Dynamic growth: balance-sheet total and operating profit up by more than one fifth. Record-setting profit before tax; profit after tax and minority interests down on the previous year. Further improvement in the market positions in Austria and Central and Eastern Europe.

Despite the increasingly difficult market conditions, the Raiffeisen Zentralbank Österreich AG Group (RZB) is poised to release yet another record pre-tax result and more dynamic growth figures. For the first time ever, the number of customers surpassed 13 million this year, as the banking network was expanded to over 3,000 branches, creating more than 7,500 high-quality new jobs. At year-end, the balance-sheet total is expected to be at least 21 per cent higher than the previous year, growing to more than 140 billion euros.

Walter Rothensteiner, CEO of the RZB Group, expressed his pleasure with the results, "This organic growth is the logical consequence of RZB’s dynamic business expansion." The prospective operating result, which is well reflected by current operating performance, is expected to rise by roughly 24 per cent to 1.99 billion euros. The profit before tax is anticipated to be approximately 1.40 billion euros and will thus be some 9 per cent better than the previous year’s record level (excl. one-off income items).

Austria – continuing success with Corporate Customers

Business with corporate customers serviced from Vienna, one of RZB’s core business segments, has once again developed very well. "Year after year, business with corporate customers has consistently achieved growth rates which are well above the market average, in a segment marked by keen competition in Austria," said Rothensteiner, describing the progress in this field. "One of the key factors behind the increases in the volume of corporate business is the high level of investment by our customers, both in Austria and abroad." RZB expects to post a gross result of over 257 million euros from business with its corporate customers serviced from Vienna, representing an increase of around 9 per cent.

Thanks to the Group’s strong growth, RZB is also steadily gaining market share: measured in terms of the aggregate balance-sheet total, RZB had already boosted its market share in Austria from 14.4 per cent at year-end 2006 to 15.4 per cent as of 30 September 2007.

Brisk growth in Central and Eastern Europe

Taking advantage of the dynamic development of the banking markets in Central and Eastern Europe, the RZB Group pressed forward with its growth strategy through its subsidiary Raiffeisen International in 2007. Particularly robust growth was seen in the number of customers, which increased by over one million during the year to exceed 13 million. Expansion of the distribution network was continued with determination, with the Group celebrating the opening of its 3,000th branch office, giving RZB the broadest network of any Western bank operating in the region. Raiffeisen International's profit contribution remains over proportional.

RZB stays the course

In the second half of the year, market conditions took a turn for the worse due to the sub-prime crisis in the USA. No bank was immune to the developments which affected the financial markets. On the one hand, valuation losses on financial instruments hit the trading and financial investment results, while on the other refinancing grew more and more expensive. "Conditions have become choppy, and there's a stiff headwind these days, but RZB is running steady as she goes," explained Rothensteiner. "We are a stable, reliable partner for our customers and will continue to work with the same commitment in our efforts to achieve our strategic goals."

The RZB Group has taken generous valuation allowances into account in its outlook for the annual results, albeit these allowances are still quite modest by international standards. Even so, the prospective pre-tax profit is still shaping up to be the eighth record-setting result in a row for RZB, and is expected to come in at around 1.40 billion euros. This is roughly 9 per cent higher than the outcome for the previous year (excl. one-off income items).

As the tax burden is expected to be significantly higher and as a larger share of earnings will be due to minority interests following the capital increase at Raiffeisen International, the profit after tax and minority interests is expected to be down approximately 13 percent on the previous year, dropping to roughly 650 million euros.

Excess-cover ratio increases to more than 44 per cent

The RZB Group's attributable own funds are forecast to increase by more than 35 per cent to more than 10.3 billion euros. As a result, the anticipated excess-cover ratio should exceed 44 per cent. As Rothensteiner noted, "This gives RZB a comfortable capital cushion to fund its further growth in Austria and in Central and Eastern Europe."

RoE influenced by strong gains in own funds

The strong increase in own funds (the own-funds ratio is poised to come in at more than 11 per cent) impacted the Return on Equity (RoE) before tax, which is forecast at around 21 per cent (down from 26.7 per cent in 2006). On the other hand, another improvement is expected in RZB’s Cost/Income ratio, and this despite the brisk pace of expansion. While 56.7 cents in cost were incurred for every euro earned in 2006, this figure is expected to be less than 56.2 cents this year.

More than 63,000 employees

RZB's healthy expansion is also reflected in the development of the Group's staff numbers. "RZB is creating jobs, both in Austria and abroad. Just this year alone, more than 7,500 new positions will be created," said Rothensteiner. As of the end of 2007, the number of employees is expected to be about 63,000, an increase of approximately 14 per cent compared to 2006.

Preview of RZB Group results for 2007*
RZB Group (in accordance with IFRS)
Monetary values in EUR millions 2007e 2006** Change
Balance-sheet total > 140.000 93,863 > 21%
Operating result approx. 1,990 1,611 approx. 24%
Profit before tax approx. 1,400 1,286 approx. 9%
Profit after tax approx. 1,070 1,035 approx. 3%
Profit after tax and minority interest approx. 650 752 approx. -13%
RoE before tax approx. 21% 26.7% approx. -5.7 pp
Staff at balance-sheet date*** approx. 63,000 55,434 approx. 14%
Branch offices approx. 3,050 2,866 approx. 7%

* Preview figures, rounded down. Comparative IFRS values from 2006 excluding one-off effects from the sale of a bank in Ukraine and minority interest in a Kazakh bank. *** In "full-time" equivalents.