team spirit - Bankier.pl

“Value-based management aims at achieving growth with a focus on profitability and using capital
efficiently to create value. Beyond this strategic function it also has a deeper significance for day-to-day
business with customers. Value-based management heightens the awareness that each banking product
and each customer relationship are required to generate returns that do not only cover production costs
and risk-related costs but also bring in the minimum return expected by the capital market. Thus valuebased
management is an instrument for self-monitoring and for promoting innovation and change.”
The chart shows the absolute figures for added value on equity
of the bank and its operating business segments for 2004
and 2005, and the absolute change in AVE, i.e. DAVE, the key
measure of value creation. In each case, the calculation was
based on net income adjusted for one-off and special effects.
In 2005, BA-CA’s results exceeded the cost of capital related
to allocated equity by € 450 m (AVE); DAVE reached € 294 m.
All business segments made positive, though widely varying,
contributions. Central and Eastern Europe (CEE) made the
largest contribution to DAVE, accounting for
Value creation
55 % of the total. Over the past years this
by segment
business segment has been the main target
for capital allocation: CEE’s share of average equity rose from
26 % (2004) to 29 % (2005), reflecting an additional allocation
of € 419 m. Three years ago, CEE accounted for 17 % of
total equity allocated. Austrian private customer business generated
a DAVE of € 42 m; AVE rose to € 95 m. Equity allocated
to the Private Customers Austria segment was increased
(to most recently 13 %). The Large Corporates and Real Estate
segment generated an even higher DAVE of € 65 m in 2005.
One of the reasons for this increase was the lower amount of
equity allocated to the business segment – which handles a
substantial volume of business – as risk-weighted assets were
placed in the secondary market, with no impact on customer
relationships. International Markets, the business segment
with the highest ROE (58.4 % after taxes), is a special case:
the amount of equity allocated to it is very small in view of the
business profile and the intensive use of derivatives. For INM,
DAVE amounted to € 40 m, and its value creation in absolute
figures (AVE) was € 110 m.
At the beginning of 2005, we defined the SMEs Austria business
segment to enhance transparency. In the SMEs Austria
segment, which focuses on small and medium-sized businesses,
productivity is weak and profitability is unsatisfactory, also
due to general market conditions. As the ROE was significantly
below the cost of capital, the segment recorded a negative
AVE of € 63 m. We started to implement a programme for
improving efficiency (for details see the Austrian Customer
Business section in this Annual Report), and allocated € 90 m
Stefan Ermisch, Managing Board member, Chief Financial Officer
to a provision for restructuring costs in the 2005 financial
statements. Creating transparency was a prerequisite for targeted
measures. Value-based management at the micro control
level is an important factor in implementing our restructuring
programme. It helps to identify unprofitable customer
relationships which are to be restored to profitability through
intensive cross-selling, structural analyses, improvements in
the customer’s financing structure, and increased automation
of day-to-day business; and it also helps to reveal inefficiencies
such as inadequate standardisation, settlement processes
that are too complex, and an excessively high cost of capital.
Quite generally, we aim to make performance transparent at
all levels of the bank and thus show up clear responsibilities.
The entire bank is required to think in terms of value management,
which will also be more strongly reflected in the incentive
system for bank staff. In the areas of back office, administration
and settlement, we expect increasing specialisation
and outsourcing into service companies to result in greater
transparency of service flows, more flexible costs and significant
improvements in efficiency and quality.
Net income before taxes (adjusted for one-off/special effects)
after the cost of capital
Added Value on Equity (AVE) / Delta Added Value on Equity (DAVE)
AVE
2004
53
DAVE
04/05
DAVE
+42
AVE
2005
95
Private Customers
Austria
DAVE
+6
–69 –63
SMEs
Austria
68 133 69 110 139 301 156
Large Corporates
and Real Estate
DAVE
+65 DAVE
+40
International
Markets
DAVE
+162
Central and
Eastern Europe (CEE)
Financial Targets and their Implementation 51
DAVE
+ 294
BA-CA
as a whole
450