Private Banking & Asset Management

The Private Banking & Asset Management (PB&AM) Division was set up by combining the relevant operations previously included in Private Customers Austria into a separate business segment. The PB&AM Division is organised along the same lines as UniCredit’s PB&AM Division and comprises two areas:

• Asset Gathering focuses on developing the segment of up-market private customers (high net worth individuals, foundations, etc.). The up-market segment is covered by Schoellerbank, an independent private bank, and by BANKPRIVAT, which operates under its own independent brand name and primarily serves the top segment of the market comprising customers recommended by BA-CA. Still fully integrated in private customer sales operations in 2005, BANKPRIVAT was not yet maintained as a profit centre. This step was taken in 2006, which is why a year-on-year comparison of income statement data is distorted. The complete transfer of the defined customer cluster from the Retail Division – i.e., high net worth individuals with investments exceeding € 1 m and private foundations – started in September 2006. The transfer from the Retail Division is taking place as part of the “Fit for TopClients” project. It is supported by a BA-CA sales contest and significantly enhances the profile of these specialist services. In this context, Asset Management GmbH (AMG) has important product competence, primarily in the area of asset management in the widest sense, the creation of structured products, and brokerage activities for investors. AMG is also a service provider for other BA-CA divisions (sales support and information, product management including tax aspects and launch of specialised products) and performs an important complementary function.
• Capital Invest was renamed Pioneer Investments Austria (PIA) in November 2006. PIA is responsible for Asset Management business, embedded within the Pioneer Group which is active on a worldwide basis. The company remains an independent mutual fund company under Austrian law and will use its core competencies to serve local needs. As one of five local investment centres of the Pioneer Group, Pioneer Investments Austria can now use its particular expertise in the area of equity and bond funds focusing on Austria and CEE on a larger scale while benefiting from the expertise available through a global network in 22 countries with about € 250 bn in assets under management. In 2006, the fund volume managed by Pioneer Investments Austria (including advice mandates) grew by about 10 % – well above the market figure – to € 26.5 bn. Large and institutional investors served from Vienna account for a little over one half of the fund volume.

After an excellent first quarter in 2006, business developments were characterised by a sharp correction on financial markets in May/June. This had a pronounced impact on the preferences shown by private investors, who were again just starting to opt for equities and higher risk investments including commodities and gold. Nevertheless, in this environment, PB&AM was very successful with the sale of its guarantee products: the recent new issues increased the outstanding volume of PIA’s guarantee funds (with a 100 % capital guarantee and an 80 % peak value guarantee) to € 2.5 bn. This makes Pioneer Investments Austria market leader in guarantee funds in Austria by a wide margin.

In 2006, total revenues – reflected primarily in net fee and commission income – rose by 23 % to € 171 m; all business areas contributed to this result.

Operating profit for 2006 was 36 % up on 2005 although PB&AM incurred costs which resulted from various restructuring measures – including customer transfer to Private Banking and rebranding in Asset Management – and increased PB&AM’s operating expenses in its first business year. It should be noted that BANKPRIVAT operated as a cost centre in 2005 and was transformed into a profit centre in 2006; without this effect, costs would have increased by 2 %, instead of 16 %.

After net income from investments of € 15 m in 2005, which included a capital gain of € 9 m from the sale of Schoellerbank’s Investkredit shares, the figure for 2006 was a net loss of € 1 m. The capital gain of € 38 m from the sale of PIA’s equity investments in the subsidiaries in Hungary and Croatia to Pioneer Investments was recorded in the Corporate Center. Therefore, although operating profit rose strongly, profit before tax of PB&AM came to € 63 m, matching the previous year’s figure (€ 64 m). Adjusted for one-off effects, profit before tax was € 7 m or 12 % up on 2005.

Outlook: We will continue to pursue our successful products and new issue policy in 2007 with our innovative guarantee fund and guarantee bond products, especially as these are currently the preferred investment products. For investors looking for a higher return than money market investments through a flexible approach to changing market conditions, without necessarily having to invest their funds directly, we are in the process of launching a new product called FokusInvest. This is a standardised asset management product which is new in Austria, and is characterised by a number of risk options and a low initial investment. The advisory services offered to customers are complemented by the computer-assisted AnlageCheck (investment check), developed by AMG to identify the customer’s investment objectives and risk appetite. The division is looking to expand the products and services offered to customers in 2007 through close cooperation with other Pioneer Group companies and via the international private banking network. This should further improve the division’s image and competence, with a positive impact on the income statement if the investment climate is favourable in 2007.