Annual Financial Statements 2008 of Bank Austria

Consolidated Financial Statements: Management Report of the Group
Management Report 2008 (cONTINUED)
Income statement of Bank Austria
for 2008
� Bank Austria’s results for 2008 are the net product of an operating
profit which held up well in a challenging environment, and of
substantial provisions and valuation adjustments reflecting the fast
deterioration of the market environment in the fourth quarter of 2008.
Operating profit for 2008 was € 3,296 m, up by 8 % over the previous
year’s level. After deduction of non-operating items, which totalled
– € 1,791 m, profit before tax amounted to € 1,505 m, down
by 45 % from the 2007 figure. Consolidated profit (without minority
interests) therefore fell by over € 1 bn or 49 %, from € 2,254 m to
€ 1,144 m.
Results for 2008 (€ m)
ADJ. 1) ADJ. 2)
2008 2007 +/– +/– % +/– % +/–
Operating income 7,231 6,414 + 816 + 13 % + 6 % – 2 %
Operating expenses – 3,935 – 3,351 – 584 + 17 % + 12 % + 5 %
Operating profit 3,296 3,063 + 232 + 8 % – 3 % – 10 %
Net writedowns of loans – 1,012 – 483 – 529 >100 % + 67 %
Goodwill impairment
Other items (net income
– 1,027 0 – 1,027 n.m. + 100 %
from investments, provisions
for risks and charges,
restructuring costs)
Total non-operating items
248 160 + 88 + 55 % >100 %
to be deducted – 1,791 – 323 – 1,468 >100 % + 26 %
Profit before tax 1,505 2,740 – 1,236 – 45 % – 14 %
Consolidated profit 1,144 2,254 – 1,110 – 49 % – 19 %
n.m. = not meaningful
ADJ.1): adjusted for one-off effects – 2008: special dividend from B&C Holding as part of the sale of
profit-sharing rights (€ 415 m); 2007: release of pension provision (ASVG equivalent) amounting to
€ 164 m.
ADJ.2): additionally adjusted for major consolidation effects (ATF and Ukrsotsbank, ATON, iT-Austria
not taken into account; including funding costs; without leasing business).
When analysing the income statement, one should note that it reflects
one-off effects and consolidation effects. These factors should be
taken into account in assessing the bank’s operating performance.
This relates primarily to the analysis of operating profit and its components
as well as segment reporting. Among the one-off effects, a
special dividend of € 415 m included in the sub-item dividend income
within net interest income is the main factor distorting the picture; the
special dividend was distributed in connection with the sale of profitsharing
rights in B&C Holding and is partly offset by capital losses on
this transaction which are reflected in net income from investments
(referred to as the “B&C effect” in the following comments). Operating
expenses in 2007 included a € 164 m one-off release of pension
provisions which the bank made as a result of the amendment to the
Austrian General Social Insurance Act (“ASVG effect”).
The acquisition of ATF Bank in Kazakhstan (consolidated as from
December 2007) and of Ukrsotsbank (consolidated as from the beginning
of 2008) has extended the group of consolidated companies
in the CEE network to include large banks operating in countries
which are at an earlier stage of the convergence process. The Russian
Aton Group has been consolidated in the Markets & Investment
Banking (MIB) Division since the end of July 2007, while Informations
Technologie Austria GmbH (iT Austria) has been accounted for under
the proportionate consolidation method since the beginning of 2008
(in the previous year, iT Austria was accounted for using the cost
method). In the Corporates business segment, the former BA-CA
Leasing GmbH was a consolidated company in the first two quarters
of 2007; in the middle of 2007 it was transferred to UniCredit Global
Leasing – now number one in the European leasing market. Since
then, a 32.59 % interest in the results of UniCredit Global Leasing has
been accounted for under the equity method, which means that income
and expense items in this business segment are not directly
comparable with the previous year, but the effect on results is less
significant. This should be noted when analysing the operating performance
of the Corporates Division. As part of the adjustment for the
above companies’ contributions to the income statement at Bank
Austria level, funding costs associated with equity investment management
in the Corporate Center are eliminated.
� Maintaining the steady trend in operating activities was one of the
successes achieved by Bank Austria in a turbulent year. Operating income
in 2008 increased by € 816 m or 13 % to € 7,231 m, although
the net trading, hedging and fair value result was € 555 m lower than
in the previous year. Even without the contributions from the newly
added banks in Central and Eastern Europe for 2008, the negative
performance from trading activities was offset by other items: on an
adjusted basis, operating income in 2008 was only 2 % below the
high level of the previous year. This was due to expansion in the CEE
business segment, where operating income rose by € 1,369 m or
41%; based on adjusted figures, the increase was 20 %. The three
segments of Austrian customer business also made a significant
contribution to revenue stability, with operating income totalling
€ 2,320 m, down by only 6 % – or 3 %, on an adjusted basis – from
2007; the overall figure also reflects a sharp decline in net fees and
commissions, which was caused by lower demand from customers.
Bank Austria · Annual Financial Statements 2008
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