clear answers for real benefits. - bank austria · 2018. 11. 19. · kazakhstan (held for sale)...

Clear answers for real benefits.

2012 Annual Report

2012 Annual Report

2012 Annual Report

C ustomer testimonials are the common thread of this year’s annual report to illustrate the concrete solutions we provide every day. These true stories were told first-hand and collected by the colleagues

who worked with the customers to offer them real benefits.

Each story lends an authentic voice to how we are having a positive impact on our stakeholders. We are making a difference by recognising everyday challenges and opportunities, and by contributing to the economic, social and cultural well-being of the communities we serve.

This report’s creative concept reflects our commitment by displaying two components that fit together. This represents the union between the real-life needs of our clients and the practical solutions that we offer.

Above all, we believe that being a commercial bank means engaging in meaningful dialogue with those with whom we come into contact. This enables us to provide simple, quick and effective responses that perfectly meet customer needs.

Inside you will find some of these stories. We hope the next one will be yours.

2 2012 Annual Report · Bank Austria

Bank Austria at a Glance

1) Comparative figures for 2011 recast to reflect the current structure and methodology. / 2) End of period. / 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%.

Income statement figures(€ million) 2012 2011 1) +/–

Net interest 4,373 4,315 +1.3%Net fees and commissions 1,595 1,625 –1.9%Net trading, hedging and fair value income 664 452 +46.9%Operating income 6,622 6,700 –1.2%Operating costs –3,893 –3,777 +3.1%Net write-downs of loans and provisions for guarantees and commitments –1,103 –1,060 +4.0%Net operating profit 1,625 1,863 –12.8%Profit before tax 1,326 1,424 –6.9%Net profit attributable to the owners of the parent company 423 206 >100%

Key performance indicators2012 2011 1)

Return on equity after tax (ROE) 2.4% 1.2%Cost / income ratio 58.8% 56.4%Provisioning charge/avg. lending volume (cost of risk) 0.84% 0.83%Loans and receivables with customers /primary funds 2) 95.5% 100.4%Leverage ratio 2) 3) 13.0 13.1Tier 1 capital ratio 2) 10.8% 10.9% 4)

Tier 1 capital ratio without hybrid capital (Core Tier 1 capital ratio) 2) 10.6% 10.6% 4)

Volume figures(€ million) 31 dec. 2012 31 dec. 2011 1) +/–

Total assets 207,596 199,229 +4.2%Loans and receivables with customers 132,424 131,307 +0.9%Primary funds 138,626 130,737 +6.0%Equity 18,192 17,661 +3.0%Risk-weighted assets (overall) 130,067 125,153 +3.9%

Staff 5)

31 dec. 2012 31 dec. 2011 1) +/–

Bank Austria (full-time equivalent) 57,556 59,265 –2.9%Central Eastern Europe business segment 46,847 48,018 –2.4%Kazakhstan (held for sale) 3,314 3,499 –5.2%Austria (other business segments) 7,396 7,747 –4.6%

Offices 5)

31 dec. 2012 31 dec. 2011 +/–

Bank Austria 2,970 3,040 –2.3%Central Eastern Europe business segment 2,542 2,607 –2.5%Kazakhstan (held for sale) 139 143 –2.8%Austria (other business segments) 289 290 –0.3%

3Bank Austria · 2012 Annual Report

Contents

Introduction 5Preface by Federico Ghizzoni 6Preface by Erich Hampel 8Preface by Willibald Cernko 10

Corporate Profile 13UniCredit 14Bank Austria: “A+CEE” in UniCredit 20 Management Board of UniCredit Bank Austria AG 26

Management Report of Bank Austria for 2012 31The banking environment in 2012 32Bank Austria in 2012 – overview 38Details of the income statement for 2012 43Financial position and capital resources 48Financial and non-financial performance indicators 50Development of business segments 61Outlook 80

Consolidated Financial Statementsin accordance with IFRSs 89

Consolidated Income Statement for the year ended 31 December 2012 90Consolidated Statement of Comprehensive Income 91 Statement of Financial Position at 31 December 2012 92Statement of Changes in Equity 93Statement of Cash Flows 94

Notes to the Consolidated Financial Statements 97A – Accounting policies 99B – Notes to the income statement 133C – Notes to the statement of financial position 145D – Segment reporting 163E – Risk report 175F – Additional disclosures 207Concluding Remarks of the Management Board of UniCredit Bank Austria AG 223Report of the Auditors 224Report of the Supervisory Board for 2012 226

Corporate Governance 231Corporate Governance Report for the 2012financial year of UniCredit Bank Austria AG 232Statement by Management 239Supervisory Board and Management Boardof UniCredit Bank Austria AG 240

Additional Information 245Office Network 246CEE Network 250Investor Relations 252

*)

*) Part of the consolidated financial statements in accordance with IFRSs

RECHARGINGI own a small business that producesequipment for recycling precious metals.After winning a bid for a project with theIndian government last year, we were in needof a qualified partner to manage our complexoperations abroad. UniCredit believed in us andour work, providing us with the initial warrantyrequest, a letter of credit and the loans weneeded. Thanks to their support,we successfully completed the project.

