The CHF 9.1 billion increase in total assets to CHF 227.7 billion is mainly attributable to the large increase in client positions in the retail business. The increase also reflected, albeit to a much lesser extent, the expansion of interbank positions as part of tactical liquidity management and volume growth in the structured products business.
Amounts due from/to banks
Both positions increased considerably as part of tactical liquidity management. Amounts due from banks increased CHF 1.2 billion to CHF 8.3 billion. Amounts due to banks went up slightly more, increasing CHF 1.8 billion to CHF 12.6 billion.
Amounts due/liabilities from securities financing transactions
Amounts due from securities financing transactions declined almost one-third to CHF 232 million. Liabilities from securities financing transactions decreased CHF 399 million to CHF 2.2 billion. These are exclusively repo transactions in which money is borrowed against collateral. Only the interest paid on these transactions is recognised in profit or loss. Changes in the value of the exchanged securities are not recognised in profit or loss.
Loans to clients
Loans to clients grew CHF 7.1 billion, or as much as in the previous year. The two items moved in very different directions. Amounts due from customers stagnated at CHF 7.9 million. Mortgage loans, by contrast, increased CHF 7.2 billion, or 4.3%, to CHF 172.6 billion. The Group grew faster than the Swiss mortgage market and so expanded its share of the domestic mortgage market from 17.2% to 17.5%. Current-year growth and the distribution of its portfolio were geographically diversified.
The Raiffeisen Group's loan portfolio has been stable for years. Roughly 90% of its loans are mortgage-backed, while over 70% of the volume consists of private clients who historically have extremely low default rates even in times of crisis. In the corporate client business, Raiffeisen focuses on clients with medium to good credit ratings. Central monitoring keeps the corporate clients portfolio adequately diversified.
Value adjustments on default risks declined CHF 16 million to CHF 208 million. As a result, the ratio of value adjustments to lending fell from 0.129% to 0.115%.
Trading portfolio assets
Trading portfolio assets (notes 3.1) increased almost CHF 1 billion to CHF 3.9 billion. While most trading positions changed very little, there was a strong increase in debt securities. This is one consequence of the strong growth in structured products. Bonds held as assets hedge the interest rate risk inherent in the bond components of structured products. The capital adequacy requirements for market risks in the trading book are detailed in the "Market risk" section of the notes to the annual financial statements.
Securities held as financial investments (notes 5.1 and 5.2) are managed in accordance with statutory liquidity requirements and internal liquidity targets. They are mainly investment-grade bonds. This item decreased CHF 0.4 billion to CHF 7.6 billion.
The new cooperation strategy prompted a sale of large participations. As a result, the book value of non-consolidated participations (note 6) decreased CHF 138 million to CHF 650 million. Disposals from sales totalled CHF 193 million. The Raiffeisen Group did not purchase any major participations. The participations, which are valued using the equity method, increased by CHF 55 million in value.
Tangible fixed assets
Due to the large amount capitalised for the core banking systems, the book value of tangible fixed assets (note 8) increased CHF 203 million to CHF 2.8 billion. This is a much larger increase than in the previous year. Overall, project costs of CHF 199 million (previous year: CHF 111 million) were capitalised in the current year. The investment volume in all other investment categories remained basically unchanged year-to-year.
Intangible assets (note 9) declined CHF 48 million to CHF 372 million. Existing goodwill positions were amortised as scheduled.
Amounts due in respect of customer deposits/assets under management
Customer deposits increased CHF 5.8 billion to CHF 164.1 billion, much less than in the previous year (up CHF 8 billion). The slower growth is attributable, at least partially, to transfers from bank accounts to securities holdings. During the same period, custody account volumes at the Raiffeisen banks and Raiffeisen Switzerland branches increased CHF 3.5 billion (previous year: +CHF 1.3 billion). The ratio of customer deposits (including cash bonds) to loans to clients remains at a comfortable refinancing ratio of 91.3% (previous year: 91.9%).
The stronger increase in total portfolio value largely offset the weaker growth in client deposits. Assets under management at the Group level increased CHF 6.8 billion to nearly CHF 210 billion. The complete Eastern Europe portfolio was sold in the fourth quarter as Notenstein La Roche Private Bank Ltd tightened its focus on the domestic Swiss market and a few select international target markets, leading to an outflow of CHF 2.1 billion in assets under management.
Liabilities from other financial instruments at fair value
As Notenstein La Roche Private Bank Ltd moved forward with its strategic realignment, all outstanding structured products were transferred to Raiffeisen in the middle of 2017. Since that time, only Raiffeisen Switzerland and Raiffeisen Switzerland B.V. Amsterdam have issued new structured products. Products issued by Raiffeisen Switzerland B.V. are marked to market and reported in this balance sheet item. These structured investment solutions continued to grow rapidly in the current year. Holdings increased CHF 946 million, or 57.9%, to CHF 2.6 billion (note 13).
The accounting treatment varies for structured products issued by Raiffeisen Switzerland. The products' underlying instruments are recognised at their nominal value in "Bond issues and central mortgage institution loans". The products' derivative components are carried at their fair values in positive and negative replacement values.
Bond issues and central mortgage institution loans
Bond issues and central mortgage institution loans rose CHF 315 million to CHF 25.9 billion (note 14) – a moderate increase compared to previous years. Central mortgage institution loans, which are an excellent supplemental source of funding for loans and a flexible tool for managing liability-side maturities, increased almost CHF 1 billion to CHF 21 billion. Raiffeisen Switzerland bonds decreased CHF 528 million to CHF 3.3 billion due to the repayment of two bonds in 2017. Structured products issued by Raiffeisen Switzerland declined slightly to CHF 1.6 billion.
Provisions (note 15) went up CHF 45 million to CHF 949 million. The increase is almost entirely attributable to additional provisioning for deferred taxes. After an increase of CHF 56 million, provisions for deferred taxes stood at CHF 907 million at the end of the current year. The restructuring provisions recognised by Notenstein La Roche Private Bank Ltd in the previous year in connection with the sale of Vescore Ltd were either used completely or released to profit or loss. No major changes occurred in the other categories of provisions.
Capital adequacy/equity capital
As expected, the Federal Council has adopted an evaluation report containing additional requirements for domestically focused systemically important banks in the event of restructuring or liquidation (gone concern). Raiffeisen will most likely have to comply with the additional requirements beginning in 2025. The Group assumes that, given its high retention of earnings rate, it will be in compliance with these stricter TLAC ("too big to fail") requirements by the end of the transitional period without having to take any additional action.
As a domestically focused systemically important bank, Raiffeisen currently has to meet a risk-weighted capital ratio requirement of 14.4%. Raiffeisen's total capital ratio of 17.0% clearly exceeds these going concern requirements. Even the CET1 ratio of 15.9% is clearly higher than the current going concern requirements. With a leverage ratio of 7.1%, Raiffeisen exceeds both the current going concern requirements and the future TLAC leverage ratio.
Equity capital with minority interests (statement of changes in equity and note 16) went up a significant CHF 1.3 billion, or 9.1%, to CHF 15.7 billion. The high retention of earnings and record Group profit played a substantial role in strengthening the equity base. The subscription of additional cooperative share certificates remains as popular as ever and increased cooperative capital CHF 360 million (previous year: CHF 343 million) to nearly CHF 2.0 billion. The Raiffeisen Group set aside its first-ever reserves for general banking risks of CHF 80 million due to the excellent business performance at the Group level.