Annual Report 2015 Bulgaria 2 FINLAN D NO RWAY Helsinki Oslo Stockholm Tallinn BALT IC SEA ESTO NIA SWEDEN Riga LATVIA DENMAR K Moscow NORTH SEA Co penhagen LITHUANIA RUSSIA Vilnius Minsk RUSSIA Dublin IRELAND BELARUS UNITED KINGDOM Amsterdam Berlin POLAN D Warsaw Lo ndon NETHERLANDS G ERMA NY BELG IUM Brussels Frankfurt Kiev Prague LUXEMBOURG UKRAINE CZECH RE PUBLIC Paris SLOVAKIA KA ZAKHSTAN Vienna Bratislava MOLDOVA SWITZERLAN D AUSTRIA Budapest Chisinau FRANCE Bern LIECHTEN - STEIN Ma ribor HUNGARY SLOVENIA ROMA NIA Zagreb CR OA TI A ARAL Belgrade SEA BOSNIA AND SERBIA Bucha rest HERZ EGOWINA Sarajevo Pristina C UZBEKISTAN ITALY MONTEN EGRO Soa BLACK SEA ASPIAN KOSOVO Co rsica Podgorica BULG ARI A Skopje GEORGIA Rome Tbilisi Tirana MACEDONIA Istanbul PORTUGAL Madrid ALBANIA ARME NIA Baku Sardinia Yerevan ASERBAIJAN SE Lisbon GREECE Ankara A TURKMENISTA N SPAIN Athens TURKE Y Asgabat MEDITERRANEAN SEA Sicily Tunis Algiers IRAN SYRI A IRAQ Tehran ALGERIA TUNISIA MOROCCO CYPRUS Nico sia www.rbinternational.com HEAD OFFICE AND NE TW ORK BANKS BRANCHES, REPRESENTATIVE OFFICES AN D OTHER UNITS 3 FINLAN D NO RWAY Helsinki Oslo Stockholm Tallinn BALT IC SEA ESTO NIA SWEDEN Riga LATVIA DENMAR K Moscow NORTH SEA Co penhagen LITHUANIA RUSSIA Vilnius Minsk RUSSIA Dublin IRELAND BELARUS UNITED KINGDOM Amsterdam Berlin POLAN D Warsaw Lo ndon NETHERLANDS G ERMA NY BELG IUM Brussels Frankfurt Kiev Prague LUXEMBOURG UKRAINE CZECH RE PUBLIC Paris SLOVAKIA KA ZAKHSTAN Vienna Bratislava MOLDOVA SWITZERLAN D AUSTRIA Budapest Chisinau FRANCE Bern LIECHTEN - STEIN Ma ribor HUNGARY SLOVENIA ROMA NIA Zagreb CR OA TI A ARAL Belgrade SEA BOSNIA AND SERBIA Bucha rest HERZ EGOWINA Sarajevo Pristina C UZBEKISTAN ITALY MONTEN EGRO Soa BLACK SEA ASPIAN KOSOVO Co rsica Podgorica BULG ARI A Skopje GEORGIA Rome Tbilisi Tirana MACEDONIA Istanbul PORTUGAL Madrid ALBANIA ARME NIA Baku Sardinia Yerevan ASERBAIJAN SE Lisbon GREECE Ankara A TURKMENISTA N SPAIN Athens TURKE Y Asgabat MEDITERRANEAN SEA Sicily Tunis Algiers IRAN SYRI A IRAQ Tehran ALGERIA TUNISIA MOROCCO CYPRUS Nico sia www.rbinternational.com HEAD OFFICE AND NE TW ORK BANKS BRANCHES, REPRESENTATIVE OFFICES AN D OTHER UNITS 4 Financial Highlights Monetary values in BGN Thousand 2015 Change 2014 2013 Income Statement Net interest income after provisioning for possible loan losses 152,193 15% 132,761 52,954 Net commission income 68,475 7% 64,195 59,785 Trading profit (loss) 14,538 (15)% 17,088 15,637 Administrative and other operating expenses (174,432) 1% (172,244) (184,292) Profit / (loss) before income tax 67,799 33% 51,118 (49,105) Profit / (loss) for the period 61,615 32% 46,553 (43,814) Balance Sheet Loans and advances to banks 782,315 99% 392,937 447,735 Loans and advances to customers 3,555,168 (2%) 3,611,798 4,187,509 Deposits from banks 50,519 (2%) 51,446 54,104 Deposits from customers 4,759,901 12% 4,235,399 4,174,110 Equity 910,327 0% 909,630 863,053 Balance-sheet total 6,459,550 8% 5,981,352 5,959,680 Regulatory own funds Total own funds 1,181,061 3% 1,143,628 783,833 Own funds requirement / According to Local Regulations 258,597 3% 250,530 494,968 Excess cover 922,463 3% 893,098 288,865 Core capital ratio (Tire 1) 25.43% (2)% 25.87% 16.80% Own funds ratio 36.54% 92% 36.52% 19.00% Performance Return of equity (ROE) before tax 7.9% 36% 5.9% - Cost/income ratio 57.2% 8% 53.2% 59.6% Return on assets (ROA) before tax 1.1% 39% 0.8% - Provisions for possible loan losses /risk-weighted assets/ According to Local Regulations 278,960 (7)% 300,833 462,681 Resources Number of staff on balance-sheet date 2,767 -5% 2,917 3,133 Banking outlets on balance-sheet date 147 -5% 154 166 Official Exchange Rate (BNB) 1 EUR BGN BGN BGN 1.95583 1.95583 1.95583 Source: Audited Separate Financial Statements of Raiffeisenbank (Bulgaria) EAD as at 31 December 2015. 5 Contents General Information 6 The Bank’s Management 8 Statement by the Chairman of the Supervisory Board 9 Statement by the Chairman of the Management Board 10 Vision and Mission 11 Corporate Social Responsibility 12 Raiffeisen Bank International at a glance 13 Economic growth 14 Activity of Raiffeisen Group in Bulgaria in 2015 17 Corporate Banking 19 Retail Banking 20 Branch Network and Alternative Distribution Channels 21 Capital Market 22 Group Custody Services 22 Financial Institutions and Sovereigns 22 Operations 24 Human resources 25 Raiffeisen Leasing Bulgaria OOD 27 Raiffeisen Asset Management (Bulgaria) EAD 28 Raiffeisen Insurance Broker 30 Notes to the Financial Statements 41 Addresses 100 6 General Information Establishment of the Bank Raiffeisenbank (Bulgaria) EAD is the first green-field foreign investment in the Bulgarian banking sector made in 1994. Main Shareholder Raiffeisenbank (Bulgaria) EAD is indirectly a 100 per cent subsidiary of Raiffeisen Bank International AG, Vienna. In this