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Preliminary results for the 2015 financial year:
Bank Austria posts net profit of about EUR 1.3 billion for 2015

  • Sound operating performance from customer business despite historically low market interest rates and persistently weak economic growth
    • Lending volume up by 2.3 per cent to EUR 116.4 billion, with growth of 4.1 per cent in Austria while lending volume in CEE rose only slightly on account of negative exchange rate effects compared with the previous year
    • Significant year-on-year growth of 7.9 per cent in customer deposits in Austria and CEE to a total of EUR 110.3 billion
  • Operating costs decline slightly, by 1.9 per cent, thanks to strict cost management
  • Net write-downs of loans up by 28.8 per cent to EUR 1,007 million
    • The main reason for the increase is the conversion, required by law, of CHF loans in Croatia, which had a one-off impact of EUR 205 million
    • Credit risk associated with Austrian customer business practically zero
  • Systemic charges including bank levies up by EUR 89 million to EUR 326 million, an increase of 37.7 per cent over the previous year; the figure is equal to over 20 per cent of profit before tax
  • After deduction of non-controlling interests, net profit of EUR 1,325 million matches the previous year’s level although the participation in profits of the Markets subdivision of UniCredit’s CIB Division expired at the end of 2014
  • Total capital ratio2 up by 142 basis points on year-end 2014, reaching 14.9 per cent; Common Equity Tier 1 capital ratio2 up by 71 basis points to 11.0 per cent
  • Excellent direct-funding ratio underlines the bank’s strong liquidity position
    • Customer loans funded with customer deposits and debt securities in issue to the extent of 119.6 per cent

Bank Austria’s CEO Willibald Cernko: "In an environment which remained challenging in 2015 we performed well again, achieving a net profit of EUR 1.3 billion, with contributions coming from successful customer business in Austria and in the markets in Central and Eastern Europe. The clear commitment to a universal banking business model in Austria was an important decision on the future direction of our Austrian operations. This enables us to resolutely pursue the transformation, started two years ago, of our business model to respond to changes in customer needs while ensuring sustainable profitability. In this context I would like to repeat once more that the costs arising from bank levies and other systemic charges increased dramatically in the past year. In combination with special laws which subsequently change the rules for business operations at the expense of one party, namely banks, this far exceeds the limits of performance capacity. Austrian and European politicians will have to decide whether they wish to go on milking the cow or slaughter it – doing both at the same time will not work out."

Items in the income statement3

Net interest remained the most important income component, accounting for 57.6 per cent of total operating income. In 2015, net interest was EUR 3,386 million, down by 3.6 per cent (2014: EUR 3,511 million, reflecting persistently low interest rates, although the bank achieved volume growth.

Dividend income and other income from equity investments rose by 7.8 per cent to EUR 535 million (2014: EUR 496 million). Our Turkish joint venture contributed a substantial EUR 349 million to the total figure.

Net fees and commissions continued to develop favourably, rising by EUR 75 million or 5.5 per cent to EUR 1,439 million (2014: EUR 1,364 million). Particularly strong growth was seen in Austria, with growth of nearly 9 per cent in net fees and commissions driven by very favourable developments in retail banking and in the CIB Division.

Net trading, hedging and fair value income was EUR 420 million, down by 13.8 per cent (2014: EUR 487 million). The decline was mainly due to the fact that the contractual participation (following the sale of CAIB) in profits of the Markets subdivision of UniCredit’s CIB Division ended (in 2014 the profit contribution amounted to EUR 98 million).

Total operating income reached EUR 5,875 million, a slight decline of 1.8 per cent compared with the previous year (2014: EUR 5,982 million). This development is mainly explained by the low interest rate environment and a significantly lower interest margin; moreover, the contractual participation in profits of the Markets subdivision of UniCredit’s CIB Division ended.

Cost efficiency was further improved thanks to strict cost management and additional efficiency enhancement in 2015. This is of great importance in view of the banking sector’s generally weak revenue performance, which reflects low levels of economic growth and demand, and in view of persistently low interest rates while additional burdens resulting from fiscal charges and regulatory requirements are steadily increasing. Operating costs in 2015 were EUR 3,076 million, down by 1.9 per cent (2014: EUR 3,136 million).

