Results of Bank Austria for the first six months of 2010:
Upward trend in operating performance continues in the second quarter
- Increase in revenues and operating profit in Austria and CEE in Q2 2010
- Profit before tax for Q2 2010 reached EUR 354 million, the highest level seen in the past five quarters and up by 22 per cent on the preceding quarter
- All customer business divisions generated higher net fees and commissions than in the first half of the previous year
- Net interest income lower than in the exceptionally good first half of 2009, reflecting the current interest rate environment
- Provisioning charge was high, at EUR 896 million, but 11% lower than a year earlier
- Impairment loss of EUR 162 million on goodwill in Kazakhstan has an impact on half-year results
- Net consolidated profit of EUR 459 million reflects impairment loss on goodwill and weaker net interest income and trading performance
- Still comfortable capital base: Tier 1 capital ratio (based on all risks) at 10.17 per cent compared with 8.68 per cent at year-end 2009
Bank Austria's CEO Willibald Cernko: "The trend reversal which started in the first quarter continued in the second quarter. Both operating profit and profit before tax reached the highest levels seen in the past five quarters. However, compared with the same period of the previous year, the strong operating performance was affected by two factors: one was the impairment loss on goodwill at our banking subsidiary ATF in Kazakhstan; the other factor resulted from the lower net interest income compared with the exceptionally strong performance in the previous year. But the upward trend in customer business in Austria and in Central and Eastern Europe means that there is reason to be cautiously optimistic about developments in the remaining part of the year."
Items in the income statement
Net interest income increased by 6 per cent from the first quarter to the second quarter of the current year, but in the first half of 2010 it was 10 per cent lower than in the same period of the previous year. The decline reflects the current interest rate environment and an exceptionally strong interest-earning performance in investment banking (CAIB) in the comparable period of 2009. Net interest income for the first six months of 2010 was EUR 2,301 million (H1 2009: EUR 2,557 million).
Net fees and commissions, on the other hand, rose by 9.9 per cent to EUR 988 million in the first six months of 2010 (H1 2009: EUR 899 million), thanks to higher levels of activity in securities business and asset management services. From the first quarter to the second quarter of 2010, net fees and commissions increased by 10 per cent.
Net trading, hedging and fair value income for the first six months was EUR 234 million, down by 13.9 per cent from the figure a year earlier (H1 2009: EUR 271 million).
Overall, operating income rose by 12 per cent from Q1 to Q2 2010. The total figure for the first six months reached EUR 3,601 million (H1 2009: EUR 3,823 million). The decrease of 5.8 per cent from the same period of the previous year was due to the reasons explained above.
Operating expenses continued to show a flat trend, rising marginally, by 2.5 per cent, to EUR 1,841 million (H1 2009: EUR 1,795 million).
Operating profit for the second quarter of 2010 was 26 per cent higher than for the preceding quarter. The total figure for the first six months was EUR 1,761 million, with weaker results from investment banking – both net interest income and trading performance – accounting for almost all of the decline of 13.2 per cent compared with the first half of the previous year (H1 2009: EUR 2,028 million).
Net writedowns of loans and provisions for guarantees and commitments in the first six months of 2010 were EUR 896 million, a significant decrease of 11.3 per cent from the same period of the previous year (H1 2009: EUR 1,009 million).
Among the other "non-operating" items between operating profit and profit before tax, a significant factor in the second quarter was a goodwill impairment in the amount of EUR 167 million: the valuation scenario for our banking subsidiary ATF in Kazakhstan was updated and this made it necessary to recognise an impairment loss of EUR 162 million on goodwill.
Net income from investments was EUR 39 million, significantly lower than in the first half of the previous year (H1 2009: EUR 56 million), mainly because Bank Austria's contractual participation in current profits of the Polish UniCredit banking subsidiary expired at the end of 2009.
Profit before tax for the second quarter of 2010 was EUR 354 million, exceeding the levels of preceding quarters; the figure for the first half of 2010 was EUR 644 million, down by 38.5 per cent from the first half of the previous year (H1 2009: EUR 1,048 million).
After deduction of income tax, net profit amounted to EUR 480 million (H1 2009: EUR 860 million). Net consolidated profit (attributable to the owners of Bank Austria), excluding minority interests, was EUR 459 million (H1 2009: EUR 833 million).
The following key financial data have been calculated on the basis of the above-mentioned results:
- Return on equity before tax was 7.8 per cent.
- Return on equity after tax was 5.8 per cent.
- The cost/income ratio came to 51.1 per cent.
- The risk/earnings ratio (provisioning charge as a percentage of net interest income) was 38.9 per cent.
- The Tier 1 capital ratio (based on all risks) improved to 10.17 per cent under Basel II.
- The Core Tier 1 capital ratio (based on all risks) improved to 9.85 per cent.
Results of the Divisions
Bank Austria reports its results in four Divisions: Family & SME Banking, Private Banking, Corporate & Investment Banking (CIB) and Central Eastern Europe (CEE). The bank also shows results for its Corporate Center.
In the first six months of 2010, the Family & SME Banking Division1 generated a profit before tax of EUR 41 million, exceeding the figure for the same period of the previous year by 70 per cent (H1 2009: EUR 24 million). The increase is due to higher levels of activity in securities business, strict cost management and a decline in the provisioning charges. The cost/income ratio improved to 72.4 per cent (H1 2009: 73.4 per cent).
