Annual Financial Statements 2008 of Bank Austria

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Consolidated Financial Statements: Management Report of the Group Management Report 2008 (cONTINUED) The recognised goodwill relating to every cash-generating unit was tested for impairment in the fourth quarter. For this purpose the recoverable amount was compared with the respective carrying amount, which is determined on the basis of equity allocated to the unit and recognised goodwill relating to the unit. The recoverable amount was determined on the basis of the value in use. The value in use was calculated using a dividend discount model (DDM) adjusted to the specific characteristics of banking business and regulatory capital requirements. An impairment loss totalling € 1,027 m was recognised in the fourth quarter of 2008 in the income statement of Bank Austria as an impairment loss on goodwill. The carrying amount of Ukrsotsbank, the bank acquired at the beginning of 2008, declined strongly at the end of 2008 as a result of exchange rate movements; moreover, an impairment loss of € 333 m on goodwill was recognised when it became clear that Ukraine is one of the countries hit hardest by the global economic crisis. At ATF Bank, the bank in Kazakhstan acquired in November 2007, an impairment loss of € 417 m on goodwill was recognised as forecasts of medium-term growth had to be lowered. Moreover, an impairment loss of € 11 m on goodwill was recognised for our unit in Latvia. Among the units combined in UniCredit CAIB in the MIB business segment, an impairment loss of € 125 m on goodwill was recognised for CAIB Polska and an impairment loss of € 140 m on goodwill was recognised for the ATON Group. It is planned to transfer this business segment to HypoVereinsbank in 2009. Income statement for 2008 compared with 2007 Change in € m Net interest income Net non-interest income Operating income Operating expenses Operating profit Goodwill impairment Net writedowns of loans … Other items *) Profit before tax Consolidated profit –45% –49% –25% +17% *) Provisions for risks and charges (– € 12 m), restructuring costs (+€ 27 m) and net income from investments (+€ 72 m). +8% +13% +36% –1,200 –800 –400 0 400 800 1,200 � Operating profit was € 3,296 m (+ 8 %) and the balance of nonoperating items was a net charge of € 1,791 m (2007: – € 323 m). On this basis, profit before tax for 2008 was € 1,505 m (down by 45%). On an adjusted basis, profit before tax amounted to € 2,155 m, a decline of 14 %. Based on profit before tax, income tax for 2008 was € 222 m, the effective tax rate is 14.7 %, slightly higher than in the previous year (13.9 %). Net profit amounted to € 1,283 m. Minority interests in net income were € 139 m, up by 31 % on the previous year, mainly on account of the strong momentum of profit growth at our unit in Turkey. Consolidated profit for 2008 was € 1,144 m, down by 49 % or € 1,110 m from the previous year. Adjusted for the above-mentioned consolidation effects and one-off effects, consolidated profit declined by 19 % compared with the previous year. Return on equity (ROE after taxes without minority interests) at Bank Austria was 7.8 %, half the figure of the previous year (17.0 %) due to non-operating expenses reducing profits. Yet the figure is still higher than the long-term yield on government bonds. Earnings per share declined from € 11.69 to € 5.66 in 2008, based on the annual average number of shares outstanding. Proposal for the appropriation of profit: The profit available for distribution is determined on the basis of the separate financial statements of the group’s parent company, UniCredit Bank Austria AG. The profit for the financial year beginning on 1 January 2008 and ending on 31 December 2008 (after release of the fund for general banking risks in the amount of € 1,518.3 m) was € 100 thsd. The profit brought forward from the previous year was € 1.9 m. Thus the profit available for distribution was € 2.0 m. The Management Board proposes to the Annual General Meeting that no dividend be paid on the share capital of € 1,468,770,749.80 and that the total profit of € 2.0 m available for distribution be carried forward to new account. Bank Austria · Annual Financial Statements 2008 15
Profitability, value creation and resources The key indicators and performance data for 2008 reflect the unusual situation in the MIB business segment, which leads to high percentage shares for the commercial banking business segments and our two core markets in a long-term comparison. Moreover, when comparing the three Austrian customer business segments with the CEE business segment, one should note that the weaker trend became increasingly discernible in Austria from quarter to quarter, while the CEE countries started to be strongly affected by the deterioration in the market environment only towards the end of the reporting period. If these factors are taken into account, the most recent key indicators confirm that Bank Austria, as an Austrian bank and the sub-holding company for CEE operations, is continuing its performance along its strategic lines under the current exceptional circumstances: in Austria, the bank is maintaining its leading market position and profitability levels while employing