Listen, understand, respond.

advertisement
Listen,
understand,
respond.
2013 Annual Report
This report expresses UniCredit’s approach to banking by telling everyday
stories about our interactions with customers, innovations in products
and adaptability in services.
These brief but meaningful stories come directly from our colleagues.
They are examples of the tangible benefits and concrete solutions offered
by UniCredit, demonstrating how we make a difference in people’s lives.
Our clear goal to improve everyday circumstances is rooted in our
complete commitment to outcomes that ensure customer satisfaction.
At UniCredit, listening to our clients and engaging with them to offer
simple, direct results lies at the heart of our commercial banking
operations. It is part of our determined effort to contribute to the economic
and social well-being of our customers as well as the communities where
we work.
We will continue with this commitment to all of you, every day.
2013 Annual Report
Bank Austria at a glance
Income statement figures
(€ million)
Net interest
Net fees and commissions
Net trading, hedging and fair value income
Operating income
Operating costs
Operating profit
Net write-downs of loans and provisions for guarantees and commitments
Net operating profit
Profit before tax
Goodwill impairment
Net profit or loss attributable to the owners of the parent company 2013
2012 1)
+/–
4,132
1,698
934
6,960
– 3,856
3,104
– 1,441
1,663
1,131
– 1,957
– 1,603
4,143
1,543
768
6,681
– 3,786
2,895
– 969
1,926
1,269
– 34
419
– 0.3 %
+ 10.0 %
+ 21.7 %
+ 4.2 %
+ 1.9 %
+ 7.2 %
+ 48.7 %
– 13.7 %
– 10.9 %
> 100 %
n.m.
31 dec. 2013
31 dec. 2012
+/–
196,210
129,121
137,984
15,052
118,510
207,596
132,424
138,626
18,192
130,378
– 5.5 %
– 2.5 %
– 0.5 %
– 17.3%
– 9.1%
n.m. = not meaningful
Volume figures
(€ million)
Total assets
Loans and receivables with customers
Primary funds (deposits from customers and debt securities in issue)
Equity
Risk-weighted assets (overall)
Key performance indicators
Return on equity after tax (ROE)
Cost/income ratio (without bank levies)
Cost of risk (provisioning charge / avg. lending volume)
Loans and receivables with customers / primary funds 2)
Leverage ratio 2) 3)
Core Tier 1 capital ratio 2)
Tier 1 capital ratio 2)
Total capital ratio 2)
2013
2012 1)
n.m.
53.4 %
1.09 %
93.6 %
13.2
11.3 %
11.6 %
13.5 %
2.4 % 4)
54.7 %
0.75 %
95.5 %
13.0
10.6 % 4)
10.8 % 4)
12.5 % 4)
31 dec. 2013
31 dec. 2012 1)
Staff 5)
Bank Austria (full-time equivalent)
Central Eastern Europe business segment
Kazakhstan (ATF Bank held for sale until the bank was sold in April 2013)
Austria (other business segments)
+/–
53,598
46,396
0
7,201
58,182
47,488
3,314
7,381
– 7.9 %
– 2.3%
n.m.
– 2.4%
31 dec. 2013
31 dec. 2012
+/–
2,789
2,520
0
269
2,970
2,542
139
289
– 181
– 22
– 139
– 20
n.m. = not meaningful
Offices 5)
Bank Austria
Central Eastern Europe business segment
Kazakhstan (ATF Bank held for sale until the bank was sold in April 2013)
Austria (other business segments)
1) Comparative figures for 2012 recast to reflect the current structure and methodology. / 2) End of year. / 3) Total assets/equity (without intangible assets). / 4) Original figures. /
5) Employees and offices of companies accounted for under the proportionate consolidation method are included at 100%.
2
2013 Annual Report · Bank Austria
Contents
Introduction Preface by Willibald Cernko
Preface by Erich Hampel
5
6
8
Corporate Profile 11
UniCredit12
Bank Austria: “A+CEE” in UniCredit18
Management Board of UniCredit Bank Austria AG
24
Management Report of Bank Austria for 2013
The banking environment in 2013
Bank Austria in 2013 – Overview
Quarterly trends in 2013 Details of the income statement for 2013
Financial position and capital resources
Financial and non-financial performance indicators
Development of business segments
Outlook Consolidated Financial Statements
in accordance with IFRSs Consolidated Income Statement
for the year ended 31 December 2013
Consolidated Statement of Comprehensive Income Statement of Financial Position at 31 December 2013
Statement of Changes in Equity Statement of Cash Flows
29
30
36
38
40
47
49
61
80
87
88
89
90
91
92
Notes to the Consolidated Financial Statements A – Accounting policies
B – Notes to the income statement
C – Notes to the statement of financial position
D – Segment reporting
E – Risk report
F – Additional disclosures
Concluding Remarks of the Management Board
of UniCredit Bank Austria AG
Report of the Auditors
Report of the Supervisory Board for 2013
95
97
149
161
179
191
239
Corporate Governance Corporate Governance Report for the 2013
financial year of UniCredit Bank Austria AG Statement by Management Supervisory Board and Management Board
of UniCredit Bank Austria AG
263
Additional Information
Office Network
CEE Network
Investor Relations
277
278
282
284
255
256
258
264
271
272
*) Part of the consolidated financial statements in accordance with IFRSs
Bank Austria · 2013 Annual Report
3
*)
Understand
Customer needs and quick responses.
“I received a call from a new customer who told me his company’s
employees were having trouble withdrawing money from ATM
machines. I wanted to solve the problem as quickly as possible, so I
went that evening to check in person. I found that the ATM was only
allowing customers to insert cards one way.
I helped a customer who was having trouble withdrawing cash.
But I knew that our ATMs were supposed to allow customers to insert
cards in either direction, so I immediately called the ATM company
to resolve the issue. By quickly responding to a client’s problem,
everyone was helped.”
Sergey Chekhonadskikh – ZAO UniCredit Bank Ekaterinburg – Russia
Introduction
Preface by Willibald Cernko
6
Preface by Erich Hampel
8
Bank Austria · 2013 Annual Report
5
Introduction
Preface by
Willibald Cernko
Ladies and Gentlemen,
Bank Austria’s Annual Report for 2013 stands out from the annual
routine. The bank’s operating activities developed favourably as
usual. However, in our 2013 financial statements, we carried out
a fundamental reassessment of assets. Operating profit for 2013
was over €3 billion, up by 7% on the previous year and 11%
higher when adjusted for exchange rate movements. Never­
theless, the bottom-line figure was a net loss of €1.6 billion.
This may irritate readers at first glance. But I can assure you that
after the measures taken for these difficult financial statements,
Bank Austria is very well positioned for the future.
WilLibald Cernko
CEO UniCredit Bank Austria AG
“
It is about time that we –
i. e. companies, banks,
supervisors and politicians –
turn our attention from coping
with the problems of the past
five years to investing into the
future in a confident mood.
„
Let me explain this by commenting on the main points: over
the past ten or fifteen years we have created an unrivalled
international network. Initially we set up banks in Central and
Eastern Europe and later acquired CEE banks in the market.
Finally, the creation of UniCredit Group enabled us to enter a
new league with the transfer to Bank Austria of additional CEE
banks and further acquisitions which thereby became possible.
The financial market crisis, followed by recession and protract­
ed adjustment processes, marked a turning point: the econo­
mies in Central and Eastern Europe, initially booming, started to
experience more subdued growth and a steadier development.
In the banking sector, too, years of external growth were fol­
lowed by a phase of consolidation. Expectations and plans for
expansion were scaled down compared with the original, exces­
sive scenarios. As a result, prices envisaged in the market have
changed: banks are no longer traded at two or three times their
book value or an even higher multiple, but at book value at
best, and in many cases below that. In response to these
­developments we have adjusted the carrying amounts of equity
interests and shareholdings in banking subsidiaries acquired in
past years, before the financial market crisis, to currently pre­
vailing circumstances and prospects. The related goodwill
impairment charge in 2013 totalled €2 billion, reducing the
amount of goodwill shown in the statement of financial posi­
tion as at 31 December 2013 to nil.
Moreover, in 2013, we removed risks from the financial state­
ments by more sharply focusing our business portfolio on
core activities and core regions. This led to a reduction of riskweighted assets while lending volume and total deposits rose
slightly. Above all, our capital ratios continued to improve:
Bank Austria’s total capital ratio rose from 12.5% at the end
of 2012 to 13.5% at the end of 2013.
6
2013 Annual Report · Bank Austria
The most significant achievement for Bank Austria, behind
these technical aspects of overall bank control, is the strong
­performance in customer business. We are the leading bank in
the perimeter of our operations covering 14 countries, with
54,000 employees and 2,800 branches of our local banks.
And we are concentrating on customer business with a leaner
balance sheet and reduced risks, with an excellent liquidity
­position and sound funding based on local customer deposits.
We again underlined our operating strengths in 2013. Based on
operating income of €7 billion, we generated an operating profit
of over €3 billion, up by 7% on the previous year and 11%
­higher when adjusted for exchange rate movements. This is a
significant achievement, especially when viewed against the
background of mixed trends in the banking environment, which
was characterised by extremely low interest rates, excess
­liquidity and continued debt reduction by companies and private
individuals. Operating income in Austrian customer business was
maintained at more or less the previous year’s level and, as
expected, the CEE business segment again generated strong
­revenue growth. Net write-downs of loans in the bank as a whole
were higher in 2013 than in the previous year. However, the
increase does not reflect a renewed deterioration in asset quality;
rather, it is to be seen in the context of meeting general expecta­
tions that banks should act with even greater caution. This was
the reason why profit before tax for 2013 was lower than in the
previous year (–11%; adjusted for exchange rate movements,
–3%) while still considerably exceeding the 1 billion euro mark.
In 2013, we launched a number of strategic projects with a view
to swiftly responding to changes in customer needs and expand­
ing our market position. SmartBanking, started in September
2013, gave new impetus to our Austrian retail banking operations.
Digital communication channels enable us to put in place an
innovative universal bank model which combines a basic services
bank for the efficient settlement of day-to-day business with an
advisory bank which provides our customers – via a number of
different channels – with specialised advisory services to meet
specific needs with genuine added value. We are flexibly adjust­
ing our Austrian branches, incorporating extensive technological
innovations in a multi-tier network with different functions.
In business with corporate customers we benefit from our strong
market position in advising large corporates on their equity capi­
tal-related measures and long-term finance while also helping
medium-sized companies access capital markets. As Austria’s
leading bank in export business we will benefit as and when
­foreign trade accelerates. In business with major international
companies we hold leading positions as a strategic financial
partner for capital market measures with the expertise and
placement power of UniCredit – as no. 3 for euro bond issues
in Europe and no. 2 in the area of syndicated finance.
Our strong commitment as a long-term investor in Central and
Eastern Europe remains unchanged. Growth in CEE will unfold
more slowly but in a more controlled way than in the euphoric
mood which prevailed some fifteen years ago, and it will con­
tinue to exceed the European average. Economic integration,
the harmonisation of living standards and the upswing of
the financial sector are far from complete. They will offer us
as a bank, and our corporate customers, promising growth
­opportunities for a long time to come.
This customer-focused strategy and our measures to reduce
costs should enable us – after the adjustments made in 2013 –
to generate a stable operating profit which can feed through to
bottom-line results without any major impact and can be used
to strengthen capital. In this way we will be able to cope with
the burdens resulting from increasing restrictions on banking
business, including tighter regulatory requirements and ad-hoc
fiscal charges.
We expect that the brighter sentiment in the past few months,
which is reflected in surveys and leading indicators, will be sus­
tainable. It is about time that we – i.e. companies, banks, super­
visors and politicians – turn our attention from coping with the
problems of the past five years to releasing the brakes and
investing into the future in a confident mood. At Bank Austria,
we prepared the ground for such confidence in 2013. We are
ready to support our customers in successful years to come.
Yours sincerely,
Willibald Cernko
Chairman of the Management Board
UniCredit Bank Austria AG
Bank Austria · 2013 Annual Report
7
Introduction
Preface by
Erich Hampel
Ladies and Gentlemen,
A few days ago, the Supervisory Board discussed
Bank Austria’s financial statements for 2013 in detail
and approved them. To put it briefly: Bank Austria is
today a rock-solid bank firmly integrated in a major
­European bank of systemic importance. Bank Austria
has a forward-oriented and customer-focused business
model and highly qualified and international employees.
With its strong capital base, the bank operates in a
unique geographic perimeter. This makes us confident
for the future.
ERICH HAMPEL
Chairman of the Supervisory Board
of UniCredit Bank Austria AG
“
The decision to build the
CEE network, and integrate
it in a cross-regional banking
group, was and is right.
It is a decision which
promises success.
8
2013 Annual Report · Bank Austria
„
At first glance, the results for 2013 may cause some
­irritation. A closer analysis shows that operating perform­
ance was satisfactory. Bank Austria generated operating
income of about €7 billion, more or less matching the
level of the past five years – despite stagnant economic
growth, especially in Western Europe, and despite the
pressure that is still burdening banks six years after the
financial market crisis. At €3 billion, operating profit was
also stable in a multi-year comparison.
The goodwill impairment charge recognised in the 2013
financial statements reflects a long-term process: prices
envisaged for operations in emerging markets, including
Central and Eastern Europe, are meanwhile different to
those prevailing ten or five years ago. We have written off
goodwill resulting from the prices that originally had to
be paid for acquisitions. But the vital point is that we
now have a network of well-established banks, some of
which are local market leaders, in an interconnected area
which will remain one of the global growth regions for
many years. The decision to build the CEE network, and
integrate it in a cross-regional banking group, was and is
right. It is a decision which promises success. Since 2006,
Bank Austria’s first year as a member of UniCredit, the
contribution of the CEE business segment to customer
business has grown steadily. In the seven years that have
passed since then, volume rose by 10 % annually and
operating income increased by 8 %. Our new multi-year
plan is based on the assumption of continued volume
and revenue growth. Our Austrian customer business will
also continue to benefit from these developments.
From professional experience which I have gained over
many years, I know that temporary excesses and subse­
quent phases of consolidation are a recurring cyclical
­phenomenon. Once such hard economic times are over,
efforts should concentrate on benefiting from technological
and social changes which have been underway for years.
2013 was a turning point in this respect.
We have been struggling with the repercussions of
the financial market crisis and recession long enough.
Companies and private individuals have reduced their debt,
streamlined their balance sheets, postponed investments,
and acted with caution.
Banks have experienced growing pressure over the past
years, less on account of economic conditions than as a
result of regulatory requirements; while these have been
imposed subject to transitional periods, they are taking
effect now on account of market pressure.
At Bank Austria, too, we have reduced risks. We have got rid
of legacy burdens and adjusted our valuations to the new
reality. While the temporary setback in profitability is pain­
ful, we have gained more manoeuvring room.
In the long term, it is new technology and the resulting
changes in consumer behaviour which will revolutionise
retail banking. One need not think as far back as the time
when punched cards were introduced; but the beginnings of
computerised banking operations met with scepticism
which is difficult to understand from a present perspective.
Today everyone carries at least one, and much more power­
ful, computer in their pockets. Banking transactions can
now be conducted from a hand-held device, wherever a
customer may be. This has created a new situation and new
possibilities within a very short time. Bank Austria lost no
time in seizing this unique opportunity by launching
­SmartBanking and its new branch strategy to put its retail
banking operations on an efficient and modern basis.
The employees of our banking subsidiaries in CEE countries,
with their affinity for technology, have helped avoid the
emergence of heavy cost structures.
In response to the new requirements to be met by relation­
ship managers in sales operations in particular, and also in
many head office functions, Bank Austria offers flexible
working time models and promotes mobility and training
schemes. Moreover, 2014 will see the start of construction
work on the bank’s new headquarters. The Campus project
involves investments in an entirely new office work setting.
Flexibly adapting to changes, as employer and employee, in
daily banking activities will help avoid friction and conflict.
I want to thank the Management Board and the employees
of Bank Austria for their professional work, and for their
strong commitment in accepting changes in banking busi­
ness. With our modernisation initiative in Austria and
dynamic trends at our banks in Central and Eastern Europe,
which have strong local roots, and with our highly qualified
colleagues from many countries at UniCredit’s business
location in Vienna, we will fully utilise the potential
­available to us.
Yours sincerely,
Erich Hampel
Chairman of the Supervisory Board
UniCredit Bank Austria AG
Bank Austria · 2013 Annual Report
9
Respond
With a smile and a desire to help.
“One of my customers had just married and was
about to set off on her honeymoon when she
called me in a panic: her credit card had been
cloned. I immediately arranged for her to be sent a
new card, but several days passed and the card did
not turn up. I was worried, but I didn’t let on to the
customer. I kept looking into it and found out that
the courier had sent the card to the wrong address.
I tracked down the courier and made sure the card
was delivered to the right address in time. I called
the customer, who was delighted that she could
now enjoy her honeymoon!”
Rita Pattuelli - Private Banking
Bologna Centro - UniCredit SpA
Corporate Profile
UniCredit12
Bank Austria: “A+CEE” in UniCredit18
Management Board of UniCredit Bank Austria AG
Bank Austria · 2013 Annual Report
24
11
Management
Report
Corporate
Profile
Highlights
Management Report
(CONTINUED)
UniCredit operates in 17 countries with more than 147,000 employees and
over 8,800 branches.
UniCredit benefits from a strong European identity, an extensive international presence
and a broad customer base.
Its strategic position in Western and Eastern Europe gives the Group one of the region’s
highest market shares.
1. Data as at 31 December 2013. FTE = “Full Time Equivalent”: number of employees counted for the rate of presence. Figures include all employees of subsidiaries consolidated proportionately,
such as Koç Financial Services Group employees.
2. Data as at 31 December 2013. Figures include all branches of subsidiaries consolidated proportionately, such as Koç Financial Services Group branches.
* Data as at 31 December 2013.
Employees
1
over
147,000
Branches by country2
Italy
CEE
Poland
Branches
2
over
12
8,800
2013 Annual Report · Bank Austria
4,171
Germany
Austria
Total
2,566
1,003
851
290
8,881
Where we operate*
AUSTRIA
AZERBAIJAN
BOSNIA AND
HERZEGOVINA
BULGARIA
CROATIA
CZECH REPUBLIC
GERMANY
HUNGARY
Revenues by region* (%)
• Italy
• Germany
• Austria
• Poland
• CEE
20
43
7
8
22
ITALY
POLAND
ROMANIA
RUSSIA
SERBIA
SLOVAKIA
SLOVENIA
TURKEY
UKRAINE
Employees by country1 (%)
• Italy
• Germany
• Austria
• Poland
• CEE
• Others
1
33
33
13
6
14
Bank Austria · 2013 Annual Report
13
Management
Report
Corporate
Profile
FManagement
cus Report
(CONTINUED)
Austria, Italy and Germany
UniCredit occupies a strategic position in Italy, Germany
and Austria. With about 4,171 branches in Italy, 851 in
Germany and 290 in Austria, UniCredit comprises one
of the largest banking networks in the heart
of Europe. Accounting for more than one-third of GDP
of the European Union, these three countries benefit
from their close ties to the growing economies
of Central and Eastern Europe.
exports and moderate growth in capital expenditure,
amid still tight credit conditions, while private
consumption is likely to be the weak spot. Finally,
while the recovery of export markets is kick-starting
the domestic economy, domestic demand, mainly
investment, will ultimately constitute the main pillar
of economic growth in Austria in 2014.
Following the introduction of the ECB’s Outright Monetary
Transactions (OMT) programme in the summer of 2012,
markets continue to return to normal levels, with a
gradual restoration of investors’ risk appetite.
At the beginning of 2014, economic recovery across the
OECD area is gaining good momentum, while global
trade is picking up. We expect eurozone growth to
accelerate to an annual average of about 1.5% in 2014,
from –0.4% in 2013. Germany is projected to be the
engine of growth in 2014, in the wake of brighter export
prospects, pent-up demand in investment in machinery
and equipment, and some strengthening of private
consumption; the tight intra-European trade links will
ensure that the positive effect will be felt in the
eurozone periphery as well as in Central Eastern Europe.
In Italy, recovery is underway, although the pace of GDP
growth is likely to remain subdued at 0.7% in 2014.
The main growth drivers will be a steady recovery in
In the medium to longer term, the OMT has helped to
create a more favourable environment for politicians to
implement structural reforms, while repairing the
transmission mechanism of monetary policy remains
the ECB’s most daunting challenge. Pushing ahead
with the structural reforms remains essential to
achieving a sufficient degree of macroeconomic and
fiscal convergence across the eurozone, while efforts
continue to shape a credible pan-European
architecture. This process is vital to making the
eurozone stronger and more competitive. In Italy, the
sustainability of the recovery will largely depend on the
effective implementation of reforms to restore longterm competitiveness and reduce public debt.
Taking into account the reforms that have already
been implemented in Italy, we expect real economic
growth to continue at an average annual rate of
roughly 1 % in Italy and 1.8 % – 1.9 % in Austria and
Germany from 2015 to 2018.
Market share1 (%)
AUSTRIA
GERMANY
14
2.5
ITALY
1. Market share in terms of total customer loans as at 31 December 2013.
Source: UniCredit, national central banks.
14
2013 Annual Report · Bank Austria
12.6
Central and Eastern Europe
UniCredit is a market leader in Central and Eastern
Europe, and it has an extensive network of roughly
3,600 branches.*
in many countries we see credit proving more
supportive of domestic demand. In many of the newer
EU states we expect GDP growth of above 2 % this year.
Its regional footprint is diverse, and includes a direct
presence in 14 countries. It is ranked in the top five
in 10 of these countries*. In fact CEE now accounts
for 28 per cent of the Group‘s revenues.** Across the
newer EU states, economic performance is expected
to continue to improve. A recovery was already
visible over much of 2013. In part, this improvement
captures a stronger external environment, supporting
industry and exports as EMU continues to use much
of the region as a competitive production base.
In 2014 this recovery should extend more visibly
into domestic demand. Following a multi-year period
of fiscal consolidation, the drag to growth on this
front should be much more subdued while some
countries will enjoy a positive impulse. Public debt
ratios remain considerably below the average for
advanced economies. In many cases labour markets
have stabilised.
Within Turkey and Russia the near-term challenges are
greater. Following a multi-year period of strong growth,
momentum will slow this year in Turkey. Political
uncertainty plays a role. A slowdown in foreign capital
inflows, prompted in part by Fed tapering, is also
having an impact. In contrast, stronger industry and
export performance brings benefits, as is the case in
the newer EU states.
Monetary policy is also exceptionally supportive across
the region while rate hikes are likely to materialise
only gradually. Progress on banking union should also
bring positive spillovers to the newer EU states while
Russia continues to adjust to stable rather than
consistently increasing energy prices. This adjustment
is supported by increased currency flexibility, a large
stock of foreign reserves and improvements in the
inflation-targeting regime. Within this environment, real
GDP growth over the coming 1 – 2 years will be more
subdued than in the past but remain positive.
From a medium to long term perspective, we believe
that the majority of Central and Eastern European
economies will continue to see an increase in living
standards as growth is supported by competitive labour
costs, flexible labour markets and a gradual recovery in
foreign direct investment.
Market share2 (%)
Russia
Ukraine3 (UCI UA + USB)
1.5
3.4
Hungary
6.0***
Slovenia
6.1
Slovakia
6.4
Czech Republic
6.8
Romania
6.9***
Serbia
8.7
Turkey
Poland
Bulgaria
9.2
10.6
15.0
Bosnia and Herzegovina
Croatia
21.6**
26.5
* As at 30 September 2013.
** As at 30 June 2013.
*** As at 31 December 2012.
2. Market share in terms of total assets as at 30 September 2013.
Market share in Azerbaijan not available.
3. Pro-forma (Ukrsotsbank + UniCredit Bank Ukraine).
Source: UniCredit Research, UniCredit CEE Strategic Analysis.
Bank Austria · 2013 Annual Report
15
Corporate Profile
15 years of UniCredit
1999
Group UniCredito Italiano establishment
Merger of Credito Italiano, Rolo Banca 1473, Cariverona, Cassa di
Risparmio di Torino, Cassamarca, Cassa di Risparmio di Trento e
Rovereto, Cassa di Risparmio di Trieste.
Beginning of international growth.
The expansion process in Central and Eastern Europe starts
with the acquisition of the Polish Bank Pekao.
16
2013 Annual Report · Bank Austria
2000
Geographical growth and diversification
Development in emerging markets. Acquisition of Bulbank
(Bulgaria) and Pol’nobanca – then Unibanka – (Slovakia).
Acquisition of the US fund manager Pioneer Investment of Boston
and establishment of Pioneer Global Asset Management.
2005
Merger with the German HVB Group and establishment
of a single, large European bank
UniCredit merged with the German HVB Group (including its
subsidiary Bank Austria with an extensive network in CEE),
thereby establishing a single, large European bank.
Acquisition of Yapı Kredi by Koç (Turkey).
2007
Merger with Capitalia. Strengthening the presence
of the Group in Italy and abroad
UniCredit strengthened its position in the Italian market with its
integration with the Capitalia group – established in 2002
from the merger of Banca di Roma Group, the Bibop-Carire Group,
Banco di Sicilia, MCC and Fineco.
2010
A new service model: “Together for our customers”
Together for our customers is the organic business evolution
programme designed to better focus on customers’ needs and
enhance proximity to territories through a set of interventional
measures to combine the specialisation of our businesses
with a simplification of the Group structure.
2012
The new UniCredit
A rock solid leading commercial bank in Europe which combines
operational efficiency and customer satisfaction by investing both
in traditional and digital communication.
2014
UniCredit Tower, the new headquarters
UniCredit Tower represents a model of:
– sustainability, with more than a 40% reduction in CO2 emissions;
– modernity, as it is ranked among the world’s 10 most beautiful
skyscrapers (source: Emporis Building Data Company);
– efficiency, resulting in a reduction of occupied office space, saving
almost 25 million euros annually, with better efficiency.
Our Approach
The current economic situation poses a new challenge for
the banking sector. It must again become a driver of the real
economy – and must be able to meet the needs of society,
maintaining sustainable operations.
The management of risk is the cornerstone of our business,
and a deep knowledge of our customers is essential if we are
to understand and control risk as effectively as possible.
In order to build even closer relationships with our customers
and respond more quickly to their needs, we have simplified
many procedures and delegated more decision-making
powers to our national operations.
How are we tackling this challenge at UniCredit? By applying
a long-term, multi-stakeholder approach to every area of our
activity:
• commercial banking – by improving our business model and
competencies in order to work more closely with customers
and meet their needs more effectively;
• corporate citizenship – by using our expertise to nurture the
economic participation of all people and preserve natural
resources;
• philanthropic initiatives – by supporting programmes that go
beyond a bank’s traditional scope and respond to basic social
needs, especially in times of crisis.
At the same time, we continue to increase efficiency in
our operations. Throughout our Group we are adopting
technological innovations that are opening up new
ways to interact with customers. We are determined to
leverage on the opportunities presented by multi-channel
communications to form stronger and more productive
relationships with our clients.
Embracing innovation is one of UniCredit’s key objectives.
It is why we seek to develop a fully integrated multi-channel
banking system that combines traditional and digital
communication. The physical branch remains at the heart
of this model, particularly in times that call for personal
relationships and direct interaction. However, the branch
banking experience will be increasingly complemented by
the new channels in which we are investing.
Indeed, to succeed in the current climate, a bank must address
economic, social and environmental issues both in its strategic
outlook and in its day-to-day work.
A business model
marked by proximity,
transparency and service quality
ropy
Initiatives
contributing
to social wellbeing and
the cultural
development of
our communities
ila
nth
shi
p
Ph
Our extensive physical presence and strong local
representation formed the fundamental character of
UniCredit. Fifteen years ago, we laid the groundwork
for our geographic expansion and operational
diversification. It was a sound decision – and it has
made our Group a leading financial institution,
respected throughout Europe.
t
erspec ive
en
on
mp
ercial bank
ing
mm
Co activities
Activities
aimed at
fostering
financial
inclusion and
preserving
natural resources
dl
r
te
sed
takeholder an
itiz
Corporate c
Solutions ba
a
m
i-s
ult
It is an approach that stems from paying close attention to
our stakeholders’ genuine expectations. After all, dialogue
with them is our guiding principle for generating lasting
value and for successfully supporting the development of the
countries in which we operate.
g-
on
Such an approach depends on a cultural shift – one that is
now the basis for our service model – and it also relies on
proper risk management. With this in mind, we are improving
cooperation between our business units and the departments
in charge of risk management. This enables us to develop
solutions that are in line with the objectives and needs of our
Group and our customers.
Sustai bilit y
na
Bank Austria · 2013 Annual Report
17
Corporate Profile
Bank Austria:
“A+CEE” in UniCredit
Structure and size
Bank Austria in UniCredit
Bank Austria is a leading bank in Austria, with a
long tradition in the country, and today a member of
­UniCredit, a major European bank. Offering its customers a unique cross-regional network and the stature of
a major international bank, Bank Austria is “UniCredit
in Austria”. Bank Austria also acts as sub-holding
­company for UniCredit operations in Central and
­Eastern Europe (CEE) and has responsibility for their
performance, based on decades of experience gained
as one of the first banks which became active in the
CEE region. Comprising the Austrian market and by
far the largest banking network in CEE, Bank Austria
represents “A+CEE in UniCredit”.
UniCredit Bank Austria AG is the parent company of
the Bank Austria group of credit institutions. It is an
Austrian credit institution within the meaning of Section 1 (1) of the Austrian Banking Act and operates in
Austria under the Bank Austria brand name. UniCredit
Bank Austria AG comprises the Austrian business opera-
tions including subsidiaries and other companies which
support Bank Austria’s core banking activities. It also
holds and manages the equity interests in banking subsidiaries in Central and Eastern Europe. Bank Austria’s
consolidation perimeter includes 149 consolidated
companies and 15 companies accounted for under the
proportionate consolidation method; investments in
27 companies are accounted for using the equity
­method. The 2013 Annual Report and the consolidated
financial statements cover the Bank Austria Group.
UniCredit S. p. A, Milan, a listed company, owns
99.996 % of UniCredit Bank Austria AG; the remaining
shares are 10,000 registered shares held by “Privat­
stiftung zur Verwaltung von Anteilsrechten” (a private
foundation under Austrian law) and 115 registered shares
held by “Betriebs­ratsfonds” (the Employees’ Council
Fund), which carry special rights. The Bank Austria companies are consolidated in UniCredit’s consolidated
financial statements. UniCredit is a listed company
and one of the systemically important major European
banks, with total assets of €846 billion.
Customer shares in Austria*
Private individuals
Private total
SMEs
18
Affluents
(High net worth
individuals)
27
Students
33
Turnover
<€3m
2013 Annual Report · Bank Austria
20
Turnover
€ 3 – 10 m
36
Turnover
€ 10 – 50 m
45
*) in %; persons/companies maintaining business relations with Bank Austria; as at mid-2013
18
Large corporates
Turnover
> € 50 m
Turnover
> € 250 m
76
84
Regional presence
In Austria, Bank Austria holds market shares of 14.1 %
in lending business and 13.6 % in deposits. One in six
private customers (18 %) – and within this total, one in
four (28 %) high net worth individuals and one in three
students (33 %) – maintains an account relationship
with Bank Austria. The bank is market leader in the
­Austrian corporate banking sector, with 15.7 % of total
lending volume and 20.2 % of total deposits, and it also
holds the leading position in business with public sector
entities (in a comparison of individual universal banks,
not sectors of the banking industry). Bank Austria’s
­services are used by 20 % of small businesses, 45 % of
medium-sized companies (with a turnover between
€10 million and €50 million) and 76 % of large
­corporate customers (with an annual turnover of over
€50 million) – 84 % of companies with a turnover of
over €250 million. Moreover, Pioneer Investments
­Austria (PIA), an affiliated company, is among the three
largest investment management companies in Austria,
with €17.1 billion in fund assets accounting for 11.8 %
of the total volume of mutual funds in Austria.
Bank Austria maintains about 350 offices throughout
Austria, of which about 270 are branches in a narrower
sense (accessible to customers and counted only once
per location). In the three customer business segments,
5,255 employees (full-time equivalents – FTEs) serve
about 1.7 million customers. Together with the employees of the Corporate Center, staff numbers at Bank Austria
without CEE were 7,201 (FTEs). If the employees of
­affiliated companies in Austria (mainly companies supporting the core banking business and specialised companies such as UBIS, the leasing services provider and
the Pioneer Investments investment management company) are included in the calculation, UniCredit employs
9,797 FTEs in Austria (all data as at the end of 2013).
Bank Austria’s banking subsidiaries in Central and
­Eastern Europe (CEE) together are market leader in
CEE by a wide margin. This outstanding position is the
result of a long development which started more than
20 years ago with the establishment of subsidiaries and
continued as the CEE network grew into ever larger
dimensions. These were the three major integration
processes: the integration of the CEE subsidiaries of
the two predecessor institutions Bank Austria and
Credit­anstalt; the inclusion of the CEE network of Hypo­
Vereinsbank (now UniCredit Bank, Munich) at the
­beginning of 2000; and finally, as a decisive step, the
transfer of UniCredit’s CEE banks to Bank Austria, which
thereby became a sub-holding company with effect
from the beginning of 2007. The Polish market is
fully divisionalised and under direct management
responsibility of UniCredit; Poland is among the four
core countries (Italy, Austria, Germany, Poland).
The financial market crisis of 2008 and subsequent
recession led to new strategic priorities in the entire
banking sector. At the same time, the outlook for peripheral emerging markets and the banking sector in these
countries changed significantly, as did valuations. Years
of strong external growth in international banking business were followed by a phase of consolidation. In the
2013 financial statements of Bank Austria we therefore
tested the carrying amounts of equity interests in all
banking subsidiaries for impairment; as a result of these
tests, we recognised an impairment charge reducing all
goodwill to nil.
Our most recent acquisitions in Kazakhstan and Ukraine
were made at the end of 2007 and at the beginning of
2008, just before the onset of the financial market crisis.
At the end of April 2013, we sold ATF Bank, Kazakhstan,
including its branch in Kirgyzstan. Negotiations with a
potential buyer of Ukrsotsbank, Ukraine, started in the
fourth quarter of 2013. This bank was therefore classified
as a disposal group held for sale in the 2013 financial
statements, and shown in the income statement in the
item “Total profit or loss after tax from discontinued
operations”. The withdrawal from these two countries,
which has already been completed or is planned, reflects
our strategy, defined in the multi-year plan, of focusing
on a defined number of targeted countries and reducing
risk (and the related large absorption of equity capital). In
Estonia, Latvia and Lithuania, our activities will be limited
to leasing business from the middle of 2014. The integration of our Czech and Slovak banking subsidiaries to form
UniCredit Czech Republic and Slovakia a. s. – an organisational measure to unlock synergies from IT systems and
back-office operations – took place at the end of 2013;
the bank continues to be active in both countries.
Bank Austria’s CEE perimeter thus encompasses banking subsidiaries in 13 countries (including the bank in
Turkey) and representative offices in three other countries. 46,396 employees are active in head offices and
branches in over 2,500 locations. The region in which
we operate has about 300 million inhabitants.
Bank Austria · 2013 Annual Report
19
Corporate Profile
Relative size: Austria/CEE
The two large sectors of Bank Austria’s operations are
still more or less equal in terms of lending volume and
deposits. Differences between the mature market and
a large region of emerging markets can be seen mainly
in growth rates, progressive monetisation and market
penetration in the banking industry, and in resources
employed.
Average loans to customers of Bank Austria in 2013
were €132.3 billion. Of this total, €55.5 billion was
accounted for by the three business segments of
­Austrian customer business and €62.0 billion by Austria
including the Corporate Center. Lending volume in the
CEE business segment rose steadily in the past few
years; exchange rate effects prevented stronger growth
in 2013. At €70.3 billion, it accounted for 53 % of total
lending volume. Deposits from customers also rose in
the past years. Primary funds (the sum total of deposits
from customers and debt securities in issue) in Austria
averaged €74.3 billion in 2013, exceeding lending
­volume by 20 %. In CEE, the monetary cycle is lagging
somewhat behind, but deposits are gradually catching
up with loans: in 2013, primary funds amounted to
€61.1 billion, accounting for 87 % of lending volume.
Primary funds rose strongly in 2013, by 6 % compared
with 2012, which means that funding from local
­customer business continued to increase.
Relative size
Austria
74.3
62.0
of which:
Corporate
Center
Operating income in 2013 totalled €4.9 billion in
C­ entral and Eastern Europe (CEE) and €2.2 billion in
Austrian customer business; the difference has steadily
increased over the past years. This development
­resulted from the following factors: based on the CEE
economies’ lead in terms of real and nominal growth,
the monetary cycle accelerates, additionally driven by
advancing market penetration with banking products.
In this expansionary environment our banking subsidiaries generate their good performance.
Net operating profit (operating profit less net writedowns of loans and provisions for guarantees and
­commitments) generated by the CEE business segment
in 2013 (€1.5 billion) was about three times the
Operating income and net operating
profit*) from customer business
CEE
(€ billion)
Average risk-weighted assets (RWAs), amounting to
€125.5 billion (average for 2013), showed a slightly
­different distribution: RWAs in Austrian customer
business were €27.3 billion, or €43.2 billion including
the Corporate Center, significantly lower than in CEE
(€82.4 billion). The figure for Austria reflects a reduction of credit risk, and market risk was also lower than
in previous years due to the reorientation of trading
activities. RWAs in CEE reflect the risk content in a
young market. Average equity at Bank Austria amounted
to €16.9 billion, of which €2.7 billion was allocated to
Austria-based business and €14.2 billion to the expanding CEE Division.
Austria
82.3
CEE
(€ million)
4,929
70.3
61.1
43.2
2,156
2,767
Costs
65%
14.2
678
2.7
Average loans to customers
Risk-weighted assets
20
Costs
43%
Average primary funds
Allocated equity
2013 Annual Report · Bank Austria
Cost
of risk
0.34%
Cost
of risk
1.74%
1,545
Operating income
Operating profit
Net operating profit
488
*) Net operating profit = operating profit less net write-downs of loans and provisions
for guarantees and commitments. Costs as a percentage of operating income
(cost/income ratio, without bank levies). Net write-downs of loans and provisions for
guarantees and commitments as a percentage of average loans to customers (cost of risk).
c­ omparable figure for Austrian customer business
(€0.5 billion). On the basis of higher operating income,
the cost / income ratio in CEE is lower than in Austria:
for CEE it is below 50 % (43 %) compared with 65 % for
Austrian customer business. While the earnings power
(and cost efficiency) in CEE is higher than in Austria,
the impact of net write-downs of loans and provisions
for guarantees and commitments is stronger in
the young economies than in the core EU countries.
The cost of risk (net write-downs of loans measured
against average lending volume) was 174 basis points
in the CEE business segment and 35 basis points in
Austria (see chart).
The number of employees (in terms of full-time equivalents = FTEs) in the CEE Division is 6.4 times the figure
for customer business in Austria (including the Corporate Center), and the CEE Division serves about ten
times as many customers as the Austrian customer
business segments; the number of inhabitants in CEE
is disproportionately large compared with Austria.
This means that the CEE Division has strong potential
for growth. On the other hand, Austrian customer business is characterised by high productivity on resources
employed, which is also reflected in key profitability
indicators. Return on equity (ROE before tax) in Austrian
customer business in 2013 was 15.2 %, higher than in
CEE (11.6 %).
Ú More details are given in the “Volume, profitability and
resources” section on page 49 of this report.
DEVELOPMENT OF BANK AUSTRIA
Over the past five years, Bank Austria’s operating activities
have shown a stable development, despite a stagnant economic environment and various negative impacts. Following
the creation of UniCredit Group, 2005 and 2006 were characterised by build-up and integration, with strong external
growth of Bank Austria. 2007 and 2008 saw the strongest
organic growth and the best performance for CEE and, to
a lesser extent, also for Austria. Throughout the years of
­consolidation in the banking sector which followed the
financial market crisis, with deep recession in 2009 and the
sovereign debt crisis flaring up several times in 2010/ 2011,
Bank Austria proved to be remarkably resilient.
After 2008, the CEE business segment experienced a sideways
trend at the high level which had been achieved by then;
­operating income and operating profit remained stable. In the
past two years, the CEE business segment again achieved
growth in volume, revenues and also in operating profit
although exchange rate movements in 2013, especially in Turkey and Russia, lopped some percentage points off the growth
rates (see chart). Operating income and operating profit in Austrian customer business were under stronger pressure. Demand
for loans and transaction-related banking services was weak
and did not recover until the end of 2013 as the business sector exercised restraint on investments although there was
excess liquidity and interest rates were at record lows. Both
companies and private individuals preferred reducing their
debts. Moreover, the persistently low interest rate environment
impacted margins and income from maturity transformation.
Operating income and operating profit in customer business
(€ million)
5,000
4,500
4,000
3,500
Operating income
Operating profit
Central and Eastern Europe (CEE)
3,000
2,500
2,000
1,500
Austria
1,000
500
0
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Austria: 3 customer business segments (Bank Austria without CEE and without the Corporate Center); CEE: varying perimeter.
2005 / 2006 realignment of regions in the new UniCredit Group: Bank Austria transfers Polish operations and takes over
the sub-holding company function for CEE operations.
Bank Austria · 2013 Annual Report
21
Corporate Profile
The 2013 financial statements reflect a favourable trend
in customer business while being impacted by substantial
charges for non-operating items resulting from the abovementioned reassessment of assets.
Operating income increased by 4% to almost €7 billion.
Operating costs were more or less unchanged (+2%) –
without the charge for bank levies they would have
declined. For this reason, revenue growth fed through to
operating profit, which rose by 7% to €3.1 billion (adjusted
for exchange rate movements, +11%). Net write-downs of
loans and provisions for guarantees and commitments in
2013 were higher than in the previous year, but this was
not due to a renewed deterioration in asset quality: as additions to impaired loans continued to decline, the increase
in loan loss provisions led to a higher coverage ratio of
impaired loans already classified as such. The higher provisioning charge was the main reason why profit before tax
for 2013 was about 11% lower than in the previous year
(adjusted for exchange rate movements, –3%); yet the
­figure still significantly exceeded the one billion euro mark.
Against the background of high levels of operating perform­
ance and profit before tax, and as a consequence of the
outcome of the goodwill impairment test performed with
regard to the carrying amounts of equity interests, we
­recognised an impairment charge of €2 billion for the
full write-off of all goodwill. This led to a net loss of
€1.6 billion in 2013. We have absorbed this charge on our
own, without using external help or burdening the taxpayer.
This measure has removed any future potential burdens in
this context.
Regulatory capital ratios continued to improve significantly,
even on the basis of these difficult financial statements.
The improvement also resulted from our strategy of concentrating our business on core activities and core regions; this
led to a reduction of risk-weighted assets while lending
­volume and total deposits increased slightly. The total capital ratio rose from 12.5% at the end of 2012 to 13.5% at
the end of 2013. As at 31 December 2013, Bank Austria’s
total assets were €196.2 billion, down by €11.4 billion or
5.5% from year-end 2012. Most of the decrease was due to
a deconsolidation effect (ATF Bank), the decline in interbank
business and the full write-off of goodwill. Loans and receivables with customers accounted for 66% of total assets, a
higher proportion than in the previous year; this means that
loans to customers are funded with primary funds (the sum
total of deposits from customers and debt securities in
issue) to the extent of 107%.
After the far-reaching adjustment measures in 2013 we
are again focusing on the bank’s sound operating perform­
ance. After completing the initiated structural improvements to optimise revenues and risk, we will be able to
use growth opportunities with a lean balance sheet and a
focused business model. In particular, our capital generation capabilities have improved. On this basis, we are getting ready to meet the regulatory requirements, which will
become more stringent, and to pursue further organic
growth in our core markets.
Ú Details of the income statement, the statement of
­financial position and the business segments are given in the
commentary of the management report on pages 29 to 84.
Lending volume by country
22
2013 Annual Report · Bank Austria
Cz
12.6
6.2
ss
ia
he
an r CE
d E
PC
V
Ru
Ot
rk
ey
1.3
Tu
1.5
4.5
3.8
2.1
ec
h
an Re
d pu
Sl bl
ov ic
Hu akia
ng
ar
y
Sl
ov
en
ia
Ro
m
an
i
Bu a
lg
ar
ia
Cr
o
Bo ati
He sn a
rz ia a
eg n
ov d
in
Se a
rb
ia
rp
or
Ce ate
nt
er
Co
CI
B
Au
st
ria
:
Re
ta
Co
il
Pr rpo
iva
ra
te
te
Ba s
nk
in
g
0.6
3.2
6.4
9.5
10.5
14.1
14.3
14.9
26.6
Average loans to customers in € billion
Customer-focused business model
Our strategy aims to secure the bank’s sustainable
development by focusing our business portfolio on customer business and meeting specific customer needs,
and internally through optimal employment of capital
and professional risk management. With SmartBanking,
a project launched in Austria in 2013, we take advantage
of progressive digitalisation, a process which has rapidly
changed customer behaviour. We have started
to implement our innovative business model in retail
banking, which encompasses a differentiated approach
to branch banking, with a “basic services bank” and an
“advisory bank”. These highly visible initiatives support
efforts to win new customers while significantly enhancing efficiency. To support the changes required in this
context, we have introduced Bank Austria 2020 with
models for the reduction of staffing levels; the related
cost savings should soon become effective. Training
­programmes and mobility incentives also support the
adjustment. Moreover, we will establish a new working
world by integrating all head office functions at the
­Campus, the bank’s new future headquarters, where construction work will start in 2014.
Our strong commitment as a long-term investor in
­Central and Eastern Europe remains unchanged; economic growth in these countries and profitability of the
regional banking industry will continue to significantly
exceed the levels seen in West European countries.
The “CEE story” is intact. With a view to optimising
­capital allocation, we concentrate investment on countries which are ahead in terms of revenue / risk considerations as well as market size and growth, more specifically Turkey, Russia and the Czech Republic. In 2013, we
realigned our structures in CEE and won over 450,000
new customers through various market initiatives.
Over the past few years we have built up a cross-regional
infrastructure for transaction settlement, IT and internal
services to enhance cost efficiency. Via UBIS Austria
GmbH, a wholly-owned subsidiary of Milan-based
UBIS S. C. p. A., we use the professional services of a
­company which provides services to the Group with
12,000 employees worldwide; it benefits from economies of scale and aims to achieve a high degree of customer satisfaction by focusing on local customer needs.
Ú More details are given in the “Strategic projects” and
“Financial and non-financial performance indicators”
sections on pages 49 to 60.
Customer satisfaction management is among the bank’s
measurable success factors. It has been established to
­ascertain the preferences and views of our customers –
through direct electronic feedback at branches, online questionnaires made available after advisory services, dialogue
with customers, surveys and statistical comparisons – with a
feedback loop used to adjust our day-to-day business activities accordingly. We thereby enhance the quality of internal
services and the degree to which the range of products and
services we offer meet customer needs. In 2013, for the third
time, Bank Austria was elected as the “Most customer-oriented service provider in Austria”.
Corporate Sustainability aims to enhance awareness of the
interdependence of economic, ecological and social aspects –
both strategically and in day-to-day banking activities. As the
general public takes a critical view of the banking industry,
­reputation-related measures are important; the focus is on
long-term orientation, simple products and credibility in customer relationships. Open dialogue with stakeholders and targeted sponsoring activities are key factors. The bank has institutionalised product ecology and operations ecology by appointing an Environmental Officer and an Environmental Manager
as well as establishing a certified and audited environmental
management system in accordance with ISO 14001.
Ú More details are given in the “Financial and non-financial
­performance indicators” section on pages 49 to 60 of this report.
Management and
organisational structure
The Management Board of UniCredit Bank Austria AG is composed of the Chief Executive Officer (CEO), who also acts as
Country Chairman representing Bank Austria within UniCredit,
the Heads of the four operating Divisions of Bank Austria, the
Chief Financial Officer (CFO), the Chief Risk Officer (CRO) and
the Head of Human Resources. Co-responsibility for other
­functions lies with the CEO, and for Internal Audit with the full
Management Board. For segment reporting purposes, the Competence Lines – including CFO, CRO, HR and Identity & Communications – are included in the Corporate Center together with
the Service Lines. Guidance, support and control functions
relate to Bank Austria as a whole, i.e. the Austrian business
­segments and the banking subsidiaries in the various countries
(with a number of functions being under decentralised responsibility and coordinated on a cross-regional basis). They are
integrated in the global Competence Lines and Service Lines.
Ú More details are given on the following double page and in the
Corporate Governance Report from page 263 of this report.
Bank Austria · 2013 Annual Report
23
Corporate Profile
Management Board
of UniCredit Bank Austria AG
Willibald Cernko
Gianni Franco Papa
Francesco Giordano
Jürgen Kullnigg
Chairman of the
Management Board
Deputy Chairman of the
Management Board
Member of the
Management Board
Member of the
Management Board
CEO SUPPORT SERVICES
CEE BANKING DIVISION
CFO FINANCE
CRO RISK MANAGEMENT
Media Relations &
Executive Communications
Stakeholder and Service
Intelligence CEE Division
Finance
Strategic Risk
Management & Control
Identity & Communications
CEE Legal
Marketing
CEE CIB
Stakeholder and Service
Intelligence Austria
CEE Retail
Legal & Corporate Affairs
Compliance
Organisation & Products
CIO & Security
Non Core Assets Management
Internal Audit
Bank Austria Group
UniCredit Center
am Kaiserwasser GmbH
24
2013 Annual Report · Bank Austria
Accounting Austria & CEE
Planning &
Controlling Austria
Strategy, Planning &
Controlling CEE
CEE Strategic Analysis
Bosnia and Herzegovina:
UniCredit Bank d. d.
UniCredit Bank a. d. Banja Luka
Bulgaria: UniCredit Bulbank AD
Croatia: Zagrebačka Banka d.d.
Czech Republic: UniCredit Bank
Czech Republic and Slovakia, a.s.
Hungary: UniCredit Bank Hungary Zrt.
Latvia: AS UniCredit Finance
Romania: UniCredit Tiriac Bank S.A.
Russia: ZAO UniCredit Bank
Serbia: UniCredit Bank Serbia JSC
Slovenia: UniCredit Banka Slovenija d.d.
Turkey: Yapı ve Kredi Bankasi A.S.
Ukraine: PJSC Ukrsotsbank
Special Credit Austria
CIB Credit Operations
CEE Credit Operations
Private Individuals & SME
Credit Operations
Shareholding & Business
Development
Market Risk & Risk Integration
Tax
UniCredit Turn-Around
Management GmbH
Data Governance
Doris Tomanek
Helmut Bernkopf
Dieter Hengl
Robert Zadrazil
Member of the
Management Board
Member of the
Management Board
Member of the
Management Board
Member of the
Management Board
HUMAN RESOURCES
AUSTRIA & CEE
COMMERCIAL BANKING
DIVISION
CORPORATE & INVESTMENT
BANKING DIVISION
PRIVATE BANKING DIVISION
UniCredit Academy Austria
CB Strategic Management
Multinational Corporates
PB Segment Management
Human Resources
Management & Strategy
CB Business Monitoring
Financial Institutions Group
PB GIS/Products & Advisory
Multi Channel Management &
Customer Relationship
Management
Financing & Advisory
PB Sales Network
Human Resources Expertise
Center & Operations
CEE Human Resources
Retail Banking
8 Regional Offices
Global Transaction Banking
Schoellerbank AG
Global Transaction Banking
Austria
House Financing Center
SmartBanking Retail
Segment Management Retail
Bank Austria Finanzservice GmbH
Markets
Corporate Banking
9 Regional Offices
CIB Client Management &
Business Development
UniCredit CAIB Poland S.A
Economics & Market Analysis
SmartBanking Business
Segment Management Corporates
FactorBank AG
Real Estate
Bank Austria Real Invest
Immobilien Management GmbH
Bank Austria Wohnbaubank AG
Public Sector
A word of thanks to our employees
The commitment and professionalism of our employees help achieve a good performance in day-to-day customer business and
are decisive for the implementation of our plans. The Management Board thanks all employees of Bank Austria for their dedication,
and for their readiness to support and further promote changes in the banking business. Let us all set to work with confidence and
enthusiasm in order to take advantage of the great potential before us.
Bank Austria · 2013 Annual Report
25
Innovate
Processes and time savings
that serve people’s goals.
Thanks to us, farmers can now get funds sooner.
The Ministry of Agriculture has developed a faster
method to make state incentive payments, based
on a proposal from our bank.
The method is related to an existing programme that
allows customers who meet certain requirements
to obtain a fast-track loan. When the loan is
approved, they can access their funds on the same
day. This innovative solution meets the needs of
87 per cent of farmers.
Legal Support for the Area Corporate Banking
UniCredit Bank Banja Luka – Bosnia AND Herzegovina
Facilitate
Finding solutions to make everything easier.
“Due to an internal bug, one of my customers received
funds to pay staff salaries two days late.
I did everything I could to find a solution. I asked my
colleagues for help, and together we came up with a
response: we compensated for the two lost days in
their wages the next month. The customer called to
thank me for solving the issue quickly.
We showed that our bank is easy to deal with.”
Peter Tschöp – Financial Institutions Group – CIB Global Division
UniCredit Bank Austria
Accelerate
Response times and problem solving.
Sometimes our customers may encounter some difficulty, either
at a branch or when banking online. These difficulties require
quick solutions. To help our customers quickly, we offer them a
questionnaire after every banking transaction.
If they tell us they are not satisfied with the quality of a product
or service, their branch manager contacts them directly within
48 hours with a solution. In a six-month period, 15 per cent of
our customers filled out the questionnaires, with 87 per cent
saying they were satisfied with our resolution of their problem.
Customer Sactisfation Unit – UniCredit Bank – Russia
Management Report of Bank Austria for 2013
The banking environment in 2013
30
Bank Austria in 2013 – Overview
36
Quarterly trends in 2013 38
Details of the income statement for 2013
40
Financial position and capital resources
47
Financial and non-financial performance indicators
49
Development of business segments
61
Outlook80
Bank Austria · 2013 Annual Report
29
Management Report
Management Report (CONTINUED)
The banking environment in 2013
Overview
World economy
2013 was a year of stabilisation and transition to the expected
­moderate scenario – six years after the financial market crisis of
2007/ 2008, and following state intervention and the great recession
in 2009/10 and repercussions in the form of the government debt
crisis seen in peripheral European countries in 2011/12. While
­previous years were characterised by economic crisis management,
2013 saw individual structural adjustments in the business sector.
This led to divergent trends – in real economic and financial terms,
among companies and private individuals – in global regions and
also within the European Union, which did not yet permit any significant growth in 2013. However, the factors required for such growth
improved appreciably. Towards the year-end, leading indicators
­signalled that the period of weak growth was coming to an end and
a stronger, though still moderate, upward trend across most regions
was emerging. The progress that has been made so far provides
­better support for such confidence than a year earlier.
Global production and global trade picked up in the summer after a
disappointing first half-year, though with pronounced divergent trends
among the individual regions. Economic growth slowed markedly in
emerging markets but remained disproportionately strong. For the
first time in over four years, it was the impetus from the industrial
countries which was responsible for the stronger economic momentum. Overall, the developments confirmed the experience that recovery from a recession caused by a financial crisis can be exceptionally
protracted and very moderate.
2013 was also a year of adjustment for banks. They had to cope
with a mixed environment: companies’ demand for investment
finance and working capital stagnated, turnover in the areas of
­foreign trade and investment business hardly revived, and excess
liquidity was mainly used to reduce debt. As a result, and in combination with low interest rates, margins and income from maturity
transformation continued to decline. Eventually, banks experienced
a further decrease in their profitability and in their ability to generate
capital from their operations. They were thus faced with an urgent
need to revise their business models, especially in the high-cost
retail banking segment.
Banks also had to adjust to tighter regulatory and fiscal conditions
while coping with a persistently restrictive market situation in their
funding and capital raising activities. All this involved a sharper focus
on core business, leaner balance sheets and risk-weighted assets,
and continued adjustments in the valuation of business and equity
interest portfolios to reflect the moderate medium-term prospects.
These efforts were intensified in the period before the ECB assumes
its role as the bank supervisory authority for systemically important
banks, which will be linked to an asset quality review and subsequent
stress tests by the EBA: the increase in equity capital ratios which
will soon become effective has affected considerations regarding
equity interests. In addition, loan loss provisions were increased
regardless of the underlying risk profile. This means that the annual
financial statements of banks – including Bank Austria – should be
viewed against the background of their efforts to meet the various
requirements despite a structural erosion of revenues and increasing
national burdens imposed on banks. On the positive side, significant
progress was made in 2013 on the road to a European banking
union. These efforts aim at creating a level playing field for the prevention of crises. Being an internationally active and systemically
important bank, we greatly welcome this development.
30
2013 Annual Report · Bank Austria
The US was the first of the global regions to emerge from the repercussions of the crisis. The housing market and the financial position
of private individuals improved to an extent that boosted consumer
spending, the construction industry, investment and also employment. This development, and an expansive monetary policy, veiled
the braking effect of the country’s public finances (abolition of tax
benefits, automatic budget cuts). Expansion also accelerated in the
UK, especially as greater progress had been made in reducing
­private debt. Japan had established ambitious economic support
programmes in 2013 and doubled monetary expansion with a view
to overcoming deflation, a measure that was supported by a dramatic
depreciation of the yen (see “2013 timeline”). Emerging markets,
on the other hand, lost much of their economic momentum. Evidently
the rapid upward trend of recent years cannot simply be assumed
to continue. The import pull from China also weakened, not least
because the country’s politicians paid more attention to the sustainable growth of the domestic economy. Further developments in the
summer were the announced change in US monetary policy, a
­temporary withdrawal of capital, currency depreciation and a rise
in interest rates on bonds, which in particular impacted exposed
countries with current account deficits. Global trade expanded by
only 2.7% in 2013 (IMF), compared with 7% as a long-term average
(20 years before 2009).
After contracting for one and a half years, the economy of the euro
area emerged from recession in the middle of 2013. While there are
still highly divergent trends between the core countries, primarily
Germany, and the peripheral countries, the decline in production in
the southern EU countries of Spain and Italy came to an end in the
third and fourth quarters. A key factor responsible for this improvement was less economic uncertainty after the ECB announced its
OMT programme in August 2012 and thereby its intention to safeguard the interests of the euro area. Ample liquidity, an easing of fiscal restrictions, and an improvement in price-related competitiveness
through internal depreciation (unit labour costs) in the peripheral
countries also had a positive impact. The moderate 0.4% decline in
GDP in 2013 is attributable to the low base level. However, a comparison of the final quarters of the respective years reveals positive
growth (an estimated +0.5%).
Financial markets
In 2013, financial markets were characterised by ample liquidity
and interest rates which were at record lows worldwide. Looking for
returns, investors were again prepared to assume higher risk.
The euro crisis continued to ease, with CDS spreads on bonds of
the five highly exposed peripheral countries declining from over
500 bp in mid-2012 to 238bp at year-end 2012 and 145bp at the
end of 2013; the most recent figure was 121bp (weighted average).
Credit risk spreads on bonds of European companies were also falling sharply. Pressure to invest, anticipating the forecast upswing, and
stronger corporate balance sheets made 2013 a year of equities:
the MSCI world index rose by 22.6% year-on-year, with disproportionately strong gains recorded on Wall Street (S&P 500: +29.6%),
leading to high valuation levels measured on an earnings basis.
The EuroStoxx advanced strongly (+20.5%) while emerging markets
indices were moving around the previous year’s levels (BRIC: –0.2%,
Emerging Europe: –1.0% in local currency terms), reflecting a slowdown of growth and higher interest-rate and currency risks.
Developments in 2013 mirrored the vacillations of US monetary
policy: in May 2013, prompted by improved economic data, the
­Federal Reserve started to discuss tapering its bond purchases of
US$85 billion per month. Although the Fed provided forward guidance, expressing its commitment to keep key interest rates at a
low level for the foreseeable future, markets anticipated a global
turnaround in interest rates. The yield on 10-year US government
bonds rose from 1.62% at the beginning of May to 3.00% at the
beginning of September, with euro benchmarks following suit (rising
from 1.17 %, the level recorded on the day when the ECB first
reduced its key interest rate, to 2.04%). When labour market data
proved disappointing and new uncertainties emerged (US budget
­dispute), the Fed postponed its plans and capital markets eased.
As the US budget/debt problem was temporarily resolved in October,
US yields declined by about one half of a percentage point before
­rising steadily to 3% in the last four months of the year. Ultimately,
the definitive announcement on 18 December 2013 of the first step
of the exit from unorthodox measures (QE3), with effect from January
2014, had only little impact. The ECB withstood external pressure to
raise interest rates, reducing its key rate on two occasions (2 May
and 7 November 2013) to a level of 0.25% and affirming its policy of
keeping interest rates low and providing liquidity via the full allocation
of tenders. Euro benchmark yields thus rose by only 63bp (despite
strong correlation) compared with an increase of 125bp on US
Treasuries. Although the yield differential widened to over 1 percentage point in favour of the US dollar, it depreciated by 4.3% in the
course of the year, to €1.3791 per US dollar.
In global capital markets, the debate on tapering led investors to
realise significant gains and rearrange their portfolios, primarily in the
summer months. Portfolio shifts were mainly seen in high-yielding
bonds. In particular, emerging markets investments made in the final
phase of the bull market in bonds were sold again, an exit which
­primarily affected countries experiencing a disequilibrium in the
­balance of payments. These developments resulted in currency
­depreciation and rises in local interest rates.
In a comparison of performance (year-end 2013/2012) US bonds
(–7.6% in US dollar terms/–11.6% in euro terms) and euro government bonds (–2.5%) showed a negative performance (price + coupon)
for the first time in many years. Even the performance of euro corporate bonds was low (non-financial/BBB: +3.5%), after an excellent
result in 2012 (+13.5%), as was the performance of higher-yielding
emerging markets bonds (+3.7%). The divergent trends seen in the
US stock market (MSCI in euro terms: +26.9%) and in euro area stock
markets (+24.4%) as compared with the BRIC index (–7.4%) reflect
the renewed growth momentum of the industrial countries; CEE markets were partly impacted by the slowdown (–2.9%, all data in euro
terms). As fears of inflation and crises abated, the Swiss franc
remained well below the intervention threshold of 1.20 (at its most
recent level of 1.2276 CHF/EUR, it was down by 1.7% ytd). The
price of gold also mirrored US monetary policy, reaching a low of
1,180.7 US$/oz at the end of June after the announcement of monetary policy tightening in the US; a recovery in the autumn was followed
by a renewed decline to a low level by the end of 2013 (closing price:
1,204.94 US$/oz, down by 28.0% year-on-year).
Austria
After a very weak second half of 2012, the Austrian economy did not
achieve any significant growth in the first two quarters of 2013, either.
The summer months then saw the start of a hesitant recovery in the
industrial sector, which turned more lively towards the end of the year.
In August, the Bank Austria Purchasing Managers’ Index (PMI) for
manufacturing exceeded the growth threshold of 50 points, reaching
54 in December 2013 and January 2014, a level last seen in mid2011. Quarterly trends in production were probably similar to those in
real GDP. Given the low base at the beginning of the year, and as the
upswing started late in the year, we believe that growth for 2013 as
a whole was only 0.3%, after 0.9% in the previous year, despite the
fact that quarter-on-quarter growth reached 0.3% in the fourth quarter of 2013.1) The renewed momentum will be reflected in a higher
growth rate (+2.0%) in 2014 – see the “Outlook” section.
Economic performance in 2013 was weighed down primarily by stagnant domestic demand and a negative impact of inventory management. The growth stimulus provided by exports (over +2 %) was moderate, as in 2012, one of the reasons being the significant reduction
of current account deficits in peripheral countries of the European
Union, with demand from CEE countries also remaining at a low level.
For this reason manufacturing capacity was underutilised. Despite a
strong internal financing capacity and excellent terms and conditions
1) All GDP data for 2013 are estimates made before the editorial close of this report.
The first data on Austria’s national accounts will be published in the middle of March.
Bank Austria · 2013 Annual Report
31
Management Report
Management Report (CONTINUED)
available for financing, investment in equipment declined considerably (– 2.5 %), both for the expansion and replacement of manufacturing plant, although 2013 saw an upward trend as the year progressed. The construction industry also experienced a marked
­slowdown in 2013: after growth of 2.5% in both 2011 and 2012,
construction output probably grew by only 0.5% (in real terms) in
2013, with housing construction recording a better trend than other
investment in construction. Private consumption decreased slightly,
by 0.4 %, in 2013 as real incomes declined. While employment rose
by 0.7 % in 2013, private households’ disposable income was down
by about 1 %, reflecting lower investment income, higher social
transfers and increases in prices. As private households tried to
maintain their consumption levels, the savings ratio continued to
decline by about 1 percentage point, to 6.5%. The increase in
employment in 2013 was due to various factors, including immigration; but unemployment also rose, reaching a rate of 4.9% based on
the Eurostat method, after 4.3% in the previous year. In the first few
months of 2013, the inflation rate was 2.5% and more; in the summer it started to fall (to a recent level of only 1.4%) as fuel prices
declined. The figure for 2013 as a whole averaged 1.9%.
Economic recovery starting in summer 2013
54
53
52
51
50
50 = growth
threshold 49
48
47
46
45
44
Purchasing Managers’ Index
PMI global
PMI manufacturing
PMI euro area
Multi-year bull market coming to an end
140
130
Share prices
120
110
100
Bond performance
(euro benchmark, total return)
90 End of 2011=100
Monetary policy turnaround anticipated
3.00
Current yield, % p.a.
2.50
In view of the weak propensity to consume and invest, liquidity in the
non-bank sector remained high and credit demand low. At the end of
2013, lending volume – which usually follows economic developments with a time lag of a few quarters – was somewhat lower than
at year-end 2012. Within total loans to private households (–0.1%)
consumer loans again declined and real estate finance picked up
towards the year-end, growing by a low 2%. Outstanding corporate
loans hardly changed (with maturities of less than one year declining). Loans to the public sector decreased more significantly. In the
area of deposits, a strong increase in 2012 was followed by a weak
trend in the middle of 2013, with growth returning as the year progressed (year-end 2013: +2% over the previous year). Corporate
deposits grew comparatively strongly, with a disproportionately strong
increase seen in short-term deposits, but this trend is beginning to
reverse as recovery gathers momentum. Among deposits held by
­private households, short-term deposits showed the strongest growth
while fixed deposits with terms of up to one year decreased significantly. The current environment of low interest rates has led to a
deleveraging process, with private households reducing loans and
investments. Although market opportunities have improved steadily,
private investors are still reluctant to consider more attractive types
of investment such as mutual funds or life insurance policies.
Net additions to financial assets were significantly lower in 2013 than
in previous years, due to lower investment income and a marked
decline in the savings ratio as well as stronger interest in real estate.
The volume of mutual funds also recorded negligible growth (+0.6%)
in 2013. After a decline (net sales and performance) in May, June
and August, which reflected the downward market trend in response
to the debate on tapering and weaker economic data, net inflows no
longer recovered on a sustainable basis in the remaining part of the
year although stock markets rallied.
32
2013 Annual Report · Bank Austria
10-year US Treasuries
2.00
1.50
Euro benchmark bond
(10-year)
1.00
0.50
Spread
0.00
Currency depreciation in CEE from May 2013
110
106
Czech crown
102
98 Currencies of CEE countries
against the euro
94
(Bank Austria-weighted)
90
Turkish lira
86
Russian
rouble
82
78 End of 2011 = 100
Sovereign debt crisis stabilised
500
bp
Country risk premiums
(CDS spread, 5-year)
400
Bonds of highly exposed countries
(Portugal, Spain, Ireland and Italy, weighted)
300
200
100
0
Core euro countries
Q1
Q2
Q3
2012
CEE countries
(Bank Austria perimeter without Ukraine)
Q4
Q1
Q2
Q3
2013
Q4
Central and Eastern Europe (CEE) 2)
Economic performance of CEE countries (within our perimeter, GDPweighted) continued to expand in real terms in the past two years,
by 1.7 % in 2013 after 2.1% in the previous year; this compares
with declines of 0.4% and 0.6%, respectively, in the euro area.
The region thus maintained its long-term growth lead, and the outlook remains good. Moreover, in the past two years economic policy
achieved significant progress in stability with regard to public
finances, inflation and external equilibrium. This generally reduced
vulnerability to external shocks, even if this came at the expense of
domestic demand and economic growth. Anchors of stability which
helped to implement economic policies in the various countries
included the avoidance of the EU deficit procedure, EU convergence,
exchange rate regimes (Bulgaria) and IMF conditionality. This policy
mix also significantly improved the basic balance (current account
plus long-term capital transactions) in most countries. External burdens eased and inflation rates declined sharply, giving central banks
room for interest rate reductions. This is true for most CEE countries,
especially EU members among them, and to a lesser extent also for
major producers of commodities, including Russia and Ukraine.
It applies less to countries like Croatia, Bosnia and Serbia, which
are lagging somewhat behind with regard to integration, quite apart
from the special case of Turkey, which enjoys a high degree of economic autonomy.
As was to be expected, economic trends in countries which are
closely integrated in European manufacturing networks were in
2013 characterised by moderate growth in the first half-year,
exports giving an impetus to production in the third quarter, and
a significant improvement in sentiment in the fourth quarter, most
recently with double-digit growth of industrial output. Direct investment and production capacity in key industries continued to
increase, mainly in the automotive sector, and partly also in services
(IT, Romania). In advanced CEE economies, industrial output
accounts for between 22% and 28% of GDP (average for the euro
area: 17 %).
The Fed’s tapering announcement in May 2013 led to expectations
of an increase in interest rates which prompted investors to sell,
within a few months, almost all of the portfolio investments which
they had made in emerging markets in the wake of quantitative
­easing in the US in autumn 2012 ; this exit also affected CEE.
In countries with large external financing requirements, primarily
Turkey, currency market intervention, renewed interest rate
increases and, ultimately, substantial currency depreciation were
inevitable. The Turkish lira depreciated by 20.4% against the euro
(based on year-end 2013/2012 figures), a movement which
also reflected political uncertainty in the final months of 2013.
2) Data on national accounts (GDP) for 2013 are forecasts available at the editorial
close of this report (actual figures are published after this report), other key indicators
are estimates or most recent figures.
The Russian rouble depreciated by 11.0% (one of the reasons being
continued capital outflows), and the Ukrainian hryvnia (slightly
stronger than the reference currency US dollar) lost 6.5% against
the euro. The Czech government, finding itself in a completely different position, moved to drive the value of the Czech crown lower
(–8.3% from year-end 2012 to year-end 2013) with a view to
­stimulating the economy. Overall, CEE currencies (Bank Austriaweighted) depreciated by 9.5% in 2013 (based on year-end levels),
or by 4.1% based on annual averages. Country risk premiums
(5-year CDS) fell to 170bp on a weighted CEE average in the first
half of 2013, a level seen before the onset of the sovereign debt
­crisis in 2011. After the debate on tapering, CDS spreads rose by
about 50bp. At the end of 2013, the CEE average was 220 bp,
­compared with 270bp a year earlier and 340bp at year-end 2011.
The renewed slight increase in 2013 was mainly driven by Croatia
(structural changes), Slovenia (banking crisis), Turkey (external sector, domestic policy) and Ukraine (geopolitical aspects).
In line with economic trends, credit expansion was unusually weak
by CEE standards. Deposits rose more strongly than loans in most
countries. Exceptions were Russia and Turkey, where credit expansion was still strong (+17% and +27%, respectively), driven by the
boom in retail lending. Without these two countries, lending volume
in CEE was up by 1.6% on the previous year, while bank deposits
were 6.4% higher. The improvement in portfolio quality in CEE,
which started in 2011, stalled in 2013 due to the weak trend in
incomes and stagnant credit volume in most countries as well as
the slowdown in domestic business activity. Nevertheless, on a CEE
average, impaired loans were 12.2% of lending volume in 2013,
significantly lower than the peak of 13.4% in 2010.
˜ Economic performance in the four Central European countries
(CE) again declined in 2013 (–0.4% after –0.7%). This was due to
developments in the Czech Republic and Slovenia, although these
countries also recorded a significant increase in industrial output in
the course of the year, primarily in the dominant automotive sector.
While the economy in the Czech Republic shrank by 1.3 % on an
annual average for 2013, six quarters of recession (reflected in
declining consumption and a sharp fall in investment) came to an
end in the summer. Recent PMI levels, at 55 points, exceeded the
growth threshold of 50, indicating a robust turnaround supported by
a policy of currency devaluation. In Slovakia, production picked up
earlier. The country’s economy was impacted by weak domestic
demand, also in the area of investment, and this led to a large
­surplus on the basic balance (close to 5 % of GDP in 2013). Both
countries seek to keep the budget deficit down, to levels below 3 %;
external financing needs are relatively low. Hungary’s policy mix of
export orientation in industry and state intervention in the domestic
economy has so far been successful. GDP grew by a surprisingly
strong 1.0% after shrinking a year earlier (–1.7%). On the supply
side, a contribution to this growth came from new production capacity (car factories). The basic balance is highly positive (+ 5 % of
Bank Austria · 2013 Annual Report
33
Management Report
Management Report (CONTINUED)
GDP), reflecting strong exports and weak imports. The government is
keeping the national deficit at a level just below the Maastricht limit
through various levies imposed on specific sectors including banks
and foreign investors while taking measures to help private households. Disinflation (CPI at year-end 2013: below +1%) was used for
continuous reductions of key interest rates. The Funding for Growth
Scheme (FGS) introduced in mid-2013 led to rescheduling of foreign
currency loans and extended maturities of SME loans at subsidised
and capped interest rates, at the expense of currency reserves. The
Hungarian forint held up well (HUF/EUR down by 1.6% from December 2012 to December 2013), despite the discriminatory fiscal policy.
However, the cost was wide CDS spreads (234bp) and interest rate
spreads (380 bp / 5-year). At the end of 2013, these country risk
spreads were even higher than in Slovenia (CDS: 208bp/interest
rate: 313 bp), where the restructuring of the banking sector overshadowed all other developments in 2013. The severe adjustment
recession (about – 2.5 % p. a. in the past two years) affected primarily
private consumption and investment (both down by 4%). Reserves
from earlier bond issues and the bad-bank solution (and the closure
of two smaller banks in the middle of 2013) helped the country to
avoid an EU assistance programme. The stress test results for the
banking sector published at the end of 2013 indicated a recapitalisation requirement of € 4 billion, of which €3 billion is accounted for by
the three large state-owned banks. Recapitalisation is planned to be
carried out with funds from government bond issues, further reducing
bail-out risk.
˜ The country group of South-East Europe (SEE) achieved sound
economic growth of 1.4 % in 2013 after stagnation in the previous
year (– 0.1 %). The situation in the various countries within the SEE
region differs widely. Romania achieved the strongest growth,
expanding by 2.6 % (after +0.7%) and benefiting from its advantage
in terms of unit labour costs. Exports (+13.5%), including those in
the automotive sector (Ford), and services were important factors
once more. The basic balance is in equilibrium, the budget deficit is
just below the 3 % mark. Romania is regarded as a success story for
the conditionality of IMF standby agreements. On the other hand,
interest rate spreads are high and domestic demand very weak, with
the domestic economy characterised by structural weakness; this is
reflected in declining lending volume (–2.7%) and consequently an
impaired loans ratio of 32.9%, the highest in CEE but now falling.
Romania is dependent on portfolio inflows also for repayments to the
IMF. Interest rate spreads are therefore high (5-year: 380bp), even
though country risk premiums (CDS/5-year) are below average
(171 bp). Inflation, previously at +5%, declined substantially in the
course of the year, to recently +1.7%; the Romanian leu remained
stable (– 0.6 %). Bulgaria’s economy continued to perform well in
2013 thanks to the currency board – exports rose (+9%), the basic
balance was positive (5 % of GDP), government debt is low (18% of
GDP) in an interest rate environment similar to that in the euro area,
and risk premiums are also low (CDS: 109bp). But domestic business activity, where the state accounts for a large proportion, is
34
2013 Annual Report · Bank Austria
weak. Adverse impacts come primarily from legal and governance
problems and from a structural productivity lag. Negative rates of
inflation (–2.2% in August) have given rise to fears of deflation.
Lending volume stagnated. Croatia has experienced recession for
five years now (real GDP in 2013: –0.8%); this is due to structural
factors and will continue in 2014. The country joined the European
Union in the middle of 2013; having left the Central European Free
Trade Agreement (CEFTA), Croatia reoriented its foreign trade. EU
membership is now resulting in an excessive deficit procedure (EDP).
The high budget deficit (expected to reach 5.7%), foreign debt in
excess of 100% of GDP and the strong use of foreign currencies
were among the reasons why Croatia lost its investment grade rating
in 2013. Croatia is trying to avoid an IMF programme by launching
new bond issues. However, the country risk premium rose in 2013
(recent CDS spread: 350bp). While asset quality deteriorated, the
ratio of impaired loans to lending volume is in the mid-range of CEE
countries (16.5%). After Croatia’s accession to the European Union,
Bosnia and Herzegovina now shares the longest border with the
EU. It cannot apply for EU candidate status due to problems with the
country’s constitution (rights of ethnic minorities). Production (mainly
energy) developed favourably in 2013, at a very low level. However,
the current account and the basic balance show large deficits
(–7.7% and –4.1% of GDP, respectively), suggesting a need to
renew the standby arrangement with the IMF. The same is true for
Serbia, with its twin deficits of budget (–6.6% of GDP in 2013) and
current account (–4.9%). The inflation rate recently declined to 5%
despite strong monetary expansion. Exports rose strongly (+13%)
thanks to output in the automotive sector (Fiat 500L). The CDS
spread is 400bp, the interest rate spread exceeds 10%. In view of
the funding gap, various credit arrangements, including those with
the United Arab Emirates (UAE), Russia and the EU/EBRD, and also
with the IMF/World Bank, are inevitable. The dinar depreciated by
only 1.9% against the euro in 2013.
˜ Russia and Turkey, two large countries outside the EU’s direct
sphere of influence which enjoy a relatively high degree of economic
autonomy, again achieved the strongest rates of real and monetary
growth in 2013, though the growth momentum slowed considerably
as the year progressed. In Russia, the slowdown in GDP growth, to
recently +1.5% (after +3.4% and +4.3% in the two preceding
years) reflects a longer-term trend. This development was due to
three factors: first, losses in the terms of trade because of a concentration on energy resources, leading to stagnant export revenues;
second, capacity bottlenecks explained by obsolete manufacturing
plant and a shortfall in investment (2013: –0.5%); third, strains in
the labour market. This compared with booming private consumption
and imports (both up by 4% in real terms). The inflation rate is over
6%. The banking sector is expanding strongly (loans: +17%, deposits: +16%), with loans to private individuals increasing by about
30%, double the rate of growth recorded in corporate lending.
­Consumption bought on credit has already led the government to
take restrictive measures. Following the introduction of a debt brake,
2013 timeline
public finances are under control and the public welfare fund is
increasingly being used for infrastructure projects. The current
account surplus to which Russia has become accustomed is dwindling and is further reduced through permanent capital outflows.
In 2013, the central bank continued to ease its exchange rate regime
(intervention thresholds in connection with the dollar/euro basket).
The objective is free floating from 2015. Ukraine’s growth model
focuses on two sectors, steel production and agriculture. Demand
and price developments for steel in 2013 led to a double-digit
decline in exports in real terms, a fall in investment and a GDP
decrease in both real (–1.4%) and nominal (–0.5%) terms. Given
the country’s twin deficit (budget: −5.7%, current account: −8.2%
of GDP), defending the exchange rate target (US dollar) was only
­possible by keeping interest rates at a high level of between 11%
and 15 %, and this increased deflationary pressure (inflation rate:
+ 0.2 %). Credit expansion (7.4%) lagged behind deposit growth
(+ 14.8); the impaired loans ratio was 30%. During the whole year,
Ukraine was facing a fundamental choice between signing an EU
association agreement or joining the Eurasian customs union. Without signing up for the customs union, the government signed an
agreement with Russia at the end of December (bond purchases of
€ 15 billion by the Russian welfare fund, and gas price reductions of
one-third). While this temporarily eased the external financing gap,
the controversial decision brought Ukraine to the brink of civil war.
With GDP growth of 3.9% in 2013, Turkey was still the fastestgrowing CEE economy. Domestic business activity was booming for
much of the year (private consumption: +4%), supported by strong
credit expansion (at a rate expected to reach 27.4% in 2013, with
even stronger growth in retail lending) and relatively high inflation
(December 2013: +7.3% year-on-year). Large imports (up by 8%)
aggravated the country’s main problem, i. e. the current account
­deficit (8% of GDP) and the negative basic balance (7 % of GDP).
No problems were experienced in financing the external gap with
strong inflows of short-term portfolio capital in the first few months
of 2013 (after Turkey was assigned an investment grade rating) and
with borrowing by the banking sector. However, given its vulnerable
external position, Turkey was hit hardest by the repatriation of capital
following the debate on Fed tapering. The country’s central bank
responded with a variable policy mix of intervention, liquidity measures and interest rate increases, but allowed the currency to depreciate in the latter part of the year (end-of-year 2013/2012 comparison: – 19.0 % against the USDxEUR basket and –20.4% against the
euro). Political unrest in a neighbouring country (Syria) and within
Turkey itself (democracy reform) had an additional impact (CDS
spread up from 105bp at the beginning of 2013 to 225bp at the
end of December). Dampening economic-policy measures (including
restrictions on the booming credit card sector and on public consumption) recently initiated a longer-term adjustment process,
which will reduce economic growth in 2014 to about 2%. Despite
the strain in retail lending, impaired loans accounted for 2.8% of
lending volume, the lowest ratio in any CEE country.
11 Jan.
Japan launches the largest post-Lehman economic stimulus
­programme (€175 billion).
24 Feb.
Parliamentary elections in Italy; stalemate in the Senate.
1 March
Fiscal cliff: spending cuts (“sequester”) take effect.
16 March Banks in Cyprus shut; rescue package initially rejected.
25 March Rescue package modified after ECB ultimatum: €19 billion from EU
and IMF, restructuring and recapitalisation of two major banks; bail-in
of bonds and of bank deposits exceeding €100,000.
19 March European Parliament, Commission and national governments
agree on European banking supervision to be set up under the
umbrella of the ECB.
19 March Japan adopts radical monetary policy to overcome deflation:
doubling the monetary base, extending the term of government
bonds, inflation target of 2% within two years. The yen depreciates
dramatically.
14 April
European Parliament adopts CRD IV, putting Basel 3 into effect as
of 1 Jan. 2014.
1 May
Slovenia’s rating falls below investment grade.
2 May
ECB responds to slowdown in growth: key interest rate reduced
by 25 basis points to 0.50%, rate on lending facility by 50 basis
points to 1.00%; 0% on deposits and excess reserves. Tenders
to be fully allocated until mid-2014.
3 May
European Commission lowers its forecast of economic growth
after the IMF, OECD and others have already done so.
9 May
Austerity and reform programme in Slovenia. The country seeks to
restructure banks on its own. Debt brake to be applied from 2015.
14 May
Greece’s credit rating raised for the first time (Fitch: B–).
22 May
Neutral statement by Federal Reserve fails to dispel interest rate
fears.
11 June
Hearing before Germany’s Constitutional Court on ECB monetary
policy (OMT).
19 June
Fed leaves key interest rates at 0% to 0.25% subject to
­conditions; “tapering” may start in 2013 g exit fears lead to
strong rise in interest rates.
27 June
Banking union: European Council draws up directive on single
resolution mechanism (SRM) comprising resolution plans, bail-in
of creditors, and resolution fund.
1 July
Hypo Alpe Adria needs €2 billion in financial assistance to
­prepare its half-yearly financial statements.
1 July
Croatia joins the European Union, becoming its 28th member.
4 July
ECB affirms that interest rates will be low for a long time (forward
guidance).
11/12 July Italy’s credit rating lowered to BBB+, that of France to AA+.
21 August Syria crisis escalates internationally with renewed use of
­chemical weapons before chemical weapons facilities are
destroyed in early September.
12 Sept.
European Parliament gives ECB the role of banking supervisor
from autumn 2014.
18 Sept.
Fed surprises financial markets by continuing intervention.
1 Oct.
US government shutdown (for 16 days).
7 Nov.
ECB lowers key interest rate to 0.25% and lending facility rate to
0.75%, deposit rate remains at 0.00%. Tenders fully allocated
until at least July 2015.
29 Nov.
Credit rating of the Netherlands downgraded. Germany, Finland and
Luxembourg are now the only EU countries to retain AAA ratings.
13 Dec.
Ireland leaves bail-out after 3 years, Spain follows suit on
31 December.
18 Dec.
Fed decides to reduce its monthly bond purchases
(of US$85 billion) by US$10 billion from January 2014.
18 Dec.
EU Finance Ministers give concrete shape to the SRM with
gradual build-up of resolution fund, bail-in rules and minimum
guarantee of 8%.
20 Dec.
S&P lowers the European Union’s rating from AAA to AA–.
Bank Austria · 2013 Annual Report
35
Management Report
Management Report (CONTINUED)
Bank Austria in 2013 – Overview
The commentary in this management report refers to the condensed
income statement shown in this section on page 39. The same format
is used for segment reporting. This makes it possible to consistently
explain the contributions made by the various business segments to the
items in the income statement and to Bank Austria’s overall development. A reconciliation of the condensed income statement to the mandatory reporting schedule – presented in a different format – of the
consolidated financial statements is given in section D.1, Segment
Reporting, of the notes to the consolidated financial statements on
pages 180 to 181.
To ensure comparability with the previous year’s figures, the items in
the income statement for 2012 were adjusted to reflect the structure of
2013. Net profit/loss (attributable to the owners of the parent company)
is not affected thereby. To obtain consistent time series, the comparative figures for 2012 have additionally been recast to reflect the currently applicable financial reporting standards and definitions, and minor
changes in the consolidation perimeter have been taken into account.
The recasting differences to the totals for the various items of the
income statement are shown in the segment reporting tables D.3 in the
notes to the consolidated financial statements on pages 184 and 185.
˜ For Bank Austria, 2013 was another year characterised by weak
demand for credit and for transaction-based banking services. This was
due to persistently weak economic growth, ample liquidity in the business sector and the decision of our customers to further reduce their
debt. The low interest rate environment also impacted revenue from
commercial banking activities in 2013 – the longer this persists, the
greater the impact. Both Austria and the closely integrated EU countries
in Central and Eastern Europe (CEE), were obliged to scale down their
plans. In the latter part of 2013 Turkey and Russia, until then the major
contributors to revenue growth, were also affected by the generally
more critical view of emerging markets. Overall, in 2013, expectations
that pre-2008 growth rates would no longer be seen in the medium to
longer term were confirmed, despite the recent brighter economic outlook. Like other major banks, Bank Austria was under strong pressure
to respond to the stricter regulatory and fiscal requirements in addition
to the commercial banking environment. In 2013, triggered by the forthcoming asset quality review and stress tests, markets already required
banks to adjust their business models, balance sheet and funding
structure, and capital held by them – ahead of the actual implementation of regulatory requirements, most notably Basel 3, which is to take
place in several stages over a number of years.
➔ In this environment, Bank Austria again generated a sound
oper­ating profit in 2013. Operating income rose by 4 % (or by 6 %
if o­ ne-off income resulting from the buyback of hybrid instruments
in the previous year is excluded) to € 6,960 million, with growth
mainly driven by the Central Eastern Europe (CEE) business
­segment. As operating costs were more or less stable (+ 2 %),
­operating profit reached € 3,104 million, an increase of
€ 208 million or 7 %; adjusted for the one-off effect, the figure
was up by € 335 million or 12 %.
36
2013 Annual Report · Bank Austria
Profit performance in 2013 compared with 2012 € million (2012 recast)
2013
Operating profit
Net write-downs of loans and provisions
for guarantees and commitments
Net operating profit
Non-operating items 1)
Profit before tax
Non-operating items 2)
Net profit / loss 2)
3,104
– 1,441
1,663
– 531
1,131
– 2,734
– 1,603
+/– €
2012 million
2,895
+ 208
+/– %
+ 7%
– 969 – 472 + 49%
1,926 – 263 – 14 %
– 656 + 125 – 19%
1,269 – 138 – 11 %
– 850 – 1,884 > 100%
419 – 2,022 >100%
1) Provisions for risks and charges, integration/restructuring costs, net income/loss from
investments. / 2) Income tax, total profit or loss after tax from discontinued operations,
non-controlling interests, Purchase Price Allocation effect, goodwill impairment charge.
3) Net profit/loss attributable to the owners of the parent company.
˜ Based on these operational strengths, we made far-reaching adjustment measures in the consolidated financial statements for 2013 in
response to a reassessment of the medium-term economic outlook and
the foreseeable operating environment in the banking industry.
 First, among the operating items, we made significant additions to
loan loss provisions. As a result, the coverage ratio of impaired loans
rose by over 7 percentage points to 55%; the coverage ratio of nonperforming loans (NPL), in particular, was increased by 2 percentage
points to 66%. Net write-downs of loans and provisions for guarantees
and commitments therefore rose by almost one-half to €1,441 million
in 2013. This was the reason why net operating profit (operating
profit less net write-downs of loans and provisions for guarantees and
commitments) was down by €263 million or 14% to €1,663 million
(see table). Almost one-half (48%) of the decrease was due to the
one-off effect in the previous year (gains of €126 million on the buyback of hybrid instruments).
 Second, the following measures relating to the consolidated financial
statements are reflected in the charge for non-operating items: the focus
of the multi-year plan is the concentration on core markets and the
bank’s commercial core business as well as risk reduction. In line with
this policy, and following our withdrawal from Kazakhstan in 2012, the
banks in Ukraine, which were recently integrated, are classified as a
­disposal group held for sale. With the realignment of leasing business
throughout UniCredit Group, we classified the shareholding interest in
UniCredit Leasing, which is accounted for under the equity method, as
held for sale; in this context it is planned to repurchase leasing subsidiaries in Austria and CEE in 2014. Our subsidiary in the Cayman Islands,
which serves as a vehicle for international capital market transactions,
was placed on a non-active basis. The impact of these transactions on
the income statement is reflected in the item “Net income/loss from
investments”.
The goodwill impairment test had the strongest impact on results.
While a cyclical recovery is underway, economic trends and industry
developments in 2013, especially vulnerability of several CEE countries
to external shocks, required a reassessment of medium-term and longterm economic and revenue growth prospects in our markets, reducing
them to levels below the scenarios prevailing in the market in the years
before 2008, when major acquisitions were made. In the past years the
carrying amounts of equity interests in various banking subsidiaries
were adjusted on several occasions. As part of a reassessment of
remaining goodwill, in line with UniCredit policy, Bank Austria recognised substantial impairment losses on goodwill in all CEE countries
and in Austria, reducing it to nil; this had an impact of €1,957 million
on the income statement. The other non-operating items include
­integration/restructuring costs, of which €104 million related to the
strategic Bank Austria 2020 project. A reduction of deferred tax assets
led to a significant increase in the income tax charge.
➔ Overall, the structural adjustments and current expenses resulted
in a net charge of €3,265 million for non-operating items, up from a
net charge of € 1,506 million in the previous year. The deduction of
this amount from the net operating profit of €1,663 million resulted in
a net loss of € 1,603 million.
˜ The result for 2013, including substantial impairment losses on
goodwill, had an impact on IFRS equity, which declined by €3.1 billion
to €15.1 billion. However, regulatory capital was maintained at more or
less the previous year’s level as goodwill was already deducted under
the provisions of the Austrian Banking Act. (The impact on the income
statement and the change in the difference between equity and the
carrying amount of subsidiaries offset each other.)
Our efforts to achieve a leaner structure of total assets, not least
through deconsolidation of ATF Bank, Kazakhstan, have also reduced
risk-weighted assets. The total capital ratio based on all risks thus rose
from 12.5% at the end of 2012 to 13.5% at the end of 2013. This
means that even on the basis of these difficult financial statements,
Bank Austria significantly improved its capital resources. In the
coming years, as the focus will continue to be on core business while
minimising risk, and as future profits will be retained, the bank aims to
further strengthen the capital base for future organic growth.
➔ The multi-year time series (see table below) puts results for 2013
and the related measures into perspective: in the build-up years of the
new Group, Bank Austria’s operating profit showed a steady upward trend,
declining only slightly after the financial market crisis of 2007/2008 and
the recession of 2009. The average figure for the period from 2009 to
2012 was even significantly higher than for the 2006–2008 period. The
crisis years in the banking sector were mainly reflected in net write-downs
of loans and provisions for guarantees and commitments. But the provisioning charge declined after the crisis years, from a peak of €2.3 billion
to about one-half of that figure. In average terms, Bank Austria’s net operating profit in the past five years was slightly lower than in previous years
but still exceeded €1.5 billion. The new scenario following the financial
market crisis, which marked a turning point, required the original plans to
be adjusted to medium-term expectations. On several occasions, this
involved the recognition of impairment losses on goodwill, which had to be
carried as an asset in previous years, and the goodwill impairment charge
absorbed a part of net operating profit. The far-reaching measures
reflected in the 2013 consolidated financial statements included a goodwill impairment charge to reduce remaining goodwill to nil, thereby taking
into account the new, more modest outlook for future developments.
This means that operating income, even if it grows only moderately, can
feed through to bottom-line results to a greater extent once the intended
disposals of equity interests are completed. With the implementation of
the strategic plan, Bank Austria has focused its business portfolio in
regional and operational terms. Over the past few years, total assets have
declined slightly while the proportion of customer business has risen.
An essential factor for Bank Austria’s future development is its sound
­capital base, which provides the bank with strong foundations for future
growth. The total capital ratio has increased by 3.3 percentage points in
the past five years, reaching a multi-year high of 13.5%.
Long-term review: build-up, growth, consolidation1)
Average for the period …
2006 2)
2007
2008
2009
2010
2011
2012 3)
2013
2002–
2005
2006 –
2008
1,283
– 473
809
– 228
2,931 3,263
–737 –1,607
2,194 1,656
–588 –1,037
2002
2003
2004
2005
Income statement, € million
Operating profit
1,109
Net write-downs of loans
– 537
Net operating profit
572
Charge for non-operating items – 263
1,069
– 467
602
– 160
1,342
– 398
944
– 335
1,610
– 491
1,119
– 155
2,428
– 715
1,713
– 325
3,069 3,296 3,630 3,442 3,083 2,895
– 483 – 1,012 – 2,267 – 1,839 – 1,352 – 969
2,586 2,284 1,363 1,603 1,731 1,926
– 298 – 1,140 – 261 – 856 – 1,522 – 1,507
3,104
– 1,441
1,663
– 3,265
442
609
964
1,388
2,288
– 1,603
Net profit/loss 4)
309
Statement of financial position, € billion
Total assets
148.0 137.1 146.6 158.9
191.2 209.2
Goodwill
0.9
1.0
0.9
1.1
2.4
3.9
IFRS equity, € billion
4.6
5.8
6.9
7.5
14.1
15.3
11.2 % 13.1 % 12.4 % 12.2 % 6) 10.8 % 11.4 %
Total capital ratio 5)
1,144
1,102
747
209
419
581
1,607
2009 –
2012
619
Cumulative changes based on
end-of-period figures
222.3 194.4 199.0 199.2 207.6
3.6
3.4
3.2
2.4
2.1
14.2
14.4
17.5
17.7
18.2
9.2 % 10.9 % 12.1 % 12.7 % 12.5 %
196.2
0.0
15.1
13.5 %
+ 11
+63
+0
+3
+3
+7
1.0 %P –3.0%P
–15
–1
+4
3.3%P
1) Several changes in the consolidation perimeter and in Bank Austria’s membership of banking groups. / 2) The income statement for 2006 did not provide meaningful information in
operating terms because of the realignment of regions (sales and purchases within UniCredit Group); for this reason the figures shown are pro-forma data reflecting the structure at the
beginning of 2007. The figures for the 2006 statement of financial position are initial figures for 2007. / 3) Recast. /4) Net profit/ loss attributable to the owners of the parent company. /
5) Total capital ratio based on all risks pursuant to the Austrian Banking Act. / 6) Figure for September 2006 because large capital gains were recorded in the fourth quarter of 2006.
Bank Austria · 2013 Annual Report
37
Management Report
Management Report (CONTINUED)
Quarterly trends in 2013
Bank Austria’s performance in operating terms has shown a more or
less stable development over the past two years, with the usual quarterly fluctuations and a moderate upward trend. In the fourth quarter
of 2013, currency depreciation in several countries where the bank
has large operations – Turkey and Russia from the middle of 2013,
and the Czech Republic from September 2013 – had an impact on
performance. But even the figures as reported show strong revenue
growth over the preceding quarter and the fourth quarter of the previous year, and a significant improvement in operating profit, which was
only offset by the increase in net write-downs of loans and provisions
for guarantees and commitments.
Operating income in the fourth quarter of 2013 was €1,850 million,
up by 11% on the preceding quarter and 7% higher than in the
fourth quarter of the previous year. Within the total figure, net interest
declined (by 2% from Q3 2013 and 5% from Q4 2012), mainly as a
result of the low interest rate environment. In CEE (down by 2% from
Q3 2013 and by 7% from Q4 2012), currency depreciation was an
important factor: adjusted for exchange rate movements, net interest
was unchanged compared with the preceding quarter and with the
same quarter of the previous year. The unusual stagnation in CEE was
due to a significant narrowing of interest margins as interest rate convergence to EMU levels accelerated in many countries; adjusted for
exchange rate movements, volume continued to rise (+2%/+11%).
Net fees and commissions, on the other hand, rose strongly in both
Austrian customer business and CEE; in the bank as a whole, they
increased by 13% to €456 million from the third to the fourth quarter,
exceeding the Q4 2012 figure by 7%. Revenue growth in the fourth
quarter of 2013 was mainly driven by net trading, hedging and fair
Quarterly trends in operating performance
€ billion
136
adjusted for exchange
rate movements
134
132
Average volume of
loans to customers
130
128
€ million
900
800
700
600
500
400
300
200
100
0
126
Operating profit
Provisioning charge
Net operating profit *)
2011
2012
2013
*) Net operating profit = operating profit less net write-downs of loans and provisions for
guarantees and commitments.
38
2013 Annual Report · Bank Austria
value income, which rose by €173 million to €366 million and
exceeded the Q4 2012 figure by about the same amount. CEE generated a large proportion of net trading income (and of its growth), with an
increase of €179 million to €304 million. Besides higher turnover in
customer business in an environment characterised by strong volatility
of exchange rates and interest rates in the final months of the year,
sales of government bonds and financial investments also made a
strong contribution to the favourable development.
Operating costs remained stable in 2013: despite a seasonal increase
of 9% in the fourth quarter, they were €1,001 million, more or less
matching the figure for the fourth quarter of the previous year (+1%).
Costs in Austrian customer business and in the Corporate Center were
lower than in the same period of the previous year, by 2% and 13%,
respectively, with payroll costs declining particularly strongly. In CEE,
operating costs grew by 5%, the same rate as revenue growth; the cost
increase in CEE was mainly driven by other administrative expenses
(including higher charges for bank levies and the financial transaction
tax) and amortisation and depreciation while payroll costs were reduced
in CEE, too.
On this basis, operating profit rose by 13% from the third to the fourth
quarter of 2013, to €849 million, an increase of 16% over the Q4
2012 figure. Although net additions to impaired loans showed a downward trend, net write-downs of loans and provisions for guarantees
and commitments rose slightly from quarter to quarter in the past two
years up to and including the third quarter of 2013. In the fourth quarter
of 2013, the provisioning charge increased sharply, to €565 million.
This explains why net operating profit for the fourth quarter, at
€285 million, was lower than in the preceding quarter and in the same
quarter of the previous year (see chart).
Non-operating items in the fourth quarter of 2013 reflected the impact
of the measures described above. The substantial expenses in this
­context were mainly recognised in the Corporate Center. Net operating
profit of the customer business segments (bank as a whole minus the
Corporate Center) was €396 million; it was lower than in the preceding
quarter (down by €128 million) and in the fourth quarter of 2012 (down
by €224 million) as a result of the charge for additional loan loss
­provisions mentioned above. Non-operating items were a net charge of
€204 million. Customer business thus generated a net profit of
€192 million in the fourth quarter of 2013. The large net profit of
€585 million recorded in the third quarter of 2013 included capital
gains of €195 million on the sale of insurance operations in Turkey (Yapı
Kredi Sigorta, YKS, and Yapı Kredi Emeklilik, YKE). Compared with the
fourth quarter of the previous year, net profit generated in customer
business was down by 45%. Together with the results recorded in the
Corporate Center – which include a large proportion of integration/
restructuring costs (of which €104 million related to the Bank Austria
2020 project), special expenses in connection with operations held for
sale, and the substantial impairment losses on goodwill – Bank Austria
recorded a net loss of €2,689 million for the fourth quarter of 2013.
Condensed income statement of Bank Austria1)
RECAST 2)
(€ million)
QUARTERLY FIGURES
recast
Q1 2013 + Q2 2013 + Q3 2013 + Q4 2013
Net interest
change
= 2013
2012
+/– €
+/– %
1,060
1,048
1,020
1,003
4,132
4,143
–11
–0%
35
28
14
6
83
86
–3
–4%
Net fees and commissions
403
434
404
456
1,698
1,543
+ 155
+ 10%
Net trading, hedging and fair value income
144
232
193
366
934
768
+ 167
+ 22%
38
14
41
20
113
141
–28
–20%
Operating income
1,680
1,757
1,673
1,850
6,960
6,681
+ 279
+ 4%
Payroll costs
– 482
– 491
– 454
– 460
– 1,886
– 1,916
+30
–2%
Other administrative expenses
– 430
– 409
– 407
– 445
– 1,690
– 1,625
–65
+ 4%
0
1
0
0
1
1
+0
+ 5%
– 62
– 63
– 60
– 96
– 281
– 246
–35
+ 14%
Operating costs
– 973
– 963
– 920
– 1,001
– 3,856
– 3,786
–70
+ 2%
Operating profit
708
794
753
849
3,104
2,895
+ 208
+ 7%
– 286
– 301
– 289
– 565
– 1,441
– 969
– 472
+ 49%
Net operating profit
421
493
464
285
1,663
1,926
– 263
–14%
Provisions for risks and charges
– 74
– 46
– 22
– 35
– 177
– 305
+ 129
–42%
Integration/restructuring costs
–2
–4
– 10
– 116
– 132
– 33
– 98
>100%
Net income/loss from investments
–1
1
194
– 417
– 223
– 318
+95
–30%
Profit before tax
344
443
627
– 284
1,131
1,269
– 138
–11%
Income tax for the period
– 64
– 111
– 100
– 259
– 534
– 327
– 207
+ 63%
18
– 45
7
– 250
– 270
– 438
+ 168
–38%
Profit or loss for the period
299
287
534
– 793
327
505
– 177
–35%
Non-controlling interests
– 11
–4
– 12
53
27
– 38
+65
n.m.
288
284
522
– 740
354
467
– 113
–24%
0
0
0
0
0
– 13
+13
–100%
Goodwill impairment
–3
–3
–3
– 1,949
– 1,957
– 34
– 1,923
>100%
Net profit or loss 3)
285
281
520
– 2,689
– 1,603
419
– 2,022
n.m.
Dividend income and other income from equity investments
Net other expenses / income
Recovery of expenses
Amortisation, depreciation and impairment losses
on intangible and tangible assets
Net write-downs of loans and provisions for
guarantees and commitments
Total profit or loss after tax from discontinued operations
Net profit or loss before
PPA 3)
Purchase Price Allocation effect 4)
n.m. = not meaningful. / 1) Bank Austria’s income statement as presented in this table is a reclassified format corresponding to the format used for segment reporting. / 2) Recast
to reflect the consolidation perimeter and business structure in 2013. / 3) Attributable to the owners of the parent company. / 4) PPA effects Russia.
