Preliminary results for the 2015 financial year:
Bank Austria posts net profit of about € 1.3 bn for 2015

• Sound operating performance from customer business despite historically low market interest rates and persistently weak economic growth
o Lending volume up by 2.3% to € 116.4 bn, with growth of 4.1% in Austria while lending volume in CEE rose only slightly on account of negative exchange rate effects compared with the previous year
o Significant year-on-year growth of 7.9% in customer deposits in Austria and CEE to a total of € 110.3 bn
• Operating costs decline slightly, by 1.9%, thanks to strict cost management
• Net write-downs of loans up by 28.8% to € 1,007 mn
o The main reason for the increase is the conversion, required by law, of CHF loans in Croatia, which had a one-off impact of € 205 mn
o Credit risk associated with Austrian customer business practically zero
• Systemic charges including bank levies up by € 89 mn to € 326 mn, an increase of 37.7% over the previous year; the figure is equal to over 20% of profit before tax
• After deduction of non-controlling interests, net profit of € 1,325 mn matches the previous year’s level although the participation in profits of the Markets subdivision of UniCredit’s CIB Division expired at the end of 2014
• Total capital ratio up by 142 basis points on year-end 2014, reaching 14.9%; Common Equity Tier 1 capital ratio2 up by 71 basis points to 11.0%
• Excellent direct-funding ratio underlines the bank’s strong liquidity position
o Customer loans funded with customer deposits and debt securities in issue to the extent of 119.6%

Items in the income statement

Net interest remained the most important income component, accounting for 57.6% of total operating income. In 2015, net interest was € 3,386 mn, down by 3.6% (2014: € 3,511 mn, reflecting persistently low interest rates, although the bank achieved volume growth).

Dividend income and other income from equity investments rose by 7.8% to € 535 mn (2014: € 496 mn). Our Turkish joint venture contributed a substantial € 349 mn to the total figure.

Net fees and commissions continued to develop favourably, rising by € 75 mn or 5.5% to € 1,439 mn (2014: € 1,364 mn). Particularly strong growth was seen in Austria, with growth of nearly 9% in net fees and commissions driven by very favourable developments in retail banking and in the CIB Division.

Net trading, hedging and fair value income was € 420 mn, down by 13.8% (2014: € 487 mn). The decline was mainly due to the fact that the contractual participation (following the sale of CAIB) in profits of the Markets subdivision of UniCredit’s CIB Division ended (in 2014 the profit contribution amounted to € 98 mn).

Total operating income reached € 5,875 mn, a slight decline of 1.8% compared with the previous year (2014: € 5,982 mn). This development is mainly explained by the low interest rate environment and a significantly lower interest margin; moreover, the contractual participation in profits of the Markets subdivision of UniCredit’s CIB Division ended.

Cost efficiency was further improved thanks to strict cost management and additional efficiency enhancement in 2015. This is of great importance in view of the banking sector’s generally weak revenue performance, which reflects low levels of economic growth and demand, and in view of persistently low interest rates while additional burdens resulting from fiscal charges and regulatory requirements are steadily increasing. Operating costs in 2015 were € 3,076 mn, down by 1.9% (2014: € 3,136 mn).

Operating profit was € 2,800 mn, down by 1.6% on the previous year (2014: € 2,846 mn). The decrease was due to two effects on the revenue side: net interest was lower, reflecting historically low interest rates; and the contractual participation in profits of the Markets subdivision of UniCredit’s CIB Division ended, leading to lower net trading, hedging and fair value income.

Net write-downs of loans and provisions for guarantees and commitments in 2015 amounted to € 1,007 mn, an increase of 28.8% (2014: € 782 mn). The main reason for the higher provisioning charge was the significant increase in the third quarter, which largely resulted from the conversion, required by law, of CHF loans in Croatia; the charge in this context was € 205 mn. Loan loss provisions had to be further increased also in Russia and Ukraine in 2015. Overall, net write-downs of loans and provisions for guarantees and commitments in CEE rose significantly, by 50.8% to € 1,017 mn (2014: € 675 mn). Without the mandatory conversion of foreign currency loans, the provisioning charge in CEE would have increased by only 20.3%. The coverage ratio, i.e. the extent to which non-performing exposures are covered by loan loss provisions, improved significantly in the bank as a whole and in CEE. In Austria, the provisioning charge developed very favourably as a result of increased recoveries on loans for which provisions had previously been made and also because of lower additions to non-performing exposures; overall, there was a net release of provisions amounting to € 10 mn. The cost of risk (net write-downs of loans expressed in basis points of average loans to customers) rose from 68 to 86 basis points. The coverage ratio improved by 84 basis points to 56.3%.

