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12.05.2010

Results for the first three months of 2010:
Bank Austria posts net consolidated profit of EUR 242 million in Q1

  • Stable trend in operating income and flat cost trend resulted in operating profit of EUR 778 million
  • Provisioning charge declined for the first time in a year, to EUR 439 million
  • Profit before tax rose significantly, to EUR 290 million, compared with the two preceding quarters
  • Net profit without minorities reached EUR 242 million, almost double the figure for Q4 2009
  • Core Tier 1 capital ratio rose to 10 per cent following capital increase
  • Leverage (ratio of equity to total assets) improved to 11.6

Bank Austria's CEO Willibald Cernko: "We again achieved a sound performance in an environment which has remained challenging. The downward trend seen in the second half of 2009, in particular, was stopped and results for the first quarter of 2010 significantly exceeded those for the two preceding quarters. It remains to be seen whether this is the first sign of a sustained turnaround, but various indicators suggest that the environment is improving: the provisioning charge declined for the first time in a year, the CEE countries as a region have regained international confidence, and volume in commercial banking business with customers is rising again in Austria and CEE. As a result of the capital increase through funds provided by UniCredit, our parent company, Bank Austria's Core Tier 1 capital ratio rose to a very strong 10 per cent. We are thus well placed to continue to fulfil our core function of providing loans to companies and private households in Austria and Central and Eastern Europe."

Items in the income statement
In a persistently difficult environment, revenues generated by Bank Austria have been very stable over the past few quarters. Operating income in each of the past three quarters more or less matched the pre-Lehman levels. In the first quarter of 2009, Bank Austria achieved an exceptionally strong performance which was in contrast to prevailing economic trends. The strong revenue performance in the first quarter of the previous year was based on the fact that volume in Central and Eastern Europe was initially maintained, driven by the growth momentum in preceding quarters; additionally, the bank benefited from the unusual market environment to generate significant net interest income and net trading income from financial market activities. Later on, the full impact of the recession was reflected in declining credit demand and rising provisioning charges. These factors should be noted when analysing results for the first quarter of 2010. For this reason the following comments include references to business developments in the third and fourth quarters of 2009, in addition to the comparative figures for Q1 2009, to provide a better understanding of performance in early 2010.

Net interest income for the first quarter of 2010 was EUR 1,118 million, almost matching the Q4 2009 figure (down by 1 per cent), but 16 per cent lower than in Q1 2009, a development which is due to the market environment prevailing a year ago. At that time the expansionary monetary policy course led to a sharp fall in market rates, which fed through to net interest income (Q1 2009: EUR 1,335 million).

Net fees and commissions showed a different trend, reaching EUR 470 million, which was 5 per cent down from the Q4 2009 level but up by 3 per cent on the first quarter of the previous year (Q1 2009: EUR 457 million). This improvement was due to slightly higher activity levels in securities and asset management business.

Net trading, hedging and fair value income was EUR 76 million, 14 per cent lower than in the preceding quarter and down by 60 per cent from the first quarter of the previous year (Q1 2009: EUR 190 million). This strong year-on-year decline reflects the large trading profit in CEE in the first quarter of 2009; as the market environment returned to normal, net trading income in CEE was lower in subsequent quarters.

Overall, operating income totalled EUR 1,695 million, down by only 3 per cent from the fourth quarter of 2009 but 16 per cent lower than in the first quarter of the previous year (Q1 2009: EUR 2,018 million) due to the factors described above.

Operating expenses continued to show a flat trend: at EUR 916 million, they were 1 per cent lower than in the preceding quarter and only 3 per cent higher than in the first quarter of the previous year (Q1 2009: EUR 892 million).

Operating profit was EUR 778 million, down by 5 per cent from the fourth quarter of 2009 and 31 per cent lower than the exceptionally high figure for the first quarter of the previous year (Q1 2009: EUR 1,126 million). The year-on-year decline reflects the trend in net interest income generated by Markets operations and in net trading income of the CEE Division.

Net writedowns of loans and provisions for guarantees and commitments declined in the first quarter of 2010, for the first time in a year. At EUR 439 million, the provisioning charge was significantly lower, by up to one-third, than in the two preceding quarters and 2 per cent lower than in the first quarter of the previous year (Q1 2009: EUR 446 million).

Among the other "non-operating" items between operating profit and profit before tax, net income from investments was EUR 22 million, significantly lower than in the same period of the previous year (Q1 2009: EUR 47 million). This was mainly due to the contractual expiry of Bank Austria's participation in current profits of the Polish UniCredit banking subsidiary at the end of 2009. 

Profit before tax was EUR 290 million, more than double the figure for Q4 2009 (up by 161 per cent) but down by 60 per cent from the first quarter of the previous year, as a result of the factors described above.

After deduction of income tax, net profit amounted to EUR 255 million, an increase of 92 per cent over the fourth quarter of 2009 and a decrease of 55 per cent from Q1 2009. Deducting also the minorities, the net profit attributable to the parent company amounted to EUR 242 million, an increase of 87 per cent over the fourth quarter of 2009 but 56 per cent below Q1 2009.