Operating profit was EUR 2,800 million, down by 1.6 per cent on the previous year (2014: EUR 2,846 million). The decrease was due to two effects on the revenue side: net interest was lower, reflecting historically low interest rates; and the contractual participation in profits of the Markets subdivision of UniCredit’s CIB Division ended, leading to lower net trading, hedging and fair value income.

Net write-downs of loans and provisions for guarantees and commitments in 2015 amounted to EUR 1,007 million, an increase of 28.8 per cent (2014: EUR 782 million). The main reason for the higher provisioning charge was the significant increase in the third quarter, which largely resulted from the conversion, required by law, of CHF loans in Croatia; the charge in this context was EUR 205 million. Loan loss provisions had to be further increased also in Russia and Ukraine in 2015. Overall, net write-downs of loans and provisions for guarantees and commitments in CEE rose significantly, by 50.8 per cent to EUR 1,017 million (2014: EUR 675 million). Without the mandatory conversion of foreign currency loans, the provisioning charge in CEE would have increased by only 20.3 per cent. The coverage ratio, i.e. the extent to which non-performing exposures are covered by loan loss provisions, improved significantly in the bank as a whole and in CEE. In Austria, the provisioning charge developed very favourably as a result of increased recoveries on loans for which provisions had previously been made and also because of lower additions to non-performing exposures; overall, there was a net release of provisions amounting to EUR 10 million. The cost of risk (net write-downs of loans expressed in basis points of average loans to customers) rose from 68 to 86 basis points. The coverage ratio improved by 84 basis points to 56.3 per cent.

In 2015, net operating profit was EUR 1,792 million, down by 13.2 per cent (2014: EUR 2,064 million) as operating income declined in the market environment described above and because net write-downs of loans were higher, largely due to the one-off effect of mandatory conversion of CHF loans in Croatia.

The balance of non-operating income and expenses between net operating profit and profit before tax was a net expense of EUR 171 million in 2015, a significant improvement over the previous year (2014: a net expense of EUR 331 million). This effect was mainly due to the item integration/restructuring costs, which shows income of EUR 312 million in the income statement for 2015 (2014: an expense of EUR 14 million); however, for accounting reasons, this requires an offsetting entry in equity which leads to an almost neutral result from restructuring (minus EUR 27 million).

Cost growth in the operating divisions was successfully contained through strict cost management. These efforts were offset, however, by further increases in bank levies and other systemic charges – shown among non-operating income and expenses in the item "systemic charges", which rose by 37.7 per cent to EUR 326 million (2014: EUR 237 million).

In Austria, bank levies and other systemic charges totalled EUR 181 million, of which EUR 134 million related to the bank levy (2014: EUR 124 million) and EUR 47 million related to contributions to the deposit guarantee scheme and the bank resolution fund. In CEE the total charge was EUR 145 million, of which bank levies (in Hungary and Slovakia) accounted for EUR 34 million and other systemic charges totalled EUR 112 million, whereof EUR 86 million contributed to the deposit guarantee schemes and EUR 26 million contributed to the bank resolution funds in Hungary, Croatia, Slovenia, Bulgaria and Romania.

Profit before tax was EUR 1,621 million, down by 6.5 per cent (2014: EUR 1,733 million) on account of the one-off charge in Croatia resulting from the mandatory conversion of CHF loans, and also against the background weak economic growth, low interest rates and significantly higher systemic charges in 2015.

The Group‘s strategy aims at focusing growth – and the allocation of capital required for such growth – on CEE countries where the outlook for growth and revenue generation is better on a sustainable basis, and at further reducing risk. In line with this strategy, UniCredit Bank Austria AG and UniCredit SpA signed a binding agreement to transfer Ukrsotsbank to the Alfa Group. The closing of the transaction is expected for 2016. Until then the Ukrainian banking subsidiary Ukrsotsbank will continue to be classified in the balance sheet as a disposal group held for sale. The income statement items of Ukrsotsbank have been combined and are shown together with write-downs and other charges in the item "total profit or loss after tax from discontinued operations". Total profit or loss after tax from discontinued operations is a loss of EUR 303 million because the item reflects the impact of Ukrsotsbank’s loss, which was not offset by income from the sale of real estate in Austria also included in this item of the income statement.