Paolo Balestri, Balestri impianti, customer of UniCredit in Italy

Supporting enterprise with concrete actionsUniCredit International


Preface by Federico Ghizzoni 6

Preface by Erich Hampel 8

Preface by Willibald Cernko 10

Introduction

RECHARGING


Introduction

more than €45 billion. This was accomplished, in part, by increasing our direct funding in Italy and other key markets including countries of CEE.

We undertook a number of measures to improve the sustainability of our revenues and to simplify the Group structure.

The key initiative was the redesign of our business model to move closer to customers. This was part of our multi-year reorganization plan designed to ensure that our Group becomes more efficient, less complex and more customer-focused. The framework to accomplish this is the Group Organization Leaner Design (GOLD) project.

Project GOLD simplifies operations by empowering local banks in our countries with greater decision-making authority. This permits us to work closer with customers and better meet their needs, making us easier to deal with. And it allows us to simplify and shorten our decision-mak-ing processes, making us nimbler and quicker to market.

Ladies and Gentlemen, 2012 was a difficult year for the European economy, and UniCredit was not immune. Nevertheless, I believe it will be remembered as the turning point for the Group. For it was the year in which we took action to secure our future as a rock-solid European commercial bank.

We secured our capital position in 2012, and simplified operations, reduced costs, strengthened our risk manage-ment culture, and introduced innovative products and new initiatives to pursue a more productive and prosper-ous future.

We began the year by achieving the first target of our three-year strategic plan, which was to strengthen the foundations of our Group by shoring up our capital posi-tion. Market conditions were particularly volatile at the time, yet we were the only bank in Europe to carry out a successful capital increase, raising €7.5 billion.

We also improved our liquidity position in our countries in 2012, largely by reducing the commercial funding gap by

Prefaceby Federico Ghizzoni

Federico GhizzoniCEO UniCredit

“2012 was the year in which we took action to secure our future as a rock-solid European commercial bank.”


Innovation remains a top priority for us. We are creating the products and services that our customers want and need. And we are developing new channels through which they can bank with us. By offering customers the option to use their mobile phones, tablets or computers to manage their finances, we are becoming a simpler, more efficient bank. This in turn will help us to reduce costs and ensure the sus-tainability of our customer relationships.

In all the countries where we operate, we are an interna-tional bank with strong local roots. We are located where our customers are. Our Group operates through an international network spanning more than 50 countries. In 22 of these, we maintain commercial banks that are rooted in their ter-ritories. We serve more than 20 million households and 3.5 million companies with 9,400 branches. And we provide our customers with assistance in capital markets wherever they operate internationally. It is for this reason that we con-solidated our investment banking activities several years ago to focus on our customer-driven business. The league tables show this was a successful move: In 2012, we were number two in issuing euro-denominated bonds and number three in EMEA market finance (EMEA loans).

In 2012, Bank Austria continued to perform successfully in the dual role it serves our international Group. We operated both as a local bank in a mature market and as a sub-hold-ing company for operations in Central and Eastern Europe’s growth markets. The operating profits from our customer business were stable, enabling the bank to absorb charges for structural improvement and risk reduction. I would like to thank the Management Board and all our employees in 20 countries for their achievements.

With the implementation of Project GOLD, Bank Austria will be even better able to capitalize on its undisputed competi-tive strength in corporate banking and in the service of our large, capital-markets-oriented customers.

In Central and Eastern Europe, we are focusing our invest-ment and capital allocation on high-growth countries, in line with our multi-year plan. In 2012, we reduced risk

Federico GhizzoniChief Executive Officer

UniCredit

and streamlined our organizational structure in several countries. CEE remains the mainstay of our growth, and it will become all the more so when global economic activ-ity accelerates, with Bank Austria serving as our Group’s capable regional hub.

As we implement our plan, we will continue to see posi-tive results. I am convinced that the measures we have taken to build a simpler, rock-solid bank will meet with continued favorable response from our customers. This will give us a competitive advantage that will be reflected in our performance.

Yours sincerely,


Introduction

which started more than 150 years ago with the establish-ment of a bank which engaged in commercial and invest-ment banking at a cross-regional level.

