und Hypothekenbank Aktiengesellschaft - Hypo Landesbank ...

this liquidity is measured by a capital formation
balance for the different currencies and
guaranteed by stable customer loans and by
refinancing on the international capital market.
Due to the continued demand for foreign
currency credits, the issue of foreign currency
loans (JPY and CHF) and currency transformation
through long-term cross-currency swaps
become very important. In the course of the
inter-bank business, short-term liquidity is controlled
using renowned banks in compliance
with investment limits that depend on the credit
standing and are determined annually by the
managing board with the consent of the supervisory
board. We do not use money dealing limits
with third-party banks and we do not use interbank
transactions for long-term financing.
Operational risk
We counter operational risks by issuing clear
guidelines and service instructions; compliance
is monitored by the Internal Audit Department.
Major transactions and decisions are always
double-checked. In addition, we make sure that
our employees are well-trained and responsible,
and we use state-of-the-art data processing
equipment. Our in-house legal department
minimises legal risks by meticulously drafting
contracts after having obtained the expertise of
specialised lawyers or university professors.
Outlook
Clearly, it is already noticeable that business
activity is picking up. Since early autumn 2003,
the economic situation has tangibly improved.
In particular, strong economic growth in the US
and in Asia provides positive impulses.
In Asia, China significantly stimulates growth;
even the dull Japanese economy has recovered
in the past quarters. Austria's economy is
recovering as well, spirits are clearly rising and
it can be expected that economic activity will
further revive. After the quite surprising stock
exchange rally at the end of 2003, we expect a
further upward yet somewhat less rampant
trend. The months of January and February
2004 as a whole were very satisfactory.
We are a business, house construction and
investment bank and provide high-quality
consulting services. Our greatest asset is
regional presence and closeness to our
customers. We want to impress our customers
with high-quality financial services, guaranteed
service and consulting standards, and an
integrated approach to personal assistance.
In the east of Austria (Vienna, Graz and Wels),
in the east of Switzerland, in Liechtenstein,
southern Germany and northern Italy, we will
continue to pursue our strategy of specialisation
in individual product segments. Our private
banking centre in Wels will become a full-size
branch. In addition, we want to install an Eastern
Europe desk at our Vienna branch and
successively acquire investment monies from
neighbouring Eastern European countries.
We expect the corporate services business to
continue to succeed on the market and generate
earnings, and we expect risk-adequate credit
terms in connection with Basel II to produce the
first positive effects. Private services, in
particular old-age and pension provision, have a
large potential.
The separation of front-office (branches and
distribution) and back-office activities (credit risk
management) on the second level was
implemented at the beginning of this year. In the
following months, we will implement a clear
organizational and functional separation of
front-office and back-office activities also on
senior management level. The preparations for
the implementation of the Basel equity
requirements are on target.
Since economic conditions have clearly
improved and the Bank could again increase its
efficiency as a result of analysing functions, we
are optimistic that we will achieve the volumes
and earnings targeted for 2004 together with
our committed team.
Branch establishments
For information on branch offices as set forth in
Section 243 (2) (4) Austrian Commercial Code,
please refer to page 78.
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Financial statements
as at 31 December 2003