innovation award winning outstanding competence … · certificates awards austria that were held...
TRANSCRIPT
INNOVATION AWARD WINNING OUTSTANDING COMPETENCE CENTER FOR EQUITIES AND CERTIFICATES HIGH LEVEL INNOVATION
AWARD WINNING OUTSTANDING COMPETENCE CENTER FOR EQUI-TIES AND CERTIFICATES HIGH LEVEL INNOVATION AWARD WINNING OUTSTANDING COMPETENCE CENTER FOR EQUITIES AND CERTIFICA-
TES HIGH LEVEL INNOVATION AWARD WINNING OUTSTANDING COMPETENCE CENTER FOR EQUITIES AND CERTIFICATES HIGH LE-
VEL INNOVATION AWARD WINNING OUTSTANDING COMPETENCE CENTER FOR EQUITIES AND CERTIFICATES HIGH LEVEL INNOVATION
AWARD WINNING OUTSTANDING COMPETENCE CENTER FOR EQUI-TIES AND CERTIFICATES HIGH LEVEL INNOVATION AWARD WINNING OUTSTANDING COMPETENCE CENTER FOR EQUITIES AND CERTIFICA-
TES HIGH LEVEL INNOVATION AWARD WINNING OUTSTANDING COMPETENCE CENTER FOR EQUITIES AND CERTIFICATES HIGH LE-
VEL INNOVATION AWARD WINNING OUTSTANDING COMPETENCE CENTER FOR EQUITIES AND CERTIFICATES HIGH LEVEL INNOVATION
AWARD WINNING OUTSTANDING COMPETENCE CENTER FOR EQUI-TIES AND CERTIFICATES HIGH LEVEL INNOVATION AWARD WINNING OUTSTANDING COMPETENCE CENTER FOR EQUITIES AND CERTIFICA-
TES HIGH LEVEL INNOVATION AWARD WINNING OUTSTANTE
2018Annual F inancial Report
03–09 Company 03 AnOverview 03 PrefacebytheChairmanoftheSupervisoryBoard 04 CEOEditorial 05 TheYearinReview 06 CorporateBodies 07 CorporateGovernance/Compliance 08
10–22 ManagementReport 10 EconomicEnvironment 11 DevelopmentofBusinessandEarnings 11 SegmentReporting 14 PerformanceIndicators 16 RiskManagement 16 InternalControlSystem 20 HumanResources 21 Outlook2019 21 ResearchandDevelopment 22
22 StatementofLegalRepresentatives 22
23–47 FinancialStatements 23 BalanceSheet 24 IncomeStatement 26 DevelopmentofFixedAssets 27 Notes 29 Auditor'sReport 45
48 Publisher'sDetails 48
ThisisatranslationfromGerman.IncaseofanydiscrepanciesbetweentheEnglishandGerman version,theGermantextshallprevailandbebinding.
AnnualFinancialReport2018:AnOverview
TheCompany
KeyDataofRaiffeisenCentrobankAG
in € thousand / in per cent 2018 2017 Change
Key ratios
Operatingincome 59,759 59,248 0.9%
Operatingexpenses (42,366) (40,134) 5.6%
Resultonordinaryactivities 15,728 19,081 (17.6%)
Netprofitfortheyear 13,004 16,576 (21.5%)
Balancesheettotal 3,735,352 3,200,183 16.7%
Return-on-Equitybeforetax 13.8% 17.4% -
Return-on-Equityaftertax 11.4% 15.1% -
Cost/incomeratio 70.9% 67.7% -
Bank-specific information
Corecapital 112,343 106,191 5.8%
Totalrisk-weightedassets 475,262 487,930 (2.6%)
Surplusofownfunds 74,322 67,157 10.7%
Corecapitalratio 23.6% 21.8% -
Corecapitalratio/creditrisk 76.0% 68.2% -
Ownfundsratio 23.6% 21.8% -
Liquiditycoverageratio(LCR) 219.6% 205.2% -
Non-financial performance indicators
Employeesatyear-end 191 181 5.5%
Averagenumberofemployees 186 178 4.5%
Stockexchangememberships 10 111 (9.1%)
Numberofnewlyissuedwarrantsandcertificates 4.869 6,941 (29.9%)1Adjustmentofpreviousyear’sdata
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DearLadiesandGentlemen,
Duringthe2018financialyear,themembersoftheSupervisoryBoardanditsCommitteeswereinfor-medinatimelyandcomprehensivemannerbytheManagementBoardaboutthedifferentbusinessareas,riskassessmentsandrelevantbusinessdeve-lopmentsatRaiffeisenCentrobankAG.InformationwasprovidedverballyaswellasinwrittenformandenabledtheSupervisoryBoardtofulfillitsdutytosuperviseandadvisetheManagementBoard.
AfterbundlingitsentirerangeofproductsandservicesintheequitiesbusinessbytakingontheEquityCapitalMarkets(ECM)segmentin2017,RaiffeisenCentrobankAGfocusedonfurthersharpeningitsprofileasacentreofcompetenceforequitiesandcertificateslastyear.
Inspiteofahighlyvolatileyear,RaiffeisenCentro-bankAGmanagedtoseeasteadyriseinprofitcontributionsacrossthemajorityofitsbusinessseg-ments.ThiswasparticularlyevidentwiththeStructu-redProductsteam,whichrecordedanotherexcepti-onalyear.Theincreaseinissuingandsalesactivi-tieswasreportedinthepartialprotectionandgua-ranteecertificatessegmentswhich,inthiscurrentlowinterestrateenvironment,representanattractiveinvestmentchoiceforprivateinvestors.Theopeninterestvolumein2018brokethe€ 4billionrecord,confirmingoncemorethatRaiffeisenCentrobankAGistheleadingcertificatesissuerinAustria.
Thisperformancewassupportedbytheincreaseddigitalinitiativesinthepastyear,whichwerecon-ductedwithintheElevatorLabofRaiffeisenBankInternationalAGaswellasinternallyacrossalmost
alldivisions.AnexampleoftheinternaleffortswastherevampingofthewebsiteaswellasthelaunchoftheCertificateFindertool.Togetherwiththeincreaseofwebinars,thesemeasuresservethepurposetomakecertificatesmorewidelyknownand,thus,furtherexpandRaiffeisenCentrobankAG’sleadingpositioninthisfield.
RaiffeisenCentrobankAGwasalsoinvolvedinmajorcapitalmarkettransactioninCEEaswellasaconsortiummemberininternationaltransactions.Inaddition,themarketingactivitiesoftheresearchproductandthenumberofcorporateroadshowswereincreasedsignificantlyasacountermeasuretothenegativeimpactoftheMiFIDII“unbundling”requirement.Thefurtherdevelopmentofthetradingsoftwarewasalsopursuedintensivelyinordertoreducethelatencytimes,increasethecompetitiven-essfororderexecutionsforinternationalbrokers,andcontinuetoenableRaiffeisenCentrobankAG’spositionasleadingmarketmaker.
AsHannesMösenbacherhastakenontheroleofDeputyChairmanoftheSupervisoryBoard,itwasagreathonorformetobecomeChairmanon25April2018.
OnbehalfoftheSupervisoryBoard,IwouldliketoexpressmysinceregratitudetotheBoardMembersandRaiffeisenCentrobankAG’sstafffortheirconti-nuedeffortandaccomplishmentsinthepastyear.
PrefacebytheChairmanoftheSupervisoryBoard
ŁukaszJanuszewskiChairmanoftheSupervisoryBoard
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LadiesandGentlemen,dearReader,
Thepastfinancialyearwasmarkedbyhighvolatility,politicaltensions,suchasthetradedisputesbetweentheUSandChinaanddemandingregulatoryrequirementsforsecuriti-escompaniesunderMiFIDII.Againsttheback-dropofthischallengingenvironment,westillmanagedtoimproveourperformance.Iwouldliketoexpressmysinceregratitudetoallemplo-yeesfortheirgreateffortandaccomplishmentsinthepastyear.
160roadshowsand12conferencesinEurope,TurkeyandtheUSunderpinnedourintensivemarketingactivities.Moreover,wefurtherstrengthenedourpositiontheleadingAustriancertificatesissuer.Theopeninterestreachedagainarecordlevel.
NumerousawardsconfirmedRaiffeisenCentro-bankAG’ssuccessfulbusinessactivities.AttheCertificatesAwardsAustriathatwereheldinApril2018,wewereawardedbestAustriancertificatesissuerforthetwelfthconsecutiveyearandwontheprize“CertificatesHouseoftheYear“.TheoutstandingperformanceofourCEEStructuredProductsteamwashonororedwithinthecfi.coawards,whichnamedRaiffeisenCent-robankAG"BestStructuredProductsBankCEE"forthesecondtime.Moreover,theBankwasnamedlargestmarketmakerandspecialistbytheBörseSocialmagazine.
DespitethelownumberofIPOsinAustriaandtheCEEregion,RaiffeisenCentrobankAGachievedastrongpositionintheECMbusinessandparticipatedassoleglobalcoordinatorinthesoleRomanianIPO.AmilestoneforourECMteamwastheUSD862millionIPOof
HudsonGroupontheNewYorkStockEx-change,whereweweresuccessfullyinvolvedasaconsortiummember.
“Digitalization“isabuzzwordthroughoutthefinancialsector.RaiffeisenCentrobankAGhaslaunchednumerousinitiativestofurtherenhancetheservicerangeforitscustomersandbusinesspartnersandtoprovidethemwithevenmorecomprehensiveaccesstoinformation.TheCertificateFinder,forexample,enablesinves-torstoinformthemselvesaboutthecertificateuniverseandtoselectandtraderelevantpro-ducts.Inaddition,severaltrainingmeasureshavebeensetupincludingbilingualtutorialvideosandwebinarsforcustomeradvisors.
Anotherdigitalizationprojectwasthecooperationwiththestartup360kompanyintheareaRegTech.Asoperatingmentor,RaiffeisenCentrobankAGhasdevelopedacomplianceconceptjointlywiththestartup360kompanytoenhanceandmakeKnow-Your-Customer(KYC)processesmoreefficient.
Thepastyearfocusedclearlyonincreasingcommunicationandtransparency.Therefore,Iwishyouaninterestingreviewofthe2018financialyear,whichhasbeenoutlinedinthepresentannualfinancialreportofRaiffeisenCentrobankAG.
Kindregards,
CEOEditorial
WilhelmCeledaCEOofRaiffeisenCentrobankAG
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11 May – Turkish Day in WarsawRaiffeisenCentrobankAGinvitesinvestorstomeetthemanagementandIRteamsofTurkishlistedcompaniesinaninformativemeeting.
July – Cooperation “Zweite Gruft“ and “Haus Amadou“Inthecourseofthe“RCBhelps!“socialengagementinitiative,RaiffeisenCentrobankAGsetsupacooperationwiththeCaritasprojects“ZweiteGruft“and“HausAmadou”.RaiffeisenCentrobankAG’semployeesengageinnumeroussponsoringandcorporatevolunteeringactivitiesincludingcookingtogetherfor“ZweiteGruft”.
5 September –Board dinner for potential issuers JointlywithRaiffeisenBankInternationalAGandtheViennaStockExchange,RaiffeisenCentrobankAGorganizesaboarddinnerfor40potentialissuersfocusingprimarilyonfamilyandindustrialcompaniestostrengthenthecooperationwiththeViennaStockExchangeintheIPOsegment.
13 September – Turkey IR day in IstanbulRaiffeisenCentrobankAGorganizestheTurkeyIRdayinIstanbulforinvestorsandIRteamsoftoplistedTurkishcompanies.
19-20 September – Raiffeisen Centrobank exlusive sponsor and exhibitor at the Börsianer Messe TogetherwithRaiffeisenBankInternationalAGandRaiffeisenCapitalManagement,RaiffeisenCentrobankAGparticipatesassponsorattheBörsianerMesse18heldonthepremisesoftheViennaHofburgpalace,discussingmegatrendsanddevelopingnewideasfortheAustriancapitalmarket.
1-2 October – Polish and Austrian days in BucharestRaiffeisenCentrobankAGorganizestwoinvestors’eventsinBucharestbringingtogetherleadingRomanianinvestorswithPolishandAustriancompaniesinmultipleone-on-onemeetings.
18 October – First Romanian investors‘ day in StockholmIncooperationtheBucharestStockExchange,RaiffeisenCentrobankAGinvitesRomaniancompaniestomeetwithScandinavianinvestors.TheeventoffersinvestorstheopportunitytomeetwithfiveRomanianlistedcompaniesonaone-on-onebasis.
18-19 October – GEWINN-fairAtthesummitoftheAustrianfinancialsectorRaiffeisenCentrobankAGpresentsitscertificatesandinformsaboutcurrentinvestmentopportunities.
29 October –cfi.co awardTherenownedLondonprintandonlinemagazinecfi.corewardsRaiffeisenCentrobankAGforthesecondtimeas“BestStructuredProductBankCEE”.
15 November – Russian IR day in MoscowRaiffeisenCentrobankAGorganizestheRussianIRdayinMoscowforinvestorsandleadinglistedRussiancompanies.
21 November – Austrian day in WarsawIncooperationwiththeViennaStockExchange,RaiffeisenCentrobankAGinvitesAustriancompaniestomeetwithPolishinvestors.
26 January – Raiffeisen Centrobank AG once again awarded by Börse Social Network RaiffeisenCentrobankAGreceivesNumberOneAwardsaslargestcertificatesissuerandlargestspecialist/marketmaker.WithatotalofeightawardsinthepastfouryearsRaiffeisenCentrobankAGhaswonmoreBörseSocialNetworkawardsthananyothercompetitor.
7 February – Russian Day in StockholmRaiffeisenCentrobankAGorganizesnumerousone-on-onemeetingsbetweenleadingScandi-navianinvestorsandRussiancompaniesinStockholm.
March – Raiffeisen Centrobank AG sets up a cooperation with 360kompany, winner of the Elevator Lab, to automate compliance processes Withaninnovativecomplianceconcept,thestartup360kompanywinstheElevatorLabforthebestRegTechsolution.AsoperatingmentorRaiffeisenCentrobankAGrefinestheconceptincooperationwiththestartuptospeedupandenhanceKnow-Your-Customer(KYC)processes.
4 April –Raiffeisen Centrobank AG’s ECM team “Best Equity House in Central and Eas-tern Europe“ TheECMteamisawardedbythefinancialmagazineEMEAFinance“BestEquityHouseinCentralandEasternEurope”aspartofthe“AchievementAwards2017“.
9-11 April – Investor Conference ZürsMorethan100institutionalinvestorssuchaspensionfunds,fundsandinsurancecompaniesmeetwithroughly70companiesattheInvestorConferenceinZürs,whichisorganizedbyRaiffeisenCentrobankAGforthe17thtime.13-14 April – Invest StuttgartTheStructuredProductsteamrepresentsRaiffeisenCentrobankAGatthelargestfinancialfairinGermanspeakingcountriesandpresentsinterestinginvestmentopportunitieswithattractiveyieldpotentialinthecurrentmarketenvironment.
25 April – EUSIPA: Heike Arbter re-elected president HeikeArbter,HeadofStructuredProductsatRaiffeisenCentrobankAG,isunanimouslyre-electedpresidentoftheEuropeanumbrellaassociationforstructuredinvestmentproductsinBrusselsforanadditionaltwo-yearterm.
26 April – Overall winner Certificates Award Austria 2018Forthe12thtimeinarowRaiffeisenCentrobankAGisawardedbestnationalcertificatesissuer.Moreover,thebankishonoredas“CertificatesHouseoftheYear”.
4 May – Number one specialist on the Vienna Stock ExchangeRaiffeisenCentrobankAGisagainthenumberoneMarketMakerandSpecialistontheViennaStockExchange.Between2May2018and29March2019RaiffeisenCentrobankAGprovidesliquidityforall38titleslistedonthePrimeMarket.
5 May – Stock exchange day in ViennaRaiffeisenCentrobankAGisrepresentedattheStockExchangeDayViennaandgivesanoverviewofcertificatesprovidingattractiveyieldsinthecurrentmarketenvironment.
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CorporateBodiesManagement Board WilhelmCeleda ChiefExecutiveOfficer ValerieBrunner MemberoftheManagementBoard Supervisory Board ŁukaszJanuszewski Chairmanasfrom25April2018 MemberoftheManagementBoardasfrom01March2018, RaiffeisenBankInternationalAG,Vienna HannesMösenbacher Chairmanuntil25April2018, MemberoftheManagementBoard, DeputyChairmanasfrom25April2018 RaiffeisenBankInternationalAG,Vienna MichaelHöllerer DeputyChairmanuntil25April2018, Plenipotentiary,RaiffeisenBankInternationalAG Memberasfrom25April2018
AndriiStepanenko Memberasfrom25April2018 MemberoftheManagementBoardasfrom01March2018, RaiffeisenBankInternationalAG,Vienna
WernerKaltenbrunner Memberuntil25April2018
State Commissioners AlfredHacker Karl-HeinzTscheppe
Vienna,4April2019TheManagementBoard
WilhelmCeledaChiefExecutiveOfficer
ValerieBrunnerMemberoftheManagementBoard
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SupervisoryBoard
TheSupervisoryBoardmonitorsandassiststheManagementBoardinthemanagementofRaiffeisenCentrobankAG,inparticularwithregardtodecisionsoffundamentalimportance.TheSupervisoryBoardhassetupanAuditCommittee.
ThebylawsfortheSupervisoryBoardandtheauditcommitteeformulateinconcretetermsalistofbusinesstransactionsthataresubjecttotheapprovaloftheSupervisoryBoardortheAuditCommittee.
CollaborationbetweentheSupervisoryBoardandManagementBoard
AkeyprincipleofgoodcorporategovernanceistheopendiscussionbetweentheManagementBoardandtheSupervisoryBoardortheAuditCommitteeandwithinthesegoverningbodies.
TheManagementBoardsubmitsregular,timelyandcomprehensivereportstotheSupervisoryBoardaboutallrelevantaspectsoftheBank’sbusinessdevelopment,includingtherisksituationandriskmanagementmeasuresattheBank.TheManagementBoardimmediatelyreportsallimportanteventstotheChairmanoftheSupervisoryBoardandalsoallreportsimmediatelyonallcircumstancesthatareofmaterialrelevancetotheprofitabilityorliquidityoftheCompany.
TheManagementBoardcoordinatesthestrategicorientationoftheCompanywiththeSupervisoryBoardanddiscussesthestatusoftheimplementationofthestrategyatregularintervalswiththisBoard.
TheSupervisoryBoardmeetsatleastfourtimesperfinancialyear.
TransparentInformationPolicy
RaiffeisenCentrobankAGattachesconsiderableimportancetoopenandtransparentcommunicationwithitsshareholdersandtheinterestedpublic.Thus,RaiffeisenCentrobankAGprovidesonitswebsite:
•Pressreleases,keydata•Shareholderstructure•DownloadableannualreportsinPDFformat•DownloadablesecuritiesprospectusesinPDFformat
CriteriafortheIndependenceoftheSupervisoryBoardMembersforthePurposesoftheAustrianCodeofCorporateGovernance
ASupervisoryBoardmemberisconsideredtobeindependentwhenheorsheisnotinanybusinessorpersonalrelationshipwiththeCompanyoritsManagementBoardthatcouldcauseamaterialconflictofinterestandthatcouldthereforeinfluencethebehavioroftheBoardmember.
All members of the Supervisory Board of Raiffeisen Centrobank AG are independent according to the defined criteria for independence.
CorporateGovernanceRaiffeisenCentrobankAG’ssharesarenotlistedonastockexchange.AsleadingAustrianissuerofstructuredproductsandasoneofthemostimpor-tantsecuritiesbrokersinViennaandotherfinancialcenters,RaiffeisenCentro-bankAGorientsitselftowardstherulesandprinciplesofgoodandrespon-siblecorporategovernanceassetforthintheAustrianCodeofCorporateGovernancetotheextentthattheserulesandprinciplesareapplicableforRaiffeisenCentrobankAG.RaiffeisenCentrobankAGhasnot(yet)formallyundertakentocomplywiththeAustrianCodeofCorporateGovernance.
