EUR 850.00 For Business Accounts Only

Morningstar | Raiffeisen Bank Reports First-Quarter 2019 Results Distorted by One-Offs

Raiffeisen Bank reported first-quarter results of EUR 226 million compared with EUR 399 million for the same period last year. Although the 43% drop in the bottom line appears alarming, we think this quarter was not as dramatic and underlying performance was robust. Operations and results have been impacted by the sale of its Polish core banking operations, negative valuation effects on derivatives held for hedging purposes, and impairment reversals that boosted the comparable period last year. As these items are one-off charges in our view and we already factor in a less favourable loan loss environment starting in 2019, we try to look past these issues. We do, however, trim our net interest margin assumptions based on a lower-for-longer interest rate outlook in Europe and signs of negative margin developments in Russia and Belarus. As result, we lower our fair value estimate to EUR 27 from EUR 31. Our no-moat and stable trend ratings are unchanged.

Net interest income was virtually flat despite good loan growth of 6% as a result of the Polish operation disposal, while net fee and commission income declined 2%. The largest impacts were a negative EUR 52 million in hedging related losses, which should level out over the portfolio lifetime, as well as positive one-offs in the form of IFRS 16 adoption impacts in the first quarter last year falling away. Moreover, loan losses of EUR 9 million compared with reversals of EUR 83 million last year were a drag. On a positive note, the disposal of the Polish operation reduced otherwise higher staffing expenses. Total expenses declined 2%.