Raiffeisen Bank International (RBI) generated a consolidated profit of EUR 2.083 billion in the first three quarters of 2024, compared to EUR 2.114 billion in the same period of the previous year. Adjusted for Belarus and Russia, however, RBI reported a consolidated net profit of just EUR 856 million. However, the result includes provisions for EUR 493 million in Swiss franc and euro mortgage loans in Poland.
The Group’s net interest income rose by almost 4 percent to EUR 4.355 billion, reflecting the continued strong demand for credit in the other markets. By contrast, net commission income, which is based on transaction fees and services, fell by around 12% to EUR 2.077 billion. Core income, excluding Russia and Belarus, fell slightly to EUR 1.481 billion in the third quarter, in line with the general market trend. Despite these slight losses in the commission business, RBI remains operationally strong and underlines its ability to hold its own in a difficult environment.
Equity ratio and forward-looking risk provisioning
A key element of the current balance sheet is the Bank’s improved Common Equity Tier 1 (CET1) ratio. Excluding the Russian and Belarusian assets, this rose to 15.3%, while remaining stable across the Group at 17.8%. This development illustrates RBI’s efforts to further strengthen its financial position through a stable capital structure and careful risk management. RBI expects to achieve additional relief for its capital structure through the deconsolidation of the Russian units.
In Poland, provisions for Swiss franc and euro mortgage loans had an additional negative impact on the result, as provisions amounting to EUR 493 million were recognized here. As a result, the bank adjusted its ROE outlook for the full year excluding Russia and Belarus from previously around 10 percent to 7.5 percent. This forward-looking approach to risk allows RBI to ensure its financial stability in a volatile environment.
Risk management in Russia
RBI is consistently implementing its withdrawal from the Russian market and is making significant progress in this area. In a quarter-on-quarter comparison, customer loans in Russia fell by 23 percent, while deposits in current accounts declined by 26 percent. Since the peak in the second quarter of 2022, customer loans have even been reduced by 67 percent. These measures illustrate RBI’s focus on gradually reducing risks in Russia and reducing its dependence on this market.
The management aims to continue the withdrawal until the Russian units are fully deconsolidated, which will also promote the stability of the entire Group and reduce the potential impact of geopolitical risks. This process is part of a comprehensive risk minimization strategy and should contribute to a more robust and resilient market position in the long term.
Outlook for 2024
RBI remains optimistic for the full year and maintains its forecasts for net interest income of around EUR 4.1 billion and net commission income of around EUR 1.8 billion. The cost-income ratio, an important measure of operating efficiency, is expected to remain stable at around 52 percent. The forecast growth in loans and advances to customers of between 4 and 5 percent also shows that RBI is exploiting growth opportunities in other markets despite the challenges in Russia and Belarus.
Together with the positive operating result, RBI is laying a solid foundation that will enable sustainable profitability even in a volatile financial environment. The return on equity excluding Russia and Belarus is estimated at 7.5 percent for the year as a whole – a figure that remains at a robust level despite the increased provisions in Poland.
International pressure and risk optimization
Raiffeisen Bank International AG (RBI) currently finds itself in a particularly delicate situation: the tensions surrounding its business activities in Russia have attracted the attention of both European and US regulatory authorities. RBI is under increasing pressure from the U.S. to drastically reduce its exposure to Russia. As early as May 2024, the US Treasury Department threatened with possible restrictions on access to the US dollar if the bank did not scale back its activities in Russia. This threat could hit RBI hard, as access to the global dollar markets is crucial for business operations and a loss would have a significant impact on the company.
Since the beginning of the war in Ukraine, RBI has been pursuing a strategy to minimize risks in Russia by gradually reducing credit volumes and the number of transactions in foreign currencies. A complete deconsolidation of the Russian business is also being considered, which means that RBI will either sell its Russian assets or spin them off into an independent unit. However, implementation is extremely challenging due to the complex, constantly changing local and international regulations. The bank also must meet the needs of its approximately 9,000 employees in Russia, making it difficult to exit the market quickly.
The pressure from the US authorities is directly related to Russia’s continued isolation from the international financial markets and the US objective of curtailing Russian banking relationships. The European Central Bank (ECB) has also made it clear that a reduction of business in Russia is necessary, but the Russian market still allows RBI to generate substantial profits, which makes the withdrawal economically more difficult. RBI still recorded high profits in the Russian market, which on the one hand provides the bank with stability, but on the other hand, also contributes to continued international criticism.
Overall, RBI finds itself in a balancing act between economic stability and geopolitical pressure. The strategic adjustments in relation to Russia and Belarus, as well as the targeted provisioning in Poland, show RBI’s apparent determination to shape its business areas sustainably and mitigate long-term risks. The ongoing reduction of risks in Russia and the simultaneous stabilization in other markets illustrate the bank’s focus on security and stability. In this context, RBI plans to continue to keep its investors fully informed about adjustments and progress. The bank’s decision to further minimize risks could ultimately lead to deconsolidation, but the timeframe for this remains unclear.