Results for the first nine months of 2003: Bank Austria Creditanstalt's profits up by 57 per cent
- Net income after taxes up from EUR 199 million to EUR 312 million.
- Strong capital base after IPO: Tier 1 capital ratio of 7.7 per cent.
- Return on equity significantly higher despite capital increase.
- New target: return on equity after taxes is to rise to over 13 per cent by 2006.
- Further significant cost reductions planned in Austria.
In the first nine months of 2003, Bank Austria Creditanstalt significantly improved its results compared with the same period in the previous year. Net income after taxes and minority interests rose by 56.5 per cent to EUR 312 million (first nine months of 2002: EUR 199 million). This means that after nine months of the current year, Bank Austria Creditanstalt's results already exceed the total figure for 2002. Increases were achieved in Austria and in Central and Eastern Europe: net income before taxes from business in Austria improved by 14 per cent, from EUR 295 million to EUR 337 million, and the return on equity (ROE) before taxes reached 15.2 per cent. In Central and Eastern Europe (CEE), net income before taxes increased by 11 per cent, from EUR 111 million to EUR 123 million; in this region, the ROE before taxes was 19.2 per cent.
Bank Austria Creditanstalt's CEO Karl Samstag: "We are very well positioned: In Austria, we are the market leader, with sound business operations improving their performance step by step. And we enjoy a strong position in the CEE growth region, where we can take advantage of excellent growth opportunities. Our objective for the next few years is to further expand our position and significantly enhance profits."
Bank Austria Creditanstalt has set itself clear earnings targets for 2006. The bank has also defined the ROE target: it aims to increase the ROE after taxes to a level exceeding 13 per cent by 2006. To achieve this target, Bank Austria Creditanstalt will consistently continue its expansion in Central and Eastern Europe as well as taking measures to significantly enhance revenues in Austria. On the cost side, further measures are planned in Austria and Poland, the two most important markets. In Austria, the bank aims to unlock additional synergies from the merger of Bank Austria and Creditanstalt, and it will quickly reduce staff numbers (in full-time equivalent terms) from currently 11,600 to around 10,000.
Bank Austria Creditanstalt has strengthened its equity capital with the proceeds from the IPO and now has a strong capital base also by international standards. As at 30 September 2003, the bank's Tier 1 capital amounted to EUR 5,084 million, the Tier 1 capital ratio was 7.7 per cent. The bank has thus positioned itself clearly ahead of other major Austrian banks. Karl Samstag: "We are ready for further strong growth in Central and Eastern Europe."
Items in the income statement
Net interest income was EUR 1,610 million, down by 8.6 per cent on the figure for the first nine months of the previous year (2002: EUR 1,762 million). This decline is due to low interest rate levels and continued market weakness in Austria, on the one hand, and to a significant decline in the exchange rate of the Polish zloty, on the other hand. Moreover, Bank Austria Creditanstalt's Treasury operations made increased use of instruments reflected in the net trading result. An encouraging feature is the trend in quarterly figures: after net interest income of EUR 520 million for the first quarter and EUR 539 million for the second quarter, Bank Austria Creditanstalt's net interest income in the third quarter reached EUR 551 million. This means that the quality of the revenue structure has steadily improved.
In the first nine months of 2003, the net charge for losses on loans and advances was substantially reduced, by 23 per cent to EUR 356 million (2002: EUR 463 million). This reduction is a result of Bank Austria Creditanstalt's strict risk management.
Net fee and commission income rose slightly compared with the previous year, by 2.5 per cent to EUR 839 million (2002: EUR 818 million). The net trading result rose very strongly, from EUR 102 million in the previous year to EUR 217 million. Bank Austria Creditanstalt's Treasury operations took full advantage of interest rate movements. On the cost side, the trend seen in previous years continued. General administrative expenses declined further, by 2.9 per cent to EUR 1,838 million (2002: EUR 1,892 million). Bank Austria Creditanstalt's operating profit reached EUR 482 million, an increase of 54.5 per cent over the previous year's figure of EUR 312 million.
Net income from investments was EUR 26 million, down by 39.2 per cent from the figure for the previous year (2002: EUR 42 million). This figure does not yet include revenues from the sale of shares in UNION Versicherung and CA-Versicherung. Amortisation of goodwill amounted to EUR 48 million, matching the previous year's level (2002: EUR 47 million). Thus Bank Austria Creditanstalt achieved net income before taxes of EUR 457 million, an increase of 50.3 per cent over the previous year (2002: EUR 304 million). Taxes on income rose by 73.6 per cent to EUR 102 million (2002: EUR 59 million). Minority interests declined slightly, by 6.2 per cent to EUR 43 million (2002: EUR 46 million). Net income after taxes and minority interests was EUR 312 million, up by 56.5 per cent on the previous year's figure (2002: EUR 199 million).
This improvement in profits had the following effects on key financial ratios:
- The return on equity before taxes rose from 10.6 per cent to 12.5 per cent, despite the significantly higher Tier 1 capital.
- The return on equity after taxes increased from 5.6 per cent to 8.5 per cent.
- The cost/income ratio improved from 71 per cent to 68.7 per cent.
- Earnings per share rose from EUR 1.75 to EUR 2.12.
