Today, HVB Group presents its interim report at June 30, 2005. Overall,
HVB Group recorded good financial performance in the second
quarter 2005, despite unfavorable conditions in the capital markets.
A particularly pleasing aspect was the increase in the two most important
revenue components: net interest income increased noticeably
compared to the first quarter, and net commission income
slightly exceeded even the high level recorded in the first three
months. Administrative expenses edged up only slightly; loan-loss
provisions recorded a very stable trend. The decline in the operating
profit is thus virtually exclusively attributable to the
lower trading result compared to the first quarter. Compared to its
ambitious guidance for full-year 2005, HVB Group was on track at
the mid-year mark. In a difficult macroeconomic environment, it
succeeded in boosting its operating profit, pre-tax and net profit
very significantly on a year-on-year basis.
Dieter Rampl, Board Spokesman of HVB Group: „Despite a still sluggish
economy, we are fully on track in our key income components.
All in all, I am very confident after the first six months of the present
fiscal year that we will realize our envisaged annual target.”
Detailed breakdown of the results
Compared to the first quarter (Euro 1,404 million), net interest income
improved significantly in the second quarter, by 6.3% to Euro
1,493 million. This increase is largely due to seasonal effects (dividend
inflows at Bank Austria Creditanstalt) and non-continuous effects
such as prepayment compensations. At the half-year mark, net
interest income stood at Euro 2,897 million, which corresponds to a
year-on-year increase of 5.7% (Euro 2,741 million). Against the background
of rising volumes, the interest margin on the basis of the
average on-balance-sheet risk-weighted assets rose to 2.67%, exceeding
both the level recorded in mid-2004 (2.53%) and the level
recorded at March 31, 2005 (2.62%).
Net commission income stood at Euro 764 million in the second
quarter and thus slightly surpassed (+0,9%) the excellent result recorded
in the first three months (Euro 757 million). With Euro 1,521
million at the end of June 2005, it exceeded the prior-year level
(Euro 1,393 million) by a pleasing 9.2%. In an uncertain capital market
environment, which was triggered off by the events in the US
automobile sector, the trading result came to Euro 101 million, falling
short of the high level recorded in the first quarter (Euro 322
million). After the first six months, the trading result amounted to
Euro 423 million and was thus 5.8% below the prior-year figure (Euro
449 million).
The balance of other operating income and expenses increased to
Euro 3 million in the second quarter compared to the result of the
first three months (-Euro 12 million). On a year-on-year basis, the
balance came to -Euro 9 million and was thus noticeably below the
prior-year level (Euro 91 million), which included the disposal gain
for BethmannMaffei of Euro 53 million. Because of the lower trading
result, total operating revenues declined 4.5%, to Euro 2,361 million,
compared to the previous quarter (Euro 2.471 million Euro ). On a
year-on-year basis, they increased 3.4%, from Euro 4,674 million to
Euro 4,832 million.
At Euro 1,623 million, administrative expenses rose only slightly, by
1.4%, in the second quarter (Q1/05: Euro 1,600 million). In particular,
this increase is attributable to the first-time consolidation effect of
IMB. In a year-on-year comparison, administrative expenses of Euro
3,223 million in the first six months were 3.5% above the prior-year
level (Euro 3,113 million). The cost-income ratio stood at 66.7% at
the end of June (previous year: 66.6%).
For fiscal 2005 as a whole, HVB Group continues to expect loan-loss
provisions of approximately Euro 1.3 billion – which translates into a
pro-rata figure of Euro 649 million for the first six months. This corresponds
to a pronounced decline of 27.5% compared to the prioryear
level (Euro 895 million). In the second quarter, loan-loss provisions
came to Euro 326 million and were thus virtually unchanged
versus the previous quarter (Euro 323 million).
At Euro 412 million, the operating profit in the second quarter declined
by 24.8% versus the above-average result generated in the
first three months (Euro 548 million). Against the background of an
otherwise pleasing operating performance, this figure again reflects
the lower trading result. Nevertheless, HVB Group’s operating profit
in the second quarter exceeded the previous year’s quarterly average
by 16%. At Euro 960 million after six months, the operating
profit was boosted substantially compared to the prior-year level
(Euro 666 million). This means that the sustained operating improvement
recorded in fiscal 2004 continued in mid-2005, too.
In the second quarter, net income from investments of Euro 30 million
included the disposal gain for the participation in Rhön-
Klinikum (Euro 36 million) and amounted to Euro 84 million at the
end of June. In accordance with the new IFRS 3, regular amortization
of goodwill has been discontinued since January 1, 2005. Nonscheduled
impairments were not necessary in the second quarter
2005. The balance of other income and expenses mainly includes
pro-rata absorbed losses for companies attributable to the Real Estate
Restructuring (RER) segment.