The following key financial data have been calculated on the basis of the above-mentioned results:
• Return on equity before tax was 7.4 per cent.
• Return on equity after tax was 6.4 per cent.
• The cost/income ratio came to 54.1 per cent.
• The risk/earnings ratio (provisioning charge as a percentage of net interest income) was 39.3 per cent.
• The Tier 1 capital ratio (based on all risks) improved to 10.35 per cent under Basel II1, as a result of the EUR 2 billion capital increase
• The Core Tier 1 capital ratio (based on all risks) improved to 10.01 per cent.

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

In the first quarter of 2010, the Retail Division generated a profit before tax of EUR 20 million. This figure is significantly higher than the average for the second, third and fourth quarters of 2009, reflecting an increase in securities business and strict cost management. But it is lower than in the first quarter of 2009 (Q1 2009: EUR 37 million) due to narrower interest margins and a slight increase in the provisioning charge. The cost/income ratio rose slightly to 72.8 per cent (Q1 2009: 69 per cent).

Profit before tax in the Private Banking Division rose to EUR 11 million (Q1 2009: EUR 6 million) as demand for securities investments increased slightly. The cost/income ratio declined to 69 per cent (Q1 2009: 79.5 per cent).

The Corporate & Investment Banking (CIB) Division's profit before tax in the first quarter of 2010 reached EUR 154 million, a figure which was significantly higher than in Q4 2009 and more or less matched the figures for the second and third quarters of the previous year. Lower net interest income from financial market activities was the main reason why profit before tax was lower than in the first quarter of the previous year (Q1 2009: EUR 379 million) The cost/income ratio was 36.3 per cent (Q1 2009: 20.9 per cent).

The CEE Division achieved a profit before tax of EUR 259 million in the first quarter of 2010. At this level, it was significantly higher than in the two preceding quarters but lower than in the first quarter of the previous year (Q1 2009: EUR 383 million). Almost all of the decrease was due to the decline in net trading income as the market environment returned to normal. The cost/income ratio was 46.9 per cent (Q1 2009: 39.9 per cent).

Bank Austria is the hub for UniCredit Group's leading banking network in Central and Eastern Europe, with more than 51,700 employees and around 2,700 branches. The economic environment in CEE started to stabilise and recovery is in sight, reflected by the upwards revision of the regional GDP forecast to 2.8 per cent for 2010, being three times as high as the forecast for the euro area (0.9 per cent). The CEE region again achieved positive results, proving that the trust in the region's potential had been right. Given the slow recovery, the provisioning charges flattened and were covered by the operating profit.

"The CEE region remains the growth engine for Europe and we have already selectively started to invest again in our network by opening new branches. Altogether 100 branches are going to be opened in 2010, to the benefit of our customers who can rely on an extensive network with deep local roots in the region", says Federico Ghizzoni, Deputy CEO of Bank Austria.

Balance sheet
Bank Austria's total assets as at 31 March 2010 were EUR 201 billion, up by 3.3 per cent on the level at the end of the previous year (31 December 2009: EUR 194.5 billion).

On the assets side, loans and receivables with customers amounted to EUR 126.5 billion as at the end of March 2010, an increase of 2.3 per cent over the figure at the end of the previous year (31 December 2009: EUR 123.6 billion). Loans and receivables with banks increased slightly, by 1.4 per cent, to EUR 23.4 billion (31 December 2009: EUR 23.1 billion).

On the liabilities side, deposits from customers rose by 0.6 per cent to EUR 97.6 billion (31 December 2009: EUR 97 billion) and debt securities in issue increased by 2.9 per cent to EUR 29.6 billion (31 December 2009: EUR 28.8 billion). Primary funds – i.e. the sum total of deposits from customers and debt securities in issue, representing funding from sources of commercial banking business – totalled EUR 127.2 billion or 63.3 per cent of the balance sheet total. This means that loans and receivables with customers were covered by primary funds to the extent of 101 per cent.

Equity was EUR 17.4 billion, up by 20.8 per cent on the year-end 2009 level as a result of the EUR 2 billion capital increase through funds provided by UniCredit Group (31 December 2009: EUR 14.4 billion). Leverage (the ratio of equity to total assets) thus improved from 13.5 at the end of 2009 to 11.6 at the end of the first quarter of 2010.

Capital ratios as at 31 March 2010 improved significantly compared with year-end 2009. The Tier 1 capital ratio based on credit risk under Basel II rose to 11.69 per cent (31 December 2009: 9.76 per cent). The Tier 1 capital ratio based on all risks improved to 10.35 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 rose to 10.01 per cent (31 December 2009: 8.33 per cent).

Staff numbers in the Bank Austria Group including the employees of UniCredit Group subsidiaries2 in Austria totalled 62,815 (full-time equivalents) as at 31 March 2010 (31 March 2009: 66,181 employees). Of this total, 11.066 FTEs were employed in Austria and 51,749 FTEs 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 UniCredit Leasing, AS (Administration Services), BTS (Banking Transaction Services) and Pioneer Investments Austria were transferred on an intra-group basis.

 charts (PDF; 103 KB)

Enquiries: Bank Austria Media Relations
 Martin Halama, tel. +43 (0) 50505 52371
 e-mail: martin.halama@unicreditgroup.at

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