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24.02.2005

Preliminary results for 2004: Profit growth driven by CEE business

  • Profit after taxes up by 36 per cent to EUR 602 million
  • Net income before taxes in the CEE business segment rises from EUR 151 million to
    EUR 362 million
  • CEE operations make the largest contribution to BA-CA Group profits
  • High quality of results: operating profit up by 53 per cent

 

Martin Hehemann, Head of Communications
Erich Hampel, Chief Executive Officer;
Stefan Ermisch, Chief Financial Officer


According to preliminary figures for the 2004 financial year, Bank Austria Creditanstalt's profit after taxes was EUR 602 million, up by 36.1 per cent on the previous year (2003: EUR 442 million). Net income before taxes and minority interests rose by 29 per cent to EUR 836 million (2003: EUR 648 million). Thus Bank Austria Creditanstalt (BA-CA) significantly exceeded its target for net income before taxes, which was raised from EUR 750 million to EUR 800 million during the year.

The high quality of results is reflected in the significant increase in operating profit, which rose by 53.2 per cent to EUR 922 million (2003: EUR 602 million). Business in Central and Eastern Europe (CEE) made a particularly strong contribution to this substantial growth in profits: the CEE business segment achieved a substantial increase in net income before taxes from EUR 151 million to EUR 362 million. Accounting for 43 per cent of the BA-CA Group's net income before taxes, the CEE business segment is the most important contributor to Bank Austria Creditanstalt's profits and also the business segment creating the highest value. Moreover, CEE strongly contributed to growth of about 7 per cent in the volume of the BA-CA Group's customer business.

Erich Hampel, CEO of Bank Austria Creditanstalt: "We have taken a major step forward. All data show that we enjoy an excellent strategic position with our clear focus on Austria and Central and Eastern Europe. Above all, our strong commitment to the high-growth countries in Central and Eastern Europe is paying off. The operating performance in Austria has improved, too. We have made good progress in customer business. In this context we must work to keep costs under control."

Bank Austria Creditanstalt's Managing Board intends to let shareholders participate in the bank's improved performance to an appropriate extent. The Managing Board will make a proposal at the Annual General Meeting to increase the dividend from EUR 1.02 to EUR 1.50 per share. This corresponds to a payout ratio of about 37 per cent. Erich Hampel: "With this payout ratio, we are in the middle of the field of listed companies. Other companies pay a higher dividend. But we aim to maintain a healthy balance between our shareholders' dividend expectations and the strengthening of the bank's capital base."

In 2004, shareholders' equity shown in Bank Austria Creditanstalt's balance sheet in accordance with IAS rose to EUR 6.6 billion. Thus BA-CA has by far the strongest capital base of any bank in Austria. Erich Hampel: "Our strong capital base offers Bank Austria Creditanstalt's customers the highest possible security. At the same time, we have sufficient capital for further expansion in Central and Eastern Europe." The Tier 1 ratio, a yardstick used in assessing financial strength, is 7.85 per cent. With this Tier 1 ratio, BA-CA is well placed in an international comparison.

The return on equity before taxes (ROE) rose to 13.4 per cent (2003: 12.8 per cent) despite a further increase in shareholders' equity. The ROE after taxes increased by one percentage point to 9.7 per cent (2003: 8.7 per cent). Erich Hampel: "The trend is right. But we should have no illusions: measured by this key indicator, we are still in the lower third of a European ranking. We must and will further improve our performance."

Bank Austria Creditanstalt continued to pursue its expansion in Central and Eastern Europe in 2004. The bank further enlarged its network by acquiring Hebros Bank in Bulgaria and Eksimbanka in Serbia. With a presence in 11 countries in Central and Eastern Europe, BA-CA operates the leading international banking network in the region. The combined total assets of Bank Austria Creditanstalt's operations in CEE rose from EUR 23 billion to EUR 30.1 billion, an increase of 31 per cent. At the same time, Bank Austria Creditanstalt added some 100 branches to the CEE network, bringing the total number of offices to 988. BA-CA's customers have access via
HVB Group to the markets in Russia, Ukraine and in the Baltic countries as well as to all major international business and financial centres.
 
Items in the income statement
Net interest income generated by Bank Austria Creditanstalt rose by 11.9 per cent to EUR 2,435 million (2003: EUR 2,176 million). The net charge for losses on loans and advances continued to decline to a level of EUR 417 million, down by 10.7 per cent from the figure for the previous year (2003: EUR 467 million). Net interest income after the provisioning charge was EUR 2,018 million, up by 18.1 per cent on the previous year (2003: EUR 1,709 million).

