RBI First Quarter Report 2021: Credit demand picked up in March

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Raiffeisen Bank International’s (RBI) consolidated profit improved by more than a fifth to € 216 million in the first quarter of 2021 – despite ongoing headwinds as RBI’s economic environment continues to be dominated by the COVID-19 pandemic and its impacts. This is also clearly visible in currency movements, with significant depreciation pressure on numerous CEE currencies in the 2020 financial year, even though the first three months of 2021 brought a noticeable appreciation trend. Further influencing factors on consolidated profit included the ongoing low interest rate environment, subdued demand for loans and banking services due to the economic situation, as well as excess liquidity in the group. 

“We are satisfied with the development in the first quarter. Credit demand picked up in March. Thanks to the progress in vaccinations, we sense a positive mood. The economic recovery is visible and will continue sustainably over the next two years,” said RBI-CEO Johann Strobl.

Net profit of RON 198 million in Romania in Q1 2021

Raiffeisen Bank has concluded the first quarter of this year with a good financial performance, with a net profit of RON 198 million, by 41% more than the the same quarter in 2020 amid a  considerably lower level of the cost of risk.

In Q1 2021, the total assets mounted to RON 52.2 billion (a 9% y-o-y increase), but the bank’s incomes have declined by 4% compared to Q1 2020, despite the increase of the net credits.

Operational expenses have also been on a slight decline by 2% less compared to Q1 2020, especially amid some costs that have been significantly higher in March 2020, amid the first phase of the pandemic.

“We are content of our result in the first three months of 2021 (…) The bank’s credit portfolio increased by 4pc, compared to Q1 2020, with a peak of 15% of the SMEs credit portfolio, mostly due to our strong involvement in the IMM Invest programme”, said Steven van Groningen, president & CEO Raiffeisen Bank.

General administrative expenses decreasing

Operating income declined 11 per cent year-on-year to € 1,259 million with net interest income decreasing by 13 per cent to € 767 million, as a result of interest rate cuts in numerous markets of the group and of currency depreciations, especially in Russia and Ukraine. Net fee and commission income was down 3 per cent to € 434 million, mainly due to lower volumes as a result of COVID-19 and to currency depreciations

General administrative expenses were down 5 per cent year-on-year to € 692 million with currency movements resulting in a € 35 million reduction.

Significant decline in impairment losses on financial assets

Impairment losses on financial assets in the amount of € 79 million were recognized in the reporting period, a decline by almost half compared with € 153 million in the previous year’s period.

The NPE ratio was slightly down to 1.8 per cent with a decrease of 0.1 percentage points on the end of the year, mainly due to an increase in deposits at central banks, while the NPE coverage ratio went down 0.3 percentage points to 61.2 per cent.

CET1 ratio (fully loaded) at 13.6 per cent

Including the first quarter results, the (fully loaded) capital ratios are as follows: CET1 ratio 13.6 per cent, tier 1 ratio 15.6 per cent, and total capital ratio 18.1 per cent.

Quarterly results

Compared to the fourth quarter of 2020, operating income increased € 12 million to € 1,259 million in the first quarter of 2021.

General administrative expenses decreased € 85 million quarter-on-quarter to € 692 million, primarily due to seasonal effects.

Impairment losses on financial assets amounted to € 79 million in the first quarter of 2021, following € 133 million in the fourth quarter of 2020.

In the reporting period, consolidated profit rose by € 11 million to € 216 million.

Outlook

Raiffeisen Bank International’s (RBI) expects modest loan growth in the first half of 2021, accelerating in the second half of the year.

The provisioning ratio for FY 2021 is expected to be around 75 basis points, as moratoria and government support programs expire.

“We remain committed to a cost/income ratio of around 55 per cent – possibly as soon as 2022 depending on the speed of the recovery. We expect the consolidated return on equity to improve in 2021, and we target 11 per cent in the medium term. We confirm our CET1 ratio target of around 13 per cent for the medium term. Based on this target we intend to distribute between 20 and 50 per cent of consolidated profit,” reads a press release.

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