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THE BANK FOR CORPORATES 16 Management discussion Austrian corporates propensity to invest stable despite the economic slowdown the end of the year, the Japanese yen was traded at about 19% below the year’s high due to the country’s persistent economic problems, the Swiss franc upheld its high exchange rate and remained attractive. Investments of the manufactoring industry in Austria “History cannot tell us what to do – only what not to do.“ As compared with the United States and Germany, Austria managed to record a more favourable real annual growth rate of +1.1% on average with the close business relations to the then still expanding Central and Eastern European markets reinforcing the positive trend. Export dynamics, however, significantly slowed throughout the year despite good competitive pricing by Austrian exports. Thus, JOSÉ ORTEGA Y GASSET towards the end of the year, export figures recorded hardly any increase despite a still expanding market share. Analogous to this development, net output in the manufacturing industry increased by an average annual rate of +1.5%. While the number of employed persons remained unchanged, productivity per hour increased by +2.1% thus lagging behind its longstanding growth rate. Manufacturers of durables and vehicles still managed to record measurable growth whereas production increase in consumer goods, primary products, industrial goods and in the basic materials sector remained significantly below the previous year’s level. However, according to the latest investment survey conducted by WIFO (Austrian Institute of Economic Research), the readiness to make investments proved quite stable in 2001 despite the sluggish performance of the economy. Due to major projects carried out in the investment goods and car manufacturing sector, capital expenditure amounted to EUR 7.47 bn thus 9% above the previous year’s amount. With a smaller increase in turnover, the propensity to invest thus reached a new peak (6.6%) in 2001. 2000 2001 2002 Nominal amount in EUR m 6,831 7,467 7,315 Changes as compared with the previous year +16.0 % +9.3 % -2.0 % Real amount in EUR m corresponding to prices of 1995 6,664 7,270 7,102 Changes as compared with the previous year +15.3 % +9.1 % -2.3 % On the whole, Investkredit still managed to profit from its business opportunities despite the overall volatility of the market environment.
Increase in business volume and earnings Significant increase in operating earnings Higher expenses for risk provisions New employees to support expansion DEVELOPMENT OF EARNINGS Management discussion INCREASE IN EARNINGS. The Bank for Corporates’ efforts to further develop its service range led to an increase in both business volume and earnings. The Bank’s operating earnings grew significantly; however, the economic slowdown entailed higher investment in risk provisions. NET INTEREST INCOME. In the financial year, Development of net interest income net interest income was even reinforced in its 1997 – 2001 position as the most important source of Net interest income in EUR m earnings. As compared with 2000, net interest income rose by EUR 20 m or 27% to Net interest margin 1.10 % 1.02 % 1.02 % 0.98 % 96.9 0.97 % EUR 96.9 m with the increase in total assets by 76.4 29% being mainly responsible for this develop- 62.1 ment. Income from lending business, securities and investments in real estate also grew accordingly. Because of a steeper interest rate 49.3 51.1 curve in the second half of the year, interest contributions relating to maturity transforma- 1997 1998 1999 2000 2001 tions improved. The interest margin, i.e. the ratio of net interest income to the average amount of total assets, thus dipped from 0.98% to 0.97%. This development was due to the relative increase in local government financing in which lower margins and lower credit risks outweigh. OTHER OPERATING RESULTS. Net fee and commission income amounted to EUR 5.0 m and thus decreased by 15% as compared with 2000. This development was caused by higher expenditure in the securities sector. The most significant items of income came once again from environmental aid administered by Kommunalkredit for the