In the first half of 2005, Bank Austria Creditanstalt (BA-CA) significantly improved its results compared with the first six months of 2004. Net income after taxes and minority interests rose by EUR 168 million or 58.9 per cent to EUR 453 million (first half of 2004: EUR 285 million).
The return on equity after taxes (ROE) improved from 9.4 per cent to 13.4 per cent, although BA-CA’s already strong equity capital base increased further, by 6.7 per cent to EUR 7.1 billion (shareholders’ equity excluding minority interests). The cost/income ratio also improved, from 64.7 per cent to 61.2 per cent.
BA-CA’s CEO Erich Hampel: „We have achieved excellent results for the first six months, which have significantly exceeded our expectations. For this reason we are raising our fullyear target for net income before taxes.” Originally, Bank Austria Creditanstalt aimed to generate net income before taxes of EUR 1 billion for 2005 as a whole. The bank is now raising this target to EUR 1.1 billion (not taking into account gains on the sale of Investkredit shares).
All business segments of Bank Austria Creditanstalt contributed to the improvement in results for the first six months of 2005. Net income after taxes in the CEE business segment (Central and Eastern Europe) rose substantially, by 52.7 per cent to EUR 201.9 million, compared with the first half of 2004. Combined total assets of the CEE banking subsidiaries also increased strongly, by 34 per cent to EUR 33.5 billion, compared with 31 December 2004. Bank Austria Creditanstalt’s entire network in the region of Central and Eastern Europe currently comprises over 1,000 offices in eleven countries. The bank serves over 4.7 million customers in this region. Via HVB Group, BA-CA customers also have access to markets in Russia, Ukraine, the Baltic states and all international financial centres. The Group has again become the largest bank in CEE, with total assets (including BA-CA Leasing) of EUR 35.5 billion.
Business in Austria also developed favourably. „We fully concentrate on customer business and focus on providing services and advice. Our employees are doing a very good job and this is reflected in results,” says Erich Hampel. Overall, net income after taxes in the Austrian customer business was EUR 203.9 million, an increase of 34 per cent over the first six months of 2004. The International Markets business segment also performed very well, with net income after taxes rising by 82.8 per cent to EUR 67.1 million.
As at 30 June 2005, Bank Austria Creditanstalt’s total assets were EUR 154.5 billion, 5.4 per cent higher than at year-end 2004 (31 December 2004: EUR 146.5 billion). Customer business continued to grow significantly. On 30 June 2005, the BA-CA Group’s staff numbered 30,336 (30 June 2004: 29,429).
Success story since reorientation in 2001
„As part of the integration with HVB Group we completely reoriented the bank in 2001. We are now fully concentrating on our core markets in Austria and Central and Eastern Europe, and we are very well placed. No other bank can offer its customers in this region in the heart of Europe such an extensive network with such a full range of products,” says Erich Hampel.
„And this clear strategy, the course we have pursued since 2001, is also reflected in the bank’s business performance. Never before has Bank Austria Creditanstalt achieved such high levels of profitability and capital strength, and never before has the bank been so valuable.”
From the first half of 2000 to the first half of 2005, key figures for BA-CA have improved significantly: its market capitalisation – the company’s value – has more than doubled from EUR 6 billion to over EUR 12 billion. Operating profit has tripled. Shareholders’ equity has increased by almost 60 per cent to over EUR 7 billion. Despite this fact, the ROE is better than 5 years earlier and the cost/income ratio is considerably lower. Moreover, as an employer, Bank Austria Creditanstalt has grown substantially: today it has more than 30,000 employees, compared with 19,000 in 2000.
Erich Hampel: „The British weekly magazine ‘The Economist’ recently referred to us as a ‘jewel’. I am pleased to accept this compliment and pass it on to our 30,000 employees, who are doing a very good job, and of course to our customers, who have placed their confidence in us for many years. Without the good relationship with our customers we would not have achieved such a good performance in the past five years.”
Details of BA-CA’s financial statements for the first half of 2005
Items in the income statement
BA-CA’s net interest income for the first half of 2005 was EUR 1,282 million, up by 8.2 per cent on the first six months of the previous year (2004: EUR 1,185 million). The net charge for losses on loans and advances was EUR 208 million, matching the previous year’s level (2004: EUR 207 million). Net interest income after losses on loans and advances thus rose by 9.8 per cent to EUR 1,074 million (2004: EUR 978 million).
Net fee and commission income increased by 8.3 per cent to EUR 666 million (2004: EUR 615 million). The net trading result developed favourably, rising by 30.4 per cent to EUR 118 million (2004: EUR 91 million). General administrative expenses increased by 4.6 per cent to EUR 1,271 million (2004: EUR 1,215 million) as a result of exchange rate effects, growth in CEE and changes in the group of consolidated companies.