In 2015, net operating profit was € 1,792 mn, down by 13.2% (2014: € 2,064 mn) as operating income declined in the market environment described above and because net write-downs of loans were higher, largely due to the one-off effect of mandatory conversion of CHF loans in Croatia.

The balance of non-operating income and expenses between net operating profit and profit before tax was a net expense of € 171 mn in 2015, a significant improvement over the previous year (2014: a net expense of € 331 mn). This effect was mainly due to the item integration/restructuring costs, which shows income of € 312 mn in the income statement for 2015 (2014: an expense of € 14 mn); however, for accounting reasons, this requires an offsetting entry in equity which leads to an almost neutral result from restructuring (minus € 27 mn).

Cost growth in the operating divisions was successfully contained through strict cost management. These efforts were offset, however, by further increases in bank levies and other systemic charges – shown among non-operating income and expenses in the item “systemic charges”, which rose by 37.7% to € 326 mn (2014: € 237 mn).

In Austria, bank levies and other systemic charges totalled € 181 mn, of which € 134 mn related to the bank levy (2014: € 124 mn) and € 47 mn related to contributions to the deposit guarantee scheme and the bank resolution fund. In CEE the total charge was € 145 mn, of which bank levies (in Hungary and Slovakia) accounted for € 34 mn and other systemic charges totalled € 112 mn, whereof € 86 mn contributed to the deposit guarantee schemes and € 26 mn contributed to the bank resolution funds in Hungary, Croatia, Slovenia, Bulgaria and Romania.

Profit before tax was € 1,621 mn, down by 6.5% (2014: € 1,733 mn) on account of the one-off charge in Croatia resulting from the mandatory conversion of CHF loans, and also against the background weak economic growth, low interest rates and significantly higher systemic charges in 2015.

The Group‘s strategy aims at focusing growth – and the allocation of capital required for such growth – on CEE countries where the outlook for growth and revenue generation is better on a sustainable basis, and at further reducing risk. In line with this strategy, UniCredit Bank Austria AG and UniCredit SpA signed a binding agreement to transfer Ukrsotsbank to the Alfa Group. The closing of the transaction is expected for 2016. Until then the Ukrainian banking subsidiary Ukrsotsbank will continue to be classified in the balance sheet as a disposal group held for sale. The income statement items of Ukrsotsbank have been combined and are shown together with write-downs and other charges in the item “total profit or loss after tax from discontinued operations”. Total profit or loss after tax from discontinued operations is a loss of € 303 mn because the item reflects the impact of Ukrsotsbank’s loss, which was not offset by income from the sale of real estate in Austria also included in this item of the income statement.

After deduction of non-controlling interests, net profit attributable to the owners of the parent company was € 1,325 mn, matching the previous year’s figure (2014: € 1,329 mn).

The following key financial ratios have been calculated on the basis of the above-mentioned results:
• The cost/income ratio was 52.3% (2014: 52.4%).
• The risk/earnings ratio (net write-downs of loans as a percentage of net interest income) was 25.7% (2014: 19.5%).
• The total capital ratio (based on all risks) was 14.9% (2014: 13.4%).
• The Common Equity Tier 1 capital ratio (based on all risks) was a sound 11.0% (2014: 10.3%).

Results of the Divisions
Bank Austria reports its results in four Divisions: Retail & Corporates, Corporate & Investment Banking (CIB), Private Banking, and Central Eastern Europe (CEE). The bank also shows results for the Corporate Center.

In 2015 the Retail & Corporates Division generated about 25% of the Bank Austria Group’s operating income and thus made a contribution of 70% to total operating income generated by Austrian customer business. With customer deposits and debt securities in issue totalling € 43 bn, the business segment is also an important source of funding for the bank.

2015 was characterised by persistently low interest rates and, as a consequence, a further decline in net interest. Credit expansion, averaging 2.9% for the year, was mainly achieved in the Retail subdivision via construction and housing finance while growth in direct funding (plus 4.8%) came mainly from business with corporate customers. The decline in customer interest rates in lending business was significantly stronger than on the deposit side. Overall, therefore, the interest margin continued to narrow. Although the other components of operating income developed favourably, especially net fees and commissions (plus 5.8%), total operating income was 3.9% lower than in the previous year. Operating costs declined by 1.1%, reflecting lower payroll costs and strict cost management. Net write-downs of loans and provisions for guarantees and commitments improved by € 29 mn on the previous year. The significantly higher charge for the bank levy and other systemic charges (€ 70 mn after € 48 mn in 2014) impacted net operating profit and was the main reason why profit before tax declined by € 58 mn (minus 17.7%) to € 269 mn.