Bank Austria · 2013 Annual Report
39
Management Report
Management Report (CONTINUED)
Details of the income statement for 2013
˜ In 2013, Bank Austria’s operating income was €6,960 million, an
increase of €279 million or 4% over the previous year. Adjusted for
exchange rate movements (i. e. CEE calculated at constant exchange
rates at overall bank level), operating income increased by 7%.
A longer-term comparison shows that after a weaker figure for
2012, operating income in 2013 returned to the average level of about
€7 billion maintained since 2008 and was only 1.7% lower than the
average of €7,081 million for the period from 2008 to 2012.
Multi-year comparison of operating income
(€ billion)
2006 pf 2007 2008 2009 2010 2011 2012 r
Austrian
segments
CEE
Corporate Center
Bank Austria
2.9
2.8
0.1
5.8
2.9
3.4
0.1
6.4
2.3 2.8
4.7 4.6
0.2 – 0.2
7.2 7.2
2.3 2.4 2.2
4.6 4.7 4.6
0.2 – 0.2 – 0.2
7.2 7.0 6.7
Five-year
average
2008–
2013
2012
2.2
4.9
– 0.1
7.0
2.4
4.7
0.0
7.1
pf = 2006 pro forma figure reflecting the consolidation perimeter in 2007. / r = 2012
recast to reflect the structure in 2013.
Growth of operating income was driven by the CEE business segment,
which achieved an increase of €299 million or 6% to €4,929 million
in 2013, the highest level ever. Currency depreciation lopped about
4 percentage points off the growth rate (adjusted for exchange rate
movements, operating income in CEE grew by 11%). While all country
groups made positive contributions to this performance (see table
below), developments in the various countries differed according to
local economic trends. Net interest generated in Central Europe (CE)
was impacted by slackness in economic activity in Western Europe
and by the low interest rate environment, but this was offset by
growth in other income components; overall, operating income in CE
rose by 11 % (despite a 7 % decrease in Slovenia). In South-East
Europe (+ 4 %), Romania had a very good year (+16%) while Croatia
recorded a slight decline (–3%). Among the high-growth countries,
the strongest increase in operating income was generated by our
­Russian banking subsidiary (+€172 million/+19%), where all income
components rose significantly.
Operating income by region
€ million (2012 recast)
2013
Austrian customer business 2)
Central Eastern Europe (CEE)
… Turkey
… Russia
… Central Europe (CE)
… South-East Europe (SEE)
… Other incl. PCV 3)
Corporate Center
Total operating income
2,156
4,929
1,221
1,074
955
1,486
193
– 125
6,960
+/– €
2012 million
2,203
4,630
1,237
901
862
1,432
198
– 152
6,681
+/– %
CONST 1)
– 48 – 2%
+ 299 +6% +11 %
– 16 – 1% + 8 %
+ 173 +19% +26 %
+ 94 +11% +13 %
+ 54 +4% + 4 %
– 5 – 3%
+ 28 +18%
+ 279 +4% + 7 %
1) CONST = adjusted for exchange rate movements = translated at exchange rates
prevailing at the end of 2011. / 2) Austrian customer business = Retail & Corporates,
Private Banking and Corporate & Investment Banking (CIB). / 3) Baltic countries and
CEE/Profit Centre Vienna (PCV).
40
2013 Annual Report · Bank Austria
The Turkish bank in which we hold an equity interest (consolidated
proportionately at 41%) continued to generate the largest operating
income of CEE banks within our perimeter: at €1,221 million for
2013, operating income in Turkey stagnated (–1%) when compared
with the previous year, due to currency depreciation (adjusted for
exchange rate movements: +8%); the unfamiliar slowdown is also to
be seen in the context of economic challenges experienced in the
second half of 2013, especially a more difficult environment in terms
of interest rates and funding conditions.
Austrian customer business continued to be affected by a gradual
erosion of income which resulted from persistent weakness of
demand and the long period of low interest rates. This development
was partly offset by more lively fee-based business in the latter part of
the year. Overall, operating income was €2,156 million, slightly lower
than in the previous year (– €48 million or –2%).
In the Corporate Center, where a number of factors – including the
sub-holding company function for CEE (liquidity and funding costs of
overall bank management, hedging of expected CEE profit contributions) – regularly lead to a negative figure, the deficit was lower than
in the previous year (– €125 million compared with – €152 million).
If the gains of €126 million on the buyback of Tier 2 hybrid capital
instruments in 2012 are deducted from operating income for that year,
the 2013 figure represents an improvement of €154 million; revenue
growth for the bank as a whole would have been higher by the same
amount (+€405 million or +6%).
Operating income by component
2013
Net interest
Dividend income and other
income from equity investments
Net fees and commissions
Net trading, hedging and fair
value income
Net other expenses / income
Operating income
€ million (2012 recast)
+/– €
2012 million
– 11
+/– %
CONST –0%
+3%
4,132
4,143
83
1,698
86
1,543
–3 –4% –3%
+ 155 + 10 % + 13 %
934
113
6,960
768
141
6,681
+ 167 + 22 % + 25 %
– 28 – 20 % – 18 %
+ 279 + 4 % + 7 %
Movements in the various income components show that weak
demand and the interest rate environment in 2013 still had an impact
on the net interest performance and (indirectly) on income from equity
investments while the other items already indicate the increase in
transactions seen as the year progressed.
Net interest, the main component of income (59%), was €4,132 million in 2013, more or less unchanged compared with the previous year
(–0%; adjusted for exchange rate movements, +3%). Based on the
various items of interest-bearing assets and liabilities, net interest generated by customer business (loans, deposits, debt securities in issue) rose
by 7% but net interest from financial market investments and trading
and hedging positions declined. The volume of the latter was reduced
(mainly hedging derivatives, see commentary on the financial position)
and also reflected losses in value resulting from the turnaround in bond
market trends which started in late summer 2013. Overall, the interest
margin (net interest/interest-bearing items, bank as a whole) recently
was 2.36%, a slight improvement over the previous year (2.29%).
A regional analysis shows that net interest generated by the three
Austrian business segments continued to decline, by €130 million or
9 %. It should be noted, however, that the decline resulted mainly from
Treasury and funding operations and from net interest on financial
market investments, which are managed in the CIB Division; the further decline in the yield curve, which remained flat over much of the
year (narrow gap between medium-term/long-term and short-term
interest rates), did not permit gains on maturity transformation as in
previous years. Net interest generated by commercial banking business with customers (including large corporate customers served by
the CIB Division) almost matched the previous year’s level. On the
lending side, the slight decline in average volume in the reporting year
(– 2 %) in line with economic trends was offset by slightly widening
spreads. On the liabilities side average volume of deposits and debt
securities in issue remained more or less unchanged (–1%, with
direct deposits rising by 3%), but margins deteriorated significantly.
One of the reasons for this is that deposits from previous years, on
which higher spreads were granted, are reaching maturity to an
increasing extent and can only be replaced at lower spreads in the
current low interest rate environment. Overall, net interest (commercial
margin and the remaining components) measured against average
lending volume declined by 17 basis points (bp), from 257bp to
240 bp; based on average volumes of loans and primary funds
(i. e. customer deposits and debt securities in issue), net interest fell
by 19 bp, from 253bp to 235bp.
In Central and Eastern Europe, net interest amounted to €3,091 million, up by €59 million; the growth rate of 2% (adjusted for exchange
rate movements, +6%) was significantly lower than in previous years.
In the Central European group of countries, net interest declined slightly
(–6%/adjusted for exchange rate movements, –3%). Given the high
degree of integration and convergence of these countries, volume stagnation and narrowing interest margins spread throughout this region in
2013 (a development which may also move in the opposite direction
again). Net interest in SEE rose slightly, by 2%, with good growth
achieved in Romania (+10%) and Serbia (+8%). The overall net interest performance also reflects the restructuring of banking business in
the Baltic countries to focus on leasing activities, but this had no material impact. The largest contribution of any CEE country in our perimeter
to overall net interest came from the bank in Turkey, with €732 million
(although Bank Austria only has a 41% shareholding in the bank).
­Currency depreciation in average terms for the year led to a decrease
in euro terms (–6%); expressed in local currency, net interest rose at a
comparatively low 3%. While average volume growth in 2013 was still
strong (+20% in local currency terms), the interest margin was down
by over 80 basis points from the previous year, due to a rise in interest
rates in the second half of the year and various restrictive measures
which impacted funding costs. Net interest generated in Russia in 2013
rose substantially, by 13% (adjusted for exchange rate movements,
+20%), as strong volume growth combined with margin improvements. Overall, it should be noted that the interest margin (net interest/
average lending volume) in the CEE business segment declined in
2013, as in 2012, from 457bp to 440bp. At this level, it is still significantly higher than for the bank as a whole (312bp), even after the
­provisioning charge (279bp compared with 203bp).
Dividend income and other income from equity investments
remained more or less unchanged at €83 million, with contributions to
this item coming primarily from Austrian regional and specialised banks,
real estate project companies and financial service providers. In this
context, following the realignment of leasing business, our 31.01%
shareholding interest in UniCredit Leasing was classified as a disposal
group held for sale and is therefore reflected in this item only with
­current profit or loss, without including valuation adjustments (the
­comparative figures for the previous year were recast).
In 2013, operating income was substantially supported by net fees
and commissions (€1,698 million), which increased by €155 million
or 10% (adjusted for exchange rate movements: +13%). It was particularly gratifying to see that the increase took place in all areas of the
bank’s operations: in Austrian customer business (€676 million) net
fees and commissions were up by about €23 million or 4%, although
in 2013 they again declined sharply in the areas of payment transactions and account services and banking services. This compared with
a favourable trend in securities business: in the retail segment (+4%)
mutual fund business experienced a recovery and in Private Banking
(+10%) assets under management won further market shares thanks
to a sustainable good performance. In the CIB Division (+15%) the
increase in net fees and commissions was driven by securities business and especially by renewed stronger demand for capital market and
financial services (guarantees, credit derivatives, placements, commitment fees). In CEE net fees and commissions rose by €83 million or
9% (adjusted for exchange rate movements: +13%) to €1,040 million,
with improvements seen in all countries. Contrary to the trend in
­Austria, contributions to growth also came from account and payment
services, and from lending business in Turkey and Bulgaria. Securities
business also experienced an upturn, although this was largely limited
to business with corporate customers where it was driven by underwriting operations, credit insurance and guarantees. In the retail segment, contributions to growth also came from the sale of insurance
policies in some countries. Central Europe made the strongest contribution to the increase in net fees and commissions (+€63 million/
+32%); in Hungary the strong rise (+€47 million) partly reflected
higher charges (for accounts, payments, transactions, credit cards) in
response to the financial transaction tax introduced in 2013, which
amounted to €65 million and is included in other administrative
expenses. Russia also recorded strong growth rates (+9%, adjusted
for exchange rate movements: +16%), generated largely by under­
writing business. Turkey’s performance was less favourable (–1%,
adjusted for exchange rate movements: +9%), partly on account of
economic-policy measures dampening growth in credit card business.
Bank Austria · 2013 Annual Report
41
Management Report
Management Report (CONTINUED)
Net trading, hedging and fair value income in 2013 rose by
€ 167 million or 22 % to € 934 million. Without the gains of
€ 126 million on the buyback of hybrid instruments included in the
comparative figure for 2012 (a non-operating one-off effect), the
increase was € 293 million or 46 %. The net trading result achieved
in Austrian customer business rose by € 65 million to € 90 million,
and was generated mainly by the CIB Division which (in contrast to
net interest) achieved strong growth in this area through Markets /
Counterparts. In 2013, the CEE business segment contributed
€ 705 million to the net trading result, accounting for about threequarters of the overall figure and € 173 million up on the previous
year (+ 33 %). Realised gains on available-for-sale securities (especially government bonds) were an important factor in this context.
In addition, banks in CEE countries with flexible exchange rates
and strong international capital movements conduct significant
transactions for local customers in interest-rate / exchange-rate
management. Strong increases in net trading income were
recorded in Turkey, Romania, in the Czech Republic and in Hungary. In Russia, gains on the sale of shares in MICEX, the Russian
trading platform, were substantial as in 2012, but these were now
generated for the last time (€ 145 million after € 76 million).
In the Corporate Center, which also covers activities relating to
liquidity management and equity capital management of the bank
as a whole and Bank Austria’s function as subholding company,
including exchange rate hedging activities in respect of the
­anticipated contributions to results by the CEE units, net trading
performance improved from € 85 million in 2012 (without gains
on the buyback of hybrid instruments) to € 140 million in 2013,
although Bank Austria’s participation in profit before tax of
­UniCredit’s Markets product line (to which Bank Austria is entitled
until the end of 2014 following the sale of UniCredit CAIB) was in
2013 slightly lower than in 2012.
Net other expenses / income, which cover many minor items not
included in core commercial business, in 2013 was €113 million,
down by € 28 million on the previous year. A contribution to the
result came from an indirect non-bank equity interest (Istraturist,
Croatia). This compared with an equalisation payment within
­UniCredit Group by Bank Austria in 2013 for services provided to
large international customers.
˜ Our efforts to improve cost efficiency in 2013 were successful,
a significant achievement in view of a weaker revenue trend in the
banking sector and growing additional burdens of a fiscal and regulatory nature. Operating costs (€ 3,856 million) rose only slightly
(+ 2 %); without the bank levies and financial transaction tax
included in other administrative expenses, operating costs would
have been slightly lower (– 0.2 %). Within the total figure, payroll
costs declined by € 30 million or 2 % to € 1,886 million, thanks to
strategic concentration on core business and cost reductions in the
administrative sector. The average number of employees in 2013
was down by 869 FTEs or 2 % from 2012 (without the operations
42
2013 Annual Report · Bank Austria
in Ukraine, which are classified as held for sale and are not
included in costs, and without Kazakhstan). Other administrative
expenses were € 1,690 million, € 65 million or 4 % up on the
­previous year; within the total figure, bank levies (including the
financial transaction tax) rose by € 78 million to € 209 million,
accounting for 12 % of other administrative expenses. The cost /
income ratio (without the bank levies but including the financial
transaction tax, which is a transitory item) improved by 1.3 percentage points to 53.4 %.
Operating costs
€ million (2012 recast)
2013
+/– €
2012 million
+/– % CONST Austrian customer business
Central Eastern Europe (CEE)
Corporate Center
Bank Austria as a whole
… without bank levies and FTT
1,478
2,162
216
3,856
3,647
1,461
2,075
250
3,786
3,654
+ 17
+ 87
– 34
+ 70
–7
+1%
+4% +8%
– 14 %
+2% +4%
–0%
Types of costs
Payroll costs
Other administrative expenses
… of which: bank levies and FTT
1,886
1,690
209
1,916
1,625
131
– 30
–2%
+ 65 + 4 %
+ 78 + 59 %
Cost / income ratio (without bank levies)
Austrian customer business
65.3 %
Central Eastern Europe (CEE)
42.9 %
Bank Austria as a whole
53.4 %
63.1 %
44.0 %
54.7 %
+ 2.2 percentage points
– 1.1 percentage points
– 1.3 percentage points
In Austrian customer business, costs rose by only 1% to
€1,478 million. Payroll costs declined slightly (–1.5%), despite the
wage drift. The total number of employees in the three Divisions
was down by 104 FTEs or 2% (average for the period). Other
administrative expenses also remained under control, rising by 2%,
despite the IT costs associated with the follow-up work at the
beginning of the year in connection with the software changeover
to EuroSIG, and the start of the SmartBanking project in the fourth
quarter. In CEE (€2,162 million) cost growth was 4%, or 8% at
constant exchange rates, in both cases lower than revenue growth.
Without the bank levies and the financial transaction tax (FTT),
costs would have declined by 1%. The cost/income ratio (without
bank levies, but including the FTT) therefore improved by more than
1 percentage point to 42.9%, a figure that is over 10 percentage
points lower than that for the bank as a whole. Payroll costs in CEE
in euro terms remained constant (–0.3%); adjusted for exchange
rate movements, payroll costs rose by a low 4%. The average
number of employees in 2013 (40,843 FTEs; pro-rata figures for
banks in which equity interests are held, without Kazakhstan and
Ukraine) was down by 689 FTEs (–2%). Programmes for optimising
the branch network and enhancing efficiency were underway in
most countries. The above-average growth of costs in Romania
(+10%) was due to the acquisition in August 2013 of the retail
portfolio (+128 FTEs) of the Royal Bank of Scotland. The sale of
insurance operations in Turkey (Yapı Kredi Sigorta, YKS), on the other
hand, resulted in a decline of about 1,800 FTEs. Almost all of the
increase in other administrative expenses (+8%/+11%) in CEE
was due to the spontaneous rise in Hungarian levies. Operating costs
in the Corporate Center were down by €34 million or 14% on the
previous year, the reduction also reflects lower payroll costs.
➔ Operating profit rose by €208 million or 7% to €3,104 million
as moderate revenue growth combined with a low increase in costs.
Without the non-operating one-off effect recorded in the previous year
(gains on the buyback of hybrid instruments), operating profit would
have increased by €335 million or 12%. Adjusted for exchange rate
movements (CEE calculated at overall bank level), the increase would
have been about 4 percentage points higher.
Operating profit
€ million (2012 recast)
2013
Austrian customer business
Central Eastern Europe
… Turkey
… Russia
… Central Europe
… South-East Europe
… Other countries and PCV
Corporate Center
Bank Austria as a whole
678
2,767
716
783
429
813
26
– 341
3,104
+/– €
2012 million
742
2,555
719
619
397
775
45
– 402
2,895
+/– %
CONST
– 65 – 9 %
+ 212 + 8 % + 13 %
–3 –0% +9%
+ 164 + 26 % + 34 %
+ 32 + 8 % + 11 %
+ 39 + 5 % + 5 %
– 19 – 42 %
+ 62
+ 208 + 7 % + 11 %
˜ Net write-downs of loans and provisions for guarantees and
commitments – comprising direct write-offs and additions to/releases
from loan loss provisions and provisions for guarantees and commitments (as well as results from purchases and disposals of loans and
receivables) – rose by €472 million to €1,441 million in 2013.
Net write-downs of loans and provisions for
guarantees and commitments Austria*)
CEE
… Turkey
… Russia
… Central Europe
… SEE
… Other + PCV
Bank Austria as a whole
€ million (2012 recast)
2013
actual
2012
+/– €
Cost of risk
2013
2012
219
1,222
156
78
247
534
207
1,441
208
761
147
67
140
367
40
+ 969
+ 11
+ 461
+9
+ 11
+ 107
+ 167
+ 167
+ 472
35bp 33bp
174bp 115bp
105bp 109bp
62bp
57bp
157bp
87bp
260bp 163bp
109bp
75bp
*) Including the Corporate Center.
Net write-downs of loans and provisions for guarantees and commitments in Austria (customer business segments plus Corporate
Center) rose only slightly, by €11 million to €219 million, in 2013.
At 35 basis points (bp) the cost of risk remained at the very low level
seen in the past years. Net write-downs of loans and provisions for
guarantees and commitments in the Retail & Corporates business
segment declined significantly, by 15% to €136 million, reflecting
developments in retail banking business. Employment and incomes
in Austria still presented a favourable picture compared with other
countries. Private individuals and businesses tended to reduce their
debt rather than adding to it. Moreover, the exchange rate of the
Additions to impaired loans lower/
total provisioning charge higher
3,500
Additions to impaired loans
Net additions to loan loss provisions
3,000
When assessing the risk situation, it is important to note that the
increase in net write-downs of loans and provisions for guarantees
and commitments was not due to a renewed deterioration in general
asset quality. The risk profile in several countries – including Romania,
Slovenia, Hungary and, at a very low level, Russia – deteriorated during the reporting period (mainly in retail banking). The increase in the
total provisioning charge led to an improvement in coverage ratios.
An analysis of trends in net write-downs of loans and provisions for
guarantees and commitments over the past years shows that they
were falling steadily from their peak in the recession year 2009
(€2,267 million) to the previous year, declining by about one-half, to
€969 million (without Ukraine) or €1,106 million (including Ukraine) in
2012. The renewed increase in 2013 reflects a slowdown in deterioration, though the situation has not yet improved. Net additions to
impaired loans have fallen significantly since 2011, reaching a low of
+€228 million in 2013 (comparative figures for 2012 recast/Ukraine
not included).
2,500
2,000
1,500
1,000
500
0
2008
2009
2010
2011
20121)
20132)
1) Kazakhstan (deconsolidated) no longer included in the comparative figures for
2011. / 2) Ukraine (classified as held for sale) no longer included in the
comparative figures for 2012
Additions to impaired loans lower/
total provisioning charge higher
3,500
Additions to impaired loans
Net additions
loan lossReport
provisions43
Bank Austria
· 2013toAnnual
3,000
Management Report
Management Report (CONTINUED)
Swiss franc remained stable, well below the intervention limit, while
the Japanese yen depreciated strongly (–22%). For this reason net
write-downs of loans and provisions for guarantees and commitments in the Retail & Corporates business segment continued to
decline slightly although we enhanced the portfolio-based provisioning method in 2013, which in itself led to an increase in the provisioning charge. In the CIB Division, net write-downs of loans and
­provisions for guarantees and commitments rose slightly, by 11% to
€ 53 million. The cost of risk in CIB was 37bp, more or less matching
the level in the three preceding years (32bp, 36bp, 35bp).
As additions to loan loss provisions were made, net write-downs of
loans and provisions for guarantees and commitments in the CEE business segment increased by €461 million or 61% to €1,222 million.
The coverage ratio thus improved in most countries, with the improvement varying from country to country. In percentage terms, the Central
European countries recorded the strongest combined increase in net
write-downs of loans and provisions for guarantees and commitments
(+€107 million, +77%). However, at 157bp, the cost of risk in these
countries remained below the average figure of 174bp for CEE as a
whole. In Hungary and Slovenia, the relatively low provisioning charges
doubled in 2013. A stronger increase of €167 million or 45% was
seen in the region of South-East Europe (SEE). Within SEE, net writedowns of loans and provisions for guarantees and commitments in
Romania rose strongly once more, by €83 million to €174 million,
although the country’s economic performance in 2013 was relatively
good. The cost of risk in Romania reached 461bp, the highest level
in CEE. In Croatia, loan loss provisions were increased already in
mid-2013, with further additions at the end of 2013 bringing the total
charge to €186 million (up by €34 million on the previous year, cost of
risk: 196bp), which reflects the bank’s size and high market share.
At our banks in Turkey and Russia, net write-downs of loans and
­provisions for guarantees and commitments in euro terms increased at
comparatively low rates of 6% and 16%, respectively, although some
segments of retail banking (credit card business, consumer credit)
were under strain; adjusted for exchange rate movements, the
increases were 16% and 23%, respectively. The cost of risk was
105bp in Turkey and 62bp in Russia, well below the CEE average as
the local banks benefited from a well-balanced business structure with
a high proportion of large customers. The Profit Centre Vienna of the
CEE business segment includes the charge for loan loss provisions for
cross-regional portfolios such as international project finance, and the
provisioning charge for a portion of the exposures of Ukrsotsbank
which was transferred to UniCredit Bank Austria by means of a subparticipation agreement at the beginning of 2013 to replace an expired
guarantee.
The following table presents the volume and quality of the loan
portfolio. It shows that, at the end of 2013, impaired loans
accounted for 8.4 % of gross loans to customers, after 9.2% at the
end of 2012. Net of loan loss provisions, impaired loans were 4.0%
44
2013 Annual Report · Bank Austria
of total loans, down from 5.1%. The decrease is also explained by
the change in accounting for Ukrsotsbank, which is classified as
held for sale in the statement of financial position at year-end 2013
and is therefore no longer included in lending volume (and in net
write-downs of loans). However, a comparison with the adjusted
figure for the previous year (without Ukraine, see the middle column in the table) does not change the picture to any significant
extent. A comparison of unadjusted year-end figures shows that
the coverage ratio of impaired loans (without taking collateral into
account) improved by over 7 percentage points, from 47.6% to
54.9%, reflecting the increase in specific loan loss provisions
while lending volume was reduced. The CEE business segment
accounted for 54% of lending volume and 69% of impaired loans.
Lending volume and asset quality
dec. 2013
Dec. 2012
Dec. 2012
ACTUAL
WITHOUT
ukraine 1)
ACTUAL 2)
136,099
– 6,979
129,121
11,409
8.4 %
– 6,262
54.9 %
5,148
4.0 %
136,297
– 6,288
130,009
11,182
8.2 %
– 5,559
49.7 %
5,622
4.3 %
139,255
– 6,831
132,424
12,802
9.2 %
– 6,092
47.6%
6,710
5.1 %
Central Eastern Europe (CEE)
Gross loans to customers
Total write-downs
Net loans to customers
Gross impaired loans
… % of loans to customers
Specific write-downs
Coverage ratio
Net impaired loans
… % of loans to customers
73,559
– 4,390
69,170
7,837
10.7 %
– 4,014
51.2 %
3,824
5.5 %
71,435
– 3,666
67,769
7,433
10.4 %
– 3,258
43.8 %
4,175
6.2 %
74,393
– 4,208
70,185
9,053
12.2 %
– 3,791
41.9%
5,262
7.5 %
Austria (incl. Corporate Center)
Gross loans to customers
Total write-downs
Net loans to customers
Gross impaired loans
… % of loans to customers
Specific write-downs
Coverage ratio
Net impaired loans
… % of loans to customers
62,540
– 2,589
59,951
3,572
5.7 %
– 2,248
62.9 %
1,324
2.2 %
(€ million)
Bank Austria as a whole
Gross loans to customers
Total write-downs
Net loans to customers
Gross impaired loans
… % of loans to customers
Specific write-downs
Coverage ratio
Net impaired loans
… % of loans to customers
64,862
– 2,622
62,240
3,749
5.8 %
– 2,301
61.4%
1,447
2.3 %
1) Ukraine classified as held for sale in the 2013 consolidated financial statements
(no longer included in the various items of the statement of financial position and the
income statement, 2012 adjusted). / 2) As reported (not adjusted). Impaired loans expressed as a proportion of total loans, in gross
terms, improved from 12.2% at the end of 2012 to 10.7%
most recently; in net terms, they improved from 7.5% to 5.5%.
In Austria (customer business segments and Corporate Center =
bank as a whole minus CEE), the ratios were more or less
unchanged (gross impaired loans amounted to 5.7% at the end
of 2013, in net terms, 2.2%). The coverage ratio of impaired loans
in Austria improved by 1.5 percentage points to 62.9%.
➔ Bank Austria’s net operating profit (operating profit less net
write-downs of loans and provisions for guarantees and commitments) in 2013 amounted to €1,663 million. The decline of
€ 263 million or 14% compared with the previous year is explained
by the additions to loan loss provisions. Adjusted for exchange rate
movements (CEE at overall bank level), net operating profit was
down by 9 %. Another factor to be taken into account is the nonoperating one-off effect in the previous year (gains of €126 million
on the buyback of hybrid instruments). As the additional loan loss
provisions were made mainly in CEE, net operating profit in CEE fell
by 14 % (adjusted for exchange rate movements, by 9%). Nevertheless, net operating profit generated by the CEE business segment was € 1,545 million, still representing more than three-quarters (76 %) of the total figure for customer business. This means
that Bank Austria’s underlying operating performance is stable and
supported by sustainable income components.
Net operating profit
€ million (2012 recast)
2013
Austrian customer business
Central Eastern Europe (CEE)
… Russia
… Turkey
… Central Europe
… South-East Europe
… Other countries + PCV
Corporate Center
Bank Austria as a whole
488
1,545
705
560
182
279
– 181
– 370
1,663
+/– €
2012 million
535
1,794
553
572
257
407
5
– 403
1,926
– 47
– 249
+ 153
– 12
– 76
– 128
– 186
+ 33
– 263
+/– %
CONST
– 9%
– 14 % – 9 %
+ 28 % + 36 %
–2% +7%
– 29 % – 27 %
– 31 % – 32 %
–8%
– 14 %
– 9%
˜ The balance of non-operating income/expenses between net
operating profit and profit before tax was – €531 million in 2013,
an improvement of €125 million or 19% over the previous year.
Within this negative balance, net additions to provisions for risks
and charges in 2013 were €177 million after €305 million in
2012. This figure also reflects legal risks, including a €65 million
charge recognised in March and April 2013 for the legal dispute in
Switzerland which has in the meantime been completed (BvS versus predecessor banks and UniCredit Bank Austria as legal successor; for details of legal risks see pages 229 to 231 in the notes to
the consolidated financial statements). Some of the additions to
provisions for risks and charges related to current retail banking
business in Turkey, including the credit card bonus point programme. Larger items included additional expenses relating to the
sale of ATF Bank, Kazakhstan, in 2013.
Integration/restructuring costs in 2013 were €132 million
(2012: €33 million). This item included primarily restructuring provisions of €104 million for the Bank Austria 2020 strategic project,
which involves staff-related measures in connection with rearrangements in branch-based sales activities, with branch closures and a
fundamental reorientation of the IT infrastructure, and the introduction of multi-channel banking (for details see the section on “nonfinancial performance indicators/strategic projects” and pages 176
to 177 in the notes to the consolidated financial statements). The
provisioning charges for the restructuring of operations in the Baltic
countries (€6 million for concentrating customer service activities in
Riga and focusing on leasing business) and for the restructuring of
the Hungarian branch network (€8 million) were comparatively low;
the item also includes expenses relating to the new deposit guarantee scheme in Slovakia. Integration costs also included € 18 million
for the integration of the banking subsidiaries in Slovakia and the
Czech Republic.
The negative amount shown in the item Net income / loss from
investments for 2013 was – € 223 million, an improvement of
€ 95 million over the previous year. The decrease resulted from
one-off income of € 195 million from the sale of equity interests in
Turkish insurance companies, which was accompanied by the conclusion of a long-term distribution cooperation agreement with the
objective of focusing on core business and enhancing capital
­efficiency (see comments on consolidated companies and changes
in consolidated companies on pages 138 to 146 of the notes to
the consolidated financial statements). This was offset by various
expenses for equity interest restructuring. The most significant
­factor in this context is the step-by-step restructuring of leasing
business in the entire UniCredit Group, which involves the sale of
Bank Austria’s shareholding interest in UniCredit Leasing S. p. A.
and in the Russian leasing subsidiary. This shareholding interest,
now classified as held for sale, impacted net income / loss from
investments with – € 131 million. (In 2012, write-downs were
reflected in the item “Dividend income and other income from
equity investments”; the comparative figures for 2012 shown in
the condensed income statement were adjusted to reflect the
structure prevailing in 2013.) A negative impact of € 134 million on
net income / loss from investments relates to the planned liquidation of a company in which we hold an equity interest. In addition
to valuation adjustments to minor equity interests in the domestic
real estate sector and in CEE countries as well as current results
from financial market investments, the carrying amounts of equity
interests in Austria were also reduced, with the related charge
being reflected in net income / loss from investments.
Bank Austria · 2013 Annual Report
45
Management Report
Management Report (CONTINUED)
Profit before tax
€ million (2012 recast)
2013
Austrian customer business
Central Eastern Europe (CEE)
… Russia
… Turkey
… Central Europe
… South-East Europe
… Other countries and PCV
Corporate Center
Bank Austria as a whole
450
1,641
707
758
123
271
– 218
– 960
1,131
+/– €
2012 million
455
1,722
553
512
235
417
5
– 907
1,269
–5
– 80
+ 154
+ 246
– 112
– 146
– 223
– 53
– 138
+/– %
CONST
– 1%
– 5%
+28%
+48%
– 48%
– 35%
+1%
+ 36 %
+ 62 %
–45 %
– 35 %
+6%
– 11%
–3%
After deduction of the balance of non-operating items from net
operating profit, profit before tax was €1,131 million in 2013,
after € 1,269 million in the previous year. Profit before tax generated by Austrian customer business almost matched the previous
year’s figure (– 1 %). In CEE, profit before tax was down by 5% in
euro terms and up by 1 % when adjusted for exchange rate movements. Large increases in the contributions from Turkey and Russia
offset declines in the other regions of CEE (see table). The special
expenses mentioned above in connection with equity interest management are reflected in the Corporate Center.
˜ Further non-operating charges and taxes of €2,734 million
(2012: € 850 million) had to be deducted from profit before tax to
arrive at net profit / loss for 2013; the total amount includes effects
from deferred taxation and discontinued operations as well as
impairment losses on goodwill, which was reduced to nil.
Although profit before tax was slightly lower than in the previous
year, the income tax charge for 2013 was €534 million, substantially higher than in the previous year (€327 million) because
deferred tax assets were written down in 2013.
In line with the strategy of concentrating on core markets in the
business portfolio and reducing risks, and following our withdrawal
from Kazakhstan in 2012, the banks in Ukraine (which were recently
integrated) are classified as a disposal group held for sale. As in the
case of ATF Bank, Kazakhstan, in the 2012 consolidated financial
statements, the income statement items of the new Ukrsotsbank
were combined and presented in the item “Total profit or loss after
tax from discontinued operations”, together with the effects from
the reclassification. The comparative figure for the previous year
46
2013 Annual Report · Bank Austria
includes expenses relating to the sale of ATF Bank, Kazakhstan,
which has been completed in the meantime. In 2013, total profit or
loss after tax from discontinued operations was a substantial loss of
– €270 million but lower than in the previous year (– €438 million).
With the merger of the two banks in Ukraine – Ukrsotsbank and
UniCredit Bank, Kiev – Bank Austria’s shareholding interest in
­Ukrsotsbank declined from 98% to 72%. A portion of the foreseeable result from the sale (and of the provisions which have been
made) of Ukrsotsbank will therefore be attributable to UniCredit’s
non-controlling interest in Ukrsotsbank. From the Bank Austria
­consolidation perspective, this had a favourable effect on the
item “Non-controlling interests”, giving a positive amount of
€27 million (including the other non-controlling interests) for 2013
after – €38 million in the previous year.
Recent goodwill impairment tests have led to the decision to write
off all goodwill (of cash-generating units). This is the result of significantly lower medium-term forecasts (economic growth in real
and nominal terms, growth of banking sector), changes in the interest rate scenario, and additional risks which recently materialised
again (such as currency depreciation and capital transfer controls)
and, last but not least, regulatory restrictions and fiscal charges
imposed on the banking sector in most countries including
Austria. Impairment losses on goodwill added up to a charge of
€1,957 million (2012: €34 million), of which €1,891 million (97%)
related to CEE banking subsidiaries.
The recognition of a goodwill impairment charge which reduces
goodwill to nil, and of provisions for the intended disposals and
restructuring of equity interests, led to a net loss of €1,603 million
in the 2013 consolidated financial statements.
Profit performance
€ million (2012 recast)
2013
Net operating profit
Non-operating items 1)
Profit before tax
Non-operating items 2)
Net profit / loss 3)
1,663
– 531
1,131
– 2,734
– 1,603
+/– €
2012 million
1,926
– 656
1,269
– 850
419
– 263
+ 125
– 138
– 1,884
– 2,022
+/– %
– 14 %
– 19 %
– 11 %
1) Provisions for risks and charges, integration/restructuring costs, net income/
loss from investments. / 2) Income tax, total profit or loss after tax from discontinued
­operations, non-controlling interests, Purchase Price Allocation effect, and impairment
losses on goodwill. / 3) Net profit/loss attributable to the owners of the parent company.
Financial position and capital resources
Financial position
Ukrsotsbank, Ukraine, which was classified as held for sale on the basis
of a strategic decision to reduce risk, is no longer included in the statement of financial position as at 31 December 2013 with its contributions to the various items but is shown in the assets item “Non-current
assets and disposal groups classifed as held for sale” and in the
­liabilities item “Liabilities included in disposal groups classified as
held for sale”. Ukrsotsbank was a significant factor in 2012, with about
€2.4 billion in loans and receivables with customers and €1.3 billion
in primary funds (customer deposits and debt securities in issue).
To ensure comparability with the previous year’s figures for the
­individual items, the 2012 statement of financial position is shown as
published and in an adjusted form for analysis purposes.
˜ As at 31 December 2013, Bank Austria’s total assets were
€196.2 billion, down by €11.4 billion or 5.5% on year-end 2012.
A large part of the decrease is due to a deconsolidation effect:
ATF Bank, Kazakhstan, which was included in the item “Non-current
assets and disposal groups classified as held for sale” of the 2012
statement of financial position and has in the meantime been deconsolidated, accounted for €3.8 billion of the total decline of €11.4 billion
on the assets side; on the liabilities side, ATF Bank, Kazakhstan, was
included in the item “Liabilities included in disposal groups classified as
held for sale” in 2012 and accounted for €3.5 billion of the decrease in
total liabilities and equity. The comparison of (unadjusted) year-end
amounts shown in these items of the statement of financial position
includes Ukrsotsbank, Ukraine, in 2013 and ATF Bank, Kazakhstan, in
2012, which were about the same size. In addition to deconsolidation,
exchange rate movements also influenced the various items of the
statement of financial position and capital consolidation. From the
­middle of 2013, the currencies of countries where Bank Austria has
large operations came under pressure against the euro: in a comparison of year-end figures 2013/2012, the Turkish lira depreciated by
20.4%, the Russian rouble by 8.3% and the Czech crown by 3.2%.
In operational terms, the slowdown of growth was reflected on the
lending side and on the deposit side. Moreover, efforts made by the
bank to optimise the structure of assets and liabilities proved effective: the proportion of items which are directly related to customer business continued to rise, at the expense of interbank business, financial
market investments, trading assets/liabilities and hedging derivatives.
˜ A presentation of the items of the statement of financial position for
analytical purposes (2012 figures adjusted to 2013 by reclassifying
Ukraine), on which the following commentary is based, shows that on
the assets side – in addition to the above-mentioned deconsolidation
effect – loans and receivables with banks declined significantly, by
€2.8 billion or 10.1% (see the three columns shown in the table under
“for analysis purposes”). Financial market investments were more or
less equal to the year-end figure of the previous year (+0.2%) while
hedging derivatives were substantially reduced (–29.4%). Loans and
receivables with customers totalled €129.1 billion at the end of
2013, more or less matching the previous year’s level (– €0.9 billion/
–0.7%). This reflects stagnant lending volume in Austrian customer
business (–2.7%) and credit expansion in the Central Eastern Europe
(CEE) business segment which was much weaker than in previous years
(+1.6%). The main reason for the weaker development was currency
depreciation: at constant exchange rates, loans and receivables with customers in CEE rose by 10.6%. At the Turkish bank in which we hold an
equity interest, lending volume grew by 26.6% in local currency terms
(reflecting a slowdown) but by only 1.6% in euro terms. For Russia,
the rates of change are +8.7% in rouble terms and –3.3% in euro.
Major items in the statement of financial position
AS PUBLISHED:
Assets
Other financial assets*)
Loans and receivables with banks
Loans and receivables with customers
Intangible assets
Non-current assets and disposal groups classified as held for sale
Other asset items
Total assets
Liabilities and equity
Deposits from banks
Deposits from customers
Debt securities in issue
Liabilities included in disposal groups
classified as held for sale
Provisions for risks and charges
Equity
Other liability items
Total liabilities and equity
for analysis purposes:
31 dec. 2012
adjusted
change
2013/2012 pub
change
2013/2012 adjusted
31 dec. 2013
31 dec. 2012
23,430
24,967
129,121
219
3,714
14,759
196,210
23,384
28,112
132,424
2,459
3,788
17,429
207,596
+ 46
– 3,145
– 3,304
– 2,240
– 73
– 2,670
– 11,386
+ 0.2 %
– 11.2 %
– 2.5 %
– 91.1 %
n.m.
– 15.3 %
– 5.5 %
23,384
27,759
130,021
2,406
7,488
16,538
207,596
+ 46
– 2,792
– 900
– 2,187
– 3,773
– 1,779
– 11,386
+0.2%
–10.1%
–0.7%
– 90.9%
–50.4%
–10.8%
–5.5%
27,020
108,935
29,049
31,061
110,563
28,063
– 4,041
– 1,628
+ 987
– 13.0 %
– 1.5 %
+ 3.5 %
30,833
108,839
28,062
– 3,813
+ 96
+ 987
–12.4%
+0.1%
+3.5%
2,242
5,155
15,052
8,757
196,210
3,506
5,389
18,192
10,822
207,596
– 1,264
– 234
– 3,140
– 2,066
– 11,386
n.m.
– 4.3 %
– 17.3 %
– 19.1 %
– 5.5 %
5,494
5,388
18,192
10,788
207,596
– 3,252
– 234
– 3,140
– 2,031
– 11,386
–59.2%
–4.3%
–17.3%
–18.8%
–5.5%
*) Financial assets at fair value through profit or loss + available-for-sale financial assets + held-to-maturity investments.
Bank Austria · 2013 Annual Report
47
Management Report
Management Report (CONTINUED)
Nevertheless, the proportion of loans and receivables with customers
shown in the statement of financial position rose from 62.6% at the
end of 2012 to 65.8% at the end of 2013. Within the financial market
investments (unchanged at €23.4 billion), claims against sovereign
­borrowers (carrying amount: €18.4 billion/9.4% of total assets), which
are included in various valuation categories, increased by 3.1%.
­Austrian government securities (€6.9 billion) accounted for the largest
proportion of the total portfolio (37.4%) and rose strongly (+30.4%),
followed by Turkish (18.4%), Czech (11.6%) and Hungarian (8.9%)
­government securities. The proportion of Italian government securities
(carrying amount: €563 million) was 3.6%, more or less the same
as Slovak or Bulgarian bonds. Holdings of government bonds fulfil an
important function in liquidity management of the local banks and of the
bank as a whole.
˜ On the liabilities side, deposits from banks amounted to
€ 27.0 billion, a decrease of €3.8 billion or 12.4%. Trading liabilities
(– 26.0 %), hedging derivatives (–24.0%) and financial liabilities at fair
value through profit or loss (–31.6%) were lower at the end of 2013
than a year earlier. The item “Liabilities included in disposal groups
classified as held for sale” declined by €3.3 billion (deconsolidation
effect from the sale of ATF Bank, Kazakhstan). Primary funds
(€ 138.0 billion) slightly exceeded the previous year’s figure (+0.8%),
they accounted for 70.3 % of total liabilities and equity in 2013, up
from 65.9 % at the end of 2012. This means that Bank Austria’s
­lending volume is funded with primary funds (customer deposits and
debt securities in issue) to the extent of 107%. Customer deposits
(€ 108.9 billion) were slightly higher than in the previous year
(+ 0.1 %). Deposits in the Austrian business segments (including the
Corporate Center) totalled €50.2 billion, more or less matching the
figure for the previous year (–0.5%). In CEE the picture is distorted by
exchange rate movements: at current exchange rates, deposits rose
slightly, by 0.7 %; translated at constant exchange rates, deposits
increased by a substantial 10.1%. In this context it should be noted
that deposits grew strongly already in 2012. In Russia (–6.5% ytd in
euro /+ 5.1 % in local currency) expansion slowed down. The rate of
change at constant exchange rates in Turkey was +22.6%, while in
euro terms it was – 1.5 %, reflecting currency depreciation.
The bank’s own issues rose by €987 million or 3.5% to €29.0 billion
in 2013, despite large redemptions. In the area of funding (without
short-term instruments and funds raised from the ECB) we issued
­Senior Bonds totalling about €3.3 billion in 2013 (including bonds in
Austria with a total volume of €1,250 million) and €1.8 billion in mortgage bonds and other covered bonds.
˜ Equity declined by €3.1 billion to €15.1 billion (–17.3%) from yearend 2012 to year-end 2013. One of the reasons for the decrease was
the net loss of €1.6 billion, which resulted from the goodwill impairment
charge of €1,957 million. Items within other comprehensive income
also had an impact: the foreign currency translation reserve, which
shows exchange differences from capital consolidation, declined by
€1,033 million. Reserves in accordance with IAS 39, which directly
48
2013 Annual Report · Bank Austria
reflect market price fluctuations of financial market instruments (for cash
flow hedges and available-for-sale financial assets), had an impact of
– €662 million. As at 31 December 2013, equity amounted to €15.1 billion, accounting for 7.7% of total liabilities and equity compared with
8.8% at the end of 2012. The leverage ratio – based on the cash concept, without intangible assets – was 13.2 after 13.0 in the previous year.
Capital resources
˜ As at 31 December 2013, risk-weighted assets (RWAs) were
€118.5 billion, down by €11.6 billion or 8.9% from the year-end 2012
figure. RWAs from credit risk declined by €11.3 billion. The decline in
credit-risk RWAs resulted mainly from exchange rate movements in TRY,
RUB and CZK, from deconsolidation of ATF Bank including its subsidiaries, from the improvement in risk weightings as Croatia joined the EU,
from the fact that banking business in the Baltic countries was discontinued, and from UniCredit Bank Austria AG. While RWAs from operational risk rose by €0.1 billion compared with year-end 2012, marketrisk RWAs declined by €0.4 billion in the same period.
˜ Capital requirements for credit risk were €8.3 billion, down by
9.8% from year-end 2012, and capital requirements for all types of risk
declined by 8.9% to €9.5 billion.
˜ Net capital resources amounted to €16.0 billion and were thus
lower than at the end of 2012. An increase resulting primarily from
retained profits at CEE banking subsidiaries was largely offset by the
release of capital reserves at UniCredit Bank Austria AG and by
exchange rate movements reflected in net capital resources. Net Tier 2
capital was only slightly up on year-end 2012 as the new issue of
€0.5 billion launched in the first quarter of 2013 was largely offset by
the maturing of previous issues and by deconsolidation of ATF Bank.
➔ The reduction of RWAs has led to an improvement in capital ratios
since the end of 2012. The Core Tier 1 capital ratio (Tier 1 capital ratio
without hybrid capital) based on all risks rose from 10.6% at the end of
2012 to 11.3% at the end of 2013. In the same period the Core Tier 1
capital ratio based on credit risk increased from 12.0% to 13.0%.
At the end of December 2013, the total capital ratio (based on all risks)
was 13.5%, up by one percentage point on year-end 2012.
Capital ratios
based on all risks 1)
Tier 1 capital ratio
… without hybrid capital (Core Tier 1 capital ratio)
Total capital ratio
based on credit risk 2)
Tier 1 capital ratio
… without hybrid capital (Core Tier 1 capital ratio)
Total capital ratio
31 DEC. 2013
31 DEC. 2012
11.6 %
11.3 %
13.5 %
10.8 %
10.6 %
12.5 %
13.2 %
13.0 %
14.3 %
12.3%
12.0%
13.0%
1) Credit risk, operational risk, position risk and settlement risk. / 2) Capital resources
less requirement for the trading book and for commodities risk, exchange rate risk and
operational risk as a percentage of the risk-weighted assessment basis for credit risk.
Financial and non-financial performance indicators
Volume, profitability and resources
˜ Bank Austria expanded moderately in 2013, despite a slowdown
from quarter to quarter which reflected economic stagnation in
most countries and depreciation of major CEE currencies. Average
loans and receivables with customers increased by 2.3% to
€ 132.3 billion in 2013. In CEE they rose by 5.6% (adjusted for
exchange rate movements, by 9.3%), reflecting expansion in Turkey
and Russia (combined growth: +8.1%; adjusted for exchange rate
movements: + 16.2%). In the three Austrian customer business
­segments, average volume declined (in retail banking and in CIB) by
2.7 %. A stronger increase of 2.8% was seen in primary funds
(customer deposits and debt securities in issue), supported by high
market liquidity in combination with acquisition efforts in the CIB
­segment comprising large customers and also in CEE, as well as the
bank’s increased new issue activities.
Resources and profitability
(2012 RECAST)
bank
austria austriaN
CUSTOMER
BUSINESS 1)
cee
132.3
+ 2.3 %
55.5
– 2.5 %
70.3
+ 5.8 %
125.5
– 2.8 %
135.4
+ 2.8 %
27.3
– 2.5 %
58.2
– 0.6 %
78.7*)
– 2.3 %
61.1
+ 5.8 %
Results, profitability and value creation
Operating income (€ million)
6,960
+ 4.2 %
Change over previous year 2)
Profit before tax (€ million)
1,131
– 10.9 %
Change over previous year 2)
6.7 %
ROE before tax 3)
Marginal EVA (€ million)
…4)
Marginal RARORAC
… 4)
2,156
– 2.2 %
450
– 1.0 %
15.2 %
94
3.93 %
4,929
+ 6.5 %
1,641
– 4.7 %
11.6 %
125
1.63 %
Equity
Average equity (€ billion) 4)
Change over previous year 2)
3.0
– 2.7 %
14.2
+ 8.8 %
Relative size
Average loans to customers (€ billion)
Change over previous year 2)
Average risk-weighted assets (RWAs,
€ billion)
Change over previous year 2)
Primary funds (€ billion)
Change over previous year 2)
16.9
– 5.5 %
*) without Ukraine / 1) Retail & Corporates, Private Banking and Corporate & Investment
Banking (CIB) Divisions; the difference to the total amount is allocated to the Corporate
Center – see “Description of segment reporting” on pages 182 to 183 of this report. /
2) Recast to reflect the consolidation perimeter and accounting principles in 2013. /
ROE = profit before tax divided by average equity of the business segments. / 4) Not
meaningful at overall bank level because of the various special effects in the Corporate
Center; see commentary. 5) Subsidiaries are included at actual IFRS capital.
˜ In the segment reporting tables, average risk-weighted assets
(RWAs) still include Ukrsotsbank (within the CEE Division), which is
held for sale but has not yet been disposed of (lending volume and
deposits shown in the statement of financial position no longer
include Ukrsotsbank because all items of Ukrsotsbank have been
combined and are shown in the items “Non-current assets and
­disposal groups classified as held for sale” and “Liabilities included
in disposal groups classified as held for sale”. Average riskweighted assets (all types of risk) including Ukraine in 2013 were
down by 2.9% from the previous year. In absolute terms, RWAs
in CEE amounted to €82.4 billion. If the RWA figure for Ukrsotsbank is deducted to make a consistent comparison with lending
volume, average risk-weighted assets for CEE are €78.7 billion
(compared with the recast figure for the previous year, the change
is as low as –1.7%).
Average equity in the CEE business segment rose by 8.8 % in
line with strategy. Equity allocated to Austrian customer business
declined slightly, by 2.7%, in parallel with risk-weighted assets.
Return on equity (ROE before tax) was 11.6% for CEE and
15.2% for Austrian customer business, which absorbs significantly
less equity.
Marginal Economic Value Added (EVA), the long-term indicator
used by UniCredit Group for value creation, by definition does not
include impairment losses on goodwill as non-cash items (“marginal” refers to the exclusion of goodwill); positive and negative
one-off effects are also not included in NOPAT. In 2013 the CEE
business segment generated an EVA of €125 million, and the
combined EVA for the three Austrian customer business segments
was €94 million. Risk-adjusted return on risk-adjusted capital
(RARORAC) in CEE was 1.63%, reflecting the relatively large
amount of equity (target Tier 1 capital ratio multiplied by RWAs)
allocated to the segment and the high cost of capital to be earned
on it (averaging 13.3%). RARORAC in Austrian customer business
was 3.93%, based on an average cost of capital of 10.7 % for the
Austrian customer business segments. (For Bank Austria as a
whole – including the Corporate Center – EVA is no longer shown
until further notice as this key figure is not meaningful at overall
bank level in view of the high risk premiums and structurally weak
profitability in the banking sector, and also because of the higher
capital requirements imposed on banks.)
˜ As a result of the sale of ATF Bank, Kazakhstan, which was
completed in the reporting year, the most recent numbers of
­branches and employees declined (just before deconsolidation) by
139 branches and 3,350 FTEs; the movements are reflected in the
Corporate Center, where ATF Bank’s branches and employees had
been recorded since the decision was made to sell the bank, and
comparative figures were adjusted. Ukrsotsbank, Ukraine, which is
classified as a disposal group held for sale, is still included in the
total numbers of employees and branches – with 402 branches
and 6,143 FTEs most recently.
Bank Austria · 2013 Annual Report
49
Management Report
Management Report (CONTINUED)
bank 3 austrian
austria segments 1)
Branches
Year-end 2013
Year-end 2012
2,789
2,970
Employees (FTEs)
Year-end 2013
53,598
Year-end 2012
58,182
269
289
CEE kaZaKhstan 2)
corpORATE
cENTER 3)
2,520
2,542
0
139
…
5,255 46,396
5,427 47,488
0
3,314
1,947
1,954
1) Retail & Corporates, Private Banking and Corporate & Investment Banking (CIB) Divisions. / 2) Kazakhstan until the end of the first quarter of 2013. / 3) Corporate Center =
Global Banking Services plus Competence Lines.
At the end of 2013, Bank Austria had 2,789 branches, down from
2,970. At the end of 2012, Kazakhstan was included with 139
branches. Without Kazakhstan, the number of branches declined by
42. The decrease resulted from Romania (–21), Hungary (–20) and
Bosnia and Herzegovina (– 6), while less significant movements in
the other countries offset each other. At the end of 2013, the number of branches in the Austrian business segments declined by 20.
A foreign brokerage firm, which was allocated to the CIB Division,
was closed. In the commercial banking branch network we closed
19 branches – under the “SmartBanking” and “Bank Austria 2020
projects”; twelve closures took place in Vienna and seven in other
Austrian regions.
Risk-weighted assets by region
At the end of 2013 the number of employees totalled 53,598 fulltime equivalents (FTEs), down by 4,585 or 7.9% compared with a
year earlier. Of this change, ATF Bank, Kazakhstan, which has been
deconsolidated in the meantime, accounted for a decline of 3,314.
In the CEE business segment (without Kazakhstan, but with Ukraine)
staff numbers at the end of 2013 were 46,936 FTEs, down by
1,091 FTEs or 2.3%. The number of employees in Turkey (counted
at 100%) fell by 835 FTEs to 16,423 FTEs. All of this decline is
explained by the deconsolidation of the insurance operations, without
which staff numbers would have grown by about 1,000. Significant
increases in the number of employees were seen in Russia
(+176 FTEs), Romania (+130 FTEs, mainly as a result of the acquisition of the retail business of the Royal Bank of Scotland) and Serbia
(+29 FTEs). This compares with reductions in Bulgaria (–173 FTEs),
Croatia (–87 FTEs), Hungary (–87 FTEs), Bosnia and Herzegovina
(–46 FTEs) and Slovenia (–28 FTEs).
Staff employed in Austrian customer business recently totalled
5,255 FTEs, a decrease of 172 FTEs or 3.2% compared with the
year-end 2012 figure. A significant reduction was made in Retail &
Corporates (–134 FTEs/–3.1% to 4,146 FTEs). The Bank Austria
2020 initiative envisages a reduction of 686 workplaces (FTEs),
mainly in areas which do not provide direct customer services;
54% of this reduction is planned to be implemented in 2014 and
46% in 2015.
Employees by region
Corporate Center 4%
CEE other 1%
CEE PCV and other 6 %
Corporate Center 13%
Austrian
customer business 10%
Ukraine, Baltics 11%
South-East
Europe (SEE) 17 %
€125 billion
Austrian
customer business 22%
South-East
Europe (SEE) 26%
Central Europe (CE) 13 %
Turkey and Russia 38%
Turkey and Russia 30%
Average risk-weighted assets in 2013
50
2013 Annual Report · Bank Austria
53,598 FTEs
Central Europe (CE) 10%
Number of employees (FTEs), end of 2013
Strategic projects
The focal areas of Bank Austria’s strategy are the concentration of
its business portfolio on business with customers in the core
countries and the realignment of the business model, the structure
of sales operations and the range of products and services to meet
customers’ specific needs. Based on optimum allocation of capital
and supported by professional risk management, this is designed to
assure the bank’s development on a sustainable basis.
Banks have been subjected to growing pressure to adapt to the
new conditions in the years following the financial crisis: several
years after the crisis management and adjustment recession in
2009, the current market environment is still characterised by
weak economic activity, surplus liquidity and interest rates at historically low levels, weakening the revenue base. In addition, current
expenses are increased by bureaucratic rules imposed on banks
with regard to the customer / bank relationship, excessive reporting
requirements and rising costs for security measures. Banks are
moreover faced with much more rigid regulatory requirements
through the implementation of Basel 3 / CRD 4 and in connection
with the banking union. Allocations to a resolution fund and to the
deposit guarantee scheme will burden Austrian banks with about
€ 250 million each year. Added to this comes the fiscal burden of
bank levies in the amount of € 550 million (of which € 97 million is
payable by Bank Austria in Austria), which is very high in an international comparison; bank levies are likely to rise to € 650 million in
2014. The rollout of risk management techniques in accordance
with Basel 2 (transition to the IRB approach) and stricter regulatory
requirements have generally also been implemented in the CEE
countries. In some countries (especially Hungary), these were supplemented by national regulatory measures and fiscal ad-hoc levies.
Overall, the burdens on both the earnings and cost sides make it
more difficult for banks to meet the stricter capital requirements
from their own resources.
Commercial banking is also undergoing a process of change: on
the demand side, technical progress reflected in the digitalisation
of our daily lives, the availability of social networks and greater performance transparency and mobility, is radically changing the preferences and demand patterns of customers, especially those of the
“Digital Natives” generation. On the supply side, FinTech boutiques
are breaking into the market in addition to major Internet providers.
Demographic developments within society moreover call for new
solutions, such as are required to address the needs occurring in
the different phases of a customer’s life, and the working environment within banks is also changing significantly.
➔ In 2013, Bank Austria responded to these challenges with a
number of strategic initiatives geared to adjusting its business
model, so as to emerge as a winner from this process of change.
˜ In Austria, at the beginning of 2013, we paved the way for the
process of change (as part of the UniCredit-wide GOLD initiative) by
realigning existing customer business segments within the bank’s
organisational structure on a needs-oriented basis. We bundled the
entire spectrum of retail and commercial customer groups within
the responsibility of one Management Board member while making
a clearer distinction between retail sales and corporate sales.
The Private Banking Division continues to serve the top segment of
private individuals. In addition, we transferred internationally-oriented
large corporate customers to the responsibility of another Management Board member to give them easier access to cross-regional
capital market products of UniCredit Group. (For details see Section
D, Segment Reporting, of the notes to the consolidated financial
statements on page 180 to 189).
˜ With our new SmartBanking customer service model we have
adopted a forward-looking strategy for revenue growth on a sustainable basis while taking advantage of current trends in consumer
behaviour (digitalisation). SmartBanking offers all customers wishing
to use this service the possibility to settle routine banking transactions and for personal advisory services via video telephony, telephone, SMS and OnlineBanking and within the branch network.
The significant added value compared to online banking alone is the
personal advisory service component, via either this channel or the
bank’s branches.
After an eight-month trial period – with very good feedback from
customers – we successfully launched SmartBanking in September
2013. In the course of the accompanying market campaign, new
SmartBanking customers who opted for a comprehensive account
package which includes a credit card (such as ErfolgsKonto Plus,
Premium or Gold) were presented with a Samsung GALAXY Tablet 3.
Bank Austria apps for iPhone and Android were very well received
and are continuously being enhanced. They now permit customers to
generate QR codes and scan them on invoices and payment slips,
and they offer a complete ATM locator for all ATMs in Austria. We
have extended daily service hours from 8 a.m. to 8 p.m. Largely for
these reasons, and because customer contact with the relationship
manager is not limited to a specific location, we have obtained high
customer satisfaction scores (including 91 % consent in the customer platform). Since September 2013 we have won an additional
6,600 new customers on the market; we are currently serving
57,000 SmartBanking customers. About 800 qualified advisory talks
take place every month via video telephony. This is complemented
by customer contact via telephone, e-mail, information, OnlineBanking and SMS. We want to win 20,000 new customers on the market
each year by the end of 2017 and serve a total 350,000 customers
via SmartBanking.
˜ Through a number of multi-year projects we continue to focus on
the business model of a universal bank, but with a much more
pronounced two-pronged approach: one approach is that of a basic
Bank Austria · 2013 Annual Report
51
Management Report
Management Report (CONTINUED)
services bank, whereby we will offer basic services such as deposits and the provision of consumer loans as well as cash deposits,
withdrawals and transfers with substantial technical support. These
basic services will be provided in an efficient and dependable manner at very competitive prices. The SmartBanking project involves
substantial investments in equipping branches with the requisite
technology such as multi-media terminals and cash recyclers for
deposits, withdrawals and transfers, as well as tablets and SignPads
in contact with customers. The other approach is that of an advisory
bank, which offers customers added value through expert advice.
Besides the settlement of payment orders, the SmartBanking concept, unlike online banking alone, provides advisory services through
personal contact with customers; these are available to customers
as and when they need them. We are thus strengthening our focus
on making experts and advisory teams available in our branches so
as to more effectively meet the needs of customers.
The branch network will be fully integrated in this customer service
model, resulting in new branch formats. Bank Austria’s branch
­initiative is being launched in the first quarter of 2014, with over
€ 100 million being invested in existing office locations in the course
of the next four years. The forthcoming months will see the establishment of the first prototypes. There will be three types of branches
of a new calibre: the advisory service centres – at least one in
each federal province and 12 to 15 in Vienna – will serve as flagship
branches with up to 50 employees, providing an extensive range of
services for all customer groups. These branches will have highlyqualified experts to advise customers on construction and housing,
investment and leasing; they will provide these services for SMEs
and independent professionals, corporate customers and Private
Banking customers. The classic branch will also be relaunched with
the objective of making advisory services a core component of its
activities. Advisory services will in these cases be upgraded by stateof-the-art technology. This will include cash managers, also known
as cash recyclers, which perform all functions from deposits and
withdrawals to transfers. They will be complemented by state-of-theart multi-media terminals and interactive screens which offer a broad
range of information including product details. Tablets and SignPads
are used for advisory services. The blending of traditional and virtual
branches will be accompanied by longer service hours, which are
still under discussion (it is planned to serve customers Monday
to Friday from 8 a.m. to 10 p.m., and Saturday from 10 a.m. to
6 p.m.). Self-­service branches will be converted into highly efficient bank office locations through investment in the latest technology to cover all basic financial needs and routine transactions.
Together with enhanced efficiency and new media capabilities,
this will increase customer service intensity, enabling the bank to
streamline its regional sales network. According to a detailed market analysis, three-quarters of the 270 retail branches are in a good
location, meaning that they are in the right place and have potential.
These branches today serve 90 % of Bank Austria’s customers. 25 %
52
2013 Annual Report · Bank Austria
of the branches need to be adapted; one half will be integrated in
larger offices, while the other half will be converted into self-service
branches. While some branches will be closed or integrated with
other offices, other branches will be newly established or relocated.
We closed 19 branches in 2013, twelve in Vienna and seven in
the other federal provinces. At the end of 2013 we maintained
324 offices at these 269 branch locations, of which 264 were retail
branch offices and 60 were Corporate Centers.
˜ The new business model will enable us to make much better use
of opportunities to generate revenue. At the same time, in November
2013, we launched the Bank Austria 2020 efficiency programme.
This aims to reduce costs in Austria by € 130 million within the next
two years, with payroll costs accounting for € 70 million of this
amount. Over the past two years we have permanently cut our other
administrative expenses by € 44 million, and we will reduce them
by a further € 20 million in the next three years. By not filling vacant
positions, and with the support of Movement Management, we have
reduced staffing levels at Bank Austria by 2.2 % per annum since
2010. In the same period, payroll costs have remained unchanged
following increases through collective bargaining agreements and
advancements.
In order to close the widening gap between stagnating or even
declining revenue and rising payroll costs we are planning to reduce
payroll costs by € 70 million in the next two years. The measures will
involve a reduction of about 850 FTEs at UniCredit Bank Austria AG
and subsidiaries in Austria over the next two years. This is some
400 FTEs more than we had originally planned based on natural
staff turnover. Staff cuts will be made in all business segments along
the entire value creation chain, but primarily in back-office units.
They are to take place in a socially compatible form, based on the
principle of free will. The objective is to achieve the reduction in
staffing levels without operational layoffs. To this end we offered
employees four different models at the end of December 2013:
three models relate to part-time work for different age-groups, and
one offers initial assistance to employees who either want to pursue
a different career or already meet the criteria for early retirement.
We are paying greater attention to the transfer of knowledge to
maintain service quality for our customers. Movement Management will therefore remain a key component, as will personnel
development and other measures for modern flexibility in the working world (see the section on Human Resources).
˜ In Central and Eastern Europe (CEE) our strategic plan covers a
focus on specific countries such as the Czech Republic, Russia and
Turkey. Under the plan, we are aligning our geographical footprint
closer to the market outlook while taking advantage of local market
niches with strong customer demand. In this process we are guided
by the optimisation of risk-conscious investment and efficient allocation of capital.
This is reflected in the sale of our bank in Kazakhstan. We are in
the process of scaling back our range of services in the Baltic
countries, limiting it to the provision of leasing services by the
middle of 2014. We sold our insurance operations in Turkey and
entered into a strategic cooperation agreement with the buyer.
On the other hand, we acquired RBS’s retail business in Romania
to reinforce our strengths in this area. 2013 moreover saw a
­further streamlining of our organisational structure. In Ukraine
we merged the two ­UniCredit entities at the end of 2013. We have
integrated our bank in Slovakia with the banking subsidiary in the
Czech Republic.
The modernisation of our sales operations now embraces our
­subsidiaries in CEE, though to varying degree. Innovative products
offered via online banking and credit card business make it easier
to step up product penetration without building large branch networks such as those in western Europe. In Bulgaria, our banking
subsidiary opened widely acclaimed pilot branches and tested a
new branch model. The latter takes advantage of all opportunities
offered by the new media within the newly designed branch and
also involves a new service approach by our relationship managers
and experts. Our banking subsidiaries in other countries are taking
this experience on board.
Our primary objective: customer satisfaction
Bank Austria’s slogan – “Life is full of ups and downs – we’re
there for both!” – shows that we are putting customers first.
We aim to live up to this commitment to customers’ needs in our
entire business and service model using an integrated system of
control elements. These efforts are based on a comprehensive
approach comprising objective measurements for which we apply
various techniques and by which we want to better understand our
– external and internal – customers in order to make steady
improvements. The degree of customer satisfaction is regularly
ascertained and is used as an element of scorecards at all levels
of the bank’s hierarchy, not least for determining variable salary
components.
In an exclusive cooperation with @Honestly, we made preparations
in 2013 for the possibility of giving direct electronic feedback to
Bank Austria branches via tablet, smartphone and online. In 2014,
we will be the first financial services provider in Austria to offer its
customers the opportunity to use this easy and modern way of
giving feedback. Direct involvement of customers is becoming
increasingly important to ascertain customer preferences. As part
of the Bank Austria customer dialogues conducted in October
2013, for example, we talked with 120 customers to find out what
they expect of SmartBanking and the “Bank of the Future”. The
findings from these discussions were immediately used as inputs
in ongoing ­projects and communication activities.
In 2013 we again interviewed about 43,000 customers to obtain
information on general customer satisfaction; this was done by
external market research institutions. The feedback was evaluated
at all levels (branches, regions, customer groups, divisions, the bank
as a whole), which included a comparison with the banking sector
and within UniCredit Group. Bank Austria’s aggregated TRI*M customer satisfaction index showed a significant decline in customer
satisfaction in the first two quarters of 2013, following the difficult
IT system implementation at the end of 2012. Subsequently, the
index developed favourably again, reaching a level of 70 as the year
progressed. The Private Banking Division improved its score to a
TRI*M of 77, up by 2 points on 2012, thereby impressively under­
lining its market leader and quality leader positions as perceived by
customers.
In addition to the telephone survey, Bank Austria increasingly uses
new methods for measuring customer satisfaction also online.
Our “@Feedback Kundenerlebnis” (customer experience feedback)
tool has met with very strong acceptance by customers: immediately
after an advisory talk with a customer, such as an annual review, we
send the customer a short electronic questionnaire for the purpose
of evaluating the talk. Since the tool was launched in 2010 we have
sent out 210,000 e-mails inviting feedback, yielding a favourable
response rate of close to 40 %. The results generally indicate a high
level of satisfaction (95 %) with the quality of advisory talks.
“Best service provider”: In 2013, for the third time in succession,
Service Rating GmbH, Germany, and the University of St. Gallen
elected Bank Austria as the “Most customer-oriented financial
­services provider in Austria” in a comparison covering all sectors.
Since 2011 we have defined, together with all sales units, service
standards for excellent customer experiences and provided training
in this respect. Bank Austria’s promise to customers – “Wir
möchten die Besten für Sie sein!” (we want to be the best for you) –
defines these various standards in a form that is simple and easy
to understand. The promise to our customers encompasses four
dimensions: “Focused on your future” (complete range of services,
simple, easy and forward-looking); “Round the clock” (availability via
modern communication channels); “Your needs” (satisfaction and
relationship management); “All-round advice” (listening, lucidity,
active information). We have made the promise to customers an
integral component of our corporate communication and the guiding
principle of our activities for customers.
Complaint management is a core process of customer relationship
management. “BeschwerdeExzellenz” is a project launched by
Bank Austria in 2013 to take a critical look at all internal and external complaint management processes with a view to further optimising them for our customers at all points of contact (branch, @mail,
CallCenter etc.) and setting a benchmark in the financial sector in
this context. Despite the difficult EuroSIG IT implementation, we were
able to significantly improve customer satisfaction with our response
Bank Austria · 2013 Annual Report
53
Management Report
Management Report (CONTINUED)
to complaints, with our solutions to specific problems, and with
­processing periods. We continued to bundle specific competences in
the ombudsperson’s office for persons experiencing social hardship,
where customers who are in financial difficulty receive assistance in
reducing their debt, or are granted additional time for payment.
People Survey: In 2013 we again conducted a survey among our
employees to find out what they think about various issues including
leadership, the clarity of strategy and objectives, commitment to the
company, customer orientation and the contribution to the community. The importance of this survey, which takes place every year,
and the related action plans are reflected in the high participation
rate of recently 71 %.
Communication using digital channels
˜ Tablets and smartphones have become indispensable sources of
information also in business and finance. Wirtschaft online is a new
Internet portal which we offer to customers who are interested in
economic affairs. The platform encompasses economic news,
­analyses and background information. Factual content is provided
by Bank Austria experts, primarily those from Economic Research
and Private Banking Research. Short texts give readers a quick
­summary while full-length versions contain comprehensive details.
Recommendations for reading and a list of subjects lead readers to
the requested topic. Wirtschaft Online is accessible via smartphones
and tablets at http:// wirtschaft-online.bankaustria.at. In addition to
PC and mobile versions, Wirtschaft Online also comes as an app for
iOS, Android, Windows and BlackBerry.
Bank Austria e-Magazines have also been optimised for all mobile
devices. They combine texts, images, photo galleries and videos into
a modern information medium for our customers. The e-Magazines
can be viewed at http:// e-magazin.bankaustria.at. The e-Magazin
app is available for iOS and Android.
In our social media presence, we focus on diversity to cover the
interests of a wide range of customer groups. While services and
edutainment are bundled on the company’s Facebook site, Twitter
offers hard facts on banking business and all press releases. Pinterest and YouTube show the whole world of Bank Austria via images
and videos. Information on jobs and advanced training is available
on XING, LinkedIn and Whatchado. Additionally, we established the
BusinessForum on XING in 2013, where Bank Austria with its recruiting team presents itself as an attractive employer. “ThemenTab”, a
feature newly added on Facebook, offers news at a glance.
˜ “Mitdenken und Mitlenken” is the motto used by Bank Austria
at www.kundenforum.at to invite its customers to join in shaping
the future. Recent surveys and discussion rounds ask for feedback,
thereby contributing to new ideas and products. This helps us to
adjust services and products even more effectively to our customers’
54
2013 Annual Report · Bank Austria
wishes and needs. Bank Austria MitarbeiterForum is an internal
platform available to Bank Austria employees, enabling them to contribute the experience gained in their customer advisory service
activities and to comment on proposals for products. Since they
were launched in February 2013, Bank Austria KundenForum and
Bank Austria MitarbeiterForum have attracted about 6,700 users,
with more than 14,000 responses providing feedback.
Bank Austria is also breaking new ground in leadership communication. In 2013, the interactive platform www.bankville.at received
the Austrian State Award for Internal PR; it supports the current
change process within Bank Austria, by linking managers in a
­network and supporting the joint development of future-oriented
­projects for Bank Austria. “Bankville”, an innovative feature in the
Austrian banking sector, will be extended to cover all employees via
the UniCredit Academy.
Human Resources
Human Resources Management is a strategic partner for business
and HR activities support the ongoing change processes in the
company. These create an environment enabling all employees to
fully use their potential in meeting customer needs in the best possible manner. The range of training programmes was expanded in
2013 to support the bank’s employees in their development while
also positioning ourselves as an attractive employer.
The CEE Human Resources team in Vienna plays an important role
for human resources management with regard to UniCredit banks in
Central and Eastern Europe (CEE.) Leveraging on geographical and
cultural diversity, human resources teams in CEE Vienna and CEE
countries are driven by the same values and principles. Capitalising
on country experiences, sharing best practice as well as driving and
implementing Group processes are the main traits of HR Management in CEE. In 2013, all areas of HR focused on providing the operating units with the support required to achieve their objectives.
Therefore we concentrated on centrally managed programmes to
enhance commitment and motivation, and on training and personnel
development.
˜ The strategic projects which we launched in 2013 – primarily
SmartBanking and the Bank Austria 2020 initiative, which are our
dynamic response to rapid changes in customer behaviour, demographic changes, technological progress and new communication
media, in banking and in the working environment quite generally –
focus on the qualifications and flexibility of our employees, i. e. on
intensive HR support.
The new job-related challenges presented by these changes require
new approaches to staff development. The newly founded UniCredit
Academy supports all employees on their way into the future.
Numerous initiatives dispel any fears of facing new situations –
these initiatives include team coaching; seminars for managers
focusing on learning partnerships for mutual support; internships
and job rotation for young employees. Thinking over the current
pattern of opening hours requires more flexible work arrangements
within the framework of variable working hours – appropriate
internal service agreements are under negotiation or being tested
in a pilot operation. Specific multimedia training programmes
are making our employees fit for serving customers online, via
video or personally at a branch. Training for new products is provided on “power days” to enable employees to offer advisory services to customers at all stages of their lives. Professional welcome management improves processes at branches in order to
faster attend to customers’ wishes.
The reorientation of the business model, which started in 2013,
is accompanied by continued efforts to make processes leaner
and reduce costs, both payroll costs and other administrative
expenses. There are plans for lowering staff costs by € 70 million
in the next two years, which translates into reducing the number of
full-time jobs by about 850 in the period to the end of 2015 (FTEs
in Austria within Bank Austria including subsidiaries and UniCredit
entities). Some 20 % of this reduction may be achieved through
natural staff turnover and retirement. In carrying out reductions
required beyond this proportion, it is our declared objective to
achieve them without operational layoffs and to reduce costs
in a manner that will not result in any social hardship, based
on the principle of free will. We have developed a number of
HR instruments to implement our objective. These range from
offering more opportunity for part-time work to providing appro­
priate support to those who decide to pursue a different direction
in their careers. Special attention is being given to retaining and
passing on knowledge in a structured form so as to ensure that
service quality for our customers is maintained and steadily
enhanced. Movement Management, including the various support
measures available to employees and managers, will continue to
be a key element in these efforts.
Two years of Movement Management – we keep moving!
More than 350 colleagues have found new jobs internally: this is
the good result of two years of Movement Management in Bank
Austria. Thanks to close cooperation of managers, HR Business
Partners and the Employees’ Council, we can improve the services
offered to our movers on an ongoing basis; feedback provides us
with important suggestions in this context. Movement Management
comprises extensive information, coaching opportunities including
the Profile XT analysis of strengths, and online services on myHR,
the Human Resources website which encompasses the portal for
job applicants. Job-Infofairs give employees opportunities for
­personal exchange and getting to know each other; more than
450 visitors – including movers, employees on unpaid maternity /
paternity leave and colleagues who wish to pursue a new career
– have been welcomed at the three events of this type organised
so far. A new series of workshops has given our managers valuable support in their tasks within the framework of Movement Management. A new initiative, “2 Become 1”, was launched especially
for part-time employees: two part-timers as a duo can benefit
from help in transferring to a full-time job.
˜ Our human resources activities are based on and guided by
the Global Job Model, the Group-wide personnel management
system used for describing and categorising all roles and activities within UniCredit, and the UniCredit Competency Model,
which defines standards for employee conduct in key situations.
In 2013, strategic workforce planning was extended to cover
the entire network. This makes it possible to plan personnel
requirements at job level for the Divisions and regions for a period
of 3 to 5 years. These plans are adjusted in the event that the
strategic orientation of a business segment changes.
˜ Bank Austria highly appreciates diversity and sees it as a
value in itself. Diversity Management is in line with our ethical
principles while also serving to enhance productivity, creativity
and innovation. UniCredit employs persons who differ from one
another in their gender, the colour of their skin, in their language,
ethical, cultural and religious values, marital status, age, disabilities, social status and sexual orientation. Positive recognition and
respect for people in all their diversity enables us to benefit
strongly from the manifold qualities, talents and personality facets
of our employees. Implementing these objectives is facilitated
by an innovative design of the working environment. With the
“Job and Family” audit we use assessments by external auditors to make further improvements. Key topics in this context
include enhancing working time flexibility to make family life and
job requirements compatible with each other, giving attention to
equal career opportunities for part-time employees, intensifying
teleworking, and creating an awareness among managers of the
need for a work-life balance.
Bank Austria has for a long time pursued numerous initiatives to
ensure equal opportunities for women and men. Controlling is
essential to the success of these efforts. Qualitative and quantitative targets are defined and measured for (almost) any activity,
with a separate dashboard indicating, for example, the proportion
of women holding managerial and successor positions and participating in career support initiatives. Women are seen as a key
resource in UniCredit Group. In 2013 we took a number of measures to provide optimum support to women in their careers.
­Seminars such as “shaping my future” and “[email protected]”
focus on realising one’s own strengths and weaknesses, on selfmarketing and networking.
Bank Austria · 2013 Annual Report
55
Management Report
Management Report (CONTINUED)
˜ The pleasure of learning – UniCredit Academy Austria.
Sharing knowledge and experience – in an entertaining, informal
and timely manner – is an essential feature of “The Bank of
the Future”. Against this background we created the UniCredit
Academy Austria in autumn 2013, which bundles all Learning &
Development activities of UniCredit in Austria. The UniCredit
­Academy Austria offers our employees a wide range of programmes to acquire and develop know-how required for an
employee’s sphere of activities by using the appropriate learning
method. Seminars, eLearning, podcasts (audio files), coaching,
mentoring, shadowing and internships are among the methods
used for promoting and supporting a person’s individual learning
style. This gives the learner a more active role in his / her learning
process. We have created a new way of learning – new in terms of
architecture and advanced learning environment, such as UniCredit
Center Am Kaiserwasser; and new with regard to knowledge transfer. The changes are also noticeable in the virtual Academy, a different type of learning space. Virtual learning space helps the bank
to respond at short notice to market requirements with a suitable
learning programme, thereby enhancing the return on learning for
everyone – in line with the motto: higher earnings through effective learning. www.unicredit-academy.at
Our Executive Development Plan (EDP) and Talent Management
programme form the basis of our forward-looking and sustainable
personnel planning for executives and talented employees, which
is geared to the bank’s strategy. Bank Austria continues to focus
on the ongoing development of management potential from within
the bank while gradually raising the percentage of female managers. Uniform Group-wide quality criteria serve as a standard for
verification. Talent Management activities featured initial measures to define the careers of senior employees or executives on
the basis of potential interviews. Under the national mentoring programme, in 2013 young employees again took advantage of the
opportunity for career and personal development through networking and the sharing of knowledge and experiences.
˜ With the global UniCredit Performance Management,
Bank Austria has a modern, fair and transparent performance evaluation system and procedure for planning employees’ future
development. Building on experience, the efficiency of the uniform
Group-wide process adopted in 2012 was enhanced in the past
year. All employees can easily view their evaluation and the
­feedback documentation in their personal electronic archives.
­Performance Management thus makes a substantial contribution to
the bank’s corporate culture based on respect, and to employees’
personal development in line with their specific abilities. The goals
agreed in a discussion between the employee and the manager are
captured in the Performance Management tool. The manager evaluates the employee’s performance after a maximum period of
12 months before discussing the next steps for his/her develop-
56
2013 Annual Report · Bank Austria
ment. The information obtained from the employee’s feedback and
evaluation serves as a basis for personal development measures,
­further career opportunities and individual remuneration measures.
The proper mix: our remuneration system. Our Group-wide remuneration system provides for a balanced mix of fixed and variable
monetary and non-monetary components. Regular communication to
our employees and information available on “myHR”, the HR Intranet
site, provide an overview of all components of compensation while
linking this to the related compensation processes including the
merit review and the bonus. Remuneration of top management is
determined within UniCredit by way of a Group Compensation System, which has been implemented at Bank Austria. The variable
components of the remuneration mix are linked to sustainable, longterm performance criteria; they also include non-financial criteria
and do not encourage persons to take unreasonable risks. Deferred
payment is possible for parts of variable remuneration, this may also
be in the form of UniCredit shares. Bank Austria applies the remuneration policies and practices for banks which are currently defined
by national and international regulatory authorities.
˜ 18 months ago, within UniCredit Group, we entered into a strategic partnership with hp and founded the Enterprise Services
Shared Service Center (ES SSC). This is a joint venture whose task
is to settle HR services such as payroll for Bank Austria employees.
A further objective of the joint venture is to migrate our HR tools to a
modern state-of-the-art IT system landscape by the end of 2014
while further optimising our processes. We successfully implemented
the initial steps in 2013: in the fourth quarter of 2013 we transferred
the first processes of Human Resources management to an international Shared Service Center of hp in Poland.
˜ Award-winning HR services. In April 2013 Bank Austria was
the first company to be presented with the coveted European Top
Employer award for the third year in succession, this time covering
the bank’s operations throughout Europe. The award is presented on
the basis of a three-tier, certified evaluation process of the CRF Institute: extensive, fact-based research activities, qualitative interviews
with representatives of the company, comparison of performance
within a group of companies. In 2013, this renowned prize was
awarded to only 20 top companies for their outstanding work in the
area of human resources.
At the end of 2013, in Austria’s largest recruiting study “Career’s
Best Recruiters”, which analysed the recruiting quality of over 500
companies, Bank Austria was ranked among the top 3 companies
among banks / financial service providers. The main criteria analysed
were the online recruiting presence, recruiting activities, a company’s response to applicants and their feedback. Bank Austria thereby
once more underlined its position as one of Austria’s most innovative
top employers.
Sustainability management
The balance between economic, ecological and social objectives is a
highly significant factor at Bank Austria. Sustainability and responsibility are important values for us. Stakeholder management plays
a key role in Bank Austria’s sustainability activities. It is a question
of identifying, within and outside the bank, the needs of important
stakeholders and to include them in the measures aimed at improving corporate sustainability. This also requires a meaningful and
open communication of topics on corporate social responsibility.
In the area of sustainability reporting our e-magazine, which
in the “Sustainability” section can be viewed (in German) at
www.bankaustria.at, provides a vivid picture of Bank Austria’s commitment to sustainability. It combines texts, images, photo galleries
and videos, supported by statements by Management Board members and renowned experts.
Social commitment is an important component of our sustainability
policy. We pursue a clear strategy by primarily supporting aid projects and initiatives which help children and young people in need,
and which also focus on integration / migration. Every year, we present the Bank Austria Social Prize, where customers and employees vote for social projects which are then supported by the bank
financially and through communication measures and the personal
commitment of Bank Austria employees. In 2013, for the first time,
in light of the large number of outstanding initiatives submitted from
throughout Austria, one winning project was chosen from each of
Austria’s federal provinces instead of just one winning project overall. Each of the nine winners received prize money of € 10,000.
The € 30,000 Bank Austria Social Innovation Award was presented for the first time in 2013, for innovations in the social sector.
This was made possible by the generous support provided by
­UniCredit Foundation.
Besides pursuing a comprehensive donation policy, Bank Austria
cooperates with social care organisations over the longer term
such as Caritas or SOS Children’s Villages, where we act as house
sponsor for one Children’s Village family in each of Austria’s federal
provinces. It is not only the financial support but the active involvement of employees which we feel is very important also in this area.
The Bank Austria Volunteer Day, which is organised with Caritas
Österreich, was a resounding success in 2013. This is one day when
employees from Bank Austria and its subsidiaries lend a helping
hand to initiatives and projects throughout Austria. Bank Austria also
supports the private social commitment of employees.
Bank Austria’s “Gift Matching Programme”, probably unique in
Austria, is an annual initiative which promotes the social commitment of the bank’s employees. The idea is simple: private donations
are increased by funds held by UniCredit Foundation if the initiating
employees succeed in inspiring at least 15 colleagues to donate to
the same charity and exceed a threshold. There are no limits to
c­ reativity. The Gift Matching Programme 2013 raised over € 296,000
for 65 projects, an amount which will now be increased by the
­Foundation.
In line with the “Financial Education” initiative, our website
http:// meingeld.bankaustria.at has been created for people who have
difficulty understanding the financial world which can sometimes be
quite complex. With a renowned partner, the Austrian Museum for
Social and Economic Affairs, we offer interested schools free workshops. The topics discussed range from money, the role of banks
and banking products to distributive justice. The objective is to give
young people an overview of the various types of financial transactions, to draw their attention to the opportunities and risks, and to
inform them of their rights and duties as consumers of financial
products. In addition to passing on knowledge, the workshops are
aimed at encouraging young people to critically examine how they
themselves handle money and the significance of money in their
social environment. Over 16,000 schoolchildren had attended these
workshops by year-end 2013. Since the end of 2013 this facility is
complemented by the new portal www.finanz-bildung.at, which offers
interesting information – without an advertising component – on
money for teachers, young people and students.
For such an international and diverse company as Bank Austria,
diversity management is not simply an integral component of its
corporate culture but something which also promotes productivity,
creativity and innovation. We derive substantial benefits from the
diversity of our employees, who differ from one another in their gender, the colour of their skin, in their language, ethical, cultural and
religious values, marital status, age, disabilities, social status and
sexual orientation. Numerous initiatives are being implemented to
promote a work-life balance and equal opportunities for men and
women. Controls of the success of the initiatives via controlling
instruments and the “Job and Family” audit provide objective information (see also the section on Human Resources). Consideration for
disabled persons is a key factor for us, both within and outside the
bank. Two disability managers are responsible for planning and
implementing numerous disability-related measures. They are supported by a network of about 60 disability employees, and awareness
of this issue is raised by employee training programmes. In pilot projects we are testing various possibilities for helping disabled persons
to settle their banking business. Measures that have already been
implemented include a special bank card for visually impaired persons, sections of Bank Austria’s website which enable customers to
listen to spoken information and watch videos in sign language or
read texts in simple language, and a shuttle service introduced in
2010 for customers with limited mobility, which is steadily being
expanded to cover the whole of Austria. The bank plans to complete
the adaption of its buildings and branches to make them barrier-free
by 2016. We are also creating a pool of employees who are skilled in
disability-related communication techniques such as sign language.
Bank Austria · 2013 Annual Report
57
Management Report
Management Report (CONTINUED)
Environmental management
In May 2011, Bank Austria’s environmental management system
(EMS) was certified in accordance with ISO 14001, an internationally recognised standard. By complying with ISO 14001, a
company can prove that it operates in harmony with the environment. Environmental management benefits the community while
also involving advantages for the company in the form of cost savings resulting from more efficient use of resources. Environmental
and climate protection covers the head office buildings and all
branches, and involves all employees. The great importance given
to ecological sustainability and a sparing use of resources is also
reflected in the organisation: the steering committee is headed
by the Chief Executive Officer and the EMS team coordinates the
measures and ensures that environmental and climate protection
issues are implemented in all operations.
In CEE we enhance environmental awareness through the
­UniCredit sustainability network of central and local contacts.
Specific CEE initiatives are described in the UniCredit Sustainability
Report, which corresponds to the highest Global Reporting
­Initiative (GRI) standard.
UniCredit Group is committed to reducing CO2 emissions by at
least 30 % in the period to 2020. Bank Austria is reducing its
ecological footprint by drawing up an annual environmental programme. In regard to operational climate protection considerations, Bank Austria, as one of the six founding members, has since
November 2011 been a partner of klima:aktiv pakt2020, which
was created by the Austrian Ministry of Life. The participating
companies undertake, through a voluntary agreement on objectives, to meet the Austrian climate-related targets for 2020 (minimum targets are a 16 % reduction of greenhouse gases, a 20 %
increase in energy efficiency and a renewable energy share of
34 %). Moreover, Bank Austria has committed itself to reducing
CO2 emissions by 30 % and achieving a 51 % share of renewable
energies. In its fleet management Bank Austria has switched to
low-consumption cars and reduced the number of pool cars. The
maximum CO2 emission level for cars in the Bank Austria fleet
has been set at 100 grams per kilometre. The CO2 emission level
of the current standard model is significantly lower than the maximum level set by the bank. Bank Austria further reduced business travel through the use of video conferencing facilities and
the trend towards digitalisation in the working world. A positive
secondary effect of the gradual expansion of teleworking is that it
reduces environmental pollution, especially the pollution caused by
commuters who use cars.
Measures aimed at improving energy efficiency focus on reducing consumption of electricity (which accounts for about 60 % of
overall energy consumption); these include the areas of refrigera-
58
2013 Annual Report · Bank Austria
tion and IT. All electricity supplied to Bank Austria comes from
renewable sources of energy, which is guaranteed by a certificate
issued by the bank’s energy supplier confirming that 100 % of the
electricity supplied is hydroelectric power. As a contribution to
increasing the proportion of renewable energy in Austria, the bank
has installed photovoltaic systems in suitable locations. Installations at branches in Innsbruck and Hirschstetten / Vienna are
already in use. Special mention should be made of our solar
power installation in Vienna’s second district, on the roof of the
Lassallestrasse 5 office building, which enables Bank Austria to
save a CO2 equivalent of about 35 tonnes annually. The aforementioned projects aimed at bundling and modernising the central
administrative buildings and at adapting the branches offer the
bank the opportunity to implement its ecological targets as well as
its operational and social objectives. The Austria Campus, in particular, is expected to result in a significant improvement in energy
efficiency.
Key environmental indicators 1)
CO2 emissions in t 2)
Electricity consumption in MWh
Heating in MWh
Business travel in thsd km
of which: air travel
by car 4)
by train 4)
Water consumption in m3
Waste in kg
Paper consumption in kg
of which copying paper
2013
2012
21,896
68,900
52,000
12,935
8,334
2,702
1,899
215,358
1,427,095
591,958
390,343
20,382
71,954
46,800
16,332
11,133
3,423
1,776
216,305
1,385,630
889,649
437,149
3)
3)
1) All branches, head office buildings and subsidiaries located therein. / 2) Since
2010, all electricity supplied to Bank Austria has come from renewable sources of
energy. / 3) Projection. / 4) UniCredit Bank Austria AG only.
Operations, ICT, infrastructure
One of UniCredit’s strategic objectives focuses on the development
of a cross-regional infrastructure for settlement, IT and internal
services which will provide optimum support to the bank’s customer service units with a view to creating value, bundling technical expertise, strengthening the bank’s innovative power and
improving cost efficiency. The need for such measures is partly
underlined by the growing relevance of IT and back office activities
(taxation of securities, reporting requirements, regulatory requirements etc.). A general cross-regional service model is moreover
consistent with the logic of an international banking group.
This function of a global service company is performed by
­UniCredit Business Integrated Solutions S. C. p. A. (UBIS S. C. p. A.),
a wholly-owned company of UniCredit.
UBIS and UBIS Austria
The main goal of UBIS is to provide UniCredit with various services in
the best quality from a single source. At the beginning of 2012 the
global company UniCredit Business Integrated Solutions S. C. p. A.
(UBIS S. C. p. A.) started operations, and on 1 February 2012 the
100 % subsidiary UniCredit Business Integrated Solutions Austria
GmbH (UBIS Austria) followed. When UBIS Austria commenced operations, the goals of the All4Quality project – service efficiency, cost
reduction, increased quality – were achieved. It was the first precise
result of the UniCredit strategic concept.
The last step to become a full service provider – and at the same
time also the end of the All4Quality project in Austria – was the integration of DOMUS Facility Management GmbH. With the completion
of the purchase in September 2012, the company became a 100 %
subsidiary of UBIS Austria. The next step came on 1 March 2013
with the integration of DOMUS Facility Management GmbH in UBIS
Austria. This was merged entirely into the Real Estate service line of
UBIS Austria.
All services are now consolidated under one umbrella – Information
and Communication Technology (ICT), Back Office and Middle Office,
Security, Procurement and also Real Estate. The main client of UBIS
Austria is Bank Austria, which now requests and receives the services it needs as a financial service provider from one single provider. At the end of 2013, 2,200 employees were working in UBIS
Austria, including the subsidiaries in Poland and Romania. Overall
UBIS has around 11,000 employees working in 4 legal entities and
several branches in 9 European countries as well as one branch in
New York and one in Singapore.
2013 – Global joint venture between UBIS and IBM. Value Transformation Services (V-TServices), the new joint venture between
­UniCredit Business Integrated Solutions and IBM, officially started its
activities on 1 September 2013. This joint venture was the result of
the Gibson project, focusing on improving the ICT infrastructure – a
consequence of the Newton Program. The main goal of the Newton
Program is to rationalise the activities and units within the GBS area
of the Group – increasing internal efficiency by using the process
knowledge and technical assets of the Group. To achieve this goal
and increase the performance of the systems and also reduce costs
a partner was sought with international experience – and IBM
appeared as a suitable choice here. The entire Group will be able to
benefit from this cooperation on a lasting basis: on the one hand
costs and performance are being improved, and on the other hand
access to innovations of a global market leader is opening up new
possibilities and opportunities. The company is active in Italy, Germany, Austria, the Czech Republic, Slovakia and Hungary. The goal
of V-TServices is, for the time being, to mainly provide UniCredit with
IT services. Later the IT services could also be provided for other
companies of the financial industry and the public sector.
UBIS will continue to be responsible as a hub for the coordination
and control of the outsourced services. This role is being played
by UBIS RTO (Retained Organisation) in the countries Austria, Germany and Italy.
EuroSIG – the joint IT platform. The introduction of EuroSIG in
October 2012 in Bank Austria means the IT platform is now fully in
use in four countries, including Austria. On 30 June 2013 the
­EuroSIG Austria project officially came to an end. The activities were
handed over to the lines as scheduled. Follow-up projects to stabilise
individual applications (e. g. Direct Banking) and to optimise processes have been drawn up.
Projects together with Bank Austria. Work has been and is still
being done to press ahead with and carry out other major projects
with UBIS involvement. Know Your Customer, EuroMIB, SmartBanking
Solutions and regulatory projects such as FATCA and SEPA are just
a few examples here. Worth emphasising is the challenging but ultimately successful MBS 6.0 use for Bank Austria, which was the only
bank in Austria to use this in time.
And in the coming years UBIS Austria will also be called on to ensure
the best possible cooperation: with the launch of the Austria Campus project, Bank Austria is – like in the past – drawing on the technical know-how and expertise of the Real Estate service line of its
partner UBIS Austria.
Operational safety and data security
Day-to-day business and the need to process and save the data of
Bank Austria’s private and business customers call for a clear strategy
for the safe and cautious handling of sensitive data. Appropriate measures must be in place to prevent data loss as a result of faulty systems
and to make it impossible for a third party to gain access to such data.
Bank Austria focuses on state-of-the-art solutions to assure operational safety and data security for maximum protection of the relevant
infrastructure components. A core focus of security management is
the protection of web applications (web application firewall), vulnerability assessments, process optimisation and the crucial quality assurance of Bank Austria’s security architecture through penetration tests.
Bank Austria employees receive security-related training in all areas
(e. g. data security, Austrian Data Security Act) to prevent damaging
events caused by malware (computer viruses, trojans, worms) and
social engineering attacks (phishing). They are instructed to comply with the rules of conduct in general and receive instructions to
this effect immediately in the case of specific events, and they have
been informed of particular issues via awareness programmes.
Bank Austria customers are informed of security precautions in
­Internet banking via the Bank Austria website and the Bank Austria
Internet banking portals, and of current attacks or fraud attempts.
Bank Austria · 2013 Annual Report
59
Management Report
Management Report (CONTINUED)
Report on research and development
Bank Austria’s business purpose is to provide banking services.
The production process of a bank does not involve research and
development in an industrial sense. But day-to-day business operations continuously benefit from development activities. Generally,
Bank Austria aims to meet the needs of different customer groups
with simple products. Expenditure on product development, methodological progress in risk management or on the continuous expansion of the bank’s reporting system is included in current expenses.
In the area of information and communication technology (ICT),
investment planning takes place at UniCredit level. It is based on
local requests and considers synergies which may be unlocked by
the cross-regional approach. Expenditure on information and communication technology (investment budgets) which can be capitalised
represents cash outflows at UBIS. This is different to the current
expenses which are charged to the bank and the individual business
segments (via Global Banking Services, which is part of the Corporate Center). Measured as a proportion of operating income, cash
outflows relating to ICT investments in CEE are about 3.7 %, as high
as those in Western Europe.
If the workstreams of the three-year plan are broken down by functional aspects, the investment amount of the immediate businessrelated ICT projects is much higher than in previous years, both in
absolute and proportionate terms. This is explained by the numerous
retail banking initiatives with a view to stepping up the digitalisation
of banking business. In this context, the focus in Austria is on our
major medium-term SmartBanking project. But the current threeyear period will also see substantial investments in IT infrastructure
for the Austria Campus, especially as the construction of the new
headquarters will take into account the need for a more flexible “new
working world” (desk sharing, mobile workplaces etc). Expenses for
development work as a result of regulatory requirements has risen
significantly in a longer term comparison. In the current three-year
plan about 30 % of the overall project budget is earmarked for regulatory requirements. The implementation of these projects is also
responsible for a large portion of the budget for external consulting
services (regulatory projects account for almost 50 % of the cost of
consulting services).
New working world for head office functions
The historic representative buildings of the European financial services sector are outdated for a number of reasons. These are primarily the different way in which banks now present themselves, the
permanent process of change experienced by centralised head office
functions, a new world of knowledge work, and last but not least,
technology and rationalisation requirements.
60
2013 Annual Report · Bank Austria
Austria Campus … Instead of constantly adapting our existing
buildings we are investing in a newly-designed headquarters at the
“Austria Campus”. By 2018, we will there bundle the head office
functions which are currently scattered among different locations.
About 6,000 employees will relocate to two of the new buildings
which will be built on the Austria Campus. The new Austria Campus
with a gross floor area of about 200,000 m2 will be built on the site
of the former Northern Railway Station, currently waste land within
Vienna’s inner city precincts, in the heart of an up-and-coming urban
development area close to Vienna’s Praterstern. The offices will be
complemented by the bank’s infrastructure and social facilities, and
various shops. The zoning procedure for the plots earmarked for
development was completed in April 2013. The final phase for the
head building structure of the group of buildings, the “Gate to the
Northern Railway Station”, took place in March 2013 in the form
of a competition for realising the structure. In February 2014 we
completed the sale, agreed in December 2013, of the historic bank
building in Vienna’s 1st district, Schottengasse 6 – 8. Bank Austria
will rent the Schottengasse property until the Austria Campus is
completed. In addition, a Letter of Intent is the basis for discussions
with a potential investor for the Austria Campus; these could end in
an agreement within the next few months.
… more than a construction project: The new headquarters will
reduce costs and bring employees together, shortening distances to
be covered while accentuating our common vision. Moreover, the
new design of the head office functions is one of our major modernisation projects: with flexible and transparent office architecture, and
fitted with state-of-the-art technology, we are creating a new working world. We installed an information platform in 2013 to closely
involve employees and prepare them for the forthcoming change
process, and conducted an initial extensive survey of the future
needs of users. This is complemented by reports of experiences and
feedback, which we collect in a “test office” on a daily basis.
UniCredit Center Am Kaiserwasser. In July 2013, Bank Austria
opened its centre for sport, leisure, events and training seminars at
Am Kaiserwasser in Vienna’s 22nd district. The centre covers an area
of 20,000 m2, of which 6,400 m2 is floor area. The investment
­volume totalled €19 million. Besides its sports and leisure facilities,
­UniCredit Center Am Kaiserwasser is used as an innovative training
centre in line with the Working Family principle. With its areas set
aside for learning and development, which are fitted with advanced
equipment to meet modern standards, it is also the location of the
new UniCredit Academy Austria. UniCredit Center Am Kaiserwasser
complements Turin as a second cross-regional centre for management development; about 4,000 employees from throughout UniCredit
Group are expected every year as participants in various events.
The faciliy is also used for events for customers and employees.
Development of business segments
Retail & Corporates
Business segment as a whole (incl. FactorBank)
(€ million)
Operating income
Operating costs
Operating profit
Net write-downs of loans
Net operating profit
Profit before tax
Loans to customers (avg.)
Primary funds (avg.)
Risk-weighted assets (avg.) 2)
Average equity 3)
2013
1,492
– 1,143
349
– 136
213
175
40,624
41,202
17,572
1,832
2012 1)
of which: Retail
CHANGE
1,543
– 51
– 1,117
– 26
425
– 76
– 160
+ 24
265
– 52
211
– 36
41,372
– 748
42,614 – 1,412
17,589
– 17
1,928
– 96
–3%
+2%
– 18 %
– 15 %
– 20 %
– 17 %
–2%
–3%
–0%
–5%
2013
768
– 766
1
– 40
– 38
– 57
14,060
22,350
7,909
701
2012 1)
798
– 758
40
– 81
– 41
– 81
14,796
22,761
8,491
927
of which: Corporates
CHANGE
– 31
–8
– 39
+ 41
+3
+ 24
– 736
– 411
– 583
– 226
–4%
+1%
– 97 %
– 51 %
–6%
– 29 %
–5%
–2%
–7%
– 24 %
2013
716
– 369
346
– 95
251
232
26,233
18,832
9,407
1,107
2012 1)
CHANGE
737
–22 –3%
– 353
–16 + 5%
384
–38 –10%
– 78
–17 + 22%
306
–55 –18%
292
–60 –21%
26,355 –122 –0%
19,842 –1,010 –5%
8,851 +556 + 6%
989 +118 + 12%
1) For segment reporting purposes, the comparative figures for 2012 were recast to reflect the structure and methodology of the 2013 reporting period (see the segment
reporting section in the notes to the consolidated financial statements on pages 182 to 183 of this report. / 2) Average risk-weighted assets under Basel 2.5 (all risks). /
3) Standardised capital; capital allocation to subsidiaries reflects actual IFRS capital. The difference compared with the consolidated equity of Bank Austria is shown in the Corporate
Center. See segment reporting section on pages 180 to 189. / This information applies to all business segment tables.
The new Retail & Corporates Division set up at the beginning of
2013 essentially covers two large subdivisions: Retail, which comprises customer segments ranging from mass-market to affluent
customers; and Corporates, the subdivision serving the entire
range of business customers, SMEs and medium-sized and large
companies which do not access capital markets (including Real
Estate and Public Sector). The Division also includes the specialised FactorBank AG (0.6 % of revenues). With 8 % of all employees
and an 11 % share of allocated capital, the Retail & Corporates
Division generated 21 % of the bank’s total revenues and 69 %
of total operating income from Austrian customer business.
The Division also has to absorb substantial costs which are in
structural terms related to branch operations. Retail & Corporates
contributed about 39 % to profit before tax generated by Austrian
customer business and 15 % of the bank’s total profit before tax
in 2013. Average primary funds of over € 40 billion in Retail &
Corporates make the business segment an important source of
funding for the bank.
