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Raiffeisen International's consolidated profit rises to € 100 million in the first quarter of 2010

Raiffeisen International:

• Profit before tax nearly doubles to € 166 million
  
• Net allocations to provisions for impairment losses decline by 33.8 per cent year-on-year to € 295 million (Q1 2009: € 445 million)
  
• Return on equity before tax improves by 4.3 percentage points year-on-year to 9.6 per cent (Q1 2009: 5.3 per cent)

RZB Group:

• Consolidated profit nearly quadruples to € 292 million (Q1 2009: € 76 million)
  
• Net allocations to provisions for impairment losses drop by 45.5 per cent year-on-year to € 325 million (Q1 2009: € 596 million)

Raiffeisen Bank International:

• Consolidated profit of € 332 million on a pro forma basis
  
• Return on equity before tax of 16.3 per cent on a pro forma basis

Exchange ratio:

• Managing boards set the exchange ratio at 30.7 shares of Raiffeisen Bank International for one share of the RZB subholding Cembra
  
• Share of Raiffeisen International free float will amount to 21.5 per cent following the transaction
  
• Earnings per share (pro forma) of € 1.45 following the merger

All figures are based on International Financial Reporting Standards (IFRS).

Raiffeisen International Bank-Holding AG, a member of RZB Group headed by Raiffeisen Zentralbank Österreich AG (RZB), posted a consolidated profit (after tax and minorities) of € 100 million in the first quarter of 2010, which represents an increase of 77.8 per cent compared to the same period a year earlier (Q1 2009: € 56 million). The net allocations to provisions for impairment losses, which declined by 33.8 per cent compared to the first quarter of 2009 to reach € 295 million (Q1 2009: € 445 million), and valuation gains on marketable securities were the main positive influences on Raiffeisen International's first-quarter results. Profit before tax rose by 98.8 per cent to € 166 million (Q1 2009: € 84 million), while profit after tax increased 94.7 per cent to € 124 million (Q1 2009: € 64 million).

"We nearly doubled our profit before tax on a year-on-year basis due to the decline in our net allocations to provisions for impairment losses. Our results reflect the slight economic recovery that is taking place in Central and Eastern Europe. Consequently, our confidence in the region's long-term potential remains unbroken," said Herbert Stepic, CEO of Raiffeisen International.

Profit from operating activities declines

Profit from operating activities fell in the first three months of 2010 by 20 per cent, or € 108 million, on the comparable period last year to € 428 million. The main reason was a decline of business volume by about 8 per cent year-on-year due to the economic crisis and selective lending.

The most important income component at 68 per cent was net interest income, which fell by € 77 million, or 10 per cent, on the comparable period last year to € 690 million. The decline of net interest income was thus greater than that of the average balance sheet total, which dropped by 8 per cent.

Net fee and commission income fell by 4 per cent, or € 11 million, on the comparable period last year to € 282 million. Net trading income came to € 58 million and was thus 26 per cent, or € 12 million, higher than in the comparable period last year. The decisive reason for that was net income from interest-related business, which grew by € 19 million to € 55 million.

Return on equity before tax at nearly 10 per cent

While a 20 per cent lower operating result weighed on Raiffeisen International’s profit and hence on its rates of return, the significantly better situation in respect to provisioning for impairment losses and the positive net income from financial investments brought an improvement of return on equity before tax. At the end of the first three months, it amounted to 9.6 per cent and was thus 4.3 percentage points higher than in the comparable period of 2009 (5.3 per cent). The consolidated return on equity (after minorities) rose from 4.2 per cent to 6.7 per cent. Earnings per share grew by € 0.28 to € 0.55 for the first three months of 2010.

Slight rise in general administrative expenses, up 2 per cent year-on-year

General administrative expenses rose by 2 per cent, or € 11 million, compared with the previous year’s period to € 585 million. This increase was primarily due to currency revaluations in the CEE countries.

Because of a decline of operating income by 9 per cent and increased general administrative expenses, the cost/income ratio worsened. It rose by 6.0 percentage points compared with the previous year’s period to 57.7 per cent.

The average number of employees came to 56,294 and was thus 6,586 below the comparable figure for the previous year’s period. The number of employees as of 31 March 2010 stood at 56,072, which represents a decline of 1 per cent, or 458 employees, compared with the end of 2009.

At € 241 million, other administrative expenses remained nearly constant compared with the level of the previous year’s period.

Moderate growth in balance sheet total

The consolidated balance sheet total amounted to € 77.2 billion as of 31 March 2010 and was thus higher than at the end of 2009 by € 0.9 billion, or 1 per cent. Set against increases of securities investments of € 1.7 billion and loans and advances to customers of € 0.7 billion were decreases of loans and advances to banks of € 0.6 billion and the cash reserve of € 0.8 billion.

Capital base further improved

Consolidated own funds according to the BWG rose by € 205 million in the reporting period to € 8,533 million . Core capital (Tier 1) rose in the first quarter by € 175 million and amounted to € 7,247 million. Currency revaluations since the beginning of the year were mainly responsible for the increase. The core capital ratio based on credit risk came to 14.3 per cent (plus 0.2 percentage points). The core capital ratio based on total risk likewise improved by 0.2 percentage points and thus amounted to 11.2 per cent. The own funds ratio rose by 0.3 percentage points to 13.3 per cent. The core Tier 1 ratio (core capital less hybrid capital based on total risk) came to 9.4 per cent.

