautious about a Bloomberg article according to which the bank has companies among its customers that supply the country's military. The bank complies with all sanctions regulations and has no business relationships with sanctioned customers. No loans have been granted to Russian customers for a long time, whether sanctioned or non-sanctioned. However, there are maturing loan portfolios. The RBI also does not finance the arms industry as a matter of principle. "There are no large payments in this direction," said Strobl. On Monday, Bloomberg reported on the case of a chemical company from which Raiffeisen is said to have received 62 million roubles (606,629 euros) for services. The company is said to have supplied products that were needed for the production of military goods.

The RBI headquarters in Vienna

(Bild: APA/HELMUT FOHRINGER)

Despite all the problems, RBI is focusing on growth for the current year. The bank is targeting credit growth of 6 to 7 percent and a stable common equity tier 1 ratio in 2025. Assuming that the Russian business has to be derecognized without income - i.e. with a price/book value ratio of zero - the bank expects a core capital ratio of around 15.2 per cent. RBI is proposing a dividend of EUR 1.10 per share for 2024. A dividend of EUR 1.25 was distributed for 2023.