The Private Banking Division benefited from the consistent implementation of its customer-focused strategy and from a slight increase in demand for securities investments. On this basis its profit before tax rose by 9 per cent to EUR 22 million (H1 2009: EUR 20 million). The cost/income ratio declined to 68.8 per cent (H1 2009: 69.4 per cent).
The Corporate & Investment Banking (CIB) Division's profit before tax for the second quarter of 2010 was EUR 252 million, higher than in any of the four preceding quarters. Profit before tax for the first half of 2010 amounted to EUR 406 million (H1 2009: EUR 498 million) as interest income from financial market activities was lower than in the first six months of the previous year. The cost/income ratio was 30.9 per cent (H1 2009: 25.9 per cent).
In an economic environment characterised by recovery, the CEE Banking Division achieved a solid operating profit of EUR 1.2 billion (H1 2009: EUR 1.4 billion). At this level it was higher than in previous quarters, though lower than in the first half of 2009 due to a decline in net trading income. Reflecting the slow improvement in the market conditions, risk provisions remained 2 per cent below the previous year's level. The cost/income ratio was 46.6 per cent (H1 2009: 39.9 per cent).
Bank Austria is the hub for the CEE region with more than 2,700 branches and 51,000 employees2. As clear market leader with an extensive network in Central and Eastern Europe, the region remains a key pillar for the Group. The importance of the region did not change during the financial crisis and the Group clearly acts as a long-term investor in the region.
The economic environment in CEE continues to stabilise, as can be seen from the upward revision of the GDP forecast to 3.1 per cent for 2010, thus remaining three times as high as the forecast for the euro area (1.0 per cent). It is however a two-speed recovery, with some countries growing faster (like Turkey or Russia) and others lagging behind (like Romania and Bulgaria). While economic conditions in the countries differ, business volumes and operating results in the area continued to develop steadily over the previous quarters.
"Our CEE banks showed a satisfactory development and again provided a highly positive contribution to the good results of Bank Austria. With the recovery remaining on track the CEE region offers positive potential and will remain the major growth area for our Group in the future. Already one-fifth of the planned 100 new branches have been opened, offering our customers an extensive and strong local network", says Federico Ghizzoni, Deputy CEO of Bank Austria.
Bank Austria's total assets as at 30 June 2010 were EUR 200.5 billion, up by 3.1 per cent on the level at year-end 2009 (31 December 2009: EUR 194.5 billion).
On the assets side, loans and receivables with customers amounted to EUR 129.7 billion as at 30 June 2010, an increase of 5 per cent over the figure at the end of the previous year (31 December 2009: EUR 123.6 billion). Loans and receivables with banks rose by EUR 1.5 billion or 6.5 per cent to EUR 24.6 billion (31 December 2009: EUR 23.1 billion). Non-current assets and disposal groups classified as held for sale declined to EUR 25 million (31 December 2009: EUR 13.2 billion) following the sale of CAIB to UniCredit Bank AG, Munich (HypoVereinsbank [HVB], the former Bayerische Hypo- und Vereinsbank AG), which was finalised as at 1 June 2010.
On the liabilities side, deposits from customers increased by EUR 2.8 billion to EUR 99.8 billion (31 December 2009: EUR 97 billion), while debt securities in issue declined slightly, by EUR 1.3 billion to EUR 27.5 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 127.4 billion or 63.5 per cent of the balance sheet total. This means that loans and receivables with customers were almost fully covered by primary funds.
As at 30 June 2010, the loan/deposit ratio was 129.9 per cent (31 December 2009: 127.4 per cent).
Equity was EUR 18 billion, up by 24.8 per cent on the year-end 2009 level (31 December 2009: EUR 14.4 billion).
Capital ratios as at 30 June 2010 improved significantly compared with year-end 2009 as UniCredit Group strengthened Bank Austria's equity capital base with a capital increase of EUR 2 billion based on a resolution adopted at the Extraordinary General Meeting on 4 March 2010. The Tier 1 capital ratio based on credit risk under Basel II rose to 11.32 per cent (31 December 2009: 9.76 per cent). The Tier 1 capital ratio based on all risks rose to 10.17 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 9.85 per cent (31 December 2009: 8.33 per cent).
Staff numbers in the Bank Austria Group including the employees of UniCredit Group subsidiaries3 in Austria totalled 62,624 (full-time equivalents) as at 30 June 2010 (30 June 2009: 64,372 employees). Of this total, 10,891 FTEs were employed in Austria and 51,733 FTEs in CEE countries.
|1||Following the integration of investment banking into the newly established Corporate & Investment Banking Division, the SME customer group will in the future be served by the Retail Division, which has been renamed "Family & SME Banking Division". High-net-worth individuals served by the former Retail Division were previously transferred to the reshaped Private Banking Division.|
|2||Figures excluding Poland.|
|3||Administration Services (now UniCredit Business Partner), BTS (Banking Transaction Services), Pioneer Investments Austria, WAVE (now UGIS), UniCredit Leasing and CAIB were transferred on an intra-group basis.|
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Enquiries: Bank Austria Media Relations
Martin Halama, Tel. +43 (0) 50505 - 52371