ConsolidatedannUal RePoRt
2010
Key FigURes
1) UnderIFRS,theitemGainsandlossesonfinancialassetsandliabilitiesalsoincludesthevaluationofsecuritieswhoseriskisbornebyshareholdersofnon-controllinginterests.Thesesecuritiesaresubjecttosubstantialfairvaluefluctuations.Inordertoimprovethecomparabilityoftheresults,thevaluationresultsattributabletoshareholdersofnon-controllinginterestshavebeenexcludedinthefigurespresentedonthispage.ComparedtotheProfitorLossStatementpresentedintheConsolidatedFinancialReportaccordingtoIFRS,theitemGainsandlossesonfinancialassetsandliabilitiesisEUR11.2millionlower(2009:EUR186.6millionlower).Accordingly,theitemProfitbeforetaxpresentedaboveisEUR11.2millionlower(2009:EUR186.6millionlower)thantheProfitbeforetaxpresentedintheConsolidatedFinancialReportaccordingtoIFRS.
2) Operatingincome:netinterestincome,incomeandexpensesfromfeesandcommissions,otherincomeandexpenses,gainsandlossesonfinancialassetsandliabilities;Operatingexpenses:administrativeexpenses,amortisationanddepreciationonintangibleandtangibleassets.
3) Ratingupdatedated14January2011.
Statement of Financial Position (in millions of Euros) 2010 2009 Change in per centAssets 38,556 41,225 -6.5%Financial assets 10,855 14,543 -25.4%Receivables from customers 22,288 21,066 +5.8%Payables to customers 21,733 22,674 -4.2%Own issues 8,867 9,279 -4.4%Eligible own funds 2,908 2,826 +2.9%
Profit or Loss Statement (in millions of Euros) 2010 2009 Change in per centNet interest income 649.9 564.3 +15.2%Net fee and commission income 159.4 154.8 +3.0%Gains and losses on assets and liabilities adjusted for non-controlling interest 1)
155.9
138.9
+12.2%
Operating income 960.8 887.9 +8.2%Administrative expenses and depreciation and amortisation
-618.3
-608.1
-1.7%
Provisions and impairment losses -199.7 -236.7 +15.6%Profit before tax adjusted for non-controlling interest 1) 138.1 35.1 >+100%
Key figures (in percentages) 2010 2009Tier I capital ratio 9.9% 10.0%Own funds ratio 12.4% 13.6%Cost-income ratio 2) 64.4% 68.5%
Resources, as of 31.12. (in numbers) 2010 2009Workforce (in full-time equivalents) 4,812 4,954Bank branches 150 153Post office branches 1,038 1,230
Rating 2010 2009Long-term senior unsecured debt Baa1 Baa1Short-term liabilities P2 P2Moody’s outlook January 2011 3) stable stable
Retail Banking & small Business Wolfgang KleinMarketingRetailBanking&SmallBusiness
AlternativeSalesBAWAGBranchesFinancialDistributionPostCenter&RegionalBranchesFinancialDistributionPostStandardBranches&LoansSmallBusinessMobileSalesRetailServices
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Managing BoaRd
Chairman of the Managing Board and Ceo Byron Haynes
CorporateOfficeCommunications&SponsoringHumanResourcesStrategy&EconomicsInternationalCorporates
deputy Chairman / Chief Risk officer stephan Koren
CreditRiskRetail&SMECorporate&InstitutionalRiskMarketRiskLegal&ComplianceRiskReporting
Chief Financial officer andreas arndt
AccountingControlling&AssetLiabilityManagement(ALM)ParticipationsandMergers&Acquisitions
Chief operating officer sanjay sharmaPaymentsProcurement,RealEstate&FacilityManagementInformationTechnologyCustomerServiceCenterOperations
Corporate & Financial Markets Christoph Raninger
Corporates&Markets:BusinessDevelopmentCorporates&Markets:SalesCorporates&Markets:SolutionsFinancialMarketsTrading&Investments
Remits of the Managing Board as a BodyComplianceOfficeInternalAudit
3
Managing BoaRd
Contents
Preface by the Chairman of the Managing Board 5
Focuses in 2010 10
Group Management Report 13
TheEconomy 14
BAWAGP.S.K.:Customer-FocusedInvestmentandGrowth 18
KeyEventsduringtheFinancialYear 26
NotestotheAnnualFinancialStatements 32
RiskManagement 42
Non-FinancialPerformanceIndicators 42
EventsaftertheReportingDate 48
Outlook 49
InternalControlandRiskManagementSystem 50
Consolidated Financial Report Prepared in Accordance
with the International Financial Reporting Standards (IFRS) 53
ConsolidatedAccounts 57
Notes 63
RiskReport 138
StatementofAllLegalRepresentatives 169
BoardsandOfficers 170
Auditor’s Opinion 172
Supervisory Board’s Report 174
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PReFaCe By tHe CHaiRMan oF tHe Managing BoaRd
PReFaCe By tHe CHaiRMan oF tHe Managing BoaRd
year 2010Asexpected,2010wasadifficultyearfortheworldwideeconomyaswellasfortheAustrianmarket,althoughtherewerealreadysomesignsofaslowrecovery.Externalmarketfactorshavecontinuedtoinfluencethebankingbusinessacrosstheworld,forexampletheon-goingsovereigndebtcrisisinthehigh-deficitcountries.Additionally,theconsequencesoftheglobalfinancialcrisisresultedinincreasedliquiditycostsandhighercapitalrequirements.
Regulatorsin2010havealsoreactedtothefinancialcrisisanddifficulteconomicenvironmentbysettingnew,tighterregulationsforthebankingindustry.BaselIIIhasbeenintroducedwhichresultsinhighercapitalandliquidityrequirementsforbanksinthefuture.TheCapitalRequirementsDirective(CRD)IIIhasalsobeenlaunched,
addressingcapitalrequirementsfortradingbooks,securitisations,aswellasdefiningstructuralchangesinremunerationpolicies.Additionally,thenewlyraisedbanklevyinAustriawillbecomeduein2011forthefirsttime.
ThesemarketfactorsandregulatorychangeswillhavesomeimpactonBAWAGP.S.K.goingforward.TheBank’ssovereignexposuretoEuropeanhigh-deficitcountriesishoweverlimited(EUR53million),duetotheprudentmeasurestakeninthepastyear.BAWAGP.S.K.’sliquiditypositionremainsstrong,despitetheincreasedcostsandcompetitionforsavingsdeposits,withourRetailBankingandSmallBusinessfranchisefirmlyanchoredinprovidingsavingsandcurrentaccountproductstocustomersacrossAustria.TheBank’sdeposittoloanratiofortheyearremainsstrongatapproximately100percent.TheBank’scapitalpositionhasalsostrengthenedduringtheyear.TheissuanceofparticipationcapitalintheamountofEUR550milliontotheRepublicofAustriainDecember2009wasapprovedbytheEuropeanCommissioninJune2010.Inaddition,throughthecontinueddiligentmanagementofrisk-weightedassetsanddeploymentofcapitalduringtheyear,theBankhaspreparedwellforthenewcapitalregulationsofBaselIII.BAWAGP.S.K.morethanfulfilstheBaselIIIcriteriaalreadyin2010andisconfidenttocontinuetobeBaselIIIcompliantatthetimeofitsimplementationin2013.
InFebruary2011,theRemunerationCommitteeoftheSupervisoryBoardapprovedanamendedremunerationpolicycoveringallpersonnelwithinBAWAGP.S.K.,incompliancewithCRDIIIandtheAustrianBankingAct.
ThebanklevyinAustriahasnowbeendeterminedandsetandwillbechargedagainsttheBank’sfutureearningsfrom2011.
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Konzernrechnungslegung nach IFrsPReFaCe By tHe CHaiRMan oF tHe Managing BoaRd
good Results in 2010 Despitethecontinueddifficulteconomicenvironmentandtheincreasingregulatoryburden,BAWAGP.S.K.realisedgoodresultsin2010,withanannualoverallnetprofitrecordedforthefirsttimeinfouryears.
TheIFRSprofitbeforetaxofEUR138.1millionissignificantlybetterthanlastyear(EUR35.1million)andshowsthecontinuedsuccessfuleffortsbytheBanktoincreaseprofitabilityandefficiency.Themaindriversbehindthissignificantincreaseinprofitsaftertaxinclude:4 NetInterestIncomeincreasedby15.2percentcomparedtolastyear
toEUR649.9million(2009:EUR564.3million).Thisreflectsthedeploymentofourexcessliquiditysupportingourcustomers’needsandimprovingprofitabilitythroughtheconsistentusageofrisk-adjustedpricing.
4 NetCommissionIncomeofEUR159.4millionwasslightlyhigherthanlastyear(2009:EUR154.8million),asourcross-sellofdifferentproductstoourcustomerscontinuedtoincrease.
4 GainsandLossesonFinancialInstrumentsofEUR155.9millionwashigherthanlastyear(+12.2percent).ThispositionincludessaleswithintheInvestmentBooksandrealisedprofitsfromthesaleofasso-ciateinvestments,netofnegativeimpactsfromvaluationmovementsofownissuesandhedgingcosts.
4 OperatingexpensesfortheyearareEUR618.3million(2009:EUR608.1million)andweretoalargeextentdrivenbystaffcostsofEUR371.7million.Operatingexpensesslightlyincreasedcomparedtolastyear(+1.7percent),entirelyduetorestructuringprovisionsofEUR25.8million.OtheradministrativeexpensesofEUR172.8millionareEUR6millionlowerthanlastyear,reflectingtheearlybenefitsofourefficiencyandproductivityprogrammeandcontinuedtightcostmanagementthroughouttheyear.
4 ProvisionsandImpairmentLossesofEUR199.7millionaresignificantlylowerthanlastyear(2009:EUR236.7million),reflectingthecontinuedconservativeriskprofileofourloanbook.
4 NetProfitaftertaxandminoritiesfortheyearamountedtoEUR121.8million(2009:EUR–30.0million).
AllbusinessareassuccessfullycontributedtothesignificantlyimprovedBank’sresultsfor2010.
TheBank’sStatementofFinancialPositionshowedlendingwithanin-creaseofEUR1,222million(+5.8percent),reflectingthegrowthofourcorporatecustomerbusiness.BothAustrianCommercialBankingandtheInternationalBusinessweresuccessfulindeployingourexcessliquidity
realisingreasonablerisk-adjustedreturns.
Ourleasingbusinesscontinuedtogrow,withnewbusinessvolumesincreasingourmarketshareinAustriafrom4.9percentin2008toover6.8percentin2010.
FinancialMarketsbusinesshadagoodyear,successfullysteeringtheBankthroughextrememarketvolatilitywhileatthesametimecapturingnewclientflowsandre-enteringthecapitalmarketsforthefirsttimesince2004,withEUR2.0billionofnewfundsraised.
IFRSprofitbeforetaxofEUR138.1millionissignifi-cantlybetterthanlastyear(EUR35.1million)andshowsthecontinuedsuccessfuleffortsbytheBanktoincreaseprofitabilityandefficiency.
Allbusinessareassuccess-fullycontributedtothesignificantlyimprovedBank’sresultsfor2010.
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PReFaCe By tHe CHaiRMan oF tHe Managing BoaRd
RetailBankingandSmallBusinesscontinuedtheirfocusonthedevelopmentandroll-outofthenew“Branchoffensive”,improvingcustomerservice,introducingnewsavingsandsecurityproductsaswellascontinuingtosecurethedepositbaseoftheBank,despiteverycompetitivemarkets.
Oursubsidiaryeasybankhadarecordyearin2010,withnowover300,000accountsandEUR1.7billionofcustomerdeposits.
BAWAGInvest,theBank’sassetmanagementbusiness,continuedtogrowwithfundvolumesincreasedbyover10percentandwithnowoverEUR4.0billionofassetsundermanagement.
Despitethesignificantinvestmentsmadeandcontinuedsupportforgrowthforallourbusinesses,theBankmaintainedastrongcapitalandliquiditypositionthroughout2010.
Yearend2010CredittierIratioof10.2percentwasinlinewith2009of10.4percent,throughcontinuedtightmanagementofrisk-weightedassets.TheBankmaintainssignificantexcessliquidityofoverEUR5.3billionasat31December2010.
enhanced Customer experience through increased investmentAcontinuedimprovementofourcustomerservicehasalwaysbeentheclearfocusoftheBank.In2010,anumberofmajorinitiativeshavebeenlaunchedtoenhancetheexperienceofexistingandnewcustomers:4 PartofourstrategyfortheBankgoingforwardwasthedecisiontakenin
2010tocombineourtwostrongbankingbrandsBAWAGandPSKBankintoone:“BAWAGP.S.K.”.ThisbrandwaslaunchedinMarch2011andwillbevisibleaspartofthebranchoffensiveroll-out,unitingthebestofourtwophysicaldistributionchannelsandofferingourcustomersfullbankingservicesinallourbranchesgoingforward.
4 ThenewbrandissupportedbyanintensifiedcooperationwithÖster-reichischePostAG.Goingforward,wewillincreaseourbankbranch
networkfrom150to520brancheslocatedacrossAustria.Theimplementationofthenewbranchconceptwillbedonegraduallyoverthenexttwoyears.TheBankwillmakesignificantinvestmentsofEUR100millionaspartofthisbranchoffensiveinitiative,whichshowsourcontinuedcommitmenttocustomersacrossAustria.
Thisbranchinitiativeprovidesgreatopportunitiesandbenefitstoourcustomers,byhavingthelargestcentrallysteeredbranchnetworkinAustria.ThissignificantlyexpandscustomercoverageandaccessacrossAustria,particularlyinruralareas,providingfullbankingservicesandattractiveproducts.
4 During2010,theBankopeneditsCustomerServiceCentrewithextensiveopeninghours,providingcustomerswiththeabilitytocontacttheBankbytelephonetomeettheiron-goingneedsandrequirements.
4 Ontheotherhand,AustrianCommercialBankingandFinancialMarketshavebeenmergedintooneManagingBoardresponsibilityinthesecondhalfof2010inordertoexploitplatformsynergiesanddriveenhancedcross-sellingopportunitiesforourclients.Corporatecustomerswillprofitfromthebundledknow-howofthecombinedbusinessareasprovidingbusinesssolutionstomeettheirneeds.
CombineourtwostrongbankingbrandsBAWAGandPSKBankintoone:“BAWAGP.S.K.”.
8
Konzernrechnungslegung nach IFrsPReFaCe By tHe CHaiRMan oF tHe Managing BoaRd
4 AnothermajorprojectlaunchedbytheBankinthefirsthalfof2010wastoimproveefficiencyandproduc-tivitythroughenhancedprocessesandincreasedtechnologyinvestmenttobeabletofreeupresourcestobetterserveourcustomers.Thecleargoaloftheprojectistofurtheralignourproducts,simplifyprocessesandtomaketheorganisationmoreresponsivetocustomers’needs.TheprojectisontracktodeliveritsoveralltargetofcostsavingsofEUR60millionbytheyear-end2013whileinvestinganincrementalEUR40millionintotechnologytoimplementnewcapabilities(e.g.,workflowsolutions)andenhanceprocessstandardisation.
4 Increasingefficiencyandimprovingthecustomerservicewasthemaintargetofourinternalreorganisationsin2010.Theoverallorganisationwasstreamlinedinordertoeliminateduplicationandtoprovidegreateraccountabilityandresponsibility,ensuringquickerdecisionmaking.Thishasledtodecreasingadministra-tionandloweroverheadcosts.
Changes in the Managing Board – experienced team going ForwardInthecourseof2010,fourmanagersjoinedtheManagingBoardoftheBank.Withthesenewmembers,theBankhasanexperiencedManagementteamcapableofleadingtheBanktofaceandrealisetheupcomingopportunitiesgoingforward.
SanjaySharmajoinedtheManagingBoardofBAWAGP.S.K.on1January2010.PriortojoiningtheManagingBoard,hewasManagingDirectorresponsibleforOperationsforBAWAGP.S.K.ChristophRaningerjoinedinMay2010fromUniCreditGroupandisresponsiblefortheAustrianCommercialBusinessandFinancialMarkets.AndreasArndthasformerlybeenworkinginleadingpositionsforDeutscheBankGroup,becameChiefFinancialOfficerofBAWAGP.S.K.inOctober2010.WolfgangKleinassumedresponsibilityfortheareaRetailBankingandSmallBusinessinNovember2010aftermanyyearsofretailandmanagementexperienceatDeutschePostbankAG.Iamreallylookingforwardtoworkingwiththisteamoverthenextyears.
IwouldalsoliketotakethisopportunitytoexpressmythankstoReginaPrehoferandCarstenSamusch,whobothlefttheManagingBoardin2010,fortheirdedicationandcontributiontotheBank’ssuccess.Iwishbothofthemthebestfortheirfuturecareers.
9
PReFaCe By tHe CHaiRMan oF tHe Managing BoaRd
outlook
2011willcontinuetobeadifficultyearfromamacroeconomicpointofview.However,wedoexpecttheeconomicenvironmenttoimprove,albeitverygradually.BanksacrossEuropewillcontinuetobesubjecttoexternalshocksandtonewregulations.Strongcompetitionisexpectedtoremaininthemarketplace.
Nevertheless,BAWAGP.S.K.willuseitsgoodmomentumfrom2010toovercometheseexternalshocksandstrongmarketcompetitionsuccessfully.Inaddition,theBankwillcontinuetoworkhardonimplementinganumberofinitiativesandprojects,includingthenewbranchoffensive,withtheprimaryfocusonfurtherimprovingourcustomerservice.
Finally,IwouldliketothankallemployeesofBAWAGP.S.K.fortheircontinuedhardworkanddedicationinrealisingourgoalsandtargetsandinmeetingthechallengesandchangesthattookplaceduringtheyear.In2011,wewillcontinuetofocusontheBank’sday-to-dayoperations,meetingourcustomers’needsandworkingtogethertoourcommongoal:TofurtherimproveourcustomerserviceandprofitabilityinordertocontinuetostrengthentheBank’spositionasastrongAustrianRetailandCommercialbank.
ByronHaynesm.p. ChairmanoftheManagingBoardandCEO Vienna,March2011
Workingtogethertoourcommongoal:TofurtherimproveourcustomerserviceandprofitabilityinordertocontinuetostrengthentheBank’spositionasastrongAustrianRetailandCommercialbank.
10
Konzernrechnungslegung nach IFrs
FoCUses in 2010
a year of “Unternehmen Österreich”The initiative thatwas launched inSeptember2009was continuedthroughout 2010. “Unternehmen Österreich” is the conceptual um-brellaforaseriesoftailoredproductsandservicesforprivate,businessandmunicipalcustomersaimedatstimulatingthedomesticeconomy,andhassustainablystrengthenedAustriaasabusinesslocation.1 1
one Billion for energyAnotheraspectofthisconceptisaprogrammeunderwhichBAWAGP.S.K.grantsloanstoprivatecustomerstofinancerenovationworkthatwillim-provetheenergybalanceoftheirhome.Thisprogrammehasgeneratedagreatdealofdemand,andnumerouscustomershavealreadytakenthisopportunitytoimprovethequalityoftheirlife. 2
BaWag P.s.K. one Billion for MunicipalitiesAspartofits“UnternehmenÖsterreich”initiative,BAWAGP.S.K.ex-tendedroughlyEUR1billioninlow-costcredittoAustriancommuni-tiestofinanceinfrastructuremodernisationprojects.RoughlyEUR600millionmadeitpossibletocompletesome540infrastructureprojectsin 2010, including the renovation of the secondary school in Saal-felden. 3
FoRMat and Women entrepreneursAcontestwasheldincooperationwiththefinancialmagazineFORMATtofindwomenwithcreativeandpromisingbusinessideasthatdonotcon-formwith“traditional”women’scareers.Andplentywerefound.Thework-shopwasheldwithrespectedtrainersinareasincludingfinance,marketresearch,law,taxes,presentation,rhetoricandadvertising,allofwhichareimportantforsettingupanewbusiness. 4
online account BoxAnewproduct that isnot tiedtoabranch,andwitha loweraccountmanagementfee.AlltransactionsarecompletedovertheInternet.TheOnlineAccountBox(Online-Kontobox)alsooffersmoreattractivetermsandisavailablearoundtheclock,evenwhenthebankisclosed.
Focuses In 2010
1
3
4
2
11
non-Profit Housing ConstructionBAWAGP.S.K.Wohnbaubankisthefifthlargestprovideroffinancingfornon-profithousingconstructioninAustriabasedonmarketshare.Wealsoplayakeyroleinsocialhousingconstruction.Thesehousingconstruction projects (including the Sonnenpark Rust PRO MENTEREHAcentreforpsychosocialhealth)arefinancedprimarilyfromthefundsraisedthroughourWohnbaubankbonds,and2010wasagainaverysuccessfulyearwithEUR370millioninnewissuance. 5
association of austrian savings associationsThe3,800savingsassociationsandsavingspoolswithover260,000saversinAustriaincreasedthevolumeofassetsundermanagementtooverEUR2billioninsavingsdepositsandEUR500millioninfinanc-ing. BAWAG P.S.K. is highly successful with these particular targetgroupswithcustom-tailoredservicessuchastheVÖSCard/CompanyServiceCard. 6
Facebook “schmetterlingskinder” youth CampaignBAWAG P.S.K. launched an interactive youth campaign on the socialnetworkingplatformFacebookunderthemotto“Borntobefirst”(Born to be vorn).ThegroupBoysfacedoffagainstthegroupGirls.Inadditiontocommunicatingourproductmessages,theinitiativeincludedonlinegamesinwhichparticipantscouldcollectpoints.Thepointswerecon-vertedintoEurosattheendofthecampaign,andatotalofEUR5,000wasdonatedtotheSchmetterlingskinderassociationforchildrensuffer-ingfromepidermolysisbullosa. 7
Business Customer Centres Become establishedThenewBusinessCustomerCentresbeganoperatingunderthemotto“Everythingyouneed
fromBAWAGP.S.K.”Thecentrescovertheprivateandbusiness-relatedneedsoftheirclients,andgeneratedagreatdealofpositiveresponse.TheSmallBusinessunitinViennawasrestruc-
tured,andnowoperateswiththethreecustomersegments“service”,“individual”and“premium”.Thisnewstructureandapproachistobeimplementedintheotherprovincesin2011.BAWAGP.S.K.
heldThinkBusinesseventsinUpperAustria,StyriaandCarinthia.Theeventswereverysuccessfulandcoveredtopicsincludingthenewprofitexemption,companypensions,thePOSpaymentterminalcam-
paign,theextensiveservicesofferedbytheBAWAGP.S.K.BusinessCustomerCentres,leasingasafinanc-ingalternative,andtheproductsofBAWAGP.S.K.VersicherungandBAWAGP.S.K.Invest.
Corporate BondsBAWAGP.S.K.againassistedmanycorporatecustomersintheirbondissuanceactivitiesin2010.AtotalofeighteenissueswerefloatedontheAustrianmarket.BAWAGP.S.K.wasinvolvedinfourteenofthesebonds,enablingourBanktocoverover70percentoftheissuevolume.Byassistingwiththeseissues,BAWAGP.S.K.successfullyenablesitsclientstotapadifferentformofbusinessfinancingthantraditionalcreditproducts.
Focuses In 2010
5
6
7
“The clear focus of BAWAG P.S.K. is on our core competence, retail and corporate banking in Austria. While the emphasis in past years lay on repositioning the Bank, we are now entering a new phase of investment and growth in which our successful business model will be expanded and enhanced for the benefit of our customers.”
gRoUP ManageMent RePoRt
14
Konzernrechnungslegung nach IFrsPReFaCe By tHe CHaiRMan oF tHe Managing BoaRd
14
group ManageMent report
gRoUP ManageMent RePoRt
the economy
economic Conditions in 2010
TheEurozoneeconomystartedtorecoverin2010.Realgrossdomesticproductgrewby1.7percentaftercontractingby4.1percentintheprioryear,thusremainingsubstantiallylowerthanbeforethecrisis.Theupswingwastriggeredbyexports,butthespringof2010sawmoreandmoreimpetuscomingfromdomesticdemand.Inadditiontocompaniesrestockingtheirinventories,revivingdemandforequipmentwasakeysourceofbusinessactivity.Consumerspendingincreasedonlymoderately,butsteadily.
TheeconomiesoftheindividualEurozonecountriesfaredverydifferently.WhileeconomiessuchasGermany,FinlandandSlovakiasawsubstantialgrowth,recoverywasslowornon-existentincountrieswithhighbudgetdeficitsandforeigntradeimbalances.Governmentspendingcutsandhighunemploymentinthesecountrieshamperedbusinessactivityanderodedconsumerconfidence.
Thesovereigndebtcrisisdominatedmediaandinvestorattention,althoughtheEurozoneasawhole,andAustriainparticular,sawareturntoamodestgrowthpath.
AustriaisamongthetopthirdoftheEurozoneeconomiesintermsofperformanceandbetteredtheregion’saveragein2010witheconomicgrowthof2.0percent.Inthefirsthalfofthereportingperiod,theAustrianeconomyprofitedfromthemarkedexport-orientationofitsindustry.InadditiontorobustdemandfromSoutheastAsia,theeconomicupswinginGermanywasakeysourceofstimulus.Worldtradebegantolosesomeofitsconsiderablemomentuminthemiddleoftheyear,butanotherimportantcornerstoneofeconomicstabilitybegantoimprove:corporateinvestment.Inadditiontothereversaloftheinventorycycle,demandforinvestmentgoodsalsostartedtopickupattheendoftheperiod.Incontrast,constructioninvestmentdeclinedovertheentireyear.Unlikeotherdemandcomponents,privateconsumptiondidnotslideduringtherecession,andprovedtobeakeysourceofsupportfortheeconomyagainin2010.Thesavingsratefellforthesecondyearinarowto10.6percentofdisposableincome.
Austrianconsumersshowedincreasingconfidenceinthereportingperiod,andtheEUCommission’sconsum-erconfidenceindexsurpasseditslong-termaverageinthespring.Inadditiontotheimprovedeconomicoutlook,akeyreasonforthiswasthemoreoptimisticexpectationsforthelabourmarket.AustriaisoneoftheveryfewmembersoftheEurozonethatrecordedadeclineinthejoblessratein2010.Thiscanofcoursebeattributedinsubstantialparttotheincreasedtrainingmeasuresbeingconductedbythenationalemploymentservice,butthenumberofjobsalsoincreased.AccordingtoAustrianstatistics,theseasonallyadjustedunemploymentratefellbyonehalfofapercentagepointinannualcomparisontoreach6.8percent.
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PReFaCe By tHe CHaiRMan oF tHe Managing BoaRd
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group ManageMent report
Austria: Consumer Confidence
20
10
0
-10
-20
-30
-40
-50
-60
-70
Jan
07
Apr
07
Jul 0
7
Oct
07
Jan
08
Apr
08
Jul 0
8
Oct
08
Jan
09
Apr
09
Jul 0
9
Oct
09
Jan
10
Apr
10
Jul 1
0
Oct
10
Jan
11
Consumer confi dence indicator Financial situationGeneral economic prospects Employment expectations Source: EU Commission (EcoWin)
Thegeneralgovernmentbalanceworsenedbythreepercentagepointsto–3.5percentofGDPin2009asaresultofthefinancialandeconomiccrisis.Thebudgetdeficitroseagainto4.1percentofGDPin2010.Thisislesscauseforconcernininternationalcomparison,butdoesmeanthatAustria,alongwithnearlyeveryothermemberoftheEurozone,hasexceededthethresholdspecifiedbytheStabilityandGrowthPact.
Creditdemandintheprivatesectorwasveryrestrainedinthereportingperiod.Corporatefinancinghititslowpointatayear-on-yeardeclineof1.5percentinthefirstquarterof2010,andbusinessinthissegmenthasonlybeenexpandingslightlyforAustrianbankssincethen.Consumerlendingstagnatedovertheentirereportingperiod;onlydemandforhousingloansprovedtoberobust,growingatanaverageof2.5percentcomparedtotheprioryear.
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Konzernrechnungslegung nach IFrsPReFaCe By tHe CHaiRMan oF tHe Managing BoaRd
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group ManageMent report
interest Rates and exchange Rates
TheEuropeanCentralBank(ECB)leftitskeyinterestrateunchangedat1percentovertheyear.Theso-called“unconventionalmeasures”forprovidingthebankingsectorwithliquiditywereexpandedinMaywhentheECBbeganpurchasingEuropeangovernmentbondsonthesecondarymarkettocountertheeffectsoftheworseningEuropeansovereigndebtcrisis.ThegradualreductionoftheunconventionalmeasuresthatwasinitiallyannouncedforJanuary2011(butthathassincebeenpushedbacktoApril)causedtheinterbankratestoriseslowly.Thethree-monthEuriborrosebyapproximately40basispointsfromitslowinAprilto1.01percentattheendof2010.
However,thepositiveeffectsfromthelowbaseratewereatleastpartiallyerodedbyaveryvolatiledevelopmentofthecreditspreads,thusincreasingtherefinancingcostsforbanks.
Eurozone: Interest Rates
5.5
5.0
4.5
4.0
3.5
3.0
2.5
2.0
1.5
1.0
0.5
0.0
Jan
07
Apr
07
Jul 0
7
Oct
07
Jan
08
Apr
08
Jul 0
8
Oct
08
Jan
09
Apr
09
Jul 0
9
Oct
09
Jan
10
Apr
10
Jul 1
0
Oct
10
Jan
11
10-year German Bund 3-month EuriborECB policy rate Source: EcoWin
Thebondmarketwasextremelyvolatileandperformeddifferentlyfromcountrytocountry.YieldsonGermangovernmentbonds,thebenchmarkfortheEurozone,fellsubstantiallyinthefirsteightmonthsofthereport-ingperiodandreachedanall-timelowof2.11percentforten-yearmaturitiesattheendofAugust.YieldsongovernmentbondsfromAustria,FranceandotherhighlyratedEurozonemembersdevelopedsimilarly.Incontrast,riskpremiumsonGreek,IrishandPortuguesegovernmentbondsrosedramatically,andSpain,ItalyandBelgiumsawtheirspreadsincreasestartinginautumn.YieldsforAAAcountriesroseagaininthelastmonthsoftheyear.Theten-yearGermangovernmentbondclosed2010at2.96percent,andthepremiumforcomparableAustriangovernmentbondswasapproximately50basispoints.
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PReFaCe By tHe CHaiRMan oF tHe Managing BoaRd
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group ManageMent report
Risk Premia of 10-Year Bonds on 10-Year German Bunds, Percentage Points
1,000
900
800
700
600
500
400
300
200
100
0
Jan
08
Apr
08
Jul 0
8
Oct
08
Jan
09
Apr
09
Jul 0
9
Oct
09
Jan
10
Apr
10
Jul 1
0
Oct
10
Jan
11
Greece Ireland PortugalItaly Spain Source: Reuters (EcoWin), BAWAG P.S.K.
Theforeignexchangemarketsalsohadaverytumultuous2010.Thenominal-effectiveEuroexchangerateindex,whichmeasuresitsvalueagainstthecurrenciesofitsmaintradingpartners,lost9percentinannualcomparison.Comparedtotheindividualcurrenciesintheindex,theEurolostthemostversustheJapaneseyen(–18percent)andtheSwissfranc(–16percent).InJune,theEuroreacheditslowfortheyearoflessthan1.20USD/EUR,butreboundedto1.42USD/EURbythebeginningofNovemberandthenfellbackto1.34USD/EURinthelasttwomonthsoftheperiod.Overall,thevalueoftheEurorelativetotheworld’sothermajorcurrenciesduring2010wasdrivenprimarilybythefrequentlychangingmarketassessmentofthesovereigndebtsituationintheEurozone.
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Konzernrechnungslegung nach IFrsPReFaCe By tHe CHaiRMan oF tHe Managing BoaRd
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BaWag P.s.K.: Customer-Focused investment and growthBAWAGP.S.K.isoneofthelargestbanksinAustria,offeringawiderangeofproductsandservicespredomi-nantlyinAustria,butalsoinothercountries.TheBank’sbusinessactivitiescoverretailandcorporatebankingaswellasthefinancialmarketssegment.
TheclearfocusofBAWAGP.S.K.isonourcorecompetence,retailandcorporatebankinginAustria.WhiletheemphasisinpastyearslayonrepositioningtheBank,wearenowenteringanewphaseofinvestmentandgrowthinwhichoursuccessfulbusinessmodelwillbeexpandedandenhancedforthebenefitofourcustom-ers.
KeystepsforthegrowthoftheBankwerealreadytakeninthefinancialyear2010including:1. ExpansionofourAustrianretailbankingfranchise,withitsstrongdepositbase,continuestobethemain
pillaroftheBank’sexcellentliquidityposition.AninvestmentbudgetofoverEUR100millionforthecomingyearsunderscoresthestrategicimportanceofthissegment.ThemergeroftheBAWAGandP.S.K./postofficebranchesintoauniformlymanagedoutletnetworkthatwasstartedinOctober2010willopenupsignificantgrowthpotential.
2. TheprofitabilityofAustriancorporatebankingwasimprovedsubstantially,andlendinginthissegmentgrewmarkedly.Ourfocusonprovidingintegratedfinancialandcapitalmarketsolutionswillcreateaddi-tionalvalueforourcustomers.
3. WeareselectivelycomplementingourAustrianbusinessactivitieswithacarefulandrisk-mitigatingexpansionofourinternationalcorporatebankingbusiness,focusedprimarilyinWesternEurope.
4. Inthefirsthalfof2010,weinitiatedacomprehensiveprogrammetodrivetheimprovementofourcus-tomerserviceandcost-incomeratio,basedonextensiveinvestmentsinefficiencyandproductivity,cover-ingallcustomer-relatedandinternalunitsoftheBank.
Retail Banking and small Business
TheBankhasatraditionallystrongpositionintheretailmarketwith1.6millioncustomers,andtogetherwithourpartnerÖsterreichischePostAG,wehavethelargestcentrallymanagedbranchnetworkinAustria.Thanks
toourcoverageofalmosttheentireAustrianmarket,BAWAGP.S.K.wasabletoholditsstrongdepositbasedespitethechallengingmarketconditions.ThissupportstheBank’sstrongliquidityposition.
TheexpansionandintensificationofthecollaborationbetweenBAWAGP.S.K.andÖsterreichischePostAGin2010willenabletheBanktoofferitsfullspectrumofbankingservicesinapproximately520branches(280outletsinruralareasand240inurbanareas)throughoutAustriainthefuture.Postalserviceswillalsobeavailableattheseoutlets.
Theexpansionandintensifi-cationofthecollaborationbetweenBAWAGP.S.K.andÖsterreichischePostAGin2010willenabletheBanktoofferitsfullspectrumofbankingservicesinapproxi-mately520branchesthroughoutAustria.
FInanzIerungsserVIce
Machen sIe sIcheIn wÄrMeBIldVon IhrenenergIeKosten.
Die BAWAG Energiemilliardemit besonders günstigen Kreditenfür Bauen, Wohnen und Sanieren. Inklusive gratis SanierService.
Mehr darüber hier in Ihrer BAWAG Filiale und auf www.unternehmenösterreich.at
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Eachofthebrancheswillhavethreeareas:4 Self-servicezonesinthefoyerarea
Aself-serviceareawillofferaccountstatementprinters,paymenttransferscannersandcashdispenserstoenablecustomerstoconvenientlycovertheirbasicbankingneeds24hoursaday.
4 CounterzoneTransactionsforfinancialandpostalserviceswillbehandledinthecounterzone
4 AdvisoryzoneforfinancialservicesAdviceonbankproductsandserviceswillbeprovidedintheadvisoryzonethatisclearlyseparatedfromtheremainderofthebranch.
Thisnewbranchconceptwillbeimplementedconsistentlythroughoutthecountry.Theexperiencegatheredduringdailyoperationswillbeusedtoimprovethefurtherimplementationofthismajorbranchconcept.ThisgroundbreakingprojectofBAWAGP.S.K.andÖsterreichischePostAGistobecompletedby2012.
Thenewsalesstrategywillalsobeunderpinnedbyanewbrandimage,astheBankwillbeoperatingunderasinglestrongbrandthroughoutAustria:BAWAGP.S.K.
Our first joint branch with Österreichische Post AG was successfully opened in Innsbruck on 15 December 2010.
FInanzIerungsserVIce
Wir unterstützen Sie bei Ihrer Aus- und Weiterbildung mit maßgeschneiderten Konten, Krediten und Vorsorgeangeboten, denn:Wir vertrauen in Ihre Zukunft.
Mehr darüber in jeder BAWAG- oder Postfi liale und aufwww.unternehmenösterreich.at
JoB und FortBIldung?da Kann Man VoM schlaFen nur trÄuMen.
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Inadditiontoexpandingourbranchnetwork,wearealsocontinuouslyworkingtoimproveandbroadenourproductrange.Whendevelopingourproducts,wealwaystakeintoaccountthewishesandneedsofourcustomers,andfocusonprovidingtransparentandfairlypricedproducts.OurSecurityBarometerclearlyshowsourcustomersthesecurityandearningsprofileofeachofourproductsataglance.Ourproductrangeincludesourstrongcurrentaccountrange“Kontobox”,attractivesavingsproductssuchasour“KletterzinsSparbuch”,investmentproductssuchasthe“MinMaxFloater”andoursuccessfulWohnbaubankbonds,andfairlypricedloanssuchasthe“SuperschnellKredit”privateloanorhousingloanswithenergysavingsservice.OursubsidiarieseasybankandBAWAGP.S.K.Investofferadditionalretailproducts.
easybankisthesecond-largestdirectbankinAustriaandmanagesover300,000accounts.Akeygoalistoexpanditspositionasamaindirectbankforretailcustomers.easybankoffersitscustomersclear,simplesolutionsfortheirfinancialneeds.Leanorganisationalstructuresmakeitpossibletoofferitsproductsatextremelycompetitiveterms.ItisalsothecentreofcompetenceforcreditcardbusinesswithinBAWAGP.S.K.Group.The2010financialyearbroughtthebestresultinthehistoryofeasybank.AsurveybytheChamberofLabour(AK)namedeasygratis,easybank’ssalaryandpensionaccount,thebestofalltestedaccountsinAustriaforthefifthtime.
BAWAGP.S.K.Investgrewitsfundvolumebyover10percentdespitethedifficultmarketconditionsin2010.Inachievingthis,thecompanynotonlyoutperformedthemarket,butalsopassedtheEUR4billionassetsundermanagementmark.BAWAGP.S.K.Invest’sfundstookprizesattheLipperFundAwards,theAustrianFundPrize,theAustrianUmbrellaFundAwardsandtheVisioFundAwardinmultiplecategoriesin2010.
Corporate Customers and Financial Markets
Incommercialbanking,theBankispursuingthesamesuccessfulstrategythatithasbeenfollowingoverthepastyears.MostofthecustomersinthissegmentarelocatedinAustria,andBAWAGP.S.K.offersabroad
rangeofproductstomeettheirneedsfordoingbusinesslocallyaswellasexpandingtheirinternationalactivities.Theseincludestandardproductsaswellastailor-madefinancingandinvestmentsolutionsthatmakeBAWAGP.S.K.aparticularlyvaluableandreliablepartnerforAustria’seconomy.
Ithasbecomeclearinrecentyearsthatdevelopmentsonthefinancialmarketshaveadirectimpactontherealeconomyandviceversa.ThismadeitalogicalsteptomergetheformerlyseparatebusinessareasAustrianCorporatesandFinancialMarketsintoasingleareaofcompetenceatBAWAGP.S.K.Thisapproachisbeingsupplementedbytheintroductionofauniquebusinesssolutionpartnerconcept.Inthefuture,ourcorporatecustomerswillhaveasinglepointofcontactthatwillbeabletoreactmorequicklytoeachcustomer’sneedsbycreatingcomprehensivebutindividualisedfinancialsolutionswithouthavingtocoordinatewithdifferentoperatingunitswithintheBank.
Businesssolutionpartner–ourcorporatecustomerswillhaveasinglepointofcon-tactthatwillbeabletoreactmorequicklytoeachcus-tomer’sneedsbycreatingcomprehensivebutindividu-alisedfinancialsolutionswithouthavingtocoordinatewithdifferentoperatingunitswithintheBank.
www.pskbank.atStand: 25.8.2010 / Änderungen vorbehalten
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TheFinancialMarketsunitconductsfinancialmarkettransactionsforourcustomersandisalsoresponsiblefortradingfortheBank’sownaccount.FinancialMarketsworkscontinuouslytodesignattractiveandinnova-tivefinancialmarketproductstosupplementourretailspectrumandtheofferingsfromthird-partybanks.In2010,theBankwastheleadorco-leadmanagerfornearlyallcorporatebondplacementsontheAustrianmarket.Thus,wewereabletooptimallyleverageourmanyyearsofexperienceincorporatebankingincombinationwithourstrongretailsalesbase.
Anothersuccessin2010wasBAWAGP.S.K.’sreturntotheinternationalcapitalmarkets,whichledtoanenthusiasticinvestorresponse.TheBankissuedalmostEUR2billioninfinancialinstrumentsinthereportingperiod,includingWohnbaubankbondsandfourcoveredbondsdenominatedinEurosandSwissfrancs.
TheBAWAGP.S.K.LeasingGroupstrengtheneditspositionasoneofthetopleasingprovidersintheAustrianmarketin2010.EspeciallythestablegrowthofmotorvehicleleasingthroughthedistributionpartnersofBAWAGP.S.K.Leasingandtherealisationofanumberofmajorrealestatetransactionsinclosecollaborationwiththebankingsalesunitsplayedakeypartinthissuccess.BAWAGP.S.K.Leasingincreaseditsnewbusinessvolumeby10percentinAustria,theCzechRepublic,Hungary,PolandandSlovakiacomparedto2009.
