Preliminary results for 2003:
Strong profit growth at Bank Austria Creditanstalt
- BA-CA's net income after taxes up by 43 per cent to EUR 442 million.
- Shareholders' equity rises to record level of EUR 5.8 billion – up by EUR 1.2 billion.
- Strong capital base for further expansion in Central and Eastern Europe.
According to preliminary figures for the 2003 financial year, Bank Austria Creditanstalt (BA-CA) achieved net income after taxes of EUR 442 million. This figure is 43 per cent higher than the previous year's level (2002: EUR 309 million). Although the capital increase via the initial public offering in summer 2003 resulted in a substantial increase in shareholders' equity, the return on equity after taxes (ROE) rose to 8.7 per cent. The cash ROE – defined as the ROE before amortisation of goodwill – was 12.4 per cent.
Erich Hampel, CEO of Bank Austria Creditanstalt: "These are respectable results. We have made a major step forward. Developments since the integration with HVB Group show that we are very well positioned with our clear focus on Austria and on the growth markets in Central and Eastern Europe. As part of a large international banking group we enjoy a strategic competitive advantage, especially in cross-border business. Today Bank Austria Creditanstalt is stronger than ever before."
In 2003, shareholders' equity of Bank Austria Creditanstalt in accordance with IAS increased by EUR 1.2 billion to a record level of EUR 5.8 billion. This means that BA-CA has by far the strongest capital base of all banks in Austria. At Bank Austria Creditanstalt, the Tier 1 capital ratio – a very important indicator of a bank's financial strength – has risen from 6.1 per cent to 7.8 per cent over the past three years. With this Tier 1 capital ratio, BA-CA is far ahead of its competitors in Austria and is also very well placed in an international comparison. Erich Hampel: "We have a strong capital base. This means security for our customers and substantial strength for further expansion in our core business in Austria and especially in Central and Eastern Europe."
Over the past three years, operating profit has risen by 70 per cent, from EUR 357 million to a record level of EUR 602 million. This reflects the fact that Bank Austria Creditanstalt's operating performance has significantly improved through the new strategic focus on the bank's core markets and consistent measures taken on the cost and income sides. In the growth market of Central and Eastern Europe, Bank Austria Creditanstalt has also made a big step forward by taking over HVB's banking subsidiaries in this region: within a period of three years, Bank Austria Creditanstalt's business volume in Central and Eastern Europe (measured by total assets) has risen from EUR 9 billion to EUR 23 billion, an increase of 150 per cent. Bank Austria Creditanstalt now operates the leading financial services network in this region, with 900 branches in 11 countries and a comprehensive range of products and financial services. Moreover, BA-CA can make available to its customers the Group's international network in Western Europe and overseas. This is a major competitive advantage. No other banking group has such a strong position in the heart of Europe.
After taking over Group subsidiaries in Poland, the Czech Republic, Hungary, Slovakia, Bulgaria and Croatia (branch) in 2001, Bank Austria Creditanstalt made six further acquisitions: it acquired Splitska banka in Croatia, Bank Biochim in Bulgaria, Central Profit Banka in Bosnia and Herzegovina, the remaining 50 per cent interest in both of the market leaders in the leasing business in the Czech Republic and in Slovakia, and a network of branches in the north of Croatia. BA-CA's CEO Erich Hampel: "Over the past three years we have completed a dozen transactions – and I am convinced that we will find attractive opportunities for acquisitions also in the future. This will enable us to further expand our business and earnings."
Items in the income statement
Net interest income fell by 5.7 per cent to EUR 2,176 million (2002: EUR 2,307 million). The reasons for this decline were the low level of interest rates and continued market weakness in Austria, on the one hand, and a significant fall 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. Quarterly figures showed a favourable trend:
BA-CA's net interest income reached EUR 520 million in the first quarter, EUR 539 million in the second quarter, EUR 551 million in the third quarter and EUR 566 million in the fourth quarter. This reflects a steady qualitative improvement in the structure of results.
The net charge for losses on loans and advances was further reduced in 2003, by 13 per cent to EUR 467 million (2002: EUR 537 million). This reduction is a result of BA-CA's strict risk management. Net interest income after losses on loans and advances thus declined by 3.4 per cent to EUR 1,709 million (2002: EUR 1,770 million).
Net fee and commission income increased by 5.4 per cent to EUR 1,134 million (2002: EUR 1,076 million). Similar to the trend seen in net interest income, there was also a gratifying development from quarter to quarter in this area: the bank generated net fee and commission income of EUR 270 million, EUR 273 million and EUR 296 million in the first three quarters, and EUR 296 million in the fourth quarter. The net trading result, at EUR 220 million, was 4.7 per cent lower than the very strong performance in the previous year (2002: EUR 231 million). On the cost side, the trend experienced in previous years continued.
As a result of tight cost management, general administrative expenses fell by 1 per cent to EUR 2,479 million (2002: EUR 2,503 million). This amount includes provisions for restructuring measures in the amount of EUR 20 million. Operating profit was EUR 602 million, 5.3 per cent higher than the previous year's figure of EUR 572 million. This means that, in 2003, Bank Austria Creditanstalt achieved the highest operating profit since the acquisition of Creditanstalt in 1997.
