EUR 850.00 For Business Accounts Only

Morningstar | Raiffeisen Records Good First Nine Months of 2018; FVE Maintained

No-moat Raiffeisen reported good first-nine months results as operating profits increased 10% to EUR 1,775 million. This was largely owed to a strong macro environment and healthy loan growth more than offsetting only marginally higher expenses. Net interest income grew to EUR 2.5 billion from EUR 2.4 billion last year, as net earnings assets increased 3% and the net interest margins grew 5 basis points to 2.49%. Net fee and commission income came in at EUR 1,325 million versus EUR 1,271 million last year. Expenses were kept under control as staff costs and other general expenses growth rates came in below 2%. As a result, the cost to income ratio improved to 55.7% from 57.9% the same period a year ago and close to management’s medium-term target of 55%. Impairment loss reversals of EUR 56 million versus impairment losses of EUR 191 million in 2017, owed to a low business risk environment and successful recoveries this year, were another positive factor contributing to the good performance. Profits after tax jumped 29% to EUR 1,173 million, and we maintain our fair value estimate of EUR 33 per share.

Credit quality metrics continued to improve in the third quarter of this year with the non-performing loan, or NPL, ratio declining to 4.4% versus 4.8% and the NPL coverage ratio increasing to 75% from 73.5% in the second quarter.

On the capital front, Raiffeisen added EUR 138 million to its common equity Tier 1 capital since the beginning of the year, although higher risk-weighted assets reduced the common equity Tier 1 ratio 0.4% to 12.3%. This is below the 13% medium-term target set by management but well above capital requirements of 9.8%.