For2011,theBank’sbusinesssolutionpartnersandtheleasingproductspecialistswillbeworkingcloselytogethertoofferBAWAGP.S.K.’scorporatecustomersleasingproductsinamorefocusedandeffectivemanner.Atthesametime,BAWAGP.S.K.LeasingwillbeincreasingitsfocusonindirectsalesthroughdistributionpartnersandonitscollaborationwithGeneraliVersicherung.
international Business
Ourservicerangeisroundedoutbyselectivetransactionswithkeyinternationalaccountswithinapre-definedandconservativeriskframework.Ingeographicalterms,ourInternationalBusinessfocusespredominantlyonWesternEurope.
Additionally,selectedcommercialpropertiesweregraduallyfinancedinWesternEuropeinthefinancialyear2010.Thisbusinessareaistobeexpandedfurtherinthefollowingyears.
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efficiency and Productivity enhancement Programme
Aprojectwaslaunchedinthefirsthalfof2010toincreasetheefficiencyandproductivityoftheBankandtoimprovethestandardofservicethatweprovidetoourcustomers.ItistorunforthreeyearsandwillfocusonimprovingprocessesandworkflowswithintheBankandonstreamliningtheBank’sorganisationalstructure.Alargeshareoftheprojectedcostsavingsenvisagedintheprogrammewillresultfromnaturalstafffluctua-tionandretirements,andwillreducethenetnumberoffull-timestaffby500by2013.
TheBankalsoplanstoinvestapproximatelyEUR40millioninnewtechnologyoverthecomingthreeyearstosupportthisprogramme.
outlook
BAWAGP.S.K.ispositioningitselftosuccessfullymasterthecontinuedchallengingconditionsontheAustrianandinternationalfinancialmarketsthroughanexpansionofourAustrianretailfranchise,bycombiningthecompetencesforAustrianCorporatesandFinancialMarketsintoasingleunit,andbyselectivelyexpandingourInternationalBusinessactivities.Thestrategicpositionthatwehaveachievedandtheconsistentimprove-mentofourprocesseshavecontributedsignificantlytothegrowthofourearningspowerinthereportingperiod,andwillensurestablegrowthinthecomingyears.
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Key events during the Financial year
Changes in the Managing Board
SanjaySharmawasappointedChiefOperatingOfficereffective1January2010.HecandrawonmanyyearsofexperienceatBarclaysBankplcandhasbeenManagingDirectorforOperationsatBAWAGP.S.K.sinceAugust2008.
ChristophRaningerjoinedtheManagingBoardon17May2010asHeadofFinancialMarkets.HesucceededCarstenSamusch,whoannouncedinJanuary2010thathewouldnotbeseekinganextensionofhisfixedtermcontract.ChristophRaningerisnowresponsibleforCorporateandFinancialMarketsandtookovertheAustrianCorporatesdivisionfromReginaPrehofer,wholefttheManagingBoardattheendofAugust2010.Beforetakingontheseduties,ChristophRaningerwasmanagingdirectorandmemberofthemanagingboardofUniCreditCAIBAG,wherehewasresponsiblefortheMarketsandInvestmentBankingdivision.
AndreasArndtbecameChiefFinancialOfficeron1October2010.Priortothis,hespentmanyyearsinmanagerialpositionsintheDeutscheBankgroup,includingatenureontheboardofDeutscheBankPrivat-undGeschäftskundenAG.
ThebusinessareasRetailBankingandSmallBusinesshavebeendirectedbyWolfgangKleinsince1November2010.WolfgangKleinworkedatDeutschePostbankforthelasttenyears.Duringthistime,hewasamemberoftheboardandwasresponsibleforthevariousaspectsofretailbanking.HewasCEOforhislasttwoyearsatthebankpriortojoiningBAWAGP.S.K.
Changes in the supervisory Board
ScottParkerlefttheBank’sSupervisoryBoardon30June2010.
TheSupervisoryBoardwasexpandedwiththeappointmentofRonaldE.Kolkaon6August2010andKeithTietjenon5October2010.
Die Hauptschule am Bahnhof wurde generalsaniert.
Die Kläranlage Glasing wurde erweitert.
Florian Fischer geht den zweiten Bildungsweg.
Mag. Ursula Zewell wird sich ihren Traum vom Haus am See erfüllen.
Das Schulzentrum Oberau wird komplett modernisiert.
Familie Visinteiner freut sich auf ihr neues Eigenheim.
Die Haussanierung spart Familie Hradil Heizkosten.
Die Bewohner des Altenheims genießen ihr renoviertes Zuhause.
Adrian Stamboli profi tiert vom Gratis-Konto für Polizeischüler.
Das Sonderpädagogische Zentrum wird neu errichtet.
Thomas Wurzer hat sämtliche Fenster und Türen erneuert.
11 von über 11.000 Erfolgsgeschichten,die wir mit der Kommunal- und Energiemilliarde sowie mit der Veranlagungs- und Ausbildungsoffensive ermöglichen konnten.Weil unser Erfolg der Erfolg unserer Kunden ist.
www.unternehmenösterreich.at
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Capital and guarantee Contributions by the Republic of austria and shareholders
Aframeworkagreementwassignedin2009betweenBAWAGP.S.K.,itsshareholdersandtheRepublicofAustriainwhichtheRepublicofAustriaundertooktosubscribeparticipationcapitalinBAWAGP.S.K.intheamountofEUR550millionandtoissueaguaranteeforcertainassetsinthemaximumamountofEUR400million.Inaddition,theBank’sshareholdersgrantedacapitalcontributiontotallingEUR205millioninAugust2009.TheBankcancelleditsentitlementtotheguaranteefromtheRepublicofAustriainfullasof22June2010.
On30June2010,theEuropeanCommissionapprovedtheparticipationcapitalpackage.ThisapprovalincludedcertainconditionsandcompensatorymeasuresthattheBankmustfulfillintheupcomingyears.
Thesecompensatorymeasuresincludethesaleofcertainnon-coreparticipations,atemporaryprohibitiononthepaymentofshareholderdividends,limitsoninvestmentsinbusinessactivitiesoutsideofAustriaandtheearlyredemptionofcertainsecurities.
Moody’s Rating for BaWag P.s.K.
TheratingagencyMoody’scompletedareviewofitsratingforBAWAGP.S.K.inOctober,basedonthefiguresforthefirsthalfof2010.
Despitethechallengingbusinessconditions,theagencyconfirmeditsratingforBAWAGP.S.K.on14January2011andassignedtheBankastableoutlook,asitdidlastyear.Thisresultissatisfactory.
Long-termbondsfromBAWAGP.S.K.areratedatBaa1,short-termliabilitiesatP2andtheBank’sfinancialstrengthratingisD.TheratingforhybridcapitalinstrumentsremainedunchangedatB2.
Initsratingillustration,Moody’sspecificallyrecognisedtheextensiveimprovementsalreadymadebytheBank;italsoincludedspecialpraisefortheimprovementsmadeintheareaofriskandtheintensivecollabo-rationwithÖsterreichischePostAG,whichwillhaveapositiveeffectontheretailnetwork.
Theratingclassificationis“stableoutlook”.
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legal aspects
sPhinXSPhinXcompaniesfiledalawsuitwiththeSupremeCourtoftheStateofNewYorkinMarch2008againstoverfiftyparties,oneofthembeingBAWAGP.S.K.Nospecificamounthasbeennamedfortheallegeddamages.
Variousmotionsforthedismissalofthissuitarestillpending.Inaddition,documentsarebeingcollectedandreviewedtogatherevidenceforthecase,andwitnesseshavealreadybeenquestionedinhearingslastingseveraldays.BAWAGP.S.K.hasfiledclaimswiththeliquidatorsofSPhinXforinvestmentsinSPhinXfundsthathavenotbeenredeemedintheamountofapproximatelyUSD29.4million.
Theproceedingsareprovingtobearduous,anditcannotbeforeseenwhentheywillbecompleted.
TheBank’sclaimsstillhavenotbeenrecognised,andtheliquidator’sproposalsforthedistributionoftheavailableassetshavebeensubjecttodebate.
Changes in the group’s Holdings
BaWag P.s.K. VersicherungTheBanksolda24.99percentshareinBAWAGP.S.K.VersicherungAGtoGeneraliHoldingViennaAGinJanuary2010,reducingitsstakefrom49.99percentto25percentplusoneshare.
Toaccountfortherequirementsofthemarketandthesignificantgrowthofthecompany,ashareholders’contributionwasagreedin2010tostrengthentheequitybaseofBAWAGP.S.K.Versicherung.BAWAGP.S.K.participatedinthecontributioninaccordancewithitsstakeinthecompany.
MKB Bank Zrt.TheHungarianMKBBankZrt.completedacapitalincreaseequaltoEUR172millionon1December2010.BAWAGP.S.K.GroupparticipatedinthiscapitalincreasethroughP.S.K.BeteiligungsverwaltungGmbHinaccordancewithitsstakeinthebank,andstillholdsashareof9.77percent.ThecapitalcontributiontotalledapproximatelyEUR17million.AntoinetteHoldingLtd.,whichisaffiliatedwiththeshareholders,didnotparticipateinthecapitalincrease.Together,P.S.K.BeteiligungsverwaltungandAntoinetteHoldingLtd.nowholda10.11percentstake.
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Restructuring of Foreign CompaniesAspartofthecomprehensivereorganisationofoursubsidiariesinLiechtensteinandIreland,anumberofstepsweretakentostreamlineourstructure.AfterthecompletionoftheliquidationproceedingsofoursubsidiariesinIrelandthatwereinitiatedin2010andthatarenearingtheirconclusion,theBankwillexittheIrishmarketentirely.Duetomergers,thenumberofcompaniesthatareactiveinLiechtensteinwasreducedtoone.
other Material Changes in the group’s HoldingsFurther Companies in Liquidation
TheliquidationofBAWAGInternationalFinanceLtd.(Ireland),BAWAGP.S.K.JerseyAutoFinanceLtd.,AutoFinanceJerseyILtd.andAutoFinanceJerseyIILtd.wascompletedin2010.
Real Estate
Wecontinuedtoconsistentlyapplyourrealestatestrategyinthe2010financialyear.PropertiesworthapproximatelyEUR41.4millionintotalweresold,inpartthroughassetandsharedeals.
The Leasing and Real Estate Project “Simple”
Thecomprehensiverestructuringandstreamliningoftheleasingstructurewasdecidedduringthecurrentfinancialyear.Theprojectconsistsofthefollowingsteps:4 Liquidationormergerofcompaniesthatarenolongerneeded4 Structuringaccordingtobusinesssegments4 Liquidationofthedormantcompanies
Someofthesestepshavealreadybeencompleted,andtheincorporationoftheCEEsubsidiariesintoanewholdingcompanyiscurrentlybeingprepared.
Intherealestatesegment,BPIHoldingGmbHandIDGImmobilienDevelopmentGesellschaftm.b.H.weremergedwithBAWAGP.S.K.IMMOBILIENGmbH.
Sale of BAWAG P.S.K. Versicherungsdienst GmbH
Inthefinancialyear2007,a49.99percentminorityshareintheinsurancebrokeragecompanyBAWAGP.S.K.VersicherungsdienstGmbHwassoldtoGenerali.Theremaining50.01percentweresoldtoBAWAGP.S.K.VersicherungAGinthereportingperiod.
Sale of APK-Pensionskasse Aktiengesellschaft
The4.25percentshareinAPK-Pensionskassewassoldattheendof2010.
www.unternehmenösterreich.at
Dies ist eine Marketingmitteilung der BAWAG P.S.K. Die Informationen stellen kein Angebot, keine Anlageberatung sowie keine Kauf- oder Ver-kaufsempfehlung dar. Der Inhalt der Informationen kann ein individuel-les Beratungsgespräch nicht ersetzen. Die Emission unterliegt nicht der Prospektpfl icht gemäß Kapitalmarktgesetz.
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notes to the annual Financial statementsTheGroup’sreportswerepreparedinaccordancewiththeInternationalFinancialReportingStandards(IFRS).
AllreportsweremadeusingtheGuidelinesonFinancialReporting(FINREP)frameworkrequiredforreportingtoOesterreichischeNationalbank(theAustrianNationalBank,OeNB),whichconformstotheframeworkrecommendedbytheCommitteeofEuropeanBankingSupervisors(CEBS)foruniformfinancialreportingbyinternationallyactivebanks.ThisframeworkclearlydepictsthemeasurementcategoriesstipulatedinIAS39.
TheGroupconsistsof55entitiesinAustriaandabroad(2009:57).Therewerenosignificantchangesinthescopeofconsolidationin2010.
AsidefromBAWAGP.S.K.,theotherbanksintheGroupareeasybank,ÖsterreichischeVerkehrskreditbank,BAWAGP.S.K.Wohnbaubank,BAWAGP.S.K.Invest,BAWAGBankad.d.inSloveniaandBAWAGMaltaBank.Materialnon-creditinstitutionsaretheleasinggroup,theBAWAGP.S.K.realestatesub-group,theshoeretailerStiefelkönigandfourassetmanagementcompaniesthatholdthemajorityofthestructuredcreditportfolio.BAWAGP.S.K.Versicherungisaccountedforusingtheequitymethodafteramajoritystakeinthecompanywassoldin2007.In2010Stiefelkönigisreportedundertheitemassetsheldforsaleforthefirsttime.
BAWAGP.S.K.planstosellfurtherholdingsthatarenotpartofitscorebusiness.PursuanttoIFRS5,theassetsandliabilitiesofthesesubsidiariesthatareclassifiedasheldforsalearereportedunderaseparateitemontheStatementofFinancialPosition.
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Assets
in millions of Euros 2010 2009 ChangeCash reserves 511 615 -104 -16.9%Financial assets 10,855 14,543 -3,688 -25.4%
Fair value through profit or loss 2,284 2,980 -696 -23.4%Available for sale 6,644 3,250 3,394 >+100%Held to maturity – 6,560 -6,650 –Held for trading 1,927 1,753 174 9.9%
Loans and receivables 26,173 24,879 1,294 5.2%Debt instruments 2,358 – 2,358 –Customers 22,288 21,066 1,222 5.8%Credit institutions 1,527 3,813 -2,286 -60.0%
Hedging derivatives 55 33 22 66.7%Tangible non-current assets 219 287 -68 -23.7%Intangible non-current assets 229 266 -37 -13.9%Other assets 478 602 -124 -20.6%Assets held for sale 36 – 36 –Total assets 38,556 41,225 -2,669 -6.5%
TheBank’s consolidated assetsasof31December2010amountedtoEUR38,556million,EUR2,669mil-lionor6.5percentlessthanattheendofthepreviousfinancialyear.TheBankreduceditsportfoliooflow-returninvestmentsandselectivelyenteredintopositionsofferinghigherreturns.
TheEUR104million(minus16.9percent)reductioninthecash reservetoEUR511millionisduetoalowerminimumreserveheldwiththeOeNBonthereportingdate.
Theitemfinancial assets recognised at fair value through profit or losscontainsthesecuritiesandloansforwhichchangesinfairvaluearerecognisedintheProfitorLossStatement.ThefinancialinstrumentsinthiscategorydecreasedbyEUR696millionor23.4percenttoEUR2,284millioninthefinancialyearprimarilyasaresultofplannedredemptionsanddisposals.
BecauseoftheBank’schangedinvestmentconcept,theassetsinthecategoryofheld-to-maturity financial assets,whichtotalledEUR6,560millionattheendoftheprioryear,wereeithersoldorreclassifiedasavailable-for-salefinancialassets(furtherinformationispresentedintheNotes).Overall,theavailable-for-sale financial assetsincreasedfromEUR3,250millionattheendof2009toEUR6,644millionatthereportingdate.Inadditiontooursecuritiesportfolio,whichconsistsprimarilyofinvestmentsinliquidbank,corporateandgovernmentbonds,thisitemalsocontainsthecarryingamountsofournon-consolidatedequityholdingsintheamountofEUR245million(2009:EUR279million).
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Held for tradingcoversnotonlythepositionsinthetradingbook,butalsoallpositivefairvaluesofderivativefinancialinstruments,includingthoseheldtohedgepositionsinthebankingbookbutforwhichhedgeaccountingisnotapplied.TheincreaseofEUR174million(9.9percent)toEUR1,927millioncanbeattributedprimarilytohighervaluesofcurrency-basedderivativesinthetradingbook.Asimilartrendwasseenforthetradingliabilities.
Theitemloans and receivablescontainstheloanstocustomersandcreditinstitutionsthatarerecognisedatamortisedcost.ThenetincreaseofEUR1,294millionisrelatedtoEUR2,358millionindebtinstrumentsandEUR1,222millioninloansandadvancestocustomers.Incontrast,loansandadvancestocreditinstitu-tionsfellbyEUR2,286million.
Theincreaseinthecarryingamountsofdebt instrumentsreportedinthisitemtoEUR2,358millioncanbemainly(EUR1,897million)attributedtothetransferofnottradedsecuritiesfromthecategoryofavailable-for-salefinancialassetstoloansandreceivables.Theremainingincreaseresultedfromthepurchaseofsecuritiesin2010.
Thereceivables from customersincludeanencouragingincreaseinloanstocommercialcustomersin2010,boostingtheitembyEUR1,222millionor5.8percenttoEUR22,288million.
Receivables from credit institutionsfellfromEUR3,813millionin2009toEUR1,527millionattheendof2010.Thiscontractioncanbeattributedabovealltoshort-termdepositsatotherbanks,whichwerereducedbecauseofthelowreturnstheyoffered.
Tangible non-current assetstotalledEUR219millionon31December2010,downfromEUR287millionattheendof2009.Thiscanbeattributedtodepreciationandthesaleofproperties.
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Gleich Infopaket anfordern unter www.easybank.at oder unter 05 70 05-507. * Quelle: www.arbeiterkammer.com/konsument, November 2010. Getestet wurden 15 Banken in Oberösterreich.Das Gratis-Gehaltskonto ist an keine weiteren Bedingungen wie Mindestumsatz oder Nutzung weiterer Bankprodukte geknüpft.
easybank_easygratis_154x217.indd 1 09.03.11 10:00
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Liabilities
in millions of Euros 2010 2009 ChangeFinancial liabilities 35,194 38,054 -2,860 -7.5%
Fair value through profit or loss 4,900 6,371 -1,471 -23.1%Customers 117 435 -318 -73.1%Issued securities 4,783 5,936 -1,153 -19.4%
Held for trading 2,271 2,198 73 3.3%At amortised cost 28,023 29,485 -1,462 -5.0%
Customers 21,733 22,674 -941 -4.2%Credit institutions 2,205 3,468 -1,263 -36.4%Issued securities 4,085 3,343 742 22.2%
Hedging derivatives 40 60 -20 -33.3%Provisions 436 441 -5 -1.1%Other obligations 462 378 84 22.2%Obligations in disposal groups held for sale 38 – 38 –Equity 2,016 1,919 97 5.1%Non-controlling interests 370 373 -3 -0.8%Total equity and liabilities 38,556 41,225 -2,669 -6.5%
Theitemfair value through profit or lossunderfinancialliabilitiescomprisestheBank’sissuedsecuritiesanddepositsthatarereportedatfairvalueandthatarenotassignedtothecategoryheldfortrading.TheseliabilitiestotalledEUR4,900millionon31December2010,EUR1,471millionor23.1percentlessthanattheendoftheprioryear.ThisdeclineisprimarilyduetotheredemptionofsecuritiesissuedbyBAWAGP.S.K.InvestmentproductswhoseinterestdependsnotonlyonthegeneralinterestratelevelbutalsoonotherfactorssuchastheinflationrateorthedevelopmentofspecificindexesdecreasedbyEUR318milliontoEUR117million.Becausetheseproductsarehedgedagainsttherelevantrisksusingderivativefinancialinstruments,theyarerecognisedatfairvaluethroughprofitorlosstoensurethattheyarereportedproperly.Nonewproductsarebeingissuedinthiscategory.
Theheld-for-trading financial liabilitiesrosebyEUR73millionor3.3percenttoEUR2,271millionin2010.Thisincreasecanespeciallybeattributedtohighervaluationsofthecurrency-basedderivativesinthetradingbook.Asimilartrendwasseenforthefairvaluesofthetradingassets.
Payables to customersfellbyEUR941millionor4.2percenttoEUR21,733million.Theratherconserva-tiveconditionsbeingofferedbyBAWAGP.S.K.overthepastmonthsaswellastheshiftofsomeinvestmentsinsecuritiesandotherbankdepositsresultedinaEUR1,219milliondecreaseinsavingsdeposits,whichwaspartiallyoffsetbyaEUR477millionincreaseinsavingsthroughsavingscardaccounts.Togetherwiththeinvestmentproductsmeasuredattheirfairvaluesmentionedabove,depositstotalledEUR13,001millionasat31December2010,oronethirdoftheBank’sconsolidatedassets.Otherdeposits(includingsavingscardaccounts)grewsatisfactorilybyEUR278milliontoreachEUR8,732million.
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Payables to credit institutionsfellbyEUR1,263millionor36.4percenttoEUR2,205million.
Theissued securitiesrecognisedatamortisedcostincreasedduetosuccessfulnewissuesintheamountofEUR2billion.Netofscheduledredemptions,issuedsecuritiesincreasedbyEUR742millionandcametoEUR4,085millionattheendofthereportingperiod.
TheBank’sprovisionsweredownbyEUR5milliontoEUR436millionon31December2010.
IFRSequityincreasedbyEUR97million(+5.1percent)toEUR2,016millionresultingfromcreditingtotalcomprehensiveincomein2010ofEUR123millionandcreditingthecouponpaidforparticipationcapitalfor2009ofEUR25.6million.Non-controlling interestsremainedvirtuallyunchangedatEUR370million.
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Profit or Loss Statement (adjusted for valuation results attributable to non-controlling interests)
in millions of Euros 2010 2009 ChangeNet interest income 649.9 564.3 +85.6 +15.2%Net fee and commission income 159.4 154.8 +4.6 +3.0%Gains and losses on financial assets and liabilities adjusted for non-controlling interests 1)
155.9
138.9
+17.0
+12.2%Other operating income and expenses -4.4 29.9 -34.3 –Operating income 960.8 887.9 +72.9 +8.2%Administrative expenses -544.5 -527.7 -16.8 -3.2%Depreciation and amortisation on tangible and intangible non-current assets
-73.8
-80.4
+6.6
+8.2%
Operating expenses -618.3 -608.1 -10.2 -1.7%Operating profit 342.5 279.8 +62.7 +22.4%Provisions and impairment losses -199.7 -236.7 +37.0 +15.6%Share of the profit or loss of associates accounted for using the equity method
-4.7
-8.0
+3.3
+41.3%
Profit before tax adjusted for non-controlling interests 1)
138.1
35.1
+103.0
>+100%
Income taxes -12.7 -56.6 +43.9 +77.6%Profit (loss) after tax (without gains and losses on financial assets attributable to non-controlling interests)
125.4
-21.5
+146.9
>+100%
Profit (loss) after tax (without gains and losses on financial assets attributable to non-controlling interests)
125.4
-21.5
+146.9
>+100%Gains and losses on financial assets attributable to non-controlling interests 1)
11.2
186.6
-175.4
-94.0%
Profit after tax 136.6 165.1 -28.5 -17.3%Thereof attributable to non-controlling interests
14.8
195.1
-180.3
-92.4%
Thereof attributable to owners of the parent
121.8
-30.0
+151.8
–
1) UnderIFRS,theitemGainsandlossesonfinancialassetsandliabilitiesalsoincludesthevaluationofsecuritieswhoseriskinbornebyshareholdersofnon-controllinginterests.Thesesecuritiesaresubjecttosubstantialfairvaluefluctuations.Becauseoftherestructuringofoneofthesesecuritiesinthe2009financialyear,impairmentlossesfromprioryearswerereversedinthereportingperiodandvaluationgainsofEUR186.6millionwerecreditedtotheshareholdersofnon-controllinginterests.Inordertoimprovethecomparabilityoftheresults,thevaluationresultsattributabletoshareholdersofnon-controllinginterestsareshowninaseparateline.ComparedtotheProfitorLossStatementpresentedintheConsolidatedFinancialReportaccordingtoIFRS,theitemGainsandlossesonfinancialassetsandliabilitiesisEUR11.2millionlower(2009:EUR186.6millionlower).Accordingly,theitemProfitbeforetaxpresentedaboveisEUR11.2millionlower(2009:EUR186.6millionlower)thantheProfitbeforetaxpresentedintheConsolidatedFinancialReportaccordingtoIFRS.
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Net interest incomeincreasedbyEUR85.6millionor15.2percenttoEUR649.9millionin2010thankstoconsistentimprovementsintheprofitabilityofourbusinessareas.Theselectiveexpansionofourinternationalbusinessactivitiesalsoplayedamajorroleinboostingnetinterestincomeintheperiod.
Net commission incomeincreasedmoderatelyby3.0percentcomparedtotheprioryear,amountingtoEUR159.4million.CommissionexpensesinthefinancialyearincludepaymentsintheamountofEUR5.7millionfortheguaranteeissuedbytheRepublicofAustriaforcertainassetsinthemaximumamountofEUR400million,whichwasterminatedon22June2010.
Thegains and losses on financial assets and liabilitiesaredrivenprimarilybythevaluationofourinvestmentsandissuedsecuritiesandgainsfromthesaleofsecurities.
TheFinancialMarketsunitachievedaresultofEUR19.2millioninthereportingperiodbytradinginsecuri-tiesandderivatives.
Riskpremiumsonthecapitalmarketdeclinedagainin2010,asin2009.ThisledtopositivevaluationresultsinthestructuredcreditportfolioofEUR28.8millionandrealisedgainsfromthesaleandredemptionofsecuritiesofthestructuredcreditportfoliointheamountofEUR10.3million.
AfurtherEUR21.2millioninincomewasgeneratedbythesaleofassociatedcompaniesandsubsidiaries.Investmentstrategychangesandrevisedinterestratepositioningresultedinthesaleofsecuritiesandrealisa-tionofcapitalgainsinthereportingperiod.Theseprofitswereusedtocoverexpensesfromthevaluationofissuedsecuritiesrecognisedatfairvaluethroughprofitorlossandothereffectsofhedgingmeasuresandvaluations.ThesemeasuresresultedinanetsurplusofapproximatelyEUR76million.
Theother operating income (expenses)resultedinnegativeEUR4.4millioninthereportingyear,mainlyduetovaluationlossesfromourretailsubsidiary.ThehigherotheroperatingincomeinthepriorperiodresultedfromrevenuefromthesaleofpropertiesandcompensationpaidtotheBankforlegaldamages.
Administrative expensestotalledEUR544.5millioninthereportingperiodandwereupbyEUR16.8millionor3.2percentcomparedto2009.ThisincludesrestructuringexpensesofEUR25.8millionarisingfromourefficiencyandproductivityenhancementprogramme.Withouttheserestructuringexpenses,thepersonnelandadministrativecostswerereducedbyEUR9.0millionforthereportingperiod.
TheEUR6.6millionreductionindepreciationtoEUR73.8millioncanmainlybeattributedtothesaleofpropertiesinthe2009and2010financialyears.
Expensesforprovisions and impairment lossesfellbyEUR37.0millionor15.6percenttoEUR199.7millioninthereportingperiod.ThisencouragingtrendwasmainlytheresultofaEUR38.9millionreductionintheprovisionsrequiredforourloanportfoliotoEUR135.6million.Impairmentlossesforequityinvest-mentsandgoodwillcametoEUR50.2millioninthefinancialyear,andwererelatedprimarilytointerestsincreditinstitutions.ImpairmentlossesonpropertiesintheamountofEUR12.0millionwererecognisedbecauseoftheongoingrestructuringmeasuresandtheplannedcombinationofBAWAGandpostofficebranches.Nosubstantialwrite-downswererecordedforthestructuredcreditportfolioin2010.
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Theresultfromtheassociates accounted for using the equity method(minusEUR4.7million)primarilycontainstheproportionatelossofZEUSRecoveryFundS.A,whichisduetothevaluationofinvestments.
Byconsistentlyimprovingtheprofitabilityofourbusinessactivitiesandthankstotheprocessoptimisationsimplementedtodate,BAWAGP.S.K.achievedaprofit before taxofEUR138.1millionin2010,substantiallyexceedingtheprofitofEUR35.1millionrecordedin2009.
Thetax expensesintheamountofEUR12.7millionconsistprimarilyofcurrenttaxes.ThesignificantdeclineintaxexpensescomparedtothepriorfinancialyearistheresultoflowerexpensesfordeferredtaxesresultingfromdifferentmeasurementapproachesaccordingtotaxlawandIFRS.Noadditionaldeferredtaxeswerecapitalisedin2010forBAWAGP.S.K.’sexistingtaxlosscarryforwards.
Thegains and losses on financial assets attributable to non-controlling interestspertaintofairvaluefluctua-tionsthatarebornebyshareholdersofnon-controllinginterests.TheIFRSProfitorLossStatementintheNotesshowsthesefairvaluefluctuationsundertheitemgainsandlossesonfinancialassetsandliabilities.Inordertoimprovethecomparabilityoftheresults,thevaluationresultsattributabletoshareholdersofnon-controllinginterestsareshownunderaseparateiteminthisProfitorLossStatement.
Theresultfortheyearattributabletotheownersoftheparentcompanyin2009intheamountofminusEUR30.0millionwasincreasedtoplusEUR121.8millionin2010.
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Consolidated own funds of the BAWAG P.S.K. bank group pursuant to the Austrian Banking Act (BWG)
in millions of Euros 31.12.2010 31.12.2009Share and participation capital 800 800Reserves (including fund for general banking risks) 1,118 954Goodwill, minorities and deductions 307 346Core capital (Tier I) 2,225 2,100Less shareholdings held for investment purposes -35 -51Core capital (Tier I) after deductions 2,190 2,049Reserve under § 57 BWG, revaluation reserve 49 85Supplementary and subordinated debt capital 593 746Additional items (Tier II) 642 831Less shareholdings held for investment purposes -35 -51Eligible own funds 2,797 2,829Tier III 115 67Own funds 2,912 2,896
OwnfundsarecalculatedonthebasisoftheresultsofthemembersofthebankgroupaccordingtoAustrianGAAP(UGB)andBWG.
Own funds requirement
in millions of Euros 31.12.2010 31.12.2009Credit risk 1,714 1,579Market risk 115 67Operational risk 146 150Capital requirements 1,976 1,796
ThisresultsinaTierIcapitalratioof9.9percent(2009:10.0percent)andanownfundsratioof12.4percent(2009:13.6percent).Bothratiosarewellabovetheminimumlegalstandards,whichamountto4percentand8percent,respectively.TheTierIcapitalratiobasedoncreditrisk(excludingoperationalrisk)amountsto10.2percent(2009:10.4percent).
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Risk Management
WithrespecttotheexplanationsonfinancialrisksatBAWAGP.S.K.aswellasthegoalsandmethodsofriskmanagement,wewouldlikedrawthereader’sattentiontotheinformationintheNotestotheconsolidatedfinancialstatements.
non-Financial Performance indicators
Corporate governance
supervisory BoardTheSupervisoryBoardofBAWAGP.S.K.,whichisresponsibleformonitoringbutalsoassistingtheManagingBoard,consistsofsixnationalandinternationalrepresentativeselectedbytheAnnualGeneralMeeting.AnadditionalthreemembersaredelegatedbytheWorksCouncil.(TheindividualmembersoftheSupervisoryBoardandthecompositionofthecommitteesarepresentedintheBoardsandOfficerssection.)
TheRulesofProcedureoftheSupervisoryBoardcomprisetherightsandobligationsofthisboardandalsodefinetheindividualcommitteesoftheSupervisoryBoardandtheirresponsibilities.Aspartoftheamend-mentoftheSupervisoryBoard’sRulesofProcedure,someoftheprovisionsweresimplifiedandharmonised.
UndertheultimateresponsibilityofthefullSupervisoryBoard,theapprovalofloansandotherformsoffinancingandcredittoindividualborrowersorgroupsofconnectedcustomersforthepurposesofsection27oftheBankingAct(exposuresthatequal10percentormoreoftheBank’seligibleownfunds)hasbeendelegatedtotheCreditCommittee.AnannualreportaboutthelargeexposuresapprovedbytheCreditCommitteeissubmittedtotheSupervisoryBoard.TheCreditCommitteealsoapprovestransactionswiththeBank’saffiliatedparties(exceptfortransactionswithmembersoftheSupervisoryBoardorManagingBoardthataredelegatedtotheRemunerationCommittee)andmaterialcreditpolicies.ItalsoadvisestheManagingBoardinbasiccreditriskpolicyissues.
TheAuditCommitteereviewstheBank’saccountsandtheannualfinancialstatements,andmonitorstheBank’sriskmanagementandinternalcontrolsystems.Thiscommitteeisalsoinregularcontactwiththeexternalauditor,theInternalAuditdivisionandtheComplianceOffice.TheannualauditplansandreportsabouttheactivitiesoftheInternalAuditdivisionandtheBank’sComplianceOfficearealsosubmittedtotheAuditCommittee.
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WhiletheNominationCommitteedealswithsuccessionplanningandselectingsuitablecandidatesfortheManagingBoard,theRemunerationCommitteedealswithrelationshipsbetweentheBankandthemembersoftheManagingBoardaswellastheexecutives.Forexample,itdecidestheperformancetargetsfortheManagingBoardandalsotheremunerationpaidtoandcontractssignedwiththemembersoftheManagingBoard.TheRemunerationCommitteealsoapprovestransactionswithmembersoftheSupervisoryBoardandManagingBoardanddeterminestheRemunerationPolicyaccordingtoCRDIIIandtheAustrianBankingAct.
TheRelatedPartiesSpecialAuditCommitteereviewsallfinancingcommitmentsandtransactionsaboveacertainamountinvolvingcompanieswithcontrollinginfluenceasdefinedinIAS24orcompaniesrelatedtothesecontrollingcompanies.TheRelatedPartiesSpecialAuditCommitteeisintendedtoensuretransparencyinalltransactionsinvolvingtheBank’sshareholders.
Managing BoardAspertheendoftheyear2010,theManagingBoardconsistedofsixmembers.
TheRulesofProcedureoftheManagingBoarddefinetheresponsibilitiesandtasksofthisboard.AccordingtotheseRulesofProcedure,theManagingBoardhastherighttoformcommitteesandtoissuestatutesforthesecommittees.Thefollowingexecutivecommitteeshavebeenformed: 4 TheEnterpriseRiskMeetingforsteeringthetotalbankrisk; 4 TheCreditPolicyCommittee,whichfocusesoncreditguidelinesandstrategies; 4 TheCreditApprovalCommittee,whichdecidesonfinancingtransactionsaboveacertainthreshold; 4 TheStrategicAssetLiabilityCommittee,whichdealswithstrategicissuesregardingcapitalandliquidity
planning; 4 TheTacticalAssetLiabilityCommittee,whichdealswithoperativetopicsoftheasset-liabilitymanagement;
and 4 TheLegalandComplianceCommittee,whichdiscussestheimplicationsofneworrelevantlegalregula-
tionsontheBank.
TheBankhasalsoestablishedaseriesofadditionalnon-executivecommittees.Theseinclude: 4 TheExposureReviewCommittee,whichwassetupin2009fortheongoinganalysisofcertaincredit
exposures; 4 TheCapitalManagementMeeting,whichmonitorsthedevelopmentoftheregulatorycapitalratiosandthe
changesinrisk-weightedassets;and 4 TheCapitalExpenditureCommittee,whichdecidesoninvestmentsaboveacertainthreshold.
Corporate governance Code BAWAGP.S.K.voluntarilyadoptedtheAustrianCorporateGovernanceCodeforlistedcompaniesin2006.AdditionalamendmentstotheCodeweremadein2010andwereimplementedinBAWAGP.S.K.’sowncodeinthesecondhalfoftheyear.
TheBankprepareditsfirst-everannualcorporategovernancereportforthefinancialyear2009andpublisheditontheInternet.Acorporategovernancereportwasalsopreparedforthefinancialyear2010.
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CompliancewiththeCorporateGovernanceCodewasauditedbyindependentthirdpartiesin2010andrevealedthatallkeyprovisionsoftheCodewerefulfilledwiththeexceptionofthosethatdonotapplyduetoitsclosedshareholderstructure.
ComplianceTheComplianceOfficeisasub-unitofBAWAGP.S.K.’sLegaldivisionbutreportsdirectlytotheManagingBoard.RegularreportsarealsosubmitteddirectlytotheBank’sAuditCommittee.
ThekeyresponsibilitiesoftheComplianceOfficearepreventingmoneylaunderingandcombatingterrorism,monitoringcompliancewithsanctions,securitiescompliance,aswellasthepreventionofinsidertrading,marketabuseandconflictsofinterest.Aseriesofdetailedguidelineshavebeenputintoplacetoensurecompliancewithalllegalrequirements.
InadditiontoallrelevantlawssuchastheSecuritiesSupervisionAct,allemployeesarealsoboundbyaCodeofConductthatcontains,amongotherthings,guidelinesforbusinessconductandcustomerservice,forhowconflictsofinterestaretobehandledandforpreventingmarketabuseandmoneylaundering.
Personnel development
Management developmentOurworkontheestablishmentofasuccessfulleadershipculturecontinuedduringtheyear,includingintheformoftheinitiative“ErfolgreichFühren–MeineBank”.TheBank’sstrategy,currentpositionanddevelop-mentsinconnectionwiththestateoftheeconomywerediscussedatlargegroupeventsinwhichManagingBoardmembersparticipated.
“LEAD–neueFührungskräfte”,anewleadershipdevelopmentprogramme,waslaunchedintheautumnof2010andwillhelpmiddle-andlower-levelmanagersgetofftoagoodstartintheirfirstmanagerialpositions.Arangeofunit-specificactivities,primarilytailoredteam-buildingandstrategyworkshopsformanagementteams,werealsoconductedin2010.
talent developmentThefirstrunofthe“EMERGE”talentdevelopmentprogrammewascompletedsuccessfullyinthespringof2010.Someoftheparticipants,employeeswithconcretepotentialtofillrelevantexpertandmanagerialpositions,havealreadytakenonnewresponsibilities.Preparationsforasecondrunin2011arealreadyunderway.
InRetailSales,the“SalesTalentManagement”process,whichwascompletedforthesecondtimealreadyin2010,hasproventobeaneffectiveinstrumentforsuccessionplanningandformanagingtrainingrequire-ments.Partofthecomputer-assistedprocessisthenominationofparticipantsforthe“TOPTeamVertrieb”programmeforthedevelopmentoffutureretailsalesmanagers.
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InCorporates,theSalesEmpowermentProgramme,whichisaimedatincreasingcross-selling,wasamaintopicin2010.Thistailoreddevelopmentprogrammenurturedthecross-sellingskillsandcustomerrelation-shipmanagementcapabilitiesofrelationshipmanagers.Apartfromthat,controlandcoachingmeasureswereimplementedinatargetedmanneronthemanagementleveltosupporttheachievementofobjectives.
trainingThenewlydevelopedtrainingplanforbranchsaleswasintroducedin2010.Trainingplansandseminarswerepreparedbasedonnewrequirementsprofiles.
TailoredinitiativessuchasspecialistandbehaviouraltrainingwerealsocompletedagaininmanydifferentareasoftheBanksuchastheCustomerServiceCentre.Thee-learningsystemwasalsorevisedaspartofthis.
Performance ManagementThenewManagementbyObjectives(MBO)processwassuccessfullyintroducedin2010.Ahighimplemen-tationratewasalreadyachievedinthefirstphase.ThenewBAWAGP.S.K.SuccessFactorswerealsoappliedforbehaviouralassessmentintheMBOprocess,andrepresentaBank-widestandardforaperformance-orientedandopencorporateculture.
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Corporate social Responsibility (CsR)
CsR ReportBAWAGP.S.K.releaseditssecondCorporateSocialResponsibilityreportinApril2010.ThisreportdiscussesthemeasuresBAWAGP.S.K.hasimplementedandtheprogresswehavemadeinoureffortstoconductourbusinessinasustainablemanner.Italsocontainsanactionplanforfurtherimprovements.ThiswasalsothefirstreporttoincludetheCommunicationonProgress(COP)requiredduetoourmembershipintheUNGlobalCompact.
TheBankjoinedtheUNGlobalCompactinApril2009.BAWAGP.S.K.’sCorporateSocialResponsibilityofficerisalsoamemberofthesteeringcommitteeoftheAustrianGlobalCompactNetwork.RepresentativesofBAWAGP.S.K.participatedinworkinggroupsonthetopicsofsustainabilityreportingandanti-corruptionundertheframeworkoftheUNGlobalCompactNetworkinAustria.
new Chance accountOn1April2009,PSKBankbecamethefirstbankinthecountrytoofferabasiccurrentaccounttoanycustomerregardlessofhisorhercreditrating.ThisNewChanceAccount(Neue Chance Konto)isavailabletoanyonewithoutlimitations,doesnotincludeanoverdraftfacilityandisofferedalloverAustria.Thisproductisdesignedfortheroughly50,000peopleinAustriawhootherwisehavenoaccesstooneofthemostimpor-tantbankingservices,electronicpaymenttransactions,becauseoftheircredithistory.
TheNewChanceAccounthasgeneratedagreatdealofpositiveresponse.Attheendof2010,animpressive7,712customerswerealreadyusingthisproduct.TheNewChanceAccountisoneofthefruitsofourpro-activecommitmenttohumanrights,andforusisawaytocounterdiscriminationandsocialexclusion.
ItsnominationforthemostimportantsustainabilityawardinAustria,theTRIGOS,inJune2010wasalsoamajorhonourfortheNewChanceAccount.
diversity CharterInreflectionofourcommitmenttopromotingdiversity,BAWAGP.S.K.inNovemberbecameoneofthefirstcompaniesinAustriatosigntheDiversityCharter.Thischarterhasclearlydefinedgoalsandisintendedasaguidelineforallofitsmembers.TheDiversityCharterspotlightsthemanybenefitsofdiversityintheeconomyandsociety,andpromotesdialoguebetweendifferentstakeholdergroups.Themembersactivelycommittoincreasingmutualrespect,toleranceandappreciationwithregardstodiversityintheirorganisations.