regard, there is no transferred and acquired own shares in 2015. Banking License Raiffeisenbank (Bulgaria) EAD has a full banking license for domestic and overseas banking and financial operations. Profile Raiffeisenbank (Bulgaria) EAD is a universal commercial bank, providing services to large corporate customers, small and medium-sized enterprises, retail clients, financial institutions and institutional clients. The Bank also performs bonds and securities trading on the local and the international money and capital markets, asset management, global security services, etc. 7 The Credit Rating of Raiffeisenbank (Bulgaria) EAD Assigned by Fitch Ratings is as follows: • Long Term Issuer Default Rating: BBB- • Short Term Issuer Default Rating: F3 • Outlook Negative Correspondent Relations Raiffeisenbank (Bulgaria) EAD has established correspondent banking relations with over 1,100 banks world-wide and maintains accounts in major currencies with first-class foreign banks. Branch Network As at the end of 2015 the network of Raiffeisenbank (Bulgaria) EAD totalled 147 branches. 8 The Bank’s Management Shareholders Raiffeisen SEE Region Holding GmbH, Austria – 100 per cent Supervisory Board Chairman: Helmut Breit SB Members: Kurt Bruckner Ferenc Berszan Herbert Stepic Management Board Chairman: Oliver Roegl Members of the Board: Tzenka Petkova Ani Angelova Martin Pytlik Evelina Miltenova Dobromir Dobrev 9 Statement by the Chairman of the Supervisory Board Ladies and Gentlemen, At the beginning of 2015, Raiffeisen Bank International announced a review of the corporate strategy which the market received very positively. An emphasis on markets in which RBI can generate sustainable returns due to a strong position is also being welcomed, as was the action taken so far to achieve these goals. The plan to become a more focused universal bank with strong customer relationships by reducing complexity and risk as well as through bolstering the capital buffer is well on track and valued by market participants. More than ever before, a bank today needs a focus – and RBI’s is on CEE and Austria. RBI, therefore, needed to look at all operations unrelated to that focus, even when, in some cases, they had been highly successful in the past. The footprint in CEE was also reviewed at this time. All of this took place against the backdrop of higher regulatory capital ratio requirements, which were taken into account while determining the target CET1 and total capital ratios. In 2015, RBI significantly strengthened its capital base, with the fully loaded CET1 ratio standing at 11.5 per cent at year- end, and also achieved a consolidated profit of € 379 million. The primary reason for the result being so positive was lower net provisioning for impairment losses. Furthermore, general administrative expenses were reduced by 4 per cent compared to 2014, in line with RBI’s cost cutting initiative. 2015 was a relatively successful year for Bulgaria. The country registered positive economic growth, a phenomenon unseen in Helmut Breit Chairman of the Supervisory Board of the past few years. This economic revival was supported by the Raiffeisenbank (Bulgaria) EAD local banking sector. A key theme was the preparation for Asset Quality Review which took place in 2016. This procedure was important to run in an honest and transparent manner so that we to be sure that Bulgaria's banking system is stable and highly trustworthy. Within this environment, Raiffeisenbank (Bulgaria) EAD performs very well by continually improving their parameters. In 2015, the Bank celebrated the 20-Year Anniversary of its operations. Throughout this period, Raiffeisenbank evolved from a small bank servicing primarily corporate and multinational clients into a market leader. This anniversary was also the time to declare our long-term intent for Bulgaria's development. I would like to take the opportunity to thank the management and all Raiffeisenbank employees for their hard work and their constant efforts to serve our customers and bring benefits to the entire Raiffeisen Group. I also thank our clients for choosing us as a partner. On behalf of the Supervisory Board Helmut Breit Chairman of the Supervisory Board 10 Statement by the Chairman of the Management Board Dear Ladies and Gentlemen, 2015 was successful for Raiffeisenbank (Bulgaria) EAD despite the challenging environment due to geopolitical tensions near Bulgaria's borders and low interest rates. As at 31 December 2015, we registered after-tax profit of BGN 61.6 million as against BGN 46.6 million a year before. Our assets were up to BGN 6.46 billion as compared to BGN 5.98 billion at end-2014 whereas our deposit base reached BGN 4.76 billion as compared to BGN 4.23 billion reported at 31 December 2014. Our loan portfolio totalled BGN 3.83 billion (BGN 3.91 billion as at the end of 2014).