EfficientcollaborationbetweenthevariousbodiesoftheCompanybasedonastrongfoundationoftrust,protectionofitsshareholders'interestsandopenandtransparentcommunicationisakeyelementinRaiffeisenCentro-bankAG’sapproachtogoodcorporategovernance.Thefollowingcom-mentsillustratesomeaspectsofRaiffeisenCentrobankAG’scompliancewiththeCodeinthereportingperiod(1Januaryto31December2018).
ManagementBoard
TheManagementBoardismadeupoftwopeopleandhassoleresponsi-bilitytomanagetheCompanybasedonconcretegoals,conceptsandguidelines.TheManagementBoardpursuesafuture-orientedapproachtakingintoaccountstandardsofgoodcorporatemanagementandtheinterestsofthepublicwell-being.
ThebylawsfortheManagementBoardasadoptedbytheSupervisoryBoardstipulatethatmeetingsoftheManagementBoardshallbeheldatregularintervals.TheChairmanoftheManagementBoardshallconveneandchairthemeeting.ThemeetingsoftheManagementBoardfocusonamutualexchangeofinformationanddecision-makinginallmatterssub-jecttoapprovalbytheManagementBoard.TheManagementBoardconductsthebusinessoftheCompanyinaccordancewiththelaw,theCompanybylawsandthebylawsfortheManagementBoard.ThebylawsfortheManagementBoardcontainstipulationsregardingthedisclosureandreportingobligationsoftheManagementBoardandformulateinconcretetermsalistofbusinesstransactionsthataresubjecttoapprovalbytheSupervisoryBoard.
RulesforProprietaryTrading
TheManagementBoardtakesitsdecisionsonthebasisofthemembers’professionalexpertiseandirrespectiveofanypersonalinterests.MembersoftheManagementBoarddiscloseallmaterialpersonalinterestsintran-sactionsofRaiffeisenCentrobankAGtotheSupervisoryBoard.ConflictsofinteresthavetobereportedtoComplianceandtotheSupervisoryBoard.AlltransactionsbetweenRaiffeisenCentrobankAGandthemem-bersoftheManagementBoardorpartiesrelatedtothemareconductedinaccordancewithgenerallyacceptedindustrystandardsandareappro-vedbytheSupervisoryBoardinadvance.
MembersoftheManagementBoardarenotpermittedtooperatebusines-sesorbeofficersinotherbusinessentitieswithouttheapprovaloftheSu-pervisoryBoardunlesstheseentitiesareinagrouprelationshipwithRaiff-eisenCentrobankAGorunlessRaiffeisenCentrobankAGholdsaninte-restintheseentities.Furthermore,membersoftheManagementBoardarenotpermittedtoconductbusinesstransactionsontheirownaccountorthatofanotherpartyortoholdsharesinanothercompanyasapersonallyliablepartnerintheareasinwhichRaiffeisenCentrobankAGisactivewithouttheapprovaloftheSupervisoryBoard.
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RaiffeisenCentrobankAGappliesRaiffeisenBankInternationalAG’sGroupComplianceguidelinesasthebasisforitscomplianceguidelines,inadditiontorelevantlegalandregulatoryprovisions.AsasubsidiaryofRaiffeisenBankInternationalAGtheprovisionscontainedinRaiffeisenBankInternationalAG’sCodeofConductarebindingforandshallbeobservedbyallemployeesofRaiffeisenCentrobankAG.TheprovisionshavebeenimplementedwithinRaiffeisenCentrobankAGinabindingsetofrulesincludinge.g.theComplianceandAnti-Money-LaunderingManu-alandorganizationalinstructions.
Corecompliance-relatedissuesinRaiffeisenCentrobankAGincludeproceduresandmeasurestopreventinsidertradingandmarketmanipulation,andperiodicreviewsoftheadherencetotheExecutionPolicywhenexecutingcustomerorders.Moreover,majortasksincludemeasuresandprocedurestopreventmoneylaundering,terroristfinancing,conflictsofinterest,adherenceto(financial)sanctions,implementationandmonitoringofregulationsforemployeetransactionsandacceptanceofgiftsaswellastrainingforemployees.Inaddition,Compliance,OperationalRiskandICSisresponsibleforhandlingthecomplaintmanagementatRaiffeisenCentrobankAG.
MiFIDII/MiFIR(MarketsinFinancialInstrumentsDirectiveII/MarketsinFinancialInstrumentsRegulation)areapplicableasfrom3January2018.BasedonMiFIDI,therulesforequitytradingandinvestmentadvisoryservices(e.g.stricterrulesforOTCtransactions,comprehensivecustomerinformationrequirementsetc.)havebeenamendedandtightened.Asfrom1January2018,thePRIIPregulations(PackagedRetailandInsurance-basedInvestmentProducts)areapplicable,whichextendcustomerinformationobligationsforPRIIPissuers,suchasRaiffeisenCentrobankAG.Retailinvestorsmustbeprovidedwithstandardizedinformation(keyinformationdocuments)onthebasicfeaturesandrisksassociatedwithaproduct.
Compliance
ThedepartmentCompliance,OperationalRiskandICS(InternalControlSystem)assumesresponsibilityformonitoringthenon-financialriskswithinRaiffeisenCentrobankAG.Theseareasofresponsibilityhavebeenbundledintooneorganizationalunitwhichprovidesfortheoverallassess-mentandintegratedcontrolofnon-financiarisks,therapidreactiontonew-lyemergingorchangingrisks,andthesafeguardingoftheefficiencyandefficacyofinternalcontrols.
Theinternalcontrolsystemsandthemanagementofnon-financialrisksarebasedonthreelinesofdefense.Thefirstlineofdefenseisformedbyindividualdepartments,wheredepartmentheadsareresponsibleformonitoringtheprocessesandrisksintheirbusinessareas.Thesecondlineofdefenseisprovidedbyspecialistareasfocusedonspecificissues.TheseincludeinparticularCompliance,OperationalRiskandICS.Theirprimaryaimistodefinestandardsformonitoring,measuringandmanagingrisk,andtosupporttheindividualdepartmentswhencarryingoutcontrolsteps.InternalAuditactsasthethirdlineofdefenseinthemonitoringprocess,overseeingthefirstandsecondlineofdefense.
Compliance,OperationalRiskandICSissubordinatetotheChiefRiskOfficer(CRO),butreportsdirectlytotheentireManagementBoardandtheSupervisoryBoard.Moreover,thereisacontinuousexchangeofinformationwithRaiffeisenBankInternationalAG'sGroupCompliance.Thesecomprehensivemeasuresprovideforaneffectiveimplementationofthehighstandardsrequiredbystatutorydemands.
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ManagementReportofRaiffeisenCentrobankAGforthe2018FinancialYear
Theadditionofroundednumbersusingautomatedsystems,aswasdoneforthisreport,mayresultinminordifferencesinamounts.Thechangesindicatedinpercentrefertotheactualamountsandnottheroundedamountsshowninthisreport.
Alldesignationsthatareusedtorefertopersonsinthisreportapplyequallytobothgendersunlessreferenceisbeingmadetoaspecificindividual.
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EconomicEnvironmentFollowingseveralyearsofstronggrowth,theglobaleconomicmomentumdeceleratedinthecourseofthe2018financialyear.Theeconomicgrowthrateintheeurozonecametoplus1.8percentandthusdroppedbelowthe2percentbenchmarkinannualcomparison(plus2.5percentin2017).One-offeffectsnegativelyimpactedeconomicactivityandtheGDPgrowthlackedthetailwindfromnetexportsagainstthebackdropofageneraldecreaseofeconomicactivity.Theslowingmomentumofeco-nomicdynamicswasalsoduetoincreasinguncertaintiesandthewell-ad-vancedeconomiccycle.Theleadingindicatorsdiminishedacrossalleco-nomicregionsoverthecourseoftheyear,exceptfortheUSeconomythatmanagedtointensifythegrowthdynamicsin2018byfiscalpoliticalgrowthstimuli.In2018,therealGDPwentupby2.9percentcomparedto2017whichhadpostedanincreaseof2.2percent.ThetradedisputetriggeredbytheUSwithitsmajortradingpartnersdidnotshowanegativeimpactonUSeconomicdata.InNovember2018,theUSunemploymentratewasat3.7percent,thelowestlevelsincetheendof1969.
Inthepastquarters,theAustrianeconomysloweddownanotchbutthepacetailedofflesssignificantlythanintheeurozone.Thisislargelyduetofactthatthetailwindfromabroadhassofardecreasedonlymoderately.DomesticdemandalsodevelopedsolidlyinAustria.
Theinflationrateintheeurozonewentupmarkedlyuntilthefirsthalfyearandwasatorjustabovethe2percenttargetoftheEuropeanCentralBank(ECB)inthesecondhalfof2018.Attheyear-end,theinflationratefellagainslightlybelowthe2percentbenchmark.
Inannualcomparison,theEURdecreasedslightlyversustheUSdollarfromroughly1.20to1.15,oscillatinginarangebetween1.25and1.12throughouttheyear.
Theeurozonerecordedasharpereconomicslowdownthananticipated,whereasRaiffeisenCentrobankAG’scoremarketsinCEEpostedasoundperformanceandcontinuedtheirstrongupturnforthefifthconsecutiveyear.Privateconsumptionandinvestmentswerethemainpillarsofgrowth.
FinancialMarketsIn2018,theECBkeptthekeyratesunchanged.Inthepastyear,ten-yearGermangovernmentbondsearnedbetween0.2percentand0.55percentandsurpassedthissidewaystrendonlyattheendofFebruary/begin-ningofMarch.ShoredupbytheECB’sexpansivemonetarypolicyandthepositiveeconomicperformanceingeneral,riskpremiumsofmostothereurocountriesversustheGermangovernmentbondsinthe10-yearseg-mentfellslightlyuntilmid-May.Thecorrectionwastriggeredbytheformati-onofthenewgovernmentinItaly.Politicaluncertaintiescausedasubstanti-alincreaseoftheItalianriskpremium.
Theestablishedstockmarketssawapatchyyear2018.TheyearhadastrongstartfueledbythepositiveeffectsoftheUStaxreformandthero-cketingUSgrowthestimates.AsfromFebruarythemoodstartedtoturnoverthemorehawkishstanceoftheFedanddecreasingUSinflationra-tes.Thedownwardtrendgainedtractionagainstthebackdropofthetradedispute.
TheDAXandtheEuroSTOXX50hittheirhighsinJanuaryandlostroughly18percentand15percentinannualcomparison.Towardstheendoftheyear,theS&P500hadtogiveupitsmedium-termpricegainsandlost7percentin2018.ThenegativeinternationalenvironmenthamperedtheATXaswellanddraggedtheindexdownby20percent.
DevelopmentofBusinessandEarnings2018DevelopmentofEarnings
Withanoperatingincomeof€59,759thousand(2017:€59,248thousand)andoperatingexpensesof€42,366thousand(2017:€40,134thousand)anoperatingresultof€17,393thousand(2017:€19,113thousand)wasgeneratedinthe2018financialyear.Takingintoconsiderationnetvaluationsandnetproceedsintheamountof€minus1,665thousand(2017:€minus33thousand)theresultonordinaryactivi-tiescameto€15,728thousand.Thepreviousyear’sresultonordinaryactivitiesof€19,081thousandwasundercutby€3.353thousandor17.6percent.
in€thousand 2018 2017 Change
Netinterestresult (19,398) (13,923) 39.3
Incomefromsecuritiesandfinancialinvestments 11,427 7,947 43.8
Netfeeandcommissionresult (935) 1,994 <(100)
Netprofitonfinancialtradingactivities 67,521 61,338 10.1
Otheroperatingincome 1,144 1,891 (39.5)
Operating income 59,759 59,248 0.9
Staffexpenses (23,907) (22,524) 6.1
Otheradministrativeexpenses (17,084) (15,567) 9.7
Depreciation (1,043) (1,135) (8.1)
Otheroperatingexpenses (332) (907) (63.4)
Operating expenses (42,366) (40,134) 5.6
Operating result 17,393 19,113 (9.0)
Netvaluationsandnetproceeds (1,665) (33) >(100)
Result on ordinary activities 15,728 19,081 (17.6)
Taxes (2,724) (2,505) 8.7
Net income for the year 13,004 16,576 (21.5)
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Otheradministrativeexpensesincreasedby€1,516thousandto€17,084thousandyoy.TheitemprimarilyincludedITcostscomingto€3,472thousand(2017:€2,632thousand),expensesforinformationservicesintheamountof€3,298thousand(2017:€3,564thousand)aswellascontributionstoassociationsandtotheresolutionfundof€2,224thousand(2017:€1,693thousand).
Depreciationsfellby8.1percentto€1,043thousandcomparedtothepreviousyear(€1,135thousand)duetodecreaseddepreciationsonmodificationsandtechnicalinstallations.
Otheroperatingexpenses,whichprimarilycontainedexpenses,chargedtothirdparties,fellby€575thousandto€332thousandyoyduetoachangeinthereportingmethod.
Thecost/incomeratio,whichhadbeenat67.7percentin2017roseto70.9percentin2018becauseoftheincreaseinoperaitngexpenses,whichwassubstantialinrelationtotheoperatingincome.
Netvaluationsandnetproceedscameto€minus1,665thousandandcontainedmainlyexpensesnotcoveredbyprovisionsinrelationtoasubsidiarycomingto€minus1,442thousand.Inaddition,theitemcontai-nedgeneralimpairmentallowancescalculatedpursuanttothemethodolo-gyaslaiddowninIFRS9addingupto€minus238thousand.In2017,netvaluationsandnetproceedsalmostreachedbreak-even(€minus33thousand).
Inthe2018financialyear,theresultonordinaryactivitiescameto€15,728thousandcomparedto€19,081thousandin2017.
Inthepastfinancialyear,incometaxesamountedto€2,397thousand(2017:€2,115thousand).Theitemincludedexpensesforgroupchargesforthecurrentyearintheamountof€1,046thousand(2017:€1,655thousand)andforpreviousperiodscomingto€216thousand(2017:in-come€397thousand).Moreover,theitemincludedcorporateincometaxrelatingtotheSlovakbranchof€77thousand(2017:€88thousand)andhigherexpensesforforeignwithholdingtaxduetohigherforeigndivi-dendincomeaddingupto€1,059thousand(2017:€769thousand).
In2018,incomefromdeferredtaxescameto€4thousand(2017:taxex-penses€8thousand).
Inthereportingperiod,othertaxesamountedto€331thousand,compa-redto€382thousandinthepreviousyear.Lowertaxexpensesfor2018wereduetoanon-periodictaxincomeinthecourseofataxauditintheamountof€348thousand(2017:taxincomeof€146thousand).ThiswascontrastedwithariseinexpensesforthebanklevyofRaiffeisenCent-robankAGandtheSlovakbranchintheamountof€607thousandand€82thousand(2017:€544thousandand€9thousand).
Thenetincomeforthe2018financialyearcameto€13,004thousand(2017:€16,576thousand).
Comparedtothepreviousyear’sresult,operatingincomeroseby0.9percentor€511thousandto€59,759thousand(2017:€59,248thousand).Thisincreasewasinparticularattributabletohighernetprofitonfinancialtradingactivitiesandhigherincomefromsecurities.
Netprofitonfinancialtradingactivitiesaccountedforthemainpartoftheoperatingincomeandfurtherwentupby10.1percentfrom€61,338thousandin2017to 67,521thousandin2018.Thefavorabledevelop-mentwasattributabletothefurtherriseofissuingactivitiesintheStructuredProductssegment.TheprofitcontributionofGlobalEquityMarketswasbelowthepreviousyear’sresultfollowingthelackofsubstantialprimarymarkettransactions.
Theimprovementwasalsoattributabletohighercouponpaymentsforstructuredproductsandtherelatedhedgingstrategy.Thesepaymentswerehedgedviatradablemoneymarketdeposits,whichwereheldinthetradingbookanddidnotyieldongoingcoupons.Netprofitonfinancialtradingactivities(tradingprofit)comprisedtheoverallresultoftradabledepositsincludinginterest.
Theincreaseinincomefromsecuritiesandfinancialinvestmentsby€3,480thousandto€11,427thousandwasduetohigherdividendin-comefromdomesticandforeignshares.
Netinterestresultroseto€minus19,398thousand.Thiswasrelatedtohighercouponexpensesforsecuritizedliabilities(structuredproducts).Dependingonthehedge,theseexpenseswerecontrastedwithinterestincomefromstructuredproductsaswellaswithapositivevaluationresultfromtradablemoneymarketdepositsinthenetprofitonfinancialtradingactivities(tradingprofit).
Comparedtothepreviousyear,interestexpenseswentupby€17,978thousandto€48,609thousand.Inadditiontocouponpaymentsforsecuritizedliabilities,interestexpensesforcustomerdepositspostedavolume-relatedrise.
Duetohighercouponincomefromstructuredproductsandvolume-relatedhigherinterestincomefromloansandadvancestocreditinstitutions,interestincomeincreasedby€12,503thousandto€29,211thousand.
Incontrasttothepreviousyear,thenetfeeandcommissionresultin2018wasnegativeandfellby€2,930thousandto€minus935thousandduetolowerfeeandcommissionincomefromequitycapitalmarkettransactions.
Otheroperatingincomepostedadecreaseby39.5percentto€1,144thousandfollowingthelackofintragroupincomefromsettlementsandlowerincomefromchargingcoststothirdpartiesfurthertoachangeinthereporting.
Operatingexpensescameto€42,366thousandandsurpassedthepreviousyear’sresult(€40,134thousand)by5.6percentor€2,232thousand.
Theincreaseinheadcountfollowinginteraliathesetting-upoftheEquityCapitalMarketsTeaminQ2/2017translatedintoariseinstaffexpensesto€23,907thousand.Comparedtothepreviousyear,thisrepresentedanincreaseof€1,383thousand.Wagesandsalarieswentupby€833thousandto€18,315thousand,andexpensesforseverancepaymentsandcontributionstoseverancefundsroseby€305thousandto€895thousand.
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BalanceSheetDevelopment
Comparedto31December2017,thebalancesheettotalincreasedby16.7percentfrom€3,200,183thousandto€3,735,352thousand.
Ontheassetside,“Loansandadvancestocreditinstitutions”postedariseof€449,956thousandto€3,035,390thousand.Therisewasprimarilyattributabletotheincreaseintradablemoneymarketdepositsof€351,927thousandto€2,373,943thousand.Moreover,theiteminclu-dedinterbankdeposits(€330,264thousand),collateralforthesecuritiesbusinessandsecuritieslending(€158,641thousand),andunlistedbonds(€166,429thousand).Collateralfortheoptionbusinessandunlistedbondswentupby€106,581thousandand€62,364thousandcompa-redtotheyear-end2017,whereasinterbankdepositsfellby€64,790thousand.“Loansandadvancestocreditinstitutions”roseslightlyfrom80.8percentasat31December2017andaccountedfor81.3percentofthebalancesheettotalasat31December2018.
“Loansandadvancestocustomers"increasedmainlyfurthertoariseincollateralfortheoptionbusinesstootherfinancialinstitutionsby€85,447thousandto€120,213thousand(3.2percentofthebalancesheettotalon31December2018and1.1percenton31December2017).
“Cashinhand,depositswithcentralbanks“(6.3percentofthebalancesheettotalon31December2018and5.7percenton31December2017)wentupby€51.433thousandto€234.905thousandbecausedepositsatOesterreichischeNationalbankincreasedforreasonsofliquiditymanagement.
Comparedto31December2017,“Bonds,notesandotherfixed-interestsecurities“(0.5percentofthebalancesheettotalon31December2018and0.3percenton31December2017)roseby€9,675thousandto€20,445thousand.