AcompleteoverviewofourCSRactivitiesandfactsandfiguresonourenvironmentalimpactandstaffcanbefoundintheCSRReport2010.
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sponsoring
BAWAGP.S.K.’skeysponsoringareasin2010wereagainthearts,educationandsocialissues.Inthearts,oureffortsfocusedonthenewopeningoftheBAWAGContemporarygalleryneartheBank’sheadquarters.Thegallery,whichisintendedtobeameetingpointfortheartscenesofdifferentcities,islocatedatFranz-Josefs-Kai3andisavenueforthedisplayofthecreativevisionsandenergiesofyoungcontemporaryartists.
TheBankalsosupportsprojectsinmusic,design,architecture,theatreandfilm.Inthesocialarea,wecollaboratecloselywithcharitableorganisations,especiallyCaritasandtheREDNOSESClownDoctors,andalsolaunchedthewww.meinespende.atinteractivedonationplatforminthelatterpartoftheyear.Ineduca-tion,wearestrivingtoenterintoadditionalcollaborationprojectswithvocationalsecondaryschools.
Inalloftheseprojects,BAWAGP.S.K.seesitselfasanactivesponsoringpartner.Weaimtoestablishlong-termpartnershipstojointlydevelopprojectsandideas.Thisoftenresultsincooperationwithindividualinstitutionsandprojectpartnersovermanyyears,andmakesiteasiertoidentifyandusesynergies.
AnoverviewofBAWAGP.S.K.’ssponsoringactivitiescanbefoundathttp://www.bawagpsk.com/sponsoring.
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events after the Reporting date
equity Holdings
Effective31January2011StiefelkönigSchuhhandelsGesellschaftm.b.H.soldits19Geoxshops,whichwererunbasedonafranchisecontract,toawholly-ownedAustriansubsidiaryoftheItalianshoemanufac-turerGEOXS.p.A.inthecourseofanassetdeal.Simultaneously,theframeworkfranchisecontractbetweenStiefelkönigandGEOXwasterminated.
StiefelkönigSchuhhandelsGesellschaftm.b.H.andSchuhquadratGmbH&CoKG,acompanyownedbySalamanderAustria,agreedonthesaleofthedistributionlineDelka,whichruns35shops.Theassetpurchaseagreementwassignedon15February2011.
exposure to libya
TheBankhasarelativelyminorexposuretoLibyaandtheotherMiddleEasterncountriesrecentlyaffectedbyinternalunrest.Intotal,theBankhassomeEUR28millioninexposuremostlyagainstcollateraloutsidetheregiontosixindividualclientsthatareeitherbasedinLibyaorthattransactamaterialpartoftheirbusinesswithLibya.Weareinclosecontactwiththeseclientstoassistthemwhereverpossible.
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outlookThestateoftheeconomyandthedevelopmentoftheleadingindicatorsattheturnoftheyeararepointingtoacontinuationoftheupswingintheEurozonein2011,which,however,remainsovershadowedbytheafter-mathofthesovereigndebtcrisis.ThedevelopmentoffoodpricesandtheuprisingofcitizensintheMENAregionresultinginhighercrudeoilpriceshaveledtoadiscussionabouttheprobabilityofsubstantiallyhigherinflationrates.
Domesticconsumptionwilllikelybecomeamoreimportantsourceofsupportforeconomicgrowth,whileforeigntradewillmakelessofacontribution.Theindividualeconomiesintheregionwillcontinuetogrowatdifferentrates,buttheplannedspendingcutsandbudgetconsolidationmeasureswillhaveaslowingeffectontheentireEurozoneeconomy.Becauseofthecontinuingdoubtsabouttheviabilityofthepublicfinancesofanumberofmemberstates,thefinancialmarketsarelikelytoremainhighlyvolatile.Thismayhaveanegativeimpactontherealeconomy.
InlightofthecurrentlyprecariousdebtsituationofsomecountriesintheEurozone,Austria’seconomicprospectsfor2011arecomparativelygood.TheAustriangovernmentmustalsoconsolidateitsbudget,butthegrowth-hamperingeffectswillberelativelyminor.AustriahasoneofthelowestunemploymentratesintheEurozone,andtheconditionsonthelabourmarketareexpectedtoimprovefurtherduringthecurrentyear.Thedomesticeconomycouldgainsubstantialmomentumduring2011andbalanceouttheslowdowninexports.RealGDPisprojectedtogrowbyabout2percent,aslastyear.Thusfar,itisnotclearwhetherandtowhatextenttherecentinternationaldevelopmentswillaffectAustria.
TheAustrianeconomyhascopedwellwiththeeconomiccrisis.Sofar,thenumberofpersonalbankruptciesandcorporateinsolvencieshasnotbeenashighaspreviouslyexpected.However,aftereffectsoftherecessionorasignificantriseininterestratesin2011couldleadtoanincreaseofpersonalbankruptciesandcorporateinsolvencies.Inaddition,negativeimpactsonfinancialresultsfromfairvaluechangescannotberuledoutduetothecontinuedhighfinancialmarketvolatility.
AsthemajorityoftheBank’sloanportfolioiscomposedofdomesticcustomers,BAWAGP.S.K.’sperformanceispartlydependentonthedevelopmentoftheAustrianeconomy,andthecurrenteconomicforecastsarecautiouslyoptimistic.In2011theBankwillbesubjecttostrongcompetitioninthemarketplace,whichwillresultinatightmarginsituationonboththecreditandthedepositside.Furthermore,newregulationsandadditionalfinancialburdens(e.g.thebanklevy)willleadtoatoughbusinessenvironment.
Nevertheless,BAWAGP.S.K.willuseitsgoodmomentumfrom2010tosuccessfullyovercometheseexternalshocksandthestrongmarketcompeti-tion.Inaddition,theBankwillcontinuetoworkhardonimplementinganumberofinitiativesandprojects,includingthenewbranchoffensive,withthefocusonfurtherimprovingourcustomerservice.Fromaneconomicpointofview,BAWAGP.S.K.isoptimallypreparedforthefinancialyear2011duetoitsfinancialstrength,thegrowthofitscorebankingbusinessanditsstrongliquidityposition.
BAWAGP.S.K.isoptimallypreparedforthefinancialyear2011duetoitsfinancialstrength,thegrowthofitscorebankingbusinessanditsstrongliquidityposition.
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group ManageMent report
internal Control and Risk Management system
introduction
Thedesignation“internalcontrolsystem”referstoallprocessesdesignedbymanagementandexecutedwithintheBanktofacilitatethemonitoringandcontrolof: 4 Theeffectivenessandefficiencyofitsoperatingactivities(includingprotectingassetsagainstlosses
resultingfromdamagesormisconduct); 4 Thereliabilityofthefinancialreports;and 4 TheBank’scompliancewithmateriallegalregulationstowhichitissubject.
Theriskmanagementsystemcoversallprocessesthatservetoidentify,analyseandmeasurerisksandthatservetodetermineandimplementappropriatemeasuresthatwillensurethattheBankcanstillreachitsobjectiveswhenrisksareincurred.
AccordingtotheinternationallyrecognisedCOSOframeworkforthedesignofriskmanagementsystems,theinternalcontrolsystemisonepartofanorganisation-wideriskmanagementsystem.Otheraspectsincludethemanagementandmonitoringofrisksthatcanaffectthecorrectnessandreliabilityoftheaccountingrecords.
TheBank’smanagementisresponsibleforthefundamentaldesign,implementationandongoingadaptationandrefinementoftheinternalcontrolandriskmanagementsystemaswellasforthealignmentofthesesystemsandprocesseswiththeexistingrequirementsinawaythattakesaccountoftheBank’sstrategy,thescopeofitsbusinessandotherrelevanteconomicandorganisationalaspects.
Characteristics of the internal Control and Risk Management system
Control environmentTheCodeofConductthathasbeenadoptedbytheBankandthefundamentalvaluesdescribedinitapplytoeveryemployeeintheGroup.TheCodeofConductcreatesaclimaterootedinfocusonthecustomer,achieve-ment,mutualrespect,teamworkandtrust.
TheAccountingdivisionisresponsibleformaintainingtheBank’saccountingrecords.Materialsubsidiariesalsooperatetheirownaccountingdepartments,whichworkinclosecooperationwiththeAccountingdivision.TheprimaryresponsibilitiesoftheAccountingdivisionarepreparingtheannualandinterimfinancialstate-mentsofBAWAGP.S.K.AG,theGroupandcertainsubsidiaries,maintainingthefinancialandconsolidatedaccounts,managingtaxesandregulatoryreporting.
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TheAccountingdivisionisresponsibleforsettingdirectivesonallmattersofaccountingandexercisesthepowertoensuretheapplicationofuniformstandardsacrosstheentireGroup.Tosupporttheoperationalimplementation,corporateguidelinesweredrawnuppartlyintheformofmanuals,suchastheGroupaccountingmanual.Thispolicyappliestoallconsolidatedsubsidiaries.Forallotherholdings,theadherencetotheseprinciplesandstandardsisrealisedasfaraspossible.
Risk assessment and Control MeasuresOurinternalcontrolandriskmanagementsystemscontaininstructionsandprocessesfortheaccountingworkflows: 4 Toensurethecorrectandappropriatedocumentationofbusinessactivities,includingtheuseofGroup
assets; 4 Torecordallinformationrequiredforthepreparationoftheperiod-endfinancialstatements;and 4 Topreventunauthorisedpurchasesorsalesthatcouldhaveamaterialeffectonthefinancialstatements.
TheAccountingdivisionisintegratedintotheBank’sentireorganisational,structuralandoperationalwork-flows.Customerandtransactiondataisgenerallycollectedinthemarketandoperatingunits,andsupplemen-taryinformationisenteredbytheriskunits.Theelementsofthisinformationthatareneededfortheaccount-ingrecordsareusuallytransferredautomaticallyintotheBank’selectronicaccountingsystems.Inthis,theAccountingdivisionfulfilsacontrolandmonitoringfunctiontoensurethatthisautomaticallytransmitteddataishandledproperlyinaccordancewiththeapplicableaccountingrules,andalsocompletesthevariousitementryandotherstepsneededtopreparethefinancialstatements.
TheaccountingofBAWAGP.S.K.AGandthesignificantdomesticsubsidiariesofthecorporationarecon-tainedinSAPNewGL.ThepreparationoftheconsolidatedfinancialstatementsunderIFRSisdoneinSAP-ECCS,whichreceivesthevaluesoftheindividualfinancialstatementsofconsolidatedcompaniesthroughinterfaces.Theaccountingandallupstreamsystemsareprotectedbyaccesspermissions,andautomaticandobligatorymanualcontrolstepsprovidedforintheprocess.
information and CommunicationAcomprehensivereportabouttheStatementofFinancialPosition,theProfitorLossStatementandothercontrollingandriskdataissubmittedtotheSupervisoryBoardatleasteveryquarter.HighlydetailedreportsaboutthisinformationarealsosubmittedtotheManagingBoardonaregular(monthlyormorefrequent)basis.TheManagingBoardhasalsosetupitsowncommitteesthatcollect,analyseandmonitorthisinformation.
MonitoringInordertolimitoreliminateoperationalrisksandcontroldeficiencies,riskidentificationthroughRiskControlSelfAssessments(RCSA)isperformedannually.Thus,themeasurestominimiseriskagreeduponwiththeAccountingdivisionaretrackedproactivelybytheOperationalRiskdepartmentinregardtoimplementation.Damageincidentsaredocumentedseparately,andarealsousedtoidentifynecessaryimprovementsinthesystemsandinthemonitoringandcontrolmeasures.
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TheGroup’sInternalAuditdivisionconductsregularaccountingsystemaudits.Thefindingsoftheseauditsarealsousedtomakeongoingimprovementsintheinternalcontrolandriskmanagementsystemsastheypertaintotheaccountingprocess.
Vienna,7March2011
ByronHaynes� m.p.ChairmanoftheManagingBoard
StephanKorenm.p.DeputyChairmanoftheManagingBoard
AndreasArndtm.p. WolfgangKleinm.p. MemberoftheManagingBoard MemberoftheManagingBoard
ChristophRaningerm.p. SanjaySharmam.p. MemberoftheManagingBoard MemberoftheManagingBoard
Consolidated FinanCial RePoRt PRePaRed in aCCoRdanCe WitH tHe inteRnational FinanCial RePoRting standaRds (iFRs)
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consolIdated FInancIal report prepared In accordance wIth IFrs
Consolidated FinanCial RePoRt PRePaRed in aCCoRdanCe WitH tHe inteRnational FinanCial RePoRting standaRds (iFRs)
Contents
Consolidated accountsConsolidated Statement of Financial Position as of 31 December 2010Consolidated Profit or Loss Statement for the Financial Year 2010Consolidated Statement of Comprehensive Income for the Financial Year 2010Consolidated Statements of Changes in Equity for the Financial Year 2010Cash Flow Statement
notesKey Events during the Financial YearNotes to the Consolidated Financial Statements 1|Accountingpolicies
Details of the Consolidated Statement of Financial Position
2|Cashreserves 3|Financialassetsdesignatedatfairvaluethroughprofitorloss 4|Available-for-salefinancialassets 5|Held-to-maturityinvestments 6|Assetsheldfortrading 7|Loansandreceivables 8|Receivablesfromcreditinstitutionsandcustomers 9|Assetmaturities10|Tangiblenon-currentassets11|Intangiblenon-currentassets12|Otherassets13|Financialliabilitiesdesignatedatfairvaluethroughprofitorloss14|Liabilitiesheldfortrading15|Financialliabilitiesatamortisedcost16|Payablestocreditinstitutionsandcustomers17|Liabilitiesmaturities18|Provisions19|Otherobligations20|Hedgingderivatives21|Equity
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consolIdated FInancIal report prepared In accordance wIth IFrs
Details of the Consolidated Profit or Loss Statement
22|Netinterestincome23|Netfeeandcommissionincome24|Gainsandlossesonfinancialassetsandliabilities25|Otheroperatingincomeandexpenses26|Administrativeexpenses27|Depreciationandamortisationontangibleandintangiblenon-currentassets28|Provisionsandimpairmentlosses29|Shareoftheprofitorlossofassociatesaccountedforusingtheequitymethod30|Incometaxes
Segment Reporting
Capital Management
Further Disclosures Required by IFRS
31|Fairvalue32|Receivablesfromandpayablestosubsidiariesandassociates33|Relatedparties34|RemunerationpolicyaccordingtoCRDIIIDirective35|DisclosuresincompliancewithIFRS5–Non-current Assets Held for Sale and Discontinued Operations36|Assetspledgedascollateral37|Totalcollateraliseddebt38|Subordinatedassets39|Contingentassets,contingentliabilitiesandcommitments40|Foreigncurrencyamounts41|Genuinerepurchaseagreements42|Leasing43|Listofconsolidatedsubsidiaries
Risk Report
44|Creditrisk45|Marketrisk46|Liquidityrisk47|Participationrisk48|Operationalrisk
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consolIdated FInancIal report prepared In accordance wIth IFrs
Disclosures Required by Austrian Law
49|Fiduciaryassets50|BreakdownofsecuritiespursuanttoAustrianBankingAct(BWG)51|Collateralreceivedforcontractualliabilities52|Hybridcapital53|Humanresources54|OtherdisclosuresrequiredbyBWGandAustrianGAAP(UGB)55|Eventsafterthereportingdate
statement of all legal Representatives
Boards and officers
Note:Differencesinthetablesaretheresultofrounding.
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consolIdated FInancIal report prepared In accordance wIth IFrs
Consolidated accounts
Consolidated statement of Financial Position as of 31 december 2010
assets
in millions of Euros (Notes) 31.12.2010 31.12.2009Cash reserves (2) 511 615Financial assets designated at fair value through profit or loss (3) 2,284 2,980Available-for-sale financial assets (4) 6,644 3,250Held-to-maturity investments (5) – 6,560Assets held for trading (6) 1,927 1,753Loans and receivables (7) 26,173 24,879
Securities 2,358 –Customers 22,288 21,066Credit institutions 1,527 3,813
Hedging derivatives (20) 55 33Tangible non-current assets (10) 219 287Intangible non-current assets (11) 229 266Other assets (12) 478 602Assets held for sale (35) 36 –Total assets 38,556 41,225
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consolIdated FInancIal report prepared In accordance wIth IFrs
equity and liabilities
in millions of Euros (Notes) 31.12.2010 31.12.2009Financial liabilities designated at fair value through profit or loss (13) 4,900 6,371Liabilities held for trading (14) 2,271 2,198Financial liabilities at amortised cost (15) 28,023 29,485
Customers 21,733 22,674Credit institutions 2,205 3,468Issued bonds, subordinated and supplementary capital 4,085 3,343
Hedging derivatives (20) 40 60Provisions (18) 436 441Other obligations (19) 462 378Obligations in disposal groups held for sale (35) 38 –Equity (21) 2,016 1,919Non-controlling interests 370 373Total equity and liabilities 38,556 41,225
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consolIdated FInancIal report prepared In accordance wIth IFrs
Consolidated Profit or loss statement for the Financial year 2010
in millions of Euros (Notes) 2010 2009Net interest income (22) 649.9 564.3Net fee and commission income (23) 159.4 154.8Gains and losses on financial assets and liabilities (24) 167.1 325.5Other operating income and expenses (25) -4.4 29.9Administrative expenses (26) -544.5 -527.7
Depreciation and amortisation on tangible and intangible non-current assets (27)
-73.8
-80.4
Provisions and impairment losses (28) -199.7 -236.7Share of the profit or loss of associates accounted for using the equity method (29)
-4.7
-8.0
Profit before tax 149.3 221.7Income taxes (30) -12.7 -56.6Profit after tax 136.6 165.1
Thereof attributable to non-controlling interests 14.8 195.1Thereof attributable to owners of the parent 121.8 -30.0
UnderIFRS,theitemGainsandlossesonfinancialassetsandliabilitiesalsoincludesfairvalueadjustmentsofsecuritieswhoseriskisbornebyshareholdersofnon-controllinginterests.Infinancialyear2010,valuationgainsofEUR11.2millionthathavebeenshownintheitemGainsandlossesonfinancialassetsandliabilitieshavebeenpassedontonon-controllinginterestsintheitemProfitattributabletonon-controllinginterests.In2009,valuationgainsintheamountofEUR186.6millionhavebeenincludedintheitemGainsandlossesonfinancialassetsandliabilities.Excludingthevaluationresultsbornebyshareholdersofnon-controllinginterests,theitemGainsandlossesonfinancialassetsandliabilitieswouldamounttoEUR155.9millionin2010(2009:EUR138.9million).TheitemProfitbeforetaxwouldamounttoEUR138.1million(2009:EUR35.1million).
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consolIdated FInancIal report prepared In accordance wIth IFrs
Consolidated statement of Comprehensive income for the Financial year 2010
in millions of Euros (Notes) 2010 2009Profit recognised in the Profit or Loss Statement 136.6 165.1Other comprehensive income
Foreign exchange differences 0.1 –AFS reserve -0.2 60.8Actuarial gains (losses) on defined benefit pension plans -6.7 10.4
Share of other comprehensive income of associates accounted for using the equity method
-2.5
2.6
Deferred taxes on items recognised directly in equity (30) -3.5 -17.8Income and expenses recognised directly in equity -12.8 56.0Total comprehensive income 123.8 221.1
Thereof attributable to non-controlling interests 0.8 195.1Thereof attributable to owners of the parent 123.0 26.0
Consolidated statements of Changes in equity for the Financial year 2010
in millions of Euros Subscribed capital
Participation capital 1)
Capital reserves
Retained reserves 2)
AFS reserve
Foreign exchange
differences
Actuarial gains / losses 2)
Equity w/o non-
controlling interests
Non-controlling interests
Equity including
non- controlling interests
Balance as of 1.1.2009 250.0 – 1,042.4 -144.1 -30.1 – 19.6 1,137.8 188.5 1,326.3
Transactions with owners – – 205.0 – – – – 205.0 -10.6 194.4
Dividends to minority shareholders – – – – – – – – -10.6 -10.6
Owner's contribution – – 205.0 – – – – 205.0 – 205.0
Issuance of participation capital – 550.0 – – – – – 550.0 – 550.0
Total comprehensive income – – – -30.0 48.2 – 7.8 26.0 195.1 221.1
Balance as of 31.12.2009 250.0 550.0 1,247.4 -174.1 18.1 – 27.4 1,918.8 373.0 2,291.8
Balance as of 1.1.2010 250.0 550.0 1,247.4 -174.1 18.1 – 27.4 1,918.8 373.0 2,291.8
Transactions with owners – – – – – – – – -3.4 -3.4
Dividends – – – – – – – – -3.4 -3.4
Dividend on participation capital – – – -25.6 – – – -25.6 – -25.6
Total comprehensive income – – – 121.8 6.1 0.1 -5.0 123.0 0.8 123.8
Balance as of 31.12.2010 250.0 550.0 1,247.4 -77.9 24.2 0.1 22.4 2,016.2 370.4 2,386.6
1) Participation capital according to section 23 (4) BWG. 2) Retained reserves have been restated due to the change in the accounting method for actuarial gains and losses for defined benefit plans as
required by IFRS. Further details are presented in Note 1.
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consolIdated FInancIal report prepared In accordance wIth IFrs
Cash Flow statement
in millions of Euros 2010 2009I. Profit (loss) (after tax, before non-controlling interests) 137 165
Non-cash items included in the profit (loss) and reconciliation to net cash from operating activities
Depreciation, amortisation, impairment losses, write-ups 216 330Changes in provisions -4 -21Changes in other non-cash items -60 154
Proceeds from the sale of financial investments, tangible non-current assets, intangible non-current assets and subsidiaries
-7
-7
Other adjustments -531 -562Subtotal -249 59
Change in assets and liabilities arising from operating activities after corrections for non-cash items
Loans and advances to customers and credit institutions -1,373 147Other financial assets (not including investing activities) 512 1,325Other assets 44 -120Payables to customers and credit institutions -2,519 -16Other financial liabilities (not including investing activities) -50 -1,302Other obligations 115 -26
Interest and dividend receipts 1,391 1,691Interest paid -806 -1,121Income taxes paid -20 –
II. Net cash from operating activities -2,955 637
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consolIdated FInancIal report prepared In accordance wIth IFrs
in millions of Euros 2010 2009Cash receipts from sales of
Financial investments 3,880 3,173Tangible and intangible non-current assets 29 63
Cash paid forFinancial investments -776 -4,773Tangible and intangible non-current assets – –
Sale of subsidiaries -28 -23Other changes – –
III. Net cash used in investing activities 3,105 -1,560Capital contributions – 755Dividends paid -3 -11Subordinated liabilities (including those designated at fair value through profit or loss) and other financing activities
-251
77
IV. Net cash from financing activities -254 821Cash and cash equivalents at end of previous period 615 717
Net cash from operating activities -2,955 637Net cash used in investing activities 3,105 -1,560Net cash from financing activities -254 821Effect of exchange rate changes – –
Cash and cash equivalents at end of period 511 615
TheCashFlowStatementprovidesinformationaboutthecurrentstateanddevelopmentoftheGroup’scashandcashequivalentsasofthereportingdate.Itshowsinflowsandoutflowsofcashbrokendownbyoperationalactivities,investingactivitiesandfinancingactivities.Theamountofcashandcashequivalentsreportedcomprisescashonhandandbalancesatcentralbanks.
TheCashFlowStatementisoflowsignificanceforBAWAGP.S.K.Group.Itisnotasubstituteforliquidityorfinancialplanningandisnotusedasamanagementinstrument.
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consolIdated FInancIal report prepared In accordance wIth IFrs
notes
Key events during the Financial year
PleaseseetheGroupmanagementreportforinformationonkeyeventsduringthefinancialyear.
notes to the Consolidated Financial statements
1 | accounting policies
Theconsolidatedfinancialstatementswerepreparedapplyingsection59aBWG,accordingtoRegulation(EC)No.1606/2002oftheEuropeanParliamentandoftheCouncilof19July2002,andinaccordancewiththeprovisionsofthestandards(IFRS)publishedbytheInternationalAccountingStandardsBoard(IASB)andtheinterpretationsbytheIFRSInterpretationsCommittee(IFRIC/SIC)asapplicableonthereportingdate.AllstandardscontainedintheInternationalFinancialReportingStandardspublishedbytheIASBandadoptedbytheEUandmandatorywithrespecttotheconsolidatedfinancialstatementsasof31December2010wereapplied.
TheseconsolidatedfinancialstatementsforBAWAGP.S.K.accordingtoIFRSarebasedontheindividualannualfinancialstatementsforallfullyconsolidatedGroupcompaniesaccordingtoIFRSasof31December2010.Allmaterialassociatesareaccountedforusingtheequitymethod.
ThepreparationofconsolidatedfinancialstatementsaccordingtoIFRSrequiresthatassumptionsandestimatesbemadeaboutfactorsthathaveamaterialinfluenceontheBank’sbusinessoperations.Theseassumptionsareregularlyreviewedandadjustedwheneverneeded.Suchadjustmentsaretakenintoaccountinthecurrentperiodandalsoforfutureperiodswhentheadjustmenthaslong-termeffects.
Therecognitionandmeasurementprinciplesdescribedbelowhavebeenapplieduniformlywithrespecttoallofthefinancialyearsstatedintheseconsolidatedfinancialstatements.
Inprinciple,wehavemaintainedtheaccountingandvaluationmethodsthatwereappliedintheconsolidatedfinancialstatementsasof31December2009.Theaccountingtreatmentofactuarialgainsandlossesresultingfromdefinedbenefitobligationshasbeenchanged.Inpreviousperiodsactuarialgainsandlosseswererecognisedintheprofitorlossandarenowrecognisedinothercomprehensiveincome.Furtherexplanationsarepresentedinthesection“ChangeinAccountingMethods”.
ThereportingcurrencyisEuro.Unlessindicatedotherwise,allfiguresareroundedtomillionsofEuros.
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Allfiguresinforeigncurrenciesaretranslatedatthemiddleexchangerateonthereportingdate.Financialstatementsfromforeignsubsidiariesareincludedintheconsolidatedfinancialstatementsusingthefunc-tionalcurrencymethod.
Scope of Consolidation and Consolidation Principles
ThescopeofconsolidationincludesalldirectandindirectmaterialequityinvestmentsofBAWAGP.S.K.Asof31December2010,theconsolidatedfinancialstatementsincluded55(2009:57)fullyconsolidatedcompaniesand2(2009:2)companiesthatareaccountedforusingtheequitymethod.Intheinterestofmateriality,thecriteriaforinclusionareboththeamountofanentity’sassetsanditsrelativecontributiontotheGroup’sconsolidatedprofit.Allnon-consolidatedsubsidiarieshadonlyaminorinfluenceontheGroup’sassets,financialpositionandtheresultsofitsoperations.Note43Listofconsolidatedsubsidiariescontainsalistofallfullyconsolidatedsubsidiariesandassociatesaccountedforusingtheequitymethod.ThecarryingamountoftheassociatesthatarenotaccountedforusingtheequitymethodtotalledEUR67million(2009:EUR72million)on31December2010.ControlledcompanieswithacarryingamountofEUR41million(2009:EUR58million)werenotconsolidatedbecausetheydidnothaveamaterialeffectontheGroup’sassets,financialpositionortheresultsofitsoperations.
In2010twopreviouslyconsolidatedsubsidiariesoftheleasinggroupHafnerSee-Liegenschaftsverwaltungs-gesellschaftm.b.H.andGaraFeuerwehrzentralenLeasingGesellschaftm.b.H.weremergedwithBAWAGP.S.K.LEASINGGmbH.Additionally,twosubsidiariesoftherealestategroup,BPIHoldingGmbHandBPIHoldingGmbH&CoImmobilienundAnlagenKG,weremergedwithBAWAGP.S.K.IMMOBILIENGmbHin2010.Duetomaterialitytwoadditionalsubsidiaries,RFBAWAGLeasingGesellschaftm.b.H.andCVGImmobilienGmbH,havebeenconsolidatedforthefirsttimein2010.
TheacquisitionmethodaccordingtoIFRS3isusedforcapitalconsolidation.Underthismethod,theacquisitioncostsfortheentityinquestionmustbecomparedwiththevalueofthenetassetsatthetimeofacquisition.Thevalueofthenetassetsisthefairvalueofallidentifiableassets,liabilitiesandcontingentliabilitiesassumedatthetimeofacquisition.
Allintragroupreceivablesandpayables,expensesandincome,andinterimprofitsareeliminatedunlesstheyareinsignificant.
CapitalisedgoodwillisrecognisedunderIntangiblenon-currentassetsontheStatementofFinancialPosition.InaccordancewithIFRS3inconjunctionwithIAS36andIAS38,therecognisedgoodwillofallcashgeneratingunits(CGUs)issubjecttoannualimpairmenttestinginaccordancewithIAS36.
Allotherequityinvestmentswerealsotestedforimpairment.
Allnon-consolidatedequityinstrumentsaremeasuredaccordingtoIAS39andcategorisedasavailable-for-salefinancialassets.
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consolIdated FInancIal report prepared In accordance wIth IFrs
Financial Instruments
Financialinstrumentsarerecognisedonthedateoftransaction.
a) Held-to-MaturityInvestments
Since31January2010BAWAGP.S.K.hasnotheldanysecuritiesofthiscategoryinitsportfolio.Duringthepreviousyearsthiscategoryhasincludedallfinancialinstrumentswithfixedordeterminablepaymentswhichwereintendedtobeheldtomaturity.Ifsecuritieswereassignedtothiscategory,BAWAGP.S.K.hadthepositiveintentionandtheabilitytoholdtheinstrumentstomaturity.
Held-to-maturityinvestmentswerecarriedatamortisedcost.Therecoverableamountoftheassetwasdeter-minedattheendofeveryreportingperiod,andacorrespondingimpairmentwasrecognisedifthisamountwaslowerthanthecarryingamount.Therecoverableamountwascalculatedbydiscountingtheexpectedfuturecashflowswiththeoriginalinterestrateofthefinancialinstrument.Ifthisimpairmentdecreasedinsubsequentperiods,awrite-upwasrecogniseduptotheamortisedcostvalidatthattime.
Premiumsanddiscountsonsecuritiesclassifiedasfinancialinvestmentswererecognisedproratatemporisviatheeffectiveinterestrate.Expensesandrevenues,respectively,weresetoffagainstinterestincomefromthesamesecurities.
b) FinancialAssetsRecognisedatFairValuethroughProfitorLoss
Held for trading
Thiscategorycoversfinancialassetsheldfortradingpurposes.Thesefinancialinstrumentsarerecognisedattheirfairvalue.Allderivativesinthetradingandbankingbookthatarenotpartofahedgingtransactionareassignedtothiscategory.
Financial assets designated at fair value through profit or loss
Certainfinancialassetsandliabilitiesthatdonotmeetthedefinitionoftradingassetsandliabilitiesaredesignatedatfairvaluethroughprofitorlossusingthefairvalueoption.
BAWAGP.S.K.exercisedthefairvalueoptioninthefollowingcases:4 Toavoidanaccountingmismatch – Forfixed-incomeownissues,securitiesheldascurrentfinancialassetsandloanswhosefairvalueonthe
dateofacquisitionhasbeenhedged; – Investmentproductswhosefairvaluechangeshavebeenhedgedwithderivatives.4 Managementonafairvaluebasis – ThesecuritiesandloansthataremanagedonafairvaluebasisbytheAssetLiabilityCommittee,which
alsopreparesdecisionsontheextentoftheopeninterestrateriskexposures.TheManagingBoardisinformedaboutthesepositionsregularly.
4 Presenceofembeddedderivatives – Structuredfinancialinstrumentswithembeddedderivatives
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consolIdated FInancIal report prepared In accordance wIth IFrs
c) LoansandReceivables
ReceivablesarerecognisedontheStatementofFinancialPositionatamortisedcostinclusiveofdeferredinterestfollowingdeductionofimpairmentallowances.Thefairvalueisusuallycomputedbydeterminingthepresentvaluesofthecontractuallyagreedcashflowswitharisk-adjustedinterestrate.
d) Available-for-SaleFinancialAssets
Thiscategorycoversfinancialassetswhicharenotclassifiedas4 Loansandreceivables;4 Held-to-maturityinvestments;or4 Financialassetsrecognisedatfairvaluethroughprofitorloss.
InadditiontothesecuritiesthatBAWAGP.S.K.hasassignedtothecategoryAvailable-for-salefinancialassets,thisitemalsoincludessharesinnon-consolidatedsubsidiaries.
TheAvailable-for-salefinancialassetsaremeasuredatfairvalue.Changesinthefairvaluearerecogniseddirectlyinequity(AFSreserve)untiltheassetissoldorrepaid.ImpairmentsarerecognisedontheProfitorLossStatementunderImpairmentprovisionsforfinancialassets.
Ifafairvaluecannotbereliablymeasuredforunlistedequityinstruments,itismeasuredatcostaccordingtoIAS39.
Premiumsanddiscountsarerecognisedproratatemporisviatheeffectiveinterestrate.Expensesandrevenues,respectively,weresetoffagainstinterestincomefromthesamesecurities.
e) FinancialLiabilities
InaccordancewithIAS39,financialliabilitiesnotheldfortradingordesignatedasFinancialliabilitiesatfairvaluethroughprofitorlossaremeasuredatamortisedcost.
Significant Reclassifications
Reclassificationoffinancialassetsoutofthecategoryheld-to-maturityinvestments
IAS39requiresthatfinancialinstrumentsthatareclassifiedasheld-to-maturityinvestmentsbereclassifiedasavailable-for-saleassetswhenitisnolongerjustifiabletoclassifythemasheldtomaturitybecauseofchangedintentionsorability.Ifdisposalsorreclassificationsaffectmorethanamarginalportionoftheheld-to-maturityinvestments,allotherheld-to-maturityinvestmentsmustbereclassifiedasavailable-for-saleassets,andnofinancialinstrumentsmaybeclassifiedasheld-to-maturityinvestmentsforthefollowingtwofinancialyears.
Whenanassetisreclassifiedasavailable-for-sale,itmustberemeasuredatitsfairvalue,andanydifferencebetweenitscarryingamountanditsfairvaluemustberecogniseddirectlyinequity(AFSreserve).
DetailsarepresentedinNote5.
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Reclassificationoffinancialassetsintothecategoryloansandreceivables
Financialassetscanbereclassifiedfromthecategoriesofheldfortradingandavailable-for-saletothecategoryofloansandreceivableswhen4 thefinancialassetmeetstherequirementsforinclusioninthecategoryloansandreceivablesaccordingto
IAS39onthedateofreclassification;and4 theentityhastheabilityandthemanagementhastheintentiononthereclassificationdatetoholdthe
reclassifiedassetsfortheforeseeablefuture.
Financialassetsarereclassifiedattheirfairvalueonthereclassificationdate.Thefairvalueofthefinancialinstrumentonthereclassificationdateisthenewamortisedcostoftheinstrument.Theexpectedcashflowsofthefinancialinstrumentareestimatedonthereclassificationdate,andtheseestimatesareusedtocalcu-latetheneweffectiveinterestrateoftheinstrument.Iftheexpectedfuturecashflowsofthereclassifiedinstrumentincreaseatalaterdateasaresultofavalueimprovement,theeffectofthisincreaseisaccountedforbyadjustingtheeffectiveinterestrateandnotbyadjustingthecarryingamountoftheinstrumentatthetimethattheestimateschange.Intheeventofasubsequentdecreaseintheexpectedfuturecashflows,theinstrumentissubjectedtoanimpairmenttestandmeasuredinaccordancewiththemeasurementrulesforthecategoryloansandreceivables.
Whenavailable-for-saleassetsarereclassifiedintoloansandreceivables,theunrealisedprofitorlossthathasbeenrecognisedinequityisdistributedovertheremainingtermoftheinstrumentusingtheeffectiveinterestmethodandrecognisedasinterestincomeorinterestexpense.Shouldtheinstrumentbediscoveredtobeimpairedatalaterdate,theunrealisedlossoftheinstrumentthatisrecognisedinequityasofthatdateisrecognisedimmediatelyontheProfitorLossStatementunderImpairmentprovisionsforfinancialassets.
DetailsarepresentedinNote7.
Hedge Accounting
Inlinewithgeneralregulations,derivativesareclassifiedasassetsheldfortradingpurposesorliabilitiesfromtradingactivitiesandarerecognisedatfairvalue.ThevaluationresultisshowninthelineitemGainsandlossesonfinancialassetsandliabilitiesasgains(losses)onfinancialassetsandliabilitiesheldfortrading.Ifderivativesareusedtohedgerisksofnon-tradingtransactions,BAWAGP.S.K.applieshedgeaccountingiftheconditionsaccordingtoIAS39aremet.
Attheinceptionofthehedgerelationship,wedocumenttherelationshipbetweenthehedginginstrumentandthehedgeditem,ourriskmanagementobjectivesandthemethodusedforassessingthehedgeeffectiveness.Furthermore,BAWAGP.S.K.documentsattheinceptionofthehedgeandoneachreportingdatewhetherthehedginginstrumentishighlyeffectiveinoffsettingchangesinfairvaluesofthehedgeditemattributabletothehedgedrisk.
BAWAGP.S.K.usesfairvaluehedgeaccountingforeffectivehedgingrelationshipsthatreducemarketrisk.Inafairvaluehedge,anassetorliabilityishedgedagainstchangesinitsfairvalue,andchangesinthevalueofthehedgeditemandthehedginginstrumentarerecognisedintheProfitorLossStatementinthesameperiod.Thefairvaluechangesofthehedginginstrumentaswellasthechangesinthefairvalueofthehedgeditemresultingfromthehedgedriskarerecognisedinprofitorloss.
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Assoonasthehedginginstrumentissold,exercisedorcomesdue,orwhentheeligibilityrequirementsforhedgeaccountingarenolongermet,thehedgingrelationshipisnolongerrecognisedontheStatementofFinancialPosition.Anychangesinthevalueofthehedgeditemarerecognisedthroughprofitorlossdistributedovertheremainderoftheterm.
Impairment Provisions
Theimpairmentprovisionscoverprovisionsforpotentialloandefaultsandareformedasindividualandgeneralprovisionsonthebasisofpastexperience.TheimpairmentprovisionsfromlendingarenettedoffagainstthecorrespondingreceivablesontheStatementofFinancialPosition.Provisionsforoff-balance-sheetloansarereportedasprovisions.
Impairmentprovisionsareformedformaterialcreditrisksinaccordancewiththeriskanalysts’estimates,andtheseestimatesarebasedontheexpectedfuturerepayments.Theapprovalprocedureforimpairmentsisdescribedinthehandbookoncompetenciesandauthorisations.Receivablesarederecognisedincoordinationwiththerespectivedivisionswhenallattemptstocollectthedebthavefailed.
AnimpairmentprovisionwasformedonaportfoliobasisinaccordancewithIAS39AG89forlossesincurredbutnotdetectedasofthereportingdate.TheamountofthisprovisioniscalculatedonthebasisoftheBaselIIExpectedLossModel.Theactuallossthathasbeenincurredisextrapolatedfromtheexpectedloss,takingintoaccountthedurationfromoccurrencetodetectionoftheloss(thelossidentificationperiodortherecognitionperiod).
Treatment of One-Time Fees
BAWAGP.S.K.chargesaprocessingfeewhenawardingaloantoacustomer.FortheBank,thisiscompensa-tionforthecostsincurredinawardingtheloan.Ifsubstantial,processingfeesaredeferredoverthetermoftheloanandrecognisedinthenetinterestincomeafterdeductingthedirectlyattributablecosts.
Methods for Determining the Fair Value of Financial Instruments
Tomeasureexchange-tradedinstrumentssuchasfuturesandoptionsonfutures,exchangepricesareused.DetailsarepresentedinNote31.Somesynopticinformationispresentedhere:
ThebasicvaluationmodelusedforplainvanillaOTCoptionsistheBlack-Scholesoptionpricemodel,whichvariesaccordingtotheunderlyinginstrument.CurrencyoptionsaremeasuredusingtheGarman-Kohlhagenmodel(adaptedBlack-Scholesmodel)andinterestrateoptionsaremeasuredusingtheBlackorHull-Whitemodels.
Thetotalvalueofaninterestrateswapisderivedfromthepresentvaluesofitsfixedandvariableratelegs.Similarly,thetotalvalueofacrosscurrencyswapisderivedfromthepresentvaluesofthetwocashflowsexpressedintermsoftheGroup’sfunctionalcurrency.
Inthecaseofforeigncurrencyforwardsandfutures,theagreedforwardrate,whichdependsonmovementsinexchangeandinterestratesforbothcurrencies,iscomparedwiththeforwardrateonthereportingdateandtheresultisusedtocalculatetheinstrument’svalue.
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Forcredit-linkednoteswherenoactivemarketsexist,fairvaluesaredeterminedbyapplyingavaluationmodel.Credit-linkednotes(CLNs)arebondswithanembeddedcreditdefaultswap(CDS)allowingtheissuertotransferaspecificcreditrisktoinvestors.ThevaluationmodelforCLNsusesbondorCDSspreadsoftheissuerandthereferenceentity,aswellascouponandmaturity.
Valuationsbyoutsideexpertsarealsousedwhenmeasuringcomplexstructures.Appropriatetestsandverifi-cationsarecarriedout.
Measurement for the Structured Credit Portfolio
Whereveranactivemarketforatransactionexists,quotedmarketpricesareusedasfairvalues.
Forstructuredcredittransactionswherenoactivemarketsexist,fairvaluesaredeterminedbyapplyingavaluationmodel.Themodelsare,however,calibratedtomarketdata,e.g.liquidindicessuchastheABX1,iTraxx2,CDX3andLCDX4.
