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22 MANAGEMENT REPORT / DEVELOPMENT OF EARNINGS AND OF THE BUSINESS
more or less stable credit risk provisions (net) of
EUR 9.1 m. The improved risk-earnings ratio (ratio
of credit risk provisions (net) to net interest
income) of 5.7% (after 7.2% in
UNCHANGING RISK 2003) is proof of the imple-
COSTS IN 2004
mentation of cautious credit
decisions. This key figure positions
Investkredit significantly better than the
industry average. The low level of direct write-offs
(EUR 1.0 m) is evidence of the Investkredit Group’s
careful valuation policies. The allocation to risk
provisions for loans and advances was EUR 16.8 m.
Total risk provisions for the lending business rose
from EUR 72.1 m to EUR 78.0 m.
Improvement in other operating income
Compared to the previous year, net fee and commission
income improved by 21% to EUR 11.6 m.
The main contributions came from administrating
the Austrian environmental support schemes, commission
income from property management and
corporate finance business. At
EUR 3.3 m, the trading result is
18% higher than in the previous
year, mainly due to an improvement
in trading in interest-rate
derivatives and foreign exchange. Financial investments
were strongly increased by the favourable
market environment – especially the improvement
in net income from securities. Compared to 2003,
the lower expense arising from assigning lower
valuations to holdings also had a favourable effect.
Overall net income from investments improved
by EUR 2.7 m or 81% to EUR 6.1 m.
NET FEE AND COMMISSION
INCOME – AN IMPORTANT
INCOME COMPONENT
Disproportionately low rise in general
administrative expenses
Business growth and the Investkredit Group’s
regional expansion led to a disproportionately low
increase in general administrative expenses of
20% to EUR 75.2 m. Compared to 31 December
2003, the number of employees at Investkredit
rose by 88 or 21%. Compared to that, the 18%
rise in personnel expenses to EUR 44.7 m was
disproportionately low. Other administrative
expenses in the year under review rose by 20%
from EUR 21.6 m to EUR 26.0 m. Increases were
especially marked in auditing
and consulting costs. These ADDITIONAL STAFF TAKEN
ON, ESPECIALLY FOR
were due to higher costs for
CENTRAL EUROPE
insurance, legal advice in connection
with transactions and
the costs for rating agencies. Depreciation and
revaluation of property and equipment rose by
38% to EUR 4.6 m. The cost-income ratio (ratio
of general administrative expenses to income)
improved from 48.2% to 43.4%. It remains well
below average for the industry.
Balance of other income and expenses
less significant than in previous years
At EUR 3.6 m, the balance of other income and
expenses is EUR 6.2 m lower than the figure for
the previous year. The change in value of derivatives
that are not there for trading purposes made
a relatively low contribution to the result in 2004.
Profit for the year up by a third
Pre-tax profit for the year came to EUR 98.8 m.
This is equivalent to a rise of 37% or EUR 26.6 m.
The expense item for taxes on income rose by
25% to EUR 15.3 m. This gives
a tax ratio for the Investkredit
Group of 15.4%. The increase
PER SHARE
in after-tax profit for the
year is even more marked – up
by 39% or 23.5 m – to EUR 83.6 m. After deducting
the minority interests of partners in subsidiaries
– especially Dexia Crédit Local and EBRD – net
profit came to EUR 54.1 m. This beat the figure
for the previous year by 33% or EUR 13.3 m. In a
similar manner, earnings per share increased
from EUR 6.45 to EUR 8.55. The improvement in
return on equity to 14.6% exceeded a significant
operating target for the year 2004 of increasing
RoE to 14%.
IMPROVED PROFIT FOR
THE YEAR AND EARNINGS