its resources sparingly; in Central and Eastern Europe, Bank Austria is taking advantage of the region’s continued, disproportionately strong growth. In Austria (three customer business segments), business volume expanded at a moderate pace typically seen in a mature market (RWA: + 4 %), while revenues contracted as a result of the tighter margins referred to above and of the currently discernible shift to business reflected in the balance sheet. In CEE, revenue growth fell only slightly short of the strong external and internal volume growth of 45 %. Marginal Economic Value Added (mEVA) measures value creation beyond the cost of capital (net operating profit after tax less minimum return required by the market on equity capital employed, excluding goodwill impairment). In 2008, Bank Austria generated an mEVA of € 1,091 m, a figure which was only 14 % lower than in the previous year. The contribution from the Markets & Investment Banking Division was negative, at – € 345 m; this business segment recorded a negative performance while the capitalisation of UniCredit CAIB increased the equity capital employed in the segment. The CEE business segment’s contribution to mEVA rose by 35 % to € 783 m in 2008. In the three business segments of Austrian customer business (Retail, PB&AM and Corporates), value creation beyond the cost of capital was a combined € 316 m, down by 12 % from the previous year. We increased the capital allocated to our banking subsidiaries in CEE by an additional 34 % to safeguard our growth prospects in the region in line with our strategy. The capital is intended for the acquisitions mentioned above, and for supporting organic growth. Risk-weighted assets (average RWA) of the CEE business segment rose by 45 % in 2008, indicating that capital employment improved. The two newly added banking subsidiaries in Kazakhstan and Ukraine made positive contributions to mEVA already in the first year of their integration, despite the particularly difficult local environment. RARORAC, risk-adjusted return on risk-adjusted capital, was 12.5 % in CEE, lower than in the very good year 2007 (14.7 %) but still significantly higher than the 2006 level (pro-forma figure: 10.2 %). Equity capital employed in Austrian customer business rose by 5 % and risk-weighted assets (RWA) increased by 4 %. RARORAC was 10.7 %, also significantly better than in 2006, also as a result of the turnaround in the Retail Division since then. While the RARORAC figures for Austrian customer business and CEE do not differ by a wide margin, there is a significant gap in absolute terms of marginal Economic Value Added. Resources and profitability 2008 AUSTRIAN CENTRAL AND CUSTOMER BUSINESS *) EASTERN EUROPE (CEE) Relative size Share of average risk-weighted assets 38 % 52 % Share of operating income 32 % 65 % Growth Average risk-weighted assets, % over previous year + 4 % + 45 % Operating income, % over previous year – 6 % + 41 % Value creation marginal EVA, € m 316 783 RARORAC 10.7 % 12.5 % Capital allocation Share of equity 24 % 62 % Equity, % over previous year + 5 % + 34 % *) Retail, PB&AM and Corporates Divisions Bank Austria · Annual Financial Statements 2008 16
Page 1 and 2: Annual Financial Statements 2008 of
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Page 7 and 8: As a result of the sharp rise in co
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Page 11 and 12: The same applies to our CEE banking
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Bank Austria - Jahresfinanzbericht
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Preliminary remarks on the financia
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Management Report of UniCredit Bank
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Liabilities and Shareholders' Equit
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Profit and Loss Account for the yea
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Notes to the balance sheet Notes to
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The following are also covered by t
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4.3. Loans and advances to, and amo
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4.17. Movements in fixed assets Equ
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4.25.4. Revenue reserves There was
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A.1 Trading book: notional amounts
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A.6 OTC financial derivatives - res
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4.30. Market risk Market risk manag
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5.5. Expenses for subordinated liab
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1. Stock Options MANAGEMENT BOARD/S
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Interests in associated companies a
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Supervisory Board and Management Bo
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Bank Austria - Annual Financial Sta
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Investor Relations Investor Relatio
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Annual Financial Statements 2008 of Bank Austria

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