ForABS-CDOs(assetbackedsecurities–collateraliseddebtobligations)withsubprimeexposure,noreliablemarketpricesareavailable.ThemodelassumptionsoncumulativelossesanddiscountratesareextractedfromABXprices(theonlyliquidmarketpricesforcomparabletransactions).Acashflowprojectionmodelwasdevelopedcoupledwithcollateralperformanceanalysesusingdataonloanlevelandgeneralmarketinforma-tion(ABXindices,housepriceindices).ThemodelgeneratesforecastsoneachABSwithinaCDO,i.e.scenariosonfuturedelinquencies,defaults(CDR–constantdefaultrate),prepayments(CPR–constantprepaymentrate)andseverities(LGD–lossgivendefault).ThesescenariosareobtainedfromhistoricalABSpoolperformancesandarecalibratedtoABXlevelsasof31December2010,i.e.modelpricesforABXindicesreflectobservedmarketpricesandthusimplicitlyreflectthedefaultratesandlossesanticipatedonthemarket.TheapplieddiscountrateisalsoderivedfromtheABXindices.BAWAGP.S.K.usesvaluationmodelsforitsABSCDOswithsubprimeexposurethatcomplywithmarketstandards.Nevertheless,itshouldbenotedthatanymodelhasinherentlimitations.
Thevaluationmodelfor(synthetic)corporatetransactions(e.g.corporateCDOs,CDO²)wasdevelopedincompliancewithmarketstandards.Themodelusesmarketinformation(iTraxx,CDX,CDSspreads,ratings,interestrates)asof31December2010todeterminethevalueofatransaction.Asingle-factorGaussiancopulamodelisusedtoextractasset-valuecorrelationsfrommarketdata;theMonteCarlomethodisappliedtosimulatedefaulteventsandcalculateexpectedcashflows.Toobtainafairvalue,thecorrespondingspotratesareusedtodiscountthecalculatedexpectedcashflowsofthetransaction.
1) ABX is a series of marketable indices, each of which references 20 residential mortgage backed securities of subprime loans.
2) iTraxx is a marketable index composed of credit default swaps of the 125 most liquid investment grade rated European companies.
3) CDX is a marketable index composed of credit default swaps of the 125 most liquid investment grade rated US companies.
4) LCDX is a marketable index referencing 100 US first lien loans.
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AvaluationmodelforCLOs(collateralisedloanobligations)wasdevelopedbyanalogywiththemodelforsyntheticcorporatetransactions.CurrentmarketpricesoftheloanswithintheCLOsareusedtodeterminemarketimplieddefaultrates(defaultintensities)andrecoveryrates(severities,LGD–lossgivendefault)takingintoaccountadiscountmargin.Applicationofasingle-factorGaussiancopulamodeltoLCDXtranchesyieldsmarketimplieddefaultcorrelation.Basedontheseparameters,marketconsistentdefaultscenariosaregeneratedforeveryCLOtransaction(MonteCarlosimulation)andthecorrespondingCLOcashflowsareprojected.ThefairvalueoftheCLOtransactionsisthenderivedbydiscountingtheexpectedcashflowswiththereferencerateplusadiscountmargin,wherethelatterisderivedfromcalibrationofthemodeltoactualcurrentCLOtradelevels.Allmarketdatathatareusedinthemodel(loanpricesandspreads,LCDXprices,interestrates)areasof31December2010.
Transfers of Financial Instruments
FinancialinstrumentsarederecognisedassoonastheGroupisnolongerentitledtoreceivethefinancialrewardsfromtheinstruments.Asarule,thisoccurswhentherightsandobligationsunderthefinancialinstrumentspasstoathirdpartybyexercise,lapse,saleorassignmentoriftheGrouphaslostitsrightofdisposal.
WhenfinancialassetsaretransferredbutBAWAGP.S.K.hassignificantcontinuingrightsandobligationsunderthem,suchassetsarestillreportedontheconsolidatedStatementofFinancialPosition.
Repurchaseagreements,alsoknownas“repos”or“saleandrepurchaseagreements”,arecontractsunderwhichfinancialassetsaretransferredtoatransferee(lender)inreturnforacashpaymentwhilealsospecify-ingthatthefinancialassetsmustlaterbetransferredbacktothetransferor(borrower)foranamountofmoneyagreedinadvance.ThefinancialassetstransferredoutbyBAWAGP.S.K.GroupunderrepurchaseagreementsremainontheGroup’sStatementofFinancialPositionandaremeasuredaccordingtotherulesapplicabletotherespectiveStatementofFinancialPositionitem.Thecashreceivedunderrepoarrangementsisrecordedwithintradingliabilities.
Conversely,underagreementstoresell,knownas“reverserepos”,financialassetsareacquiredforaconsid-erationwhileatthesametimecommittingtotheirfutureresale.Cashoutflowsunderreversereposarerecordedwithintradingassets.
Insecuritieslendingtransactions,thelendertransfersownershipofsecuritiestotheborrowerontheconditionthattheborrowerwillretransfer,attheendoftheagreedloanterm,ownershipofinstrumentsofthesametype,qualityandquantityandwillpayafeedeterminedbythedurationoftheloan.Securitieslenttocounterpartiesareaccountedforinthesamewayasrepos:TheyareretainedintheGroup’sfinancialstate-mentsandaremeasuredinaccordancewithIAS39.Securitieslendingandborrowingtransactionsaregenerallycollateralised.Collateralfurnishedbythesecuritiesborrowercontinuestoberecordedintheborrower’sfinancialstatements.
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Intangible Non-Current Assets, Tangible Non-Current Assets
Intangiblenon-currentassetsconsistmainlyofacquiredgoodwillandotheracquiredintangibleassets(inparticularsoftware)andprojectsrecognisedinaccordancewithIAS38.
Intangiblenon-currentassetswithanunlimitedusefullifearemeasuredatcost.Intangibleandtangiblenon-currentassetswithlimitedusefullivesaremeasuredatcostlessstraight-lineamortisationordeprecia-tion.Buildingsaredepreciatedatanannualrateofbetween2.5and4percent,whileothertangiblenon-currentassetsaredepreciatedatannualratesbetween5and20percent.Purchasedandself-producedintangibleassets(otherthangoodwill)areamortisedatannualratesof10percentand20percent.
Landandbuildingsheldforinvestmentpurposes(investmentproperty)aremeasuredatcostlessstraight-linedepreciationwhichrangesbetween2.5and4percentperyear(IAS40).Inadditiontoreviewingthemethodofdepreciationandusefullives,impairmenttestsarealsoperformedasofeachreportingdate.
Impairment Testing
InaccordancewithIFRS3inconjunctionwithIAS36andIAS38,therecognisedgoodwillofallcashgeneratingunits(CGUs)issubjecttoannualimpairmenttestinginaccordancewithIAS36.Allotherequityinvestmentswerealsotestedforimpairment,providedthatapreliminaryexaminationhasnotruledoutimpairmentindicators.
TodeterminethevalueinuseoftheCGUorthesingleentity,thepresentvalueoftheprojectedpre-taxprofitswascalculatedbyusingtherisk-weightedpre-taxdiscountrateinthemarketapplicabletotheCGUinquestion.Asarule,theplanninghorizonusedforvaluationpurposesisbetweenthreeandfiveyears.Long-termgrowthratesusedinthecalculationvarybetween2and4percent.
Thediscountrateiscomposedoftherisk-freerate,thelocalmarketriskpremiumandthebetafactor:4 Therisk-freerate(3.10percent)isthethirty-yearspotratecalculatedinaccordancewiththeSvensson
method,basedontheparameterspublishedbyDeutscheBundesbank.4 Thesourceforthecountry-specificmarketriskpremiumisthewebsiteDamodaran.4 TheappliedbetafactorforbanksistheaveragebetaoftwelvebankslistedonEuropeanstockexchanges.
Basedontheaforementionedassumptions,thevalueinuseoftheCGUorequityinvestmentwascalculatedfortheyearunderreview,inaccordancewithIAS36.Valueinuserepresentsthepresentvalueoftheestimatedfuturecashflowsexpectedfromacashgeneratingunit.
Leasing
Forfinanceleases,therightsofclaimsagainstthelesseearerecognisedintheamountofthepresentvalueofthecontractuallyagreedpayments,takinganyresidualvalueintoaccount.Bycontrast,operatingleases,whereBAWAGP.S.K.Groupretainsallrisksandrewardsincidentaltoownershipoftheleasedasset,arereportedunderTangiblenon-currentassets.Eachleasedassetisdepreciatedasappropriate.LeasepaymentsreceivedarerecognisedintheProfitorLossStatement.
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Income Taxes and Deferred Taxes
AccordingtoIAS12,incometaxesmustbecomputedandreportedusingtheliabilitymethod.Thecomputa-tionisbasedonthelocaltaxratesthatarelegallybindingatthetimetheconsolidatedfinancialstatementsareprepared.
DeferredtaxassetsandliabilitiesresultfromthedifferentmethodsusedtomeasureassetsandobligationsontheStatementofFinancialPositionunderIFRSandtherespectivetaxcode.Thisgenerallyleadstopositiveornegativedifferencesintheincometaxtobepaidforfutureperiods(temporarydifferences).Adeferredtaxassetisrecognisedforthecarryforwardofunusedtaxlosseswhenitisprobablethatfuturetaxableprofitwillbegeneratedbythesametaxableunit.Deferredtaxassetsandliabilitiesarenotdiscounted.
TaxexpensesallocabletothetaxableprofitwererecognisedintheProfitorLossStatementunderIncometaxesandbrokendownintocurrentanddeferredincometaxes.OthertaxesthatarenotattributabletoprofitarerecognisedunderOtheroperatingincomeandexpenses.
AccordingtoIAS12.34,adeferredtaxassetisrecognisedfortaxlosscarryforwardsifitisprobablethatfuturetaxableprofitwillbeavailableagainstwhichtheunusedtaxlossescanbeutilised.Asof31December2010unusedtaxlossesamountedtoEUR1,770millionatthelevelofBAWAGP.S.K.andEUR197millionatthelevelofmembersofthetaxgroupincludedintheconsolidatedfinancialstatements,henceatotalofEUR1,967million.
TheutilisabilityofunusedtaxlossesbyBAWAGP.S.K.wastestedonthebasisoftheBank’slong-termplanapplyinganadditionalcontingencycharge.TheexpectedutilisationofunusedtaxlossesisprojectedtoamounttoEUR1,128million.Intotal,deferredtaxassetsfortaxlosscarryforwardsintheamountofroughlyEUR282million(2009:EUR283million)arerecognisedwithinBAWAGP.S.K.Group(taxrate25percent).
Thetaxgrouppursuanttosection9KStGthathadbeenheadedbyBAWAGP.S.K.since2005wasdissolvedinthefinancialyear.Afinalsettlementof25percentfornotyetcreditedtaxlosseswaspaidtoindividualmembersoftheformertaxgroup.Somemembersofthetaxgroupdidnotmeettheminimumgroupmember-shiprequirementofthreeyears.Asaresult,alltaxeffectsappliedtothesecompaniesonthebasisoftheirmembershipinthetaxgroupwerereversed,andthegroupparentreversedallpositivetaxallocationsfromthesecompanies.
Asofthestartofthefinancialyear,anewtaxgroupwasformedpursuanttosection9KStG;thisgroupisheadedbyBAWAGHoldingGmbHandhas25membersinAustria.Anewtaxallocationagreementwasconcluded.Theallocationmethodwaschosenfordeterminingthetaxallocations.Thismethodisbasedonthetaxresultofthegroupasawhole.Thepayabletaxisallocatedtoeachgroupmemberwithapositivetaxresultonthebasisofitsproportionateshareofthegroup’staxresult.Inthis,aninternaltaxlosscarryforwardistakenintoaccountfortaxlossesallocatedtothegroupparent.Afinalsettlementforuncreditedtaxlossesmustbeeffectedbythegroupparentupondissolutionofthenewtaxgrouporwhenamemberentityleavesthegroup.
TheitemIncometaxesincludesexpensesintheamountofEUR4.1millionfromincometaxpaymentsinconnectionwiththedissolutionoftheformertaxgroup.
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Provisions
AccordingtoIAS19,provisionsforpost-employmentandterminationbenefitsandforjubileebenefitsarecalculatedusingtheProjectedUnitCreditMethod.
Thepresentvaluesofobligationsoutstandingasofthemeasurementdatearecalculatedonthebasisofactuarialassumptionsapplyinganappropriatediscountrateandtakingintoaccounttheexpectedratesofincreaseinsalariesandpost-employmentbenefits.TheyarerecognisedasaprovisionintheconsolidatedStatementofFinancialPosition.Actuarialgainsandlossesarerecognisedinfullintheyearinwhichtheyareincurred.Inprioryears,actuarialgainsandlosseswererecognisedinprofitorloss.In2010,BAWAGP.S.K.changeditsaccountingmethodretrospectivelyandactuarialgainsandlossesarerecognisedentirelyinothercomprehensiveincome.Detailsarepresentedinthesection“ChangeinAccountingMethods”.
Theprincipalparametersunderlyingtheactuarialcalculationsare:
Forpost-employmentobligations: Interestrate 5.00%p.a. Yieldgrowth 2%p.a. Fluctuationdiscount individualcalculation
Forterminationbenefitsandanniversarybonuses: Interestrate 5.00%p.a. Wagegrowth 4%p.a. Fluctuationdiscount individualcalculation Retirementage 57–65years*)
*)TheearliestpossibleindividualretirementageasperASVGwasassumed.
In2009thediscountrateamountedto5.25percent.Theotherparametersusedhavenotbeenchangedcomparedto2009.
ThegenerationmortalitytablesPensionsversicherung AVÖ 2008-P-Angestelltewereusedwhencalculatingthelong-termemployeebenefitprovisions.
Thepost-employmentbenefitrightsofsomeemployeeswerecoveredbyAllianzPensionskasseAGandAPK-PensionskasseAGin2010.Thecontributionsthataremadetothesepensionfundsarerecognisedasexpensesinthecurrentperiod;therearenofurtherobligations.
ForonegroupofBAWAGP.S.K.employees,amountsweretransferredtoapensionfundin2005.Theeligiblepensionfundassetsfromthiswereusedagainstexistingobligationsfromthedefinedbenefitplan.Forthisreason,thegrossdefinedbenefitobligationforthisgroupofemployeesisreducedbytheeligibleassetsinthepensionfundon31December2010.
Theexistingpost-employmentbenefitplansinBAWAGP.S.K.Groupthatarefinancedentirelythroughreservesbecausetheyaredefinedbenefitobligationspertainprimarilytopost-employmentbenefitrightsandfuturerightsofemployeesoftheparentcompany,BAWAGP.S.K.AG.
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Theallocatedassetsdisclosedbythepensionfundaresetoffagainstthedeterminedamountsofprovisionsforpost-employmentbenefits.
Otherlong-termemployeebenefitspertaintoreservesforanniversarybonuses.
Otherreservesforuncertainobligationstothirdpartiesareformedinaccordancewiththeexpectedamountoftheobligation.
Non-Current Assets Held for Sale and Discontinued Operations
Non-currentassets(ordisposalgroupsconsistingofassetsandliabilities)mustbeclassifiedasheldforsalewhenthecorrespondingcarryingamountisprimarilytheresultofasaletransactionandnotofcontinueduse.Immediatelybeforethefirst-timeclassificationasheldforsale,theassets(ordisposalgroups)aremeasuredaccordingtotheGroup’saccountingpolicies.Then,thenon-currentassets(ordisposalgroups)arewrittendownattheloweroftheircarryingamountorfairvaluelesssellingcosts.
Impairmentsofassets(ordisposalgroups)arefirstoffsetagainstgoodwillandthenagainsttheremainingassetsandliabilitiesonaproportionatebasisiftheimpairmentdoesnotpertaintoinventories,financialassets,deferredtaxassetsorstaffbenefits.ThesemuststillberecognisedinaccordancewiththeGroup’saccountingpolicies.First-timeandsubsequentimpairmentlossesandreversalsarerecogniseddirectlyinincome.Reversalsofimpairmentsmayonlybecompleteduptotheamountofthecumulativerecognisedimpairmentlosses.
Equity
EquityisthecapitalprovidedbytheBank’sowners(issuedcapitalandcapitalreserves),participationcapitalandthecapitalgeneratedbytheBank(retainedearnings,reservesfromcurrencytranslation,AFSreserve,profitbroughtforwardandtheprofitfortheperiod).
Latitude of Judgement and Uncertainty of Estimates
Themeasurementoffinancialinstrumentsandtherelatedestimatesinrespectofmeasurementparameters,inparticularthefuturedevelopmentofinterestrates,haveamaterialeffectontheresultsofoperations.TheparametervaluesappliedbytheBankarederivedlargelyfrommarketconditionsprevailingasofthereportingdate.
ThedeterminationoffairvalueforfinancialassetsandliabilitiesforwhichthereisnoobservablemarketpricerequirestheuseofvaluationtechniquesasdescribedinNote1Accountingpolicies.Forfinancialinstrumentsthattradeinfrequently,calculationoffairvaluerequiresvaryingdegreesofjudgementdependingonliquidity,uncertaintyofmarketfactors,pricingassumptionsandotherrisksaffectingthespecificinstrument.
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Assessmentsastowhetherornotcashgeneratingunits(CGUs)wereunimpairedarebasedonplanningcalculations.Thesenaturallyreflectthemanagement’sevaluations,whichareinturnsubjecttoadegreeofpredictiveuncertainty.Similarly,assessmentsoftherecoverabilityoflong-termloansarebasedonassump-tionsregardingtheborrower’sfuturecashflows,andthesetooaresubjecttoadegreeofpredictiveun-certainty.
Intheseconsolidatedfinancialstatementsfortheperiodended31December2010,goodwillanddeferredtaxassetshavebeenrecognised,thevalueofwhichwilldependcruciallyontheoccurrenceofprojectedresultsinthefuture.AmountsrecognisedinconnectionwiththeAllegrosoftwaresystemarebasedonestimatesofitsfuturevalueinuse.
Change in Accounting Methods
During2010,BAWAGP.S.K.changeditsaccountingpolicyforthetreatmentofdefinedbenefitplans(excludingthedefinedbenefitplanforjubileebenefits)byrecognisingactuarialgainsandlossesinothercomprehensiveincome.Inpreviousperiods,thedefinedbenefitplanshadbeenrecognisedinprofitandloss.BAWAGP.S.K.isoftheopinionthatthenewpolicyprovidesmorerelevantinformationbecauseitresultsinanimprovedpresentationoftheincomeandexpensesresultingfromourcorebankingbusinessintheProfitorLossStatementandthereforemakesthefinancialstatementseasiertounderstand.
Thedisaggregationofchangesinthedefinedbenefitobligationsbyhighlightingthevariouscomponentslikeserviceandinterestcostscomparedtoactuarialgainsandlosseshelpstoreflectrisksmoreclearly.Recognis-ingactuarialgainsandlossesinothercomprehensiveincomereducesvolatileswingsinprofitorlossthatarenotrelatedtotheentity’sunderlyingoperations.
Overall,thenewaccountingpolicyisconsistentwiththeCentralEuropeanbankingindustry,makingBAWAGP.S.K.’sfinancialstatementmorecomparablewithitspeers.
TheIASBhasissuedanexposuredraftinwhichitproposesthatcompaniesshouldrecogniseactuarialgainsandlossesimmediatelyandthattheseitemsshouldbepresentedinothercomprehensiveincome.Intheirview,thisaccountingtreatmentprovidesimprovedinformationabouttherisksfromacompany’sinvolvementindefinedbenefitplans.TheaccountingpolicyadoptedbyBAWAGP.S.K.isthereforeinlinewiththecurrentproposalsofinternationalstandardsetters.
Thischangeinaccountingpolicyhasbeenaccountedforretrospectivelyandthecomparativestatementshavebeenrestated.AsBAWAGP.S.K.’sStatementofFinancialPositionisnotaffectedbytheapplicationofthenewaccountingpolicy,BAWAGP.S.K.willonlyshowtwocomparativeStatementsofFinancialPosition.
Thechangeintheaccountingmethodfordefinedbenefitplans(excludingthedefinedbenefitplanforjubileebenefits)onlyaffectsthepresentationofprofitorlossandothercomprehensiveincome;totalequitydoesnotchange.Theeffectofthechangeissummarisedinthetablesbelow.
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Effect on profit or loss:
in millions of Euros 2010 2009Increase (-) / decrease (+) of administrative expenses 6.7 -10.4Increase (-) / decrease (+) of tax expenses -1.7 2.6Increase (+) / decrease (-) of profit after tax 5.0 -7.8
Effect on other comprehensive income:
in millions of Euros 2010 2009
Actuarial gains (+) and losses (-) recognised in other comprehensive income
-6.7
10.4
Taxes recognised in other comprehensive income 1.7 -2.6Increase (+) / decrease (-) of other comprehensive income -5.0 7.8
Effect on retained reserves:
in millions of Euros 2009Retained reserves as of 1 January 2009 as previously reported -124.5Change in accounting policy for defined benefit plans -19.6Retained reserves as of 1 January 2009 as restated -144.1
in millions of Euros 2009
Actuarial gains and losses recognised in other comprehensive income as of 1 January 2009 as previously reported
–
Change in accounting policy for defined benefit plans 19.6
Actuarial gains and losses recognised in other comprehensive income as of 1 January 2009 as restated
19.6
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Effects of Adopting Amended and New Standards
Thefollowingstandards,amendmentsandinterpretationstoexistingstandardsweremandatoryforthefirsttimeforthe2010consolidatedfinancialstatements:
TheamendmentsclarifythescopeofIFRS2,aswellastheaccountingforgroupcash-settledshare-basedpaymenttransactionsintheseparatefinancialstatementsofanentitywhenanothergroupentityhastheobligationtosettletheaward.ThischangehasnoeffectontheconsolidatedfinancialstatementsofBAWAGP.S.K.
TheamendedIAS27Consolidated and Separate Financial Statementsrequiresthatchangesintheownershipstructurearereportedasequitytransactionsaslongastheentityretainscontrolofthesubsidiary.Iftheentitylosescontrolofthesubsidiary,theremaininginterestinthesubsidiarymustberemeasuredatitsfairvalueatthetimethesaleiseffected.TheapplicationhasnoeffectonBAWAGP.S.K.’sconsolidatedfinancialstate-ments.
IFRIC17Distributions of Non-cash Assets to Ownersprovidesguidanceonaccountingforarrangementswherebyanentitydistributesnon-cashassetstoshareholders.TheapplicationhasnoeffectonBAWAGP.S.K.’sconsolidatedfinancialstatements.
IFRIC18Transfers of Assets from Customersaddressestheaccountingbyrecipientsfortransfersofproperty,plantandequipmentfromcustomers.TheapplicationhasnoeffectonBAWAGP.S.K.’sconsolidatedfinancialstatements.
Thefollowingstandards,amendmentsandinterpretationstoexistingstandardswereapprovedandendorsedbytheInternationalAccountingStandardsBoard(IASB)andtheEUbutarenotyetmandatoryfortheprepa-rationofIFRSfinancialstatementsfortheperiodended31December2010:
TheamendmentstoIFRS3Business Combinationsrequireanentitytoaccountforcontingentconsiderationsasanadjustmenttotheoriginalcostofthebusinesscombination.Furthermore,theIASBlimitedthemeas-urementchoicetocovernon-controllinginterestsandextendedthecurrentIFRS3accountingtreatmenttoreplacementawards.Theseamendmentsbecomemandatoryforthe2011consolidatedfinancialstatements.
TheamendmenttoIFRS7Financial Instruments: Disclosures – disclosure of the financial effect of the extent to which collateral and other credit enhancements mitigate credit riskprovidesclarityintheinteractionbetweenthequalitativeandquantitativedisclosureofthenatureofrisksarisingfromfinancialinstruments.TheamendedIFRS7becomesmandatoryforthe2011consolidatedfinancialstatementsandwillhaveminoreffectsonthenotespresentedbyBAWAGP.S.K.
AmendmenttoIAS1Presentation of Financial Statements – clarification of statement of changes in equityclarifiespresentationrequirementsforothercomprehensiveincome.Thisamendmentbecomesmandatoryforthefinancialyear2011andwillhavenoeffectontheconsolidatedfinancialstatementsofBAWAGP.S.K.
IAS21The Effects of Changes in Foreign Exchange Rates, IAS28 Investment in Associates andIAS31Interests in Joint Ventures havebeenamendedinaccordancewith IAS27 Consolidated and Separate Financial Statements.Therearenoamendmentstodisclosurerequirements.
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Theseamendmentsbecomemandatoryforthe2011consolidatedfinancialstatementsandwillhavenoeffectontheconsolidatedfinancialstatementsofBAWAGP.S.K.
IAS24Related Party Disclosuresmodifiesthedefinitionofarelatedpartyandsimplifiesdisclosuresforgovernment-relatedentities.ThedisclosureexemptionsintroducedinIAS24donotaffecttheconsolidatedfinancialstatementsofBAWAGP.S.K.;however,disclosuresregardingrelatedpartytransactionsmaybeaffectedwhentherevisedversionofthestandardisappliedinfutureaccountingperiodsduetothereviseddefinitionofarelatedparty.
TheamendedIFRIC13Customer Loyalty Programmesrequiresthattheamountofproceedsallocatedtotheawardcreditsismeasuredbasedontheirfairvalue.IFRIC13willnothaveanimpactontheconsolidatedfinancialstatementsofBAWAGP.S.K.
IFRIC19Extinguishing Financial Liability with Equity InstrumentsprovidesclarificationontherequirementsofInternationalFinancialReportingStandardswhenanentityrenegotiatesthetermsofafinancialliability.Theinterpretationiseffectiveforthefinancialyear2011andwillhavenoeffectontheconsolidatedfinancialstatementsofBAWAGP.S.K.
ThefollowingstandardsandamendmentshavenotyetbeenendorsedbytheEuropeanUnion:
TheIASBissuedamendmentstoIFRS7Financial Instruments: Disclosures – Transfer of Financial Assetsaspartofitscomprehensivereviewofoff-balance-sheetactivities.Theamendmentswillallowusersoffinancialstatementstoimprovetheirunderstandingoftransfersoffinancialassets(forexamplesecuritisations),includingthepossibleeffectsofanyrisksthatmayremainwiththeentitythattransferredtheassets.Theamendmentsalsorequireadditionaldisclosuresifadisproportionateamountoftransfertransactionsareundertakenaroundtheendofareportingperiod.Applicationoftheseamendmentsismandatoryforannualperiodsbeginningonorafter1July2011.ThenewrequirementswillleadtoadditionaldisclosuresforrepotransactionsinthenotesofBAWAGP.S.K.
TheIASBhaspublishedIFRS9Financial Instruments: Classification and Measurement,whichispartofthewiderprojecttoreplaceIAS39Financial Instruments: Recognition and Measurementover2010and2011.IFRS9retainsthemixedmeasurementmodelandestablishestwoprimarymeasurementcategoriesforfinancialassets:amortisedcostandfairvalue.Thebasisofclassificationdependsontheentity’sbusinessmodelandthecontractualcashflowcharacteristicsofthefinancialasset.ClassificationandmeasurementrequirementsforfinancialliabilitiesareonlyslightlychangedcomparedtoIAS39,withfairvaluechangesrelatedtochangesintheentity’sowncreditriskrecognisedinothercomprehensiveincome.Inaddition,theIASBhasissuedexposuredraftsforthecalculationofamortisedcostandfortheimpairmentoffinancialassets(basedonan“expectedlossmodel”)andhedgeaccounting.TheIASBcurrentlyproposesthatIFRS9shouldbecomemandatoryforannualperiodsbeginningonorafter1January2013.TheprospectiveimpactofIFRS9isexpectedtobematerialbuthasnotyetbeendetermined.
TheEuropeanUnionhasnotyetendorsedIFRS9astheEFRAGhasdecidedtotakemoretimetoconsidertheoutputfromtheIASBprojectaimedatimprovingaccountingforfinancialinstruments.
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details of the Consolidated statement of Financial Position
2 | Cash reserves
in millions of Euros 31.12.2010 31.12.2009Cash on hand 230 245Balances at central banks 281 370Cash reserves 511 615
3 | Financial assets designated at fair value through profit or loss
in millions of Euros 31.12.2010 31.12.2009Bonds and other fixed income securities 1,207 1,611
Public sector debt instruments 9 19Bonds of other issuers 1,198 1,592
Shares and other variable rate securities 69 173Investment certificates 54 51Other 15 122
Loans and advances to customers 1,008 1,196Customers 1,008 1,196
Designated at fair value through profit or loss 2,284 2,980
ThecategoryFinancialassetsdesignatedatfairvaluethroughprofitorlosscontainsallfinancialinstrumentsthatarecarriedattheirfairvaluethroughprofitorlossbecausethefairvalueoptiondefinedinIAS39hasbeenexercisedforthem.FurtherinformationonthefairvalueoptioncanbefoundinNote1.
Themaximumcreditriskofloansandadvancestocustomersequalsbookvalue.
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4 | available-for-sale financial assets
in millions of Euros 31.12.2010 31.12.2009Debt instruments 6,399 2,971
Bonds and other fixed income securities 6,396 2,968Public sector debt instruments 1,286 –Bonds of other issuers 5,110 2,968
Other variable rate securities 3 3Equity investments 245 279
Recognised at costInvestments in non-consolidated subsidiaries 39 58Interests in associates 67 72Other shareholdings 139 149
Available-for-sale financial assets 6,644 3,250
Theincreaseindebtinstrumentsincludesthereclassificationofheld-to-maturityinvestmentsinJanuary2010.
ThefollowingtableshowskeyfinancialindicatorsfortheBank’sassociates:
Associates not accounted for using the equity method
in millions of EurosCumulated
assetsCumulated
equityCumulated net profit
2010 1,511 191 482009 1,373 174 23
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consolIdated FInancIal report prepared In accordance wIth IFrs
5 | Held-to-maturity financial investments
in millions of Euros 31.12.2010 31.12.2009Bonds and other fixed income securities
Public sector debt instruments – 2,814Bonds of other issuers – 3,746
Held-to-maturity investments – 6,560
BAWAGP.S.K.soldasignificantportionofitsheld-to-maturityinvestmentsin2010,andthereforetheremainingpositionswerereclassifiedasavailable-for-salefinancialassets.
Theeffectsofreclassificationfromheld-to-maturitytoavailable-for-saleareshowninthefollowingtable:
in millions of Euros Carrying amount Fair valueHeld-to-maturity investments -5,480 -5,454Available-for-sale financial assets +5,454 +5,454
6 | assets held for trading
in millions of Euros 31.12.2010 31.12.2009Bonds and other fixed income securities 71 160
Public sector debt instruments – –Bonds of other issuers 71 160
Positive fair values of derivative financial instruments 1,856 1,493Derivatives trading book 1,169 822
Foreign currency derivatives 726 223Interest rate derivatives 436 590Credit related derivatives 7 9
Derivatives banking book 687 671Foreign currency derivatives 45 6Interest rate derivatives 601 614Credit related derivatives 41 51
Other trading assets – 100Thereof repurchase agreements – 100
Assets held for trading 1,927 1,753
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7 | loans and receivables
ThefollowingbreakdowndepictsthecompositionoftheitemLoansandreceivables.Thefinancialassetsinthiscategoryarerecognisedatamortisedcost.
31.12.2010in millions of Euros
Unimpaired assets
Impaired assets (total gross carrying
amount)
Allowances for individually
impaired financial assets
Allowances for collectively
impaired financial assets 1)
Total net carrying amount
Securities 2,358 – – – 2,358 Public sector debt instruments 164 – – – 164 Debt instruments of other issuers 2,194 – – – 2,194
Receivables from credit institutions 1,527 25 -25 – 1,527 Receivables from customers 22,004 1,014 -580 -150 22,288
Central governments 146 – – – 146 Corporates 12,407 326 -174 -4 12,555 Retail 6,488 688 -406 -109 6,661 Other customers 2,963 – – – 2,963 Portfolio impairment provision – – – -37 -37
Total 25,889 1,039 -605 -150 26,173
1) Includes allowances for incurred but not reported losses.
31.12.2009in millions of Euros
Unimpaired assets
Impaired assets (total gross carrying
amount)
Allowances for individually
impaired financial assets
Allowances for collectively
impaired financial assets 1)
Total net carrying amount
Receivables from credit institutions 3,812 34 -33 – 3,813 Receivables from customers 20,668 1,217 -470 -349 21,066
Central governments 409 – – – 409 Corporates 10,693 353 -180 -2 10,864 Retail 6,405 864 -290 -312 6,667 Other customers 3,161 – – – 3,161 Portfolio impairment provision – – – -35 -35
Total 24,480 1,251 -503 -349 24,879
1) Includes allowances for incurred but not reported losses.
TheReceivablesfromcustomersarebrokendownintothereceivablesclassesspecifiedintheOeNBreportingstructureaccordingtotherequirementsofBaselII.
ThecategoryCentralgovernmentsincludesreceivablesfromcentralgovernments,primarilyfromtheRepublicofAustriainthecaseofBAWAGP.S.K.
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TheCorporatesincludelargerenterpriseswithanexposureinexcessofEUR1millionorrevenueofoverEUR50million,andspecialfinancingagreements(projectfinance)asdefinedinBaselII.
TheRetailcategorycoversreceivablesfromretailbanking.Thissegmentcomprisesjobholdersandsmallandmedium-sizedenterpriseswithanexposureoflessthanEUR1millionorrevenueoflessthanEUR50million.
ThecategoryOthercustomerscoverspublicsectorentities,churchesandreligiousgroups,politicalpartiesandsecuritiestradinghouseswithoutabankinglicence.
ThePortfolioimpairmentprovisionrepresentsaprovisionforlossesincurredbutnotdetected.
BAWAGP.S.K.transferredavailable-for-salefinancialassetstotheStatementofFinancialPositionitemLoansandreceivablesusingtheirfairvaluesasof1June2010.
Thesereclassifiedassetsarestructuredloansandcreditsurrogateswithoutderivativecomponents.BAWAGP.S.K.isoftheopinionthattheintrinsicvalueofthereclassifiedassetsoffersrelevantinformationforreadersofthefinancialreport.
Theeffectsofthereclassificationofavailable-for-saleassetsareshowninthefollowingtable:
in millions of Euros Carrying amount Fair valueAvailable-for-sale financial assets -1,897 -1,897Loans and receivables +1,897 +1,897
Theeffectiveinterestratesofthereclassifiedfinancialassetsaveraged2.2percentwithexpectedachievablecashflowsofEUR2.2billion.
Iftheassetshadnotbeenreclassified,unrealisedfairvaluechangesintheamountofEUR+13millionwouldhavebeenrecogniseddirectlyinequity(intheAFSreserve)foravailable-for-salefinancialassets.
Afterreclassification,thefinancialassetsinquestioncontinuedtomakethefollowingcontributiontothepre-taxprofitfor2010:
in millions of Euros 2010Interest income 24.2Profits from disposals 3.0Impairments –
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Beforereclassification,unrealisedfairvaluelossesofEUR–38million(beforetax)wererecogniseddirectlyinequityforreclassifiedavailable-for-salefinancialassetsinthefirsthalfof2010.Noimpairmentprovisionswereformedintheconsolidated2010ProfitorLossStatementforthenowreclassifiedavailable-for-salefinancialassetsbeforetheirreclassification.
Allavailable-for-salefinancialassetsthatwerereclassifiedinthefirsthalfof2010wereclassifiedasheld-to-maturityinvestmentsinthepriorfinancialyear.Nounrealisedfairvaluelossesforthenowreclassifiedavailable-for-salefinancialassetswererecogniseddirectlyinequityinprioryears.
Changes in impairment provisions
in millions of EurosIndividual and
collective impairment
Impairment provisions for incurred but not
reported lossesTotal
Balance as of 1.1.2010 817 35 852
AdditionsProvisions created through profit or loss
180
3
183
DisposalsChanges in the scope of consolidation
–
–
–
Used as intended -174 – -174Provisions released through profit or loss -101 -1 -102Reclassification -4 – -4Balance as of 31.12.2010 718 37 755
in millions of EurosIndividual and
collective impairment
Impairment provisions for incurred but not
reported lossesTotal
Balance as of 1.1.2009 678 29 707
AdditionsProvisions created through profit or loss
238
6
244
DisposalsChanges in the scope of consolidation
–
–
–
Used as intended -29 – -29Provisions released through profit or loss -70 – -70Balance as of 31.12.2009 817 35 852
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Theimpairmentprovisionforsignificantindividualcounterpartyriskswascreatedonthebasisofexpectedfuturerecoveries.Provisionsforcounterpartyrisksthatwerenotindividuallyofsignificancewerecreatedgenerally,onapercentagebasis,dependingontheamountsoverdueandbasedonourhistoricallossexperience.
TheconsolidatedfinancialstatementsofBAWAGP.S.K.asof31December2010containanimpairmentprovisionofEUR36.5million(2009:EUR34.6million)forloanlossesincurredbutnotyetreported.ThecalculationoftheseimpairmentprovisionsisexplainedinNote1.
Theimpairmentprovisionsbreakdownbyregionasfollows:
in millions of Euros 31.12.2010 31.12.2009Austria 625 699Abroad 130 153
Western Europe 80 83Central and Eastern Europe 49 65North America 1 1Asia/Pacific – –Rest of the world – 4
Impairment provisions 755 852
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8 | Receivables from credit institutions and customers
Thefollowingbreakdownsdepicttheregionaldistributionofthereceivablesfromcustomersandcreditinstitutionsasofthereportingdate,basedonthelocationofthecounterparty’sregistereddomicile.
Receivables from credit institutions – Regional breakdown
in millions of EurosDesignated at fair value
through profit or lossAt amortised cost Total
31.12.2010 31.12.2009 31.12.2010 31.12.2009 31.12.2010 31.12.2009Austria – – 292 2,273 292 2,273Abroad – – 1,235 1,540 1,235 1,540
Western Europe – – 1,012 1,275 1,012 1,275Central and Eastern Europe – – 93 108 93 108North America – – 13 41 13 41Asia/Pacific – – 80 62 80 62Rest of the world – – 37 54 37 54
Receivables from credit institutions – – 1,527 3,813 1,527 3,813
Receivables from customers – Regional breakdown
in millions of EurosDesignated at fair value
through profit or lossAt amortised cost Total
31.12.2010 31.12.2009 31.12.2010 31.12.2009 31.12.2010 31.12.2009Austria 1,008 1,196 17,125 17,184 18,133 18,380Abroad – – 5,163 3,882 5,163 3,882
Western Europe – – 2,748 1,962 2,748 1,962Central and Eastern Europe – – 1,560 1,382 1,560 1,382North America – – 456 250 456 250Asia/Pacific – – 6 7 6 7Rest of the world – – 393 281 393 281
Receivables from customers 1,008 1,196 22,288 21,066 23,296 22,262
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Thefollowingtabledepictsthebreakdownofreceivablesfromcustomersandcreditinstitutionsbycredittype.
Receivables from credit institutions – Breakdown by credit type
in millions of EurosDesignated at fair value
through profit or lossAt amortised cost Total
31.12.2010 31.12.2009 31.12.2010 31.12.2009 31.12.2010 31.12.2009Demand deposits – – 188 183 188 183Time deposits – – 1,055 3,238 1,055 3,238Loans – – 277 385 277 385Other – – 7 7 7 7
Receivables from credit institutions
–
–
1,527
3,813
1,527
3,813
Receivables from customers – Breakdown by credit type
in millions of EurosDesignated at fair value
through profit or lossAt amortised cost Total
31.12.2010 31.12.2009 31.12.2010 31.12.2009 31.12.2010 31.12.2009Current accounts – – 1,236 1,758 1,236 1,758Cash advances – – 553 728 553 728Loans 1,008 1,196 19,445 17,470 20,453 18,666
One-off loans 1,008 1,196 19,278 17,249 20,286 18,445Current account loans – – 7 28 7 28Other – – 160 193 160 193
Debt instruments 1) – – – – – –Leasing – – 1,054 1,110 1,054 1,110Receivables from customers 1,008 1,196 22,288 21,066 23,296 22,262
1) Not traded on an active market.
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9 | asset maturities
Thefollowingtablecontainsabreakdownoffinancialassetswithadefinedmaturitybyremainingperiodtomaturity:
Financial assets – Breakdown by remaining period to maturity 2010
in millions of Euros Up to 3 months
3 months up to 1 year
1–5 years
Over 5 years Total
Designated at fair value through profit or loss31.12.2010 Receivables from customers
5
12
849
142
1,008
Bonds and other fixed-income securities 82 155 700 270 1,207
Available-for-sale financial assets31.12.2010 Bonds and other fixed-income securities
272
890
4,128
1,106
6,396
Held-to-maturity investments31.12.2010 Bonds and other fixed-income securities
–
–
–
–
–
Loans and receivables31.12.2010 Receivables from customers
4,275
1,824
6,391
9,798
22,288
Receivables from credit institutions 1,357 33 59 78 1,527
Bonds and other fixed-income securities 4 19 907 1,428 2,358
Total as of 31.12.2010 5,995 2,933 13,034 12,822 34,784
Financial assets – Breakdown by remaining period to maturity 2009
in millions of Euros Up to 3 months
3 months up to 1 year
1–5 years
Over 5 years Total
Designated at fair value through profit or loss31.12.2009 Receivables from customers
4
13
1,085
94
1,196
Bonds and other fixed-income securities 58 419 797 337 1,611
Available-for-sale financial assets31.12.2009 Bonds and other fixed-income securities
226
1,064
1,627
51
2,968
Held-to-maturity investments31.12.2009 Bonds and other fixed-income securities
196
689
3,174
2,501
6,560
Loans and receivables31.12.2009 Receivables from customers
4,044
1,670
6,250
9,102
21,066
Receivables from credit institutions 3,527 148 68 70 3,813
Bonds and other fixed-income securities – – – – –
Total as of 31.12.2009 8,055 4,003 13,001 12,155 37,214
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10 | tangible non-current assets
Changes in tangible non-current assets 2010
in millions of EurosCarrying amount
31.12.2009 1)
Acquisition cost
01.01.2010 1)
Change in scope of con-
solidationAcquisition
cost
Change in scope of
consolidation Cumulative
depreciation
Change in foreign exchange
differences
Additions Disposals Reallocations Write-downscumulative
Subtotal31.12.2010
Reclassi- fication to held for sale 2)
Carrying amount
31.12.2010
Deprecia- tion (-), impair-ments (-) and reversal of
impairments (+) Financial
year
Tangible non-current assets 287 924 -28 – – 19 -75 – -616 225 -6 219 -49
Land and buildings used by the enterprise for its own operations
139
242
–
–
–
1
-7
–
-104
133
-1
132
-4
Investment properties
64
127
-28
–
–
–
-16
–
-50
33
–
33
-5
Office furniture and equipment
83
554
–
–
–
15
-52
1
-462
56
-5
51
-40
Plant under construction
1
1
–
–
–
3
–
-1
–
3
–
3
–
1) The balance as of 1.1.2010 refers to the amounts on 31.12.2009 prior to reclassification to assets held for sale.2) Reported on the Statement of Financial Position under Non-current assets and disposal groups classified as held for sale.
