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Insolvencies: number and insolvency liabilities
16,000
14,000
12,000
10,000
8,000
6,000
4,000
2,000
0
91 92 93 94 95 96 97 98 99 00 01 02 03 04 05
Total number of insolvencies
Average insolvency liabilities
(liabilities per insolvency, right scale)
Insolvencies of small businesses and
private individuals on the increase
Structure of insolvency liabilities
(out-of-court settlements, bankruptcies)
The above-mentioned one-off effects determined the trend in
the net charge for losses on loans and advances in 2005.
Therefore, an estimate of the provisioning charge to be
expected for 2006 should be based on the situation prevailing
in the BA-CA Group before the most recent measures were
taken. Apart from the one-off increase and the structural
adjustment between loans to SMEs and private customers, the
new retail scoring system and the streamlining of processes
and lending guidelines in private customer business over the
past years have steadily improved the quality of risk management
in retail banking.
Net charge for losses on loans and advances: long-term trend
2005 2004 2003 2002 2001
Charge in € m 495 398 467 537 703
Risk/earnings ratio 18.9 16.3 21.5 23.3 26.3
Provisioning charge/RWA 0.68 0.59 0.70 0.77 0.93
28 Management Report of the Group
Insolvencies of private individuals
Large insolvencies
over € 7 m
2001 2005
Business insolvencies
up to € 7 m
€ ’000
1,000
900
800
700
600
500
400
300
200
100
0
Net interest income after losses on loans and advances
increased by 4 % to € 2,117 m in 2005, or by 7 % excluding
the one-off increase in the provisioning charge for the Private
Customers segment.
Net fee and commission income rose strongly, by € 225 m
or 18 %, with the Austrian business segments (including INM)
and CEE each accounting for about half of the increase. The
main contributor to this growth was securities business, which
improved across the board, especially in the Austrian Private
Customers segment (+13 %). Our specialised asset management
subsidiaries AMG and Capital Invest, and our private
banking units BankPrivat and Schoellerbank very successfully
offered structured investment products and discretionary
investment management services. Custody business also
improved. In the SMEs segment (+ 8 %), growth was mainly
driven by liquidity and interest rate/exchange rate risk management
via derivatives. The targeted use of financial market
instruments with no impact on the balance sheet is a suitable
way to put business with SMEs on a healthy basis. In the Large
Corporates and Real Estate segment, net fee and commission
income rose by 11%, supported by trade finance and cash
management activities, derivatives, advisory services and new
issue business with corporate customers, and by the real
estate funds of BA-CA Real Invest which are managed within
this business segment.
Net fee and commission income generated in CEE increased
by 27 % (or 18 %, adjusted for exchange rate effects). The
strongest growth in absolute terms was seen in Poland, Romania
and Bulgaria; the new EU member states in CEE also
reported large increases. An analysis of the components of net
fee and commission income – transaction-related services
(payments, cash management, foreign trade financing), advisory
services and securities business – shows varying trends in
the individual countries. Overall, net fee and commission
income accounts for 34 % of total operating revenues in CEE,
the same proportion as in Austria and is a sign that the modernisation
process in the market is making rapid progress.
� Net trading result: 2005 saw comparatively low volatility
in international financial markets, even though there were
phases of temporary strains and uncertainty in interest-rate
and currency markets in the spring and autumn (in the wake
of the hurricanes and the oil price high). Yield curves in major
currencies flattened and convergence of major CEE markets to
the euro continued. As investors were looking for returns significantly
exceeding those on government bonds, this benefited
the high-yield segments (corporate bonds and emerging
markets investments), which developed favourably except for
an interruption in spring. Equity markets, especially in Austria
and CEE, also performed very well.