˜ Retail & Corporates accounts for three-quarters of Austrian
interest-bearing business volume and was very strongly affected
by persistently low interest rates in 2013, in combination with
declining credit demand, high levels of liquidity and intense competition on terms. The impact of an interest rate environment that
is close to zero is stronger the longer it lasts: higher-margin
investments made in the past are reaching maturity to an increasing extent and can only be replaced with lower-margin products
in the current interest rate environment. Private customers have
largely taken advantage of the period of low interest rates to
reduce their debts, as can be seen from trends experienced by
banks in their business volume on the assets side and the liabilities side. However, sentiment brightened in the course of the
reporting year as the advance in prices on stock markets
enhanced investors’ awareness of missed opportunities. Sales of
higher-quality investment products in combination with a recovery of
securities turnover resulted in an increase in net fees and commissions, primarily in the Retail subsegment.
˜ This environment was reflected in revenue trends in 2013:
­operating income declined by €51 million or 3% to €1,492 million.
The decrease was mainly seen in net interest (– €46 million or – 5 %
to €936 million). On the lending side, interest rate margins held up
well at the previous year’s level, mainly as a result of developments
in business with corporates. On the liabilities side, deposits were
more or less unchanged thanks to increased acquisition efforts and
attractive interest rates offered towards the year-end; however, the
narrow interest rate spread continued to deteriorate significantly.
­Dividend income and other income from equity investments was
€23 million in 2013, down by €14 million from the previous year,
mainly because of a weaker performance of specialised banks in
line with economic trends. Net fees and commissions amounted to
€477 million in 2013, matching the previous year’s level (+ 0 %), a
good result as the continued decline in net fees and commissions
from banking and financial services (accounts, payments, loan
­commissions, guarantees, derivatives) was offset by a favourable
trend in investment management business. Net trading income
(+€8 million to €33 million) includes gains on the buyback of Wohnbaubank bonds.
Trends in business with the two large customer groups varied considerably: in line with market developments in Austria, retail banking
was impacted by a decline in lending volume as private households
still preferred consolidating their debt position through early repayment of loans. Although the interest margin widened somewhat
recently, the figure for 2013 as a whole was still below the previous
year’s level. Nevertheless, the situation improved as the year
Bank Austria · 2013 Annual Report
61
Management Report
Management Report (CONTINUED)
p­ rogressed. We achieved significant growth of new business in 2013
with an increase of € 970 million or 14%; within the total figure,
housing construction finance rose by 20%. We placed emphasis on
offering attractive fixed-rate loans to help customers benefit from the
low interest rate environment in the longer term. However, in view of
more favourable initial interest rates, there was still strong demand
for loans with variable terms and conditions. While deposit volume
declined only slightly, spreads narrowed significantly, leading to a fall
in interest income, and this had an impact on overall developments.
This was the main reason why net interest declined by 12% to
€ 427 million. Deposits with longer maturities have become particularly valuable for banks ahead of the new Basel 3 rules including the
Liquidity Coverage Ratio (LCR) and the Net Stable Funding Ratio
(NSFR). In the middle of October 2013 we therefore started offering
regional savings accounts with an interest rate of 1.25% for a
deposit period of 24 months, a rate that clearly exceeds other offers
currently available in the market. Given the low level of interest rates
we concentrated on investment alternatives responding to our customers’ individual risk appetite. New sales of investment fund units
were up by 30 % on the previous year, exceeding the one billion euro
mark. Total fund volume in business with retail customers rose by
3 % to € 5.8 billion. We also placed a wide range of pension planning
products including VorsorgePlusPension, Pension Management
and pension products and life insurance policies available from
Bank Austria’s partner ERGO. “Vermögensverwaltung 5Invest” is an
asset management service which we offer selectively, starting from
€ 100,000 in assets available for investment; customers can choose
from five investment approaches, depending on their risk tolerance
(conservative, traditional, balanced, dynamic and progressive). This
service provides them with flexible asset management otherwise
available only in the Private Banking segment. As securities business
picked up (+ 17 %), the continued decline in net fees and commissions generated by account and payment services was more than
offset, with net fees and commissions in the Retail subsegment rising
by 4 % to € 307 million. In addition to sales activities through the
Austrian branch network, credit card business – comprising the
­consolidated companies Card Complete (previously VISA) and Diners
Club – again made an important and growing contribution to overall
results, both directly (i. e. primarily via net fees and commissions) and
indirectly through downstream settlement companies (reflected in
other operating income). This means that the fall in revenues which
was due to the net interest performance was limited to –4%.
Lending volume in the Corporates subsegment was slightly below
the previous year’s level – as in the market as a whole – and margins rose slightly on account of ongoing repricing. In the context of
our initiative for small and medium-sized businesses we remained a
reliable financing partner for SMEs, using our specific advisory tools
and concentrating on innovation loans and loans under financial
assistance programmes. The cooperation agreement concluded with
the European Investment Bank Group and the European Commission
62
2013 Annual Report · Bank Austria
in summer 2012 has given us a genuine USP. We are the first European bank and – so far – the only Austrian bank to grant loans
backed by a 50% guarantee of the European Investment Fund (EIF)
to innovation-oriented customers under the Risk Sharing Instrument
(RSI). The cost benefit resulting from the guarantee is fully passed on
to customers. In 2013, the total amount of loans granted on this
basis was about €50 million and another €40 million or so will soon
be made available. The great success of this initiative has encouraged us to enlarge and extend the cooperation agreement in 2013,
so that €160 million is now available in the period to the end of
2015. On the deposits side, although interest rates are historically
low, we succeeded in maintaining volume at about €17 billion
(including the bank’s own issues) by making attractive offers across
various maturity bands. The revenue contribution from these deposits
rose strongly. Our “Dispo+” account is an attractive product which
will also make it easier for us to meet the Basel 3 liquidity rules.
Overall, net interest generated by the Corporates subsegment grew
by 2% to €504 million. Net fees and commissions reflect the fact
that fees for European payment transactions are no longer applicable. In our advisory services we consequently focused on our expertise in the payments sector in connection with the switch to SEPA.
Seminars for customers in all Austrian regions, a section dedicated to
this topic on Bank Austria’s website together with video clips, and
many advisory talks held by our experts with customers helped us
Bank lending rates to non-financial corporates
% p.a.
6.00
Italy
Spain
France
Germany
Austria
5.50
5.00
4.50
4.00
3.50
3.00
2.50
2.00
1.50
1.00
2008
2009
2010
2011
2012
ECB, MFI interest rates, new business, average, all maturities
(excluding revolving loans and overdrafts)
2013
gain a leading position in an area which concerns every one of our
corporate customers. As guarantee commissions and loan commissions in business with corporate customers declined, net fees and
commissions in Corporates were down by 7% to €166 million in
2013. An analysis by customer segment shows that besides corporate customers in a narrower sense, the activities of our Real Estate
and Public Sector units significantly supported business performance,
primarily with growing net interest. These two areas accounted for
about 30 % of operating income in the Corporates subsegment.
˜ Operating costs in the reporting period were up by a mere 2%
on the previous year. The average number of staff decreased by
18 to 4,217 FTEs in 2013; a comparison based on end-of-year figures shows a stronger decline of 134 FTEs, reflecting initial branch
closures under the SmartBanking project. Payroll costs remained
unchanged, despite the wage drift. Other administrative expenses
rose by € 20 million or 3% to €715 million as follow-up work in
­connection with the introduction of EuroSIG involved additional costs
and expenses related to sales initiatives (SmartBanking, branch
restructuring) started to be incurred in the fourth quarter of 2013.
Net write-downs of loans and provisions for guarantees and
commitments declined by €24 million or 15% to €136 million;
the decrease was mainly accounted for by the Retail subsegment.
The cost of risk, at 33 basis points, remained at a very low level not
only on the Retail side (28 bp) but also in the Corporates subsegment
(36 bp). Restraint displayed by consumers and a relatively good
liquidity position in the corporate sector – both facts are reflected in
decreasing insolvency numbers – as well as further model parameters made it possible to reduce portfolio-based specific loan loss provisions made in previous years. Net operating profit (operating profit
less net write-downs of loans and provisions for guarantees and commitments) generated by the Retail & Corporates business segment in
2013 reached €213 million; this compares with €265 million for
2012. The decline of €52 million or 20% resulted from both customer segments (see table). The balance of non-operating items
down to profit before tax was a net charge of €38 million, improving
by € 16 million compared with the previous year although the negative net result from investments was slightly higher than in the previous year (– € 33 million after – €24 million).
➔ In 2013, Retail & Corporates generated a profit before tax of
€ 175 million (– €36 million or –17%). Based on a lower amount of
allocated equity (–3%), return on equity (ROE before tax) was 9.4%
(2012: 11.0 %). While operating income in the two subdivisions
was more or less equal, Corporates benefited from a significantly
lower cost / income ratio (48%) and achieved a profit before tax of
€ 232 million (– 21%) in 2013. The Retail subdivision closed the year
with a negative contribution to results (– €57 million) as it had to
absorb the substantial costs associated with branch operations.
The cost / income ratio of 98% in retail banking is the highest among
the bank’s Divisions, reflecting the gradual erosion of revenues
which has been seen over many years. A slight decline in operating
income (2013: –4%) – due to economic trends – therefore suffices
for the Retail subdivision to move into the red. The current structures cannot be expected to bring any significant revenue growth
in the medium term, either. Apart from the moderate outlook for
growth, consumer behaviour and the use of sales channels in retail
banking have changed considerably (demography, digitalisation).
In 2013 we therefore started to take strategic measures, under the
“SmartBanking” and “Bank Austria 2020” initiatives, by which we
are pursuing a forward-looking strategy for sustained revenue
growth, using current trends in consumer behaviour (digitalisation)
to gain market share while enhancing efficiency in sales activities
and reducing costs with an innovative business model.
˜ With the introduction across Austria of our virtual SmartBanking
branch, which is an essential first step in our new service approach,
in September 2013 and the advertising campaign that accompanied it, we have won 6,600 new customers in the market. At the
end of 2013, the number of customers served via SmartBanking
totalled 57,000. We aim to win 20,000 new customers in the
­market annually until 2017, and to serve 350,000 customers via
SmartBanking by then. About 70 SmartBanking employees currently
hold some 800 advisory talks per month via video telephony.
­Customer satisfaction levels have risen significantly, customers particularly appreciate the bank’s extended service hours from 8 a.m.
to 8 p.m. Our business customers can also use electronic channels
including video telephony, independent of their location and also
outside branch opening hours. Further elements will be added to
our attractive range of modern business banking services in the
coming months. These will include an app for business customers,
a new version of our BusinessNet online banking platform and a
“Smart” account.
Our ongoing strategic repositioning is turning a classic universal
bank into an innovative modern retail bank which covers basic
financial services needs of customers in Austria by providing a
range of simple and low-cost services while also offering high-quality advisory services through a stationary network and via SmartBanking. This involves a two-pronged approach in the Retail & Corporates branch network: the “basic services” bank for everyday
banking transactions, available around the clock and with top quality; and the “advisory services” bank, where specialised experts are
available for highly qualified services – at branches and via SmartBanking (video telephony, telephone, SMS, e-mail, OnlineBanking
and MobileBanking). Starting in the second quarter of 2014 we will
open the first newly designed pilot branches based on the new service model in Vienna and other Austrian regions. (For more details
see “Strategic projects” in the section on “Non-financial indicators”
on page 51).
Bank Austria · 2013 Annual Report
63
Management Report
Management Report (CONTINUED)
Private Banking
(€ million)
Operating income
Operating costs
Operating profit
Net write-downs of loans
Net operating profit
Profit before tax
Total financial assets (avg.)
Primary funds (avg.)
Loans to customers (avg.)
Risk-weighted assets (avg.)
Average equity
2013
2012
156
– 109
46
–1
46
44
18,935
7,813
620
661
157
141
– 107
34
0
34
33
17,915
7,576
613
954
168
CHANGE
+ 15
–3
+ 12
–1
+ 11
+ 11
+ 1,020
+ 236
+8
– 292
– 12
+11 %
+3%
+ 36 %
n.m.
+ 33 %
+34 %
+6%
+3%
+1%
– 31 %
–7%
n.m. = not meaningful
The Private Banking segment, with the two well-known brands
Bank Austria Private Banking – the private banking arm of a major
bank – and Schoellerbank – a traditional private banking institution –
is the undisputed market leader in Austria’s private banking market.
At the end of 2013, assets under management totalled €19.2 billion,
with the Private Banking Division continuing to hold the top position
in the Austrian private banking market. Two-thirds of the customers
of Bank Austria Private Banking use the entire range of services
offered by Bank Austria as a universal bank, while also taking
­advantage of Private Banking advisory services to meet their specific
needs. ­Schoellerbank is perceived by its clients primarily as an institution specialising in asset management services. With a presence in
24 locations throughout Austria, the Private Banking Division’s
539 employees (FTEs, year-end 2013) serve about 34,000 high net
worth individuals and some 1,200 of the 3,000 Austrian private
foundations.
˜ Private Banking can look back on a very successful year. This is
reflected in profit before tax, which improved by one-third in 2013,
and in the steady rise in assets under management also in periods
of market volatility during the reporting year. The increase in volumes
is attributable both to the favourable performance and to the success
in winning new customers. The further upturn in asset management
business was particularly gratifying: for the bank, this is linked to
higher management performance and value creation; in a low interest rate environment customers benefit from active and flexible portfolio management, depending on their individual risk appetite.
The diversified and flexible approach was of even greater relevance
in the 2013 investment year. A comparison of year-end 2013 with
year-end 2012 shows that the rise in global stock market prices was
the strongest in the last four years (MSCI world index: +30%)
although 2013 was interspersed with some periods of uncertainty.
The reporting year finally saw the end of the multi-year bull market
in bonds. The end was heralded when, in May 2013, the Federal
Reserve started to discuss tapering its monthly bond purchases.
64
2013 Annual Report · Bank Austria
This led markets to anticipate a turnaround in interest rates. Prices of
US Treasuries and euro government bonds fell in a comparison of
performance (year-end 2013/2012), notwithstanding a temporary
recovery. After several good years, prices of CEE government bonds
and euro corporate bonds and mortgage bonds rose only moderately.
The BRIC countries, which in previous years were among the preferred investment destinations, lost more than 7%, and stock markets in CEE also lost ground (–2%; MSCI regional indices in euro).
In November/December the balance of payments problems of some
major emerging markets led to renewed uncertainty, despite a
marked improvement in economic prospects of the industrial countries. Boosted by an unprecedented impetus from monetary policy,
Japan’s stock exchange was one of the top performers in 2013
(+57%), although this was accompanied by competitive currency
depreciation (–22% against the euro). The Swiss franc remained
well below the intervention threshold of 1.20 (end of 2013:
1.2276 EUR/CHF), and the gold price also failed to recover fully
after falling sharply in April 2013 and June 2013 (closing price:
1,205 US$/oz, down by 28% year-on-year).
˜ In 2013, total financial assets of the Private Banking Division
increased by 4% to €19.2 billion (December 2013/2012). (In average terms for 2012 and 2013, total financial assets increased by
6% in 2013.) In asset management, a value creation-intensive
­service, it was particularly gratifying to note that assets under management grew at a disproportionately strong rate of €660 million or
12% on account of the good performance and net inflows of funds.
The trend steadily moved upwards throughout the reporting year.
Performance was hardly affected by periods of temporary weakness
in financial markets in mid-May/June and November/mid-December,
which were quickly overcome. This investment category experienced
a steady net inflow of funds (with the exception of stagnation in
November). The VermögensManagement 5Invest asset management
product was very successful in 2013, with volume growing by 43%
to €827 million. Thanks to a predominance of equities, and most
particularly of Japanese shares, even a balanced portfolio widely
diversified in terms of risk achieved a return of 9%, well above the
underlying benchmark of 7%. The strong performance of asset management activities was at the expense of assets under custody,
which declined by 3%. The portfolio share of asset management has
exceeded that of safe-custody business since May 2013; at the end
of 2013 the ratio was 33% to 31%. 36% of managed funds are still
invested as direct deposits, representing further potential for increasing the proportion of funds under active asset management.
˜ In the income statement for 2013, operating income rose by
11% to €156 million. Net fees and commissions – the most important income component as it accounts for two-thirds (65%) of operating income – increased by 10% to €101 million. In line with the
general trend, fee-based income from asset management services
grew at a disproportionately strong rate, while fee-based income
from custody services and securities trading declined. Unlike other
divisions, Private Banking saw an increase in net interest despite the
adverse interest rate environment; this was up 9% to €52 million.
As interest margins on the assets and liabilities sides improved
slightly, the increase in net interest is explained by volume trends.
While the growth of deposits was significant, 2013 also saw disproportionately strong growth of loans from a low base: in 2013, private
customers in the top market segment expressed interest in the
acquisition of real estate (for their own use, as a source of income
for the future, apartment buildings, shopping centres or specialist
retail centres, business parks, production facilities, etc.) which was
increasingly financed through borrowed funds, a development which
also reflects the interest rate environment.
Investment advisory and asset management services are based on
our market view as a component of our advisory approach. Under our
Preferred Partners concept we select our products in close cooperation with eleven of the largest and most renowned global fund management companies, which are analysed and selected in a detailed
due diligence process. This also provided the basis for the standardised “VermögensManagment5Invest” asset management product.
­Clients can choose from five investment approaches, depending on
their personal risk tolerance and specific investment goals. The quality of the 5Invest portfolios is regularly appraised and certified by the
Institut für Vermögensaufbau, an independent institution. The product
is now also available as an insurance-linked investment scheme.
In the Private Banking Division, the 11% increase in operating income
in 2013 compared with a modest 3% rise in operating costs to
€109 million. Within this item, payroll costs were unchanged, with
staffing levels falling by 5 FTEs in average terms for the year (and
below the planned figures). Other administrative expenses rose more
strongly, by 7%. In 2013, the cost/income ratio of the Private Banking Division, which has a strong focus on personal advisory services,
was 69.9%, 5.5 percentage points below the level of the previous
year. With net write-downs of loans and provisions for guarantees and
commitments amounting to a low €802,000 and the balance of nonoperating items more or less unchanged (– €2 million), profit before
tax in 2013 was €44 million (2012: €33 million). As capital allocation to this service-intensive business segment is low (declining by
7%), return on equity (ROE before tax) was 28.0% (2012: 19.5%).
Bank Austria sees private foundations as an interesting growth
market. Our team of experts in the private foundations competence
centre supports clients with economic and legal issues relating to
succession planning. There are currently 3,035 private foundations in
Austria, of which Bank Austria, as market leader, serves 1,159, corresponding to a market share of 38%. We believe that succession
planning and inheritance, in particular, holds out enormous potential for the asset management segment. In the course of the next
thirty years, an amount of about €17 billion in financial assets will be
bequeathed to persons each year in Austria. Potential heirs, including
grandchildren, participate in individual next generation discussions
with clients or at “tea-time” events in small groups with experts,
selected public notaries and the bank’s private foundations specialists. Within Bank Austria we have further intensified our cross-selling
activities with a view to making the owners and managers of companies which are among our corporate customers aware of the
opportunities available in Private Banking; these activities are pursued jointly with the relationship managers serving the companies.
Efforts made under this growth strategy within the bank have already
proved successful. Since 2011 this cooperation has generated over
€300 million in assets under management. Unlocking synergies in
this way has paved the way for organic growth without the need to
think of acquisitions or similar measures.
˜ With the Bank Austria Private Banking business model we
embrace a holistic service philosophy geared to meeting clients’ specific needs. This is complemented by a broad range of services. Given
high market volatility, a period of low interest rates and the absence of
easily identifiable trends, we give priority to asset optimisation over
short-term performance targets and focus on managing risk through
wide diversification. Our holistic advisory approach covers liquidity
planning, analyses of financial and portfolio structures, asset transfers
and retirement planning. Our new e-magazine “Private Banking für
Unternehmer” (available in German only) presents our advisory
approach and range of client services in a concise manner.
Our advisory services are supported by Portfolio Quality Analysis
(PQA), an innovative analysis tool which monitors portfolios to ascertain whether there is any unused return potential and/or insufficient
diversification of risk, and makes the necessary adjustments.
The inclusion of specialists (portfolio quality analysts, investment
managers, wealth advisors, credit experts, legal experts) is of growing relevance for client advisory services and for meeting clients’
needs. In addition, the risk profile test (based on a method developed
by the Max­Planck Institute) gives clients an objective analysis of
their financial risk profile. On this basis it helps them assess risks
and opportunities when they make investment decisions.
Schoellerbank celebrated its 180th anniversary in 2013. Alexander
Schoeller, one of the nineteenth century’s most successful entrepreneurs, founded a banking and wholesale trading house in Vienna in
1833. Today, as a wholly-owned subsidiary of UniCredit Bank Austria
AG, Schoellerbank can look back on a long and successful tradition.
With a presence in twelve locations it covers virtually all of Austria
and is Austria’s largest private banking institution. At the end of 2013
it had total financial assets of €8.4 billion, of which assets under
management totalled €3.6 billion (43%). Schoellerbank’s investment
philosophy is based on the simple, but successful, principle: “It is
better to invest than to speculate”. Classic asset management,
together with investment advisory services and retirement planning,
belong to its core competence areas, and together with its own
investment management company this sub-segment has made
an important contribution to overall results in the challenging
Bank Austria · 2013 Annual Report
65
Management Report
Management Report (CONTINUED)
e­ nvironment of the last few years. Schoellerbank has regularly
been recognised as the best private banking institution in
­Austria and all the German-speaking countries: Elite Report, an
intensive test involving portfolio analyses and anonymous advisory
talks which include the participation of chartered accountants, has
always ranked Schoellerbank among the top asset managers in
the ten years in which the test report has been published so far.
In 2013, as in the previous year, it reached first place among
350 private banking institutions; an impressive achievement.
­Schoellerbank is also to provide a basis for the further growth of
the Private Banking Division as the exclusive contact in Austria for
high net worth individuals served by UniCredit in Central and
Eastern Europe.
Corporate & Investment Banking (CIB)
(€ million)
Operating income
Operating costs
Operating profit
Net write-downs of loans
Net operating profit
Profit before tax
Loans to customers (avg.) Primary funds (avg.)
Risk-weighted assets (avg.) Average equity 2013
2012
508
– 226
282
– 53
229
231
14,300
9,156
9,087
984
520
– 237
283
– 48
235
211
14,975
8,328
9,465
958
CHANGE
– 12
+ 11
–1
–6
–6
+ 20
– 675
+ 828
– 378
+ 25
–2%
–5%
–0%
+11 %
–3%
+10 %
–5%
+10 %
–4%
+3%
The reorganisation of Austrian customer business at the beginning
of 2013 involved the transfer of the Corporates, Real Estate and
Public Sector customer segments to the Retail & Corporates Division. Since then the Corporate & Investment Banking (CIB) business segment has focused on serving multinational companies and
large international customers, providing them with capital market
services and / or investment banking solutions tailored to their specific needs. CIB also serves banks, asset managers, institutional
customers, insurance companies and selected real estate customers and funds. At the beginning of 2013, we assumed regional
responsibility within UniCredit Group for markets in South Africa, in
the Nordic countries, in Spain, Portugal and the Netherlands, making it easier for large international companies to access Austria and
CEE and vice versa. Senior Bankers provide services to selected
top customers with a focus on investment banking (ECM, DCM,
M & A). In cooperation with relationship managers of corporate customers, CIB meets customers’ commercial banking product needs.
Integrated in the international network of UniCredit’s CIB Division,
CIB uses the financial market expertise of a major international
bank to perform important functions as a product provider for other
Divisions; these products include structured finance; export and
trade finance; cash management solutions; risk management to
hedge currency risk, commodity risk and interest rate risk; and
capital market and investment products.
66
2013 Annual Report · Bank Austria
Operating income matrix: product view / network view
2013, € million / +/–%
Network
Counterparts
Total
Finance &
Advisory
Markets
Global
Transaction
Banking
CIB
total
177
+ 14 %
24
+ 42 %
144
+ 11 %
346
+ 15 %
–4
n.m.
165
– 28 %
…
…
162
– 26%
174
+ 22 %
190
– 24 %
144
+ 11 %
508
–2%
In organisational terms, the CIB business segment has a matrix
structure comprising two customer groups, i. e. Network (commercial customers) and Counterparts, and the following three product
lines: Finance & Advisory (F&A): loan products/credit advisory,
Corporate Finance & Advisory, Loan Syndication, Capital Markets
(equities, bonds), Leveraged Buy-out, Project & Commodity Finance,
Structured Trade & Export Finance, Real Estate Financing, Principal
Investments; Markets: fixed-income and foreign-exchange market
activities; credit-related transactions; structured products; Corporate
Treasury Sales; implementation of asset/liability and liquidity management, and of funding and the Bank Austria/treasury function;
Global Transaction Banking (GTB): Cash Management & eBanking,
Supply Chain Finance, Trade Finance, Structured Trade & Export
Finance, Global Securities Services.
˜ The economic environment in Austria did not start to improve
until the latter part of 2013, with industry giving initial impetus.
Domestic demand was stagnant throughout the year, the stimulus
provided by exports remained moderate, and inventory management
had a negative influence. Although internal financing capacity was
strong and financing terms and conditions were very favourable,
companies’ investment in equipment declined significantly although
sentiment brightened considerably towards year-end 2013. Demand
for finance and transaction-related banking services was therefore
weak in 2013. Strategic projects (M&A, capital measures, etc.) were
postponed. Corporate liquidity remained generally high and was held
at banks – selected on the basis of strict criteria – mainly in the form
of short-term deposits. Ahead of Basel 3, banks competed in making
attractive offers to attract longer-term deposits. On the lending side,
there was stronger demand for short-term finance and services (such
as cash management), especially in foreign trade with emerging
markets. The reversal of investor sentiment in bond markets which
started in May/June 2013 caused uncertainty, besides other factors
prompting companies to wait with their plans for medium-term and
long-term corporate finance. However, in response to structural
changes in the banking sector and in view of attractive terms and
conditions for finance via capital markets, companies turned to
­capital markets to a greater extent. Over the past ten years, bond
issues as a proportion of total external financing has more than
­doubled in Austria, too, rising from 10% to 23%. In financial markets, interest rate expectations moved up and down, and balance-ofpayments problems of major emerging markets resulted in significant
changes in values in the fixed-income segment as well as volatility
and currency depreciation in foreign exchange markets.
˜ Although Corporate & Investment Banking (CIB) was faced with a
mixed operating environment, the business segment had a successful year. Profit before tax rose by 10% to €231 million in 2013,
supported by high operating income, significant cost savings and a
risk profile that remained favourable. Operating income totalled
€ 508 million and was thus only €12 million or 2% lower than in the
previous year. In customer business (Network) all product lines –
F & A, Markets and GTB – generated double-digit revenue growth,
achieving a combined increase of 15% to €346 million, which
accounted for two-thirds of CIB’s operating income. The focused service approach for multinational companies thus led to a significant
increase in revenues from customer business. Within the total figure,
Finance & Advisory benefited from consistent repricing of customer
interest rates to generate a significant increase of €22 million or
14 % to € 177 million, despite a slightly declining lending volume and
weak new business. Global Transaction Banking, responsible for
numerous services and short-term deposits, achieved revenue
growth of € 15 million or 11% to €144 million; the increase was
due to a higher volume of deposits and to lower interest rates on
sight deposits. Trade Finance also exceeded expectations in 2013.
Operating income generated by Counterparts was €165 million, still
a strong performance even if it did not match the exceptionally high
level of € 248 million recorded in the previous year. The main reason
for this was the fact that the yield curve continued to decline and
was flat throughout 2013. The ABS portfolio, derivatives business
with customers and operating income of CAIB Polska, a CIB subsidiary, also fell short of expectations.
Within operating income, net interest was €346 million, down by
€ 88 million or 20% from the previous year. All of the decline was
accounted for by Markets/Counterparts operations (– €106 million to
€ 109 million), which reflects the base effect of an exceptionally
strong net interest performance in the previous year (€215 million).
Net interest generated by commercial banking activities rose significantly, by € 21 million or 10% to €233 million, with more or less
equal contributions to growth coming from lending business and the
deposits side. Total volume matched the previous year’s level; a
decline in loans was offset by strong growth on the liabilities side
(mainly in sight deposits), with margins improving on both sides as
a result of consistent repricing measures. Average lending volume
of CIB in 2013 amounted to €14.3 billion (–5%) and the average
volume of deposits plus the bank’s own issues totalled €9.2 billion
(+ 10 %). Net fees and commissions in the CIB business segment
rose by € 13 million or 15% to €99 million in 2013. Growth was
driven by Global Transaction Banking and Financing & Advisory, and
net fees and commissions in Markets also remained at a high level.
A product-based analysis shows strong growth in net fees and commissions from guarantees and credit derivatives, and also from safe
custody business and securities trading. Net trading, hedging and
fair value income in 2013 reached €54 million, marking a turnaround from the negative trading result of – €3 million in the previous
year. While the swing was mainly accounted for by Markets / Counterparts, trading activities in customer business (Markets/Network) also
developed very favourably.
The moderate decline in operating income was more or less offset by
the positive cost trend: operating costs in the CIB Division were
down by €11 million or 5% to €226 million, largely due to a
€10 million or 11% decline in payroll costs. Staff numbers fell by
79 FTEs (–12%) to 577 FTEs in average terms for 2013, primarily
as a result of the closure of some CEE brokerage houses (– 60 FTEs)
which were still allocated to the CIB Division in 2013. Other administrative expenses almost matched the level of 2012, partly due to
IT expenses for regulatory changes, including SEPA. In 2013, net
write-downs of loans and provisions for guarantees and commitments were €53 million. In CIB, the cost of risk (provisioning
charge/average lending volume) remained very low at 37 basis
points (2012: 32 bp).
The above developments resulted in net operating profit of
€229 million in 2013 compared with €235 million in the previous
year. Overall, the balance of non-operating items down to profit
before tax was positive in 2013 (+€3 million) after a negative figure
in 2012 (– €24 million). No provisions for risks and charges had
to be made, and no additions to such provisions were required.
­Provisions made in 2012 (and not used) for integration/ restructuring
costs relating to the winding up of the CEE brokerage subsidiaries
were partly released, and the net result from investments was almost
balanced (– €2 million). In 2013, profit before tax generated by the
CIB Division rose by €20 million or 10% to €231 million. Return on
equity (ROE before tax) improved by 1.5 percentage points to 23.5 %.
With just under one-third (31%) of allocated equity, the CIB business
segment accounted for more than one-half (51%) of the profit before
tax generated by Austrian customer business in 2013.
˜ The CIB Division’s capital market expertise, the presence of the
global UniCredit Division in all international financial centres and the
excellent access provided to our core regions in Western, Central and
Eastern Europe and 50 countries worldwide are an essential competitive advantage for Bank Austria.
Loans remain the key product in our business relationships. Notwithstanding moderate demand for loans, the Corporate & Investment
Banking Division took a pro-active approach in making loans available
to the business sector in 2013; lending volume most recently
amounted to about €14 billion. If the Austrian economy experiences
a sustainable recovery in 2014 – the credit cycle follows economic
Bank Austria · 2013 Annual Report
67
Management Report
Management Report (CONTINUED)
trends with a time lag of two to three quarters – we can make loan
facilities available to Austrian companies within a very short time. Such
a response is facilitated by the moderate demand for credit and active
balance-sheet management. We are moreover working more closely
with institutional investors who have long-term capital at their disposal
and want to make long-term investments.
We actively support our customers in their efforts to more effectively
plan their liquidity, interest-rate, currency and funding needs. As Austria’s leading corporate bank and long-term finance partner we offer
risk management instruments and strategic financial advisory services (Capital Structure Advisory), working with customers to make
analyses of balance sheets and financing flows and draw up customised solutions. For this purpose we use IT-supported analysis and
advisory instruments such as the WorkingCapitalCheck, stress simulation, RatingBeratung, BusinessPlanner (on a database basis),
BranchenCheck and VerschuldungsKapazitätsRechner.
In addition to the demand-related effects induced by economic trends
there is a structural trend which is linked to the implementation of
Basel 3. Capital market products will increasingly replace credit products, though certainly not entirely. We expect to see sizeable bond
­flotations on the Austrian bond market. Redemptions due in 2014 will
provide the market with about €6 billion. In Austria there are about
Yield on bank bonds vs. corporate bonds
iBoxx Bond Indices, yield to maturity, terms of 3 to 5 years, weighted
3.00
2.50
2.81
Sovereign bonds
Covered bonds
Bank bonds
Corporate bonds
2.08
2.00
1.76
1.50
1.40
1.34
1.40
1.25
1.37
0.98
1.00
0.69
68
2013 Annual Report · Bank Austria
BBB
A
AA
Covered/
Germany
Covered/
avg. euro area
0.00
Benchmark/
Germany
Sovereign/
avg. euro area
0.50
Rating
Year-end 2013
80 borrowers with 140 bonds outstanding (excluding banks and the
Republic of Austria). The first half of 2014 will see stronger issue activity in anticipation of rising yields and higher spreads. We want to further strengthen our top position in the European and Austrian capital
markets in 2014. In 2013, 28 (2012: 29) Austrian companies made
use of capital market products such as bond-based funding or loans
against borrowers’ notes with a higher overall volume; seven companies availed themselves of such instruments for the first time. The
global UniCredit CIB Division claims top positions for eurobond issues
in Europe in the league tables (no. 3). Activities range from international benchmark bonds, domestic bonds for private investors, hybrid
bonds and private placements to loans against borrowers’ notes. In the
area of syndicated finance, the global UniCredit is no. 2 in the league
tables. On this basis, in combination with capital strength, we can take
large volumes on our books and subsequently place them in credit and
capital markets.
The Basel 3 effects will have a stronger impact on the deposit
side when, ahead of the implementation of liquidity and funding
requirements (LCR and NSFR), efforts primarily focus on acquiring
deposits with terms over and beyond money market maturities.
We were the first bank in Austria to offer products with a term longer
than 31 days and with an interest rate that was higher than that for
call money (e. g. the Dispokonto Plus account and fixed deposits).
With this initiative we generated deposit volume of €4 billion (in
respect of deposits with a term of more than 31 days) in December
2013 and January 2014.
As a leading export finance bank with the largest network in CEE
and throughout the world within UniCredit, we support the export
industry – not least as some 42,000 companies are involved in
exports. Throughout Austria, Bank Austria handles one-half of the
export loans covered by Oesterreichische Kontrollbank. Almost every
second export letter of credit is routed via Bank Austria, and in the
area of foreign guarantees the bank has a market share of 40%.
2013 again saw strong demand for export finance products (tied
finance credit and purchase of accounts receivable). These products
offer our customers liquidity, competitive advantages through favourable financing terms, and protection against risk. Our focus on traditional growth markets such as China and Russia is complemented by
global activities which include the extension of soft loans. The US
financial magazine “Global Finance” named Bank Austria “Best Trade
Finance Bank” in Austria for 2014, a distinction which the bank has
received six years in succession. This was the result of an annual survey among analysts, managers and technology experts. The award
was also presented to the banking subsidiaries in Bulgaria, the Czech
Republic and Ukraine. UniCredit was voted “Best Trade Finance Bank”
in Central and Eastern Europe. The key selection criteria for the
awards were transaction volume, geographic reach, customer services, competitive pricing and innovative technology.
Central Eastern Europe (CEE)
(€ million)
Operating income
Operating costs
Operating profit
Net write-downs of loans
Net operating profit
Profit before tax
Loans to customers (avg.) Primary funds (avg.)
Risk-weighted assets (avg.) Average equity 2013
2012
4,929
– 2,162
2,767
– 1,222
1,545
1,641
70,263
61,058
82,367
14,206
4,630
– 2,075
2,555
– 761
1,794
1,722
66,392
57,721
84,185
13,061
CHANGE
+ 299
– 87
+ 212
– 461
– 249
– 80
+3,871
+ 3,337
–1,817
+1,145
+6%
+4%
+8%
+ 61 %
– 14 %
–5%
+6%
+6%
–2%
+9%
const.*)
+ 11 %
+7%
+ 13 %
+ 64 %
– 9%
+1%
+9%
+9%
–0%
+ 11 %
*) const. = at constant exchange rates
˜ Conditions in the major regions of Central and Eastern Europe
again varied considerably in 2013, with the patterns in the regions
changing in the course of the year: in the first six months, the closely
integrated EU countries were still impacted by the weak economic
growth experienced by the countries in Western Europe and by their
own consolidation policies. But economic growth strengthened as the
year progressed. The banking environment in large countries with a
high degree of economic autonomy, initially very favourable, deteriorated in the second half of the year. In Turkey, which has a significant
impact on results (though consolidated proportionately at 41%), retail
business was initially affected by an economic policy which dampened growth. Towards the end of the year, the reversal of portfolio
capital inflows triggered potential balance of payments problems,
resulting in currency depreciation and a sharp rise in interest rates.
In Russia, the banking sector continued to expand strongly especially
in business with corporate customers, but growth in this segment
was impacted by structural problems and a steady outflow of capital
weakened the country’s currency. The depreciation of the Turkish lira
(by an annual average of −9%, and in a comparison of year-end
2012 / 2013 by −20%) and the Russian rouble (−6% and −11%,
respectively), combined with the depreciation of the Czech crown in
September (−3 %/−8%) as a result of pro-active measures, had an
impact on overall results (amounts denominated in local currency are
translated into euro at average annual exchange rates); depending on
the nature of the total figure, currency depreciation sliced 3 to 4 percentage points off the growth rates.
 Notwithstanding the lacklustre environment, the CEE Division
was Bank Austria’s mainstay of growth and main source of
revenue in 2013: with 56 % of average lending volume it generated 76 % of the bank’s operating profit and 78 % of the profit
before tax in terms of overall customer business (Bank Austria
without the Corporate Center). Commercial banking business continues to generate substantial operating income, and on account
of the low cost intensity (cost / income ratio 42.9 % compared with
53.4 % for the bank as a whole) a large portion of this feeds
through to profit before tax.
˜ Following the hesitant recovery of the global economy over
the past few years it is clear that the recovery process after a
financial market crisis is protracted and moderate, and that a
much lower figure needs to be assumed for the growth potential. A further factor is the growing degree of economic maturity
of the advanced CEE economies – in other words, a weakening
of the impetus provided by the convergence process. While the
growth trend in CEE is still considerably above that of the
Western European economies, it will probably always be well
below the CEE growth rates to which we became accustomed in
the first and second decades of the economic upswing in the
region. The current growth trend is moreover impacted by
­economic cycles and specific structural weaknesses; in some
exposed countries also by vulnerability to external shocks.
 This general reassessment led to two developments in the
2013 consolidated financial statements: first, we significantly
increased loan loss provisions although there was already a
marked improvement in additions to impaired loans. The
increase in net write-downs of loans and provisions for guarantees and commitments from € 761 million to € 1,222 million
(+ € 461 million) led to an improvement in the coverage ratio for
impaired loans already classified as such. Secondly, in the new
scenario, the goodwill impairment test performed in respect
of the companies in which we have an equity interest resulted
in a goodwill impairment charge which reduced goodwill to nil.
As a non-operating measure taken in the context of equity interest management, the goodwill impairment charge is recognised
in the Corporate Center (the CEE business segment only
includes local goodwill impairment charges of € 9 million for
Russian subsidiaries).
For the purposes of implementing our multi-year plan and following the completion of our withdrawal from Kazakhstan, the
banks in Ukraine, which were recently merged, were classified
as a disposal group held for sale. In the income statement for
the bank as a whole all income statement items relating to
Ukraine are included below profit before tax under “Total profit
or loss after tax from discontinued operations”. In this context,
non-operating items of the income statement for the CEE business segment reflect only the current impact of Ukraine, without
valuation adjustments. In Estonia, Latvia and Lithuania we are
restructuring banking business. After surrendering the local
banking licence as at 1 January 2014 and selling banking
licence-related products, we will only be active in the leasing
business in the Baltic countries (for details see section A.9 in
the notes to the consolidated financial statements on page 138).
We sold our insurance operations in Turkey in 2013 and entered
into a strategic cooperation agreement with the buyer. On the
other hand, we acquired retail banking assets in Romania to
reinforce our strengths in this area. 2013 moreover saw a further streamlining of our organisational structure. We integrated
Bank Austria · 2013 Annual Report
69
Management Report
Management Report (CONTINUED)
our bank in Slovakia with the banking subsidiary in the Czech
Republic with a view to unlocking synergies; the comparative
­figures for 2012 were recast to reflect all changes.
˜ Notwithstanding the above-mentioned additions to loan loss provisions, the CEE business segment achieved a good result in 2013
with a profit before tax of € 1,641 million. The slight decline of
€ 80 million or 5 % from the previous year is explained by exchange
rate movements (adjusted for exchange rate movements: + 1 %).
Operating income rose by 6% compared with 2012 (at constant
exchange rates: +11%) to €4,929 million. Among the income components, net interest was up 2% (adjusted for exchange rate movements: +6%) to €3,091 million, a more moderate increase than in
previous years. In the Central European group of countries, net interest declined slightly (–6%/ adjusted for exchange rate movements,
–3%). Given the high degree of integration and convergence of these
countries, trends from West European countries spread throughout
this region in 2013 (a development which may also move in the opposite direction again). Net interest in SEE rose slightly, by 2%, with
good growth achieved in Romania (+10%) and Serbia (+8%).
The overall net interest performance also reflects the restructuring of
banking business in the Baltic countries to focus on leasing activities,
but this had no material impact. The largest contribution of any CEE
country in our perimeter to overall net interest came from the bank in
Turkey, with €732 million (although Bank Austria only has a 41%
shareholding in the bank). Currency depreciation in average terms for
the year led to a decrease in euro terms (–6%); expressed in local
currency, net interest rose at a comparatively low 3%. While average
volume growth in 2013 was still strong (+20% in local currency
terms), the interest margin was down by over 80 basis points from the
previous year, due to a rise in interest rates in the second half of the
year and various restrictive measures which impacted funding costs.
Net interest generated in Russia in 2013 rose substantially, by 13%
(adjusted for exchange rate movements, +20%), as strong volume
growth (+9%/+12%) combined with margin improvements. Overall,
it should be noted that the interest margin (net interest/average
­lending volume) in the CEE business segment declined in 2013, as in
2012, from 457bp to 444bp. At this level, it is still significantly higher
than for the bank as a whole (312bp), even after the provisioning
charge (279bp compared with 203bp).
Net fees and commissions (€1,040 million) rose strongly over the
previous year (by 9 %, adjusted for exchange rate movements:
+ 13 %) and – unlike net interest – in all countries including Central
Europe (especially Hungary) and South-East Europe. Contributions to
growth came from account and payment services, and from lending
business in Turkey and Bulgaria. Securities business also experienced
an upturn, although this was largely limited to business with corporate customers where it was driven by underwriting operations, credit
insurance and guarantees. In the retail segment, contributions also
came from the sale of insurance policies in some countries. Central
70
2013 Annual Report · Bank Austria
Europe made the strongest contribution to the increase in net fees
and commissions (+€63 million/+32%); in Hungary the strong rise
(+€47 million) partly reflected higher charges (for accounts, payments, transactions, credit cards) in response to the financial transaction tax introduced in 2013, which amounted to €67 million and is
included in other administrative expenses. Russia also recorded
strong growth rates (+9%, adjusted for exchange rate movements:
+16%), generated partly by underwriting business. Turkey’s
­performance was less favourable (–1%, adjusted for exchange rate
movements: +9%), partly on account of economic-policy measures
dampening growth in credit card business.
Net trading income came to € 705 million, well up on the figure
for 2012 (€ 531 million). Strong increases in net trading income
were recorded in Russia, Turkey, Romania, in the Czech Republic /
Slovakia and Hungary. In Russia, gains on the sale of shares in
MICEX, the Russian trading platform, were substantial as in 2012,
but these were now generated for the last time (€ 145 million after
€ 76 million). In the reporting year, realised gains on financial market investments (primarily government bonds) in several countries
(Russia, Romania, Turkey, Czech Republic) made positive contributions. Apart from this development, the improvement took place in
countries with flexible exchange rates and significant capital
­transactions, where trading activities in customer business play
an important role. All countries made positive contributions to
­overall net trading income, with the largest coming from Russia
(€ 269 million) and Turkey (€ 143 million), followed by the Czech
Republic / Slovakia (€ 90 million), Romania (€ 85 million), Croatia
(€ 49 million) and Hungary (€ 36 million).
˜ Operating costs in CEE totalled €2,162 million in 2013.
They grew by 4%/8% year-on-year, a rate which is well below
­revenue growth. In 2013, bank levies and the financial transaction
tax (€114 million) were three times the 2012 figure (€36 million).
Without the bank levies and the financial transaction tax (FTT), costs
in CEE (in euro terms) remained constant. The cost/income ratio
(without bank levies, but including the FTT) therefore improved by
more than 1 percentage point to 42.9%, a figure that remains over
10 percentage points below that for the bank as a whole. Payroll
costs in CEE in euro terms were more or less unchanged (–0.3%);
adjusted for exchange rate movements they rose by a low 4%. The
average number of employees (40,843 FTEs) was down by 689 FTEs
(2%) in the reporting year (pro-rata figures for banks in which equity
interests are held, without Kazakhstan and Ukraine). Programmes for
optimising the branch network and enhancing efficiency were underway in most countries. The above-average growth of costs in Romania (+10%) was due to the acquisition in August 2013 of the retail
portfolio (+128 FTEs) of the Royal Bank of Scotland. The sale of
insurance operations in Turkey (Yapı Kredi Sigorta, YKS), on the other
hand, resulted in a decline of about 1,800 FTEs. Almost all of the
increase in other administrative expenses (+8%/+11%) in CEE was
due to the spontaneous rise in Hungarian levies.
 Operating profit in the CEE business segment rose by
€ 212 million or 8% (adjusted for exchange rate movements: +13%)
to € 2,767 million as revenue growth combined with cost stability.
˜ As additions to loan loss provisions were made, net writedowns of loans and provisions for guarantees and commitments in the CEE business segment’s income statement increased
by € 461 million or 61 % to € 1,222 million. As a result, the coverage ratio improved in almost all countries, with the increase varying
from country to country. In percentage terms, the Central European
countries recorded the strongest combined increase in net writedowns of loans and provisions for guarantees and commitments
(+ € 107 million, + 77 %). However, at 157 bp, the cost of risk in
these countries remained below the average figure of 174 bp
for CEE as a whole. In Hungary and Slovenia, the relatively low
­provisioning charges doubled in 2013. A stronger increase of
€ 167 million or 45 % was seen in the region of South-East Europe
(SEE). Within SEE, net write-downs of loans and provisions for
guarantees and commitments in Romania rose strongly once more,
by € 83 million to € 174 million, although the country’s economic
performance in 2013 was relatively good. The cost of risk in Romania reached 461 bp, the highest level in CEE. In Croatia, loan loss
provisions were increased already in mid-2013, with further additions at the end of 2013 bringing the total charge to € 186 million
(up by € 34 million on the previous year, cost of risk: 196 bp), which
reflects the bank’s size and high market share. At our banks in
Net write-downs of loans
and provisions for guarantees and commitments
(€ million)
Austria
CEE
Romania
Serbia
Slovenia
Hungary
Bulgaria
Croatia
Turkey
Bosnia and
Herzegovina
Czech Rep./Slovakia
Baltics
Russia
PCV*) and other
Bank as a whole
2013
2012
+/– %
COST OF
RISK
2013
219
1,222
174
42
60
89
117
186
156
208
761
92
26
30
35
81
151
147
+ 11
+5%
+ 461 +61 %
+ 83 +91 %
+ 16 +60 %
+ 30 > 100 %
+ 53 > 100 %
+ 35 +43 %
+ 34 +23 %
+9
+6%
35 bp
174 bp
461 bp
325 bp
285 bp
276 bp
258 bp
196 bp
105 bp
15
99
4
77
203
1,441
16
75
4
67
37
969
–1
–8%
+ 24 +32 %
+0
+0%
+ 11 +16 %
+ 167 > 100 %
+ 472 +49 %
101 bp
94 bp
91 bp
62 bp
340 bp
109 bp
+/– €
million
CEE countries listed according to cost of risk. *) PCV= Profit Centre Vienna includes
cross-regional portfolios of special financing transactions and guarantees of
Bank Austria AG. T­ urkey and Russia, net write-downs of loans and provisions for
guarantees and commitments in euro terms increased at comparatively low rates of 6 % and 16 %, respectively, although some segments of retail banking (credit card business, consumer credit)
were under strain; adjusted for exchange rate movements, the
increases were 16 % and 23 %, respectively. The cost of risk was
105 bp in Turkey and 62 bp in Russia, well below the CEE average
as the local banks benefited from a well-balanced business structure with a high proportion of large customers. The Profit Centre
Vienna of the CEE business segment includes the charge for loan
loss provisions for cross-regional portfolios such as international
project finance, and the provisioning charge for a portion of
the exposures of Ukrsotsbank which was transferred to UniCredit
Bank Austria by means of a subparticipation agreement at the
beginning of 2013 to replace an expired guarantee.
˜ In 2013, the CEE business segment achieved a net operating
profit (operating profit less net write-downs of loans and provisions
for guarantees and commitments) of € 1,545 million. The decline
of € 249 million or 14 % (adjusted for exchange rate movements:
– 9 %) is explained by the additional loan loss provisions. Additions
to provisions for risks and charges were € 40 million, lower than in
the previous year (€ 63 million); the additions mainly relate to provisions in Turkey for the bonus points programme in card business,
and therefore to current retail banking business. Integration /
restructuring costs (€ 32 million, after € 1 million in the previous
year) relate to the integration of the banking subsidiaries in Slovakia and the Czech Republic, and to a lesser extent to provisions for
the restructuring of the Hungarian branch network and for the surrender of the banking licence in the Baltic states as part of the
strategic concentration on leasing business. Net income / loss from
investments improved significantly from – € 8 million in 2012 to
+ € 169 million in the reporting year, primarily on account of capital
gains on the sale of insurance operations in Turkey (see the group
of consolidated companies on page 138 of the notes to the consolidated financial statements).
 Profit before tax for 2013 amounted to € 1,641 million, a
­figure which is € 80 million or 5 % lower than that for the previous
year, but 1 % above the 2012 figure when adjusted for exchange
rate movements. Average risk-weighted assets (RWAs, all types of
risk) of the CEE Division (€ 82.4 billion) were slightly below the level
of the previous year (– 2 %); at constant exchange rates they
were a little higher. Equity increased more strongly, by 9 % to
€ 14.2 billion. On this basis, return on equity (ROE before tax) came
to 11.6 % (2012: 13.2 %). Despite the large amount of equity
­allocated to the CEE business segment and the high cost of
equity, CEE generated a marginal Economic Value Added (EVA) of
€ 125 million.
Bank Austria · 2013 Annual Report
71
Management Report
Management Report (CONTINUED)
Reports on CEE banking subsidiaries
In 2013, asset quality remained intact. The NPL ratio was 3.5%.
 Turkey: 2013 was a year in which the first half was marked
by improving fundamentals and strong economic growth, while
the second half was impacted by Fed tapering and domestic
political uncertainties. During the second half, Turkey, like other
emerging markets, experienced capital outflows which resulted in
currency depreciation and a rise in interest rates. In this environment, the Turkish banking sector achieved 33% y/y growth in
loans, 24 % y / y growth in deposits and stable net income.
The Group provides high quality products and services to its loyal
and diversified customer base of 8.8 million through a widespread service network. Yapı Kredi’s branch network consists of
971 branches covering all regions in Turkey. In addition, Yapı
Kredi has promoted the use of its alternative delivery channels
(ADCs) which handle 83% of total banking transactions.
These ADCs comprise 3,000 ATMs, innovative Internet banking
(3.2 million users), leading mobile banking (500,000 users) and
two award-winning call centres (42 million customer contacts).
In 2013, Koç Financial Services (KFS), the financial holding
company controlling 81.8 % of Yapı Kredi, effectively strengthened
its capital and liquidity while maintaining a resilient performance.
Consolidated net profit increased by 73% to 3.2 billion Turkish
Lira (after minority interests). Through the closing of the sale of its
insurance business in July 2013, KFS booked a capital gain of
about 1.3 billion Turkish Lira in the local books. Excluding the
capital gain, net income increased by 17% to 1.9 billion Turkish
Lira.
Yapı Kredi’s local capital adequacy ratio was realised at 16.0%
(−30 bp y / y) as of the end of 2013, one of the highest levels in
the sector (sector: 14.6 %, −266 bp y/y). In addition to leveraging
on its conservative balance sheet, Yapı Kredi undertook focused
action to strengthen its capital base throughout the year, such as
the sale of its insurance business, the realignment of the securities portfolio, the renewal of sub-debt and risk-weighted asset
optimisation.
In terms of volume, total loans increased by 27% y/y, driven by
both consumer and corporate lending. In asset gathering, deposits
increased by 23 %, driven mainly by foreign currency deposits.
In 2013, the Group continued to focus on diversifying its funding
activities as a key strategic area and raised US$5.2 billion
through syndications, securitisations, bond issues and other
­financial instruments.
Total revenues increased to 7.6 billion Turkish Lira (7.9% y/y),
driven by the strong contribution of core revenues and positive
impact of other income. The cumulative net interest margin was
in line with guidance at 2.9%, confirming the Group’s ability to
navigate in a challenging rate environment. Fee growth of 8.6%
y / y was driven by value-generating lending growth and by a
­positive contribution from asset management and bancassurance
activities. The Group continued to pursue its disciplined cost management policy, with 6.7 % y/y growth driven by strict management of ordinary costs and ongoing investments for growth.
72
2013 Annual Report · Bank Austria
 Russia: ZAO UniCredit Bank (UCBR) in 2013 once again
confirmed its position as the leading international bank in Russia.
With total assets amounting to 888 billion Russian roubles, UCBR
kept its seventh position among the top ten banks. With a net
profit of about 24 billion Russian roubles the bank achieved the
highest net profit in its history and generated a strong return on
equity of about 20 %. This excellent result was supported by a
one-off effect from the disposal of shares in CJSC “MICEX”
(Moscow Interbank Currency Exchange). Net of this effect (both
in 2012 and 2013) net profit increased y / y by 26 %. The bank’s
revenues increased steadily during the year, reaching a total
amount of 45.4 billion Russian roubles, 27 % more than in the
previous year (or 19 % net of the one-off effect from the disposal
of shares in “MICEX”). At 28.1 billion Russian roubles, net interest income remained the main source of the bank’s revenues,
driven by an increase in business volume: about 9 % y / y growth
in loans and 5 % y / y increase in deposits which, together
with successful placements of own issues (28 % y / y volume
increase), contributed to a very sound loan / deposit ratio of 94 %.
Operating expenses amounted to 12.3 billion Russian roubles
and continued to be strictly monitored, leading to a very efficient
cost / income ratio of 27 % (31 % net of the “MICEX” effect).
Sound risk management led to a further improvement in asset
quality with an excellent cost of risk ratio of 0.6 %. In December
2013 Standard & Poor’s confirmed the bank’s BBB rating, the
highest rating in the Russian banking sector (at the same level
as the country rating).
UniCredit Bank Russia serves almost 1,450,000 customers
through its network of 105 branches.
The CIB Division maintained its position as the main contributor to
the bank’s total revenues and profit before taxes. Revenue growth
y/y was 18%, totalling 23.5 billion Russian roubles. Customer
satisfaction results confirmed UniCredit as the best performer
compared with its main peers with a growing positive gap to
­market across the years. CIB continued to serve the bulk of the
largest corporate clients in Russia, actively supporting cross-border cooperation while dynamically developing and expanding relationships with international companies and regional corporates.
The bank strengthened its reputation as a leading financial institution on the Russian market, in part by increasing the share of
structured loans in its portfolio and offering financial advisory
­services. In 2013 UniCredit confirmed its strong position in trade
finance and its performance in debt capital market business
improved significantly.
The Retail Division achieved an outstanding 24% y/y growth in
revenues (totalling 12.1 billion Russian roubles), confirming its
sustainable performance and capacity to outperform the market.
Thanks to the bank’s reliable reputation, deposits from private
individuals increased by more than 22% y/y. In 2013, the Retail
Division focused on strengthening customer relationships: its new
model for servicing SME customers was successfully launched,
the new operational CRM MyClient implemented, and mobile
applications for iOS and Android upgraded – all supporting new
approaches in customer services and bringing UniCredit closer to
the customer. Retail sales underlined its leading role in the area
of car loans: it was ranked second among the main retail banks in
the government’s car subsidising programme according to the
Ministry of Industry and Trade of the Russian Federation.
 Croatia: In a challenging environment, Zagrebačka banka
(ZABA) Group succeeded in keeping revenues very close to last
year’s level (−1.8% y/y) and in maintaining its high level of operational efficiency. The prolonged recession and stricter regulations
on the classification of loans weighed on the group’s financial
performance, requiring higher provisioning charges. Bottom-line,
the group still achieved a net profit of 649 million Croatian kuna.
The group continued with a strong focus on fundamentals of
­sustainable operations: a stable and diversified deposit base, high
capital adequacy level, strong balance sheet structure, responsible risk management, high level of productivity and efficiency,
­on-going learning and innovation.
The bank’s strong market position, customer trust, product range,
client orientation and highly qualified employees and product and
process excellence are foundations of the future.
In the retail segment, the bank reaffirmed its position as a market
leader with a 24.4% market share in deposits by private individuals and retail loans. The group seized all opportunities for growth,
with many commercial activities and products launched: commercial campaigns targeting small entrepreneurs, in cooperation with
the Croatian Chamber of Craftsmen; new Visa business card for
entrepreneurs of small businesses and corporate clients; ongoing promotion of the MasterCard Student Card; new insurance
products in cooperation with Allianz; new m-banking functions; a
40% share in the government’s housing programme.
In the corporate segment, the bank was successful in increasing
loans to customers and its market share despite negative market
trends and increased competition for a limited number of quality
opportunities. Market share in corporate loans reached 29.5 %
and market share in corporate deposits increased to 26.6 %.
An ongoing pro-active approach resulted in the group being the
leader in setting new market trends in identifying and structuring
financial schemes to meet customers` specific financial needs.
As one of the pioneers of energy efficiency (EE) and renewable
energy (RE) loans in Croatia, the group continued with its
­strategic commitment to offer financial solutions for EE and
RE projects, gaining a leading position in this market niche.
Multi-year cooperation with international financial institutions and
funds resulted in over €100 million in new funding to support
SMEs, EE and RE projects.
In light of recent EU membership, EU-funded projects are seen
as a potential growth catalyst in forthcoming years. In order to
expand participation in this growing market segment, besides
financing products the group also provides professional support
and advisory services in relation to EU funds. The group continued to be the absolute leader in the Croatian investment banking
segment. In the capital markets segment, ZABA arranged or coarranged bond issues in the total amount of 8.4 billion Croatian
kuna. Structured Finance arranged a number of deals, most
notably a 1.5 billion Croatian kuna financing for the construction
of the new terminal of Zagreb Airport. Corporate Finance was
mandated for all significant corporate finance advisory trans­
actions in Croatia and SEE. Markets maintained their dominant
role in providing financial market products to a wide range of
corporate and institutional clients.
 Czech Republic, Slovakia: UniCredit Bank Czech Republic
and Slovakia a.s. is the new name of the bank operating in the
two countries. The bank was created by merging UniCredit Bank
Czech Republic and UniCredit Bank Slovakia. The integration
project, which was launched in the second half of 2012, was
successfully accomplished by the legal merger of the two legal
entities as of 1 December 2013. The new bank is registered in
the Czech Republic and operates in Slovakia in the form of a
­foreign branch. Despite the intensive integration activities during
Bank Austria · 2013 Annual Report
73
Management Report
Management Report (CONTINUED)
the year, both banks were able to operate without any adverse
impact on business, meeting their targets and posting excellent
business results.
Revenues grew by 8 %, leveraging on initial synergies from the
integration of the two banks, especially thanks to know-how
transfer. One of the main success areas was corporate structured
financing, where the bank participated in most of the large transactions concluded on both markets. The successful implementation of consumer finance know-how was a key driver in the retail
segment in Slovakia. Strong trading results from customer-based
trading as well as proprietary trading also contributed to revenue
growth.
Dynamic 12 % growth in lending volume was generated mainly
by retail mortgage and consumer financing and by SME financing. While asset growth was strong, deposits increased at an
even faster pace, by 15 % y/y. This positive development on the
liabilities side further improved the bank’s self-financing ability
and created more scope for a future expansion of its lending
activities. The bank increased deposit volume in both the retail
and corporate segments, reflecting successful efforts in winning
customers in line with the bank’s strategy to expand its customer
base.
Prudent cost management together with initial synergy effects
from the integration project resulted in a decrease of the
cost base by approximately 2%. As loan loss provisions were
increased compared to the previous year, the coverage ratio of
non-performing loans improved. In combination with integration
costs this impacted net profit in 2013, which reached a level of
about € 121 million. Overall, the bank considers 2013 to have
been a very successful year in terms of business performance
and in terms of enhancement of the bank’s financial stability.
Integration of both banks is the basis for continuity in this
respect.
UniCredit Bank Czech Republic and Slovakia was awarded high
profile awards in various categories in 2013. The most notable
awards were Best Cash Management in CEE, Best Project
Finance House in CEE, Global Finance Award and Best Cash
Management in the Czech Republic. In addition, for its retail
activities, the bank received 2 prizes under the prestigious Zlata
koruna Award in the mortgages and consumer finance category.
For its operations in Slovakia, the bank was awarded the prize for
Best Acquirer 2013 by VISA for the fastest growth in merchant
volume via POS terminals and most recently it came in first place
in pre-paid products for our innovative corporate pre-paid card.
74
2013 Annual Report · Bank Austria
 Unlike its main competitors, UniCredit Bank Hungary remained
profitable in 2013 thanks to its prompt response to the economic
and institutional challenges. In 2013 revenues increased by 31%
y/y. A decline in net interest income due to weak credit demand
and falling market rates accompanied by a continuous cycle of
monetary easing were offset by an outstanding trading result and
income from net fees and commissions.
The significant annual growth of operating costs was attributable to
the increased volume of extraordinary indirect taxes that accounted
for 70% of other administrative expenses in 2013. Along with an
unchanged special banking tax, the financial transaction tax (FTT)
levied from January 2013 also burdened the financial sector. To
compensate for these negative income effects, UniCredit Bank
­Hungary launched a network optimisation process and achieved
savings in some core activities. As a result, gross operating profit
grew by 5% y/y.
As loan loss provisions were increased compared to the previous
year, the coverage ratio of non-performing loans improved.
Net profit thus finally reached more than 6 billion Hungarian forint
in 2013.
With lending volume and net repayments of private households
remaining more or less unchanged, the positive effects of the Hungarian central bank’s liquidity programme for the SME sector could
only slow the overall declining trend of lending volume. The bank’s
net loan to deposit ratio remained below 85% as total deposits
increased by 4.5% y/y, supported by the corporate segment.
Retail deposits, on the other hand, were shrinking throughout the
year as households continued to transfer savings from deposits
providing low returns into more attractive mutual funds and government securities. Assets under management thus grew by more than
22% y/y in 2013.
 In 2013, uncertainties on Slovenian markets and continued
recession impacted the banking sector, which again showed an
overall net loss. The country avoided a bailout and some of the
large competitors were re-capitalized following an asset quality
review and stress testing in the banking sector. UniCredit Banka
Slovenija d.d. was the strongest of the banks included in the asset
quality review. The bank reported a capital adequacy ratio of 17%
according to local regulations as of December 2013, 900bps above
minimum regulatory requirements.
The commercial performance of UniCredit Banka Slovenija d.d.
and Uctam upravljanje d.o.o. (a company specialised in managing
assets derived from debt restructuring) was also influenced by the
 UniCredit Group in Bosnia and Herzegovina (B&H) in 2013 has
reaffirmed its position as the largest and most profitable banking
group measured by all main categories (total assets, loans, deposits,
capital, revenues and net profit). The group operates through two
banks, UniCredit Bank d.d. Mostar and UniCredit Bank a.d. Banja
Luka, serving almost 1.2 million customers with the largest banking
network of 124 branches.
overall worsening of the economic situation. Deleveraging in the
corporate sector and weakening of both consumption and investment activity significantly impacted the bank’s loan growth
(−13 % y / y) and resulted in a 7% y/y decrease of the bank’s
revenues by. However, the bank managed to further increase fee
and commission income by 14% y/y, driven by continuous
growth of the customer base and the opening of new accounts.
Customer deposits increased by 4% y/y, which helped the bank
to improve the loan to deposit ratio to 148% compared to 183%
in 2012. Operating costs were kept flat at €43 million y/y (while
still absorbing an additional €2 million Slovenian bank levy and
financial services tax in 2013) through a strong focus on cost
management.
During 2013 the group seized market opportunities for growth with
many new and innovative commercial activities, aiming to support
easy life banking through the enhancement of direct channels
(mobile banking, e-commerce, 24-hour zone, deposit ATM, day-night
vault and POS devices network), specifically designed loans (insured
loans) and deposits. These were well received by customers,
reflected in a further improvement in the customer satisfaction index.
Based on such a proactive market approach, net profit increased to
72 million B&H Convertible Marks (+9% y/y), of which UniCredit
Bank d.d. Mostar generated 56 million, and UniCredit Bank a.d.
Banja Luka 17 million B&H Convertible Marks. The result was driven
by higher revenues (+3%) and improved cost efficiency, and supported by lower net loan loss provisions (−8%). Customer loans
increased by 3.3% y/y, while the deposit base showed an increase
of 4% y/y. The loan/deposit ratio, at 92%, shows a well-balanced
trend and confirms the self-sustainability of the group in B & H.
­Market shares are above 20% in both loans and deposits.
The overall result of Slovenian operations for 2013 was significantly affected by impairments of available-for-sale equity investment in the total amount of €25 million, of which €6 million were
recognised for shares owned by Uctam upravljanje d.o.o, and by
loan loss provisions of €60 million.
In 2013, the bank received the EMEA Finance Award as the Best
Bank, and the Euromoney awards as the Best Bank in Private
Banking services and the Best Bank in cash management services. In addition, the bank received the Social Responsibility
Award HORUS for the fourth consecutive year.
Profit before tax in Central and Eastern Europe (CEE)
(€ million)
Turkey
758
Russia
707
Czech Republic and Slovakia
149
Croatia
105
Bulgaria
100
Bosnia and Herzegovina
42
Serbia
31
Hungary
27
Romania
2012
2013
–7
Baltic states
–11
Slovenia
–53
PC Vienna and other
–300
–206
–200
–100
0
100
200
300
400
500
600
700
800
900
Bank Austria · 2013 Annual Report
75
Management Report
Management Report (CONTINUED)
The banks were committed to corporate social responsibility,
reflected in a number of activities, and they carried out a series of
initiatives related to projects on environmental protection and
improving the quality of life in B & H. They won various awards
from local institutions including a Crystal Prism for Best Bank in
B & H, 3 Golden BAM awards (for total assets, total capital and
ROE), “Employers of Choice” award, Euromoney awards as Best
Bank in B & H and Best Bank in Transactional Operations in B & H.
 Serbia: Despite the turbulence and spillover of the global
­crisis, the recovery of the Serbian economy is on track, driving
real GDP growth in 2013 primarily through net exports and a solid
year in the agricultural sector. Monetary policy measures combined with local currency stability and lower overall demand have
returned inflation to within the central bank’s tolerance band.
In combination with the announced structural reforms initiated
by the government, this stable environment is attracting more
­foreign direct investment. The banking sector again displayed its
stability, despite the overall slowdown in credit activity, high level
of non-performing loans and a clear trend towards consolidation.
The sector continued to be well capitalised and liquid, while also
being highly fragmented and more competitive compared to other
markets.
Despite the difficult business environment, UniCredit Bank
­Serbia managed to achieve sound financial results and to
increase market share in the most important parameters.
The bank is positioned as one of the top three players in the
country, reflected in its role as market leader in terms of efficiency and productivity. In 2013, the bank managed to reach a
higher level of self-sufficiency by improving the loan to deposit
ratio by 11 percentage points, supported by an increase in stable
funding and customer deposits. Thanks to sound revenue growth
and cost containment, gross operating profit improved by 8 %
y / y. While higher net write-downs of loans led to an improvement
in the coverage ratio, this also resulted in a lower net profit
­compared with the previous year. The bank serves its clients
through a network of 74 branches. In 2013, the client base was
further enlarged to 210,000 clients through an improved service
model and the introduction of a number of innovative products
and services.
 In 2013, Romania’s GDP grew at the fastest pace in Central
and South-East Europe for the first time since 2007 due to a
favourable performance of industry and agriculture that managed
to offset poor domestic demand. UniCredit Tiriac Bank (UCT)
was one of the most active banks in the Romanian market in
2013. In August 2013, UCT successfully acquired the retail and
Royal Preferred Banking portfolios of RBS Romania. In June 2013,
76
2013 Annual Report · Bank Austria
the first corporate bond issue by UCT was completed; it was
oversubscribed by 110 %. Subscriptions were made by over
30 local and international institutional investors (including EBRD
and IFC, funds, insurance companies, local and international
banks), reflecting the sound trust placed by the market in the
bank. This initiative is very relevant for the Romanian capital
­market, representing a benchmark and contributing to its further
development. The JEREMIE programme, supported by the European Investment Fund, in 2013 continued to support lending to
SMEs through better pricing and lower collateralisation requirements.
UniCredit Tiriac Bank performed well in 2013, absorbing the
effect of the RBS business integration and reporting a gross
operating profit of 751 million Romanian leu (consolidated group
figures), up 22 % y / y. Total revenue reached 1.5 billion Romanian
leu, up 15 % y / y supported by fee income and the trading result.
Operating costs were 739 million Romanian leu and the cost /
income ratio 50 %, down 288 bp y / y. Loan loss provisions were
increased compared to last year and totalled 771 million Romanian leu, resulting in a net profit of 70 million Romanian leu.
UniCredit Tiriac Bank records a strong and balanced financial
position. The consolidated balance sheet reached 28.5 billion
Romanian leu at the end of December 2013, up by more than
8 % y / y. Overall growth was supported by the expansion of commercial business which allowed the bank to increase deposits by
approximately 12 %. The bank ended the reporting period with
188 branches and 3,171 employees.
 The Bulgarian economy showed some signs of recovery in
2013, but there are so far no signs of any significant acceleration
of growth. Increased exports and higher government spending
helped GDP growth to rebound. The unemployment rate remained
high and the deflationary pressure proved persistent. Markedly
reduced reliance on external borrowing and a slowing in the
growth of non-performing loans improved the resilience of Bulgarian banks. Customer deposits continued growing faster than
customer loans, enhancing the system’s liquidity. Net profit in the
banking sector was down by 6.6 % y / y as of November, which
reflects a combination of weaker operating income and nearly flat
operational costs.
UniCredit Bulbank maintained its leading position in the market
with total assets of 13 billion Bulgarian leva, up by 1.3 % y / y.
Gross loans to customers reached 9.9 billion Bulgarian leva
(+ 3.3 % y / y), with retail loans increasing by 4.9 % y / y and corporate loans rising by 3.3 % y / y. Customer deposits grew by
5.4 % y / y with a significant contribution from retail deposits that
went up by 8.5 % y / y, while corporate deposits grew by 3.1 % y / y.
The structural liquidity position improved with the net loan / deposit
ratio declining to 104 % from 107 % in 2012. Total revenues
increased by 3.3 % y / y to 702 million Bulgarian leva. Higher lending
volume and improved deposit margins contributed to the growth of
net interest revenue by 5.2 % y / y to 469 million Bulgarian leva.
Net fee and commission income continued the trend of the previous
year, rising by 7.8 % y / y thanks to the launch of several innovative
products in the retail area like the “Modula” flexible package product
and contactless cards, structured products for private customers
and stronger cooperation with the bank’s product factories for consumer financing, factoring and leasing. Operating costs were down
by 0.9 % y / y, leveraging on FTE optimisation activities. Efficiency
was further enhanced and the cost / income ratio declined by
1.6 percentage points y / y, to 38.4 % in 2013. As loan loss provisions were increased to 228 million Bulgarian leva, the coverage
ratio of non-performing loan exposures improved. Net profit thus
reached a level of about 175 million Bulgarian leva (−23 % y / y).
As of 31 December 2013, total assets of the newly integrated
UniCredit Bank amounted to 43 billion Ukrainian hryvnias.
The deposit base of the integrated bank grew by 6 % y / y, while
total loans increased by 2 % y / y compared to the combined
balance sheets of both banks as of the end of 2012. As of
31 December 2013, the net loans to deposit ratio of the integrated bank totalled 130 % against 141 % of the combined ratio
at the beginning of 2013.
In retail business, the first pilot branch of the future for UniCredit
Group in CEE was opened in March 2013. It was built on “customer
journey” experience and introduced a number of improvements in
customer services and processes. The specialised subsidiary for consumer financing, UniCredit Consumer Financing, was fully integrated,
giving a strong competitive advantage and possibilities for new customer acquisition. The CIB&PB Division put the focus on extracting
value from innovation, product excellence and quality of service,
which led to very high customer satisfaction. Opportunities for new
client acquisition were discovered also with the launch of new EU
subsidised instruments and new products in the areas of GTB, factoring and Private Banking.
Besides the integration process, the bank’s commercial activities in 2013 focused on strengthening the market position and
on maintaining the bank’s status as the leading international
bank in Ukraine. The Retail Division continued to optimise its
branch network, with a stronger focus on innovations and
expanding Internet and mobile banking features. The customer
base kept growing and more companies signed up for the
bank’s salary projects, resulting in over 400,000 salary cards
clients. Growth of non-lending operations like trade finance,
cash management, factoring and transactional services boosted
fee and commission income by 6 % y / y, while salary projects
and cash collection services supported the bank’s Hryvnia
liquidity. In a still challenging market environment the bank
increased loan loss provisions, which led to an improvement in
the coverage ratio of non-performing loans.
 In 2013 UniCredit Group successfully completed the integration
of two institutions in Ukraine – PJSC “Ukrsotsbank” and PJSC
“UniCredit Bank”. Since 2 December 2013 PJSC “Ukrsotsbank”,
under the trademark UniCredit Bank, is the only bank representing
UniCredit Group in Ukraine.
The integrated branch network consists of 402 multifunctional
outlets, four of which will serve Private Banking clients.
The number of the bank’s full-time employees after integration
totalled 6,143. The noteworthy achievement of the integration
was the smooth migration of UniCredit Bank’s clients to the
joint bank. As a result, the total number of the bank’s corporate
business clients reached 6,285, while the number of retail
­clients exceeded 1 million. The number of SME business clients
totalled 60,000.
Bank Austria · 2013 Annual Report
77
Management Report
Management Report (CONTINUED)
Income statement of the consolidated banking subsidiaries in CEE 1)
(€ million)
CEE business segment 2)
CZECH REPUBLIC, SLOvAKia
hungary
2013
2012
2013
2012
2013
2012
Net interest
Dividends and income from equity investments
Net fee and commission income
Net trading income
Net other operating income/expenses
Operating income
Operating costs
Operating profit
Net write-downs of loans
Net operating profit
Provisions for risks and charges
Integration/restructuring costs
Net income from investments
Profit before tax
3,091
13
1,040
705
80
4,929
– 2,162
2,767
– 1,222
1,545
– 40
– 32
169
1,641
3,032
16
958
531
93
4,630
– 2,075
2,555
– 761
1,794
– 63
–1
–8
1,722
313
1
128
90
1
533
– 265
267
– 99
169
0
– 17
–3
149
322
2
115
68
1
508
– 276
232
– 75
157
2
–1
4
162
200
0
107
36
3
346
– 218
129
– 89
40
–3
–8
–1
27
217
1
60
17
– 22
272
– 146
126
– 35
91
–2
0
1
90
Customer loans (end of period)
Customer deposits and debt securities in issue
(end of period)
69,170
68,051
10,563
10,254
3,065
3,300
63,615
62,486
12,736
12,055
3,620
3,524
Exchange rate (period average)
Appreciation/depreciation against the euro
103.95 3)
– 3.8 %
100.00
25.9797
– 3.2 %
25.1491
296.873
– 2.6 %
289.249
(€ million)
slovenia
Net interest
Dividends and income from equity investments
Net fee and commission income
Net trading income
Net other operating income/expenses
Operating income
Operating costs
Operating profit
Net write-downs of loans
Net operating profit
Provisions for risks and charges
Integration/restructuring costs
Net income from investments
Profit before tax
Customer loans (end of period)
Customer deposits and debt securities in issue
(end of period)
Exchange rate (period average)
Appreciation/depreciation against the euro
bulgaria
romania
2013
2012
2013
2012
2013
2012
48
0
26
1
0
76
– 43
33
– 60
– 27
0
0
– 25
– 53
55
2
23
2
0
82
– 43
39
– 30
9
0
0
– 26
– 17
239
1
91
22
6
359
– 138
221
– 117
105
–5
0
1
100
227
1
84
33
3
348
– 139
209
– 81
127
3
0
1
131
186
0
66
85
0
337
– 167
170
– 174
–4
–1
0
–2
–7
169
0
61
59
2
291
– 152
139
– 92
47
–1
0
0
46
1,895
2,256
4,613
4,501
3,771
3,751
1,283
1,231
4,428
4,199
3,492
3,036
1.0000
0.0 %
1.0000
1.9558
0.0 %
1.9558
4.41899
+ 0.9 %
4.45931
1) The income statement figures are shown on a consolidated basis at country level. / 2) The CEE business segment for segment reporting purposes comprises the total figures for
the CEE banks shown in this table and the Vienna-based CEE headquarters. / 3) Index of the relevant currencies against the euro, weighted by operating income.
78
2013 Annual Report · Bank Austria
(€ million)
TURKEY 4)
russia
BALTICS
2013
2012
2013
2012
2013
2012
Net interest
Dividends and income from equity investments
Net fee and commission income
Net trading income
Net other operating income / expenses
Operating income
Operating costs
Operating profit
Net write-downs of loans
Net operating profit
Provisions for risks and charges
Integration/restructuring costs
Net income from investments
Profit before tax
732
2
323
143
21
1,221
– 505
716
– 156
560
– 29
0
228
758
778
3
325
86
45
1,237
– 518
719
– 147
572
– 66
0
6
512
660
5
129
269
10
1,074
– 291
783
– 77
705
–1
0
3
707
583
3
118
199
–1
901
– 282
619
– 67
553
0
0
0
553
8
0
1
1
–3
8
–9
–2
–4
–5
0
–6
0
– 11
15
0
2
2
0
19
–14
5
–4
1
0
0
0
1
Customer loans (end of period)
Customer deposits and debt securities in issue
(end of period)
14,669
14,436
12,049
12,462
123
603
14,012
13,734
12,796
13,504
0
397
2.53354
– 8.6 %
2.31354
42.337
– 5.7 %
39.9262
2013
2012
2013
2012
2013
2012
Net interest
Dividends and income from equity investments
Net fee and commission income
Net trading income
Net other operating income / expenses
Operating income
Operating costs
Operating profit
Net write-downs of loans
Net operating profit
Provisions for risks and charges
Integration/restructuring costs
Net income from investments
Profit before tax
325
5
118
49
45
542
– 250
292
– 186
106
0
0
–1
105
348
5
118
41
44
556
– 251
305
– 151
154
–1
0
6
160
94
0
34
6
–1
133
– 76
57
– 15
42
0
0
0
42
90
0
33
5
1
129
– 75
53
– 16
37
1
0
0
38
88
0
17
10
0
115
– 42
73
– 42
31
0
0
0
31
81
0
16
11
–1
108
–39
68
–26
42
0
0
0
42
Customer loans (end of period)
Customer deposits and debt securities in issue
(end of period)
9,518
9,302
1,526
1,477
1,266
1,357
8,463
8,272
1,675
1,665
907
900
7.57862
– 0.8 %
7.52167
1.9558
0.0 %
1.9558
113.087
– 0.0 %
113.036
Exchange rate (period average)
Appreciation/depreciation against the euro
0.701463 5)
– 0.6 %
0.69727
(€ million)
cROATIa
Exchange rate (period average)
Appreciation/depreciation against the euro
bosnia
serbia
4) pro quota / 5) Latvian lat (LVL).
Bank Austria · 2013 Annual Report
79
Management Report
Management Report (CONTINUED)
Outlook
Economic scenario
˜ In 2013 the global economy started to recover later than
expected, but recovery is gaining momentum in early 2014. The
global Purchasing Managers’ Index (JPMorgan global Manufacturing
PMI) was recently well above the growth threshold, matching the
level at the beginning of 2011. World trade is also growing notice­
ably, and the global leading indicator of UniCredit Research is signalling that this process will intensify over the next 12 to 18 months.
The acceleration of growth in the coming two years will originate in
the industrial countries. In contrast to the basic situation a year
ago, the indicators for all regions are now pointing upwards. It
seems that the expansionary monetary policies pursued over the
past years are gradually taking effect now that the burdens resulting
from the crisis have been removed, the financial position of private
households is improving and the restrictive fiscal policy impact is
easing off. Emerging markets, on the other hand, are experiencing
a phase of consolidation and a reorientation towards sustainable
growth models. While economic growth in these markets, at about
5 ½%, is still higher than in the industrial countries, the doubling of
the rate of growth in the industrial countries from over 1 % to more
than 2 % is equally significant. The expansion of world output will
rise from 3 % in 2013 to 3.7 % in 2014, continuing to increase
slightly in 2015 (+ 3.9 %).
˜ The European economy has so far coped well with the euro
­crisis, initiating trend-setting reforms such as strengthening the
Maastricht process or establishing the banking union – and now it is
releasing the brakes. After shrinking by an average of about ½% in
the past two years, with wide divergence among the various markets,
the European countries are now again moving forward in the same
direction. Overall, our economists forecast real growth of 1.5% for
2014 and 1.8 % for 2015, levels which represent the upper limit of
the expected range. Yet this scenario is significantly lower than the
rates of expansion at which the economy emerged from five major
financial crises in the post-war period. For the first time in many
years, domestic demand will take up the stimulus provided by world
trade to drive growth, in the form of investment in equipment which
has been postponed for a long time. Companies’ productivity, profits
and financing terms have improved. Moreover, in the period from
2010 to 2013, most countries in the euro area reduced their structural budget deficits by more than three percentage points. The consolidation requirement for 2014 is as low as 0.3% of GDP. This and
the very low rate of inflation should benefit private consumption,
though the increase will remain very moderate in view of the labour
market situation. With an increase of 2½% in its GDP, Germany will
remain the engine of growth, pulling with it the peripheral countries
via intra-EU trade thanks to their improved competitiveness on pricing. We expect that in 2014/2015, Italy and Spain will achieve real
growth of 0.7 % /1.4 % and 0.8%/1.4%, respectively.
80
2013 Annual Report · Bank Austria
In 2014, the ECB will again do all it can to ensure the supply of
liquidity and reactivate the transmission mechanism to the entire
euro area. It will probably take unconventional measures for this
purpose in the near future. One of the possibilities is a further
long-term tender, which could be linked to banks’ lending activities.
This new liquidity should contribute to shielding the euro area from
the tightening of financing conditions imported from the US (and
triggered by the Fed), thus helping primarily South European banks
to meet growing credit demand on reasonable terms. We do not
expect interest rates to change in 2014, neither down (despite
speculation about a negative deposit rate, whose disadvantages
outweigh any advantages in our view) nor up. The ECB will probably leave its current forward guidance unchanged throughout 2014.
This should help to restrict the contagion effect resulting from the
Fed’s tapering of securities purchases. Our base scenario for the
ECB’s key interest rate envisages an initial increase of one-quarter
of a percentage point to occur not before mid-2015; the long-term
interest rate (10-year benchmark yield) may partly decouple from
US interest rate movements, reaching 2.5 % at the end of 2014
and not exceeding 3 % until the middle of 2015 while the TED
spread will widen to 130 bp. Nevertheless, we see the euro firmer,
all the more so as the euro is regaining its previous status in central banks’ portfolios.
˜ The Austrian economy will strongly benefit from Europe’s more
favourable economic environment in the coming two years, not only
from growth in Germany (+2.5% in both years) but also from
recovery in Italy (+0.7%/+1.3%) and Central and Eastern Europe
(+2.1%/+2.5%). Results of the Bank Austria Purchasing Managers’ Index survey, climbing to 53 points around the turn of the year,
showed optimistic expectations. The Bank Austria Business Indicator
confirmed the upward trend in the past few months and recently
attained the highest level since the middle of 2011. On a weighted
average of Austria’s trading partners, business sentiment has visibly
improved and this has had a favourable effect on Austrian companies; both index components already exceed the multi-year averages. While the recovery of export markets is kick-starting the
­Austrian economy, domestic demand will ultimately again become
the main driver of growth, accounting for three-quarters of the
increase. In contrast to the previous year, the economy benefits in
the early part of 2014 from a growth momentum of +0.5%
achieved in the final quarter of 2013 and this provides a strong base.
We expect real GDP growth to rise from 0.3% to 2.0% in 2014,
with a further slight acceleration in 2015. Industrial output, which
more or less stagnated in 2013 (+0.6%), will accelerate as the current year progresses and may reach an average 4% in 2014.
Investment and consumption are picking up in line with growing
export demand. As companies carry out replacement and expansion
investment projects which have so far been postponed, the invest-
ment tailback will be gradually resolved in the coming months.
A strong internal financing capacity and continued favourable
financing terms and conditions will provide essential support in this
development. We expect a turnaround in investment in equipment,
from a decline of 2.5% to growth of almost 8% in 2014.
­Investment in construction will also increase moderately
(+ 1.7 % /+ 1.9 %). Private consumption, which fell in 2013, is
expected to rise slightly, by 0.7% and 0.8%, respectively, in the
coming years. The moderate increase in energy prices will be one
of the factors contributing to this growth; we see the price of crude
oil at a level below 106 US$/bl, also as a result of the relaxation of
the Iran embargo. Demand will translate into growing pressure on
prices (CPI) in the course of 2014 and the agreed measures to
raise taxes and levies will also push up prices. Nevertheless, the
inflation rate in Austria will remain below 2% in 2014 and 2015.
Employment will continue to grow in the period to 2015 (+1.2%
annually) and the unemployment rate will not decline until later in
this period (2014: 5.0%, 2015: 4.7%), reflecting an increase in the
labour supply. Disposable incomes will grow more strongly than in
2013; as wage increases will be more or less stable, growth will
mainly come from investment income, which will rise again after
declining in the past year. The savings ratio, which dropped significantly in the recent past, will consequently stabilise (from 6.5% to
7.7 % in 2014 and 7.0% in 2015).
We do not expect any major changes in demand for commercial
banking products and services. The longer-term trends in this
industry are largely determined by excess liquidity and the interest
rate environment, which is close to zero. There are still higher-yielding investments which were made in the past and are now maturing. The strong growth of deposits held with banks by private
households weakened noticeably towards the end of 2013, and
foreseeable interest rate trends hardly offer attractive replacements.
The switch from deleveraging and debt reduction to expansion and
borrowing will proceed slowly as household incomes grow only
moderately. The usual time lag in response will also be a factor:
growth of corporate lending has traditionally followed economic
trends with a time lag of about three quarters. In 2013, markets
anticipated a significant portion of economic and earnings trends,
and previous investment favourites (BRIC) lost much of their attraction. We nevertheless expect investors’ risk appetite to grow. For
this reason, and because of the modest prospects offered by
longer-term bonds when interest rates start to rise, investors are
likely to remain interested in real estate and also in equities. Banks
themselves will continue to face difficult market conditions in 2014
and 2015: while the yield curve in the base scenario will gradually
but steadily steepen, enabling banks to generate more income from
maturity transformation, uncertainty will need to be overcome in
connection with asset quality reviews and stress tests, the related
measures to tap capital markets, and regulatory and fiscal burdens.
˜ Countries within the perimeter of our operations in Central and
Eastern Europe (CEE)*) will achieve real GDP growth of 1.9 % in
2014 and 2.4 % in 2015. Growth will be driven by industrial output, which increased by over 5 % in 2013. This performance,
which is rather moderate by CEE standards, reflects a change in
growth drivers. As in previous years, our broadly diversified presence enables us to balance out heterogeneous developments:
while the four Central European countries benefit the most from
recovery in nearby Western Europe, with the prospect of achieving
a pronounced turnaround – driven by industry – from stagnation
(– 0.4 %) to growth of 2.2 % (and 2.6 % in the subsequent year),
expansion in SEE will be less pronounced, at about 1 ½%, in the
coming two years. This compares with a slowdown in Russia and
Turkey, the previous growth drivers, where the economic momentum will weaken by about one-half to 1 ½% in 2014 and recover
to about 2 ½% in 2015. While CEE will remain a growth market
overall, the high growth rates seen in years before the financial
crisis will not return.
The upswing in the industrial sector in the CEE/EU countries (with
the exception of Croatia) will continue in 2014. Close links in the
manufacturing sector will be further intensified with direct investment (including reinvested profits). As in Western Europe, restraint
with regard to investment projects may be gradually resolved.
­Following strict budget consolidation in the past years, governments
now have more leeway for expansionary measures. With various
elections forthcoming, pressure is increasing to use such leeway at
least up to the budgetary limits set under the Maastricht rules.
Monetary conditions and resistance to potential external shocks
have also improved in those CEE countries which are EU member
states. In various countries the rate of inflation is below the central
bank’s target level and will rise only slowly. However, the phase of
interest rate reductions will probably end in the second half of
2014. Credit expansion in CEE countries which are EU member
states should accelerate at a moderate pace, thanks to stronger
demand from companies, primarily in the Czech Republic and in
Slovakia, but stagnation in Hungary and a continued decline in
Romania and Slovenia (restructuring) will curb this development in
2014. Funds from EU assistance schemes are now being better
absorbed in these countries. Banks will probably no longer reduce
their foreign liabilities to any significant extent as international
liquidity will remain abundant, not least as a result of the ECB’s
policy. Under the base scenario, the CEE/EU countries should also
record inflows of portfolio investments after the strong outflows
seen in the recent past; however, there will be no boom in such
*) Bank Austria perimeter without Poland (under management responsibility of
UniCredit), without the Baltic countries, without Kazakhstan. The perimeter includes
Central Europe (CE) = the Czech Republic, Slovakia, Hungary and Slovenia; South-East
Europe (SEE) = Romania, Bulgaria, Croatia, Bosnia and Herzegovina, and Serbia; Russia,
Ukraine; Turkey.
Bank Austria · 2013 Annual Report
81
Management Report
Management Report (CONTINUED)
inflows. Risks are associated with the banking sectors in Slovenia,
where the restructuring process has been initiated, and in Croatia,
where the economy is in its sixth year of recession. We expect that
the other countries in the Western Balkans will concentrate on
reforms which they have to carry out in response to demands by
international lenders and to implement IMF conditionality.
Developments in Turkey, both in the real economy and in monetary terms, are moving in the opposite direction to those in the EU
member states and will pause in 2014. Our economists see a
decline in economic growth from a strong 4.2 % in 2013 to nil in
2014. Growth in 2015 will be 2.8 %, lagging behind the levels
achieved in the boom years of 2010 and 2011 (+ 9.2 % and
+ 8.8 %, respectively). Given the country’s external vulnerability,
Turkey will need to take restrictive measures with a view to
dampening domestic demand. Thanks to strong exports and a
weaker import pull, the current account deficit will decline from
6.8 % of GDP in 2013 to 3.8 % in 2014 and 2.6 % in 2015.
Financing this deficit has become difficult as portfolio inflows
have ceased and hard-currency transfers have declined.
A continued downward spiral of currency depreciation would
result in even stronger inflation than the forecast annual 6 ½%.
The adjustment process involves higher funding costs for the
local banking sector (including the minimum reserve policy and
FX deposits) and a mix of stronger foreign exchange market intervention and sustainable positive real interest rates. Moreover,
measures taken in 2013 to dampen consumer loans (credit card
boom) are taking effect. Private consumption and investment will
therefore decline by about 2 % in 2014 (and rise only slightly in
2015). After the boom years with credit expansion of 30 %, the
trend has slowed already and lending volume will probably grow
by 18 % in 2014 after 27 % in 2013; at this rate, credit expansion
is moving closer to deposit growth in Turkey, too. But the impaired
loans ratio of about 3 % is still the lowest in any of the CEE countries within our perimeter. As can be seen from sensitivity to the
Fed tapering discussion, the principal risk in this scenario in view
of a shortage of foreign exchange is a renewed turnaround in
capital flows, resulting in a further round of currency depreciation.
Political unrest is also a new phenomenon. With local authority
elections due to be held in March 2014, presidential elections
scheduled for August 2014 and parliamentary elections probably
taking place in 2015, fiscal policy is likely to be eased.
In Russia, the past year marked the beginning of a long period of
adjustment. Progress in fighting inflation (central bank target:
5 – 6 %, declining to 4.5 % in 2015), more flexibility in rouble
exchange rate management, and budget consolidation (including
debt ceilings) are important steps forward. But as long as the
country’s economy is focused on oil exports to such a great
extent, these measures will not suffice to generate stronger
82
2013 Annual Report · Bank Austria
­sustainable growth. The economy is therefore expected to grow by
about 2 % in 2014 and 2015 (after 1.3 % in the previous year).
With the creeping capital flight which started in 2009, the economy’s dependence on foreign capital has been rising, despite the
export revenues and substantial holdings of foreign exchange.
The difference between the current account surplus and domestic
capital outflows is progressively moving into negative territory.
A more flexible exchange rate regime with the prospect of floating
may serve as a buffer in the event of a further decline in oil market prices. But significant currency depreciation involves the risk
of continued capital outflows. While credit expansion in consumer
loans by local banks is close to overheating, the growth rate of
corporate loans is only one half of the figure for retail loans.
­Overall we expect credit growth to weaken slightly, to 15 %, in
2014. As in the past few years, the impaired loans ratio in Russia
should remain between 14 % and 15 %, slightly higher than the
CEE average of just under 12 %.
The political crisis in Ukraine came to a head in February, leading
to political upheaval which has recently assumed geopolitical
dimensions in the region. Country risk premiums (CDS) exceed
1,000 bp. In response to capital flight and dwindling currency
reserves, the currency had to be left to float and depreciated by
26% by the editorial close of this report. The crisis in Ukraine is
currently the major risk factor for CEE. A further escalation could
also lead to disturbances in Ukraine’s neighbouring countries,
especially if the already high political and economic risks continue
to increase. However, as economic trends in large neighbouring
countries have stabilised, repercussions should remain limited.
➔ According to the forecasts of our economists, the CEE countries within the Bank Austria perimeter (GDP-weighted) will achieve
real growth of 1.5% in the current year and 2.3% in 2015. The
Bank Austria market including Austria will expand at the same rates
(see table). On this basis, continued strong monetary expansion in
CEE (including higher inflation) determines nominal GDP growth.
Since 2010, after the boom years came to an end, credit expansion
has been moving closely in line with these developments and it will
therefore continue to grow. Additional impetus to growth of volume
and transactions in commercial banking business is provided in
these countries by the processes of modernisation and advancing
to higher levels of maturity, as well as increasing market penetration with banking products.
Banks in CEE are shifting to a new, more self-sustaining business model. More sustainable funding from local sources is
steadily gaining in importance. Credit expansion is being brought
more into line with the accrual of deposits. Without Russia and
Turkey, loans in CEE increased by 20 % from 2008 to 2013, while
deposits grew by 34 % (adjusted for exchange rate movements).
In the pre-Lehman boom years, the rate of credit expansion
(2005 – 2008: + 113 %) was double the rate of deposit growth
(+ 55 %). Subsequently, the loans-to-deposits ratio improved from
114 % in 2008 to 102 % in 2013.
While facing many challenges, the CEE banking sector has maintained its high level of profitability, which is far higher than in
Western Europe: return on assets (ROA) generated by CEE banks
is forecast at an average 1.5 % for 2014. Figures for the various
countries range from 2.0 % in Turkey and 1.8 % in Russia to
1.4 % in the Czech Republic and 1.1 % in Slovakia all the way to
0.1 % in Romania and Hungary (Slovenia is a special case with
– 2.1 %); this compares with 0.3 % for German banks (for 2013,
according to the IMF).
Economic growth (real GDP, % over the previous year)
2011
2012
2013e
2014p
2015p
World (IMF, PPP)
China
USA
Euro area
…Austria
Czech Republic
Slovakia
Hungary
Slovenia
Central Europe (CE)
Poland
Bulgaria
Romania
Croatia
Bosnia and Herzegovina
Serbia
South-East Europe (SEE)
Russia
Turkey
Russia and Turkey
Ukraine
+3.7
+ 9.3
+ 1.8
+ 1.5
+ 2.6
+ 1.8
+ 3.2
+ 1.6
+ 0.6
+ 1.9
+ 4.5
+ 1.8
+ 2.2
+ 0.0
+ 1.0
+ 1.6
+ 1.6
+ 4.3
+ 8.8
+ 5.6
+ 5.2
+ 3.1
+ 7.8
+ 2.8
– 0.6
+ 0.9
– 0.9
+ 1.8
– 1.7
– 2.5
– 0.8
+ 1.9
+ 0.8
+ 0.7
– 2.0
– 0.9
– 1.7
– 0.1
+ 3.4
+ 2.2
+ 3.0
+ 0.2
+ 3.0
+ 7.7
+ 1.9
– 0.4
+ 0.3
– 1.1
+ 0.9
+ 1.1
– 2.4
– 0.2
+ 1.6
+ 0.5
+ 2.6
– 0.8
+ 0.9
+ 1.8
+ 1.5
+ 1.3
+ 4.2
+ 2.2
– 1.4
+ 3.7
+ 7.3
+ 2.9
+ 1.5
+ 2.0
+ 2.5
+ 2.9
+ 2.5
– 0.9
+ 2.2
+ 2.9
+ 1.5
+ 2.1
– 1.0
+ 1.5
+ 1.6
+ 1.4
+ 2.0
+ 0.0
+ 1.4
+ 3.9
+ 7.0
+ 2.5
+ 1.8
+ 2.1
+ 3.0
+ 3.6
+ 2.0
+ 0.7
+ 2.6
+ 3.2
+ 2.1
+ 2.4
+ 1.0
+ 2.5
+ 2.5
+ 2.1
+ 2.8
+ 2.3
+ 2.3
CEE1), GDP-weighted
CEE1), Bank Austria-weighted 2)
+ 4.7
+ 4.0
+ 2.1
+ 0.7
+ 1.6
+ 1.3
+ 1.5
+ 1.0
+ 2.3
+ 2.2
+ 4.5
+ 2.0
+ 1.5
+ 1.5
+ 2.3
+ 3.5
+ 0.8
+ 1.0
+ 1.3
+ 2.2
Bank Austria market 3),
GDP-weighted
Bank Austria market 3),
Bank Austria-weighted 2)
1) Without Poland, without the Baltic countries and without Kazakhstan. / 2) Bank Austria
market = Austria and CEE. / 3) Bank Austria-weighted = weighted by contribution of
Bank Austria’s subsidiaries to operating income in CEE.
Source: UniCredit Research (world: IMF/DIW). UniCredit forecasts for CEE: annual forecast
at the end of December 2013.
Outlook for Bank Austria’s performance
˜ The bank’s operating performance will depend on whether the
expected economic recovery will be sufficiently sustainable while
overcoming disruptions to enable credit demand to get underway.
The time lag between an economic upturn and a revival of credit
demand is normally two to three quarters. It will therefore still be
some time before we see a discernible recovery of volumes in
Austria, not least because the business sector still has a sufficient
liquidity cushion and private individuals still tend to reduce their
debt. In Austria, deposits will rise only slowly, especially as invested
funds will be increasingly drawn. In CEE, the prospects for stronger
credit growth in the closely integrated EU countries are good, while
the dynamic upturn in Russia and Turkey has already weakened.
In addition to the unpredictable crisis in Ukraine and the region of
the Black Sea, the main risks include a renewed withdrawal of
portfolio investments followed by strong currency depreciation.
Net interest will still be impacted by the low interest rate environment in 2014. We believe key interest rates will remain unchanged.
Some CEE countries may see further convergence of interest rates
as a result of the sharp decline in inflation. The divergent central
bank policies between the US and the euro area may lead to some
disruption and to a slight upward slope in the yield curve in 2014.
Any revenue generated from maturity transformation will remain
insignificant, however. Net fees and commissions recovered
­visibly in the year to date from 2013, a trend which should continue as foreign trade gathers momentum and securities business
picks up again. Thanks to our undisputed position as market leader
we can also assist and closely advise large companies with their
equity capital measures and long-term finance requirements, and
help medium-sized companies access capital markets as soon as
they no longer exercise restraint. On this basis, we anticipate an
improvement in operating income in 2014.
We expect a number of benefits from the implementation of our
new business model, which includes the Bank Austria 2020 initiative described earlier on in the report: first, it will give an impetus
to revenue and help us to expand market share; second, it will
result in significant efficiency enhancement over the medium term
while lowering the structurally high cost / income ratio, primarily in
retail business with Austrian customers. With the innovative SmartBanking project we are taking advantage of the trends in consumer
behaviour and digitalisation; our differentiated branch strategy is
closely geared to meeting customers’ specific needs, both as a
basic services bank and as an advisory bank. These initiatives, with
their strong visibility, support our efforts in winning new customers
and have a positive additional effect of significant efficiency
enhancement. We will speed up the related change under the
Bank Austria 2020 project with models to reduce the number of
Bank Austria · 2013 Annual Report
83
Management Report
Management Report (CONTINUED)
employees so that the effects resulting from lower costs can soon
be realised. Similar projects are underway in many CEE countries.
As regards the trend in the charge for loan loss provisions, it is
encouraging that additions to impaired loans have slowed markedly. The process of working out the impaired loans that have
already been classified as such is likely to lag some way behind
the business cycle and may still require some time. Overall, we
continue to expect a stable operating performance.
˜ Within non-operating items, the recognition of an impairment
charge reducing goodwill to nil, a measure taken on the basis of
goodwill impairment tests, led to a net loss in 2013. This means
that in this context, there will be no further burdens weighing on
results. We also took initiatives to reduce risk and to optimise
capital allocation. The decision to classify our banking subsidiary
in Ukraine as held for sale is consistent with our withdrawal from
Kazakhstan, which has been concluded, and in line with our policy
of focusing on defined core countries.
Realising the intended disposal may involve further expenses in
2014; in this context, apart from the actual results of the sale,
additional factors such as exchange rate movements will have an
influence. Further currency depreciation would impact both current
profit or loss and equity capital. After the far-reaching adjustment
measures we are again focusing on the bank’s sound operating
performance. In the medium term, after completing the initiated
structural improvements to optimise revenues and risk, we will be
able to use growth opportunities with a lean balance sheet and a
84
2013 Annual Report · Bank Austria
focused business model. In particular, our capital generation capabilities have improved. On this basis, we are getting ready to meet
the regulatory requirements, which will become more stringent. In
the forthcoming years we will be focusing on further strengthening
the capital base for further organic growth by continuing to concentrate on core business and mitigating risk, as well as by retaining
future profits.
˜ In response to the financial market crisis, the regulatory environment, at EU level, has certainly made significant progress in
stabilising the global financial sector. CRD IV, the EU Directive
implementing the Basel 3 package, came into force as of 1 January 2014. In this connection, new instruments relating to liquidity
ratios and funding requirements, such as the Liquidity Coverage
Ratio (LCR) and the Net Stable Funding Ratio (NSFR), still have to
be tested and calibrated. In October 2013, the Council of the European Union adopted the Single Supervisory Mechanism, whereby
the ECB will be empowered to supervise large banks in the euro
area as from the end of 2014. This measure constitutes the first
central component of the European banking union. The assumption
of the ECB’s new role as the banking supervisory authority will be
preceded by a scrutiny of the balance sheets of about 130 EU
banks and the next stress test by the European Banking Authority
in the second quarter of 2014. Bank Austria has been preparing
itself for this new environment for some time, and with its sound
capital base and good liquidity position it is well placed to meet the
new requirements. Definitions such as those relating to the categories of impaired loans moreover comply with the strictest criteria.
