Annual Financial Statements 2011 of Bank Austria

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Management Report of UniCredit Bank Austria AG income/expenses from the disposal and valuation of securities valued as financial fixed assets, and of shares in group companies and equity interests (– € 633 m). The latter item includes the writedown on Greek government bonds held as financial fixed assets and the results from the disposal and valuation of shares in group companies and equity interests, which were mainly determined by the adjustment of the book values of shareholdings in our banking subsidiaries in Kazakhstan and Ukraine through impairment charges. Items in the profit and loss account for 2011 compared with the previous year Net interest income in the reporting year was € 1,390 m, up by € 81.6 m or 6.2%. Income from securities and equity interests decreased by € 184.2 m or 26.6% to € 508.4 m in 2011. The decline was partly due to the fact that dividend income from credit institutions and specialised credit institutions in 2011 was down by € 27.9 m, also because profits generated by CEE banks in which UniCredit Bank Austria AG holds interests were retained locally (in 2010, our Slovak banking subsidiary had paid a large special dividend). But the main reason for the decline was the sale of UniCredit CAIB in the middle of 2010, which resulted in substantial income from the intermediate holding company in that year. Net fee and commission income was down by 18% to € 572.7 m. Fee and commission income declined by 11.9% to € 802.9 m and fee and commission expenses rose by 8.4% to € 230.2 m. In lending business, income from guarantees given to CEE banks fell significantly while risk-related commission expenses vis-à-vis leasing companies increased. In the securities sector, mutual fund business declined strongly and commission income from foreign exchange dealings was also down by about 13%. Among other services, commission income declined in the areas of new building society savings agreements and insurance contracts. The item net profit/loss on trading activities increased to € 69.5 m, despite the reorganisation of trading activities to focus on customer-driven business. The figure cannot be directly compared with the previous year (+ € 35 m) because UniCredit CAIB was sold within UniCredit Group in 2010. Operating income in 2011 totalled € 2,615 m and was thus down by € 225.8 m or 7.92% from the 2010 figure. In 2011, general administrative expenses (€ 1,564 m) rose by € 102.1 m or 7.0%. Staff costs increased by 8.4% (+ € 73.6 m) to € 953.2 m. Other administrative expenses, including those for services provided by Group-internal service companies, rose by 4.9% (+ € 28.5 m) to € 610.8 m, mainly as a result of increases in the areas of advisory services and Information & Communications Technology (ICT). The major portion of the cost increase was due to structural changes: as part of the separation of customer-driven business and trading-related activities of UniCredit CAIB AG, a number of UniCredit CAIB AG’s employees were reintegrated in UniCredit Bank Austria AG before the banking subsidiary was sold. Moreover, in the middle of 2010, various operations-related services (Postal Service and Printing Service) were retransferred from UniCredit Business Partners (UCBP) to the bank, increasing staff costs and other administrative expenses. Total operating expenses – including depreciation and amortisation and other operating expenses, which together did not change to any significant extent – rose by € 114.6 m or 6.8% to € 1,802 m. Net expenses from the disposal and valuation of loans and advances as well as securities were € 565.9 m, down by € 138.8 m from the previous year. Most of the decline resulted from a reduction of write-downs on customer loans. The provisioning charge (€ 522 m net) for 2011 was down by 23% or € 153 m from the 2010 figure. Contributions to this further improvement – which was supported by favourable economic trends in the first six months of the reporting year – came from retail banking and from business with corporate customers, with the latter also benefiting from successful restructuring of loans. Net expenses arising from the disposal and valuation of securities valued as financial fixed assets rose by € 226.5 m or 55.7% to € 632.9 m. The increase resulted primarily from valuation losses on securities investments (Greek government bonds). The European Council decisions made on 21 July 2011 to support Greece were for the first time accompanied by an offer for the participation of private investors, suggesting an impairment of the investments in Greek government bonds of about 21%. The European Council’s statements of intent of 26 October 2011 made a more extensive debt restructuring appear more likely, and financial markets discounted this factor. Therefore the investments held as financial fixed assets were written down to the mid-market prices prevailing as at the end of 2011. This resulted in an expense of € 262 m reflected in the valuation results for financial investments (including another € 14 m from current assets). Together with the partly favourable development of other financial investments, the results from the disposal and valuation of securities investments were – € 213 m after + € 30 m in the previous year. Within the item “net income/expenses from the disposal and valuation of securities valued as financial fixed assets, and of shares in group companies and equity interests”, the results from the valuation and disposal of shares in group companies and equity interests were a net expense of € 419 m, down by € 17 m from the previous year’s figure (2010: – € 436 m). As part of the current multi-year planning process (five-year plan covering the period from 2011 to 2015) Bank Austria updated medium-term scenarios for its business segments and regions. Compared with the original assumptions made for planning purposes, the less favourable earnings trend for JSC ATF Bank in Kazakhstan and for PJSC Ukrsotsbank and PJSC Ferrotrade International in Ukraine required an adjustment of the respective book values in the combined amount of € 569 m. This expense was offset to the extent of about one half by positive results from the valuation and disposal of other equity interests; for example, the 50% interest in the Turkish Koç Finansal Hizmetler A.