RZB Group doubles first-half profit

Vienna, 3 September 2004

Semi-annual report 2004

Balance sheet total exceeds€ 60 billion. Ratios significantly improved. Market position in Austria and Central and Eastern Europe further extended.

RZB Group (RZB), steered by Vienna-based Raiffeisen Zentralbank?sterreich AG and including ZAO“Raiffeisenbank Austria” has achieved excellent results in the first half of 2004. RZB now has a presence in 16 markets in the region, where it has 15 banking subsidiaries, numerous specialized companies and two representative offices. They give it practically unbroken coverage of Central and Eastern Europe (CEE).

RZB had a balance-sheet total of€ 62.8 billion on 30 June 2004, which was 12 per cent more than at year-end 2003. Its first-half profit before tax was 89 per cent up on 2003 at € 313.6 million. After tax and allowing for minority interests in profit, consolidated first-half profit was 117.3 per centup on the year at € 223.6 million. By comparison, the average profit from ordinary activities of all Austrian banks applying Austrian financial reporting standards as projected by OeNB rose by just 47.2 per cent. “It is particularly gratifying that RZB has achieved this powerful increase from an already high level in the preceding year“, says RZB’s Chairman, Walter Rothensteiner, referring to the fact that RZB has already been performing significantly better than the industry average for many years.

Ratios significantly improved

That sharp rise in profit also substantially improved RZB’s key performance ratios – even though they are still being affected by the large amounts being invested in expansion undertaken to create a solid basis for the Group’s long-term business strength and success. For example, RZB’s cost/income ratio, in spite of thehigh level of expenditure on the development and enlargement of the network, fell to 58.4 per cent. RZB’s return on equity (ROE) before tax jumped to 25.8 per cent, and its return on assets (ROA) before tax rose to 1.06 per cent. Each of those ratios is the best of anymajor Austrian bank.

Own funds of€ 3.2 billion

RZB’s eligible own funds grew by over 4 per cent to € 3.2 billion. RZB’s own funds ratio came to nearly 10 per cent on 30 June 2004 and its core capital ratio was 7.3 per cent, giving the Group sufficient equity capitalization to fund its medium-term plans.

Size of workforce reflects rapid growth

The number of staff grew by 11.4 per cent to 23,533 during the periodunder review. RZB’s Network Banks had 19,993 employees on the reporting date. That was 2,449 or 14 per cent more than at year-end 2003. RZB created nearly 1,500 new jobs, and the Savings Bank of Albania contributed 965.

Takeover of market leader in Albania

In April 2004, RZB completed the full takeover of Savings Bank ofAlbania (Banka e Kursimeve) at a cost of US$ 126 million. It made RZBthe country’s market leader and reinforced its leading position in South Eastern Europe. “This acquisition once again underscores RZB’s pioneer role in the region. No other competitor has a banking network in CEE as closely meshed as Raiffeisen’s. And we will continue its dynamicdevelopment, proceeding on the way to achieve our goal: to become the leading banking group in CEE”, says Herbert Stepic, Deputy General Manager of RZB and Chairman of Raiffeisen International Bank-Holding AG (Raiffeisen International).

Raiffeisen International grows dynamically

Raiffeisen International is a wholly-owned subsidiary of RZB-Austria andacts as the umbrella company for its so-called Network Banks, theleasing companies as well as service providers for the Group in CEE. Itsbalance-sheet came to€ 25.3 billion at mid-year 2004. That translates into growth of 25.9 per cent or € 5.2 billion during the first half, € 1.5 billion of which was attributable to the acquisition of Banka e Kursimeve. Consequently, the subsidiary recorded organic growth of 18.4 per cent or € 3.7 billion. € 23.5 billion of the balance-sheet total of Raiffeisen International was accounted for by the Network Banks, whose aggregate balance-sheet total was 27.6 per cent up on year-end 2003.

Raiffeisen International’s first-half profit before tax came to € 173.5 million, which was nearly one fourth up on the comparable figure for 2003. It was achieved despite high capital outlay on the continuing enlargement of the branch network and the associated efforts to attract new business in the retail segment. Raiffeisen International’s return on equity before tax rose to 25.2 per cent from 24.1 per cent as of year-end 2003. The advance in profits was mainly the result of increased business volumes, but it was also the fruit of high level of cost awareness and continuous process optimizations.

The number of outlets in the region also grew, namely by 126 to 823. TheSavings Bank of Albania accounted for 82 of those outlets or roughly twothirds of the increase, but the 44 new outlets of the other NetworkBanks also underscored the rapid organic growth of RZB’s Retail Customers segment. The Network Banks had just over four million customers at mid-year following a massive growth since year-end 2003, when customers numbered 3.2 million. Banka e Kursimeve added some 290,000 customers. In the first half of 2004, the breakevenpoint was reached in this segment. That is a remarkable achievement given that RZB only entered the retail banking market in 1999 and has predominantly relied on organic growth.

You will find an extensive description of RZB''s business segments aswell as detailed information regarding the consolidated balance sheetand income statement in RZB''s semi-annual report. You can download itfrom http://www.rzb.at/interimreport2004.