“Sharesandothervariable-yieldsecurities“(4.7percentofthebalancesheettotalon31December2018and7.3percenton31December2017)wentdownby€54,960thousandto€177,142thousand,comparedto31December2017,becausevariable-yieldsecurities(funds)fellby€43,124thousandandsharesby€11,836thousand.
FollowingacapitalreductioninCentrotradeHoldingGmbHby€2,800thousandto€1,100thousand“Sharesinaffiliatedcompanies“postedadecrease.Therisein“Equityparticipations“wasduetotheacquisitionofashareholdinginEinlagensicherungAUSTRIAGes.m.b.H.
“Otherassets”(3.4percentofthebalancesheettotalon31December2018and4.1percenton31December2017),whichcontainedmainlypurchasepositionsfromtradinginfinancialinstrumentsintheamountof€127,094thousand(2017:€129,337thousand)remainedstableat€128,200thousandcomparedtothepreviousyear(2017:€131,812thousand).
SharesandfundsheldbyRaiffeisenCentrobankAGintandemwithpurchasedoptions(“Otherassets“),tradablemoneymarketdeposits(“Loansandadvancestocreditinstitutions“)andzerobonds("Loansandadvancestocreditinstitutions"and“Bonds,notesandotherfixed-interestsecurities”)servedashedgesforissuedcertificatesandwarrantsorwerepartoftheBank’smarketmakingactivities.
Ontheequityandliabilitiesside“Securitizedliabilities“(73.6percentofthebalancesheettotalon31December2018and73.3percenton31December2017)wentupby€404,753thousandto€2,749,275thousand.Therisewasattributabletothevolume-relatedincreaseofissuedbonds(guaranteecertificatesandreverseconvertiblebonds)by€301.771thousandaswellasofothersecuritizedliabilities(certificateswithoptioncharacterandwarrants)by€102,981thousand.
“Otherliabilities“(12.5percentofthebalancesheettotalon31December2018and10.7percenton31December2017)increasedby€125,168thousandto€467,538thousand.Thisrisewasattributabletotheincreaseofnegativefairvaluesofderivativefinancialinstruments(options,futuresandforwardexchangecontracts)by€243,346thousand.Theitemalsoincludedtheshort-sellingoftradingassetswhichfellby€126,354thousand.
Short-sellingwaseffectedinconnectionwiththemarketmakeractivitiesofRaiffeisenCentrobankAGandinrelationtopensionplansandrepresen-tedoffsettingitemstoequityandindexfuturesaswellastocashpositionsontheassetsideofthebalancesheet.“Otherliabilities”andsettlementaccountsontheequityandliabilitiessideroseagainstthebackdropofafinancialtransactionattheyear-endintheamountof€8,176thousand.
“Liabilitiestocustomers“(9.8percentofthebalancesheettotalon31December2018and10.4percenton31December2017)wentupby€32,995thousandto€364,975thousandmainlyfurthertohigherdepositsfromforeigncustomers.Contrary,collateralofotherfinancialinstitutionsfortheoptionbusinessfellby€8,088thousand.
Thedecreaseof“Liabilitiestocreditinstitutions“(0.4percentofthebalancesheettotalon31December2018and1.2percenton31December2017)of€24,582thousandto€14,353thousandwasalsoduetothedropofcollateralfortheoptionbusinessattheyear-end.
Zerobonds,unlistedoptionsandtradablemoneymarketdepositspurchasedfromRaiffeisenBankInternationalAGforhedgingpurposeswereincludedin“Loansandadvancesofcreditinstitutions“,“Otherassets“and“Bonds,notesandotherfixed-interestsecurities”ontheassetsideandcametoatotalof€2,393,967thousand(31December2017:€2,021,526thousand).
“Provisions“(0.3percentofthebalancesheettotalon31December2018and0.5percenton31December2017)wentdowninthecomparativeperiodfrom€15,884thousandasat31December2017to€12,153thousandasat31December2018.Thedecreaseresultedmain-lyfromthereductionofotherprovisionsof€4,020thousandandoftaxprovisionsof€185thousand.Incontrast,provisionsforseverancepaymentspostedariseof€475thousand.
“Retainedearnings“(0.9percentofthebalancesheettotalon31December2018and0.9percenton31December2017)rosefrom€28,030thousandasat31December2017to€32,160thousandasat31December2018.Thechangerelatedsolelytootherreservesandwasattributabletotheallocationfromthe2017netprofitcarriedforwardintheamountof€4,131thousand.
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kingin25Austrianand2GermanshareslistedontheXETRAinFrankfurt.OntheexchangeinWarsaw,RaiffeisenCentrobankAGprovidedmarketmakingfor25sharesandtradedsinglestockfuturesof14shares,WIG20derivativesandMWIG40indices.ThenumberofmarketmakermandatesinsharesontheexchangesinBucharestandPraguecameto11and22,respectively.In2018,RaiffeisenCentrobankAGincreaseditsmandatesonbothexchangesby4and5,respectively(2017:7sharesinBucharest,17sharesinPrague).Moreover,RaiffeisenCentrobankAGactedasmar-ketmakerontheEUREXforlistedderivativeson15AustriantitlesaswellasforATX,EasternEuropeanandRussianindices.
Whereasthefirsthalfof2018sawsidewaysmovingmarketsandlowvolatility,thesecondhalfoftheyearwasmorevolatilewithnegativepricedevelopmentsandrisingvolatility.Thus,operatingincomeexcludingotheroperatingincomeforTrading&Treasurycameto€13.1millionandundercutthepreviousyear’sresultof€13.4millionby2percent.
Global Equity Markets & Company Research
In2018,Europesawatotalof81IPOswithanofferingvolumeofover€75millioneach,whichrepresentsadecreasecomparedto2017with98comparableIPOs.InCEE,only2IPOswithover€75milliontookplacewhichwassubstantiallybelowthepreviousyear’slevel.TheViennaStockExchangewasalsocaughtupinthistrendasnoIPOormajorcapi-talmarketplacementswerecarriedoutin2018.
TheECMteamofRaiffeisenCentrobankAGsuccessfullyfinalizedthreemandatesforpublicoffersinAustria.RaiffeisenCentrobankAGaccompa-niedthetakeoveroffersofStarwoodCapitaltotheshareholdersofCAImmobilienandImmofinanz,aswellasthepublictenderofferofOttakrin-gerGetränkeAG.
FollowingthetakeoveroftheRomanianbrokeragebusinessfromRaffeisenBankS.A.(theRomaniannetworkbank),RaiffeisenCentrobankAGfurtherintensifieditstransactionactivitiesinBucharestandwasinvolvedassoleglobalcoordinatorinthesoleIPOontheBucharestStockExchange,theIPOofPurcariWineries.ThetransactionwasoneofonlyafewIPOsintheCEEregion.RaiffeisenCentrobankAG’sinvolvementunderpinstheBank’sstrongpositionintheECMbusinessagainstthebackdropofachallengingregionalcapitalmarketeconomyin2018.
AnothermilestoneforRaiffeisenCentrobankAG2018wastheIPOofHudsonGroup,asubsidiaryoftheSwissDufryAG,ontheNewYorkStockExchangewhichcametoUSD862million.Forthefirsttime,Raiffei-senCentrobankAGsuccessfullyparticipatedasmemberoftheconsortiuminanIPOontheNewYorkStockExchange.
Severaltransactionswhichhadbeenscheduledfor2018hadtobepost-ponedfurthertounfavorabledevelopmentsinsomecountries(Turkey,Rus-sia)andbecauseofincreasedvolatilitiesontheexchangesinthesecondhalfoftheyear.
RaiffeisenCentrobankAGByprovidedcomprehensiveadvisoryservicesandmarketeditscompetenciesincooperationwiththelocalRaiffeisenunitsandthuscreatedasoundbasisforthe2019financialyear.Againstthebackdropofintensivetalkswithcustomersandpreparations,RaiffeisenCentrobankAG’sECMteammaintainsaconfidentoutlookasregardstransactionsinAustriaandtheCEEregioninthe2019financialyear.Tran-sactionsareanticipatedtotakeplacemainlyontheAustrian,RussianandRomanianmarket.
Thenetprofit(0.3percentofthebalancesheettotalon31December2018and0.5percenton31December2017)asat31December2018comingto€13,004thousandwasequaltothenetincomefortheyear.Fromthenetprofitanamountof€10,480thousandistobedistributedtotheshareholdersand€2,524thousandaretobeallocatedtootherreserves.
FinancialInstruments
Pleaserefertothenotes.
RaiffeisenCentrobankAGSlovakBranch
TheestablishmentofabranchinBratislava(RaiffeisenCentrobankAGSlo-vakBranch,pobočkazahraničnejbanky)wasapprovedbytheEuropeanCentralBankandwasregisteredintheCompanyRegisteron26April2017.Thebusinessvolumeaswellasincomeandexpensesattributabletothebranchofficehavebeenincludedinthesefinancialstatements.
In2018,theSlovakBranchplaced5customizedproductswithatotalis-suevolumeof€45million.Inthepreviousyear,thefirsttwoGuaranteeCertificateswithatotalissuevolumeof€32millionweresuccessfullyplacedinthepremiumbankingsegmentofTatraBanka.
ReviewofBusinessSegmentsRaiffeisenCentrobankAGisoneofthelargestplayersinequitiesandstructuredproductsontheViennaStockExchangeandholdsakeypositioninthemarketsinCentralandEasternEurope.
Trading & Treasury Comparedtothe2017financialyear,thespotmarketoftheViennaStockExchangerecordedariseinsalesvolumeof5.6percentto€70.9billion(2017:€67.1billion),whiletheleadingEuropeanexchangesFrankfurtandEuronextroseby15.4percentto€1.5billion(2017:€1.3billion)andby8.4percentto€1.9million(2017:€1.7billion).ThesalesvolumeontheexchangesWarsawandBudapestroseby15.5percentto€48.3millionandby0.2percentto€8.7million,whichwasbelowthepreviousyear’slevelsof€55.8millionand€8.7million,respectively.Theexchan-gesinBucharestandPraguegained5.9percentcomingto€2.3million(2017:€2million)and5.1percentaddingupto€5.5million(2017:€5.3million).
RaiffeisenCentrobankAG’smarketshareonthedomesticspotmarketcameto6.3percentwithasalesvolumeof€4.5billion(2017:6.7percentand€4.5billion).TheshareandsalesvolumeinmarketmakingontheViennaStockExchangewasfurtherexpandedandcameto€2.0billionor13.0percent,respectively(2017:€1.6billionor10.9percent).IntermsofsalesvolumesRaiffeisenCentrobankAGranked4thinmarketmakingontheViennaStockExchange.
IntheannualspecialistandmarketmakingtenderRaiffeisenCentrobankAGreceived20specialistand18marketmakermandatesontheViennaStockExchange.ThusRaiffeisenCentrobankAGfullycoveredtheAustrianPrimeMarketandprovidedliquidityforalltitleslistedonthePrimeMarket.Moreover,RaiffeisenCentrobanktookovermandatesontheStandardMarketContinuousandGlobalMarketoftheViennaStockExchange.RaiffeisenCentrobankAGprovidedliquidityfor2Austrianand20Russiantitles.
Inaddition,RaiffeisenCentrobankAGwasresponsibleforthemarketma-
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InSales & Sales Tradingtherecordvolumeofmarketingactivities(160roadshowsand12conferencesinEuropeandtheUSA)couldnotsetoffthesharpdecreaseoffeeincomefromsecondarymarkettransactions.ThesubstantialriseofResearchfeescouldonlypartlycushionthisdecrease.Themainburdenwasthelackofincomederivedfrommarketingprimarymarkettransactions.The2018financialyearsawverylowprimarymarketactivityinAustriaandtheCEEregion.Forthe2019financialyear,howe-ver,anoticeablerecoveryisanticipated.
Shoredupby13salesroadshows,Execution & Electronic Tradingma-nagedtofurtherexpanditscustomerbase.ThepressureonmarginsinthewakeofMiFIDIIcouldbesetoffandtheincomewasslightlyincreased.Moreover,transactioncostsweresubstantiallyreducedbyimplementingnumerousefficiencyenhancingmeasures.Thiscontributestorisingcompeti-tiveness,acquiringnewcustomersandtoreducingthetransactioncostba-sissustainablyintheforthcomingyears.Thesuccessful"ETFExecution"wasfurtherimprovedbyacquiringnewtradingpartnersandlinkingnewcusto-merstoRaiffeisenCentrobankAG’snetwork.
AnadditionalfocuswasonprovidingtheBestExecutionMonitoringToolandtheservicerangerelatedthereto.Inthisrespect,RaiffeisenCentro-bankAGhasturnedintoamajorMiFIDIIcompetencecenterwithintheRaiffeisenBankingGroup.Anadditionalcoreprojectwastheimplementa-tionofanewbrokerageschemefortheRussianstockmarketincloseco-operationwithRaiffeisenBankRussia.TheprojectwillgoliveinQ1/2019withcorporatecustomers.
TheCompany Researchteamcoversroughly120companiesfromAust-ria,theCEEregionandRussia.AgainstthebackdropofamorefocusedcoverageonRomaniaandCroatia,thenumberofcoveragesslightlyde-creasedinannualcomparison(fromroughly130).ToexpandtheregionalapproachinEmergingEurope,coverageoftheTurkishmarketisprovidedincooperationwiththeTurkishbrokerGlobalSecurities.RaiffeisenCentro-bankAG’sCompanyResearchteamconsistsof20analystsbothinVien-naandseveralCEEcountries.Theanalystsprovidelong-standingsectorexpertiseintandemwithprofoundlocalmarketknowhowandasectoralapproachacrosstheentireregion.
AgainstthebackdropofMiFIDII,researchforSmall&MidCapcompa-niesontheEuropeanmarketdiminished.RaiffeisenCentrobankAG,howe-ver,considersthissegmentthecorebusinessofCompanyResearchandthuskeptthenumberofreportsunchangedatover1,100.ThesuccessfulIPOoftheRomaniancompanyPurcariWineriesinFebruarywassuppor-tedbycomprehensivetransactionresearchandinvestoreducation.
Thenumberofmarketingroadshowswassubstantiallyincreased.Roads-howswereheldforinvestorsinNewYork,Boston,London,Paris,Frankfurt,Zurich,Stockholm,Helsinki,Dublin,Warsaw,Budapest,Bucharest,Tallinn,Prague,Zagreb,ViennaandLinz.
FortheGlobalEquityMarketssegment,operatingincomeexcludingotheroperatingincomeamountedto€6.6millioninthe2018financialyearandundercutthepreviousyear’slevelof€9.0millionbyroughly26percent.
ExpensesofCompanyResearchareincludedintheTrading&Treasury,GlobalEquityMarketsandStructuredProductssegments.
Structured ProductsInthe2018financialyear,theStructuredProductsbusinesssegmentagainachievedarecordresult.Salesvolumeandissuanceactivitybothpostedanincrease.In2018,11,362productswerepubliclyoffered(2017:11,970)and4,869certificateswereissued(2017:6,941).OntheAustri-
ancertificatesmarket,RaiffeisenCentrobankAGonceagainunderpinneditsmarketleadership.Asperyear-end2018,theopeninterestreachedarecordlevelof€4.3billionandrosebyroughly10percentcomparedto€3.9billionon31December2018.Thesalesvolumewentupaswellandcontributedtoafurtherincreaseinthesegment’sprofitforthe2018financialyear.Comparedtothepreviousyear,thesalesvolume(purchasesandsales)gained2percentandcametoover€1.8billion,whichtranslatedintoarecordresultontheincomeside.
IntheAustrianRaiffeisensectorallkeydatawereagainoutperformed.Theteamheldarecordnumberofeducationprogramswith130certificatestrainingsandroughly2,000trainedadvisors.Comparedtothepreviousyear,thevolumeofplacementswasagainincreasedandgainedplus25percent.Moreover,thetotalopeninterestwithRaiffeisencustomersreachedanewrecordlevelgainingplus23percent.Inadditiontostan-dardseminars,thenumberoflivewebinarsstronglyincreasedwithuptoseveralhundredparticipantstakingpartinonewebinar.
IntheRaiffeisennetworkbanksinCEE100customizedproductswereplacedonthePrimeMarketwhichunderpinstherisingdemandforinvest-mentcertificatesintheretailsegmentintheregion.InCEE,theopeninte-restroseby29percentto€1billion.
RaiffeisenCentrobankAG’sSlovakbranchinBratislavadistributesstructu-redproductsontheSlovakmarket.In2018,thebranchplacedfivepro-ductswithatotalissuevolumeof€45million.Inthepreviousyear,thefirsttwoGuaranteeCertificateswithanissuevolumeof€32millionweresuc-cessfullyplacedinthepremiumbankingsegmentofTatraBanka.
RaiffeisenCentrobankAG’sperformanceinthecertificatessegmentwasalsoawardedbyspecialistsandmedia.AttheCertificatesAwardAustriainApril2018,RaiffeisenCentrobankAGwaselectedbestcertificatesissu-erinAustriaforthetwelfthtimeinarow,winningthetoprankineightoutofninecategories.InOctober2018,RaiffeisenCentrobankAGwasawarded“BestStructuredProductsBankCEE“forthesecondtimebytheLondonprintandonlinemagazinecfi.co.
TheStructuredProductssegmentfocusesparticularlyondigitalizationandinnovationinitiatives.ThishasbeentakenaccountofwiththerelaunchofthewebsiteandtheCertificateFinder.RaiffeisenCentrobankAGhassetanewbenchmarkwiththeCertificateFinderwhichprovidesaneasy-to-un-derstandintroductiontotheworldofcertificates.Explanatoryvideosaboutthemajorproductcategories,themonthlycertificatesmagazine,andtheproductbrochure“Zertifikate-WissenKompakt“areavailableinthenewknow-howsectionofthewebsite.
Forthestructuredproductssegment(includingthebranchinSlovakia)ope-ratingincomeexcludingotheroperatingincomecameto€36.6millionandsurpassedthepreviousyear’sresultof€33.1millionby10percent.
Investment ServicesThedepartmentservicescustomersofRaiffeisennetworkbanksinCentralandEasternEurope.AgainstthebackdropofportfolioadjustmentsonthepartofRaiffeisenbankRussia,thedepositvolumeintheInvestmentServi-ces/BookingPlatformsegmentdecreasedfrom€612millionto€596millioncomparedto31December2017.
Theroll-outoftheBookingPlatformbusinessmodelwithinRBIGroupincooperationwithRaiffeisenBankRomaniawassuccessfullyfinalizedin2018.Thenumberofcustomerscomesto247withadepositvolumeof€84million.
Operatingincomeexcludingotheroperatingincomecameto€2.4millionandsurpassedthepreviousyear’sresultof€1.9millionby26percent.
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RiskManagementPrinciples
BusinessopportunitiesandearningspotentialarerealizedinRaiffeisenCentrobankAGbasedonactiveriskmanagementbytakingriskoninatargetedandcontrolledmanner.Inallrelevantareasofrisk,efficientmoni-toringandcontrollinginstrumentsareavailable,enablingtherelevantbo-diestoreacttomarketopportunitiesandspecificbankingbusinessrisk.Activeriskmanagementresultedinastableandlittlevolatiletradingresult.
AsasubsidiaryofRaiffeisenBankInternationalAG(RBI),RaiffeisenCent-robankAGisintegratedintotheriskmanagementprocessoftheRBICre-ditInstitutionGroup,safeguardingthatallmajorrisksareidentified,measu-redandcontrolledonGroup-levelandensuringthattransactionsarecon-cludedsolelyifparticularrisk/rewardratiosarecompliedwith.
RiskGovernance
TheManagementBoardofRaiffeisenCentrobankAGisresponsibleforallrisksonthepartoftheBankaswellasfordevelopingandimplemen-tingariskstrategy.TheManagementBoardissupportedinimplementingthesetasksbyanindependentriskmanagementunitseparatedclearlyfromthefrontoffices.OperationalRisk,theInternalControlSystemandCompliancearebundledinonedepartment(Compliance,OperationalRisk&ICS).
