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etween Germany, Austria and CEE intensified, as did those
among the various CEE countries and with Russia and Ukraine.
In business with local companies, intensive use is made of
corporate finance products and risk management services at
an early stage of market maturity. We benefited from these
developments. New issue business, customer-driven trading
activities in financial market instruments and M&A advisory
services also generated good results.
� Following the acquisition of Hebros Bank in Bulgaria and of
Eksimbanka in Serbia in 2004, we acquired two more banks in
South-East Europe (SEE) in 2005. At the end of August 2005,
we acquired a majority interest in Banca Comerciala “Ion Tiriac”
S.A., Bucharest, by way of an exchange of shares; this
bank will be merged with HVB Bank Romania S.A. to form the
fourth-largest bank in Romania. With its focus on private customer
business, Banca Tiriac has a large customer base and a
country-wide network of branches, optimally complementing
HVB Bank Romania’s strength in corporate banking. Bank Austria
Creditanstalt also acquired 83.3 % of Nova banjalucka
banka, the third-largest bank in Republika Srpska, which concentrates
on serving small and medium-sized businesses and
private customers. On the basis of this acquisition, BA-CA’s
market share as the fourth-largest bank in Bosnia and Herzegovina
rose from 8.5 % to 10.9 %.
International Markets (INM)
€ m 2005 2004 Change adjusted
Operating revenues
… after net charge for losses on
275 254 22 9 % 9 %
loans and advances 286 254 32 13 % 13 %
General administrative expenses –158 –140 –18 13 % 13 %
Operating profit 128 114 14 12 % 12 %
Net income before taxes 147 117 30 25 % 28 %
Net income
Net income – share of
126 87 39 44 % 46 %
Group total 12 % 13 % 12 %
Equity – share of Group total 3 % 3 % 3 %
ROE before taxes 68.0 % 55.0 % 69.3 %
ROE after taxes 58.4 % 41.1% 59.3 %
2005 was a very successful year for the International Markets
(INM) business segment: both the results as reflected in
the income statement and the total return, the guiding principle
for the bank’s financial market activities, climbed to new
record levels. All areas of the bank’s proprietary trading operations
and customer business contributed to the outstanding
results. In addition to the expertise perfected over the years,
and the broad diversification of business in all risk categories,
INM in 2005 took full advantage of the outstanding competence
in the CEE markets. In this way, it strengthened Bank
Austria Creditanstalt’s unique selling proposition. The results
achieved in 2005 also underline the successful strategy of
38 Management Report of the Group
expanding all areas of customer business with a view to making
greater use of value creating products without impacting
the balance sheet, while further reducing and offsetting fluctuations
in results from the generally more volatile trading
business.
Operating revenues improved by 9 % over the good level of
the previous year; this growth is even higher (+13 %) after the
net charge for losses on loans and advances on account of
revenues generated from the positive outcome of a debt
rescheduling arrangement. With the inclusion of the net result
from investments, which in the INM segment constitutes
income from operating activities, operating revenues, after the
provisioning charge, rose by 16 % to € 305 m.
Individual income components showed a varied pattern: net
interest income was about one third below the previous year’s
figure, while the net trading result was 46 % up on 2004, and
the net result from investments was almost twice as high. One
should not read too much into these figures since, depending
on the use of the spot and derivative markets and the time
horizon, the success of the trading strategies and the performance
of the investment books reflected in the income statement
are included in net interest income, in the net trading
result, and in the net result from investments. In 2005, net fee
and commission income more than doubled to € 40 m due to
an outstanding performance on the primary equity and bond
markets and, above all, income from custody services.
General administrative expenses increased by 13 % to
€ 158 m in 2005. For this reason, the cost/income ratio was
slightly higher than in 2004 (57.3 % after 55.2 %), but low in
comparison with the staff-intensive financial market and
investment banking sector. With a further improvement in
Structure of International Markets (INM)
segment result
€ m
300
250
200
150
100
50
0
211
101
61
34
15
283
133
122
9
19
326
89
178
19
40
2003 2004 2005
Net interest income
Net trading result
Net result from
investments *)
Net fee and commission
income
*) In the INM segment, the net
result from investments is income
from operating activities.