After deduction of non-controlling interests, net profit attributable to the owners of the parent company was EUR 1,325 million, matching the previous year’s figure (2014: EUR 1,329 million).

The following key financial ratios have been calculated on the basis of the above-mentioned results:
• The cost/income ratio was 52.3 per cent (2014: 52.4 per cent).
• The risk/earnings ratio (net write-downs of loans as a percentage of net interest income) was 25.7 per cent (2014: 19.5 per cent).
• The total capital ratio (based on all risks) was 14.9 per cent (2014: 13.4 per cent).
• The Common Equity Tier 1 capital ratio (based on all risks) was a sound 11.0 per cent (2014: 10.3 per cent).

Mirko Bianchi, Chief Financial Officer of Bank Austria: "Bank Austria has significantly improved its capital ratios, despite negative exchange rate effects in several countries. The bank has a strong and sound balance sheet structure: our total capital ratio is an outstanding 14.9 per cent, an increase of 142 basis points. Our Common Equity Tier 1 capital ratio has risen by 71 basis points to an excellent 11.0 per cent. In absolute terms, total regulatory capital in the 2015 consolidated financial statements is EUR 19.1 billion, up by EUR 1.5 billion on the previous year. The leverage ratio4 is a very conservative 5.8 per cent, reflecting our strong capital base and our conservative business model. Our long-term liquidity position has improved as a result of deposit growth. The loan/direct funding ratio is an excellent 83.6 per cent. This means that our customer loans are more than fully covered by customer deposits and debt securities in issue."

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

In 2015 the Retail & Corporates Division generated about 25 per cent of the Bank Austria Group’s operating income and thus made a contribution of 70 per cent to total operating income generated by Austrian customer business. With customer deposits and debt securities in issue totalling EUR 43 billion, the business segment is also an important source of funding for the bank.

2015 was characterised by persistently low interest rates and, as a consequence, a further decline in net interest. Credit expansion, averaging 2.9 per cent for the year, was mainly achieved in the Retail subdivision via construction and housing finance while growth in direct funding (plus 4.8 per cent) came mainly from business with corporate customers. The decline in customer interest rates in lending business was significantly stronger than on the deposit side. Overall, therefore, the interest margin continued to narrow. Although the other components of operating income developed favourably, especially net fees and commissions (plus 5.8 per cent), total operating income was 3.9 per cent lower than in the previous year. Operating costs declined by 1.1 per cent, reflecting lower payroll costs and strict cost management. Net write-downs of loans and provisions for guarantees and commitments improved by EUR 29 million on the previous year. The significantly higher charge for the bank levy and other systemic charges (EUR 70 million after EUR 48 million in 2014) impacted net operating profit and was the main reason why profit before tax declined by EUR 58 million (minus 17.7 per cent) to EUR 269 million.

Bank Austria is pursuing and accelerating its transformation, started in 2014, into a modern universal bank, in which branches and the digital marketplace, comprising the Online-Shop and the online branch, will have equal weight as channels for product sales and advisory services in the medium term. In 2015, 42 smaller branches were combined to form significantly larger branches with a wider offering of advisory services. More than 40 branches throughout Austria currently have extended opening hours, with 30 branches in Vienna being available to customers from 9 a.m. to 6 p.m. and 10 branches in other Austrian regions offering their services from 8.30 a.m. to 5.30 p.m. in most cases. Some 35 branches throughout Austria were modernised according to the new branch design in 2015. The Retail subdivision achieved growth of 64.1 per cent in construction and housing loans in 2015 and an increase of 27.6 per cent in sales of mutual funds.

The bank will increasingly take advantage of advancing digitalisation in the coming years to serve its customers and streamline internal processes. In the medium term, banking services and advisory services will be available at branches and in the digital marketplace 24 hours a day and 7 days a week, at a significantly higher level of cost efficiency than has been the case so far. Branches will be considerably larger and offer a wider range of advisory services. Services for small businesses and independent professionals will also be significantly expanded and offered in some 70 locations from 2016.