RiskmanagementatRaiffeisenCentrobankAGisdividedintotwocatego-ries:
•RiskManagement(market,credit,liquidityrisks,overallbankrisk management)•OperationalRisk&ICS(non-financialrisks)
ThecentralriskmanagementbodiesaretheRiskManagementCommittee(RMK),theInternalLimitCommittee(ILC),theOperationalRiskOperationalRiskManagementandControlCommittee(ORMKK)andtheAssetandLiabilityCommittee(ALCO).
TheRMK,whichmeetsweekly,addressesallissuesandregulationsrela-tedtotheriskmanagementoftheBankfocusinginparticularoncreditrisk,marketriskandoperationalrisk.Overdraftsandnecessaryvalueadjust-mentsarereportedinduecourseandrecommendationsfortheManage-mentBoardaredeveloped.TheRMKisadecision-takingbody,autho-rizedtoapproverisk-relatedprinciples,measures,processesandparame-ters.
TheILC,whichmeetseverytwoweeks,decideswithinitscompetency(de-pendingonthetypeandamountofthelimit)oncounterparty,countryandmarketrisklimits.LargeexposuresrequiretheapprovaloftheSupervisoryBoard.Inaddition,theaggregateoflargeexposuresisreportedtotheSu-pervisoryBoardonceayear.
The(ORMKK),whichmeetsonceaquarter,establishesanappropriateframeworkforoperationalriskmanagement,definesandapprovesanadequateriskstrategyandmonitorsandassessestheadequacyofinternalcontrols.Moreover,riskassessments,scenarioanalysesandriskindicatorsarediscussedandapproved,andmaterialcasesofdefaultandtheresul-
PerformanceIndicatorsFinancialPerformanceIndicators
Comparedtothepreviousyear,theresultonordinaryactivitiesdecreasedandtranslatedintoadropofthereturn-on-equitybeforetaxfrom17.4percentto13.8percentandthereturn-on-equityaftertaxfrom15.1percentto11.4percent.
Thecost/incomeratiowhichhadbeenat67.7percentin2017roseto70.9percentduetotheincreaseinoperatingexpenseswhichwassubs-tantialinrelationtotheoperatingincome.
Non-FinancialPerformanceIndicators
AspertheendofDecember2018,thenumberofemployeesatRaiffeisenCentrobankAGamountedto191,which,comparedto31December2017,representedanincreaseof10employees.Inannualcomparison,thestaffroseonaverageby8to186employees.Theincreasewasmain-lyduetotheonboardingofthenon-advisorybrokeragebusinessfromRaiffeisenbankRomaniaaswellastotheadjustmentofstaffresourcesfurthertothefavorablebusinessdevelopment.
Comparedtothe2017financialyear,thenumberofstockandderivativesexchangemembershipsfellto10becausethemembershipof“BATSChi-X”wascancelled(fordetailskindlyseethewebsiteofRaiffeisenCentro-bankAG:https://www.rcb.at/en/the-bank/business-segments/ed/).Thenumberofnewlyissuedwarrantsandcertificateswentdownby2,072or30percentto4,869.Thedropwasmainlyattributabletothedecreaseofissuedwarrants
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in per cent 31/12/2018 31/12/2017
Return-on-equitybeforetax 13.8 17.4
Return-on-equityaftertax 11.4 15.1
Cost/incomeratio 70.9 67.7
Ownfundsratio 23.6 21.8
Corecapitalratio 23.6 21.8
LiquidityCoverageRatio(LCR) 219.6 205.2
31/12/2018 31/12/2017
Employeesatyear-end 191 181
Averagenumberofemployees 186 178
Stockexchangememberships 10 111
Numberofnewlyissuedwarrantsandcertificates 4,869 6,941
1Adjustmentofpreviousyear’sdata
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tingmeasurestobetakenareanalyzed.TheALCO,whichmeetsonceamonth,continuouslyevaluatesthemacro-economicenvironmentandcontrolsandassessesinterestraterisk,liquidityriskandbalancesheetstructuralrisk.
RiskManagementSystematRaiffeisenCentrobankAG
RaiffeisenCentrobankAGemploysacomprehensiveriskmanagementsys-temtakingintoaccountalllegal,businessandregulatoryrequirements.Theappliedprocessesandmodelsaresubjecttoongoingreviewandfurtherdevelopment.Thekeycomponentsoftheriskmanagementsystemsarecompliantwithregulatorycapitalrequirements,limitingspecificban-kingrisksandprovidingadequateriskcoveragesumsaswellasperma-nentsupervisionandcontrolofprocessriskwithinacomprehensiveInter-nalControlSystem.
1.Capital requirements to limit market risk, credit risk and operational risk Tosecureadequatecapitalforcreditrisk,marketriskandoperationalrisk,RaiffeisenCentrobankAGappliesthestandardapproach.Tocalculateoption-relatednon-linearrisksthescenariomatrixmethodisemployed.
Fordetailsonregulatorycapitalrequirementspleaserefertothenotes(page42).
2. Identifying and limiting specific banking business risks (ICAAP) AsasubordinatecompanyofRBI,RaiffeisenCentrobankAGisintegratedintotheICAAPofRBIonaconsolidatedbasis.Therisk-bearingcapacityanalysisispreparedbyRBIonamonthlybasisbothforthegoingconcern(Value-at-Risk(VaR)withaconfidenceintervalof95percent)andtargetratingperspective(VaRwithaconfidenceintervalof99.92percent)andisprovidedtoRaiffeisenCentrobankAGtosupporttheManagementBoardinmanagingtheoverallbankingrisk.
3. Internal Control SystemRaiffeisenCentrobankAGhasimplementedacompany-widemodernInter-nalControlSystemthatmeetsRBIGroupstandards.AllkeyprocessesandimmanentrisksaswellasotherkeyrisksoftheBankaredocumentedandcontrolsaresetupandreviewed,accordingly.Onceayear,thecontrolsarereviewedintermsofimplementation,efficiencyandefficacy.TheresultsarecentrallymonitoredandarereportedtotheManagementBoardandtheSupervisoryBoard.
MajorRisks
Market riskMarketriskisdefinedastheriskofpossiblelossesinonandoff-balancesheetpositionsarisingfromchangesinmarketprices(equityandcommodi-typrices,interestratesorexchangerates).
AsthemainfocusofthebusinessactivitiesofRaiffeisenCentrobankAGisonsecuritiestradingandtheissueofequity-indexbasedderivativesandstructuredproducts,thetoppriorityofRaiffeisenCentrobankAGistocoun-teractmarketrisk.RaiffeisenCentrobankAGmeasures,monitorsandma-nagesmarketriskbysettingavarietyoflimitsthatarereviewedandappro-vedonanannualbasis.Allmarketriskpositionsarecomparedwiththerespectivelimitsinamostlyautomatedprocess.Limitoverdraftsarehandledinanescalationprocess.Currently,over15,000limitsinroughly25categoriesaremonitored.Limitsforsinglesharesaccountforthemajority.
Inmarketriskmanagement,theVaRisemployed,whichprovidesforecastsonpotentiallossesinadversescenariosundernormalmarketconditionsandcontraststhemwithaparticularlimit.Onthebasisofthevariance-co-variancemodel,theVaRforequityandproduct-specificpositionsiscalcu-lateddailywithaconfidenceintervalof99percentandaretentionperi-odofoneday.Asat31December2018,theVaRforequityandproduct-specificpositionscameto€335thousand(31December2017:€470thousand).
TheabovechartdepictstheperformanceoftheVaRandhypotheticalP&L(profitandlossthatwouldhaveoccurredinaconstantportfolioaswellasactuallyrecordedmarketmovements)intheperiodbetween1January2018and31December2018.
Intheperiodunderreview,backtestingrevealedthreeVaRexceedances.Twowererelatedtothe“flashcrash”inFebruary2018whichcausedlos-sesparticularlyontheAmericanmarketswithinashorttimeandstronglyfluctuatingvolatilityindices.ThreeVaRexceedancesinoneyeararestatisti-callyexpectedbythequantile;thisunderlinesthequalityandconservativeparametrizationoftheVaR.
InadditiontotheVaR,RaiffeisenCentrobankAGusesregulatoryanddailymanagement-definedstressteststoevaluatemarketrisk.TheresultsarereportedinthemonthlyRiskManagementCommittee.Stresstestssimu-latetheperformanceoftheportfoliounderabnormalmarketsituationsandatypicalpricemovements.
Credit riskCreditriskrepresentsthedefaultriskthatarisesfromtheinabilityofacusto-mertofulfilcontractuallyagreedfinancialobligations,whenserviceshavebeenrendered(e.g.liquidity,securities,advisoryservices)orwhenunrea-lizedprofitsfrompendingbusinesstransactionscannolongerbereco-vered(counterpartydefaultrisk).
RaiffeisenCentrobankAG’smajorcreditrisksresultfrompositionsofpurchaseddebtinstruments,tradablemoneymarketdepositsandOTCop-tionsservingprimarilytohedgeissuedcertificatesandstructuredproductsaswellasfrommarginpositionsrelatingtoOTCandstockexchangetran-sactions.ThisprimarilyaffectsmembersoftheRBICreditInstitutionGroupandtoalimitedextentotherfinancialinstitutions.ThetraditionalcreditandloanbusinessisnotofmaterialsignificanceforRaiffeisenCentrobankAGduetothelimitedbusinessvolumeandtheCompany'sstrategicorientation(lombardloans,otherloanstoprivateandcorporatecustomers).
Creditriskmanagementisbasedoncounterparty-relatednominallimits,whicharecomprehensivelymonitoredbytheinternallimitsystemforcreditrisk.Thelimitsareapproved-dependingonthetypeandsize-bytherele-vantauthorityinthehierarchy.Creditdecisionsaretakendependingontheassessmentofthecounterpartydefaultrisk,takingintoaccountthera-tingandapplicablecreditriskmitigatingmeasureslikefinancialcollateral(e.g.cashorsecuritiescollateral).IntheGroup-widedefaultandrating
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databasecustomersareregisteredandevaluatedandcasesofdefaultaredocumented.Thewholelendingdecisionadherestoregulatoryrequi-rementsandRBIGroupDirectives.
Operational riskOperationalriskisdefinedastheriskofunexpectedlossesresultingfrominternalprocessesandsystemswhichareinadequateorhavefailed,fromhumanerrororfromexternalevents.Thisdefinitionincludeslegalriskbutexcludesstrategicandreputationalrisk.OperationalriskismanagedonthebasisoftheresultsofregularBank-wideriskassessments,standardizedkeyriskindicators,scenarioanalysesandGroup-internalhistoricaldata.
CasesofdefaultinoperationalriskareregisteredintheGroup-widedatabasisORCA(OperationalRiskControllingApplication)andaregroupedbybusinesssegmentandtypeofevent.Measurestakenarealsodocu-mentedandlinkedwiththecaseofdefault.
Liquidity riskLiquidityriskiscalculatedbasedonaliquiditymodeldevelopedincoope-rationwithRBI.DailybalancesheetitemsofRaiffeisenCentrobankAGaresplitbymaturitybandsandcurrencies,theirinflowsandoutflowsaremo-deledbasedonpre-definedfactors.TheliquidityrequirementindifferentmaturitybandsislimitedbymeansofregulatorylimitsaswellasbylimitsdeterminedbyRBI.Moreover,regularliquiditystresstestsarecarriedoutandthetime-to-wallinthestressscenarioismonitoredindifferentcurrenci-es.Inflowsneedtoexceedoutflowsforaparticularperiodinacrisisscenario(marketcrisis,namecrisisandscenarioinvolvingboth).
Theliquiditycoverageratio(LCR)servestomeasuretheBank’sliquiditysupplyinadefinedstressscenario(combinationofmarketandnamecri-sis).Asat31December2018,theLCRcameto219.6percent(31De-cember2017:205.2percent).SinceJanuary2018,aminimumrateof100percenthasbeenmandatoryonsingle-institutionlevel.
AllkeyindicatorsconfirmedtheadequateliquiditysupplyofRaiffeisenCentrobankAGinthe2018financialyear.
RiskSituation
TheRiskAppetiteFrameworkisaninternaltooltodefineandcommunicatetheriskappetiteofRaiffeisenCentrobankAG.Themanagementofriskisdoneaccordingtoalimitandmonitoringsystempursuanttoparticularwar-ninglevelsandlimits.
Thefollowingtabledepictsthebank-widekeyfiguresasat31December2018comparedto31December2017aswellastherespectiveminimum,maximumandaveragevaluesforthe2018financialyear.
16%
18 %16 %
18 %110 %
130 %
13,0 %15,0 %50,0 %
40,0 %7,5 %
9,0 %20 mn30
20,0 %
25,0 %1,4 %
1,7 %
46.4% 30.0% 39.2%
2.8% 2.2%2.8% 3.5% 2.6%
+44 mn 254 mn 61 mn 154 mn
Risk
rew
ard
pr
ofile
RORAC 46.4%
Pilla
r II
(inte
rnal
cap
ital)
LCR Cash Puffer 137 mn 92 mn
RORWA
23.3%
Net Leverage Ratio 13.8% 13.7% +0.1 PP 13.8% 11.9% 12.8%
29.6% 16.9%Economic Capital Utilization 16.9% 22.6% (5.7) PP
Total Capital Ratio in Stress 23.6% 21.8% +1.9 PP
+14.3 PP 348.3% 156.6% 243.3%
24.1% 20.3% 22.5%
24.1% 20.3% 22.5%
CET 1 Ratio 23.6% 21.8% +1.9 PP 24.1% 20.3%
+1.9 PP
22.5%
Pilla
r I
Total Capital Ratio 23.6% 21.8%
LCR 219.6% 205.2%
53.0% (6.6) PP
(0.7) PP
mn
Key figure Status Limits 12/2018 12/2017 Change Max1 Min1 Avg1
1during2018
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TheNetLeverageRatiolimitsthemaximumbusinessvolumebytheavailablecorecapital.ThecalculationoftheNetLeverageRatioexcludescertainin-tragroupriskpositions(e.g.fundingpassedon).
NetLeverageRatio=Corecapital
Balancesheetvolume(excl.RBI)
TheRORAC(ReturnonRisk-AdjustedCapital)andtheRORWA(ReturnonRisk-WeightedAssets)arekeyfiguresofrisk-adjustedreturnmanagement.Thenetincomeisrelatedtotheallocatedriskcapital.Projectswithhigherriskprofilestieupmorecapitalandshouldbemoreprofitable.
RORAC=NPAT
EconomicCapital(ytdavg)+prudentvaluation(ytdavg)
RORWA=NPAT
Risk-WeightedAssets(ytdavg)
Onoverallbanklevel,allkeyfigureswerestableandwereabovetherespectiveinternallimitsandwarninglevels.Theinternalwarninglevelsandlimitsaredefinedconservatively,i.e.eveniftheyareundercut,theregulatorylevelsarestillcompliedwith.
Risk-WeightedAssetsbyrisktypesaredepictedinthebelowtable:
1incl.SettlementriskandOwnedpropertyrisk
RWAs acc. to type of risk (in € million) 31/12/2018 31/12/2017 Change
Creditrisknon-retail 85.9 98.4 (12.8%)
Marketrisk 204.9 218.7 (6.3%)
Operationalrisk 121.8 113.5 7.4%
Equityparticipationrisk 6.2 9.0 (31.0%)
CVArisk 42.3 34.9 21.2%
Otherrisks1 14.0 13.4 4.9%
RWAs Total 475.3 487.9 (2.6%)
Theabovekeyfiguresaredefinedasfollows:
TotalCapitalRatioandCET1Ratioserveasquantitativemeasuretodeterminethecreditinstitution’sownfundsinrelationtotheRisk-WeightedAssets(RWAs).
CET1Ratio=CommonEquityTier1
TotalRisk-WeightedAssetsTotalCapitalRatio=
EligibleownfundsTotalRisk-WeightedAssets
TheLCR(LiquidityCoverageRatio)measurestheliquidityoutflowina30-daystressscenario.
LCR=LiquidassetsNetoutflows
TheLCRCashBuffermeasurestheliquiditysurpluswhichexceedsregulatoryrequirementsandservestosafeguardthattherequiredLCRismet.
TheTotalCapitalRatioinstressmeasurestheTotalCapitalRatiointhegoingconcernscenario(1yearretentionperiod,95percentconfidenceinter-val).EligibleownfundsandexpectedprofitarestressedattheVaRandcontrastedwiththeRisk-WeightedAssets.TheTotalCapitalRatioactsasafloor.
TotalCapitalRatioinStress=Eligibleownfunds+NPAT–ValueatRisk
TotalRisk-WeightedAssets
TheEconomicCapital(EC)Utilizationdepictstheutilizationoftheriskcoveragesuminthetargetratingscenario(1yearretentionperiod,99.92percentconfi-denceinterval).
EconomicCapitalUtilization=EconomicCapital
Risk-takingcapacity
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In2018,themajorchangesintherisksituationwereasfollows:
Equaltothepreviousyear,thecreditriskRWAsdroppedsignificantlydrivenbyafurtherreductionofthecreditportfolioandalowerinvestmentvolumeintoshort-termcapitalmarketinstrumentsasattheduedate.Theutilizationinmarketriskislowbutwellwithinthecommonfluctuationrange.Theequityparticipationriskdecreasedagainstthebackdropofareduc-tioninthecarryingamountofCentrotradeHoldingGmbH.TheriseoftheRWAsoftheCVA(CreditValueAdjustment)riskwasattributabletothehedgingoftheincreasedcertificates’volume.
TheInternalControlSystemasRelevantfortheAccountingSystemRaiffeisenCentrobankAGanditsgoverningbodiesarecommittedtoensu-ringbalancedandcompletefinancialreporting.Afundamentalrequire-mentforthisiscompliancewithallrelevantlegalregulations.Inconnectionwiththeaccountingprocess,theManagementBoardisresponsiblefordesigningandinstallinganinternalcontrolandriskmanagementsystemthatmeetstherequirementsoftheCompany.Theobjectofthisinternalcontrolsystemistosupportthemanagementbymakingcertainthateffecti-veinternalcontrolsareappliedtotheaccountingprocessandthatthesecontrolsareimprovedonwheneverappropriate.Thecontrolsystemisdesi-gnedtoassurecompliancewithguidelinesandregulations,aswellastocreateoptimalconditionsforspecificcontrolmeasures.AninternalcontrolsystemhasalreadyexistedatRaiffeisenCentrobankAGforyearsintheformofdirectivesandinstructionsforstrategicallyimportantsubjectareas.ThefinancialstatementsarepreparedonthebasisofthepertinentAustrianlaws,abovealltheAustrianBankingAct(BWG)inconnectionwithEURegulation575/2013(CapitalRequirementsRegulation“CRR”)andtheAustrianCommercialCode(UGB)asamendedbytheRÄG2014.
Thedepartment“Finance”isresponsiblefortheBank’saccountingsystemandisdirectlysubordinatedtotheManagementBoard.Thedepartmentisresponsiblefordealingwithallaccountingissuesandhastheauthoritytoprovideforthesafeguardingoftheapplicationofuniformstandards.Orga-nizationalinstructionsandguidelines,whicharecomprisedinamanual,havebeensetupforsupport.
AccountingaccordingtotheAustrianBankingActandAustrianCommer-cialCodeiseffectedviaacentralITsystemusingPAGORO/400,whichisprotectedbytherestrictedassignmentofaccessauthorizations.Thetab-leofaccountsistailoredtotheBank’sindividualrequirements.Transactionsareregisteredbothautomaticallyandmanually.Accountingvouchersarethenfiledsystematicallyandchronologically.