Bank Austria is pursuing and accelerating its transformation, started in 2014, into a modern universal bank, in which branches and the digital marketplace, comprising the Online-Shop and the online branch, will have equal weight as channels for product sales and advisory services in the medium term. In 2015, 42 smaller branches were combined to form significantly larger branches with a wider offering of advisory services.
More than 40 branches throughout Austria currently have extended opening hours, with 30 branches in Vienna being available to customers from 9 a.m. to 6 p.m. and 10 branches in other Austrian regions offering their services from 8.30 a.m. to 5.30 p.m. in most cases. Some 35 branches throughout Austria were modernised according to the new branch design in 2015. The Retail subdivision achieved growth of 64.1% in construction and housing loans in 2015 and an increase of 27.6% in sales of mutual funds.

The bank will increasingly take advantage of advancing digitalisation in the coming years to serve its customers and streamline internal processes. In the medium term, banking services and advisory services will be available at branches and in the digital marketplace 24 hours a day and 7 days a week, at a significantly higher level of cost efficiency than has been the case so far. Branches will be considerably larger and offer a wider range of advisory services. Services for small businesses and independent professionals will also be significantly expanded and offered in some 70 locations from 2016.

Bank Austria is the leading bank for corporate customers in Austria and a financial partner of the Austrian business sector, serving the whole range of companies, from small businesses all the way to large companies. Although financing terms were extremely favourable in 2015, the year continued to see only moderate investment propensity on the part of corporate customers and credit demand was low. In this difficult environment Bank Austria achieved market share gains in the corporate finance sector. The market for deposits from companies grew by about 5% in 2015. Bank Austria benefited from this development and achieved gains in market share beyond average market growth.

In 2015, Bank Austria continued its initiative aimed at internationalisation, a key driver of growth. The bank provided corporate customers with product-specific know-how and made its international banking network available to them worldwide. In regional terms, the focus was on Central and Eastern Europe and China. Conversely, Bank Austria also provided extensive assistance to companies from other countries in expanding their business and setting up operations in Austria. The “UniCredit International Centers” have been established as internationalisation hubs: they help medium-sized companies which are active in the banking group’s core markets in Europe and also in Asia and America to benefit from the advantages of a comprehensive cross-border business relationship with UniCredit Group.

Demand for real estate was again supported by extremely low interest rates in 2015. As a result, commercial real estate transactions reached a record volume. In this dynamic environment, and in the face of intense competition, the bank’s Real Estate department achieved a new record level of € 3.1 bn in investment and development finance in Austria.

The Corporate & Investment Banking (CIB) Division focuses on serving multinational companies and major international customers, providing them with capital market services and investment banking solutions tailored to their specific needs. CIB also serves banks, asset managers, institutional customers, insurance companies and selected real estate customers.

In addition to its functions within the bank, CIB enables its customers to benefit from its capital market expertise, its market position based on the UniCredit Group network and a presence in all major financial centres around the world as well as from excellent access to our core regions in Western, Central and Eastern Europe and 50 countries worldwide, giving Bank Austria essential competitive advantages.

In 2015, the CIB business segment further expanded its leading market position in the segment of multinational companies. Its corporate finance business developed in a very positive manner in the face of a challenging and highly competitive market environment characterised by reluctance of customers to take up loans, a squeeze on margins and continued loan-bond substitution. Structured business, in particular, involving acquisitions, syndicated loans, capital market transactions, commodity trade finance and structured trade and export finance, grew at a rate well above that of the previous year; in many cases the growth rate was in the double-digit range.

Over the years, funding via the capital market has become a significant feature of business with corporate customers. Besides loan-based financing, bonds and loans against borrowers’ notes have developed into an important second pillar in this context. CIB has benefited from this positive development, maintaining its position as market leader in this segment over the past years and acting in a leading capacity for attractive transactions.

Bank Austria’s expertise and contacts to export credit agencies moreover opened up additional opportunities for corporate customers in Austria and other countries wishing to export their products and services – from working capital facilities with favourable interest rates to highly complex buyer finance arrangements for plant manufacturers. 2015 saw a significant rise in new export finance business compared with the previous year. Bank Austria’s trade finance operations held up well despite a contracting market, with the bank maintaining its position as the undisputed market leader in this segment.

