Bank Austria Creditanstalt - Annual Report 2005

The primary segment reporting format is based on the internal reporting structure of business segments, which reflects management responsibilities in the Bank Austria Creditanstalt Group in 2005. The business segments are presented as independent units with their own capital resources and are responsible for their own results. The definition of business segments is primarily based on organisational responsibility for customers. Organisational changes in responsibility may lead to changes in the definition of business segments during the year. On the basis of the new segment Large Corporates and Real Estate, the previous year’s figures were adjusted. The internal reporting structure in the Bank Austria Creditanstalt Group comprises the following business segments:

Changes in segment reporting in 2005
As part of a restructuring of Austrian customer business, the previous business segments “Private Customers Austria” and “Corporate Customers Austria” were divided into three new segments: Private Customers Austria, SMEs Austria, and Large Corporates and Real Estate. The Private Customers Austria segment covers only private individuals. Business customers are now included in the SMEs Austria segment (previously in the Private Customers Austria segment). The Large Corporates and Real Estate segment covers multinational corporates, financial institutions, public sector and real estate customers. The comparative figures for 2004 were adjusted to reflect these changes.

Private Customers Austria
Responsibility for the Private Customers Austria segment covers the private customer business of Bank Austria Creditanstalt AG and the activities of Schoellerbank AG, BANKPRIVAT AG, the fund management activities and the credit card business.

SMEs Austria
The SMEs Austria segment covers small and medium-sized businesses (SMEs).

Large Corporates and Real Estate
The Large Corporates and Real Estate segment comprises multinational corporates, financial institutions, public sector and real estate customers as well as the activities of BA-CA Wohnbaubank AG, BA-CA Real Invest GmbH and the leasing business of the Bank Austria Creditanstalt Leasing Group.

International Markets
International Markets essentially comprises the treasury activities of Bank Austria Creditanstalt AG.

CEE
The CEE business segment includes the commercial banking units of the Bank Austria Creditanstalt Group in Central and Eastern Europe.

Corporate Center
“Corporate Center” covers all equity interests that are not assigned to other segments. Also included are inter-segment eliminations and other items which cannot be assigned to other business segments.

Methods
Net interest income is split up according to the market interest rate method. Costs are allocated to the individual business segments from which they arise. Goodwill arising on acquisitions is also assigned to the individual business segments.

Capital allocation is based on Austrian supervisory guidelines. Capital allocated to the business segments amounts to 7% (10% for CEE subsidiaries) of the risk positions (credit and market risk equivalent). The difference to the equity capital actually available is transferred to the Corporate Center segment. An interest rate of 5% which represents the long-term average return on risk-free investments in the capital market, as determined by empirical surveys, is applied to allocated capital on a uniform Group-wide basis, and the notional income from investment of capital is included in net interest income.

The result of each business segment is measured by the net income before taxes and the net income after taxes earned by the respective segment. In addition to the cost/income ratio, the return on equity is one of the key ratios used for controlling the business segments.

The segment reporting data also show the net income after taxes. The changes in IFRSs described in “Changes in accounting principles in 2005” in note 2 are applied retrospectively for the year 2004 also for segment reporting purposes (first-time application).