Vienna, 5 March 2014
The Management Board
Helmut Bernkopf
Commercial Banking Division
(Retail & Corporates)
Gianni Franco Papa
CEE Banking Division
(Deputy CEO)
Willibald Cernko
CEO Support Services
(Chief Executive Officer)
Jürgen Kullnigg
CRO Risk Management
Francesco Giordano
CFO Finance
Dieter Hengl
Corporate & Investment
Banking Division
Doris Tomanek
Human Resources Austria & CEE
Robert Zadrazil
Private Banking Division
Bank Austria · 2013 Annual Report
85
Collaborate
More efficiency, better results.
A long-standing client of UniCredit had been owned since 2008 by
a US private equity fund. The company consistently recorded good
results and after four years the equity fund began to consider the
best options for maximising its investment. The transaction was quite
complex, involving many teams in UniCredit who worked in unison, like
an orchestra, to achieve the same objective, that of satisfying all the
clients involved.
Our intervention enabled all of the potential buyers to benefit from
substantial support and the deal was concluded in a very short time,
allowing the company to continue its growth path under a new
shareholder, also a key client of UniCredit. The US equity fund managed to
achieve a very successful investment. One deal, more satisfied clients.
Working together for the same objective produces excellent results.
CIB Financial Sponsor Solutions – ITALY
Consolidated Financial Statements
in accordance with International Financial Reporting Standards (IFRSs)
Consolidated Income Statement
for the year ended 31 December 2013
Income statement
88
88
Consolidated Statement of Comprehensive Income
Statement of comprehensive income
Earnings per share
89
89
89
Statement of Financial Position at 31 December 2013
90
Statement of Changes in Equity 91
Statement of Cash Flows
92
Bank Austria · 2013 Annual Report
87
Consolidated Financial Statements in accordance with IFRSs
Consolidated Income Statement
of the Bank Austria Group for the year ended 31 December 2013
Income statement for the year ended 31 December 2013
Interest income and similar revenues
Interest expense and similar charges
Net interest margin
Fee and commission income
Fee and commission expense
Net fees and commissions
Dividend income and similar revenue
Gains and losses on financial assets and liabilities held for trading
Fair value adjustments in hedge accounting
Gains and losses on disposal of:
a) loans
b) available-for-sale financial assets
c) held-to-maturity investments
d) financial liabilities
Gains and losses on financial assets / liabilities at fair value through profit or loss
Operating income
Impairment losses on:
a) loans
b) available-for-sale financial assets
c) held-to-maturity investments
d) other financial assets
Net income from financial activities
Premiums earned (net)
Other income (net) from insurance activities
Net income from financial and insurance activities
Administrative costs:
a) staff expense
b) other administrative expense
Net provisions for risks and charges
Impairment/write-backs on property, plant and equipment
Impairment/write-backs on intangible assets
Other net operating income
Operating costs
Profit (loss) of associates
Gains and losses on tangible and intangible assets measured at fair value
Impairment of goodwill
Gains and losses on disposal of investments
Total profit or loss before tax from continuing operations
Tax expense (income) related to profit or loss from continuing operations
Total profit or loss after tax from continuing operations
Total profit or loss after tax from discontinued operations
Net profit or loss for the year
Attributable to:
Owners of the parent companyfrom continuing operations
from discontinued operations
Non-controlling interests from continuing operations
from discontinued operations
Earnings per share (in €, basic and diluted) from continuing operations
from discontinued operations
88
2013 Annual Report · Bank Austria
(€ million)
Notes
2013
2012
B.1
7,508
– 3,376
4,132
2,161
– 463
1,698
25
565
12
321
2
305
3
11
37
6,791
– 1,500
– 1,416
– 56
–
– 28
5,290
83
– 65
5,308
– 3,697
– 1,992
– 1,705
– 56
– 215
– 112
94
– 3,986
– 135
–1
– 1,957
66
– 704
– 534
– 1,237
– 392
– 1,629
8,316
– 4,206
4,110
2,033
– 497
1,536
30
539
–8
237
–5
90
25
126
–5
6,438
– 1,041
– 976
– 63
– 16
14
5,397
161
– 123
5,435
– 3,513
– 1,914
– 1,599
– 332
– 175
– 98
109
– 4,009
– 185
–
– 34
19
1,226
– 326
900
– 440
460
– 1,263
– 340
25
– 52
– 5.46
– 1.47
863
– 440
38
–
3.73
– 1.90
B.1
B.2
B.2
B.3
B.4
B.5
B.6
B.7
B.8
B.9
B.10
B.11
B.12
B.13
B.14
B.15
B.16
B.17
B.18
B.19
B.20
Consolidated Statement of Comprehensive Income
of the Bank Austria Group for the year ended 31 December 2013
Statement of comprehensive income
Total profit or loss after tax from continuing operations
Total profit or loss after tax from discontinued operations
NET Profit or loss for the YEAR
Other comprehensive income
Items that will not be reclassified to profit or loss
Actuarial gains or (–) losses on defined benefit plans
Income tax relating to items that will not be reclassified
Items that may be reclassified to profit or loss
Foreign currency translation
Translation gains or (–) losses taken to equity
Transferred to profit or loss
Cash flow hedges [effective portion]
Valuation gains or (–) losses taken to equity
Transferred to profit or loss
Available-for-sale financial assets
Valuation gains or (–) losses taken to equity
Transferred to profit or loss
Non-current assets and disposal groups held for sale
Valuation gains or (–) losses taken to equity
Transferred to profit or loss
Share of other recognised income and expense of investments in subsidiaries and joint ventures
Income tax relating to items that may be reclassified to profit or (–) loss
Gains/losses on assets available for sale (available-for-sale reserve)
Gains/losses on assets available for sale (available-for-sale reserve) of associates
Gains/losses on cash flow hedges (cash flow hedge reserve)
Gains/losses on cash flow hedges (cash flow hedge reserve) of associates
Total comprehensive income for the PERIOD
Comprehensive income after tax from continuing operations
Comprehensive income after tax from discontinued operations
Attributable to non-controlling interests from continuing operations
from discontinued operations
Attributable to owners of the parent company from continuing operations
from discontinued operations
(€ million)
1 jan. –
31 dec. 2013
1 jan. –
31 dec. 2012
– 1,237
– 392
– 1,629
900
–440
460
– 17
– 23
6
– 1,662
– 1,033
– 1,324
291
– 89
– 46
– 43
– 573
– 437
– 135
–4
–5
1
– 106
144
112
2
34
–5
– 3,304
– 3,029
– 274
– 27
54
– 3,002
– 328
–690
– 921
230
794
178
178
–
–136
–140
3
936
998
–63
–18
–18
–
2
–167
–192
–9
33
1
582
1,040
–458
–38
–
1,077
–458
1 jan. –
31 dec. 2013
1 jan. –
31 dec. 2012
– 13.10
– 1.19
4.50
–1.98
Earnings per share (in €, basic and diluted)
Earnings per share from comprehensive income after tax from continuing operations
Earnings per share from comprehensive income after tax from discontinued operations
(€)
Bank Austria · 2013 Annual Report
89
Consolidated Financial Statements in accordance with IFRSs
Statement of Financial Position
of the Bank Austria Group at 31 December 2013
Assets
Cash and cash balances
Financial assets held for trading
Financial assets at fair value through profit or loss
Available-for-sale financial assets
Held-to-maturity investments
Loans and receivables with banks
Loans and receivables with customers
Hedging derivatives
Changes in fair value of portfolio hedged items (+/ –)
Investments in associates and joint ventures
Insurance reserves attributable to reinsurers
Property, plant and equipment
of which held for investment
Intangible assets
of which goodwill
Tax assets
a) current tax assets
b) deferred tax assets
Non-current assets and disposal groups classified as held for sale
Other assets
Total assets
(€ million)
Notes
31 Dec. 2013
31 Dec. 2012 C.1
2,663
2,434
343
21,502
1,586
24,967
129,121
2,913
33
2,032
–
2,208
866
219
–
1,061
73
988
3,714
1,414
196,210
2,754
2,855
426
21,063
1,895
28,112
132,424
4,125
54
2,348
1
2,509
782
2,459
2,127
1,336
52
1,284
3,788
1,446
207,596
Notes
31 Dec. 2013
31 Dec. 2012
C.16
27,020
108,935
29,049
1,625
788
2,273
–
590
25
565
2,242
3,481
5,155
4,647
507
–
15,052
485
196,210
31,061
110,563
28,063
2,196
1,152
2,989
–
856
88
768
3,506
3,428
5,389
4,600
789
201
18,192
530
207,596
C.2
C.3
C.4
C.5
C.6
C.7
C.8
C.9
C.10
C.11
C.12
C.13
C.14
C.15
Liabilities and equity
Deposits from banks
Deposits from customers
Debt securities in issue
Financial liabilities held for trading
Financial liabilities at fair value through profit or loss
Hedging derivatives
Changes in fair value of portfolio hedged items (+/ –)
Tax liabilities
a) current tax liabilities
b) deferred tax liabilities
Liabilities included in disposal groups classified as held for sale
Other liabilities
Provisions for risks and charges
a) post-retirement benefit obligations
b) other provisions
Insurance reserves
Equity
of which non-controlling interests (+/–)
Total liabilities and equity
90
2013 Annual Report · Bank Austria
(€ million)
C.17
C.18
C.19
C.20
C.21
C.22
C.23
C.24
C.25
C.26
Statement of Changes in Equity
of the Bank Austria Group for the year ended 31 December 2013
(€ million)
SUBSCRIBED
CAPITAL
As at 1 January 2012
Changes in the group of
consolidated companies
Shares in controlling
companies
Net profit or loss
for the period
Other comprehensive
income
Dividend paid
As at 31 dec. 2012
1,681
7,097
10,380
– 1,898
348
149
11
– 642
3
1,681
1,681
7,100
2
163
– 95
701
29
– 690
10,805
– 1,735
253
850
40
– 1,332
FOREIGN CASH FLOW
CAPITAL RETAINED
CURRENCY
HEDGE
RESERVES EARNINGS TRANSLATION
RESERVE
7,100
10,805
– 1,735
253
850
40
– 1,332
– 1,603
– 1,051
6,052
534
17,661
0
–15
–15
3
423
38
461
109
0
17,662
0
–27
530
109
–27
18,192
CASH FLOW
actuarial
AVAILABLEHEDGE AND
losses in
share- non-conFOR-SALE AFS RESERVE accordance holders’ trolling
RESERVE ASSOCIATES with ias 19
equity interests
4
1,681
equity
17,127
3
423
SUBSCRIBED
CAPITAL
As at 1 January 2013
Changes in the group of
consolidated companies
Shares in controlling
companies
Net profit or loss
for the period
Recognised income and
expenses
Dividend paid
Other changes *)
As at 31 dec. 2013
FOREIGN CASH FLOW
CAPITAL RETAINED
CURRENCY
HEDGE
RESERVES EARNINGS TRANSLATION
RESERVE
CASH FLOW
actuarial
AVAILABLEHEDGE AND
losses in
share- non-conFOR-SALE AFS RESERVE accordance holders’ trolling
RESERVE ASSOCIATES with ias 19
equity interests
– 106
– 847
– 74
– 459
7
– 17
1,051
10,147
– 2,582
178
392
46
– 1,349
17,662
equity
530
18,192
189
189
4
0
4
– 1,603
–27
–1,629
– 1,496
0
0
14,567
–185
–22
–1,681
–22
0
15,052
485
*) Release of capital reserve pursuant to Section 229 (7) of the Austrian Business Code (UGB)
Bank Austria · 2013 Annual Report
91
Consolidated Financial Statements in accordance with IFRSs
Statement of Cash Flows
of the Bank Austria Group for the year ended 31 December 2013
(€ million)
NET PROFIT OR LOSS
Non-cash items included in net profit, and adjustments to reconcile net profit to cash flows from operating activities
Depreciation, amortisation, net write-downs of loans, and changes in fair values
Increase in staff-related provisions and other provisions
Increase/decrease in other non-cash items
Interest income/interest expenses from investing activities
Gains/losses on disposal of intangible assets, property, plant and equipment, and investments
SUB-TOTAL
Increase /decrease in operating assets and liabilities after adjustment for non-cash components
Financial assets held for trading
Loans and receivables with banks and customers
Other asset items
Financial liabilities held for trading
Deposits from banks and customers
Debt securities in issue
Other liabilities items
CASH FLOWS FROM OPERATING ACTIVITIES
of which: cash flows from operating activities of discontinued operations
Proceeds from disposal of
investments
property, plant and equipment
Payments for purchases of
investments
property, plant and equipment
Proceeds from sales (less cash disposed of) of subsidiaries
Payments for acquisition (less cash acquired) of subsidiaries
Other changes
CASH FLOWS FROM INVESTING ACTIVITIES
of which: cash flows from investing activities of discontinued operations
Proceeds from capital increase
Dividends paid
Subordinated liabilities and other financial activities (net)
CASH FLOWS FROM FINANCING ACTIVITIES
of which: cash flows from financing activities of discontinued operations
CASH AND CASH EQUIVALENTS FROM CONTINUING OPERATIONS AT END OF PREVIOUS PERIOD
Cash and cash equivalents from discontinued operations at end of previous period
CASH AND CASH EQUIVALENTS AT END OF PREVIOUS PERIOD
Cash flows from operating activities
Cash flows from investing activities
Cash flows from financing activities
Effects of exchange rate changes
CASH AND CASH EQUIVALENTS AT END OF PERIOD
Cash and cash equivalents from discontinued operations
Cash and cash equivalents from continuing operations
Payments for taxes, interest and dividends
Income taxes paid from operating activities
Interest received from operating activities
from investing activities
Interest paidfrom operating activities
from investing activities
Dividends received from investing activities
92
2013 Annual Report · Bank Austria
2013
2012
– 1,629
460
4,294
321
– 136
113
– 339
2,624
2,100
600
– 335
– 241
– 256
2,328
523
1,079
498
– 899
– 2,921
1,796
– 1,255
1,445
7
603
– 4,387
– 938
– 250
7,110
– 1,183
833
4,115
98
14,276
52
8,798
65
– 15,890
– 385
416
– 87
545
– 1,073
– 12
–
–
– 542
– 542
–3
2,754
293
3,046
1,445
– 1,073
– 542
– 22
2,854
191
2,663
– 12,677
– 440
6
–
287
– 3,961
59
–
–
– 26
– 26
11
2,921
–
2,921
4,115
– 3,961
– 26
–3
3,046
293
2,754
– 360
7,033
946
– 2,700
– 932
62
– 88
8,034
1,133
– 3,614
– 942
60
Support
Flexibility to meet customer needs.
“As the result of a discussion among
different sections of the Risk Division,
we realised that it is important to tailor
communications according to the needs
of each customer. We worked together as a
team, sharing our research and knowledge.
This ultimately led to more flexible
reports and made us more responsive
and proactive, improving the skills and
cohesion of all internal departments.”
Francesco Ivan Pomarico
Group Financial Risk – UniCredit Holding
Notes to the Consolidated Financial Statements
A – Accounting policies
97
B – Notes to the income statement149
C – Notes to the statement of financial position161
D – Segment reporting
179
E – Risk report
191
F – Additional disclosures239
Concluding Remarks of the Management Board
of UniCredit Bank Austria AG
255
Report of the Auditors
256
Report of the Supervisory Board for 2013
258
Note
In this report, “Bank Austria” and “the Bank Austria Group” refer to the Group. To the extent that information relates to the parent company’s separate financial statements,
“UniCredit Bank Austria AG” is used.
In adding up rounded figures and calculating the percentage rates of changes, slight differences may result compared with totals and rates arrived at by adding up component
figures which have not been rounded off.
Bank Austria · 2013 Annual Report
95
A – Accounting policies
A.1 – Information on the company
98
A.2 – Basis for the preparation of the financial statements
98
A.3 – Consolidation principles
99
A.4 – Application of amended and new IASs and IFRSs
A.4.1 – Effects arising from changes in
accounting methods
A.4.2 – New and amended financial reporting
standards not yet adopted by the Group
101
A.5 – Significant accounting policies
A.5.1 – Business Combinations
A.5.2 – Foreign currency translation
A.5.3 – Financial instruments
103
103
104
105
A.6 – Information on other financial statement line items
A.6.1 – Cash and cash equivalents
A.6.2 – Property, plant and equipment;
investment property
A.6.3 – Intangible assets
A.6.4 – Non-current assets held for sale
A.6.5 – Income tax
A.6.6 – Other assets
A.6.7 – Deposits from banks / customers,
debt securities in issue
A.6.8 – Insurance assets and liabilities
A.6.9 – Provisions for risks and charges and
contingent liabilities
A.6.10 –Equity
A.6.11 –Net interest
A.6.12 –Fees and commissions
A.6.13 –Dividends A.6.14 –Gains and losses on disposals of
financial instruments
A.6.15 –Gains and losses on financial assets /
liabilities at fair value through profit or loss
A.6.16 –Impairment losses on loans/Impairment losses
on other financial transactions
A.6.17 –Impairment / write-backs on property, plant
and equipment and on intangible assets
A.6.18 –Profit (loss) of associates
A.6.19 –Gains and losses on disposal of investments
116
116
A.7 – Information on Fair Value
A.7.1 – General overview
A.7.2 – Fair value hierarchy
A.7.3 – Day One Profit / Loss
A.7.4 – Additional information on fair value
A.7.5 – Transfer between portfolios
123
123
124
127
128
134
A.8 – Impairment test
135
A.9 – Group of consolidated companies and changes
in the group of consolidated companies of the
Bank Austria Group in 2013
138
Bank Austria · 2013 Annual Report
101
101
116
117
118
118
119
119
119
119
122
122
122
122
122
122
122
123
123
123
97
Consolidated Financial Statements in accordance with IFRSs
A – Accounting policies (continued)
A.1 – Information on the company
UniCredit Bank Austria AG, Schottengasse 6 – 8, A-1010 Vienna, Austria, is a universal bank conducting banking business within the meaning of
­Section 1 (1) of the Austrian Banking Act. It is registered under no. FN 150714p in the Austrian Register of Firms. The Bank Austria Group as part of
the UniCredit group offers a complete range of banking and other financial services, such as corporate finance, foreign trade financing, project finance,
capital markets and money market services, securities and foreign exchange trading, investment banking, consumer credit and mortgage lending,
­savings accounts, asset management, leasing and factoring. The bank continues to operate in the market under the “Bank Austria” brand name.
The geographical focus of the bank’s operations is on Austria, Central and Eastern Europe (CEE), and Turkey and Russia.
A.2 – Basis for the preparation of the financial statements
The consolidated financial statements of Bank Austria for the year ended 31 December 2013 and the comparative information have been prepared in
accordance with International Financial Reporting Standards (IFRSs) as issued by the International Accounting Standards Board (IASB), including the
interpretation documents issued by the SIC and IFRIC, and endorsed by the European Commission up to 31 December 2013, pursuant to EU Regulation 1606 / 2002. The additional disclosure requirements according to Section 245a UGB (Austrian Business Code) and Section 59a of the Austrian
Banking Act as well as the disclosure requirements specified in the Accounting Manual of UniCredit S. p. A., the ultimate parent company, required to
be applied throughout the Group were taken into account in the preparation of the consolidated financial statements.
The following documents have been used to interpret and support the application of IFRS, even though they have not all been endorsed by the
­European Commission:
• Framework for the Preparation and Presentation of Financial Statements issued by the IASB in 2010;
• Implementation Guidance, Basis for Conclusions and any other documents prepared by the IASB or the IFRS Interpretations Committee supplementing the IFRS;
• ESMA (European Securities and Markets Authority) and Consob documents on the application of specific IFRS provisions.
• Interpretative documents on the application of IFRS in Austria prepared by the Austrian Financial Reporting and Advisory Committee (AFRAC)
The consolidated financial statements comprise the statement of financial position, the income statement, the statement of comprehensive income,
the statement of changes in equity, the statement of cash flows (compiled using the indirect method) and the notes to the consolidated financial
­statements, and are accompanied by the management report.
The consolidated financial statements are prepared in euros, the presentation currency of the Group. Unless indicated otherwise, all figures are in
­millions of euros (€).
These consolidated accounts have been prepared on the assumption that the business is a going concern in accordance with IAS 1, as there is no
uncertainty as to the company’s ability to continue its business operations.
The measurement criteria adopted are therefore consistent with this assumption and with the principles of accrual based accounting, the relevance
and materiality of accounting information, and the prevalence of economic substance over legal form. These criteria have not changed with respect
to the previous year.
Risk and uncertainty due to use of estimated figures
The preparation of financial statements under IFRS requires management to make judgements, estimates and assumptions that affect the application
of accounting principles and the amounts of assets and liabilities and income and expenses reported in the consolidated financial statements, as well
as the disclosure concerning contingent assets and liabilities. Estimates and related assumptions are based on previous experience and other factors
considered reasonable under the circumstances and have been used to estimate the carrying values of assets and liabilities for which evidence of
value is not readily available from other sources.
Valuation is particularly complex given the uncertainty in the macroeconomic and market environment, which is characterised by both the volatility in
the financial parameters defined for the valuation process and signs of deterioration in credit quality.
The parameters and information used to check the above-mentioned values are therefore significantly affected by such factors, which could change
rapidly in ways that are currently unforeseeable, such that further effects on future carrying amounts cannot be ruled out.
Estimates and assumptions are regularly reviewed. Any changes resulting from these reviews are recognised in the period in which these reviews are
carried out, provided that the change only concerns that period. If the revision concerns both current and future periods, it is recognised accordingly
in both current and future periods.
98
2013 Annual Report · Bank Austria
Uncertainty affecting estimates is generally inherent in the measurement of:
• fair value of financial instruments not listed in active markets;
• loans and receivables, investments and, in general, any other financial assets/liabilities;
• post employment benefit obligations and other employee benefits;
• provisions for risks and charges, contingent liabilities and contingent assets;
• goodwill and other intangible assets as well as
• deferred tax assets.
This is because the measurement of these items is mainly dependent on both the evolution of socio-economic conditions and the performance of
the financial markets, which affect interest rates, securities prices, actuarial assumptions and, more generally, the creditworthiness of borrowers and
counterparties.
A more detailed description of the relevant estimates and assumptions used in the consolidated financial statements of the Bank Austria Group as
well as quantitative sensitivity analyses are disclosed in detail in the relevant notes to the consolidated financial statements.
A.3 – Consolidation principles
This section outlines the consolidation criteria and principles used to prepare the consolidated accounts at December 31, 2013
Consolidated Accounts
The financial information in the consolidated financial statements includes that of the parent company, UniCredit Bank Austria AG, together with its
subsidiaries as at 31 December 2013.
Amounts in foreign currencies are converted at closing exchange rates in the balance sheet, whereas the average exchange rate for the year is used
for the income statement.
The accounts and the explanatory notes of the main consolidated subsidiaries prepared under IFRS are subject to audit by leading audit companies.
Subsidiaries
Subsidiaries are entities in which:
• The parent company owns, directly or indirectly through subsidiaries, more than half of the voting power unless, in exceptional circumstances,
it can be clearly demonstrated that such ownership does not constitute control.
• The parent company owns half or less of the voting power, but has:
– control over more than half of the voting rights by virtue of an agreement with other investors;
– power to determine the financial and operating policies of the entity under a statute or an agreement;
– power to appoint or remove the majority of the members of the board of directors or equivalent governing body and the entity is managed by
that board or body; or
– power to cast the majority of votes at meetings of the board of directors or equivalent governing body and the entity is managed by that board
or body.
The existence and effect of potential voting rights that are currently exercisable or convertible, are considered when assessing whether an entity has
the power to govern the financial and operating policies of another entity.
The list of subsidiaries also includes any special-purpose entities as required by SIC 12.
Under the SIC 12 interpretation Bank Austria is required to consolidate special purpose entities for which, in substance, the majority of the risks and
rewards incident to the activities of these special-purpose entities is attributable to the Bank or, in substance, the Bank controls the special purpose
entities. An interest in the equity capital of the special-purpose entities is immaterial.
Equity interests held by third parties in a special-purpose entity consolidated by the Bank in accordance with SIC 12 are recognised under non-controlling interests.
The carrying amount of an ownership interest in a fully consolidated entity held by the parent company or another group company is eliminated –
against the recognition of the assets and liabilities of the investee – as an offsetting entry to the corresponding portion of equity of the subsidiary
due to the Group.
Intragroup balances, off-balance sheet transactions, income and expenses and gains/losses between consolidated companies are eliminated in full.
Bank Austria · 2013 Annual Report
99
Consolidated Financial Statements in accordance with IFRSs
A – Accounting policies (continued)
A subsidiary’s income and expenses are included in the consolidation from the date the parent acquires control. On disposal of a subsidiary, its
income and expenses are consolidated up to the date of disposal, i. e., until the parent ceases to control the subsidiary. The difference between
the proceeds from the disposal of the subsidiary and the carrying amount of its net assets is recognised in the item “Gains and losses on
­disposal of investments” in profit and loss for fully consolidated entities.
Minority interests are recognised in the consolidated balance sheet item “Non-controlling interests” separately from liabilities and parent shareholders’ equity. Minority interests in the profit or loss of the group are separately disclosed under the item “Non-controlling interests” of the
­consolidated income statement.
With respect to subsidiaries included in the scope of consolidation for the first time, the fair value of the price paid to obtain control of them is
measured at the acquisition date.
Joint ventures
A joint venture is a contractual arrangement whereby two or more parties undertake an economic activity that is subject to joint control. Joint
control exists only when financial and operating decisions relating to the activity require consent of the parties sharing control.
Investments in jointly controlled companies are currently accounted for under the proportionate consolidation method, if they are material for the
Bank Austria Group.
Associates
These are entities over which an investor has significant influence and which are not subsidiaries or joint ventures. It is presumed that:
• the investor has significant influence if the investor holds, directly or indirectly, at least 20 per cent of the voting power of an investee;
• is able to exercise significant influence through:
– representation on the board of directors or equivalent governing body of the investee;
– participation in policy-making process, including participation in decisions about dividends or other distributions;
– material transactions between the investor and the investee;
– interchange of managerial personnel;
– provision of essential technical information.
Investments in associates are recognised using the equity method. The carrying amount includes goodwill (less any impairment loss). The investor’s share of the profit and loss of the investee after the date of acquisition is recognised in the item “Profit (Loss) of associates” in the income
statement. Distributions received from an investee reduce the carrying amount of the investment.
Gains and losses on transactions between fully or proportionately consolidated entities and associates are eliminated according to the percentage interest in the associate.
The changes in the revaluation reserves of associates, which are recorded as a contra item to changes in value of assets and liabilities that are
relevant to this purpose, are reported separately in the Statement of Comprehensive Income.
100 2013 Annual Report · Bank Austria
A.4 – Application of amended and new IASs and IFRSs
A.4.1 – Effects arising from changes in accounting methods
Except for the changes below, the accounting policies applied are consistent with those of the previous financial year.
New and amended financial reporting standards adopted in 2013
The Group has adopted the following new standards and amendments to standards, with a date of initial application of 1 January 2013.
IFRS 13 Fair Value Measurement
The standard became effective on 1 January 2013 and clarifies the definition of fair value as an exit price, which is defined as a price at which an
orderly transaction to sell the asset or transfer the liability would take place between market participants at the measurement date under current
market conditions and introduces more comprehensive disclosure requirements on fair value measurement. The change did not have a significant
impact on the measurement of the group’s assets and liabilities, but new disclosures were added to the financial statements, in order to meet the
new requirements under IFRS 13. This refers to qualitative descriptions of the valuation methods applied as well as new quantitative disclosures
(above all the breakdown of fair values into Fair Value Levels also for assets and liabilities measured at cost.)
IAS 19 Employee Benefits
The revised IAS 19 became effective on 1 January 2013. Significant changes relate to the elimination of allowed alternatives in the treatment of
actuarial gains and losses in connection with provisions for post-employment benefits in defined benefit plans as well as the discounting and
measurement of plan assets in relation to such provisions. For the Bank Austria Group, the effects of this change are negligible, as the accounting
policy for Bank Austria group has already been the measurement of actuarial gains and losses against other comprehensive income also in prior
years, thus not resulting in a change in this respect, also because the Bank Austria Group does currently not have plan assets in relation to its
defined benefit plans, so that also from this side the amendments did not have an impact. The only effect on the group financial statements are
the extended disclosure requirements introduced by the new standard.
Amendments to IAS 1 Presentation of Financial Statements
As a result of the various amendments to IAS 1 becoming effective on 1 January 2013, of which the most relevant refers to the changes in
­presentation of items of other comprehensive income, the group has modified the presentation of items of OCI in its statement of comprehensive
income. The amendments require the components of other comprehensive income to be grouped according to whether such items may be
­reclassified subsequently to the income statement.
Amendments to IFRS 7 Financial Instruments: Disclosures – Offsetting Financial Assets and Financial Liabilities
As a result of the amendments to IFRS 7 regarding disclosures in connection with offsetting financial assets and financial liabilities, which became
effective on 1 January 2013, the group has expanded disclosures in this context (compare Note F.7)
Other Amendments
The Amendment to IFRS 1 regarding government loans as well as the new IFRIC 20 regarding stripping costs in the Production Phase of a
­Surface Mine are not relevant for our group.
A.4.2 – New and amended financial reporting standards not yet adopted by the Group
IFRS 9 Financial Instruments
Since November 2008, the IASB has been working to replace its financial instruments standard (IAS 39). The IASB structured its project into three
phases:
Phase 1: Classification and measurement of financial assets and financial liabilities
The IASB issued IFRS9 Financial instruments (2009) and IFRS 9 (2010), which contain the requirements for the classification and measurement
of financial assets and liabilities. In November 2012, the IASB issued an exposure draft(ED) on limited amendments to the classification and
measurement requirements of IFRS 9. The IASB plans to issue a final standard by mid-2014.
Phase 2: Impairment methodology
IASB and FASB were working jointly on a model for the impairment of financial assets based on the expected credit losses, which would replace
the current incurred loss model in IAS 39. Differing proposals were published by IASB in November 2009 and in May 2010 by FASB.
At the July 2012 joint meeting the FASB expressed concern about the direction of the joint project and in December 2012 issued an ED of its own
impairment model. The IASB continued to develop separately its three-bucket impairment model, and issued a new ED in March 2013. A final
standard issued by IASB is planned mid-2014.
Bank Austria · 2013 Annual Report 101
Consolidated Financial Statements in accordance with IFRSs
A – Accounting policies (continued)
Phase 3: Hedge accounting
The IASB has split the hedge accounting phase into two parts: general hedging and macro hedging. The IASB issued a new general hedging
standard as part of IFRS 9 in November 2013, and is working towards issuing a discussion paper on macro hedging in early 2014.
None of the parts of IFRS 9 have been endorsed by the European Union, therefore our group does not early adopt any of the parts of IFRS 9.
The potential effects on the financial statements of Phase 1 (Classification and measurement) are expected to be significant, as it is currently
­expected, based on the current Standard and taking the Exposure Draft into account, that more financial assets will have to be carried at fair
value through profit or loss than has been the case so far as many of the mass products sold in Austria and also in various CEE countries are
likely not to meet the criteria for solely payments on principal and interest (SPPI), that will be required for a treatment at amortised cost under
IFRS 9.
Phase 2 is expected to result in an increase in loan loss provisions, as not only the incurred, but also the expected loss will have to be provided
for. Moreover, the group is currently investigating the various options offered by the new hedge accounting regulations (phase 3) that are
­expected to bring hedge accounting and risk management closer together. Due to the fact that the EU has announced, that only the complete set
of IFRS 9 will be endorsed, we believe that the first-time application of IFRS 9 for the Bank Austria Group will not be before 1 January 2018.
Introduction of IFRS 10, IFRS 11 and IFRS 12 as well as amendments to IAS 27 and IAS 28
In May 2011 the IASB issued IFRS 10 Consolidated Financial Statements, IFRS 11 Joint Arrangements, IFRS 12 Disclosures of Interests
in Other Entities, a revised IAS 27 Separate Financial Statements, which was amended as IFRS 10 was issued, while leaving the existing rules
for separate financial statements unchanged, and a revised IAS 28 Investments in Associates and Joint Ventures, which was adjusted as IFRS 10
and IFRS 11 were issued. These Standards were endorsed by the EU in December 2012.
The Group applies IFRS 10, IFRS 11, IFRS 12, the amended IAS 27, the amended IAS 28, and the consequential amendments from
1 January 2014.
IFRS 10 supersedes IAS 27 Consolidated and Separate Financial Statements and SIC-12 Consolidation – Special Purpose Entities and establishes a single control model that applies to all entities, including special purpose entities previously considered under SIC 12. IFRS 10 specifies
that an investor controls an investee when the investor is exposed or has rights to variable returns from its investment with the investee and has
the ability to use power over the investee to influence such returns. Control is to be assessed on the basis of all current facts and circumstances
and is to be reassessed as facts and circumstances change. The Group has assessed the consolidation perimeter under the new control concept
of IFRS 10 in detail. The effect on the consolidated financial statements as a result of this change is negligible.
IFRS 11 supersedes IAS 31 Interests in Joint Ventures and SIC-13 Jointly Controlled Entities – Non-Monetary Contributions by Venturers.
IFRS 11 classifies joint arrangements as either joint operations or joint ventures and focuses on the nature of the rights and obligations of the
arrangement. For joint ventures IFRS requires the use of the equity method of accounting, eliminating the option to use the proportionate
consolidation method, presently applied by the Group.
IFRS 11 brings a major change to the financial statements of Bank Austria Group, as our investment in Yapi Kredi ve Bankasi, a joint venture with
our partner Koc Group in Turkey, and all the subsidiaries belonging to Yapi Kredi group, which are currently accounted for using proportionate
consolidation based on IAS 31, will have to be accounted for using the equity method from 1 January 2014. This will have a large effect on our
financial statements and would have led to a reduction in total assets of about € 16,082 million as at 31 December 2013.
IFRS 12 requires an entity to disclose the nature, associated risks, and financial effects of interests in subsidiaries, associates and joint
­arrangements and of unconsolidated structured entities. IFRS 12 requires more comprehensive disclosures in the notes than IAS 27 or SIC-12.
As a preparation for the new and extended disclosure requirements resulting from IFRS 12, the group invests into database modules for the
­consolidation software, in order to be able to meet the new requirements in 2014.
Amendments to IAS 36 Recoverable amount disclosures for Non-Financial Assets
The amendments refer to minor changes in the disclosures regarding recoverable amounts of non-financial assets and in particular cash
­generating units. They become effective on 1 January 2014 and are applied by the Group from that date.
Amendments to IAS 39 Novation of Derivatives and Continuation of Hedge Accounting
This amendment of IAS 39 allows the continuation of hedge-accounting when a derivative is novated to a clearing counterparty and certain
­conditions are met. The amendment is a response to changes in laws and regulations for over-the-counter derivatives, requiring many of them
to be transacted with a central counterparty or entity acting in a similar capacity. The amendment will become effective on 1 January 2014,
Whether these amendments will have effects on the Bank Austria Group will depend on the ESMA’s final technical standard.
102 2013 Annual Report · Bank Austria
A.5 – Significant accounting policies
A.5.1 – Business Combinations
A business combination is a transaction through which an entity obtains control of a company or of a business segment, thus bringing together
different businesses into one reporting entity.
A business combination may result in a parent-subsidiary relationship in which the acquirer is the parent and the acquiree a subsidiary of the
acquirer. A business combination may involve the purchase of the net assets of another entity – in which case goodwill can arise – or the
­purchase of the equity of the other entity (mergers).
IFRS 3 requires that all business combinations shall be accounted for by applying the purchase method, that involves the following steps:
• identifying an acquirer;
• measuring the cost of the business combination;
and:
• allocating, at the acquisition date, the cost of the business combination to the fair value of the assets acquired and liabilities and contingent
­liabilities assumed.
The cost of a business combination is the aggregate of the fair value, at the date of exchange, of assets given, liabilities incurred or assumed and
equity instruments issued by the acquirer, in exchange for control of the acquiree.
The acquisition date is the date on which the acquirer effectively obtains control of the acquiree. When this is achieved through a single exchange
transaction, the date of exchange coincides with the acquisition date.
A business combination may involve more than one exchange transaction; nevertheless, the cost of the business combination remains equal to the
fair value of the amount paid at the acquisition date. This involves the revaluation at fair value – and the recognition of the effects in the income
statement – of the equity investments previously held in the acquired entity.
The cost of a business combination is allocated by recognising the assets, the liabilities and the identifiable contingent liabilities of the acquired
company at their acquisition-date fair value. Exceptions to this principle are deferred income tax assets and liabilities, employee benefits,
­indemnification assets, reacquired rights, non-current assets held for sale, and share-based payment transactions that are subject to review in
accordance with the principle applicable to them.
A positive difference between the cost of the business combination and the acquirer’s interest in the net fair value of the identifiable assets,
­liabilities and contingent liabilities so recognised is accounted for as goodwill.
After initial recognition, goodwill is tested for impairment at least annually.
If the acquirer’s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities exceeds the cost of the business combination, the acquirer shall reassess the fair values and recognise immediately any excess remaining after that reassessment in profit or loss.
If the acquisition concerns a percentage less than 100 % of the assets of the acquired company, non-controlling interests are recognised.
At the acquisition date, non-controlling interests are valued:
• at fair value and
• as a proportion of non-controlling interests in the assets, liabilities and identifiable contingent liabilities of the acquired company.
Business combinations under common control (e. g. transfers of entities to and from other subsidiaries of UniCredit S. p. A. outside our
Bank Austria Group) are accounted for based on book values, with any effects directly recognised in equity.
A reduction of a stake from a controlled entity to an entity with significant influence accounted for under the equity method is accounted for as
a sale without any proportionate elimination of the result of deconsolidation regarding the percentage of ownership retained. The fair value of the
retained investment is its deemed cost for the purpose of subsequent accounting.
Bank Austria · 2013 Annual Report 103
Consolidated Financial Statements in accordance with IFRSs
A – Accounting policies (continued)
A.5.2 – Foreign currency translation
The consolidated financial statements are prepared in euros, the presentation currency of the Group.
Various entities in the Group use a different functional currency, the currency of the primary economic environment in which the entity operates.
Foreign currency transactions are translated into the functional currency using the spot exchange rates prevailing at the dates of the transaction or
valuation when items are re-measured.
Monetary assets and liabilities denominated in foreign currencies are translated into the functional currency at the rate of exchange effective at
the balance sheet date. Any resulting exchange differences are included in the income statement under “gains and losses on financial assets and
liabilities held for trading”.
Non-monetary assets and liabilities recognised at historical cost in a foreign currency are translated into the functional currency using the
exchange rate at the date of the initial transaction. Non-monetary assets and liabilities measured at fair value in a foreign currency are translated
into the functional currency using the rate of exchange at the date the fair value was determined.
The exchange differences on a non-monetary item are recognised in other comprehensive income if the gain or loss on a non-monetary item is
recognised in other comprehensive income. Any exchange component of a gain or loss on a monetary item is recognised in the income statement
if the gain or loss on the monetary item is recognised in the income statement.
For consolidation purposes assets, liabilities and equity of foreign operations, the functional currency of which is not euro, are translated into the
Group’s presentation currency at the closing rate of exchange of each period. Items of income and expenses are translated at the average rate of
exchange for the reporting period. Differences arising from the use of spot and weighted average exchange rates and from the remeasurement of
a foreign operation’s net assets at the closing rate of the period are recognised in the revaluation reserves.
The exchange differences arising on the translation of the financial statements of a foreign operation are recognised in other comprehensive
income and accumulated in a separate component of equity. The amount attributable to any non-controlling interests is allocated to and recognised as part of non-controlling interests.
Goodwill and intangible assets recognised on acquisition of foreign subsidiaries (brands, customer relationships) and fair value adjustments arising
on the acquisition of a foreign entity are treated as assets and liabilities of a foreign entity and translated at the closing rate. Exchange differences
arising are recognised in other comprehensive income.
On the disposal of a foreign subsidiary and associate, which results in the loss of control or loss of significant influence of that operation, all the
exchange differences accumulated in a separate component of equity in respect of that operation attributable to the equity holders of the company
are reclassified to profit or loss.
In case of a partial disposal of a foreign operation that does not result in the loss of control, the proportionate share of the accumulated exchange
differences is re-attributed to non-controlling interests and is not recognised in profit or loss. For all other partial disposals the proportionate share
of the accumulated exchange difference is reclassified to profit or loss.
104 2013 Annual Report · Bank Austria
Exchange rates used for foreign currency translation
(Exchange rate in currency /€)
2013
Azerbaijani manat
Bosnian marka
Bulgarian lev
Swiss franc
Czech crown
Croatian kuna
Hungarian forint
Kirgyzstan som
Kazakh tenge
Lithuanian litas
Latvian lat
Polish zloty
Romanian leu
Serbian dinar
Russian rouble
Turkish lira
Ukrainian hryvnia
US dollar
AZN
BAM
BGN
CHF
CZK
HRK
HUF
KGS
KZT
LTL
LVL
PLN
RON
RSD
RUB
TRY
UAH
USD
2012
Average
end of reporting period
1.0418
1.9558
1.9558
1.2311
25.9797
7.5786
296.8730
64.3337
202.1400
3.4528
0.7015
4.1975
4.4190
113.0870
42.3370
2.5335
10.7877
1.3281
1.0819
1.9558
1.9558
1.2276
27.4270
7.6265
297.0400
67.8901
212.4386
3.4528
0.7028
4.1543
4.4710
114.7915
45.3246
2.9605
11.3292
1.3791
Change in %
end of reportAverage
ing period
1.0088
1.9558
1.9558
1.2053
25.1491
7.5217
289.2490
60.4034
191.5990
3.4528
0.6973
4.1847
4.4593
113.0360
39.9262
2.3135
10.3520
1.2848
1.0351
1.9558
1.9558
1.2072
25.1510
7.5575
292.3000
62.5348
198.6210
3.4528
0.6977
4.0740
4.4445
112.6050
40.3295
2.3551
10.5836
1.3194
Average
end of reporting period
3.27 %
0.00 %
0.00 %
2.14 %
3.30 %
0.76 %
2.64 %
6.51 %
5.50 %
0.00 %
0.60 %
0.30 %
– 0.90 %
0.05 %
6.04 %
9.51 %
4.21 %
3.37 %
4.52%
0.00%
0.00%
1.69%
9.05%
0.91%
1.62%
8.56%
6.96%
0.00%
0.73%
1.97%
0.60%
1.94%
12.39%
25.71%
7.04%
4.52%
A.5.3 – Financial instruments
A.5.3.1 – General definitions in the context of financial instruments
Initial recognition and measurement
A financial instrument is any contract giving rise to a financial asset at one company and a financial liability or equity instrument at another company.
In accordance with IAS 39, all financial assets and liabilities, including derivative financial instruments, have to be recognised in the statement of
­financial position and measured in accordance with their assigned classification.
The classification of financial instruments at initial recognition depends on their purpose and characteristics and the management’s intention in
­acquiring them.
The group classifies its financial instruments into the following categories:
• at fair value through profit and loss
– held for trading
– designated under the “fair value option”
• available for sale (AfS)
• held to maturity (HtM)
• loans and receivables
All financial instruments are measured initially at their fair value plus transaction costs, except in the case of financial assets and liabilities recorded at
fair value through profit and loss.
Amortised cost
The amortised cost of a financial asset or financial liability is the amount at which the financial asset or financial liability is measured at initial recognition minus principal repayments, plus or minus the cumulative amortisation using the effective interest method of any difference between that initial
amount and the maturity amount, and minus any reduction (directly or through the use of an allowance account) for impairment or uncollectability.
The effective interest method is a method of allocating the interest income or interest expense over the life of a financial asset or liability. The effective
interest rate is the rate that exactly discounts estimated future cash payments or receipts through the expected life of the financial instrument to the
net carrying amount of the financial asset or financial liability. The calculation includes all fees and points paid or received between parties to the contract that are an integral part of the effective interest rate, transaction costs, and all other premiums or discounts.
Bank Austria · 2013 Annual Report 105
Consolidated Financial Statements in accordance with IFRSs
A – Accounting policies (continued)
Commissions forming an integral part of the effective interest rate include loan drawdown fees or underwriting fees relating to a financial asset not
designated at fair value, e. g., fees received as compensation for the assessment of the issuer’s or borrower’s financial situation, for valuation and
registration of security, and generally for the completion of the transaction (management fees).
Transaction costs include fees and commissions paid to agents (including employees acting as selling agents), advisers, brokers and dealers, levies
by regulatory agencies and securities exchanges, and transfer taxes and duties. Transaction costs do not include debt premiums or discounts,
­financing costs or internal administrative or holding costs.
Impairment of financial assets
At each balance sheet date an entity assesses whether there is any objective evidence that a financial asset or group of financial assets is
­impaired.
A financial asset or a group of financial assets is impaired and impairment losses are incurred if, and only if, there is objective evidence of impairment as a result of one or more events that occurred after the initial recognition of the asset (a “loss event”) and that loss event (or events) has an
impact on the estimated future cash flows of the financial asset or group of financial assets that can be reliably estimated.
Losses expected as a result of future events, no matter how likely, are not recognised.
Objective evidence that a financial asset or group of assets is impaired includes observable data that comes to our attention about the following
loss events:
• significant financial difficulty of the issuer or obligor;
• a breach of contract, such as a default or delinquency in interest or principal payments;
• the lender, for economic or legal reasons relating to the borrower’s financial difficulty, granting a concession to the borrower which the lender
would not otherwise consider;
• it becoming probable that the borrower will enter bankruptcy or other financial reorganisation;
• the disappearance of an active market for that financial asset because of financial difficulties; however, the disappearance of an active market
due to the fact that a company’s financial instruments are no longer traded publicly is no evidence of impairment; or
• observable data indicating that there is a measurable decrease in the estimated future cash flows from a group of financial assets since the
­initial recognition of those assets, although the decrease cannot yet be identified with the individual financial assets in the group, including:
– adverse changes in the payment status of borrowers in the group; or
– national or local economic conditions that correlate with defaults on the assets in the group.
Objective evidence of impairment for an investment in an equity instrument includes information about significant changes with an adverse effect
that have taken place in the technological, market, economic or legal environment in which the issuer operates, and indicates that the cost of the
investment may not be recovered.
If there is objective evidence that an impairment loss on loans and receivables or held-to-maturity investments carried at amortised cost has been
incurred, the amount of the loss is measured as the difference between the asset’s carrying amount and the present value of estimated future
cash flows (excluding future credit losses that have not been incurred) discounted at the financial asset’s original effective interest rate (i. e. the
­effective interest rate computed at initial recognition). The carrying amount of the asset shall be reduced either directly or through use of an allowance account. The amount of the loss is recognised in the profit and loss item “Impairment losses”.
If the terms of a loan, receivable or held-to-maturity investment are renegotiated or otherwise modified because of financial difficulties of the
­borrower or issuer, impairment is measured using the original effective interest rate before the modification of terms. Cash flows relating to shortterm receivables are not discounted if the effect of discounting is immaterial. If a loan, receivable or held-to-maturity investment has a variable
interest rate, the discount rate for measuring any impairment loss is the current effective interest rate determined under the contract.
The calculation of the present value of the estimated future cash flows of a collateralised financial asset reflects the cash flows that may result
from foreclosure less costs for obtaining and selling the collateral.
106 2013 Annual Report · Bank Austria
Objective evidence of impairment is initially assessed individually; however, if it is determined that there is no objective evidence of individual
impairment, the asset is included in a group of financial assets with similar credit risk characteristics and assessed collectively.
Formula-based approaches and statistical methods may be used to assess impairment losses on a group of financial assets. Models used incorporate the time value of money, and consider cash flows over the entire residual life of the asset (not just the following year) and do not give rise to
an impairment loss on initial recognition of a financial asset. They take into account losses already sustained but not manifest in the group of financial assets at the time of measurement, on the basis of past experience of losses on assets having a similar credit risk to the group of assets being
measured.
Reversals of impairment losses
If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the
impairment was recognised (such as an improvement in the debtor’s creditworthiness), the previously recognised impairment loss is reversed and
the amount of the reversal is recognised in profit and loss item “Impairment losses” except in the case of AfS equity instruments (see section 5.3.2
below).
The reversal shall not result – at the date the impairment is reversed – in a carrying amount of the financial asset that exceeds what the amortised
cost would have been had the impairment not been recognised.
Derecognition
Derecognition is the removal of a previously recognised financial asset or financial liability.
Before evaluating whether, and to what extent, derecognition is appropriate, under IAS 39 an entity should determine whether the relevant conditions apply to a financial asset in its entirety or to a part of a financial asset. The standard is applied to a part of financial assets being transferred
if, and only if, the part being considered for derecognition meets one of the following conditions:
• the part comprises only specifically identified cash flows from a financial asset (or a group of assets), e. g. interest cash flows from an asset;
• the part comprises a clearly identified percentage of the cash flows from a financial asset, e. g., a 90 per cent share of all cash flows from an
asset;
• the part comprises only a fully proportionate (pro rata) share of specifically identified cash flow, e. g. 90 per cent share of interest cash flows
from an asset.
• In all other cases, the standard is applied to the financial asset in its entirety (or to the group of similar financial assets in their entirety).
A financial asset must be derecognised when the contractual rights to the cash flows from the financial asset expire or the contractual rights to
receive the cash flows of the financial asset are transferred to a non-Group counterparty. Rights to cash flow are considered to be transferred even
if ­contractual rights to receive the asset’s cash flow are retained but there is an obligation to pay this cash flow to one or more entities and all the
following conditions are fulfilled (pass-through agreement):
• there is no obligation on the Group to pay amounts not received from the original asset;
• sale or pledge of the original asset is not allowed, unless it secures the obligation to pay cash flow;
• the Group is obliged to transfer forthwith all cash flows received and may not invest them, except for liquidity invested for the short period
between the date of receipt and that of payment, provided that the interest accrued in that period is paid on.
Recognition is also subject to verification of effective transfer of all the risks and rewards of ownership of the financial asset. If the entity transfers
substantially all the risks and rewards of ownership of the financial asset, the entity shall derecognise the asset (or group of assets) and recognise
separately as assets or liabilities any rights and obligations created or retained in the transfer.
Conversely, if the entity substantially retains all the risks and rewards of ownership of the asset (or group of assets), the entity shall continue to
­recognise the transferred asset(s). In this case it is necessary to recognise a liability corresponding to the amount received under the transfer and
subsequently recognise all income accruing on the asset or expense accruing on the liability.
The main transactions that do not allow, under the above rules, total derecognition of a financial asset are securitisations, repurchase (sell and
­buybacks) and stock lending transactions.
Bank Austria · 2013 Annual Report 107
Consolidated Financial Statements in accordance with IFRSs
A – Accounting policies (continued)
In the case of securitisations the Group does not derecognise the financial asset on purchase of the equity tranche or provision of other forms of
support of the structure which result in the Group retaining the credit risk of the securitised portfolio.
In the case of repurchase transactions and stock lending, the assets transacted are not derecognised since the terms of the transaction entail the
retention of all their risks and rewards.
Lastly, it should be noted that securities lending transactions collateralised by other securities or not collateralised were recorded as off-balance
sheet items.
A.5.3.2 – Categories of financial instruments
Financial assets and financial liabilities at fair value through profit or loss
Financial assets at fair value through profit or loss include financial assets held for trading and financial assets designated as at fair value through
profit or loss upon initial recognition.
Financial assets and financial liabilities held for trading (HfT)
A financial asset is classified as held for trading if it is:
• acquired or incurred principally for the purpose of selling or repurchasing it in the near term;
• part of a portfolio of identified financial instruments that are managed together and for which there is evidence of a recent actual pattern of
short-term profit-taking;
• a derivative (except for derivatives which constitute financial guarantees, see Section 5.3.3, and derivatives designated as hedging instruments
– see Section 5.3.3).
Like other financial instruments, on initial recognition, at settlement date, a held-for-trading financial asset is measured at its fair value, usually
equal to the amount paid, excluding transaction costs and income, which are recognised in profit and loss even when directly attributable to the
financial assets. Trading book derivatives are recognised at trade date.
After initial recognition these financial assets are measured at their fair value through profit or loss. An exception is represented by derivatives
settled by delivery of an unlisted equity instrument whose fair value cannot be reliably measured, and which is therefore measured at cost.
All changes in fair value are recognised as part of “Gains and losses on financial assets and liabilities held for trading” in the income statement.
Interest income and expenses are reported under “net interest”.
A gain or loss arising from sale or redemption or a change in the fair value of an HfT financial instrument is recognised in the income statement
item “Gains and losses on financial assets and liabilities held for trading”.
Financial assets held for trading include securities held for trading and positive market values of derivative financial instruments, recognised at
their fair values. The item financial liabilities held for trading shows negative market values of derivative financial instruments and short positions
held in the trading portfolio.
Derivatives
A derivative is a financial instrument or other contract with all three of the following characteristics:
• its value changes in response to the change in a specified interest rate, financial instrument price, commodity price, foreign exchange rate,
index of prices or rates, credit rating or credit index, or other variable (usually called the ‘underlying’);
• it requires no initial net investment or an initial net investment that is smaller than would be required for other types of contracts that would be
expected to have a similar response to changes in market factors;
• it is settled at a future date.
An embedded derivative is a component of a hybrid (combined) instrument that also includes a non-derivative host contract, with the effect that
some of the cash flows of the combined instrument vary in a way similar to a stand-alone derivative. A derivative that is attached to a financial
instrument but is contractually transferable independently of that instrument, or has a different counterparty from that instrument, is not an
embedded derivative, but a separate financial instrument.
108 2013 Annual Report · Bank Austria
An embedded derivative is separated from the host contract and recognised as a derivative if:
• the economic characteristics and risks of the embedded derivative are not closely related to those of the host contract;
• a separate instrument with the same terms as the embedded derivative would meet the definition of a derivative;
• the hybrid (combined) instrument is not measured entirely at fair value through profit or loss.
If it is necessary to separate an embedded derivative from its host contract, but it is not possible to measure the embedded derivative separately
either at acquisition or at a subsequent financial reporting date, the entire combined contract is treated as a financial asset or financial liability at
fair value through profit or loss.
When an embedded derivative is separated, the host contract is recognised according to its accounting classification.
Some derivatives are traded on organised exchanges where the terms of the contracts are standardised and quoted prices for the instruments
are generally available publicly.
Non-exchange traded derivatives, commonly referred to as over-the-counter (OTC) derivatives, are transacted directly between market counterparties with the terms of the contracts often tailored to the parties’ specific requirements. These trades are usually governed by general terms
published by the International Swaps and Derivatives Association (ISDA) and may be accompanied by a Credit Support Annex (CSA), which details
the requirements for the posting of collateral.
Generally, derivatives fall into the following categories:
• Forward-based derivatives are contracts with a mandatory requirement to settle at a set point in time in the future at a specified price.
The agreement stipulates the reference rate – e. g. interest rate or currency exchange rate – the settlement date and the notional value.
• A forward contract that is exchange-traded is generally referred to as a “futures contract”. Futures are generally based on interest rates,
­currencies, commodities or stock market indices. OTC forward-based derivatives are generally referred to as ‘forward agreements’. The two
most common types of OTC forward agreements are based on interest rates and foreign exchange rates.
• Swap-based derivatives are contracts in which counterparties exchange, over a period of time, one stream of cash flows for another stream
of cash flows. The cash flows are normally calculated with reference to a notional amount, which is often not exchanged by the counterparties
– e. g. interest rate swaps.
• Option-based derivatives include contracts that give one party the right, but not the obligation, to engage in a transaction to buy or sell an
asset on a set date or within a set period of time at a particular (strike) price. Options can be exchange-traded or OTC.
All derivatives are initially measured at fair value.
Subsequent to initial recognition all derivatives are measured at fair value with changes in fair value recognised in profit or loss.
Financial Instruments at fair value through profit or loss (fair value option)
Any financial instrument may be designated as a financial instrument measured at fair value through profit and loss on initial recognition, in
accordance with the provisions of IAS 39, except for the following:
• investments in equity instruments for which there is no price quoted in active markets and whose fair value cannot be reliably determined;
• derivatives.
Financial assets and liabilities classified in this category are those that have been designated by management upon initial recognition under the
so-called “fair value option”. Management may only designate an instrument at fair value through profit and loss upon initial recognition when the
following criteria are met:
• The designation eliminates or significantly reduces the inconsistent treatment that would otherwise arise from measuring the assets or liabilities or recognising gains and losses on them on a different basis.
• The assets and liabilities are part of a group of financial assets and liabilities, which are managed and their performance evaluated on a fair
value basis in accordance with a documented risk management or investment strategy.
• The financial instrument contains one or more embedded derivatives, which significantly modify the cash flows that would otherwise be
required by the contract.
Bank Austria · 2013 Annual Report 109
Consolidated Financial Statements in accordance with IFRSs
A – Accounting policies (continued)
Financial assets and liabilities at fair value through profit or loss are recorded in the statement of financial position at fair value; changes in fair
value are recorded in the item “Net change in financial assets and liabilities at fair value through profit or loss”. Interest earned or incurred is
accrued in interest income or interest expense using the effective interest rate.
FIaFV includes financial assets and liabilities:
(i)not belonging to regulatory trading book, whose risk is:
• connected with debt positions measured at fair value
• and managed by the use of derivatives not treatable as accounting hedges.
(ii)represented by hybrid (combined) instruments containing embedded derivatives that otherwise should have been separated from the host
­contract.
FIaFV are accounted for in a similar manner to HfT financial instruments (see above), however gains and losses, whether realised or unrealised,
are recognised in item “Gains (losses) on financial assets and liabilities measured at fair value”.
Available-for-sale financial assets (AfS)
Available-for-sale financial assets are those non-derivative financial assets that are designated as available for sale or are not classified as loans
and receivables, held-to-maturity investments, financial assets held for trading or financial assets at fair value through profit or loss. These assets
are held for an indefinite period of time and can meet the need to ensure liquidity and face changes in interest rates, exchange rates and prices.
AfS financial assets are money market instruments, other debt instruments or equity instruments; they include shares held as non-controlling
interests where these do not constitute controlling or associate interests, or joint control.
On initial recognition, at settlement date, an AfS financial asset is measured at fair value, which is usually equal to the consideration of the
­transaction, plus transaction costs and income directly attributable to the instrument. In subsequent periods AfS assets are measured at fair value,
the interest on interest-bearing instruments being recognised at amortised cost in the income statement.
Equity instruments (shares) not listed in an active market and whose fair value cannot be reliably determined are valued at cost.
If there is objective evidence of an impairment loss on an available-for-sale financial asset, the cumulative loss that had been recognised directly
in the equity item “Revaluation reserves”, is removed from equity and recognised in profit or loss under the item “Impairment losses (b) availablefor-sale financial assets”.
The loss of value is normally considered lasting if fair value falls to less than 50% of the carrying amount or lasts for more than 18 months.
If however the fall in the fair value of the instrument is over 20 % but less than or equal to 50% or continues for no less than 9 but no longer
than 18 months, further market indicators are used for a review.
If the results of the review are such as to prejudice the recovery of the amount originally invested, a lasting loss of value is recognised.
The amount taken to profit and loss is the difference between the carrying amount (value of initial recognition less any impairment loss already
recognised in profit or loss) and current fair value. Given the low volume of available-for-sale equity instruments, there is currently no material
case in which this is applied in the Bank Austria Group. Where instruments are valued at amortised cost, the amount of the loss is determined as
the difference between their carrying value and the present value of estimated future cash flows, discounted at the current market yield on similar
financial assets.
Impairment losses recognised in profit or loss for an investment in an equity instrument classified as available for sale are not reversed through
profit or loss, but recognised in equity.
In respect of debt instruments, any circumstances indicating that the borrower/issuer is experiencing financial difficulties which could prejudice
the collection of the principal or interest, represent an impairment loss. A lasting loss of value of equity instruments is assessed on the basis of
indicators such as fair value below the carrying amount and adverse changes in the environment in which the company operates, as well as the
issuer’s debt service difficulties.
If, in a subsequent period, the fair value of a debt instrument increases and the increase can be objectively related to an event such as an
improvement in the debtor’s credit worthiness occurring after the impairment loss was recognised in profit or loss, the impairment loss is
reversed and the amount of the reversal is recognised in the same profit or loss item. The reversal cannot result in a carrying amount of the
financial asset that exceeds what the amortised cost would have been had the impairment not been recognised.
110 2013 Annual Report · Bank Austria
Held-to-maturity investments (HtM)
Held-to-maturity investments are non-derivative financial assets with fixed or determinable payments and fixed maturity, for which there is the
positive intention and ability to hold them to maturity.
If, during the financial year, more than an insignificant amount of held-to-maturity investments are sold or reclassified before maturity, the
remaining HtM financial assets shall be reclassified as available-for-sale and no financial assets shall be classified as HtM investments for the
two following financial years, unless the sales or reclassifications:
• are so close to maturity or the financial asset’s call date that changes in the market rate of interest would not have a significant effect on the
financial asset’s fair value;
• occur after substantially all of the financial asset’s original principal has been collected through scheduled payments or prepayments;
• are attributable to an isolated event that is beyond the reporting entity’s control, is non-recurring and could not have been reasonably
­anticipated.
After initial recognition at its fair value, which will usually be the price paid including transation costs and income directly attributable to the
acquisition or provision of the financial asset (even if not yet settled), a, held-to-maturity investment is measured at amortised cost using the
effective interest method. A gain or loss is recognised in profit or loss in the item “Gains and losses on disposal of held-to-maturity investments”
when the financial asset is derecognised.
Loans and receivables
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market.
Loans and receivables are recognised on the date of contract signing, which normally coincides with the date of disbursement to the borrower.
These items include debt instruments with the above characteristics or those subject to portfolio reclassification in accordance with the rules
of IAS 39 (see Section A.7.5) and the net value of finance leases of assets under construction or awaiting lease, provided the leases have the
characteristics of contracts entailing the transfer of risk.
After initial recognition at fair value, which is usually the price paid including transaction costs and income directly attributable to the acquisition
or issuance of the financial asset (even if not yet paid), a loan or receivable is measured at amortised cost, which can be adjusted to take
account of any write-downs / write-backs resulting from the valuation process.
A gain or loss on loans and receivables is recognised in profit or loss:
• when a loan or receivable is derecognised: in the item “Gains and losses on disposal”;
or:
• when a loan or receivable is impaired (or the impairment loss previously recognised is reversed): in the item “Impairment losses (a) loans and
receivables”.
Interest on loans and receivables is recognised in profit or loss on an accrual basis by using the effective interest rate method under the item
“Interest income and similar revenue”.
Delay interest is taken to the income statement on collection or receipt.
Loans and receivables are reviewed in order to identify those that, following events occurring after initial recognition, show objective evidence of
possible impairment. These impaired loans are reviewed and analysed periodically at least once a year.
A loan or receivable is deemed impaired when it is considered that it will probably not be possible to recover all the amounts due according to
the contractual terms, or equivalent value.
Allowances for impairment of loans and receivables are based on the present value of expected cash flows of principal and interest; in determining the present value of future cash flows, the basic requirement is the identification of estimated collections, the timing of payments and the
rate used.
The amount of the loss on impaired exposure classified as non-performing, doubtful or restructured according to the categories specified below,
is the difference between the carrying value and the present value of estimated cash flows discounted at the original interest rate of the financial
asset. If the original rate is not immediately available, or if obtaining it is too burdensome, its best approximation will be applied.
Bank Austria · 2013 Annual Report 111
Consolidated Financial Statements in accordance with IFRSs
A – Accounting policies (continued)
For all fixed rate positions the interest rate so determined is kept constant also in subsequent financial years, while for floating rate positions
the interest rate is updated with respect to the floating component used as a reference while keeping the spread originally set constant.
Recovery times are estimated on the basis of any repayment schedules agreed with the borrower or included in a business plan or in forecasts
based on historical recovery experience observed for similar classes of loans, taking into account the type of loan, the geographical location, the
type of security and any other factors considered relevant.
Any subsequent change vis-à-vis initial expectations of the amount or timing of expected cash flows of principal and interest causes a change
in allowances for impairment and is recognised in profit or loss in the item “Impairment losses (a) loans and receivables”.
In the notes to the financial statements, write-downs of impaired loans are classified as specific in the relevant income statement item even
when the calculation is flat-rate or statistical, as indicated below.
When the reasons for the impairment no longer exist, and this assessment is objectively attributable to an event such as an improvement in the
debtor’s creditworthiness occurred after the impairment, a reversal is made in the same profit or loss item, within the amount of the amortised
cost that there would have been if there had been no impairments.
Derecognition of a loan or receivable in its entirety is made when the loan or receivable is deemed to be irrecoverable or is written off. Writeoffs are recognised directly in profit or loss under the item “Impairment losses (a) loans and receivables” and reduce the amount of the principal
of the loan or receivable. Reversals of all or part of amounts previously written off are recognised in the same item.
According to UniCredit Group guidelines, impaired loans and receivables are classified in the following categories:
• Non-performing loans – formally impaired loans, being exposure to insolvent borrowers, even if the insolvency has not been recognised in
a court of law, or borrowers in a similar situation. Measurement is generally on a loan-by-loan basis, or for loans which are not significant
individually, on a portfolio basis for homogeneous categories of loans.
• Doubtful loans – exposure to borrowers experiencing temporary difficulties, which the group believes may be overcome within a reasonable
period of time.
• Restructured loans – exposure to borrowers with whom a rescheduling agreement has been entered into including renegotiated pricing at
interest rates below market, reduction of principal and/or the conversion of part of a loan into shares.
• Past due loans – total exposure to any borrower not included in the other categories, which at the end of the reporting period has expired
­facilities or unauthorised overdrafts that are more than 90 days past due.
In respect of loans and receivables on which no specific write-downs have been made, any impairment losses which have been incurred as at
the end of the reporting period but have not yet been identified by the bank are covered by a portfolio-based write-down. In this context we use
the Loss Confirmation Period Method. The Loss Confirmation Period is the period between the occurrence of a loss event or the default of a
­borrower and the time when the bank identifies the loss. The Loss Confirmation Period is determined on a differentiated basis for various loan
portfolios. The loss which has been incurred but has not yet been identified is estimated by using Basel 2 parameters (­expected loss – with a
one-year time horizon) for the differentiated loan portfolios and the respective loss confirmation period.
Allowances for impairment reduce the loan or receivable’s carrying amount. The risk inherent in off-balance-sheet items, such as loan commitments, losses due to impairment of guarantees and comparable credit derivatives under IAS 39, is recognised in profit or loss under the item
­“Impairment losses (d) other financial assets”, offsetting the item “Other liabilities”.
A 5.3.3 Further definitions in the context of financial instruments
Repo transactions and securities lending
Securities received in a transaction that entails a contractual obligation to sell them at a later date or delivered under a contractual obligation
to repurchase are neither recognised nor derecognised. In respect of securities purchased under an agreement to resell, the consideration is
recognised as a loan to customers or banks, or as an asset held for trading. In respect of securities held in a repurchase agreement, the liability
is recognised as due to banks or customers, or as an HfT financial liability. Revenue from these loans, being the coupons accrued on the securities and the difference between the sale / purchase and resale / repurchase prices, is recognised in profit or loss through interest income and
­expenses on an accrual basis.
These transactions can only be offset if, and only if, they are carried out with the same counterparty and provided that such offset is provided
for in the underlying contracts.
The same rules apply to securities lending transactions. Counterparty risk related to such securities lending or borrowing transactions is shown
in the tables in section “E.6 – Credit risk”.
112 2013 Annual Report · Bank Austria
Finance leases
Finance leases effectively transfer all the risks and benefits of ownership of an asset to the lessee; ownership of the asset is transferred to the
lessee, however not necessarily at contractual maturity.
The lessee acquires the economic benefit of the use of the leased asset for most of its useful life, in exchange for a commitment to pay to the
lessor an amount approximately equivalent to the fair value of the asset and related finance costs. Recognition in the lessor’s accounts is as
­follows:
• in assets, the value of the loan, less the principal of lease payments due and paid by the lessee;
• in profit or loss, interest received.
See the sections on “Property, plant and equipment” and “Intangible assets” below for the treatment of the lessee’s assets.
Factoring
Loans acquired in factoring transactions with recourse are recognised to the extent of the advances granted to customers on their consideration.
Loans acquired without recourse are recognised.
Loan securitisations
Loans and receivables also include loans securitised which cannot be derecognised under IAS 39.
Corresponding amounts received for the sale of securitised loans net of the amount of any issued securities and any other type of credit
­enhancement held in portfolio (retained risk) are recognised in the liability items “Deposits from banks” and “Deposits from customers”.
Both assets and liabilities are measured at amortised cost and interest received is recognised through profit or loss.
Impairment losses on securitised assets sold but not derecognised are reported in item “Impairment losses (a) loans and receivables”.
Hedge accounting
Hedging instruments are those created to hedge market risks (interest-rate, currency and price) to which the hedged positions are exposed.
They may be described as follows:
• Fair value hedge: a hedge of the exposure to changes in fair value of a recognised asset or liability, or an identifiable portion of such an asset
or liability;
• Cash flow hedge: a hedge of the exposure to variability in cash flows that is attributable to a particular risk associated with a recognised asset
or liability or a highly probable forecast transaction which could affect profit or loss in future periods;
• Hedge of a net investment in a foreign entity whose operations are presented in a currency other than euro. Hedges of net investments are
currently not used by the Bank Austria Group.
Hedging derivatives are initially recognised on trade date and are valued at their fair value.
A hedging relationship qualifies for hedge accounting if there is formal designation and documentation of the hedging relationship including the
risk management objective, the strategy for undertaking the hedge, and how the hedging instrument’s prospective and retrospective effectiveness will be assessed. It is necessary to assess the hedge’s effectiveness, at inception and in subsequent periods, in offsetting the exposure to
changes in the hedged item’s fair value or cash flows attributable to the hedged risk.
A hedge is regarded as highly effective if, at the inception of the hedge and in subsequent periods, it is determined prospectively to remain
highly effective, and the retrospectively verified that the hedge ratio (i. e. the changes in fair value of hedged items and hedging instruments) is
within a range of 80 – 125 per cent. The hedge is assessed on an ongoing basis and thus must prospectively remain highly effective throughout
the financial reporting periods for which the hedge has been designated.
The assessment of effectiveness is made at each balance-sheet date or other reporting date.
If the assessment does not confirm the effectiveness of the hedge, from that time on hedge accounting is discontinued in respect of the hedge
and the hedging derivative is reclassified as a held-for-trading instrument.
In addition, the hedging relationship ceases when the hedging instrument expires or is sold, terminated or exercised; the hedged item is sold,
expires or is repaid; or it is no longer highly probable that the forecast transaction will occur.
Bank Austria · 2013 Annual Report 113
Consolidated Financial Statements in accordance with IFRSs
A – Accounting policies (continued)
Hedging instruments are so designated when identifiable with an ultimate counterparty outside the Group.
Hedging derivatives are measured at fair value. Specifically:
• Fair value hedging – an effective fair value hedge is accounted for as follows: the gain or loss from remeasuring the hedging instrument at
fair value is recognised through profit or loss in the item “Fair value adjustments in hedge accounting”; the gain or loss on the hedged item
attributable to the hedged risk adjusts the carrying amount of the hedged item and is recognised through profit or loss in the same item.
If the hedging relationship is terminated for reasons other than the sale of the hedged item, this is measured according to the original criterion
dictated by the accounting standard applied to the relevant portfolio. In the case of interest-bearing instruments, the difference between the
carrying amount of the hedged item on termination of the hedging and the carrying amount it would have had if the hedge had never existed,
is recognised through profit or loss in interest receivable or payable over the residual life of the original hedge. The difference in fair value of
the hedging derivative since the latest effectiveness testing date is recognised in profit or loss under the item “Fair value adjustments in hedge
accounting”. If the hedged item is sold or repaid, the portion of fair value which is still unamortized is at once recognised through profit or loss
in the item “Gains and losses on disposal or repurchase”.
• Cash flow hedging – hedging instruments are valued at fair value. A change in the fair value of a hedging instrument that is considered
effective is recognised in the equity item “Revaluation reserves”. The ineffective portion of the gain or loss is recognised through profit or loss
in the item “Fair value adjustments in hedge accounting”. If a cash flow hedge is determined to be no longer effective or the hedging relationship is terminated, the cumulative gain or loss on the hedging instrument that remains recognised in “Revaluation reserves” from the period
when the hedge was effective remains separately recognised in “Revaluation reserves” until the forecast hedged transaction occurs or is
determined to be no longer possible; in the latter case gains or losses are transferred through profit or loss to “Fair value adjustments in
hedge accounting”. The fair value changes recorded in item “Revaluation reserves” are also disclosed in the Statement of Comprehensive
Income.
• Hedging a net investment in a foreign entity – hedges of a net investment in a foreign entity are accounted for similarly to cash flow
hedges. The gain or loss on the hedging instrument relating to the effective portion of the hedge that has been recognised directly in equity is
recognised through profit or loss on disposal of the foreign entity.
The fair value changes recorded in item “Revaluation reserves” are also disclosed in the Statement of Comprehensive Income; the ineffective
portion of the gain or loss is recognised through profit or loss in the item “Fair value adjustments in hedge accounting”.
• Portfolio fair value hedge for financial assets (liabilities) – IAS 39 allows a fair-value item hedged against interest rate fluctuations to be not
only a single asset or liability but also a monetary position contained in a number of financial assets or liabilities (or parts of them); accordingly, a group of derivatives can be used to offset fair-value fluctuations in hedged items due to changes in market rates. Macro hedging may
not be used for net positions resulting from the offsetting of assets and liabilities. As for fair value micro hedging, macro hedging is considered
highly effective if, at the inception of the hedge and in subsequent periods, changes in the fair value attributable to the hedged position are
offset by changes in fair value of the hedging instrument and if the hedge ratio is retrospectively assessed falling within the range of
80–125 per cent. Net changes – gains or losses – in the fair value of the macro-hedged assets and liabilities attributable to the hedged risk
are recognised in special line items on the asset or liability side and offset the profit and loss item “Fair value adjustments in hedge accounting”.
The ineffectiveness of the hedging arises to the extent that the change in the fair value of the hedging item differs from the change in the fair
value of the hedged monetary position. The extent of hedge ineffectiveness is in any case recognised in the profit and loss item “Fair value
adjustments in hedge accounting”.
If the hedging relationship is terminated, for reasons other than the sale of the hedged items, a cumulative gain or loss in the balance sheet
line items is recognised through profit or loss in interest income or expenses, along the residual life of the hedged financial assets or liabilities.
If the latter are sold or repaid, unamortised fair value is at once recognised through profit and loss in the item “Gains and losses on disposal or
repurchase”.
A portfolio fair value hedge is used by our Turkish bank Yapı ve Kredi Bankasi AS, by our Moscow-based banking subsidiary ZAO UniCredit Bank
and by UniCredit Consumer Financing IFN S. A. in Romania. Yapı ve Kredi Bankasi AS uses cross-currency interest rate swaps to hedge part of its
mortgage and car loan portfolios denominated in Turkish lira against the possible effects of changes in market interest rates and foreign
exchange rates. In ZAO UniCredit Bank, portfolio fair value hedge accounting is part of an interest rate risk hedging strategy that helps to avoid
discrepancies between the economic substance of deals concluded for hedging purposes and their accounting treatment. Interest rate swaps are
designated as hedging instruments. UniCredit Consumer Financing IFN S. A. uses interest rate swaps to hedge a portfolio of euro-denominated
fixed-rate loans against interest rate risk.
Cash flow hedges are used by Bank Austria for protecting future variable cash flows against changes in market rates. They hedge the exposure
to variability in cash flows which result from assets or liabilities or from planned transactions and have an effect on profit or loss. Changes in the
fair values of derivatives designated as hedging instruments are divided into a portion that is determined to be an effective hedge, and into an
ineffective portion. The effective portion of any gain or loss on the hedging instrument is included in the cash flow hedge reserve and recognised
in profit or loss in the same period in which the change in the value of the hedged item is recognised in profit or loss. This neutralises the effect
on profit or loss. The effectiveness of cash flow hedges is measured on a regular basis.
114 2013 Annual Report · Bank Austria
Guarantees and credit derivatives in the same class
Guarantees and credit derivatives in the same class measured under IAS 39 (i. e. contracts under which the issuer makes pre-established payments
in order to compensate the guaranteed party or buyer of protection for losses sustained due to default by a debtor on the maturity of a debt instrument) are initially and subsequently (on remeasurement following impairment losses) recognised in the item “Other liabilities”.
On first recognition guarantees given are recognised at fair value, which usually corresponds to the amount received when the guarantee is issued.
After initial recognition, guarantees given are recognised at the greater of the initially recognised value, net of any amortised portion, and the
­estimated amount required to meet the obligation.
The effects of valuation, related to any impairment of the underlying, are recognised in the same balance-sheet item contra item “Write-downs and
write-backs due to impairment of other financial transactions” in the income statement.
Equity investments
The principles governing the recognition and measurement of equity investments under IAS 27 Consolidated and Separate Financial Statements,
IAS 28 Investments in Associates, and IAS 31 Interests in Joint Ventures, are given in detail in Part A.3 – Consolidation principles.
Remaining interests other than subsidiaries, associates and joint ventures, and interests recognised in items “Non-current assets and disposal groups
classified as held for sale” and “Liabilities included in disposal groups classified as held for sale” are classified as AfS financial assets or financial
assets at fair value through profit and loss and treated accordingly.
Liabilities, debt securities in issue and subordinated loans
The items “Deposits with banks”, “Deposits with customers” and “Debt securities in issue” are used for all forms of third-party funding other than
trading liabilities or those valued at fair value through profit and loss.
These financial liabilities are recognised on the settlement date principle initially at fair value, which is normally the consideration received less transaction costs directly attributable to the financial liability. Subsequently these instruments are measured at amortised cost using the effective interest
method.
Hybrid debt instruments relating to equity instruments, foreign exchange, credit instruments or indexes, are treated as structured instruments.
The embedded derivative is separated from the host contract and recognised as a derivative, provided that separation requirements are met, and
recognised at fair value. Any subsequent changes in fair value are recognised in the profit and loss item “Gains and losses on financial assets and
liabilities held for trading”.
The difference between the total amount received and the initial fair value of the embedded derivative is attributed to the host contract. Instruments
convertible into treasury shares imply recognition, at the issuing date, of a financial liability and of the equity part, recognised in the item “Equity
instruments”, any time contractual terms provide for physical delivery settlement.
The equity part is initially measured at the residual value, i. e., the overall value of the instrument less the separately determined value of a financial
liability with no conversion clause and the same cash flow.
The financial liability is initially recognised at amortised cost using the effective interest method.
Securities in issue are recognised net of repurchased amounts; the difference between the carrying value of the liability and the amount paid to
repurchase it is taken to profit and loss under item “Gains and losses on repurchases of financial liabilities”. Subsequent disposal by the issuer is
considered as a new issue which does not produce gains or losses.
Our subsidiary Bank Austria Wohnbaubank AG has issued debt instruments theoretically involving convertibility to equity instruments (under IASB
IFRIC 19 Extinguishing Financial Liabilities with Equity Instruments), because this feature is required for providing tax advantages for the holder of the
instruments. However, the embedded call options are deemed to have a fair value of zero upon issuance, as a conversion into equity does virtually
never occur.
Group debts do not include covenants that would cause default or restructuring events.
Bank Austria · 2013 Annual Report 115
Consolidated Financial Statements in accordance with IFRSs
A – Accounting policies (continued)
A.6 – Information on other financial statement line items
A.6.1 – Cash and cash equivalents
The amount of cash and cash equivalents stated in the statement of cash flows includes the cash holdings (cash and demand deposits with
­central banks). In addition to the cash and cash equivalents shown in the item Cash and cash balances in the statement of financial position,
cash and cash equivalents also include those in the item Non-current assets and disposal groups classified as held for sale.
A.6.2 – Property, plant and equipment; investment property
The item includes:
• land;
• buildings;
• furniture and fixtures;
• plant and machinery;
• other machinery and equipment;
and is divided between
• assets used in the business and
• assets held as investments
Assets used in the business are held for use in the production or supply of goods or services or for administrative purposes and are expected
to be used during more than one period. This category also (conventionally) includes assets to be let or under construction and to be leased under
a finance lease, only for those finance leases which provide for retention of risk by the lessor until the acceptance of the asset by the lessee and
the start of rentals under the finance lease (see also section “loans and receivables” for finance leases with risk transfer).
The item includes assets used by the Group as lessee under a finance lease, or let/hired out by the Group as lessor under an operating lease.
Property, plant and equipment also include leasehold improvements relating to assets which can be which can be separately identified. They are
classified according to the specific sub-items relating to the asset type (e. g. plants). Leasehold improvements are usually borne in order to make
leased premises fit for the expected use. Improvements and additional expenses relating to property, plant and equipment identifiable but not
separable are recognised in the item “Other assets”.
Assets held for investment purposes (“Investment Property”) are properties covered by IAS 40, i. e. properties held (owned or under a finance
lease) in order to derive rentals and / or a capital gain.
Property, plant and equipment are initially recognised at cost including all costs directly attributable to bringing the asset into use (transaction
costs, professional fees, direct transport costs incurred in bringing the asset to the desired location. installation costs and dismantling costs).
Subsequent costs are added to the carrying amount or recognised as a separate asset only when it is probable that there will be future economic
benefits in excess of those initially foreseen and the cost can be reliably measured. Other expenses borne at a later time (e. g. normal maintenance
costs) are recognised in the year they are incurred in profit and loss items:
• “General and administrative expenses”, if they refer to assets used in the business; or:
• “Other net operating income”, if they refer to property held for investment.
After being recognised as an asset, an item of property, plant and equipment is carried at cost less any accumulated depreciation and any
­cumulative impairment losses.
Exceptions are made for property investments underlying liabilities whose yield is linked to their fair value. For these latter assets the fair value
model as per IAS 40 paragraph 32A is used.
An item with a finite useful life is subject to straight-line depreciation.
116 2013 Annual Report · Bank Austria
Useful life is usually assessed as follows:
Property, plant and equipment (tangible assets)
useful life
Buildings
Movables
Electronic equipment
max. 50 years
max. 25 years
max. 15 years
Other
Leasehold improvements
max. 10 years
max. 25 years
An item with an indefinite useful life is not depreciated.
Land and buildings are recognised separately, even if acquired together. Land is not depreciated since it usually has an indefinite useful life.
­Buildings, conversely, have a finite useful life and are therefore subject to depreciation.
The estimate of the useful life of an asset is reviewed at least at each accounting period-end on the basis inter alia of the conditions of use of the
asset, of maintenance conditions and expected obsolescence, and, if expectations differ from previous estimates, the depreciation amount for the
current and subsequent financial years is adjusted accordingly.
If there is objective evidence that an asset has been impaired the carrying amount of the asset is compared with its recoverable value, equal to
the greater of its fair value less selling cost and its value in use, i. e., the present value of future cash flow expected to originate from the asset.
Any value adjustment is recognised in profit and loss item “Impairment/write-backs on property, plant and equipment”.
If the value of a previously impaired asset is restored, its increased carrying amount cannot exceed the net carrying amount it would have had if
there had been no losses recognised on the prior-year impairment.
An item of property, plant and equipment is derecognised on disposal or when no future economic benefits are expected from its use or sale in
the future and any difference between sale proceeds or recoverable value and carrying value is recognised in the profit and loss item “Gains and
losses on disposal of investments”.
A.6.3 – Intangible assets
An intangible asset is an identifiable non-monetary asset without physical substance which is expected to be used during more than one period,
and from which future economic benefits are probable.
Intangible assets are principally goodwill, software, brands and customer-related intangible assets.
Intangible assets other than goodwill are recognised at purchase cost, i. e. including any cost incurred to bring the asset into use, less
­accumulated amortisation and impairment losses.
An intangible asset with a finite life is subject to straight-line amortisation over its estimated useful life.
Useful life is usually assessed as follows:
• software: 4 – 6 years
• other intangible assets: 4 – 20 years
• customer base: 3 – 20 years
Intangible assets with an indefinite life are not amortised.
If there is objective evidence that an asset has been impaired, the carrying amount of the asset is compared with its recoverable value, equal to
the greater of its fair value less selling cost and its value in use, i. e. the present value of future cash flows expected to originate from the asset.
Any impairment loss is recognised in the profit and loss item “Impairment/write-backs on intangible assets”.
For an intangible asset with an indefinite life even if there are no indications of impairment, the carrying amount is compared annually with
its recoverable value. If the carrying amount is greater than the recoverable value, the difference is recognised in the profit and loss item
­“Impairment / write-backs on intangible assets”.
Bank Austria · 2013 Annual Report 117
Consolidated Financial Statements in accordance with IFRSs
A – Accounting policies (continued)
If the value of a previously impaired intangible asset, other than goodwill is restored, its increased carrying amount cannot exceed the net
­carrying amount it would have had if there were no losses recognised on the prior-year impairment.
Goodwill
In accordance with IFRS3, goodwill is the excess of the cost of a business combination over the net fair value of the assets and liabilities
acquired at the acquisition date. Intangible assets are recognised separately from goodwill when they are separable or arise from contractual or
other legal rights, and their fair value can be measured reliably.
Goodwill arising from the acquisition of subsidiaries and joint ventures (consolidated proportionally) is recognised as an intangible asset,
whereas goodwill arising from the acquisition of associates is included in the carrying value of the investments in associates.
At a subsequent financial reporting date, goodwill is recognised net of any cumulative impairment losses and is not amortised.
Goodwill is tested for impairment annually, as for other intangible assets with an indefinite useful life. To this end it is allocated to the Group’s
business areas identified as the Cash Generating Units (CGUs). Goodwill is monitored by the CGUs at the lowest level in line with its business
model.
Impairment losses on goodwill are recognised in the profit and loss item “Impairment of goodwill”. In respect of goodwill, no write-backs are
­allowed. Please see Section A.8. regarding the goodwill impairment test.
A.6.4 – Non-current assets held for sale
Non-current assets or groups of associated assets / liabilities (i. e. so called “disposal groups”, which may also be cash generating units)
whose sale is highly probable, are recognised in the item “Non-current assets and disposal groups classified as held for sale” and in the item
“Liabilities included in disposal groups classified as held for sale”, respectively, at the lesser of the carrying amount and fair value net of
­disposal costs.
If a disposal group constitutes a separate material line of business or geographical operation, it is referred to as a “discontinued operation”.
The balance of revenue and expense relating to discontinued operations and the measurement as determined above of discontinued operations,
net of current and deferred tax, is recognised in the item “Total profit or loss after tax from discontinued operations”.
The revaluation reserves relating to Non-current assets held for sale, which are recorded as a contra item in other comprehensive income
within equity, are reported separately in the Statement of Comprehensive Income (see Part D – Consolidated Comprehensive Income).
A.6.5 – Income tax
Tax assets and tax liabilities are recognised in the consolidated balance sheet respectively in the item “Tax assets” or in the item “Tax liabilities”.
In compliance with the “balance sheet liability method”, current and deferred tax items are:
• current tax assets, i. e. amount of tax paid in excess of income tax due in accordance with local tax regulations;
• current tax liabilities, i. e. amount of corporate tax due in accordance with local tax regulations;
• deferred tax assets, i. e. amounts of income tax recoverable in future fiscal years and attributable to:
– deductible temporary differences;
– the carryforward of unused tax losses; and
– the carryforward of unused tax credits
• deferred tax liabilities, i. e. the amounts of income tax due in future fiscal years in respect of taxable temporary differences.
Current and deferred tax assets and tax liabilities are calculated in accordance with local tax regulations and are recognised in profit or loss on
an accrual basis.
In general, deferred tax assets and liabilities arise when there is a difference between the accounting treatment and the tax treatment of the
carrying amount of an asset or liability.
118 2013 Annual Report · Bank Austria
Deferred tax assets and liabilities are recognised applying tax rates that at the balance sheet date are expected to apply in the period when the
­carrying amount of the asset will be recovered or the liability will be settled on the basis of tax regulations in force, and are periodically reviewed in
order to reflect any changes in regulations.
Furthermore, deferred tax assets are recognised only to the extent that it is probable that sufficient taxable profit will be generated by the entity.
In accordance with the provisions of IAS12, the probability that sufficient future taxable profit against which the deferred tax assets can be utilised
will be available is reviewed periodically. The carrying amount of deferred tax assets should be reduced to the extent that it is not probable that
­sufficient taxable profit will be available.
Current and deferred taxes are recognised in profit and loss item “Tax expense (income) related to profit or loss from continuing operations”, except
for tax relating to items that in the same or in another fiscal year are credited or charged directly to equity, such as those relating to gains or losses
on available-for-sale financial assets and those relating to changes in the fair value of cash flow hedging instruments, whose changes in value are
recognised, net of tax, directly in the Statement of Comprehensive Income – valuation reserves.
Pursuant to the group taxation rules introduced in Austria in 2005, Bank Austria has formed a group of companies. Profit and loss transfer
­agreements have been concluded with 24 group members, tax compensation agreements have been reached with 25 companies and there are
3 joint control arrangements. These agreements and arrangements do not include foreign companies.
A.6.6 – Other assets
The components of this item are accounts receivable from deliveries of goods and the performance of services, tax claims and deferred tax assets.
A.6.7 – Deposits from banks / customers, debt securities in issue
These financial liabilities are recognised initially at fair value, net of transaction costs incurred. Subsequently these instruments are measured at
amortised cost using the effective interest rate.
A.6.8 – Insurance assets and liabilities
IFRS 4 defines an insurance contract as a contract under which one party (the insurer) accepts significant insurance risk from another party (the
policyholder) by agreeing to compensate the policyholder if a specified uncertain future event (the insured event) adversely affects the policyholder.
These policies are recognised as follows:
• in the profit and loss item “Other income (net) from insurance activities”: gross premium including all amounts due during the year under
­insurance contracts, net of cancellations. Premium transferred to reinsurers during the year is also recognised in this item;
• in the liability item “Insurance reserves”: contractual obligations to policyholders, calculated analytically contract by contract using the prospective
method, on the basis of demographic and financial projections currently used by the market;
• in the asset item “Insurance reserves attributable to reinsurers”: reinsurers’ liabilities.
A.6.9 – Provisions for risks and charges and contingent liabilities
A.6.9.1 – Long-term employee benefits
For retirement provisions – i. e. provisions for employee benefits payable after the completion of employment – a distinction is made between
defined-contribution plans and defined-benefit plans according to the economic nature of the plan.
In detail:
• Defined-benefit plans provide a series of benefits depending on factors such as age, years of service and compensation policies. Under this type
of plan actuarial and investment risks are borne by the company;
• Defined-contribution plans are plans under which the company makes fixed contributions. Benefits are the result of the amount of contributions
paid and return on contributions invested. The employer bears no actuarial and/or investment risks connected with this type of plans as it has no
legal or implicit obligation to make further contributions, should the plan not be sufficient to provide benefit to all employees.
Bank Austria · 2013 Annual Report 119
Consolidated Financial Statements in accordance with IFRSs
A – Accounting policies (continued)
Defined-benefit plans are present-valued by an external actuary using the Projected Unit Credit Method.
This method distributes the cost of benefits uniformly over the employee’s working life. Obligations are the present value of average future
­benefits pro rata to the ratio of years of service to theoretical seniority at the time of benefit payment.
The amount recognised as a liability in item Provisions for risks and charges – (a) Post-retirement benefit obligations is the present value of the
obligation at the balance sheet date. The UniCredit Bank Austria AG sub-group currently does not have any plan assets.
Pursuant to IAS 19, actuarial gains and losses are not recognised in profit or loss but directly in equity. Such gains and losses are stated in the
table “Other comprehensive income”.
Under a commitment to provide defined benefits, UniCredit Bank Austria AG continues to recognise a pension provision for the entitlements
of employees who retired before the pension reform as at 31 December 1999 became effective, and – as a special feature of
UniCredit Bank Austria AG’s staff regulations – for the future benefits, equivalent to those under mandatory insurance, earned by active
employees and pensioners for whom UniCredit Bank Austria AG has assumed the obligations of the mandatory pension insurance scheme
­pursuant to Section 5 of the Austrian General Social Insurance Act (ASVG).
The following are also covered by the provision:
• disability risk and rights to future benefits based on early retirement and pension entitlements of surviving dependants, to the extent that the
pension fund benefit is insufficient,
• rights to future benefits under commitments to provide direct benefits in individual service agreements,
• rights to future benefits relating to additional pension payments for employees performing manual work.
The present value of pension obligations and severance-payment obligations as well as anniversary bonuses is determined with due regard to
­internal service regulations, on the basis of the following actuarial assumptions:
• discount rate/Austria: 3.75 % p. a. (2012: 3,75 % p. a.)
On the basis of the Mercer Pension Discount Yield Curve and the cash flows determined for the pension plan for active employees and pensioners, the interest rate is 3.80 % (duration: 16 years).
A shorter duration applies to provisions for severance payments and anniversary bonuses; a lower interest rate could therefore be applied to
these plans. However, the company prefers a standard interest rate for all provisions. On this basis the interest rate used for all calculations as
at 31 December 2013 is 3.75 % (31 December 2012: 3.75 %).
• increases under collective bargaining agreements: 2.45 % p. a. (2012: 2.45% p. a.); assumption of increases for employees and pensioners
• career trends including regular salary increases under the current collective bargaining agreement for employees of Austrian banks and the
­effects of the transitional rules under the 2005 reform of Bank Austria’s staff regulations. The rate applied in calculating non-regular salary
­increases was 0.25 % p. a. (2012: 0.25 % p. a.); assumption of increases for employees.
• no discount for staff turnover
• retirement age: as a basis for calculation in respect of employees enjoying “permanent tenure” status in accordance with the internal agreement dated 30 December 1999 (as amended on 1 May 2007) on the payment of a Bank Austria ASVG pension equivalent, the age of 60 for
men and 55 for women, with a transition to the retirement age of 65, has been taken into account. For all other employees, the new retirement
age of 65 for men and women has been taken into account in accordance with the applicable rules (2003 pension reform including transitional
rules).
If the corridor pension rule results in a lower retirement age, the lower age was used as retirement age.
• 2008-P statistical tables of Aktuarverein Österreich (life-expectancy tables for salaried staff)
Sensitivity analysis
(€ million)
Effect on defined benefit obligation
Discount rate
Salary increase rate
Pension increase rate
– 0.25 %
0.25 %
– 0.25 %
0.25 %
– 0.25 %
0.25 %
180
– 169
– 49
50
– 125
131
No provisions are made for defined-contribution plans. Payments agreed to be made to a pension fund for defined-contribution plans are
­recognised as an expense.
120 2013 Annual Report · Bank Austria
A.6.9.2 – Other provisions
Provisions for risks and charges are recognised when
• the entity has a present obligation (legal or constructive) as a result of a past event;
• it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation; and
• a reliable estimate can be made of the amount of the obligation.
The amounts recognised as provisions are the best estimate of the expenditure required to settle the present obligation. The risks and uncertainties
that inevitably surround the relevant events and circumstances are taken into account in reaching the best estimate of a provision.
Where the effect of the time value of money is significant, the amount of the provision should be the present value of the best estimate of the cost
required to settle the obligation. The discount rate used reflects the current market assessments.
Provisions are reviewed periodically and adjusted to reflect the current best estimate. If it becomes clear that it is no longer probable that an
­outflow of resources embodying economic benefits will be required to settle the obligation, the provision is reversed.
Provisions are used only for expenses for which they were originally recognised. Allocations made in the year are recognised in the profit and loss
item “Provisions for risks and charges” and include increases due to the passage of time; they are also net of any reversal.
“Other provisions” also include obligations relating to benefits due to agents, specifically supplementary customer portfolio payments, merit payments, contractual payments and payments under non-competition agreements, which are measured as per defined benefit plans; accordingly
these obligations are calculated using the projected unit credit projection method (see above under Retirement Payments and Similar Obligations).
Contingent liabilities, which include certain guarantees and letters of credit pledged as collateral security, are possible obligations that arise from
past events whose existence will be confirmed only by occurrence or non-occurrence, of one or more uncertain future events not wholly within the
control of Bank Austria, or are present obligations that have arisen from past events but are not recognised because it is not probable that
settlement will require the outflow of resources, or because the amount of obligation cannot be reliably measured.
Contingent liabilities are not recognised in the financial statements but are disclosed unless the probability of settlement is low.
A.6.9.3 – Share-based payments
Equity-settled payments made to employees in consideration of services rendered, using equity instruments comprise:
• Stock options;
• Performance shares (i. e. awarded on attainment of certain objectives);
• Restricted shares (i. e. subject to a lock-up period).
Considering the difficulty of reliably measuring the fair value of the services acquired against equity-settled payments, reference is made to the fair
value of the instruments themselves, measured at the date of the allocation.
This fair value is recognised as cost in the profit and loss item “Administrative costs – staff expense” offsetting the Shareholders’ Equity item
“Reserves”, on an accruals basis over the period in which the services are acquired.
The fair value of a cash-settled share-based payment, the services acquired and the liability incurred are measured at the fair value of the liability,
recognised in the item “Other liabilities”. The fair value of the liability, as long as it remains unsettled, is remeasured at each balance sheet date
and all changes in fair value are recognised in the profit and loss item “Administrative costs”.
A.6.9.4 – Other long-term employee benefits
Long-term employee benefits – e. g. long-service bonuses, paid on reaching a predefined number of years’ service – are recognised in the item
“Other liabilities” on the basis of the measurement at the balance sheet date of the liability, also in this case determined by an external actuary
using the Projected Unit Credit Method (see section “Provisions for risks and charges – post-employment benefits”).
Gains (losses) on this type of benefit are recognised at once through profit or loss.
Bank Austria · 2013 Annual Report 121
Consolidated Financial Statements in accordance with IFRSs
A – Accounting policies (continued)
A.6.10 – Equity
Equity is composed of paid-in capital, i. e., capital made available to the company by shareholders (subscribed capital plus capital reserves), and
earned capital (retained earnings, foreign currency translation reserves, IAS 39 reserves, actuarial gains/losses, profit carried forward from the
previous year, and net profit). The IAS 39 reserves include gains and losses on available-for-sale financial assets (available-for-sale reserve),
which are not recognised in income, and those components of hedge accounting in accordance with IAS 39 which are not included in income
(cash flow hedge reserve), after adjustment for deferred taxes.
Treasury shares held are deducted from equity. The difference between the price on a later sale of treasury shares and the related post-tax
repurchase cost is recognised directly in equity.
A.6.11 – Net interest
Interest income and expense and similar income and expense items relate to monetary items – i. e. liquidity and debt, financial instruments held
for trading, measured at fair value through profit or loss or available for sale, HtM financial assets, loans and receivables, deposits, and securities
in issue.
Interest income and expense are recognised through profit or loss with respect to all instruments measured at amortised cost, using the effective
interest method.
Interest also includes the net credit or debit balance of differentials and margins on financial derivatives:
• hedging interest-bearing assets and liabilities;
• HfT but linked for business purposes to assets and liabilities designated as measured at fair value (fair value option);
• linked for business purposes to HfT assets and liabilities paying differentials or margins on different maturities.
A.6.12 – Fees and commissions
Fee and commission income and expense that are integral to the effective interest rate on a financial asset or liability are included in the
­measurement of the effective interest rate.
Other fees and commission income, including account servicing fees, investment managing fees, sales commission, placement fees and
­syndication fees, are recognised as the related services are performed.
Other fees and commission expenses relate mainly to transaction and service fees, which are expensed as the services are received.
A.6.13 – Dividends
Dividends are recognised in profit or loss in the financial year in which their distribution has been approved.
A.6.14 – Gains and losses on disposals of financial instruments
This item shows the results from disposals of loans and receivables, available-for-sale financial assets, held-to-maturity investments and financial
liabilities. Gains and losses on disposal of financial assets held for trading and on financial instruments at fair value through profit or loss are not
included.
A.6.15 – Gains and losses on financial assets/liabilities at fair value through profit or loss
This item includes gains and losses on financial assets and financial liabilities as well as the results from the measurement of these items at their
fair values.
A.6.16 – Impairment losses on loans/Impairment losses on other financial transactions
These items include write-downs of loans, write-offs and additions to provisions for guarantees and commitments, and income from write-backs
as well as recoveries of loans previously written off.
122 2013 Annual Report · Bank Austria
A.6.17 – Impairment / write-backs on property, plant and equipment and on intangible assets
Write-downs on assets held under finance leases are part of this item.
A.6.18 – Profit (loss) of associates
Dividends received from associates are included in the item Dividend income.
A.6.19 – Gains and losses on disposal of investments
This item includes gains/losses on the disposal of investments in property and other assets.
A.7 – Information on Fair Value
A.7.1 – General overview
This section presents a disclosure of reclassified financial instruments according to IAS 39 and information on fair value as required by IFRS 13.
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the
measurement date (i. e. an exit price).
The fair value of a financial liability with a demand feature (e. g. a demand deposit) is not less than the amount payable on demand, discounted from
the first date that the amount could be required to be paid.
For financial instruments listed in active markets, fair value is determined on the basis of official prices in the principal market to which the Group has
access (Mark to Market).
A financial instrument is regarded as quoted in an active market if quoted prices are readily and regularly available from a pricing service, dealer,
­broker, agency that determines prices or regulatory agency, and those prices represent actual and regularly occurring market transactions on an arm’s
length basis. If a published price quotation in an active market does not exist for a financial instrument in its entirety, but active markets exist for its
component parts, fair value is determined on the basis of the relevant market prices for the component parts.
If the observable prices in an active market for the identical item held by another party as an asset, or other observable inputs, such as the quoted
price in a market that is not active for the identical item held by another party as an asset are not available, the Group should use another valuation
technique, such as:
(i)an income approach (e. g. a present value technique that takes into account the future cash flows that a market participant would expect to receive
from holding the liability or equity instrument as an asset);
(ii)a market approach (e. g. using quoted prices for similar liabilities or equity instruments held by other parties as assets).
The Group uses valuation models (Mark to Model) in keeping with the methods generally accepted and used by the market. Valuation models include
techniques based on the discounting of future cash flows and on volatility estimates, and they are subject to revision both during their development
and periodically in order to ensure their consistency with the objectives of the valuation.
These methods use inputs based on prices set in recent transactions for the instrument being valued and/or prices/quotations for instruments having
similar characteristics in terms of risk profile.
Indeed, these prices /quotations are relevant for determining significant parameters in terms of the credit risk, liquidity risk and price risk of the
­instrument being valued.
Reference to these “market” parameters makes it possible to limit the discretionary nature of the valuation, and ensures that the resulting fair value
can be verified.
If for one or more risk factors it is not possible to refer to market data, the valuation models employed use estimates based on historical data as
inputs.
Bank Austria · 2013 Annual Report 123
Consolidated Financial Statements in accordance with IFRSs
A – Accounting policies (continued)
As a further guarantee of the objectivity of valuations derived from valuation models, the Group employs:
• independent price verifications (IPVs);
• fair value adjustments (FVAs).
Independent price verification requires that the prices for trading positions be verified monthly by Risk Management units that are independent
from the units that assume the risk exposure.
This verification calls for comparing and adjusting the daily price in line with valuations obtained from independent market participants.
For instruments not quoted in active markets, the above verification process uses prices contributed by information providers as a reference, and
assigns a greater weighting to those prices that are considered representative of the instrument being valued.
This valuation includes the “executability” of the transaction at the price observed, the number of contributors, the degree of similarity of the
financial instruments, the consistency of prices from different sources, and the process followed by the information provider to obtain the
­information.
Independent price verification is supplemented by the calculation of further regulatory fair-value adjustments, which are also recognised for
accounting purposes, to take into account risks mainly associated with both the limited liquidity of the positions, the valuation models used and
counterparty risk.