Ş. (“KFS”), on which we made a write-down in 2008 following an impairment test, has in the meantime developed much more favourably than originally assumed. And the outlook is also positive, as confirmed in our multi-year plan. This means that the reasons for the lower valuation were no longer applicable, and we were able to make a write-up, valuing the equity interest at cost. The large expense arising from the results of valuation and disposals in 2011 led to negative results from ordinary business activities in the amount of – € 386.3 m (2010: + € 41.8 m). After deduction of income taxes (€ 21.5 m) and other taxes (€ 78 m) and after a release of reserves, the profit for the year was € 100 thsd (2010: € 234 thsd). Together with the profit brought forward from the previous year, UniCredit Bank Austria AG’s accumulated profit was € 2.4 m. Bank Austria – Annual Financial Statements 2011 190
Management Report of UniCredit Bank Austria AG 1.2. Structural changes in the Bank Austria Group Consolidated companies Number 124 11 Newly established companies Companies newly added to the group of 5 consolidated companies 5 Acquired companies 1 6 Companies sold or liquidated 4 Mergers 2 Other changes 1) Opening balance Additions Disposals 10 Closing balance 139 1) includes companies which were previously included in a sub-group and are now reported separately Companies accounted for under the proportionate consolidation method Number 17 0 1 Other changes 1) Opening balance Additions Disposals 1 Closing balance 17 1) includes companies which were previously included in a sub-group and are now reported separately Companies accounted for under the equity method Opening balance Number 25 Additions 11 Newly established companies 1 Newly added companies 10 Disposals 4 Closing balance 32 Additions Consolidated companies Name of Company Domicile Addition as at UCTAM RK Limited Liability Company 1) Almaty 1 January 2011 UCTAM Ukraine LLC 1) Kiev 1 January 2011 UniCredit Turn-Around Management GmbH 1) Vienna 1 January 2011 VIENNA DC Bauträger GmbH Vienna 1 January 2011 VIENNA DC Tower 1 Liegenschaftsbesitz GmbH Vienna 1 January 2011 VIENNA DC Tower 2 Liegenschaftsbesitz GmbH Vienna 1 January 2011 Center Heinrich-Collin-Straße 1 Vermietungs GmbH u. Co KG Vienna 30 June 2011 DC elektronische Zahlungssysteme GmbH Vienna 30 June 2011 UCTAM RO S.R.L. 1) Bucharest 30 June 2011 Europa Investment Fund Management Budapest 1 September 2011 UCTAM d.o.o. Beograd. 1) Belgrade 31 December 2011 1) The objectives of the Uctam companies are to acquire, manage, administer and sell equity interests, properties and other business assets, especially of or from real estate projects and other business undertakings, deriving from debt restructuring. Companies accounted for under the equity method Name of Company Domicile Addition as at BA GebäudevermietungsgmbH Vienna 30 June 2011 Cash Service Company AD Sofia 30 June 2011 Kapital-Beteiligungs Aktiengesellschaft Vienna 30 June 2011 MARINA CITY Entwicklungs GmbH Vienna 30 June 2011 MARINA TOWER Holding GmbH Vienna 30 June 2011 Wiener Kreditbürgschaftsgesellschaft m.b.H. Vienna 30 June 2011 SP Projektentwicklung Schönefeld GmbH & Co KG Stuttgart 30 September 2011 V.A. Holding GmbH Vienna 30 September 2011 UNI Gebäudemanagement GmbH Linz 30 September 2011 Österreichische Wertpapierdaten Service GmbH Vienna 30 September 2011 ADF Service GmbH Vienna 31 December 2011 Disposals Consolidated companies Name of Company Domicile Disposal as at Bank Austria Global Information Service GmbH Vienna 30 June 2011 ZAO IMB Leasing Moscow 31 August 2011 UPI poslovni Sistem DOO Sarajevo 3 November 2011 Limited Liability Company B.A. Real Estate Moscow 1 December 2011 Companies accounted for under the proportionate consolidation method Name of Company Domicile Disposal as at Informations Technologie Austria GmbH in Liqu. Vienna 29 December 2011 Companies accounted for under the equity method Name of Company Domicile Disposal as at RCG Holding LLC (vormals Ramius LLC) New York 31 May 2011 UniCredit Business Partner SCPA Cologno Monzese 31 May 2011 Credanti Holdings Limited Nicosia 31 August 2011 Moll Holding GmbH Munich 31 December 2011 Mergers Consolidated companies Name of merged company UniCredit Factoring Penzügyi Domicile Name of absorbed company Domicile Merger as at Szolgoltato Zrt. Budapest UniCredit Bank Hungary Zrt. Budapest 1 January 2011 Teledata Consulting und Systemmanagement GesmbH Vienna Treuconsult Beteiligungsgesellschaft m.b.H. Vienna 14 July 2011 Bank Austria – Annual Financial Statements 2011 191
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Annual Financial Statements 2011 of Bank Austria

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