Net income before taxes rose by 69.7 per cent to EUR 1.1 billion (first nine months of 2004: EUR 655 million), a figure which also reflects one-off effects of EUR 193.5 million. Adjusted for these one-off effects, net income before taxes increased by 40.1 per cent to EUR 917 million. Net income after taxes and minority interests rose by 86.4 per cent to EUR 824 million (2004: EUR 442 million).
Excluding one-off effects, net income after taxes and minority interests improved by an impressive 50.5 per cent to EUR 665 million. Central and Eastern Europe continues to drive the growth of operating activities. The Central and Eastern Europe (CEE) business segment more than doubled its net income after taxes from EUR 197 million to EUR 442 million.
Business with private customers and large corporates as well as the International Markets business segment also contributed to the improvement in results.
BA-CA’s CEO Erich Hampel: „We are making very good progress. Our hard work and focused approach of the past years are paying off. We are gradually making improvements in Austria and we benefit from our strategy of expansion in Central and Eastern Europe. The business combination with UniCredit will further substantially strengthen Bank Austria Creditanstalt.”
Plans envisage that the CEE Division of the new UniCredit Group will be located within Bank Austria Creditanstalt. As a result, BA-CA’s network in CEE would grow from about 1,000 to a total of 2,800 branches, total assets in CEE would increase from EUR 32 billion to some EUR 80 billion. The number of employees would more than double from 19,000 to over 50,000. It is also envisaged that Bank Austria Creditanstalt will assume responsibility for operations in Russia, Ukraine, Turkey and the Baltic states. This will make Bank Austria Creditanstalt the clear number one in Central and Eastern Europe – more than twice as large as the number two in the region.
Erich Hampel: „At present we are responsible for a market of 100 million people, in the future this number will be 400 million people. This is a tremendous opportunity for our customers, employees and shareholders. It is a guarantee for growth.”
Items in the income statement
BA-CA’s net interest income for the first nine months of 2005 was EUR 1,925 million, an
increase of 7.3 per cent over the first nine months of the previous year (2004: EUR 1,794 million). The net charge for losses on loans and advances was EUR 316 million, virtually matching the figure for the same period of the previous year (2004: EUR 309 million).
Net interest income after losses on loans and advances thus rose by 8.4 per cent to EUR 1,609 million (2004: EUR 1,485 million). Net fee and commission income increased by 12.4 per cent to EUR 1,047 million (2004: EUR 932 million). The net trading result also developed favourably, rising by 28.4 per cent to EUR 186 million (2004: EUR 145 million). General administrative expenses increased by 4.5 per cent to EUR 1,917 million (2004: EUR 1,835 million) as a result of exchange rate effects, growth in CEE and changes in the group of consolidated companies.
Operating profit amounted to EUR 905 million, an increase of 29.5 per cent over the first nine months of the previous year (2004: EUR 699 million). Net income from investments was EUR 269 million (2004: EUR 9 million). This figure mainly reflects proceeds of EUR 130 million from the sale of shares in Investkredit, and the effects from the acquisition of Banca Tiriac in Romania in September 2005, which was effected by way of an exchange of shares. The gain realised in this connection was EUR 123.5 million.
A provision of EUR 60 million has been made for restructuring costs relating to the reorganisation of the SMEs business segment, which is aimed at enhancing profitability in this segment. On balance, one-off effects in the third quarter of 2005 were EUR 193.5 million.
Bank Austria Creditanstalt’s net income before taxes reached EUR 1,111 million, an increase of 69.7 per cent over the previous year (2004: EUR 655 million). Minority interests rose to EUR 79 million (2004: EUR 47 million). Net income after taxes and minority interests increased by 86.4 per cent to EUR 824 million (2004: EUR 442 million).
The following key financial data have been calculated on the basis of these results:
• The return on equity before taxes (ROE) rose significantly, to 20.1 per cent
(2004: 13.5 per cent). Adjusted for one-off effects, the ROE before taxes was 16.6 per cent.
• The return on equity after taxes increased to 16 per cent (2004: 9.7 per cent). Adjusted
for one-off effects, the ROE after taxes was 12.9 per cent.
• The cost/income ratio improved from 64.6 per cent to 61.1 per cent.
• Earnings per share increased from EUR 3.01 to EUR 5.61. Adjusted for one-off effects,
earnings per share were EUR 4.53.
• The Tier 1 capital ratio was 7.59 per cent, after 7.85 per cent at the end of 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.