Changes in tangible non-current assets 2009
in millions of EurosCarrying amount
31.12.2008
Acquisition cost
01.01.2009
Change in scope of con-
solidationAcquisition
cost
Change in scope of
consolidation Cumulative
depreciation
Change in foreign exchange
differences
Additions Disposals Reallocations Write-downscumulative
Subtotal31.12.2009
Reclassi- fication to held for
sale
Carrying amount
31.12.2009
Deprecia- tion (-), impair-ments (-) and reversal of
impairments (+) Financial
year
Tangible non-current assets
379
1,053
5
-4
–
22
-152
–
-637
–
–
287
-43
Land and buildings used by the enterprise for its own operations
186
293
–
–
–
–
-51
–
-103
–
–
139
-3
Investment properties
82
149
–
–
–
7
-29
–
-63
–
–
64
-4
Office furniture and equipment
110
610
5
-4
–
15
-72
–
-471
–
–
83
-35
Plant under construction
1
1
–
–
–
–
–
–
–
–
–
1
-1
ThelineitemInvestmentpropertiesincludestherealestatethatmeetsthecriteriafordesignationasinvest-mentpropertywithinthemeaningofIAS40.5.Thesepropertiesareprimarilyheldtoearnrentals.Toalimiteddegree,theBankalsousessomeofthesepropertiesitself.However,becausetheseportionscannotbesoldseparatelyandareinsignificantforthepurposesofIAS40.10,theentiretyofsuchpropertiesisincludedinInvestmentproperties.
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11 | intangible non-current assets
ThecorebankingsystemAllegroisoneoftheBank’smostimportantintangibleassets.Ofthetotalcarryingamountforallintangiblenon-currentassets,EUR130millioncanbeattributedtoAllegroprojectscarriedoutinthiscontext.Allegro’sremainingaverageusefullifeis3.5years.
Changes in intangible non-current assets 2010
in millions of EurosCarrying amount
31.12.2009
Acquisition cost
01.01.2010
Change in scope of
consolidationAcquisition
cost
Change in scope of
consolidationCumulative amortisation
Change inforeign
exchange differences
Additions Disposals Reallocations Write-downscumulative
Carrying amount
31.12.2010
Amortisation (-), impairments (+) and reversal of impairments (+)Financial year
Intangible non-current assets
266
539
–
–
–
9
-2
–
-317
229
-44
Goodwill 85 115 – – – – – – -38 77 -8Software and other intangible non-current assets
180
423
–
–
–
6
-2
1
-279
149
-36Thereof purchased 124 283 – – – 6 -2 1 -184 104 -26Thereof internally generated
56
140
–
–
–
–
–
–
-95
45
-10
Intangible non-current assets in development
1
1
–
–
–
3
–
-1
–
3
–
Thereof purchased 1 1 – – – 3 – -1 – 3 –
Changes in intangible non-current assets 2009
in millions of EurosCarrying amount
31.12.2008
Acquisition cost
01.01.2009
Change in scope of
consolidationAcquisition
cost
Change in scope of
consolidationCumulative amortisation
Change inforeign
exchange differences
Additions Disposals Reallocations Write-downscumulative
Carrying amount
31.12.2009
Amortisation (-), impairments (+) and reversal of impairments (+)Financial year
Intangible non-current assets
295
527
10
-4
–
6
–
–
-273
266
-40
Goodwill 88 116 – – – – – – -30 85 -2Software and other intangible non-current assets
207
411
10
-4
–
5
–
–
-243
180
-38Thereof purchased 139 271 10 -4 – 5 – – -159 124 -26Thereof internally generated
68
140
–
–
–
–
–
–
-84
56
-12
Intangible non-current assets in development
–
–
–
–
–
1
–
–
–
1
–
Thereof purchased 0 – – – – 1 – – – 1 –
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consolIdated FInancIal report prepared In accordance wIth IFrs
Thefollowingtableshowsthegoodwillrecognisedasof31December2010:
Goodwill
in millions of Euros 31.12.2010 31.12.2009BAWAG P.S.K. Fuhrparkleasing GmbH, Vienna 1 1BAWAG P.S.K. Invest GmbH, Vienna 75 75easybank AG, Vienna 1 1Österreichische Verkehrskreditbank AG, Vienna – 8Goodwill 77 85
ThegoodwillofÖsterreichischeVerkehrskreditbankAGwaswrittendowntozerointhecurrentfinancialyear.
12 | other assets
in millions of Euros 31.12.2010 31.12.2009Tax assets 277 292
Thereof for current taxes 16 29Thereof for deferred taxes 261 263
Associates accounted for using the equity method 17 30Accruals 36 34Leasing objects not in operation 21 49Other items 127 197Other assets 478 602
ThefollowingtableshowskeyfinancialindicatorsfortheBank’sassociates:
Associates accounted for using the equity method
in millions of EurosCumulated
assetsCumulated
equityCumulated net profit
2010 1,818 3 -102009 1,688 34 -19
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consolIdated FInancIal report prepared In accordance wIth IFrs
ThedeferredtaxassetsreportedontheStatementofFinancialPositionaretheresultoftemporarydifferencesbetweenthecarryingamountspursuanttoIFRSandthevaluationsofthefollowingitemsaccordingtothetaxrequirements:
Net deferred tax assets on Statement of Financial Position
in millions of Euros 31.12.2010 31.12.2009Financial assets designated at fair value through profit or loss 21 47Available-for-sale financial assets 2 –Held-to-maturity investments – 1Loans and receivables 21 10Hedging derivatives – 7Financial liabilities designated at fair value through profit or loss 15 22Provisions 30 29Tax loss carryforwards 282 283Other 6 5Deferred tax assets 377 404Financial assets designated at fair value through profit or loss 10 21Available-for-sale financial assets 22 27Held-to-maturity investments – 2Assets held for trading 58 66Hedging derivatives 5 –Internally generated intangible assets 11 14Tangible non-current assets 10 11Deferred tax liabilities 116 141Net deferred tax assets on Statement of Financial Position 261 263
ForeachGroupmember,thedeferredtaxassetsandliabilitiespertainingtothesamelocaltaxauthoritywereoffsetagainsteachotherandreportedunderOtherassetsorTaxprovisions.
93
PReFaCe By tHe CHaiRMan oF tHe Managing BoaRd
93
consolIdated FInancIal report prepared In accordance wIth IFrs
13 | Financial liabilities designated at fair value through profit or loss
in millions of Euros 31.12.2010 31.12.2009Payables to customers 117 435
Investment products 117 435Other deposits – –
Issued bonds, subordinated and supplementary capital 4,783 5,936Issued bonds (own issues) 2,774 3,566Subordinated capital 601 847Supplementary capital 32 31Other obligations evidenced by paper 1,376 1,492
Financial liabilities designated at fair value through profit or loss 4,900 6,371
Thefairvaluesoftheinvestmentproductsarehedgedbyderivatives.
TheIssuedbondsarelistedissues,theOtherobligationsevidencedbypaperareshort-termnotesandnon-listedprivateplacements.
ThecarryingamountofthesecuritiesissuedbyBAWAGP.S.K.andrecognisedattheirfairvalueasof31December2010wasEUR53millionabovetheirnominalvalue(2009:EUR33millionabovethenominalvalue).ThecarryingamountoftheinvestmentproductsrecognisedattheirfairvaluewasEUR5millionabovetheirnominalvalue(2009:EUR13million).
14 | liabilities held for trading
in millions of Euros 31.12.2010 31.12.2009Negative fair values of derivative financial instruments 1,938 1,372
Derivatives trading book 1,356 861Foreign currency derivatives 704 235Interest rate derivatives 625 611Credit related derivatives 27 15
Derivatives banking book 582 511Foreign currency derivatives 419 180Interest rate derivatives 120 228Credit related derivatives 43 103
Other trading liabilities 333 826Thereof repurchase agreements 333 826
Liabilities held for trading 2,271 2,198
94
Konzernrechnungslegung nach IFrsPReFaCe By tHe CHaiRMan oF tHe Managing BoaRd
94
consolIdated FInancIal report prepared In accordance wIth IFrs
15 | Financial liabilities measured at amortised cost
in millions of Euros 31.12.2010 31.12.2009Payables to credit institutions 2,205 3,468Payables to customers 21,733 22,674
Savings deposits 13,001 14,220Other deposits 8,732 8,454
Issued bonds, subordinated and supplementary capital 4,085 3,343Issued bonds 2,331 1,808Subordinated capital 251 256Supplementary capital 277 325Other obligations evidenced by paper 1,226 954
Financial liabilities at amortised cost 28,023 29,485
ThebondsissuedbyBAWAGP.S.K.werelistedsecurities.TheOtherobligationsevidencedbypaperwereshort-termnotesandunlistedprivateplacements.
16 | Payables to credit institutions and customers
Thefollowingbreakdownsdepicttheregionaldistributionofthepayablestocustomersandcreditinstitutionsasofthereportingdate,basedonthelocationofthecounterparty’sregistereddomicile.
Payables to credit institutions – Regional breakdown
in millions of EurosDesignated at fair value
through profit or lossAt amortised cost Total
31.12.2010 31.12.2009 31.12.2010 31.12.2009 31.12.2010 31.12.2009Austria – – 1,252 2,226 1,252 2,226Abroad – – 953 1,242 953 1,242
Western Europe – – 378 814 378 814Central and Eastern Europe – – 2 22 2 22North America – – 13 20 13 20Asia/Pacific – – – – – –Rest of the world – – 560 386 560 386
Payables to credit institutions – – 2,205 3,468 2,205 3,468
95
PReFaCe By tHe CHaiRMan oF tHe Managing BoaRd
95
consolIdated FInancIal report prepared In accordance wIth IFrs
Payables to customers – Regional breakdown
in millions of EurosDesignated at fair value
through profit or lossAt amortised cost Total
31.12.2010 31.12.2009 31.12.2010 31.12.2009 31.12.2010 31.12.2009Austria 115 429 21,291 22,095 21,406 22,524Abroad 2 6 442 579 444 585
Western Europe 1 4 281 298 282 302Central and Eastern Europe 1 2 99 201 100 203North America – – 19 21 19 21Asia/Pacific – – 8 8 8 8Rest of the world – – 35 51 35 51
Payables to customers 117 435 21,733 22,674 21,850 23,109
Thefollowingtabledepictsthebreakdownofpayablestocustomersandcreditinstitutionsbysector.
Payables to customers – Breakdown by sector
in millions of EurosDesignated at fair value
through profit or lossAt amortised cost Total
31.12.2010 31.12.2009 31.12.2010 31.12.2009 31.12.2010 31.12.2009Savings deposits – – 13,001 14,220 13,001 14,220
Savings accounts – – 5,238 6,651 5,238 6,651Savings associations – – 379 416 379 416Fixed-term investment savings accounts
–
–
7,384
7,153
7,384
7,153
Investment accounts 117 435 – – 117 435Other deposits – – 8,732 8,454 8,732 8,454
Central governments – – 393 412 393 412Non credit institutions – – 356 489 356 489Corporates – – 2,655 3,137 2,655 3,137Retail – – 5,328 4,416 5,328 4,416
Payables to customers 117 435 21,733 22,674 21,850 23,109
96
Konzernrechnungslegung nach IFrsPReFaCe By tHe CHaiRMan oF tHe Managing BoaRd
96
consolIdated FInancIal report prepared In accordance wIth IFrs
17 | liabilities maturities
Thefollowingtablesdepictabreakdownofthefinancialliabilitiesbymaturity.
Financial liabilities – Breakdown by remaining period to maturity 2010
in millions of EurosUp to
3 months3 months
up to 1 year1–5 years
Over 5 years
Total
Liabilities designated at fair value through profit or loss31.12.2010 Payables to customers
11
9
7
90
117
Bonds, subordinated and supplementary capital
435
118
2,614
1,616
4,783
Liabilities at amortised cost31.12.2010 Payables to customers
9,669
3,819
3,443
4,802
21,733
Payables to credit institutions 1,221 80 240 664 2,205
Bonds, subordinated and supplementary capital
141
417
2,178
1,349
4,085
Total as of 31.12.2010 11,477 4,443 8,482 8,521 32,923
Financial liabilities – Breakdown by remaining period to maturity 2009
in millions of EurosUp to
3 months3 months
up to 1 year1–5 years
Over 5 years
Total
Liabilities designated at fair value through profit or loss31.12.2009 Payables to customers
43
40
27
325
435
Bonds, subordinated and supplementary capital
39
1,217
2,495
2,185
5,936
Liabilities at amortised cost31.12.2009 Payables to customers
10,721
2,586
4,175
5,192
22,674
Payables to credit institutions 1,553 1,075 333 507 3,468
Bonds, subordinated and supplementary capital
101
848
912
1,482
3,343
Total as of 31.12.2009 12,457 5,766 7,942 9,691 35,856
Ofthethreehybridnotesissuedtodate(BCF,BCFII,BCFIII),thetermsofone(BCF)provideforacouponstep-upatitsfirstcallingdate,whereasnochangesinthetermsoftheothertwonotes(BCFII,BCFIII)areprovidedforduringtheirmaturity.InthecaseoftheBCFnote,thecouponwillchangefromfixedtovariableonthefirstcallingdate.Onlytheissuerhasanordinaryrightofredemption.Thecallingdatesofthenotesareasfollows:4 BCF:callablequarterly(showninFinancialliabilitiesdesignatedatfairvaluethroughprofitorloss)4 BCFII:callablequarterly(showninFinancialliabilitesmeasuredatamortisedcost)4 BCFIII:firstcallingdateis5April2014,andsemi-annuallythereafter(showninFinancialliabilities
designatedatfairvaluethroughprofitorloss)
97
PReFaCe By tHe CHaiRMan oF tHe Managing BoaRd
97
consolIdated FInancIal report prepared In accordance wIth IFrs
18 | Provisions
in millions of Euros 31.12.2010 31.12.2009Provisions for social capital 362 356
Thereof for severance payments 86 89Thereof for pension provisions 246 236Thereof for jubilee benefits 30 31
Tax provisions 18 19Thereof for current taxes 3 4Thereof for deferred taxes 15 15
Anticipated losses on pending business 18 17Credit promises and guarantees 3 2Provisions for troubled contracts 15 15
Other items 38 49Provisions for pending litigation 38 43Other – 6
Provisions 436 441
98
Konzernrechnungslegung nach IFrsPReFaCe By tHe CHaiRMan oF tHe Managing BoaRd
98
consolIdated FInancIal report prepared In accordance wIth IFrs
Changes in social capital
in millions of EurosProvisions for
post-employment benefits
Provisions for severance
payments
Provisions for jubilee benefits
Total social capital
Defined benefit obligation as of 01.01.2010 247 89 31 367Service cost 1 5 2 8Interest cost 12 4 1 17Payments -13 -3 -1 -17Others – -2 – -2Actuarial gain/loss as of 31.12.2010 10 -3 -1 6Defined benefit obligation as of 31.12.2010 257 90 32 379Fair value of plan assets -11 – – -11Reclassification to Non-current assets and disposal groups classified as held for sale
–
-4
-2
-6
Balance as of 31.12.2010 246 86 30 362
in millions of EurosProvisions for
post-employment benefits
Provisions for severance
payments
Provisions for jubilee benefits
Total social capital
Defined benefit obligation as of 01.01.2009 245 92 30 367Service cost 1 5 2 8Interest cost 12 4 1 17Payments -13 -4 -1 -18Actuarial gain as of 31.12.2009 5 – – 5Elimination from scope of consolidation -3 -8 -1 -12Defined benefit obligation as of 31.12.2009 247 89 31 367Fair value of plan assets -11 – – -11Balance as of 31.12.2009 236 89 31 356
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PReFaCe By tHe CHaiRMan oF tHe Managing BoaRd
99
consolIdated FInancIal report prepared In accordance wIth IFrs
Assignable unit-linked pension fund assets
in millions of Euros 2010 2009Pension fund assets as of 1 January 11 5Additions – 5Fair value changes – 1Pension fund assets as of 31 December 11 11
TheFairvaluechangescontainexpectedreturnsonplanassets,actuarialgainsandlosses,contributionsbytheemployer,contributionsbyplanparticipantsandbenefitspaid.
Changes in tax and other provisions
in millions of EurosBalance
01.01.2010Added Used Released
Disposal scope of con-
solidation
Balance 31.12.2010
Tax provisions 19 3 -3 – -1 18Current taxes 4 1 -3 1 – 3Deferred taxes 15 2 – -1 -1 15Other provisions 66 5 -8 -7 – 56Anticipated losses from pending business
17
2
–
-1
–
18
Other items 49 3 -8 -6 – 38
in millions of EurosBalance
01.01.2009Added Used Released
Disposal scope of con-
solidation
Balance 31.12.2009
Tax provisions 22 2 -1 -4 – 19Current taxes 5 1 – -2 – 4Deferred taxes 17 1 -1 -2 – 15Other provisions 78 6 -4 -14 – 66Anticipated losses from pending business
27
1
–
-11
–
17
Other items 51 5 -4 -3 – 49
Otheritemsmainlycompriseprovisionsforpendinglegalproceedings.
100
Konzernrechnungslegung nach IFrsPReFaCe By tHe CHaiRMan oF tHe Managing BoaRd
100
consolIdated FInancIal report prepared In accordance wIth IFrs
Provisions for deferred taxes
ThedeferredtaxliabilitiesreportedontheStatementofFinancialPositionaretheresultoftemporarydifferencesbetweenthecarryingamountspursuanttoIFRSandthevaluationsofthefollowingitemsaccordingtothetaxrequirements:
in millions of Euros 31.12.2010 31.12.2009Financial assets designated at fair value through profit or loss – –Available-for-sale financial assets 7 7Loans and receivables 2 1Tangible non-current assets 2 3Other 4 4Deferred tax liabilities 15 15Net deferred tax liabilities on Statement of Financial Position 15 15
Temporarydifferencesforwhichnodeferredtaxliabilitieswererecognised,aspermittedbyIAS12.39,cametoEUR466million(2009:EUR458million).
19 | other obligations
in millions of Euros 31.12.2010 31.12.2009Other liabilities 441 347Accruals 21 31Other obligations 462 378
20 | Hedging derivatives
in millions of Euros 31.12.2010 31.12.2009Hedging derivatives in fair value hedges
Positive market values 55 33Negative market values 40 60
101
PReFaCe By tHe CHaiRMan oF tHe Managing BoaRd
101
consolIdated FInancIal report prepared In accordance wIth IFrs
BAWAGP.S.K.usesfairvaluehedgeaccountingtoaccountforhedgesofinterestrateriskinherentinfixed-ratefinancialinstruments.Interestrateswapsareusuallyusedashedginginstruments.ThehedgeditemsaresecuritiesinthecategoryAvailable-for-salefinancialassetsaswellastheBank’sownissuesandsavingsaccountsthatarerecognisedatamortisedcost.
in millions of EurosNotional of
hedged itemsNet book value of
hedging instruments
Net valuation of hedged item and hedging
instrument recognised in the financial year
31.12.2010 31.12.2009 31.12.2010 31.12.2009 31.12.2010 31.12.2009Available for sale financial assets 926 1,254 -16 -59 4 -2
Securities 926 1,254 -16 -59 4 -2
Financial instruments recognised at amortised cost
7,722
3,699
31
32
10
-8
Own issues 2,941 686 9 31 7 -8
Savings deposits of customers
4,706
3,013
20
1
3
–
Loans to customers 75 – 2 – – –Total 8,648 4,953 15 -27 14 -10
TheeffectsofchangesinthevalueofthehedginginstrumentandthehedgeditemareshownunderNote24Gainsandlossesonfinancialassetsandliabilities.
102
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102
consolIdated FInancIal report prepared In accordance wIth IFrs
21 | equity
Share Capital
BAWAGP.S.K.hassharecapitalofEUR250milliondividedinto250,000,000shares.
Participation Capital
PursuanttotheagreementinprincipleconcludedwiththeRepublicofAustriaonthesubscriptionofpartici-pationcapitalandthesubscriptionagreement,theRepublicofAustriasubscribed11,000participationcertificateswithanominalvalueofEUR50,000each,fortotalparticipationcapitalofEUR550millionin2009.
Theholdersoftheparticipationcertificatesareentitledtoadividendof9.3percentp.a.,whichwillincreaseby0.5percentinboth2014and2015,by0.75percentin2016,andby1.0percenteveryfinancialyearstartingin2017.Thisdividendiscappedattheamountofthetwelve-monthEuriborplus10.0percentp.a.
AdividendmayonlybepaidonparticipationcertificateswhenitiscoveredbytheprofitforthepriorfinancialyearafterchangesinreservesinaccordancewithAustrianGAAP(UGB)andacorrespondingmotionispassedbytheAnnualGeneralMeetingofBAWAGP.S.K.ThedividendshallbepaidatthediscretionofBAWAGP.S.K.;thepresenceofdistributableprofitsdoesnotobligatetheBanktopayadividend.
Theparticipationcertificatesareissuedforanindefiniteperiodoftime,butcanberedeemedbytheissuerinaccordancewiththelegalrequirements.Theholdersoftheparticipationcertificateswaivetheirrighttotheordinaryandextraordinaryterminationofthecertificates.
TheparticipationcapitalisreportedasequitycapitalinBAWAGP.S.K.’sconsolidatedfinancialstatements;dividenddisbursementsfortheparticipationcapitalwillbereportedasappropriationofprofits.Theparticipa-tioncapitalwillberecognisedassupervisorycorecapitalforthepurposesofcalculatingtheBank’sownfundspursuanttotheAustrianBankingAct.
In2011,BAWAGP.S.K.planstopayadividendofEUR51.2milliontotheholdersoftheparticipationcapitalrelatedtotheperformancein2010.
103
PReFaCe By tHe CHaiRMan oF tHe Managing BoaRd
103
consolIdated FInancIal report prepared In accordance wIth IFrs
Changes in reserves
in millions of Euros 2010 Capital reserves
Retained reserves
AFS reserve
Foreign exchange
differences
Actuarial gains/ losses
Equity w/o non-
controlling interests
Non-controlling interests
Equity includ-ing non-
controlling interests
Total comprehensive income – 121.8 6.1 0.1 -5.0 123.0 0.8 123.8Consolidated profit/loss – 121.8 – – – 121.8 14.8 136.6Income and expenses recognised directly in equity
–
–
6.1
0.1
-5.0
1.2
-14.0
-12.8
Foreign exchange differences – – – 0.1 – 0.1 – 0.1Changes in AFS reserves – – 13.8 – – 13.8 -14.0 -0.2
Income and expenses recognised directly in equity (before taxes)
–
–
89.2
–
–
89.2
–
89.2
Reclassified due to realised profit/loss (before taxes)
–
–
-75.4
–
–
-75.4
–
-75.4
Share of other comprehensive income of associates accounted for using the equity method
–
–
-2.5
–
–
-2.5
–
-2.5
Actuarial gains (losses) on defined benefit pension plans
–
–
–
–
-6.7
-6.7
–
-6.7
Income taxes – – -5.2 – 1.7 -3.5 – -3.5
104
Konzernrechnungslegung nach IFrsPReFaCe By tHe CHaiRMan oF tHe Managing BoaRd
104
consolIdated FInancIal report prepared In accordance wIth IFrs
in millions of Euros 2009 Capital reserves
Retained reserves
AFS reserve
Foreign exchange
differences
Actuarial gains/ losses
Equity w/o non-
controlling interests
Non-controlling interests
Equity includ-ing non-
controlling interests
Total comprehensive income – -30.0 48.2 – 7.8 26.0 195.1 221.1Consolidated profit/loss – -30.0 – – – -30.0 195.1 165.1Income and expenses recognised directly in equity
–
–
48.2
–
7.8
56.0
–
56.0
Changes in AFS reserves – – 63.4 – – 63.4 – 63.4
Income and expenses recognised directly in equity (before taxes)
–
–
68.2
–
–
68.2
–
68.2
Reclassified due to realised profit/loss (before taxes)
–
–
-4.8
–
–
-4.8
–
-4.8
Actuarial gains (losses) on defined benefit pension plans
–
–
–
–
10.4
10.4
–
10.4
Income taxes – – -15.2 – -2.6 -17.8 – -17.8
Income taxes recognised directly in equity
in millions of EurosBefore taxes
Incometaxes
After taxes
Before taxes
Incometaxes
After taxes
1–12/2010 1–12/2009AFS reserve 11.2 -5.1 6.1 63.4 -15.2 48.2Actuarial gains (losses) on defined benefit pension plans
-6.7
1.7
-5.0
10.4
-2.6
7.8
Income and expenses recognised directly in equity
4.5
-3.4
1.1
73.8
-17.8
56.0
105
PReFaCe By tHe CHaiRMan oF tHe Managing BoaRd
105
consolIdated FInancIal report prepared In accordance wIth IFrs
details of the Consolidated Profit or loss statement
22 | net interest income
in millions of Euros 2010 2009Interest income 1,429.5 1,584.8
Cash reserves 3.8 5.7 Financial assets held for trading 284.7 202.9 Financial assets designated at fair value through profit or loss 105.6 134.0Available-for-sale financial assets 221.5 103.2 Loans and receivables 798.5 886.9 Held-to-maturity investments 15.4 252.1
Interest expenses -787.4 -1,028.1 Financial liabilities held for trading -114.3 -99.9 Financial liabilities designated at fair value through profit or loss -257.0 -288.1 Financial liabilities measured at amortised cost -416.1 -640.1 Other liabilities – –
Dividend income 7.8 7.6 Available-for-sale financial assets 7.8 7.6
Net interest income 649.9 564.3
Ingeneral,interestincomeandsimilarincomearerecognisedonanaccrualbasis.Interestincomealsoincludespremiumsonsecuritiesclassifiedasfinancialinvestmentsontheaccrualbasisofaccounting.Interestincomeonimpairedreceivablesduring2010cametoEUR15.5million(2009:EUR10.8million).
106
Konzernrechnungslegung nach IFrsPReFaCe By tHe CHaiRMan oF tHe Managing BoaRd
106
consolIdated FInancIal report prepared In accordance wIth IFrs
23 | net fee and commission income
NetfeeandcommissionincomecanbebrokendownbyBAWAGP.S.K.operationsasfollows:
in millions of Euros 2010 2009Payment transfers 151.8 151.1Lending 28.3 26.1Securities and custody business 36.7 36.2Foreign business, currency and notes-and-coin business 0.4 0.4Payments to Österreichische Post AG -73.0 -80.5Other services 20.9 21.5Fee relating to guarantee granted by the Republic of Austria -5.7 –Net fee and commission income 159.4 154.8
TheguaranteeissuedbytheRepublicofAustriaforcertainassetsinthemaximumamountofEUR400millionwasterminatedon22June2010.
107
PReFaCe By tHe CHaiRMan oF tHe Managing BoaRd
107
consolIdated FInancIal report prepared In accordance wIth IFrs
24 | gains and losses on financial assets and liabilities
in millions of Euros 2010 2009
Realised gains and losses on financial assets and liabilities not measured at fair value through profit or loss, net
209.2
-27.1
Available-for-sale financial assets 55.5 10.0 Loans and receivables (including finance leases) 1.7 -2.1 Held-to-maturity investments 130.7 -35.1 Financial liabilities measured at amortised cost 0.1 0.1 Gain from the sale of consolidated subsidiaries 21.2 –Gains (losses) on financial assets and liabilities held for trading, net 23.0 96.1 Interest rate instruments and related derivatives 24.0 -46.0 Foreign exchange trading 11.2 4.8 Credit risk instruments and related derivatives -12.2 137.3
Gains (losses) on financial assets and liabilities designated at fair value through profit or loss, net
-82.9
266.1
Gains (losses) from fair value hedge accounting 14.3 -10.2 Fair value adjustment of hedged item -33.2 -6.7 Fair value adjustment of hedging instrument 47.5 -3.5 Exchange differences revaluations, net 3.5 0.6 Gains and losses on financial assets and liabilities 167.1 325.5
TheGains and losses on financial assets and liabilitiesaredrivenprimarilybythevaluationofourinvestmentsandissuedsecuritiesandgainsfromthesaleofsecurities.
TheFinancialMarketsunitachievedaresultofEUR19.2millioninthereportingperiodbytradinginsecuritiesandderivatives.
Riskpremiumsonthecapitalmarketdeclinedagainin2010,asin2009.ThisledtopositivevaluationresultsinthestructuredcreditportfolioofEUR28.8millionandrealisedgainsfromthesaleandredemptionofsecuritiesinthestructuredcreditportfoliointheamountofEUR10.3million.
AfurtherEUR21.2millioninincomewasgeneratedbythesaleofassociatedcompaniesandsubsidiaries.Investmentstrategychangesandrevisedinterestratepositioningresultedinthesaleofsecuritiesandtherealisationofcapitalgainsinthereportingperiod.Theseprofitswereusedtocoverexpensesfromthevaluationofissuedsecuritiesrecognisedatfairvaluethroughprofitorlossandothereffectsofhedgingmeasuresandvaluations.ThesemeasuresresultedinanetsurplusofapproximatelyEUR76million.
108
Konzernrechnungslegung nach IFrsPReFaCe By tHe CHaiRMan oF tHe Managing BoaRd
108
consolIdated FInancIal report prepared In accordance wIth IFrs
25 | other operating income and expenses
in millions of Euros 2010 2009Net income from investment properties 4.5 3.8Net income from the sale of tangible and intangible non-current assets 0.2 7.0Net income from retailing -10.8 -9.2Other income and expenses 1.7 28.3Other operating income and expenses -4.4 29.9
IncomefrominvestmentpropertiesamountedtoEUR6.8millionin2010(2009:EUR6.8million);expensesdeclinedtoEUR1.9millionin2010(2009:EUR2.5million).VacancycostsamountedtoEUR0.4million(2009:EUR0.5million).
26 | administrative expenses
in millions of Euros 2010 2009Staff costs -371.7 -348.9Wages and salaries -279.2 -259.6Statutory social security contributions -62.4 -60.5Voluntary fringe benefits -4.5 -3.8Post-employment benefit costs -6.0 -6.0(Increase) decrease of pension provision -12.9 -11.2(Increase) decrease of provision for severance payments -4.1 -5.3(Increase) decrease of provision for jubilee benefits -1.5 -1.4Staff benefit fund costs -1.1 -1.1Other administrative expenses -172.8 -178.8Administrative expenses -544.5 -527.7
Post-employmentbenefitcostsincludepaymentstopensionfundsunderdefinedcontributionplans.
Otheradministrativeexpensesinclude,amongothers,advertisingexpenses,advisoryfees,rentalexpensesandITcosts.
ThewagesandsalariesstaffcostsincludecostsofrestructuringintheamountofEUR25.8million,whicharosefromourprogrammetoincreaseefficiencyandproductivity.Withouttakingintoaccountthecostsofrestructuring,the2010totaladministrativeexpenseswereEUR9.0millionlowerthanin2009.
109
PReFaCe By tHe CHaiRMan oF tHe Managing BoaRd
109
consolIdated FInancIal report prepared In accordance wIth IFrs
27 | depreciation and amortisation on tangible and intangible non-current assets
in millions of Euros 2010 2009Depreciation and amortisation
Intangible non-current assets -36.4 -37.8Tangible non-current assets -37.4 -42.6
Depreciation and amortisation -73.8 -80.4
28 | Provisions and impairment losses
in millions of Euros 2010 2009Changes in provisions for credit risk 2.3 7.9Impairment losses on financial assets -182.0 -241.5Impairment losses on non-financial assets -20.0 -3.1Provisions and impairment losses -199.7 -236.7
Impairment losses on financial assets
in millions of Euros 2010 2009Financial assets measured at cost -42.2 -8.8Available-for-sale financial assets not measured through profit or loss -1.9 –Held-to-maturity investments at amortised cost – -50.3Loans and receivables at amortised cost (including finance leases) -137.9 -182.4Direct write-downs and charges for losses on loans and advances to credit institutions and customers
-241.3
-252.9
Released from loan loss provisions for loans and advances to credit institutions and customers
101.7
69.5
Recoveries on loans previously written off 1.7 1.0
Impairment losses on financial assets not measured at fair value through profit or loss
-182.0
-241.5
Oftheimpairmentlossesonheld-to-maturityinvestmentsin2009,EUR48.1millioncanbeattributedtothestructuredcreditportfolio.In2010impairmentsofthestructuredcreditportfoliowerenotnecessary.
110
Konzernrechnungslegung nach IFrsPReFaCe By tHe CHaiRMan oF tHe Managing BoaRd
110
consolIdated FInancIal report prepared In accordance wIth IFrs
Impairment losses on non-financial assets
Thefollowingtabledepictstheimpairmentsandreversalofimpairmentsmadeonindividualnon-financialassets.
in millions of Euros 2010 2009Property, buildings and equipment -8.4 0.5Investment property -3.6 -1.0Intangible non-current assets -8.0 -2.6
Goodwill -8.0 -2.6Other intangible non-current assets – –
Impairment losses on non-financial assets -20.0 -3.1
29 | share of the profit or loss of associates accounted for using the equity method
ThelossreportedforthecurrentyearofEUR–4.7million(2009:EUR–8.0million)isprimarilyduetotheproportionateshareinBAWAGP.S.K.VersicherungAGandZEUSRecoveryFundS.A.
TheunrecognisedshareofthelossesofentitiesthatwereaccountedforusingtheequitymethodasprovidedbyIAS28.37(g)cametoEUR0.0million(2009:EUR0.0million).
30 | income taxes
Income taxes recognised in profit or loss
in millions of Euros 2010 2009Current tax income / expense -13.6 0.6Deferred tax income / expense 0.9 -57.2Income taxes -12.7 -56.6
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Thefollowingreconciliationshowstherelationshipbetweencomputedtaxexpensesandreportedtaxexpenses:
in millions of Euros 2010 2009Profit before tax 149.3 221.7Tax rate 25% 25%Computed tax expenses -37.3 -55.4Reductions in taxDue to tax-exempt income from equity investments 2.4 –Due to gains and losses from the valuation of equity investments 0.9 –Due to tax neutral revaluations – 51.8Due to other tax-exempt income – 2.6Due to differing foreign tax rates 5.0 4.1Due to use of tax loss carryforwards without recognition of deferred taxes 58.4 –Due to other tax effects 0.9 8.1Increases in taxDue to the sale of equity investments -3.8 –Due to gains and losses from the valuation of equity investments – -1.4Due to unrecognised deferred taxes on tax loss carryforwards – -64.7Due to non tax deductable expenses -0.4 -1.5Due to other tax effects -26.4 -1.4Income tax in the period -0.3 -57.8Out-of-period income tax -12.4 1.2Reported income tax (expense) -12.7 -56.6
TheGroup’sassetsincludeddeferredtaxassetsaccountedforonthegroundsoftherecognisedbenefitsarisingfromasyetunusedtaxlossesintheamountofEUR282million(2009:EUR283million).Themajorityofthetaxlossescouldbecarriedforwardforanunlimitedperiod.TheuntaxedportionoftheliabilityreservewasEUR317.6million(2009:EUR317.6million).
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segment Reporting
ThisinformationisbasedontheGroupstructureasof31December2010.
ThesegmentreportingpresentstheresultsoftheoperatingbusinesssegmentsofBAWAGP.S.K.Group.ThefollowingsegmentinformationisbasedonIFRS8Operating Segments,whichfollowstheso-calledmanage-mentapproach.Inthis,thesegmentinformationispreparedonthebasisoftheinternalreportsusedbytheManagingBoardtoassesstheperformanceofthesegmentsandtomakedecisionsonallocatingresourcestothesegments.
Theprofitabilityofeachindividualsegmentismeasuredusingtheoperatingresultandtheindicatorsreturnonequityandcost-incomeratio.Thereturnonequityiscalculatedbydividingtheoperatingresultbeforetaxesbytheregulatorycapital(TierI).Thecost-incomeratioinoperatingbusinessactivitiesreflectsthecostefficiencyofthesegments;itiscalculatedbydividingoperatingexpensesbyearningsbeforeriskprovisions.
Inthemanagementreporting,netinterestincomeisallocatedtotheindividualsegmentsusingthemarketinterestratemethod.Accordingtothismethod,itisassumedthatassetsandliabilitiesarerefinancedbymoneyandcapitalmarkettransactionswithcorrespondingmaturities,leadingtonointerestraterisk.
Changesinthesegmentstructurecanresultfromorganisationalchangesorfromalteredmanagementrespon-sibilities.Thefollowingreorganisationsthathadamaterialeffectonthesegmentreportingtookplaceinfinancialyear2010:4 Duringthereportingperiod,managementresponsibilityforallrealestateandleasingbusinesswastrans-
ferredtotheCorporatessegment.4 InternationalBusinesswascarvedoutoftheCorporatessegmentandpresentedasaseparatesegment
startingin2010.4 TheformerTreasurysegmentwasextensivelyrestructuredduringthefinancialyear.Theresultfromtrading
andinvestmentsisnowallocatedtotheFinancialMarketssegment,whileequityinvestments,fundingandallassetliabilitymanagementarewithintheresponsibilityofCorporateCenter/AssetLiabilityManagement.
4 Theassignmentofsubsidiariestothesegmentswasmodifiedaccordinglyaspartoftheseorganisationalandmanagementresponsibilitychanges.
Comparisonperiodswereadjustedforallofthechangesmentionedabove.
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The segments in detail:
in millions of Euros Retail Banking
CorporatesInternational
BusinessFinancialMarkets
Total Business
Corporate Center/ALM
Total
Net interest income 2010 2009
305.0335.6
178.2173.5
78.234.9
60.677.1
621.9620.9
28.0-56.6
649.9564.3
Net fee and commission income 2010 2009
122.8110.0
77.166.4
-4.09.2
1.50.1
197.5185.7
-38.0-30.9
159.4154.8
Gains and losses on financial assets and liabilities
2010 2009
3.83.5
3.35.2
0.3–
19.219.0
26.727.7
129.1111.2
155.8138.9
Other operating income (expenses)
2010 2009
0.3-1.1
3.113.7
– –
– –
3.412.6
-7.817.3
-4.429.9
Total revenues 2010 2009
431.9448.0
261.7258.7
74.544.1
81.496.2
849.5846.9
111.241.0
960.8887.9
Provisions and impairment losses 2010 2009
-85.5-89.1
-13.1-65.1
– –
–-0.7
-98.6-154.9
-101.1-81.9
-199.7-236.7
Revenues after risk costs 2010 2009
346.4358.9
248.7193.7
74.544.1
81.495.4
751.0692.1
10.1-40.8
761.1651.2
Administrative expenses 2010 2009
-352.7-356.6
-100.2-98.9
-14.2-6.9
-29.6-24.5
-496.8-486.9
-47.7-41.0
-544.5-527.8
Depreciation and amortisation on tangible and intangible non-current assets
2010 2009
-32.9-38.4
-12.3-14.7
-0.9-0.8
-2.4-2.7
-48.5-56.6
-25.3-23.7
-73.8-80.3
Operating expenses 2010 2009
-385.6-395.0
-112.6-113.6
-15.2-7.6
-32.0-27.2
-545.3-543.5
-73.1-64.7
-618.3-608.1
Operating profit 2010 2009
-39.2-36.2
136.180.0
59.336.5
49.468.3
205.7148.6
-62.9-105.5
142.743.1
Share of the profit or loss of associates accounted for using the equity method
2010 2009
– –
– –
– –
– –
– –
-4.7-8.0
-4.7-8.0
Profit/Loss before tax 2010 -39.2 136.1 59.3 49.4 205.7 -67.6 138.02009 -36.2 80.0 36.5 68.3 148.6 -113.5 35.1
Assets 2010 2009
7,189.96,935.1
16,983.916,149.2
1,846.61,133.0
4,464.05,411.4
30,484.429,628.7
8,072.011,595.8
38,556.441,224.5
Refinancing of business 2010 2009
18,894.719,606.4
3,515.34,167.0
–2.1
––
22,410.023,775.6
16,146.417,449.0
38,556.441,224.6
Risk-weighted assets 2010 2009
3,897.63,924.8
9,123.67,968.3
1,886.81,541.9
968.21,623.7
15,876.215,058.7
5,549.84,605.0
21,426.019,663.7
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TheRetail Bankingsegmentcoversbankingservicesprovidedbybranches,alternativesaleschannelsandtheSmallBusinessunit.
ItalsocoversthesubsidiarieseasybankandBAWAGP.S.K.Invest.
TheinterestincomeintheRetailBankingsegmentisinfluencedsignificantlybyrevenuesfromdeposit-takingbusiness.Inthereportingperiodwefacedcontinuedfiercecompetitionandsustainedmarginpressure.BecauseoftheBank’sgoodliquidityposition,wewerenotforcedtofullyabsorbchangesonthemarket.However,thedeclineincustomerdepositsandtheremainingpressureonmarginsindeposit-takingbusinessstillreducedthecontributionthattheseactivitiesmadetotheBank’sresult.Incontrast,agoodlevelofnewlendingbusinessinthissegmentresultedinaslightlyimprovedcontributiontonetinterestincomefromtheseactivities.Commissionincomeimprovedconsiderablycomparedtothepriorfinancialyear,inpartthankstothestrongincreaseinsecuritiescommissions.Theimprovedcostbasisalsohadapositiveeffectonthesegment’sresults.