A.7.2 – Fair value hierarchy
IFRS 13 calls for classifying instruments being measured at fair value as a function of the ability to observe the inputs used for pricing.
To be specific, three levels are specified:
• Level 1: the fair value of instruments classified in this level is determined based on quotation prices observed in active markets;
• Level 2: the fair value of instruments classified in this level is determined based on valuation models that use inputs that can be observed in
active markets;
• Level 3: the fair value of instruments classified in this level is determined based on valuation models that primarily use inputs that cannot be
observed in active markets.
The following tables show a breakdown of financial assets and liabilities designated at fair value according to the above-mentioned levels, as
well as the annual changes of Level 3 assets or liabilities.
Accounting portfolios – Breakdown by fair value levels
FINANCIAL ASSETS / LIABILITIES MEASURED AT FAIR VALUE
Financial assets held for trading
Financial assets at fair value through profit or loss
Available-for-sale financial assets
Hedging derivative assets
Property, plant and equipment (measured at fair value)
Total
Financial liabilities held for trading
Financial liabilities at fair value through profit or loss
Hedging derivative liabilities
Total
124 2013 Annual Report · Bank Austria
(€ million)
31 Dec. 2013
31 Dec. 2012
LEVEL 1
LEVEL 2
LEVEL 3
LEVEL 1
LEVEL 2
LEVEL 3
306
21
13,996
–
–
14,323
31
–
–
31
2,115
236
6,165
2,911
–
11,426
1,586
788
2,272
4,646
13
86
1,341
2
41
1,483
7
–
1
8
284
75
9,914
–
–
10,273
42
–
–
42
2,496
224
8,913
4,125
–
15,758
2,152
1,152
2,988
6,291
76
127
2,236
–
78
2,517
2
–
1
4
Annual changes in financial assets at fair value level 3
(€ million)
HELD FOR TRADING
Opening balances
Increases
Purchases
Profits recognised in:
Income statement
of which unrealised gains 1)
Equity 2)
Transfers from other levels
Other increases
Decreases
Sales
Redemptions
Losses recognised in:
Income statement
of which unrealised losses 3)
Equity 4)
Transfers to other levels
Other decreases
Closing balances
HEDGING DERIVATIVES
90
80
32
143
7
–
2,158
962
685
–
–
–
33
4
X
10
5
– 94
– 42
– 35
7
4
X
–
–
– 23
–
– 20
18
11
226
2
30
– 884
– 319
– 193
–
–
–
–
–
–
–
–
–5
–1
X
–1
– 10
76
–2
–2
X
–
–1
127
– 70
– 25
– 243
– 36
– 22
2,236
–
–
–
–
–
–
2013
FINANCIAL ASSETS
AT FAIR VALUE
THROUGH
PROFIT OR LOSS
AVAILABLE FOR SALE
HEDGING DERIVATIVES
HELD FOR TRADING
Opening balances
Increases
Purchases
Profits recognised in:
Income statement
of which unrealised gains1)
Equity 2)
Transfers from other levels
Other increases
Decreases
Sales
Redemptions
Losses recognised in:
Income statement
of which unrealised losses3)
Equity 4)
Transfers to other levels
Other decreases
Closing balances
2012
FINANCIAL ASSETS
AT FAIR VALUE
THROUGH
PROFIT OR LOSS
AVAILABLE FOR SALE
76
744
721
127
6
–
2,236
928
495
–
2
2
15
2
X
1
6
– 806
– 735
– 23
5
5
X
–
1
– 47
–
– 16
138
–
69
139
87
– 1,824
– 637
– 15
–
–
–
–
–
–
–
–
–4
–
X
–
– 45
13
– 29
– 29
X
–
–2
86
– 34
–
– 138
– 840
– 159
1,341
–
–
–
–
–
2
1), 3) Increases/decreases in financial assets are recognised in the income statement in the following items:
• Gains and losses on financial assets held for trading;
• Fair value adjustments in hedge accounting;
• Gains and losses on financial assets at fair value through profit or loss.
2), 4) Gains or losses arising out of changes in fair value are recognised in the equity item “Revaluation reserves” – except losses due to impairment and exchange rate gains or
losses on monetary items (debt instruments) which are recognised under “Impairment losses on available-for-sale financial assets” and “Gains and losses on financial assets and
liabilities held for trading”, respectively – until the financial asset is sold, at which time cumulative gains and losses presented in revaluation reserves are recognised in profit or loss
in “Gains (losses) on disposal or repurchase of available-for-sale financial assets”.
Bank Austria · 2013 Annual Report 125
Consolidated Financial Statements in accordance with IFRSs
A – Accounting policies (continued)
Annual changes in financial liabilities at fair value level 3
(€ million)
2012
FINANCIAL LIABILITIES
AT FAIR VALUE
THROUGH
HELD FOR TRADING
PROFIT OR LOSS
Opening balances
Increases
Issuance
Losses recognised in:
Income statement
of which unrealised losses 1)
Equity
Transfers from other levels
Other increases
Decreases
Redemptions
Purchases
Profits recognised in:
Income statement
of which unrealised gains
Equity
Transfers to other levels
Other decreases
Closing balances
Opening balances
Increases
Issuance
Losses recognised in:
Income statement
of which unrealised losses
Equity
Transfers from other levels
Other increases
Decreases
Redemptions
Purchases
Profits recognised in:
Income statement
of which unrealised gains 2)
Equity
Transfers to other levels
Other decreases
Closing balances
1), 2) Increases / decreases in financial liabilities are recognised in the income statement in the following items:
• Gains and losses on financial liabilities held for trading;
• Fair value adjustments in hedge accounting;
• Gains and losses on financial liabilities at fair value through profit or loss.
126 2013 Annual Report · Bank Austria
HEDGING DERIVATIVES
10
38
–
–
–
–
–
1
–
37
2
X
–
1
– 46
– 41
–
–
–
X
–
–
–
–
–
–
–
–
–
1
–
–
–
–1
–1
X
–
–4
2
–
–
X
–
–
–
–
–
–
–
–
1
2013
FINANCIAL LIABILITIES
AT FAIR VALUE
THROUGH
HELD FOR TRADING
PROFIT OR LOSS
HEDGING DERIVATIVES
2
21
–
–
–
–
1
1
1
21
6
X
–
–
– 17
– 16
–
–
–
X
–
–
–
–
–
–
–
–
–
–
–1
–
–
–1
–
X
–
–
7
–
–
X
–
–
–
–
–
–
–
–1
1
Accounting portfolios measured at fair value: transfers between Levels of the fair value hierarchy (Level 1 and Level 2)
31 december 2013
LEVEL 1
(€ million)
LEVEL 2
Financial assets
Financial assets held for trading
Transfer from Level 1
Transfer from Level 2
Financial assets at fair value through profit or loss
Transfer from Level 1
Transfer from Level 2
Available-for-sale financial assets
Transfer from Level 1
Transfer from Level 2
Hedging derivatives assets
Transfer from Level 1
Transfer from Level 2
X
– 28
–4
X
X
–4
–
X
X
– 1,228
–49
X
X
–
–
X
X
–
–
X
X
–
–
X
X
–
–
X
Financial liabilities
Financial liabilities held for trading
Transfer from Level 1
Transfer from Level 2
Financial liabilities at fair value through profit or loss
Transfer from Level 1
Transfer from Level 2
Hedging derivatives liabilities
Transfer from Level 1
Transfer from Level 2
The level migrations for fixed income securities are due to alignment with fair value hierarchy levels provided by the UCG group-wide bond IPV process.
Since the global IPV process has access to more markets in combination with a more accurate methodology this constitutes an improvement of the
classification on average.
A.7.3 – Day One Profit / Loss
The value at which financial instruments are recognised is equal to their fair value on the same date.
The fair value of financial instruments, other than those designated at fair value through profit or loss, at their recognition date is usually assumed to
be equal to the amount collected or paid.
For financial instruments held for trading (see Part A.5.3.2 above) and instruments designated at fair value (see Part A.5.3.2 above), any difference
from the amount collected or paid is posted under the appropriate items of the income statement.
The use of conservative valuation models, the processes described above for revising the models used and related parameters and value adjustments
to reflect model risk ensure that the amount recognised in the income statement is not derived from the use of valuation parameters that cannot be
observed.
More specifically, the calculation of fair value adjustments to reflect model risk ensures that the fair value portion of these instruments relating to the
use of subjective parameters is not recognised in the profit and loss account, but changes the balance sheet value of these instruments.
Recognition of this portion in the profit and loss account is then made only when objective parameters are applied and therefore the adjustments are
derecognised.
The balance of value adjustments to reflect model risk was €69 million at 31 December 2013.
Bank Austria · 2013 Annual Report 127
Consolidated Financial Statements in accordance with IFRSs
A – Accounting policies (continued)
A.7.4 – Additional information on fair value
We hereby provide information required under IFRS 13 about accounting portfolios measured at fair value on a recurring basis.
Fixed income securities
Fixed income securities are priced in a two-tier process depending on the liquidity in the respective market. Liquid instruments in active markets
are marked to market and consequently positions in these instruments are disclosed in reference to the fair value hierarchy under Level 1.
Instruments not traded in active markets are marked to model based on implied credit spread curves derived from the former Level 1 instruments.
The model maximises the use of observable input and minimises the use of unobservable inputs. In this respect, depending on the proximity of
the credit spread curve applied, the bonds are disclosed as Level 2 or Level 3, respectively; Level 3 is applied in case comparable credit spread
curves are not available (and unobservable credit spreads are used), or in the case of complex bonds. Under fair value accounting, fair value
adjustments for liquidity and model deficiencies compensate for the lack of market observables for the Level 2 and Level 3 positions.
In the global bond Independent Price Verification (IPV) process, market prices of Level 1 bonds and pricing models for illiquid bonds are regularly
verified for accuracy. The global IPV process is already established in UniCredit Bank Austria AG and is subject to rollout to the CEE subsidiaries in
2014; currently the CEE subsidiaries perform a local IPV process in compliance with the Group policy.
Structured financial products
The company determines the fair value of structured financial products using the appropriate derivative valuation methodology given the nature of
the embedded derivative. Such instruments are classified as Level 2 or Level 3 depending on the observability of significant inputs to the model.
Asset-backed securities
UniCredit’s “Structured Credit Bonds Valuation Group Policy” is centred on:
• extension and implementation across all the Group’s legal entities of the new Independent Price Verification (IPV) process suited to the changed
market conditions for structured credit bonds;
• integration of the current Fair Value Adjustments Policy.
According to the IPV process the quality of a price is assessed based upon the availability of quotes of independent market players for identical
assets. The process relies in the first instance on Markit as reliable collector of market quotes.
As a second step “fallback” prices are assessed by benchmarking each security to a pool of similar securities with available market quotes.
OTC derivatives
Fair value of derivatives not traded in an active market is determined using a valuation technique. In such cases, where active markets exist for its
component parts, then fair value is determined on the basis of the relevant market prices for the component parts.
Valuation techniques that are based on inputs that are observable are referred to as Level 2 valuations. Valuation techniques that use significant
unobservable inputs are referred to as Level 3 valuations.
Equity instruments
Equity instruments are assigned to Level 1 when a quoted price is available on an active market and to Level 3 when no quotations are available
or quotations have been suspended indefinitely (equity instruments are disclosed as Level 2 only if the market where the equity is quoted is not
considered to be sufficiently active and therefore an adjustment to the quoted prices appears to be required.
Investment funds
Bank Austria group holds investments in certain investment funds that calculate the net asset value (NAV) per share, including mutual funds,
­private equity funds, and real estate funds. The company’s investments include co-investments in funds that are managed by the company and
investments in funds that are managed by third parties.
128 2013 Annual Report · Bank Austria
Private equity funds
Private equity funds are disclosed as Level 3 since reliable NAV prices are usually not available.
When reliable information for fair value measurements is not available, private equity funds are valued at cost and classified as available for
sale (“fixed assets”) under IAS 39. An increase in value of the private equity asset does not lead to an increase in book value, while a value
increase is only shown at exit via capital gains. A decline of value might give reason for an impairment if certain criteria are met. Objective
evidence is given when an adverse effect on the expected future cash flows can be presumed, and quantified reliably, and is significant or
­prolonged.
Other funds
Bank Austria group holds investments also in mutual funds and real estate funds.
Mutual funds are usually assigned to Level 1 or Level 2 due to the high level of transparency and traceability of their market and observable
inputs.
Real estate funds disclosure as level 2 or level 3 is mainly related to the characteristics of their underlying asset. Regardless of the typology,
investment funds are evaluated through an adequate adjustment of the NAV based on the specific features of each fund.
Fair value adjustments
The base fair value assessments have to be adjusted for factors not included in the base NPV that a market participant would consider in order
to arrive at the derivative instrument’s fair value. Such adjustments, within the Bank Austria Group, include:
• Credit and debit valuation adjustment (CVA / DVA)
• Model risk
• Close-out risk
• Other adjustments
Credit and debit valuation adjustment (CVA/DVA)
Credit valuation adjustments (CVAs) and debit valuation adjustments (DVAs) are incorporated into derivative valuations to reflect the impact on
fair value of counterparty credit risk and UniCredit Bank Austria AG’s own credit quality, respectively.
UniCredit CVA / DVA methodology is based on the following input:
• Expected exposure profiles derived by simulation techniques.
• Simulated exposures also take into account Specific Wrong Way Risk (e. g. EQ options, repos) is considered.
Depending on the counterparty segment a mixed approach is applied:
1) unilateral CVA calculation based on historical PDs and LGDs (for non-financial counterparts and counterparts with no single-name CDS),
2) bilateral CVA calculation based on market-implied PDs and LGDs (CDS).
For customers with PD=1 (i. e. defaulted customers), an additional CVA/DVA is not calculated in order to avoid double counting with a general
or specific loan loss provision.
OIS Discounting Adjustment
The group has applied the following approximation centrally by means of an adjustment as of 31 December 2013 in order to reflect the effect of
OIS (overnight index swap) discounting for collateralised exposures: The EUR discount curve is replaced with OIS curve and the impact on profit
and loss is evaluated via a full revaluation. In order to cover the OIS effect from non-EUR currencies, an additional OIS-model reserve was booked.
Both adjustments were booked as changes in accounting estimates and booked for the first time in 2013.
Model risk
Financial models are used for the valuation of the financial instruments if direct market quotes are not readily available. In general the model risk
is represented by the possibility that a financial instrument’s evaluation is actually sensitive to the choice of model. It is possible to value the same
financial instrument by using alternative models which could provide different results in terms of pricing. The model risk adjustments refer to the
risk that the actual fair value of the instrument differs from the value produced by the model. The reserve with regard to structured own issues
(own credit spread) is covered under the model risk reserve.
Bank Austria · 2013 Annual Report 129
Consolidated Financial Statements in accordance with IFRSs
A – Accounting policies (continued)
Close-out risk
The close-out adjustment accounts for the costs of closing an (aggregated) position measured at fair value. The position could be closed by a
sale (or purchase in the case of a short position), or by entering into a new transaction (or several transactions) that offsets (hedges) the open
position. The close-out costs are typically derived from the bid / ask spreads observed on the market. It accounts for the fact that a position is
valued at mid but can only be closed at bid or ask. Therefore the bid/ask spread determines the adjustment. Moreover a close-out adjustment
of the NAV is required when there are some penalties related to position write-off in an investment fund.
Other adjustments
Other fair value adjustments, which are not included in the previous categories, could be taken into consideration to align the evaluation to the
current exit price, e. g. adjustments of equity prices whose quotation on the market is not representative of the effective exit price or adjustments
of less liquid securities.
Description of the valuation processes used by the entity for fair value measurements categorised within
Level 3 of the fair value hierarchy
UniCredit ensures that the value applied to each trading book position appropriately reflects the current fair value. Fair value measurements of
assets and liabilities are determined using various techniques, including, but not limited to, discounted cash flows and internal models.
Based on the observability of inputs used, all the financial instruments are classified as Level 1, Level 2 or Level 3 of the fair value hierarchy.
When a position involves one or more significant inputs that are not directly observable, additional price verification procedures are applied.
These procedures may include reviewing relevant historical data, analysing profit and loss, valuing each component of a structured trade
individually, and benchmarking, among others. This approach involves estimation and expert judgment and, therefore, might require valuation
adjustments which take into account bid-ask spreads, liquidity and counterparty risk, besides the employed pricing model.
According to Group Market Risk Governance Guidelines, in order to ensure the adequate separation between functions in charge of development
activities and functions in charge of validation, all pricing models developed by legal entities’ front-office functions are centrally and independently tested and validated by the Holding Company Market Risk functions. The purpose of this independent control framework is to assess
model risk arising from models’ theoretical soundness, calibration techniques where needed, and the appropriateness of the model for a specific
product in a defined market.
In addition to daily marking to market or marking to model, Independent Price Verification (IPV) shall be performed. The Global Bond IPV Project
is aimed at supplying a market risk-independent fair value (FV) for any illiquid instrument.
The sensitivity analysis for Level 3 positions with respect to the unobservable model input is based on the following categories of model inputs:
Credit Spreads (SP): For instruments exposed to issuer risk the unobservable input is mainly the issuer credit spread.
Interest Rates (IR): In the absence of liquid interest rate swap markets the term structure of the yield curve is proxied.
Equity (EQ): In the absence of active markets equity prices are proxied.
The reasonable alternative estimate for the model input is disclosed in the column “Variation Range”.
The sensitivity analysis for the Bank Austria Group reveals that the Level 3 position resides in the regulatory banking book (BB); from a financial
reporting perspective the fixed income securities are predominantly booked as available for sale (AfS) and derivatives in the BB are mainly used
for hedge accounting. As the portfolio in the Bank Austria Group is rather plain by nature, there are materially no more complex unobservable
model inputs applied (e. g. volatilities).
130 2013 Annual Report · Bank Austria
(€ million)
Banking Book
Trading Book
– 0.10
0.00
40bp –480bp
– 15.51
0.00
– 0.03
– 12.55
– 2.92
– 3.27
0.00
– 0.04
– 0.02
– 3.20
10bp
25bp
50bp
100bp
Corporates & Indices
– 2.95
– 0.48
10bp –300bp
Treas /Muni /Supr
– 5.09
1.57
– 0.12
– 0.04
– 6.50
– 0.01
0.00
0.00
0.00
– 0.01
15bp
10bp
30bp
70bp –250bp
– 23.66
– 3.76
– 0.25
– 0.58
0.00
0.14
0.00
0.90
Total IR
– 0.83
1.03
Total EQ
0.54
– 0.73
– 23.95
– 3.45
ABS / MBS
Credit Spread
Fixed Income Securities
Services – Finance
AAA
AA
A
BBB
AAA
AA
A
<= BBB
Interest Rate
Derivatives, Money Market,
SFT, Equities
Total SP
Equity
Grand Total
HRK
UAH
XAU
Variation Range
100 bp
100 bp
100 bp
15%
Description of the valuation technique used to measure the fair value of items categorised in Level 2 or Level 3
Valuation techniques are used to value positions for which a market price is not available from market sources. UniCredit Group uses well known
valuation techniques for determining fair values of financial and non-financial instruments that are not actively traded and quoted. The valuation
techniques used for Level 2 and Level 3 assets and liabilities are described as follows.
Option pricing model
Option model valuation techniques are generally used for instruments in which the holder has a contingent right or obligation based on the
­occurrence of a future event, such as the price of a referenced asset going above or below a predetermined strike price. Option models estimate
the likelihood of the specified event occurring by incorporating assumptions such as volatility estimates, price of the underlying instrument and
expected rate of return.
Discounted cash flow
Discounted cash flow valuation techniques generally consist of developing an estimate of future cash flows that are expected to occur over the life
of an instrument. The model requires the estimation of the cash flow and the adoption of market parameters for the discounting: the discount rate
or discount margin reflects the credit and / or funding spreads required by the market for instruments with similar risk and liquidity profiles
to produce a “present value”. The fair value of the contract is given by the sum of the present values of future cash flows.
Bank Austria · 2013 Annual Report 131
Consolidated Financial Statements in accordance with IFRSs
A – Accounting policies (continued)
Hazard Rate Model
Unlike bonds, the gain or loss from a CDS position cannot be computed simply by taking the difference between current market quoted price
plus the coupons received and the purchase price. To value a CDS we need to use a term structure of default swap spreads, a recovery rate
assumption and a model.
Market approach
A valuation technique that uses prices generated by market transactions involving identical or comparable (i. e. similar) assets, liabilities or
a group of assets and liabilities, such as a business.
Adjusted NAV
Net asset value is the total value of a fund’s assets less liabilities. An increase in net asset value would result in an increase in a fair value
­measurement.
Description of the unobservable inputs used to measure the fair value of items categorised in Level 3 and
of the sensitivity of the fair value measurement to changes in those inputs
The directional sensitivity of the company’s Level 3 fair value measurements to changes in significant unobservable inputs is provided below.
For fair value measurement where significant unobservable inputs are used (Level 3) sensitivity analysis is performed in order to generate a range
of reasonably possible alternative valuations. The Group considers that the impact of an unobservable input on the Level 3 fair value measurements depends on the correlation between various inputs used in the valuation process. Furthermore, the effect of a change in an unobservable
input impacts the amount and the direction of the fair value measurement depending also on the nature of the instrument and on whether the
instrument is held as an asset or as a liability.
Volatility
Volatility is a measure for variation of price of a financial instrument over time. In particular, volatility measures the speed and severity of
market price changes for an instrument, parameter or market index given how much the particular instrument, parameter or index changes
in value over time, expressed as a percentage of relative change in price. The higher the volatility of the underlying, the riskier the instrument.
In general, long option positions (assets) benefit from increases in volatility, whereas short option positions (liabilities) will suffer losses.
There are different types of volatility: volatility of interest rate, inflation volatility, volatility of foreign exchange and volatility of equity stocks, equity
or other indices.
Correlation
Correlation is a measure of the relationship between the movements of two variables. When parameters are positively correlated, an increase in
correlation results in a higher fair value measurement. On the contrary, given a short correlation position, an increase in correlation, in isolation,
would generally result in a decrease in a fair value measurement. Therefore changes in correlation levels can have a major impact, favourable or
unfavourable, on the fair value of an instrument, depending on the type of correlation.
Correlation is a pricing input for a derivative product where the payoff is driven by multiple underlying risks. The level of correlation used in the
valuation of derivatives with multiple underlying risks depends on a number of factors including the nature of those risks.
Dividends
The derivation of a forward price for an individual stock or index is important both for measuring fair value for forward or swap contracts and for
measuring fair value using option pricing models. The relationship between the current stock price and the forward price is based on a combination of expected future dividend levels and payment timings and, to a lesser extent, the relevant funding rates applicable to the stock in question.
The dividend yield and timing represents the most significant parameter in determining fair value for instruments that are sensitive to an equity
forward price.
Interest rate curve
Less liquid currencies’ interest curve refers to the rates in currencies for which a market liquidity in terms of tightness, depth and resiliency does
not exist. The illiquidity of these input data directly impacts the valuation of bonds or derivatives expressed in illiquid currencies.
Credit spreads
Different valuation models, especially for credit derivatives, require an input for the credit spread which reflects the credit quality of the associated
credit name. The credit spread of a particular security is quoted in relation to the yield on a benchmark security or reference rate, typically either
U. S. Treasury or LIBOR, and is generally expressed in terms of basis points. The ranges for credit spreads cover a variety of underlyings (index
and single names), regions, sectors, maturities and credit qualities (high-yield and investment-grade). The broad range of this population gives
rise to the width of the ranges of unobservable inputs.
132 2013 Annual Report · Bank Austria
Loss Given Default (LGD)/recovery rate
LGD, also known as loss severity (the inverse concept is the recovery rate), represents the percentage of contractual cash flows lost in the event of
a default, expressed as the net amount of loss relative to the outstanding balance. An increase in the loss severity, in isolation, would result in a
decrease in a fair value measurement. Loss Given Default is facility-specific because such losses are generally understood to be influenced by key
transaction characteristics such as the presence of collateral and the degree of subordination.
Price
Where market prices are not observable, comparison via proxy is used to measure a fair value.
Prepayment rate (PR)
The PR is the estimated rate at which forecast prepayments of principal of the related debt instrument are expected to occur. Voluntary unscheduled
payments (prepayments) change the future cash flows for the investor and thereby change the fair value of the security.
In general, as prepayment speeds change, the weighted average life of the security changes, which impacts the valuation either positively or
­negatively, depending upon the nature of the security and the direction of the change in the weighted average life.
Probability of Default (PD)
The probability of default is an estimate of the likelihood of not collecting contractual amounts. It provides an estimate of the likelihood that a client
of a financial institution will be unable to meet its debt obligations over a particular time horizon. The PD of an obligor not only depends on the risk
characteristics of that particular obligor but also on the economic environment and the degree to which it affects the obligor.
Financial instruments not carried at fair value (FV), including “Loans and receivables with customers and banks” and “Deposits from customers and
banks”, are not managed on a fair value basis.
For these instruments, fair values are calculated solely in order to comply with disclosure requirements and do not impact the balance sheet nor
profit or loss. Additionally, since the instruments generally are not traded, FV measurement is based on internal parameters considered not observable inputs according to IFRS 13.
When comparing fair value disclosures as of 31 December 2013 with prior-year disclosures as of 31 December 2012 one must take into account
that the methodological approach of fair value calculation of loans and deposits was materially improved during 2013, taking into account more
­precise and consistent credit risk information in the discounting routines. In general the trend of decreasing spreads and interest rate levels in 2013
should entail soaring fair value results.
Loans and receivables
The fair value of loans and receivables with customers and banks measured at amortised cost is mainly determined using a risk-adjusted net
­present value approach. For some portfolios simplified approaches are applied, taking into consideration their financial features.
Cash flows include capital repayments, interest payments and any other charges and depend on contractual conditions and market conditions
(i. e. interest rates).
The risk-free rate represents the amount of interest the market asks for investments with no risk for a specific maturity.
Credit Spread (CS) represents the excess return a market participant asks for a risky investment. CS for non-quoted products, like commercial
instruments, cannot be derived from observable market prices; the bank has therefore estimated the CS based on counterpart/transaction specific
factors (i. e. recovery-rate assumptions and probability of default).
For the purpose of defining the level of the fair value hierarchy (Level 2 or Level 3), the bank estimates whether the estimated credit spread has a
material effect on the fair value. If the fair value calculated on the basis of a discount rate including the estimated credit spread does not differ
materially from a risk-free present value, the loans and receivables are classified as Level 2.
Bank Austria · 2013 Annual Report 133
Consolidated Financial Statements in accordance with IFRSs
A – Accounting policies (continued)
Liabilities
The fair value of liabilities, recorded at amortised cost, is determined using the Discounted Cash Flow model as previously described for loans and
receivables. The bank’s own credit spread is determined using Bank Austria’s subordinated and non-subordinated risk curves.
The classification into the levels of the fair value hierarchy is made according to the same methodology as for loans and receivables.
Held-to-maturity investments
Considering that held-to-maturity investments are mainly composed of securities, fair value for this asset class is determined according to what was
previously explained in the section “Additional information on fair value – fixed income securities”.
Cash and cash balances
Cash and cash balances are not carried at fair value on the consolidated balance sheet, but they are carried at amounts that approximate fair value,
due to their short-term nature and generally negligible credit risk.
Debt securities in issue
The fair value of debt securities in issue, recorded at amortised cost, is determined using the Discounted Cash Flow model.
A.7.5 – Transfer between portfolios
In accordance with the amendments to IAS 39 and IFRS 7, Reclassification of Financial Assets, published in October 2008, and in response to the rare
circumstances presented by the financial market crisis, we had reclassified asset-backed securities (ABSs/specific securitised assets) from financial
assets held for trading into loans and receivables with customers with effect from 1 July 2008 at the fair values determined at that date.
In accordance with IAS 39.50E, bonds included in the available-for-sale category had been reclassified into loans and receivables with banks with
­effect from 1 August 2011. There is the intention to hold these reclassified bonds until maturity.
The following table shows the effects of this reclassification by item in the statement of financial position and by income statement item as at
31 December 2013:
Reclassified financial assets: carrying amount, fair value and effects on comprehensive income
types of Instruments
Accounting
Portfolio
Accounting
before
Portfolio after
reclassification reclassification
Debt securities
HFT
HFT
HFT
HFT
AFS
Total
134 2013 Annual Report · Bank Austria
AFS
HTM
Loans to banks
Loans to customers
Loans to banks
Carrying
amount
as at
31 dec.
2013
– 3,599
– 10
– 18
–
– 625
– 2,946
– 3,599
(€ million)
Fair Value
as at
31 dec.
2013
Income/expenses absent
reclassification
(before taxes)
Income/expenses recognised during the period
(before taxes)
From
measurement
Other
From
measurement
Other
– 3,621
– 10
– 19
–
– 597
– 2,994
– 3,621
106
–
–2
–
60
48
106
72
–
2
–
21
49
72
–5
–
–
–
–6
–
–5
89
–
1
–
18
69
89
A.8 – Impairment test
In compliance with IFRS 3 and in conjunction with IAS 36 and IAS 38, goodwill and intangible assets with indefinite useful lives allocated to cash-generating units (CGUs) were tested for impairment as at 31 December 2013.
Goodwill per Cash Generating Unit: annual changes
Turkey
Russia
Czech Republic
Croatia
Bulgaria
Romania
Hungary
Bosnia
Serbia
Slovakia
Other
Total
(€ million)
31 Dec. 2012
Changes due to
currency movements
OTHER
CHANGES*)
Impairment
2013
31 Dec. 2013
350
795
311
50
159
134
118
39
19
88
63
2,127
– 71
– 86
– 11
–
–
–1
–
–
–
–
–
– 170
–
–
88
–
–
–
–
–
–
– 88
–
–
– 279
– 708
– 388
– 50
– 159
– 133
– 118
– 39
– 19
–
– 63
– 1,957
–
–
–
–
–
–
–
–
–
–
–
–
*) transfer of goodwill due to merger
Definition of cash-generating units (CGU)
Estimating the value in use for the purposes of goodwill impairment testing requires that goodwill is first attributed to autonomous operating units (from
the points of view of independent cash flows generated and of internal planning and reporting). These units are defined as cash-generating units
(CGU).
According to IAS 36 a CGU is the smallest identifiable group of assets that generates cash flows that are largely independent of cash flows of other
groups of assets or other CGUs. The cash-generating unit is defined as the lowest level within the Group at which goodwill is allocated for management purposes. Goodwill recognised is an intangible asset representing the future economic benefits arising from those assets acquired in a business
combination which are not individually identified.
Calculation of value in use
The impairment test is carried out by comparing the carrying value of each CGU with its recoverable amount. When the latter proves to be less than
the carrying amount, an impairment must be recorded in the financial statements. The recoverable amount of the CGU is the higher of its fair value
(net of sales costs) and the related value in use.
The value in use is determined on the basis of future cash flows expected from each CGU to which goodwill has been allocated. These cash flows are
estimated based on:
• current macroeconomic scenarios
• the budget for 2014
• the 5-year plan for the period 2015 – 2018
Projections of future results were extended to 2023 by extrapolation in order to obtain an assessment of the earning capability of the Group and its
ability to create value over time. The expected cash flow for 2023 is the basis for calculating the Terminal Value, which represents the ability of the
CGUs to generate future cash flows beyond that year. Based on the adopted methodology, Terminal Value is calculated as a perpetual income estimated on the basis of a normalised, economically sustainable cash flow, consistent with a constant long-term growth rate, as required by the IAS/IFRS
accounting standards.
The value in use is determined by discounting the financial flows at a rate that takes into account present market rates and the specific risks of the
asset. Taking into consideration the different risk levels of their respective operating environments, we used different risk premiums for each CGU
including a component related to country risk.
The corresponding carrying amount of a cash-generating unit for purposes of testing impairment of the related goodwill is determined on the basis of
pro-rata equity and the carrying amount of goodwill allocated to that unit.
Bank Austria · 2013 Annual Report 135
Consolidated Financial Statements in accordance with IFRSs
A – Accounting policies (continued)
Discounted Cash Flow Model
For the fair value calculation the Standard UniCredit Group Discounted Cash Flow Valuation Model (3-phase model) was employed throughout the
Group, as in the previous year, using the following assumptions: The cash flows were determined by subtracting the annual capital requirement,
­generated by risk-weighted assets, from net profit (net of minority interests). This capital requirement is defined as the level of capitalisation that the
Group aspires to achieve in the long term, also in light of the minimum regulatory capital requirements.
The Discounted Cash Flow model used by the Group is based on three stages:
• Phase 1 – planning period (2014 – 2018): the 2014 budget figures for net profit and risk-weighted assets were used for 2014 and multi-year plan
figures were used for subsequent years.
• Phase 2 (2019 – 2023) – in this phase the growth rates of net income and risk-weighted assets converge towards 2%. The discount rate in the
form of cost of equity (Ke) declines to the corresponding terminal value level (for details see the following section on “Calculation of cost of equity”).
• Phase 3 – perpetual annuity: calculation of the present value of a perpetual annuity on the assumption of a long-term growth rate which takes the
sustained long-term economic growth expected by Bank Austria for the euro area into account (2%).
Phase 1 is the result of a detailed planning process which does not exceed the 5-year horizon in accordance with IAS 36. The purpose of phase 2 is
to illustrate the expected long-term convergence of growth rates in these markets to those in Europe.
As required by IAS 36.33(c), the nominal growth rates applied to the model both in the intermediate period and in the TV are much lower than the
average long-term growth rate of the sector or of the countries in which the Group is present.
136 2013 Annual Report · Bank Austria
Calculation of cost of equity
The expected cash flows are discounted at the country-specific rate of cost of capital, which is determined on the basis of the long-term risk-free
interest rate of the local currency, the debt risk premium and the UniCredit equity risk premium. The discount rate is a nominal rate, net of taxes.
• Risk-free rate: Calculation is based on the historical average (6 years) of the 5-year swap rate in local currency. If no swap rate is available, the
most liquid and comparable interbank rate (with a 3-month tenor) is used.
• Risk premium for debt: This is the country risk premium calculated as the historical average (6 years) of the 5-year credit default swap paid by the
country (given the lack of time series in certain countries we considered a shorter time period or the asset swap spread of a benchmark government
bond).
• Risk premium for equity: This is calculated using the option pricing model and is based on the historical volatility of the UniCredit share price over
the last six years.
• Terminal value cost of equity: The cost of capital used in discounting cash flows converges to a specific value for each CGU. This value is determined taking into account the market‘s risk perception concerning the ability of the banking sector to generate returns in the long-term and the
level of capitalisation that the Group hopes to achieve in the long term. The terminal value cost of capital used differs depending on whether the
CGU is located in the euro area (10 %), in an Eastern European country that would in the medium term enter the euro zone (10.35%) or in another
country (11.85 %).
The relevant parameters were as follows:
Initial discount rate – Ke
Subsidiary
Croatia
Bosnia
Bulgaria
Czech Republic & Slovakia
Hungary
Romania
Russia
Slovenia
Serbia & Montenegro
Turkey
2013
2012
Final discount rate
Ke target value
Nominal growth rate
CAGR target value*)
17.13 %
14.67 %
14.70 %
12.17 %
18.71 %
19.41 %
18.73 %
12.56 %
25.30 %
22.49 %
16.43 %
14.20 %
15.35 %
12.23 %
18.27 %
19.04 %
17.90 %
12.55 %
24.69 %
23.76 %
11.85 %
11.85 %
10.35 %
10.35 %
10.35 %
11.85 %
11.85 %
10.00 %
11.85 %
11.85 %
2%
2%
2%
2%
2%
2%
2%
2%
2%
2%
*) 2013 unchanged compared with 2012.
The full impairment of goodwill in all cases implies that the value in use for each CGU is equal to the net equity. Since the value in use calculation only
reflects a best estimate assumption of a possible range of outcomes (including a sensitivity analysis based on the applied discount rates/Ke), management decided to impair the full goodwill also for those CGUs where the value in use differs slightly from net equity.
It should also be noted that the parameters and the information used to test goodwill impairment are significantly influenced by the macroeconomic
environment and market conditions, which can be subject to rapid unforeseeable changes, possibly leading to very different results as compared to
those used for the 2013 consolidated financial statements.
Due to the full impairment of the total goodwill, a sensitivity analysis is not applicable.
Bank Austria · 2013 Annual Report 137
Consolidated Financial Statements in accordance with IFRSs
A – Accounting policies (continued)
A.9 – Group of consolidated companies and changes in the group of
consolidated companies of the Bank Austria Group in 2013
Consolidated companies
domicile
COMPANY
city
country
UniCredit Bank Austria AG
AI Beteiligungs GmbH
Alpine Cayman Islands Ltd.
Ambassador Parc Dedinje d. o. o.
Arany Penzügyi Lizing Zrt.
Artist Marketing Entertainment GmbH
AS UniCredit Bank Latvia
AWT Handels Gesellschaft m. b.H.
AWT International Trade GmbH
BA Alpine Holdings Inc.
BA Betriebsobjekte GmbH
BA Betriebsobjekte GmbH & Co Beta Vermietungs OG
BA Betriebsobjekte Praha, spol. s. r. o.
BA Creditanstalt Bulus EOOD
BA Gebäudevermietungs GmbH
BA GVG-Holding GmbH
BA Immo-Gewinnscheinfonds1
BA Private Equity GmbH
BA-CA Finance II Limited
BA-CA Finance Limited
BA-CA Infrastructure Finance Advisory GmbH
BA-CA Markets & Investment Beteiligung Ges. m. b.H.
BA-CA Wien Mitte Holding GmbH
Bank Austria Finanzservice GmbH
Bank Austria Real Invest Client Investment GmbH
Bank Austria Real Invest Immobilien-Kapitalanlage GmbH
Bank Austria Real Invest Immobilien-Management GmbH
Bank Austria Wohnbaubank AG
Buchstein Immobilienverwaltung GmbH und Co OG
Bulbank Leasing EAD
CABET-Holding GmbH
CABO Beteiligungsgesellschaft m. b.H.
Cafu Vermögensverwaltung GmbH & Co OG
card complete Service Bank AG
Cards & Systems EDV-Dienstleistungs GmbH
CEAKSCH Verwaltungs G. m. b.H.
Centar Kaptol doo
Center Heinrich-Collin Straße1 Verm. GmbH u Co KG
Christoph Reisegger Gesellschaft m. b.H.
DBC Sp. z. o. o.
DC Bank AG
DC Elektronische Zahlungssysteme GmbH
Diners Club CS s. r. o.
Diners Club Polska Sp. z. o. o.
DiRana Liegenschaftsverwertungsgesellschaft m. b.H.
Domus Clean Reinigungs GmbH
DV Alpha GmbH
DV Beteiligungsverwaltungs GmbH
Europe Real-Estate Investment Fund
Europa Investment Fund Management Ltd.
Vienna
Vienna
George Town
Belgrade
Budapest
Vienna
Riga
Vienna
Vienna
Wilmington
Vienna
Vienna
Prague
Sofia
Vienna
Vienna
Vienna
Vienna
George Town
George Town
Vienna
Vienna
Vienna
Vienna
Vienna
Vienna
Vienna
Vienna
Vienna
Sofia
Vienna
Vienna
Vienna
Vienna
Vienna
Vienna
Zagreb
Vienna
Vienna
Warsaw
Vienna
Vienna
Bratislava
Warsaw
Vienna
Vienna
Vienna
Vienna
Budapest
Budapest
Austria
Austria
Cayman Islands
Serbia
Hungary
Austria
Latvia
Austria
Austria
USA
Austria
Austria
Czech Republic
Bulgaria
Austria
Austria
Austria
Austria
Cayman Islands
Cayman Islands
Austria
Austria
Austria
Austria
Austria
Austria
Austria
Austria
Austria
Bulgaria
Austria
Austria
Austria
Austria
Austria
Austria
Croatia
Austria
Austria
Poland
Austria
Austria
Slovakia
Poland
Austria
Austria
Austria
Austria
Hungary
Hungary
138 2013 Annual Report · Bank Austria
interest in %
DIREcT
INDIREcT
ownership ownership
100.00
100.00
0.00
0.00
0.00
100.00
0.00
100.00
100.00
100.00
0.00
0.00
0.00
0.00
100.00
99.00
100.00
0.00
0.00
0.00
100.00
100.00
100.00
0.00
0.00
94.95
100.00
100.00
0.00
100.00
0.00
0.00
50.10
52.00
0.00
0.00
0.00
0.00
0.00
99.94
0.00
0.00
0.00
0.00
100.00
0.00
0.00
0.00
0.00
0.00
0.00
100.00
100.00
100.00
0.00
100.00
0.00
0.00
0.00
100.00
100.00
99.45
70.00
0.00
0.00
0.00
100.00
100.00
100.00
0.00
0.00
0.00
94.95
94.95
0.00
0.00
0.00
99.45
0.00
100.00
100.00
0.00
3.50
100.00
84.47
79.34
99.00
100.00
0.00
50.10
99.94
99.94
100.00
0.00
100.00
100.00
100.00
100.00
VOTING RIGHTS
total
TOTAL
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
99.45
70.00
100.00
99.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
94.95
94.95
94.95
100.00
100.00
99.45
100.00
100.00
100.00
50.10
55.50
100.00
84.47
79.34
99.00
100.00
99.94
50.10
99.94
99.94
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
99.45
70.00
100.00
99.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
94.95
94.95
94.95
100.00
100.00
99.45
100.00
100.00
100.00
50.10
55.50
100.00
84.47
83.56
100.00
100.00
99.94
50.10
99.94
99.94
100.00
100.00
100.00
100.00
100.00
100.00
domicile
COMPANY
city
Euroventures-Austria-CA-Management GesmbH
FactorBank Aktiengesellschaft
General Logistic Solutions LLC
GUS Consulting GmbH
Human Resources Service and Development GmbH
HVB Auto Leasing EOOD
HVB Leasing EOOD
HypoVereins Immobilien EOOD
Immobilien Rating GmbH
ISB Universale Bau GmbH
ISTRA D.M.C. d. o. o.
ISTRATURIST UMAG, hotelijerstvo, turizam i turisticka agencija d. d.
IVONA Beteiligungsverwaltung GmbH
JOHA Gebäude-Errichtungs- und Vermietungsges. m. b.H.
Kaiserwasser Bau- und Errichtungs GmbH und Co OG
KLEA ZS-Immobilienvermietung G. m. b.H.
KLEA ZS-Liegenschaftsvermietung G. m. b.H.
KSG Karten-Verrechnungs- und Servicegesellschaft m. b.H.
Lassallestraße Bau-, Planungs-, Erricht.- u. Verw. ges. m. b.H.
LLC “BDK-Consulting”
LLC Ukrsotsbud
LTD SI&C AMC Ukrsots real estate
M. A. I. L Beteiligungsmanagement Ges. m. b.H. & Co. MCL Theta KG
M. A. I. L Finanzberatung Gesellschaft m. b.H.
MC Marketing GmbH
MC Retail GmbH
Mezzanin Finanzierungs AG
MY Beteiligungs GmbH
Nordbahnhof Baufeld Acht Projektentwicklung GmbH
Nordbahnhof Baufeld Fünf Projektentwicklung GmbH
Nordbahnhof Baufeld Sieben Projektentwicklung GmbH
Nordbahnhof Projekte Holding GmbH
Palais Rothschild Vermietungs GmbH Co OG
PIRTA Verwaltungs GmbH
POLLUX Immobilien GmbH
Pominvest dd
Privat JSC Ferrotrade International
Prva Stambena Stedionica dd Zagreb
Public Joint Stock Company Ukrsotsbank 1)
RAMSES Immobilien Gesellschaft m. b.H. & Co OG
RANA-Liegenschaftsverwertung GmbH
Real Invest Immobilien GmbH
RIGEL Immobilien GmbH
Sas-Real Ingatlanüzemelteto es Kezelo Kft.
Schoellerbank Aktiengesellschaft
Schoellerbank Invest AG
Schottengasse 6– 8 Immobilien GmbH
Schottengasse 6– 8 Immobilien GmbH und Co OG
SIA “UniCredit Leasing”
SIA UniCredit Insurance Broker
SIRIUS Immobilien GmbH
Suvremene poslovne komunikacije d. o. o.
SVIF Ukrsotsbud
Vienna
Austria
Vienna
Austria
Moscow
Russian Federation
Vienna
Austria
Vienna
Austria
Sofia
Bulgaria
Sofia
Bulgaria
Sofia
Bulgaria
Vienna
Austria
Brandenburg Germany
Umag
Croatia
Umag
Croatia
Vienna
Austria
Leonding
Austria
Vienna
Austria
Vienna
Austria
Vienna
Austria
Vienna
Austria
Vienna
Austria
Lutsk
Ukraine
Kiev
Ukraine
Kiev
Ukraine
Vienna
Austria
Vienna
Austria
Vienna
Austria
Vienna
Austria
Vienna
Austria
Vienna
Austria
Vienna
Austria
Vienna
Austria
Vienna
Austria
Vienna
Austria
Vienna
Austria
Vienna
Austria
Vienna
Austria
Split
Croatia
Kiev
Ukraine
Zagreb
Croatia
Kiev
Ukraine
Vienna
Austria
Vienna
Austria
Vienna
Austria
Vienna
Austria
Budapest
Hungary
Vienna
Austria
Salzburg
Austria
Vienna
Austria
Vienna
Austria
Riga
Latvia
Riga
Latvia
Vienna
Austria
Zagreb
Croatia
Kiev
Ukraine
country
interest in %
DIREcT
INDIREcT
ownership ownership
0.00
100.00
0.00
100.00
100.00
0.00
0.00
0.00
19.00
0.00
0.00
0.00
0.00
0.00
99.80
99.80
99.80
0.00
99.00
0.00
0.00
0.00
0.00
0.00
100.00
0.00
56.67
100.00
0.00
0.00
0.00
93.00
0.00
100.00
99.80
0.00
100.00
0.00
50.17
99.30
0.00
0.00
99.80
0.00
100.00
0.00
100.00
100.00
100.00
0.00
99.80
0.00
0.00
100.00
0.00
100.00
0.00
0.00
99.45
99.45
96.53
63.91
100.00
60.65
60.65
94.95
94.03
0.00
0.00
0.00
50.10
0.00
98.56
97.32
98.30
100.00
94.95
0.00
100.00
5.45
0.00
93.00
93.00
93.00
0.00
100.00
0.00
0.00
74.89
0.00
84.47
48.40
0.20
99.90
94.95
0.00
100.00
0.00
100.00
0.00
0.00
0.00
100.00
0.00
84.47
100.00
VOTING RIGHTS
total
TOTAL
100.00
100.00
100.00
100.00
100.00
99.45
99.45
96.53
82.91
100.00
60.65
60.65
94.95
94.03
99.80
99.80
99.80
50.10
99.00
98.56
97.32
98.30
100.00
94.95
100.00
100.00
62.12
100.00
93.00
93.00
93.00
93.00
100.00
100.00
99.80
74.89
100.00
84.47
98.57
99.50
99.90
94.95
99.80
100.00
100.00
100.00
100.00
100.00
100.00
100.00
99.80
84.47
100.00
100.00
100.00
100.00
100.00
100.00
99.45
99.45
96.53
82.91
100.00
60.65
60.65
94.95
94.03
100.00
100.00
100.00
50.10
100.00
98.58
97.34
98.33
100.00
94.95
100.00
100.00
62.18
100.00
93.00
93.00
93.00
93.00
100.00
100.00
99.80
75.14
100.00
84.47
98.58
99.50
99.90
94.95
99.80
100.00
100.00
100.00
100.00
100.00
100.00
100.00
99.80
84.47
100.00
1) The percentage of 98.57% indicated for the shareholding interest is based on the legal situation on 31 December 2013 because following the acquisition of the assets and liabilities of
UniCredit Bank Ukraine, the new shares had not yet been issued by that date. For consolidation purposes and for determining the non-controlling interests, the economic shareholding interest of
72.46 % was used.
Bank Austria · 2013 Annual Report 139
Consolidated Financial Statements in accordance with IFRSs
A – Accounting policies (continued)
domicile
COMPANY
city
country
Treuconsult Beteiligungsgesellschaft m. b.H.
Uctam Baltics SIA
UCTAM Bulgaria EOOD
UCTAM Czech Republic s. r. o.
UCTAM d. o. o. Beograd
UCTAM RK Limited Liability Company
UCTAM RO S.R. L.
UCTAM RU Limited Liability Company
UCTAM Ukraine LLC.
Uctam upravljanje d. o. o.
UniCredit Auto Leasing EOOD
UniCredit Bank a. d. Banja Luka
UniCredit Bank Czech Republic and Slovakia a. s.
UniCredit Bank d. d.
UniCredit Bank Hungary Zrt.
UniCredit Bank Serbia J. S.C.
UniCredit Banka Slovenija d. d.
UniCredit Bulbank AD
UniCredit CAIB Poland S. A.
UniCredit CA IB Romania SRL
UniCredit CAIB Securities Romania SA
UniCredit Center am Kaiserwasser GmbH
UniCredit Consumer Financing EAD
UniCredit Consumer Financing IFN S. A.2)
UniCredit Factoring EAD
UniCredit Insurance Broker OOD
UniCredit Jelzalogbank Zrt.
UniCredit Leasing EAD
UniCredit Tiriac Bank S. A.2)
UniCredit Turn-Around Management CEE GmbH
UniCredit Turn-Around Management GmbH
UNIVERSALE International Realitäten GmbH
VIENNA DC Bauträger GmbH
VIENNA DC Tower 1 Liegenschaftsbesitz GmbH
VIENNA DC Tower 2 Liegenschaftsbesitz GmbH
WED Donau-City Gesellschaft m. b.H.
WED Holding Gesellschaft m. b.H.
WED Wiener Entwicklungsgesellschaft für den Donauraum AG
ZABA Partner d. o. o. za posredovanje u osiguranju i reosiguranju
Zagreb Nekretnine doo
Zagrebacka banka dd
Zane BH doo
ZAO UniCredit Bank
Zapadni Trgovacki Centar d. o. o.
ZB Invest d. o. o.
ZETA Fünf Handels GmbH
Vienna
Riga
Sofia
Prague
Belgrade
Almaty
Bucharest
Moscow
Kiev
Ljubljana
Sofia
Banja Luka
Prague
Mostar
Budapest
Belgrade
Ljubljana
Sofia
Warsaw
Bucharest
Bucharest
Vienna
Sofia
Bucharest
Sofia
Sofia
Budapest
Sofia
Bucharest
Vienna
Vienna
Vienna
Vienna
Vienna
Vienna
Vienna
Vienna
Vienna
Zagreb
Zagreb
Zagreb
Sarajevo
Moscow
Rijeka
Zagreb
Vienna
Austria
Latvia
Bulgaria
Czech Republic
Serbia
Kazakhstan
Romania
Russian Federation
Ukraine
Slovenia
Bulgaria
Bosnia and Herzegovina
Czech Republic
Bosnia and Herzegovina
Hungary
Serbia
Slovenia
Bulgaria
Poland
Romania
Romania
Austria
Bulgaria
Romania
Bulgaria
Bulgaria
Hungary
Bulgaria
Romania
Austria
Austria
Austria
Austria
Austria
Austria
Austria
Austria
Austria
Croatia
Croatia
Croatia
Bosnia and Herzegovina
Russian Federation
Croatia
Croatia
Austria
interest in %
DIREcT
INDIREcT
ownership ownership
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
98.37
99.94
24.40
100.00
100.00
99.99
99.45
100.00
100.00
0.00
100.00
0.00
0.00
0.00
0.00
0.00
0.00
50.56
0.00
100.00
100.00
0.00
0.00
0.00
0.00
53.83
38.00
0.00
0.00
84.47
0.00
100.00
0.00
0.00
100.00
94.95
100.00
100.00
100.00
100.00
100.00
100.00
100.00
99.99
100.00
99.45
0.00
0.00
55.40
0.00
0.00
0.00
0.00
0.00
0.00
90.13
0.00
99.45
25.34
99.45
99.45
100.00
99.45
0.03
100.00
0.00
0.00
71.37
71.37
71.37
71.37
0.00
33.37
84.47
84.47
0.00
84.47
0.00
100.00
84.47
0.00
VOTING RIGHTS
total
TOTAL
94.95
100.00
100.00
100.00
100.00
100.00
100.00
100.00
99.99
100.00
99.45
98.37
99.94
79.80
100.00
100.00
99.99
99.45
100.00
100.00
90.13
100.00
99.45
25.34
99.45
99.45
100.00
99.45
50.59
100.00
100.00
100.00
71.37
71.37
71.37
71.37
53.83
71.37
84.47
84.47
84.47
84.47
100.00
100.00
84.47
100.00
94.95
100.00
100.00
100.00
100.00
100.00
100.00
100.00
99.99
100.00
99.45
98.37
99.94
79.78
100.00
100.00
99.99
99.45
100.00
100.00
90.13
100.00
99.45
25.34
99.45
99.45
100.00
99.45
50.59
100.00
100.00
100.00
71.37
71.37
71.37
71.37
53.83
71.37
84.47
84.47
84.47
84.47
100.00
100.00
84.47
100.00
2) For consolidation purposes, in view of combined put/call options, the non-controlling interests in UniCredit Tiriac Bank S. A. are determined on the basis of an economic shareholding interest
of 95.52 %. This gives a shareholding interest of 50.1% for UniCredit Consumer Financing EAD.
140 2013 Annual Report · Bank Austria
Investments in companies accounted for under the proportionate consolidation method
domicile
COMPANY
city
country
Koc Finansal Hizmetler AS
Stichting Custody Services YKB
UniCredit Menkul Degerler AS
Tasfiye Halinde Yapi Kredi B Tipi Yatirim Ortakligi AS
Yapi Kredi Bank Azerbaijan Closed Joint Stock Company
Yapi Kredi Bank Moscow
Yapi Kredi Bank Nederland N.V.
Yapi Kredi Faktoring AS
YAPI Kredi Finansal Kiralama AO
Yapi Kredi Diversified Payment Rights Finance
Yapi Kredi Holding BV
Yapi Kredi Invest Limited Liability Company
Yapi Kredi Portföy Yönetimi AS
Yapi Kredi Yatirim Menkul Degerler AS
Yapi ve Kredi Bankasi AS
Istanbul
Amsterdam
Istanbul
Istanbul
Baku
Moscow
Amsterdam
Istanbul
Istanbul
George Town
Amsterdam
Baku
Istanbul
Istanbul
Istanbul
Turkey
Netherlands
Turkey
Turkey
Azerbaijan
Russian Federation
Netherlands
Turkey
Turkey
Cayman Islands
Netherlands
Azerbaijan
Turkey
Turkey
Turkey
(in %)
interest
DIREcT
INDIREcT
ownership ownership
50.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
40.90
50.00
39.00
40.90
40.90
40.90
40.88
40.89
40.90
40.90
40.90
40.88
40.89
40.90
total
50.00
40.90
50.00
39.00
40.90
40.90
40.90
40.88
40.89
40.90
40.90
40.90
40.88
40.89
40.90
Bank Austria · 2013 Annual Report 141
Consolidated Financial Statements in accordance with IFRSs
A – Accounting policies (continued)
Investments in associated companies accounted for under the equity method
PROFIT/
TOTAL OPERATING LOSS AFTER
ASSETS
INCOME
TAX
domicile
%
(€ thousand)
EQUITY
CAPITAL
CARRYING
VALUE
23,277
80,112
1,390
3,375
8,007
18,595
65,716 874,527
12,780 282,591
– 4,383 162,936
40,569 706,119
6,848 1,468,524
250
6,551
– 795
5,704
– 305
313
–3
1,473
– 2,876 – 25,395
– 132
– 1,270
7,182
25,302
116,811 1,399,099
46,461 665,032
2,617
51,503
26,673
1,654
9,111
435,675
35,448
65,174
254,443
266,684
1,310
6,566
99
406
– 11,047
– 317
6,326
466,362
340,606
17,112
6,352
1,852
26,288
3,437
6
53
17,304
4,704
31,746
3,943
2,603
17,744
240
38
– 152
278,264 – 151,636 1,813,839
16,653 – 24,703 106,568
13,144
16
7,576
8,872
– 76
200,000
53,284
NAME OF COMPANY
city
country
Allianz Yasam ve Emeklilik A. S.
Allianz ZB D.O.O. Drustvo za Upravljanje Dobrovoljnim
Allianz ZB D.O.O. Drustvo za Upravljanjie Obveznim
Bank fur Tirol und Vorarlberg Aktiengesellschaft
Banque de Commerce et de Placements SA
BARN B.V.
BKS Bank AG
CA Immobilien Anlagen Aktiengesellschaft
Cash Service company AD
CBD International Sp. zo. o.
Marina City Entwicklungs GmbH
Marina Tower Holding GmbH
Megapark OOD
Multiplus Card D.O.O za Promidzbu I Usluge
Notartreuhandbank AG
Oberbank AG
Oesterreichische Kontrollbank Aktiengesellschaft
OOO UniCredit Leasing
Österreichische Hotel- und Tourismusbank
Ges. m. b. h.
Österreichische Wertpapierdaten Service GmbH
PSA Payment Service Austria GmbH
SP Projektentwicklung Schönefeld GmbH & Co KG
UNI Gebäudemanagement GmbH
UniCredit Leasing SPA
Wien Mitte Immobilien GmbH
WKBG Wiener Kreditbürgschafts- und
Beteiligungsbank AG
Yapi Kredi Koray Gayrimenkul Yatirim Ortakligi AS
Istanbul
Zagreb
Zagreb
Innsbruck
Geneva
Amsterdam
Klagenfurt
Vienna
Sofia
Warsaw
Vienna
Vienna
Sofia
Zagreb
Vienna
Linz
Vienna
Moscow
Turkey
Croatia
Croatia
Austria
Switzerland
Netherlands
Austria
Austria
Bulgaria
Poland
Austria
Austria
Bulgaria
Croatia
Austria
Austria
Austria
Russian Federation
8.18
49.00
49.00
47.38
12.54
40.00
36.03
18.16
19.89
49.75
25.00
25.00
43.50
25.00
25.00
33.33
49.15
40.00
310,591
5,065
20,013
9,304,189
1,754,797
164,648
6,812,920
5,491,468
6,770
23,791
11,860
1,508
70,565
2,285
1,466,920
17,388,900
30,531,299
238,735
34,223
3,199
14,588
167,848
61,447
498
142,593
176,752
3,221
52
8
–
– 2,883
– 188
11,976
344,200
106,222
14,631
Vienna
Vienna
Vienna
Schönefeld
Linz
Milan
Vienna
Austria
Austria
Austria
Germany
Austria
Italy
Austria
50.00
29.30
23.87
50.00
50.00
31.01
50.00
1,052,985
1,958
130,973
19,168
2,007
26,743,711
463,874
Vienna
Istanbul
Austria
Turkey
22.73
12.45
30,831
37,705
2,178
– 3,586
– 344
– 12,788
28,674
9,777
7,415
1,218
CA Immobilien Anlagen Aktiengesellschaft is the only associated company accounted for under the equity method for which liquid market prices are available. As at 31 December
2013, the fair value of the equity interest in CA Immobilien Anlagen Aktiengesellschaft was €201,989 thousand (31 December 2012: €134,657 thousand).
Investments in other controlled and associated companies
Aggregate total assets of unconsolidated companies which are controlled by UniCredit Bank Austria AG amounted to €6.0 million (2012: €6.1 million).
Aggregate total assets of associated companies in which Bank Austria holds investments which were not accounted for under the equity method were
€18.4 million (2012: € 16.8 million).
Aggregate equity capital amounted to €850 thousand (2012: €1.4 million) for controlled companies and €7.3 million (2012: €8.6 million) for associated
companies.
Controlled companies generated a combined net loss of € 917 thousand (2012: a net loss of €773 thousand) and associated companies reported
a combined net profit of € 1.0 million (2012: € 451 thousand).
142 2013 Annual Report · Bank Austria
Consolidated companies and changes in consolidated companies
of the Bank Austria Group in 2013
Companies accounted for
under the proportionate Companies accounted for
Consolidated companies
consolidation method under the equity method
Opening balance
Additions
Newly established companies
Acquired companies
Other changes
Disposals
Companies sold or liquidated
Mergers
Other changes
Closing balance
144
22
5
4
13
– 17
– 13
–3
–1
149
17
–
–
–
–
–2
–2
–
–
15
TOTAL
29
3
1
1
1
–5
–5
–
–
27
190
25
6
5
14
–24
–20
–3
–1
191
Additions
(€ million)
NAME OF COMPANY
Moa1)
DOMICILE
UniCredit Consumer Financing AD
UniCredit Consumer Financing IFN S. A.
CBD International Sp. z. o. o.
UniCredit Center am Kaiserwasser GmbH
Ambassador Parc Dedinje d. o. o. Beograd
SIA UniCredit Insurance Broker
SIA UniCredit Leasing
Buchstein Immobilienverwaltung GmbH und Co OG
Yapi Kredi Emeklilik AS
ZABA Partner d. o. o.
BARN B.V.
Schottengasse 6– 8 Immobilien GmbH
Schottengasse 6– 8 Immobilien GmbH und Co OG
LLC BDK Consulting
UniCredit Leasing AD
HVB Leasing OOD
Bulbank Leasing EAD
UniCredit Auto Leasing E.O.O.D.
UniCredit Insurance Broker EOOD
BA Creditanstalt Bulus EOOD
HVB Auto Leasing EOOD
Nordbahnhof Projekte Holding GmbH
Nordbahnhof Baufeld Fünf Projektentwicklungs GmbH
Nordbahnhof Baufeld Sieben Projektentwicklungs GmbH
Nordbahnhof Baufeld Acht Projektentwicklungs GmbH
C
C
E
C
C
C
C
C
E
C
E
C
C
C
C
C
C
C
C
C
C
C
C
C
C
Sofia
Bucharest
Warsaw
Vienna
Belgrade
Riga
Riga
Vienna
Istanbul
Zagreb
Amsterdam
Vienna
Vienna
Lutsk
Sofia
Sofia
Sofia
Sofia
Sofia
Sofia
Sofia
Vienna
Vienna
Vienna
Vienna
ADDITION AS AT
purchase price
01 Jan. 2013
01 Jan. 2013
15 March 2013
31 March 2013
03 April 2013
01 June 2013
01 June 2013
01 July 2013
12 July 2013
30 Sept. 2013
30 Sept. 2013
12 Nov. 2013
19 Nov. 2013
02 Dec. 2013
04 Dec. 2013
04 Dec. 2013
04 Dec. 2013
04 Dec. 2013
04 Dec. 2013
04 Dec. 2013
04 Dec. 2013
18 Dec. 2013
18 Dec. 2013
18 Dec. 2013
18 Dec. 2013
–
–
–
–
–
–
–
–
74.3
–
–
–
–
–
–
–
–
–
–
–
–
28.0
2)
2)
2)
1) Method of accounting:
C = consolidated
P = accounted for using proportionate consolidation
E = accounted for using the equity method
2) Included in the purchase price for Nordbahnhof Projekte Holding GmbH.
In accordance with IFRS 3. B64, the purchase price is presented only for those additions which were acquired by external third parties outside
UniCredit Group.
Bank Austria · 2013 Annual Report 143
Consolidated Financial Statements in accordance with IFRSs
A – Accounting policies (continued)
Disposals
(€ million)
NAME OF COMPANY
Moa*)
DOMICILE
DISPOSAL AS AT
Lowes Limited in Liquidation
CBD International Sp. z. o. o.
EK Mittelstandsfinanzierungs AG
Anger Machining GmbH
Forstinger International GmbH
V. A. Holding GmbH
Papcel a. s.
ATF Finance JSC
ATF Inkassatsiya Ltd
JSC ATF Bank
UniCredit Bank OJSC
ATF Capital B.V.
Limited Liability Company “AI Line”
Yapı Kredi Sigorta AS
Yapı Kredi Emeklilik AS
CJSC Bank Sibir
Pay Life Bank GmbH
UniCredit CA IB Serbia Ltd.
UniCredit Securities International Limited in Liquidation
Closed Joint Stock Company UniCredit Securities
UniCredit CA IB Hungary Ltd.
C
C
C
E
E
E
E
C
C
C
C
C
C
P
P
C
E
C
C
C
C
Nicosia
Warsaw
Vienna
Traun
Vienna
Vienna
Litovel
Almaty
Almaty
Almaty
Bishkek
Rotterdam
Moscow
Istanbul
Istanbul
Omsk
Vienna
Belgrad
Nicosia
Moscow
Budapest
01 Feb. 2013
15 March 2013
11 April 2013
11 April 2013
11 April 2013
11 April 2013
11 April 2013
02 May 2013
02 May 2013
02 May 2013
02 May 2013
02 May 2013
27 May 2013
12 July 2013
12 July 2013
29 Aug. 2013
19 Sept. 2013
27 Sept. 2013
16 Dec. 2013
17 Dec. 2013
31 Dec. 2013
Sales/liquidation
proceeds
–
–
28.0
1)
1)
1)
1)
2)
2)
299.7
2)
2)
–
283.1
3)
–
13.9
0.1
–
–
–
Sales proceeds are presented only for disposals of companies which were sold to buyers outside UniCredit Group.
1) Included in the sales proceeds of EK Mittelstandsfinanzierungs AG.
2) Included in the sales proceeds of JSC ATF Bank.
3) Included in the sales proceeds of Yapı Kredi Sigorta AS Bank.
Mergers
NAME OF MERGED COMPANY
Moa*)
DOMICILE
NAME OF ABSORBED COMPANY
DOMICILE
MERGER AS AT
UniCredit CA IB Slovakia a. s.
C
Bratislava
Bratislava
14 June 2013
UniCredit Bank Slovakia a. s.
UniCredit CA IB Slovenija d. o. o.
C
C
Bratislava
Ljubljana
UniCredit Bank Slovakia a. s.
UniCredit Bank Czech Republic and
Slovakia a. s.
UniCredit Bank Slovenija d. o. o.
Bratislava
Ljubljana
01 Dec. 2013
17 Dec. 2013
*) Method of accounting:
C = consolidated
P = accounted for using proportionate consolidation
E = accounted for using the equity method
144 2013 Annual Report · Bank Austria
Sale of ATF Bank
As of 30 April 2013 UniCredit Bank Austria AG completed the disposal of 99.75% held in Kazakh JSC ATF Bank to KazNitrogenGaz LLP, a company
wholly owned by Mr Galimzhan Yessenov.
In connection with the sale of ATF Bank a loss guarantee agreement with UniCredit Bank Austria AG was maintained in an amended form for a period
of 2 years after closing to protect the interests of Bank Austria relating to recoveries. The main amendments were the reduction of the size of the
­guaranteed amount by UniCredit Bank Austria to US$631 million and a reduction of the guaranteed premium payable by ATF Bank to 2%. A cash
­collateral in the size of the guaranteed amount was posted to ATF Bank by Bank Austria at the closing of the transaction.
In connection with the sale, an indemnity was also provided to the buyer in an escrow account in the overall amount of US$150 million for purchase
price adjustments and for additional credit losses in the special loan portfolio exceeding the amount covered by the amended guarantee. This
amount was reduced in 2013 through a purchase price adjustment of US$29 million to US$121 million (€89.5 million). Of this remaining amount,
US$75.7 million (€ 56 million) have been provided for by Bank Austria based on the economic situation of the underlying credit exposures covered by
this indemnity. The final amount of the credit losses will only be calculated by ATF Bank in April 2015, i. e. two years after the sale of ATF Bank.
The purchase price of the 99.75 % interest based on the consolidated net equity as of the closing date was €299.7 million.
Sale of Yapı Credi Sigorta
As of 12 July 2013, the sale of Yapı Kredi Group’s (Yapı Kredi) 93.95% stake in the non-life insurance subsidiary Yapı Kredi Sigorta (YKS) including the
life insurance/pension subsidiary Yapı Kredi Emeklilik (YKE) to Allianz SE was finalised following obtainment of all regulatory approvals.
In a second step a 19.93% stake in YKE was bought back from Allianz by Yapı Kredi through its subsidiary Yapı Kredi Leasing.
As the third pillar of the transaction, Yapı Kredi entered into a 15-year exclusive Strategic Distribution Agreement with Allianz for the distribution of
insurance and pension products in Turkey through its network.
Merger of the banking subsidiaries in the Czech Republic and in Slovakia
The legal integration of the two banking subsidiaries was completed on 1 December 2013 and the Czech subsidiary bank was renamed
“UniCredit Czech Republic and Slovakia a. s.”. In the merged subsidiary synergies can be realised in IT systems and back-office operations.
UniCredit Bank Czech Republic and Slovakia operates a joint network with a total of about 170 branches. In addition, there are 46 franchise
locations in the Czech Republic. About 3,100 employees serve 530,000 customers in the two countries.
Restructuring of the banking subsidiary in Latvia
Based on a strategic decision by the Management Board, Bank Austria restructured its operations in the Baltic countries (Estonia, Latvia and Lithuania)
in 2013. The banking operations of AS UniCredit Bank were stopped in all Baltic countries, the liquidation of the branches in Estonia and Lithuania
started in August 2013. In October 2013 an agreement was signed with Swedbank for the sale of the banking licence related products to its
­subsidiaries in Latvia, Lithuania and Estonia.
In December 2013 the Financial and Capital Market Commission of Latvia approved the annulment of AS UniCredit Bank’s banking licence by ­
1 January 2014; afterwards the name of the company was changed to AS UniCredit Finance.
After the merger of AS UniCredit Finance with SIA UniCredit Leasing, scheduled for the second half of 2014, UniCredit Group will only be active in
the leasing business in the Baltics. The main presence of these leasing activities will be in Latvia (SIA UniCredit Leasing in Riga), with 2 branches in
Estonia (Tallinn) and Lithuania (Vilnius).
Bank Austria · 2013 Annual Report 145
Consolidated Financial Statements in accordance with IFRSs
A – Accounting policies (continued)
Effects of changes in the group of consolidated companies in 2013
The following table shows the aggregate total assets and aggregate total liabilities and equity of additions and disposals reflected in the consolidated
financial statements.
Assets
Cash and cash balances
Financial assets held for trading
Financial assets at fair value through profit or loss
Available-for-sale financial assets
Held-to-maturity investments
Loans and receivables with banks
Loans and receivables with customers
Hedging derivatives
Changes in fair value of portfolio hedged items (+/ –)
Investments in associates and joint ventures
Insurance reserves attributable to reinsurers
Property, plant and equipment
Intangible assets
of which goodwill
Tax assets
a) current tax assets
b) deferred tax assets
Non-current assets and disposal groups classified as held for sale
Other assets
Total assets
(€ million)
31 Dec. 2013
OF WHICH:
ADDITIONS IN 2013
31 Dec. 2012
of which:
DISPOSALS IN 2013
2,663
2,434
343
21,502
1,586
24,967
129,121
2,913
33
2,032
–
2,208
219
–
1,061
73
988
3,714
1,414
196,210
3
–
–
–
–
294
1,237
–
1
34
–
67
1
–
2
–
2
86
21
1,747
2,754
2,855
426
21,063
1,895
28,112
132,424
4,125
54
2,348
1
2,509
2,459
2,127
1,336
52
1,284
3,788
1,446
207,596
1
8
–
97
–
162
71
–
–
23
1
5
3
–
2
–
2
4,411
18
4,801
31 Dec. 2013
OF WHICH:
ADDITIONS IN 2013
31 Dec. 2012
of which:
DISPOSALS IN 2013
27,020
108,935
29,049
1,625
788
2,273
–
590
25
565
2,242
3,481
5,155
4,647
507
–
15,052
485
196,210
1,235
118
–
–
–
1
–
7
1
5
–
28
3
–
3
–
355
–
1,747
31,061
110,563
28,063
2,196
1,152
2,989
–
856
88
768
3,506
3,428
5,389
4,600
789
201
18,192
530
207,596
12
11
–
–
–
–
–
2
1
1
4,000
48
4
2
3
201
523
–
4,801
Liabilities and equity
Deposits from banks
Deposits from customers
Debt securities in issue
Financial liabilities held for trading
Financial liabilities at fair value through profit or loss
Hedging derivatives
Changes in fair value of portfolio hedged items (+/ –)
Tax liabilities
a) current tax liabilities
b) deferred tax liabilities
Liabilities included in disposal groups classified as held for sale
Other liabilities
Provisions for risks and charges
a) post-retirement benefit obligations
b) other provisions
Insurance reserves
Equity
of which non-controlling interests (+/–)
Total liabilities and equity
146 2013 Annual Report · Bank Austria
(€ million)
B – Notes to the income statement
B.1 – Interest income / Interest expense
150
B.2 – Fee and commission income / Fee
and commission expense
151
B.3 – Dividend income and similar revenue
152
B.4 – Gains and losses on financial assets and
liabilities held for trading
152
B.5 – Fair value adjustments in hedge accounting 152
B.6 – Gains and losses on disposals / repurchases 153
B.7 – Net change in financial assets and liabilities
at fair value through profit or loss
153
B.8 – Impairment losses
154
B.9 – Premium earned (net) – breakdown
154
B.10 – Other income (net) from insurance business
154
B.11 – Payroll 155
B.12 – Other administrative expenses 155
B.13 – Net provisions for risks and charges
156
B.14 – Impairment on property, plant and equipment
156
B.15 – Impairment on intangible assets
156
B.16 – Other net operating income
157
B.17 – Profit (Loss) of associates
157
B.18 – Gains and losses on disposal of investments
157
B.19 – Tax expense (income) related to profit or loss
from continuing operations
158
B.20 – Total profit or loss after tax from
discontinued operations
158
B.21 – Earnings per share
159
B.22 – Appropriation of profits
159
Bank Austria · 2013 Annual Report 149
Consolidated Financial Statements in accordance with IFRSs
B – Notes to the income statement (CONTINUED)
B.1 – Interest income/Interest expense
Interest income and similar revenues
(€ million)
2013
Financial assets held for trading
Financial assets at fair value through profit or loss
Available-for-sale financial assets
Held-to-maturity investments
Loans and receivables with banks
Loans and receivables with customers
Hedging derivatives
Other assets
Total
2012
Debt securities
Loans
Other
transactions
18
4
745
91
64
19
X
X
940
–
–
–
–
192
5,854
X
X
6,046
77
–
–
–
–
–
440
6
522
Total
Total
94
4
745
91
256
5,873
440
6
7,508
111
6
704
201
482
6,257
550
5
8,316
Within this item, total interest income from financial assets that are not at fair value through profit or loss was €6,971 million (2012: €8,061 million).
The total amount of interest income from impaired financial assets was €209 million (2012: €376 million). Of this total amount, €171 million (2012:
€341 million) is included in interest income and similar revenues from loans which relate to interest actually paid. Interest income from the release of
provisions as a result of the passage of time is presented in B.8.
Interest expense and similar charges
(€ million)
2013
Deposits from central banks
Deposits from banks
Deposits from customers
Debt securities in issue
Financial liabilities held for trading
Financial liabilities at fair value through profit or loss
Other liabilities
Hedging derivatives
Total
2012
Deposits
Securities
Other
transactions
– 72
– 428
– 1,859
X
–1
–
X
X
– 2,359
X
X
X
– 836
–
–9
X
X
– 845
–
–
–
–
– 79
–
–3
– 90
– 172
Total
Total
– 72
– 428
– 1,859
– 836
– 79
–9
–3
– 90
– 3,376
– 77
– 661
– 2,387
– 904
– 82
– 13
–3
– 79
– 4,206
Within this item, total interest expense for liabilities that are not at fair value through profit or loss was €3,198 million (2012: €4,187 million).
150 2013 Annual Report · Bank Austria
B.2 – Fee and commission income / Fee and commission expense
Fee and commission income
Guarantees given
Management, brokerage and consultancy services:
securities trading
currency trading
portfolio management
custody and administration of securities
custodian bank
placement of securities
reception and transmission of orders
advisory services
distribution of third party services
Collection and payment services
Securitisation servicing
Factoring
Management of current accounts
Other services
Total
(€ million)
2013
2012
227
542
15
31
197
75
38
18
28
37
103
917
–
7
210
258
2,161
209
500
28
42
173
78
41
15
7
35
81
855
–
9
226
233
2,033
Fee and commission expense
Guarantees received
Credit derivatives
Management, brokerage and consultancy services:
trading in financial instruments
currency trading
portfolio management
custody and administration of securities
placement of financial instruments
off-site distribution of financial instruments, products and services
Collection and payment services
Other services
Total
(€ million)
2013
2012
– 37
– 14
– 82
–4
–1
– 14
– 39
–1
– 22
– 276
– 55
– 463
–72
–18
–100
–6
–1
–15
–39
–1
–37
–266
–42
–497
Bank Austria · 2013 Annual Report 151
Consolidated Financial Statements in accordance with IFRSs
B – Notes to the income statement (CONTINUED)
B.3 – Dividend income and similar revenue
(€ million)
2013
Financial assets held for trading
Available-for-sale financial assets
Financial assets at fair value through profit or loss
Investments
Total
2012
Dividends
Income from
units in
investment
funds
TOTAL
–
16
–
7
24
–
1
–
X
1
–
18
–
7
25
Dividends
Income from
units in
investment
funds
total
–
20
–
7
27
–
3
–
X
3
–
23
–
7
30
B.4 – Gains and losses on financial assets and liabilities held for trading
2013
Financial assets held for trading
Debt securities
Equity instruments
Other
Financial liabilities held for trading
Other financial assets and liabilities: exchange differences
Derivatives
Financial derivatives
on debt securities and interest rates
on equity securities and share indices
on currency and gold
other
Credit derivatives
Total
2012
Unrealised
profits
Realised
profits
Unrealised
losses
Realised
losses
Net profit
Net profit
4
3
–
1
–
X
710
653
506
140
X
8
57
714
102
50
20
32
–
X
537
537
498
8
X
31
–
638
–4
–3
–1
–
–
X
– 522
– 454
– 424
– 22
X
–9
– 68
– 527
– 63
– 33
– 23
–7
–1
X
– 466
– 466
– 427
– 10
X
– 30
–
– 531
38
17
–4
26
–1
4
523
534
153
116
265
1
– 11
565
– 17
29
4
– 51
1
365
191
233
–1
142
92
–
– 43
539
B.5 – Fair value adjustments in hedge accounting
Gains on:
Fair value hedging instruments
Hedged asset items (in fair value hedge relationship)
Hedged liability items (in fair value hedge relationship)
Cash-flow hedging derivatives (ineffectiveness)
Total gains on hedging activities
Losses on:
Fair value hedging instruments
Hedged asset items (in fair value hedge relationship)
Hedged liability items (in fair value hedge relationship)
Cash-flow hedging derivatives (ineffectiveness)
Total losses on hedging activities
Net hedging result
152 2013 Annual Report · Bank Austria
(€ million)
(€ million)
2013
2012
28
27
6
9
69
29
18
–
–
47
– 45
– 12
–
–
– 57
12
– 46
–
–3
–5
– 54
–8
B.6 – Gains and losses on disposals / repurchases
(€ million)
2013
Financial assets
Loans and receivables with banks
Loans and receivables with customers
Available-for-sale financial assets
Debt securities
Equity instruments
Units in investment funds
Loans
Held-to-maturity investments
Total assets
Financial liabilities
Deposits with banks
Deposits with customers
Debt securities in issue
Total liabilities
Total
2012
Gains
Losses
Net profit
Gains
Losses
Net profit
–
10
340
182
155
3
–
3
354
–
–9
– 35
– 34
–1
–
–
–
– 44
–
1
305
148
154
3
–
3
310
–
31
125
44
79
2
–
36
192
–
– 36
– 34
– 34
–1
–
–
– 10
– 81
–
–5
90
10
78
2
–
25
111
–
–
11
11
–
–
–
–
–
–
11
11
–
–
126
126
–
–
–
–
–
–
126
126
365
– 44
321
318
– 81
237
B.7 – Net change in financial assets and liabilities at fair value
through profit or loss
(€ million)
2013
Financial assets
Debt securities
Equity instruments
Units in investment funds
Loans
Financial liabilities
Debt securities
Deposits from banks
Deposits from customers
Credit and financial derivatives
Total
2012
Unrealised
profits
Realised
profits
Unrealised
losses
Realised
losses
Net profit
Net profit
5
–
–
5
–
13
13
–
–
65
83
58
28
–
29
–
–
–
–
–
–
58
– 24
–1
–
– 24
–
– 51
– 51
–
–
–
– 75
– 28
– 28
–
–
–
–
–
–
–
–
– 28
11
–
–
11
–
– 39
– 39
–
–
65
37
10
2
–
8
–
–177
–177
–
–
161
–5
In 2013 changes in fair values resulting from changes in our own credit rating were – €50.1 million (2012: – €134.4 million).
Bank Austria · 2013 Annual Report 153
Consolidated Financial Statements in accordance with IFRSs
B – Notes to the income statement (CONTINUED)
B.8 – Impairment losses
(€ million)
2013
2012
Write-downs
WRITE-BACKS
Specific
Impairment losses on loans and receivables
Loans and receivables with banks
Loans and receivables with customers
Impairment losses on available-for-sale
financial assets
Debt securities
Equity instruments
Units in investment funds
Impairment losses on held-to-maturity
investments
Debt securities
Impairment losses on other financial
transactions
Guarantees given
Credit derivatives
Commitments to disburse funds
Other transactions
TOTAL
Write-offs
Other
Portfolio
SPECIFIC
PORTFOLIO
total
total
– 70
–
– 70
– 1,981
–1
– 1,980
– 121
–
– 121
625
3
622
131
–
131
– 1,416
2
– 1,418
– 976
1
– 978
–6
–
–6
–
– 50
–
– 47
–3
X
X
X
X
–
–
X
–
X
X
X
X
– 56
–
– 53
–3
– 63
5
– 67
–
–
–
–
–
–
–
–
–
–
–
–
–
– 16
– 16
–
–
–
–
–
– 76
– 79
– 74
–
–4
–1
– 2,110
–9
–6
–
–4
–
– 131
50
42
–
4
4
675
10
9
–
–
1
141
– 28
– 29
–
–3
4
– 1,500
14
14
–
–1
1
– 1,041
The column “Specific” under “Write-backs” also includes the time-value interest component of impaired loans in the amount of €38 million
(2012: € 35 million). Details of impairment losses on loans and receivables with customers are given in the risk report.
B.9 – Premium earned (net) – breakdown
(€ million)
2013
Life business
Non-life business
Total net premiums
2012
Direct
business
Indirect
business
Total
Total
16
–
16
–
67
67
16
67
83
31
130
161
B.10 – Other income (net) from insurance business
The decline in the balance of other income and expenses relating to insurance business from – €123 million in the previous year to – €65 million in
2013 is due to the sale of Yapı Kredi Sigorta AS on 3 July 2013.
154 2013 Annual Report · Bank Austria
B.11 – Payroll
Employees
Wages and salaries
Social charges
Provision for retirement payments and similar provisions
Defined contribution
Defined benefit
Payments to external pension funds
Defined contribution
Defined benefit
Costs related to share-based payments
Other employee benefits
Recovery of compensation Others
Total
(€ million)
2013
2012
– 1,926
– 1,328
– 282
– 253
–2
– 251
– 23
– 22
–1
–2
– 195
158
– 65
– 1,992
–1,851
–1,342
–277
–253
–2
–251
–27
–26
–1
–6
–102
156
–63
–1,914
Defined-benefit company retirement funds: total costs
Pension and similar funds allowances – with defined benefits
Current service cost
Settlement gains/losses
Net actuarial gain/ loss recognised in the year
Past service cost
Interest cost on the DBO
Interest income on plan assets
Expenses recognised in PROFIT OR LOSS
(€ million)
2013
2012
– 74
–6
–
–3
– 168
–
– 251
–55
–4
–5
–
–186
–
–251
Other employee benefits
Seniority premiums
Leaving incentives
Other
Total
(€ million)
2013
2012
–7
– 111
– 78
– 195
–19
–9
–74
–102
Further information on other employee benefits is given in C.25.
B.12 – Other administrative expenses
Indirect taxes and duties
Miscellaneous costs and expenses
Advertising, marketing and communication
Expenses related to credit risk
Expenses related to personnel
Information and communication technology expenses
Consulting and professional services
Real estate expenses
Other functioning costs
Total
(€ million)
2013
2012
– 244
– 1,461
– 128
– 16
– 62
– 416
– 79
– 316
– 444
– 1,705
–164
–1,435
–123
–26
–63
–383
– 91
–307
–442
–1,599
The item “Indirect taxes and duties” includes the bank levy in Austria (€97 million; 2012: €97 million) and the bank levies in Slovenia (€3 million),
Slovakia (€ 14 million; 2012: € 14 million), Romania (€ 2 million) and Hungary (€93 million; 2012: €29 million).
Bank Austria · 2013 Annual Report 155
Consolidated Financial Statements in accordance with IFRSs
B – Notes to the income statement (CONTINUED)
B.13 – Net provisions for risks and charges
(€ million)
2013
Legal disputes
Staff costs
Other
Total
2012
Provisions
Reallocation
surplus
Total
Total
– 91
–
– 110
– 201
5
–
140
145
– 86
–
30
– 56
– 80
–
– 252
– 332
Expenses for legal disputes in 2013 primarily include costs related to the conclusion of the legal disputes in Switzerland. The line “Other” includes
­provisions for risks in connection with the sale of JSC ATF Bank.
B.14 – Impairment on property, plant and equipment
(€ million)
2013
2012
Depreciation
Impairment
losses
Write-backs
Net profit
– 164
– 150
– 14
–5
–5
–
– 47
–6
– 40
–
–
–
1
1
–
–
–
–
– 210
– 156
– 54
–5
–5
–
– 173
– 156
– 18
–1
–1
–
X
X
X
– 169
–
–
–
– 47
–
–
–
1
–
–
–
– 215
–
–
–
– 175
Property, plant and equipment
Owned
used in the business
held for investment
Finance lease
used in the business
held for investment
Non-current assets and disposal groups
classified as held for sale
used in the business
held for investment
Total
B.15 – Impairment on intangible assets
(€ million)
2013
Intangible assets
Owned
generated internally by the company
other
Finance leases
Non-current assets and disposal groups
classified as held for sale
Total
156 2013 Annual Report · Bank Austria
2012
Amortisation
Impairment
losses
Write-backs
Net profit
– 96
–7
– 89
–
– 15
–
– 15
–
–
–
–
–
– 112
–7
– 104
–
– 98
–5
– 93
–
X
– 96
–
– 15
–
–
–
– 112
–
– 98
B.16 – Other net operating income
Other operating expenses
Non-deductible tax and other fiscal charges
Write-downs on improvements of goods owned by third parties
Costs related to tourism business
Other
Total other operating expenses
(€ million)
2013
2012
–1
–5
– 19
– 85
– 109
–2
–5
–18
–63
–87
Other operating income
Recovery of costs
Other income
Revenue from administrative services
Revenues from rentals of investment property (net of operating direct costs)
Revenues from operating leases
Recovery of miscellaneous costs paid in previous years
Revenues from tourism business
Others
Total other operating income
Other net operating income
(€ million)
2013
2012
1
201
42
13
12
3
58
73
203
1
195
46
18
4
2
56
68
196
94
109
B.17 – Profit (Loss) of associates
Companies subject to significant influence
Income
Profits of associates
Gains on disposal
Expense
Losses of associates
Impairment losses
Losses on disposal
Net profit
Total
(€ million)
2013
2012
133
122
11
– 267
– 64
– 202
–1
– 135
– 135
111
111
–
–296
–291
–5
–
–185
–185
B.18 – Gains and losses on disposal of investments
Property
Gains on disposal
Losses on disposal
Other assets
Gains on disposal
Losses on disposal
Total
(€ million)
2013
2012
12
–1
19
–2
204
– 148
66
3
–1
19
The gains from sales of investments primarily consist of the sale of the insurance business of Yapı Kredi Group.
The losses from sales of investments contain the effect of the recycling of the foreign currency translation reserve relating to the foreign operation in
Cayman, which was finally discontinued in 2013.
Bank Austria · 2013 Annual Report 157
Consolidated Financial Statements in accordance with IFRSs
B – Notes to the income statement (CONTINUED)
B.19 – Tax expense (income) related to profit or loss
from continuing operations
Current tax (–)
Adjustment to current tax of prior years (+/ –)
Reduction of current tax for the year (+)
Changes to deferred tax assets (+/ –)
Changes to deferred tax liabilities (+/ –)
Tax expense for the year (–)
(€ million)
2013
2012
– 276
–3
2
– 246
– 11
– 534
– 379
17
13
–
24
– 326
Reconciliation of theoretical tax charge to actual tax charge
Total profit or loss before tax from continuing operations
Applicable tax rate
Theoretical tax
Different tax rates
Non-taxable income
Non-deductible expenses
Prior years and changes in tax rates
a) effects on current tax
b) effects on deferred tax
Valuation adjustments and non-recognition of deferred taxes
Amortisation of goodwill
Non-taxable foreign income
Other differences
Recognised taxes on income
Effective tax rate
(€ million)
2013
2012
– 704
25 %
176
107
79
– 107
– 101
–5
– 96
– 167
– 486
–
– 33
– 534
–
1,111
25%
– 278
115
25
– 124
78
29
48
– 59
– 61
–
– 22
– 326
29.4%
B.20 – Total profit or loss after tax from discontinued operations
Ukraine
Net interest
Dividends and income from equity investments
Net fee and commission income
Net trading income
Net other operating income/expenses
Operating income
Operating costs
Operating profit
Net write-downs of loans
Net operating profit
Provisions for risks and charges
Net income from investments
Profit before tax
Income tax
Profit after tax/ Ukraine
Impairment Ukraine
Consolidation effects
Profit after tax/ Ukraine
Kazakhstan
Profit after tax/Kazakhstan
Total profit or loss after tax from discontinued operations
158 2013 Annual Report · Bank Austria
(€ million)
2013
2012
169
–
61
–12
5
223
–141
82
–208
–126
–1
4
–123
16
–107
–200
30
–277
202
–
59
12
–3
270
–138
132
–136
–4
–
–
–4
–24
–28
–165
54
–139
–115
–301
–392
–440
B.21 – Earnings per share
During the reporting period, no financial instruments with a dilutive effect on the bearer shares were outstanding. Therefore basic earnings per share
in accordance with IAS 33 equal diluted earnings per share in accordance with IAS 33. Earnings per share are calculated on the basis of the average
number of shares outstanding (2013: 231.2 million shares; 2012: 231.2 million shares).
B.22 – Appropriation of profits
After movements in reserves in UniCredit Bank Austria AG amounting to €1,630,384,591.99 the loss for the financial year beginning on
1 January 2013 and ending on 31 December 2013 was €2,514,165.47. After addition of the profit brought forward from the previous year,
which amounted to €2,514,165.47, there is no accumulated profit which may be distributed.
Bank Austria · 2013 Annual Report 159
C – Notes to the statement of financial position
Assets
C.1 – Cash and cash balances
162
C.2 – Financial assets held for trading
162
C.3 – Financial assets at fair value through profit or loss
162
C.4 – Available-for-sale financial assets 163
C.5 – Held-to-maturity investments
164
C.6 – Loans and receivables with banks 164
C.7 – Loans and receivables with customers
165
C.8 – Hedging derivatives
165
C.9 – Changes in fair value of portfolio hedged items 165
C.10 –Investments in associates and joint ventures 166
C.11 – Property, plant and equipment
166
C.12 – Intangible assets
169
C.13 – Deferred tax assets
170
C.14 – Non-current assets and disposal groups
classified as held for sale
171
C.15 –Other assets 172
Liabilities and equity
C.16 – Deposits from banks
172
C.17 – Deposits from customers
173
C.18 – Debt securities in issue
173
C.19 – Financial liabilities held for trading
173
C.20 – Financial liabilities at fair value through profit or loss 173
C.21 – Hedging derivatives
174
C.22 – Deferred tax liabilities
174
C.23 – Liabilities included in disposal groups
classified as held for sale
174
C.24 – Other liabilities
175
C.25 – Provisions for risks and charges
175
C.26 – Equity
177
Bank Austria · 2013 Annual Report 161
Consolidated Financial Statements in accordance with IFRSs
C – Notes to the statement of financial position (CONTINUED)
C.1
– Cash and cash balances
(€ million)
31 dec. 2013
31 Dec. 2012
1,315
1,348
2,663
1,588
1,166
2,754
Cash
Demand deposits with central banks
Total
The fair values are equal to the carrying amounts.
C.2
– Financial assets held for trading
(€ million)
31 dec. 2013
Financial assets (non-derivatives)
Debt securities
Structured securities
Other debt securities
Equity instruments
Units in investment funds
Derivative instruments
Financial derivatives
Credit derivatives
Total
31 Dec. 2012
FAIR VALUE
LEVEL 1
FAIR VALUE
LEVEL 2
FAIR VALUE
LEVEL 3
305
285
5
281
13
7
1
1
–
306
239
238
3
235
–
–
1,876
1,873
3
2,115
10
10
–
10
–
–
3
2
1
13
TOTAL
FAIR VALUE
LEVEL 1
FAIR VALUE
LEVEL 2
FAIR VALUE
LEVEL 3
TOTAL
554
534
8
526
13
7
1,880
1,876
4
2,434
283
252
10
243
24
7
1
1
–
284
146
145
–
145
–
1
2,350
2,344
6
2,496
71
71
10
61
–
–
5
5
–
76
500
469
20
449
24
7
2,355
2,350
6
2,855
C.3
– Financial assets at fair value through profit or loss
(€ million)
31 dec. 2013
Debt securities
Equity instruments
Units in investment funds
Loans
Total
cost
31 Dec. 2012
FAIR VALUE
LEVEL 1
FAIR VALUE
LEVEL 2
FAIR VALUE
LEVEL 3
4
–
17
–
21
20
236
–
–
–
236
236
31
–
55
–
86
86
TOTAL
FAIR VALUE
LEVEL 1
FAIR VALUE
LEVEL 2
FAIR VALUE
LEVEL 3
TOTAL
271
–
72
–
343
342
61
–
14
–
75
73
224
–
–
–
224
224
32
–
95
–
127
127
317
–
109
–
426
424
This item shows assets in respect of which Bank Austria used the option to designate financial instruments as at fair value through profit or loss in
order to avoid inconsistencies in the valuation of assets and liabilities which are connected with each other. Most of these assets are complex
structures with embedded derivatives.
162 2013 Annual Report · Bank Austria
Financial assets at fair value through profit or loss: annual changes
(€ million)
2012
Opening balance
Increases
Purchases
Positive changes in fair value
Other increases
Decreases
Sales
Redemptions
Negative changes in fair value
Other decreases
Closing balance
DEBT SECURITIES
EQUITY
INSTRUMENTS
UNITS IN
INVESTMENT
FUNDS
TOTAL
92
243
161
21
60
– 18
–3
– 10
–4
–2
317
–
–
–
–
–
–
–
–
–
–
–
122
17
12
5
–
– 30
– 14
– 15
–
–1
109
214
260
173
26
60
–48
–17
–24
–4
–3
426
DEBT SECURITIES
EQUITY
INSTRUMENTS
UNITS IN
INVESTMENT
FUNDS
TOTAL
317
256
255
1
–
– 303
– 48
– 232
–
– 22
271
–
–
–
–
–
–
–
–
–
–
–
109
20
14
5
–
– 57
– 12
– 20
– 24
–1
72
426
276
270
6
–
–360
–61
–252
–24
–24
343
2013
Opening balance
Increases
Purchases
Positive changes in fair value
Other increases
Decreases
Sales
Redemptions
Negative changes in fair value
Other decreases
Closing balance
C.4
– Available-for-sale financial assets
(€ million)
31 Dec. 2013
Debt securities
Structured securities
Other
Equity instruments
Measured at fair value
Carried at cost
Units in investment funds
Loans
Total
31 Dec. 2012
FAIR VALUE
LEVEL 1
FAIR VALUE
LEVEL 2
FAIR VALUE
LEVEL 3
13,959
–
13,959
25
25
–
12
–
13,996
6,059
–
6,059
4
4
–
101
–
6,165
689
19
671
593
531
62
59
–
1,341
TOTAL
FAIR VALUE
LEVEL 1
FAIR VALUE
LEVEL 2
FAIR VALUE
LEVEL 3
TOTAL
20,708
19
20,689
622
560
62
172
–
21,502
9,845
12
9,833
37
37
–
31
–
9,914
8,824
147
8,677
–
–
–
89
–
8,913
1,368
19
1,349
800
356
444
68
–
2,236
20,037
178
19,859
837
393
444
189
–
21,063
Bank Austria · 2013 Annual Report 163
Consolidated Financial Statements in accordance with IFRSs
C – Notes to the statement of financial position (CONTINUED)
C.5
– Held-to-maturity investments
(€ million)
31 Dec. 2013
Debt securities
Loans
Total
BOOK
VALUE
1,586
–
1,586
31 Dec. 2012
FAIR VALUE
FAIR VALUE
LEVEL 1
FAIR VALUE
LEVEL 2
FAIR VALUE
LEVEL 3
BOOK
VALUE
FAIR VALUE
FAIR VALUE
LEVEL 1
FAIR VALUE
LEVEL 2
FAIR VALUE
LEVEL 3
1,593
–
1,593
1,115
–
1,115
308
–
308
170
–
170
1,895
–
1,895
1,967
–
1,967
1,184
–
1,184
601
–
601
182
–
182
Held-to-maturity investments: annual changes
Opening balance
Increases
Purchases
Write-backs
Transfers from other portfolios
Other changes and positive exchange differences
Decreases
Sales
Redemptions
Write-downs
Transfers to other portfolios
Other changes and negative exchange differences
Closing balance
(€ million)
2013
2012
1,895
479
354
–
21
103
– 788
–4
– 558
–
–
– 226
1,586
3,498
345
235
1
–
110
– 1,949
– 197
– 585
– 16
– 1,040
– 109
1,895
C.6
– Loans and receivables with banks
Loans to central banks
Time deposits
Compulsory reserves
Reverse repos
Other
Loans to banks
Current accounts and demand deposits
Time deposits
Other loans
Reverse repos
Other
Debt securities
Total (carrying amount)
Total (fair value)
Fair value – Level 1
Fair value – Level 2
Fair value – Level 3
Loan loss provisions deducted from loans and receivables
164 2013 Annual Report · Bank Austria
(€ million)
31 Dec. 2013
31 Dec. 2012
8,863
1,361
6,673
825
3
16,104
4,386
5,012
3,260
998
2,263
3,446
24,967
25,044
–
17,395
7,649
23
7,996
1,308
6,246
425
18
20,116
5,214
7,489
2,984
601
2,383
4,429
28,112
28,148
–
16,560
11,588
46
C.7
– Loans and receivables with customers
(€ million)
31 dec. 2013
31 Dec. 2012
PERFORMING
IMPAIRED
TOTAL
PERFORMING
IMPAIRED
TOTAL
123,240
11,187
1,394
25,463
7,678
1,053
1,413
75,052
733
123,973
125,530
5,127
405
–
1,957
80
76
20
2,590
21
5,148
5,389
124,775
12,344
587
25,669
8,338
515
1,264
76,058
939
125,715
125,816
6,686
533
–
2,519
125
19
13
3,478
24
6,710
6,661
717
6,262
128,367
11,592
1,394
27,419
7,758
1,129
1,433
77,641
754
129,121
130,919
–
73,460
57,460
6,979
739
6,092
131,462
12,877
587
28,188
8,463
535
1,277
79,535
963
132,424
132,477
–
79,564
52,913
6,831
Loans
Current accounts
Reverse repos
Mortgages
Credit cards and personal loans, including wage assignment loans
Finance leases
Factoring
Other loans
Debt securities
Total (carrying amount)
Total (fair value)
Fair value – Level 1
Fair value – Level 2
Fair value – Level 3
Loan loss provisions deducted from loans and receivables
Finance leases: customers
(€ million)
31 dec. 2013
31 dec. 2012
PRESENT VALUE OF
MINIMUM LEASE PAYMENTS
PRESENT VALUE OF
MINIMUM LEASE PAYMENTS
331
697
101
1,129
185
299
50
535
Amounts receivable under finance leases:
Up to 12 months
From 1 to 5 years
Over 5 years
Present value of minimum lease payments receivable (net investment in the lease)
C.8
– Hedging derivatives
(€ million)
31 dec. 2013
Financial derivatives
Fair value hedge
Cash flow hedge
Credit derivatives
Total
31 Dec. 2012
FAIR VALUE
LEVEL 1
FAIR VALUE
LEVEL 2
FAIR VALUE
LEVEL 3
–
–
–
–
–
2,911
603
2,308
–
2,911
2
2
–
–
2
TOTAL
FAIR VALUE
LEVEL 1
FAIR VALUE
LEVEL 2
FAIR VALUE
LEVEL 3
TOTAL
2,913
605
2,308
–
2,913
–
–
–
–
–
4,125
877
3,248
–
4,125
–
–
–
–
–
4,125
877
3,248
–
4,125
C.9 – Changes in fair value of portfolio hedged items
Market changes in portfolio-hedged items related to positive changes in loans and receivables in the amount of €33 million (2012: €54 million).