Segment reporting
€ m		Private Customers Austria	SMEs Austria	Large Cor- porates and Real Estate	Central and Eastern Europe (CEE)	Inter- national Markets	Cor- porate Center	BA-CA Group
Net interest income	2005	670	369	483	977	89	24	2,611
	2004	678	394	489	744	133	3	2,441
Losses on loans	2005	–234	–121	–35	–117	10	2	–495
and advances	2004	–74	–200	–35	–86	–	–3	–398
Net fee and	2005	536	237	132	519	40	–7	1,458
commission income	2004	473	219	120	408	19	–5	1,233
Net trading result	2005	4	1	–1	46	178	10	237
	2004	3	–	6	78	122	24	233
General administrative	2005	–888	–403	–292	–824	–158	–57	–2,622
expenses	2004	–908	–385	–291	–692	–140	–63	–2,479
Balance of other operating	2005	1	8	12	–17	–32	–20	–48
income and expenses	2004	–9	–15	12	–39	–19	–16	–85
Operating profit	2005	88	91	300	584	128	–49	1,142
	2004	163	13	301	413	114	–59	944
Net result from investments	2005	14	–	138	129	19	–17	282
	2004	4	–	–33	7	9	5	–8
Amortisation of goodwill	2005	–4	–	–	–	–	–	–4
	2004	–4	–	–4	–53	–6	–9	–75
Allocation to provisions	2005	–2	–90	–	–7	–	–9	–108
for restructuring costs	2004	–	–	–	–	–	–	–
Balance of other	2005	–2	–	–8	–1	–	–	–11
income and expenses	2004	–	–	–3	–1	–	2	–2
Net income before taxes	2005	94	1	430	704	147	–75	1,301
	2004	163	13	261	366	117	–61	859
Taxes on income	2005	–21	–	–115	–116	–21	47	–226
	2004	–44	–4	–65	–83	–30	38	–188
Net income	2005	73	1	315	588	126	–28	1,075
	2004	119	9	196	282	87	–24	671
Risk-weighted assets	2005	13,286	13,987	20,383	21,350	3,082	3,284	75,372
(average, Austrian Banking Act)	2004	11,182	13,089	21,621	16,991	3,039	4,356	70,277
Equity allocated (average)	2005	930	979	1,427	2,106	216	1,631	7,290
	2004	783	916	1,513	1,687	213	1,329	6,441
Return on equity	2005	10.1	0.1	30.1	33.4	68.0	n,a,*)	17.9
before taxes in %	2004	20.8	1.4	17.3	21.7	55.0	n,a,	13.3
Return on equity	2005	7.9	0.1	22.1	27.9	58.4	n,a,	14.8
after taxes in %	2004	15.2	1.0	13.0	16.7	41.1	n,a,	10.4
Cost/income	2005	73.4	65.6	46.5	54.0	57.3	n,a,	61.6
ratio in %	2004	79.3	64.4	46.4	58.1	55.2	n,a,	64.9
Risk/earnings	2005	35.0	32.6	7.3	12.0	n,a,	n,a,	18.9
ratio in %	2004	10.9	50.8	7.1	11.5	n,a,	n,a,	16.3

*)	not meaningful

Balance sheet data by segment
€ m		Private Customers Austria	SMEs Austria	Large Cor- porates and Real Estate	Central and Eastern Europe (CEE)	Inter- national Markets	Cor- porate Center	BA-CA Group
Trading assets	2005	8	–	–	1,000	16,172	484	17,665
	2004	9	–	–	1,866	15,831	868	18,575
Loans and advances	2005	17,455	17,283	30,135	21,939	–	201	86,404
to customers	2004	15,869	15,277	32,526	17,630	–	317	81,260
Loan loss provisions	2005	–559	–1,551	–426	–678	–	–18	–3,232
	2004	–697	–1,623	–177	–797	–	–10	–3,305
Amounts owed to customers	2005	24,437	7,434	9,852	20,340	–	170	61,863
	2004	24,634	7,213	8,856	16,896	–	257	57,856
Trading liabilities	2005	–	–	–	427	6,649	–	6,807
	2004	–	–	–	566	8,225	139	8,930

The totals reflect inter-segment eliminations.

Breakdown of income by region
€ m	Austria		Central and Eastern Europe		Other regions		Total
	2005	2004	2005	2004	2005	2004	2005	2004
Net interest income	1,541	1,486	1,051	904	20	50	2,611	2,441
Losses on loans and advances	–377	–310	–115	–87	–2	–	–495	–398
Net interest income after losses on loans and advances	1,164	1,176	936	818	17	50	2,117	2,042
Net fee and commission income	950	827	517	417	–8	–10	1,458	1,233
Net trading result	151	122	72	86	14	24	237	233

(31) Segment reporting