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13.05.2009

Results for the first three months of 2009: Bank Austria off to a good start in 2009 with profit of EUR 547 million

  • Operating profit of EUR 1.1 billion, up by about 89 per cent on Q1 2008
    o Operating income rises strongly to a level exceeding the two billion euro mark
    o Net trading result positive again for the first quarter of 2009
    o Efficient cost management and synergies within UniCredit Group reduce costs
  • Significant increase in provisioning charge to EUR 446 million reflects economic environment
  • Profit before tax up by 40 per cent to EUR 722 million
  • Consolidated profit up by 35 per cent to EUR 547 million

While financial markets show initial signs of stabilisation, the economic environment continued to deteriorate in the first quarter of 2009 as the global economic downturn accelerated.

Erich Hampel, Bank Austria’s Chief Executive Officer: “In this environment we again proved our resilience and stability as a widely diversified universal bank and started the year with good results. Customer business in Austria shows a stable trend, and operating profit in Central and Eastern Europe continued to rise strongly, by 42 per cent. In the first three months, Markets & Investment Banking made a large positive contribution to overall profits, after poor results in previous quarters. Strict cost management also contributed to the 35 per cent increase in consolidated profit to EUR 547 million despite a significantly higher provisioning charge.“

Items in the income statement

Net interest income
in the first quarter of 2009 was EUR 1,335 million, up by 18.6 per cent on the first three months of the previous year (Q1 2008: EUR 1,125 million), and remained the major revenue component.

Net fees and commissions amounted to EUR 457 million, down by 11.9 per cent on the previous year (Q1 2008: EUR 519 million). The decline was due to persistently low demand for securities investments and lower income from payment transactions.

The net trading, hedging and fair value result turned positive in the first quarter of 2009, reaching EUR 190 million. The comparative figure for the same period of the previous year, when the financial market crisis first came to a head, was a net loss of EUR 143 million.

Overall, operating income improved significantly to a level of EUR 2,018 million, thus exceeding the two billion euro mark. The increase over the same period of the previous year was 30.7 per cent (Q1 2008: EUR 1,543 million).

Operating expenses declined by 5.8 per cent to EUR 892 million compared with the first three months of the previous year (Q1 2008: EUR 946 million). This shows that lower-cost processes and cross-regional synergies are beginning to take effect.

The improvement in operating profit was thus supported by both revenues and costs. Bank Austria’s operating profit for the first quarter of 2009 was EUR 1.126 million, up by 88.5 per cent on the same period of the previous year (Q1 2008: EUR 597 million).

As in the fourth quarter of the previous year, the persistently weak economic environment had an impact on the income statement items between operating profit and profit before tax. The provisioning charge increased as the risk position in commercial banking business deteriorated further. Net writedowns of loans and provisions for guarantees and commitments more than doubled compared with the same period of the previous year, to a level of EUR 446 million (Q1 2008: EUR 173 million).

Although the provisioning charge increased and net income from investment was lower, Bank Austria’s profit before tax rose by 40 per cent to EUR 722 million (Q1 2008: EUR 514 million).

Consolidated profit (after minority interests) for the first quarter of 2009 increased by 34.7 per cent to EUR 547 million (Q1 2008: EUR 406 million).

The following key financial data have been calculated on the basis of the above-mentioned results:

  • Return on equity before tax was 20.3 per cent (Q1 2008: 13.8 per cent).
  • Return on equity after tax was 16.1 per cent.
  • The cost/income ratio improved to 44.2 per cent (Q1 2008: 61.3 per cent).
  • The risk/earnings ratio (provisioning charge as a percentage of net interest income) rose to 33.4 per cent (Q1 2008: 15.4 per cent).  
  • The Tier 1 capital ratio based on credit risk was 7.98 per cent under Basel II1).
  • The Tier 1 capital ratio based on all risks was 6.95 per cent under Basel II.

Results of the Divisions

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

In the first quarter of 2009, the Retail Division strongly improved its profit before tax to EUR 44 million (Q1 2008: EUR 26 million), continuing to pursue its successful course in a difficult market environment. Return on equity before tax increased to 19.8 per cent (Q1 2008: 10.6 per cent), the cost/income ratio improved to 67.8 per cent (Q1 2008: 72.7 per cent).

The Private Banking Division was affected by persistently low activity in securities business in the first quarter of 2009. As a result of a change in the group of consolidated companies (Pioneer Investments Austria no longer included), a comparison with the same period of the previous year is of limited informative value. The Division generated a profit before tax of EUR 6 million (Q1 2008: EUR 17 million). Return on equity before tax was 16.3 per cent (Q1 2008: 33.7 per cent), the cost/income ratio 74.2 per cent (Q1 2008: 63.6 per cent).

Given the continued weakness of the economic environment, the provisioning charge in the Corporates Division rose significantly in the first quarter of 2009. Profit before tax amounted to EUR 99 million (Q1 2008: EUR 154 million). Return on equity before tax was 19.7 per cent (Q1 2008: 26.5 per cent). The cost/income ratio was 29.4 per cent (Q1 2008: 27.1 per cent).