Net fee and commission income also developed favourably, rising by 8.7 per cent to EUR 1,233 million (2003: EUR 1,134 million). The net trading result reached EUR 223 million, an increase of 1.3 per cent over the previous year's figure (2003: EUR 220 million). General administrative expenses were unchanged at EUR 2,479 million.

The net result from investments was minus EUR 8 million (2003: net income of EUR 120 million, which included proceeds from the sale of shares in insurance companies). Amortisation of goodwill amounted to EUR 75 million (2003: EUR 67 million). Thus Bank Austria Creditanstalt's net income before taxes was EUR 836 million, up by 29 per cent on the previous year (2003: EUR 648 million). Net income after taxes and minority interests reached EUR 602 million, an increase of 36.1 per cent over the previous year (2003: EUR 442 million).

These results give the following key financial ratios:

  • The return on equity before taxes (ROE) rose to 13.4 per cent (2003: 12.8 per cent).
  • The ROE after taxes increased to 9.7 per cent (2003: 8.7 per cent). Adjusted for amortisation
    of goodwill (IFRS 3), the ROE after taxes is 10.9 per cent.
  • The cost/income ratio improved significantly, declining to 64.9 per cent (2003: 69.9 per cent).
  • The risk/earnings ratio (net charge for losses on loans and advances as a percentage of net interest income) also improved significantly, to 17.1 per cent (2003: 21.5 per cent).
  • Earnings per share rose to EUR 4.09 (2003: EUR 3.40).
  • The Tier 1 capital ratio was 7.85 per cent (2003: 7.8 per cent), almost 100 per cent above
    the level of 4 per cent required by law.
  • The total capital ratio was 12.4 per cent (2003: 13.1 per cent).
  • Subject to approval at the Annual General Meeting, Bank Austria Creditanstalt will pay
    a dividend of EUR 1.50 per share (2003: EUR 1.02).


Segment reporting at BA-CA
Bank Austria Creditanstalt divides its results into five business segments: Central and Eastern Europe (CEE), Private Customers Austria, Corporate Customers Austria, International Markets and Corporate Center.

Business segment results
Besides Austria, the region of Central and Eastern Europe (CEE) is Bank Austria Creditanstalt's core market. Business in the region developed very well in 2004. BA-CA's banking subsidiaries significantly increased their net income before taxes to a combined total of EUR 486.3 million, an increase of 52 per cent over the previous year (2003: EUR 320.8 million). Bank BPH, BA-CA's Polish banking subsidiary, showed a particularly strong performance, with net income before taxes rising by 68 per cent to EUR 216.6 million. Strong growth rates were also achieved by the banking subsidiaries in Hungary, where net income before taxes rose by 74 per cent to EUR 86 million, and in Romania, with an increase of 91 per cent to EUR 24 million. HVB Bank Biochim, the Bulgarian banking subsidiary, increased its net income before taxes by 61 per cent to EUR 18.4 million.

After amortisation of goodwill and after consolidation effects, net income before taxes in the CEE business segment was EUR 362 million, up from EUR 151 million in the previous year. This is an increase of 140 per cent. The ROE before taxes was 21.5 per cent (2003: 17.3 per cent). The cost/income ratio declined significantly to 57.8 per cent (2003: 72.2 per cent).

The Private Customers Austria business segment significantly improved its operating performance. Adjusted for one-off effects resulting from sales of equity interests, net income before taxes rose by about 30 per cent from EUR 100 million (including sales proceeds: EUR 175 million) to EUR 133 million. The return on equity before taxes was 14.4 per cent (2003: 23.6 per cent). The cost/income ratio was 79.7 per cent  (2003: 79.2 per cent).

Net income before taxes in the Corporate Customers Austria business segment was EUR 275 million, up by 17 per cent on the previous year's level (2003: EUR 235 million). The return on equity before taxes reached 12 per cent (2003: 11.6 per cent). The cost/income ratio declined to 52.4 per cent (2003: 56.8 per cent).
 
The International Markets business segment generated net income before taxes of EUR 117 million, an increase of 74 per cent over the previous year (2003: EUR 67 million). The return on equity before taxes reached 55 per cent (2003: 35.4 per cent). The cost/income ratio was 55.2 per cent (2003: 76.1 per cent).

The Corporate Center includes the results from equity interests which do not belong to the Group's core business, as well as costs of Group functions which are not directly allocated to any other business segment. In the Corporate Center segment, Bank Austria Creditanstalt recorded a net loss before taxes of EUR 51 million (2003: net income before taxes of EUR 20 million).