Bank Austria is the leading bank for corporate customers in Austria and a financial partner of the Austrian business sector, serving the whole range of companies, from small businesses all the way to large companies. Although financing terms were extremely favourable in 2015, the year continued to see only moderate investment propensity on the part of corporate customers and credit demand was low. In this difficult environment Bank Austria achieved market share gains in the corporate finance sector. The market for deposits from companies grew by about 5 per cent in 2015. Bank Austria benefited from this development and achieved gains in market share beyond average market growth.

In 2015, Bank Austria continued its initiative aimed at internationalisation, a key driver of growth. The bank provided corporate customers with product-specific know-how and made its international banking network available to them worldwide. In regional terms, the focus was on Central and Eastern Europe and China. Conversely, Bank Austria also provided extensive assistance to companies from other countries in expanding their business and setting up operations in Austria. The “UniCredit International Centers” have been established as internationalisation hubs: they help medium-sized companies which are active in the banking group’s core markets in Europe and also in Asia and America to benefit from the advantages of a comprehensive cross-border business relationship with UniCredit Group.

Demand for real estate was again supported by extremely low interest rates in 2015. As a result, commercial real estate transactions reached a record volume. In this dynamic environment, and in the face of intense competition, the bank’s Real Estate department achieved a new record level of EUR 3.1 billion in investment and development finance in Austria.

The Corporate & Investment Banking (CIB) Division focuses on serving multinational companies and major international customers, providing them with capital market services and investment banking solutions tailored to their specific needs. CIB also serves banks, asset managers, institutional customers, insurance companies and selected real estate customers.

In addition to its functions within the bank, CIB enables its customers to benefit from its capital market expertise, its market position based on the UniCredit Group network and a presence in all major financial centres around the world as well as from excellent access to our core regions in Western, Central and Eastern Europe and 50 countries worldwide, giving Bank Austria essential competitive advantages.

In 2015, the CIB business segment further expanded its leading market position in the segment of multinational companies. Its corporate finance business developed in a very positive manner in the face of a challenging and highly competitive market environment characterised by reluctance of customers to take up loans, a squeeze on margins and continued loan-bond substitution. Structured business, in particular, involving acquisitions, syndicated loans, capital market transactions, commodity trade finance and structured trade and export finance, grew at a rate well above that of the previous year; in many cases the growth rate was in the double-digit range.

Over the years, funding via the capital market has become a significant feature of business with corporate customers. Besides loan-based financing, bonds and loans against borrowers’ notes have developed into an important second pillar in this context. CIB has benefited from this positive development, maintaining its position as market leader in this segment over the past years and acting in a leading capacity for attractive transactions.

Bank Austria’s expertise and contacts to export credit agencies moreover opened up additional opportunities for corporate customers in Austria and other countries wishing to export their products and services – from working capital facilities with favourable interest rates to highly complex buyer finance arrangements for plant manufacturers. 2015 saw a significant rise in new export finance business compared with the previous year. Bank Austria’s trade finance operations held up well despite a contracting market, with the bank maintaining its position as the undisputed market leader in this segment.

The Corporate & Investment Banking Division achieved a profit before tax of EUR 208 million, exactly matching the good result of the previous year (2014: EUR 208 million).

Bank Austria’s Private Banking Division, with the two well-known brands Bank Austria Private Banking – the private banking arm of a major bank – and Schoellerbank – a traditional private banking institution – is the market leader in Austria’s private banking market.

2015 saw the launching of the "UNIVERS" service model in Bank Austria‘s Private Banking Division: based on a transparent one-off fee, the customer can make investment decisions without considering the transaction costs. Customers with an investment volume of over EUR 600 million had opted for this model by the end of 2015. It is targeted at investors looking for professional advice and execution, while preferring to take investment decisions themselves.

