Luxembourg-based Banque Raiffeisen wrapped up its 2023 fiscal year on a high, announcing a remarkable surge in net profit after taxes to €43.868m, marking an impressive increase from €23.716m in 2022. Operational profits reached €25.5m, showing a noteworthy €1.8m uptick, as stated in the cooperative bank’s press release issued on Monday 29 April, highlighting a one-time gain of €18.4m attributed to the restructuring of the bank’s shareholdings.

Loans

On the asset side of the balance sheet, customer loans saw a slight dip of €39m, totalling €7.694bn, representing a decrease of about 0.5%. This decline is attributed to significant shifts in customer behaviour, influenced by inflationary pressures and disruptions in the real estate market, said the bank. Particularly noteworthy is 2.4% drop in mortgage loan applications, indicating a decreased demand for housing.

The economic slowdown, coupled with a significant rise in interest rates, had far-reaching impacts across multiple sectors, resulting in a dampened demand for credit, stated the bank.

Deposits

On the liabilities side of the balance sheet, customer deposits surged to €9.597bn, marking a €170m increase, or approximately 1.8%, compared to 2022. This uptick was predominantly fuelled by a rise in household savings, which grew by €209m. Conversely, deposits from professional customers dwindled by €39m, representing a 1.1% decrease, owing to the challenging economic conditions.

Income

Net interest income more than doubled to €389.11m from €149.469m the previous year, indicating a remarkable growth. “The positive impact of higher interest rates was mainly due to the higher return produced on the re-investment of the bank’s liquid assets and equity capital,” stated a bank representative to Delano.

On the other hand, net commissions decreased by 2.6% compared to 2022, primarily due to lower commissions from financing activities, partially offset by higher commissions from securities placement and payment activities. Consequently, net banking income rose from €23.7m to €43.9m.

Operating costs and risk management

Operating costs increased by 6.5% in 2023, attributed mainly to higher staff costs following a 3.5% increase in the workforce and successive index-linked pay rises. As of 31 December 2023, Banque Raiffeisen employed 683 staff members.

The cost of risk had a notable influence on the financial outcomes of the bank in 2023. Diligent risk management strategies prompted a substantial allocation towards value adjustments on loans and advances, amounting to €53.5m, alongside an additional €10m allocated to the general banking risk fund.

Bonuses

In light of the exceptional performance, when asked by Delano about potential bonuses for staff, a bank representative clarified that the remuneration structure for Raiffeisen employees aligns with the practices prevalent in the Luxembourg financial sector. This package includes both a fixed and a variable (bonus) component, with the variable portion constituting a relatively small fraction of the overall remuneration. Specifically, for the year 2023, it accounted for less than 6% of the bank’s total wage bill, a proportion roughly consistent with that of preceding financial years.