Republic of Austria on a trust basis. In the financial year, total risk provision for loans in the lending business increased by 30% thus reaching an amount of EUR 8.5 m. The economic development, furthermore, led to higher expenses concerning value adjustment of corporate financing. On the whole, total risk provision for the lending business rose by EUR 4.7 m or 7% to EUR 69.0 m. At EUR 0.3 m, direct write-offs, however, remained on a very low level in the financial year. With EUR 3.0 m, the net trading result reached the same amount as in the previous year. Securities trading recorded a rather dissatisfying loss of EUR 1.4 m whereas derivatives trading achieved an amount of EUR 3.9 m thus improving on the previous year’s result. Financial investments were hit by the strongest decline due to the assessment of marketable securities and the declining credit quality of a bond reported as fixed asset. Due to the write-down of the Bank’s interest in INVEST EQUITY Beteiligungs-<strong>AG</strong>, the net result from investments also contributed to a total minus of EUR 22.0 m. GENERAL ADMINISTRATIVE EXPENSES. Due to the Group’s strong expansion, general administrative expenses rose by 21% to EUR 44 m. An increase in personnel expenses by EUR 7.3 m to EUR 27.5 m was caused by both higher provisions for retirement which rose by EUR 4 m and the rather unfavourable market development for pension schemes. The number of employees increased by 30 to 320 (disregarding the Board of Management and staff on maternity leave) which entailed a rise in current wage costs of EUR 2.6 m or 16%. Other administrative expenses rose by 2% from EUR 13.4 m to EUR 13.7 m, proportionately less than income. Depreciation and value adjustment of property and equipment increased only slightly to EUR 2.6 m. In the past year, investments in property and equipment focused on computer hardware and securities software. On the whole, general administrative expenses rose by a total of 22% from EUR 36.2 m to EUR 44.3 m. The cost-income ratio (the ratio of general administrative expenses to income) remained at the previous year’s level of 42% thus resting far behind the average obtained in the banking sector. THE BANK FOR CORPORATES 17
Page 1 and 2: THE BANK FOR CORPORATES. Annual Rep
Page 3 and 4: CONTENTS. Investkredit at a glance.
Page 5 and 6: INCOME DEVELOPMENT OF THE INVESTKRE
Page 7 and 8: LETTER FROM THE BOARD OF MANAGEMENT
Page 9 and 10: Letter from the Board of Management
Page 11 and 12: Board of Management. ALFRED REITER
Page 13 and 14: INVESTKREDIT SHARES. Investkredit s
Page 15 and 16: MANAGEMENT DISCUSSION. The members
Page 17: Management style allows for quick d
Page 21 and 22: Significantly improved capital rati
Page 23 and 24: Ensuring liquidity for corporate cu
Page 25 and 26: A euro financial market is emerging
Page 27 and 28: Deal structuring in the context of
Page 29 and 30: Competent consulting on aid-related
Page 31 and 32: Assistance in the acquisition and d
Page 33 and 34: Issuing focus on strengthening equi
Page 35 and 36: 60% of Austrian local authorities a
Page 37 and 38: Benefiting from advantages of Centr
Page 39 and 40: FINANCIAL STATEMENTS OF THE INVESTK
Page 41 and 42: STATEMENT OF CHANGES IN EQUITY. For
Page 43 and 44: Notes to the financial statements o
Page 45 and 46: (5) LOANS AND ADVANCES. Loans and a
Page 47 and 48: a fluctuation rate of 0% and assume
Page 49 and 50: (23) GENERAL ADMINISTRATIVE EXPENSE
Page 51 and 52: (32) RISK PROVISIONS. Risk provisio
Page 53 and 54: BWG- Investment Extent of investmen
Page 55 and 56: (36) PROPERTY AND EQUIPMENT. in EUR
Page 57 and 58: (42) PROVISIONS. in EUR m 31.12.200
Page 59 and 60: Expenses related to all subordinate
Page 61 and 62: Local go- Real Disclosure in EUR m
Page 63 and 64: (51) SUBORDINATED ASSETS. The asset
Page 65 and 66: (58) FAIR VALUE BALANCE SHEET. Fair
Page 67 and 68: (65) INFORMATION ON EMOLUMENTS OF A
Page 69 and 70:
Equity capital. Equity held by outs
Page 71 and 72:
REPORT OF THE SUPERVISORY BOARD. In
Page 73 and 74:
Cost-income ratio. Index of the cos
Page 75 and 76:
Own funds to be taken into account.
Page 77 and 78:
INVESTOR RELATIONS. Margot Binder P
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