Bank Austria’s Private Banking Division serves 1,172 out of a total of 3,257 private foundations and 460 foundations set up by Austrian federal and provincial government agencies. On this basis, Bank Austria is the market leader in services for foundations, with a market share of 31 per cent. Under its special initiative focusing on foundations, Bank Austria is committed to innovation as a factor helping to maintain Austria’s attraction as a business location: the bank collected ideas and demands for modernising Austria’s legislation on foundations and to improve the overall framework for private providers of risk capital. The ideas and demands were then presented to the relevant decision-makers. Bank Austria will continue its efforts in this area in 2016, in cooperation with the Austrian Association of Charitable Foundations.

2015 was a very successful year for the Private Banking Division: total financial assets grew by 6.7 per cent to EUR 22.8 billion. Given the nature of private banking business, net fees and commissions were again the largest revenue component (64 per cent), contributing EUR 114 million to operating income. This was an increase of 4.6 per cent on the previous year. In line with the Division’s business strategy, fee-based income from asset management, including fund products, was up by 8.6 per cent and most recently accounted for over three-quarters of net fees and commissions.

One-third of the 16.3 per cent increase in assets under management to EUR 8.3 billion in 2015 is explained by good performance and two-thirds by ongoing net inflows of funds, which were positive in every quarter of 2015.

Profit before tax was EUR 51 million, down by EUR 2.6 million on the previous year’s level. Over one half of the decrease is due to higher systemic charges (including bank levies).

The CEE Division reported a solid operating profit of EUR 2,341 million in 2015, reflecting positive contributions from across the region despite methodological changes regarding subholding effects in Q2 2015; adjusted for exchange rate movements, the figure was up by 8.9 per cent compared to the previous year. At current rates, operating profit remained at the same level as in 2014, when it was EUR 2,323 million.

Operating income showed a strong development in 2015, with slightly weaker net interest income amounting to EUR 2,381 million (2014: EUR 2,456 million), higher net fees and commissions of EUR 718 million (2014: EUR 702 million) and an increased net trading income of EUR 329 million (2014: EUR 266 million). Other income from equity investments, reflecting mostly the net contribution from Turkey, was up at EUR 364 million (2014: EUR 345 million). Net other income amounted to EUR 24 million (2014: EUR 55 million). Including these effects, overall operating income therefore increased by 6.7 per cent to EUR 3,816 million (2014: EUR 3,824 million) at constant rates and was flat at current rates.

Due to continued strict cost management the CEE Division was able to reduce operating costs compared with the previous year by 1.7 per cent to EUR 1,475 million (2014: EUR 1,501 million). Even eliminating the exchange rate movements, operating costs were reduced in real terms: their increase at constant rates was kept at 3.2 per cent and thus significantly below the weighted inflation rate in the region. The cost/income ratio therefore stood at a sound 38.7 per cent (2014: 39.3 per cent).

Net write-downs on loans in the CEE Division rose to EUR 1,017 million (2014: EUR 675 million) mainly driven by the newly introduced Consumer Credit Act in Croatia enforcing the conversion of Swiss Franc denominated loans and by additional provisions for Russia and for Ukrainian borrowers. Thus the CEE Division achieved a net operating profit of EUR 1,324 million (2014: EUR 1,648 million). Net profit was at EUR 604 million in 2015, reflecting also the full P&L impact of EUR 367 million from Ukrsotsbank.

In 2015 the economic environment for banks operating in Central and Eastern Europe (CEE) was largely positive. Despite some exceptions, most countries in the region showed strong economic growth and resilience against shifts in investor sentiment towards emerging markets, which was in good part related to their deep integration with the euro area and solid macroeconomic fundamentals. Banking sectors in most CEE countries remained profitable, although the overall level is normalizing compared to the pre-crisis period. A more sustainable funding model is moving forward in the region, with local deposits becoming a more important funding source. The average loans-to-deposits ratio improved significantly from 122 per cent in 2008 to 101 per cent in 2015. Looking forward, economic recovery is expected to further support lending, especially in countries which have been lagging behind so far. Non-performing loan ratios, which are currently high in some countries, should decline.