RZB Group quadruples consolidated profit in first quarter of 2010

The RZB Group headed by Raiffeisen Zentralbank Österreich AG posted a profit before tax of € 374 million in the first quarter of 2010, which corresponds to an increase of 217.4 per cent in comparison to the same quarter a year earlier (Q1 2009: € 118 million). The Group's consolidated profit (after tax and minorities) rose by 284.3 per cent to € 292 million (Q1 2009: € 76 million). This positive development was attributable primarily to valuation gains: the net allocations to provisions for impairment losses declined by 45.5 per cent to € 325 million, income from financial investments rose by € 203 million to € 142 million.

"Our pre-tax profit for the first quarter of 2010 is more than three times larger than it had been during the same period a year earlier. This earnings performance is very gratifying, even if the operating business posted some declines. Our strong capital base and sustainable business model provide a solid foundation for a continuously positive development," said Walter Rothensteiner, Chairman of RZB's Board of Management.

On a euro basis, net interest income declined by 8 per cent to € 842 million due to lower volume along with higher costs for long-term institutional funding.

General administrative expenses increased year-on-year by 4 percent, to € 719 million. This increase of € 26 million was driven by appreciating CEE currencies as well as a higher level of depreciation/amortisation/write-downs on tangible and intangible assets.

The RZB Group's operating profit was down year-on-year in the first three months of 2010 by 22 per cent or € 166 million to € 607 million.

The slight increase in general administrative expenses, with a simultaneous 10 per cent decrease in operating income, led to a 6.9 percentage point year-on-year increase in the cost-income ratio, which rose to 54.2 percent.

In the first quarter of 2010, the Tier 1 ratio measured in relation to credit risk was virtually unchanged compared to the end of 2009 at 12.0 per cent. The Tier 1 ratio measured in relation to total risk improved by 0.2 percentage points to 9.6 per cent. RZB’s own funds ratio improved by 0.2 percentage points to 13.3 per cent. The core Tier 1 ratio (Tier 1 capital less hybrid capital in relation to total risk) was 8.8 per cent, an increase of 0.3 percentage points.

Merger of Raiffeisen International and Cembra

On February 22, the public was informed for the first time about the strategic plan of a possible merger between Raiffeisen International and RZB. Through this restructuring, whose implementation is being pursued with great vigor, RZB's principal business areas – above all, its business with Austrian and international corporate customers – would be spun-off into Cembra Beteiligungs AG, a 100 per cent indirectly-owned RZB subsidiary that holds a 72.8 per cent stake in Raiffeisen International; in a further step, Cembra would be merged with Raiffeisen International. Through the merger, Raiffeisen International should gain a banking license and will be renamed Raiffeisen Bank International AG. Raiffeisen Bank International would remain listed on the Vienna Stock Exchange.

"With first-class corporate business in Austria, a tightly meshed network in CEE and complementary business in Asia, the merged bank will address as an integrated unit all of the markets that the RZB Group had been active in to date. Moreover, the new bank's network will profit even more from product development know-how that up to now had been established at RZB," said Herbert Stepic, the future CEO of Raiffeisen Bank International AG.

Raiffeisen Bank International

Putting together Raiffeisen International and RZB contributed businesses would provide the following pro forma results for Raiffeisen Bank International :

Raiffeisen Bank International would have posted a profit before tax of € 388 million in the first quarter of 2010. The consolidated profit (after tax and minorities) would have amounted to € 332 million. Net allocations to provisions for impairment losses would have come in at € 325 million.

Raiffeisen Bank International's net interest income would have been € 833 million. General administrative expenses would have amounted to € 714 million, while profit from operating activities would have stood at € 602 million. The new bank would have posted a cost/income ratio of 54.3 per cent.

The Tier 1 ratio measured in relation to credit risk would have been11.7 per cent (a rise of 0.4 percentage points in comparison to the end of 2009). The Tier 1 ratio measured in relation to total risk would have amounted to 9.3 per cent (an increase of 0.3 percentage points in comparison to the end of 2009). The core Tier 1 ratio (Tier 1 capital less hybrid capital in relation to total risk) would have been 8.4 per cent (an increase of 0.2 percentage points in comparison to the end of 2009).

Valuation

The valuation ratios of the units included in the merger have been determined in the meantime; the underlying results are confirmed by reports from two renowned auditing companies, which were appointed as independent experts by both parties.

On the basis of these reports, the managing boards of the two entities agreed on an exchange ratio. According to this exchange ratio, Cembra's sole shareholder will receive 30.7 shares of Raiffeisen Bank International for each Cembra share.

On this basis, 21.5 per cent of Raiffeisen International shares will be in free float after the transaction has been completed (until now: 27.2 per cent; both figures include own shares held by Raiffeisen International). In turn, the merger would increase earnings per share in the first quarter of 2010 attributable to the hitherto existing Raiffeisen International shareholders from an actual € 0.55 to € 1.45 per share (based on a pro forma calculation).

"We applied strong transparency criteria and the utmost care when pursuing the valuation according to international standards and national guidelines. We are confident that market participants will see these principles reflected in the enterprise valuations and the exchange ratio we have put forward," said Walter Rothensteiner, chairman of the supervisory board of Raiffeisen International.

The financial report for the first quarter of 2010 for Raiffeisen International is available at http://qr012010.ri.co.at

The financial report for the first quarter of 2010 for the RZB Group is available at http://www.rzb.at/q1report2010

Supporting documents for Raiffeisen International's 2010 annual general meeting, as well as the spin-off documents RZB/Cembra, will be available in the Investor Relations section of www.ri.co.at