Annual Financial Statements 2011 of Bank Austria

Management Report
Management Report (CONTINUED)
While revenues were stable, higher operating costs (+7.0% to
€ 910 m) had an impact on operating profit. The inclusion of small
service providers in the group of consolidated companies and in the
F&SME Banking Division (DC Elektronische Zahlungssysteme GmbH
and Cards & Systems EDV-Dienstleistungs GmbH) influenced the
overall picture because the relevant figures for the previous year
were not recast. On the other hand, initiatives to expand our market
position became effective: the sales network was strengthened with
the recruitment of new employees and internal transfers to customer
service units – especially in the SME sub-segment – of employees
who received special training for this purpose. More over, young new
employees joined the Division under the “Best Start” programme.
This compares with the retransfer of a number of employees from
support functions to central Competence Lines (Corporate Center).
On balance, staff numbers rose by 189 FTEs (+5.0%) in 2011.
In 2011, net write-downs of loans and provisions for guarantees
and commitments in F&SME were € 161 m, down by
€ 103 m or 39% from the previous year; this was the main factor
contributing to profit growth. The cost of risk was as low as 74 basis
points (bp), substantially lower than in the previous year (120 bp).
This development is explained by a positive economic trend: default
rates among private individuals showed a relatively favourable development,
supported by economic growth and the gradual improvement
in employment and incomes in Austria over the past few years.
On the other hand, appreciation and depreciation of the Swiss franc
had an impact additionally amplified, for methodological reasons, by
a leverage effect in the development of current net additions to loan
loss provisions (and in risk-weighted assets). A change in Basel 2
model parameters and the switch to a quantitative model more
effectively took account of these special factors. When the Swiss
central bank announced an intervention threshold of 1.20 CHF/EUR
on 6 September 2011, exchange rate movements started to reverse.
After the release of loan loss provisions in the fourth quarter of
2011, the provisioning charge was very low, further reducing the
full-year figure. (Average RWAs in 2011 were also significantly lower,
by 8.2%, than the comparative figure for the previous year, which
reflected the strength of the Swiss franc at the time.)
➔ operating profit in the F&SME business segment was down by
€ 33 m or 11% from the previous year. As the decline in net writedowns
of loans and provisions for guarantees and commitments was
even larger (€ 103 m), net operating profit improved by € 70 m to
€ 106 m compared with the previous year. The balance of non-operating
items in the income statement had hardly any impact on the
overall picture: provisions for risks and charges showed net income
of € 4 m (after a net expense of € 7 m in 2010). Net income from
investments was down by € 11 m to € 3 m, reflecting the base
effect of one-off income in the first quarter of 2010 (realised gains
on the sale of shares held by a subsidiary). Profit before tax rose by
€ 69 m to € 112 m, an increase more or less matching that in net
operating profit.
� A sharp focus on customer needs, products which are easy to
understand, the employment of new means of communication and,
quite generally, enhancing customer satisfaction continued to be
focal areas of our activities in sales, marketing and product development
in 2011. In business with private customers we successfully
launched a new service approach – “Smart Banking” – as a pilot
project for about 60,000 identified target customers in Vienna.
We are thereby leading customers in real-time contact from the
Bank Austria app in the Apple, Android or Nokia environment towards
personal dialogue with relationship managers in OnlineB@nking via
telephone or SMS – around the clock and independent of branch
opening hours. In this context Bank Austria achieved high activation
and cross-selling rates while also relieving the workload at branches
in standard business. This suggests that the new sales channel will
be of major significance in the future.
Other focal areas in 2011 were acquisition efforts based on a structured
dialogue with new customers, which accompanies customers
during the first year in which they are served by Bank Austria, and
advertising campaigns concentrating on such topics as housing and
provision for the future (insurance products). We use numerous feedback
instruments aimed at customer retention. Bank Austria was the
first bank in Austria to introduce feedback loops immediately after
personal contacts with customers. “Banking without Borders“ is an
initiative, initially launched at five branches, to serve foreign-language
customers in their own language; in this context we offered low-cost
payment solutions in cooperation with UniCredit branches in Serbia,
Croatia, Bosnia and Turkey (ethnic banking). To further enhance services
provided by relationship managers to customers in the Affluent
sub-segment, we made a significant investment in ongoing training
in investment advisory services in cooperation with national and
international institutions of higher education; 60% of relationship
managers at Bank Austria have already obtained a certificate after
participating in the training programme. Furthermore, we completely
changed our performance incentives, switching from product-
oriented sales objectives to customer satisfaction and team performance.
After the integration of the SmE sub-segment (small and mediumsized
enterprises) in the Family & SME Division (which was prepared
in 2010 and completed at the beginning of 2011), we now operate
31 branches and 23 specialised outlets serving SMEs. The team of
relationship managers – including specialists in finance, factoring,
leasing and Treasury operations – use a wide range of products.
Advisory services with regard to financial planning, liquidity management
and risk management are an essential component of the customer
relationship. Subsidised loans, loans under the “SME Billion”
lending scheme, the “Umbrella Facility”, trade finance and FX risk
management are tailored to meet the needs of small and mediumsized
businesses.
Bank Austria · Annual Financial Statements 2011
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