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10.11.2010

Results for the first nine months of 2010:
Bank Austria: net consolidated profit of EUR 761 million for the first nine months

 

  • Profit before tax of EUR 450 million in Q3 2010 was the best quarterly performance since the beginning of 2009
  • Net fees and commissions for the first nine months significantly higher than in the previous year; net interest income lower than the exceptionally high figure in the previous year, reflecting low level of interest rates, but with a steadily increasing quarterly trend
  • Provisioning charge continued to decline in Austria and Central and Eastern Europe (CEE), at EUR 1.3 billion it was down by 19 per cent from the previous year 
  • Net consolidated profit of EUR 761 million reflects an increasing quarterly trend, but was still lower than in the previous year as a result of goodwill impairment and weaker net interest income
  • Equity at EUR 17.9 billion, up by almost one quarter from year-end 2009
  • Tier 1 capital ratio (based on all risks) rose to 9.95 per cent

Bank Austria’s CEO Willibald Cernko: “In our customer business we achieved a strong operating performance in the first nine months. Profit before tax generated in the third quarter of 2010 was higher than in any quarterly period in the past one and a half years. But we have not yet returned to pre-crisis levels. In the countries where we are responsible for banking operations, the speed of recovery varies considerably: Turkey and Russia – the countries which make the largest contribution to CEE profits – are achieving the strongest growth. We are pleased to note that the provisioning charge has continued to decline in both Austria and Central and Eastern Europe. With our strong equity capital base we are well placed to meet the new capital adequacy requirements (Basel III). We see no need for action in this respect.
I continue to take a critical view of the multiple burden arising from Basel III, the new deposit guarantee scheme and levies on banks in Austria and Hungary – not so much in the context of Bank Austria because it is a strong and sound bank. But there is a risk of overburdening the entire banking system to the disadvantage of the economy.”


Items in the income statement

Net interest income
continued to increase over the preceding quarters, rising to EUR 3,513 million for the first nine months of 2010. The 6 per cent decline from the figure for the comparable period of the previous year was mainly due to weaker net interest income from international financial market trading activities and in Treasury (1-9 2009: EUR 3,743 million).

Net fees and commissions in the first nine months were EUR 1,480 million, up by 11 per cent on the comparable period of the previous year. Securities business increased in the course of the first nine months but did not yet match pre-crisis levels.

Net trading, hedging and fair value income for the first nine months of 2010 was EUR 277 million, a significant increase of 17 per cent over the figure for the same period of the previous year (1-9 2009: EUR 237 million). 

Operating income in the third quarter of 2010 was 7 per cent higher than in Q3 2009; the figure for the first nine months was EUR 5,406 million, only 2 per cent lower than in the previous year (1-9 2009: EUR 5,506 million).

Operating expenses rose moderately, by 3 per cent to EUR 2,782 million, compared with the same period of the previous year (1-9 2009: EUR 2,693 million). The slight increase of 2.6 percentage points in the cost/income ratio to 51.5 per cent primarily reflects lower net interest income.

In the third quarter of 2010, operating profit exceeded the previous year’s figure by 10 per cent. Operating profit for the first nine months was EUR 2,623 million, down by 7 per cent from the same period of the previous year (1-9 2009: EUR 2,813 million).

Net writedowns of loans and provisions for guarantees and commitments were significantly reduced, by 19 per cent to EUR 1,314 million, compared with the first nine months of the previous year (1-9 2009: EUR 1,612 million). Reductions were made in Austria-based business, where the provisioning charge declined by 23 per cent to EUR 302 million for the first nine months, and in Central and Eastern Europe, where the provisioning charge was reduced by 17 per cent to EUR 1,010 million. Kazakhstan and Ukraine, both with declining loan loss provisions over the past quarters, accounted for about 47 per cent of net writedowns of loans and provisions for guarantees and commitments in CEE, whereas the provisioning charge in two large countries – Turkey and Russia – was significantly reduced.    

Among the other non-operating items between operating profit and profit before tax, the impairment loss of EUR 162 million on goodwill relating to the banking subsidiary in Kazakhstan, which was recognised in the second quarter, had a significant impact on results for the first nine months of 2010. Net income from investments was EUR 61 million, down from EUR 79 million in the previous year, as Bank Austria’s contractual participation in current profits of the Polish UniCredit banking subsidiary expired at the end of 2009; in the previous year, the latter item amounted to EUR 74 million.

Profit before tax for the third quarter of 2010 reached EUR 450 million, the best quarterly performance since the first quarter of 2009. However, on account of the above-mentioned special effects, profit before tax for the first nine months of 2010 was lower  than in the comparable period of the previous year. Profit before tax for the first nine months was EUR 1,094 million, down by 11 per cent from the previous year (1-9 2009: EUR 1,224 million).

After deduction of minorities, net consolidated profit (attributable to the owners of Bank Austria) for the first nine months of 2010 amounted to EUR 761 million (1-9 2009: EUR 972 million).

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

  • Return on equity before tax was 8.7 per cent (1-9 2009: 11.5 per cent).
  • Return on equity after tax excluding minority interests was 6.2 per cent (1-9 2009: 9.6 per cent).
  • The cost/income ratio rose slightly, to 51.5 per cent (1-9 2009: 48.9 per cent).
  • The risk/earnings ratio (provisioning charge as a percentage of net interest income) declined significantly, to 37.4 per cent (1-9 2009: 43.1 per cent). 
  • The Tier 1 capital ratio (based on all risks) improved to 9.95 per cent (year-end 2009: 8.68 per cent).
  • The Core Tier 1 capital ratio (Tier 1 capital without hybrid capital) rose to 9.63 per cent (year-end 2009: 8.33 per cent).


