Annual Financial Statements 2010 of Bank Austria

Consolidated Financial Statements in accordance with IFRSs
E – Risk report (CoNTINuED)
Credit spread basis-point values (CPVs) of the Bank Austria Group (€)
aNNual aVerage, miNimum/maximum
cpVs iN € sectOr maximum miNimum absOlute aVerage
Main sectors Financial services –452,754 –2,094,264 1,119,446
ABSs and MBSs –401,194 –749,087 535,349
Corporates Industrial –2,074 –58,869 13,376
Automobiles – –17,979 772
Consumer goods –12,941 –55,944 29,137
Pharmaceutical –59 –31,711 1,367
Telecommunications –2,107 –40,843 12,291
Energy & utilities –21,196 –69,588 33,184
Other (e.g. indices) –7,095 –444,407 93,721
Treasury-near Treasuries – EU & European industrial nations –1,509,450 –1,960,220 1,661,765
Treasuries – new EU countries –730,720 – 956,245 875,070
Treasuries – CEE & emerging markets –1,177,004 –2,266,706 1,677,671
Treasuries – developed countries overseas 4,954 –38,818 1,913
Treasuries – agencies & supranationals –7,410 –49,772 27,322
Municipals & German Jumbo –210,060 –258,827 243,277
tOtal –5,559,079 –7,418,361 6,325,113
Measured by the total basis-point value, the Bank Austria Group’s credit spread position in 2010 ranged between – € 5.6 m and – € 7.4 m. On an
annual average, the long position increased by about 0.7 m CPVs compared with the previous year 1). The increase was due to intra-group funding
activities and to a higher sovereign position in CEE (mainly Turkey). Overall, Treasury-near instruments continue to account for the largest part of the
credit spread positions while the current exposure to financials 2) and corporates is very low by comparison. The positions of asset-backed securities
(ABSs) and mortgage-backed securities (MBSs) were further reduced in 2010, primarily through redemptions. The average CPV also continued to
decline in this sector. Overall, the ABS book developed very favourably in 2010 in terms of total return in the year. Measured by redemption behaviour,
the entire ABS/MBS book is to be classified as performing in 2010.
The sale of CAIB resulted in a further reduction in the credit spread-sensitive trading portfolio in 2010. Bank Austria’s CDS book was sold together
with CAIB, except for minor holdings and holdings used as hedges for the bank’s own credit spread in trading issues. The bond holdings remaining in
Bank Austria are almost entirely attributable to the banking book. Trading bonds held by CEE subsidiaries are not significant at most entities; in the few
subsidiaries where there are significant holdings (e.g. Russia), these are further reduced in favour of holdings in the banking book.
Bank Austria further reduced its investments in hedge funds in 2010. The reduction will continue in 2011, so that hedge fund investments proper,
which currently represent a low three-digit million euro amount, will decline to a two-digit million euro amount in the first six months of 2011. This
means that the total investment in hedge funds is now low compared with the overall size of the Bank Austria Group.
Capital requirements for market risk
Bank Austria’s risk model is subjected to daily backtesting in accordance with regulatory requirements. As the number of backtesting excesses
(negative change in value larger than model result) has been within the range permitted by law ever since the model was introduced, the multiplier
need not be adjusted. In 2010, there was no backtesting excess (either in the old or in the new internal model). The backtesting results thus confirm
the accuracy and reliability of both models.
1) As in the previous year, bonds which are subject to a loan approval process are not included in this total (just under –1.4 m CPVs). Moreover, in 2010 we excluded Credit Treasury positions (at
year-end, close to –200 thsd CPVs) because these positions are also managed via credit processes. On the other hand, in line with a Group standard, reclassified ABSs were again included (about
0.5 m CPVs).
2) Spread positions on UniCredit in the banking book are included in the presentation until 21 December and are now, as in the case of the Bank Austria banking book positions, no longer included
(about –1.4 m CPVs intra-group funding).
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