Bank Austria · 2013 Annual Report 165
Consolidated Financial Statements in accordance with IFRSs
C – Notes to the statement of financial position (CONTINUED)
C.10
– Investments in associates and joint ventures
(€ million)
Opening balance
Increases
Purchases
Write–backs
Profit/loss for the year
Other changes
Decreases
Sales
Write–downs
Profit/loss for the year
Other changes
Closing balance
2013
2012
2,348
324
127
–
122
75
– 640
– 42
– 202
– 64
– 331
2,032
2,562
436
35
–
111
289
– 649
– 31
–2
– 291
– 325
2,348
C.11 – Property, plant and equipment
(€ million)
31 Dec. 2013
31 Dec. 2012
1,437
1,382
92
948
140
125
76
55
14
40
–
–
1
772
772
234
538
–
2,208
1,727
1,667
96
1,165
149
152
105
60
14
46
–
–
1
782
782
264
518
–
2,509
Assets for operational use
Owned
Land
Buildings
Office furniture and fittings
Electronic systems
Others
Leased
Land
Buildings
Office furniture and fittings
Electronic systems
Others
Held-for-investment assets
Owned
Land
Buildings
Leased
Total
Property, plant and equipment held for investment
(€ million)
31 dec. 2013
Assets carried at cost
Owned
Land
Buildings
Leased
Assets measured at FV
Owned
Land
Buildings
Leased
Total
166 2013 Annual Report · Bank Austria
31 dec. 2012
BOOK VALUE
FAIR VALUE
LEVEL 1
FAIR VALUE
LEVEL 2
FAIR VALUE
LEVEL 3
BOOK VALUE
FAIR VALUE
LEVEL 1
FAIR VALUE
LEVEL 2
FAIR VALUE
LEVEL 3
731
731
234
498
–
41
41
–
40
–
772
–
–
–
–
–
–
–
–
–
–
–
37
37
1
36
–
–
–
–
–
–
37
747
747
233
514
–
41
41
–
40
–
788
704
704
245
459
–
78
78
19
58
–
782
–
–
–
–
–
–
–
–
–
–
–
35
35
1
34
–
–
–
–
–
–
35
677
677
243
433
–
78
78
19
58
–
755
Property, plant and equipment used in the business
(€ million)
2012
Gross opening balance
Total net reduction in value
Net opening balance
Increases
Purchases
Capitalised expenditure on improvements
Write-backs
Positive exchange differences
Transfer from property, plant and equipment
held for investment
Other changes
Reductions
Disposals
Depreciation
Impairment losses
Negative exchange differences
Transfers
property, plant and equipment held for investment
assets held for sale
Other changes
Net final balance
Total net reduction in value
Gross closing balance
LAND
BUILDINGS
OFFICE
FURNITURE
AND FITTINGS
OTHER
TOTAL
161
–
161
12
6
–
–
2
2,003
– 703
1,300
131
84
9
2
15
491
– 344
147
37
36
–
–
1
583
– 442
141
79
73
–
–
2
373
– 266
107
52
50
–
–
1
3,610
–1,756
1,855
311
249
9
2
21
–
4
– 63
–2
–
–
–
– 60
–1
– 60
–
110
–
110
–
21
– 219
– 21
– 58
–1
–6
– 112
–5
– 107
– 21
1,211
– 688
1,899
–
–
– 35
–
– 29
–
–1
–3
–
–3
–2
149
– 353
502
–
3
– 67
–
– 52
–
–1
– 10
–
– 10
–3
152
– 456
608
–
2
– 54
–3
– 28
–
–1
–4
–
–4
– 18
105
– 269
374
–
30
–438
–28
–168
–2
–8
–189
–5
–184
–44
1,727
–1,766
3,493
LAND
BUILDINGS
OFFICE
FURNITURE
AND FITTINGS
ELECTRONIC
SYSTEMS
OTHER
TOTAL
110
–
110
49
1
–
–
–
1,899
– 688
1,211
123
53
1
1
4
502
– 353
149
30
27
–
–
1
608
– 456
152
68
57
–
–
–
374
– 269
105
38
29
–
–
–
3,493
–1,766
1,727
309
167
1
1
5
1
47
– 53
–
–
–
–4
–2
–
–1
– 47
106
–
106
8
55
– 346
– 13
– 53
–6
– 52
– 171
– 18
– 153
– 50
988
– 622
1,610
–
3
– 39
–1
– 29
–1
–1
–4
–
–3
–4
140
– 346
486
–
11
– 95
–1
– 51
–
– 12
– 25
–
– 10
–7
125
– 360
486
–
9
– 66
–6
– 23
–
–5
– 15
–
–4
– 18
77
– 234
312
10
125
–599
–22
–156
–6
–74
–216
–18
–172
–126
1,437
–1,563
2,999
ELECTRONIC
SYSTEMS
2013
Gross opening balance
Total net reduction in value
Net opening balance
Increases
Purchases
Capitalised expenditure on improvements
Write-backs
Positive exchange differences
Transfer from property, plant and equipment
held for investment
Other changes
Reductions
Disposals
Depreciation
Impairment losses
Negative exchange differences
Transfers
property, plant and equipment held for investment
assets held for sale
Other changes
Net final balance
Total net reduction in value
Gross closing balance
Bank Austria · 2013 Annual Report 167
Consolidated Financial Statements in accordance with IFRSs
C – Notes to the statement of financial position (CONTINUED)
Tangible assets held for investment: annual changes
(€ million)
2012
Opening balances
Increases
Purchases
Capitalised expenditure on improvements
Write-backs
Positive exchange differences
Transfer from property, plant and equipment used in the business
Other changes
Reductions
Disposals
Depreciation
Reductions in fair value
Impairment losses
Negative exchange differences
Transfers to
properties used in the business
non-current assets classified as held for sale
Other changes
Closing balances
Measured at fair value
LAND
BUILDINGS
TOTAL
289
5
3
–
–
2
1
–
– 31
–1
–
–
–1
– 14
– 12
–
– 12
–1
264
245
432
153
126
–
–
20
5
2
– 67
– 15
–7
–
–4
–1
– 37
–
– 37
–3
518
466
721
158
130
–
–
21
5
2
– 98
– 17
–7
–
–5
– 16
– 49
–
– 49
–4
782
711
LAND
BUILDINGS
TOTAL
264
47
33
–
–
–
–
15
– 78
–3
–
–
– 20
–2
–7
–1
–5
– 46
234
234
518
245
85
–
–
1
18
141
– 224
– 14
– 14
–1
– 20
–7
– 152
–8
– 144
– 17
538
591
782
292
117
–
–
1
18
156
– 302
– 17
– 14
–1
– 40
–9
– 159
– 10
– 149
– 63
772
825
2013
Opening balances
Increases
Purchases
Capitalised expenditure on improvements
Write-backs
Positive exchange differences
Transfer from property, plant and equipment used in the business
Other changes
Reductions
Disposals
Depreciation
Reductions in fair value
Impairment losses
Negative exchange differences
Transfers to
properties used in the business
non-current assets classified as held for sale
Other changes
Closing balances
Measured at fair value
168 2013 Annual Report · Bank Austria
C.12 – Intangible assets
(€ million)
31 Dec. 2013
31 Dec. 2012
–
219
219
26
193
–
219
2,127
331
331
29
303
–
2,459
Goodwill
Other intangible assets
Assets carried at cost
Intangible assets generated internally
Other assets
Assets valued at fair value
Total
Intangible assets – annual changes
(€ million)
2012
Other intangible assets
GOODWILL
GENERATED INTERNALLY
OTHER
TOTAL
Gross opening balance
Net reductions
Net opening balance
Increases
Purchases
Increases in intangible assets generated internally
Write-backs
Positive exchange differences
Other changes
Reductions
Disposals
Write-downs
Amortisation
Write-downs
Transfers to non-current assets held for sale
Negative exchange differences
Other changes
Net closing balance
Total net write down
Closing balance
5,210
– 2,813
2,397
66
24
X
X
42
–
– 336
–
– 199
X
– 199
–
– 12
– 125
2,127
– 3,099
5,226
76
– 33
43
18
14
–
–
1
3
– 33
–
–5
–5
–
–1
–
– 26
29
– 37
65
1,266
– 840
426
126
80
7
–
11
27
– 249
–2
– 100
– 94
–6
–7
– 10
– 129
303
– 967
1,270
6,552
–3,686
2,866
210
118
7
–
54
31
–617
–2
–304
– 99
–205
–8
–23
–280
2,459
–4,103
6,562
Gross opening balance
Net reductions
Net opening balance
Increases
Purchases
Increases in intangible assets generated internally
Write-backs
Positive exchange differences
Other changes
Reductions
Disposals
Write-downs
Amortisation
Write-downs
Transfers to non-current assets held for sale
Negative exchange differences
Other changes
Net closing balance
Total net write down
Closing balance
5,226
– 3,099
2,127
–
–
X
X
–
–
– 2,128
–
– 1,957
X
– 1,957
–
– 171
–
–
– 2,805
2,805
1,270
– 967
303
118
66
–
–
10
42
– 227
–5
– 104
– 89
– 15
– 65
– 34
– 19
193
– 851
1,045
6,562
–4,103
2,459
131
76
–
–
10
45
–2,371
–5
–2,068
– 96
–1,972
–67
–206
–25
219
–3,698
3,917
2013
65
– 37
29
12
9
–
–
–
3
– 16
–
–7
–7
–
–2
–1
–6
26
– 42
67
Bank Austria · 2013 Annual Report 169
Consolidated Financial Statements in accordance with IFRSs
C – Notes to the statement of financial position (CONTINUED)
C.13 – Deferred tax assets
Assets/liabilities held for trading
Other financial instruments
Property, plant and equipment/ intangible assets
Provisions
Write-downs on loans
Other assets/liabilities
Loans and receivables with banks and customers
Tax losses carried forward
Other
Total
(€ million)
31 Dec. 2013
31 Dec. 2012
72
90
21
564
41
109
32
52
6
988
71
120
25
683
59
120
18
177
12
1,284
As actuarial gains and losses on pension and severance-payment obligations were not recognised in income in the reporting year, deferred tax assets of
€7 million (2012: €228 million) were offset against equity in UniCredit Bank Austria AG.
As a result of the first-time consolidation of the subsidiaries and sub-groups referred to in section A.9, and of foreign currency translation of deferred taxes
and direct offsetting against reserves, part of the change in deferred taxes was not reflected in the expense in 2013.
The assets include deferred tax assets arising from the carry-forward of unused tax losses in the amount of €52 million (2012: €177 million). Most of the
tax losses carried forward can be used without time restriction.
In respect of tax losses carried forward in the amount of €2,151 million (2012: €918 million), no deferred tax assets were recognised because, from a
current perspective, a tax benefit is unlikely to be realised within a reasonable period.
170 2013 Annual Report · Bank Austria
C.14 – Non-current assets and disposal groups classified as held for sale
(€ million)
31 Dec. 2013
31 Dec. 2012
5
200
101
–
1
307
102
–
205
–
25
27
179
–
–
231
179
–
52
–
Asset groups
Financial assets held for trading
Financial assets designated at fair value
Available-for-sale financial assets
Held-to-maturity investments
Loans and receivables with banks
Loans and receivables with customers
Equity investments
Tangible assets
Intangible assets
Other assets
Total
of which at cost
of which fair value level 1
of which fair value level 2
of which fair value level 3
38
–
199
–
197
2,477
–
316
67
113
3,407
–
–
3,407
–
–
1
62
–
110
2,948
–
95
8
332
3,557
–
–
3,557
–
ASSETS
3,714
3,788
Individual assets
Financial assets
Equity investments
Tangible assets
Intangible assets
Non current – Other
Total
of which at cost
of which fair value level 1
of which fair value level 2
of which fair value level 3
This item includes non-current assets and disposal groups whose sale is highly probable. They are recognised at the lower of their carrying amount
and fair value less costs to sell and are stated separately in the consolidated financial statements.
Ukrsotsbank
UniCredit Group is considering a plan to streamline its activities in the region of Central and Eastern Europe. In this context all assets and liabilities of
Public Joint Stock Company UniCredit Bank (“UniCredit Bank Ukraine” or “UCB”), a wholly-owned subsidiary of UniCredit S. p. A., were transferred to
Public Joint Stock Company Ukrsotsbank (“Ukrsotsbank” oder “USB”), in which UniCredit Bank Austria AG had a shareholding interest of 98.56% until
then. The transfer took place on 2 December 2013 after approval had been given by the national banking authority, resulting in a reduction of the
shareholding interest to 72.46 %.
In Q4 2013, the group started concrete negotiations with a potential buyer of Ukrsotsbank. Accordingly, it has become highly probable that a sale of
Ukrsotsbank can be completed within one year, which is why Ukrsotsbank is classified as a disposal group held for sale as of 31 December 2013 and
shown as a discontinued operation in the income statement. The reclassification to held for sale triggered an impairment of €200 million (of which
€ 52 million is attributable to non-controlling interests).
It should be noted that UniCredit Bank Austria AG’s own share of the FX translation reserve (– €517 million as at 31 December 2013) will have to be
recycled to profit or loss upon the final sale of Ukrsotsbank. Moreover, it should be noted that as a result of the difficult economic environment and the
unclear political situation in Ukraine, the local currency (UAH) has weakened significantly against the euro and the US dollar since the beginning of
2014. Future developments are not yet foreseeable and it is therefore not possible to make any statement on the amount of the FX translation reserve
which may be expected at the time of the sale.
Bank Austria · 2013 Annual Report 171
Consolidated Financial Statements in accordance with IFRSs
C – Notes to the statement of financial position (CONTINUED)
Sale of Schottengasse property
Bank Austria sells its head office at Schottengasse 6 – 8 to an equity investment company
Bank Austria and the RPR private foundation of investor Ronny Pecik signed a purchase agreement for the sale of the Schottengasse property on
13 December 2013. The two parties have agreed not to disclose details of the purchase price and of the agreement. The closing took place on
19 February 2014.
Bank Austria will rent the Schottengasse property until construction of the bank’s new headquarters, the Austria Campus located close to Vienna’s
Northern Railway Station, has been completed. After completion (scheduled for 2016/17), Bank Austria will concentrate all employees and the entire
Management Board at its new headquarters.
C.15 – Other assets
Margin with derivatives clearers (non-interest bearing)
Gold, silver and precious metals
Accrued income other than capitalised income
Cash and other valuables held by cashier
Interest and charges to be debited
Items in transit between branches not yet allocated to destination accounts
Items in processing
Items deemed definitive but not attributable to other items
Adjustments for unpaid bills and notes
Other taxes
Other items
Total
(€ million)
31 Dec. 2013
31 Dec. 2012
4
34
37
1
8
50
285
146
8
11
831
1,414
7
47
43
1
10
–
372
163
8
18
776
1,446
As at 31 December 2013, the total amount of assets which are attributable to the “loans and receivables” category was €158,165 million
(2012: € 164,736 million).
C.16 – Deposits from banks
Deposits from central banks
Deposits from banks
Current accounts and demand deposits
Time deposits
Loans
Repos
Other
Other liabilities
Total
total Fair value
Fair value – Level 1
Fair value – Level 2
Fair value – Level 3
172 2013 Annual Report · Bank Austria
(€ million)
31 Dec. 2013
31 Dec. 2012
5,057
21,962
2,236
5,810
13,807
970
12,837
110
27,020
26,851
–
20,606
6,245
4,758
26,303
3,449
7,573
15,111
1,470
13,641
170
31,061
31,466
–
22,938
8,528
C.17 – Deposits from customers
(€ million)
31 Dec. 2013
31 Dec. 2012
56,179
50,296
1,286
1,155
131
695
478
108,935
109,866
–
70,162
39,704
55,767
52,493
929
800
129
649
726
110,563
111,234
–
64,607
46,627
Current accounts and demand deposits
Time deposits
Loans
Repos
Other
Liabilities in respect of commitments to repurchase treasury shares
Other liabilities
Total
TOTAL Fair value
Fair value – Level 1
Fair value – Level 2
Fair value – Level 3
C.18 – Debt securities in issue
(€ million)
31 Dec. 2013
Securities
Bonds
Structured
Other
Other securities
Structured
Other
Total
CARRYING
AMOUNT
28,886
182
28,704
164
–
164
29,049
31 Dec. 2012
FAIR VALUE
FAIR VALUE
LEVEL 1
FAIR VALUE
LEVEL 2
FAIR VALUE
LEVEL 3
CARRYING
AMOUNT
FAIR VALUE
FAIR VALUE
LEVEL 1
FAIR VALUE
LEVEL 2
FAIR VALUE
LEVEL 3
29,264
192
29,072
164
–
164
29,428
7,686
–
7,686
–
–
–
7,686
19,786
192
19,594
164
–
164
19,949
1,793
–
1,793
–
–
–
1,793
27,706
181
27,524
357
–
357
28,063
28,332
182
28,150
357
–
357
28,689
975
–
975
–
–
–
975
25,932
182
25,750
333
–
333
26,265
1,425
–
1,425
24
–
24
1,449
C.19
– Financial liabilities held for trading
(€ million)
31 dec. 2013
Financial liabilities
Deposits from banks
Deposits from customers
Derivative instruments
Financial derivatives
Credit derivatives
Total
31 Dec. 2012
FAIR VALUE
LEVEL 1
FAIR VALUE
LEVEL 2
FAIR VALUE
LEVEL 3
31
–
31
–
–
–
31
–
–
–
1,586
1,566
20
1,586
–
–
–
7
7
–
7
TOTAL
FAIR VALUE
LEVEL 1
FAIR VALUE
LEVEL 2
FAIR VALUE
LEVEL 3
TOTAL
31
–
31
1,593
1,573
20
1,625
42
–
42
–
–
–
42
19
–
19
2,133
2,063
70
2,152
–
–
–
2
2
–
2
61
–
61
2,135
2,066
70
2,196
C.20 – Financial liabilities at fair value through profit or loss
This item shows structured debt instruments in the amount of €788 million (2012: €1,152 million) in respect of which Bank Austria used the option to
designate financial instruments as at fair value through profit or loss in order to avoid inconsistencies in the valuation of assets and liabilities which are
connected with each other. Most of these liabilities are debt securities and complex structures with embedded derivatives. All instruments are classified
as Fair Value Level 2.
Of the changes in fair values in 2013, an expense of € 50 million (2012: an expense of €134 million) related to changes in our own credit risk.
In the valuation as at 31 December 2013, the cumulative portion relating to changes in our own credit risk was cumulative income of €18 million
(31 December 2012: cumulative income of € 68 million). The repayable amount of liabilities as at 31 December 2013 was €750 million
(31 December 2012: € 1,163 million).
Bank Austria · 2013 Annual Report 173
Consolidated Financial Statements in accordance with IFRSs
C – Notes to the statement of financial position (CONTINUED)
C.21
– Hedging derivatives
(€ million)
31 dec. 2013
31 Dec. 2012
FAIR VALUE
LEVEL 1
FAIR VALUE
LEVEL 2
FAIR VALUE
LEVEL 3
–
–
–
–
–
2,272
171
2,101
–
2,272
1
–
1
–
1
Financial derivatives
Fair value hedge
Cash flow hedge
Credit derivatives
Total
TOTAL
FAIR VALUE
LEVEL 1
FAIR VALUE
LEVEL 2
FAIR VALUE
LEVEL 3
TOTAL
2,273
171
2,102
–
2,273
–
–
–
–
–
2,988
229
2,759
–
2,988
1
–
1
–
1
2,989
229
2,760
–
2,989
C.22 – Deferred tax liabilities
Loans and receivables with banks and customers
Assets/liabilities held for trading
Other financial instruments
Property, plant and equipment/ intangible assets
Other assets/liabilities
Deposits from banks and customers
Other
Total
(€ million)
31 Dec. 2013
31 Dec. 2012
42
107
178
45
167
–
26
565
79
51
286
36
300
1
16
768
Pursuant to IAS 12.39, no deferred tax liabilities were recognised for temporary differences in connection with investments in domestic subsidiaries
amounting to € 911 million (2012: € 628 million) because from a current perspective, they are not intended to be sold.
C.23 – Liabilities included in disposal groups classified as held for sale
Deposits from banks
Deposits from customers
Debt securities in issue
Financial liabilities held for trading
Financial liabilities designated at fair value
Reserve
Other liabilities
Total
of which at cost
of which fair value level 1
of which fair value level 2
of which fair value level 3
See comments on C.14. All disposal groups presented above are measured at cost.
174 2013 Annual Report · Bank Austria
(€ million)
31 Dec. 2013
31 Dec. 2012
307
1,907
4
1
–
–
23
2,242
2
–
2,240
–
161
2,681
620
1
–
–
44
3,506
–
–
3,506
–
C.24
– Other liabilities
Liabilities in respect of financial guarantees issued
Impairment of financial guarantees issued, of credit derivatives, of irrevocable commitments to distribute funds
Accrued expenses other than those to be capitalised for the financial liabilities concerned
Share-based payments classified as liabilities under IFRS 2
Other liabilities due to employees
Other liabilities due to other staff
Interest and amounts to be credited
Items in transit between branches and not yet allocated to destination accounts
Available amounts to be paid to others
Items in processing
Entries related to securities transactions
Items deemed definitive but not attributable to other lines
Tax items different from those included in tax liabilities
Other entries
Total
(€ million)
31 Dec. 2013
31 Dec. 2012
–
698
90
–
338
5
49
–
48
1,426
5
241
54
525
3,481
–
214
126
–
377
7
51
–
59
1,637
–
371
51
533
3,428
As at 31 December 2013, the total amount of liabilities which are attributable to “deposits from banks/customers, debt securities in issue and other
liabilities” was € 168,485 million (2012: € 173,115 million).
C.25 – Provisions for risks and charges
Pensions and other post-retirement benefit obligations
Other provisions for risks and charges
Legal disputes
Staff expenses
Other
Total
(€ million)
31 Dec. 2013
31 Dec. 2012
4,647
507
113
135
260
5,155
4,600
789
301
16
472
5,389
Bank Austria · 2013 Annual Report 175
Consolidated Financial Statements in accordance with IFRSs
C – Notes to the statement of financial position (CONTINUED)
Provisions for risks and charges: annual changes
(€ million)
2012
Opening balance
Increases
Provisions for the year
Current service costs
Settlement gains/losses
Past service costs
Interest costs
Remeasurement losses recognised in other comprehensive income
Other increases
Decreases
Uses during the year
Remeasurement gains recognised in other comprehensive income
Other decreases
Closing balance
PENSIONS AND POSTRETIREMENT BENEFIT
OBLIGATIONS
OTHER PROVISIONS
TOTAL
3,664
1,174
–
64
3
–
183
921
3
– 238
– 232
–
–6
4,600
540
366
349
–
–
–
–
–
17
– 118
– 115
–
–3
789
4,204
1,540
349
64
3
–
183
921
21
– 356
– 347
–
–9
5,389
2013
Opening balance
Increases
Provisions for the year
Current service costs
Settlement gains/losses
Past service costs
Interest costs
Remeasurement losses recognised in other comprehensive income
Other increases
Decreases
Uses during the year
Remeasurement gains recognised in other comprehensive income
Other decreases
Closing balance
PENSIONS AND POSTRETIREMENT BENEFIT
OBLIGATIONS
OTHER PROVISIONS
TOTAL
4,600
299
–
76
6
3
168
27
19
– 252
– 234
–4
– 13
4,647
789
191
184
–
–
–
–
–
7
– 472
– 416
–
– 57
507
5,389
490
184
76
6
3
168
27
26
– 724
– 650
–4
– 70
5,155
Restructuring provisions
In December 2013, Bank Austria launched the Bank Austria 2020 initiative in response to changes in customer behaviour and market environment
as well as rising costs. The goal of the initiative is to put Banak Austria’s business model on a more sustainable basis, to be optimally positioned in
the forthcoming transformation of the Austrian banking industry.
While Bank Austria will adhere to the Group commercial banking strategy, the bank will differentiate more clearly between two directions:
The “basic services bank” will offer services such as deposits, consumer loans, cash deposits and withdrawals, as well as transfers, intensively
using technology to provide these services at competitive prices.
The “advisory services bank” will offer consulting services with greater added value to its customers through the presence of experts and
­specialists.
The new business model will enable Bank Austria to make better use of opportunities to generate more revenues. However, in order to improve the
profitability of its retail operations, a further streamlining of processes and additional measures for cost reductions are planned.
The necessary restructuring processes are planned to be implemented in Bank Austria and its subsidiaries in the years 2014 and 2015.
176 2013 Annual Report · Bank Austria
The following measures are planned to reduce expenses:
• Staff-related measures are planned to be taken primarily in back-office units and in a socially compatible form, with a focus on two areas: positions
which become vacant will not be filled, and part-time working models will be promoted. A total reduction of 686 FTEs (54% in 2014 and 46% in
2015) is planned in Bank Austria.
• Reduction of the number of branches.
• Fundamental reorganisation of the IT infrastructure in light of the introduction of multichannel banking.
The expected costs related to this planned restructuring in the amount of €104 million have been provided for in a restructuring provision.
C.26 – Equity
From 1 January 2013 to 31 December 2013, the number of shares was 231,228,820, of which 10,115 were registered shares. The registered shares
(10,000 registered shares are held by “Privatstiftung zur Verwaltung von Anteilsrechten”, a private foundation under Austrian law; 115 registered shares
are held by “Betriebsratsfonds des Betriebsrats der Angestellten der UniCredit Bank Austria AG Region Wien”, the Employees’ Council Fund of the
Employees’ Council of employees of UniCredit Bank Austria AG in the Vienna area) carry special rights: for resolutions concerning spin-offs and specific
mergers or specific changes in the bank’s Articles of Association to be adopted at a general meeting of shareholders, the registered shareholders have to
be present when the resolutions are adopted. The relevant resolutions are specified in Article 20 (13) and (14) of UniCredit Bank Austria AG’s Articles of
Association.
Bank Austria · 2013 Annual Report 177
D – Segment reporting
D.1 – Reconciliation of reclassified accounts to
mandatory reporting schedule
180
D.2 – Description of segment reporting
182
D.3 – Segment reporting 1 – 12 2013 /1 – 12 2012
184
D.4 – Segment reporting Q1 – Q4 2013 / Q1 – Q4 2012
186
Bank Austria · 2013 Annual Report 179
Consolidated Financial Statements in accordance with IFRSs
D – Segment reporting (CONTINUED)
D.1 – Reconciliation of reclassified accounts to mandatory reporting schedule
Net interest
Dividends and other income from equity investments
Dividend income and similar revenue
minus: dividends from equity instruments held for trading
Profit (loss) of associates – of which: income (loss) from equity investments valued at net equity
Net fees and commissions
Net trading, hedging and fair value income
Gains (losses) on financial assets and liabilities held for trading
plus: dividends from equity instruments held for trading
Fair value adjustments in hedge accounting
Gains (losses) on disposal and repurchase of available-for-sale financial assets
Gains (losses) on disposal and repurchase of held-to-maturity investments
Gains (losses) on disposal or repurchase of financial liabilities
Gains (losses) on financial assets and liabilities designated at fair value through profit or loss
Net other expenses/income
Gains (losses) on disposals/repurchases of loans and receivables – not impaired
Premiums earned (net)
Other income (net) from insurance activities
Other net operating income
minus: other operating income – of which: recovery of expenses
plus: impairment on tangible assets – other operating leases
minus: Other operating expenses – write-downs on improvements of goods owned by third parties
OPERATING INCOME
Payroll costs
Administrative costs – staff expenses
minus: integration/restructuring costs
Other administrative expenses
Administrative costs – other administrative expenses
minus: integration/restructuring costs
plus: Other operating expenses – write-downs on improvements of goods owned by third parties
Recovery of expenses = Other net operating income – of which: Other operating income – recovery of costs
Amortisation, depreciation and impairment losses on intangible and tangible assets
Impairment/Write-backs on property, plant and equipment
minus: impairment losses/write-backs on property owned for investment
minus: impairment on tangible assets – other operating leases
Impairment/Write-backs on intangible assets
minus: integration/restructuring costs
minus: Purchase Price Allocation effect
Operating costs
OPERATING PROFIT
180 2013 Annual Report · Bank Austria
(€ million)
2013
2012
4,132
83
25
0
58
1,698
934
565
0
12
305
3
11
37
113
–2
83
– 65
94
–1
0
5
6,960
– 1,886
– 1,992
106
– 1,690
– 1,705
20
–5
1
– 281
– 215
40
0
– 112
5
0
– 3,856
3,104
4,110
– 150
30
0
– 180
1,536
768
539
0
–8
90
25
126
–5
142
–8
161
– 123
109
–1
0
5
6,405
– 1,911
– 1,914
3
– 1,601
– 1,599
3
–5
1
– 245
– 175
11
0
– 98
1
16
– 3,755
2,650
Net write-downs of loans and provisions for guarantees and commitments
Gains (losses) on disposal and repurchase of loans
Impairment losses on loans
Impairment losses on other financial assets
NET OPERATING PROFIT
Provisions for risks and charges
Net provisions for risks and charges
minus: release of a provision related to the disposal of a participation
minus: integration / restructuring costs
Integration/restructuring costs
Net income from investments
Impairment losses on available-for-sale financial assets
Impairment losses on held-to-maturity investments
plus: impairment losses / write-backs on property owned for investment
Profit (loss) of associates
minus: profit (loss) of associates – income (loss) from equity investments valued at net equity
Gains and losses on tangible and intangible assets
Gains (losses) on disposal of investments
PROFIT BEFORE TAX
Income tax for the period
Tax expense (income) related to profit or loss from continuing operations
minus: taxes on Purchase Price Allocation effect
Total profit or loss after tax from discontinued operations
Profit or loss after tax from discontinued operations
plus: release of a provision related to the disposal of a participation
PROFIT or loss FOR THE PERIOD
Non-controlling interests
NET PROFIT ATTRIBUTABLE TO THE OWNERS OF THE PARENT COMPANY BEFORE PPA
Purchase Price Allocation effect
Impairment of goodwill
NET PROFIT or loss ATTRIBUTABLE TO THE OWNERS OF THE PARENT COMPANY
2013
2012
– 1,441
3
– 1,416
– 28
1,663
– 177
– 56
– 122
1
– 132
– 223
– 56
0
– 40
– 135
– 58
–1
66
1,131
– 534
– 534
0
– 270
– 392
122
327
27
354
0
– 1,957
– 1,603
– 959
3
– 976
14
1,691
–305
–332
0
27
–33
–76
–63
–16
–11
–185
180
0
19
1,276
–328
–326
–2
–440
–440
0
508
–38
470
–13
–34
423
Bank Austria · 2013 Annual Report 181
Consolidated Financial Statements in accordance with IFRSs
D – Segment reporting (CONTINUED)
D.2 – Description of segment reporting
The segment reporting format is based on the internal reporting structure of business segments, which reflects management responsibilities in the
Bank Austria Group in 2013. The business segments are presented as independent units with responsibility for their own results. The definition of
business segments is primarily based on organisational responsibility for customers.
Structural changes in segment reporting: As part of a UniCredit-wide initiative (Group Organisation Leaner Design = GOLD project), the
Management Board responsibilities and the definitions of business segments were changed as of 2013. The new structure strengthens regional
control, customer service teams can adjust more quickly to local market changes. The new Retail & Corporates Division was created by combining
the customer segments of the previous Family & SME Banking (F & SME) business segment with the previous CIB customer segments Corporates II
(corporate customers with an annual turnover of over € 50 million), Real Estate and Public Sector. The new Division also includes Factoring, the
business conducted by FactorBank AG. The Corporate & Investment Banking (CIB) business segment continues to operate within the network of the
global CIB Division; following the transfer of the local corporate customer segments, CIB focuses on serving multinational companies and large
institutional customers, which are provided with investment banking solutions and capital market services. The definition and tasks of the other
customer business segments – i. e. Private Banking and Central Eastern Europe (CEE) – and also the Corporate Center are more or less unchanged.
Segment reporting covers the following business segments:
Retail & Corporates
The Retail & Corporates business segment comprises business with private individuals (Retail), including the Mass Market and Affluent customer
segments except Private Banking customers, and thus encompasses the entire multi-channel distribution network. Also included in this Division are
subsidiaries active in credit card business and FactorBank. The Corporates subdivision covers the customer segments SMEs (small and medium-sized
businesses) and corporate customers with an annual turnover of over €50 million, and Real Estate including various subsidiaries (e. g. Wohnbaubank,
Bank Austria Real Invest Group) and the Public Sector customer segment.
Private Banking
Private Banking has responsibility for private customers with investments exceeding €500,000. Schoellerbank AG and various other small subsidiaries
are also included in the Private Banking business segment.
Corporate & Investment Banking (CIB)
The Corporate & Investment Banking segment covers the customer segment of multinational companies and large international customers using
capital market services and investment banking solutions. Corporate & Investment Banking also serves financial institutions including banks, asset
managers, institutional customers and insurance companies. The product lines offered by CIB to these customers are Financing & Advisory (classic
and structured lending business and capital market advisory services), Global Transaction Banking (including payment transactions, trade finance,
cash management) and within Markets & Corporate Treasury Sales the services relating to customer-driven trading activities. The product specialists
continue to support commercial banking activities of the bank’s other business segments.
Central Eastern Europe (CEE)
The CEE business segment includes the commercial banking units of the Bank Austria Group in the region of Central and Eastern Europe (including
Turkey). The equity interest in JSC ATF Bank and its subsidiaries in Kazakhstan and Kirgyzstan was classified as a discontinued operation already in
2012 and allocated to the Corporate Center. The equity interest in JSC ATF Bank and its subsidiaries was sold as at 30 April 2013.
On the basis of a strategic decision on risk reduction, the equity interest in Ukrsotsbank was classified as held for sale at the end of 2013. Profit or
loss of Ukrsotsbank is now included in the CEE business segment in the income statement item “Total profit or loss after tax from discontinued
operations”; figures for previous periods were adjusted accordingly.
Corporate Center
The item “Total profit or loss after tax from discontinued operations” in the Corporate Center’s income statement includes the other effects resulting
from the classification of Ukrsotsbank as a discontinued operation and the effects from the sale (including profit or loss until the sale) of JSC ATF Bank
and its subsidiaries. In addition to current expenses relating to steering and administrative functions for the entire bank, the Corporate Center
comprises all equity interests that are not assigned to a business segment, including the contribution from UniCredit Leasing, in which Bank Austria
has a shareholding interest of 31.01 % accounted for under the equity method. In the fourth quarter of 2013, the equity interest in UniCredit Leasing
was classified as a disposal group held for sale.
Funding costs relating to consolidated subsidiaries are also assigned to the Corporate Center. Also included are inter-segment eliminations, other items
which are not to be assigned to the business segments, and impairment losses on goodwill.
182 2013 Annual Report · Bank Austria
Methods
Net interest is split up according to the market interest rate method. Costs are allocated to the individual business segments from which they arise.
The result of each business segment is measured by the profit earned by the respective segment. The interest rate applied to investment of equity
allocated to the business segments is determined for one year in advance as part of the budgeting process. Essentially, it is composed of the
1-month EURIBOR and a liquidity cost margin based on the average term of balance sheet volume.
Overhead costs are allocated to the business segments according to a key of distribution applied within the Group on a uniform basis (50% costs,
20 % revenues, 20 % FTEs and 10 % proportionately).
Capital allocated to the business segments in UniCredit Bank Austria AG, based on the Tier 1 capital ratio, is 9% of risk-weighted assets.
Recasting:
A number of structural changes took place within the business segments and in the group of consolidated companies. This means that results for
2013 are not fully comparable with those for 2012. For this reason, the segment results for 2012 have been adjusted to the new structure. The
difference compared with Bank Austria’s overall results is presented in a separate column showing “Recasting differences”.
The main pro-forma adjustments are as follows:
• The profit-or-loss effect resulting from customer transfers and the reallocation of subsidiaries (Group Organisation Leaner Design = GOLD project)
was also taken into account in previous periods.
• Starting with 2013, the Austrian bank levy was allocated to the business segments essentially on the basis of total assets
(UniCredit Bank Austria AG) of the respective business segments. Figures for previous periods were adjusted accordingly.
• DOMUS Facility Management GmbH was sold to UniCredit Global Information Services in September 2012. DOMUS Facility Management GmbH
is therefore no longer included in the recast figures for 2012.
• UniCredit Consumer Financing AD (Bulgaria) and UniCredit Consumer Financing IFN S. A. (Romania) were acquired in January 2013.
The two companies are therefore retrospectively included in the recast figures for 2012.
• Bank Austria’s 31.01 % equity interest in UniCredit Leasing was classified as a disposal group held for sale; this means that profit or loss
continues to be included in the item “Dividends and other income from equity investments” while valuation adjustments are now included in
net income / loss from investments. Figures for previous periods were adjusted accordingly.
• Other minor adjustments were made to improve data comparability.
Bank Austria · 2013 Annual Report 183
Consolidated Financial Statements in accordance with IFRSs
D – Segment reporting (CONTINUED)
D.3 – Segment reporting 1 – 12 2013/1–12 2012
RETAIL &
CORPORATES
Net interest
1 – 12 2013
1 – 12 2012
Dividends and other income
1 – 12 2013
from equity investments
1 – 12 2012
Net fees and commissions
1 – 12 2013
1 – 12 2012
Net trading, hedging and
1 – 12 2013
fair value income/loss
1 – 12 2012
Net other expenses/income
1 – 12 2013
1 – 12 2012
OPERATING INCOME
1 – 12 2013
1 – 12 2012
OPERATING COSTS
1 – 12 2013
1 – 12 2012
OPERATING PROFIT
1 – 12 2013
1 – 12 2012
Net write-downs of loans and provisions 1 – 12 2013
for guarantees and commitments
1 – 12 2012
NET OPERATING PROFIT
1 – 12 2013
1 – 12 2012
Provisions for risks and charges
1 – 12 2013
1 – 12 2012
Integration/restructuring costs
1 – 12 2013
1 – 12 2012
Net income/loss from investments
1 – 12 2013
1 – 12 2012
PROFIT BEFORE TAX
1 – 12 2013
1 – 12 2012
Income tax for the period
1 – 12 2013
1 – 12 2012
Total profit or loss after tax from
1 – 12 2013
discontinued operations
1 – 12 2012
PROFIT or LOSS FOR THE PERIOD
1 – 12 2013
1 – 12 2012
Non-controlling interests
1 – 12 2013
1 – 12 2012
NET PROFIT or loss ATTRIBUTABLE 1 – 12 2013
TO THE OWNERS OF THE PARENT
1 – 12 2012
COMPANY BEFORE PPA
Purchase Price Allocation effect
1 – 12 2013
1 – 12 2012
Goodwill impairment
1 – 12 2013
1 – 12 2012
NET PROFIT OR LOSS ATTRIBUTABLE 1 – 12 2013
TO THE OWNERS OF THE PARENT
1 – 12 2012
COMPANY
184 2013 Annual Report · Bank Austria
CORPORATE &
INVESTMENT
PRIVATE
BANKING
BANKING
(CIB)
(€ million)
CENTRAL
EASTERN
EUROPE
(CEE)
CORPORATE
CENTER
BANK
AUSTRIA
GROUP
(RECAST) BANK
REcasting
AUSTRIA
DIFFERGROUP
ENCES 1) (published) 2)
936
982
23
38
477
476
33
26
22
22
1,492
1,543
– 1,143
– 1,117
349
425
– 136
– 160
213
265
–5
–3
–
– 27
– 33
– 24
175
211
– 48
– 44
–
–
127
167
–7
–7
120
160
52
47
–
–
101
91
3
2
–
–
156
141
– 109
– 107
46
34
–1
–
46
34
–2
–1
–
–1
–
–
44
33
– 12
–9
–
–
32
24
–
–
32
24
346
434
5
1
99
86
54
–3
5
2
508
520
– 226
– 237
282
283
– 53
– 48
229
235
–
– 15
4
–4
–2
–5
231
211
– 56
– 60
–
–
175
150
–
1
175
151
3,091
3,032
13
16
1,040
958
705
531
80
93
4,929
4,630
– 2,162
– 2,075
2,767
2,555
– 1,222
– 761
1,545
1,794
– 40
– 63
– 32
–1
169
–8
1,641
1,722
– 254
– 323
– 108
1
1,280
1,400
– 26
– 51
1,255
1,349
– 292
– 352
42
31
– 19
– 68
140
212
5
25
– 125
– 152
– 216
– 250
– 341
– 402
– 29
–1
– 370
– 403
– 129
– 223
– 104
–
– 358
– 280
– 960
– 907
– 164
110
– 162
– 439
– 1,287
– 1,236
59
20
– 1,228
– 1,217
4,132
4,143
83
86
1,698
1,543
934
768
113
141
6,960
6,681
– 3,856
– 3,786
3,104
2,895
– 1,441
– 969
1,663
1,926
– 177
– 305
– 132
– 33
– 223
– 318
1,131
1,269
– 534
– 327
– 270
– 438
327
505
27
– 38
354
467
–
– 33
–
– 237
–
–7
–
–
–
1
–
– 276
–
31
–
– 245
–
10
–
– 235
–
–
–
–
–
241
–
7
–
–2
–
–2
–
3
–
–
–
3
4,132
4,110
83
– 150
1,698
1,536
934
768
113
142
6,960
6,405
– 3,856
– 3,755
3,104
2,650
– 1,441
– 959
1,663
1,691
– 177
– 305
– 132
–33
– 223
–76
1,131
1,276
– 534
– 328
– 270
– 440
327
508
27
–38
354
470
–
–
–
–
120
160
–
–
–
–
32
24
–
–
–
–
175
151
–
–
–9
– 22
1,245
1,327
–
– 13
– 1,947
– 12
– 3,176
– 1,242
–
– 13
– 1,957
– 34
– 1,603
419
–
–
–
–
–
3
–
–13
– 1,957
–34
– 1,603
423
RETAIL &
CORPORATES
Risk-weighted assets (RWA) (avg.) 3) 1 – 12 2013
1 – 12 2012
Loans to customers (end of period) 1 – 12 2013
1 – 12 2012
Primary funds (end of period) 4)
1 – 12 2013
1 – 12 2012
Cost/income ratio excl. bank levy in % 1 – 12 2013
1 – 12 2012
Risk/earnings ratio in % 5)
1 – 12 2013
1 – 12 2012
17,572
17,589
39,901
41,762
40,300
43,601
74.1
70.0
14.2
15.7
CORPORATE &
INVESTMENT
PRIVATE
BANKING
BANKING
(CIB)
661
954
644
599
7,686
7,716
69.9
75.4
1.6
0.6
9,087
9,465
13,581
13,285
9,191
8,390
37.9
39.2
15.3
11.0
CENTRAL
EASTERN
EUROPE
(CEE)
CORPORATE
CENTER
BANK
AUSTRIA
GROUP
(RECAST) 82,367
84,185
69,170
68,051
63,615
62,486
42.9
44.0
39.4
25.0
15,808
17,065
5,824
6,476
17,192
14,630
n.m.
n.m.
n.m.
n.m.
125,496
129,257
129,121
130,173
137,984
136,824
53.4
54.7
34.2
22.9
BANK
REcasting
AUSTRIA
DIFFERGROUP
ENCES 1) (published) 2)
–
– 173
–
2,251
–
1,802
n.m.
n.m.
n.m.
n.m.
125,496
129,083
129,121
132,424
137,984
138,626
53.4
56.6
34.2
24.2
1) The segment results have been recast. The difference compared to Bank Austria’s results is presented in a separate column showing “Recasting differences”, which for 2012
mainly relate to the sale of Domus Facility Management GmbH, the purchase of UniCredit Consumer Financing AD (Bulgaria) and UniCredit Consumer Financing IFN S. A.
(Romania). “Recasting differences” for 2012 relating to loans to customers and primary funds are due to Public Joint Stock Company “Ukrsotsbank” and its subsidiaries.
2) The comparative figures for 2012 and 2013 reflect the accounting figures, restatements as described in the notes included accordingly.
3) Corporate Center: including Kazakhstan (until disposal).
4) Primary funds: deposits from customers and debt securities in issue.
5) Risk/earnings ratio: net write-downs of loans and provisions for guarantees and commitments measured against net interest and dividends and other income from equity
investments.
n. m. = not meaningful
Bank Austria · 2013 Annual Report 185
Consolidated Financial Statements in accordance with IFRSs
D – Segment reporting (CONTINUED)
D.4 – Segment reporting Q1 – Q4 2013/Q1– Q4 2012
Net interest
Dividends and other income
from equity investments
Net fees and commissions
Net trading, hedging and
fair value income/loss
Net other expenses/income
OPERATING INCOME
OPERATING COSTS
Q4 2013
Q3 2013
Q2 2013
Q1 2013
Q4 2012
Q3 2012
Q2 2012
Q1 2012
Q4 2013
Q3 2013
Q2 2013
Q1 2013
Q4 2012
Q3 2012
Q2 2012
Q1 2012
Q4 2013
Q3 2013
Q2 2013
Q1 2013
Q4 2012
Q3 2012
Q2 2012
Q1 2012
Q4 2013
Q3 2013
Q2 2013
Q1 2013
Q4 2012
Q3 2012
Q2 2012
Q1 2012
Q4 2013
Q3 2013
Q2 2013
Q1 2013
Q4 2012
Q3 2012
Q2 2012
Q1 2012
Q4 2013
Q3 2013
Q2 2013
Q1 2013
Q4 2012
Q3 2012
Q2 2012
Q1 2012
Q4 2013
Q3 2013
Q2 2013
Q1 2013
Q4 2012
Q3 2012
Q2 2012
Q1 2012
1) Quarterly figures based on unaudited recast data only.
186 2013 Annual Report · Bank Austria
(€ million)
RETAIL &
CORPORATES
PRIVATE
BANKING
CORPORATE &
INVESTMENT
BANKING (CIB)
CENTRAL
EASTERN
EUROPE (CEE)
CORPORATE
CENTER
BANK AUSTRIA
GROUP
(RECAST) 1)
236
236
230
235
241
237
254
250
10
3
4
7
10
8
15
5
127
118
118
114
125
119
117
115
1
7
7
18
7
9
7
3
8
5
5
5
7
5
5
4
383
368
364
378
390
378
398
376
– 298
– 271
– 290
– 283
– 304
– 275
– 272
– 267
14
13
12
12
13
10
12
13
–
–
–
–
–
–
–
–
27
22
26
26
28
22
20
21
1
1
1
–
–
1
–
1
–
1
–
–
–
1
–
–1
42
37
39
38
41
33
33
34
– 28
– 26
– 28
– 28
– 28
– 27
– 26
– 26
84
82
90
91
99
103
115
116
1
–
–
4
1
–
–
–
30
19
26
24
24
17
23
22
15
11
20
8
9
–
–5
–6
1
–
1
3
–1
1
–
1
130
112
136
130
133
121
132
134
– 58
– 55
– 56
– 56
– 61
– 59
– 54
– 62
742
756
791
802
795
784
739
714
–2
2
10
3
4
4
4
5
275
252
265
248
264
243
234
217
304
125
153
122
154
174
103
100
1
31
27
21
44
45
20
– 16
1,320
1,166
1,247
1,197
1,261
1,250
1,099
1,020
– 560
– 516
– 535
– 551
– 534
– 521
– 522
– 497
– 73
– 67
– 74
– 79
– 93
– 82
– 82
– 94
–3
10
14
21
–4
– 18
33
20
–4
–6
–
–9
– 18
– 17
– 17
– 16
45
48
51
–4
18
64
– 65
194
9
6
– 19
9
–5
11
10
9
– 25
–9
– 29
– 62
– 102
– 42
– 121
113
– 56
– 52
– 53
– 55
– 65
– 61
– 62
– 62
1,003
1,020
1,048
1,060
1,055
1,051
1,038
999
6
14
28
35
10
–6
52
30
456
404
434
403
424
384
376
359
366
193
232
144
189
249
40
291
20
41
14
38
45
63
35
–2
1,850
1,673
1,757
1,680
1,723
1,741
1,541
1,677
– 1,001
– 920
– 963
– 973
– 993
– 943
– 937
– 914
OPERATING PROFIT
Net write-downs of loans and provisions
for guarantees and commitments
NET OPERATING PROFIT
Provisions for risks and charges
Integration/restructuring costs
Net income/loss from investments
PROFIT BEFORE TAX
Q4 2013
Q3 2013
Q2 2013
Q1 2013
Q4 2012
Q3 2012
Q2 2012
Q1 2012
Q4 2013
Q3 2013
Q2 2013
Q1 2013
Q4 2012
Q3 2012
Q2 2012
Q1 2012
Q4 2013
Q3 2013
Q2 2013
Q1 2013
Q4 2012
Q3 2012
Q2 2012
Q1 2012
Q4 2013
Q3 2013
Q2 2013
Q1 2013
Q4 2012
Q3 2012
Q2 2012
Q1 2012
Q4 2013
Q3 2013
Q2 2013
Q1 2013
Q4 2012
Q3 2012
Q2 2012
Q1 2012
Q4 2013
Q3 2013
Q2 2013
Q1 2013
Q4 2012
Q3 2012
Q2 2012
Q1 2012
Q4 2013
Q3 2013
Q2 2013
Q1 2013
Q4 2012
Q3 2012
Q2 2012
Q1 2012
RETAIL &
CORPORATES
PRIVATE
BANKING
CORPORATE &
INVESTMENT
BANKING (CIB)
CENTRAL
EASTERN
EUROPE (CEE)
CORPORATE
CENTER
BANK AUSTRIA
GROUP
(RECAST) 1)
85
97
73
94
86
103
126
110
–2
– 45
– 45
– 45
–7
– 76
– 18
– 59
83
52
28
50
79
27
108
50
–5
–
–
–
–2
–1
–
–
–
–
–
–
– 27
–
–
–
– 43
12
–2
–
– 19
–
–6
–
35
64
27
50
32
27
102
50
14
11
11
11
13
7
7
8
–
–
–
–
–
–
–
–
14
10
11
10
13
7
7
8
–1
–1
–
–
–
–
–
–1
–
–
–
–
–1
–
–
–
–
–
–
–
–
–
–
–
13
9
11
10
12
7
7
7
72
56
80
74
72
62
78
71
– 15
– 13
– 12
– 13
– 37
–1
–5
–6
57
44
67
61
34
62
73
66
–
–
–
–
– 15
–
–
–
–
4
–
–
–
–
–3
–
–2
–1
3
–2
–2
–
–4
–
55
47
71
59
17
62
66
66
760
650
712
646
727
728
577
523
– 517
– 231
– 246
– 228
– 233
– 181
– 193
– 154
242
419
466
417
494
548
384
369
–7
–5
– 16
– 12
– 37
–7
– 10
– 10
– 12
– 14
–4
–2
–1
–
–
–
– 17
185
–1
1
– 13
–1
1
5
207
585
446
404
442
540
376
364
– 82
– 61
– 82
– 117
– 167
– 102
– 184
51
– 30
–
1
–
–2
–
1
–
– 112
– 61
– 81
– 117
– 169
– 102
– 183
51
– 22
– 15
– 31
– 62
– 177
–
– 49
3
– 104
–
–
–
–
–
–
–
– 356
–2
1
–
– 239
7
–8
– 39
– 594
– 78
– 111
– 178
– 586
– 95
– 240
14
849
753
794
708
730
798
604
763
–565
–289
–301
–286
–279
–257
–215
–219
285
464
493
421
451
541
390
544
–35
–22
–46
–74
–231
–7
–59
–8
–116
–10
–4
–2
–30
–
–3
–
–417
194
1
–1
–273
6
–16
–34
–284
627
443
344
–83
539
312
502
1) Quarterly figures based on unaudited recast data only.
Bank Austria · 2013 Annual Report 187
Consolidated Financial Statements in accordance with IFRSs
D – Segment reporting (CONTINUED)
Income tax for the period
Total profit or loss after tax from
discontinued operations
PROFIT (LOSS) FOR THE PERIOD
Non-controlling interests
NET PROFIT or loss ATTRIBUTABLE
to the OWNERS OF THE PARENT
COMPANY BEFORE PPA
Purchase Price Allocation effect
Goodwill impairment
Q4 2013
Q3 2013
Q2 2013
Q1 2013
Q4 2012
Q3 2012
Q2 2012
Q1 2012
Q4 2013
Q3 2013
Q2 2013
Q1 2013
Q4 2012
Q3 2012
Q2 2012
Q1 2012
Q4 2013
Q3 2013
Q2 2013
Q1 2013
Q4 2012
Q3 2012
Q2 2012
Q1 2012
Q4 2013
Q3 2013
Q2 2013
Q1 2013
Q4 2012
Q3 2012
Q2 2012
Q1 2012
Q4 2013
Q3 2013
Q2 2013
Q1 2013
Q4 2012
Q3 2012
Q2 2012
Q1 2012
Q4 2013
Q3 2013
Q2 2013
Q1 2013
Q4 2012
Q3 2012
Q2 2012
Q1 2012
Q4 2013
Q3 2013
Q2 2013
Q1 2013
Q4 2012
Q3 2012
Q2 2012
Q1 2012
1) Quarterly figures based on unaudited recast data only.
188 2013 Annual Report · Bank Austria
RETAIL &
CORPORATES
PRIVATE
BANKING
CORPORATE &
INVESTMENT
BANKING (CIB)
CENTRAL
EASTERN
EUROPE (CEE)
CORPORATE
CENTER
BANK AUSTRIA
GROUP
(RECAST) 1)
– 25
– 10
–6
–8
–8
–2
– 22
– 12
–
–
–
–
–
–
–
–
10
54
21
42
23
25
80
39
–1
–3
–1
–2
–2
–4
–1
–2
9
52
19
40
22
21
80
37
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–4
–2
–3
–3
–3
–2
–3
–2
–
–
–
–
–
–
–
–
9
7
8
8
9
5
4
6
–
–
–
–
–
–
–
–
9
7
8
8
9
5
4
6
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
– 14
– 11
– 17
– 14
–9
– 15
– 19
– 18
–
–
–
–
–
–
–
–
41
36
53
44
9
47
48
47
–1
–
–
1
1
–
–
–
40
36
53
46
9
46
48
47
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
– 29
– 86
– 61
– 77
– 83
– 101
– 70
– 69
– 52
1
– 58
1
– 25
8
7
11
125
500
327
328
335
447
313
305
17
– 10
– 17
– 16
–3
– 24
– 14
– 11
143
490
310
312
332
423
300
294
–
–
–
–
–
–
–
–
–9
–
–
–
– 22
–
–
–
– 187
8
– 24
38
23
46
44
–3
– 198
6
13
17
– 462
6
6
10
– 979
– 63
– 121
– 124
– 1,025
– 43
– 190
22
38
1
14
6
5
7
6
2
– 941
– 63
– 107
– 118
– 1,021
– 36
– 184
24
–
–
–
–
–7
–2
–2
–2
– 1,940
–3
–3
–3
–3
–3
–3
–4
– 259
– 100
– 111
– 64
– 80
– 73
– 69
– 104
– 250
7
– 45
18
– 487
14
14
21
– 793
534
287
299
– 650
480
256
419
53
– 12
–4
– 11
1
– 21
–8
– 10
– 740
522
284
288
– 649
459
248
408
–
–
–
–
–7
–2
–2
–2
– 1,949
–3
–3
–3
– 24
–3
–3
–4
NET PROFIT or loss ATTRIBUTABLE
TO THE OWNERS OF THE PARENT
COMPANY
Risk-weighted assets (RWA) (avg.) 2)
Loans to customers (end of period)
Primary funds (end of period) 3)
Cost/income ratio excl. bank levy in %
Risk/earnings ratio in % 4)
Q4 2013
Q3 2013
Q2 2013
Q1 2013
Q4 2012
Q3 2012
Q2 2012
Q1 2012
Q4 2013
Q3 2013
Q2 2013
Q1 2013
Q4 2012
Q3 2012
Q2 2012
Q1 2012
Q4 2013
Q3 2013
Q2 2013
Q1 2013
Q4 2012
Q3 2012
Q2 2012
Q1 2012
Q4 2013
Q3 2013
Q2 2013
Q1 2013
Q4 2012
Q3 2012
Q2 2012
Q1 2012
Q4 2013
Q3 2013
Q2 2013
Q1 2013
Q4 2012
Q3 2012
Q2 2012
Q1 2012
Q4 2013
Q3 2013
Q2 2013
Q1 2013
Q4 2012
Q3 2012
Q2 2012
Q1 2012
RETAIL &
CORPORATES
PRIVATE
BANKING
CORPORATE &
INVESTMENT
BANKING (CIB)
CENTRAL
EASTERN
EUROPE (CEE)
CORPORATE
CENTER
BANK AUSTRIA
GROUP
(RECAST) 1)
9
52
19
40
22
21
80
37
17,274
17,417
17,624
17,974
17,745
17,598
17,557
17,455
39,901
40,195
40,710
40,758
41,762
41,106
41,666
40,960
40,300
39,213
41,201
42,442
43,601
43,607
42,555
42,078
75.4
71.2
77.3
72.6
75.5
70.2
65.9
68.4
0.8
18.8
19.2
18.5
2.7
31.0
6.8
23.3
9
7
8
8
9
5
4
6
600
597
615
833
1,039
1,020
910
846
644
642
627
592
599
621
614
615
7,686
7,969
7,821
7,761
7,716
7,737
7,448
7,647
66.2
70.8
71.1
71.9
68.8
79.9
79.2
75.4
1.8
1.6
1.2
1.6
2.3
0.1
3.1
2.9
40
36
53
46
9
46
48
47
8,603
8,522
9,285
9,940
9,749
9,234
9,034
9,845
13,581
14,145
14,757
14,864
13,285
14,978
14,626
15,106
9,191
8,872
9,186
9,776
8,390
8,376
7,995
8,438
38.2
41.9
35.2
36.9
39.9
42.0
34.4
40.5
18.0
15.6
13.8
13.9
37.0
0.6
4.2
4.8
134
490
310
312
310
423
300
294
78,891
81,687
84,506
84,385
84,782
86,012
84,126
81,818
69,170
70,633
70,654
71,154
68,051
67,666
66,660
65,157
63,615
60,116
60,205
60,860
62,486
58,873
57,452
55,371
42.1
43.8
42.5
43.3
41.1
40.9
46.6
48.6
69.9
30.5
30.6
28.4
29.2
22.9
26.0
21.4
– 2,881
– 65
– 109
– 121
– 1,030
– 41
– 189
17
14,263
14,751
16,364
17,855
17,477
17,795
17,337
15,650
5,824
6,158
6,917
6,571
6,476
6,152
6,325
5,584
17,192
16,478
16,314
16,001
14,630
14,747
14,922
16,550
n.m.
n.m.
n.m.
n.m.
n.m.
n.m.
n.m.
n.m.
n.m.
n.m.
n.m.
n.m.
n.m.
n.m.
n.m.
n.m.
–2,689
520
281
285
–680
454
243
402
119,631
122,974
128,395
130,986
130,792
131,658
128,964
125,614
129,121
131,774
133,665
133,939
130,173
130,522
129,890
127,423
137,984
132,647
134,727
136,840
136,824
133,340
130,373
130,084
52.6
53.3
53.1
54.5
55.4
52.2
58.6
53.0
56.0
27.9
28.0
26.2
26.2
24.6
19.7
21.3
1) Quarterly figures based on unaudited recast data only.
2) Corporate Center: including Kazakhstan (until disposal).
3) Primary funds: deposits from customers and debt securities in issue.
4) Risk/earnings ratio: net write-downs of loans and provisions for guarantees and commitments measured against net interest and dividends and other income from equity
investments.
n. m. = not meaningful
Bank Austria · 2013 Annual Report 189
E – Risk report
E.1 – Overall risk management 192
E.2 – Market risk
194
E.3 – Liquidity risk
202
E.4 – Counterparty risk
205
E.5 – Country risk and sovereign risk
206
E.6 – Credit risk
209
E.7 – Operational risk
227
E.8 – Reputational risk
228
E.9 – Business risk
228
E.10 – Financial investment risk and real estate risk
228
E.11 – Legal risks
229
E.12 – Report on key features of the internal control and
risk management systems in relation to the
financial reporting process
231
E.13 – Information on the squeeze-out pursuant to the
Austrian Federal Act on the Squeeze-out of
Minority Shareholders (Gesellschafterausschluss
gesetz) of the holders of bearer shares in
UniCredit Bank Austria AG
232
E.14 – Financial derivatives
233
Bank Austria · 2013 Annual Report 191
Consolidated Financial Statements in accordance with IFRSs
E – Risk report (CONTINUED)
E.1 – Overall risk management
UniCredit Bank Austria AG identifies, measures, monitors and manages all risks of the Bank Austria Group. In performing these tasks, Bank Austria
works closely with the risk control and risk management units of UniCredit. In this context, UniCredit Bank Austria AG supports UniCredit’s ongoing
­projects which are aimed at establishing uniform group-wide risk controlling procedures.
UniCredit Bank Austria AG divides the monitoring and controlling processes associated with risk management into the following categories: market risk,
liquidity risk, counterparty risk, credit risk, operational risk, reputational risk, business risk, financial investment risk and real estate risk.
The Management Board determines the risk policy and approves the principles of risk management, the establishment of limits for all relevant risks,
and the risk control procedures. A key element of this is the annual definition of the group’s Risk Appetite (RA), in terms of a verbal Statement (RAS)
and a Framework (RAF) of key metrics (targets, triggers, limits). RA defines risk types and the level of risk that the group is prepared to accept in
­pursuit of its strategic objectives and business plan, taking into account the interest of its customers and shareholders as well as capital and other
requirements. RA is integrated in the budgeting processin the context of defining and selecting the desired risk-return profile.
In performing these tasks, the Management Board is supported by specific committees and independent risk management units. All risk management
activities of UniCredit Bank Austria AG are combined within a management function at Management Board level directed by the Chief Risk Officer
(CRO); secondary lending decisions for corporate customers are made in the CIB Credit Operations, CEE Credit Operations and Market Risk departments, and for private customers and business customers in the Risk Management Family & SME Banking (+PB) department. The Special Credit
­Austria and CEE Credit Operations departments deal with problem loans. These organisational units are supported by the Strategic Risk Management &
Control department. Credit risk control of the CEE business units is performed by the Strategic Risk Management & Control and CEE Credit Operations
departments. The unit for active credit portfolio management (Credit Treasury) reports to the Chief Financial Officer (CFO) indirectly via the Finance
department.
Cross-divisional control
The Risk Committee (RICO) is responsible for the management of balance-sheet structure positions, it deals with cross-divisional risk management
issues arising between sales units and overall bank management, and provides an overview of credit portfolio model results while also preparing
reports on economic capital (Pillar 2). Liquidity risk control is performed by a separate committee (Liquidity Committee – LICO) which meets once a
week to deal with current liquidity-related topics. These include operational aspects of liquidity management including market monitoring; and
compliance with the liquidity policy, with CEE banking subsidiaries also being covered in this context – Bank Austria acts as a regional liquidity centre
of UniCredit Group. Control of market risk is ensured by the Market Risk Committee (MACO), which meets once a week. MACO deals with short-term
business management issues relating to the presentation and discussion of the risk/earnings position of Markets & Corporate Treasury Sales and with
limit adjustments, product approvals and positioning decisions in the area of market risk. Other topics discussed and decided include, for example, the
replication portfolio and methods for funds transfer pricing. In addition, the general framework and limits for banking subsidiaries are defined by
MACO. Credit risk is assessed by the Credit Committee. The Operational & Reputational Risk Committee (OpRRiCo) meets on a quarterly basis to deal
with operational & reputational risk issues. Risk arising from derivative transactions is managed by the Derivative Committee (DECO). DECO deals with
classic credit risk and counterparty risk issues and aspects of reputational risk in customer business.
The Management Board of UniCredit Bank Austria AG sets risk limits for market risk activities and liquidity positions of the entire Bank Austria Group
at least once a year, in coordination with UniCredit Group. RICO performs analyses and makes decisions with regard to business activities closely
­connected with customer business (in particular, risk management issues arising between sales units and overall bank management, ICAAP). The
­decisions and results of these committees are reported directly to the bank’s full Management Board. Risk Management, which is separate from the
business divisions up to Management Board level, is in charge of preparing analyses and monitoring compliance with limits.
Beyond compliance with the regulatory capital rules pursuant to Section 39 of the Austrian Banking Act, economic capital (Pillar 2) is intended to
reflect the bank’s specific risk profile in a comprehensive and more consistent way. These unexpected losses over a period of one year are calculated
with a confidence level of 99.93 %. This means that the confidence level was reduced from 99.97 in 2012 to 99.93% in 2013. The reduction follows
the adjustment of the longer-term target rating of UniCredit Group, which is to be seen in the general context of rating developments in the banking
sector in the past years.
Value-at-risk methodologies are used in the Bank Austria Group for calculating or planning economic capital for various specified types of risk (credit
risk, market risk, operational risk, business risk, financial investment risk and real estate risk). Under the risk-taking capacity concept, economic capital
is compared with available financial resources and monitored on an ongoing basis. The Bank Austria Group is included in the risk monitoring and risk
management system of the entire UniCredit Group. This ensures overall risk management across the Group.
192 2013 Annual Report · Bank Austria
Current status of the application of the internal ratings-based approach (IRB approach)
to credit risk in the Bank Austria Group
UniCredit Bank Austria AG has applied the internal ratings-based approach since March 2008, using its own estimates of loss given default and of
conversion factors for the major part of its loan portfolio (advanced IRB approach).
The bank is planning to further refine and develop local as well as Group-wide models while also introducing various other Group-wide models.
Banca d’Italia (the Bank of Italy), the home supervisor of UniCredit Group, is responsible for all approvals at Group level, while local supervisory
­authorities are responsible for local topics in the legal entities and for local on-site reviews. Regulatory issues are being dealt with in close cooperation
between home and host regulators (college of supervisors).
Implementation of the advanced IRB approach has been established as a Group-wide programme. Therefore UniCredit is responsible for Group-wide
decisions and guidelines as well as for the development of Group-wide models. For example, Group-wide homogeneous portfolios have been defined
for which uniform rating models are used across the Group, such as those for countries, banks and multinational companies.
Group standards have for the most part already been prepared and adopted by the UniCredit Group holding company in cooperation with the major IRB
legal entities, and are used as an instrument for uniform Group-wide implementation, with a view to complying with local legal requirements – some of
which differ from country to country – and safeguarding Group interests. These Group standards will continue to be gradually extended and complemented.
The Group standards continue to be integrated step by step in the processes and organisational set-up of all business areas and Group units, with
account being taken of local features and legal requirements in ensuring Basel 2 compliance.
Austrian subsidiaries
All Austrian subsidiaries of UniCredit Bank Austria AG use the standardised approach. From a current perspective, for reasons of materiality, it is not
planned to switch to one of the IRB approaches.
CEE subsidiaries
The CEE subsidiaries started to use the standardised approach to credit risk at the beginning of 2008. Based on a detailed roll-out plan, there are
plans to switch to the advanced IRB approach at most of the CEE banking subsidiaries in line with the Group’s decision to use the advanced IRB
approach.
According to the detailed roll-out plan communicated to the supervisory authorities involved, the switch to the A-IRB approach takes place at the
­relevant CEE subsidiaries step by step. Most subsidiaries start with the Foundation IRB approach (F-IRB).
In the course of the cross-border approval process, supervisory IRB assessments took place in an initial group of CEE subsidiaries in 2010. For the
CEE subsidiaries UniCredit Bulbank AD, UniCredit Bank Czech Republic, a.s., and UniCredit Bank Slovenija d.d., the application of the F-IRB approach
was approved as at 1 January 2011. The application of the F-IRB approach at UniCredit Bank Hungary Zrt. was approved as at 1 July 2011.
In 2012, further approvals for the application of the F-IRB approach at the CEE subsidiaries UniCredit Bank Slovakia a.s. and UniCredit Tiriac Bank S. A.
were given as at 1 July 2012 and 31 July 2012, respectively. Further approvals for the application of the F-IRB approach at the CEE subsidiary
ZAO UniCredit Bank and for the application of the A-IRB approach at the CEE subsidiary UniCredit Bank Czech Republic, a.s. are expected for 2014.
Current status of the application of the advanced measurement approach (AMA)
for operational risk in the Bank Austria Group
UniCredit Bank Austria AG has used the AMA since the beginning of 2008.
Austrian subsidiaries
Schoellerbank applies the AMA in the area of operational risk.
CEE subsidiaries
In the reporting period, approval for the use of the AMA in the area of operational risk was available for the banking subsidiaries in the Czech Republic,
in Slovakia, Hungary, Slovenia, Croatia, Bulgaria and Romania. In the next few years, AMA preparations will concentrate on ZAO UniCredit Bank Russia,
Yapı ve Kredi Bankasi AS and UniCredit Bank Serbia JSC.
Bank Austria · 2013 Annual Report 193
Consolidated Financial Statements in accordance with IFRSs
E – Risk report (CONTINUED)
Implementation of disclosure requirements pursuant to Sections 26 and 26a of the Austrian Banking Act
(regular disclosure of information on the organisational structure, risk management and risk capital position pursuant to
Sections 2 to 15 of the Austrian Disclosure Regulation)
Within UniCredit Group, comprehensive disclosure (under the Pillar 3 disclosure requirements) is carried out by the parent company UniCredit on its
website, based on the consolidated financial position in its function as EEA parent bank of Bank Austria. Bank Austria is a significant subsidiary pursuant
to Section 26 (4) of the Austrian Banking Act and therefore discloses its supervisory capital structure (Section 4 of the Austrian Disclosure Regulation)
and its capital adequacy requirement (Section 5 of the Austrian Disclosure Regulation); furthermore, the bank discloses information regarding the use
of own estimates for volatility adjustments (comprehensive method) for credit risk mitigation techniques to take account of financial collateral pursuant
to Section 17 of the Austrian Disclosure Regulation and in accordance with the approval by the Austrian Financial Market Authority (FMA).
The disclosure by Bank Austria is available at its website www.bankaustria.at/Investor Relations/Basel 2 Disclosure Pillar 3.
Current status of Basel 2.5 / Basel 3 implementation in the Bank Austria Group
Market risk in the trading book:
For the entire year 2013, capital requirements for the Basel 2.5 concepts of “stressed value at risk” (SVaR) and “incremental risk charge” (IRC) for the
Bank Austria Group were calculated and covered as part of market risk. A reporting procedure for all Basel 2.5 parameters was set up in MACO, which
meets once a week. Moreover, separate IRC limits were introduced for the relevant risk-takers in the Bank Austria Group. At the global level, besides
detailed VaR limits, an SVaR limit is also implemented for the regulatory trading book in addition to further granular market risk limits.
Counterparty risk:
As the changes in the area of counterparty credit risk resulting from the publications of the Basel Committee (Basel 3) and the Capital Requirements
Directive (CRD IV) have been finalised, Bank Austria has implemented the respective requirements. Originally conceived for UniCredit Bank Austria AG,
the local project in Austria was integrated in a broader context at UniCredit Group level subject to joint management. The main changes in the area of
counterparty credit risk include the calculation of a stressed counterparty exposure, comparable to the stressed VaR in market risk. Other new features
are the capital backing for market risk in respect of credit valuation adjustments (CVA market risk) and stricter standards for collateral management
and margining. There are also stricter requirements to be met in the area of stress testing and backtesting in respect of counterparty credit risk.
Liquidity:
Basel 3 sets liquidity standards under stressed conditions in the short-term maturity range (liquidity coverage ratio ≥ 100%) and in the structural sector (net stable funding ratio, NSFR ≥ 100 %). Compliance with these rules will be mandatory from 2015 and 2018, respectively. In a separate Basel 3
project, Bank Austria established the technical infrastructure to meet all reporting requirements for all relevant entities in Bank Austria Group starting
from 2014. Bank Austria participated in 2013 and will also continue to participate in the Quantitative Impact Studies of the European Banking Authority
(EBA) in 2014. Adjustments to the business strategy like strengthening the liquid bond portfolio and incentivising longer customer deposit maturities
have already been launched with a view to ensuring compliance with the new Basel 3 liquidity ratios at all times.
E.2 – Market risk
Market risk management encompasses all activities in connection with our Markets and Corporate Treasury Sales operations and management of the
balance sheet structure in Vienna and at Bank Austria’s subsidiaries. Risk positions are aggregated at least daily, analysed by the independent risk
management unit and compared with the risk limits set by the Management Board and the committees (including MACO) designated by the Management Board. At Bank Austria, market risk management includes ongoing reporting on the risk position, limit utilisation, and the daily presentation of
results of all positions associated with market risk. Most of the positions held in Bank Austria are attributable to the banking book. Market risk of the
banking book is an important factor also in other Divisions (the CEE banking subsidiaries, in particular). UniCredit Bank Austria uses uniform risk management procedures for all market risk positions throughout the Group. These procedures provide aggregate data and make available the major risk
parameters for the various trading operations once a day. Besides Value at Risk (VaR), other factors of equal importance are stress-oriented sensitivity
and position limits. Additional elements of the limit system are the loss-warning level (applied to accumulated results for a specific period), the stressed
VaR (SVaR) limit (determined for the trading book with a separate observation period), incremental risk charge (IRC) limits, the stress test warning limit
(limiting losses when a pre-defined stress event is applied) and granular market risk limits (GML).
As mentioned above, Bank Austria uses a standard measurement procedure which is also applied in UniCredit Group. The model, approved in 2011,
is used for internal risk management and for reporting regulatory capital requirements for market risk. Bank Austria is embedded in the market risk
governance framework of UniCredit Group and leverages on the group-wide risk management platform UGRM.
194 2013 Annual Report · Bank Austria
The internal model (IMOD) is based on historical simulation with a 500-day market data time window for scenario generation. It is applied by Market
Risk and Risk Integration within Bank Austria and is being further developed in cooperation with the UniCredit holding company. Further development includes reviewing the model as part of back-testing procedures, integrating new products, implementing requirements specified by the
­Management Board and the Market Risk Committee, and executing the Model Maintenance Report on a quarterly basis.
Risk governance
A new product process (NPP) has been established for the introduction of new products in the area of market risk in which risk managers play a
decisive role in approving products. When the Group-wide UniCredit market risk model was approved by the college of supervisors (Italy, Germany
and Austria), a multiplier of 3.5 was set in respect of the Value-at-Risk figures and this was used unchanged in 2013 for calculating the capital
requirement. The market risk model is used for UniCredit Bank Austria AG, as until now, and for the Bank Austria Group. The risk model covers all
major risk categories: interest rate risk and equity risk (both general and specific), credit spread risk, currency risk and commodity position risk.
The IMOD Is subject to an annual review by Group Internal Validation (GIV) and internal audit. The structure of the standard risk report presented
at MACO’s weekly meetings covers (stress) sensitivities in addition to VaR figures, and utilisation levels in the areas of IRC and SVaR (both for the
regulatory trading books). Regular and specific stress scenario calculations complement the information provided to MACO and the Management
Board.
Stress testing
Bank Austria conducts a rigorous programme of stress testing and the results are reviewed and discussed in the MACO at least quarterly or on an
ad hoc basis given unfavourable market developments. In addition to the prevailing market risk stress test Bank Austria introduced an IRC stress
test in 2013. Macro scenarios show the potential adverse impacts of global developments with specific effects on the respective risk categories,
while stress sensitivities of individual risk factors or groups of risk factors show the potential adverse impacts on partial market segments. Stress
scenarios are based on assumptions of extreme movements in individual market risk parameters. The bank analyses the effect of such fluctuations
and a liquidity disruption in specific products and risk factors on the bank’s results. These assumptions of extreme movements are dependent on
currency, region, liquidity and the credit rating, and are set by Market Risk on a discretionary basis after consultation with experts in other areas of
the bank (e. g. research, trading, and Market Risk UniCredit holding company). Bank Austria contributes to the UniCredit Group-wide open market
risk forums (OMRF), which is the platform for CRO units to discuss stress test results and agree on further common group-wide scenario definitions; the picot scenario “ICAAP Widespread Contagion” is used for stress test analysis, stress test warning level monitoring, ICAAP stress test and
the regulatory stress report throughout UniCredit Group.
Fair value measurement
In addition to the IMOD results, the P/ L is determined on a total return basis for both the trading and banking books and is communicated to senior
management on a daily basis. In 2013 Bank Austria conducted a thorough review of its fair value measurement principles in order to ensure that
measurement of fair values complies with the new IFRS 13 rules. Fair value adjustments (FVA) are appropriate to the extent that they are consistent
with the objective of a fair value measurement. Reporting covers the components reflected in IFRS-based profit and the marking to market of all
investment positions regardless of their recognition in the IFRS-based financial statements (“total return”). The daily P/L explanation is supported by
the intranet application “ERCONIS”; results are available to UniCredit Bank Austria’s trading and risk management broken down by portfolio, income
statement item and currency. The regulatory approach to prudent valuation in the trading book is implemented primarily by Market Risk and further
developed on an ongoing basis through cooperation within UniCredit Group in the same way as “independent price verification” (IPV), which establishes valuation processes and verification procedures on a harmonised Group-wide basis and is used in Bank Austria for fixed-income securities.
In 2013, as part of a Group-wide initiative, Bank Austria assumed the responsibility of the “EEMEA” Center of Competence for generating the golden
copy price for fixed income securities issued in the EEMEA region. Regarding OTC IPV Bank Austria has harmonised the end of day market data
items according to the Group-wide official rate source document (ORSD) and participates in the asset class committees designed to address and
resolve revaluation topics. The use of credit / debt valuation adjustments (CVA/DVA) for OTC derivatives in Bank Austria was further refined in 2013
and integrated in the presentation of results of market activities including Corporate Treasury Sales (CTS) on a quarterly basis.
In Austria and all CEE subsidiaries the intranet platform “MARCONIS” is established as the group-wide standard for market conformity surveillance to
systematically review the market conformity of its trading transactions. The scope of application of this tool has been further extended to include all
CEE banking subsidiaries with market risk activities. Since 2010 the MARCONIS system has been extended to include another module, and the tool
is also used to address the topic of price transparency (determining minimum margins and maximum hedging costs for Corporate Treasury Sales).
Bank Austria · 2013 Annual Report 195
Consolidated Financial Statements in accordance with IFRSs
E – Risk report (CONTINUED)
Market risk metrics
The chart below shows the VaR time series for the trading book and the banking book in 2013, calculated on the basis of the internal market risk
model (IMOD), which is also used for regulatory reporting of capital requirements for market risk.
IMOD VaR and SVaR of the Bank Austria Group in 2013 (€ million)
–110
–100
–90
–80
–70
–60
–50
–40
–30
–20
–10
0
Jan. 13 Feb. 13 Mar. 13 Apr. 13 May 13 June 13 July 13 Aug. 13 Sept. 13 Oct. 13 Nov. 13 Dec. 13
IMOD-VaR Total
IMOD-SVar Trading Book
IMOD-VaR Trading Book
By year-end 2013, the total (overnight) VaR for the trading book and the banking book of the Bank Austria Group (cf. crimson line) was about
€71.1 million. The SVaR for the regulatory trading book (cf. light red line) was below €10.7 million at the end of 2013. The VaR for the trading
book (cf. orange line) amounted to € 2.3 million at the end of 2013. The regulatory trading book was further reduced in CEE and in
UniCredit Bank Austria AG in the course of the year.
Credit spread risk and interest rate risk account for most of the total risk of the Bank Austria Group. Other risk categories are much less significant by
comparison. Since January 2007, commodity risk has only been assumed in the Bank Austria Group on a back-to-back basis.
In addition to VaR, risk positions of the Bank Austria Group are limited through sensitivity-oriented limits. As part of daily risk reporting, detailed “Trader
Reports” are prepared for a large number of portfolios, with updated and historical information made available to all risk-takers and the responsible
senior management via the Intranet. These reports are now complemented by the UniCredit market risk platform, which enables trading and other units
to perform analyses down to individual position level.
196 2013 Annual Report · Bank Austria
As of 31 December 2013, the entire interest rate position of the Bank Austria Group (trading and investment) for major currencies was composed as
follows:
Basis point values of the Bank Austria Group 2013
(in €)
Annual average 2013,
minimum/maximum
As at 31 December 2013
Europe
New EU countries
Central and Eastern
Europe incl. Turkey
Overseas – highly
developed countries
Other countries
total
EUR
CHF
GBP
NOK
BGN
CZK
HUF
PLN
Ron
HRK
AZN
BAM
LTL
LVL
RSD
RUB
TRY
UAH
USD
CAD
AUD
NZD
JPY
AED
XAU
ZAR
BPV<500
0 to 3
months
3 months
to 1 year
1 year to
3 years
3 to 10
years
over
10 years
total
– 213,267
90,789
392
605
9,311
13,431
310
– 1,447
4,214
9
–
– 2,310
–
–
461
18,229
2,788
3,343
– 12,394
106
– 378
1
4,507
–
3,727
16
– 190
– 77,748
– 36,305
40,756
– 21,582
627
– 8,226
– 3,213
13,956
– 113
1,849
3,220
187
– 835
–
–
4,708
20,681
– 33,640
– 19,372
– 125,949
– 1,558
2,133
141
– 91
–
775
7
9
– 161,835
– 60,494
– 9,201
1,430
189
– 15,723
– 15,302
440
– 254
– 52,143
– 37,303
– 3,314
– 6,722
–
–
– 9,134
– 77,236
– 28,556
– 16,145
85,611
1,520
2,937
–
– 1,780
–
–
–
27
– 241,154
– 12,268
– 28,751
2,321
683
– 59,171
108,431
– 53,610
– 262
– 48,152
17,226
– 1,329
– 12,272
–
–
683
– 259,244
– 144,307
– 35,389
310,070
42
1,157
–
– 3,667
–
–
–
49
– 217,760
489,612
– 23,490
82
–
– 845
– 8,356
– 2,340
–5
– 11,346
– 6,010
– 36
41
–
–
–
– 57,700
– 89
– 12,431
– 307,092
–
47
–
– 160
–
–
–
–
59,883
167,278
70,103
– 17,356
2,104
– 74,655
94,992
– 41,244
– 2,080
– 105,578
– 22,858
– 4,492
– 22,099
–
–
– 3,282
– 355,270
– 203,803
– 79,994
– 49,754
109
5,896
142
– 1,191
–
4,502
23
– 107
– 638,614
maximum
minimum
2,044,578
30,558
416,229 – 103,821
10,213
– 28,395
3,441
– 129
18,150 – 126,334
154,979
– 68,772
70,592 – 180,758
1,610
– 3,996
26,416 – 173,119
– 22,272 – 174,361
– 313
– 17,044
– 13,349
– 52,339
714
– 4,199
3,713
– 6,973
8,378
– 37,486
– 99,955 – 1,528,266
54,819 – 1,051,485
– 65,537 – 157,624
– 35,587 – 2,573,747
3,270
– 1,950
12,201
2,712
282
12
673
– 13,888
33
– 22
8,163
1,804
152
1
1,189
– 747
absolute
average
490,754
–8,520
–1,417
1,031
–38,302
34,731
–33,530
–1,218
–35,038
–63,939
–4,044
–22,864
–627
–2,017
–7,323
–224,394
–229,275
–81,812
–520,659
138
4,854
93
–3,026
1
4,430
75
243
1,895,385
Bank Austria · 2013 Annual Report 197
Consolidated Financial Statements in accordance with IFRSs
E – Risk report (CONTINUED)
Basis point values of the Bank Austria Group 2012
(in €)
Annual average 2012,
minimum/maximum
As at 31 December 2012
Europe
New EU countries
Central and Eastern
Europe incl. Turkey
Overseas – highly
developed countries
Other countries
total
EUR
CHF
GBP
NOK
BGN
CZK
HUF
PLN
Ron
HRK
AZN
BAM
KGS
KZT
LTL
LVL
RSD
RUB
TRY
UAH
USD
CAD
AUD
NZD
JPY
AED
XAU
ZAR
BPV<500
0 to 3
months
3 months
to 1 year
1 year to
3 years
3 to 10
years
37,569
76,358
815
18
7,221
– 9,154
1,933
1,195
– 1,871
7,578
– 59
– 1,253
– 160
204
– 76
– 272
– 1,841
– 26,492
– 7,631
3,939
– 28,684
– 615
– 208
13
4,758
1
1,467
–2
73
64,824
– 70,972
79,797
917
1,031
21,546
– 8,282
– 10,957
– 397
519
– 12,030
– 133
– 1,442
60
15,588
1,734
– 5,346
– 3,556
46,446
– 46,343
– 25,953
– 45,720
– 454
1,144
135
– 1,266
–2
1,504
43
76
–62,316
– 154,269
– 12,723
2,219
150
– 16,125
4,414
17,709
– 29
– 4,674
– 26,255
– 3,268
– 9,327
– 1,853
56,067
– 1,878
– 196
– 8,969
– 111,266
682
– 16,428
370,454
402
1,011
–
– 992
–
–
–
3
84,858
2,278
– 37,910
995
33
– 72,996
– 8,444
22,012
–1
– 23,911
– 51,038
– 958
– 14,326
– 504
– 105,757
– 1,672
–
– 4,611
– 12,226
– 241,286
– 26,235
– 94,628
–
626
–
– 4,870
–
–
–
17
– 675,411
over
10 years
total
547,612
362,218
– 32,896
72,625
42
4,988
1
1,233
– 511
– 60,864
200
– 21,266
– 871
29,826
–4
763
– 2,325
– 32,261
– 1,200
– 82,945
– 12
– 4,430
58
– 26,290
–
– 2,457
– 29,189
– 63,087
–
– 1,893
–
– 5,814
–
– 18,977
– 50,937
– 154,475
21
– 294,557
– 3,156
– 67,833
– 1,079,099
– 877,678
–
– 668
–
2,573
–
148
– 467
– 2,837
–
–1
–
2,971
–
40
–
170
– 652,734 – 1,240,779
maximum
minimum
absolute
average
797,111 – 120,567
280,450
80,187
– 98,543
– 23,661
22,836
1,592
10,168
1,449
530
895
– 26,239
– 69,129
– 40,290
27,081
– 77,635
– 29,651
73,578
– 2,435
35,400
2,649
– 3,166
– 1,149
– 23,005
– 66,338
– 45,695
– 17,433 – 108,248
– 59,401
– 3,055
– 4,926
– 4,278
– 8,994
– 26,863
– 17,689
– 1,048
– 3,088
– 1,894
67,140
– 95,932
– 11,373
1,718
– 2,492
– 474
– 2,408
– 6,158
– 4,264
9,494
– 18,977
– 8,659
11,944 – 306,783 – 178,326
– 10,470 – 510,119 – 247,289
– 34,926
– 91,341
– 67,751
– 611,478 – 1,624,891 – 1,277,016
8,570
– 1,190
1,516
8,243
2,573
4,973
163
19
83
14,745
– 14,193
756
64
– 37
1
4,304
169
1,985
42
– 438
– 14
1,127
–3
313
2,405,693
The bank continues to hold appropriate interest rate positions in local currencies, reflecting the size of its banking subsidiaries; most of the related
interest rate sensitivity is in the banking book (not in the trading book). The USD position is also related to the banking book position of our banking
subsidiaries.
By analogy to the detailed presentation of basis point positions in the interest rate sector, daily reporting presents details of credit spread by curve and
maturity band.
198 2013 Annual Report · Bank Austria
Credit spread basis-point values (CPVs) of the Bank Austria Group
(in €)
ANNUAL AVERAGE 2013, MINIMUM /MAXIMUM
CPVS IN €
SECTOR
Main sectors
Financial services
ABSs and MBSs
Industrial
Automobiles
Consumer goods
Merchandising
Pharmaceutical
Energy & utilities
Other (e. g. indices)
Treasuries – EU & European industrial nations
Treasuries – new EU countries
Treasuries – CEE & emerging markets
Treasuries – developed countries overseas
Treasuries – agencies & supranationals
Municipals & German Jumbo
Corporates
Treasury-near
TOTAL
ANNUAL AVERAGE 2012, MINIMUM /MAXIMUM
MAXIMUM
MINIMUM
ABSOLUTE
AVERAGE
MAXIMUM
MINIMUM
ABSOLUTE
AVERAGE
– 1,023,677
– 131,689
– 6,404
–1
– 13,399
– 469
130
– 27,031
27,431
– 2,694,898
– 1,401,469
– 1,598,620
– 144
– 10,065
– 208
– 7,053,404
– 1,779,082
– 331,168
– 49,740
– 8,678
– 47,478
– 841
– 41,624
– 71,427
– 56,067
– 3,256,192
– 1,884,394
– 2,553,755
– 1,186
– 146,258
– 140,251
– 9,099,782
1,362,028
195,351
16,110
5,587
21,917
622
18,143
42,237
17,168
2,877,865
1,521,854
2,119,595
404
130,509
125,332
8,446,272
– 1,568,501
– 223,236
– 1,714
86
– 13,930
– 776
12,116
– 9,749
863
– 1,238,116
– 1,000,755
– 2,141,810
– 214
– 3,592
– 132,440
– 6,930,732
– 1,900,321
– 415,315
– 12,671
– 7,332
– 25,619
– 1,056
238
– 45,378
– 50,937
– 2,842,197
– 1,494,027
– 2,867,113
– 670
– 46,501
– 170,608
– 8,981,722
1,713,347
321,002
3,626
1,449
19,420
924
6,772
13,970
5,870
2,155,018
1,277,020
2,475,690
574
26,343
147,988
8,154,871
Measured by the total basis-point value, the Bank Austria Group’s credit spread position in 2013 ranged between – €7.05 million and – €9.1 million.
The increase was due to intra-group funding activities and to a higher sovereign position in CEE. Overall, Treasury-near instruments continue to
account for the largest part of the credit spread positions, followed by financials, which include intra-group funding bond positions. The corporates
exposure is very low by comparison. The positions of asset-backed securities (ABSs) and mortgage-backed securities (MBSs) were further reduced in
2013, primarily through redemptions. The average CPV also continued to decline in this sector. Overall, the ABS book developed very favourably in
2013 in terms of total return in the year. Measured by redemption behaviour, the entire ABS/MBS book is to be classified as performing in 2013.
Backtesting
UniCredit Bank Austria performs a daily back testing of both the hypothetical and actual (i. e. clean economical P/L excluding fees, commissions, and
net interest income) changes in the portfolio’s value in accordance with Art. 366 CRR. The number of back-testing overshootings (negative change in
value larger than model result) in both P/ L dimensions has been within the “green zone” permitted by law ever since IMOD was introduced, thus the
addend for the VaR multiplier for the number of overshootings is zero. The backtesting results thus confirm the accuracy and reliability of the IMOD.
The chart below shows the hypothetical P/ L backtesting time series for the Bank Austria Group’s regulatory trading book; the hypothetical P/L
is based on hypothetical changes in the portfolio value assuming unchanged positions. In June and July 2013 three hypothetical backtesting
­overshootings occurred due to losses of the strategic FX hedges for CEE profits given a simultaneous appreciation of various CEE currencies against
the EUR. The overshootings were notified to OeNB and FMA on time.
Bank Austria · 2013 Annual Report 199
Consolidated Financial Statements in accordance with IFRSs
E – Risk report (CONTINUED)
Backtesting time series for the regulatory trading book of the Bank Austria Group, 2013 (€ million)
5
4
3
2
1
0
–1
–2
–3
–4
–5
Jan. 13 Feb. 13 Mar. 13 Apr. 13 May 13 June 13 July 13 Aug. 13 Sept. 13 Oct. 13 Nov. 13 Dec. 13
IMOD-VaR mirrored
Hyp P&L
new IMOD-VaR
Capital requirements for market risk
The new model was used for the purposes of calculating capital requirements throughout 2013. The relevant parameters are a 10-day holding period,
a confidence level of 99 % and a multiplier of 3.5 set in respect of the Value-at-Risk figures which is used in determing the capital requirement for
market risk.
As of 31 December 2013, the following capital requirements resulted for the Bank Austria Group in connection with value at risk (VaR), stressed VaR
(SVaR) and incremental risk charge (IRC):
• VaR: € 17.9 million
€ 84.4 million
• SVaR:
€ 60.6 million
• IRC: Market risk management in CEE
At Bank Austria, market risk management covers the activities in Vienna and the positions at the subsidiaries, especially in Central and Eastern Europe.
These subsidiaries have local risk management units with a reporting line to Risk Management in UniCredit Bank Austria AG. Uniform processes,
­methods, rules and limit systems ensure consistent Group-wide risk management adjusted to local market conditions.
The “IMOD” risk model has been implemented locally at major units (Czech Republic, Slovakia, Hungary, Croatia, Bulgaria, Russia, Turkey), and a daily
risk report is made available to the other units; moreover all units also have technical access to the central market risk platform.
Analyses of position structure and balance sheet structure are available to all banks in the Group via “ALMRisk”, a Group-wide web tool. Liquidity
­monitoring is also based on this instrument.
The web application “ERCONIS” records the daily business results of treasury activities in CEE. In line with a total-return approach, measurements of
the performance of subsidiaries include income generated by the subsidiaries and the valuation results of the banking book.
To avoid risk concentrations in the market risk position, especially in tight market conditions, Bank Austria has implemented at its banking subsidiaries
Value-at-Risk limits and position limits for exchange rate risk, interest rate risk and equity risk, which are monitored daily. The monitoring of income
trends at banking subsidiaries by means of stop-loss limits provides an early indication of any accumulation of position losses.
To meet higher capital requirements for trading positions pursuant to Basel 2.5, an RWA optimisation project was carried out to reduce trading
­activities as far as possible and lower existing trading limits.
The timely and continuous analysis of market risk and income is the basis for integrated risk-return management of treasury units at banking
­subsidiaries.
200 2013 Annual Report · Bank Austria
Value at Risk of banks in CEE
(€ thousand)
VaR as at 31 dec. 2013
Bulgaria
Czech Republic
Croatia
Hungary
Baltics
Romania
Russia
Serbia
Slovenia
Turkey
Ukraine
Total CEE
average usage 2013
USAGE AS PER
31 DEC. 2013
FX RISK
INTEReST RATE RISK
CREDIT SPREAD RISK
EQUITY RISK
3,188
6,401
1,890
3,984
166
5,499
8,966
1,907
2,974
35,807
3,227
54,391
3,269
5,591
1,422
3,588
44
4,102
11,595
2,964
3,115
40,553
2,488
53,546
10
107
255
203
3
23
516
136
8
110
115
558
2,642
714
718
4,256
42
1,034
6,783
2,061
72
23,895
2,704
25,449
2,827
5,510
1,091
3,160
–
4,072
4,719
2,102
1,853
21,430
1,159
35,951
1
13
185
8
–
–
–
–
1,742
200
397
1,791
At the end of 2013, value at risk of all CEE banks was approximately €54 million (limit: €95 million), with open interest rate positions in the banking
books and credit-spread positions of securities still accounting for the largest risk contributions.
Management of balance sheet structure
The matched funds transfer pricing system applied throughout the Group and the principle of causation applied in attributing credit risk, market risk
and liquidity risk enable the bank to determine contribution margins from customer transactions in the bank’s business divisions. The risk committees
of the bank ensure that the bank’s overall liquidity and interest rate gap structure is optimised, with the results from interest maturity transformation
being reflected in the Corporate & Investment Banking Division. Factors taken into account in this context include the costs of compensation for
assuming interest rate risk, liquidity costs and country risk costs associated with foreign currency financing at CEE banking subsidiaries.
Products for which the material interest-rate and capital maturity is not defined, such as variable-rate sight and savings deposits, are modelled in
respect of investment period and interest rate sensitivity by means of analyses of historical time series, and taken into account in the bank’s overall
risk position.
To assess its balance-sheet and profit structure, the bank uses the Value-at-Risk approach, complemented by a scenario analysis concerning the
­simulation of future net interest income under different interest rate scenarios (“earnings perspective”).
The analyses performed at year-end 2013 show that a further interest rate decline in all currencies, from an already low level, would have the
­strongest impact on the bank’s net interest income. This is a typical feature of commercial banks, given the interest rate remanence on the liabilities
side of banks’ balance sheets (sight deposits, equity).
The Basel 2 rules require the measurement at Group level of “interest rate risk in the banking book” in relation to the bank’s capital by comparing a
change in the market value of the banking book after a 2% interest rate shock with the bank’s net capital resources. In the event that such an interest
rate shock absorbs more than 20 % of a bank’s net capital resources, the bank supervisory authority could require the bank to take measures to
reduce risk.
A 2 % interest rate shock would absorb 4.4 % of the Group’s net capital resources; this calculation also includes the current investment of equity
­capital as an open risk position. This means that the figure for Bank Austria is far below the outlier level of 20%.
Bank Austria · 2013 Annual Report 201
Consolidated Financial Statements in accordance with IFRSs
E – Risk report (CONTINUED)
E.3 – Liquidity risk
Qualitative information
General information, processes and management model
In line with Group standards, the Bank Austria Group deals with liquidity risk as a central risk in banking business by introducing and monitoring
­short-term and long-term liquidity requirements. In this context the liquidity situation for the next few days and months and also for longer periods is
analysed against a standard scenario and stress scenarios. Methods and procedures of liquidity analysis, analyses of the degree of liquidity of customer positions, management responsibilities and reporting lines in this area have been laid down in the liquidity policy, which is also applicable at
Bank Austria’s CEE units and includes a contingency plan in the event of a liquidity crisis.
Liquidity management in UniCredit Bank Austria AG is an integral part of UniCredit Group liquidity management. In line with the Group-wide distribution
of tasks, Bank Austria ensures the consolidation of liquidity flows and the funding for subsidiaries in Austria and CEE. The flow of funds is thereby
­optimised and external funding is reduced to the necessary extent.
Liquidity management methods and control
In medium-term and long-term liquidity management, assets must be covered by liabilities to a minimum extent of 90%/85%/80% over a period of
1/3/5 years. This limit must be observed at Group level and for each banking subsidiary. At individual currency level, absolute limits for cross-currency funding arrangements have been defined for each bank of the Group; these limits are largely geared to the above-mentioned liquidity ratios.
At Bank Austria Group level, the liquidity ratio as at year-end 2013 was 1.03 for > 1 year, 1.08 for > 3 years and 1.03 for > 5 years. This means that
in effect, long-term assets are fully funded at Group level.
For the purpose of short-term liquidity management, volume limits have been implemented in the Bank Austria Group and in all banks for maturities
up to three months, which limit all Treasury transactions and the securities portfolio of the respective bank. Volume limits are also established for open
maturities in various currencies to keep down the risk of a need for follow-up funding in the event that foreign currency markets dry up.
These limits were essentially observed at all levels. Sluggish credit demand, a strong improvement in deposit volume towards year-end 2013 and the
increase in the liquidity bond portfolio holdings result in a comfortable liquidity position of the Group.
Liquidity stress test
Bank Austria performs liquidity stress tests for the Group and for individual banks on a regular basis, using a standardised Group-wide instrument and
standardised Group-wide scenarios. These scenarios describe the effects of market-driven or name-driven crisis signals on liquidity inflows and outflows, with assumptions also being made about the behaviour of non-banks.
The liquidity outflows expected to occur in stress situations are compared with available collateral (essentially, securities and credit instruments eligible
as collateral at the central bank) to examine the banks’ risk-taking capability in the short term up to two months.
The worsening of the commercial deposit position during the summer months and a comparatively low bond position led to a decrease of the “time-towall horizon” for the Austrian entity to levels even below the defined minimum of 20 working days. The banks in CEE always had a sufficient liquidity
buffer to be comfortably above this time horizon in the most severe liquidity stress scenario.
Successful issuance of senior and covered bonds as well as customer deposit attraction and increase of liquid bond holdings towards year-end
improved the stress test results materially, leading to a comfortable buffer above the stress test limit for all banks within the group.
202 2013 Annual Report · Bank Austria
Quantitative information
Time breakdown by residual contractual maturity of financial assets and liabilities 2013
(€ million)
31 Dec. 2013
Assets
Government securities
Other debt securities
Units in investment funds
Loans
Banks
Customers
Liabilities
Deposits and current accounts
Banks
Customers
Debt securities
Other liabilities
Off-balance sheet transactions
Physically settled financial derivatives
long positions
short positions
Cash settled financial derivatives
long positions
short positions
Deposits to be received
long positions
short positions
Irrevocable commitments to disburse funds
long positions
short positions
Written guarantees
Financial guarantees received
Physically settled credit derivatives
long positions
short positions
On demand
1 to 7
days
7 to 15 15 days to
1 month
days
1 to 3
months
3 to 6
months
6 months
to 1 year
1 to 5
years
Over 5
years
21,890
58
158
–
21,674
8,138
13,537
61,070
59,930
2,468
57,462
–
1,139
8,000
3,381
–
26
7
3,347
1,856
1,491
3,425
2,784
443
2,341
48
593
364
3,700
85
1,008
–
2,607
1,828
779
6,433
5,047
253
4,794
–
1,385
285
4,790
100
17
–
4,673
444
4,229
7,305
6,371
407
5,964
35
899
687
15,652
691
523
12
14,426
5,182
9,243
18,022
16,187
275
15,912
274
1,561
921
7,803
755
143
–
6,905
238
6,667
8,657
6,492
213
6,278
1,353
813
1,862
12,930
782
403
–
11,746
404
11,341
10,330
8,092
531
7,561
1,697
541
1,632
54,312
7,307
6,653
–
40,351
1,951
38,400
37,008
10,413
2,901
7,512
18,297
8,299
113,375
56,806
4,744
4,077
–
47,985
1,680
46,306
15,981
1,515
715
800
8,251
6,215
40,922
1
1
1,239
934
1,110
622
1,863
2,007
3,019
3,610
1,974
1,377
2,815
4,802
5,810
4,703
685
465
158
128
2,010
2,009
1,006
933
1,593
1,599
2,985
2,975
2,493
2,370
4,776
4,745
14,613
14,708
9,522
9,563
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
1,085
2,670
66
9,490
–
–
–
75
21
5
–
–
–
–
309
595
9
–
–
–
–
1,406
596
27
–
–
–
–
1,364
1,946
242
1
–
43
43
3,564
2,533
110
–
–
13
13
3,264
3,373
234
198
–
66
66
2,517
2,730
888
111,687
–
555
555
1,964
1,082
927
38,934
–
105
105
The breakdown by maturity reflects items of companies within the group of banks which are subject to regulatory supervision.
Bank Austria · 2013 Annual Report 203
Consolidated Financial Statements in accordance with IFRSs
E – Risk report (CONTINUED)
Time breakdown by residual contractual maturity of financial assets and liabilities 2012
(€ million)
31 Dec. 2012
Assets
Government securities
Other debt securities
Units in investment funds
Loans
Banks
Customers
Liabilities
Deposits and current accounts
Banks
Customers
Debt securities
Other liabilities
Off-balance sheet transactions
Physically settled financial derivatives
long positions
short positions
Cash settled financial derivatives
long positions
short positions
Deposits to be received
long positions
short positions
Irrevocable commitments to disburse funds
long positions
short positions
Written guarantees
Financial guarantees received
Physically settled credit derivatives
long positions
short positions
On demand
1 to 7
days
7 to 15 15 days to
1 month
days
1 to 3
months
3 to 6
months
6 months
to 1 year
1 to 5
years
Over 5
years
18,411
68
1
87
18,255
5,638
12,617
53,710
52,687
3,139
49,548
–
1,023
7,540
5,399
2
360
–
5,037
2,198
2,838
9,820
9,069
922
8,146
74
677
27
4,975
158
212
–
4,605
3,495
1,110
8,940
7,838
783
7,055
161
942
9
6,887
257
175
–
6,455
1,786
4,669
6,634
4,837
993
3,844
118
1,679
381
15,831
1,115
461
14
14,241
5,376
8,866
20,031
16,478
621
15,857
1,418
2,135
2,170
10,230
950
1,160
–
8,120
963
7,158
7,804
6,331
183
6,148
964
510
1,842
13,967
1,248
168
–
12,551
897
11,655
11,332
7,678
337
7,341
2,513
1,141
3,944
49,725
5,450
7,023
–
37,254
1,689
35,562
39,006
12,826
2,861
9,965
17,518
8,662
106,647
59,583
4,126
5,136
–
50,321
1,660
48,662
15,928
1,790
1,128
662
7,156
6,982
34,091
–
–
1,606
1,606
701
701
1,752
1,752
1,667
1,667
2,493
2,493
1,930
1,931
6,501
6,507
1,174
1,174
215
189
3,299
3,303
2,125
2,126
1,640
1,640
3,272
3,270
3,583
3,581
6,831
6,799
18,821
18,872
12,878
12,864
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
856
2,387
48
8,996
44
33
12
9
14
12
4
4
549
400
50
181
437
492
325
1,898
1,040
460
124
1,136
7,915
7,890
295
3,657
2,675
1,856
869
107,526
725
725
1,119
32,958
–
–
–
–
–
–
–
–
–
–
–
–
32
32
1,255
1,255
–
–
The breakdown by maturity reflects items of companies within the group of banks which are subject to regulatory supervision.
Funding plan and liquidity costs in pricing
In the Funding Plan 2013 and its execution Bank Austria focused particularly on the self-sufficiency principle of its subsidiaries in Central Eastern
Europe and safely managed the liquidity risk for those markets which were characterised by some volatility. Future liquidity requirements stemming
from Basel 3 (e. g. Liquidity Coverage Ratio) have also been targets for Bank Austria as demonstrated by initiatives taken also in the Austrian market
in order to reshape commercial funding, rebalancing its weight towards more stable longer term funding sources.
Funding provided to commercial business units in the Group is priced taking into account relevant cost aspects like own liquidity cost, country risk
­premiums and insurance cost.
204 2013 Annual Report · Bank Austria
E.4 – Counterparty risk
UniCredit Bank Austria AG has made further efforts, as part of the implementation of Basel 3 requirements, to refine the risk management model for
derivatives, securities lending and repurchase agreements. For the purposes of portfolio management and risk limitation in the derivatives and security
financing business with banks and customers, the bank uses an internal counterparty risk model (IMM) based on a Monte Carlo path simulation to
estimate the potential future exposure at portfolio level for each counterparty.
The bank is taking account of the growing importance of counterparty risk by having a separate unit for this purpose within Market Risk & Risk
­Integration department since the beginning of 2010.
The counterparty risk model was approved by the Austrian supervisory authority in 2009, for UniCredit Bank Austria AG to base its regulatory capital
requirements for counterparty credit risk on this model. In addition to UniCredit Bank Austria AG it also covers all relevant CEE countries for managerial
risk management aspects; special mention should be made of the bank in Turkey because of its size. In this context the focus is on risk management
and not yet on regulatory approval.