Austria and the region of Central and Eastern Europe are the core markets of Bank Austria Creditanstalt. BA-CA’s banking subsidiaries in Central and Eastern Europe significantly increased their combined net income before taxes by 34.2 per cent to EUR 459 million (2004: EUR 342 million). After consolidation effects and the one-off effect resulting from the exchange of shares with Banca Tiriac, net income before taxes in the CEE business segment was EUR 526 million (2004: EUR 254 million). Net income after taxes was EUR 442 million, 124.4 per cent higher than the figure of EUR 197 million for the first nine months of the previous year.
Bank Austria Creditanstalt completed its most recent acquisition project with Banca Tiriac in Romania in September 2005. The merger of BA-CA’s banking subsidiary HVB Bank Romania and Banca Tiriac has been initiated. The combination of the banks was carried out by way of an exchange of shares and a purchase of shares. A gain realised in this connection amounted to EUR 123.5 million. Bank Austria Creditanstalt now holds 50 per cent plus one share in Banca Tiriac. After the merger of the two banks, BA-CA will hold a majority interest of 50 per cent plus one share in the new bank and will be responsible for managing the bank’s business.
With total assets of EUR 2.1 billion, 72 branches and over 720,000 customers, the new bank will be a strong number four in Romania. And with a market share of 7.5 per cent, it will rank ahead of the Romanian savings bank CEC (5.9 per cent, number five).
The CEE business segment also improved its operating performance, with operating profit rising by 39.8 per cent from EUR 289 million to EUR 404 million. The ROE after taxes reached 29.2 per cent (2004: 16.0 per cent). The cost/income ratio declined from
59.2 per cent to 54 per cent.
In the first nine months of 2005, net income after taxes generated by the Private Customers Austria segment was EUR 129 million, an increase of 39 per cent over the same period of the previous year (2004: EUR 93 million). This reflects primarily the bank’s market initiative and the reorganisation of back-office activities: in November 2004, the bank transferred back-office activities and the processing of payment transactions to separate companies, which were combined within BA-CA Administration Services in October 2005.
The idea behind this move was to separate front-office operations from back-office and settlement activities. The most recent number of customers demonstrates that this strategy is successful: the bank has won 20,000 new customers in Austria so far in 2005. Today Bank Austria Creditanstalt serves about 1.85 million customers in almost 400 branches in Austria. The return on equity after taxes in the Private Customers Austria segment was 18.8 per cent (2004: 16.2 per cent). The cost/income ratio also improved from 78.3 per cent to 75 per cent.
The SMEs Austria segment achieved an operating profit of EUR 33 million in the first nine months of 2005, an increase of 83.3 per cent over the same period of the previous year (2004: EUR 18 million). As announced previously, BA-CA has started an extensive work programme in 2005 to enhance profitability in the SMEs segment on a sustainable basis.
The objective is to generate at least the cost of capital by 2007 (the cost of capital is between 8 and 9 per cent). The work programme includes optimising the entire process chain in business with small and medium-sized companies. Bank Austria Creditanstalt has already implemented an important objective by establishing BA-CA Administration Services, a company in which the bank’s entire back-office and settlement activities, including those for the SMEs segment, have been combined. A provision of EUR 60 million has been made for restructuring costs relating to the reorganisation and process adjustments of the SMEs business segment.
As a result, the business segment recorded a net loss after taxes of EUR 20 million (2004: net income after taxes of EUR 12 million). The return on equity after taxes was –2.8 per cent (2004: 1.7 per cent). The cost/income ratio was 62.3 per cent (2004: 61.5 per cent).
In the Large Corporates and Real Estate segment, net income after taxes was
EUR 235 million, 72.8 per cent higher than in the previous year (2004: EUR 136 million).
The result of this segment reflects the sale of shares in Investkredit. Nevertheless, operating profit in this business segment improved by 4.9 per cent from EUR 205 million to EUR 215 million. The return on equity after taxes reached 21.5 per cent (2004: 12.1 per cent). The cost/income ratio was 46.1 per cent (2004: 47.9 per cent).
The International Markets segment generated net income after taxes of EUR 98 million, an increase of 44.1 per cent over the previous year (2004: EUR 68 million). The return on equity after taxes was 55.9 per cent (2004: 44 per cent). The cost/income ratio was 55.3 per cent (2004: 54.3 per cent).
BA-CA’s Corporate Center recorded a net income after taxes of EUR 19 million (2004: a net loss after taxes of EUR 17 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 1,111 million. The remaining amount of EUR 1,017 million is apportioned to HVB Group’s business segments: EUR 901 million to the Austria and CEE segment, EUR 115 million to Corporates & Markets, and EUR 1 million to Other Items.