Inclusion of results in the business segments of HVB Group
BA-CA's net income before taxes of EUR 836 million for 2004 is included in HVB Group's business segments in the following way: first, additional amortisation of goodwill, calculated refinancing costs, one-off effects and other consolidation effects are deducted from EUR 836 million. The remaining amount of EUR 670 million is apportioned to HVB Group's business segments: EUR 623 million to the Austria and CEE business segment, EUR 103 million to Corporates & Markets, and minus EUR 55 million to Other Items.

Balance sheet
As at 31 December 2004, BA-CA's total assets amounted to EUR 146.5 billion (31 December 2003: EUR 137 billion), an increase of 6.9 per cent over the year-end 2003 figure. The increase is mainly due to a strong expansion of customer business.

On the assets side of the balance sheet, loans and advances to, and placements with, banks were reduced as planned, by 4.5 per cent to EUR 24 billion compared with the level at the end of 2003. Loans and advances to customers increased by 6.9 per cent to EUR 81.3 billion (2003: EUR 76 billion). Trading assets grew by 15.2 per cent to EUR 18.6 billion (2003: EUR 16.1 billion). Investments increased by 4.1 per cent to EUR 16.7 billion
(2003: EUR 16 billion).
 
On the liabilities side, amounts owed to banks rose by 2 per cent to EUR 39.9 billion (2003: EUR 39.1 billion). Amounts owed to customers increased by 7.5 per cent to EUR 57.9 billion (2003: EUR 53.8 billion). Liabilities evidenced by certificates grew by 12.7 per cent to EUR 19.6 billion (2003: EUR 17.4 billion). Trading liabilities rose by 4.7 per cent to EUR 9.0 billion (2003: EUR 8.6 billion). Shareholders' equity increased significantly, by
more than EUR 800 million or 14.2 per cent, to EUR 6.6 billion (2003: EUR 5.8 billion).

Outlook for 2005 and new profitability targets
For the current year 2005, Bank Austria Creditanstalt will apply IFRS 3 (which prohibits the amortisation of goodwill acquired in a business combination). Bank Austria Creditanstalt expects that net income before taxes for 2005, in accordance with IFRS 3, will exceed EUR 1 billion. BA-CA's CEO Erich Hampel: "CEE business will continue to drive our profits in 2005. But we want to improve our performance in Austria, too. In 2004 we already made some progress in the Austrian market." 

Bank Austria Creditanstalt has set itself new profitability targets: the bank aims to reduce the cost/income ratio from currently just under 65 per cent to a level below 60 per cent in the medium term. The ROE after taxes is to be increased to 15 per cent in the medium term. (The previous ROE target of 13 per cent before taxes rises to 13.8 per cent as a result of goodwill not being amortised.) These targets bring Bank Austria Creditanstalt within reach of the levels achieved by comparable European banks with a similar business model.

