Annual Financial Statements 2011 of Bank Austria

Management Report
Management Report (CONTINUED)
Bank Austria in 2011 – overview
While 2008 and 2009 were marked by economic crisis and recession
and 2010 saw a renewed upswing, the 2011 financial year presented
a more moderate scenario, widely referred to as “the new normal”,
also for Bank Austria. The years in which the Group built its operations
saw strong expansion through acquisitions and organic growth.
Over the past two years, the bank has focused on customer centricity
and its core business, and on strengthening its risk-bearing capacity,
as its strategic priorities.
On this basis, Bank Austria achieved a sound operating performance
in 2011, enabling the bank to absorb exceptionally large charges from
non-operating items without having to draw on net assets. These
charges were caused by external factors (government debt crisis) and
are also to be seen in connection with the reassessment of the bank’s
own business (impairment losses on goodwill).
The 2011 consolidated financial statements show a moderate net
profit of € 209 m after € 747 m for the previous year or € 709 m
if adjusted to reflect the current consolidation perimeter. With the
write-downs on equity interests, Bank Austria has removed a burden
on future profits. Moreover, the structure of current business has
improved. This is reflected in the reduction of write-downs of loans
and provisions for guarantees and commitments from the high levels
recorded in 2008 and 2009. The substantial capital increase carried
out in 2010 further strengthened Bank Austria’s risk-bearing capacity.
Net operating profit absorbs exceptional charges
€ m
3,500
3,000
2,500
2,000
1,632
1,500
1,000
500
0
1,211
914
2,428
1,713
1,388
3,063
3,292
1,144
3,630
1,102
3,466
747
3,083
Operating
profit
Net operating
profit 1)
2,580
Net write-downs of loans
and provisions for
2,254
2,280
guarantees and
commitments
1,626
1,732
1,363
Non-operating
deductions 2)
2005 2006 2007 2008 2009 2010
Net profit
2011
3)
4)
209
1) Operating profit less net write-downs of loans and provisions for guarantees and commitments
/ 2) Figures for 2011 in brackets: provisions for risks and charges (– € 136 m),
integration/restructuring costs (– € 28 m), net income from investments (– € 277 m,
including € 396 m write-downs on Greek government bonds), income tax (– € 261 m),
non-controlling interests (– € 50 m), Purchase Price Allocation effect (– € 35 m) and
impairment losses on goodwill (– € 737 m). / 3) Net profit attributable to the owners of
Bank Austria. / 4) Figures for past years adjusted to the respective most recent
consolidation perimeter. 2005 and 2006 pro forma corresponding to the CEE perimeter
of 2007, which is still applicable.
� In 2011 Bank Austria achieved a moderately positive trend in its
core commercial banking business. This is a success given the
difficult environment in which the bank operated: credit demand and
transaction volume were lower than expected against the background
of developments in the “real economy”. As explained in the previous
section, stricter regulatory requirements introduced in the wake of
stress tests impacted the banking sector at a time when the market
environment was under severe strain. Bank Austria, too, was faced
with higher funding costs and rising liquidity costs. Additional
burdens resulted from ad hoc economic-policy measures and fiscal
levies in some countries.
Nevertheless, Bank Austria’s customer business – comprising the
three Austrian customer segments and the Central Eastern Europe
(CEE) business segment – continued to grow in 2011. Lending
volume expanded steadily throughout the year, rising by an annual
average of close to 2.6%. Operating income increased slightly, by
1.1%, over the already high level attained. Costs were up by 4.5%
on the previous year, partly due to the bank levies reflected in this
item. Operating profit from customer business consequently
declined by 2.1%, also on account of currency depreciation in CEE
countries where the bank has large operations. Net write-downs of
loans and provisions for guarantees and commitments were reduced
substantially in 2011, as in 2010, across all business segments and
regions. The lower provisioning charge underlines the strong operating
performance from customer business. Net operating profit
generated by the customer business segments rose by € 412 m or
23.1% to € 2.2 bn.
Upward trend in customer business driven
by quality improvement 1) (€ m)
2011 2010 CHAngE ovEr 2010 2)
Lending volume, € bn 131.1 127.7 +3.4 +2.6%
Operating income 7,144 7,063 +81 +1.1%
Operating profit 3,549 3,623 –74 –2.1%
Net write-downs of loans and
provisions for guarantees and
commitments –1,351 –1,838 +486 –26.5%
net operating profit 3) 2,197 1,785 +412 +23.1%
1) Sum total of customer business segments F&SME, PB, CIB (= Austria) and CEE.
2) Comparative figures for 2010 recast to reflect the current consolidation perimeter (mainly
determined by deconsolidation of CAIB in 2010). / 3) Operating profit less net write-downs of
loans and provisions for guarantees and commitments.
� Overall, the bank’s net operating profit (Bank Austria including the
Corporate Center) exceeded € 1.7 bn in 2011, an increase of 13%
over the previous year. non-operating charges to be deducted from
this amount totalled € 441 m. The main burden from non-operating
items was the € 396 m write-down on Greek government bonds
resulting from mark-to-market adjustment (fair value level 1).
Other items included net additions to staff-related provisions and
to provisions for litigation risk, reflecting various legacy burdens.
Profit before tax thus declined to € 1.3 bn, a decrease of 11% or
€ 165 m from the comparative figure for 2010.
Bank Austria · Annual Financial Statements 2011
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