TheCorporatessegmentincludestheprofitcentrescommercialcustomers,publicsector,projectfinance,socialhousing,institutionalcustomersandfinancialinstitutions.MostofthecustomersinthissegmentarelocatedinAustria,andBAWAGP.S.K.offersabroadrangeofproductstomeettheirneeds.Theseincludestandardproductsaswellastailor-madefinancingandinvestmentsolutionsthatmakeBAWAGP.S.K.aparticularlyvaluableandreliablepartnerforAustria’seconomy.
Theleasingsub-grouphasbeenassignedtothissegmentsince2010.
Thepre-taxresultoftheCorporatessegmentimprovedconsiderablycomparedtothepreviousperiod.Thiswastheresultoftheincreaseinlendingcombinedwithanewwideningofinterestratemargins,aswellasincreasedcross-selling.Theriskprovisionsalsodevelopedwellinthe2010financialyear,reflectingtheconservativeprofileoftheloanportfolio.
TheBank’sInternational Businessincludestwounits,InternationalCorporatesandCommercialRealEstate.
Businessvolumeexpandedinthereportingperiod,butinstringentcompliancewiththerestrictiveriskguidelines.InternationalCorporatesinvestsprimarilyininvestmentgradeandnon-investmentgradecorporatebondsandloansdenominatedinEurosand,toalimitedextent,USdollars.ThisportfoliohadacarryingvalueofapproximatelyEUR1.8billionattheendof2010(approximatelyEUR1.1billionattheendof2009).
ThestructureoftheFinancial Marketssegmentwasadaptedtobetteraccountforthemarketandcustomerrequirementsin2010andnowcomprisestheunitsFX,CommoditiesandExecution,RatesandCreditMarkets.Fundingandequitycapitalinvestmentswerecarvedout,andhavebeenundertheresponsibilityofCorporateCenter/ALMsince2010.FinancialMarketsmanagestheGroup’sinvestmentandtradingactivities.Whilesubstantialgainsweremadeinoperationaltradingandinvestmentactivities,netinterestincomefellasaresultofthetargetedreductionofsecuritiesinvestmentsinthebankingbookastheBankadapteditsinterestrateposition.
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TheCorporate Center/ALMsegmentprimarilycoversassetandliabilitymanagement,fundingportfolios,investmentsofourequitycapital,thestructuredcreditportfolio,andadditionalbankandnon-banksub-sidiariesandportfolios.ItalsoincludestheresultofequityinvestmentsoutsideoftheBank’scorebusinessaswellasconsolidationeffectsandtranslationitemstocompensateforvaluationandreportingdifferencesbetweenthesegmentreportingandtheProfitorLossStatement.
Thegainsandlossesonfinancialassetsandliabilitiesaredrivenprimarilybythevaluationofourinvestmentsandissuedsecuritiesandgainsfromthesaleofsecurities.Riskpremiumsonthecapitalmarketdeclinedagainin2010,asin2009.Thisledtopositivevaluationresultsinthestructuredcreditportfolio.Furtherincomewasgeneratedbythesaleofassociatedcompaniesandsubsidiaries.Investmentstrategychangesandinterestratepositionchangesresultedinthesaleofsecuritiesandprofittakinginthereportingperiod.Theseprofitswereusedtocoverexpensesfromthevaluationofissuedsecuritiesrecognisedatfairvaluethroughprofitorlossandothereffectsofhedgingmeasuresandvaluations.Overall,thesemeasuresresultedinanetsurplus.
Theimpairmentsincludeloanlossprovisionsinsubsidiaries,whichareassignedtothissegment,aswellasimpairmentsofequityinvestments(EUR42.2million),ofgoodwill(EUR8.0million)andofrealestate(EUR12.0million).Thesegment’sadministrativeexpensesincludeexpensesaccruedinsubsidiariesallocatedtothissegment,centralitemssuchasfromoverallBankprojectsandinparticulartherestructuringcostsforthe2010financialyear.
ThesegmentresultisreconciledwiththeconsolidatedProfitorLossStatementasfollows:
in millions of Euros 2010 2009
Gains and losses on financial assets and liabilities according to segment report
155.9
138.9
Gains and losses on financial assets attributable to non-controlling interests
11.2
186.6
Gains and losses on financial assets and liabilities according to consolidated profit or loss statement
167.1
325.5
in millions of Euros 2010 2009Profit before tax according to segment report 138.1 35.2Gains and losses on financial assets attributable to non-controlling interests
11.2
186.6
Profit before tax according to consolidated profit or loss statement 149.3 221.8
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Capital Management
TheAustrianBankingAct(BWG)requirestheBanktomaintainaminimumamountofownfundsthatiscalculatedonthebasisofitsrisk-weightedassets.ThecapitalmanagementsystememployedbyBAWAGP.S.K.isbasedonownfundsasdefinedbytheBWGandtheInternalCapitalAdequacyAssessmentProcess(ICAAP)capitalmanagementapproach.
TheICAAPofBAWAGP.S.K.ismodeledtakingintoaccounttheBank’sbusinessandriskprofileandisanintegralpartoftheplanningandthecontrolsystem.InthecourseoftheICAAP,therisk-bearingcapacityandthecapitalforriskcoverageaccordingtopillar2oftheBaselframeworkaremonitored.EquityaccordingtoIFRS,certainhiddenreservesandthenominalvalueofTierIIemissionsareusedfortheICAAP.Furthermore,stresstestsareconductedunderICAAP.
TheregulatoryownfundsarebrokendownintothethreecategoriesTierItoIII,wherebytherearerecognitionlimitsforTierIIandIII.
BAWAGP.S.K.continuallymonitorsitscompliancewiththestipulatedownfundsratiosonthebasisofthenotificationssenttoOesterreichischeNationalbank(theAustrianNationalBank)attheendofeverymonthandonthebasisofcurrentbusinessdevelopments.
Thebudgetedbusinessvolumesarealsocomparedwiththeexpectedchangesintheeligibleownfundsatthebeginningofeveryfinancialyear.Inadditiontotherisk-weightedassets,thecalculationalsoincludestheownfundsrequirementforthesecuritiestradingbook(usinganinternalvalue-at-riskmodel)andtheownfundsrequirementtocoveroperationalrisk.Besidesregulatorycapitalmanagement,capitallimitsareassignedtothebusinesssegmentsbasedontheirplanningaspartoftheICAAPprocess.
TheBankemploysacentralisedcapitalmanagementsystembasedonamonthlyCapitalManagementMeeting.ThemainresponsibilitiesofthisfunctionaretocontinuouslymonitorthedevelopmentoftheBank’sbusiness,toanalysechangesinitsrisk-weightedassetsandtoreconciletheseassetswiththeavailableregulatoryownfundsortheICAAPlimitandutilisationspersegment.TheimplementationoftheBaselIIIregulationsisalsodiscussedatthemeetings;BAWAGP.S.K.hasalreadyincludedtheBaselIIIcriteriainitscapitalmanagement.TheCapitalManagementMeetinggivesrecommendationstotheManagingBoardforincreasingtheownfundscoveragewhennecessaryandreportstotheManagingBoardandtheEnterpriseRiskMeetingonceamonth.
TheapplicationfiledbyBAWAGP.S.K.withtheFinancialMarketAuthority(FMA)inDecember2009fortheapprovaloftheuseoftheInternalRatingBased(IRB)approachforcalculatingitsownfundsrequirementsstemmingfromcreditriskinsteadofthepreviouslyusedBaselIIstandardisedapproachwaswithdrawnbytheBankinthefirsthalfof2010.TheBankintendstosubmitanewapplicationtotheFMAatalaterpointintime.
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ThefollowingtableshowsthebreakdownoftheGroup’sownfundsanditsownfundsrequirementpursuanttoBWG:
in millions of Euros 31.12.2010 31.12.2009Share capital, participation capital 800 800Reserves (including fund for general banking risks) 1,118 954Goodwill, minorities and deductions 307 346Core capital (Tier I) 2,225 2,100Less shareholdings held for investment purposes -35 -51Core capital (Tier I) after deductions 2,190 2,049Reserve under § 57 BWG, revaluation reserve 49 85Supplementary and subordinated debt capital 593 746Additional items (Tier II) 642 831Less shareholdings held for investment purposes -35 -51Eligible own funds 2,797 2,829Tier III 115 67Own funds 2,912 2,896
Ourownfundscomparedwiththefollowingownfundsrequirement:
Credit risk 1,714 1,579Market risk 115 67Operational risk 146 150Capital requirements 1,976 1,796
The core capital ratio (Tier I) of 9.9 per cent (2009: 10.0 per cent) and the own funds ratio of 12.4 per cent (2009: 13.6 per cent) are well above the legally stipulated minimum requirements of 4 per cent and 8 per cent, respectively. The Tier I capital ratio based on credit risk is 10.2 per cent (2009: 10.4 per cent). The expected appropriation of earnings is considered in this presentation.
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Further disclosures Required by iFRs
31 | Fair value
ThefollowingtabledepictsthefairvaluesoftheStatementofFinancialPositionitems.Thesearetheamountsforwhichassetscouldhavebeenexchanged,orliabilitiessettled,betweenknowledgeable,willingpartiesinanarm’slengthtransactiononthereportingdate.Ifmarketpriceswereavailableonastockex-changeorotherfunctioningmarket,theywereused.
Ifnocurrent,liquidmarketvalueswereavailable,generallyaccepted,standardstate-of-the-artmethodsofmeasurementwereused.Thisappliestothecategoryliabilitiesevidencedbypaper(issuedbyBAWAGP.S.K.),structuredcredittransactionsforwhichtherearenoactivemarkets,and,inindividualcases,othercurrentfinancialassetsintheBank’stradingportfoliowherethevaluationofplainvanillasecuritieswasperformedonthebasisoftheyieldcurveplusthecurrentcreditspread.
Themeasurementtofairvalueofcustomers’businesswascarriedoutbyapplyingcreditspreadsforeachcustomercategory.Theblanketcreditspreadsareappliedforthefollowingcustomercategories:creditinstitutions,commercialcustomers,publicsectorandprivatecustomers,forwhichmortgageloansandotherloansareconsideredseparately.Thecreditspreadsincustomerbusinessarederivedbyanalysingbothexternaldata(marketdevelopmentsandOeNBstatistics)andinternaldefaultstatistics.
Linearderivativefinancialinstrumentscontainingnooptionalcomponents(suchasinterestrateswaps,currencyforwardsandfutures)werealsorecognisedusingapresentvaluetechnique(discountingoffuturecashflowsapplyingthecurrentswapcurve).
OptionalinstrumentsweremeasuredusingoptionpricemodelssuchasBlack-Scholes(swaptions,caps,floors),Garman-Kohlhagen(currencyoptions)ortheHull-Whitemodel(swapswithmultiplecancellationrights),whichwereimplementedandappliedconsistentlyinthefrontofficesystems.
Thebasicparametersonwhichthemodelsarebased(yieldcurves,volatilitiesandexchangerates)areinputintothesystembytheMarketRiskunitindependentlyoftheTreasurydivision,whichensurestheseparationoffrontofficefunctionsfrombackofficeprocessingandcontrol.
Formorecomplexderivativesthatareheldforhedgingpurposesandthatareconcludedbacktoback,externalvaluationsareobtainedbytheMarketRiskunitinisolatedcasesandinputintothesystemsforcorrectprocessing.
StandardproviderssuchasBloomberg(spreadsfrombenchmarkbonds)andMarkit(toevaluatethetermstructure)areusedtoevaluatethespreadsofissuedsecuritiesrecognisedatfairvaluethroughprofitorloss.ThesecuritiespricesforBAWAGP.S.K.issuesarethencalculatedbydiscountingtheswapcurveadaptedbythespread.
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In2010,theportionofthechangeinthefairvaluesofthesecuritiesissuedbyBAWAGP.S.K.accountedforsolelybychangesinourcreditspreads(followingthenettingofassetandliabilityportfolios)wasEUR–95million(EUR–58millionasof31December2009).Asof31December2010thecumulativefairvaluechangeresultingfromchangesinourcreditratingamountedtoEUR144million(EUR240millionasof31December2009).
Intheyearthereafter,aonebasispointnarrowingofthecreditspreadisexpectedtoreducetheirfairvaluebyEUR1.2million.
ThecumulativefairvaluechangeofreceivablesrecognisedatfairvaluethroughprofitorlossthatwasrecognisedduetochangesincreditspreadsamountedtoEUR+0millionasof31December2010(EUR0millionasof31December2009).
Thecarryingamountwasusedasthefairvalueforpartoftheinterest-bearingreceivablesandpayableswithoutfixedinterestperiods.
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Fair values of selected items on the Statement of Financial Position
ThefollowingtabledepictsacomparisonofthecarryingamountsandfairvaluesforselecteditemsontheStatementofFinancialPosition.
in millions of EurosCarrying amount
12/2010
Fair value 12/2010
Carrying amount
12/2009
Fair value 12/2009
AssetsCash reserves 511 511 615 615
Financial assets designated at fair value through profit or loss
2,284
2,284
2,980
2,980
Available-for-sale financial assets 6,644 6,644 3,250 3,250Held-to-maturity investments – – 6,560 6,632Assets held for trading 1,927 1,927 1,753 1,753Loans and receivables 26,173 26,645 24,879 25,160Hedging derivatives 55 55 33 33Tangible non-current assets 219 n/a 287 n/a
Thereof investment properties 33 39 64 70Intangible non-current assets 229 n/a 266 n/aOther assets 478 n/a 602 n/aNon-current assets in disposal groups held for sale 36 n/a – –Total assets 38,556 41,225
Equity and liabilities
Financial liabilities designated at fair value through profit or loss
4,900
4,900
6,371
6,371
Liabilities held for trading 2,271 2,271 2,198 2,198Financial liabilities designated at amortised cost 28,023 28,408 29,485 29,669Hedging derivatives 40 40 60 60Provisions 417 n/a 441 n/aOther obligations 481 n/a 378 n/aObligations in disposal groups held for sale 38 n/a – –Equity 2,016 n/a 1,919 n/aNon-controlling interests 370 n/a 373 n/aTotal equity and liabilities 38,556 41,225
TheAvailable-for-salefinancialassetsincludeequityinvestmentsintheamountofEUR247million(2009:EUR279million).Thecarryingamountwasusedasthefairvaluebecauseamarketvaluecannotbedeterminedreliably.
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Fair value hierarchy
ThefollowingtabledepictsananalysisofthefinancialinstrumentsrecognisedattheirfairvaluesonthebasisofthefairvaluehierarchyinIFRS7.Thebreakdownconsistsofthefollowinggroups:4 Level1:Thevalueoffinancialinstrumentsismeasuredusingaquotedpricewithoutadjustment.This
includesgovernmentbonds,bondswithquotedpricesandexchange-tradedderivatives;4 Level2:Thevalueismeasuredbyusinginputfactors(defaultrates,costs,liquidity,volatility,interest
rates,etc.)toderivevaluesfromquotedprices(Level1).Thispertainstopricesthatarecalculatedusinginternalmodelsorusingvaluationmethods,aswellastoexternalpricequotesforsecuritiesthataretradedonmarketswithlimitedliquidityandthataredemonstrablybasedonobservablemarketprices.Thiscategoryincludesalargeshareofthestructuredcreditportfolio.ItalsoincludesthemajorityoftheOTCderivativecontracts,corporatebondsandotherbondsforwhichnoquotedpriceisavailable,aswellastheGroup’sownissuesthatarerecognisedattheirfairvalues;
4 Level3:Themeasurementisbasedonunobservableinputfactorsthathaveamaterialinfluenceonthemarketvalue.Thispertainsprimarilytoilliquidstructuredsecuritisationinstrumentswhosevalueisdeter-minedbyunobservableassumptions(theoutcomeoflitigation,investordecisions,triggerevents,etc.);
4 Other:Thispertainstostakesinnon-consolidatedsubsidiariesthatareclassifiedasavailableforsale.
in millions of EurosLevel 1
12/2010Level 2
12/2010Level 3
12/2010Others 1)
12/2010Total
12/2010
Assets
Financial assets designated at fair value through profit or loss
466
1,712
106
–
2,284
Available-for-sale financial assets 6,040 357 – 247 6,644Assets held for trading 71 1,856 – – 1,927Hedging derivatives – 55 – – 55Total assets 6,577 3,980 106 247 10,910Liabilities
Financial liabilities designated at fair value through profit or loss
14
4,796
90
–
4,900
Liabilities held for trading 333 1,938 – – 2,271Hedging derivatives – 40 – – 40Total liabilities 347 6,774 90 – 7,211
1) Investments in equity that are measured at cost in accordance with IAS 39.AG80-81 because their fair value cannot be measured reliably.
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in millions of EurosLevel 1
12/2009Level 2
12/2009Level 3
12/2009Others 1)
12/2009Total
12/2009
Assets
Financial assets designated at fair value through profit or loss
2,212
705
63
–
2,980
Available-for-sale financial assets 2,749 222 – 279 3,250Assets held for trading 460 1,293 – – 1,753Hedging derivatives – 33 – – 33Total assets 5,421 2,253 63 279 8,016Liabilities
Financial liabilities designated at fair value through profit or loss
159
6,212
–
–
6,371
Liabilities held for trading 942 1,256 – – 2,198Hedging derivatives – 60 – – 60Total liabilities 1,101 7,528 – – 8,629
1) Investments in equity that are measured at cost in accordance with IAS 39.AG80-81 because their fair value cannot be measured reliably.
ThechangesinfinancialinstrumentsintheLevelIIIcategorywereasfollows:
in millions of EurosFinancial
assetsFinancial liabilities
Opening balance as of 1.1.2010 63 –Gains and losses in profit and loss
for assets held at the end of the period -10 -36for assets no longer held at the end of the period 2 –
Redemptions/Sales -24 –Foreign exchange differences 4 -23Transfers into or out of Level 3 71 -31Closing balance as of 31.12.2010 106 -90
in millions of EurosFinancial
assetsFinancial liabilities
Opening balance as of 1.1.2009 75 –Total gains and losses in profit and loss
for assets held at the end of the period -1 –Purchases 1 –Redemptions -12 –Closing balance as of 31.12.2009 63 –
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Movements in Level 3 financial instruments measured at fair value
Inthefinancialyear2010,significantpartsofsecuritiespresentedinLevel3asof31December2009weresold.Ontheotherhand,structuredcreditsecuritiesandownissueshavebeenreclassifiedtoLevel3becauseunobservableparametershavebeenincludedinthefairvaluecalculationduetochangedcircumstancesin2010.
Sensitivity analysis of unobservable parameters
Ifthevalueoffinancialinstrumentsisdependentonunobservableinputparameters,thepreciselevelfortheseparameterscouldbedrawnfromarangeofreasonablypossiblealternatives.Iftheseunobservableparametersaremovedtotheouterrangeasof31December2010itcouldhaveincreasedfairvaluebyEUR47millionordecreasedfairvaluebyEUR12million.Themainfactorsthatwerevariedinestimatingtheseimpactsweretheprobabilitiesofdefaultandtheexpectedredemptiondatesofownissues.
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32 | Receivables from and payables to subsidiaries and associates
BAWAGP.S.K.Group’sreceivablesfromandpayablestonon-consolidatedsubsidiariesandassociateswereasshownbelow.Businessrelationshipswiththeseentitiesweresubjecttonormalbankingtermsandconditions.
Receivables from and payables to subsidiaries
in millions of Euros 31.12.2010 31.12.2009Receivables from credit institutions – –Receivables from customers 222 169Receivables from subsidiaries 222 169Payables to credit institutions – –Payables to customers 33 62Payables to subsidiaries 33 62Other obligations 48 48
Thistableonlydepictsreceivablesandpayables(nosecurities).
Interestincomefrombusinesswithsubsidiariesin2010totalledEUR6million(2009:EUR4million)andinterestexpensesEUR1million(2009:EUR1million).
Receivables from and payables to associates
in millions of Euros 31.12.2010 31.12.2009Receivables from credit institutions – –Receivables from customers 233 227Impairment provisions – –Receivables from associates 233 227Payables to credit institutions 1 1Payables to customers 48 74Payables to associates 49 75
Thistableonlydepictsreceivablesandpayables(nosecurities).
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33 | Related parties
Owners of BAWAG P.S.K.
99.62percent BAWAGHoldingGmbH 0.38percent Pa-ZweiundsechzigsteWTBeteiligungsverwaltungsGmbH
Pa-ZweiundsechzigsteWTBeteiligungsverwaltungsGmbHisa100percentsubsidiaryofBAWAGHoldingGmbH(formerly:Pa-ZweiundfünfzigsteWTPBeteiligungsverwaltungsGmbH).
BAWAGHoldingGmbH(calledBAWAGHoldinginthefollowing)iswhollyownedbytheDutchfinancialholdingfirmPromontoriaSacherHoldingN.V.,whichisinturnwhollyownedbytheDutchfinancialholdingfirmPromontoriaSacherCoöperatieU.A.Thelatterisa51.25percentsubsidiaryoftheDutchfinancialholdingfirmBAWAGHoldingsCoöperatieU.A.BAWAGHoldingsCoöperatieU.A.isdirectlyandindirectlyownedbyaconsortiumofcompaniesincludingÖsterreichischePostAG,GeneraliHoldingAGandWüstenrotVerwaltungs-undDienstleistungenGmbH,andismanagedbyawiderangeofprivateinvestmentfundsthatareinturnassociatedwithCerberusand,asCerberus,areultimatelyunderthecontrolofStephenA.Feinberg.
TheBankalsohasbusinessdealingswiththefollowingcompanies,whicharerelatedtoCerberus:4Ableco(agent)4AntoinetteHoldingLtd.(contractualrelationship)4BAWAGHoldingGmbH(currentaccount,timedeposit,headoftaxgroup)4CerberusOperationsandAdvisoryCompany,LLC(consultant)4KomagataHoldingB.V.(CLNfromStröerOut-of-HomeMediaAG[StröerTurkey]loan)
Subsidiaries, Joint Ventures and Equity Investments of BAWAG P.S.K.
BAWAG P.S.K. Versicherung Aktiengesellschaft
ThebusinessdealingsbetweenBAWAGP.S.K.andBAWAGP.S.K.VersicherungAG,amajority-ownedsub-sidiaryoftheGeneraliGroup,coversecuritiesaccountsandcurrentaccounts,allofwhichareofferedatstandardmarketterms.ThebusinessrelationsbetweenBAWAGP.S.K.andGeneraliaregovernedbycontractswithstandardmarketterms,includingacooperationagreement,alicenseagreement,apensionagreementandothers.Toaccountfortherequirementsofthemarketandthesignificantgrowthofthecompany,anadditionalshareholders’contributionwasagreedin2010tostrengthenBAWAGP.S.K.Versicherung’sequitybase.
Versicherungsdienst BAWAG P.S.K. GmbH
Inthefinancialyear2007,aminorityshareintheinsurancebrokeragecompanyVersicherungsdienstBAWAGP.S.K.GmbHwassoldtoGenerali.BAWAGP.S.K.ispaidstandardmarketcommissionsforbrokeringinsurancepolicies.Theremaining50.01percentwassoldtoBAWAGP.S.K.VersicherungAGinthereportingperiod.
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Omnitec Informationstechnologie-Systemservice GmbH
BAWAGP.S.K.holds50percentofOmnitecInformationstechnologie-SystemserviceGmbHthroughoneofitssubsidiaries.Theremaining50percentisownedbyÖsterreichischePostAG.Thebusinessofthiscompanyistheplanning,installationandoperationofauniformITsystemforAustria’spostoffices.TheapplicationsinthissystemcanbeusedbythepostalserviceandbyBAWAGP.S.K.
BAWAG Allianz Vorsorgekasse AG
HalfofthiscompanyisownedbyBAWAGP.S.K.GroupandhalfbyAllianzElementarVersicherungs-Aktien-gesellschaft.TheassetsundermanagementtotalledapproximatelyEUR531millionattheendof2010,andaremanagedinequalpartsbyBAWAGP.S.K.InvestGmbHandAllianzInvestmentBankatstandardmarketterms.
Associated but not consolidated companies in the real estate group and in the leasing group
Thefollowingcompaniesareindirect100percentsubsidiariesofBAWAGP.S.K.:4BAWAGLeasing&fleetKft(Hungary)4BAWAGLeasing&fleetSp.z.o.o.(Poland)4BAWAGLeasing&fleets.r.o.(CzechRepublic)4BAWAGLeasing&fleets.r.o.(Slovakia)4BAWAGLeasingZrt.(Hungary)4BAWAGRealEstateLeasings.r.o.(CzechRepublic)4BAWAGLeasings.r.o.(Slovakia)4BPLCZOnes.r.o.(CzechRepublic)4GaraRPKGrundstücksverwaltungsgesellschaftm.b.H.4PTImmobilienleasingGmbH4REALESTATELeasings.r.o.(Slovakia)4IDGImmobilienDevelopmentGmbH&CoKG4IngebeImmobilienhandels-undvermittlungsGmbH4PlatoGrundstücksverwertungsGmbH
IDGImmobilienDevelopmentGmbHwasmergedwithBAWAGP.S.K.ImmobilienGmbHin2010,andthesharesinMARVEImmobilienentwicklungsgesellschaftm.b.H.weresold.
EachofthefollowingleasingcompaniesisheldindirectlybyBAWAGP.S.K.andonecooperationpartner:KommunalleasingGmbH(50percent),RealplanBetaLiegenschaftsverwertungGmbH(50percent),HFEAlphaHandels-GmbH(50percent),ImmoconsultUriahLeasinggesellschaftm.b.H.(45percent),FidesLeasingGmbH(50percent)andGeneraliLeasingGmbH(25percent).
ImmobiliengesellschaftB.A.O.ImmobilienvermietungsGmbHisheldtogetherwithtwocooperationpartners;eachownerhasaone-thirdstake.
TheleasingcompaniesthataremajorityownedbyBAWAGP.S.K.havebeenrefinancedwithoutriskpremiumsorprofitmarginssofarandwillberefinancedwithoutprofitmarginsinthefuture.AdministrativecostsareassessedagainstBAWAGP.S.K.LeasingGmbHandBAWAGP.S.K.IMMOBILIENGmbHfortheirmanagement.
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Foreign Companies
BensorTrust,theBiamoFoundation,TrevalTrust,theGlenStarFoundationandCelesteTrustREG.wereconvertedintoprivate-lawinstitutionsduringthe2010financialyear.AustinvestAnstaltandtheseconvertedentitieswerethenmergedintoAustostAnstalt,whichisnowtheonlyremainingcompanyinLiechtenstein.
AustostHandels-undTreuhandLtd.(Guernsey),ShrivenhamLtd.(acquiredbyAustostAnstaltin2010)andPolestarLtd.wereplacedunderliquidation.
TheliquidationofBAWAGInternationalFinanceLtd.(Ireland)wasfinalisedduringthereportingperiod.
DatchetLtd.(Ireland)isnotaholdingofBAWAGP.S.K.However,BAWAGP.S.K.holdsacalloptionforthepurchaseofsharesinthecompanyandissuedanauthorisationanddischargedeclarationinfavourofthecurrentshareholdersanddirectorsfromLiechtenstein.Thiscompanywasalsoplacedunderliquidationin2010.
BAWAGInvestmentsLtd.(Jersey)isanindirect100percentsubsidiaryofBAWAGP.S.K.Itsbusinessfocusesoninvestmenttransactionsandisconductedatstandardmarketterms.
TheliquidationofBAWAGP.S.K.JerseyAutoFinanceLtd.,AutoFinanceJerseyILtdandAutoFinanceJerseyIILtd.wascompletedin2010,andtheliquidationofBAWAGP.S.K.CapitalAdvisorsLtd.isstillunderway.
Amongothers,thefollowingcompaniesarenotconsolidated:4 VindobonaalphaS.a.r.l.(Luxembourg,100percent);thiscompanywasestablishedtoprovideprivate
healthinsuranceforforeignemployeesandforManagingBoardmembersofBAWAGP.S.K.andtheirfamilymembers.
4BAWAGP.S.K.EquityFinanceLtd.(Jersey,100percent;isnotconductingbusinessatthistime)
Other Contractual Relationships with Related Entities
AletterofcomfortforthebenefitofB.I.S.BAWAGInternetServicesGmbHwasissuedbyBAWAGP.S.K.in2001andhasnotermoramountlimit.BAWAGP.S.K.hasalsofullyindemnifiedPlatoGrundstücksverwer-tungsGmbHagainstanydamagesresultingfromthird-partyclaims,lawsuitsorfinanciallosses.
Private Equity and Venture Capital Companies
Inadditiontoanumberofnon-controllinginterests,thisalsoincludesthe50percentinterestinAthenaWienBeteiligungenAGandthe100percentinterestinuniventureBeteiligungsAG.
ThebusinessdealingsbetweenthesecompaniesandBAWAGP.S.K.areconductedatarm’s-lengthtermswiththefollowingexception:NopersonnelchargesareassessedagainstuniventureforworkcompletedbyBAWAGP.S.K.employeesforthecompany.
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MKB Bank Zrt.
AfterthecapitalincreasescompletedforMKBBankZrt.in2010tostrengthenitsequitybase,P.S.K.BeteiligungsverwaltungGmbHholds9.77percentofthebankor2,025,420shares.Inadditiontothis,AntoinetteHoldingLtd.,acompanycontrolledbyCerberusCapitalManagement,L.P.,holds70,472sharesorastakeof0.34percent.
Paysafecard.com Wertkarten AG
BAWAGP.S.K.holds11.24percentoftheparentcompanyoftheinternationallyactivePaysafecardGroup,whichspecialisesinprepaidpaymentsolutions.AndroschPrivatstiftungholds38percentoftheshares.
BWA Beteiligungs- und Verwaltungs-Aktiengesellschaft
BAWAGP.S.K.hasa3.88percentinterestinthecompany,whichisthesoleownerofBausparkasseWüsten-rotAG.BAWAGP.S.K.isrepresentedonbothsupervisoryboardsbyDeputyCEOStephanKoren.
BAWAGP.S.K.exclusivelysellsbuildingassociationsavingsproductsfromBausparkasseWüstenrotAGthroughitsdistributionnetworksonthebasisofacooperationagreement.
Zeus Recovery Fund S.A.
Thecompany,whichisdomiciledinLuxembourg,holdsthreeportfoliosofdistressed,non-securedGreekconsumerloansandisa50:50jointventurewiththeBankofAmerica.ItisheldthroughBAWAGP.S.K.JerseyCapitalLtd.
The Members of the Managing Board, the Supervisory Board and Key Management Personnel
ExpensesforremunerationpaidtoactivemembersoftheManagingBoardduringthefinancialyearcametoEUR9,358thousand(2009:EUR6,662thousand).Expensesforpost-employmentbenefitsforformermembersoftheManagingBoardandtheirsurvivingdependantscametoEUR1,674thousand.Duetothereleaseofprovisionsforbeneficiaries,earningsofEUR456thousandwererecognisedintheperiod(2009:earningsofEUR1,669thousand).
Expendituresforseverancepayandpost-employmentbenefitsfortheManagingBoardandkeymanagementpersonnelcametoEUR10,729thousand(2009:EUR11,549thousand).ExpenditureswithrespecttootheremployeescametoEUR32,219thousand(2009:EUR39,400thousand).
SixmembersoftheManagingBoardhadapost-employmentbenefitarrangementasof31December2010.ProvisionswereformedontheStatementofFinancialPositionfordirectbenefitobligations.ThepensionclaimsofManagingBoardmemberswereshiftedtoapensionfundforthemostpart.
Asofthereportingdate,therewasoneoutstandingloantoamemberoftheManagingBoardintheamountofEUR38thousand(2009:nooutstandingloans).LoanstomembersoftheSupervisoryBoardtotalledEUR29thousand(2009:EUR33thousand).Repaymentsofloansgrantedtoboardmemberstookplaceascontractuallyagreed.
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Furthermore,ManagingBoardmembersdidnotmakeuseofcurrentaccountlimitsasofthereportingdate.Intotal,thecurrentaccountlimitsmadeuseofbymembersoftheSupervisoryBoardamounttoEUR26thousand(2009:EUR32thousand).TurnoversofguaranteedcreditcardsthatbelongtoManagingBoardmembersamountedtoEUR0inDecember2010.TurnoversofguaranteedcreditcardsthatbelongtomembersoftheSupervisoryBoardamountedtoEUR2thousandinDecember2010(2009:EUR1thousand).
AlistoftheBank’sBoardsandOfficerscanbefoundinanappendixtotheNotes.
Notallmanagerialstaffareentitledtopost-employmentbenefitsfromtheBank.Themanagerialemployeeswhoareentitledtopost-employmentbenefitsfromtheBankwereawardedtheseentitlementsundertheprovisionsofthe1961pensionreformoronthebasisofindividualcommitmentsbytheBank.Allemployeesareentitledtopensionbenefitsfromapensionfundundertheprovisionsofthecollectivebargainingagree-mentforpensionfunds.
Thefollowingbreakdowndepictsthebusinessrelationswithrelatedindividualsandtheirfamilymembers.Allbusinessisconductedatstandardindustryandgrouptermsforemployeesoratstandardmarketterms.
in thousands of Euros 31.12.2010 31.12.2009Current account deposits 5,028 5,243Savings deposits 3,245 3,789Loans 1,667 1,468Leasing 70 142
TheremunerationschemeforSupervisoryBoardmembersapprovedattheAnnualGeneralMeetingstipulatesthattheChairmanoftheSupervisoryBoardshallreceiveEUR60,000percalendaryear,theDeputyChairmanshallreceiveEUR40,000percalendaryearandthemembersoftheSupervisoryBoardselectedattheAnnualGeneralMeetingshalleachreceiveEUR30,000percalendaryear.ThechairmenoftheCreditandAuditCommitteeseachreceiveEUR20,000andallothermembersoftheCreditandAuditCommitteeseachreceiveEUR10,000(theseadditionalcompensationmeasuresdonotapplyfortheChairmanoftheSuper-visoryBoard).RemunerationofmembersoftheSupervisoryBoardcametoEUR253thousandin2010(2009:EUR308thousand).WorksCouncilDelegatestotheSupervisoryBoarddonotreceiveanyremuneration.
In2008somemembersoftheSupervisoryBoardandManagingBoardenteredintoalong-termincentiveplanwithBAWAGHoldingsCoöperatieU.A.,anaffiliatedcompanyoftheBAWAGP.S.K.Group.Thisplanprovideslong-termincentiveremunerationlinkedtothecreationofshareholdervalue.Theawardsvestoveranaverageperiodoffouryearsbasedpartiallyonthemembers’continuedemploymentandpartiallyontheattainmentofperformance-basedtargetsofBAWAGP.S.K.Theconditionsaresuchthattheawardshavenovalueatincep-tionandthereforenoliabilitieshavebeenrecordedinthe2010financialstatements(2009:0).Thefuturevalueofthelong-termincentiveplanisalsouncertaininlightofthecurrenteconomicenvironment.
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34 | Remuneration policy according to CRd iii directive
BAWAGP.S.K.hasagreedandamendeditsremunerationpolicycoveringManagingBoardmembersandemployeesoftheBankthatwaspresentedandapprovedbytheRemunerationCommitteeinFebruary2011.ThisamendedremunerationpolicytakesintoaccounttheprinciplesoftheEU’sCRDIIIDirectiveandtheassociatedamendmentstotheAustrianBankingAct.Thisremunerationpolicyisvalidforvariableremunera-tionawardspaidoutinthefirstquarterof2011basedonBAWAGP.S.K.’s2010financialresults.
ForemployeeswhoseactivitieshaveamaterialinfluenceontheBank’sriskprofile,thisguidelinestipulatesaremunerationpolicythatdoesnotimpedeeffectiveriskmanagement.Itisdesignedtoalignthepersonalobjectivesoftheemployeeswiththelong-terminterestsoftheBankandtoensureanappropriatebalancebetweenfixedandvariableremunerationcomponents.Italsotakesintoaccountthelegalregulationsstipulat-ingthatthepolicymustbeappliedtothemanagementandtorisktakers,toemployeeswithcontrollingduties,aswellastoemployeeswhoareinthesamewagegroupasthemanagementandtherisktakersandwhoseactivitieshaveamaterialinfluenceontheriskprofileoftheBank.
Themandatoryelementswereaccountedforasfollows:4 Toensureriskadequacy,thevariableremunerationmustnotprovideanincentivetoenterintoinappropri-
aterisks;4 Toensuresustainability,successisdeterminedbasedonlonger-termobservationperiods;4 Theappropriatenessandmarketadequacyofremunerationisensured,applyingabalancedrelationship
betweenfixedandvariablecomponents;and4 Thevariableremunerationisdeterminedonthebasisoftheindividual’ssuccess(inquantitativeand
qualitativeterms)aswellasonthesuccessoftherespectiveorganisationalunitandtheBank.
TheannualbudgetforvariableremunerationcomponentsisbasedonthedegreetowhichtheBankachievesitsstatedtargets.
BAWAGP.S.K.hasaRemunerationCommittee,whichisaSupervisoryBoardcommittee.ThisRemunerationCommitteeapprovestheremunerationpolicy,monitorsitsimplementationandsubmitsregularreportsonitsactivitiestothefullSupervisoryBoard.
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35 | disclosures in compliance with iFRs 5 – non-current assets Held for sale and discontinued operations
TheapprovalgrantedtotheBankfortheacceptanceofparticipationcapitalfromtheRepublicofAustriaincludedcertainconditionsandcompensationmeasuresimposedbytheEUCommission.Thesecompensa-torymeasurescoverthesaleofcertainnon-coreholdings,suchastheshoeretailerStiefelkönigSchuhhandelsGesellschaftmbH.
AccordingtoIFRS5,subsidiaries(disposalgroupsconsistingofassetsandliabilities)aretobeclassifiedasheldforsalewhentheassociatedcarryingamountstemsprimarilyfromasaletransactionandnotfromcontinuedusage,andthesaleisexpectedtobeeffectedwithintwelvemonths.Forthisreason,thecarryingamountsoftheassetsandliabilitiesofStiefelkönigSchuhhandelsGesellschaftmbHarereportedontheconsolidatedStatementofFinancialPositionundertheitemNon-currentassetsanddisposalgroupsclassifiedasheldforsale.Thefollowingtableshowsabreakdownofthisitem.
Non-current assets and disposal groups classified as held for sale
in millions of Euros
31.12.2010
thereof consolidated on
31.12.2010
thereof not consolidated on
31.12.2010
Assets in disposal groups classified as held for sale 36 – 36 Available-for-sale financial assets 2 – 2 Loans and receivables 15 – 15
Customers 15 – 15 Credit institutions – – –
Tangible non-current assets 6 – 6 Other assets 13 – 13
Obligations in disposal groups classified as held for sale 75 37 38 Financial liabilities 29 24 5
Valued at amortised cost 29 24 5 Customers 5 – 5 Credit institutions 22 22 –Issued bonds, subordinated and supplementary capital 2 2 –
Provisions 7 – 7 Other obligations 39 13 26
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36 | assets pledged as collateral
in millions of Euros 31.12.2010 31.12.2009Receivables and securities assigned to Oesterreichische Kontrollbank AG 985 993Collateral pledged to the European Investment Bank 518 329Cover pool for trust savings deposits 39 47Cover pool for covered bonds 3,586 2,802Other collateral 50 43Assets pledged as collateral 5,178 4,214
37 | total collateralised debt
ThecollaterallistedinthetableabovecorrespondedtothefollowingpayablesofBAWAGP.S.K.:
in millions of Euros 31.12.2010 31.12.2009
Liabilities to Oesterreichische Kontrollbank secured with assigned receivables
985
993
Payables arising due to refinancing by the European Investment Bank 495 378Trust savings deposits 29 33Payables secured by the cover pool for covered bonds 2,605 2,177Total collateralised debt 4,114 3,581
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38 | subordinated assets
LineitemsontheassetssideoftheStatementofFinancialPositionincludedthefollowingsubordinatedassets:
in millions of Euros 31.12.2010 31.12.2009Loans and receivables 27 36Subordinated assets designated at fair value through profit or loss 21 7Subordinated assets designated as available for sale – 14Subordinated assets 48 57
39 | Contingent assets, contingent liabilities and commitments
in millions of Euros 31.12.2010 31.12.2009Contingent assets 1 –Contingent liabilities 938 1,479Arising from guarantees 929 1,466Other contingent liabilities 9 13Commitments 9,729 7,440
ThemostimportantcomponentoftheitemCommitmentsisunusedlinesofcredit.
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40 | Foreign currency amounts
BAWAGP.S.K.Grouphadassetsandliabilitiesinthefollowingforeigncurrencieson31December2010:
in millions of Euros 31.12.2010 31.12.2009USD 1,854 1,770CHF 3,424 3,226JPY 174 192SKK – –CZK 155 126Other 378 268Foreign currency 5,985 5,582EUR 32,571 35,643Total assets 38,556 41,225
in millions of Euros 31.12.2010 31.12.2009USD 767 756CHF 1,295 1,843JPY 592 599SKK – –CZK 6 4Other 356 561Foreign currency 3,016 3,763EUR 35,540 37,462Total liabilities 38,556 41,225
ThistableincludesonlyStatementofFinancialPositionitemsandprovidesnoinformationaboutopencurrencypositions.
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41 | genuine repurchase agreements
in millions of Euros 31.12.2010 31.12.2009Repurchaser – receivables from credit institutions – 100Repurchaser – payables to credit institutions -333 -826Repurchase agreements -333 -726
42 | leasing
Thefollowingtableshowsreconciliationbetweengrossinvestmentvalueandpresentvalue,brokendownaccordingtomaturity:
31.12.2010 in millions of Euros
Up to 1 year
1–5 years
Over 5 years
Total
Total outstanding leasing instalments (gross investment value) 302 531 293 1,126As yet unrealised financial income 28 48 26 102Receivables from finance leases (net investment value) 274 483 267 1,024
31.12.2009in millions of Euros
Up to 1 year
1–5 years
Over 5 years
Total
Total outstanding leasing instalments (gross investment value) 312 580 301 1,193As yet unrealised financial income 31 54 31 116Receivables from finance leases (net investment value) 281 526 270 1,077
Asof31December2010thenon-guaranteedresidualvalueamountstoEUR69million(2009:EUR11million).