MonthlybalancesheetsarecreatedandpassedontotheManagementBoardandtheseniormanagementbymeansofastandardizedfinancialreportingsystem.AtleastonceperquartertheSupervisoryBoardisinformedinthecourseoftheSupervisoryBoardmeetingsofthecurrentcourseofbusinessincludingtheBank’soperativeplanningandmedium-termstrategy.
TheManagementBoardevaluatesandmonitorsmaterialrisksinconnec-tionwiththeaccountingprocess.Inthis,thefocusisplacedontherisksthataretypicallyfoundtobematerial.Theannualevaluationoftheinternalcontrolmeasuresappliedbyeachoftheresponsibleunitsisbasedonarisk-orientedapproach.Theriskofincorrectfinancialreportingisassessedonthebasisofanumberofdifferentcriteria.Forexample,complexac-countingprinciplescanincreasetheriskoferrors.Differentprinciplesforthemeasurementofassetsandcomplexorchangingbusinessconditionscanalsoleadtosubstantialerrorsinthefinancialreporting.
Estimatesmustregularlybemadeduringthepreparationofthefinancialstatements.Inallofthesecases,thereisaninherentriskthatactualdeve-lopmentsmaydeviatefromtheseestimates.Thisespeciallyappliestotheparametersinvaluationmodelsthatareusedtodeterminethefairvaluesoffinancialinstrumentsforwhichthereisnocurrentpricequotationaswellastosocialcapital,theoutcomeoflegaldisputes,thecollectabilityoflo-ansandadvances,andtheimpairmentofequityparticipations.Insomecases,externalexpertsareinvolvedorpubliclyavailableinformationsour-cesareusedtominimizetheriskofincorrectestimates.
InadditiontotheManagementBoard,thegeneralcontrolframeworkalsoincludesseniormanagement(thedepartmentheads).Allcontrolmeasuresareappliedtothedailybusinessprocessestoensurethatpotentialerrorsordeviationsinthefinancialreportingarepreventedordiscoveredandcorrected.Thecontrolmeasuresthatareappliedatregularintervalsrangefromthereviewoftheperiodicresultsbythemanagementtothespecificreconciliationandcoordinationofaccountsandtheanalysisandfurtheroptimizationofaccountingprocesses.TheInternalAuditdepartmentisalsoinvolvedinthemonitoringprocess.ItsactivitiesarebasedontheAustrianFinancialMarketAuthority’sminimumstandardsforinternalauditingandinternationalbestpractice.TheInternalAuditdepartmentreportsdirectlytotheManagementBoard.
“Controlling”(partofthe“Finance”department)isresponsibleforprepa-ringthenotestotheannualfinancialstatementsdraftedaccordingtotheAustrianBankingActandtheAustrianCommercialCode.Inaddition,amanagementreportisdrawnupwhichexplainstheresultsinlinewithstatu-toryrequirements.TheannualfinancialstatementsandthemanagementreportareforwardedtoandreviewedbytheAuditCommitteeoftheSu-pervisoryBoardandarethenpresentedtotheSupervisoryBoardforitsapproval.TheannualfinancialstatementsarepublishedontheCompany’swebsite,intheOfficialGazetteoftheWienerZeitung,andarealsofiledwiththeAustrianCompanyRegister.KeyemployeesandtheManagementBoardreviewtheannualfinancialstatementspriortotheirdistributiontotheSupervisoryBoard.Moreover,analysesoftheannualfinancialstatementsarepreparedspeciallyforthemanagement.
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HumanResourcesAsat31December2018RaiffeisenCentrobankAGhad191employees,which,comparedto31December2017,representedanincreaseof10employees.In2018,RaiffeisenCentrobankAGhadonaverage186employees.
Thismodestriseisattributabletotheonboardingofthenon-advisorybro-keragebusinessfromRaiffeisenBankRomaniaaswellastotheadjustmentofstaffresourcesfurthertothefavorablebusinessdevelopment.Inthere-portingperiod,thefluctuationratecameto5percent.
Follow up employee surveyTheemployeesurveywascarriedoutinOctober2018andrecordedaparticipationrateof90percent.Attheendof2018,beginningof2019,theresultswereanalyzedandwillbeevaluatedindetailininterdisciplina-ryworkshopsinthecourseoftheyear.
DiversityAttheendofDecember2017,RaiffeisenCentrobankAGachievedthetargetrateof30percentfortheunder-representedgenderinSupervisoryBoard,ManagementBoardandseniormanagementfunctions(B-1andB-2).Asat31December2018,thepercentageofwomeninleadershippositionscameto30percent.
TrainingEmployeeshaverespondedverypositivelytoagileworkingmethodsandhaveintegratedthemintotheirworkingroutine.Furthertopertinenttrai-nings,abroadspectrumofagileworkingpracticeshasbeenadoptedthroughoutvariousdepartments.
Inthecourseofthe“OutoftheBox“initiative,expertsgavelecturesoncur-renttopics.Inthepastyear,4topicswerepresentedcoveringbehavioralfinance,healthydietattheworkplace,e-mobilityandsalesmethodsusingtheIERmodel.Morethan200employeestookpartinthelecturesandthediscussions.Becauseoftheverypositivefeedbackandtheactivepartici-pationonthepartoftheemployees,additionallectureswillbeorganizedinthecourseoftheforthcomingyear.
Outlookfor2019Eventhoughtheeconomicindicatorspartlyfellshortofexpectations,theprospectsfortheeurozoneremainsolid.Theeurozoneshouldcontinueitseconomicupswing.However,thepaceofgrowthshouldbeslackening.In2019,theeconomicgrowthrateshouldcometo1.5percentcomparedto1.1percentin2018.Shoredupbystrongdomesticdemand,Austria(plus1.7percent)andtheCEEregion(plus3.4percent)shouldgrowmorevigorouslythantheentirecurrencyunion.Thepoliticalissuesthatdo-minatedtheheadlinesin2018(tradeconflicts,Brexitscenarios,geopoliti-caltensions,effortstoconsolidatenationalbudgets),willfurtherimpactthefinancialmarkets.Withtheendofthequantitativeeasingprogramattheendof2018,theEuropeanCentralBank’smonetarypolicybecamemorerestrictive.Nevertheless,theEuropeanCentralBankindicatedtoleavein-terestratesunchangeduntilandbeyondsummer2019.TheUSeconomicmomentum,whichisakeydriverfortheNewYorkStockExchange,isexpectedtotaperoffoverthecourseoftheyear.Inmid-2019,thetailwindsofthetaxreformthatwasadoptedattheendof2017andthepublicspendingpackagethatwaspassedatthebeginningof2018,shouldbewaning.Thus,dynamicsareanticipatedtoweakeninthesecondhalfof2019and2020.USeconomicgrowthisexpectedtogain2.3percentfurthertoariseof2.9percentin2018.Againsttheback-dropofslowingdowndynamics,theFedshouldreachtheinterestratepeakin2019.
Followingthelongerthanaverageupswingontheexchanges,themarketsingeneralareinanadvancedstageofthecycle.
Asthecompetencecenterforequitiesandcertificates,RaiffeisenCentro-bankAGiswellpreparedandmaintainsapositiveoutlookasregardsbusinessopportunitiesintheexpectedmarketenvironment.AgainstthebackdropoftheBank’sstrongmarketpositionandcuttingedgeproductportfolio,RaiffeisenCentrobankAGexpectsthebusinesssegmentsTrading&Treasury,StructuredProducts,InvestmentServices,GlobalEquityMar-ketsandCompanyResearchtopostastableresultinthe2019financialyear.
Intheforthcomingbusinessyear,thefocuswillbeonthesustaineddeve-lopmentofbothexistingandnewbusinessactivitiesintandemwithstrictcostdisciplineandfurtherefficiencyenhancement.In2019,RaiffeisenCentrobankAGexpectstomaintainorslightlysurpassthebusinessresultachievedinthe2018financialyear.
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WilhelmCeledaChiefExecutiveOfficer
ValerieBrunnerMemberoftheManagementBoard
WilhelmCeledaChiefExecutiveOfficer
ValerieBrunnerMemberoftheManagementBoard
ResearchandDevelopmentRaiffeisenCentrobankAGwithitscoreareaofbusinessfocusingonequi-tiesandstructuredproductsdoesnotengageinresearchanddevelop-ment.
Vienna,4April2019TheManagementBoard
StatementofLegalRepresentativespursuantto§82StockExchangeActWeconfirmtothebestofourknowledgethattheannualfinancialstate-mentsgiveatrueandfairviewoftheassets,liabilities,financialposition,andprofitorlossofRaiffeisenCentrobankAGasrequiredbytheappli-cableaccountingstandardsandthatthemanagementreportgivesatrueandfairviewofthedevelopmentandperformanceofthebusinessandthepositionoftheCompany,togetherwithadescriptionoftheprincipalrisksanduncertaintiestheCompanyfaces.
Wien,4April2019TheManagementBoard
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FinancialStatementsofRaiffeisenCentrobankAGasat31December2018accordingtotheAustrianBankingAct
Theadditionofroundednumbersusingautomatedsystems,aswasdoneforthisreport,mayresultinminordifferencesinamounts.
Thechangesindicatedinpercentrefertotheactualamountsandnottheroundedamountsshowninthisreport.
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BalanceSheetasat31December2018 Assets 31/12/2018 31/12/2018 31/12/2017 31/12/2017 in € in € in € thousand in € thousand
1. Cashinhand,depositswithcentralbanks 234,904,704.24 183,472
2. Loansandadvancestocreditinstitutions
a)repayableondemand 164,753,913.89 64,298
b)otherloansandadvances 2,870,636,491.34 3,035,390,405.23 2,521,136 2,585,434
3. Loansandadvancestocustomers 120,212,876.36 34,766
4. Bonds,notesandotherfixed-interestsecurities
a)issuedbypublicbodies 4,280,612.09 2,348
b)issuedbyotherborrowers 16,164,464.30 20,445,076.39 8,422 10,770
5. Sharesandothervariable-yieldsecurities 177,142,167.41 232,102
6. Equityparticipations 5,139,498,88 5,138
7. Sharesinaffiliatedcompanies 1,100,000.00 3,900
8. Intangiblefixedassets 105,018,01 54
9. Tangiblefixedassets 10,969,882.63 11,309 thereoflandandbuildingsusedbythecreditinstitution forownpurposes:€9,276,463.92 previousyear:€9,528thousand
10.Otherassets 128,199,705.82 131,812
11.Prepaymentsandotherdeferrals 1,575,339.70 1,263
12.Deferredtaxassets 167,066.00 163
Total assets 3,735,351,740.67 3,200,183
Off-balance sheet items
1. Foreignassets 488,583,523.70 325,048
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Equity and liabilities 31/12/2018 31/12/2018 31/12/2017 31/12/2017 in € in € in € thousand in € thousand
1. Liabilitiestocreditinstitutions
a)repayableondemand 3,181,333.96 36,833
b)withagreedmaturitydatesorperiodsofnotice 11,171,449.66 14,352,783.62 2,103 38,935
2. Liabilitiestocustomers
a)repayableondemand 134,486,340.48 94,015
b)withagreedmaturitydatesorperiodsofnotice 230,488,688.16 364,975,028.64 237,966 331,980
3. Securitizedliabilities
a)issuedsecuritizedliabilities 1,460,555,635.32 1,158,784
b)othersecuritizedliabilities 1,288,718,926.90 2,749,274,562.22 1,185,737 2,344,522
4. Otherliabilities 467,537,655.32 342,370
5. Accrualsanddeferreditems 104,722.78 98
6. Provisions
a)forseverancepayments 4,436,050.00 3,962
b)taxprovisions 189,649.33 375
c)otherprovisions 7,527,311.08 12,153,010.41 11,547 15,884
7. Subscribedcapital 47,598,850.00 47,599
8. Capitalreserves
a)committed 6,651,420.71 6,651
b)uncommitted 14,000,000.00 20,651,420.71 14,000 20,651
9. Retainedearnings
a)legalreserve 1,030.936.83 1,031
b)otherreserves 31,129,480.61 32,160,417.44 26,999 28,030
10.LiabilityreservepursuanttoArticle57para5AustrianBankingAct 13,538,860.00 13,539
11.Netprofitfortheyear 13,004,429.53 16,576
Total equity and liabilities 3,735,351,740.67 3,200,183
Off-balance sheet items
1. Contingentliabilities 0.07 0
2. Commitmentsarisingfromfiduciarybusinesstransactions 7,091,121.47 7,091
3. EligibleownfundspursuanttoPart2ofRegulation(EU)No575/2013 112,342,566.64 106,191
4. CapitalrequirementspursuanttoArticle92ofRegulation(EU) 475,262,345.75 487,930 No575/2013(TotalRisk-WeightedAssets) hereof:capitalrequirementspursuanttoArticle92para1lit(a)to(c) ofRegulation(EU)No575/2013 hereof:capitalrequirementspursuanttoArticle92para1lit(a) 23.64% 21.76% hereof:capitalrequirementspursuanttoArticle92para1lit(b) 23.64% 21.76% hereof:capitalrequirementspursuanttoArticle92para1lit(c) 23.64% 21.76%
5. Foreignequityandliabilities 696,106,851.33 477,670
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IncomeStatementforthe2018FinancialYear
2018 2018 2017 2017 in € in € in € thousand in € thousand
1. Interestandinterest-likeincome 29,210,855.03 16,708
thereoffixed-interestsecurities 98,796.72 236
2. Interestandinterest-likeexpenses (48,608,914.29) (30,631)
I. Net interest result (19,398,059.26) (13,923)
3. Incomefromsecuritiesandfinancialinvestments 11,426,712.45 7,947
4. Feeandcommissionincome 12,828,333.08 14,058
5. Feeandcommissionexpenses (13,763,228.08) (12,064)
6. Netprofitonfinancialtradingactivities 67,521,483.39 61,338
7. Otheroperatingincome 1,144,097.57 1,891
II. Operating income 59,759,339.15 59,248
8. Generaladministrativeexpenses (40,990,487.71) (38,092)
a)staffexpenses
aa)salaries (18,315,191.89) (17,482)
bb)expensesforstatutorysocialcontributionsandcompulsorycontributionsrelated towagesandsalaries (3,891,434.88) (3,694)
cc) othersocialexpenses (383,058.08) (380)
dd)expensesforpensionsandassistance (422,143.68) (379)
ee)provisionsforseverancepaymentsandcontributionstoseverancefunds (895,075.37) (590)
(23,906,903.90) (22,524)
b)otheradministrativeexpenses (17,083,583.81) (15,567)
9. Valueadjustments onassetitems8and9 (1,043,308.54) (1,135)
10.Otheroperatingexpenses (332,265.53) (907)
III. Operating expenses (42,366,061.78) (40,134)
IV. Operating result 17,393,277.37 19,113
11.Loanlossprovisionsandexpendituresarisingfromthevaluation anddisposalofsecuritiesheldasother currentassets (237,945.32) (5)
12.Incomearisingfromthevaluationanddisposalofloansandadvances andofsecuritiesheldasother asothercurrentassets 15,000.00 111
13.Expendituresarisingfromthevaluationofequityinvestments heldasfinancialinvestments (1,442,036.74) (139)
V. Result on ordinary activities 15,728,295.31 19,081
14.a)currentincometaxes (2,396,907.53) (2,115) thereofpassedonfromparentcompanyfortheyear: € (1,045,500.00); previous year: € (1,655thousand) b)deferredtaxes 4,378.43 (2,392,529.10) (8) (2,123)
15.Othertaxesunlessincludedinitem14 (331,336.68) (382)
VI. Net income (=Net porfit) for the year 13,004,429.53 16,576
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DevelopmentofFixedAssetsinthe2018FinancialYear Amounts in € Cost of acquisition Cost of acquisition Cost of acquisition Cost of acquisition Accumulated depr. Accumulated depr. Accumulated depr. Accumulated depr. Accumulated depr. Carrying amount Carrying amount Balance as at 1/1/2018 Additions Disposals Balance as at 31/12/2018 Balance as at 1/1/2018 Additions / Depreciation Write-up Disposals 31/12/2018 31/12/2018 31/12/2017
I. Intangible fixed assets
Softwarelicenses 1,974,462.53 120,524.40 523,001.27 1,571,985.66 1,920,259.52 69,709.40 0.00 523,001.27 1,466,967.65 105,018.01 54,203.01
II. Tangible fixed assets
1.Landandbuildingsusedbythecreditinstitution forownpurposes thereofvalueofproperty:€ 2,637,765.92; previousyear:€ 2,638thousand 12,694,367.11 0.00 0.00 12,694,367.11 3,166,487.19 251,416.00 0.00 0.00 3,417,903.19 9,276,463.92 9,527,879.92
2.Officefurnitureandequipment 13,964,038.30 634,650.14 370,761.60 14,227,926.84 12,183,086.59 722,183.14 0.00 370,761.60 12,534,508.13 1,693,418.71 1,780,951.71
26,658,405.41 634,650.14 370,761.60 26,922,293.95 15,349,573.78 973,599.14 0.00 370,761.60 15,952,411.32 10,969,882.63 11,308,831.63
III. Financial investments
1.Sharesinaffiliatedcompanies thereofincreditinstitutions:€0.00 3,900,000.00 0.00 2,800,000.00 1,100,000.00 0.00 0.00 0.00 0.00 0.00 1,100,000.00 3,900,000.00
2.Equityparticipations thereofcreditinstitutions:€0.00 5,138,934.88 1000.00 0.00 5,139,934.88 436.00 0.00 0.00 0.00 436.00 5,139,498.88 5,138,498.88
9,038,934.88 1,000.0 2,800,000.00 6,239,934.88 436.00 0.00 0.00 0.00 436.00 6,239,498.88 9,038,498.88
Total 37,671,802.82 756,174.54 3,693,762.87 34,734,214.49 17,270,269.30 1,043,308.54 0.00 893,762.87 17,419,814.97 17,314,399.52 20,401,533.52
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DevelopmentofFixedAssetsinthe2018FinancialYear Amounts in € Cost of acquisition Cost of acquisition Cost of acquisition Cost of acquisition Accumulated depr. Accumulated depr. Accumulated depr. Accumulated depr. Accumulated depr. Carrying amount Carrying amount Balance as at 1/1/2018 Additions Disposals Balance as at 31/12/2018 Balance as at 1/1/2018 Additions / Depreciation Write-up Disposals 31/12/2018 31/12/2018 31/12/2017
I. Intangible fixed assets
Softwarelicenses 1,974,462.53 120,524.40 523,001.27 1,571,985.66 1,920,259.52 69,709.40 0.00 523,001.27 1,466,967.65 105,018.01 54,203.01
II. Tangible fixed assets
1.Landandbuildingsusedbythecreditinstitution forownpurposes thereofvalueofproperty:€ 2,637,765.92; previousyear:€ 2,638thousand 12,694,367.11 0.00 0.00 12,694,367.11 3,166,487.19 251,416.00 0.00 0.00 3,417,903.19 9,276,463.92 9,527,879.92
2.Officefurnitureandequipment 13,964,038.30 634,650.14 370,761.60 14,227,926.84 12,183,086.59 722,183.14 0.00 370,761.60 12,534,508.13 1,693,418.71 1,780,951.71
26,658,405.41 634,650.14 370,761.60 26,922,293.95 15,349,573.78 973,599.14 0.00 370,761.60 15,952,411.32 10,969,882.63 11,308,831.63
III. Financial investments
1.Sharesinaffiliatedcompanies thereofincreditinstitutions:€0.00 3,900,000.00 0.00 2,800,000.00 1,100,000.00 0.00 0.00 0.00 0.00 0.00 1,100,000.00 3,900,000.00
2.Equityparticipations thereofcreditinstitutions:€0.00 5,138,934.88 1000.00 0.00 5,139,934.88 436.00 0.00 0.00 0.00 436.00 5,139,498.88 5,138,498.88
9,038,934.88 1,000.0 2,800,000.00 6,239,934.88 436.00 0.00 0.00 0.00 436.00 6,239,498.88 9,038,498.88
Total 37,671,802.82 756,174.54 3,693,762.87 34,734,214.49 17,270,269.30 1,043,308.54 0.00 893,762.87 17,419,814.97 17,314,399.52 20,401,533.52
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A.AccountingPolicies
General principlesThefinancialstatementsofRaiffeisenCentrobankAGforthe2018financi-alyearhavebeenpreparedinaccordancewiththegeneralaccountingprinciplesstipulatedinthemostrecentversionoftheAustrianCommercialCodeandthespecificsectoralregulationsasspecifiedbytheAustrianBankingAct.Inaccordancewiththeprinciplesofproperaccounting,andtakingintoaccountstandardpracticeasdescribedinArticle222section2oftheAustrianCommercialCode,theannualfinancialstatementsgiveatrueandfairviewofthecompany’snetassets,financialpositionandearnings.
