Raiffeisen had a 15 percent lower net income in the first half of the year as the bank reorganized its business and following the divestment of Notenstein La Roche private bank.
Heinz Huber on Wednesday presented a half-year result for the first time during his tenure as CEO of Raiffeisen Switzerland. Switzerland’s third-largest bank reported a decline in profit to 355 million Swiss francs ($363 million) in the first six months from 416 million a year ago.
A large part of the decline is attributable to the sale of Notenstein La Roche, Raiffeisen’s private-banking unit, to Vontobel. And yet, revenues declined even disregarding the private-banking division’s business, while costs increased slightly.
Tight Interest Margins
The bank said that the decline was due to lower revenues from holdings and the integration of Arizon, the IT service business. The revenues from the interest business, core to the strategy of the retail banking giant, increased 1.1 percent to 1.1 billion francs even as Raiffeisen considered margins to have become tight.
The increase was down to a release of reserves the bank had to cover for bad loans. The revenues dropped in the first half, while operating costs for the business increased.
Milestones Reached
Raiffeisen Group has reached significant milestones in the first half of 2019, having simplified its business structure, the introduction of a new core-banking system and the launch of an efficiency program, Huber said in the statement. Raiffeisen had a good operative result, despite the new focus of the bank and the challenging environment, he added.
Huber assumed control of the bank in January, and together with Chairman Guy Lachapelle, he was charged to steady the ship at the cooperative bank after difficult months following the arrest of its former CEO Pierin Vincenz.
Efficiency Program
The new focus of the bank generated an increase in operating costs of 0.6 percent, if the divestment of Notenstein La Roche is taking out of the equation.
The efficiency program also resulted in the reduction of the workforce, which in turn led to the bank taking a provision. The efficiency program will result in savings of about 100 million francs come 2020.
IT System Costs
The adjustment of the valuation of its stake in Leonteq affected profit to the tune of 38 million francs, the bank said. The write-down of the new core-banking system cost a further 26 million francs.
Raiffeisen assumed the new system fully early in 2019. Originally, the system had been developed by a joint firm called Arizon in cooperation with Avaloq.
