Raiffeisen International Bank-Holding AG, a member of the RZB Group headed byRaiffeisen Zentralbank Österreich AG, utilized the growth dynamics in Centraland Eastern European markets and once again achieved a record result on the backof a strong development of customer business. Consolidated profit (after tax andminorities) surged by 41.7 per cent to 841 million euros (2006: 594 millioneuros). Profit before tax crossed the 1 billion euros threshold for the firsttime and amounted to 1.24 billion euros (2006: 891 million euros). Earningsper share rose from 4.17 in 2006 to 5.80 euros. The Managing Board willpropose the General Shareholders Meeting to increase the dividend per share forthe business year 2007 by 0.22 euros to 0.93 euros (2006: 0.71 euros). Basedon that proposal the payout would amount to 143.8 million euros. (All dataaccording to International Financial Reporting Standards (IFRS). All datarelated to the business year 2006 are displayed without one-off or specialeffects for reasons of better comparison.)

Herbert Stepic, CEO of Raiffeisen International, said, „Despite theturbulences on the global credit and capital markets we have had an outstandingyear 2007. We have very successfully placed our Secondary Public Offering in anextremely challenging market environment and closed the year with yet anotherrecord result. The increase in consolidated profit of 247 million euros in2007 is larger than our total consolidated profit was in 2004, at 209 millioneuros. This underlines that the traditional customer-focused banking business inour markets is characterized by both strong growth and strong profitability. Wehave earned confidence by having achieved all strategic and financial goals setat the IPO in 2005 on time.“

Good results in the 4th quarter 2007

In the 4th quarter 2007, Raiffeisen International earned a record netinterest income (after provisioning) of 600.2 million euros, representing anincrease of 38 per cent compared to the same quarter of the previous year. Netcommission income of 354.8 million euros was also significantly – by 30 percent – above the 4th quarter 2006. Consolidated profit amounted to215.6 million euros and was 38 per cent up compared to the 4th quarter 2006,and only slightly below the previous quarter. Despite the specifics of the 4thquarter with regard to cost allocation it was the second-best quarterly resultin the company's history.

Regional segments

Central Europe Earnings grew significantly in the region of Central Europe inthe reporting period. With an increase of 112 million euros, or 36 per cent onthe preceding year, an impressive increase was registered in profit before tax.Initial consolidation of asset management companies in Slovakia and Hungaryresulted in an additional contribution to annual earnings in the amount of20 million euros. The return on equity before tax for Central Europe fellslightly, by 1.7 percentage points to 21.7 per cent. The main reason for thatwas an increase of equity by 46 per cent on the comparable period.

Group assets in Central Europe rose on the preceding year by 28 per cent, or6.5 billion euros, to 29.7 billion euros. Volume growth was somewhat lowerthan the increase of net interest income by 36 per cent to 821 million euros.The net interest margin rose by 3 basis points to 3.17 per cent despite thecompetitive market environment. The risk-weighted assets increased less thanbalance sheet assets, by 26 per cent from 17.2 billion euros to 21.6 billioneuros. Provisioning for impairment losses rose by 31 per cent to 122 millioneuros, to a smaller extent than net interest income. New allocations toportfolio-based provisions in some of the region’s group units accounted for30 per cent of that increase.

The risk/earnings ratio for the entire region improved on the comparableperiod by 0.6 percentage points to 14.9 per cent. The share of the creditportfolio attributable to non-performing loans increased on the preceding yearby 0.35 percentage points to 2.64 per cent.

Net commission income rose by 127 million euros to 471 million euros. Thatincrease is based on constantly growing transaction volumes and amounted to152 million euros in payment transfers and account services. In absolute terms,the Hungarian and Slovakian group units achieved the highest results. Netcommission income in foreign exchange and notes/coins business rose to183 million euros, to which Raiffeisenbank Polska made the largestcontribution. The asset management companies newly consolidated in2007 contributed 14 million euros to this good result. Their assets undermanagement amounted to 2.3 billion euros at year’s end. The share ofoperating income attributable to business affecting commission income was thehighest of all segments at 35 per cent.