Thevaluationofassetsandequityandliabilitiesisbasedontheprincipleofindividualvaluationassumingagoingconcernperspective.Theprincip-leofprudenceisapplied,takingaccountofthespecificcharacteristicsofthebankingbusiness.
Thefinancialstatementshavebeenpreparedincompliancewiththecon-sistencyprinciple.Comparedtotheannualfinancialstatementsasat31December2017,theaccountingandvaluationmethodshavechangedasaresultoftheimplementationofgeneralimpairmentallowancesforloansandadvancestocreditinstitutionsandcustomers.Thecalculationofthegeneralimpairmentallowancesisgroup-widebasedonIFRS9.Theimple-mentationoftheregulationshasresultedinaone-offadjustmenteffectof€198thousand,whichhasbeenexpensedimmediatelyinthefinancialyearunderreview.
Thebalancesheetandtheincomestatementhavebeenstructuredaccor-dingtoAppendix2oftheformscontainedinArticle43AustrianBankingAct.
Since26April2017,RaiffeisenCentrobankAGhasbeenoperatingabranchofficeinBratislava(RaiffeisenCentrobankAGSlovakBranchpobočkazahraničnejbanky).Thebusinessvolumeaswellasincomeandexpensesattributabletothebranchofficehavebeenincludedinthefinan-cialstatements.
Foreign currency translationAssetsandliabilitiesdenominatedinforeigncurrenciesarereportedattheratesofexchangesfixedbytheEuropeanCentralBank.Amountsdenomi-natedincurrenciesforwhichtheEuropeanCentralBankpublishednora-tesareconvertedatthemiddleratesofexchangepublishedbyRaiffeisenBankInternationalAGonthebalancesheetdate.
Atyear-end,foreigncurrencypositionsareconvertedattheratespublis-hedbytheViennaStockExchangeonthelasttradingday.Ifnorateisavailableforaparticularcurrency,ratespublishedbytheEuropeanCen-tralBank,RaiffeisenBankInternationalAGortherespectivemarketratesareused.
Forwardforeignexchangecontractsarecapitalizedattheforwardex-changerates.Anydifferencesinratesresultingfromcurrencyconversionarereportedasaprofitorlossintheincomestatement.
Trading portfolio – valuation of securities, futures and options Intermsofsecuritiesheldfortradingpurposesorasothercurrentassets,thecompany’sportfolioofsharesinpubliclylistedcompaniesaswellasfixed-interestsecuritiesisreportedatthesharepriceprevailingontheba-lancesheetdate.Ifnoquotesorsharepricesareavailable,thevalueisdeterminedbymeansofvaluationmodels.
Bondsheldbythecompanyfortradingpurposesarevaluedatquotesprovidedbyothercreditinstitutions,brokersoratReutersquotes,incasestockexchangequotesarenotavailableorarenotconclusive.Ifsuchquotesarenotavailable,pricesarecalculatedinternallyonthebasisofthenetpresentvaluemethod.Thismethodisbasedonaninterestratecur-vecomprisedofmoneymarket,futuresandswapratesaswellasspreads.
Certificatesacquiredbasedonanequity-basedorindex-basedperfor-mancearevaluedwiththesharepricesprevailingonthebalancesheetdate,andifnosharepricesareavailable,withtheassistanceofvaluationmodelstoillustratestochasticdevelopmentprocesses.
Derivativesarereportedinthebalancesheetatfairvalue,whichequalsthemarketpriceorasyntheticvalue.Adjustmentsinvaluearerecognizedthroughprofitorlossintheincomestatement.Thesyntheticvaluesarede-terminedaccordingtotheBank’sownevaluationmethods,whichareexa-minedandapprovedbyriskmanagementandwhicharebasedonrecog-nizedoption-theoreticalmodels.
Optionsonsecuritiesofpubliclylistedcompaniesandoptionsonsecurityindices(i.e.purchasedandsoldcallsandputs,primarilyEUREXoptions)aswellasfuturesheldfortradingpurposesarevaluedaccordingtothemarketpricesprevailingonthebalancesheetdate.Valueadjustmentsweremadetotaketemporaldifferencesintoaccount.
OTCoptionsareprimarilyvaluedattradablepricesquotedbythecoun-terparty.Optionsforwhichnotradablepricesareavailablearevaluedbyadequatemodels.Forplainvanillaoptions(AmericanandEuropeansty-le),theBlack-ScholesmodelandthebinomialpricingmodelaccordingtoCox-Ross-Rubinsteinareapplied.TheCurranapproximationisappliedtoAsianoptions,whereasbarrieroptionsusetheHeynen-KatmodelandspreadoptionsrelyontheKirkmodel.
Banking book — valuation of derivativesThederivativesvolumeinthebankingbookrelatesexclusivelytoFXfor-wardstohedgeforeigncurrencyrisks.Theyarevaluedatfairvaluerelyingonobservablemarketparameters.
Loans and advances to credit institutions and customersLoansandadvancestocreditinstitutionsandcustomersareshownattheirnominalvalue.Individualloanlossprovisionsaremadeinthecaseofanidentifiablerecognizableriskofdefaultonthepartofborrowers.Inadditi-on,generalimpairmentallowanceshavebeenmadefrom2018onwardsforexpectedcreditlosses(ECL),wherebyRaiffeisenCentrobankAGhastakentheopportunitytoapplytheregulationsofIFRS9tocalculategene-ralimpairmentallowancesundercompanylaw.
ThegeneralimpairmentallowancespursuanttoIFRS9havebeenimple-mentedbasedonatwo-stageprocedure.Ifthecreditdefaultriskforcurrentassetsdoesnotincreasesignificantlysinceinitialrecognition,theimpair-mentlossforeachassetismeasuredatthepresentvalueofanexpectedtwelve-monthlossasatthereportingdate(ECLStage1).Inthecaseofas-setswhosecreditriskdoesnotincreasesignificantlysinceinitialrecognitionandwhicharenotclassifiedastransactionswithalowcreditriskatthere-portingdate,theexpectedcreditlossiscalculatedovertheasset’sentire
FinancialStatementsasat31December2018
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remainingterm(ECLStage2).Theexpectedlossesforbothstagesarecal-culatedonanindividualtransactionbasisapplyingstatisticalriskparame-terssuchasProbabilityofDefault(PD),ExposureatDefault(EAD)aswellasLossGivenDefault(LGD).Theestimationofriskparametersincludesnotonlyhistoricaldefaultinformationbutalsothecurrenteconomicenvironment(point-in-timeorientation)andforward-lookinginformation.
Equity participations and shares in affiliated companiesEquityparticipationsandsharesinaffiliatedcompaniesarevaluedatcostunlesspermanentlossesordecreasedequityrequireanon-scheduledde-preciationofthefairvalue(subjectiveorobjectifiedcompanyvalue).Incase,reasonsforimpairmentarenolongerapplicable,awrite-uptothecostofacquisitioniscarriedout.
Intangible and tangible fixed assetsThevaluationofintangibleandtangiblefixedassets(i.e.landandbuil-dings,officefurnitureandequipmentaswellasothertangiblefixedassets)iscarriedoutatthecostofacquisitionlesstheirscheduled,lineardepre-ciation.
Depreciationratesappliedare33.3percentp.a.forintangiblefixedas-sets,2.5percentand10.0percentp.a.forimmovablefixedassets,and10.0percent–33.0percentformovablefixedassets.Afullyear’sde-preciationistakeninthecaseofadditionsmadeduringthefirsthalfofthefinancialyear,whereashalf-yeardepreciationappliestoadditionsinthesecondhalfofthefinancialyear.Lowvalueassets(costofacquisitionperitemlessthan€0.4thousand)arefullydepreciatedintheyearofacquisiti-on.
Liabilities to credit institutions and customersLiabilitiestocreditinstitutionsandcustomersarereportedattheamountofrepayment,takingintoconsiderationtheprincipleoffinancialprudence.
Securitized liabilitiesSecuritizedliabilitiesaremeasuredatfairvaluewhichequalsthepresent
valuemethod,orthecommonoptionvaluemethodsfortheoptioncompo-nent.Securitizedliabilitiesincludecapitalguaranteedstructuredproducts,whoserateofinterestdependsontheequitypriceorequityindexperfor-mance,reverseconvertiblebondsandcertificateswithoptioncharacter(turbo,discount,open-endandbonuscertificates)andwarrants.
Provisions for severance paymentsTheprovisionsforseverancepaymentsaredesignedtofulfillegalde-mands,aswellasthosearisingfromindividualorcollectivecontractualag-reements.Provisionsarecalculatedinaccordancewiththeguidelinesspe-cifiedbyIAS19,applyingtheProjectedUnitCreditMethodandassumingacalculatoryinterestrateof1.8percent(31/12/2017:1.5percent),aswellasanunchangedannualsalaryincreaseamountingto3.5percent(31/12/2017:2.7percent).TheAVÖ(Austrianactuaries’association)2018-P-basisforcalculatingretirementpensioninsurances–Pagler&Pag-lerforsalariedemployeeswastakenasbiometricbasisforcalculation.
Theunderlyingpresumptionisadecreasingfluctuationrateinconnectionwiththeearliestpossibleretirementdate,attheageof60forwomenand65formen,takingintoaccountthechangestoAustria’sGeneralSocialSecurityLawinaccordancetotheBudgetaryAmendment2003.Thepre-miumreserveamountsto77.5percent(31/12/2017:75.9percent)ofthestatisticalterminationbenefitobligationsonthebalancesheetdate.
Other provisionsOtherprovisionshavebeenmadeaccordingtoexpecteddemands.Theycompriseidentifiablerisksandliabilities,theextentofwhichhasnotyetbeendetermined.Long-termprovisionsarediscounted.Theinterestrateamountsto1.8percent(31/12/2017:1.5percent).
B.NotestoBalanceSheetItems
I. Cash in hand, deposits with central banksThebalancesheetitemA1,whichencompassescashinhandanddepo-sitswiththeAustrianNationalBank,amountedto€234,905thousand(31/12/2017:€183,472thousand).Prevailingregulationspertainingtoliquidityandminimumreserveswereobserved.
II.1. Classification of loans and advances and securities positions according to their remaining term
II. Loans and advances
31/12/2018 repayable 0-3 3-12 1-5 >5 Total in€thousand on demand / without maturity months months years years
Loansandadvancestocreditinstitutions 164,754 150,084 366,354 1,881,283 472,916 3,035,390
Loansandadvancestocustomers 110,867 564 1,676 7,017 90 120,213
Bonds,notesandotherfixed-interestsecurities 0 0 1,287 12,028 7,130 20,445
Sharesandothervariable-yieldsecurities 177,142 0 0 0 0 177,142
Otherassets 44,307 2,068 10,147 60,870 10,807 128,200
497,070 152,716 379,464 1,961,197 490,943 3,481,390
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31/12/2017 repayable 0-3 3-12 1-5 >5 Total in€thousand on demand / without maturity months months years years
Loansandadvancestocreditinstitutions 64,298 378,623 336,119 1,633,995 172,399 2,585,434
Loansandadvancestocustomers 22,443 2,604 0 2,768 6,950 34,766
Bonds,notesandotherfixed-interestsecurities 0 0 1 10,769 0 10,770
Sharesandothervariable-yieldsecurities 232,102 0 0 0 0 232,102
Otherassets 22,573 2,209 10,525 89,606 6,898 131,812
341,417 383,437 346,644 1,737,140 186,247 2,994,885
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II.2. Loans and advances to affiliated companies and equity participations
31/12/2018 Loans and advances to Loans and advances to equity in€thousand affiliated companies participations in which Raiffeisen (direct/indirect >50%) Centrobank AG has a direct shareholding (<50%)
Loansandadvancestocreditinstitutions 2,692,527 0
Loansandadvancestocustomers 0 514
Bonds,notesandotherfixed-interestsecurities 8,441 0
Sharesandothervariable-yieldsecurities 105 0
Otherassets 450 8
2,701,522 522
31/12/2017 Loans and advances to Loans and advances to equity in€thousand affiliated companies participations in which Raiffeisen (direct/indirect >50%) Centrobank AG has a direct shareholding (<50%)
Loansandadvancestocreditinstitutions 2,383,236 0
Loansandadvancestocustomers 2,041 514
Bonds,notesandotherfixed-interestsecurities 8,422 0
Sharesandothervariable-yieldsecurities 83 0
Otherassets 977 8
2,394,759 522
III. Securities
Figures supplied pursuant to Article 64 section 1 no 10 and 11 Austrian Banking Act
31/12/2018 Unlisted Listed Total Valued at in€thousand market price
Bonds,notesandotherfixed-interestsecurities,A4 0 20,445 20,445 20,445
Sharesandothervariable-yieldsecurities,A5 42,119 135,023 177,142 177,142
Equityparticipations,A6 5,139 0 5,139 x
Sharesinaffiliatedcompanies,A7 1,100 0 1,100 x
31/12/2017 Unlisted Listed Total Valued at in€thousand market price
Bonds,notesandotherfixed-interestsecurities,A4 0 10,770 10,770 10,770
Sharesandothervariable-yieldsecurities,A5 55,767 176,335 232,102 232,102
Equityparticipations,A6 5,138 0 5,138 x
Sharesinaffiliatedcompanies,A7 3,900 0 3,900 x
“Loansandadvancestocreditinstitutions”includedtradablemoneymarketdepositsintheamountof€2,373,943thousand(31/12/2017:€2,022,017thousand)servingashedgesforcertificatesandwarrantsissuedbyRaiffeisenCentrobankAG.Thereof€2,369,340thousandwereattributabletoRaiffeisenBankInternationalAG(31/12/2017:€2,013,932thousand).
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Asat31/12/2018,balancesheetitemA4includedfixed-interestsecuritiesheldfortradingamountingto€20,445thousand(31/12/2017:€10,770thousand)ofwhich€1,287thousand(31/12/2017:€1thousand)willfalldueintheforthcomingyear.
Thefairvalueofsecuritiesofthetradingbook(excludinghedgepositions)exceededtheacquisitioncostsby€95thousandasat31/12/2018(31/12/2017:€81thousand).
IV. Equity participations and shares in affiliated companiesAsat31/12/2018,theBankdirectlyheldaminimumof20percentofthesharesinthesubsequentcompanies:
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in€thousand Name Shareholding in % Equity Annual results 2018 Domicile 31/12/2018
1CentrotradeHoldingGmbH,Vienna 100 1,131 (12)1
2SyrenaImmobilienHoldingAG,Spittal/Drau 21 27,688 (567)1unauditedfigures
V. Fixed assetsThecompositionanddevelopmentoffixedassetsiscontainedinthetableoutliningthedevelopmentoffixedassets.
Furthertothesaleofthecommoditytradingsubsidiaries,CentrotradeHoldingGmbHdidnotperformanyoperationalactivities.InNovember2018,areductionofthecompany’spaid-incapital(from€3millionto€200thousand)wasfinalizedbypayingbackthecapitalinvestedtothesolesharehol-der(RaiffeisenCentrobankAG).
VI. Other assetsBalancesheetitemA10“Otherassets“totaling€128,200thousand(31/12/2017:€131,812thousand)referredprimarilytopurchasecontractsfromtradinginderivativefinancialinstrumentsreportedatfairvalueasat31/12/2018:
in€thousand 31/12/2018 31/12/2017
Positive fair values of derivative financial instruments
fromOTCoptionsandforwardexchangetransactions 83,634 108,620
fromtradinginEUREXoptionsandfutures 39,034 6,013
fromtradinginotheroptionandfutures 4,425 14,704
127,094 129,337
Inaddition,loansandadvancestoforeigntaxauthoritiesintheamountof€747thousand(31/12/2017:€1,269thousand)wereincluded.Intheprevi-ousyeartheitemcontainedthesettlementofGroupcharges(includingcapitalyieldstaxchargedtotheGroup)intheamountof€808thousandwhichwerepartlysettledinthe2018financialyear.
in€thousand Name Shareholding in % Equity Annual results 2017 Domicile 31/12/2017
1CentrotradeHoldingGmbH,Vienna 100 3,944 (25)
2SyrenaImmobilienHoldingAG,Spittal/Drau 21 28,256 (790)
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V II. Deferred tax assets“Deferredtaxassets”pursuanttotheapplicationofRÄGamountedto€167thousand(31/12/2017:€163thousand)asat31/12/2018.
Balance sheet items Deferred tax assets Deferred tax liabilities
Sharesandothervariable-yieldsecurities 0 (95)
Sharesinaffiliatedcompanies 3
Prepaymentsandotherdeferrals 14
Provisionsforseverancepayments 1,390
Otherprovisions 25
Total 1,432 (95)
Balance 1,337
Deferredtaxassetsasat31/12/2018(12.5%) 167
“Deferredtaxassets”wererecognizedatataxrateof12.5percentas,basedontheprevailinggroupassessmentagreement,thispercentageprovidesfortaxreliefinthefuture.AnytaxreliefbeyondthisratecannotbeassessedbytheGroupmemberasnoinfluencecanbeexertedontheamountoftheuntaxableportionofthetaxableprofitonGrouplevel.
VIII. Liabilities
VIII.1. Classification of liabilities according to their remaining term
31/12/2018 repayable 0-3 3-12 1-5 >5 Total in€thousand on demand / without maturity months months years years
Liabilitiestocreditinstitutions 3,181 11,070 0 0 101 14,353
Liabilitiestocustomers 134,486 575 11,557 218,357 0 364,975
Securitizedliabilities 0 75,383 411,014 1,604,430 658,448 2,749,275
Otherliabilities 132,557 8,130 89,830 226,074 10,946 467,538
270,225 95,158 512,401 2,048,861 669,496 3,596,140
31/12/2017 repayable 0-3 3-12 1-5 >5 Total in€thousand on demand / without maturity months months years years
Liabilitiestocreditinstitutions 36,833 2,054 0 0 48 38,935
Liabilitiestocustomers 94,014 0 159,678 78,288 0 331,980
Securitizedliabilities 0 74,044 218,422 1,691,417 360,640 2,344,522
Otherliabilities 244,666 1,354 5,263 85,863 5,223 342,370
375,513 77,452 383,363 1,855,568 365,911 3,057,807
Balance sheet items Deferred tax assets Deferred tax liabilities
Sharesandothervariable-yieldsecurities 0 (81)
Sharesinaffiliatedcompanies 5
Prepaymentsandotherdeferrals 14
Provisionsforseverancepayments 1,242
Otherprovisions 122
Total 1,383 (81)
Balance 1,302
Deferredtaxassetsasat31/12/2017(12.5%) 163
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VIII.2. Liabilities to affiliated companies and equity participations
31/12/2018 Liabilities to affiliated Liabilities to equity in€thousand companies (direct/indirect >50%) participations in which Raiffeisen Centrobank AG has a direct shareholding (<50%)
Liabilitiestocreditinstitutions 10,291 0
Liabilitiestocustomers 1,139 0
Otherliabilities 7,164 2
18,594 2
31/12/2017 Liabilities to affiliated Liabilities to equity in€thousand companies (direct/indirect >50%) participations in which Raiffeisen Centrobank AG has a direct shareholding (<50%)
Liabilitiestocreditinstitutions 1,866 0
Liabilitiestocustomers 3,950 0
Otherliabilities 21,485 1
27,301 1
VIII.3. Securitized liabilitiesThebalancesheetitemP3“Securitizedliabilities”includedissuedandothersecuritizedliabilitiestotaling€2,749,275thousand(31/12/2017:€2,344,522thousand),heldfortradingandallocatedtothefollowingproductcategories:
in€thousand 31/12/2018 31/12/2017
Negative fair values of derivative financial instruments 368,257 124,911
fromOTCoptionsandforwardexchangetransactions 332,173 96,624
fromtradinginEUREXoptionsandfutures 3,792 16,195
fromtradinginotheroptionsandfutures 32,291 12,092
Short-selling of trading assets 89,376 215,730
457,633 340,642
“Securitizedliabilities”intheamountof€486,397thousand(31/12/2017:€292,465thousand)wouldfalldueinthenextyear.
