Results 2006

In our value-based management approach we focus on profit-oriented growth in day-to-day business. In our mature markets we are seeking to improve the return on capital employed, and in CEE we support growth in areas with sustained, high profitability.

Johann Strobl, Member of the Management Board, Chief Financial Officer

Improvement in operating profit …

Bank Austria Creditanstalt continued its steady upward trend in 2006 and showed a strong operating performance: operating profit increased by 25% to € 2.0 bn. On an adjusted basis, both profit before tax and consolidated profit were about 22% higher than a year ago.

… and one-off effects in connection with integration

The 2006 consolidated financial statements, details of which are included in the section Consolidated Financial Statements (p. 120 ff) as well as in the management report of Bank Austria Creditanstalt (p. 100 ff), reflected the integration in UniCredit Group in several ways: in the course of BA-CA’s assuming the sub-holding function for CEE, subsidiaries were transferred. Sales of subsidiaries took place in 2006 while acquisitions and thus the enlargement of the group of consolidated companies will only take effect from 2007. Substantial capital gains were achieved on the disposal of HVB Splitska banka, which was effected to comply with merger control requirements, and the internal transfer of Bank BPH, which became necessary to comply with conditions imposed by the Polish government. The transfer to Pioneer Investments of CEE subsidiaries of Pioneer Investments Austria as part of the realignment of equity interests also led to capital gains. These positive one-off effects increased the bank’s net income from investments by € 2.3 bn.

The item “Integration costs” comprises comprehensive provisions totalling € 231 m for the upcoming restructuring measures. The major part of the total amount represents restructuring provisions for business with customers in Austria.

One-off effects in the amount of € 278 m are related to the improvement of credit risk management standards as part of refined methodologies in the run-up to Basel II.

Bottom line

The good operative development, reflected undistorted in operating profit, and the other items, affected by one-off effects – on balance € 1.8 bn – add up to a profit before tax of € 3.3 bn (2005: € 1.3 bn) and a consolidated profit of € 3.0 bn (2005: € 964 m).

Key financial data are only meaningful on an adjusted basis (see key figures (2) below). Earnings per share increased by 22% to € 7.61. ROE after tax increased from 13.5% (adjusted figure for 2005) to 15.8% (adjusted figure for 2006). AVE rose by over half to € 517 m.

Improved quality of results …

Despite the temporarily smaller scope of consolidation, the improvement in BA-CA’s economic performance is reflected in the fact that total revenues grew by 12%, three times as fast as expenses (+4%). As described in the management report of the Group, BA-CA benefited from the increase in net non-interest income such as the steadily growing net fee and commission income and the excellent net trading income. Net interest income increased by 5%, in particular due to expansion in CEE. BA-CA’s business volume (measured by average risk-weighted assets) grew by 3%; the CEE Division recorded 15% growth of RWA in spite of the disposals in the course of 2006.

The initiated cost reduction measures are beginning to take effect. The (adjusted) risk/earnings ratio has fallen marginally, mainly due to positive developments in business with large corporates but also supported by the favourable risk situation in CEE.

… but persisting need for adjustment in customer business in Austria

An analysis by business segment shows that there is a need for adjustment in business with customers in Austria and in the related back-office functions, in order to close the profitability gap which exists in a comparison within UniCredit Group.