Net income from investments reached EUR 120 million, a substantial increase over the previous year (2002: EUR 28 million). This mainly reflects proceeds from sales of equity interests in insurance companies. Amortisation of goodwill, at EUR 67 million, was lower than in the previous year (2002: EUR 88 million). Thus Bank Austria Creditanstalt's net income before taxes amounted to EUR 648 million, up by 28.5 per cent on the previous year (2002: EUR 504 million). Taxes on income increased by 39.6 per cent to EUR 155 million (2002: EUR 111 million). Minority interests declined by 39.5 per cent to EUR 51 million (2002: EUR 84 million). Net income after taxes and minority interests was EUR 442 million, an increase of 43 per cent over the previous year (2002: EUR 309 million).
This improvement in results had the following effect on key financial ratios:
- Shareholders' equity in accordance with IAS increased from EUR 4.6 billion to EUR 5.8 billion.
- The cash ROE rose to 12.4 per cent (2002: 10.2 per cent) despite the increase in shareholders' equity. The ROE after taxes increased from 6.5 per cent to 8.7 per cent.
- The cost/income ratio rose slightly from 69.3 per cent to 69.9 per cent.
- Earnings per share increased from EUR 2.71 to EUR 3.40.
- The risk/earnings ratio (net charge for losses on loans and advances as a percentage of net interest income) improved significantly from 23.3 per cent to 21.5 per cent.
- The Tier 1 capital ratio was 7.8 per cent (2002: 6.8 per cent), almost 100 per cent above the level of 4 per cent required by law.
- The total capital ratio increased to 13.1 per cent (2002: 11.2 per cent). This means that Bank Austria Creditanstalt's total capital ratio is comfortably above the level of 8 per cent required by law.
Details of the balance sheet of Bank Austria Creditanstalt
In the 2003 financial year, Bank Austria Creditanstalt further reduced its total assets through specific measures, from EUR 148 billion at 31 December 2002 to EUR 137 billion at the end of 2003. This reflects the sale of BA-CA Asset Finance, a company based in Glasgow, and the reduction of Bank Austria Creditanstalt's interbank business. Bank Austria Creditanstalt pursues the strategy of minimising interbank business, which is closely connected with Treasury operations, with due regard to risk and cost aspects. More precisely, the aim is to reduce capital required to be allocated to such business and the liqudity costs. This is done by conducting trading activities mainly via derivatives.
These effects are reflected very clearly in the balance sheet items: on the assets side, loans and advances to, and placements with, banks were significantly reduced, by 15 per cent to EUR 25.1 billion (2002: EUR 29.6 billion). Loans and advances to customers, totalling EUR 76 billion, matched the previous year's level (2002: EUR 76.4 billion). Loan loss provisions declined by 3.6 per cent to EUR 3.5 billion (2002: EUR 3.6 billion). Trading assets, which are recognised at their market prices, fell by 14.8 per cent to EUR 16.1 billion (2002: EUR 19.0 billion). Investments were reduced by 11.5 per cent to EUR 15.9 billion (2002: EUR 18.0 billion). The decline in this item was due to various factors including sales of equity interests.
On the liabilities side, amounts owed to banks fell by 4.6 per cent to EUR 39.1 billion (2002: EUR 41.0 billion). Amounts owed to customers declined by 4.8 per cent to EUR 53.8 billion (2002: EUR 56.6 billion). Liabilities evidenced by certificates were reduced by 13.0 per cent to EUR 17.4 billion (2002: EUR 20.0 billion). Trading liabilities declined by 18.5 per cent to EUR 8.6 billion (2002: EUR 10.5 billion). Subordinated capital declined by 16.1 per cent to EUR 5.4 billion (2002: EUR 6.5 billion). Shareholders' equity rose substantially, by EUR 1.2 billion or 26.2 per cent, to EUR 5.8 billion (2002: EUR 4.6 billion).
Outlook for 2004 and targets for 2006:
For the 2004 financial year, Bank Austria Creditanstalt expects a moderate increase in operating revenues. In combination with a further slight reduction of costs, this will lead to a double-digit percentage increase in operating profit. Under the basic scenario – excluding special risks arising from movements in interest rates and exchange rates – the bank aims to achieve an increase of over 15 per cent in net income before taxes, as a further step towards reaching the earnings targets for 2006.
Bank Austria Creditanstalt has set itself the following targets for 2006:
- Risk/earnings ratio: below 20 per cent
- Cost/income ratio: below 63 per cent
- Tier 1 capital ratio: over 7 per cent
- ROE after taxes: over 13 per cent
The income statement of Bank Austria Creditanstalt for 2003, the balance sheet of Bank Austria Creditanstalt at 31 December 2002 and charts are available for download (to the right) in PDF format.
Enquiries: Bank Austria Creditanstalt Group Public Relations
Martin Hehemann, tel. +43 (0)5 05 05 57007
e-mail: martin.hehemann@ba-ca.com