Transformation And Transparency

Following Raiffeisen Bank International’s strategic merger and withdrawal from noncore markets, chairman and CEO Johann Strobl sets the Austrian bank’s sights on growth in the CEE region.

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Global Finance: How did RBI restructure, and how has that changed operations?

Johann Strobl: In a downstream merger, RBI’s parent bank RZB was merged into RBI. This improved the overall capitalization of the ultimate group by eliminating current and future minority deductions of regulatory capital on the former parent bank’s level, which also constrained RBI. This merger also optimized capital planning and allocation. Moreover, the reduced structural complexity improved transparency for all stakeholders and aligned the RBI-centric shareholder and RZB-centric regulatory views. Furthermore, the merger leads to a more efficient organizational and governance structure, as well as to faster and more focused decision-making processes within the group.

GF: What have been the benefits of this transformation program so far?

Strobl: The comprehensive transformation program started in early 2015 aimed at a more focused, efficient and transparent as well as less complex group with an improved risk profile and a significantly stronger capitalization. RBI’s exit of non-core markets, especially from Asia and the USA, is almost completed. So is the repositioning in selected markets such as Russia, Ukraine and Hungary. Risk-weighted assets have been reduced by 13% during the program, while asset quality improved and risk costs were down by 57%. RBI went into the transformation program with a fully loaded [Common Equity Tier 1] ratio of 10% and arrived at 13.6% at year-end 2016. This provides room for selected growth, which already took place in 2016. Further growth of risk-weighted assets is expected in the Czech Republic, Slovakia and Romania.

GF: What do you see as the bank’s principal challenges and opportunities in the near future?

Strobl: Banks are put in chains by the low-interest rate environment of the euro area and, in some Central European markets, by the ever-increasing regulatory requirements and to some extent by political risks. RBI broke its chains by adapting to this “new normal” via its transformation program. Its home market, Central and Eastern Europe, provides ample opportunities for a bank with a fitting strategy and a regionwide presence like RBI. General market trends support an optimistic view. Banking intermediation in Southeastern and Eastern Europe is comparatively low and local economies show solid growth dynamics. Real GDP in Central Europe is expected to grow by 3.1% in 2017, in Southeastern Europe by 3.7%, and also the Russian and Ukrainian economies are recovering from recession. Though geopolitical risk remains, RBI is in an excellent position to benefit from these developments.