- The risk/earnings ratio (net charge for losses on loans and advances as a percentage of net interest income) improved significantly, from 26.3 per cent to 22.1 per cent.
- The Tier 1 capital ratio was 7.7 per cent, after 6.6 per cent in the previous year.
- The total capital ratio rose from 10.9 per cent to 12.9 per cent.
Business segment results
Bank Austria Creditanstalt divides its results into five business segments: Private Customers Austria, Corporate Customers Austria, Central and Eastern Europe, International Markets, and Corporate Center. Segment results for the first nine months are not compared with figures for the first nine months of the previous year, but with three-quarters of the adjusted results for 2002 as a whole.
Markets in Central and Eastern Europe (CEE) play a particularly important role in BA-CA's strategy. In this growth region, whose economy will be given an additional boost by EU enlargement, the bank operates the leading network, with more than 900 offices in 11 countries. On the basis of the significantly stronger capital base resulting from the capital increase via the IPO, Bank Austria Creditanstalt intends to consistently pursue its expansion in CEE through organic growth and acquisitions. With the closing in October, the bank completed the acquisition of Central Profit Banka and now has a market share of about seven per cent in Bosnia and Herzegovina.
Operations in Central and Eastern Europe continued to perform well in the first nine months. Net income before taxes generated by Bank Austria Creditanstalt's banking subsidiaries in CEE totalled EUR 229.7 million, an increase of 18.3 per cent over three-quarters of the figure for the previous year (2002: EUR 194.2 million). After goodwill amortisation and consolidation effects, the CEE business segment's net income before taxes was EUR 123 million, up by 11 per cent on the previous year (2002: EUR 111 million). The return on equity rose from 18.3 per cent to 19.2 per cent. The cost/income ratio fell from 72.6 per cent to 70.9 per cent.
Details of the other business segments:
In the first nine months of 2003, the Private Customers Austria business segment achieved net income before taxes of EUR 85 million (2002: EUR 111 million). This result is mainly due to the decline in net interest income caused by the low level of interest rates. The return on equity reached 15.5 per cent (2002: 20 per cent). The cost/income ratio was 80.6 per cent (2002: 80.9 per cent).
Net income before taxes generated by the Corporate Customers Austria business segment rose substantially, to EUR 188 million (2002: EUR 137 million). This improvement resulted primarily from higher net interest income and a significantly lower net charge for losses on loans and advances. The return on equity reached 12.4 per cent (2002: 8.3 per cent). The cost/income ratio was 54.3 per cent (2002: 52.5 per cent).
The International Markets business segment reported net income before taxes of EUR
64 million (2002: EUR 48 million). The return on equity reached 40.8 per cent (2002: 23.8 per cent). The cost/income ratio was 66.1 per cent (2002: 62.5 per cent).
The Corporate Center business segment recorded a net loss before taxes of EUR 3 million (2002: a net loss of EUR 29 million).
Inclusion of results in the business segments of the HVB Group
Bank Austria Creditanstalt's net income before taxes is included in the HVB Group's business segment results in the following way: amortisation of goodwill and calculated refinancing costs as well as other consolidation effects are deducted from the amount of EUR 457 million. The remaining amount of EUR 291 million is then apportioned to the HVB Group's business segments: EUR 232 million to the Austria and CEE business segment, EUR 52 million to Corporates & Markets, and EUR 7 million to Other Items.
Balance sheet of Bank Austria Creditanstalt
As at 30 September 2003, Bank Austria Creditanstalt's total assets amounted to EUR 143.8 billion (31 December 2002: EUR 148.0 billion).
On the assets side of the balance sheet, loans and advances to, and placements with, banks were reduced by 8.8 per cent, to EUR 27 billion, compared with the year-end 2002 figure (2002: EUR 29.6 billion). Trading assets declined by 4.6 per cent to EUR 18.1 billion. Loans and advances to customers were EUR 76.2 billion, remaining at a stable level (2002: EUR 76.4 billion). Investments totalled EUR 17.3 billion, a decrease of 3.9 per cent (2002: EUR 18.0 billion).
On the liabilities side, amounts owed to banks rose by 3 per cent to EUR 42.3 billion (2002: EUR 41.0 billion). Amounts owed to customers declined by 3.7 per cent to EUR 54.5 billion (2002: EUR 56.6 billion). Savings deposits remained at a stable level, while other amounts owed to customers declined. Liabilities evidenced by certificates decreased by 10.9 per cent to EUR 17.8 billion (2002: EUR 20.0 billion). As a result of the IPO carried out in summer 2003, shareholders' equity rose by 22.2 per cent to EUR 5,631 million (2002: EUR 4,610 million).
Targets for 2006:
Bank Austria Creditanstalt has set itself the following targets for 2006:
- Risk/earnings ratio: 20 per cent.
- Cost/income ratio: 63 per cent.
- Profit contribution from the CEE business segment: 38 per cent.
- Tier 1 capital ratio: 7 per cent.
- NEW: return on equity after taxes (ROE): over 13 per cent.
Enquiries: Bank Austria Creditanstalt Group Public Relations
Martin Hehemann, tel. +43 (0)5 05 05 57007; e-mail: email@example.com