The pre-tax profit stood at Euro 406 million in the second quarter
and thus remained 28.1% below the result of the first quarter (Euro
565 million). The level of Euro 971 million recorded at the mid-year
mark considerably exceeded the prior-year figure (Euro 608 million),
by 59.7%. After taxes and minority interest, HVB Group generated a
profit of Euro 230 million in the second quarter, which fell 31.5%
short of the strong performance of the previous quarter (Euro 336
million). Its cumulative profit for the first six months came to Euro
566 million and thus more than doubled compared to the prior-year
figure (Euro 267 million).
Return on equity before taxes of HVB Group increased from 9.0% (at
June 30, 2004, after adjustment for goodwill amortization) to 13.5%;
return on equity after taxes climbed from 5.4% (at June 30, 2004,
after adjustment for goodwill amortization) to 9.7%.
Segment reporting at June 30, 2005
The individual business segment made the following contributions
to the bank’s operating profit of Euro 960 million
Germany: Euro 359 million
Austria & CEE: Euro 467 million
Corporates & Markets: Euro 361 million
Real Estate Restructuring: Euro 19 million
As a result of the changes to the organizational structure of HVB
Group detailed in the interim report at March 31, 2005, (cf. interim
report at March 31, 2005), the results of the business segments and
business units disclosed in the prior year are no longer comparable
with the figures calculated for the first half of fiscal 2005. Compliant
with IAS 14.76, the prior-year figures have been adjusted to match
the new structure in the presentation of the segment information.
The effects of applying revised and new IFRSs, where they are to be
applied retrospectively, have similarly been incorporated in the adjusted
prior-year values for segment reporting.
With an operating profit of Euro 359 million, the Germany business
segment made a significant contribution to HVB Group’s overall
operating profit. In fiscal 2004 as a whole, the operating profit of the
Germany business segment as reported in the 2004 Annual Report –
before changes in the organizational structure (including RER) –
amounted to just Euro 18 million.
The workout portfolios of the German real estate business managed
by the Germany business segment until December 31, 2004 are no
longer included in the adjusted prior-year comparative figures of
the Germany business segment because they have been allocated
to the RER segment. In particular, the loan-loss provisions set up for
these portfolios in 2004 are no longer shown. By transferring all the
workout portfolios of the German real estate business to the RER
segment, an atypical trend has occurred in the area of loan-loss provisions
in the Germany business segment compared with the adjusted
prior-year figures (cf. the detailed description in the interim
report at June 30, 2005).
The Austria/CEE business segment generated an operating profit of
Euro 467 million in the first half of 2005 and is thus Euro 103 million,
or more than one quarter, above the comparable period of the previous
year.
The operating profit in the Corporates & Markets business segment
was in line with the previous year. Pre-tax profit was boosted by one
third due to the disposal gains from the sale of some of the shares
the bank hold in Premiere AG and the holding in Rhön-Klinikum,
which are recognized under net income from investments (Euro 79
million, up from -Euro 7 million in the previous year).
The new Real Estate Restructuring segment (RER) comprises the
ailing real estate exposures from the entire German real estate finance
business of HVB AG and the remaining portfolios of the former
Real Estate Workout segment. Here, the bank recorded an increase
in both operating revenues and administrative expenses
compared to the adjusted prior-year figures. Since no further loanloss
provisions had to be posted in 2005 for the lending portfolios
allocated to this segment, it generated a positive operating profit of
Euro 19 million (previous year -Euro 418 million). The volume of the
RER segment was reduced noticeably in the first half of 2005, to Euro
13.9 billion (Euro 15.4 billion at yearend 2004).
Risk-weighted assets and capital ratios
At June 30, 2005, risk-weighted assets compliant with BIS rules
amounted to Euro 246.5 billion This is Euro 7.9 billion more than the
level recorded at yearend 2004. The core capital ratio came to 6.4%
(6.6% at December 31, 2004), the equity funds ratio stood at 10.0%
(10.4% at December 31, 2004).
The comparative figures have been adjusted to reflect the required initial application
of revised IFRS. As a result of changes to the organizational structure of HVB
Group, the results of the business segments and business units disclosed in the
prior year are no longer comparable with the figures calculated for the first half of
fiscal 2005. We have therefore adjusted the prior-year figures to match the new
structure in the segment information.
