Listen, understand, respond. 2013 Annual Report 2013 Annual Report This report expresses UniCredit’s approach to banking by telling everyday stories about our interactions with customers, innovations in products and adaptability in services. These brief but meaningful stories come directly from our colleagues. They are examples of the tangible benefits and concrete solutions offered by UniCredit, demonstrating how we make a difference in people’s lives. Our clear goal to improve everyday circumstances is rooted in our complete commitment to outcomes that ensure customer satisfaction. At UniCredit, listening to our clients and engaging with them to offer simple, direct results lies at the heart of our commercial banking operations. It is part of our determined effort to contribute to the economic and social well-being of our customers as well as the communities where we work. We will continue with this commitment to all of you, every day. 2013 Annual Report Bank Austria at a glance Income statement figures (€ million) 2013 2012 1) +/– Net interest 4,132 4,143 –0.3% Net fees and commissions 1,698 1,543 +10.0% Net trading, hedging and fair value income 934 768 +21.7% Operating income 6,960 6,681 +4.2% Operating costs –3,856 –3,786 +1.9% Operating profit 3,104 2,895 +7.2% Net write-downs of loans and provisions for guarantees and commitments –1,441 – 969 +48.7% Net operating profit 1,663 1,926 –13.7% Profit before tax 1,131 1,269 –10.9% Goodwill impairment –1,957 –34 >100% Net profit or loss attributable to the owners of the parent company –1,603 419 n.m. n.m. = not meaningful Volume figures (€ million) 31 DEC. 2013 31 DEC. 2012 +/– Total assets 196,210 207,596 –5.5% Loans and receivables with customers 129,121 132,424 –2.5% Primary funds (deposits from customers and debt securities in issue) 137,984 138,626 –0.5% Equity 15,052 18,192 –17.3% Risk-weighted assets (overall) 118,510 130,378 – 9.1% Key performance indicators 2013 2012 1) Return on equity after tax (ROE) n.m. 2.4% 4) Cost/income ratio (without bank levies) 53.4% 54.7% Cost of risk (provisioning charge/avg. lending volume) 1.09% 0.75% Loans and receivables with customers/primary funds 2) 93.6% 95.5% Leverage ratio 2) 3) 13.2 13.0 Core Tier 1 capital ratio 2) 11.3% 10.6% 4) Tier 1 capital ratio 2) 11.6% 10.8% 4) Total capital ratio 2) 13.5% 12.5% 4) Staff 5) 31 DEC. 2013 31 DEC. 2012 1) +/– Bank Austria (full-time equivalent) 53,598 58,182 –7.9% Central Eastern Europe business segment 46,396 47,488 –2.3% Kazakhstan (ATF Bank held for sale until the bank was sold in April 2013) 0 3,314 n.m. Austria (other business segments) 7,201 7,381 –2.4% n.m. = not meaningful Offices 5) 31 DEC. 2013 31 DEC. 2012 +/– Bank Austria 2,789 2,970 –181 Central Eastern Europe business segment 2,520 2,542 –22 Kazakhstan (ATF Bank held for sale until the bank was sold in April 2013) 0 139 –139 Austria (other business segments) 269 289 –20 1) Comparative figures for 2012 recast to reflect the current structure and methodology. / 2) End of year. / 3) Total assets/equity (without intangible assets). / 4) Original figures. / 5) Employees and offices of companies accounted for under the proportionate consolidation method are included at 100%. 2 2013 Annual Report · Bank Austria Contents Introduction 5 Preface by Willibald Cernko 6 Preface by Erich Hampel 8 Corporate Profile 11 UniCredit 12 Bank Austria: “A+CEE” in UniCredit 18 Management Board of UniCredit Bank Austria AG 24 *) Management Report of Bank Austria for 2013 29 The banking environment in 2013 30 Bank Austria in 2013 – Overview 36 Quarterly trends in 2013 38 Details of the income statement for 2013 40 Financial position and capital resources 47 Financial and non-financial performance indicators 49 Development of business segments 61 Outlook 80 Consolidated Financial Statements in accordance with IFRSs 87 Consolidated Income Statement for the year ended 31 December 2013 88 Consolidated Statement of Comprehensive Income 89 Statement of Financial Position at 31 December 2013 90 Statement of Changes in Equity 91 Statement of Cash Flows 92 Notes to the Consolidated Financial Statements 95 A – Accounting policies 97 B – Notes to the income statement 149 C – Notes to the statement of financial position 161 D – Segment reporting 179 E – Risk report 191 F – Additional disclosures 239 Concluding Remarks of the Management Board of UniCredit Bank Austria AG 255 Report of the Auditors 256 Report of the Supervisory Board for 2013 258 Corporate Governance 263 Corporate Governance Report for the 2013 financial year of UniCredit Bank Austria AG 264 Statement by Management 271 Supervisory Board and Management Board of UniCredit Bank Austria AG 272 Additional Information 277 Office Network 278 CEE