ImpairmentsrecognisedinrespectofirrecoverableminimumleaseinstalmentscametoEUR0million(2009:EUR0million).
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43 | list of consolidated subsidiaries
ThefollowingtableshowstheconsolidatedsubsidiariesofBAWAGP.S.K.Group:
Entities consolidated in accordance with IFRS as of 31.12.2010Method of inclusion
Stake
BanksBAWAG Banka d.d., Ljubljana F 100.00%BAWAG Malta Bank Limited, Sliema F 100.00%BAWAG P.S.K. Invest GmbH, Vienna F 100.00%BAWAG P.S.K. Wohnbaubank Aktiengesellschaft, Vienna F 100.00%easybank AG, Vienna F 100.00%Österreichische Verkehrskreditbank AG, Vienna F 100.00%
Real estateBAWAG P.S.K. IMMOBILIEN GmbH, Vienna F 100.00%BPI Holding GmbH & Co KEG., Vienna F 100.00%CARNI Industrie-Immobiliengesellschaft m.b.H., Vienna F 100.00%R & B Leasinggesellschaft m.b.H., Vienna F 100.00%RVG Realitätenverwertungsgesellschaft m.b.H., Vienna F 100.00%
LeasingBAWAG P.S.K. Fuhrparkleasing GmbH, Vienna F 100.00%BAWAG P.S.K. IMMOBILIENLEASING GmbH, Vienna F 100.00%BAWAG P.S.K. Kommerzleasing GmbH, Vienna F 100.00%BAWAG P.S.K. LEASING GmbH & Co. MOBILIENLEASING KG., Vienna F 100.00%BAWAG P.S.K. LEASING GmbH, Vienna F 100.00%BAWAG P.S.K. MOBILIENLEASING GmbH, Vienna F 100.00%BAWAG P.S.K. Vermietungs- und Leasing GmbH, Vienna F 100.00%B.L.H. BAWAG Leasing Holding GmbH, Vienna F 100.00%CVG Immobilien GmbH, Vienna F 100.00%HBV Holding und Beteiligungsverwaltung GmbH, Vienna F 100.00%KLB Baulandentwicklung GmbH, Vienna F 100.00%M. Sittikus Str. 10 Errichtungs GmbH, Vienna F 100.00%P.S.K. IMMOBILIENLEASING GmbH, Vienna F 100.00%RF BAWAG Leasing Gesellschaft m.b.H., Vienna F 100.00%RF 17 BAWAG Immobilienleasing GmbH, Vienna F 100.00%RF elf Realitätenverwertungsgesellschaft m.b.H., Vienna F 100.00%RF fünfzehn BAWAG Mobilien-Leasing Gesellschaft m.b.H., Vienna F 100.00%RF sechs BAWAG P.S.K. LEASING GmbH & Co. KG., Vienna F 100.00%RF zwölf BAWAG Leasing Gesellschaft m.b.H., Vienna F 100.00%START Immobilienleasing GmbH, Vienna F 100.00%
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Entities consolidated in accordance with IFRS as of 31.12.2010Method of inclusion
Stake
Other non credit institutionsA.U.S. Alpha Holding GmbH, Vienna F 100.00%A.U.S. Alpha Vermögensverwaltung GmbH, Vienna F 100.00%A.U.S. Beta Holding GmbH, Vienna F 100.00%A.U.S. Beta Vermögensverwaltung GmbH, Vienna F 100.00%A.U.S. Delta Holding GmbH, Vienna F 100.00%A.U.S. Delta Vermögensverwaltung GmbH, Vienna F 100.00%A.U.S. Gamma Holding GmbH, Vienna F 100.00%A.U.S. Gamma Vermögensverwaltung GmbH, Vienna F 100.00%BAWAG CAPITAL FINANCE II LIMITED, Jersey F 100.00%BAWAG CAPITAL FINANCE III LIMITED, Jersey F 100.00%BAWAG CAPITAL FINANCE LIMITED, Jersey F 100.00%BAWAG Finance Malta Ltd., Sliema F 100.00%BAWAG Investments Ltd., Jersey F 100.00%BAWAG P.S.K. Jersey Capital Limited, Jersey F 100.00%BAWAG P.S.K. Versicherung AG, Vienna E 25.00%Bodensee Limited, Sliema F 51.00%BV Holding GmbH, Vienna F 100.00%BV Vermögensverwaltung GmbH, Vienna F 100.00%FCH beta Finanzierungsvermittlung GmbH, Vienna F 100.00%NAVENSIS Zahlungsverkehrsabwicklungs GmbH, Vienna F 99.66%P.S.K. Beteiligungsverwaltung GmbH, Vienna F 100.00%Rhein Limited, Grand Cayman F 51.00%Stiefelkönig Schuhhandels Gesellschaft m.b.H., Graz F 100.00%Vindobona Finance Beta S.A., Luxembourg F 100.00%ZEUS Recovery Fund S.A., Luxembourg E 50.00%
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Risk Report
introduction and overview
RiskManagementandthecorrespondingcommitteesofBAWAGP.S.K.identify,measure,monitorandmanageallriskstowhichBAWAGP.S.K.Groupisexposed.Atallorganisationallevels,startingwiththefunctionoftheChiefRiskOfficerasamemberoftheManagingBoard,MarketandRiskarestrictlyseparated.TheGroupissubjecttothefollowingrisksthatareaddressedinriskmanagementthroughclearmonitoringandcontrolprocesses: 4 Creditrisk 4 Marketrisk 4 Liquidityrisk 4 Participationrisk 4 Operationalrisk
ThisriskreportprovidesinformationontheGroup’spositioningwithregardtoeachoftheriskslistedabove.
Risk Management – Risk organisation
BAWAGP.S.K.’sManagingBoarddefinestheBank’sriskstrategyandtheprinciplesofriskmanagement.Thedeterminationoflimitsforallrelevantrisksaswellastheproceduresformonitoringtheserisksaredocumentedinriskmanualsandworkguidelines.TheManagingBoardisinformedoftheoverallrisksituationandthesituationregardingspecificrisktypesonamonthlybasis.QuarterlyriskreportsaresubmittedtotheSupervisoryBoard’smonitoringandcontrolcommittees.
Theriskmanagementguidelinesandrisksystemsarereviewedregularlytoreflectchangesinmarketconditionsandintheproductsandservicesoffered.In2010BAWAGP.S.K.Group’sriskmanagementwasconcentratedintothefollowingfourdivisionsaspartofaBank-wideprojectaimedatimprovingtheBank’sefficiencyandproductivity: 4 CommercialandInstitutionalRisk 4 CreditRiskRetailandSME(creditriskofthesegmentsandoperationalrisk) 4 MarketRisk(market-specificrisksandliquidityrisks) 4 RiskReporting
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specific Risks of BaWag P.s.K. group
44 | Credit risk
Creditriskisthegeneralriskthatacustomerwillnotbeabletomeetitspaymentobligations.Withintheframeworkofitsriskmanagement,BAWAGP.S.K.considersandconsolidatesallelementsofcreditrisk,suchascounterpartydefaultrisk,countryriskandindustryrisk.
AseparatefunctionalspecialisationinriskcontrolexistsforthespecificcustomersegmentsCommercialandInstitutionalandRetail,SmallBusinessandSME.TheaggregationofspecificriskindicatorsandperiodicalreportingiscoveredbyaconsistentprocessundertheresponsibilityoftheorganisationalunitRiskReporting.
CreditworthinesswithinthecustomersegmentRetail,whichincludesretailprivateandsmallbusinesscus-tomers,isassessedbymeansofanautomatedscoringmethod.Thisconsistsofanapplicationscoringonthebasisofprovenandrecognisedmathematicalandstatisticalmodels,andbehaviouralscoringonthebasisofthecustomer’saccountuse.Onthisbasis,thecustomer’screditworthinessisupdatedeverymonth.
NoratingsareavailablefromexternalagenciesforthemajorityofBAWAGP.S.K.’scommercialcustomers.Beforenewcommitmentsaremade(orwhenexistingcommitmentsaretobeexpandedorriskassessmentsneedtobeupdated),theborrower’screditratingisassessedusinganinternalratingmethodforthecustomer’sspecificbusinesssegment.TheratingmethodsthathavebeendevelopedbyBAWAGP.S.K.forthisarebasedonabroadspectrumofquantitativeandqualitativefactors.ThedeterminedriskclassificationistransformedbasedonauniformBAWAGP.S.K.masterscaleandrepresentsthecustomer’sindividualestimatedprobabilityofdefault.
Allriskcomponents(withtheexceptionofsmall-scaleprivatecustomers)areaggregatedatthecustomerandcustomergrouplevel.DependingonriskclassandtheamountoftheoutstandingclaimcertainexposuresmustbereportedtotheManagingBoardandSupervisoryBoardfordecision.
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Revised Risk Policy for Retail and Small Business Customers
Implementation of Late Payment Notice Software for Retail and Small Business Customers
NewsoftwareformanagingdunningprocessesbytelephoneorbyletterforprivateandsmallbusinesscustomerswasintroducedinAugust2010.Thisnewsoftwareresultedinthefollowingimprovements: 4 Thesoftwareenablestheautomaticdifferentiationofcustomersbyprobabilityofdefault,andallowsthe
individualsegmentstobeprocessedinatargetedmanner. 4 AnextremelyhighdegreeofautomationmakesitpossibletoeffectivelyfocustheBank’sresourcesforearly
intervention,whichreducesriskandincreasescustomersatisfaction. 4 Offeringrepaymentagreementsandconsistentlyenforcingthempreventsthedefaultofsignificantpartsof
theportfolio.
Continuation of Efforts to Increase Efficiency for Credit Processes in the Small Business Segment
TheprogrammethatwaslaunchedinNovember2009toimprovethecreditprocessesintheSmallBusinesssegmentwascontinuedinthereportingperiod.
Theprimarygoalsofallmeasuresare: 4 Increasedcustomersatisfactionthroughshorterdecision-makingtimes. 4 Increasingthelevelofautomationtofreeupadditionaladvisorcapacitiesforourcustomers. 4 Consistentimplementationoftheregulatoryrequirementsforportfolioriskassessment.
Theimplementationofanautomatedprocessforcreditreviewsandlimitextensionsforcustomerswithindefinedexposurelimitsinthereportingperiodwasanotherkeymilestone.
Improved Interfaces in the SME Segment
WorkintheSmallandMedium-SizedEnterprisessegmentfocusedonimprovingtheinterfacesbetweenthemarketandriskunits.Existingprocesseswerestreamlinedandexistingsystemswereexpanded.
Keyachievementsincludedtheexpansionofthecustomerrelationshipmanagementsystemtosignificantlysimplifytheprocessingandmonitoringofspecificconditionsforcreditdecisionsandfortheprocessingandmonitoringoftheannualriskreviews.
Valuation of Residential and Commercial Properties
ThevalueofallresidentialpropertiesinAustriaisdeterminedbythecentralrealestatevaluationdepartmentonthebasisofalargelystandardisedmethodandusingavaluationtool.Altogether,nearly45,000residentialpropertieswerepledgedtoBAWAGP.S.K.ascollateral.TheperiodicreviewandupdatingofthepropertyvaluesisautomatedonthebasisofthechangesintherealestatepriceindexpublishedbytheAssociationofRealEstateandAssetTrusteesoftheAustrianFederalEconomicChamber(Fachverband der Immobilien- und Vermögenstreuhänder der Wirtschaftskammer Österreich).
Commercialpropertiesareappraisedindividuallybyexpertsinthecentralrealestatevaluationdepartment,byselectedexternalappraiserscommissionedbytheBankorbyasyndicatepartnerafteraninspectionofthepropertyandcompletionofafullreport.Approximately2,800commercialpropertieshavebeenpledgedtoBAWAGP.S.K.ascollateral.
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Improvement and Refinement of the Scorecards and Rating Systems
Thefollowingmeasuresweretakenaspartoftheperiodicrevisionofthescorecardsandratingsystems:
Thestandardcommercialratingsystemwasrevisedinthesecondandthirdquarterof2010.Thisbroughtanimprovementinthediscriminatorypowerofthesystemandincreasedtheacceptanceofthesystembythesalesunits.Anewratingsystemwasalsoadoptedforthestandardforeigncommercialcustomerssegment.ThesystemwasimplementedintheITsystemsinthefourthquarterof2010,andbecameoperationalinthefirstquarterof2011.
Theresultsofthevalidationwereincludedinthebehaviouralscorecardstoimprovediscriminatorypowerintheannualassessment.
Theprivateleasingandconsumerloanscorecardswerealsorevisedandimplemented.
Portfolio Development in 2010
Theportfoliovolumeinthecorporateandretailsegmentsincreasedagainin2010,whilethevolumeofloanstopublicsectorborrowersdeclinedslightly.
Credit risk by customer segment as of 31.12.2010, in millions of Euros 1)
SegmentBook value credits 2) Bonds Off-balance business Total risk
31.12.2010 31.12.2009 31.12.2010 31.12.2009 31.12.2010 31.12.2009 31.12.2010 31.12.2009
Banks 1,502 2,640 4,646 5,006 754 802 6,902 8,448 Public sector 4,697 6,199 1,459 3,258 746 692 6,902 10,149
Corporates 11,608 10,391 3,912 3,022 2,654 2,411 18,174 15,824 Small business 1,352 1,377 18 16 139 132 1,509 1,525 Retail private customers
5,664
5,467
–
–
213
88
5,877
5,555
Others – 1 – – 1 36 1 37 Total 24,823 26,075 10,035 11,302 4,507 4,161 39,365 41,538
1) Total risk includes book values and off-balance-sheet items like guarantees and committed but currently unutilised limits.
2) Including fair value assets.
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Number of customers and volume by size as of 31.12.2010
Geographical distribution of the loan portfolio as of 31.12.2010, in millions of Euros
Theoverviewshowsthenetexposureineachregionbyultimaterisk.Theoutstandingvolumesareassignedtotheactualcountryofrisk(e.g.anexportpromotionloanthatisguaranteedbytheRepublicofAustriaisallocatedtoAustria).
22,000
20,000
18,000
16,000
14,000
12,000
10,000
8,000
6,000
4,000
2,000
0
12,000
10,000
8,000
6,000
4,000
2,000
0100–1,000 �5,000
1,451
�20,000 �50,000 �100,000 �500,000 �500,000
21,348
Number of customers | Exposure in thousands of Euros | Exposure total in millions of Euros
387 185 76 50 1
30,000
25,000
20,000
15,000
10,000
5,000
0Austria Western Europe CEE North America Others
4,161
22,065
1,672595 274
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ThemajorityofBAWAGP.S.K.Group’soutstandingloanscanbeattributedtoAustriancustomers,followedbyoutstandingloanstoWesternEuropeanborrowers.IncludedwithintheseareasmallnumberofloanstoborrowersinEuropeancountrieswithhighbudgetdeficits,whichareshowninthefollowingoverview.
Credit portfolio in states with high budget deficits
in millions of EurosNet exposure Bank Non-bank Sovereign
31.12.2010 31.12.2009 31.12.2010 31.12.2009 31.12.2010 31.12.2009 31.12.2010 31.12.2009
Greece 41 99 – 4 – – 41 95 Ireland 108 529 40 181 68 39 – 310 Italy 648 572 559 503 90 67 – 1 Portugal – 66 – 44 – – – 22 Spain 532 486 212 135 308 285 12 65
TheclaimsinGreececonsistalmostentirelyofgovernmentbonds,whiletheoutstandingbalanceofreceivablesinSpainandItalyconsistprimarilyofclaimsagainstthreemajorbanks.ThereceivablesinIrelandconsistofclaimsagainstcommercialcustomersthatareregisteredinIrelandandcollateralisedclaimsagainstaforeignbankthatisdomiciledinIreland.
AfterthesaleofIstrobankainSlovakiaandBAWAGBankCZintheCzechRepublic,theBankonlyhasmoderatenetexposuresinCentralandEasternEurope,primarilyinconnectionwithaminorityshareinaHungarianbankandBAWAGBankad.d.inSlovenia.
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Geographical distribution of the loan portfolio: CEE as per 31.12.2010
in millions of EurosNet exposure 1) Bank Non-bank Sovereign
31.12.2010 31.12.2009 31.12.2010 31.12.2009 31.12.2010 31.12.2009 31.12.2010 31.12.2009
Slovenia 606 843 20 27 586 817 – –Slovakia 48 51 – – 48 51 – –Eurozone 654 895 20 27 634 868 – –Hungary 234 310 121 169 113 131 – 10 Czech Republic 158 136 10 6 141 123 6 7 Romania 66 20 12 16 54 5 – –Poland 60 16 – 3 59 13 – –Latvia 7 10 3 10 – – 5 –Estonia 7 8 – – 7 8 – –Bulgaria – – – – – – – –Non Eurozone 531 500 147 203 373 279 11 17 Russia 177 166 4 7 174 159 – –Croatia 124 100 – 1 104 100 19 –Turkey 94 5 51 2 43 2 1 1 Kazakhstan – – – – – – – –Serbia 10 2 – – 10 2 1 –Montenegro – – – – – – – –
Bosnia and Herzegovina
1
1
–
–
1
1
–
–
Ukraine – – – – – – – –Non EU 407 274 54 10 332 264 21 1 Total 1,592 1,669 221 240 1,339 1,411 32 17
1) The net exposure values include equity investments in non-consolidated CEE subsidiaries.
Impaired Loans
Impairmentprovisionsareformedforloansforwhichitcanbeassumedthattheopenclaimswillnotbeentirelyfulfilled.Thesecorrespondtotheestimatedincurredlossesinthecreditportfolio.Theprimarycomponentsare: 4 specificloanlossprovisionsthatareformedmanuallyafterdetailedanalysisbasedontheestimatesofthe
CreditRiskunitandunderresponsibilityoftheWorkoutGroupandLegalCollection,and 4 loanlossprovisionsthatareformedautomaticallybythecorebankingsysteminthecaseofmorethantwo
unpaidinstalments,whenlimitsarecontinuouslyexceededoncurrentaccounts,aswellaswhenlegalactionisinitiated.
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Non Performing Loans (NPLs)
Exposuresrelatingtoallcustomersindefaultriskclass“8”arecategorisedasnonperformingloans,regard-lessofwhetheralimithasbeenexceededorapaymentmissedonanindividualaccountornot.Onceacustomerexposureismorethanninetydayspastdueoracustomer-relatedcriterionofdefaultapplies,thecustomerandallproductswithexposurearesettodefaultandareassignedtodefaultriskclass“8”.
Afterincreasingcontinuouslyoverthepastyears,thevolumeofNPLsdeclinedsignificantlyin2010.Thisimprovementcanbeattributedprimarilytothefollowing: 4 Alowlevelofnewdefaults 4 RepaymentandsaleoflargerindividualNPLpositions 4 SaleofaportionoftheretailNPLbook
Development of and provision for NPLs
in millions of Euros
Exposure Provisions Collateral Net position Coverage*)
31.12.2010 31.12.2009 31.12.2010 31.12.2009 31.12.2010 31.12.2009 31.12.2010 31.12.2009 31.12.2010 31.12.2009
Banks 30 39 25 33 – – 5 6 83.3% 84.6%State/Public sector
–
–
–
–
–
–
–
–
–
–
Corporates 435 523 201 202 92 96 142 225 67.4% 57.0%Retail SME 245 291 145 165 69 76 31 50 87.3% 82.8%
Retail private customers
506
627
331
412
83
88
92
127
81.8%
79.7%
Others/Not related
5
5
40
30
–
–
-35
-25
800.0%
600.0%
Total 1,221 1,485 742 842 244 260 235 383 80.8% 74.2%
*) (Provisions+Collateral)/Exposure
IFRS Portfolio Impairments pursuant to IAS 39 AG 89
AgeneralimpairmentprovisionisformedonaportfoliobasisforincurredbutnotdetectedlossesintheGroup’screditportfolioasofthereportingdate.Forthis,itisassumedthatacertainpercentageofcustomersthathavenotbeenidentifiedasbeingindefaultareinfactindefaultonthereportingdate.
Tocalculatetheselossprovisions,thereceivablesaregroupedintohomogeneousportfolioswithcomparableriskcharacteristics.Theprovisionsarequantifiedonthebasisoftheexpectedloss,takingintoaccountthelossidentificationperiod.Thisisdeterminedindividuallyforeachcustomersegmentonthebasisoftheaveragetimeuntilthenextexpectedpayment.Asof31December2010,theIFRSportfolioimpairmentamountedtoEUR36.5million,comparedtoEUR34.6millionon31December2009.
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Credit quality overview: Outstanding loan book amounts in different categories as of 31.12.2010
in millions of EurosBook value loan book
before provisionsProvisions Book value Collateral
31.12.2010 31.12.2009 31.12.2010 31.12.2009 31.12.2010 31.12.2009 31.12.2010 31.12.2009
Outstandings with specific provisionsBanks 25 34 25 33 – 1 – –Public sector – – – – – – – –Corporates 320 339 174 180 146 159 46 32Retail SME 174 179 140 144 34 35 30 16Retail private customers 319 180 266 146 53 34 24 11Total 838 732 605 504 233 228 100 58
Outstandings with general provisionsPublic sector – – – – – – – –Corporates 6 14 4 2 2 12 1 10Retail SME 33 73 19 33 14 39 9 21Retail private customers 162 432 90 279 72 153 19 33Portfolio provision – – 37 35 -37 -35 – –Total 201 519 150 348 51 171 29 64
Outstandings past due unprovisionedDays past due
30–60 days 23 73 – – 23 73 12 2060–90 days 40 10 – – 40 10 21 390–180 days 44 42 – – 44 42 6 19More than 180 days 84 98 – – 84 98 67 58
Total 191 223 – – 191 223 106 99
Normal outstandings (not past due/not provisioned)
Not rated 26 75 – – 26 75 17 19Rating 1 4,043 5,808 – – 4,043 5,808 298 771Rating 2 2,277 2,500 – – 2,277 2,500 1,009 842Rating 3 4,508 5,251 – – 4,508 5,251 2,093 2,263Rating 4 6,558 5,191 – – 6,558 5,191 2,383 1,868Rating 5 4,425 4,198 – – 4,425 4,198 1,676 1,996Rating 6 1,507 1,322 – – 1,507 1,322 667 606Rating 7 901 967 – – 901 967 496 473Rating 8 105 139 – – 105 139 52 73Total 24,348 25,453 – – 24,348 25,453 8,692 8,911
Total book value 25,578 26,927 755 852 24,823 26,075 8,927 9,133
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Past Due Loans with No Provisions
Noprovisionsareformedforpastdueloanswhenthecreditworthinessofthecustomerappearstobestable,whensufficientcollateralhasbeenprovidedorwhentheoutstandingamountwillbepaidinthenearfuture.
Collateral
AlltypesofcollateralthatareacceptedbyBAWAGP.S.K.arelistedintheGroupCollateralHandbook.Conservativediscountsaredefinedforeachtypeofcollateral.TheamountsinthetableaboveshowtherecognisedvaluesofthecollateralheldbytheBankafterapplicationofthesediscounts.
Workout Group and Legal Collections
TheWorkoutGroupandLegalCollectionsunitsareresponsiblefortheprocessingandadministrationoftroubledanddefaultedcreditcommitments.Theprimaryobjectiveistominimiselossesbyprovidingrestructuringexpertiseandmaximisetheamountcollectedifcollectionisrequired.
Early Recognition of Troubled Assets
TheBankseekstoidentifycustomerswithcreditproblemsatanearlystage.Manyfactorsareusedtodrivethemonitoringprocessincludingdeclinesinstockprices,ariseinCDSspreads,deteriorationincredit-worthiness,negativereportsinthenewsoradeclineinriskrating.Suchcustomersareplacedonareviewlistandaresubjecttoreviewandmonitoringatshorterintervals.
Structured Credit Portfolio
BAWAGP.S.K.’ssecuritiesportfolioincludesaportfolioofstructuredcreditinstrumentswithanominalvalueofEUR1.48billionandacurrentbookvaluepursuanttoIFRSofEUR842million(excludingsecuritieswhoseriskisbornebynon-controllinginterests).Theresultingriskpositionisdetailedinthefollowingtablesbyrating,maturityandorigin.Scheduledrepaymentssignificantlyreducedthevolumeofthisportfolioagainin2010.Furtherstepsweretakeninthereportingperiodtoreducetheremainingrisk,includingmicrohedg-ingthecorporateCDO²assetclassandadditionalrestructuring,forexampleforcorporateCDOs.
Thereducedcarryingamountsareaneffectofscheduledandearlyrepaymentsaswellassales.
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Structured credit portfolio as of 31.12.2010 – Breakdown by rating (IFRS book value)
in millions of Euros AAA AA A BBBBB and below
Not rated
Total
CDO-of-ABS – 12 3 5 3 – 23 CDO-of-ABS w/ subprime 10 – – 16 38 – 65 CLO 17 81 100 76 21 – 296 CMBS 6 14 2 5 – 5 32 Corporate CDO – 1 1 – 79 45 126 Corporate CDO² – – – – – 84 84 Corporate CPDO – – 20 – 11 42 74 Corporate LSS – – – – – 90 90 European RMBS 27 5 9 – – – 41 US RMBS – – – – 13 – 13 Total 60 114 134 102 165 266 842
Structured credit portfolio as of 31.12.2009 – Breakdown by rating (IFRS book value)
in millions of Euros AAA AA A BBBBB and below
Not rated
Total
CDO-of-ABS – 19 8 1 2 – 30 CDO-of-ABS w/ subprime 11 – – 19 42 – 72 CLO 54 86 115 73 18 – 347 CLO² – – – – – – –CMBS 9 21 2 – – 4 36 Corporate CDO 27 23 9 – 83 48 190 Corporate CDO² – 98 – – – 73 170 Corporate CPDO – – 20 – 12 48 80 Corporate LSS 49 – – – – 125 174 European RMBS 31 8 8 – – – 47 US RMBS – – – – 14 – 14 Total 181 254 161 94 171 298 1,159
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Structured credit portfolio as of 31.12.2010 – Breakdown by maturity (IFRS book value)
in millions of Eurosuntil
end of 2011 2012 – 2014 2015 – 2017 2018 and later Total
CDO-of-ABS – 21 3 – 23 CDO-of-ABS w/ subprime 2 3 26 33 65 CLO – 146 149 – 296 CMBS – 12 20 – 32 Corporate CDO 5 80 41 – 126 Corporate CDO² – 84 – – 84 Corporate CPDO – – 74 – 74 Corporate LSS – 90 – – 90 European RMBS – 16 7 17 41 US RMBS – 3 9 – 13 Total 7 455 330 50 842
Structured credit portfolio as of 31.12.2009 – Breakdown by maturity (IFRS book value)
in millions of Eurosuntil
end of 2011 2012 – 2014 2015 – 2017 2018 and later Total
CDO-of-ABS – 30 – – 30 CDO-of-ABS w/ subprime 16 14 23 19 72 CLO – 184 163 – 347 CLO² – – – – –CMBS 11 24 – – 36 Corporate CDO 57 76 57 – 190 Corporate CDO² 98 73 – – 170 Corporate CPDO – – 80 – 80 Corporate LSS 94 80 – – 174 European RMBS 5 14 6 22 47 US RMBS 1 4 10 – 14 Total 281 499 337 41 1,159
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Structured credit portfolio as of 31.12.2010 – Breakdown by origin (IFRS book value)
in millions of Euros USAContinental
EuropeUK Other Total
CDO-of-ABS 3 17 3 – 23 CDO-of-ABS w/ subprime 45 1 18 – 65 CLO 137 130 28 – 296 CMBS 22 10 – – 32 Corporate CDO 51 68 6 – 126 Corporate CDO² 45 30 9 – 84 Corporate CPDO 34 35 5 – 74 Corporate LSS 60 17 12 – 90 European RMBS – 35 6 – 41 US RMBS 13 – – – 13 Total 410 344 88 – 842
Structured credit portfolio as of 31.12.2009 – Breakdown by origin (IFRS book value)
in millions of Euros USAContinental
EuropeUK Other Total
CDO-of-ABS 1 23 6 – 30 CDO-of-ABS w/ subprime 43 9 20 – 72 CLO 163 151 33 – 347 CLO² – – – – –CMBS 22 14 – – 36 Corporate CDO 82 92 16 – 190 Corporate CDO² 86 64 20 – 170 Corporate CPDO 37 38 5 – 80 Corporate LSS 102 48 24 – 174 European RMBS – 42 5 – 47 US RMBS 14 – – – 14 Total 550 481 128 – 1,159
Abbreviations:
ABS Asset backed security
CDO Collateralised debt obligation
CDO² Collateralised debt obligation on collateralised debt obligation
CLO Collateralised loan obligation
CMBS Commercial mortgage backed security
CPDO Constant proportion debt obligation
LSS Leveraged super senior
RMBS Residential mortgage backed security
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BAWAGP.S.K.usesinternalvaluationmodelstodeterminethefairvaluesoftransactionsforwhichthereisnoactivemarket.SuchmodelsareusedforCDOsofABSwithsubprimeexposure,corporateCDOsandCDO²,corporateCPDOs,corporateLSS,CLOs,USRMBSandcorrespondingmicrohedges.AllofBAWAGP.S.K.’smodelsarecalibratedtoactivelytradedinstrumentssuchasABX,tranchediTraxxandCDX,andtranchedLCDXanduseallavailablemarketdata(suchasyieldcurves,CDSspreads,loanprices,etc.)asinputs.
PositivefairvaluechangesintheamountofEUR29millionwererecognisedontheProfitorLossStatementunderGainsandlossesonfinancialassetsandliabilitiesforthestructuredcreditportfolioin2010.Inthesameperiod,bookgainsofEUR10millionwereachievedthroughredemptionsandsales.
TheBanksoldalargeshareoftheassetscategorisedasheld-to-maturityfinancialassetsinthecurrentfinancialyear.AccordingtotheprovisionsofIAS39,thisrequiresthatallsecuritiesinthiscategorybereclassifiedasavailable-for-salefinancialassets.Duringthisreclassification,theaffectedsecuritiesfromthestructuredcreditportfolioweremeasuredattheircurrentfairvalues.On1June2010,thesecuritiesinthestructuredcreditportfolioweretransferredfromthecategoryofavailable-for-salefinancialassetstothecategoryofloansandreceivables.UnrealisedfairvaluechangesofEUR–43millionhavebeenrecognisedinequityandwillnowbedistributedoverthetermofthesecurities.UnrealisedfairvaluechangesofEUR–37millionwererecognisedinequityasof31December2010.
Stress Tests and Sensitivity Analysis of the Structured Credit Portfolio
Stresstestsandsensitivityanalysesforthestructuredcreditportfolioarecompletedonaquarterlybasis.Inthis,theeffectsofvariousscenariosontherecoveryvalue,fairvalueandrisk-weightedassets(RWAs)areanalysed.TheresultsarereportedtotheManagingBoard.
Foreachassetclassinthestructuredcreditportfolio,thefirststepistheidentificationofthematerialriskfactorsandthecreationofabasecasescenariofortheseriskvaluesthatreflectsthecurrentlossexpecta-tions.Individualormultipleriskfactorsarethenworsenedtosimulatevariousstressscenarios.
Thebasecaseisthescenariothatisbasedontheexpectedrecoveryvalue.Therecoveryvalueisdefinedasthepresentvalueoftheexpectedcashflows(discountedwiththeriskpremiumspecifieduponconclusionofthetransaction).Asub-parrecoveryvaluemeansthattheexpectedcashflowsarelowerthanthecontractuallyagreedcashflows.
Allassumptionsapplyinadditiontothelossesalreadyincurredintheportfolio;downgradesthathavealreadyoccurredarealsoconsidered.
Toassesstheeffectsthatthestressscenarioscouldhaveonthefairvalues,thecurrentimplieddiscountmarginsareincreaseddependingonthelevelofriskinthescenarioandtheexpectedmarketreaction.
ThefollowingtablesshowtheeffectsthatthestressscenarioshaveontheIFRSvalueandtherecoveryvalueoftheportfolio.ThedifferencebetweenthevalueaccordingtoIFRSandtherecoveryvalueisduetothefactthatthemajorityoftheassetsintheportfolioaremeasuredattheirfairvalues,whicharelowerthantheirrecoveryvaluesbecauseofthecurrentlyhigherriskpremiums.
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Thedepictedstressscenariosaredefinedasfollows: 4 Defaults+20percent:Thedefaultandarrearsratesareincreasedby20percent. 4 Combinedscenario:thesimultaneousworseningofthedefault,arrears,LGDandprepaymentratesby
20percentanda10percentworseningofthecorrelation.
Effects of stress scenarios on the IFRS value of the structured credit portfolio
in millions of EurosScenario p.d.
+20 %Combined scenario
CDO-of-ABS -2 -3CDO-of-ABS w/ subprime -13 -19CLO -3 -6CMBS -6 -10Corporate CDO -5 -9Corporate CDO² – –Corporate CPDO -7 -13Corporate LSS -8 -24European RMBS -3 -3US RMBS – –Total -46 -88
Recovery value of the structured credit portfolio; effects of stress scenarios on the recovery value of the structured credit portfolio
in millions of Euros Recovery valueDiff. btwn. recovery
value and IFRS value
Change of recovery valueScenario p.d.
+20 %Combined scenario
CDO-of-ABS 36 13 -1 -2CDO-of-ABS w/ subprime 95 30 -14 -20CLO 369 73 -4 -17CMBS 51 19 -7 -14Corporate CDO 143 17 -5 -9Corporate CDO² 84 – – –Corporate CPDO 105 31 -1 -2Corporate LSS 100 10 – –European RMBS 45 4 -1 -1US RMBS 17 5 – -4Total 1,044 202 -34 -69
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45 | Market risk
Marketriskistheriskoflosscausedbyopenriskpositionsinthemarketandtheadversedevelopmentofmarketriskfactors(interestrates,foreignexchangerates,equityprices,volatilities).Marketriskcanariseinconjunctionwithtradingandnon-tradingactivities.
AtBAWAGP.S.K.particularemphasisisplaceduponmarketriskidentification,measurement,analysisandmanagementperformedbytheMarketRiskdivisionforallmarketrisksintheGroup.
MarketriskisboundedbytheBAWAGP.S.K.ManagingBoard’sapprovedmarketrisklimitswhichconsistofvalue-at-risk,sensitivity,volumeandworst-caselimits.
Forriskmanagementpurposes,theManagingBoardisinformedoftheBank’smarketriskposition,theutilisationoflimitsandtheprofitandlosssituation.ThesereportsareprovidedonadailybasisforBAWAGP.S.K.asanindividualinstitutionandonamonthlybasisfortheGroup.
Allstrategies,organisationalprocedures,principlesofriskmanagementandriskmonitoringaswellasmarketrisklimitsapprovedbytheManagingBoardaredocumentedinaninternalGroupMarketRiskManualandinaspecificBAWAGP.S.K.FinancialMarketsManual.
Market Risk in the Trading Book
BAWAGP.S.K.usesthevalue-at-risk(VaR)ofaninternalmodelthathasbeenauditedbyOesterreichischeNationalbank(theAustrianNationalBank)andapprovedbytheFederalMinistryofFinancetocontrolandlimitthemarketriskarisingfromtradingactivities.Itincludestheriskcategoriesinterestrate,equitymarketandforeignexchangerisk(therewasnoactiveequitydeskinthetradingbookin2010)andthelinearandnon-lineargammaandvegarisksbrokendownbyrisktype.
Becauseoftheuniformdepictionofthemarketrisk,theVaRresultsareusedforinternalriskcontrolpurposesandarealsoincludedinthereportstothesupervisoryauthorities.Theregulatorycapitalrequire-mentsforeachspecificriskinthetradingbookarecalculatedusingthelegallyspecifiedstandardprocedure.
Themodelisbasedonavariance-covarianceapproachinwhichthevalue-at-riskiscalculatedforalltradingpositionsataconfidencelevelof99percenttakingintoaccountthecorrelationsforaholdingperiodofonedayandtendaysusingthecomputersystemPMS.Inordertotestthereliabilityofthemodel,thetradingbookisalsosubjectedtoaMonteCarlosimulation,andtheresultsofbothanalysesarecompared.
TheVaRlimitsaresupplementedbysensitivitylimitsandworst-caselimits.
On31December2010,thevalue-at-risk(withgammaandvegariskincluded)wasmeasuredatEUR4.51million(31December2009:EUR1.26million),basedonaconfidenceintervalof99percentandaholdingperiodofoneday.
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TheresultoftheaggregatedVaR,whichtakesthediversificationeffectintoconsideration,differsfromthesumoftheindividualVaRresultsoftheriskcategoriesasfollows:
VaR (99 per cent, one-day holding period), financial year 2010, in millions of Euros
Risk class Minimum Maximum Average 31.12.2010FX risk -0.23 -4.17 -1.62 -4.17 Interest rate risk -0.70 -2.07 -1.39 -0.70 Total (without correlations) -1.18 -5.21 -3.02 -4.87 Total (with correlations) -1.04 -4.90 -2.71 -4.51 Diversification n/a n/a -0.31 -0.36
Theaccuracyandreliabilityofthemodelisverifiedbymeansofdailybacktestingbycomparingthehypotheti-callyrealisedgainsandlossesfortwoconsecutivetradingdayswiththevalue-at-riskofthefirstday.IfanegativebacktestingresultislowerthantheVaR,thisisdesignatedasan“exception”.
TherewerenoexceptionsatBAWAGP.S.K.duringthereportingperiod,whichconfirmsthehighqualityofthemodelandwhichmeansthatthebest-possiblemultiplierof3forthecalculationofownfundsasspecifiedbytheFederalMinistryofFinance(whichhasbeenappliedcontinuouslysince1998)canbemaintained.
ThedailyVaR(99percent,one-dayholdingperiod)valuesarecomparedwiththebacktestingresults(delta)forthereportingperiodinthefollowingchart.
VaR (99 per cent, one-day holding period) compared with the backtesting results (delta), financial year 2010, in thousands of Euros
3,0002,5002,0001,5001,000
5000
-500-1,000-1,500-2,000-2,500-3,000-3,500-4,000-4,500-5,000
01/2
010
Delta VaR
02/2
010
03/2
010
04/2
010
05/2
010
06/2
010
07/2
010
08/2
010
09/2
010
10/2
010
11/2
010
12/2
010
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Theriseinthevalue-at-riskinAugust2010canbeattributedtoacustomer-inducedposition.Withregardtothisincreasedriskposition,anappropriateprovisionwasformedforpartsoftheposition.
Asameasureofrisk,thevalue-at-riskquantifiesthepotentiallossundernormalmarketconditions.VaRmethodologyisbasedontheassumptionthatthepricedatafromtherecentpastcanbeusedtopredictfuturemarketevents.Ifmarketconditionsdiffersubstantiallyfrompastmarketdevelopments,thentheriskpredictedbyvalue-at-riskmaybetooconservativeortooliberal.Itisnotintendedtoassesslossesinconjunc-tionwithunexpectedmarketdevelopments.Thevaluationiscoveredbyadditionalstresstests.
Inthecourseofsuchstresstests,whichwereexpandedduringthe2010financialyear,thetradingbookisstressedbyscenariossimulatingextrememarketconditionswhicharenotcoveredbytheconfidenceinterval.Theresultsofthesetestsarecomparedwiththeworst-caseforeignexchangeandinterestratelimits.
Adistinctionismadebetweentime-basedandevent-basedstresstests,wherebystatisticalmethods(changesincorrelations,higherconfidencelevel,etc.)andextrememarketmovementsofriskfactorsareassumedandapplied.TheresultsarereportedtotheManagingBoard,theAssetLiabilityCommittee(ALCO),tradingmanagementandtheresponsiblegroupheads.
Market Risk in the Banking Book
TheprimarycomponentsofmarketriskforBAWAGP.S.K.Groupresultfrominterestraterisk,foreigncurrencyriskandliquidityrisk.
Interest Rate Risk in the Banking Book
Interestrateriskinthebankingbookisthepotentiallossresultingfromnetassetvaluechangesandthefuturedevelopmentofnetinterestincomeduetoadverseinterestrateshifts.
TheAssetLiabilityCommittee(ALCO)hasassignedinterestraterisklimitstotheFinancialMarketsdivisiontomanagetheinterestrateriskintermsofanoptimalrisk/returnratioattheGrouplevel.TheMarketRiskdivisionreportstotheALCOonadailybasisforsomeareasandmonthlyattheGrouplevelonlimitutilisationaswellasonthedistributionofrisk.
Everytwoweeks,alternatingmeetingsareheldbytheStrategicALCO(fullManagingBoard)andtheTacticalALCO(ManagingBoardmemberresponsibleforAustrianCorporates&FinancialMarkets,CFO,CRO).InadditiontothemembersoftheManagingBoard,theALCOmeetingsarealsoattendedbytheheadsoftheFinancialMarketsdivisions,MarketRisk,Controlling/ALMandAccounting.
Onthebasisoftheriskreportsandalsousingthescenarioanalysesandstresstests,themarketriskanditseffectsareanalysedandsteeringmeasuresaredecidedtoreduceriskandoptimiseearningsfortheBankasawhole.
TherisksarealsopresentedtotheManagingBoardaspartofanoverallriskreportsubmittedtotheEnterpriseRiskCommitteeonamonthlybasis.
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Forthepurposeofinterestrateanalysis,allinterest-bearinginstrumentsareassignedtocorrespondingtimebucketsbasedupontheircontractualrepricingperiods(inthecaseoffixedandvariablerateinstruments)orassumptionsregardingthese(inthecaseofaccountswithundefinedmaturityprofilesorwheninterestrateandminimumcommitmentperiodsarenotcontractuallyagreed).