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

In the first nine months of 2010, the Family & SME Banking Division generated a profit before tax of EUR 42 million, an increase of 26 per cent over the same period of the previous year (1-9 2009: EUR 33 million). The improvement resulted from higher activity levels in securities business, strict cost management and a decline in the provisioning charge. The cost/income ratio rose slightly, to 74.8 per cent (1-9 2009: 73.3 per cent).

The Private Banking Division’s profit before tax for the first nine months of 2010 reached EUR 27 million (1-9 2009: EUR 34 million). The decline resulted from lower net interest income. The cost/income ratio was 72.9 per cent (1-9 2009: 67.6 per cent).

The favourable performance trend recorded in the Corporate & Investment Banking (CIB) Division in the two preceding quarters continued in the third quarter of 2010. Profit before tax for the first nine months of the current year was EUR 552 million (1-9 2009: EUR 674 million), making a substantial contribution to the Group’s overall results. Operating income was lower than in the same period of the previous year, reflecting the exceptionally strong performance of UniCredit CAIB AG in the first quarter of 2009. But operating expenses remained more or less unchanged and the provisioning charge was significantly reduced compared with the first nine months of the previous year. The cost/income ratio of the CIB Division was at a low level of 32.7 per cent (1-9 2009: 26.8 per cent).

The CEE Division’s profit before tax for the first nine months was EUR 863 million, up by 4.4 per cent on the same period of the previous year (1-9 2009: EUR 827 million), thus again making a substantial contribution to the Group’s overall results. The increase in profit before tax was due to the decline in the provisioning charge. The cost/income ratio rose slightly, to 45.6 per cent, thus remaining below the average for the bank as a whole (1-9 2009: 41.2 per cent).

This performance was supported by an improved interest margin in the period from July to September, which led to a steady increase in net interest income and offset the temporary downturn in the first half of 2010, when credit spreads for CEE were at high levels. At the same time, the provisioning charge improved, although there are wide regional variations. Net writedowns of loans and provisions for guarantees and commitments in the third quarter of 2010 were EUR 319 million, significantly lower than in the preceding quarter. In Turkey, successful debt collection efforts enabled the local bank to release loan loss provisions made in previous periods. An easing of the situation was also seen in Russia.

Bank Austria is UniCredit’s sub-holding company for operations in Central and Eastern Europe. With a banking network comprising about 52,000 employees and more than 2,700 branches, it holds a leading position in this region.

Balance sheet
Bank Austria’s total assets as at 30 September 2010 were EUR 191.5 billion, down by EUR 2.9 billion or 1.5 per cent as a result of the sale of UniCredit CAIB (31 December 2009: EUR 194.5 billion). Overall, the quality of the balance sheet improved. Loans and receivables with customers continued to grow, deposits remained stable, and equity rose strongly on account of the capital increase in March 2010. The leverage ratio (total assets / equity) thus improved from 13.5 to 10.7.

On the assets side, loans and receivables with customers rose by 3.3 per cent to EUR 127.7 billion as at 30 September 2010 (31 December 2009: EUR 123.6 billion), representing 67 per cent of total assets (year-end 2009: 64 per cent). Loans and receivables with banks declined by EUR 2.4 billion or 10.1 per cent to EUR 20.7 billion (31 December 2009: EUR 23.1 billion).

On the liabilities side, deposits from customers increased slightly to EUR 97.7 billion (31 December 2009: EUR 97 billion), while debt securities in issue were down by EUR 0.9 billion to EUR 27.9 billion (31 December 2009: EUR 28.8 billion). Primary funds – i.e. the sum total of deposits from customers and debt securities in issue – amounted to EUR 125.6 billion; they accounted for 65.6 per cent of the balance sheet total, an increase of 1 percentage point. This means that loans and receivables with customers were almost fully covered by primary funds.

The loan/deposit ratio is currently 130.7 per cent (31 December 2009: 127.4 per cent).

Equity was EUR 17.9 billion, up by a substantial EUR 3.5 billion or 24.1 per cent on the year-end 2009 level (31 December 2009: EUR 14.4 billion).
 
Capital ratios as at 30 September 2010 improved significantly compared with year-end 2009 as UniCredit strengthened Bank Austria’s equity capital base with a capital increase of EUR 2 billion in March 2010. The Tier 1 capital ratio based on credit risk under Basel II rose to 11.04 per cent (31 December 2009: 9.76 per cent). The Tier 1 capital ratio based on all risks rose to 9.95 per cent (31 December 2009: 8.68 per cent). The Core Tier 1 capital ratio (Tier 1 capital ratio without hybrid capital) based on all risks was 9.63 per cent (31 December 2009: 8.33 per cent).

Staff numbers in the Bank Austria Group including the employees of UniCredit subsidiaries1 in Austria totalled 62,376 (full-time equivalents) as at 30 September 2010 (30 September 2009: 63,527). Of this total, 10,739 FTEs were employed in Austria and 51,637 FTEs in CEE countries.

1 Administration Services (now UniCredit Business Partner), BTS (Banking Transaction Services), Pioneer Investments Austria, WAVE (now UGIS), UniCredit Leasing and UniCredit CAIB were transferred on an intra-group basis.

 charts (PDF; 1.643 KB)


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

 

 

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