Network 282 Investor Relations 284 *) Part of the consolidated financial statements in accordance with IFRSs Bank Austria · 2013 Annual Report 3 Understand Customer needs and quick responses. “I received a call from a new customer who told me his company’s employees were having trouble withdrawing money from ATM machines. I wanted to solve the problem as quickly as possible, so I went that evening to check in person. I found that the ATM was only allowing customers to insert cards one way. I helped a customer who was having trouble withdrawing cash. But I knew that our ATMs were supposed to allow customers to insert cards in either direction, so I immediately called the ATM company to resolve the issue. By quickly responding to a client’s problem, everyone was helped.” Sergey Chekhonadskikh – ZAO UniCredit Bank Ekaterinburg – RUSSIA Introduction Preface by Willibald Cernko 6 Preface by Erich Hampel 8 Bank Austria · 2013 Annual Report 5 Introduction Preface by Willibald Cernko Ladies and Gentlemen, Bank Austria’s Annual Report for 2013 stands out from the annual routine. The bank’s operating activities developed favourably as usual. However, in our 2013 financial statements, we carried out a fundamental reassessment of assets. Operating profit for 2013 was over €3 billion, up by 7% on the previous year and 11% higher when adjusted for exchange rate movements. Never­ theless, the bottom­line figure was a net loss of €1.6 billion. This may irritate readers at first glance. But I can assure you that after the measures taken for these difficult financial statements, Bank Austria is very well positioned for the future. Let me explain this by commenting on the main points: over WILLIBALD CERNKO the past ten or fifteen years we have created an unrivalled CEO UniCredit Bank Austria AG international network. Initially we set up banks in Central and Eastern Europe and later acquired CEE banks in the market. Finally, the creation of UniCredit Group enabled us to enter a new league with the transfer to Bank Austria of additional CEE banks and further acquisitions which thereby became possible. The financial market crisis, followed by recession and protract­ ed adjustment processes, marked a turning point: the econo­ It is about time that we – mies in Central and Eastern Europe, initially booming, started to experience more subdued growth and a steadier development. i.e. companies, banks, In the banking sector, too, years of external growth were fol­ lowed by a phase of consolidation. Expectations and plans for supervisors“ and politicians – expansion were scaled down compared with the original, exces­ sive scenarios. As a result, prices envisaged in the market have turn our attention from coping changed: banks are no longer traded at two or three times their book value or an even higher multiple, but at book value at with the problems of the past best, and in many cases below that. In response to these developments we have adjusted the carrying amounts of equity five years to investing into the interests and shareholdings in banking subsidiaries acquired in future in a confident mood. past years, before the financial market crisis, to currently pre­ „ vailing circumstances and prospects. The related goodwill impairment charge in 2013 totalled €2 billion, reducing the amount of goodwill shown in the statement of financial posi­ tion as at 31 December 2013 to nil. Moreover, in 2013, we removed risks from the financial state­ ments by more sharply focusing our business portfolio on core activities and core regions. This led to a reduction of risk­ weighted assets while lending volume and total deposits rose slightly. Above all, our capital ratios continued to improve: Bank Austria’s total capital ratio rose from 12.5% at the end of 2012 to 13.5% at the end of 2013. 6 2013 Annual Report · Bank Austria The most significant achievement for Bank Austria, behind medium­sized companies access capital markets. As Austria’s these technical aspects of overall bank control, is the strong leading bank in export business we will benefit as and when performance in customer business. We are the leading bank in foreign trade accelerates. In business with major international the perimeter of our operations covering 14 countries, with companies we hold leading positions as a strategic financial 54,000 employees and 2,800 branches of our local banks. partner for capital market measures with the expertise and And we are concentrating on customer business with a leaner placement power of UniCredit – as no. 3 for euro bond issues balance sheet and reduced risks, with an excellent liquidity in Europe and no. 2 in the area of syndicated finance. position and sound funding based on local customer deposits.