The Corporate & Investment Banking Division achieved a profit before tax of € 208 mn, exactly matching the good result of the previous year (2014: € 208 mn).

Bank Austria’s Private Banking Division, with the two well-known brands Bank Austria Private Banking – the private banking arm of a major bank – and Schoellerbank – a traditional private banking institution – is the market leader in Austria’s private banking market.

2015 saw the launching of the “UNIVERS” service model in Bank Austria‘s Private Banking Division: based on a transparent one-off fee, the customer can make investment decisions without considering the transaction costs. Customers with an investment volume of over € 600 mn had opted for this model by the end of 2015. It is targeted at investors looking for professional advice and execution, while preferring to take investment decisions themselves.

Bank Austria’s Private Banking Division serves 1,172 out of a total of 3,257 private foundations and 460 foundations set up by Austrian federal and provincial government agencies. On this basis, Bank Austria is the market leader in services for foundations, with a market share of 31%. Under its special initiative focusing on foundations, Bank Austria is committed to innovation as a factor helping to maintain Austria’s attraction as a business location: the bank collected ideas and demands for modernising Austria’s legislation on foundations and to improve the overall framework for private providers of risk capital. The ideas and demands were then presented to the relevant decision-makers. Bank Austria will continue its efforts in this area in 2016, in cooperation with the Austrian Association of Charitable Foundations.

2015 was a very successful year for the Private Banking Division: total financial assets grew by 6.7% to € 22.8 bn. Given the nature of private banking business, net fees and commissions were again the largest revenue component (64%), contributing € 114 mn to operating income. This was an increase of 4.6% on the previous year. In line with the Division’s business strategy, fee-based income from asset management, including fund products, was up by 8.6% and most recently accounted for over three-quarters of net fees and commissions.

One-third of the 16.3% increase in assets under management to € 8.3 bn in 2015 is explained by good performance and two-thirds by ongoing net inflows of funds, which were positive in every quarter of 2015.

Profit before tax was € 51 mn, down by € 2.6 mn on the previous year’s level. Over one half of the decrease is due to higher systemic charges (including bank levies).

The CEE Division reported a solid operating profit of € 2,341 mn in 2015, reflecting positive contributions from across the region despite methodological changes regarding subholding effects in Q2 2015; adjusted for exchange rate movements, the figure was up by 8.9% compared to the previous year. At current rates, operating profit remained at the same level as in 2014, when it was € 2,323 mn.

Operating income showed a strong development in 2015, with slightly weaker net interest income amounting to € 2,381 mn (2014: € 2,456 mn), higher net fees and commissions of € 718 mn (2014: € 702 mn) and an increased net trading income of € 329 mn (2014: € 266 mn). Other income from equity investments, reflecting mostly the net contribution from Turkey, was up at € 364 mn (2014: € 345 mn). Net other income amounted to € 24 mn (2014: € 55 mn). Including these effects, overall operating income therefore increased by 6.7% to € 3,816 mn (2014: € 3,824 mn) at constant rates and was flat at current rates.

Due to continued strict cost management the CEE Division was able to reduce operating costs compared with the previous year by 1.7% to € 1,475 mn (2014: € 1,501 mn). Even eliminating the exchange rate movements, operating costs were reduced in real terms: their increase at constant rates was kept at 3.2% and thus significantly below the weighted inflation rate in the region. The cost/income ratio therefore stood at a sound 38.7% (2014: 39.3%).

Net write-downs on loans in the CEE Division rose to € 1,017 mn (2014: € 675 mn) mainly driven by the newly introduced Consumer Credit Act in Croatia enforcing the conversion of Swiss Franc denominated loans and by additional provisions for Russia and for Ukrainian borrowers. Thus the CEE Division achieved a net operating profit of € 1,324 mn (2014: € 1,648 mn). Net profit was at € 604 mn in 2015, reflecting also the full P&L impact of € 367 mn from Ukrsotsbank.

In 2015 the economic environment for banks operating in Central and Eastern Europe (CEE) was largely positive. Despite some exceptions, most countries in the region showed strong economic growth and resilience against shifts in investor sentiment towards emerging markets, which was in good part related to their deep integration with the euro area and solid macroeconomic fundamentals. Banking sectors in most CEE countries remained profitable, although the overall level is normalizing compared to the pre-crisis period. A more sustainable funding model is moving forward in the region, with local deposits becoming a more important funding source. The average loans-to-deposits ratio improved significantly from 122% in 2008 to 101% in 2015. Looking forward, economic recovery is expected to further support lending, especially in countries which have been lagging behind so far. Non-performing loan ratios, which are currently high in some countries, should decline.