Moreover, with the creation of a Group-wide counterparty risk model in 2012, the relevant aspects of Basel 3 were implemented. The project also
involved work on refining the risk model (e. g. use of 52 gridpoints instead of 20, or 3,000 scenarios instead of 1,000, in the simulation). Additionally,
the group-wide methodology has foreseen a switch from the previously used 97.5% confidence level to expected shortfall 87.5% (equals 95%
­quantile), a harmonisation of the margin period of risk and the implementation of a default conditional metric. UniCredit Bank Austria AG implemented
these changes during the financial year 2013.
In 2013, as part of the EuroMIB project, UniCredit Bank Austria AG started the implementation of Group-wide IT systems for counterparty credit calculation. As of 31 December 2013 the revaluation for selected countries and the aggregation for the full perimeter are performed with the Group-wide
IT systems (Full Revaluation Engine FRE and Aggregation Engine AGE) while the remaining calculations are performed with the ancillary IT systems
(mainly NORISK CR).
The simulation calculations are performed for all major types of transactions, e. g. forward foreign exchange transactions, currency options, interest
rate instruments, equity / bond-related instruments, credit derivatives and commodity derivatives. Other transactions are taken into account with an
add-on depending on factors such as maturity. The calculations are based on market volatility, correlations between specific risk factors, future cash
flows and stress considerations. Netting agreements and collateral agreements are also taken into account for simulation purposes. The bank applies
a confidence interval of 95.0 %.
At the end of the year, derivative transactions, repurchase agreements and securities lending transactions resulted in the following exposures:
Exposures
Austria
CEE
TOTAL
(€ billion)
2013
2012
2.0
4.2
6.2
2.8
3.8
6.6
Separate reporting on counterparty risk is in place with a view to informing UniCredit Bank Austria AG’s Market Risk Committee (MACO) and Derivative
Committee (DECO) of current exposure trends and providing additional information relevant to risk management. Moreover, backtesting is performed at
regular intervals, at the level of individual counterparties and at overall bank level, in order to check the quality of the model on an ongoing basis.
Line utilisation for derivatives and security financing business of customers is available online in WSS (“Wallstreet”), the central treasury system, on
a largely group-wide basis. In addition to determining the potential future exposure, the path simulation also enables the bank to calculate the average
exposure and the modified average exposure pursuant to Basel 3 (exposure at default) and the effective maturity of the exposure as well as the
“stressed EPE” pursuant to Basel 3 to each counterparty.
UniCredit Bank Austria AG additionally limits the credit risk arising from its derivatives business, repurchase agreements and securities lending
­business through strict use of master agreements, the definition and ongoing monitoring of documentation standards by legal experts, and through
­collateral agreements and break clauses. Management takes proper account of default risk, especially because the relevance of this risk category
has increased and on the basis of experience gained in the international financial market crisis, despite the good average credit rating of our busi­ness partners.
Bank Austria · 2013 Annual Report 205
Consolidated Financial Statements in accordance with IFRSs
E – Risk report (CONTINUED)
E.5 – Country risk and sovereign risk
Risk associated with cross-border transactions with all customer groups is reflected in country risk (“transfer and convertibility risk”; country risk
includes, for example, loans to foreign corporate customers or banks). Risk associated with the state itself (e. g. the purchase of government bonds) is
reflected in sovereign risk, irrespective of whether such risk is cross-border or local risk. Both risks are assessed via a group-wide credit process.
Country limits and sovereign limits are assessed by the responsible risk management team, approved by the relevant body having approval authority,
and assigned to UniCredit subsidiaries according to business needs. In general, cross-border business is not limited for countries which are presumed
less risky, e. g. the US, Japan, core EU countries; for all other countries, cross-border business is limited via the assigned country limit. Sovereign risk
is in each case limited via counterparty limits. The overall bond exposure is monitored via nominal credit risk limits and market risk limits. Impairment
losses are recognised, if necessary, according to international standards.
Spain
UniCredit Group responded to the crisis in the Spanish financial market with a strict watch list strategy. Business partners accepted by the Group are
primarily internationally active tier 1 banks; business transactions with other Spanish banks are subject to a restrictive credit policy emphasising shortterm customer-driven business.
Italy
The Italian risk is also centrally monitored and has been adjusted via a watch list strategy, mainly focusing on UniCredit, tier 1 banks and the sovereign
within assigned counterparty credit and market risk limits.
Cyprus
Cyprus exposures were managed downwards beginning in FY 2012, and thus UniCredit Group’s exposure to Cypriot bank risk was negligible at the
time of default.
Hungary, Slovenia and other countries in Central and Eastern Europe
In view of the economic and political situation in Hungary and the difficult situation in Slovenia, UniCredit Group has taken prudent risk-mitigating
measures. UniCredit is monitoring the situation and its portfolio and has also limited business via a watch list strategy.
Large sovereign exposures for other countries (e. g. Russia, Romania, Croatia) mainly result from excess liquidity management of Bank Austria banking
subsidiaries or guarantees from the respective sovereign provided to support local (i. e. Bank Austria banking subsidiaries in e. g. Serbia, Croatia) corporate business. Both are monitored and limited within the framework of credit risk management.
206 2013 Annual Report · Bank Austria
Breakdown of sovereign debt securities by country and portfolio
(€ million)
31 dec. 2013
Country/portfolio
31 dec. 2012
Nominal value
Book value
Fair value
Nominal value
Book value
Fair value
Austria
HFT financial assets / liabilities (net exposures) 1)
Financial assets at FV through P & L
Available for sale
Loans and receivables
Held-to-maturity investments
6,128
–
–
6,001
–
126
6,882
–
–
6,755
–
127
6,892
–
–
6,755
–
137
4,516
–
–
4,373
–
143
5,280
–
–
5,136
–
144
5,293
–
–
5,136
–
157
Turkey 2)
HFT financial assets / liabilities (net exposures) 1)
Financial assets at FV through P & L
Available for sale
Loans and receivables
Held-to-maturity investments
2,246
6
–
1,470
–
770
2,465
4
–
1,564
–
897
2,503
4
–
1,564
–
934
2,906
79
–
1,967
–
860
3,438
78
–
2,367
–
993
3,104
78
–
2,367
–
659
Czech Republic
HFT financial assets / liabilities (net exposures) 1)
Financial assets at FV through P & L
Available for sale
Loans and receivables
Held-to-maturity investments
1,837
93
232
1,512
–
–
1,967
96
232
1,638
–
–
1,967
96
232
1,638
–
–
2,105
65
233
1,805
–
–
2,240
63
235
1,942
–
–
2,240
63
235
1,942
–
–
Hungary
HFT financial assets / liabilities (net exposures) 1)
Financial assets at FV through P & L
Available for sale
Loans and receivables
Held-to-maturity investments
1,901
74
–
1,811
7
8
1,949
74
–
1,859
7
9
1,950
74
–
1,859
7
9
1,362
11
–
1,304
28
19
1,372
12
–
1,312
29
20
1,373
12
–
1,312
29
20
Romania
HFT financial assets / liabilities (net exposures) 1)
Financial assets at FV through P & L
Available for sale
Loans and receivables
Held-to-maturity investments
1,162
–
–
1,162
–
–
1,213
–
–
1,213
–
–
1,213
–
–
1,213
–
–
872
–
–
872
–
–
893
–
–
893
–
–
893
–
–
893
–
–
Croatia
HFT financial assets / liabilities (net exposures) 1)
Financial assets at FV through P & L
Available for sale
Loans and receivables
Held-to-maturity investments
758
8
–
750
–
–
826
8
–
818
–
–
826
8
–
818
–
–
888
–
–
884
–
3
889
–
–
885
–
3
889
–
–
885
–
3
Russia
HFT financial assets / liabilities (net exposures) 1)
Financial assets at FV through P & L
Available for sale
Loans and receivables
Held-to-maturity investments
593
83
–
510
–
–
600
82
–
518
–
–
600
82
–
518
–
–
803
58
–
745
–
–
839
62
–
777
–
–
839
62
–
777
–
–
Italy
HFT financial assets / liabilities (net exposures) 1)
Financial assets at FV through P & L
Available for sale
Loans and receivables
Held-to-maturity investments
541
–
–
540
–
1
563
–
–
563
–
1
563
–
–
563
–
1
829
–
–
775
–
54
849
–
–
795
–
55
850
–
–
795
–
55
1) Including exposures in credit derivatives.
2) Amounts recognised using proportionate consolidation with reference to the ownership percentage for exposures held by joint ventures.
Bank Austria · 2013 Annual Report 207
Consolidated Financial Statements in accordance with IFRSs
E – Risk report (CONTINUED)
31 dec. 2013
Country/ portfolio
31 dec. 2012
Nominal value
Book value
Fair value
Nominal value
Book value
Fair value
Bulgaria
494
532
535
443
481
486
HFT financial assets /liabilities (net exposures) 1)
Financial assets at FV through P & L
Available for sale
Loans and receivables
Held-to-maturity investments
6
1
421
7
59
7
1
455
7
63
7
1
455
7
66
24
5
290
8
117
26
4
317
8
127
26
4
317
8
132
Slovakia
HFT financial assets/liabilities (net exposures) 1)
Financial assets at FV through P & L
Available for sale
Loans and receivables
Held-to-maturity investments
492
12
–
473
–
7
516
9
–
499
–
8
516
9
–
499
–
8
466
–
–
438
–
27
499
–
–
470
–
28
500
–
–
470
–
30
Other Countries
HFT financial assets/liabilities (net exposures) 1)
Financial assets at FV through P & L
Available for sale
Loans and receivables
Held-to-maturity investments
1,029
195
–
810
–
25
868
35
–
810
–
23
868
35
–
810
–
23
1,181
201
–
948
–
33
1,045
44
–
970
–
31
1,045
44
–
970
–
31
17,180
18,383
18,434
16,370
17,826
17,512
179
161
30
8
188
2
30
6
189
2
30
6
206
156
30
8
212
1
29
6
212
1
29
6
227
214
214
205
210
210
TOTAL
thereof:
Slovenia
Greece
Portugal
Spain
shown under held for sale: 2)
Ukraine
1) Including exposures in credit derivatives.
Breakdown of sovereign debt securities by portfolio
(€ million)
31 dec. 2013
Held for trading Financial assets at Available-for-sale
(net exposures)
fair value
financial assets
Book value of sovereign
portfolio
Total portfolio of debt securities
% Portfolio
316
503
62.86 %
233
271
85.99 %
16,692
20,708
80.61 %
Loans
Held-to-maturity
investments
Total
14
754
1.83 %
1,128
1,586
71.12 %
18,383
23,820
77.17%
Loans
Held-to-maturity
investments
Total
36
5,392
0.67 %
1,400
1,895
73.92 %
17,826
28,524
62.49%
31 dec. 2012
Held for trading Financial assets at Available-for-sale
fair value
financial assets
(net exposures)
Book value of sovereign
portfolio
Total portfolio of debt securities
% Portfolio
286
484
59.07 %
239
317
75.44 %
15,864
20,437
77.62 %
Sovereign exposures are bonds issued by and loans granted to central banks, governments and other public sector entities. ABSs are not included.
208 2013 Annual Report · Bank Austria
Breakdown of sovereign loans by country
(€ million)
country
31 dec. 2013
31 dec. 2012
book value*)
book value*)
4,888
2,567
468
228
216
187
167
137
118
678
9,769
5,623
2,270
526
258
175
216
23
185
114
684
10,075
33
45
Austria
Croatia
Indonesia
Slovenia
Bosnia and Herzegovina
Hungary
Bulgaria
Serbia
Philippines
Other
TOTAL ON-BALANCE SHEET EXPOSURE
shown under held for sale:
Ukraine
*) amounts recognized using proportionate consolidation with reference to the ownership percentage for exposures held by joint ventures.
Sovereign loans are loans granted to central and local governments and other public sector entities.
E.6 – Credit risk
Credit risk
In the course of a restructuring of UniCredit Bank Austria AG’s business divisions in 2013, the new Retail & Corporates Division was created by
­combining the customer segments of the previous Family & SME Banking (F&SME) business segment with customer segments previously included in
the Corporate & Investment Banking (CIB) Division.
In the Corporate & Investment Banking (CIB) segment, credit risk costs rose slightly, to €53.5 million (2012: €48.0 million).
Risk costs in the Retail & Corporates segment amounted to €136.0 million (2012: €160.3 million). The significant reduction was achieved despite the
effects of the enhanced portfolio-based provisioning method.
The notable risk cost increase in the Corporate Center segment to €28.7 million was due to risk developments in two individual cases.
The favourable trend in net write-downs of loans and provisions for guarantees and commitments seen at the subsidiaries in Central and Eastern
Europe in 2012 did not continue in 2013. The provisioning charge increased substantially, to about €1,222 million (2012: €761 million); the increase
is explained by provisions for growing impaired loans and by the aim to increase the coverage ratio of impaired loans (i. e. loan loss provisions for
impaired loans / gross impaired loans).
Developments in Turkey in 2013 remained more or less unchanged in euro terms in comparison to 2012, despite the politically and economically
­difficult situation. Risk costs increased only slightly, from €147 million in 2012 to €156 million in 2013, being influenced by depreciation of the ­Turkish
lira in 2013. In local currency terms, risk costs rose by about 17%. The main reason for this higher provisioning charge was the growing loan portfolio
together with the still difficult situation of the retail loan portfolio. The cost of risk as a proportion of lending volume in Turkey is continuously at a satisfactory low level.
Russia represents the second-largest bank in terms of loans to customers within the CEE network of UniCredit. The 2013 evolution of risk costs
showed a slight increase to € 77 million after € 67 million in 2012, mainly driven by provisioning for corporate customers.
The newly formed bank in the Czech Republic and Slovakia (legally merged as at 1 December 2013) ended the financial year with risk costs of
about € 99 million in 2013, which constitutes an increase compared to €75 million for the two separately organised banks in 2012. This increase took
place both in the Corporate and Retail segments.
Croatia recorded a substantial increase in the provisioning charge from €151 million in 2012 to €186 million in 2013, mainly driven by additional
provisions for corporate customers.
The bank in Bulgaria had to absorb a large increase in the provisioning charge in 2013, to a level of €117 million (2012: €81 million), with €1 million
being due to the first-time reporting of the Leasing activities in the bank’s figures. The main reason for this significantly higher provisioning charge was
significant volume growth and additional provisioning needs mainly in the corporate loan portfolio.
Bank Austria · 2013 Annual Report 209
Consolidated Financial Statements in accordance with IFRSs
E – Risk report (CONTINUED)
Romania achieved considerable volume growth and substantially strengthened provisions for impaired loans to customers. As a result, the provisioning
charge went up from about € 92 million in 2012 to € 174 million in 2013.
The situation in Hungary was impacted by the difficult economic environment, requiring a proper reaction with additional loan loss provisions, which
increased the risk costs in 2013 to € 89 million after € 35 million in 2012.
In Slovenia, the economic situation continued to be unfavourable during 2013, which was reflected in additional needs for provisions and resulted in
an increase in risk costs from € 30 million in 2012 to € 60 million in 2013.
In Serbia, risk costs grew to € 42 million (2012: € 26 million) due to the aim of increasing provisions for impaired loans.
Risk costs at the two banks Bosnia in 2013 were € 15 million, a slight improvement over the figure of €16 million for 2012. In the Baltic countries
(bank and leasing company), risk costs rose slightly, from € 4 million in 2012 to €5 million in 2013.
Additions to loan loss provisions for the CEE segment in UniCredit Bank Austria AG in 2013 totalled €201 million (2012: €37 million). These additions
mainly related to already impaired loans to corporate customers in Romania, Bulgaria and Ukraine.
Breakdown of financial assets by portfolio and credit quality (carrying value)
(€ million)
BANKING GROUP
Portfolio / Quality
Financial assets held for trading
Available-for-sale financial assets
Held-to-maturity financial instruments
Loans and receivables with banks
Loans and receivables with customers
Financial assets at fair value through profit or loss
Financial instruments classified as held for sale
Hedging derivatives
Total 31 december 2013
OTHER COMPANIES
NOT
Nonperforming Doubtful Restructured IMPAIRED IMPAIRED
loans
exposures PAST-DUE PAST-DUE
assets
–
1
–
–
2,241
–
534
–
2,776
–
–
1
17
1,894
–
91
–
2,003
1
–
5
–
727
–
240
–
973
–
–
–
–
286
–
40
–
326
–
–
–
–
49
–
–
–
49
Other
Assets
IMPAIRED
OTHER
Total
2,413
20,697
1,579
24,942
123,923
271
2,011
2,913
178,749
–
–
–
–
–
–
–
–
–
–
10
–
8
1
–
–
–
19
2,414
20,708
1,586
24,967
129,121
271
2,916
2,913
184,895
BANKING GROUP
Portfolio / Quality
Financial assets held for trading
Available-for-sale financial assets
Held-to-maturity financial instruments
Loans and receivables with banks
Loans and receivables with customers
Financial assets at fair value through profit or loss
Financial instruments classified as held for sale
Hedging derivatives
Total 31 december 2012
Nonperforming Doubtful Restructured
loans
assets
exposures
1
–
–
3
2,223
–
759
–
2,986
–
1
6
1
2,846
–
268
–
3,122
6
–
–
–
1,074
–
95
–
1,175
OTHER COMPANIES
IMPAIRED
PAST-DUE
–
–
–
–
566
–
6
–
573
Other
Assets
IMPAIRED
OTHER
Total
2,816
19,933
1,889
28,032
125,644
317
2,017
4,125
184,773
–
–
–
–
–
–
–
–
–
1
103
–
76
71
–
–
–
252
2,824
20,037
1,895
28,112
132,425
317
3,145
4,125
192,880
Impaired loans are divided into the following categories:
•Non-performing loans – formally impaired loans, being exposure to insolvent borrowers, even if the insolvency has not been recognised in a court of law, or borrowers in a similar
situation. Measurement is on a loan-by-loan basis or portfolio basis.
•Doubtful loans – exposure to borrowers experiencing temporary difficulties, which the Group believes may be overcome within a reasonable period of time. Doubtful loans are
valued on a loan-by-loan basis or portfolio basis.
•Restructured loans – exposure to borrowers with whom a rescheduling agreement has been entered into including renegotiated pricing at interest rates below market, the
conversion of loans /reduction of principal etc.; measurement is on a loan-by-loan basis or portfolio basis.
•Past-due loans – total exposure to any borrower not included in the other categories, who at the balance-sheet date has expired facilities or unauthorised overdrafts that are more
than 90 days past due.
In contrast to the presentation in the consolidated statement of financial position, equity investments and units in investment funds are not included
in the presentation of credit risk. For this reason, the following table shows slight differences compared with the consolidated statement of financial
position in the items financial assets held for trading, financial assets at fair value through profit or loss and available-for-sale financial assets.
210 2013 Annual Report · Bank Austria
Breakdown of financial assets by portfolio and credit quality (gross and net values)
(€ million)
impaired assets
Portfolio / Quality
Financial assets held for trading
Available-for-sale financial assets
Held-to-maturity financial instruments
Loans and receivables with banks
Loans and receivables with customers
Financial assets at fair value
through profit or loss
Financial instruments classified
as held for sale
Hedging derivatives
Total 31 december 2013
performing
Gross
Exposure
Specific
write-downs
Net
exposure
Gross
Exposure
Portfolio
adjustments
Net
exposure
Total (Net
Exposure)
1
5
9
40
11,409
–
5
2
23
6,262
1
1
6
17
5,148
2,413
20,707
1,580
24,950
124,690
X
–
–
–
717
2,413
20,707
1,579
24,950
123,973
2,414
20,708
1,586
24,967
129,121
–
–
–
271
X
271
271
1,577
–
13,042
672
–
6,964
905
–
6,078
2,021
2,913
179,545
11
X
728
2,011
2,913
178,817
2,916
2,913
184,895
impaired assets
Portfolio / Quality
Financial assets held for trading
Available-for-sale financial assets
Held-to-maturity financial instruments
Loans and receivables with banks
Loans and receivables with customers
Financial assets at fair value
through profit or loss
Financial instruments classified
as held for sale
Hedging derivatives
Total 31 december 2012
performing
Gross
Exposure
Specific
write-downs
Net
exposure
Gross
Exposure
Portfolio
adjustments
Net
exposure
Total (Net
Exposure)
6
8
8
50
12,802
–
7
2
46
6,092
6
1
6
5
6,710
X
20,037
1,889
28,108
126,454
X
–
–
–
739
2,818
20,037
1,889
28,108
125,715
2,824
20,037
1,895
28,112
132,425
–
–
–
X
X
317
317
2,511
–
15,385
1,383
–
7,530
1,128
–
7,856
2,029
X
178,515
12
X
751
2,017
4,125
185,024
3,145
4,125
192,880
Banking group – On-balance sheet and off-balance sheet credit exposure by external rating class (book values)
(€ million)
balance at 31 dec. 2013
Class 1
Class 2
Class 3
Class 4
Class 5
Class 6
No
external
rating
14,184
25
25
–
2
818
15,028
9,341
302
302
–
296
288
10,227
8,048
140
140
–
1,114
1,133
10,435
11,098
128
128
–
670
522
12,418
740
35
35
–
31
92
897
286
–
–
–
2
7
296
137,091
4,085
4,081
4
18,887
17,678
177,742
Total
186,806
7,639
6,462
1,177
21,081
30,257
245,784
External rating classes
On-balance sheet exposures
Derivative contracts
Financial derivative contracts
Credit derivative contracts
Guarantees given
Other commitments to disburse funds
Total
Total
180,790
4,715
4,711
4
21,001
20,538
227,044
balance at 31 dec. 2012
Class 1
Class 2
Class 3
Class 4
Class 5
Class 6
No
external
rating
11,148
83
83
–
28
838
12,097
11,849
5,851
4,679
1,172
251
1,049
19,000
15,229
531
531
–
680
679
17,119
9,340
331
331
–
759
710
11,140
1,477
65
65
–
50
104
1,696
8,001
51
51
–
430
136
8,618
129,762
728
723
5
18,883
26,742
176,114
External rating classes
On-balance sheet exposures
Derivative contracts
Financial derivative contracts
Credit derivatives contracts
Guarantees given
Other commitments to disburse funds
Total
Class 1 (AAA/AA–), 2 (A+/A–), 3 (BBB+/BBB–), 4 (BB+/BB–), 5 (B+/B–), 6 (impaired exposures are included in class 6)
40% of rated counterparties were investment grade (from class 1 to 3),
43% of customers were not rated due to the considerable share of customers in the segment comprising private individuals and SMEs.
Bank Austria · 2013 Annual Report 211
Consolidated Financial Statements in accordance with IFRSs
E – Risk report (CONTINUED)
Banking group – On-balance sheet and off-balance sheet exposure by internal rating class (book values) 2013
(€ million)
balance at 31 dec. 2013
Internal rating classes
On-balance sheet exposures
Derivative contracts
Financial derivative contracts
Credit derivative contracts
Guarantees given
Other commitments to disburse funds
Total
1
2
3
4
5
6
299
2
2
–
6
17
324
14,398
65
65
–
436
1,134
16,033
31,351
3,444
3,443
1
3,272
2,769
40,836
39,751
416
415
1
4,896
4,006
49,068
33,179
235
235
–
2,838
2,971
39,223
19,602
155
155
–
1,834
1,885
23,477
Internal rating classes
On-balance sheet exposures
Derivative contracts
Financial derivative contracts
Credit derivative contracts
Guarantees given
Other commitments to disburse funds
Total
7
8
9
IMPAIRED
EXPOSURES
NO INTERNAL
RATING
TOTAL
13,213
68
68
–
5,958
591
19,829
3,487
25
25
–
637
213
4,362
1,201
–
–
–
54
62
1,318
6,058
3
3
–
336
34
6,431
18,251
302
300
2
734
6,855
26,143
180,790
4,715
4,711
4
21,001
20,538
227,044
Banking group – On-balance sheet and off-balance sheet exposure by internal rating class (book values) 2012
(€ million)
balance at 31 dec. 2012
Internal rating classes
On-balance sheet exposures
Derivative contracts
Financial derivative contracts
Credit derivatives contracts
Guarantees given
Other commitments to disburse funds
Total
1
2
3
4
5
6
5,018
–
–
–
1
804
5,823
11,905
82
82
–
291
109
12,387
29,070
5,705
4,533
1,172
2,777
2,561
40,113
46,976
984
984
–
5,567
3,042
56,568
22,641
256
256
–
2,468
2,177
27,542
20,118
182
182
–
2,104
1,814
24,218
balance at 31 dec. 2012
Internal rating classes
On-balance sheet exposures
Derivative contracts
Financial derivative contracts
Credit derivatives contracts
Guarantees given
Other commitments to disburse funds
Total
7
8
9
IMPAIRED
EXPOSURES
NO internal
RATING
TOTAL
18,742
98
98
–
914
5,405
25,159
4,630
22
22
–
469
218
5,338
952
16
16
–
76
42
1,085
7,851
6
6
–
421
118
8,395
18,904
290
285
5
5,994
13,968
39,155
186,806
7,640
6,462
1,177
21,081
30,257
245,784
The mapping to the internal rating masterscale considers the PD ranges mentioned below:
Internal rating classes
1
2
3
4
5
6
7
8
9
10
PD Min
0.0000 %
0.0036 %
0.0208 %
0.1185 %
0.5824 %
1.3693 %
3.2198 %
7.5710 %
17.8023 %
impaired
212 2013 Annual Report · Bank Austria
PD Max
0.0036 %
0.0208 %
0.1185 %
0.5824 %
1.3693 %
3.2198 %
7.5710 %
17.8023 %
99.9999 %
Information on forborne exposures
In accordance with the ESMA document no. 2012 / 853 of 20 December 2012 on disclosures about forborne exposures*) to be provided in the IFRS
financial statements of financial institutions, it should be noted that with reference to the non-performing portfolio, the Group’s activities are mainly
focused on the following:
• prompt action. With a solid and effective monitoring and reporting process, the early identification of possible credit quality deterioration allows
the Group to promptly undertake any necessary forbearance practices as well as restrictive management measures aimed at risk reduction in the
early phases prior to the potential default; all forbearance measures aim at the timely identification and proper management of exposures with
increased risk at a stage where the Bank has not yet initiated expropriation or similar enforcement proceedings and the borrower is still able to
service the debt;
• proper assessment of the impaired loans, in order to define the strategies/actions to be taken and the applicable default classification;
• initiating recovery procedures on the basis of the type and amount of the exposure and the specific borrower involved;
• appropriate provisioning through profit and loss in line with the relevant recovery strategies and plans as well as the type of exposure. Provisioning is carried out in line with the principles of IAS 39 and Basel 2 rules;
• accurate and regular reporting in order to monitor aggregate portfolio risk over time.
Each legal entity shall classify positions into the various default categories in compliance with Basel 2 and Bank of Italy regulations.
Exposures subject to modifications as a result of forbearance practices are classified as impaired loans when the conditions for their classification
into the various impaired loans categories are met.
With specific reference to forbearance practices, a position is classified as a “restructured loan” according to the Bank of Italy’s classification when
a rescheduling agreement has been entered into including renegotiated pricing at interest rates below market, the conversion of part of a loan into
shares and / or reduction of principal. Measurement of restructured loans is on a loan-by-loan basis, including discounted cost due to renegotiation
of the interest rate at a lower rate than the original contractual rate.
Restructured exposures may be reclassified to “performing loans” when at least two years have elapsed from the closing of the restructuring agreement and a resolution has been passed by the competent corporate bodies stating that the borrower is again able to service the debt according to
the restructuring agreement.
The accounting policies on assessment and credit risk provisioning of loans subject to modifications as a result of forbearance practices conform
with the general rule, i. e. whether there is objective evidence that an impairment loss on loans or held-to-maturity investments (measured at
­amortised cost) has been incurred, the amount of the loss is measured as the difference between the asset’s carrying amount and the present
value of estimated future cash flows (excluding future credit losses that have not yet been incurred) discounted at the financial asset’s original
effective interest rate. The amount of the loss is recognised in the income statement under “Impairment losses” and the carrying amount of the
asset is reduced.
In more detail, if the terms of a loan, receivable or held-to-maturity investment are renegotiated or otherwise modified because of the borrower’s
financial difficulties, this is considered to be objective evidence of impairment in accordance with IAS 39.
*) According to the ESMA document, “forbearance measures occur in situations in which the borrower is considered to be unable to meet the terms and conditions of the contract
due to financial difficulties. Based on these difficulties, the issuer decides to modify the terms and conditions of the contract to allow the borrower sufficient ability to service the debt
or refinance the contract, either totally or partially.”
Bank Austria · 2013 Annual Report 213
Consolidated Financial Statements in accordance with IFRSs
E – Risk report (CONTINUED)
Forbearance exposures
(€ million)
RESTRUCTURED – IMPAIRED
INFORMATION on
FORBORNE exposures
forbearance measure by
counterparty breakdown
Debt securities
Loans and advances
General governments
Financial companies
Non-financial companies
Households
RESTRUCTURED – PERFORMING
Gross
Exposures
Specific
Writedowns
Net
1,368
–
1,368
–
32
1,235
102
– 641
–
– 641
–
–6
– 604
– 32
727
–
727
–
26
631
70
Gross
PORTFOLIO
Exposures ADJUSTMENTS
1,029
–
1,029
–
–
666
363
– 27
–
– 27
–
–
– 19
–9
RESTRUCTURED – total
Net
Gross
Exposures
Specific
Writedowns
Net
1,002
–
1,002
–
–
648
354
2,397
–
2,397
–
32
1,901
465
– 668
–
– 668
–
–6
– 623
– 40
1,729
–
1,729
–
26
1,278
424
Restructured impaired: This category comprises all loans and receivables for which the terms and conditions were modified in view of a deterioration in the borrowers financial position, and which
were classified as impaired at the time of restructuring or in respect of which the bank incurred a cash loss as a result of restructuring.
Restructured performing: This category includes all loans and receivables for which the terms and conditions were modified in view of a deterioration in the borrowers financial position, and
which were not classified as impaired at the time of restructuring and in respect of which the bank did not incur a cash loss as a result of restructuring.
Realisation of mortgage collateral
Mortgages are the main type of collateral accepted by UniCredit Bank Austria AG for real estate finance. The impact of international financial market
turbulence on real estate markets in CEE often leads to further losses being incurred by UniCredit Bank Austria AG when realising collateral.
UniCredit Bank Austria AG has therefore established subsidiaries in Vienna and in major CEE countries (the Czech Republic, Russia, Bulgaria, Romania,
…) which concentrate on active workout management and optimum realisation of real estate. These companies act as potential buyers of real estate
mortgaged to UniCredit Group when such real estate is sold at auction or on the basis of voluntary arrangements with borrowers.
A potential purchase of real estate mortgaged to UniCredit Group is preceded by intensive evaluation to ensure that the purchase of such real estate –
as compared with immediate realisation – will lead to a significant reduction of the loss to the Group. Such transactions are considered especially
for real estate which is run effectively or may be developed, and in respect of promising projects, which are to be liquidated because the owners are
insolvent.
Via its subsidiaries established for this purpose, UniCredit Bank Austria AG can purchase and temporarily hold real estate or assume control of projects,
complete or continue developing such projects if necessary, and subsequently sell the real estate through an orderly process.
Credit risk mitigation techniques
UniCredit Bank Austria uses various credit risk mitigation techniques to reduce potential credit losses in case of obligor default.
With specific reference to credit risk mitigation, general guidelines issued by the parent company as well as UniCredit Bank Austria in its sub-holding
function are in force, to lay down Group-wide rules and principles that should guide, govern and standardise credit risk mitigation management, in line
with Group principles and best practice, as well as in accordance with the relevant regulatory requirements. Following the General Group and Subgroup
Credit Risk Mitigation Guidelines all legal entities are developing internal regulations that specify processes, strategies and procedures for collateral
management. In particular such internal regulations detail collateral eligibility, valuation and monitoring rules and ensure the soundness, legal enforceability and timely liquidation of valuable collateral according to each country’s local legal system.
Collateral management assessments and credit risk mitigation compliance verifications have been performed by the legal entities, specifically as part
of internal rating system applications, in order to assess the presence of adequate documentation and procedures concerning the credit risk mitigation
instruments used for supervisory capital.
According to the credit policies, collateral or guarantees can be accepted only to support loans and they cannot serve as a substitute for the borrower’s
ability to meet obligations. For this reason, in addition to the overall analysis of the creditworthiness and of the repayment capacity of the borrower,
they are subject to specific evaluation and analysis of the support role for the repayment of the exposure.
Collateral accepted in support of credit lines granted by the Group’s legal entities, primarily includes real estate, both residential and commercial and
financial collateral (including cash deposits, debt securities, equities, and units of undertakings for collective investment in transferable securities
(UCITS)). Further types of collateral comprise pledged goods, loans and insurance contracts as well as other types of funded protection. The Group also
makes use of bilateral netting agreements for OTC derivatives (by means of ISDA and CSA agreements), repos and securities lending.
214 2013 Annual Report · Bank Austria
The management systems of credit risk mitigation techniques are targeted to be embedded in the credit approval process and in the credit risk
monitoring process, and widely support the evaluation and data quality checks of collateral/guarantees and their appropriate linking to the
­categories defined for LGD estimation purposes. Controls and related responsibilities are duly formalised and documented in internal rules and
job descriptions. Furthermore, processes are implemented to control that all the relevant information regarding the identification and evaluation
of the credit protection is correctly registered in the system.
When accepting a credit risk mitigation technique, the Group and the sub-group emphasise the importance of processes and controls of the legal
certainty requirements of the protection, as well as the assessment of the suitability of the collateral or guarantee. In case of personal guarantees,
the protection provider (or the protection seller in case of credit default swap) has to be assessed in order to measure his/her solvency and risk
profile.
In case of collateral, the process of valuation is based on precautionary principles, with reference to the use of “market values” and to the application of adequate haircuts to ensure that, in case of liquidation, there are no unexpected losses.
Monitoring processes of credit risk mitigation techniques ensure that general and specific requirements established by credit policies, internal and
regulatory rules are met at all times.
Banking group – Secured credit exposures to banks
(€ million)
BALANCE AT 31 dec. 2013
NET
EXPOSURES
TOTAL
CREDIT RISK
MITIGATION
GUARANTEES
COLLATERAL
MORTGAGES /
PLANTS SECURITIES
OTHER
ASSETS
GOVERNMENT
AND
CENTRAL
BANKS
OTHER
PUBLIC
ENTITIES
BANKS
OTHER
ENTITIES
Secured on-balance sheet credit exposures:
totally secured
of which impaired
of which performing
partially secured
of which impaired
of which performing
2,185
–
2,185
6,410
15
6,395
4,045
–
4,043
808
15
793
2
–
2
–
–
–
1,025
–
1,025
159
–
159
1,568
–
1,568
223
–
223
1,056
–
1,056
388
15
373
–
–
–
–
–
–
393
–
393
13
–
13
1
–
1
24
–
24
Secured off-balance sheet credit exposures:
totally secured
of which impaired
of which performing
partially secured
of which impaired
of which performing
172
–
172
1,182
–
1,182
181
–
181
223
–
223
–
–
–
–
–
–
–
–
–
–
–
–
12
–
12
215
–
215
–
–
–
–
–
–
–
–
–
–
–
–
2
–
2
8
–
8
168
–
168
–
–
–
Bank Austria · 2013 Annual Report 215
Consolidated Financial Statements in accordance with IFRSs
E – Risk report (CONTINUED)
Banking group – Secured credit exposures to customers
(€ million)
BALANCE AT 31 dec. 2013
NET
EXPOSURES
TOTAL
CREDIT RISK
MITIGATION
COLLATERAL
MORTGAGES/
PLANTS SECURITIES
GUARANTEES
OTHER
ASSETS
GOVERNMENT
AND
CENTRAL
BANKS
OTHER
PUBLIC
ENTITIES
BANKS
OTHER
ENTITIES
Secured on-balance sheet credit exposures:
totally secured
of which impaired
of which performing
partially secured
of which impaired
of which performing
18,108
2,274
15,834
71,465
2,901
68,564
49,401
23,447
25,954
37,059
2,478
34,581
24,240
19,089
5,151
23,891
1,981
21,910
793
29
764
1,698
20
1,678
22,165
4,292
17,873
5,348
246
5,102
1,686
3
1,683
4,705
205
4,500
36
–
36
–
–
–
80
2
78
710
22
689
401
31
370
705
3
702
Secured off-balance sheet credit exposures:
totally secured
of which impaired
of which performing
partially secured
of which impaired
of which performing
13,473
41
13,432
4,317
211
4,106
17,178
139
17,039
1,540
40
1,500
1,354
57
1,296
555
24
531
40
–
40
61
–
61
3,938
31
3,907
547
12
536
6
–
6
70
4
66
–
–
–
2
–
2
22
14
7
225
–
225
11,818
36
11,782
81
–
81
Credit risk methods and instruments
Very important factors in the credit approval process are a detailed assessment of risk associated with each loan exposure, and the customer’s
credit rating in particular. Every lending decision is based on a thorough analysis of the loan exposure, including an evaluation of all relevant factors. Following the initial loan application, the bank’s loan exposures are reviewed at least once a year. If the borrower’s creditworthiness deteriorates substantially, shorter review intervals are obligatory.
For internal credit assessment in Austria and by Bank Austria’s banking subsidiaries in CEE, the bank uses various rating and scoring models – for
calculating the parameters PD (probability of default), LGD (loss given default) and EAD (exposure at default) – on the basis of models specifically
developed for these purposes for the customer / business segments to be assessed, in line with the various asset classes pursuant to Section 22 b
of the Austrian Banking Act, the Solvency Regulation and Directive 2006/48/EC of the European Parliament and of the Council of 14 June 2006
relating to the taking up and pursuit of the business of credit institutions. There are country-specific or region-specific models (e. g. for corporate
customers, private and business customers) and Group-wide models (e. g. for sovereigns, banks, multinational corporates). The assessment of a
loan exposure is based on data from the respective company’s financial statements and on qualitative business factors.
The various rating and scoring models provide the basis for efficient risk management of the Bank Austria Group and are embedded in all decisionmaking processes relating to risk management. They are also a key factor for capital required to be held against risk-weighted assets.
Great attention is given to consistency in the presentation for supervisory purposes and the requirements of internal control.
All internal rating and scoring systems are monitored on an ongoing basis. The systems are also subject to regular validation on an annual basis,
including a review to verify if the rating / scoring system provides a correct representation of the risks to be measured. All model assumptions are
based on multi-year statistical averages for historical defaults and losses, with appropriate attention being given to the potential impact of turbulence in international financial markets.
In this context, credit risk stress tests, which are required by banking supervisory authorities and are carried out on a regular basis, are an
­essential instrument for assessing future risks in an unfavourable economic environment. Such tests enable the Management Board to assess
the adequacy of regulatory capital and economic capital on the basis of different stress scenarios. Credit risk stress calculations for the entire
Group are based on a credit portfolio model developed in-house and are analysed for their impact on regulatory and economic capital.
Risk-adjusted pricing and proactive risk management constantly improve the diversification and the risk/earnings ratio of the portfolio.
For real estate customers, the customer-related rating is complemented by a transaction rating.
216 2013 Annual Report · Bank Austria
Bank Austria uses a retail scoring system. The automated rating tool is used for assessing, monitoring and managing the large number of loan exposures to private customers, small businesses, independent professionals and small non-profit organisations. Retail scoring comprises an application
scoring procedure based on effective and recognised mathematical and statistical methods, and a behaviour scoring procedure taking into account
such factors as amounts received in the account and customers’ payment practices. The retail scoring system provides information that is updated on
a monthly basis. This gives the bank an efficient tool for lending decisions and early recognition of risk. Automated data processing helps Bank Austria
to reduce costs required for credit control while accelerating lending decisions.
Four CEE banking subsidiaries switched from the standardised approach to the Foundation IRB approach in 2011, followed by two further CEE
banking subsidiaries in 2012. The forecasting quality of rating models and underlying processes were optimised in close cooperation with specialists
at U­ niCredit Bank Austria AG. In developing models and carrying out validations, attention is given to ensuring the consistent and quality-assured
­implementation of Group guidelines.
Credit Treasury
Credit Treasury has two main tasks: preparing and monitoring the risk-adequate pricing of loans; and executing risk-transfer and capital-generating
measures and transactions.
To ensure uniform pricing within UniCredit Group, the risk-adjusted spread is determined on the basis of multi-year probabilities of default (depending
on the term of the loan), added as a price component and monitored on an ongoing basis.
Initially rolled out for a predefined customer segment of Austrian corporate customers as at 1 January 2011, this system is to be extended to cover
other segments and regions. Moreover, Credit Treasury is responsible for risk transfers and capital-generating measures/transactions (via synthetic
securitisations, CLNs, etc.) and liquidity-generating measures/transactions for the entire Bank Austria Group (including CEE).
The Credit Treasury Committee, which holds quarterly meetings, is responsible for strategic coordination and decisions on measures and transactions.
Provisioning process
Loans/bonds:
Special Credit managers have to review all exposures at regular intervals to see if there is a requirement for recognising an impairment loss.
The amount of the impairment loss is the difference between the carrying amount of the loan and the present value of estimated future cash flows.
In cases where there is a low probability of restructuring, future cash flows are calculated using the liquidation scenario. The workout unit calculates
any provisioning requirement on the basis of the estimated present value of the liquidation proceeds/recovery percentage.
ABSs:
As part of a structured watchlist and impairment process for ABSs, positions are identified which are reviewed for any provisioning requirement at
­regular intervals. This is usually done by applying specific models, especially cash flow models. These models map the individual transaction structure
and calculate a present value of estimated future cash flows. The amount of the impairment loss is the difference between the carrying amount of the
ABS position and the present value of estimated future cash flows.
Enhancement of portfolio-based provisioning method
UniCredit Bank Austria AG applies a portfolio-based provisioning method (“Pauschale Einzelwertberichtigung” – PEWB) for defaulted assets grouped by
similar credit risk characteristics and with no significant exposure at counterparty level. According to recent re-estimation results and with regard to
further alignment with parameter-based Expected Loss calculation, the applied method was enhanced in the fourth quarter of 2013, although the overall approach remained untouched. The consideration of more granular information (counterparty’s exposure, period in default, and status of default)
revealed that provisions have to be increased especially for counterparties being insolvent and/or already several years in default.
In total, the enhancement of the PEWB methodology resulted in additional LLP needs of €58.2 million in 2013.
The assumptions and parameters for risk assessment of foreign currency loans were monitored in 2013. As a consequence, the existing portfoliobased provision was increased by € 23 million to € 215 million.
The following breakdowns of on-balance sheet and off-balance sheet exposures to banks and customers include not only loans and receivables but
also exposures from the other IAS 39 categories and the disposal groups, for banks and customers without derivative exposures.
Bank Austria · 2013 Annual Report 217
Consolidated Financial Statements in accordance with IFRSs
E – Risk report (CONTINUED)
Banking group – On-balance sheet and off-balance sheet exposure to banks: gross and net values
Exposure types /Amounts
(€ million)
Gross Exposure
Specific Write-downs
Portfolio adjustments
Net exposure
On-balance sheet exposure
Non-performing loans
Doubtful loans
Restructured exposures
Past due
Other assets
Total
22
19
–
–
28,096
28,137
21
2
–
–
X
23
X
X
X
X
–
–
–
17
–
–
28,096
28,113
Off-balance sheet exposure
Impaired
Other
Total
Total 31 december 2013
473
6,903
7,377
35,514
471
X
471
495
X
–
–
–
2
6,903
6,905
35,019
Gross Exposure
Specific Write-downs
Portfolio adjustments
Net exposure
37
3
10
–
30,731
30,781
34
1
10
–
X
46
X
X
X
X
–
–
3
1
–
–
30,731
30,736
12
8,167
8,179
38,960
12
X
12
57
X
–
–
–
–
8,167
8,167
38,903
Exposure types /Amounts
On-balance sheet exposure
Non-performing loans
Doubtful loans
Restructured exposures
Past due
Other assets
Total
Off-balance sheet exposure
Impaired
Other
Total
Total 31 december 2012
218 2013 Annual Report · Bank Austria
Banking group – On-balance sheet and off-balance sheet exposure to customers: gross and net values
Exposure types /Amounts
(€ million)
Gross Exposure
Specific Write-downs
Portfolio adjustments
Net exposure
On-balance sheet exposure
Non-performing loans
Doubtful loans
Restructured exposures
Past due
Other assets
Total
7,794
3,133
1,634
442
147,344
160,346
5,017
1,146
661
116
X
6,940
X
X
X
X
728
728
2,776
1,986
973
326
146,616
152,677
Off-balance sheet exposure
Banking group
Impaired
Other
Total
Total 31 december 2013
566
39,475
40,040
200,386
195
X
195
7,136
X
34
34
762
370
39,441
39,811
192,489
Gross Exposure
Specific Write-downs
Portfolio adjustments
Net exposure
8,212
4,607
1,769
742
148,975
164,305
5,230
1,486
598
170
X
7,484
X
X
X
X
751
751
2,982
3,121
1,171
573
148,224
156,071
714
50,305
51,019
215,324
169
X
169
7,653
X
39
39
790
544
50,266
50,810
206,881
Exposure types /Amounts
On-balance sheet exposure
Non-performing loans
Doubtful loans
Restructured exposures
Past due
Other assets
Total
Off-balance sheet exposure
Banking group
Impaired
Other
Total
Total 31 december 2012
Bank Austria · 2013 Annual Report 219
Consolidated Financial Statements in accordance with IFRSs
E – Risk report (CONTINUED)
Banking group – On-balance sheet exposure to customers: gross change in impaired exposures
(€ million)
Changes in 2013
SOURCE/ CATEGORIES
Opening balance – gross exposure
Sold but not derecognised
Increases
Transfers from performing loans
Transfers from other impaired exposure
Other increases
Reductions
Transfers to performing loans
Derecognised items
Recoveries
Sales proceeds
Losses on disposals
Transfers to other impaired exposure
Other reductions
Closing balance – gross exposure
Sold but not derecognised
NON-PERFORMING
LOANS
DOUBTFUL
LOANS
8,212
–
3,107
795
1,985
328
– 3,525
– 113
– 538
– 296
– 35
–1
– 115
– 2,428
7,794
–
4,607
–
1,919
1,158
644
117
– 3,394
– 285
– 88
– 186
– 15
–
– 1,977
– 843
3,133
–
NON-PERFORMING
LOANS
DOUBTFUL
LOANS
7,523
–
2,607
830
1,538
239
– 1,919
– 148
– 617
– 348
– 106
– 228
– 472
8,212
–
5,025
–
2,590
1,811
698
80
– 3,007
– 200
– 130
– 402
– 19
– 2,016
– 240
4,607
–
RESTRUCTURED
EXPOSURES PAST-DUE EXPOSURES
1,769
–
749
288
349
113
– 885
– 145
– 32
– 133
–2
–
– 383
– 189
1,634
–
742
–
595
502
33
60
– 896
– 205
– 31
– 45
–
–
– 535
– 80
442
–
TOTAL
15,331
–
6,371
2,743
3,010
618
– 8,700
– 747
– 689
– 661
– 52
–1
– 3,010
– 3,540
13,002
–
Changes in 2012
SOURCE/ CATEGORIES
Opening balance – gross exposure
Sold but not derecognised
Increases
Transfers from performing loans
Transfers from other impaired exposure
Other increases
Reductions
Transfers to performing loans
Derecognised items
Recoveries
Sales proceeds
Transfers to other impaired exposure
Other reductions
Closing balance – gross exposure
Sold but not derecognised
RESTRUCTURED
EXPOSURES PAST-DUE EXPOSURES
1,864
–
1,178
331
751
96
– 1,273
– 61
– 410
– 121
– 110
– 398
– 174
1,769
–
600
–
681
606
20
55
– 539
– 81
– 10
– 38
– 19
– 365
– 26
742
–
TOTAL
15,012
–
7,057
3,579
3,008
470
– 6,738
– 490
– 1,166
– 909
– 253
– 3,008
– 912
15,331
–
The most significant development in the above table is the migration of loans totalling about €1.9 billion from doubtful loans to non-performing loans. Of the total amount, about
€710 million relates to UniCredit Bank Austria AG, €345 million to Zagrebačka banka and €146 million to Yapı Kredi.
Of the increase of €1,158 million in doubtful loans, which were transferred from originally performing exposures, €310 million relates to UniCredit Bank Austria AG, €289 million to
Zagrebačka banka and €121 million to UniCredit Moscow.
Within non-performing loans, UniCredit Bank Austria AG accounts for the largest portion of recoveries, i. e. €114 million, followed by Zagrebačka banka with €58 million.
In the line showing “Other reductions”, the sale of ATF Bank accounts for a reduction of €2,021 million in non-performing loans and a reduction of €370 million in doubtful loans.
220 2013 Annual Report · Bank Austria
Banking group – On-balance sheet exposure to customers: changes in overall impairment
(€ million)
Changes in 2013
SOURCE / CATEGORIES
Opening gross write-downs
Sold but not derecognised
Increases
Write-downs
Losses on disposal
Transfers from other impaired exposure
Other increases
Reductions
Write-backs from assessments
Write-backs from recoveries
Gains on disposal
Write-offs
Transfers to other impaired exposure
Other reductions
Final gross write-downs
Sold but not derecognised
NON-PERFORMING
LOANS
DOUBTFUL
LOANS
5,230
–
2,433
1,542
7
661
222
– 2,645
– 249
– 241
–8
– 538
– 63
– 1,546
5,017
–
1,486
–
897
645
–
125
127
– 1,237
– 42
– 162
–
– 88
– 651
– 294
1,146
–
NON-PERFORMING
LOANS
DOUBTFUL
LOANS
4,703
–
1,971
1,244
5
565
157
– 1,445
– 145
– 380
–8
– 617
– 118
– 177
5,230
–
1,824
–
1,193
822
1
212
159
– 1,531
– 186
– 183
–2
– 130
– 960
– 70
1,486
–
RESTRUCTURED
EXPOSURES PAST-DUE EXPOSURES
598
–
322
165
–
97
60
– 259
– 19
– 62
–1
– 32
– 129
– 15
661
–
170
–
151
118
–
14
20
– 205
– 13
– 74
–
– 31
– 53
– 35
116
–
TOTAL
7,484
–
3,802
2,470
7
897
429
–4,346
–322
–539
–10
–689
–897
–1,890
6,940
–
Changes in 2012
SOURCE / CATEGORIES
Opening gross write-downs
Sold but not derecognised
Increases
Write-downs
Losses on disposal
Transfers from other impaired exposure
Other increases
Reductions
Write-backs from assessments
Write-backs from recoveries
Gains on disposal
Write-offs
Transfers to other impaired exposure
Other reductions
Final gross write-downs
Sold but not derecognised
RESTRUCTURED
EXPOSURES PAST-DUE EXPOSURES
618
–
652
151
–
495
6
– 672
– 14
– 48
–
– 410
– 119
– 80
598
–
151
–
183
164
–
5
13
– 163
– 26
– 47
–
– 10
– 79
–2
170
–
TOTAL
7,296
–
3,999
2,381
7
1,276
335
–3,811
–371
–657
–10
–1,166
–1,276
–330
7,484
–
Bank Austria · 2013 Annual Report 221
Consolidated Financial Statements in accordance with IFRSs
E – Risk report (CONTINUED)
Banking group – On-balance sheet and off-balance sheet credit exposure to customers by segment
COUNTERPARTS / EXPOSURES
Cash exposure
Non-performing loans
Doubtful loans
Restructured exposures
Impaired past-due exposures
Other exposures
Total
Off-balance sheet exposures
Non-performing loans
Doubtful loans
Other impaired assets
Other exposures
Total
TOTAL 31 dec. 2013
COUNTERPARTS/ EXPOSURES
Cash exposure
Non-performing loans
Doubtful loans
Restructured exposures
Impaired past-due exposures
Other exposures
Total
Off-balance sheet exposures
Non-performing loans
Doubtful loans
Other impaired assets
Other exposures
Total
TOTAL 31 dec. 2013
(€ million)
GOVERNMENTS
OTHER PUBLIC ENTITIES
FINANCIAL COMPANIES
NET
SPECIFIC
PORTFOLIO
EXPOSURE write-downs ADJUSTMENTS
NET
SPECIFIC
PORTFOLIO
EXPOSURE write-downs ADJUSTMENTS
NET
SPECIFIC
PORTFOLIO
EXPOSURE write-downs ADJUSTMENTS
–
–
1
–
18,306
18,307
–
–
–
–
X
–
X
X
X
X
2
2
–
2
6
6
6,195
6,209
5
1
2
–
–
–
–
258
258
18,565
–
–
–
X
X
X
–
–
2
–
–
–
149
149
6,358
–
–
8
X
X
X
X
4
4
10
28
13
–
11,531
11,581
84
6
8
–
98
X
X
X
X
20
20
–
–
–
X
–
8
X
X
X
–
–
5
1
–
1
1,879
1,880
13,461
–
–
8
X
8
106
X
X
X
–
–
20
INSURANCE COMPANIES
OTHER ENTITIES
total
NET
SPECIFIC
PORTFOLIO
EXPOSURE write-downs ADJUSTMENTS
NET
SPECIFIC
PORTFOLIO
EXPOSURE write-downs ADJUSTMENTS
NET
SPECIFIC
PORTFOLIO
EXPOSURE write-downs ADJUSTMENTS
–
–
–
–
438
438
–
–
–
–
X
–
X
X
X
X
–
–
2,766
1,956
954
319
110,147
116,142
–
–
–
70
70
508
–
–
–
X
–
–
X
X
X
–
–
–
250
70
49
36,662
37,031
153,173
222 2013 Annual Report · Bank Austria
4,929
1,138
651
116
6,834
X
X
X
X
702
702
2,776
1,986
973
326
146,616
152,677
5,017
1,146
661
116
6,940
X
X
X
X
728
728
125
37
25
X
187
7,021
X
X
X
34
34
735
251
70
49
39,017
39,387
192,065
125
37
33
X
195
7,135
X
X
X
34
34
762
Securitisation transactions
Qualitative information
The Group’s main objectives in its securitization transactions (whether traditional or synthetic) are the optimisation of the loan portfolio by freeing
up regulatory and economic capital and obtaining fresh liquidity together with greater diversification of its sources of funding.
The difficult economic environment of the last years suggested also the opportunity to improve, where possible, the usage of securitisation
schemes as a tool to support the origination of new loans by leveraging on specialised investors, like supranationals, able to provide protection for
newly originated portfolios complying with certain pre-agreed eligibility criteria.
Analysis and realisation of securitisation transactions are carried out within the parent in close cooperation with the legal entities involved and with
UniCredit Bank AG as Arranger and Investment Bank. This process requires an economic feasibility study to assess the impact of transactions
(according to their nature and aims), on regulatory and economic capital, on risk-adjusted profitability measures and on the level of the Group’s
liquidity. If this initial phase produces a positive result, a technical and operational feasibility study is carried out to identify the assets to be securitised and design the structure of the transaction. Once technical feasibility has been established, the transaction is realised.
No new securitisation transactions were conducted in 2013 involving the existing portfolio of the banks. On the contrary, concerning synthetic
securitisations affecting loans to be newly originated, in two subsidiaries of the CEE Divisions (UniCredit Bulbank AD and UniCredit Tiriac Bank SA),
similar initiatives originated in the past with European Investment Fund under the so called JEREMIE programme, 2013 saw the affected portfolios
reaching a relatively meaningful size.
Details of the transactions carried out in previous financial years are set out in the following tables.
Starting from H2 2007 the above-mentioned market conditions influenced sponsor and investor transactions, in that stricter monitoring of
­exposures was required.
In particular, in its role as sponsor the Group purchased Asset-Backed Commercial Paper issued by sponsored conduits. This meant that these
vehicles were consolidated as from 2007.
With regard to investment in other parties’ securitisations, i. e. structured credit products, these instruments were ring-fenced in a separate
­portfolio managed with a view to maximising future cash flow.
Given the asset quality of the underlyings, the best business strategy was considered to be retention in the bank’s books.
In this regard, in H2 2008 it is noted that managerial strategy was transposed for accounting purposes by reclassifying structured credit products
from held-for-trading financial assets to loans and receivables with customers (see also A.3.1 Transfers between portfolios).
In line with the above management principles, risk monitoring and maximising profit on securitisation transactions is achieved by:
• analysing the monthly or quarterly investor reports produced by the Trustee, paying special attention to the performance of the collateral;
• monitoring similar transactions’ collateral performance and issues of similar paper;
• watching the market fundamentals of the underlying credit and
• staying in constant contact with the investors and, where collateral is managed, with the managers and analysts of the Collateral Manager.
Furthermore each portfolio is assigned a market VaR limit by Risk Management. This is monitored bearing in mind the correlations. The Group has
spread curves for each rating and product (asset-backed securities, mortgage-backed securities, etc.) and uses them to calculate risk, in the same
way as other instruments in its portfolio. The method used is in line with other sources of market risk, and enables us to estimate the possible
effects of diversification and to aggregate the VaR with other sections of the portfolio.
Further details are given in the following section “Information on structured credit products and trading derivatives with customers”.
Bank Austria · 2013 Annual Report 223
Consolidated Financial Statements in accordance with IFRSs
E – Risk report (CONTINUED)
Originator: UniCredit Bulbank AD
NAME
Type of securitisation:
Originator:
Issuer:
Servicer:
Arranger:
Target transaction:
Type of asset:
Quality of asset:
Closing date:
Nominal value of reference portfolio:
Issued guarantees by the Bank:
Issued guarantees by third parties:
Bank lines of credit:
Third Parties lines of credit:
Other credit enhancements:
Other relevant information:
Rating Agencies:
Amount of CDS or other risk transferred:
Amount and Condition of tranching:
ISIN
Type of security
Class
Rating
Reference Position
Reference Position at the end of accounting period
Distribution of securitised assets by area:
Italy– Northwest
– Northeast
– Central
– South and Islands
Other European Countries– EU countries
– non-EU countries
America
Rest of the World
TOTAL
Distribution of securitised assets by business sector of the borrower:
Governments
Other government agencies
Banks
Finance companies
Insurance companies
Non-financial companies
Other entities
TOTAL
EIF JEREMIE
Synthetic – First loss Portfolio Guarantee
UniCredit Bulbank AD (“UniCredit Bulbank”)
European Investment Fund (“EIF”)
UniCredit Bulbank
UniCredit Bulbank
Capital Relief and Risk Transfer
Highly diversified and granular pool of UniCredit Bulbank’s SME loans
Performing
14 July 2011
49,695,086 €
–
First Loss Portfolio Guarantee issued by EIF
–
–
–
• The portfolio is into the ramp-up period until 14 February 2014
• The agreed portfolio maximum volume is equal to EUR 50,000,000
• The guarantee covers 80 % of each outstanding loan up to a total amount equal to 25 % of
the portfolio volume
No rating agency, use of Standardized Approach*)
n. a.
Senior
A
n. r.
29,817,052 €
29,817,052 €
n. a.
Junior
B
n. r.
9,939,017 €
9,939,017 €
–
49,695,086 €
–
–
–
49,695,086 €
–
–
–
–
–
49,695,086 €
–
49,695,086 €
*) Synthetic securitisation carried out using the Standardised Approach as required under Basel 2.
Where there is no eligible external rating, the Bank that holds or guarantees such an exposure may determine the risk weight by applying the “look through” treatment, provided the composition of the underlying pool is known at all times. The unrated most senior position receives the average risk weight of the underlying exposures subject to supervisory review. Where the Bank is
unable to determine the risk weights assigned to the underlying credit risk exposures, the unrated position must be deducted from regulatory capital.
224 2013 Annual Report · Bank Austria
Originator: UniCredit Tiriac Bank SA
NAME
Type of securitisation:
Originator:
Issuer:
Servicer:
Arranger:
Target transaction:
Type of asset:
Quality of asset:
Closing date:
Nominal value of reference portfolio:
Issued guarantees by the Bank:
Issued guarantees by third parties:
Bank lines of credit:
Third Parties lines of credit:
Other credit enhancements:
Other relevant information:
Rating Agencies:
Amount of CDS or other risk transferred:
Amount and Condition of tranching:
ISIN
Type of security
Class
Rating
Reference Position
Reference Position at the end of accounting period
Distribution of securitised assets by area:
Italy– Northwest
– Northeast
– Central
– South and Islands
Other European Countries– EU countries
– non-EU countries
America
Rest of the World
TOTAL
Distribution of securitised assets by business sector of the borrower:
Governments
Other government agencies
Banks
Finance companies
Insurance companies
Non-financial companies
Other entities
TOTAL
EIF JEREMIE
Synthetic – First loss Portfolio Guarantee
UniCredit Tiriac Bank SA (“UniCredit Tiriac”)
European Investment Fund (“EIF”)
UniCredit Tiriac
UniCredit Tiriac
Capital Relief and Risk Transfer
Highly diversified and granular pool of UniCredit Tiriac’s SME loans
Performing
12 December 2011
36,335,458 €
–
First Loss Portfolio Guarantee issued by EIF
–
–
–
• The portfolio is into the ramp-up period until June 30, 2014
• The agreed portfolio maximum volume is equal to EUR 87,500,000
• The guarantee covers 80 % of each outstanding loan up to a total amount equal to 25 % of
the portfolio volume
No rating agency
n. a.
Senior
A
n. r.
21,801,275 €
21,801,275 €
n. a.
Junior
B
n. r.
7,267,092 €
7,267,092 €
–
36,335,458 €
–
–
–
36,335,458 €
–
–
–
–
–
36,335,458 €
–
36,335,458 €
Bank Austria · 2013 Annual Report 225
Consolidated Financial Statements in accordance with IFRSs
E – Risk report (CONTINUED)
Originator: HVB AG – UniCredit BA AG
NAME
Type of securitisation:
Originator:
Issuer:
Servicer:
Arranger:
Target transaction:
Type of asset:
Quality of asset:
Closing date:
Total nominal value of reference portfolio at closing
Guarantees issued by the Bank:
Guarantees issued by Third Parties:
Bank lines of credit:
Third Parties lines of credit:
Other credit enhancements:
Other relevant information:
Rating agencies:
Amount of CDS or other supersenior risk transferred:
Amount and Conditions of tranching:
Issuer
ISIN
Type of security
Class
Rating
Reference position at the end of accounting period
ISIN
Type of security
Class
Rating
Nominal value issued
Nominal value at the end of accounting period
Reference position at the end of accounting period
Issuer
ISIN
Type of security
Class
Rating
Nominal value issued
Nominal value at the end of accounting period
Reference position at the end of accounting period
Issuer
ISIN
Type of security
Class
Rating
Nominal value issued
Nominal value at the end of accounting period
ISIN
Type of security
Class
Rating
Nominal value issued
Nominal value at the end of accounting period
226 2013 Annual Report · Bank Austria
EuroConnect SME 2008
EuroConnect Issuer SME 2007
Synthetic
Bayerische Hypo- und Vereinsbank AG (68.1 %),
UniCredit Bank Austria AG (31.9 %)
EuroConnect SME 2008 Limited,
Bayerische Hypo- und Vereinsbank AG
UniCredit Bank Austria AG
Bayerische Hypo- und Vereinsbank AG
UniCredit Bank Austria AG
Bayerische Hypo- und Vereinsbank AG
(UniCredit Markets & Investment Banking)
Capital Relief / Funding and risk transfer for
concentration risks
Corporate SME Loans
Performing
30 September 2008
2,488,493,144 €
–
–
–
–
Synthetic Excess Spread + Reserve Ledger
Replenishing
S&P
–
Synthetic
Bayerische Hypo- und Vereinsbank AG (66.09 %) –
Bank Austria Creditanstalt AG (33.91 %)
EuroConnect Issuer SME 2007 Limited,
Bayerische Hypo- und Vereinsbank AG
Bank Austria Creditanstalt AG
Bayerische Hypo- und Vereinsbank AG
UniCredit Bank Austria AG
Bayerische Hypo- und Vereinsbank AG
(UniCredit Markets & Investment Banking)
Capital Relief / Funding and risk transfer for
concentration risks
Corporate SME loans
Performing
28 December 2007
3,089,092,363 €
–
–
–
–
Synthetic Excess Spread + Reserve Ledger
Replenishing
S & P/Fitch
–
Bayerische Hypo- und Vereinsbank AG
UniCredit Bank Austria AG
n. a.
Senior
A
n. r.
552,224,120 €
XS0388966102
XS0388966441
Mezzanine
Mezzanine
A2
B2
A–
A–
100,000 €
100,000 €
100,000 €
100,000 €
16,950,000 €
45,800,000 €
UniCredit Bank Austria AG
XS0388966524
XS0388966797
Mezzanine
Mezzanine
A2
B2
B+
CCC+
100,000 €
100,000 €
100,000 €
100,000 €
7,950,000 €
7,950,000 €
EuroConnect SME 2008 Limited
XS0388589128
XS0388589631
Mezzanine
Mezzanine
A
B
BBB+
BBB –
24,900,000 €
34,850,000 €
24,900,000 €
34,850,000 €
XS0388589714
XS0388590134
Mezzanine
Junior
C
D
B+
n. r./n. r.
24,900,000 €
97,100,000 €
24,900,000 €
97,100,000 €
Bayerische Hypo- und Vereinsbank AG
Bank Austria Creditanstalt AG
n. a.
Senior
A
n. r.
285,808,173 €
XS0337935968
XS0337936180
Mezzanine
Mezzanine
A2
B2
A–
A–
100,000 €
100,000 €
100,000 €
100,000 €
20,450,000 €
40,850,000 €
Bank Austria Creditanstalt AG
XS0337946221
XS0337946650
Mezzanine
Mezzanine
A2
B2
A–
BB+
100,000 €
100,000 €
100,000 €
100,000 €
10,500,000 €
20,950,000 €
EuroConnect Issuer SME 2007 Ltd.
XS0336039325
XS0336040331
Mezzanine
Mezzanine
A
B
A–
A –/ BB+
35,550,000 €
43,250,000 €
35,550,000 €
43,250,000 €
XS0336040505
XS0336041222
Mezzanine
Junior
C
D
BBB –/ B+
n. r./n. r.
37,100,000 €
100,400,000 €
37,100,000 €
97,690,418 €
E.7 – Operational risk
Operational risk (OpRisk) is defined as the risk of loss resulting from inadequate or failed internal processes, people and systems or from
­external events (including legal risks). For example, compensation paid to customers for incorrect/inadequate product-related advice, IT system
failures, damage to property, processing errors or fraud are subject to accurate and consolidated risk measurement and management (collection
of loss data, external data, scenarios, indicators), on which the calculation of capital to be held for operational risk is based.
Loss data are collected, and processes are optimised, in close coordination and cooperation with other departments and units including Internal
Audit, the Compliance Office, Legal Affairs and the insurance sector. Over the years, UniCredit Bank Austria AG has taken numerous measures in
the various divisions to manage and reduce operational risk. Thus data security measures, measures to ensure the confidentiality and integrity of
stored data, access authorisation systems, the two-signatures principle, and a large number of monitoring and control processes as well as staff
training programmes have been implemented among other measures.
In line with other types of risk, UniCredit Bank Austria AG – like UniCredit – has built up a decentralised operational risk management framework
based on representatives within divisions and at banking subsidiaries – Divisional OpRisk Managers (DORM) and OpRisk Managers – in addition
to central operational risk management. While the main task of central risk management is to define the methods used and to perform risk
measurement and analysis, decentralised risk managers are responsible for taking measures to reduce, prevent, or take out insurance against,
risks.
• Activities in 2013 concentrated on supporting the holding company in the revision of the current AMA model as well as on further developing operational risk management by monitoring operational risk limits; analysing UniCredit Bank Austria AG’s insurance portfolio in respect of the potential
mitigation of top risks within operational risk and finally proposing a Banker’s Blanket Bond (BBB) insurance for UniCredit Bank Austria AG; analysing, collecting and classifying operational risk events relating to credit risk, and reporting them at Bank Austria Operational & Reputational Risk
Committee meetings; developing a process for identifying operational risk-relevant projects and fostering the further integration of the Permanent Work Group (PWG) into the Operational Risk framework of UniCredit Bank Austria AG aiming at reducing potential future operational risk
through adequate mitigation actions. This was strongly supported by the implementation of the group operational risk strategy process, a
structural approach to analysing ongoing key business initiatives and transformation programmes that may have a material impact on the
Group operational and reputational risk exposures for material mitigation actions reducing operational key risks in cooperation with relevant
stakeholders. The Bank Austria Group OpRisk Strategy 2014 constitutes a working agenda for the UniCredit Bank Austria Permanent Work
Group.
• In CEE, the focus was on finalising the PWG rollout at all strategically relevant banking subsidiaries to identify and implement possible measures in respect of existing and potential operational risks on the basis of analyses of loss events, KRIs, scenarios, projects and new products.
­Moreover, operational risk management for CEE at Bank Austria focused on preparing the local operational risk framework at relevant units for
the regulatory review in accordance with the AMA rollout plan in cooperation with UniCredit Group as well as on supporting the preparations
for the AMA model validations in CEE countries.
Overall, the organisation of operational risk management at UniCredit Bank Austria AG is well established at a high level of quality. A network of
independent functions and teams are involved in managing and controlling risks, providing the Management Board with sufficient information on
the risk situation and enabling the Management Board to manage risk. The analysis of the general ledger for operational risk relevance confirmed the extensive and complete operational risk data collection.
Since 2008, the task of dealing with operational risk issues has been performed by a separate Operational Risk Committee (OpRiCo), whose
meetings are held on a quarterly basis and are attended by the Chief Risk Officer, the Head of Strategic Risk Management & Control, the Head of
UniCredit Operational Risk Management, Compliance, Internal Audit, the Divisional Operational Risk Managers and OpRisk representatives of CEE
banking subsidiaries. The Committee is a major step towards integrating operational risk in the bank’s processes; its main tasks are to report on
current operational risk issues and developments, to approve operational risk-relevant documents, to report losses and serve as a body to which
unresolved issues are referred. As from May 2012, the Committee’s responsibilities were extended to include strategic reputational risk issues
and monitoring, and the number of the Committee’s members was enlarged by including persons who are in charge of individual cases of reputational risk. Therefore the Committee was renamed “Operational & Reputational Risk Committee” (OpRRiCo).
In 2014 activities with regard to operational risk will focus on:
• intensifying and further expanding the Permanent Work Group with regard to actions to mitigate operational risk in UniCredit Bank Austria AG
and at strategically relevant CEE banking subsidiaries, taking into account the objectives and measures described in the global Operational
Risk Strategy for 2014;
• supporting the units in accordance with the AMA rollout plan in preparing and carrying out regulatory reviews in cooperation with UniCredit
Group;
• preparing and implementing a concept for integrating operational risks in the general budgeting process;
• analysing the collection and classification of operational risk events relating to credit risk.
Bank Austria · 2013 Annual Report 227
Consolidated Financial Statements in accordance with IFRSs
E – Risk report (CONTINUED)
E.8 – Reputational risk
Various controversial topics – including nuclear energy, armaments and weapons production, trading and maintenance, large-scale dam projects and
mining etc. – may present a partner bank involved in such transactions with reputational risks and lead to a negative perception of the bank by the
public.
UniCredit Group has identified reputational risk as the current or future risk of a decline in profits as a result of a negative perception of the Bank’s
image by customers, counterparties, shareholders, investors, employees or regulators.
At the beginning of 2012 Operational & Reputational Risk, a separate unit within the CRO management function, was entrusted with strategic management and monitoring of reputational risk.
Reputational Risk activities in 2013 focused mainly on the continuation of providing support to CEE legal entities in introducing and establishing
­structures, policies and training, on monitoring and reporting cases of reputational risk and trends with regard to relevant topics and on enhancing
the awareness of reputational risk management through training activities within UniCredit Bank Austria AG and CEE.
In 2014, activities with regard to reputational risk will focus on:
• implementing new reputational risk policies within UniCredit Bank Austria AG and rolling them out at CEE subsidiaries;
• continuing to support CEE legal entities in enhancing structures, implementing policies and training etc. for reputational risk;
• enriching monitoring and reporting cases of reputational risk and trends with regard to relevant topics;
• extending awareness of reputational risk management through further training activities within UniCredit Bank Austria AG and CEE.
E.9 – Business risk
Business risk is defined as unexpected adverse changes in business volume and/or margins which cannot be attributed to other types of risk. Adverse
changes result mainly from a significant deterioration in market conditions, changes in the competitive position or customer behaviour, and from
changes in the legal environment.
Business risk measurement thus measures the influence of external factors on a decline in profits and the effect on the market value.
As part of general income and cost management, operational management of business risk is the responsibility of the individual business units.
E.10 – Financial investment risk and real estate risk
In dealing with risks arising from the bank’s shareholdings and equity interests, Bank Austria takes into account potential market price fluctuations in
its equity holdings in listed and unlisted companies.
Not included are equity interests in consolidated subsidiaries of the Group because risks associated with such companies are determined and recorded
under the various other risk types. The portfolio includes various strategic investments; real estate holding companies are taken into account in real
estate risk.
Generally, Value at Risk is determined on the basis of market values and volatilities of the relevant equity interests. For shares in unlisted companies
the bank uses book values and volatilities of relevant stock exchange indices and takes account of residual variances.
Real estate risk measures the potential fluctuations in market value of bank-owned real estate on the basis of market prices and the volatility of related
rent indices.
Generally, the respective risk is determined by market risk Value-at-Risk and/or PD/LGD models considering the availability of appropriate indices and
the quality of market quotations.
228 2013 Annual Report · Bank Austria
E.11 – Legal risks
We generally do not make provisions to the extent it is not possible to reliably predict the outcome of proceedings or to quantify possible losses.
In cases where it is possible to estimate in a reliable manner the amount of the possible loss and such loss is deemed probable, we have made
provisions in amounts we deem appropriate in light of the particular circumstances and in accordance with applicable accounting principles.
In line with the above policy, provisions have been made in the amount of the estimated risk for the following pending legal proceedings:
The Madoff fraud
Several customers addressed enquiries and complaints against Bank Austria in connection with certain funds related to the fraudulent actions by
Mr. Bernard L. Madoff. The following proceedings are relevant:
Austrian criminal proceedings: UniCredit Bank Austria AG has been named as a defendant in criminal proceedings in Austria which concern the
Madoff case. These proceedings were initiated by a complaint filed by the FMA (the Austrian Financial Market Authority) to the Austrian prosecutor. Subsequently complaints were filed by purported investors in funds which were invested, either directly or indirectly, in Bernard L. Madoff
Investments Securities LLC and Bernard L. Madoff Securities LLC (collectively referred to as “BMIS”). These complaints allege, amongst other
things, that UniCredit Bank Austria AG breached provisions of the Austrian Investment Fund Act as prospectus controller of the Primeo Fund.
These criminal proceedings are still at the pre-trial stage. In addition, the fee structure and the prospectuses themselves have been examined by
an expert appointed by the prosecution.
Austrian civil proceedings: Numerous civil proceedings (with the claimed amount totaling about €150 million) have been initiated in Austria by
numerous investors related to Madoff’s fraud in which UniCredit Bank Austria AG, among others, has been named as defendant; different types of
claims are asserted, including prospectus liability claims. The plaintiffs invested in investment funds that, in turn, invested directly or indirectly
with BMIS. Several judgments have been issued in favour of UniCredit Bank Austria AG in various instances, some are already legally binding.
Other judgments have been handed down against UniCredit Bank Austria AG, but none of them is final so far as appeals are pending. With
respect to those cases currently on appeal no estimate can be made as to their potential outcomes nor the effects, if any, which the appeal decisions may have on other cases pending against UniCredit Bank Austria AG. In four recent Supreme Court cases, different senates of the Austrian
Supreme Court have held in favour of UniCredit Bank Austria AG and rejected claims based on various theories of liability and related to prospectus liability. At this stage, it is not possible to forecast what effect these decisions may have on other cases.
U.S. Securities Class Actions in the U.S.: UniCredit Bank Austria AG was named as one of many defendants in two putative class action suits
(the Primeo Action and the Herald Action) filed in the United States District Court for the Southern District of New York. An indirect subsidiary of
UniCredit Bank Austria AG has also been named in two putative class action suits filed in the United States District Court for the Southern District
of New York (the Herald Action and the Thema Action). In each of the suits, the class action plaintiffs claim to represent investors whose assets
were invested in BMIS, directly or indirectly.
Proposed amended complaints have been filed; one of which purports to include allegations that the defendants, including UniCredit Bank Austria
AG, violated the Racketeer Influenced and Corrupt Organizations Act (“RICO”) by allegedly participating in a plan to enrich themselves by feeding
investors’ money into Madoff’s Ponzi scheme and seeks treble damages under RICO, i. e., three times US$2 billion.
On 29 November 2011, the Court dismissed the actions as against UniCredit Bank Austria AG and its indirect subsidiary, among others, and
denied plaintiffs’ motion to amend the complaints. The plaintiffs in those actions have filed notices of appeal of that decision. In the Primeo
Action, the putative class action plaintiff agreed to stay its appeal and be bound by an affirmance of the dismissal of the Herald Action. On 16
September 2013, the United States Court of Appeals for the Second Circuit affirmed the judgment of the Court. The Plaintiffs in the Herald Action
and the Thema Action have filed a petition for panel rehearing and rehearing en banc of the Second Circuit’s affirmance. That petition remains
pending.
The United States Bankruptcy Court appointed Irving H. Picard as Trustee (the “SIPA Trustee”) for the liquidation of BMIS. In December 2010,
the SIPA Trustee filed two complaints in the United States Bankruptcy Court in the Southern District of New York against many defendants, including UniCredit Bank Austria AG and an indirect subsidiary of UniCredit Bank Austria AG, to recover amounts to be determined at trial.
Bank Austria · 2013 Annual Report 229
Consolidated Financial Statements in accordance with IFRSs
E – Risk report (CONTINUED)
One complaint (the “First Trustee Complaint”) seeks to recover so-called avoidable transfers to initial transferees of funds from BMIS, subsequent transfers of funds originating from BMIS (in the form of alleged management, performance, advisory, administrative and marketing fees,
among other such payments, said to exceed US$400 million in the aggregate for all defendants), and compensatory and punitive damages
against certain defendants alleged to be in excess of US$2 billion.
The other complaint (the “Second Trustee Complaint”) further alleges defendants violated RICO by allegedly participating in a plan to enrich
themselves by feeding investors’ money into Madoff’s Ponzi scheme. In this latter complaint, the SIPA Trustee seeks treble damages under RICO,
i. e. three times the reported net US$19.6 billion losses allegedly suffered by all BMIS investors.
On 28 July 2011, the Court granted the motion to dismiss the First Trustee Complaint with respect to the claims for aiding and abetting Madoff’s
fraud, breach of fiduciary duty, unjust enrichment and contribution. The Court’s decision did not address the claims to recover avoidable transfers,
which were returned to the Bankruptcy Court. The SIPA Trustee filed a notice of appeal of the decision. On 20 June 2013, the United States Court
of Appeals for the Second Circuit affirmed the judgment of the Court. On 9 October 2013, the SIPA Trustee filed a petition for writ of certiorari
to the United States Supreme Court seeking permission to appeal the Second Circuit’s affirmance. On 13 January 2014 the Supreme Court
invited the United States Solicitor General (“Solicitor General”) to express the opinion of the United States on whether review should be granted.
The Solicitor General has yet to express a view on the matter, and the SIPA Trustee’s petition remains under consideration.
On 21 February 2012, the Court granted the motion to dismiss the Second Trustee Complaint with respect to the RICO claims and the claims
for unjust enrichment, conversion and money had and received. The Court’s decision did not address the claims to recover avoidable transfers
which were returned to the Bankruptcy Court. On 21 March 2012, the SIPA Trustee filed a notice of appeal. By stipulation of the parties, on
5 April 2012, the SIPA Trustee withdrew his notice of appeal without prejudice. Pursuant to the terms of the stipulation, the SIPA Trustee had until
6 April 2013 to reinstate his appeal. By further stipulation of the parties, which stipulation was so ordered by the Second Circuit Court of Appeals
on 25 April 2013, the SIPA Trustee’s time to reinstate his appeal has been extended to 4 April 2014.
On 22 March 2012, UniCredit Bank Austria AG filed an application with respect to each of the First and Second Trustee Complaints requesting
that the District Court withdraw the reference from the Bankruptcy Court in respect of the Trustee’s avoidance and recovery claims. On
14 April 2012, the District Court granted UniCredit Bank Austria AG’s application to withdraw the reference.
Certain individuals who are or were affiliated with UniCredit Bank Austria AG and related entities who had been named as defendants in the First
Trustee Complaint and the Second Trustee Complaint, and who had not been previously served complaints in those actions, have now been
served. These individuals may have similar defenses to the claims as UniCredit Bank Austria AG and its affiliated entities, and may have rights to
indemnification from those parties.
All pending U.S. actions are still in their initial phases.
UniCredit Bank Austria AG intends to defend itself vigorously against the Madoff-related claims and charges. At present it is not possible to reliably estimate the timing and results of the various actions, nor determine the level of responsibility, if any responsibility exists. In addition to the
proceedings outlined above, additional actions arising out of Madoff’s activities have been threatened and may be filed in the future by private
investors or local authorities; in this context the question of whether these cases fall under the statute of limitations will have to be examined.
Pending or future actions may have negative consequences for UniCredit Bank Austria AG.
Disputes relating to foreign currency loans
In Central and Eastern Europe, in the last decade, a significant number of customers took out mortgages denominated in a foreign currency.
There is now a growing trend for customers – or consumer associations acting on their behalf – to seek to renegotiate the terms of such foreign
currency mortgages, including having the loan principal and associated interest payments re-denominated in the local currency with retroactive
effect to the time the loan was taken out, and floating rates retrospectively changed to fixed rates. This is resulting in litigation against subsidiaries of UniCredit in a number of countries including Croatia, Hungary and Serbia. Specifically in Croatia, a consumer association sued eight of the
largest banks in 2012 (including Zagrebačka banka) claiming that (a) for loans linked to Swiss francs, consumers had not been given adequate
information prior to taking out the loan and had not therefore been able to make a fully informed decision about the risks of such loans; and (b) a
variable interest rate was unlawful, as it was set on the basis of a unilateral decision of the relevant bank, without the factors affecting the setting
of the rate being clearly defined. On 4 July 2013 the court of first instance in Zagreb upheld the complaint of the consumer association in a decision which is as yet not binding. All eight banks have appealed. Were the judgment to be upheld in a court of final jurisdiction the banks would,
within 60 days of a court ruling, have to offer the customers amended terms, converting the outstanding principal amount to Croatian kuna (HRK)
at the CHF / HRK rate prevailing on the date the loan agreement was signed and substituting the variable interest rate for the fixed rate applicable
on the date the loan in question was drawn down. At this time, it is not possible to assess the timing of any final decisions, how successful any
such litigation may ultimately be or what financial impact it or any associated legislative or regulatory initiatives might ultimately have on the individual subsidiaries or the Group.
230 2013 Annual Report · Bank Austria
In line with the above policy, no provision has been made for the following pending legal proceedings. Due to the uncertain nature of litigation,
however, we cannot exclude that the following may result in losses to the bank:
• Action brought by the Belgian company Valauret S. A. in Paris on the grounds of alleged involvement of Creditanstalt AG (now
UniCredit Bank Austria AG) in wilful deception in connection with a French joint stock company as a result of which the plaintiffs incurred
losses through a loss in value of shares acquired by it in the joint stock company.
E.12 – Report on key features of the internal control and risk management
systems in relation to the financial reporting process
The Management Board is responsible for establishing and designing internal control and risk management systems which meet the company’s
requirements in relation to the financial reporting process. The purpose of this report is to provide an overview of how internal controls are
­organised in relation to the financial reporting process.
The objective of the internal control system is to assist management in assuring internal controls in relation to financial reporting which are
­effective and are improved on an ongoing basis. The system is geared to complying with rules and regulations and creating conditions which are
conducive to performing specific controls in key accounting processes.
Following the integration of the Bank Austria Group in UniCredit Group, the Italian Savings Law, Section 262 (process description for minimising
risk in preparing financial statements) in particular, must be complied with in addition to the existing internal control system.
Pursuant to the “262 Savings Law”, the CEO and the CFO delegated by UniCredit S. p. A. are liable, under civil and criminal law, for any violation
of the legal provisions. They are also responsible for every subsidiary within the group of consolidated companies which is covered by financial
reporting because the “262 Savings Law” deals with consolidated financial statements.
Internal Audit performs independent and regular reviews of compliance with internal rules also in the area of accounting. The Head of Internal
Audit reports directly to the Management Board and provides the Chairman of the Supervisory Board with quarterly reports.
Control environment
The basic aspect of the control environment is the corporate culture in which management and all employees operate.
UniCredit S. p. A., the parent company of UniCredit Bank Austria AG, works to maintain effective communication and convey the corporate values
defined in the Integrity Charter. The Integrity Charter embodies the UniCredit Group’s identity and is based on the following shared values: fairness, transparency, respect, reciprocity, freedom to act, and trust.
The implementation of the internal control system in relation to the financial reporting process is also set out in the internal rules and regulations:
All accounting entries are made within the guidelines established in the Accounting Policy, and release follows defined instruction and control
­criteria. For each general ledger account there is a responsible person who reconciles the general ledger accounts in accordance with existing
rules. This internal reconciliation process is interrogated by Financial Accounting and reviewed by Internal Audit.
Risk assessment
In the course of the “262 Savings Law” project, the persons having process responsibility identified risks in relation to the financial reporting
­process; these risks are monitored on an ongoing basis. The focus is on those risks which are typically considered to be material.
To meet the “262 Savings Law” requirements, controls pursuant to the methodology used by UniCredit S. p. A. are required to be performed at
least on a half-yearly basis (for full-year and half-year reporting).
Bank Austria · 2013 Annual Report 231
Consolidated Financial Statements in accordance with IFRSs
E – Risk report (CONTINUED)
Controls
All controls are applied in the current business process to ensure that potential errors or deviations in financial reporting are prevented or
detected and corrected. Controls range from a management review of results for the various periods to specific reconciliation of accounts and the
analysis of continuous accounting processes.
The levels of hierarchy are designed so that an activity and the control of that activity is not performed by the same person (four-eyes principle).
In the course of the preparation of financial reports, the general ledger accounts are reconciled with business and front-end systems.
IT security controls are a cornerstone of the internal control system. Defined IT controls are documented under “262 Savings Law” and audited
by external auditors pursuant to “International Standards for Assurance Engagements” (ISAE) No. 3402 and are audited by external auditors.
Information and communication
Management regularly updates rules and regulations for financial reporting and communicates them to all employees concerned.
Moreover, regular discussions on financial reporting and on the rules and regulations applicable in this context take place in various bodies and
are repeatedly communicated to UniCredit Bank Austria AG. Employees in Financial Accounting receive regular training in new methods of international financial reporting in order to identify risks of unintended misreporting at an early stage.
To perform monitoring and control functions with a view to proper financial accounting and reporting, extensive financial information is made
available at key levels of the bank. Relevant information is not only provided to the Supervisory Board and the Management Board, middle
­management levels also receive detailed reports.
Monitoring
As part of the implementation of the internal control system pursuant to the “262 Savings Law”, instruments were introduced to monitor the effectiveness of controls. In connection with the compulsory half-yearly certification process for the preparation of the management report, the persons
having process responsibility are required to carry out effectiveness tests to check the effectiveness of controls. It must be ascertained whether the
controls work according to their design and whether the persons who perform controls have the competence/authority and qualifications required to
perform the controls effectively.
All persons having process responsibility confirm by means of certification that their processes are adequately documented, risks have been
identified and controls have been evaluated with a view to deriving measures to minimise risk.
The results of these monitoring activities are contained in a management report which is based on the certifications provided to the respective
chief financial officer by all persons having process responsibility and issued on a half-yearly basis. The Chief Financial Officer of UniCredit Bank
Austria AG receives the certifications by the chief financial officers of the subsidiaries covered by the process in accordance with the group of
consolidated companies, and provides the Holding Company and the public with confirmation of the reliability and effectiveness of the internal
control system in the context of the financial statements for the first six months and the annual financial statements.
E.13 – Information on the squeeze-out pursuant to the Austrian Federal Act
on the Squeeze-out of Minority Shareholders (Gesellschafterausschlussgesetz) of the holders of bearer shares in UniCredit Bank Austria AG
The company’s Annual General Meeting on 3 May 2007 adopted a resolution concerning the planned squeeze-out. The legal actions for rescission and declaration of nullity brought against various resolutions adopted at the Annual General Meeting on 3 May 2007 were terminated in
spring 2008. The squeeze-out was entered in the Register of Firms on 21 May 2008. After that date, former minority shareholders initiated proceedings for a review of the cash compensation offered by UniCredit. An expert has been appointed in these proceedings to review the amount of
the cash compensation paid; the expert report is now available and essentially confirms the adequacy of the cash compensation paid in connection with the squeeze-out. A decision by the court of first instance in this case is not yet available.
232 2013 Annual Report · Bank Austria
E.14 – Financial derivatives
Derivatives shown in the following tables are classified as financial derivatives and credit derivatives, according to the underlying financial
­instrument. In these categories, a distinction is made between trading book and banking book and between different counterparties.
UniCredit Bank Austria AG’s business volume in derivatives focuses on interest rate contracts.
Over-the-counter transactions are individual agreements concerning volume, maturities and underlying instrument. In large-volume interbank
­trading, these agreements reflect international practice, while in customer business they are usually adjusted to specific needs. Exchange-traded
contracts are always standardised in respect of volume and maturity date.
Derivatives are mainly used by the bank itself for hedging market risk and credit spread risk arising from new issue activities. In customer business,
market participants include banks, securities houses, mutual funds, pension funds and corporate customers.
Trading in derivatives at Bank Austria is primarily related to the hedging of positions entered into vis-a-vis customers.
For the purposes of portfolio and risk management, contracts are valued at current prices using recognised and tested models. Market values show
the contract values as at the balance sheet date, positive market values indicate the potential default risk arising from the relevant activity.
For the purposes of portfolio management and risk limitation in the derivatives business with banks and customers, UniCredit Bank Austria AG
uses a Monte Carlo path simulation to estimate the potential future exposure at portfolio level for each counterparty. The calculations are based on
market volatility, correlations between specific risk factors, future cash flows and stress considerations. Netting agreements and collateral agreements are also taken into account for simulation purposes.
The simulation calculations are performed for all major types of transactions, e. g. forward foreign exchange transactions, commodity futures
­transactions, interest rate instruments, securities lending transactions and repurchase agreements, equity-related, commodity-related or inflationrelated instruments and credit derivatives. Other (exotic) products are taken into account with an add-on factor (depending on volatility and maturity).
The bank applies a confidence interval of 97.5 %.
In addition to determining the potential future exposure for the purpose of internal risk management, the path simulation also enables the bank to
calculate the mean exposure and the Basel 2-modified mean exposure as well as the effective term of the exposure for each counterparty. In this
way, counterparty risk can be taken into account in a Basel 2-compliant internal model for the calculation of capital requirements. In 2009, the bank
obtained approval from the Austrian regulatory authorities for the use of the relevant model.
Line utilisation for derivatives business is available online in WSS (“Wallstreet”), the central treasury system, on a largely Group-wide basis.
For smaller units not connected to the central system, separate lines are allocated and monitored. Group-wide compliance with lines approved
in the credit process is thus ensured at any time.
UniCredit Bank Austria AG additionally limits the credit risk arising from its derivatives business through strict use of master agreements, through
collateral agreements and break clauses. In combination with the very good average credit rating of our business partners in the derivatives business, management takes proper account of default risk.
Bank Austria · 2013 Annual Report 233
Consolidated Financial Statements in accordance with IFRSs
E – Risk report (CONTINUED)
Regulatory trading portfolio: end of period notional amounts
(€ million)
31 dec. 2013
Derivative instrument types / Underlyings
31 dec. 2012
Over the counter
Clearing House
Over the counter
Clearing House
58,269
12,523
45,374
373
–
–
882
714
–
150
–
18
28,094
3,032
12,639
12,423
–
–
308
30
87,583
522
–
221
–
301
–
8
–
–
–
8
–
42
–
–
–
42
–
–
–
572
68,249
16,100
49,092
3,052
–
5
1,061
837
28
172
–
24
27,676
4,206
12,567
10,904
–
–
557
16
97,559
118
–
5
–
113
–
–
–
–
–
–
–
70
–
–
–
70
–
–
–
188
Debt securities and interest rate indexes
Options
Swap
Forward
Futures
Others
Equity instruments and stock indexes
Options
Swap
Forward
Futures
Others
Gold and currencies
Options
Swap
Forward
Futures
Others
Commodities
Other underlyings
Total
Banking book: end of period notional amounts – Hedging derivatives
(€ million)
31 dec. 2013
Derivative instrument types /Underlyings
Debt securities and interest rate indexes
Options
Swap
Forward
Futures
Others
Equity instruments and stock indexes
Options
Swap
Forward
Futures
Others
Gold and currencies
Options
Swap
Forward
Futures
Others
Commodities
Other underlyings
Total
31 dec. 2012
Over the counter
Clearing House
Over the counter
Clearing House
114,622
3,569
111,053
–
–
–
–
–
–
–
–
–
29,294
–
27,784
1,510
–
–
–
–
143,916
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
110,998
4,022
106,924
51
–
–
–
–
–
–
–
–
31,350
–
28,797
2,552
–
–
–
–
142,348
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
For information on the presentation of hedging transactions see section A.5.3.3 Hedge accounting and sections B.5 and C.21.
234 2013 Annual Report · Bank Austria
Banking book: end-of-period notional amounts – Other derivatives
(€ million)
31 dec. 2013
Derivative instrument types/ Underlyings
31 dec. 2012
Over the counter
Clearing House
Over the counter
Clearing House
34
34
–
–
–
–
102
102
–
–
–
–
95
–
94
–
–
–
–
–
231
–
–
–
–
–
–
–
–
–
–
–
–
36
–
36
–
–
–
–
–
36
34
34
–
–
–
–
107
102
–
–
–
5
–
–
–
–
–
–
–
–
140
–
–
–
–
–
–
–
–
–
–
–
–
79
–
79
–
–
–
–
–
79
Debt securities and interest rate indexes
Options
Swap
Forward
Futures
Others
Equity instruments and stock indexes
Options
Swap
Forward
Futures
Others
Gold and currencies
Options
Swap
Forward
Futures
Others
Commodities
Other underlyings
Total
Financial derivatives – breakdown by product
(€ million)
31 dec. 2013
Transaction types/Underlyings
Regulatory trading portfolio
Options
Interest rate swaps
Cross currency swap
Equity swaps
Forward
Futures
Others
Banking book – Hedging derivatives
Options
Interest rate swaps
Cross currency swap
Equity swaps
Forward
Futures
Others
Banking book – Other derivatives
Options
Interest rate swaps
Cross currency swap
Equity swaps
Forward
Futures
Others
Total
31 dec. 2012
Positive fair value
Negative fair value
Positive fair value
Negative fair value
Over the
counter
Clearing
House
Over the
counter
Clearing
House
Over the
counter
Clearing
House
Over the
counter
Clearing
House
1,891
260
935
405
132
146
–
12
2,913
61
2,570
266
–
16
–
–
1
–
–
1
–
–
–
–
4,805
1
–
–
–
–
–
1
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
1
1,567
178
900
347
–
127
–
14
2,273
54
1,985
232
–
2
–
–
5
–
–
5
–
–
–
–
3,845
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
2
–
–
2
–
–
–
–
2
2,355
344
1,445
266
136
158
–
5
4,125
82
3,636
393
–
13
–
–
–
–
–
–
–
–
–
–
6,480
1
–
–
–
–
–
1
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
1
2,061
248
1,437
201
–
171
–
4
2,989
56
2,564
366
–
3
–
–
2
–
–
–
–
–
–
2
5,053
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
2
–
–
2
–
–
–
–
2
Bank Austria · 2013 Annual Report 235
Consolidated Financial Statements in accordance with IFRSs
E – Risk report (CONTINUED)
OTC financial derivatives – residual life: notional amounts
Underlying / residual maturity
Regulatory trading book
Financial derivative contracts on debt securities and interest rates
Financial derivative contracts on equity securities and stock indexes
Financial derivative contracts on exchange rates and gold
Financial derivative contracts on other values
Banking book
Financial derivative contracts on debt securities and interest rates
Financial derivative contracts on equity securities and stock indexes
Financial derivative contracts on exchange rates and gold
Financial derivative contracts on other values
Total 31 dec. 2013
Underlying / residual maturity
Regulatory trading book
Financial derivative contracts on debt securities and interest rates
Financial derivative contracts on equity securities and stock indexes
Financial derivative contracts on exchange rates and gold
Financial derivative contracts on other values
Banking book
Financial derivative contracts on debt securities and interest rates
Financial derivative contracts on equity securities and stock indexes
Financial derivative contracts on exchange rates and gold
Financial derivative contracts on other values
Total 31 dec. 2012
(€ million)
Up to 1 year
Over 1 year
up to 5 years
Over 5 years
Total
37,362
17,983
119
19,041
219
40,096
35,981
–
4,115
–
77,458
33,391
26,758
505
6,010
118
70,192
52,534
102
17,557
–
103,582
16,831
13,529
258
3,044
–
33,858
26,141
–
7,717
–
50,689
87,583
58,269
882
28,094
337
144,146
114,656
102
29,389
–
231,729
Up to 1 year
Over 1 year
up to 5 years
Over 5 years
Total
37,830
16,765
529
20,168
369
37,335
32,466
–
4,869
–
75,165
38,965
32,923
443
5,396
203
69,188
52,064
102
17,022
–
108,153
20,763
18,561
90
2,113
–
35,965
26,502
5
9,458
–
56,729
97,559
68,249
1,061
27,676
572
142,488
111,032
107
31,350
–
240,047
Credit derivatives – breakdown by product
(€ million)
31 dec. 2013
Portfolios / Derivative instrument types
Regulatory trading portfolio
Credit default products
Credit spread products
Total rate of return swap
Others
Banking book
Credit default products
Credit spread products
Total rate of return swaps
Others
Total
236 2013 Annual Report · Bank Austria
31 dec. 2012
Positive fair value
Negative fair value
Positive fair value
Negative fair value
4
2
2
–
–
–
–
–
–
–
4
20
19
1
–
–
–
–
–
–
–
20
6
2
4
–
–
–
–
–
–
–
6
70
68
2
–
–
–
–
–
–
–
70
Credit derivatives: end of period notional amounts
(€ million)
31 dec. 2013
Regulatory trading book
Transaction categories
Protection buyer’s contracts
Credit default products
Credit spread products
Total rate of return swaps
Other
Total
Protection seller’s contracts
Credit default products
Credit spread products
Total rate of return swaps
Other
Total
31 dec. 2012
Banking book
with a single
counterparty
with more
than one
counterparty
(basket)
13
–
–
–
13
746
13
–
–
759
Regulatory trading book
with a single
counterparty
with more
than one
counterparty
(basket)
5
–
–
–
5
–
–
–
–
–
5
–
–
–
5
–
–
–
–
–
Banking book
with a single
counterparty
with more
than one
counterparty
(basket)
with a single
counterparty
with more
than one
counterparty
(basket)
–
–
–
–
–
10
–
–
–
10
5
–
–
–
5
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
1,234
32
–
–
1,265
5
–
–
–
5
–
–
–
–
–
–
–
–
–
–
Credit derivatives – residual life: notional amount
Underlying /Residual maturity
Regulatory trading book:
Credit derivatives with qualified reference obligation
Credit derivatives with not qualified reference obligation
Banking book:
Credit derivatives with qualified reference obligation
Credit derivatives with not qualified reference obligation
Total 31 dec. 2013
Underlying /Residual maturity
Regulatory trading book:
Credit derivatives with qualified reference obligation
Credit derivatives with not qualified reference obligation
Banking book:
Credit derivatives with qualified reference obligation
Credit derivatives with not qualified reference obligation
Total 31 dec. 2012
(€ million)
Up to 1 year
Over 1 year
up to 5 years
Over 5 years
Total
109
–
109
–
–
–
109
568
13
555
–
–
–
568
105
–
105
–
–
–
105
782
13
769
–
–
–
782
Up to 1 year
Over 1 year
up to 5 years
Over 5 years
Total
527
29
498
–
–
–
527
403
3
400
–
–
–
403
357
–
357
–
–
–
357
1,286
32
1,255
–
–
–
1,286
Bank Austria · 2013 Annual Report 237
F – Additional disclosures
F.1 – Supervisory Board and Management Board
240
F.2 – Related party disclosures 240
F.2.1 – Information on members of the Management
Board, the Supervisory Board and the
Employees’ Council of UniCredit Bank Austria AG 240
F.2.2 – Related party disclosures
241
F.2.3 – Other information on related party relationships 242
F.3 – Share-based payments
242
F.4 – Employees
245
F.5 – Auditors’ fees
245
F.6 – Geographical distribution
245
F.7 – Effects of netting agreements on the statement
of financial position
246
F.8 – Assets pledged as security
246
F.9 – Transfer of financial assets
246
F.10 – Subordinated assets / liabilities
249
F.11 – Assets and liabilities in foreign currency
249
F.12 – Trust assets and trust liabilities
249
F.13 – Guarantees given and commitments
250
F.14 – Consolidated capital resources and regulatory
capital requirements
250
F.15 – Events after the reporting period
252
Bank Austria · 2013 Annual Report 239
Consolidated Financial Statements in accordance with IFRSs
F – Additional disclosures (CONTINUED)
F.1 – Supervisory Board and Management Board
The following persons were members of the Management Board of UniCredit Bank Austria AG in 2013:
Chairman and Chief Executive Officer: Willibald CERNKO
Deputy Chairman: Gianni Franco PAPA
Members: Helmut BERNKOPF, Francesco GIORDANO, Dieter HENGL, Jürgen KULLNIGG, Doris TOMANEK, Robert ZADRAZIL.
The following persons were members of the Supervisory Board of UniCredit Bank Austria AG in 2013:
Chairman: Erich HAMPEL
Deputy Chairman: Paolo FIORENTINO
Members: Alessandro DECIO (from 14 February 2013), Candido FOIS (until 15 January 2013), Olivier Nessime KHAYAT (from 16 May 2013),
Alfredo MEOCCI (from 14 February 2013), Jean Pierre MUSTIER (until 16 May 2013), Roberto NICASTRO, Vittorio OGLIENGO, Franz RAUCH,
Karl SAMSTAG, Wolfgang SPRISSLER, Ernst THEIMER, Wolfgang HEINZL, Adolf LEHNER, Johannes KOLLER (from 13 March 2013), Emmerich PERL,
Josef REICHL (until 12 March 2013), Robert TRAUNWIESER, Barbara WIEDERNIG
F.2 – Related party disclosures
Related party disclosures as at 31 December 2013
Loans and advances
Equity instruments
Other receivables
Total assets
Deposits
Other financial liabilities
Other liabilities
Total liabilities
(€ million)
Parent company
unconsolidated
subsidiaries
3,957
–
385
4,342
9,895
87,090
12
9,995
15,227
–
3,513
18,740
7,976
3,250
23
11,249
Associates
Non-consolidated
Joint ventures
Key Management
Personnel
Other related
parties
1,273
7
53
1,333
9,288
1
–
9,289
–
–
–
–
1
–
–
1
4
–
–
4
17
–
–
17
82
–
–
82
113
128
–
241
F.2.1 – Information on members of the Management Board, the Supervisory Board and
the Employees’ Council of UniCredit Bank Austria AG
F.2.1.1 – Emoluments of members of the Management Board and the Supervisory Board
The emoluments paid by UniCredit Bank Austria AG to Management Board members in the 2013 financial year (excluding payments into pension
funds) totalled € 2,945,603.17 (comparable emoluments in 2012 totalled €1,727 thousand). Of this total, €2,087,942.87 (2012: €1,483 thousand)
related to fixed salary components and € 857,660.30 were variable salary components (2012: €244 thousand). The changes resulted from one-off
effects in connection with Management Board changes and from cash deferrals from previous years pursuant to legal requirements. Moreover, a
provision was made for variable remuneration for 2012 (subject to clawback) in the amount of €1,557,000.00, which may be paid in subsequent
years pursuant to the same legal provisions governing compensation.