Income statement of Bank Austria Creditanstalt for 2004

2004

2003

Change

Change

in EUR m

in EUR m

in EUR m

in %

Net interest income

2,435

2,176

259

11.9

Losses on loans and advances

-417

-467

50

-10.7

Net interest income after losses on loans and advances

2,018

1,709

309

18.1

Net fee and commission income

1,233

1,134

99

8.7

Net trading result

223

220

3

1.3

General administrative expenses

-2,479

-2,479

0

0.0

Balance of other operating income and expenses

-73

18

-90

>100

Operating profit

922

602

320

53.2

Net result from investments

-8

120

-129

>100

Amortisation of goodwill

-75

-67

-9

12.8

Balance of other income and expenses

-2

-8

5

-68.7

Net income before taxes

836

648

188

29.0

Taxes on income

-173

-155

-18

11.6

Minority interests

-61

-51

-11

20.9

Net income after taxes and minority interests

602

442

159

36.1


Income statement of Bank Austria Creditanstalt by quarter

Q4 2004

Q3 2004

Q2 2004

Q1 2004

Q4 2003

in EUR m

in EUR m

in EUR m

in EUR m

in EUR m

Net interest income

646

608

640

541

566

Losses on loans and advances

-94

-107

-107

-109

-111

Net interest income after losses on loans and advances

552

501

534

432

455

Net fee and commission income

301

317

319

297

296

Net trading result

85

52

29

57

3

General administrative expenses

-644

-620

-612

-604

-641

Balance of other operating income and expenses

-57

-3

-12

0

8

Operating profit

237

246

257

181

121

Net result from investments

-9

-10

-22

33

95

Amortisation of goodwill

-22

-18

-18

-18

-19

Balance of other income and expenses

-3

2

-1

0

-6

Net income before taxes

204

220

216

196

191

Taxes on income

-22

-53

-51

-47

-53

Minority interests

-14

-16

-15

-16

-8

Net income after taxes and
minority interests

168

151

150

133

130


Business segments

EUR m

Private Customers

Austria

Corporate Customers Austria

Central and Eastern Europe

Inter- national Markets

Corporate Center

BA-CA GROUP

Net interest income

2004

764

786

748

133

3

2,435

2003

765

777

530

101

3

2,176

Losses on loans and advances

2004

-124

-203

-85

0

-3

-417

2003

-139

-228

-90

0

-10

-467

Net fee and commission income

2004

514

298

408

19

-5

1,233

2003

498

275

353

15

-7

1,134

Net trading result

2004

3

6

67

122

24

223

2003

6

33

66

61

54

220

General administrative expenses

2004

-1,014

-570

-692

-140

-63

-2,479

2003

-1,033

-613

-690

-125

-18

-2,479

Balance of other operating income and expenses

2004

-9

-3

-26

-19

-16

-73

2003

35

-6

6

-12

-5

18

Operating profit

2004

133

314

420

114

-59

922

2003

131

238

175

40

18

602

Net result from investments

2004

4

-33

-4

9

15

-8

2003

48

5

20

34

12

120

Amortisation of goodwill

2004

-4

-3

-53

-6

-9

-75

2003

-5

-3

-42

-7

-10

-67

Balance of other income and expenses

2004

0

-3

-1

0

2

-2

2003

0

-5

-2

0

0

-8

Net income before taxes

2004

133

275

362

117

-51

836

2003

175

235

151

67

20

648

EUR m

Private Customers Austria

Corporate Customers Austria

Central and Eastern Europe

Inter- national Markets

Corporate Center

BA-CA GROUP

Credit and market risk equivalent (Austrian Banking Act)

2004

13,135

32,756

16,991

3,039

4,356

70,277

2003

11,908

32,641

14,034

3,076

6,004

67,664

Average allocated equity

2004

919

2,293

1,687

213

1,105

6,218

2003

738

2,024

870

191

1,233

5,056

Return on equity before taxes in %

2004

14.4

12.0

21.5

55.0

 

13.4

2003

23.6

11.6

17.3

35.4

 

12.8

Cost/income ratio in %

2004

79.7

52.4

57.8

55.2

 

64.9

2003

79.2

56.8

72.2

76.1

 

69.9

Risk/earnings ratio in %

2004

16.3

25.9

11.4

0.1

 

17.1

2003

18.2

29.3

17.0

0.2

 

21.5


Balance sheet of Bank Austria Creditanstalt at 31 December 2004

Assets

31 Dec. 2004

31 Dec. 2003

Change

Change

in EUR m

in EUR m

in EUR m

in %

Cash and balances with central banks

3,302

2,286

1,016

44.5

Trading assets

18,590

16,140

2,450

15.2

Loans and advances to, and placements with, banks

23,995

25,130

-1,134

-4.5

Loans and advances to customers

81,260

75,997

5,263

6.9

- Loan loss provisions

-3,215

-3,490

275

-7.9

Investments

16,668

16,005

663

4.1

Property and equipment

1,122

1,120

2

0.2

Intangible assets

1,133

1,193

-61

-5.1

Other assets

3,662

2,674

988

36.9

Total assets

146,516

137,053

9,463

6.9

Liabilities and shareholders' equity

31 Dec. 2004

31 Dec.2003

Change

Change

in EUR m

in EUR m

in EUR m

in %

Amounts owed to banks

39,927

39,133

794

2.0

Amounts owed to customers

57,856

53,824

4,032

7.5

Liabilities evidenced by certificates

19,617

17,399

2,218

12.7

Trading liabilities

8,960

8,560

400

4.7

Provisions

3,753

3,422

331

9.7

Other liabilities

4,033

3,118

914

29.3

Subordinated capital

5,291

5,419

-128

-2.4

Minority interests

439

362

76

21.1

Shareholders' equity

6,641

5,815

825

14.2

Total liabilities and shareholders' equity

146,516

137,053

9,463

6.9


Enquiries: Bank Austria Creditanstalt Press Relations
Martin Hehemann, tel.: +43 (0)5 05 05 57007; e-mail: martin.hehemann@ba-ca.com 
Peter N. Thier, tel.: +43 (0)5 05 05 52371; e-mail: peter.thier@ba-ca.com