Annual Financial Statements 2010 of Bank Austria

Management Report of UniCredit Bank Austria AG
Development of total assets
Overview: As at 31 December 2010, UniCredit Bank Austria AG’s
total assets were € 120.7 bn, down by € 8.9 bn or 6.8% from the
level as at 31 December 2009. While customer business was more
or less stable, rising in the course of the year, balance sheet
developments were mainly determined by the above-mentioned
reorganisation of trading and capital market activities. The sale of
UniCredit CAIB AG had significant direct and indirect effects on
assets and liabilities. These effects include those in connection with
the handling of the transaction itself by the shareholding
management unit, and the fact that UniCredit CAIB AG was no
longer reflected in funding and liquidity management, which was the
main reason for the decline in the balance sheet total. Indirect
effects resulting from the transaction included the following:
UniCredit CAIB AG performed various functions for UniCredit Bank
Austria AG which after the sale had to be performed by the bank
itself, including asset/liability management functions and liquidity
management functions such as the holding of securities eligible for
repurchase transactions. A comparison of selected balance sheet
items expressed as a percentage of the balance sheet total at the
end of 2010 and 2009 (see table below) shows that the structural
changes involved a significant reduction of interbank business on
both sides of the balance sheet, while the proportion of customer
business increased. As at 31 December 2010, loans and advances
to customers accounted for 55.2% of total assets, up from 51.5% in
the previous year, and primary funds (i.e. amounts owed to
customers and debts evidenced by certificates) were 55.5% of the
balance sheet total, up from 55%. Lending business continued to be
fully covered by primary funds. The bank’s balance sheet structure
and risk-bearing capacity improved further, not least as a result of
the € 2 bn capital increase carried out in March 2010. As at
31 December 2010, capital and reserves (equity) amounted to €
14.5 bn, representing 12.0% of the balance sheet total
(31 December 2009: 9.6%). The ratio of total assets to equity – i.e.
the leverage ratio – declined from 10.4 to 8.3.
Selected balance sheet items as a proportion of the balance
sheet total compared with the previous year
31 Dec. 2010 31 Dec. 2009
Assets
Loans and advances to credit
institutions (item 3)
Loans and advances to customers
19.1% 24.0%
(item 4)
Securities including shares (items
55.2% 51.5%
5 and 6)
Shares in group companies (item
7.8% 3.9%
8) 10.4% 14.0%
Liabilities and equity
Amounts owed to credit
institutions (item 1) 25.0% 27.8%
Amounts owed to customers (item
2) 38.0% 37.6%
Debts evidenced by certificates
(item 3) 17.4% 17.4%
Primary funds (items 2 and 3) 55.5% 55.0%
Capital and reserves (total of items
9, 10, 11 and 12) 12.0% 9.6%
Major balance sheet items – comparison of year-end levels
2010/2009
On the assets side, cash in hand and balances with central
banks and postal giro offices declined by € 25.0 m or 2.0% to €
1,221.1 m, mainly on account of lower balances with
Oesterreichische Nationalbank, Austria’s central bank. During the
financial market crisis, liquidity was transferred among banks
primarily via central bank accounts. In the reporting year, interbank
activity levels increased, at least among market participants with a
high credit rating.
To create additional liquidity reserves, Treasury bills and similar
securities were increased by € 496.4 m to € 3.4 bn. Holdings of
euro-area government bonds, which are eligible for refinancing in
the Eurosystem, rose by € 827.5 m.
Loans and advances to credit institutions were € 23.1 bn, down
by € 8.0 bn or 25.8% from the year-end 2009 level. The reduction of
interbank business reflected the – desirable – trend in the banking
industry as a whole. In UniCredit Bank Austria AG, this development
was explained as part of the reorganisation of trading and
investment banking functions; all of the decline in loans and
advances to credit institutions was due to domestic credit
institutions, with the sale of UniCredit CAIB AG accounting for
almost the entire amount of the decline. Loans and advances to
foreign credit institutions, on the other hand, rose strongly – mainly
for funding the stronger growth of business volume at the CEE
subsidiaries, especially our Moscow-based banking subsidiary.
Loans and advances to customers were unchanged at € 66.7 bn.
Domestic customers accounted for about three-quarters of total
lending volume (€ 50.5 bn); loans and advances to domestic
borrowers increased by 2.1%, with mortgage loans showing the
strongest growth, followed by local-authority loans. A significant
decline was recorded in consumer loans, while other loans and
advances declined only slightly, mainly because of the cyclical lag in
investment activity and the good liquidity position of our corporate
customers. Foreign currency loans were no longer actively offered
by the bank. Where necessary, foreign currency loans were hedged
or rescheduled through joint action with customers. Nevertheless,
the currencies concerned appreciated to such an extent that
conversion into euro resulted in a nominal increase (Swiss franc:
+18.7%, Japanese yen +14.5% against the euro, year-on-year).
Loans and advances to foreign customers were down by 5.9% from
the previous year although export financing increased.
Bonds and other fixed-income securities rose by € 4.4 bn, doubling
to € 9.0 bn. The increase was mainly due to the acquisition of
foreign euro-denominated securities.
Shares in group companies declined by € 5.6 bn or 30.8% to €
12.6 bn. The main reason for the decline was the sale of UniCredit
CAIB AG; in addition, the valuation of the shareholdings in our
banking subsidiaries in Kazakhstan and Latvia had to be adjusted to
the difficult situation and to changes in the outlook for the local
banking sector.
Bank Austria – Annual Financial Statements 2010 162