Annual Financial Statements 2011 of Bank Austria

Management Report
Management Report (CONTINUED)
Financial and non-financial performance indicators
Volume, profitability and resources
Average loans and receivables with customers rose by 2.8% to
€ 131 bn in 2011, after a decline in the crisis year 2009 and stagnation
of average volume in 2010. While the CEE business segment
accounted for all the increase, lending volume in Austrian customer
business was more or less maintained (see table). In both regions,
currency movements were a significant factor: at constant exchange
rates, lending volume in CEE was 4 percentage points higher, and
fluctuations in Austria during the year were explained by appreciation
and depreciation of the Swiss franc. The annual averages show an
underlying upward trend from quarter to quarter, which started at the
end of 2009; this development also resulted from the growth markets
in Central and Eastern Europe. Average lending volume in CEE
was again higher than in the three Austrian customer business segments
in 2011. But the difference – € 67 bn in CEE compared with
€ 64 bn in Austria – is not very large given the structure of the loan
portfolio in Austria and the market position in corporate banking.
The ratio of average loans to customer deposits is also higher in
Austria than in CEE.
Resources and profitability: 2011 compared with 2010
BAnK
AUSTrIA AUSTrIA 1) CEE
relative size
Average loans to customers (€ bn) 131.0 63.8 67.2
Change over previous year 2) +2.8% –0.9% +6.4%
Average customer deposits (€ bn) 100.6 47.2 53.6
Change over previous year 2) +2.2% –2.6% +6.9%
Average risk-weighted assets
(RWA, € bn) 124.4 38.5 81.5
Change over previous year 2) +1.5% –8.7% +8.3%
results, profitability and value creation
Operating income (€ m) 6,986 2,422 4,722
Change over previous year 2) –1.2% +2.1% +0.7%
Profit before tax (€ m) 1,291 672 1,462
Change over previous year 2) –11.3% +6.4% +28.0%
ROE before tax 3) 7.4% 19.6% 12.3%
Marginal EVA, (€ m) 4) 129.0 234.9 387.0
Marginal RARORAC 1.35% 8.48% 5.75%
Equity
Average equity (€ bn) 5) 17.4 3.4 11.9
Change over previous year 2) +2.1% +17.0% +8.2%
1) F&SME, Private Banking and Corporate & Investment Banking (CIB) Divisions, the difference
of the total amount is shown in the Corporate Center – see “D.2 Description of segment
reporting” in the notes to the consolidated financial statements, pages 126 to 127 of this
report. / 2) Adjusted to the consolidation perimeter in 2011. / 3) ROE = profit before tax
divided by average equity of the business segments. / 4) Calculated on the basis of capital
allocated under Basel 2. Difference = Corporate Center and intersegment items, sum total
calculated using bank’s own cost of capital of 10.93%. / 5) Subsidiaries are included at
actual IFRS capital.
Trends in risk-weighted assets (RWAs) differed between Austria
and CEE (see table), mainly due to structural differences but also
in the context of efforts focusing on (risk-adjusted) equity capital
efficiency in line with business policy. RWAs in Austria declined
significantly, by 8.7%; in absolute terms, the figure was considerably
lower than total customer loans. This reflects the successful
reduction of risk-weighted assets while volume hardly changed.
In the CEE business segment, RWAs expanded steadily (year-onyear
and quarter-on-quarter) and exceeded the total volume of
loans. Trends in risk-weighted assets over time and in their composition
by type of risk underline the efforts made to achieve a
sustainable development of business: in 2011, market risk in
Bank Austria was reduced by 9.2% in annual average terms and
by 2.1% in a comparison of year-end data; previous strong
reductions in 2009 and 2010 resulted from the reorganisation of
investment banking activities. It should be noted in this context
that at the end of 2011, the implementation of the new rules
known as Basel 2.5 (Stressed VaR and Incremental Risk Charge/
IRC) led to a sharp increase in market risk RWAs in the CEE
business segment, which is also reflected in the figures for the
bank as a whole. Risk-weighted credit risk was more or less
unchanged (+0.4%). Operational risk showed double-digit
growth (+16.2%) over the previous year, not least on account
of methodological progress and more accurate measurement,
to a level of 9% of total RWAs.
return on equity (ROE before tax = profit before tax/allocated
equity, subsidiaries with institutional capital) was 7.4% in 2011,
down from the previous year’s figure (8.6% recast) and still far
below the pre-crisis level (average for the period 2005–2007:
19.1%). ROE after tax – based on profit for the period (including
non-controlling interests, before deduction of goodwill impairment
and the Purchase Price Allocation effect) – was also lower, at
5.9% after 6.8% recast, due to substantially higher non-operating
income components (the average for the period 2005 to 2007,
before the collapse of Lehman Brothers, was 15.7%). Measured
by net profit attributable to the owners of Bank Austria, return on
equity for 2011 was 1.2% after 4.5% in the previous year. marginal
Economic value Added (EVA), the long-term indicator used by
UniCredit Group for value creation, by definition does not include
impairment losses on goodwill as non-cash items (“marginal”
refers to the exclusion of goodwill); positive and negative one-off
effects are also not included in NOPAT (net operating profit after
tax), which is used for the calculation. At overall bank level, marginal
EVA in 2011 reached only € 129 m, reflecting weaker current
results and a higher cost of capital (10.93%). EVA for 2010
was € 194 m (original figures). Risk-adjusted return on riskadjusted
capital (RARORAC) declined to 1.35% from 2.88%.
While marginal EVA for CEE is higher than for the three Austrian
Bank Austria · Annual Financial Statements 2011
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