The CEE Division manages a network of about 2,300 branches (including the Turkish joint venture, which is accounted for using the equity method) in 13 countries in the region with about 47,500 employees. The Group continues to see itself as a long-term investor in this region and will expand its leading market position through sustainable growth in the coming years.

Statement of financial position

Bank Austria’s total assets as at 31 December 2015 were € 193.6 bn, up by 2.4% or € 4.5 bn on the end of the previous year (31 December 2014: € 189.1 bn).

On the assets side, loans and receivables with customers were € 116.4 bn, up by 2.3% or € 2.6 bn (31 December 2014: € 113.7 bn). Loans and receivables with banks increased by 5.5% to € 32.2 bn (31 December 2014: € 30.5 bn).

On the liabilities side, deposits from customers rose significantly, by 7.9% or € 8.1 bn, to € 110.3 bn (31 December 2014: € 102.3 bn). Debt securities in issue declined by 4.0% or € 1.2 bn to € 28.8 bn (31 December 2014: € 30.0 bn).

Direct funding – i.e. the sum total of customer deposits and debt securities in issue – totalled € 139.1 bn, up by 5.2% or € 6.9 bn (31 December 2014: € 132.3 bn), accounting for over two-thirds (71.9%) of total liabilities and equity.

This gives a loans/direct-funding ratio of 83.6%, which means that customer loans are covered by customer deposits and debt securities in issue to the extent of 119.6%.

Asset Quality

Net impaired loans declined to € 4.5 bn (-7.9% year to date) while the coverage ratio rose to a sound 56.3 % (+0.8 percentage points year to date). This means that asset quality at Bank Austria continued to develop positively. Gross impaired loans (€ 10.4 bn) declined both in CEE (€ 7.2 bn, -3.7% year to date) and – due to a highly favourable development - in Austria, where gross impaired loans totalled € 3.2 bn (-11.1% year to date). The increase in total write-downs of loans in CEE to € 4.3 bn (+4.1%) resulted mainly from the conversion, required by law, of CHF-denominated loans in Croatia and an increase of provisioning in Russia.

Regulatory capital resources and risk-weighted assets

Regulatory capital, capital requirements and regulatory capital ratios are calculated in accordance with the Capital Requirements Regulation (CRR) and the Capital Requirements Directive (CRD IV) to implement Basel 3 in the European Union. Under the Austrian CRR Supplementary Regulation of 11 December 2013, these provisions are not yet fully applicable but will be gradually introduced over several years. For example, new deductions from Common Equity Tier 1 capital or capital components which are no longer eligible for inclusion under Basel 3 are not yet allowed to be fully taken into account pursuant to CRR / CRD IV in the second year of the transition period but to the extent defined for 2015 in the Austrian CRR Supplementary Regulation.

Movements in capital resources:

Total regulatory capital as at 31 December 2015 was € 19.1 bn, up by € 1.5 bn on the end of the previous year (31 December 2014: € 17.5 bn).

The total capital ratio based on all risks rose significantly, to a sound 14.9% (2014: 13.4%) and the Common Equity Tier 1 capital ratio8 based on all risks increased to an excellent 11.0% (2014: 10.3%).
Total regulatory capital was € 18.6 bn, up by € 1.1 bn on year-end 2014. Common Equity Tier 1 capital (CET1) rose by € 0.4 bn to € 13.8 bn.
The increase in Common Equity Tier 1 capital as at 31 December 2015 is mainly due to the inclusion of preliminary net profit 2015 and the fact that unrealised gains on assets and liabilities measured at fair value were eligible for inclusion for the first time under Section 2 of the Austrian CRR Supplementary Regulation. In addition, Tier 2 capital was strengthened through three eligible new issues totalling € 0.9 bn.
In 2015, the total risk exposure amount (RWAs) decreased to € 128.4 bn, down by € 2.1 bn or -1.6%; a low increase in credit risk was offset by declines in market risk and operational risk.

At the end of 2015, the leverage ratio to be calculated under Basel 3 was a conservative 5.8% in conformity with Basel 3 transitional rules.

 IR Release + tables (PDF; 529 KB) 

Enquiries: Bank Austria Corporate Relations
Günther Stromenger, phone: +43 (0)50505-57232