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Risk-weighted assets increased by 19 %. Despite this expansion,
general administrative expenses were 2 % lower than in
2004, thanks to our successful sales initiative and enhanced
efficiency in the sales sector.
Nevertheless, net income before taxes for 2005 was 42 %,
and net income 39 %, lower than in the previous year. The
reason why improvements in operating performance were not
reflected in results is the one-off increase, mentioned before,
in the provisioning rates for flat-rate specific provisions on the
basis of more refined methods applied to identifying risk. The
provisioning rates applied to small loans were raised, resulting
in a one-off charge of € 138 m in the income statement of the
Private Customers Austria segment. The charge reflected in
the segment result was higher than the additional charge for
the bank as a whole (+ € 70 m) because the provisioning
charge in the SMEs segment was reduced. If these one-off
effects are excluded from the calculation, net income before
taxes exceeded the previous year’s figure by 39 %. And the
adjusted figure for net income was 46 % higher than a year
earlier.
Within operating revenues, net interest income matched the
previous year’s figure and net fee and commission income rose
strongly. Net interest income for 2005 was € 670 m, over
1% lower than in the previous year. As the squeeze on
margins became stronger in 2005, this result may be seen as
satisfactory. Higher revenues from lending business more than
offset the decline in margins on the liabilities side. A major
sales initiative in the lending business helped to more than
compensate for the negative effect of narrower margins,
although lending rates deteriorated significantly from quarter
to quarter. The financing volume of BA-CA AG increased by
15 %, especially in the areas of housing loans and various
types of consumer loans. On the deposits side, the volume of
savings deposits, a large component, was almost maintained
while margins deteriorated dramatically. This development was
not offset by positive trends in volumes of and margins on
sight deposits.
Net fee and commission income rose by 13 % in 2005 and
accounted for 44 % of operating revenues. Apart from good
results from card business and other services, contributions to
this increase came especially from securities business, both
sales and related services, and from our subsidiaries specialising
in asset management, including Capital Invest, AMG,
Schoellerbank and BANKPRIVAT. After several weak years for
stock markets, investors again showed a stronger preference
for securities and a higher risk appetite. Custodian business
also improved. Our range of pre-standardised investment
products was geared to investors’ willingness to take risks, and
the products were well placed through intensified contacts
with customers. Net inflows of funds at AMG and Capital
32 Management Report of the Group
Invest rose by over 60 % to € 2.9 bn. The bank was particularly
successful with guarantee-linked products, bonds, mutual
funds and index products with a capital guarantee, sales of
which tripled. Most recently, R.I.CH. – a guarantee fund containing
investments in Russia, India and China – ideally met
the current expectations of investors, who still displayed a
limited appetite for risk. Assets under management in the
BA-CA Group at the end of 2005 totalled € 33.5 bn, up by 22 %
over the year-end 2004 figure. Of this total, our local investment
management companies in CEE countries had assets of
€ 2.3 bn under management, an increase of over 80 %.
Net inflows at BA-CA investment
management companies
Purchases less sales less redemptions;
mutual funds and capital-guaranteed products
€ m
3,000
2,500
2,000
1,500
1,000
500
0
2002 2003 2004 2005
Net inflows in the year
>60%
>200%
of which: guarantee funds and guarantee bonds
On the basis of revenue growth and a slight decline in general
administrative expenses, the cost/income ratio fell from
79.3 % to 73.4 %. Operating profit amounted to € 88 m – or
€ 227 m, adjusted for the one-off effects reflected in the segment
result – after € 163 m in 2004. Net income from investments
reached € 14 m (compared with € 4 m in the previous
year), including € 9 m from the sale of Investkredit shares held
by Schoellerbank, a fully consolidated company; € 3 m was
allocated to the provision for restructuring costs. Net income
came to € 73 m. The adjusted figure of € 183 m for net
income gives an ROE after taxes of 18.7 % compared with
15.2 % in the previous year. In terms of operating performance,
Private Customers Austria is among the business segments
with above-average profitability and good prospects,
and thus remains one of the main targets for capital allocation.