In the first quarter of 2009, the Markets & Investment Banking Division returned to profitability, with a profit before tax of EUR 259 million (Q1 2008: a loss before tax of EUR 96 million). Return on equity before tax improved to 18.7 per cent (Q1 2008: minus 8.7 per cent), and the cost/income ratio was 15.2 per cent.

Bank Austria’s CEE Division again achieved a strong increase in its operating profit, which rose by 42 per cent to EUR 720 million. As the provisioning charge tripled compared with the same period of the previous year, profit before tax was EUR 386 million, down by 8 per cent on the first three months of the previous year (Q1 2008: EUR 420 million). Return on equity before tax was 16.2 per cent (Q1 2008: 20.8 per cent), while the cost/income ratio improved significantly to 39.8 per cent
(Q1 2008: 50.3 per cent).

The countries in Central and Eastern Europe belong to the core markets of Bank Austria. Despite challenging circumstances and a general view of CEE being a risky region the networking banks achieved positive results and clearly contributed to the overall good results of Bank Austria.

“Of course risks in some of the CEE countries have increased and the differences between the individual countries in the region have become more visible. However, the overall excellent results in CEE in the first quarter of 2009 prove that the CEE banks are very well positioned and that they can handle the current market situation in an effective manner. In the medium to long term CEE remains a region with a large business potential and good growth opportunities”, says Erich Hampel.

Within UniCredit Group Bank Austria manages the largest banking network in CEE with more than 56,000 employees serving 24 million customers in over 2,800 branches.

Balance sheet

Bank Austria’s total assets at 31 March 2009 were EUR 214.4 billion, down by 3.5 per cent from the level at the end of the previous year (31 December 2008: EUR 222.2 billion).

Like the consolidated balance sheet at 31 December 2008, the interim consolidated balance sheet at 31 March 2009 includes disposal groups classified as held for sale (valued at the lower of carrying amount and fair value less costs to sell), which are shown in accordance with IFRS 5 in the items Non-current assets and disposal groups classified as held for sale and Liabilities included in disposal groups classified as held for sale. These items include the investment bank UniCredit CAIB AG and card complete Service Bank AG.

On the assets side, loans and receivables with customers were EUR 129.3 billion as at 31 March 2009, 2 per cent lower than at the end of the previous year (31 December 2008: EUR 132 billion); the decline was mainly due to short-term transactions by institutional customers. Loans and receivables with banks decreased by EUR 0.5 billion or 2.6 per cent to EUR 19.5 billion (31 December 2008: EUR 20 billion). The reorientation of financial market activities with a view to focusing on customer-driven business is reflected in the decline of EUR 2.5 billion or 7.4 per cent in the item Non-current assets and disposal groups classified as held for sale to EUR 31.6 billion (31 December 2008: EUR 34.1 billion). 

On the liabilities side, interbank business declined by EUR 2.9 billion and liabilities included in disposal groups classified as held for sale were down by EUR 2.7 billion, accounting for most of the EUR 7.7 billion contraction of the balance sheet total. Deposits from customers declined by EUR 2.0 billion to EUR 93.2 billion (31 December 2008: EUR 95.2 billion) and debt securities in issue were EUR 32.4 billion, down by 0.7 per cent (31 December 2008: EUR 32.6 billion). Primary funds – the sum total of the above two items, representing funding from commercial banking business sources – reached EUR 125.6 billion or 59 per cent of the balance sheet total. This means that primary funds cover 97 per cent of loans and receivables with customers.

Equity was EUR 14.3 billion, up by 0.6 per cent compared with the level at the end of 2008 (31 December 2008: EUR 14.2 billion).

Capital ratios as at 31 March 2009 improved slightly compared with year-end 2008. The Tier 1 capital ratio based on credit risk pursuant to Basel II rose to 7.98 per cent. The Tier 1 capital ratio based on all risks increased to 6.95 per cent.  The Core Tier 1 capital ratio (Tier 1 capital ratio without hybrid capital based on all risks) was 6.64 per cent.

Staff numbers in the Bank Austria Group including the employees at UniCredit Group subsidiaries2) in Austria totalled 65,904 (FTE) as at 31 March 2009, a slight decrease compared with the previous year (31 March 2008: 66,825 employees). Of this total, 10,918 (FTE) were employed in Austria and 54,986 (FTE) in CEE countries.

1) Capital components held in non-consolidated companies are deducted from Tier 1 capital under Basel II and from total capital under Basel I.
2) Administration Services, Banking Transaction Services and Pioneer Investments Austria – three companies which were transferred on an intra-group basis.

 charts

Enquiries: Bank Austria
Communications Austria
Martin Halama, tel. +43 (0)5 05 05 52371;
e-mail: martin.halama@unicreditgroup.at

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