Central Europe’s trading profit amounted to 52 million euros. Theitem’s increase by 11 million euros in the reporting period was largely dueto an improved result on currency-related business, which contributed39 million euros to trading profit. Income in interest-related businessimproved in the reporting year by about 10 million euros to 13 million eurosin view of rising interest rates in some countries of Central Europe.

Southeastern Europe

Southeastern Europe registered the highest earnings growth of all threeregional segments in the reporting period. Thanks to the good market position ofgroup units in this region, profit before tax grew by 55 per cent to442 million euros. The return on equity before tax likewise improvedsignificantly from 28.2 per cent before to 30.2 per cent.

Net interest income in the region grew by 28 per cent, or 158 millioneuros, to 718 million euros, although the net interest margin declinedslightly, by 6 basis points to 3.48 per cent. Balance sheet assets rose by23 per cent to 23.2 billion euros. The risk-weighted assets increased somewhatmore strongly, by 30 per cent from 12.6 billion euros before to16.4 billion euros.

Positive development characterized provisioning for impairment losses. Lowlevels of new allocations to provisions for impairment losses were necessary, anincrease of only 26 per cent or 22 million euros, despite a stark increase inbusiness volume in comparison to the previous year. The total amount ofprovisions for impairment losses fell to 66 million euros. It was possible tolower provisioning in some group units thanks to a solid customer base and gooddevelopment of the risk structure. That resulted in a substantial reduction ofthe risk/earnings ratio, from 15.8 per cent to 9.2 per cent.

The region’s net commission income rose strongly, by 44 per cent from268 million euros before to 386 million euros. The largest increase wasachieved by the group unit in Romania thanks to a pronounced retail orientationand solid customer base. Good development in payment transfers and accountservices at 167 million euros and in foreign exchange and notes/coins businessat 82 million euros were critical for this increase. The asset management unitin Croatia newly consolidated in the reporting year contributed 12 millioneuros to net commission income. Assets under management reached0.6 billion euros.

The Southeastern Europe segment made trading profit of 35 million euros.That result is largely based on currency-related business and was 31 per centbelow the preceding year’s value. Valuation losses of about 10 million eurosfrom hedging transactions in Croatia, used to minimize the currency risk ofcertain credit portfolios, were the main reason for that. Income frominterest-related business likewise declined due to the rising interest ratelevel in the region.

Outlook 2008

Building on its successful mid-market strategy, the corporate customersegment will make the largest contribution to profit before tax again in2008. In the retail business, Raiffeisen International continues to emphasizeexpansion of the branch network to support the broadening of its customer base.Moreover, the company will further develop its product range in the areas ofasset management and insurance in the current year.

The management has set the goal for consolidated profit in 2008 of about1 billion euros. It is aimed to grow the balance sheet total by at least20 per cent per year in the period to 2010, with the strongest increasestargeted in the retail customer segment.

Raiffeisen International has set a return on equity (ROE) before tax of morethan 25 per cent as a goal for 2010. That does not take into account anyacquisitions or capital increases. The cost/income ratio should come to about56 per cent. The company's target risk/earnings ratio is about15 per cent.

Raiffeisen International operates one of the largest banking networks in CEE.17 markets of Europe's growth region are covered by subsidiary banks, financeleasing companies and a number of other financial service providers. About14 million customers are attended to through more than 3,000 business outlets.Raiffeisen International is a fully consolidated subsidiary of RaiffeisenZentralbank Österreich AG (RZB), which owns 68.5 per cent of the common stock.The balance is free float, the shares are traded on the Vienna Stock Exchange.RZB is a leading corporate and investment bank in Austria and the centralinstitution of the Austrian Raiffeisen Banking Group, the country's largestbanking group.

You can access the web-version of Raiffeisen International's an­nual reporton http://ar2007.ri.co.at. The Englishprinted version can be subscribed to on that site.