VIII.4. Other liabilitiesThebalancesheetitemP4“Otherliabilities“amountingto€467,538thousand(31/12/2017:€342,370thousand)referredprimarilytoliabilitiesreportedatfairvalueaswellaspremiumsreceivedfromtradinginsecuritiesandderivativefinancialinstruments.
“Otherliabilities“asat31/12/2018includedinparticularshort-termchargesderivedfromsecuritytradesnotyetsettledat31/12/2018comingto€5,003thousand(31/12/2017:€114thousand)andaliabilityrelatingtoanequitycapitalmarkettransactiontotaling€1,461thousand(31/12/2017:€0thousand).Inaddition,theitemincludedvariousliabilitiesinrelationtocostschargedcomingto€447thousand(31/12/2017:€875thousand),groupchargesintheamountof€938thousand(31/12/2017:€0thousand),liabilitiestodomestictaxauthoritiesaddingupto€996thousand(31/12/2017:€126thousand),andliabilitiesrelatedtopayrollaccountingintheamountof€573thousand(31/12/2017:€555thousand).
in€thousand 31/12/2018 31/12/2017
Issued securitized liabilities 1,460,556 1,158,784
GuaranteeCertificates 1,094,088 804,1431
ReverseConvertibleBonds 366,467 354,6421
Other securitized liabilities 1,288,719 1,185,738
Certificateswithoptioncharacter 1,280,236 1,173,098
Warrants 8,483 12,639
2,749,275 2,344,5221Adjustmentofpreviousyear’sdataduetoashiftbetweenGuaranteeCertificatesandReverseConvertibleBonds
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in€thousand 31/12/2018 31/12/2017
Provisions for severance payments 4,436 3,962
Provisions for taxes 190 375
Other provisions 7,527 11,547
Provisionsforbonuspayments 3,016 2,787
Provisionsforlitigationrisks 0 4,216
Provisionsforoverduevacation 1,308 1,171
Provisionsforlegal,auditingandconsultingexpenses 347 231
Provisionsforoutstandinginvoicesinthesecuritiessegment 310 370
ProvisionsforoutstandinginvoicesintheInvestmentServicessegment 326 22
Provisionsforoutstandinginvoices(others) 450 364
Provisionsforsecuritiessupervision 350 240
Provisionsformarketingcosts 290 156
ProvisionsforchargedManagementBoardexpenses 1,043 1,307
Provisionsforoutstandinglicensefees 0 325
Provisionsforchargedthirdpartyfees 0 120
Sundry 87 238
12,153 15,884
XI. Obligations arising from the use of tangible fixed assets not recognized in the balance sheetTherentalandleasingexpensesduringtheperiodunderreviewamountedto€451thousand(2017:€447thousand),thereof€123thousand(2017:€99thousand)toaffiliatedcompanies.Forthe2019financialyear,rentalandleasingexpensesareexpectedtototal€419thousandand€2,314thousandforthe2019-2023financialyears,ofwhichtherentalandleasingexpensestoaffiliatedcompanieswilltotal€66thousandand€366thousand,respectively.
IX. Provisions“Provisions”wereasfollows:
Capital reservesamountedto€20,651thousandasat31/12/2018,remainedunchangedtothepreviousyear(31/12/2017:€20,651thousand)andcontaincommittedanduncommittedcapitalreservesaddingupto€6,561thousandand€14,000thousand,respectively.
Retained earningsincludelegalreservesintheamountof€1,031thousand(31/12/2017:€1,031thousand)andotherreservestotaling€31,129thousand(31/12/2017:€26,999thousand).Theincreaseofotherreservesamountingto€4,131thousandisattributabletotheallocationoftheundis-tributedbalancesheetprofitfor2017tootherreserves.
Liability reservepursuanttoArticle57section5AustrianBankingActremainedunchangedtothepreviousyear,totaling€13,539thousand.
X. Share capital and reservesTheshare capitalremainedunchangedandiscomprisedof655,000no-par-valueshares.
ThesharesinRaiffeisenCentrobankAGareownedbythefollowingcompanies:
% Shares
RBIIBBeteiligungsGmbH,Vienna 100.00 654,999
LexxusServicesHoldingGmbH,Vienna 0.00 1
100.00 655,000
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Trading bookAtradingbookismaintained.Atthebalancesheetdate,thetradingvolumeatfairvalues(positiveandnegativefairvaluesoffset)estimatedpursuanttointernalriskcalculationamountedto:
in€thousand 31/12/2018 31/12/2017
Shares/mutualfunds 41,151 (16,940)
Listedoptions 7,445 (6,720)
Futures 286 (754)1
Warrants/certificates (1,287,876) (1,184,806)
OTCoptions (249,464) 9,638
Purchasedbonds 2,583,238 2,189,367
Issuedguaranteebondandreverseconvertiblebondss (1,461,113) (1,160,000)
-366,333 -170,215
Data on transactions with derivative financial instruments and unsettled forward transactionsRaiffeisenCentrobankAG’stradinginderivativefinancialinstrumentsfocusesonoptionsandforwardtransactions(mainlyfutures).
ThefinancialinstrumentsissuedbyRaiffeisenCentrobankAGcanbeclassifiedaswarrants,certificatesmainlyonequitiesandequityindices(turbo,discount,bonusandopen-endcertificates),andguaranteecertificatesandreverseconvertiblebondswithapaymentstructurerelatedtoequityorequityindices.
EquitiesheldbyRaiffeisenCentrobankAGrepresent,togetherwithpurchasedoptions,tradablemoneymarketdepositsandzerobondsdepictedinotherbalancesheetitems,thehedgepositionstoissuedcertificatesandwarrants,andarepartoftheBank’smarketmakeractivities.
Volume of the securities trading book Asatthebalancesheetdatethesecuritiestradingbook(notionalamount)wasmadeupasfollows:
in€thousand 31/12/2018 31/12/20171
Securities 3,554,790 3,272,283
Otherfinancialinstruments 6,909,103 6,369,023
10,463,893 9,641,3061Adjustmentofpreviousyear’sdata
XII. Supplementary data
Assets and liabilities in foreign currenciesThefollowingamountswerecontainedinthebalancesheettotalinforeigncurrencies:
in€thousand 31/12/2018 31/12/2017
Assets 1,179,190 1,182,145
Liabilities 1,127,785 1,002,294
1Adjustmentofpreviousyear’sdata
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Thevolumesofderivativefinancialinstrumentsandunsettledforwardtransactionsasat31/12/2018wereasfollows:
in€thousandNotional amount thereof Fair value 31/12/2018 Purchase Sale Trading Book Positive Negative
1. Interest rate contracts 0 0 0 0 0
1.1. OTC products 0 0 0 0 0
Interestrateoptions 0 0 0 0 0
1.2. Products traded on stock exchange 0 0 0 0 0
Interestratefutures 0 0 0 0 0
2. Foreign exchange contracts 160,366 875 71,020 2,987 0
2.1. OTC products 136,059 875 46,713 1,844 0
Forwardforeignexchangecontracts 90,221 0 0 293 0
Currencyoptions/goldcontracts 45,839 875 46,713 1,551 0
2.2. Products traded on stock exchange 24,307 0 24,307 1,143 0
Currencyfutures 24,307 0 24,307 1,143 0
3. Equity contracts 2,100,476 2,165,382 4,265,858 121,157 (365,702)
3.1. OTC products 1,640,188 1,883,938 3,524,126 80,408 (331,712)
Equity/index-basedoptions 1,640,188 1,883,938 3,524,126 80,408 (331,712)
3.2. Products traded on stock exchange 460,288 281,444 741,732 40,750 (33,990)
Equity/index-basedfuturecontracts 251,185 63,890 315,075 23,831 (24,163)
Equity/index-basedoptions 209,103 217,554 426,657 16,919 (9,827)
4. Commodities/precious metals 94,511 4,444 98,955 2,949 (2,555)
4.1 OTC products 43,163 4,444 47,607 1,382 (462)
Commodityandpreciousmetalfuturecontracts 43,163 4,444 47,607 1,382 (462)
4.2. Products traded on stock exchange 51,348 0 51,348 1,568 (2,093)
Commodityandpreciousmetalfuturecontracts 51,348 0 51,348 1,568 (2,093)
Total OTC products 1,819,410 1,889,256 3,618,446 83,633 (332,173)
Total stock exchange traded products 535,943 281,444 817,386 43,460 (36,083)
2,355,353 2,170,700 4,435,833 127,094 (368,257)
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Comparativefiguresasat31/12/2017
in€thousandNotional amount thereof Fair value 31/12/2017 Purchase Sale Trading Book Positive Negative
1. Interest rate contracts 200 9,000 9,000 69 0
1.1.OTC products 200 0 0 0 0
Interestrateoptions 200 0 0 0 0
1.2. Products traded on stock exchange 0 9,000 9,000 69 0
Interestratefutures 0 9,000 9,000 69 0
2. Foreign exchange contracts 145,425 93,753 53,443 1,942 (355)
2.1. OTC products 120,467 93,753 28,485 1,545 (355)
Forwardforeignexchangecontracts 92,690 93,045 0 0 (355)
Currencyoptions/goldcontracts 27,777 708 28,485 1,545 0
2.2. Products traded on stock exchange 24,958 0 24,958 397 0
Currencyfutures 24,958 0 24,958 397 0
3. Equity contracts1 1,775,304 2,118,596 3,893,901 124,148 (123,487)
3.1. OTC products 1,172,206 1,719,281 2,891,487 105,966 (96,070)
Equity/index-basedoptions 1,172,206 1,719,281 2,891,487 105,966 (96,070)
3.2. Products traded on stock exchange 603,098 399,315 1,002,413 18,182 (27,417)
Equity/index-basedfuturecontracts 379,772 62,275 442,047 9,650 (12,069)
Equity/index-basedoptions 223,326 337,040 560,366 8,532 (15,348)
4. Commodities/precious metals 116,023 2,166 118,190 3,178 (1,069)
4.1. OTC products 40,227 2,166 42,393 1,109 (199)
Commodityandpreciousmetaloptions 40,227 2,166 42,393 1,109 (199)
4.2. Products traded on stock exchange 75,796 0 75,796 2,069 (870)
Commodityandpreciousmetalfuturecontracts 75,796 0 75,796 2,069 (870)
Total OTC products1 1,333,100 1,815,200 2,962,365 108,620 (96,624)
Total stock exchange traded products1 703,851 408,315 1,112,166 20,717 (28,287)
2,036,951 2,223,515 4,074,533 129,337 (124,911) 1Adjustmentofpreviousyear’sdataduetoashiftbetweenOTCandstockexchangetradedproducts
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C.NotestotheIncomeStatement
I. Interest and similar income
“Netinterestresult”intheamountof€19,398thousandwasnegativebothin2018and2017(€13,923thousand).
Furthertohighercouponincomefromstructuredproductsandavolume-relatedriseininterestincomefromloansandadvancestocreditinstitutions,interestincomewentupby€12,503thousandto€29,211thousand.
Comparedtothepreviousyear,interestexpensesroseby€17,978thousandto€48,609thousandandcontainedmainlycouponpaymentsforsecuritizedliabilities.Theincreasewasstillbelowtheriseininterestincomefromstructuredproducts.Moreover,interestexpensesforcustomerdepositswentupduetoavolume-relatedrise.
“Netinterestresult”decreasedby€5,475thousandto€minus19,398thousandduetotheriseincouponpaymentsforsecuritizedliabilities(structuredproducts).Theexpenseswerecontrastedwithinterestincomefromstructuredproductsaswellaswithapositivevaluationresultfromtradablemoneymarketdepositsandfromderivativefinancialinstrumentsinthe“Netprofitonfinancialtradingactivities”(tradingresult).
Theliquidityderivedfromissuesisprimarilyinvestedintotradablemoneymarketdepositswithoutcurrentcouponswhichareincludedinthetradingbook.Theresultfromtradablemoneymarketdepositsincludedinthetradingbookisshownin“Netprofitonfinancialtradingactivities”.
Furthertothelowinterestrateenvironment,item“Netinterestresult”includedexpensesresultingfromnegativeinterestforloansandadvancesintheamountof€1,169thousand(2017:€936thousand).Incontrast,theitemincludedincomederivedfromnegativeinterestforliabilitiesintheamountof€172thousand(2017:€152thousand).
III. Income from securities and financial investmentsInthe2018financialyear,“Incomefromsecuritiesandfinancialinvestments”comingto€11,427thousand(2017:€7,947thousand)includedprimarilyincomefromdomesticandforeignsecurities.
in€thousand 2018 2017
fromloansandadvancestocreditinstitutions 10,351 4,101
fromloansandadvancestocustomers 549 800
fromfixed-interestsecurities 99 236
fromstructuredproducts 18,211 11,571
29,211 16,708
II. Interest and similar expenses
in€thousand 2018 2017
forliabilitiestocreditinstitutions (4,668) (2,958)
forliabilitiestocustomers (6,163) (1,876)
forsecuritizedliabilities (37,778) (25,796)
(48,609) (30,631)
IV. Fee and commission income
in€thousand 2018 2017
fromsecuritiesbusiness 9,782 9,341
fromECMtransactions 1,706 4,451
frompaymenttransactions 1,340 266
12,828 14,058
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VI. Net profit on financial trading activities”Netprofitonfinancialtradingactivities”accountedforthemajorpartoftheoperatingincomeandwentupfrom€61,338thousandin2017to€67,521thousandin2018.Thisfavorabledevelopmentresultedfrompositivenetvaluationsandnetproceedsofcertificatesandsharesaddingupto€154,362thousand.Incontrast,therewasanegativeresultfromthevaluationanddisposalofderivativesandmoneymarketdepositsheldforhedgingpurposesintheamountof€minus92,238thousand.Thevaluationofspotandfuturespositionscameto€plus€5,398thousand.
VII. Other operating incomeTheitemincludedmainlyincomefromthereleaseofprovisionsintheamountof€658thousand(2017:€614thousand).Inaddition,theitemincludedincomefromchargespassedontothirdpartiesintheamountof€315thousand(2017:€730thousand)aswellasotherincomeintheamountof€171thousand(2017:€546thousand).Thedecreasewasmainlyattributabletothelackofintra-groupincomefromchargesaswellastolowerincometochargespassedontothirdpartiesfurthertoachangeinthereportingmethod.
VIII. Other administrative expenses
in€thousand 2018 2017
Officespaceexpenses(maintenance,operation,administration,insurance) (1,003) (964)
Officesupplies,printedmatter,literature (322) (286)
ITcosts (3,472) (2,632)
Communicationcosts (1,063) (1,038)
Informationservices (3,298) (3,564)
Carexpensesandtravellingexpenses (652) (644)
Advertisingandpromotionalexpenses (1,491) (1,301)
Legal,advisoryandconsultancyservices (1,379) (1,045)
Contributionstoassociations (1,502) (1,151)
Resolutionfund (723) (541)
Sundry (2,179) (2,401)
(17,084) (15,567)
“Sundry”intheamountof€2,179thousand(2017:€2,401thousand)mainlyincludedexpenseschargedfortheManagementBoard.Therisein“Con-tributionstoassociations”wasattributabletohigherfeespayabletotheFinancialMarketAuthoritystemmingfromanincreaseinRaiffeisenCentrobankAG’sissuanceactivity.
IX. Other operating expenses“Otheroperatingexpenses“intheamountof€332thousand(2017:€907thousand)primarilyrelatedtoexpenseschargedintheamountof€311thousand(2017:€734thousand).Thedecreasewasattributabletoachangeinthereporting.
X. Net valuations and net proceeds Inthe2018financialyear,“Netvaluationsandnetproceeds”amountedto€minus1,665thousand(2017:€minus33thousand)andincludedmainlyadditionalexpensesnotcoveredbyprovisionsrelatingtoaliabilityforasubsidiaryamountingto€1,442thousand.Inaddition,theitemcontainedage-neralimpairmentallowancepursuanttoIFRS9addingupto€238thousand.
V. Fee and commission expenses
Thenetfeeandcommissionresultintheamountof€minus935thousand(2017:€plus1,994thousand)wascomprisedoffeeandcommissionincometotaling€12,828thousand(2017:€14,058thousand)andfeeandcommissionexpensesintheamountof€13,763thousand(2017:€12,064thousand).In2018,thedecreaseinnetfeeandcommissionresultwasmainlyattributabletolowerincomederivedfromequitycapitalmarkettransactions.
in€thousand 2018 2017
fromsecuritiesbusiness (12,365) (11,520)
fromECMtransactions 0 (232)
frompaymenttransactions (1,398) (312)
(13,763) (12,064)
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D.OtherDisclosuresContingent liabilitiesInaccordancewithArticle93oftheAustrianBankingAct,theBankislegallyobligedtoprovideforproportionatedepositinsuranceaspartofitsmem-bershipinaprofessionalassociation.RaiffeisenCentrobankAGisamemberoftheFachverbandderRaiffeisenbanken(professionalassociationoftheRaiffeisenBankingGroup).ThisalsoentailsanaffiliationwithÖsterreichischeRaiffeisenEinlagensicherungreg.GenmbH,Vienna.Inthefinancialyear,thetheoreticalclaimonthisinsurancewaslimitedtoarateof1.5percentoftheassessmentbasisinaccordancewithArticle22para2oftheAustrianBan-kingActatthebalancesheetdate,plustheweighteditemsofthesecuritiestradingbook,alsoinaccordancewithpart3CapitalRequirementRegulation(CRR).Thesecontingentliabilitieswerereportedatamarketvalueof€0.07.
Other contractual bank guarantee obligationsThefollowingassetswerepledgedassecurityforobligationsasat31/12/2018:
ItemA2Loansandadvancestocreditinstitutions
€ 397,971 thousand (31/12/2017:€ 358,265 thousand) Collateraldepositedwithbanksforthesecuritiesandoptionsbusinessandsecuritieslending
ItemA3Loansandadvancestocustomers
€ 98,432thousand (31/12/2017:€8,502thousand) Collateraldepositedwithstockexchangesandotherfinancialinstitutionsforthesecuritiesandoptionbusiness
ItemA4Fixed-interestsecurities€4,223thousand (31/12/2017:€2,348thousand) Collateraldepositedwithbanksforthesecuritiesandoptionsbusiness
Letters of comfortAsatthebalancesheetdateRaiffeisenCentrobankAGhadnotissuedanylettersofcomfort.
Commitments arising from fiduciary businessCommitmentsarisingfromfiduciarybusinesstransactionsnotincludedinthebalancesheetreferredtooneequityparticipationheldintrustintheamountof€7,091thousandon31/12/2018and31/12/2017.
XII. Deferred taxesIn2018,incomefromdeferredtaxassetscameto€4thousand(2017:taxexpensesof€8thousand).
XIII. Expenses for auditing the financial statements“Expensesforauditingthefinancialstatements”werecontainedinlegal,advisoryandconsultancyservices.Thereof€110thousandwereattributabletotheauditor(2017:€133thousand)and€23thousandtootherconsultancyservices(2017:€20thousand).
