Annual Financial Statements 2010 of Bank Austria

Management Report
Management Report (CONTINUED)
Income statement of Bank Austria for 2010 compared with the previous year
Bank Austria’s income statement for 2010 reflects the underlying
pattern of economic trends:
� Operating performance shows a moderate upswing of commercial
banking business (with wide regional variations in Central and Eastern
Europe). The effects of the sale of UniCredit CAIB have a discernible
influence on the overall picture.
� The repercussions of the crisis years are tapering off: this led to a
significant decline in net writedowns of loans and provisions for guarantees
and commitments in 2010. However, charges for non-operating
items remained high, especially in light of credit risk trends in
several highly exposed countries, which are lagging the business
cycle.
� In 2010, valuation adjustments entailing the recognition of impairment
losses on goodwill in the Corporate Center prevented an
improvement in profits.
Profit before tax for 2010 reached € 1,146 m after € 1,335 m in
2009. The decrease of € 189 m or 14% compared with the previous
year resulted from the € 360 m increase in impairment losses on
goodwill. The goodwill impairment charge recognised in the income
statement for 2010 was € 378 m, of which € 359 m related to JSC
ATF Bank, Kazakhstan. A low charge for goodwill impairment was
accounted for by the local bank in Latvia. In 2009, the total impairment
loss on goodwill amounted to € 19 m. Without the goodwill
impairment charge, profit before tax would have improved by 13%.
The higher charge for income tax translated into an even more pronounced
decline of € 355 m or 32% in consolidated profit (net
profit attributable to the owners of Bank Austria) to € 747 m for
2010.
The combined effects of the above factors are shown in the table
and chart below: operating income (€ 7,208 m) was only 1% lower
than in the previous year. In this context one should note the base
effect resulting from significant trading-induced interest income gen-
Profit before tax for 2010 compared with 2009
2009 AS
PUBlIShEd
erated in the first quarter of 2009 (and to a lesser extent, also in
the second quarter of 2009). The trading activities of the former
UniCredit CAIB, which are now included in the “Counterparts” product
line following organisational changes, reduced net interest
income by € 364 m compared with the previous year. Excluding this
negative special effect, net interest income – from commercial
banking operations – rose by 4%. The participation (recognised in
the Corporate Center) in the profits of the UniCredit Markets product
line is also connected with the UniCredit CAIB transaction, representing
compensation for the disposal of these business activities.
If this positive special effect is also excluded from the comparison
with the previous year, the resulting revenue growth of 3% indicates
a – moderate – increase in the performance from customer business.
Based on unadjusted figures, operating profit was down by
5% to € 3,442 m. The € 189 m decrease resulted from the above
special effects, which totalled minus € 288 m; on an adjusted
basis, operating profit grew slightly, by 3% to € 3,729 m.
Net writedowns of loans and provisions for guarantees and
commitments in 2010 were down by € 428 m or 19% from the
previous year; at € 1.8 bn they were still exceptionally high. The
total of provisions for risks and charges, restructuring costs and net
income from investments – i.e. other “non-operating” items – was
down by a net € 68 m. This resulted in an increase of € 360 m in
the combined figure for the items between operating profit and
profit before tax compared with the previous year. This improvement
was offset by impairment losses on goodwill and other non-operating
expenses in 2010, which were up by exactly the same amount,
€ 428 m, on the previous year. This means that the € 458 m
improvement (adjusted, i.e. generated in commercial banking operations)
was more than offset by a net charge of € 647 m reflecting
the combined special effects. On the basis of adjusted figures,
profit before tax would have increased by 34% instead of falling
by 14%.
UNdErlyINg ChANgE
2010
ONE-OFFS tOtAl ChANgE
€ M % AdjUStEd
€ M € M %
2010 AS
PUBlIShEd
Net interest income 4,877 +188 +4% 5,065 –364 1) –176 –4% 4,701
Net non-interest income 2,369 +62 +3% 2,431 +76 2) +139 +6% 2,507
Operating income 7,245 +250 +3% 7,495 –288 –38 –1% 7,208
Operating expenses –3,615 –151 +4% –3,766 +0 –151 +4% –3,766
Operating profit 3,630 +99 +3% 3,729 –288 –189 –5% 3,442
Net writedowns of loans –2,267 +428 –19% –1,839 +0 +428 –19% –1,839
Other non-operating items –29 –68 >100% – 97 –360 3) –428 >100% –456
Profit before tax 1,335 +458 +34% 1,793 –647 –189 –14% 1,146
1) Decrease in trading-induced interest income (which mirrors the restructuring of UniCredit CAIB and the exceptional interest rate environment at the beginning of 2009). / 2) Participation in
profits of the Markets product line of UniCredit (compensation for the sale of UniCredit CAIB) – 1) and 2) are related to proprietary trading, which has been concentrated in a specialised UniCredit
competence centre. / 3) Increase in impairment losses on goodwill.
Bank Austria · Annual Financial Statements 2010
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