Several members of the Management Board receive their emoluments from companies which are not included in the group of consolidated companies
of Bank Austria; these emoluments granted to Management Board members for activities in UniCredit Bank Austria AG and in subsidiaries in the
2013 financial year amounted to € 2,757,040.69 (2012: € 2,656 thousand) and are partly (2013: €1,083,019.80; 2012: €1,384 thousand)
charged to UniCredit Bank Austria AG. These Management Board members also received emoluments for activities which are not connected with
the Bank Austria Group but are in the interest of UniCredit Group.
Payments to former members of the Management Board and their surviving dependants (excluding payments into pension funds) totalled
€8,772,856.20. (Of this total, € 5,228,490.58 was paid to former Management Board members of Creditanstalt AG, which merged with Bank Austria
in 2002, and their surviving dependants; € 1,546,578.13 was paid to former Management Board members of Österreichische Länderbank AG, which
merged with Zentralsparkasse in 1991, and their surviving dependants.) The comparative figure for 2012 was €8,311 thousand. Emoluments paid to
this group of persons for activities in subsidiaries amounted to € 14,885.09 (2012: €19 thousand).
The emoluments of the Supervisory Board members active in the 2013 business year totalled €330,443.08 (2012: €340 thousand) for
UniCredit Bank Austria AG, and € 2,020.00 (2012: € 2 thousand) for the two credit associations.
240 2013 Annual Report · Bank Austria
F.2.1.2 – Loans to members of the Management Board and of the Supervisory Board
Loans to members of the Management Board amounted to €1,779,386.54 (2012: €1,870 thsd), overdrafts granted to them were €47,671.48 (2012:
€ 76 thousand). Repayments during the business year totalled €54,815.63 (2012: €78 thousand).
Loans to members of the Supervisory Board amounted to €356,726.05 (2012: €233 thousand). Overdrafts granted to Supervisory Board members
totalled € 3,995.35 (2012: € 49 thousand). Repayments during the business year totalled €34,943.67 (2012: €25 thousand).
Loans to the Supervisory Board include those made to members of the Employees’ Council who are members of the Supervisory Board. The maturities of
the loans range from five to twenty-five years. The rate of interest payable on these loans is the rate charged to employees of UniCredit Bank Austria AG.
F.2.2 – Related party disclosures
In order to ensure full compliance with legislative and regulatory provisions currently in effect as regards disclosure of transactions with related parties,
UniCredit has adopted procedures for identifying related-party transactions designed to ensure that appropriate information is provided to enable
compliance with the obligations of the Directors of UniCredit, as a listed company and the parent company of the Group.
Transactions carried out within the Group and / or generally with Austrian and foreign related parties are executed as a rule on an arm’s length basis,
on the same terms and conditions as those applied to transactions entered into with independent third parties.
Intra-group transactions were carried out based on assessments of a mutual economic advantage, and the determination of applicable terms and
conditions took place in compliance with substantial correctness, keeping in mind the common goal of creating value for the entire Group. The same
principle was also applied to the provision of services, combined with the principle of charging for such services at minimal rate solely to recover
related production costs.
Pursuant to IAS 24, Bank Austria’s related parties include:
• companies belonging to UniCredit Group and companies controlled by UniCredit but not consolidated;
• associates and joint ventures;
• UniCredit’s “key management personnel”;
• close family members of key management personnel and companies controlled (or jointly controlled) by key management personnel or their close
family members;
• Group employee post-employment benefit plans.
Banking operations – outsourcing in 2013
Bank Austria has completed its consolidation programme for banking operations. Procurement functions as well as the operational security function
were transferred in 2012 to UniCredit Business Integrated Solution (UBIS), the Group-owned provider of banking operations services. HR-related
services, especially payroll services, were also outsourced to UBIS, which set up a joint venture with HP to manage those HR-related services.
Bank Austria’s subsidiary Domus FM, which provides services in the area of facility management, was sold to UBIS while maintaining the full service
scope rendered to Bank Austria.
Value Transformation Services (V-TServices), a new joint venture between UniCredit Business Integrated Solutions and IBM, started its activities on
1 September 2013. The main goal of the joint venture is to improve the ICT infrastructure and increase the performance and efficiency of the systems.
UBIS RTO (Retained Organisation) will continue to be responsible as a hub for coordination and control of the outsourced services.
Compensation agreement
In connection with the “Restated Bank of the Regions Agreement”, UniCredit S. p. A. and UniCredit Bank Austria AG signed a contract valid from
1 January 2010 to 31 March 2016 which may be terminated from 1 January 2015 and includes a commitment by UniCredit S. p. A. to pay 13.8% of
profit before tax of the CIB Division Markets segment in return for the commitment by UniCredit Bank Austria AG to pay 12M Euribor + 200bps
recorded annually on a notional value of € 1.28 billion.
Cooperation agreement
In the course of the integration of HVB (now UniCredit Bank AG) into the UniCredit group of companies, HVB has been assigned the role of centre
of competence for markets and investment banking for the entire corporate group. Among other things, HVB acts as counterparty for derivative
transactions conducted by UniCredit companies in this role. For the most part, this involves hedge derivatives that are externalised on the market via
HVB. UniCredit Bank Austria AG and UniCredit Bank AG signed a corresponding cooperation agreement for 10 years in 2010.
Restated Bank of the Regions Agreement (ReBoRA)
In the Restated Bank of the Regions Agreement, “AV-Z Stiftung” and “Betriebsratsfonds” have given an undertaking to UniCredit to the effect that if
they want to sell UniCredit Bank Austria shares, they will first offer such shares held by them to UniCredit. If UniCredit does not accept the offer, the
relevant contracting party could sell the UniCredit Bank Austria shares to a third party. In this case UniCredit has a right of preemption.
Bank Austria · 2013 Annual Report 241
Consolidated Financial Statements in accordance with IFRSs
F – Additional disclosures (CONTINUED)
For the duration of this agreement (10 years), “AV-Z Stiftung” has a right to nominate two members of the Supervisory Board of UniCredit Bank Austria AG,
and thereafter one member of the Supervisory Board for the duration of the guarantee issued by “AV-Z Stiftung” and the Municipality of Vienna.
As at 31 December 2013, UniCredit held a direct interest of 99.996 % in UniCredit Bank Austria AG.
As at 31 December 2013, there were the following interlocking relationships with UniCredit S. p. A.:
• Four members of the Supervisory Board of UniCredit Bank Austria AG were members of the Executive Management Committee of UniCredit.
Guarantee of Bank Austria for a portfolio of non-performing loans of Ukrsotsbank
The terms of the guarantee were set out in 2010 according to the rules of the National Bank of Ukraine; they are not at arm’s length from a ­
non-Ukrainian point of view. The main purpose of the guarantee transaction was to enable Ukrsotsbank to fulfil the statutory capital requirements.
On 27 December 2011, Ukrsotsbank and Bank Austria had signed a replacement of the guarantee, which expired at 10 January 2013. For the
replacement of this guarantee a significant part of the portfolio was transferred to UniCredit Bank Austria by means of a sub-participation agreement.
F.2.3 – Other information on related party relationships
Under Section 92 (9) of the Austrian Banking Act, “Privatstiftung zur Verwaltung von Anteilsrechten” (“AV-Z Stiftung”, a private foundation under
Austrian law) serves as deficiency guarantor for all liabilities of UniCredit Bank Austria AG in the event of the company’s insolvency. The board of
trustees of the private foundation has 14 members. These included four members of the Supervisory Board of UniCredit Bank Austria AG.
After the change in the legal form of Anteilsverwaltung Zentralsparkasse into a private foundation (“AV-Z Stiftung”) in 2001, the Municipality of
Vienna serves as deficiency guarantor for all outstanding liabilities, and obligations to pay future benefits, of UniCredit Bank Austria AG (then
Bank Austria Aktiengesellschaft) which were entered into prior to and including 31 December 2001.
The board of trustees of Immobilien Privatstiftung has three members. One of them is a member of the Supervisory Board of
UniCredit Bank Austria AG.
F.3 – Share-based payments
Description of payment agreements based on own equity instruments
Outstanding instruments
Group Medium & Long Term Incentive Plans for selected employees include Equity-Settled Share-Based Payments based on the shares of the
parent company UniCredit S. p. A:
• Stock Options allocated to selected Top & Senior Managers and Key Talents of the Group;
• Performance Stock Options & Performance Shares allocated to selected Top & Senior Managers and Key Talents of the Group and represented
respectively by options and free UniCredit ordinary shares that the Parent Company undertakes to grant, conditional upon achieving performance
targets approved by the Parent Company’s Board of Directors;
• Employee Share Ownership Plan (ESOP) that offers to eligible Group employees the possibility to buy UniCredit ordinary shares with the following
advantages: granting of free ordinary shares (“Discount Shares” and “Matching Shares” or, for the second category, rights to receive them) measured on the basis of the shares purchased by each Participant (“Investment Shares”) during the “Enrolment Period”. The granting of free ordinary
shares is subordinated to vesting conditions (other than market conditions) stated in the Plan Rules.
• Group Executive Incentive System that offers to eligible Group Executives a variable remuneration for which payment will be made within five years.
For the first two years the beneficiary will receive the payment by cash and for the next years they will receive the payment by UniCredit shares;
the payments are related to the achievement of performance conditions (other than marked conditions) stated in the Plan Rules.
• Share Plan for Talent that offers free UniCredit ordinary shares that the Parent Company undertakes to grant, conditional upon achieving
p­ erformance targets approved by the Parent Company’s Board of Directors
Measurement model
Stock Options and Performance Stock Options
The Hull and White Evaluation Model has been adopted to measure the economic value of Stock Options.
This model is based on a trinomial tree price distribution using the Boyle’s algorithm and estimates the early exercise probability on the basis of
a deterministic model connected to:
• reaching a Market Share Value equals to an exercise price-multiple (M);
• probability of beneficiaries’ early exit (E) after the end of the Vesting Period.
No new Stock Options Plans and Performance Stock Options were granted during 2013.
242 2013 Annual Report · Bank Austria
Other equity instruments – Performance Shares
The economic value of Performance Shares is measured considering the share market price at the grant date less the present value of the future
dividends during the performance period. Parameters are estimated by applying the same model used for Stock Options measurement.
No new Performance Shares Plans were granted during 2013.
Other equity instruments – Share Plan for Talent
The plan offers three “Free UniCredit Shares” instalments, having subsequent annual vesting, to selected beneficiaries.
The economic value of Performance Shares is measured considering the share market price at the grant date less the present value of the future
dividends during the performance period. Parameters are estimated by applying the same model used for Stock Options measurement.
No new Share Plans for Talent were granted during 2013.
Group Executive Incentive System
The amount of the incentive will be determined on a basis of the achievement of quantitative and qualitative goals stated by the plan. In particular,
the overall evaluation of the employee’s relevant manager shall be expressed as a percentage, from a minimum of 0% to a maximum of 150% (non
market vesting conditions).
This percentage, adjusted by the application of a risk / opportunity factor – Group Gate – at first payment, multiplied by the Bonus Opportunity will
determine the effective amount that will be paid to the beneficiary.
The economic and equity effects will be recognised on the basis of the instrument’s vesting period.
Group Executive Incentive System 2012 – Shares
The economic value of Performance Shares is measured considering the share market price at the grant date less the present value of the future
dividends during the vesting period.
Shares Granted Group Executive Incentive System 2012
Date of granting Board resolution (Grant Date)
Date of Board resolution
Vesting Period start-date
Vesting Period end-date
UniCredit Share market price [€]
Economic value of vesting conditions [€]
Performance Shares’ fair value per unit at the Grant Date [€]
1st Instalment (2015)
2nd Instalment (2016)
3rd Instalment (2017) *)
27 March 2012
11 April 2013
1 January 2012
31 December 2014
3.52
– 0.19
3.33
27 March 2012
11 April 2013
1 January 2012
31 December 2015
3.52
– 0.37
3.15
27 March 2012
11 April 2013
1 January 2012
31 December 2016
3.52
–0.63
2.89
*) refers only to Executive Vice President assignations
Group Executive Incentive System 2013
Variable incentive related to 2013 defined on the basis of:
• individual performance, as well as results at business level and, as relevant, at country and /or Group level
• definition of a balanced structure of upfront (following the moment of performance evaluation) and deferred payments, in cash and in shares
• distributions of share payments which take into account the applicable regulatory requirements regarding the application of share retention periods.
In particular, the payment structure has been defined in line with Bank of Italy provisions requiring a share retention period of 2 years for upfront
shares and of 1 year for deferred shares
• application of an overall risk/ sustainability factor, related to annual Group and/or concerning every single Business /Country profitability, solidity and
liquidity results (“Group Gate”) as well as a Zero Factor related to future Group and/or concerning every single Business/Country profitability, solidity
and liquidity results as approved by the Board of Directors of UniCredit S. p. A.
All profit-and-loss and net equity effects related to the plan will be booked during the vesting period
Bank Austria · 2013 Annual Report 243
Consolidated Financial Statements in accordance with IFRSs
F – Additional disclosures (CONTINUED)
Employee Share Ownership Plan (Let’s Share 2012)
The following tables show the measurements and parameters used in relation to Discount Shares and Matching Shares (or rights to receive them)
connected to the “Employee Share Ownership Plan” approved in 2012.
Measurement of Free Shares ESOP 2012
Date of Free Shares delivery to Group employees
Vesting Period start-date
Vesting Period end-date
Discount Shares’ fair value per unit [€]
Free Shares
1st Election Window
Free Shares
2nd Election Window
5 February 2013
31 January 2013
31 January 2014
4.35
5 August 2013
31 July 2013
31 July 2014
3.78
All profit-and-loss and net equity effects related to free shares had been booked during the vesting period (except adjustments, according to Plan
Rules, that will be booked during the next closing after vesting period);
The UniCredit free ordinary shares assigned in plan rules applications had been acquired on the market.
Other information
Let’s Share for 2014 (ex 2013) – Employee Share Ownership Plan for 2014
In May 2013 the Ordinary Shareholders’ Meeting approved the “UniCredit Group Employee Share Ownership Plan for 2014” (“Let’s Share for 2014”)
that offers to eligible Group employees the opportunity to purchase UniCredit ordinary shares at favourable conditions, starting from January 2014, in
order to reinforce employees’ sense of belonging and commitment to achieve the corporate goals.
Let’s Share for 2014 was launched on November 27, 2013 in 11 countries across the Group (Austria, Bulgaria, Czech Republic, Germany, Hungary,
Italy, Poland, Serbia, UK, Slovakia, and Luxemburg) with a participation rate of about 3.4% of the eligible employees.
Let’s Share for 2014 is a broad based share plan under which:
• during the “Enrolment Periods” (from January 2014 to December 2014) the Participants can buy UniCredit ordinary shares (“Investment Shares”)
by means of monthly or one-off contributions (via one instalment in January or July 2014) taken from their current account. In case, during this
Enrolment Period, a Participant leaves the Plan, he / she will lose the right to receive any free ordinary shares at the end of the Enrolment Period;
• at the first month of the Enrolment Period (January 2014 / July 2014), each Participant will receive a discount of 25% on the overall amount of
shares purchased; the Free Shares will be locked up for one year. The Participant will lose the entitlement to the Free Share if, during the holding
period, he / she will no longer be an employee of a UniCredit Group company unless the employment has been terminated for one of the specific
reasons stated in the Rules of the Plan. In some countries, for fiscal reasons, it will not be possible to grant the Free Shares at the beginning of the
Enrolment Period: in that case an alternative structure is offered that provides to the Participants of those countries the right to receive the Free
Shares at the end of the Holding Period (“Alternative Structure”);
• during the “Holding Period” (from January 2014 to January 2015 or from July 2014 to July 2015), the Participants can sell the Investment Shares
purchased at any moment, but they will lose the corresponding Free Shares (or right to receive them).
The Free Shares are qualified as “Equity Settled Share-based Payments” as Participants, according to Plan’s Rules, will receive UniCredit Equity
Instruments as consideration for the services rendered to the legal entity where they are employed. The fair value will be measured at the beginning of
Enrolment Period according to the price paid by Participants to acquire the first instalment of the Investment Shares on the market.
All profit-and-loss and net equity effects related to Let’s Share for 2014 will be booked during the holding period.
Let’s Share for 2014 did not have any effect on the 2013 consolidated financial statements.
Effects on profit and loss
All share-based payments granted after 7 November 2002 for which the vesting period ends after 1 January 2005 are included within the scope of
IFRS 2.
Payroll costs in 2013 included share-based payments of € 2 million.
244 2013 Annual Report · Bank Austria
F.4 – Employees
In 2013 and 2012, the Bank Austria Group employed the following average numbers of staff (full-time equivalents):
Employees
Salaried staff
Other employees
TOTAL*)
of which: in Austria
of which: abroad
2013
2012
55,377
66
55,443
7,306
48,137
57,708
75
57,783
7,496
50,287
*) Average full-time equivalents of staff employed in the Bank Austria Group (employees of companies accounted for under the proportionate consolidation method are included at
100%), excluding employees on unpaid sabbatical or maternity/paternity leave
F.5 – Auditors’ fees
(pursuant to Section 237 no. 14a and Section 266 no. 11 of the Austrian Business Code)
The following table shows the fees charged by the auditors of the consolidated financial statements for the 2013 financial year in the
following categories:
Auditors’ fees
(€ thsd)
Fees for the audit of the financial statements and the consolidated financial statements
Deloitte Austria (2012: KPMG Austria)
Austrian Savings Bank Auditing Association
Other services involving the issuance of a report
Deloitte Austria (2012: KPMG Austria)
Austrian Savings Bank Auditing Association
Tax consulting services
Deloitte Austria (2012: KPMG Austria)
Austrian Savings Bank Auditing Association
Other services
Deloitte Austria (2012: KPMG Austria)
Austrian Savings Bank Auditing Association
TOTAL
2013
2012
3,784
2,263
1,521
522
522
–
440
440
–
2,088
963
1,125
6,834
4,064
2,592
1,473
532
521
11
–
–
–
1,172
84
1,088
5,768
F.6 – Geographical distribution
Geographical distribution of total assets and operating income
(€ million)
31 Dec. 2013
Austria
Total European countries
Western Europe
Central and Eastern Europe
America
Asia
Total
31 Dec. 2012
Total assets
Operating income
Total assets
Operating income
97,394
98,649
673
97,976
54
113
196,210
1,873
4,903
13
4,891
2
12
6,791
100,418
103,464
738
102,726
72
3,642
207,596
1,768
5,005
13
4,992
–10
10
6,773
The geographic breakdown is based on the location of the subsidiary in which the transaction is recorded.
Bank Austria · 2013 Annual Report 245
Consolidated Financial Statements in accordance with IFRSs
F – Additional disclosures (CONTINUED)
F.7 – Effects of netting agreements on the statement of financial position
Assets and liabilities subject to accounting offsetting or under master netting agreements and similar ones
Assets
1) Derivatives
2) Repos
3) Securities lending
4) Others
Total 31 Dec. 2013
Liabilities
1) Derivatives
2) Repos
3) Securities lending
4) Others
Total 31 Dec. 2013
Gross amounts of
financial assets
Financial liabilities
offset in the
statement of
financial position
Net amounts presented
in the statement of
financial position values
of financial assets
3,081
–
–
–
3,081
–
–
–
–
–
2,842
–
–
–
2,842
–
–
–
–
–
(€ millon)
Related amounts not recognised in the
statement of financial position
Financial
instruments
Cash collateral
received
Net amounts
3,081
–
–
–
3,081
– 2,702
–
–
–
– 2,702
– 190
–
–
–
– 190
190
–
–
–
190
2,842
–
–
–
2,842
– 2,702
–
–
–
– 2,702
–
–
–
–
–
140
–
–
–
140
F.8 – Assets pledged as security
Assets used to guarantee own liabilities and commitments
Financial instruments held for trading
Financial instruments designated at fair value
Financial instruments available for sale
Financial instruments held to maturity
Loans and receivables with banks
Loans and receivables with customers
Property, plant and equipment
TOTAL
(€ million)
31 Dec. 2013
31 Dec. 2012
21
–
5,948
729
567
24,305
–
31,570
–
30
4,788
1,045
372
25,251
26
31,512
F.9 – Transfer of financial assets
In the ordinary course of business, the Group enters into transactions that result in the transfer of financial assets, primarily debt and equity securities
and loans and advances to customers. The transferred financial assets continue either to be recognised in their entirety, or are derecognised in their
entirety.
The Group transfers financial assets primarily through the following transactions:
• Sale and repurchase of securities
• Securities lending
• Securitisation activities in which loans and advances to customers or investment securities are transferred to special-purpose entities or to investors
in the notes issued by special-purpose entities. Every special-purpose entity is assessed in order to evaluate whether the majority of the risks and
rewards incident to the activities is attributable or not to the bank and its consolidation is therefore needed according to applicable IFRS (SIC 12).
Transferred financial assets that are not derecognised in their entirety
Sale and purchase agreements
Sale and purchase agreements are transactions in which the Group sells a financial asset and simultaneously agrees to repurchase it at a fixed date in
the future. The Group continues to recognise the financial asset in its entirety in the statement of financial position because it retains all the risks and
rewards of ownership. The cash consideration received is recognised as a financial asset and a financial liability is recognised for the obligation to pay
the repurchase price. Because the Group sells the contractual rights to the cash flows of the securities it does not have the ability to use the transferred assets during the term of the arrangement.
246 2013 Annual Report · Bank Austria
Under repurchase agreements, financial assets were sold to third parties with a commitment to repurchase the financial instruments at a price
specified when the assets were sold. The assets transferred are either securities held by the bank or borrowed from other parties. In those cases
where Bank Austria is the transferor, securities held by the bank continue to be recognised as assets in its statement of financial position. In those
cases where Bank Austria is the transferee, the bank does not recognise the assets in its statement of financial position.
Securities lending
Securities lending agreements are transactions in which the Group lends equity securities for a fee and receives cash as collateral. The Group
­continues to recognise the securities in their entirety in the statement of financial position because it retains substantially all the risks and rewards
of ownership.
The cash received is recognised as a financial asset and a financial liability is recognised for the obligation to repay this collateral. Because the
Group sells the contractual rights to the cash flows of the securities it does not have the ability to use the transferred assets during the term of the
arrangement.
Security borrowing transactions collateralized by other securities or without collateral
(€ million)
AMOUNTS AS AT 31 dec. 2013
AMOUNTS OF THE SECURITIES BORROWED/TRANSACTION PURPOSE
LENDER BREAKDOWN
GIVEN AS COLLATERAL IN
FUNDING TRANSACTIONS
SOLD
SOLD IN REPO
TRANSACTIONS
OTHER PURPOSES
294
–
–
–
–
294
31
–
–
–
–
31
26
–
–
–
–
26
33
–
–
–
–
33
Banks
Financials companies
Insurance companies
Non Financials companies
Others
Total
Sales transactions relating to financial liabilities with repayment
exclusively based on assets sold and not derecognised: fair value
(€ million)
31 dec. 2013
Financial assets
held for trading
Type / Portfolios
Balance-sheet assets
Debt securities
Equity securities
UCIS
Loans
Derivatives
Associated financial liabilities
Deposits from customers
Deposits from banks
Debt securities in issue
TOTAL 31 dec. 2013
TOTAL 31 dec. 2012
Available-for-sale
financial assets
Held-to-maturity
investments
A
B
A
B
A
B
TOTAL
31 dec. 2013
TOTAL
31 dec. 2012
78
78
–
–
–
–
76
–
76
–
2
–1
–
–
–
–
–
–
–
–
–
–
–
–
2,330
2,330
–
–
–
X
2,243
788
1,455
–
86
– 35
–
–
–
–
–
X
–
–
–
–
–
1
461
461
X
X
–
X
461
461
–
–
–
1
–
–
X
X
–
X
–
–
–
–
–
–
2,868
2,868
–
–
–
–
2,780
1,249
1,531
–
88
X
3,214
3,214
–
–
–
–
3,248
1,719
1,529
–
X
–34
A= Financial assets sold and fully recognised
B= Financial assets sold and partially recognised
The carrying amounts are equal to the fair values.
Bank Austria · 2013 Annual Report 247
Consolidated Financial Statements in accordance with IFRSs
F – Additional disclosures (CONTINUED)
Securitisations
The Group sells loans and advances to customers and investment securities to special-purpose entities (SPEs) that in turn issue notes to investors that
are collateralised by the purchased assets. If the Group sells assets to a consolidated SPE then the transfer is in the form of the Group assuming an
obligation to pass cash flows from the underlying assets to investors in the notes. Derecognition of the transferred assets is prohibited because either
the cash flows that it collects from the transferred assets on behalf of the investors are not passed through to them without material delay or the
majority of risks and rewards of such assets has not been substantially transferred. In these cases, the consideration received from the investors in the
notes in the form of cash is recognised as a financial asset and a corresponding financial liability is recognised. The investors of the notes have
recourse only to the cash flows of the transferred financial assets.
Exposures deriving from the securitisation of own assets
(€ million)
Balance sheet exposure as at
31 dec. 2013
Balance sheet exposure as at
31 dec. 2012
Gross exposure
(nominal amount)
Net exposure
Gross exposure
(nominal amount)
Net exposure
–
2
371
374
–
2
370
372
–
3
564
566
–
3
558
561
Assets sold and totally derecognised
Assets sold but not derecognised
Synthetic transactions
Total
Exposures deriving from the securitisation of own assets broken down by subordination degree
amounts as at 31 dec. 2013
Balance sheet exposure
Assets sold and totally derecognised
Assets sold but not derecognised
Synthetic transactions
(€ million)
amounts as at 31 dec. 2012
Senior
Mezzanine
Junior
Total
Senior
Mezzanine
Junior
Total
280
–
2
277
92
–
–
92
–
–
–
–
372
–
2
370
472
–
3
470
88
–
–
88
–
–
–
–
561
–
3
558
Securitisation exposures: breakdown by quality of underlying assets
(€ million)
AmountS at 31 dec. 2013
on balance-sheet
SENIOR
Quality of the underlying assets/exposures
With own underlying assets:
Impaired
Other
With third-party underlying assets:
Impaired
Other
Gross
Exposure
1,552
–
1,552
682
6
676
MEZZANINE
Net Exposure
Gross
Exposure
280
–
280
546
6
540
82
–
82
226
–
226
JUNIOR
Net Exposure
Gross
Exposure
Net Exposure
92
–
92
224
–
224
–
–
–
–
–
–
–
–
–
–
–
–
AmountS at 31 dec. 2012
on balance-sheet
SENIOR
Quality of the underlying assets/exposures
With own underlying assets:
Impaired
Other
With third-party underlying assets:
Impaired
Other
248 2013 Annual Report · Bank Austria
Gross
Exposure
1,537
–
1,537
1,076
8
1,068
MEZZANINE
Net Exposure
Gross
Exposure
472
–
472
891
6
885
82
–
82
145
–
145
JUNIOR
Net Exposure
Gross
Exposure
Net Exposure
88
–
88
148
–
148
–
–
–
–
–
–
–
–
–
–
–
–
Transferred financial assets that are derecognised in their entirety
Securitisations
When the Group transfers substantially all the risks and rewards of ownership of financial assets to an unconsolidated SPE and retains a relatively
small interest in the SPE or a servicing arrangement in respect of the transferred financial assets, the transferred assets are derecognised in their
entirety. If the financial assets are derecognised in their entirety, then the interest received as part of the transfer and the servicing arrangement
­represent continuing involvement with those assets according to IFRS 7.
F.10 – Subordinated assets/liabilities
(€ million)
Available-for-sale financial assets
Loans and receivables with banks
Loans and receivables with customers
Subordinated assets
Deposits from banks
Deposits from customers
Debt securities in issue
Subordinated liabilities
31 Dec. 2013
31 Dec. 2012
77
610
287
974
15
85
3,310
3,410
77
816
295
1,189
154
96
3,773
4,023
F.11 – Assets and liabilities in foreign currency
(€ million)
31 Dec. 2013
USD
JPY
CHF
Other
TOTAL
31 Dec. 2012
Assets
Liabilities
Assets
Liabilities
27,149
19
13,096
59,241
99,505
22,532
203
1,481
44,870
69,086
26,420
775
14,860
59,882
101,937
23,105
286
1,819
48,366
73,576
F.12 – Trust assets and trust liabilities
Loans and receivables with banks
Loans and receivables with customers
Equity securities and other variable-yield securities
Debt securities
Other assets
Trust assets
Deposits from banks
Deposits from customers
Debt securities in issue
Other liabilities
Trust liabilities
(€ million)
31 Dec. 2013
31 Dec. 2012
–
543
7,749
15,894
692
24,877
8,890
15,872
–
115
24,877
6
528
6,441
9,603
965
17,543
4,862
12,581
–
99
17,543
Bank Austria · 2013 Annual Report 249
Consolidated Financial Statements in accordance with IFRSs
F – Additional disclosures (CONTINUED)
F.13 – Guarantees given and commitments
Financial guarantees given to:
Banks
Customers
Commercial guarantees given to:
Banks
Customers
Other irrevocable commitments to disburse funds
Banks
Usage certain
Usage uncertain
Customers
Usage certain
Usage uncertain
Underlying obligations for credit derivatives: sales of protection
Assets used to guarantee others’ obligations
Other commitments
Total
(€ million)
31 Dec. 2013
31 Dec. 2012
4,534
502
4,032
16,433
1,610
14,824
15,597
1,162
1,112
50
14,435
5,366
9,069
–
–
4,922
41,487
5,549
743
4,807
15,524
1,174
14,350
15,718
152
103
49
15,566
6,248
9,318
–
238
2,936
39,965
F.14 – Consolidated capital resources and regulatory capital requirements
Capital management
Bank Austria, as part of UniCredit Group, places a high priority on capital management and capital allocation. The Bank’s capital management strategy
is characterised by a strong commitment to maintaining a sound capital base; the strategy is based on a risk-oriented and earnings-oriented allocation
of capital to achieve the highest possible shareholder value.
From 2013 Bank Austria’s internal capital is set at a level that will cover adverse events with a probability of 99.93% (confidence interval).
At the same time regulatory capital ratio targets (Core Tier 1) are set so as to be consistent with regulatory expectations and the Risk Appetite
Framework defined by the bank.
Capital management activities form a major part of the Group’s planning and budgeting process as well as within ICAAP/Pillar 2 processes.
Bank Austria is regularly monitoring capital evolution and regulatory trends at country level and at Group level.
Capital management activities comprise:
• planning and budgeting processes:
– proposals as to risk propensity, development and capitalisation objectives
– analysis of RWA development and changes in the regulatory framework
– proposals for the financial plan and an appropriate dividend policy
• monitoring processes
– analysis and monitoring of limits for Pillar 1 and Pillar 2
– analysis and monitoring of the capital ratios of the Bank Austria Group as well as at single entity level
Capital is managed dynamically which means that Bank Austria prepares the financial plan, monitors capital ratios for regulatory purposes on an
ongoing basis and anticipates the appropriate steps required to achieve the goals set.
250 2013 Annual Report · Bank Austria
Capital requirements
The capital requirements pursuant to Section 22 of the Austrian Banking Act comprise requirements resulting from credit risk, all types of risk in the
trading book, commodities risk and foreign-exchange risk outside the trading book and from operational risk.
Regulatory developments – Basel 3/CRD IV, CRR
The final Capital Requirements Regulation (CRR) and the Capital Requirements Directive (CRD IV) for the implementation of Basel 3 in the European
Union were published in the EU Official Journal on 27 June 2013. The new legal framework replaces Capital Requirements Directives 2006/48/EC
and 2006 / 49 / EC and came into force in Austria on 1 January 2014.
After the framework is fully implemented, Basel 3 will consist of stricter requirements for regulatory capital with a minimum of Common Equity Tier 1
Capital of 4.5% of RWA, Total Tier 1 Capital of 6 % and Total Capital of 8%. In addition, all banks will be required to hold a capital conservation buffer
consisting of Common Equity Tier 1 Capital of 2.5 % on top of the new minimum requirements. This will lead to an effective total requirement of 7%
Common Equity Tier 1 Capital, 8.5 % Tier 1 Capital and 10.5% Total Capital.
Furthermore, Member States can set an additional buffer requirement to dampen excess lending growth (counter-cyclical buffer up to 2.5%).
In addition, systemic risk buffers (up to 3% in 2014, as from 2015 without limitation) and capital surcharges for systemically important banks
(0 – 3.5 %) can be set by the authorities. Where an authority imposes the systemic risk buffer and the systemic bank surcharge is applicable,
the higher of the two should apply.
With the steady improvement in its capital ratios in 2013, Bank Austria has a strong capital base to meet the new capital adequacy requirements
(Basel 3).
As part of the Joint Risk Assessment and Decision (“JRAD”) process, the bank-specific minimum total capital ratio is currently being discussed.
The JRAD process has not yet been completed.
Bank Austria · 2013 Annual Report 251
Consolidated Financial Statements in accordance with IFRSs
F – Additional disclosures (CONTINUED)
Net capital resources of the Bank Austria group of credit institutions
(€ million)
31 dec. 2013
31 Dec. 2012
1,681
13,243
– 419
– 787
13,718
2,510
239
–
– 678
2,071
–
15,789
169
15,958
1,681
13,709
– 509
– 804
14,078
2,494
308
–
– 752
2,050
–137
15,991
204
16,194
31 dec. 2013
31 Dec. 2012
4,598
3,690
8,288
1,024
169
–
9,481
118,510
5,397
3,793
9,190
1,012
204
–
10,405
130,067
31 dec. 2013
31 Dec. 2012
11.6 %
13.5 %
13.2 %
14.3 %
10.8%
12.5%
12.3%
13.0%
Paid-in capital (less own shares)
Reserves and minority interests
Intangible assets
Deductions from Tier 1 capital (in particular 50 % deduction pursuant to Section 23 (13) 3 to 4d of the Austrian Banking Act) Core capital (Tier 1)
Net subordinated liabilities
Revaluation reserves and undisclosed reserves
IRB excess in risk provision
Deductions from Tier 2 (50% deduction pursuant to Section 23 (13) 3 to 4d) Supplementary capital resources (Tier 2)
Deductions from Tier 1 and Tier 2 (deduction pursuant to Section 23 (13) 4a) Net capital resources (excl. Tier 3)
Tier 3 (re-assigned subordinated capital)
NET CAPITAL RESOURCES (INCL. TIER 3)
Capital requirements of the Bank Austria group of credit institutions
(€ million)
Capital requirements of
a) Credit risk pursuant to standardised approach
b) Credit risk pursuant to internal ratings-based (IRB) approach
Credit risk
Operational risk
Position risk – debt instruments, equities, foreign currencies and commodities
Settlement risk
CAPITAL REQUIREMENT
Total RWA
Capital ratios
Tier 1 capital ratio, based on all risks
Total capital ratio, based on all risks 1)
Tier 1 capital ratio, based on credit risk
Total capital ratio, based on credit risk 2)
1) Net capital resources (incl. Tier 3) as a percentage of the risk-weighted assessment basis for all risks
2) Total capital resources less requirement for trading book, commodities risk, exchange rate risk and operational risk as a percentage of the risk-weighted assessment basis for
credit risk
F.15 – Events after the reporting period
On 23 January 2014 the Mariahilfer Straße 70 property in Vienna (formerly owned by the subsidiary RIGEL Immobilien GmbH) was sold.
On 19 February 2014, UniCredit Bank Austria AG sold its stake in Mezzanin Finanzierungs AG as well as the premises of its headquarters in
Schottengasse 6 – 8, Vienna.
All circumstances had already been classified as held for sale in the statement of financial position at 31 December 2013.
Furthermore, in the course of the restructuring of the leasing business, two Russian subsidiaries of UniCredit Leasing S. p. A. were taken over by
ZAO UniCredit Bank, Moscow, on 13 February 2014.
The political crisis in Ukraine came to a head in February 2014, leading to political upheaval which has recently assumed geopolitical dimensions in
the region. The crisis in Ukraine is currently the major risk factor for CEE. A further escalation could also lead to disturbances in Ukraine’s neighbouring
countries, especially if the already high political and economic risks continue to increase. However, as economic trends in large neighbouring countries
have stabilised, repercussions should remain limited.
252 2013 Annual Report · Bank Austria
Concluding Remarks of the Management Board
of UniCredit Bank Austria AG
The Management Board of UniCredit Bank Austria AG has prepared
the consolidated financial statements for the financial year beginning on 1 January 2013 and ending on 31 December 2013 in
accordance with International Financial Reporting Standards (IFRSs)
published by the International Accounting Standards Board as
adopted by the European Union. The management report of the
Group was prepared in accordance with the Austrian Business Code
and is consistent with the consolidated financial statements.
The consolidated financial statements and the management
report of the Group contain all required disclosures; in particular,
events of special significance which occurred after the end of the
financial year, and other major circumstances that are significant
for the future development of the Group have been appropriately
explained.
Vienna, 5 March 2014
The Management Board
Helmut Bernkopf
Commercial Banking Division
(Retail & Corporates)
Gianni Franco Papa
CEE Banking Division
(Deputy CEO)
Willibald Cernko
CEO Support Services
(Chief Executive Officer)
Jürgen Kullnigg
CRO Risk Management
Francesco Giordano
CFO Finance
Dieter Hengl
Corporate & Investment
Banking Division
Doris Tomanek
Human Resources Austria & CEE
Robert Zadrazil
Private Banking Division
Bank Austria · 2013 Annual Report 255
Consolidated Financial Statements in accordance with IFRSs
Report of the Auditors
Auditors’ report *)
Report on the
consolidated financial statements
The Auditing Board of the Austrian Savings Bank Auditing Association
and Deloitte Audit Wirtschaftsprüfungs GmbH have audited the
accompanying consolidated financial statements of UniCredit
Bank Austria AG, Vienna, for the financial year from 1 January 2013
to 31 December 2013. These consolidated financial statements
­comprise the statement of financial position at 31 December 2013,
the statement of comprehensive income, the statement of cash flows
and the statement of changes in equity for the year ended
31 December 2013, and the notes to the consolidated financial
statements.
Management’s responsibility for the
consolidated financial statements and
for the consolidated accounting
UniCredit Bank Austria AG’s management is responsible for the consolidated accounting as well as the preparation and fair presentation
of these consolidated financial statements in accordance with International Financial Reporting Standards as adopted by the EU and in
accordance with the additional requirements of Section 59a of the
Austrian Banking Act. This responsibility includes: designing, implementing and maintaining internal control relevant to the preparation
and fair presentation of financial statements that are free from
­material misstatement, whether due to fraud or error; selecting and
applying appropriate accounting policies; and making accounting
estimates that are reasonable in the circumstances.
Auditors’ responsibility and description of
the type and scope of the statutory audit
and principles governing an audit of financial statements which are
applicable in Austria and in accordance with International Standards on Auditing (ISAs), issued by the International Auditing and
Assurance Standards Board (IAASB) of the International Federation
of Accountants (IFAC). Those standards require that we comply
with ethical requirements and plan and perform the audit to obtain
reasonable assurance whether the financial statements are free
from material misstatement.
An audit involves performing procedures to obtain audit evidence
about the amounts and disclosures in the consolidated financial
statements. The procedures selected depend on the auditor’s
judgment, including the assessment of the risks of material
­misstatement of the financial statements, whether due to fraud or
error. In making those risk assessments, the auditor considers
internal control relevant to the entity’s preparation and fair presentation of the consolidated financial statements in order to design
audit procedures that are appropriate in the circumstances, but
not for the purpose of expressing an opinion on the effectiveness
of the entity’s internal control. An audit also includes evaluating
the appropriateness of accounting policies used and the
­reasonableness of accounting estimates made by management,
as well as evaluating the overall presentation of the consolidated
financial statements.
We believe that the audit evidence we have obtained is sufficient
and appropriate to provide a basis for our audit opinion.
Opinion
Our audit did not give rise to any objections. Based on the results
of our audit in our opinion, the consolidated financial statements
present fairly, in all material respects, the financial position of the
group as of 31 December 2013, and its financial performance and
its cash flows for the financial year from 1 January 2013 to
31 December 2013 in accordance with International Financial
Reporting Standards (IFRSs) as adopted by the EU.
The responsibility of the Austrian Savings Bank Auditing Association
and of Deloitte Audit Wirtschaftsprüfungs GmbH is to express an
opinion on these consolidated financial statements based on our
audit. We conducted our audit in accordance with laws, regulations
This report has been translated from German to English for referencing purposes only. Please refer to the official legally binding version as written and signed in German. Only the German
version is definitive.
256 2013 Annual Report · Bank Austria
Statement on the consolidated
management report
Laws and regulations require us to perform audit procedures to
determine whether the consolidated management report is consistent
with the consolidated financial statements and whether the other
­disclosures made in the consolidated management report are not
misleading to the group’s position. The audit report must also include
a statement as to whether the consolidated management report is
consistent with the consolidated financial statements and if the
­disclosures pursuant to section 243a of the Austrian Business Code
are appropriate.
In our opinion, the consolidated management report for the group is
consistent with the consolidated financial statements. The disclosures
pursuant to section 243a Austrian Business Code are appropriate.
Consolidated financial statements for 2013
UniCredit Bank Austria AG, Vienna
Vienna, 5 March 2014
Austrian Savings Bank Auditing Association
Auditing Board
Gerhard Margetich
Christian Spitzer
Certified Accountant
Auditor
Deloitte Audit Wirtschaftsprüfungs GmbH
Peter Bitzyk
Gottfried Spitzer
Certified Accountant
Certified Accountant
*) The report (in the German language, or translations into another language, including shortened or amended versions) may not be made public or used by third parties, when reference is made
in part or in whole to the auditors’ report, without the express written consent of the auditors.
This report has been translated from German to English for referencing purposes only. Please refer to the official legally binding version as written and signed in German. Only the German
version is definitive.
Bank Austria · 2013 Annual Report 257
Consolidated Financial Statements in accordance with IFRSs
Report of the Supervisory Board for 2013
Cooperation between the Supervisory Board and the Management
Board was good and effective in the 2013 financial year. In this
­context, the Supervisory Board performed its duties as defined by
law and in the Articles of Association and the rules of procedure,
with due regard to the Austrian Code of Corporate Governance.
The Supervisory Board held five meetings and passed six resolutions
by written circular vote. For the efficient performance of its duties,
the Supervisory Board created five committees from among its
­members; four of these are permanent committees and one is for
a current project. The Supervisory Board was directly involved in
decisions on issues which are of fundamental importance to the
bank, and it passed resolutions on matters within its competence
after in-depth analyses. In addition to periodic meetings, the Chairman of the Management Board and the Chairman of the Supervisory
Board discussed major issues and current business developments in
regular talks.
Focus of the Supervisory Board’s activity
In the reporting period, the Management Board regularly provided
information to the Supervisory Board, in writing and orally and in
a timely and comprehensive manner, on business policy, financial
developments, results, and on risk management, liquidity management and capital management. The Supervisory Board in this way
performed its advisory and supervisory functions. Besides regularly
concerning itself with the financial position and results, the Super­
visory Board conducted intense, ongoing discussions on reports
relating to Internal Audit activities and the EuroSIG project and the
relevant findings of Internal Audit, and on findings and measures
in connection with the review of credit risk performed by Oesterreichische Nationalbank, Austria’s central bank, pursuant to Section 70
of the Austrian Banking Act. The Supervisory Board gave special
attention to the GOLD project and the related new approach adopted
by the Commercial Banking Division, Corporate & Investment Banking
Division, Private Banking Division and CEO Support Services, and in
this connection it gave approval for adjustments to the distribution of
responsibilities of Management Board members.
In order to comply with legal requirements in connection with
Basel III, the rules of procedure were adjusted as of 1 January 2014
for the Supervisory Board, the Strategy and Nominations Committee,
the Credit/Risk Committee, the Remuneration Committee and the
Management Board. In this context the Supervisory Board members
were informed of the new Governance rules for members of a supervisory board. In addition, the Fit & Proper Policy – comprising minimum requirement rules for members of the Supervisory Board – was
approved.
258 2013 Annual Report · Bank Austria
While completing a separate training programme on the prevention
of money laundering activities, the Supervisory Board deepened its
knowledge in this area and focused on the anti-corruption report.
The Supervisory Board issued an updated statement of compliance
with the Austrian Code of Corporate Governance. The self-evaluation by the Supervisory Board was an issue discussed at three
meetings, with an efficiency test on the basis of a detailed questionnaire carried out for 2012 and approved for 2013. To the extent
that the results of the self-evaluation in 2012 indicated a need for
changes, they were taken into account for the Supervisory Board’s
future activities.
In regard to companies in which the bank has an equity interest,
there were a number of developments in the 2013 financial year.
These included the return of the banking licence of AS “UniCredit
Bank”, Latvia, and the acquisition of SIA “UniCredit Leasing” under
the leasing reorganisation project; the acquisition of shares in
­UniCredit Bulbank AD; the capital increase at FactorBank Aktien­
gesellschaft; the increase in the capital facility of UniCredit TurnAround Management GmbH; and the acquisition of a company for
property development and property held in connection with the
planned relocation of the bank’s headquarters. Further developments were the sale of EK Mittelstandsfinanzierungs AG, the
­conclusion of a joint venture with RCI and Nissan for car finance
in Russia, and the merger of the UniCredit banks in the Czech
Republic and Slovakia.
Besides giving attention to all measures relating to the separate
financial statements and the consolidated financial statements and
the audit reports, the Supervisory Board took decisions in respect
of the Bank Austria Group’s funding plan and the ceiling applicable
for 2013, and its extension, as well as the appointment of persons
authorised to represent and act on behalf of the bank. The subject
of a number of reports were the performance of the company
­“Special Assets Holding for Repossession of Assets and Equities”,
the status of the Ramius exposures and the closing of the sale of
JSC ATF Bank, Kazakhstan. Finally, the activities of the Supervisory
Board also included giving advance approval to loans to members
of the Supervisory Board and of the Management Board as well as
other related parties as defined in Section 28 of the Austrian Banking Act, and discussing the details of major legal issues.
The Supervisory Board was constantly provided with information,
through written and oral presentations, on the main issues dealt
with by the Supervisory Board Committees and on the result of
their meetings.
Committee activities
The Credit/Risk Committee held five meetings and passed three
resolutions by written circular vote. All loans approved under the
Management Board’s approval authority were brought to the
Credit/Risk Committee’s notice and the Committee passed resolutions on loan applications requiring its approval. Close attention
was paid to the presentation of credit risk, market risk, liquidity
risk and reputation risk as part of periodic reporting with regard to
Austria and CEE. These were supplemented by details of the credit
portfolio structure and risk policy principles, as well as of operational risk and ICAAP.
Besides capital management and regulatory capital requirements,
extensive discussions in 2013 focused on risk strategy, risk appetite, funding and liquidity management.
The Committee, on an ongoing basis, dealt with portfolio reports
classified by industry and region, risk reports on significant specific
exposures, the risk situation in Turkey and, on specific occasions,
with large exposures pursuant to Section 27 of the Austrian Banking Act, the recovery and resolution plan, and the changes made
by the Basel Committee with regard to the calculation of the
liquidity coverage ratio.
The Audit Committee held four meetings, which were also regularly
attended by representatives of the auditors. The Committee closely
discussed the separate financial statements and the consolidated
financial statements as well as the audit reports, including the
report on the effectiveness of risk management, and provided the
Supervisory Board with information on these topics. The management letter of the auditors and the status report on measures
taken in this connection were subject to detailed analysis. The
Audit Committee also dealt with the proposal concerning the
­election of the auditors for the 2014 financial year, and with the
engagement letter of the auditors. The activities of the Audit Committee also focused on the final EuroSIG report and accompanying
findings of Internal Audit, on the risk management report and the
complaint management report. In addition, the Audit Committee
examined the Corporate Governance Report for 2012, the external
Corporate Governance Report on the evaluation of compliance with
the provisions of the Austrian Code of Corporate Governance in the
2012 financial year, and the Governance Rule Book reports. Internal Audit documented the effectiveness of the internal control and
audit systems in its report for 2012 and subsequent quarterly
reports, and presented the Internal Audit Bank Austria Group 2013
audit plan for approval. Besides the 2012 annual report, extensive
compliance-related information focused on quarterly reports on the
results of compliance assessment mapping, status information on
anti-money laundering activities, compliance in securities business,
regulatory issues and the 2013 Compliance Activities Plan. Activities
of the Audit Committee also included the monitoring of the financial
reporting process with due regard to the “262 Savings Law” together
with the relevant considerations for quality assurance measures.
The Strategy and Nominations Committee held one meeting in
which it dealt with the extension of the terms of Management Board
members.
The Remuneration Committee held one meeting and passed one resolution by written circular vote. Its discussions focused on the 2013
Group Remuneration Policy and on general information regarding the
implementation of CRD III and the resolutions required in this context.
The Committee charged with the sale of the Schottengasse building
passed one resolution by written circular vote and formalised the sale
of the building housing the bank’s headquarters by way of the sale of
an equity interest.
Supervisory Board and
Management Board changes
Alessandro Decio and Alfredo Meocci were elected to the Supervisory
Board at the Extraordinary General Meeting on 14 February 2013
­following the resignation of Karl Guha on 31 December 2012 and
of Candido Fois with effect from 15 January 2013. Alessandro Decio
was elected Chairman of the Credit/Risk Committee and member
of the Audit Committee at the Supervisory Board meeting on
11 March 2013.
All previously elected members of the Supervisory Board with the
exception of Jean Pierre Mustier were re-elected to the Supervisory
Board for the maximum term permitted by the Articles of Association
at the Annual General Meeting on 16 May 2013. Olivier Nessime
Khayat was elected to the Supervisory Board for the first time and,
by written circular vote of the Supervisory Board, to member of
the Audit Committee with effect from 3 June 2013; he replaced
­Roberto Nicastro. With the same resolution Erich Hampel was
appointed Chairman of the Remuneration Committee and
Paolo Fiorentino Deputy Chairman, and Roberto Nicastro was
appointed member of the same committee.
Bank Austria · 2013 Annual Report 259
Consolidated Financial Statements in accordance with IFRSs
Report of the Supervisory Board for 2013 (CONTINUED)
Josef Reichl left the Supervisory Board with effect from 12 March 2013
and was replaced by Johannes Koller with effect from 13 March 2013
in accordance with the decision taken by the Employees’ Council.
The Supervisory Board thanks the members who have left the Board
for their valuable contribution to its activities.
Helmut Bernkopf commenced his functions as member of the
­Management Board on 1 January 2013.
The term of Gianni Franco Papa, Deputy Chairman of the Management
Board, as a member of the Management Board was extended until
21 January 2017, and the term of Francesco Giordano as a member
of the Management Board was extended until 31 January 2017.
Details of the composition of the Supervisory Board and the Super­
visory Board Committees and of the Management Board in the past
financial year are given in the “Supervisory Board and Management
Board of UniCredit Bank Austria AG” section of the Annual Report.
Audit of the separate financial statements
and consolidated financial statements
The accounting records, the 2013 separate financial statements and
the management report were audited by the Auditing Board of the
Austrian Savings Bank Auditing Association and by Deloitte Audit
Wirtschaftsprüfungs GmbH. As the audit did not give rise to any
objections and the legal requirements were fully complied with, the
auditors’ report was expressed without qualification.
The Supervisory Board endorsed the findings of the audit, agreed with
the separate financial statements and management report, including
the proposal for the appropriation of profits, presented by the Management Board, and approved the 2013 separate financial statements, which were thereby adopted pursuant to Section 96 (4) of the
Austrian Joint Stock Companies Act.
The compliance review of the Corporate Governance Report pursuant
to Section 243b of the Austrian Business Code was performed by
Univ. Prof. DDr. Waldemar Jud Corporate Governance Forschung
CGF GmbH and has not given rise to any major objections in its final
findings.
260 2013 Annual Report · Bank Austria
The 2013 consolidated financial statements were audited by the
Auditing Board of the Austrian Savings Bank Auditing Association
and by Deloitte Audit Wirtschaftsprüfungs GmbH for consistency
with International Financial Reporting Standards (IFRSs) published
by the International Accounting Standards Board as adopted by the
European Union, and the management report of the Group was
audited for consistency with the Austrian Business Code. The audit
did not give rise to any objections and the legal requirements were
fully complied with. In the opinion of the auditors, the consolidated
financial statements give a true and fair view of the financial position of the Group as at 31 December 2013, and of the results of
the Group’s operations and its cash flows for the financial year
beginning on 1 January 2013 and ending on 31 December 2013,
in accordance with International Financial Reporting Standards
(IFRSs) as adopted by the European Union.
The auditors certified that the management report of the Group was
consistent with the consolidated financial statements, and that the
legal requirements for exemption from the obligation to prepare
also separate consolidated financial statements pursuant to Austrian law were met, and they expressed their unqualified opinion.
The Supervisory Board has endorsed the findings of the audit.
A word of thanks
The Supervisory Board expresses its thanks and appreciation to the
Management Board, the Employees’ Council, management and
employees in Austria and all other countries for their work in 2013.
With their strong dedication they contributed to a continuation of
the bank’s positive development in a challenging environment.
Vienna, 10 March 2014
The Supervisory Board
Erich Hampel
Chairman of the Supervisory Board
Resolve
Anytime, anywhere.
“On her way back from holiday, one of my
customers had a problem with her car, forcing
her to call for assistance.
The problem was serious, and the daily limit
on her debit card did not permit our customer
and her husband to pay for the repairs.
She called me on the verge of panic, and I
went straight to work to solve the problem
as quickly as possible. They were able to pay
their bill and set off again with peace of mind.
When they got home, I received a phone call
from my customer to thank me and let me
know that after their positive experience
with UniCredit, her husband was becoming
a customer.”
Silvia Rieder – Commercial Bank
Pressbaum Branch – UniCredit Bank Austria
Corporate Governance
Corporate Governance Report for the 2013
financial year of UniCredit Bank Austria AG 264
Statement by Management 271
Supervisory Board and Management Board
of UniCredit Bank Austria AG 272
Bank Austria · 2013 Annual Report 263
Corporate Governance
Corporate Governance Report
for the 2013 financial year of UniCredit Bank Austria AG
Preface:
The Austrian Code of Corporate Governance (ACCG) is the standard
for good corporate management and corporate control in the Austrian
capital market.
After enactment of the Austrian Statute Amending Business Law
[Unternehmensrechtsänderungsgesetz] the ACCG was given even
more importance, as listed joint-stock companies [Aktiengesellschaften] have been put under a statutory obligation to prepare a Corporate Governance Report.
The Code itself primarily applies to listed Austrian joint-stock companies. The Preamble to the ACCG recommends that also joint-stock
companies that are not listed on a stock exchange follow the rules of
this Code to the extent that they are applicable to them.
UniCredit Bank Austria AG is an Austrian joint-stock company having
its registered office in Vienna; since 21 May 2008 its shares have
not been listed on the stock exchange anymore. In line with the recommendation contained in the Preamble to the ACCG UniCredit Bank
Austria AG will continue to orient itself by the rules of the ACCG as
amended from time to time, which can be found on the website of
the Austrian Working Group on Corporate Governance at www.corporate-governance.at.
This Corporate Governance Report of UniCredit Bank Austria AG for
the 2013 financial year was prepared by using the Opinion on Corporate Governance Reports published by the Austrian Financial Reporting and Auditing Committee according to Section 243b of the Austrian Business Code [Unternehmensgesetzbuch/UGB] and Annex 2 of
the Austrian Code of Corporate Governance 2012 pursuant to the
compliance statement.
Data as at 31 December 2013.
A.UniCredit Bank Austria AG departed from
the following C-Rules of the ACCG (July
2012) in the 2012 business year (Explain):
The company applies the Austrian Code of Corporate Governance as
amended from time to time. Deviations exist with respect to the following C-Rules (comply or explain):
 Rules 4 to 5 – Publication requirements with regard to the shareholders’ meeting: since its delisting from the stock exchange the
company is a closely held corporation. Invitations and documents are
sent directly to the shareholders. It is intended to simplify the holding
of shareholders’ meetings.
 Rules 29, 31 and 60 – Publication of the emoluments of the
management board regarding each member: due to the closely held
structure the emoluments are not published.
 Rule 45 – Non-competition clause supervisory board: Members of
the supervisory board of UniCredit Bank Austria AG can assume
functions on the supervisory boards of competing companies if the
company holds a stake in the competitor.
 Rule 51 – Publication of the emoluments of the supervisory board
regarding each member: due to the closely held structure the emoluments are not published.
 Rule 52a – Limitation of the number of supervisory board members to ten members: due to an agreement between our majority
shareholder and the holders of registered shares our supervisory
board will continue to consist of eleven members who are elected by
the shareholders’ meeting.
 Rule 66 – Preparation of quarterly financial statements in accordance with IAS 34: UniCredit Bank Austria AG is not required to prepare quarterly financial statements as at 31 March and 30 September in accordance with IAS 34. However, with a view to maintaining a
high level of transparency in the market, UniCredit Bank Austria AG
will continue to publish condensed interim reports as at the above
dates. The income statement and the statement of financial position
contained in the condensed interim reports are prepared in accordance with International Financial Reporting Standards (IFRS) complemented by explanatory information.
 Rule 74 – Publication of the financial calendar at least two
months before the start of the new business year: The necessary coordination with the parent company (UniCredit S.p.A) may result in
UniCredit Bank Austria AG not being able to publish the financial calendar at least two months before the start of the new business year.
Disclaimer: The English translation of UniCredit Bank Austria AG’s Corporate Governance Report serves information purposes only. The exclusively binding version shall be the German text.
264 2013 Annual Report · Bank Austria
B. Additional information according to Section
243b of the Austrian Business Code (“UGB”):
1. Information regarding the Management
Board and its working procedures:
Supervisory board mandates:
The Management Board’s working procedures:
The Management Board has sole responsibility for managing the company in the best interests of the company. The Management Board
runs the business on the basis of the duties and rights conferred by
law, the Articles of Association and the internal rules of procedure. The
Management Board meets every week and reports regularly to the
Supervisory Board.
Supervisory board mandates or comparable functions of Management The Management Board’s distribution of responsibilities:
Board members in other Austrian and foreign companies which are not For the distribution of responsibilities within the Management Board
included in the consolidated financial statements (C-Rule 16):
see page 272.
Willibald Cernko:
UniCredit Leasing (Austria) GmbH, Chairman Supervisory Board
UniCredit Business Integrated Solutions Austria GmbH,
Chairman Supervisory Board
UniCredit Business Integrated Solutions SCpA,
Member Board of Directors
CEESEG AG, Chairman Supervisory Board
Notartreuhandbank AG, Deputy Chairman Supervisory Board
Wiener Börse AG, Chairman Supervisory Board
Gianni Franco Papa:
–
Helmut Bernkopf:
BWA Beteiligungs- und Verwaltungs-Aktiengesellschaft,
Member Supervisory Board
CA Immobilien Anlagen Aktiengesellschaft,
Deputy Chairman Supervisory Board
Oesterreichische Kontrollbank Aktiengesellschaft,
Member Supervisory Board
Bausparkasse Wüstenrot Aktiengesellschaft,
Member Supervisory Board
Lenzing Aktiengesellschaft, Member Supervisory Board
Francesco Giordano:
–
Dieter Hengl:
Oesterreichische Kontrollbank AG, Member Supervisory Board
Wien Mitte Immobilien GmbH, Chairman Supervisory Board
Jürgen Kullnigg:
–
Doris Tomanek:
UniCredit Business Integrated Solutions Austria GmbH,
Member Supervisory Board
Bank Pekao SA, Member Supervisory Board
For further information on the Management Board see page 272.
2. Information regarding the Supervisory
Board and its working procedures:
Supervisory Board mandates:
Further supervisory board mandates or similar functions of Supervisory
Board members in Austrian or foreign listed companies (C-Rule 58):
Erich Hampel:
Österreichische Post Aktiengesellschaft, Member Supervisory Board
Zagrebačka banka dd, Chairman Supervisory Board
Paolo Fiorentino:
AS Roma, Member Board of Directors
Pirelli & C. SpA, Member Board of Directors
Alessandro Decio:
Mediobanca SpA, Member Board of Directors
Borsa Italiana SpA, Member Board of Directors
Bank Pekao SA, Member Supervisory Board
Roberto Nicastro:
Bank Pekao SA, Deputy Chairman Supervisory Board
Franz Rauch:
Austria Email Aktiengesellschaft, Deputy Chairman Supervisory Board
Karl Samstag:
Allgemeine Baugesellschaft-A. Porr Aktiengesellschaft,
Member Supervisory Board
Bank für Tirol und Vorarlberg Aktiengesellschaft,
Member Supervisory Board
BKS Bank AG, Member Supervisory Board
Oberbank AG, Member Supervisory Board
Schoeller-Bleckmann Oilfield Equipment Aktiengesellschaft,
Member Supervisory Board
For further information on the Supervisory Board see page 272.
Robert Zadrazil:
Oesterreichische Kontrollbank AG, Member Supervisory Board
Bank Austria · 2013 Annual Report 265
Corporate Governance
Corporate Governance Report (CONTINUED)
In the 2013 business year none of the members of the Supervisory
Board failed to personally attend more than half of the meetings of the
Supervisory Board.
Information on criteria for the independence of members
of the Supervisory Board:
A member of the Supervisory Board shall be deemed independent if
said member does not have any business or personal relations with
the company or its management board that constitute a material conflict of interests and are therefore suited to influence the behaviour of
the member.
Additional criteria for the independence of members of the Supervisory Board are laid down on the basis of the guidelines for the
assessment of independence contained in Annex 1 to the ACCG:
 A member of the Supervisory Board shall not have served as a
member of the Management Board or as a management-level staff
member of the Company or one of its subsidiaries in the past five
years.
 A member of the Supervisory Board shall not maintain or have
maintained in the past year any business relations with the Company
or one of its subsidiaries to an extent of significance for said member
of the Supervisory Board. This shall also apply to business relations
with companies in which said member of the Supervisory Board has a
considerable economic interest, but not for exercising functions in the
bodies of the group. The approval of individual transactions by the
Supervisory Board pursuant to L Rule 48 of the ACCG does not automatically mean that the person is qualified as not independent.
 A member of the Supervisory Board shall not have acted as an
auditor of the Company or have owned a share in the auditing company or have worked there as an employee in the past three years.
 A member of the Supervisory Board shall not be a member of the
management board of another company in which a member of the
Management Board of the Company is a member of the supervisory
board.
 A member of the Supervisory Board may not remain on the Supervisory Board for more than 15 years. This shall not apply to members
of the Supervisory Board who are shareholders with a direct investment or who represent the interests of such a shareholder.
 A member of the Supervisory Board shall not be a closely related
family member (direct offspring, spouses, life partners, parents,
uncles, aunts, brothers, sisters, nieces, nephews) of a member of the
Management Board or of persons who hold one of the aforementioned
positions.
Of the elected members of the Supervisory Board, Erich Hampel, a
former Chairman of the Management Board of UniCredit Bank Austria
AG, does not meet the independence criteria.
Information as to which members of the Supervisory
Board fulfil the criteria in C-Rule 54:
C-Rule 54 is not applicable for lack of free float.
266 2013 Annual Report · Bank Austria
Number and kind of the Supervisory Board’s committees:
The Supervisory Board establishes the following permanent
four committees:
Credit-/Risk Committee
Audit Committee
Remuneration Committee
Strategic & Nomination Committee
Additional in the 2013 business year: Committee charged with the sale
of the Schottengasse building
Number of meetings held by the Supervisory Board,
reports on its operation and its activities:
In 2013 the Supervisory Board held five meetings, in which it performed its duties as defined by the law and in the Articles of Association with due regard to the ACCG. In six cases, resolutions of the
Supervisory Board were passed by written circular vote.
The Supervisory Board advises and supervises the bank’s Management Board on an ongoing basis. In this context the Management
Board regularly provided information to the Supervisory Board, in writing and orally, on all major developments and business transactions on
a timely basis and in a comprehensive manner. The Supervisory Board
was involved in all competence-relevant issues and made its decisions,
where required, after thorough deliberation and examination. The
Supervisory Board gives further information about its activities in its
report to the General Meeting.
Number of meetings held by the Committees of the
Supervisory Board, their decision-making power and
report on their activities:
The Credit-/Risk Committee of the Supervisory Board is responsible for
approving loans above a specified amount and for overseeing the company’s risk position. As part of its responsibility for overseeing risk
management, the Credit-/Risk Committee discusses the structure of
the loan portfolio and principles of risk policy, and reports to the
Supervisory Board. The Credit-/Risk Committee is authorised to decide
on urgent business cases.
The Credit-/Risk Committee dealt with large exposures pursuant to
Section 27 of the Austrian Banking Act and especially loans requiring
its approval. The Credit-/Risk Committee of the Supervisory Board held
five meetings and passed three resolutions by written circular vote.
The Audit Committee is responsible for the audit and the preparation of
the adoption of the financial statements and consolidated financial
statements, the proposal for the appropriation of profits and the management report (of the Group) and for matters related to the auditors.
Since 2008 the Audit Committee has performed additional tasks,
namely monitoring the financial reporting process, the effectiveness of
the internal control system, the internal audit system and the risk management system of the company as well as monitoring the audit of
financial statements and the audit of consolidated financial statements.
The Audit Committee audits the Corporate Governance Report and
deals with the management letter and the report on the effectiveness
of risk management. The Audit Committee held four meetings.
The Strategic & Nomination Committee prepares, if required, basic
decisions for the Supervisory Board, in cooperation with the Management Board and, if required, using the services of experts. The Strategic & Nomination Committee also submits proposals to the Supervisory Board for appointments to the Management Board when positions become vacant and it deals with issues of successor planning.
The Strategic & Nomination Committee held one meeting.
The Remuneration Committee held one meeting and passed one resolution by written circular vote. The Remuneration Committee focused on
all matters relating to the relationship between the company and Management Board members, especially on matters relating to the compensation of Management Board members and on the contents of employment contracts with Management Board members. Since November
2011 the Remuneration Committee has been vested with new tasks
due to the implementation of the Capital Requirements Directive (CRD
III) in the Austrian Banking Act. Amongst those new tasks the Remuneration Committee monitors the remuneration policy, remuneration practices and remuneration-related incentive schemes of the company and
adopts the general principles of remuneration policy, and reviews them
on a regular basis, and is responsible for their implementation. The
Remuneration Committee adopted the Group Compensation Policy. In
compliance with Rule 43 ACCG the chairman of the Remuneration
Committee is the chairman of the Supervisory Board.
The Committee charged with the sale of the Schottengasse building
passed one resolution by written circular vote and formalised the sale
of the building housing the bank’s headquarters by way of the sale of
an equity interest.
3. Disclosure of information regarding the
remuneration of Management Board and
Supervisory Board members (C-Rules
27, 27a, 28, 30, 31, 43 and 51 as well as
R-Rule 28a):
Remuneration of the Management Board:
The Supervisory Board has set up a Remuneration Committee pursuant to Section 39c of the Austrian Banking Act. Among other tasks,
the Remuneration Committee reviews the remuneration of all members of the Management Board in relation to their tasks and performance. Therefore the Remuneration Committee assesses the tasks of
each member of the Management Board, the situation of the company
and standard market remuneration. Long-term remuneration incentives shall provide a basis for the company’s sustainable development.
The remuneration contains fixed and variable components. As in
previous years, the remuneration of Management Board members
is divided into fixed and performance-linked components in accordance with Rule 30 of the Austrian Code of Corporate Governance
and published in the notes to the consolidated financial statements
of UniCredit Bank Austria AG. The variable remuneration components are linked, above all, to sustainable, long-term and multiyear performance criteria; they include non-financial criteria and do
not entice persons to take unreasonable risks.
Measurable performance criteria are set for the variable remuneration components: The performance-related component is linked to
an “operational matrix” and a “sustainability matrix” which are individually specified on an annual basis within the framework of UniCredit Group. Evaluated are Group, company and individual performance in both absolute and relative terms in relation to a peer
group and sustainability factors (e.g. customer satisfaction). The
financial target range is determined by external benchmarks. The
performance-linked components paid depend on the degree to
which targets are met and on the performance of UniCredit Group.
UniCredit Group has a Group Incentive Compensation System
which fulfils the regulatory requirements and has been implemented in UniCredit Bank Austria AG since 1 January 2011. The
remuneration mix is set systematically and monitored against the
market. Variable remuneration is capped with a maximum limit exante according to incentive schemes. Precautions are taken to
ensure that the company can reclaim variable remuneration components if it becomes clear that these were paid out on the basis
of obviously false data.
In compliance with CRD III and the Austrian Banking Act, variable
remuneration is paid on a deferred basis. Reference is made to the
fact that the payout of the respective deferred variable remuneration depends on UniCredit Group’s performance (in case of a negative result).
Contracts concluded with Management Board members (new contracts or renewals) provide that in the case of premature termination of a contract with a Management Board member without a
material breach, severance payments do not exceed more than two
years annual pay and that not more than the remaining term of the
employment contract is remunerated. In the case of premature termination of a management contract for a material reason for which
a Management Board member is responsible, no severance payment is made. Any agreements reached on severance payments on
the occasion of the premature termination of Management Board
activities take into account the circumstances under which said
Management Board member left the company as well as the economic situation of the company.
Bank Austria · 2013 Annual Report 267
Corporate Governance
Corporate Governance Report (CONTINUED)
There are no stock option programmes for Management Board
members since the 2012 financial year.
The above-mentioned principles apply accordingly also in the case
of new remuneration systems for senior management staff.
The amendment to the Austrian Banking Act implementing the provisions regarding the remuneration policy of the Capital Requirements Directive (CRD III) entered into force on 1 January 2011. It
implements a new framework for the remuneration policies and
practices of banks. UniCredit Bank Austria AG adapted its remuneration policy to the new European legal situation and updates it on an
ongoing basis.
For the term of the employment contract of a Management Board
member, payments into a pension fund are made on the basis of a
defined-contribution plan. In addition, cover is provided against disability risk, also via a pension fund. There are severance payment
arrangements based on the legal provisions applicable to the severance payment scheme for employees. In the case of a public takeover offer, there are no arrangements for the Management Board that
deviate from the above.
The company bears the proportionate costs of a D&O insurance
which UniCredit Group concluded for the Group companies.
Remuneration of the Supervisory Board:
The compensation schedule for Supervisory Board members provides that the Chairman of the Supervisory Board receives double,
and the Deputy Chairman one and a half times, the compensation
received by a Supervisory Board member. Members of the Credit-/
Risk Committee and members of the Audit Committee receive additional compensation.
Emoluments of Management and Supervisory Board
members:
Information on emoluments of Management and Supervisory Board
members can be found in the notes to the consolidated financial
statements of UniCredit Bank Austria AG. According to our statement of compliance with the ACCG the emoluments regarding each
member of the Management Board and the Supervisory Board are
not published.
Information to the General Meeting:
In the course of the ordinary General Meeting on 16 May 2013, the
Chairman of the Supervisory Board provided information on the
principles of the remuneration system.
268 2013 Annual Report · Bank Austria
4. Report on the measures taken by the
company to promote women on the Management Board, on the Supervisory Board
and in executive positions (Section 80 of
the Austrian Joint-Stock Companies Act
[Aktiengesetz/AktG] as laid down in Section
243b (2) (2) of the Austrian Business Code
[Unternehmensgesetzbuch/UGB]:
As early as at the beginning of the 1990s UniCredit Bank Austria AG
and its predecessor banks took women-specific measures. One of
them was to create the position of a Women’s Officer, who is still
active within UniCredit Bank Austria AG. Today, diversity management
in UniCredit Bank Austria AG is located organisationally in Identity &
Communications and thus forms an essential part of sustainability
management. Since UniCredit Bank Austria AG was integrated in UniCredit Group the numerous efforts aiming at equal opportunities have
been intensified and more measures for implementation of the equality strategy have been taken.
In the course of an analysis project carried out at UniCredit in Austria,
Germany and Italy in 2009, among other things, career barriers for
women were identified by means of a number of qualitative interviews
and focus groups. One major finding of the survey was that having a
family-friendly environment in the company is a necessary basis for
all women and, in particular, for ambitious and career-oriented female
employees. This means that the numerous family-friendly activities
carried out by UniCredit Bank Austria AG in the past were indispensable and are still necessary today.
For example, UniCredit Bank Austria AG considers it very important to
support employees who are on parental leave. Since 1993 special
events, including provision of childcare services at those events, have
been organised for employees on parental leave to make it easier for
them to return to work. Those who return from parental leave are
offered almost any part-time model; teleworking is also an option.
Company kindergartens for a total of about 200 children are offered
at two locations in Vienna and holiday childcare is provided during the
entire summer holidays as well as during the semester and Easter
holidays. A number of courses were offered at the bank’s Kaiserwasser sports facilities in 2013.
In the past UniCredit Bank Austria AG received many different awards
for its special family-friendly measures. For example, in June 2010
the bank won the 3rd prize of the Kinderbetreuungspreis [Child Care
Award] 2010 of the Federal Ministry of Economic Affairs, Family and
Youth. In 2011 UniCredit Bank Austria AG participated in the “Taten
statt Worte” [action speaks louder than words] competition and came
in second out of 70 companies in the category of large firms for its
women- and family-friendly policies.
In 2009 UniCredit Bank Austria AG decided to subject itself to an
audit in connection with “Family and Work”. On 16 November 2009
UniCredit Bank Austria AG was awarded the basic certificate by the
Ministry of Economic Affairs, Family and Youth. Interim reports must
be submitted at regular intervals to document progress made and/or
measures taken. A working group focuses on further developing
“audit ideas and measures” at monthly meetings. The bank underwent a successful re-audit in 2012. The 2013 interim report was
very favourable.
A very important step was taken by UniCredit Group in 2010 when
the Group established the Global Job Model. Until then the Group
had many different jobs and titles in all divisions and countries. In
the meantime there is a standardised job catalogue of about 250
jobs and all employees know their position and the way in which
they can pursue career opportunities. The defined goal of UniCredit
Group is to considerably increase the share of women in jobs requiring higher qualifications in the next few years. To reach this goal,
Doris Tomanek, female Management Board member of UniCredit
Bank Austria AG with responsibility for human resources, was mandated with a group-wide “Gender Diversity Project” in autumn 2011.
The project, renamed “Gender Balance Programme” in the meantime, focuses on gender diversity and the advancement of women.
The programme underlines Bank Austria’s und UniCredit’s strong
commitment to efforts in these areas. The “business case” for diversity and equal opportunities is recognised across the Group. This
leads to specific measures aimed at bringing about real changes
that can be perceived by all those involved rather than being merely
symbolic. Appointing women to managerial positions is a key objective under the programme. In 2013 the “Global Policy on Gender
Equality” was implemented on a group-wide basis.
In 2009, the European Works Council and Human Resources managers created an essential base for equality of opportunity. They
prepared and signed a common “Declaration of equal opportunities
and non-discrimination”. The Group is working to implement various
measures in different countries on the basis of that Declaration.
In order to motivate female employees to actively seize career
opportunities and provide them with guidance on which way to take,
the “Shaping my Future” seminar was implemented in a number of
countries in 2012. The follow-up seminar was rolled out in 2013.
For Austria, it should be noted that members of the women’s network, which comprises about 100 members, agreed to act as trainers and to support women in their development.
It is important to emphasise that the percentage of women among
talents defined in Austria has risen from 20% to around 50% within
a few years. In some business areas the percentage of women
among talents amounts to 80%. More than one-fifth of participants
in the Executive Development Programme (EDP) are women.
UniCredit Group does not use a women’s quota; rather, efforts are
being made to achieve a change of mindset and enhance awareness
by showing managers the status quo and developments regarding
the number of women whenever nominations and appointments are
made. Both genders are represented in external hiring processes and
internal appointment processes; this is reflected in the establishment
of a shortlist which includes at least one candidate of each gender.
Another measure of UniCredit Bank Austria AG in 2010 was to make
women “visible” also in the language used, with a view to creating
awareness in the company by means of language and communication. The corporate wording defined, and communicated to all
employees, the way in which persons should communicate at UniCredit Bank Austria AG in a gender-sensitive way.
In spring 2011, the Vienna Economic Chamber ranked UniCredit
Bank Austria AG first in the DiversCity competition. This shows that
UniCredit Bank Austria AG is on the right track, takes gender diversity
seriously and proves its diversity philosophy with deeds rather than
words. Despite this remarkable award UniCredit Bank Austria AG is
well aware that the goals have not yet been achieved in the various
diversity dimensions and consequently also in respect of gender
diversity as a focal area.
C.Report on external evaluation:
The evaluation of adherence to the Austrian Code of Corporate Governance by UniCredit Bank Austria AG in the 2013 financial year was
carried out by Univ. Prof. DDr. Waldemar Jud Corporate Governance
Forschung CGF GmbH. The report on the external evaluation is available at http://ir.bankaustria.at g Corporate Governance.
The Management Board:
Willibald Cernko
Gianni Franco Papa
Helmut Bernkopf
Francesco Giordano
Dieter Hengl
Jürgen Kullnigg
Doris Tomanek
Robert Zadrazil
Bank Austria · 2013 Annual Report 269
Statement by Management
We state to the best of our knowledge that the consolidated financial statements prepared in accordance with the applicable financial reporting standards provide a true and fair view of the financial
position and performance of the Group, and that in the management report of the Group the business trends including business
results and the position of the Group have been presented in such
a way as to provide a true and fair view of the financial position
and performance of the Group, and that the management report of
the Group describes the material risks and uncertainties to which
the Group is exposed.
Vienna, 5 March 2014
The Management Board
Willibald Cernko
CEO Support Services
(Chief Executive Officer)
Helmut Bernkopf
Commercial Banking Division
(Retail & Corporates)
Jürgen Kullnigg
CRO Risk Management
Gianni Franco Papa
CEE Banking Division
(Deputy CEO)
Francesco Giordano
CFO Finance
Dieter Hengl
Corporate & Investment
Banking Division
Doris Tomanek
Human Resources Austria & CEE
Robert Zadrazil
Private Banking Division
Bank Austria · 2013 Annual Report 271
Corporate Governance | Supervisory Board and Management Board
Supervisory Board and Management Board
of UniCredit Bank Austria AG
Information regarding
the Management Board
Information regarding
the Supervisory Board
Chairman
The term of office of elected members will end with the Annual
General Meeting in 2018. The employees’ representatives are
delegated to the Supervisory Board without a time limit.
Willibald Cernko, born 1956
Chief Executive Officer (CEO)
Member from 1 April 2003 until 31 December 2007 and
Chairman from 1 October 2009, end of the current term of office:
30 September 2015
Deputy Chairman
Gianni Franco Papa, born 1956
CEE Banking
Member and Deputy Chairman from 22 January 2011,
end of the current term of office: 21 January 2017
Members
Helmut Bernkopf, born 1967
Commercial Banking
From 1 January 2013, end of the current term of office:
31 December 2015
Francesco Giordano, born 1966
Chief Financial Officer (CFO)
From 1 February 2011, end of the current term of office:
31 January 2017
Dieter Hengl, born 1964
Corporate & Investment Banking
From 1 August 2011, end of the current term of office: 31 July 2014
(term of office extended on 20 January 2014 until 31 July 2017)
Jürgen Kullnigg, born 1961
Chief Risk Officer (CRO)
From 1 November 2012, end of the current term of office:
31 October 2015
Doris Tomanek, born 1956
Human Resources Austria & CEE
From 7 May 2010, end of the current term of office: 6 May 2016
Robert Zadrazil, born 1970
Private Banking
From 1 October 2011, end of the current term of office:
30 September 2014 (term of office extended on 20 January 2014
until 30 September 2017)
272 2013 Annual Report · Bank Austria
Chairman
Erich Hampel, born 1951
Former Chairman of the Management Board
of UniCredit Bank Austria AG
(Member and Deputy Chairman from 1 October 2009 until
2 November 2011, Chairman from 2 November 2011)
Deputy Chairman
Paolo Fiorentino, born 1956
Deputy General Manager
COO Head of Global Banking Services Strategic Business Area
UniCredit Group
(from 4 May 2006, Chairman from 21 January 2011 until
2 November 2011, Deputy Chairman from 2 November 2011)
Members
Alessandro Decio, born 1966
Group Chief Risk Officer
UniCredit Group
(from 14 February 2013)
Candido Fois, born 1941
Chairman
UniCredit Credit Management Bank SpA
(from 5 June 2009 until 15 January 2013)
Olivier Nessime Khayat, born 1963
Deputy Head of Corporate and Investment Banking
UniCredit Group
(from 16 May 2013)
Alfredo Meocci, born 1953
Board Member of Italian Public Contracts Supervision Authority
(from 14 February 2013)
Jean Pierre Mustier, born 1961
Deputy General Manager
Head of CIB Division
UniCredit Group
(from 20 April 2011 until 16 May 2013)
Roberto Nicastro, born 1964
Group General Manager
UniCredit Group
(from 4 May 2006)
Vittorio Ogliengo, born 1958
Head of CIB Italy and Head of CIB International
UniCredit Group
(from 4 May 2006)
Franz Rauch, born 1940
Former Managing Director
Franz Rauch GmbH
(from 17 March 2003)
Robert Traunwieser, born 1955
Member of the Employees’ Council
(from 24 April 2009)
Barbara Wiedernig, born 1961
Third Deputy Chairman of the Employees’ Council
(from 24 April 2009)
Representatives of the
Supervisory Authorities
Commissioner
Hans-Georg Kramer
Secretary-General Federal Ministry of Finance
Karl Samstag, born 1944
Deputy Chairman of the Management Board
Privatstiftung zur Verwaltung von Anteilsrechten
(from 4 May 2006)
Deputy Commissioner
Wolfgang Sprißler, born 1945
Former Spokesman of the Management Board (CEO)
Bayerische Hypo- und Vereinsbank AG (now: UniCredit Bank AG)
(from 19 March 2002)
Alfred Katterl
Ernst Theimer, born 1947
Chairman of the Board of Trustees
Privatstiftung zur Verwaltung von Anteilsrechten
(from 7 July 2010)
Trustee pursuant to the Austrian Mortgage Bank Act
Delegated by the Employees’ Council
Hannes Schuh Ulrike Huemer
Head of Municipal Department 6 of the City of Vienna
State Cover Fund Commissioner
Deputy State Cover Fund Commissioner
Christian Wenth
Bernhard Perner
Deputy Trustee pursuant to the
Austrian Mortgage Bank Act
Wolfgang Heinzl, born 1953
Chairman of the Employees’ Council
(from 7 November 2000)
Adolf Lehner, born 1961
First Deputy Chairman of the Employees’ Council
(from 4 December 2000)
Johannes Koller, born 1964
Fourth Deputy Chairman of the Employees’ Council
(from 13 March 2013)
Emmerich Perl, born 1950
Member of the Employees’ Council
(from 20 April 2005)
Josef Reichl, born 1956
Member of the Employees’ Council
(from 25 October 2007 until 12 March 2013)
Bank Austria · 2013 Annual Report 273
Corporate Governance | Supervisory Board and Management Board
Supervisory Board and Management Board (CONTINUED)
The Supervisory Board formed the
following permanent committees:
Credit-/Risk Committee:
Chairman:
Remuneration Committee:
Chairman:
Alessandro Decio (Member and Chairman from 11 March 2013)
Erich Hampel (Deputy Chairman from 1 October 2009 until
3 June 2013, Chairman from 3 June 2013)
Deputy Chairman:
Franz Rauch (Member from 25 January 2006,
Deputy Chairman from 13 July 2006)
Deputy Chairman:
Paolo Fiorentino (Chairman from 21 January 2011 until 3 June 2013,
Deputy Chairman from 3 June 2013)
Members:
Roberto Nicastro (from 13 July 2006)
Vittorio Ogliengo (Chairman from 13 July 2006 until
21 January 2011, member from 21 January 2011)
Wolfgang Sprißler (from 25 January 2006)
Members:
Roberto Nicastro (from 3 June 2013)
Jean Pierre Mustier (from 2 November 2011 until 16 May 2013)
Delegated by the Employees’ Council:
Delegated by the Employees’ Council:
Wolfgang Heinzl (from 7 November 2000)
Adolf Lehner (from 2 May 2006)
Barbara Wiedernig (from 11 March 2011)
Audit Committee:
Chairman:
Wolfgang Heinzl (from 6 November 2011)
Adolf Lehner (from 6 November 2011)
Strategic & Nomination Committee:
Chairman:
Paolo Fiorentino (from 21 January 2011)
Wolfgang Sprißler (Member from 17 March 2003,
Deputy Chairman from 13 July 2006 until 2 November 2011,
Chairman from 2 November 2011)
Deputy Chairman:
Deputy Chairman:
Members:
Erich Hampel (from 2 November 2011)
Roberto Nicastro (from 13 July 2006)
Vittorio Ogliengo (from 13 July 2006)
Erich Hampel (Member from 4 November 2009 until 21 January 2011,
Deputy Chairman from 21 January 2011)
Members:
Alessandro Decio (from 11 March 2013)
Olivier Nessime Khayat (from 3 June 2013)
Roberto Nicastro (from 13 July 2006 until 3 June 2013)
Karl Samstag (Chairman from 31 July 2008 until 2 November 2011,
member from 2 November 2011)
Delegated by the Employees’ Council:
Wolfgang Heinzl (from 7 November 2000)
Adolf Lehner (from 2 May 2006)
Emmerich Perl (from 6 November 2011)
274 2013 Annual Report · Bank Austria
Delegated by the Employees’ Council:
Wolfgang Heinzl (from 7 November 2000)
Adolf Lehner (from 2 May 2006)
Vienna, 5 March 2014
The Management Board
Helmut Bernkopf
Commercial Banking Division
(Retail & Corporates)
Gianni Franco Papa
CEE Banking Division
(Deputy CEO)
Willibald Cernko
CEO Support Services
(Chief Executive Officer)
Jürgen Kullnigg
CRO Risk Management
Francesco Giordano
CFO Finance
Dieter Hengl
Corporate & Investment
Banking Division
Doris Tomanek
Human Resources Austria & CEE
Robert Zadrazil
Private Banking Division
Bank Austria · 2013 Annual Report 275
Simplify
The bank within easy reach.
Today’s customers have less time to go to a
branch, even though their needs are the same as
ever. They need high-tech means to access their
bank services at any time, in any place.
The answer to their needs? Subito Banca, which
includes an app designed with input from our
customers. It facilitates a wide range of online
banking processes and offers an opportunity to
buy new Samsung smartphones and tablets
at discounted prices.
Transactional Products and Partnerships
UniCredit – ITALY
Additional Information
Office Network
278
Austria278
280
Central and Eastern Europe
CEE Network
282
Investor Relations
284
Bank Austria · 2013 Annual Report 277
Additional Information
Office Network
Austria
Head Office
Retail Banking
Regional Offices
Corporate Banking
Regional Offices
Vienna City
1010 Vienna, Schottengasse 6–8
Tel: 05 05 05-53108
Vienna City 1
1010 Vienna, Schottengasse 6–8
Tel: 05 05 05-56022
Vienna East
1030 Vienna, Gärtnergasse 17
Tel: 05 05 05-62300
Vienna City 2
1020 Vienna, Lassallestrasse 5
Tel: 05 05 05-53482
Amstetten*, Arnoldstein, Baden, Bludenz,
Bregenz* (2), Bruck / Leitha, Bruck/Mur*,
Brunn / Gebirge, Deutsch Wagram, Deutschkreutz, Dornbirn, Eisenstadt* (2), Feistritz/
Drau, Feldbach*, Feldkirch, Fohnsdorf,
Fulpmes, Gänserndorf, Gmünd* (2),
Gmunden, Gols*, Graz* (12), GroßEnzersdorf, Groß-Petersdorf, Guntramsdorf,
Hall / Tirol, Hallein, Hard, Heidenreichstein,
Hinterbrühl, Höchst, Hollabrunn, Horn, Imst,
Innsbruck* (4), Judenburg*, Kapfenberg,
Kitzbühel, ­Klagenfurt* (4), Klosterneuburg,
Knittelfeld, Korneuburg, Krems*, Kufstein*,
Leibnitz*, ­Leoben*, Lienz*, Liezen*, Linz* (7),
Lustenau, Maria Enzersdorf, Mattersburg,
Mauerbach, Mistelbach, Mödling* (2), Neudörfl, Neun­kirchen, Neusiedl/See, Obdach,
Oberpullendorf, Oberwart*, Perchtoldsdorf,
Pöls, Pressbaum, Purkersdorf*, Rankweil,
Reutte, Ried / Innkreis, Riezlern, Salzburg*
(6), Schladming*, Schrems, Schwaz,
Schwechat, Sierning, Spittal/Drau*,
St. Johann / Pongau, St. Pölten* (3),
­Stegersbach, Steyr* (3), Stockerau*,
­Strasshof, Straßwalchen, Telfs, Ternitz,
Traun, Tulln, Velden, Villach* (8), Vöcklabruck*, ­Völkermarkt*, Waidhofen/Ybbs,
Weiz*, Wels*, Vienna* (110), Wiener Neudorf, Wiener ­Neustadt*, Wolfsberg, Wörgl,
Zell / See.
Vienna West
1120 Vienna, Schönbrunner Strasse 231
Tel: 05 05 05-48804
Lower Austria, Burgenland
3100 St. Pölten, Rathausplatz 3
Tel: 05 05 05-50933
2340 Mödling, Enzersdorfer Strasse 4
Tel: 05 05 05-50933
*) With offices serving corporate customers.
Salzburg
5020 Salzburg, Rainerstrasse 2
Tel: 05 05 05-96111
1010 Vienna, Schottengasse 6–8
Tel: (+ 43) 05 05 05-0
Fax: (+ 43) 05 05 05-56155
Internet: www.bankaustria.at
e-mail: [email protected]
Branches
Vienna North
1210 Vienna, Schwaigergasse 30
Tel: 05 05 05-48803
International Community
1010 Vienna, Stephansplatz 2
Tel: 05 05 05-53108
Customer Direct Service
1120 Vienna, Schönbrunner Strasse 231
Tel: 05 05 05-39525
Lower Austria
3100 St. Pölten, Rathausplatz 3
Tel: 05 05 05-47212
Burgenland
7000 Eisenstadt, Pfarrgasse 28
Tel: 05 05 05-47212
Styria
8010 Graz, Herrengasse 15
Tel: 05 05 05-31640
Carinthia
9500 Villach, Hans-Gasser-Platz 8
Tel: 05 05 05-31640
Upper Austria
4020 Linz, Hauptplatz 27
Tel: 05 05 05-96111
Tyrol / Eastern Tyrol
6020 Innsbruck, Maria-Theresien-Strasse 36
Tel: 05 05 05-65100
Vorarlberg
6900 Bregenz, Kornmarktplatz 2
Tel: 05 05 05-65100
278 2013 Annual Report · Bank Austria
Upper Austria
4020 Linz, Hauptplatz 27
Tel: 05 05 05-67104
4600 Wels, Dr.-Salzmann-Strasse 9
Tel: 05 05 05-67104
Tyrol
6020 Innsbruck, Maria-Theresien-Strasse 36
Tel: 05 05 05-65431
Styria
8010 Graz, Herrengasse 15
Tel: 05 05 05-93105
Salzburg
5020 Salzburg, Rainerstrasse 2
Tel: 05 05 05-96145
Vorarlberg
6900 Bregenz, Kornmarktplatz 2
Tel: 05 05 05-68111
Carinthia
9020 Klagenfurt, Burggasse 4
Tel: 05 05 05-64402
Bank Austria Private Banking
Offices
Private Banking Vienna
Hohenstaufengasse 6, 1010 Vienna
Tel: 05 05 05-46000
Private Banking Vienna Hietzing
Altgasse 20, 1130 Vienna
Tel: 05 05 05-53727
Private Banking Vienna Döbling
Himmelstrasse 9, 1190 Vienna
Tel: 05 05 05-46213
Private Banking Lower Austria West
Rathausplatz 3, 3100 St. Pölten
Tel: 05 05 05-36863
Private Banking Lower Austria South/
Burgenland
Kollonitschgasse 1, 2700 Wiener Neustadt
Tel: 05 05 05-55874
Private Banking Upper Austria
Hauptplatz 27, 4020 Linz
Tel: 05 05 05-67242
Private Banking Salzburg
Getreidegasse 1, 5020 Salzburg
Tel: 05 05 05-96361
Private Banking Tyrol
Museumstrasse 20, 6020 Innsbruck
Tel: 05 05 05-95524
Private Banking Vorarlberg
Kornmarktplatz 2, 6900 Bregenz
Tel: 05 05 05-98304
Selected subsidiaries and
equity interests of UniCredit Bank
Austria AG in Austria
Schoellerbank Aktiengesellschaft
1010 Vienna, Renngasse 3
Tel: (+43 1) 534 71-0
www.schoellerbank.at
Bank Austria Finanzservice GmbH
1020 Vienna, Lassallestrasse 5
Tel: (+43) 05 05 05-53000
www.baf.at
Bank Austria Real Invest
Immobilien-Management GmbH
1020 Vienna, Lassallestrasse 5
Tel: (+43 1) 331 71-0
www.realinvest.at
Immobilien Rating GmbH
1020 Vienna, Taborstrasse 1–3
Tel: (+43) 05 05 05-51880
www.irg.at
Bank Austria Wohnbaubank AG
1020 Vienna, Lassallestrasse 1
Tel: (+43 1) 331 47-5601
card complete Service Bank AG
1020 Vienna, Lassallestrasse 3
Tel: (+43 1) 711 11-0
www.cardcomplete.com
DC Bank AG (Diners Club)
1040 Vienna, Rainergasse 1
Tel: (+43 1) 50 135-0
www.dcbank.at
ERGO Versicherung
Aktiengesellschaft
1110 Vienna, Modecenterstrasse 17
Tel: (+43 1) 313 83-0
www.ergo-austria.at
UniCredit Leasing (Austria) GmbH
(UniCredit Global Leasing S.p.A.)
1040 Vienna, Operngasse 21
Tel: (+ 43 1) 588 08-0
www.unicreditleasing.at
FactorBank Aktiengesellschaft
1041 Vienna, Floragasse 7
Tel: (+43 1) 506 78-0
www.factorbank.com
UniCredit Business Integrated Solutions
Austria GmbH*
1090 Vienna, Nordbergstrasse 13
Tel: (+43 1) 717 30-0
*) Majority-owned by UniCredit Business
Integrated Solutions S.C.p.A., Milan
Private Banking Styria
Herrengasse 15, 8010 Graz
Tel: 05 05 05-93327
Private Banking Klagenfurt
Neuer Platz 6, 9020 Klagenfurt
Tel: 05 05 05-94296
Private Banking Villach
Hans-Gasser-Platz 8, 9500 Villach
Tel: 05 05 05-94329
Bank Austria · 2013 Annual Report 279
Additional Information
Office Network (Continued)
Central and Eastern Europe
Azerbaijan
Bosnia and Herzegovina
Macedonia
Yapı Kredi Bank Azerbaijan
678.C.Mammadquluzade street, 73 F Baku City
Baku, Azerbaijan
Tel: (+ 994 12) 497 77 95
Fax: (+ 994 12) 497 02 76
www.yapikredi.com.az
BIC: KABAAZ22
UniCredit Bank a.d. Banja Luka
Marije Bursac 7
78000 Banja Luka
Tel: (+387 51) 243 200
Fax: (+387 51) 212 830
www.unicreditbank-bl.ba
BIC: BLBABA22
Representative Office Skopje
11 Oktomvri 6/2–1
1000 Skopje
Tel: (+389 2) 3215 130
Fax: (+389 2) 3215 140
UniCredit Bank d.d.
Kardinala Stepinca b.b
88000 Mostar
Tel: (+387) 36 312 112
Fax: (+387) 36 312 116
www.unicreditbank.ba
BIC: UNCRBA22
Bulgaria
UniCredit Bulbank AD
7, Sveta Nedelya Sq.
1000 Sofia
Tel: (+359 2) 923 2111
Fax: (+359 2) 988 4636
www.unicreditbulbank.bg
BIC: UNCRBGSF
Croatia
Zagrebačka banka d.d.
Trg bana Josipa Jelacica
10 10000 Zagreb
Tel: (+385 1) 3773 333
Fax: (+385 1) 3789 764
www.zaba.hr
BIC: ZABAHR2X
280 2013 Annual Report · Bank Austria
Montenegro
Representative Office Podgorica
Hercegovacka 13
81 000 Podgorica
Tel: (+382 0) 20 66 77 40
Fax: (+382 0) 20 66 77 42
Romania
UniCredit Tiriac Bank S.A.
Bd. Expozitiei No. 1F 012101
Bucharest 1
Tel: (+40 21) 200 2020
Fax: (+40 21) 200 2022
www.unicredit-tiriac.ro
BIC: BACXROBU
Russia
ZAO UniCredit Bank
Prechistenskaya nab., 9
119034 Moscow
Tel: (+7 495) 258 7200
Fax: (+7 495) 258 7272
www.unicreditbank.ru
BIC: IMBKRUMM
JSCB Yapı Kredi Bank Moscow (CJSC)
2, Goncharnaya Naberezhnaya
115172 Moscow
Tel: (+7 495) 234 98 89
Fax: (+7 495) 956 19 72
www.ykb.ru
BIC: YKBMRUMM
Serbia
Turkey
UniCredit Bank Serbia J.S.C. Belgrade
Rajićeva 27 – 29
11000 Belgrade
Tel: (+ 381 11) 3777 888
Fax: (+ 381 11) 3342 200
www.unicreditbank.rs
BIC: BACXRSBG
Yapı ve Kredi Bankası A.Ş.
Yapı ve Kredi Plaza D Blok
Levent 34330, Istanbul
Tel: (+90 212) 339 70 00
Fax: (+90 212) 339 60 00
www.yapikredi.com.tr
BIC: YAPITRIS
Slovakia
Ukraine
UniCredit Bank Czech Republic
and Slovakia, a.s.
Šancova 1 /A
813 33 Bratislava
Tel: (+ 421 2) 4950 1111
Fax: (+ 421 2) 4950 3406
www.unicreditbank.sk
BIC: UNCRSKBX
PJSC Ukrsotsbank
29, Kovpaka Str.
03150 Kiev
Tel: (+380 44) 230 3299
Fax: (+380 44) 529 1307
www.unicredit.com.ua
BIC: UKRSUAUX
Slovenia
UniCredit Bank Hungary Zrt.
Szabadság tér 5–6
1054 Budapest
Tel: (+36 1) 301 1271
Fax: (+36 1) 353 4959
www.unicreditbank.hu
BIC: BACXHUHB
UniCredit Banka Slovenija d.d.
Šmartinska 140
1000 Ljubljana
Tel: (+ 386 1) 5876 600
Fax: (+ 386 1) 5876 684
www.unicreditbank.si
BIC: BACXSI22
Hungary
Czech Republic
UniCredit Bank Czech Republic
and Slovakia, a.s.
Zeletavska 1525/1
140 92 Prague 4 – Michle
Tel: (+ 420) 955 911 111
www.unicreditbank.cz
BIC: BACXCZPP
Bank Austria · 2013 Annual Report 281
Additional Information
CEE Network
Market share (%)
ranking
Russia, UniCredit Bank
1.5
8
Poland, Bank Pekao 1)
10.6
2
Ukraine, Ukrsotsbank
3.4
7
Hungary, UniCredit Bank
Czech Republic,
UniCredit Bank Czech Republic & Slovakia
Slovakia,
UniCredit Bank Czech Republic & Slovakia
6.0
7
6.8
4
6.4
5
Romania, UniCredit Tiriac Bank
6.9
5
Slovenia, UniCredit Banka
6.1
5
Croatia, Zagrebačka banka
26.5
1
Serbia, UniCredit Bank
Bosnia and Herzegovina,
UniCredit Bank and
UniCredit Bank Banja Luka
8.7
3
21.6
1
Bulgaria, UniCredit Bulbank
15.0
1
Turkey, Yapı Kredi 2)
Azerbaijan,
Yapı Kredi Bank Azerbaijan
9.2
5
1.6
15
l Representative offices in Macedonia, Montenegro and
Belarus 3)
1) Poland (Bank Pekao) under management responsibility of UniCredit
2) Total assets consolidated proportionately
3) Representative office of UniCredit Bank Russia
Source: CEE Strategic Analysis
282 2013 Annual Report · Bank Austria
Bank Austria · 2013 Annual Report 283
Additional Information
Investor Relations
UniCredit Bank Austria AG / Corporate Relations
Lassallestrasse 5, 1020 Vienna, Austria
Tel: (+43) (0)5 05 05-57232
e-mail: [email protected]
Günther Stromenger
Tel: (+43) (0)5 05 05-57232
Erich Kodon
Tel: (+43) (0)5 05 05-54999
Andreas Petzl
Tel: (+43) (0)5 05 05-59522
Fax: (+ 43) (0)5 05 05-8957232
Internet: http://ir.bankaustria.at
Ratings
Moody’s1)
Standard & Poor’s2)
Long-Term
Subordinated liabilities
short-term
Baa1
A–
Ba1
BBB –
P-2
A-2
Both, public-sector covered bonds and mortgage bonds of Bank Austria are rated Aaa by Moody’s.
1) Grandfathered debt is rated Aa3, grandfathered subordinated debt is rated A1.
2) Grandfathered debt is rated AA–, grandfathered subordinated debt is also rated AA–.
Financial calendar
12 May 2014
Publication of the results as of 31 March 2014
6 August 2014
Publication of the half-year results as of 30 June 2014
11 November 2014
Publication of the results as of 30 September 2014
All information is available electronically at http:// ir. bankaustria. at
Published by
Notes
UniCredit Bank Austria AG
A-1010 Vienna, Schottengasse 6 – 8
Telephone within Austria: 05 05 05-0; from abroad: + 43 5 05 05-0
Fax within Austria: 05 05 05-56155; from abroad: + 43 5 05 05-56155
Internet: www.bankaustria.at
e-mail: [email protected]
BIC: BKAUATWW
Austrian routing code: 12000
Austrian Register of Firms: FN 150714p
VAT registration number: ATU 51507409
This report contains forward-looking statements relating to the future performance
of Bank Austria. These statements reflect estimates which we have made on the
basis of all information available to us at present. Should the assumptions
­underlying forward-looking statements prove incorrect, or should risks – such as
those mentioned in this report – materialise to an extent not anticipated, actual results may vary from those expected at present. Market share data are based on the
most recent information available at the editorial close of this report.
Editor:
Planning & Controlling Austria
External Reporting
Photographs: Prefaces: Erich Hampel: UniCredit; Willibald Cernko: Paul Wilke
Pages showing Management Board members: Paul Wilke
Sorter pages: UniCredit
In adding up rounded figures and calculating the percentage rates of changes,
slight differences may result compared with totals and rates arrived at by adding up
component ­figures which have not been rounded off.
Creative concept: Orange 021
Design, graphic development and composition: Mercurio GP – Milan
Graphics: www.horvath.co.at
Printed by: Die Stadtdrucker
Contact:
Bank Austria
Identity & Communications
P. O. Box 22.000
A-1011 Vienna, Austria
e-mail: [email protected]
Switchboard: within Austria: 05 05 05-0; from abroad + 43 5 05 05-0
284 2013 Annual Report · Bank Austria
“Bank Austria” as used in this report refers to the group of consolidated companies.
“UniCredit Bank Austria AG” as used in this report refers to the parent ­company.
Disclaimer
This edition of our Annual Report is prepared for the convenience of our Englishspeaking readers. It is based on the German original, which is the authentic version
and takes precedence in all legal respects.