Operating profit rose by 31 per cent to EUR 598 million (2004: EUR 456 million). Net income from investments amounted to EUR 15 million (2004: EUR 8 million). Bank Austria Creditanstalt’s net income before taxes thus reached EUR 611 million, an increase of 43 per cent over the previous year (2004: EUR 427 million). Net income after taxes and minority interests rose by 58.9 per cent to EUR 453 million (2004: EUR 285 million).
This improvement in results has the following effects on key financial data:
• The return on equity before taxes (ROE) rose to 16.8 per cent (2004: 13.3 per cent).
• The return on equity after taxes increased to 13.4 per cent (2004: 9.4 per cent).
• The cost/income ratio improved from 64.7 per cent to 61.2 per cent.
• Earnings per share increased from EUR 1.94 to EUR 3.09.
• The risk/earnings ratio (net charge for losses on loans and advances as a percentage of
net interest income) improved from 17.4 per cent to 16.2 per cent.
• The Tier 1 capital ratio was 7.85 per cent, after 7.59 per cent as at 30 June 2004.
Business segment results
Bank Austria Creditanstalt divides its results into five business segments: Central and Eastern Europe (CEE), Private Customers Austria, SMEs Austria, Large Corporates and Real Estate, and International Markets. The bank also shows results for its Corporate Center.
Central and Eastern Europe
Bank Austria Creditanstalt’s banking subsidiaries in Central and Eastern Europe significantly increased their combined net income after taxes to EUR 232.5 million (2004: EUR 184.2 million). After consolidation effects, net income after taxes in the CEE business segment was EUR 201.9 million, an increase of 52.7 per cent over the figure of EUR 132.2 million for the first six months of the previous year. The ROE after taxes was 20.6 per cent (2004: 16.4 per cent). The cost/income ratio declined from 58 per cent to 54.3 per cent.
In the first half of 2005, net income after taxes generated by the Private Customers Austria segment was EUR 67.5 million, up by 23.9 per cent on the same period of the previous year (2004: EUR 54.5 million). The return on equity after taxes was 15.1 per cent (2004: 14.6 per cent). The cost/income ratio declined to 77.5 per cent (2004: 80 per cent).
The SMEs Austria segment achieved a net income after taxes of EUR 16.8 million in the first half of 2005, an increase of 66.3 per cent over the previous year (2004: EUR 10.1 million). The return on equity after taxes reached 3.6 per cent (2004: 2.2 per cent). The cost/income ratio was 62.3 per cent (2004: 60.7 per cent). In this business segment BA-CA’s management has developed an extensive work programme to improve results on a sustainable basis.
In the Large Corporates and Real Estate segment, net income after taxes was EUR 119.6 million, 36.5 per cent higher than in the previous year (2004: EUR 87.6 million). The return on equity after taxes reached 16.2 per cent (2004: 11.7 per cent). The cost/income ratio was 42.6 per cent (2004: 49.1 per cent).
The International Markets segment generated net income after taxes of EUR 67.1 million, an increase of 82.8 per cent over the previous year (2004: EUR 36.7 million). The return on equity after taxes was 53.7 per cent (2004: 36.1 per cent). The cost/income ratio was 55.4 per cent (2004: 59.3 per cent).
BA-CA’s Corporate Center recorded net income after taxes of EUR 21.9 million (2004: a net loss after taxes of EUR 4.7 million).
Inclusion of results in the business segments of HVB Group
Net income before taxes generated by BA-CA is included in HVB Group’s business segment results in the following way: calculated refinancing costs and other consolidation effects are deducted from the amount of EUR 611 million. The remaining amount of EUR 531 million is apportioned to HVB Group’s business segments: EUR 452 million to the Austria and CEE segment, EUR 76 million to Corporates & Markets, and EUR 3 million to Other Items.
Balance sheet
As at 30 June 2005, Bank Austria Creditanstalt’s total assets amounted to EUR 154.5 billion, an increase of 5.4 per cent over the year-end 2004 figure (31 December 2004: EUR 146.5 billion). Growth was recorded mainly in customer business, investments and trading activities.
On the assets side of the balance sheet, loans and advances to, and placements with, banks were EUR 23.8 billion, matching the level at the end of the previous year (2004: EUR 24.0 billion). Trading assets rose by 5 per cent to EUR 19.5 billion (2004: EUR 18.6 billion). Loans and advances to customers increased by 5.8 per cent to EUR 86.0 billion (2004: EUR 81.3 billion). Investments rose by 8.2 per cent to EUR 18.7 billion (2004: EUR 17.3 billion).
On the liabilities side, amounts owed to banks increased by 8.7 per cent to EUR 43.4 billion (2004: EUR 39.9 billion). Amounts owed to customers rose by 4.5 per cent to EUR 60.4 billion (2004: EUR 57.9 billion). Liabilities evidenced by certificates increased by 2.5 per cent to EUR 20.1 billion (2004: EUR 19.6 billion). Shareholders’ equity (including minority interests) rose by 7.1 per cent to EUR 7.6 billion (2004: EUR 7.1 billion).