Interestrateriskismeasuredusingthepresentvalueofabasispoint(PVBP)concept.ThePVBPisanabsolutevaluethatisderivedfromthedurationofinterest-bearingfinancialinstruments.Itindicatesinmonetaryunitsthechangeinthenetcashvalueduetoashiftoftheyieldcurvebyonebasispoint(0.01percent).
ThefollowingtabledepictstheGroup’sinterestrateriskasof31December2010onthebasisofthePVBPconcept.ThenetassetvaluechangesofallfinancialpositionsintheGroup’sbankingbookduetoanincreaseintheyieldcurveofonebasispointareassignedtothecorrespondingtimebucketsasfollows:
PVBP
in thousands of Euros < 1Y 1Y–3Y 3Y–5Y 5Y–7Y 7Y–10Y > 10Y TotalEUR -28 23 -146 -21 569 113 511USD – -5 -8 -4 -3 -19 -39CHF -18 – -7 -9 -14 -40 -87JPY 3 -1 -4 1 2 17 18Other currencies -14 4 12 -1 4 -14 -9Total 31.12.2010 -56 21 -152 -35 558 58 394
Total 31.12.2009 -62 -130 61 31 118 -112 -94
ThePVBPofallpositionswhosefairvaluechangesarisingfrominterestratechangesimpacttheProfitorLossStatementiscalculated,limitedandmonitoredseparately.ThePVBPsoftheGroupbytimebucketareasfollows:
P&L and equity-relevant PVBP
in thousands of Euros < 1Y 1Y–3Y 3Y–5Y 5Y–7Y 7Y–10Y > 10Y Total31.12.2010 60 27 -133 316 113 78 460
31.12.2009 16 -313 275 90 240 16 323
Inadditiontothetraditionalapproachestomeasuringinterestraterisk,avalue-at-riskcalculationfortheGroupisconductedwithintheframeworkoftheinternalcapitaladequacyassessmentprocess(ICAAP)onamonthlybasis.
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Foraparticularportfolio,thevalue-at-riskmeasurestheworstexpectedfutureloss(intermsofmarketvalue)overagiventimehorizonwithaspecificconfidencelevel.Thecalculationofvalue-at-riskisbasedonthevariance-covarianceapproachandusesaconfidencelevelof99percentandatimehorizonoftendays.Asof31December2010,thevalue-at-riskforinterestrateriskintheGroup’sbankingbookamountedtoEUR12.4million(comparedtoEUR4.2millionasof31December2009).
Netinterestincomeisoneofthekeyparametersinperiodicincomemanagementandconsistsofthedifferencebetweeninterestincomeandinterestexpensesinagivenperiod.Todeterminethenetinterestincomeforaspecificfutureperiod,theaveragevolumeandaverageinterestratesofallinterest-bearingassetsandliabilitiesthataresubjecttointerestrateriskarecompared.Asoftware-basedmodelforthedynamicinterestratesimulationisusedtodeterminetheinterestincomeandexpenseattheindividualcontractlevelusingtheinterestratecharacteristicsextractedfromthecorebankingsystem.
Additionalinputsrequiredforthismodelareexpectedfutureproductmarginsaswellasestimatesconcerningthevolumeofnewcontractsandtheextensionofexistingcontracts.Themarketyieldcurveiskeptconstantinthemodelfortheentiresimulationperiod,andplaysakeyroleindeterminingfutureinterestratesfortheindividualproducts.Thisbaseprojectionisknownasthe“stableratesscenario”.
Thepossibleeffectsofshiftsintheyieldcurve(bothstandardisedinterestratescenariosaswellasforwardratesandinternalinterestprojectionsfromtheStrategy&Economicsdivision)arecalculatedusingthisbaseprojection.TheresultsofthesesimulationsareanalysedandpresentedonamonthlybasistotheAssetLiabilityCommitteeandtotheEnterpriseRiskMeetingaspartoftheoverallriskreport.
Thequalityimprovementsachievedintermsofmanaginginterestrateriskinthebankingbookin2010includetheexpansionofthemethodfordeterminingthereplicationassumptionsforpositionswithunspeci-fiedinterestrateterms,whichisbasedonmathematicalmodels,aswellasthequalitativerefinementofthedynamicnetinterestincomesimulation.
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Derivative financial transactions as of 31.12.2010
in millions of EurosNominal amount/maturity* Fair value*
Up to 1 year 1– 5 years Over 5 years Total Positive NegativeInterest-rate related business 18,786 32,170 14,028 64,983 1,343 -968
Thereof interest rate swaps banking book
13,034
13,238
4,807
31,079
647
-341
interest rate options banking book 82 170 90 342 2 -3
forward rate agreements banking book 307 – – 307 – –
interest rate swaps trading book 3,843 11,207 6,118 21,168 548 -472
interest rate options trading book
1,438
7,554
3,013
12,005
146
-152
forward rate agreements trading book
83
–
–
83
–
–
Currency related business 7,477 9,541 3,186 20,204 506 -914Thereof currency swaps banking book 83 906 457 1,446 16 -139
foreign currency forward transactions and options banking book
2,013
10
279
2,302
21
-70
currency swaps trading book 20 1,261 5 1,286 3 -262
foreign currency forward transactions and options trading book
5,361
7,364
2,445
15,170
466
-444
Securities related business 88 1,575 1,249 2,913 62 -95
Thereof securities related business banking book
78
363
999
1,441
56
-68
securities related business trading book
10
1,212
250
1,472
7
-27
Total 26,351 43,286 18,463 88,100 1,911 -1,977Thereof banking book business 15,597 14,688 6,632 36,917 742 -621 trading book business 10,754 28,598 11,831 51,183 1,169 -1,356
* Banking book derivatives include fair value hedging instruments.
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Derivative financial transactions as of 31.12.2009
in millions of EurosNominal amount/maturity* Fair value*
Up to 1 year 1– 5 years Over 5 years Total Positive NegativeInterest-rate related business 11,782 27,691 14,096 53,569 1,274 -952
Thereof interest rate swaps banking book
4,013
11,068
3,502
18,582
616
-340
interest rate options banking book
1,896
163
16
2,075
2
-1
forward rate agreements banking book
20
–
–
20
–
–
interest rate swaps trading book 4,950 10,790 6,716 22,456 528 -476
interest rate options trading book
684
5,670
3,863
10,217
128
-135
forward rate agreements trading book
220
–
–
220
–
–
Currency related business 9,820 3,343 921 14,083 174 -337Thereof currency swaps banking book 138 388 30 555 14 -17
foreign currency forward transactions and options banking book
1,745
72
233
2,051
3
-86
currency swaps trading book – 1,083 2 1,085 4 -70
foreign currency forward transactions and options trading book
7,937
1,800
655
10,392
153
-165
Securities related business 569 1,355 1,233 3,158 78 -143
Thereof securities related business banking book
539
630
1,013
2,183
69
-128
securities related business trading book
30
725
220
975
9
-15
Total 22,171 32,389 16,250 70,810 1,526 -1,432Thereof banking book business 8,351 12,321 4,794 25,466 704 -571 trading book business 13,821 20,067 11,456 45,345 822 -861
* Banking book derivatives include fair value hedging instruments.
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Alternative Investments
InNovember2009,theManagingBoardofBAWAGP.S.K.decidedtodiscontinuetheBank’salternativeinvestmentsstrategy.Asaresultofthisdecision,BAWAGP.S.K.submittednoticeoftheterminationofallfundsinitsalternativeinvestmentsportfolioin2009.
Asof31December2010,approximately10percent(whichamountstoapprox.USD21million)oftheoriginalportfoliowasstillinvested;therepaymentshavebeencompletedasscheduledtodate.
FX Risk in the Banking Book
TheextentoftheopenforeignexchangepositionsinBAWAGP.S.K.’sbankingbookisconstrainedbyconservativelimitstoensurethatonlymarginalFXrisksarecarriedinthebankingbook.
Compliancewiththeselimitsisobservedbymeansofadailyprocess.AnotherreconciliationroutinecomparestheoutstandingFXpositionsaccordingtoTreasuryapplicationswiththeaccountingpositionandinitiatesanalysisandclearingactivitiesincaseofdifferences.
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46 | liquidity risk
Liquidityriskmanagementhastwoimportantgoals: 4 securingtheBank’ssolvencyand 4 managingtheriskresultingfromchangesinrefinancingcosts.
BAWAGP.S.K.usesamulti-stageprocessforthis:
a)Managementofstructuralliquidity MarketRiskpreparesamonthlyliquiditygapreportthatincludesscenariocalculationsforchangesinthe
StatementofFinancialPositionstructureandvariousassumptionsaboutcustomerbehaviourandpresentsittotheTacticalALCOtocontrolstructuralliquiditymanagement.
b)Annualprojection Aliquidityprojectionispreparedonamonthlybasisfor(atleast)thefollowingtwelvemonthsanddepicts
thedevelopmentoftheBank’scashposition,collateralpositionandregulatoryliquidityposition,takingintoaccountthebudgetedcustomerbusinessandanyplannedrefinancingmeasures.LimitshavebeendefinedfortheBank’sregulatoryliquiditypositionandcashpositionandmustbecompliedwithinanycurrentorplannedscenarios.TheGroup’soverallliquidityandcollateralpositionismanagedwithintheframeworkofthisreport.
SimulationsarealsoruntoassesstheimpactsontheBank’sliquiditypositionwhenindividualrefinancingmeasurescannotbecompletedasplannedorwhentheBankexperiencesunexpectedcashoutflows.
TheprojectionsarepresentedtotheStrategicALCOonamonthlybasistoenabletheManagingBoardtotakeappropriateaction(forexampleinitiatingadditionalrefinancingmeasures).
Theactualliquidityusageisalsocomparedwiththeprojectionsinmonthlybackteststoidentifywaystoimprovethemethodsforgeneratingtheliquidityforecast.
c)Operationalliquiditymanagement Aone-weekbalancepreviewispreparedfortheaccountseverydayfordailyliquiditypositionmanagement
purposes.Thisthenformsthebasisforselectingtheindividualactionsthatneedtobetakeneachday.
Thankstotheseprocesses,BAWAGP.S.K.wasabletomeetallofitspaymentobligationsandtofullycomplywithalllegalrequirementsin2010.
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Thefollowingtableshows 4 Theconsolidatednominal(non-discounted)cashflowsincludinginterestpaymentsonfinancialliabilitiesin
thebankingbookonthebasisoftheearliestcontractualmaturitieswiththeexceptionofvariablesavingsdepositswithavolumeofEUR3.8billion,forwhichthenextcontractuallyagreedinterestadjustmentdateswereused;
4 CapitalsavingsaccountsintheamountofEUR7.4billion,despitethefactthatthesedepositsareusuallyextendedonmaturityandgenerallyincreaseovertime.TheexpectedcashflowdatesinBAWAGP.S.K.Groupdeviateconsiderablyfromthedatesinthisanalysisinotherareas;aswellas
4 UnderDepositsfromcustomers,currentaccountswithavolumeofEUR5.8billion;and 4 OtherdemanddepositswithavolumeofEUR4.2billionarereportedinthelessthan1monthtimeperiod,
buttheexpectedinvestmentdurationisconsiderablylongeronthebasisofyearsofhistoricalexperience.
Liability maturities as of 31.12.2010
in millions of Euros Gross nominal inflow/outflow
Less than 1 month
1–3 months3 months to 1 year
1–5 yearsMore than
5 years
Non-derivative liabilitiesDeposits from banks -2,976 -1,743 -27 -226 -300 -681Deposits from customers -21,944 -13,585 -800 -3,259 -4,063 -238Debt securities issued -12,186 -51 -596 -733 -6,323 -4,482
Subtotal -37,107 -15,379 -1,422 -4,218 -10,687 -5,401Derivative liabilities
Net inflow/outflow 54 32 -272 113 18 163
Other off-balance-sheet financial obligations
-938
-938
–
–
–
–
Total -37,991 -16,286 -1,694 -4,105 -10,668 -5,238
Liability maturities as of 31.12.2009
in millions of Euros Gross nominal inflow/outflow
Less than 1 month
1–3 months3 months to 1 year
1–5 yearsMore than
5 years
Non-derivative liabilitiesDeposits from banks -5,210 -2,642 -209 -1,305 -531 -523Deposits from customers -23,470 -14,683 -1,676 -2,532 -4,330 -248Debt securities issued -12,466 -14 -169 -2,485 -4,641 -5,157
Subtotal -41,146 -17,339 -2,055 -6,322 -9,501 -5,929Derivative liabilities
Net inflow/outflow 534 -19 68 95 177 213Other off-balance-sheet financial obligations
-1,479
-1,479
–
–
–
–
Total -42,091 -18,837 -1,987 -6,227 -9,325 -5,716
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47 | Participation risk
Participationriskincludespotentiallossesinthefairvalueofnon-consolidatedequityinvestments,potentialimpairmentsandlowprofitabilityofnon-consolidatedequityinvestments.ParticipationriskdoesnotincludeoperatingGroupsubsidiariesbecausetheirrisksareassessedseparatelyaccordingtothespecificrisktypesandarealreadyaccountedforinthisway.
ImpairmenttestsareconductedeveryyeartovalidatethevaluesoftheequityinvestmentsintheBank’sportfolioandtodeterminethehiddenreservesintheequityinvestmentportfolio.Theseimpairmenttestsarecompletedonthebasisoftheplanningprojections(budgetedincomestatements,budgetedbalancesheets,budgetedcashflows)preparedforfutureperiodsbythemanagementofeachentity.Thefreecashflowsindicatedintheprojectionsarediscountedusingrisk-adjustedrates.Thetotalofthediscountedfreecashflowsfromthedetailedplanningperiodasofthereportingdateistakenasthevalueofthecompanyintoperpetuity.TheproportionatevalueofthecompanybasedontheBank’sshareholdingisthencomparedwiththecarryingamountoftheinvestment.Ifthecurrentproportionatevalueofthecompanyislowerthanthecarryingamount,theequityinvestmentiswrittendownbythecorrespondingamount.Ifthecurrentpropor-tionatevalueofthecompanyishigherthanthecarryingamount,thedifferenceisrecognisedasahiddenreserve.
Incontrasttotheproceduredescribedabove,moresimplifiedtechniquesareadoptedformicro-participationsandthosereportingbookvaluescoveredbyeitherprorataequity,byproratacapitalisedaverageEBTsofthelastthreeyearsorbyotherproofsofvalue.
TheresultsoftheimpairmenttestsarereviewedbytheParticipationRiskteamwithinCorporateandInstitutionalRisk.
Shares in non-consolidated companies
in millions of Euros 31.12.2010 31.12.2009Shares categorised as available-for-sale assets 247 279
Shares in credit institutions 145 177Associates 36 36Other shares 109 141
Shares in other companies 102 102Subsidiaries 41 58Associates 31 36Other shares 30 8
Shares accounted for using the equity method 17 30Associates 17 30
Total shares in non-consolidated companies 264 309
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48 | operational risk
BAWAGP.S.K.definesoperationalriskastheriskoflossresultingfrominsufficientorfailedinternalprocesses,externalevents,misconductorstafferrors.Thisdefinitionofoperationalriskincludeslegalrisks,butnotstrategicrisksorriskstotheBank’sreputation,whichareassessedandmanageddirectlybytheManagingBoard.
BAWAGP.S.K.’sManagingBoardspecifiesGroup-wideprinciplesformanagingoperationalriskinitsEnter-priseRiskMeeting.InordertoensurethatmeasuresandprinciplesareapplieduniformlythroughouttheGroup,theseactivitiesarecoordinatedbythecentralOperationalRiskdepartment.Thedetailedmanagementofoperationalrisksintheindividualbusinesssegmentsiscompletedlocallyintherespectiveunitsbythedivisionheadsandtheiroperationalriskagents.
BAWAGP.S.K.usesthebasisindicatorapproachpursuanttosections182ffSolvaVtocalculateitsownfundsrequirementsinconnectionwithoperationalriskattheGrouplevelandforitselfasanindividualinstitution.
Lossesincurredinthebusinesssegmentsanddivisionsasaresultofoperationalrisksarecontinuouslydocumentedinacentrallossdatabasethroughaninstitutionalisedlossreportingsystemtocollectdatafortheinternalmanagementofoperationalrisks.Subsequentcentralanalysisallowstheclusteringoflossestobeidentifiedearlyandfurtherlossestobeprevented.
AdditionalinformationiscollectedthroughRiskControlSelfAssessments(RCSAs).Allunitsandsubsidiariesassesstheirmaterialoperationalrisksandtheeffectivenessoftheircontrolmeasuresonayearlybasisusingauniformframework.Thisincludestheassessmentofindividualcontrolmeasures,theestimationofprobabili-tiesandtheextentoflossesarisingfromindividualrisks.
BAWAGP.S.K.hascreatedaneffectivebasisforlimitingoperationalriskswithacompartmentalisedorganisa-tionalstructure,clearauthorisationlevelsandworkinginstructions.Additionally,consistentguidelinesregard-ingauthoritylevelsandarisk-adequateinternalcontrolsystemincludingcomputer-assistedplausibilityreviewsisdesignedtoallowtheBanktomaintainacontrolledrisksituation.
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additional disclosures Required by austrian law
49 | Fiduciary assets
in millions of Euros 31.12.2010 31.12.2009Fiduciary assets 210 216Receivables from credit institutions 4 –Receivables from customers 206 216Fiduciary liabilities 210 216Payables to credit institutions 28 33Payables to customers 182 183
50 | Breakdown of securities pursuant to the austrian Banking act (BWg)
Thefollowingtablebreakssecuritiesdowninaccordancewithsection64paragraph1line10andline11BWGasof31December2010:
in millions of Euros Not listedListed BAWAG P.S.K.
Group Total 2010Total
Loans and receivables
Other valuations
Bonds and other fixed income securities 1,157 8,874 1,326 7,548 10,031Shares and other variable income securities 20 54 – 54 74Shares in associates and other shares 206 – – – 206Shares in non-consolidated subsidiaries 39 – – – 39Total securities 1,422 8,928 1,326 7,602 10,350
Thedifferencebetweencarryingamountsandlowerrepaymentamountsforthepurposesofsection56paragraph2BWGwasEUR160million(2009:EUR66million).Thedifferencebetweencarryingamountsandhigherrepaymentamountsforthepurposesofsection56paragraph3BWGwasEUR63million(2009:EUR65million).
LiabilitiesandsubordinatedcapitalamountingtoanominalEUR978millionwillcomedueunderthecorrespondingcontractsin2011.
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51 | Collateral received for contractual liabilities
DifferenttypesofcollateralhavebeenpledgedtotheBankaspartofitsbusinesstransactions.ThefollowingbreakdownisbasedontheBaselIIcollateralmanagementsystem.
in millions of Euros Collateralised
on-balance-sheet claims
Collateralised off-balance-sheet
claimsTotal
Financial collateralStocks 83 146 229Cash deposits 109 686 795Bonds 45 9 54
Real estateCommercial properties 656 21 677Private properties 3,767 67 3,834
Personal collateralGuarantees 3,021 92 3,113Credit derivatives 37 – 37
Other forms of collateralLife insurance policies 48 – 48
Collateral received 7,766 1,021 8,787
Toreducecreditriskforderivativeinstruments,theBankreceivedconsideration(collateraldeals)intheamountofEUR359million(2009:EUR368million)andpaidconsideration(collateraldeals)intheamountofEUR831million(2009:EUR393million).
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52 | Hybrid capital
Theconsolidatedfinancialstatementsrecognisehybridcapitalwithinthemeaningofsection24paragraph2lines5and6BWGintheamountofEUR404million(2009:EUR404million).TheentiretyofthisamountwasreportedontheIFRSStatementofFinancialPositioninthelineitemSupplementarycapitalandsub-ordinateddebtcapital.
53 | Human resources
TheGrouphad5,534employees(headcount)asof31December2010(2009:5,659employees).Averagedovertheyear2010,theGroup’shumanresourcesincluded5,595(2009:5,879)salariedemployeesandcivilservants.
54 | other disclosures required by BWg and austrian gaaP (UgB)
TheStatementofFinancialPositionentryforLandandbuildingsshowspropertywithacarryingamountofEUR50million(2009:EUR56million).
Obligationsarisingfromtheuseoftangiblenon-currentassetsnotrecognisedontheStatementofFinancialPositionwereexpectedtocometoEUR19millionin2010(2009:EUR22million);theexpectedamountinthefiveyearsfollowingtheyearunderreviewwasEUR99million(2009:EUR100million).
TheStatementofFinancialPositionasof31December2010containsdeferredinterestonsupplementarycapitalbondsintheamountofEUR9million(2009:EUR16million).
ExpensesforsubordinatedliabilitiesamountedtoEUR81million(2009:EUR86million).
ExpensesforBAWAGP.S.K.’sgroupauditorinthecurrentfinancialyearamounttoEUR3.6millionandcompriseauditfeesintheamountofEUR2.4million,taxadvisoryfeesofEUR0.1millionaswellasotheradvisoryfeesintheamountofEUR1.1million.
BAWAGP.S.K.usestheInternetasthemediumforpublishingdisclosuresundersection26BankingActandtheDisclosureRegulation.DetailsareavailableonthewebsiteofBAWAGP.S.K.at:www.bawagpsk-annualreport.com.
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Konzernrechnungslegung nach IFrsPReFaCe By tHe CHaiRMan oF tHe Managing BoaRd
168
consolIdated FInancIal report prepared In accordance wIth IFrs
55 | events after the reporting date
Pleaseseethemanagementreportforinformationonkeyeventsaftertheendofthereportingperiod.
Vienna,7March2011
ByronHaynes� m.p.ChairmanoftheManagingBoard
StephanKorenm.p.DeputyChairmanoftheManagingBoard
AndreasArndtm.p. WolfgangKleinm.p. MemberoftheManagingBoard MemberoftheManagingBoard
ChristophRaningerm.p. SanjaySharmam.p. MemberoftheManagingBoard MemberoftheManagingBoard
169
PReFaCe By tHe CHaiRMan oF tHe Managing BoaRd
169
consolIdated FInancIal report prepared In accordance wIth IFrs
statement of all legal Representatives
“Weconfirmtothebestofourknowledgethattheconsolidatedfinancialstatementsgiveatrueandfairviewoftheassets,liabilities,financialpositionandprofitorlossofthegroupasrequiredbytheapplicableaccountingstandardsandthatthegroupmanagementreportgivesatrueandfairviewofthedevelopmentandperformanceofthebusinessandthepositionofthegroup,togetherwithadescriptionoftheprincipalrisksanduncertaintiesthegroupfaces.”
Vienna,7March2011
ByronHaynesm.p.ChairmanoftheManagingBoard
StephanKorenm.p.DeputyChairmanoftheManagingBoard
AndreasArndtm.p. WolfgangKleinm.p. MemberoftheManagingBoard MemberoftheManagingBoard
ChristophRaningerm.p. SanjaySharmam.p. MemberoftheManagingBoard MemberoftheManagingBoard
170
Konzernrechnungslegung nach IFrsPReFaCe By tHe CHaiRMan oF tHe Managing BoaRd
170
consolIdated FInancIal report prepared In accordance wIth IFrs
Boards and officers of BaWag P.s.K. Bank für arbeit und Wirtschaft und Österreichische Postsparkasse aktiengesellschaft
the Managing Board of BaWag P.s.K. as of 31 december 2010
ByronHAYNES,MemberoftheManagingBoard(from1August2008),ChairmanoftheManagingBoardandCEO(from16September2009)
StephanKOREN,DeputyChairmanoftheManagingBoard(from1October2005)
AndreasARNDT(from1October2010)
WolfgangKLEIN(from1November2010)
ChristophRANINGER(from17May2010)
SanjaySHARMA(from1January2010)
Managing Board appointments that ended during the yearReginaPREHOFER(until31August2010)
CarstenSAMUSCH(until14May2010)
the supervisory Board of BaWag P.s.K. as of 31 december 2010
ChairmanCeesMAAS(from15October2009,MemberoftheSupervisoryBoardfrom27July2009totheAnnualGeneralMeeting2011*)
deputy ChairmanPieterKORTEWEG(from15December2009,MemberoftheSupervisoryBoardfrom27August2007totheAnnualGeneralMeeting2011*)
MembersMariusJ.L.JONKHART(from18July2007totheAnnualGeneralMeeting2011*)
RudolfJETTMAR(from15May2007totheAnnualGeneralMeeting2011*)
RonaldE.KOLKA(from6August2010totheAnnualGeneralMeeting2011*)
KeithTIETJEN(from5October2010totheAnnualGeneralMeeting2011*)
Works Council delegatesIngridSTREIBEL-ZARFLBrigitteJAKUBOVITSBeatrixPRÖLL
state CommissionerBeateSCHAFFER(from1August2009,previouslyDeputyStateCommissionerfrom1March2007to31July2009)
deputy state CommissionerMarkusCHMELIK(from1March2010)
supervisory Board appointments that ended during the yearScottPARKER(until30June2010;MemberoftheAudit,NominationandRemunerationCommittees)
state Commissioner appointments that ended during the yearSusanneSPIESZ(until28February2010;DeputyStateCommissioner)
*UntiltheendoftheAnnualGeneralMeetingadoptingtheAnnualFinancialStatementsfor2010.
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PReFaCe By tHe CHaiRMan oF tHe Managing BoaRd
171
consolIdated FInancIal report prepared In accordance wIth IFrs
Committees of BaWag P.s.K. as of 31 december 2010
Credit CommitteeCeesMAAS,Chairman
MariusJ.L.JONKHART,DeputyChairman
RudolfJETTMARKeithTIETJENIngridSTREIBEL-ZARFL,WorksCouncilDelegate
BeatrixPRÖLL,WorksCouncilDelegate
audit CommitteeMariusJ.L.JONKHART,Chairman
RonaldKOLKA,DeputyChairman
RudolfJETTMARCeesMAASIngridSTREIBEL-ZARFL,WorksCouncilDelegate
BrigitteJAKUBOVITS,WorksCouncilDelegate
nomination CommitteeCeesMAAS,Chairman
RonaldKOLKA,DeputyChairman
PieterKORTEWEGIngridSTREIBEL-ZARFL,WorksCouncilDelegate
BrigitteJAKUBOVITS,WorksCouncilDelegate
Remuneration CommitteeCeesMAAS,Chairman
PieterKORTEWEG,DeputyChairman
KeithTIETJEN
Related Parties special audit CommitteeMariusJ.L.JONKHART,Chairman
CeesMAAS,DeputyChairman
PieterKORTEWEGRudolfJETTMARIngridSTREIBEL-ZARFL,WorksCouncilDelegate
BrigitteJAKUBOVITS,WorksCouncilDelegate
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aUditoR’s oPinion
aUditoR’s oPinion
WehaveauditedtheaccompanyingconsolidatedfinancialstatementsofBAWAG P.S.K. Bank für Arbeit und
Wirtschaft und Österreichische Postsparkasse Aktiengesellschaft, Vienna,forthefiscalyearfrom1January
2010to31December2010.Theseconsolidatedfinancialstatementscomprisetheconsolidatedstatementof
financialpositionasof31December2010,theconsolidatedprofitorlossstatement,theconsolidated
statementofcomprehensiveincome,theconsolidatedstatementofchangesinequityandthecashflow
statementforthefiscalyearended31December2010,andtheNotes.
Management’s Responsibility for the Consolidated Financial Statements and for the Accounting Records
TheCompany’smanagementisresponsiblefortheGroupaccountingrecordsandforthepreparationandfair
presentationoftheseconsolidatedfinancialstatementsinaccordancewithInternationalFinancialReporting
Standards(IFRSs)asadoptedbytheEU.Thisresponsibilityincludes:designing,implementingandmain-
tainingasystemofinternalcontrolsrelevanttothepreparationandfairpresentationofconsolidatedfinancial
statementsthatarefreefrommaterialmisstatement,whetherduetofraudorerror;selectingandapplying
appropriateaccountingpoliciesandmakingaccountingestimatesthatarereasonableinthecircumstances.
Auditor’s Responsibility and Description of Type and Scope of the Statutory Audit
Ourresponsibilityistoexpressanopinionontheseconsolidatedfinancialstatementsbasedonouraudit.We
conductedourauditinaccordancewithlawsandregulationsapplicableinAustriaandAustrianStandardson
Auditing,aswellasinaccordancewithInternationalStandardsonAuditing(ISAs)issuedbytheInternational
AuditingandAssuranceStandardsBoard(IAASB)oftheInternationalFederationofAccountants(IFAC).
Thesestandardsrequirethatwecomplywithprofessionalguidelinesandthatweplanandperformtheaudit
toobtainreasonableassurancewhethertheconsolidatedfinancialstatementsarefreefrommaterialmis-
statements.
Anauditinvolvesperformingprocedurestoobtainauditevidenceabouttheamountsanddisclosuresinthe
consolidatedfinancialstatements.Theproceduresselecteddependontheauditor’sjudgment,includingthe
assessmentoftherisksofmaterialmisstatementoftheconsolidatedfinancialstatements,whetherdueto
fraudorerror.Inmakingthoseriskassessments,theauditorconsidersthesystemofinternalcontrolsrelevant
totheGroup’spreparationandfairpresentationoftheconsolidatedfinancialstatementsinordertodesign
auditproceduresthatareappropriateinthecircumstances,butnotforthepurposeofexpressinganopinion
ontheeffectivenessoftheGroup’sinternalcontrol.Anauditalsoincludesevaluatingtheappropriatenessof
accountingpoliciesusedandthereasonablenessofaccountingestimatesmadebymanagement,aswellas
evaluatingtheoverallpresentationoftheconsolidatedfinancialstatements.
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aUditoR’s oPinion
Webelievethattheauditevidencewehaveobtainedissufficientandappropriatetoprovideareasonable
basisforourauditopinion.
Opinion
Ourauditdidnotgiverisetoanyobjections.Inouropinion,whichisbasedontheresultsofouraudit,the
consolidatedfinancialstatementscomplywiththelegalrequirementsandgiveatrueandfairviewofthe
financialpositionoftheGroupasof31December2010andofitsfinancialperformanceanditscashflows
forthefiscalyearfrom1January2010to31December2010,inaccordancewithInternationalFinancial
ReportingStandards(IFRSs)asadoptedbytheEU.
Comments on the Group Management Report
Pursuanttostatutoryprovisions,themanagementreportfortheGroupistobeauditedastowhetheritis
consistentwiththeconsolidatedfinancialstatementsandastowhethertheotherdisclosuresarenotmis-
leadingwithrespecttotheCompany’sposition.Theauditor’sreportalsohastocontainastatementasto
whetherthemanagementreportfortheGroupisconsistentwiththeconsolidatedfinancialstatementsand
whetherthedisclosurespursuanttosection243apara2UGB(AustrianCommercialCode)areappropriate.
Inouropinion,theconsolidatedmanagementreportfortheGroupisconsistentwiththeconsolidated
financialstatements.Thedisclosuresaccordingtosection243apara2UGB(AustrianCommercialCode)
areappropriate.
Vienna,7March2011
Deloitte Audit Wirtschaftsprüfungs GmbH
Dr.PeterBitzykm.p. ppaMag.WolfgangWurmm.p.
CertifiedPublicAccountants
Thepublicationortransmissionoftheconsolidatedfinancialstatementsinaformdifferentfromtheonewehaveauditedisonly
permittedwithourconsentifinthecourseofdoingsoreferenceismadetoourauditopinionorouraudit.Theauditor’sopiniononly
referstotheGermanversionoftheconsolidatedfinancialstatementsincludingthegroupmanagementreport.Foranyamendedversion
theprovisionsofsection281para2ACCneedtobeobeyed.
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sUPeRVisoRy BoaRd’s RePoRt
sUPeRVisoRy BoaRd’s RePoRt
supervisory Board
BAWAGP.S.K.’sSupervisoryBoarddulyfulfilledallofitsobligationsassetforthinthelaw,intheArticlesof
AssociationandinitsRulesofProcedure.Inaddition,regularadviceandsupportweregiventotheManaging
Board,whileatthesametimetheactionsofthemanagementwerecloselymonitored.TheManagingBoard
reportedallrelevantissuestotheSupervisoryBoardinatimelyandcomprehensivemanner.Therewasan
opendiscussionintheSupervisoryBoardaswellasbetweentheSupervisoryandManagingBoardatalltimes.
IndividualissuesandtopicswerediscussedonanongoingbasisbetweentheChairmanoftheManaging
BoardandtheChairmanoftheSupervisoryBoard.
supervisory Board Members
ScottParkersteppeddownfromtheSupervisoryBoardin2010duetoacareerchange.Iwouldliketotake
thisopportunitytowishScottParkerallthebestforhisprofessionalfutureinthenameoftheentireSuper-
visoryBoard.
RonaldKolkawasappointedtotheSupervisoryBoardinAugustandKeithTietjeninOctobertoachievethe
requirednumberofsixequityholderrepresentatives.
supervisory Board Meetings
TheSupervisoryBoardconvenedforsevenmeetingsin2010,andallmemberswerepersonallypresentatthe
majorityofthemeetings.
TheSupervisoryBoarddiscussedthestrategyoftheBank,possiblestrategicalliancesandtheoverallrisk
profileofBAWAGP.S.K.onaregularbasis.
TheagendaofeachmeetingincludedthediscussionoftheBank’sbusinessandcapitalsituation,among
otherthings.TheSupervisoryBoardwasalsoinformedonaregularbasisabouttheBank’smarketposition,
aboutrelevantlegalandcomplianceissuesandaboutpersonnelandManagingBoardmatters.
ThefocusesoftheindividualmeetingsincludedthediscussionofkeysubsidiariesofBAWAGP.S.K.,thenew
salesstrategyandtheintensificationofcooperationwithÖsterreichischePostAG,theefficiencyboosting
programmeandtheEuropeanCommissionprocedureforapprovingtheacceptanceofparticipationcapital
fromtheRepublicofAustria.AnotherkeytopicwastheeffectthatregulatorychangessuchasBaselIIIwill
haveontheBank.InMarch2010,thediscussionsfocusedontheresultsforthe2009financialyear.
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sUPeRVisoRy BoaRd’s RePoRt
Additionalreportsandpresentationsdealtwiththemanagementletterandtheapprovaloftheincorporationof
amendmentstothegeneralAustrianCodeofCorporateGovernanceintheBank’sowncode.TheRulesof
ProcedurefortheManagingBoardandSupervisoryBoardwerealsorevisedandamended.
Onceayear,theSupervisoryBoarddiscussesitsownefficiencyandpotentialmeasuresforimprovementof
discussionsandprocedures.
ThecommitteesoftheSupervisoryBoardalsoreportedregularlyabouttheirdiscussionsanddecisions.
Meetings of the supervisory Board Committees
TheAuditCommitteeheldsixmeetingsin2010.ThemeetingsinFebruaryandMarchfocusedonreviewing
theBank’sannualfinancialstatementsandtheCorporateGovernanceReportfor2009.InJuly,thecommittee
discussedtherecommendationfortheappointmentoftheauditor,amongotherthings.Quarterlyreportsfrom
InternalAuditandtheCompliancedepartmentwerepresented.TheannualauditplansforInternalAuditand
theCompliancedepartmentwerepresentedandapproved.Thereareregularprivatesessionswithoutpartici-
pationoftheManagingBoard,forexamplewiththeexternalandinternalauditoraswellaswiththeheadof
LegalandCompliance.
Reportsonauditsandenquiriesfromtheregulatoryauthoritieswerealsoprovidedonaregularbasis.Therisk
reportfortheBank,whichincludesthecalculationoftheBank’srisk-bearingcapacityandreportsoncorpo-
rate,retailandmarketrisk,wasaregularitemontheAuditCommittee’sagenda.
Theauditorswerepresentatallofthemeetingsandwereinvolvedinthediscussions.Inadditiontothe
meetings,themembersoftheAuditCommitteealsohelddiscussionswithrelevantdivisionmanagers.
TheCreditCommitteeheldsixmeetingsin2010.Therewerealsoanumberofcreditapplicationsthatwere
decideduponbywayofcircularresolution.Inadditiontodecidingoncreditapplications,thiscommitteealso
discussedgeneralcreditriskissues.AfocusinFebruarywastheguidelinesfortheInternationalBusiness
unit.TheresultsofastudyonriskreturnswerepresentedinMay.ReportsontheBank’smostimportant
equityholdingswerepresentedinJuly.
TheRelatedPartiesCommitteegenerallymeetsonlywhenneeded.Therewerenomeetingsin2010.
TheNominationCommitteeconvenedfourtimesinthereportingperiod.Themostimportanttopicsof
discussionwerethepostsoftheManagingBoardmembersandsuccessionplanning.Recommendationson
theappointmentofManagingBoardmemberswerealsosubmittedtotheSupervisoryBoard.
TheRemunerationCommitteeheldfivemeetingsinwhichitdiscussedthecompensation,objectivesand
contractsoftheManagingBoardmembers.Thenewremunerationregulations(CRDIII)werealsodiscussed.
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sUPeRVisoRy BoaRd’s RePoRt
Managing Board
TheSupervisoryBoardwelcomedfournewmemberstotheManagingBoardin2010.
SanjaySharmawasappointedasthenewChiefOperatingOfficerinJanuary.HehadbeentheManaging
DirectorofOperationsforBAWAGP.S.K.sinceAugust2008.Priortothat,hewasatBarclaysBankplc,where
hegainedinternationalexperienceespeciallyintheimplementationofstrategiesandoperationalandstruc-
turalchanges.
ChristophRaningerjoinedtheBankinMay2010andtookoverresponsibilityfortheFinancialMarketsunit
asthesuccessortoCarstenSamusch,whodecidednottoextendhiscontractinMay2010.InSeptember
2010,hewasalsoassignedresponsibilityforAustriancommercialbankingintheplaceofReginaPrehofer,
wholefttheManagingBoardattheendofAugust2010.IwouldliketousethisopportunitytothankRegina
PrehoferandCarstenSamuschfortheirworkandtheircommittmentandwouldliketowishthemallthebest
fortheirfutureonbehalfoftheentireSupervisoryBoard.
AndreasArndtwasbroughtonboardasChiefFinancialOfficereffective1October2010.Beforethat,he
workedfortheDeutscheBankgroupandRolandBergerStrategyConsultants,amongotherpositions,where
hegainedextensiveexperienceinvariousaspectsofbanking.
WolfgangKlein,whowasnewlyappointedduringthereportingperiod,assumedresponsibilityforRetail
BankingandSmallBusinesseffective1November2010.WolfgangKleincancontributehisexperiencefrom
positionsatMcKinseyandDeutschePostbankAG,amongothers,toenhanceBAWAGP.S.K.’sretailactivities.
AllofthenewManagingBoardmembershavemanyyearsofexperienceinbankingandintheirspecificareas
ofresponsibility,andarecertaintoprovidevaluableinputforthemanagementoftheBank.
IlookforwardtoworkingwiththeBank’sManagingBoardandtoconstructivediscussionsattheSupervisory
Boardmeetings.
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sUPeRVisoRy BoaRd’s RePoRt
annual Financial statements
Theaccounts,the2010annualfinancialstatementsandthemanagementreportwereauditedbyDeloitteAuditWirtschaftsprüfungsGmbH.Theauditrevealednocauseforobjection.Thelegalrequirementsweremetinfull,andanunqualifiedauditor’sopinionwasissued.
Afteranin-depthdiscussion,theSupervisoryBoardconcurredwiththeresultsoftheaudit,raisednoobjectionsagainsttheannualfinancialstatementsandmanagementreportincludingtheproposalfortheappropriationofprofitssubmittedbytheManagingBoardandherebyapprovestheannualfinancialstate-mentsfor2010pursuanttosection125paragraph2Aktiengesetz.
Theconsolidatedannualfinancialstatementsfor2010includingthenotespursuanttotheInternationalFinancialReportingStandards(IFRS)andtheGroupmanagementreportwereauditedbyDeloitteAuditWirtschaftsprüfungsGmbH.Theauditrevealednoreasonsforobjection,andthelegalrequirementsweremetinfull.TheauditorconfirmedthattheconsolidatedannualfinancialstatementsprovideatrueandaccuratepictureofthefinancialpositionoftheGroupasof31December2010andoftheearningspositionandcashflowsforthefinancialyearstartedon1January2010andended31December2010inaccordancewiththeInternationalFinancialReportingStandards.
TheauditorsalsoconfirmedthattheGroupmanagementreportiscongruentwiththeconsolidatedfinancialstatementsandthatthelegalrequirementsforexemptionfromthepreparationofconsolidatedannualfinan-cialstatementsaccordingtoAustrianlawhavebeenmetinfull.
TheSupervisoryBoardagreedwiththeopinionoftheauditorafterextensivediscussion.
Inconclusion,IwouldliketosincerelythankalloftheBank’semployeesfortheirhardworkanddedicationin2010inthenameoftheentireSupervisoryBoard.
Vienna,15March2011
TheSupervisoryBoard CeesMaas� m.p.� ChairmanoftheSupervisoryBoard
Owner and Publisher
BAWAGP.S.K.
BankfürArbeitundWirtschaftund
ÖsterreichischePostsparkasseAktiengesellschaft
Georg-Coch-Platz2,1018Vienna,Austria
CompaniesRegistrynumber:205340x
DataProtectionAuthoritynumber:1075217
EUVATnumber:ATU51286308
Telephone:+43(0)59905-0
E-mail:[email protected]
Internet:www.bawagpsk.com
Editors:ChristianMader,CarolinePranzl,JuliaWiesinger-Knie,SebastianWitek(BAWAGP.S.K.)
Translation:LanguageLinkSprachdienste,Vienna
LayoutandProduction:GottfriedNeubauer,HelmutWernbacher(BAWAGP.S.K.)
TypesettingandPrinting:AV+AstoriaDruckzentrum,Vienna
www.bawagpsk.infowww.bawagpsk-annualreport.com