XI. Income taxes and other taxesIncometaxeswereasfollows:
in€thousand 2018 2017
Grouptaxation (1,046) (1,655)
Corporateincometax/Slovakbranch (77) (88)
Taxesforformerperiods(settlementofGroupcharge) (216) 397
Notrecognizedasforeignwithholdingtax (1,059) (769)
Current income taxes (2,397) (2,115)
Deferredincometaxes 4 (8)
(2,393) (2,123)
“Taxesforformerperiods”comingto€216thousand(2017:taxincome,of€397thousand)wereattributabletothesettlementoftheGroupchargefrompreviousyearsatRaiffeisenBankInternationalAG.Duetoariseinforeigndividendincomehigherforeignwithholdingtaxexpensesaddingupto€1,059thousand(2017:€769thousand)wereduein2018.
Inthe2018financialyear,“Othertaxes”cameto€331thousand(2017:€382thousand).Lowtaxexpenseswereattributabletonon-periodicVATtaxincomefollowingataxauditintheamountof€348thousand(2017:taxincome€146thousand).ThiswascontrastedwithariseinexpensesforthebanklevyofRaiffeisenCentrobankAGandtheSlovakbranchintheamountof€607thousandand€82thousand(2017:€544thousandand€9thousand).
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Own fundsTheownfundspursuanttopart2CRRwereasfollows:
in€thousand 31/12/2018 31/12/2017
Risk-weighted assets according to standard approach 105,450 120,793
Institutions 53,106 65,743
Corporates 32,898 33,031
Equityparticipations 6,240 9,038
Otherpositions 13,206 12,980
CVA risk 42,349 34,945
147,799 155,738
in€thousand 31/12/2018 31/12/2017
Capitalpaid-in 47,599 47,599
Earnedcapital 66,351 62,220
Core capital (tier 1 capital) before deductions 113,950 109,819
Intangiblefixedassets (105) (54)
Prudentvaluation (917) (2,119)
Holdingsinnon-significantinvestmentsinfinancialsectorentities (585) (1,455)
Core capital (tier 1 capital) after deductions 112,343 106,191
Supplementaryownfunds 0 0
Core capital 112,343 106,191
Supplementary capital 0 0
Supplementary own funds (after deductions) 0 0
Total own funds 112,343 106,191
Total risk-weighted assets 475,262 487,930
Corecapitalratio,creditrisk 76.0% 68.2%
Corecapitalratio,total 23.6% 21.8%
Ownfundsratio 23.6% 21.8%
OwnfundsrequirementspursuanttoArticle92ofRegulation(EU)No575/2013(totalrisk-weightedassets)wereasfollows:
Risk-weightedassetsforthecreditriskaccordingtoassetclasseswereasfollows:
in€thousand 31/12/2018 31/12/2017
Risk-weightedassets(creditrisk) 147,799 155,738
Standardapproach 105,450 120,793
CVA(creditvalueadjustment)risk 42,349 34,945
Risk-weightedassets(positionriskinbonds,equities,commoditiesandforeigncurrencies) 204,926 218,664
Risk-weightedassets(settlementanddeliveryrisks) 696 68
Risk-weightedassets(operationalrisk) 121,842 113,460
Total risk-weighted assets 475,262 487,930
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Number of staff
31/12/2018 Annual 31/12/2017 Annual average average
Salariedemployees 191 186 181 178
thereofpart-time 40 41 39 35
Advances and loans to members of the Management Board and Supervisory BoardAtthebalancesheetdatenoadvancesandloanshadbeengrantedtomembersoftheManagementBoard.Noadvances,loansorguaranteeshadbeengrantedtomembersoftheSupervisoryBoard.
Expenses for severance payments and retirement benefits“Expensesforseverancepaymentsandretirementbenefits”(includingcontributionstopensionfundsandstaffretirementbenefitplans,aswellasprovisionsforseverancepayments)fortheManagementBoard(includedin“Otheradministrativeexpenses”)andthestaffamountedto€1,477thousand(2017:€ 1,048thousand).Paymentstoemployeepensionfundstotaled€211thousand(2017:€181thousand).
Nobreak-downpursuanttoArticle239section1no3accordingtoArticle242section4wasprovided.
Remuneration for members of the Management Board and Supervisory BoardNobreak-downpursuanttoArticle239section1no4accordingtoArticle242section4wasprovided.
In2018,attendingfeesintheamountof€70thousandwerepaidtomembersoftheSupervisoryBoard(2017:€75thousand).
RemunerationsandexpensesonseverancepaymentsandretirementbenefitsformembersoftheManagementBoardwerebornebyRaiffeisenBankInternationalAG(anaffiliatedcompany)andwerechargedtoRaiffeisenCentrobankAG(includedin“Otheradministrativeexpenses”).
Group relationsThecompanyisanaffiliatedcompanyofRaiffeisenBankInternationalAG(ultimateholdingcompany),Vienna,andisintegratedinitsconsolidatedfinancialstatements,TheconsolidatedfinancialstatementsaredepositedwiththeCommercialCourtinViennaandareavailableattherespectiveparentcompany.
Since17December2008,thecompanyhasbeenamemberofthecorporategroupRaiffeisenZentralbankÖsterreichAktiengesellschaft(nowRaiffeisenBankInternationalAG)pursuanttoArticle9AustrianCorporationTaxAct.TheapplicationsubmittedbythecompanytobecomeagroupmemberofthecorporategroupRZBasofthebusinessyear2008pursuanttoArticle9AustrianCorporationTaxActwasnotifiedtothefinancialauthoritieson19December2008andwasapprovedbynoticeon22April2009.
Thetaxableresultsofthemembersofthegroupareattributedtotheparentcompany.Anytaxadjustmentsbetweentheparentcompanyandtheindividualmembersofthecorporategroupareregulatedintheformofataxallocationagreement.
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Distribution of the Profit 2018
The2018financialyearclosedwithanetprofitof€13,004,429.53.
TheManagementBoardproposestotheSupervisoryBoardthatadividendintheamountor€16.00persharebedistributedfromthenetprofitasat31December2018.Thiscorrespondstoatotaldividendamountingto€10,480,000.00for655,000shares.TheManagementBoardfurtherproposestoallocateanamountof€2,524,429.53tootherreserves.Otherreserveswillchangefrom€31,129,480.61to€33,653,910.14.
Significant Events after the Balance Sheet Date
Therewerenosignificanteventsafterthebalancesheetdate.
Members of the Management Board, the Supervisory Board and State Commissioners
Management Board WilhelmCeleda ChiefExecutiveOfficer ValerieBrunner MemberoftheManagementBoard Supervisory Board ŁukaszJanuszewski Chairmanasfrom25April2018 MemberoftheManagementBoardasfrom01March2018, RaiffeisenBankInternationalAG,Vienna HannesMösenbacher Chairmanuntil25April2018, MemberoftheManagementBoard, DeputyChairmanasfrom25April2018 RaiffeisenBankInternationalAG,Vienna MichaelHöllerer DeputyChairmanuntil25April2018, Plenipotentiary,RaiffeisenBankInternationalAG Memberasfrom25April2018
AndriiStepanenko Memberasfrom25April2018 MemberoftheManagementBoardasfrom01March2018, RaiffeisenBankInternationalAG,Vienna
WernerKaltenbrunner Memberuntil25April2018
State Commissioners AlfredHacker Karl-HeinzTscheppe
Vienna,4April2019TheManagementBoard
WilhelmCeledaChiefExecutiveOfficer
ValerieBrunnerMemberoftheManagementBoard
Vienna,4April2019TheManagementBoard
WilhelmCeledaChiefExecutiveOfficer
ValerieBrunnerMemberoftheManagementBoard
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Auditor’sReportReportontheFinancialStatements
AuditOpinion
Wehaveauditedthefinancialstatementsof
RaiffeisenCentrobankAG,Vienna,Austria,
whichcomprisetheBalanceSheetasat31December2018,theIncomeStatementfortheyearthenended,andtheNotes.
Inouropinion,thefinancialstatementspresentfairly,inallmaterialre-spects,thefinancialpositionoftheCompanyasat31December2018,anditsfinancialperformancefortheyearthenendedinaccordancewithAustrianGenerallyAcceptedAccountingPrinciplesandotherlegalrequi-rements(AustrianBankingAct).
BasisforOurOpinion
WeconductedourauditinaccordancewiththeRegulation(EU)No537/2014("APRegulation")andAustrianStandardsonAuditing.ThesestandardsrequiretheaudittobeconductedinaccordancewithInter-nationalStandardsonAuditing(ISAs).Ourresponsibilitiesunderthosestandardsarefurtherdescribedinthe"Auditor´sResponsibilities"sectionofourreport.WeareindependentoftheCompany,inaccordancewithAustriancompanylawandprofessionalregulations,andwehavefulfilledourotherresponsibilitiesunderthoserelevantethicalrequirements.Webelievethattheauditevidencewehaveobtainedissufficientandappro-priatetoprovideabasisforourauditopinion.
KeyAuditMatters
Keyauditmattersarethosemattersthat,inourprofessionaljudgment,wereofmostsignificanceinourauditofthefinancialstatements.Thesematterswereaddressedinthecontextofourauditofthefinancialstatementsasawhole,however,wedonotprovideaseparateopinionthereon.
Valuationofcertificates,warrantsandotherfinancialinstrumentsaswellasdynamichedging
The Financial Statement RiskTheissuanceofcertificatesandwarrantswithatotalvolumeofroughly2.7billionEUR,ieroughly73percentofthebalancesheettotal,aswellascontinualadjustmentsofhedgingpositions(dynamichedging)con-nectedtothisactivityrepresentthemajorbusinessactivitiesofRaiffeisenCentrobankAG.
TheManagementBoarddescribestheprocessofvaluatingassets-relatedandliabilities-relatedproductsunder"AccountingPolicies"withinthenotes.RaiffeisenCentrobankAGcalculatespricesforissuedcertificates,war-rantsandstructuredproductsbasedoninternalvaluationmodels.Marketpricerisksandinterestraterisksresultingfromtheissueofcertificatesarehedgeddynamically.Structuredproductsissuedontheliabilitiessidearereplicatedbycounter-positionsontheassetsside.Hedgingpositionsarecontinuallyadjustedtomarketconditions.Financialproductswithout
tradablepricesarereportedinthebalancesheetatfairvaluewhichisdeterminedbyvaluationmodelsor,inindividualcases,byexternal(indica-tive)quotesofbrokersorothercreditinstitutions.Followingtheprincipleofprudentvaluation,valueadjustmentsaremadeinthedeterminationofthefairvalueofparticularfinancialproducts.
Therisktothefinancialstatementsresultsfromdiscretionaryassumptionsandparametersappliedintheinternalmodelsandthuspotentialmisjudg-mentforthevaluationoffinancialinstrumentsreportedatfairvaluewithouttradablepricesandobservablemarketdata.Thesameappliestothede-terminationofthefairvaluebasedonexternal(indicative)pricingmethodsandvalueadjustments.
Our ResponseWetestedtheprocessesofvaluationoffinancialproducts,reconciliationofdepositoriesandadjustmentofgeneralledgerandsub-ledger.Inad-dition,weassessedtheimplementationofriskmanagementinthetradingbook,inparticularlimitreviews,marketconformitycheckandproductintroduction.Wetestedsignificantkeycontrolsinrespecttotheirdesign,implementationandoperatingeffectiveness.
Weinvolvedvaluationspecialiststoassesstheappropriatenessofthefairvaluesdeterminedbythebankaswellasofthevaluationmodels,valueadjustmentsandtheunderlyingparametersapplied.Wecomparedtheparameterswithmarketdataonasamplebasisandverifiedwhethertheyrepresentedadequateinputfactors.Further,weanalyzedthevaluead-justmentassumptionsandcriticallyassessedifthevalueadjustmentswereappropriatetodeterminethefairvalue.Inaddition,weassessedwhetherexternal(indicative)quoteswereadequatetobeusedasfairvaluesba-sedontheinquiriesoftheresponsibleemployeesandtheinspectionofdocumentsprovidedtous.Onasamplebasiswetestedwhethertheun-derlyingassumptionsforthecalculationwereconclusiveandrecalculatedthefairvalue.
Finally,weassessedwhetherthedisclosuresinthenotesregardingthevaluationmethodswereappropriateandcomplete.
ResponsibilitiesofManagementandtheAuditCommitteefortheFinancialStatements
ManagementisresponsibleforthepreparationandfairpresentationofthefinancialstatementsinaccordancewithAustrianGenerallyAcceptedAccountingPrinciplesandotherlegalrequirements(AustrianBankingAct)andforsuchinternalcontrolsasmanagementdeterminesarenecessarytoenablethepreparationoffinancialstatementsthatarefreefrommaterialmisstatement,whetherduetofraudorerror.
ManagementisalsoresponsibleforassessingtheCompany’sabilitytocontinueasagoingconcern,disclosing,asapplicable,mattersrelatedtogoingconcernandusingthegoingconcernbasisofaccounting,unlessmanagementeitherintendstoliquidatetheCompanyortoceaseopera-tions,orhasnorealisticalternativebuttodoso.
TheauditcommitteeisresponsibleforoverseeingtheCompany´sfinancialreportingprocess.
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Auditors’Responsibilities
Ourobjectivesaretoobtainreasonableassuranceaboutwhetherthefinancialstatementsasawhole,arefreefrommaterialmisstatement–whetherduetofraudorerror–andtoissueanauditor’sreportthatincludesourauditopinion.Reasonableassurancerepresentsahighlevelofassurance,butprovidesnoguaranteethatanauditconductedinaccordancewiththeAPRegulationandAustrianStandardsonAuditing(andthereforeISAs),willalwaysdetectamaterialmisstatement,ifany.Misstatementsmayresultfromfraudorerrorandareconsideredmaterialif,individuallyorinaggregate,theycouldreasonablybeexpectedtoinfluencetheeconomicdecisionsofuserstakenonthebasisofthesefinancialstatements.
AspartofanauditinaccordancewiththeAPRegulationandAustrianStandardsonAuditing,weexerciseprofessionaljudgmentandmaintainprofessionalskepticismthroughouttheaudit.
Moreover:
— Weidentifyandassesstherisksofmaterialmisstatementsinthe financialstatements,whetherduetofraudorerror,wedesign andperformauditproceduresresponsivetothoserisksandobtain sufficientandappropriateauditevidencetoserveasabasisforour auditopinion.Theriskofnotdetectingmaterialmisstatementsresulting fromfraudishigherthanforoneresultingfromerror,asfraudmay involvecollusion,forgery,intentionalomissions,misrepresentationsor theoverrideofinternalcontrol.
— Weobtainanunderstandingofinternalcontrolrelevanttotheaudit inordertodesignauditproceduresthatareappropriateinthe circumstances,butnotforthepurposeofexpressinganopinionon theeffectivenessoftheentity'sinternalcontrol.
— Weevaluatetheappropriatenessofaccountingpoliciesusedand thereasonablenessofaccountingestimatesandrelateddisclosures madebymanagement.
— Weconcludeontheappropriatenessofmanagement’suseofthe goingconcernbasisofaccountingand,basedontheauditevidence obtained,whetheramaterialuncertaintyexistsrelatedtoeventsor conditionsthatmaycastsignificantdoubtontheCompany’sability tocontinueasagoingconcern.Ifweconcludethatamaterial uncertaintyexists,wearerequiredtodrawattentioninouraudit reporttotherespectivenoteinthefinancialstatements.Ifsuch disclosuresarenotappropriate,wewillmodifyourauditopinion.Our conclusionsarebasedontheauditevidenceobtaineduptothedate ofourauditor’sreport.However,futureeventsorconditionsmay causetheCompanytoceasetocontinueasagoingconcern.
— Weevaluatetheoverallpresentation,structureandcontentofthe financialstatements,includingthenotes,andwhetherthefinancial statementsrepresenttheunderlyingtransactionsandeventsina mannerthatachievesfairpresentation.
— Wecommunicatewiththeauditcommitteeregarding,amongstother matters,theplannedscopeandtimingofourauditaswellas significantfindings,includinganysignificantdeficienciesininternal controlthatweidentifyduringouraudit.
— Wecommunicatetotheauditcommitteethatwehavecomplied withtherelevantprofessionalrequirementsinrespectofourinde- pendence,thatwewillreportanyrelationshipsandothereventsthat couldreasonablyaffectourindependenceand,whereappropriate, therelatedsafeguards.
— Fromthematterscommunicatedwiththeauditcommittee,we determinethosemattersthatwereofmostsignificanceintheauditi.e. keyauditmatters.Wedescribethesekeyauditmattersinour auditor’sreportunlesslawsorotherlegalregulationsprecludepublic disclosureaboutthematterorwheninveryrarecases,wedetermine thatamattershouldnotbeincludedinourauditreportbecausethe negativeconsequencesofdoingsowouldreasonablybeexpected tooutweighthepublicbenefitsofsuchcommunication.
ReportonOtherLegalRequirements
Management ReportInaccordancewithAustrianCompanylawthemanagementreportistobeauditedastowhetheritisconsistentwiththefinancialstatementsandpreparedinaccordancewithlegalrequirements.
ManagementisresponsibleforthepreparationofthemanagementreportinaccordancewithAustriancompanylawandotherlegalrequirements(AustrianBankingAct).
WehaveconductedourauditinaccordancewithgenerallyacceptedstandardsontheauditofmanagementreportsasappliedinAustria.OpinionInouropinion,themanagementreportisconsistentwiththefinancialstate-mentsandhasbeenpreparedinaccordancewithlegalrequirements.ThedisclosurespursuanttoSection243aUGB(AustrianCommercialCode)areappropriate.
StatementBasedonourknowledgegainedinthecourseoftheauditofthefinancialstatementsandourunderstandingoftheCompanyanditsenvironment,wedidnotnoteanymaterialmisstatementsinthemanagementreport.
Other InformationManagementisresponsibleforotherinformation.Otherinformationisallinformationprovidedintheannualreport,otherthanthefinancialstate-ments,themanagementreportandtheauditor’sreport.
Ouropiniononthefinancialstatementsdoesnotcoverotherinformationandwedonotprovideanykindofassurancethereon.
Inconjunctionwithouraudit,itisourresponsibilitytoreadthisotherinfor-mationandtoassesswhether,basedonknowledgegainedduringouraudit,itcontainsanymaterialinconsistencieswiththefinancialstatementsoranyapparentmaterialmisstatementoffact.Ifweconcludethatthereisamaterialmisstatementoffactinotherinformation,wemustreportthatfact.Wehavenothingtoreportinthisregard.
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Additional information in accordance with Article 10 EU RegulationAttheAnnualGeneralMeetingdated26April2017,wewereelectedasauditors.Wewereappointedbythesupervisoryboardon31July2017.WehavebeentheCompany’sauditorsformorethan20yearswithoutinterruption.
Wedeclarethatouropinionexpressedinthe"ReportontheFinancialStatements"sectionofourreportisconsistentwithouradditionalreporttotheauditcommittee,inaccordancewithArticle11APRegulation.
Wedeclarethatwehavenotprovidedanyprohibitednon-auditservices(Article5Paragraph1APRegulation)andthatwehaveensuredourinde-pendencethroughoutthecourseoftheaudit,fromtheauditedCompany.
Engagement Partner TheengagementpartnerisMrWilhelmKovsca..
Vienna,4April2019
ThisreportisatranslationoftheoriginalreportinGerman,whichissolelyvalid.Thefinancialstatements,togetherwithourauditor'sopinion,mayonlybepublishedifthefinancialstatementsandthemanagementreportareidenticalwiththeauditedversionattachedtothisreport.Article281section2UGB(AustrianCommercialCode)applies.
KPMGAustriaGmbHWirtschaftsprüfungs-undSteuerberatungsgesellschaft
signedbyWilhelmKovscaWirtschaftsprüfer
(AustrianCharteredAccountant)
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