"In 2015 we have acquired over 800,000 new customers in Central and Eastern Europe, until 2018 we intend to expand our customer base by 1 million each year. With the sale of our bank in Ukraine to Alfa Group we are going to reduce our local business risk and focus on countries with higher potential", says Carlo Vivaldi, Deputy Chairman of the Management Board and Head of CEE Division of Bank Austria. "Overall we are very satisfied with our CEE portfolio, which proved to be a consistently strong contributor to Group results. We are fully committed to the new Strategic Plan and will go ahead with investing in digitalisation and Big Data in order to expand our regional customer business."

The CEE Division manages a network of about 2,300 branches (including the Turkish joint venture, which is accounted for using the equity method) in 13 countries in the region with about 47,500 employees. The Group continues to see itself as a long-term investor in this region and will expand its leading market position through sustainable growth in the coming years.

Statement of financial position5

Bank Austria’s total assets as at 31 December 2015 were EUR 193.6 billion, up by 2.4 per cent or EUR 4.5 billion on the end of the previous year (31 December 2014: EUR 189.1 billion).

On the assets side, loans and receivables with customers were EUR 116.4 billion, up by 2.3 per cent or EUR 2.6 billion (31 December 2014: EUR 113.7 billion). Loans and receivables with banks increased by 5.5 per cent to EUR 32.2 billion (31 December 2014: EUR 30.5 billion).

On the liabilities side, deposits from customers rose significantly, by 7.9 per cent or EUR 8.1 billion, to EUR 110.3 billion (31 December 2014: EUR 102.3 billion). Debt securities in issue declined by 4.0 per cent or EUR 1.2 billion to EUR 28.8 billion (31 December 2014: EUR 30.0 billion).

Direct funding – i.e. the sum total of customer deposits and debt securities in issue – totalled EUR 139.1 billion, up by 5.2 per cent or EUR 6.9 billion (31 December 2014: EUR 132.3 billion), accounting for over two-thirds (71.9 per cent) of total liabilities and equity.

This gives a loans/direct-funding ratio of 83.6 per cent, which means that customer loans are covered by customer deposits and debt securities in issue to the extent of 119.6 per cent.

At the end of 2015, the leverage ratio6 to be calculated under Basel 3 was a conservative 5.8 per cent in conformity with Basel 3 transitional rules.

Total regulatory capital7 as at 31 December 2015 was EUR 19.1 billion, up by EUR 1.5 billion on the end of the previous year (31 December 2014: EUR 17.5 billion).

The total capital ratio8 based on all risks rose significantly, to a sound 14.9 per cent (2014: 13.4 per cent) and the Common Equity Tier 1 capital ratio8 based on all risks increased to an excellent 11.0 per cent (2014: 10.3 per cent).
Staff numbers9 in the Bank Austria Group including the employees of UniCredit’s subsidiaries9 in Austria totalled 56,716 as at 31 December 2015 (full-time equivalents – FTEs; 31 December 2014: 56,756 FTEs). Of the total number, 9,254 FTEs were employed in Austria and 47,462 FTEs in CEE countries.

 tables (PDF; 167 KB)

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

1 The 2015 Annual Report will be published in the middle of March 2016.
2 Capital ratios are calculated in conformity with Basel 3 transitional arrangements. Net profit is included in the calculation of regulatory capital and capital ratios.
3 To ensure comparability, the figures for 2014 have been adjusted. Most of the leasing activities were transferred to Bank Austria by the UniCredit parent company in 2014 and segment reporting has been adjusted to reflect the new structure. The income statement items relating to Ukrsotsbank continue to be reflected in the item "Total profit or loss after tax from discontinued operations".
4 Leverage ratio pursuant to Basel 3 transitional arrangements, including net profit.
5 In the statement of financial position, Ukrsotsbank is reflected in the items "Non-current assets and disposal groups classified as held for sale" and "Liabilities in disposal groups classified as held for sale" as the bank is in the process of being sold.
6 Leverage ratio calculated on the basis of the inclusion of net profit.
7 Calculated on an IFRS basis.
8 Capital ratios are calculated in conformity with Basel 3 transitional arrangements. Net profit is included in the calculation of regulatory capital and capital ratios.
9 Mainly UniCredit Business Integrated Solutions Austria GmbH (UBIS Austria) and Pioneer Investments Austria.