Today, Bank Austria is a strong and sound bank that contin-ues to live up to its international standing. The bank’s inte-gration in UniCredit involved the enlargement of its net-work, the assumption of the sub-holding company function for CEE operations and the strengthening of its capital base, mainly through funds provided by its parent company. All this has significantly contributed to Bank Austria’s strength and soundness. Bank Austria coped well in the past years of adjustment, reporting profits in each of these years, and it has not been a burden on taxpayers.

UniCredit’s international business model is fully in line with the European idea: maintaining diversity through a local approach to day-to-day business while making intensive use of the single market. For an international company of this size – with some 150,000 employees in 20 countries – it is by no means a matter of course to sharpen the focus

Ladies and Gentlemen, Most of the annual reports that are published this year will refer to the difficult environment at the local, European and global levels. The fifth year after the onset of the financial market crisis was again a difficult year for inter-national banks. While they were faced with a more or less stagnant economy characterised by interest rates close to zero, they also had to adapt to more stringent regulatory requirements and fiscal charges. And given the current outlook for economic developments, the entire banking industry had to adjust the valuation of numerous equity interests in the banks’ portfolios, which were built up in previous years of expansion until 2005 or 2006.

Looking back, we find that good years for the economy, and thus for banks, were regularly preceded by a period in which economies became more open and international, setting out for new horizons. Conversely, this process was viewed critically during crisis years, and tendencies to seal off national economies involved substantial losses of prosperity. At Bank Austria, we are familiar with such developments through our eventful corporate history,

erich hAMPeLChairman of the Supervisory Board of UniCredit Bank Austria AG

“Our international business model is fully in line with the European idea: maintaining diversity through a local approach to day-to-day business while making intensive use of the single market.”

Prefaceby Erich Hampel


on local conditions and customer needs in the way UniCredit did in 2012. At the same time, we further enhanced our international character in 2012 by working more closely with the CIB Division in serving large interna-tional customers with a capital market orientation, and by intensifying cross-border selling in our commercial banking business. Major initiatives for modernising the sales organ-isation have been launched on a cross-regional basis. We should be aware of the fact that in many young CEE markets, people are more receptive to modern sales chan-nels than in Western Europe, and various innovations have been launched in CEE markets which could also prove use-ful in other countries. We are gradually developing into a homogeneous group of companies, also in HR manage-ment and in the major control functions and competence lines, from Risk Management, Finance and Treasury all the way to the expansion of the Compliance network.

As earnings prospects are persistently weak, efforts to enhance efficiency and productivity are gaining impor-tance. Reducing complexity in a diverse company like UniCredit is among the priorities of our business policy. We need to standardise back-office activities, wherever possible, to unlock synergies and use the advantages of specific locations. In 2012, we took major steps in Bank Austria which will pay off in coming years: we bun-dled the entire range of ITC services, the back office, settle-ment and operations-related services within UBIS, a com-pany which works at a cross-regional level and benefits from economies of scale. Moreover, with the introduction of a common core banking system, initially in UniCredit’s core countries, we have moved to a more uniform interna-tional standard. The changeover to the EuroSIG platform in autumn 2012 proved to be more complex than anticipated, and caused some problems. This situation required under-standing and patience on the part of our customers, and very strong efforts by our employees. They are working intensively to stabilise and improve the systems and go ahead with further ITC development. Under the Smart Banking Solutions project we will put sales activities – the decisive production function – on a new and efficient basis for the future.

I would like to thank the Management Board and all employees of Bank Austria for their professional work and strong personal commitment, especially in times when banks are viewed critically.

We are building new local headquarters in Vienna, the Bank Austria Campus, which involves an investment volume of about €500 million. And we are going to open a new training centre at Vienna’s “Kaiserwasser” very soon. Real-ised in Vienna, a major UniCredit business location, these projects symbolise Bank Austria’s function as a hub of our group of companies. Following many adjustments in the past years, Bank Austria with its 55,000 employees, its net-work and its strong capital base is well equipped to expand its customer business. In this context, we would welcome support from more favourable economic trends.

Yours sincerely,

Erich HampelChairman of the Supervisory Board

of UniCredit Bank Austria AG


Introduction

where different economic trends balanced out. Operating income in Austria was relatively stable, and performance was supported by good asset quality and consequently a further decline in net write-downs of loans. If the bank levy is excluded from the calculation, costs were down in abso-lute terms. Growth in CEE continued, with volume increas-ing by about 10%. This did not reflect an expansion of the entire banking system, as in previous years, but was rather due to varying developments in CEE countries, depending on the degree of their integration in the West European economy. In 2012 we benefited strongly from prosperity in Turkey and Russia, large countries with comparatively autonomous economies. CEE accounted for almost three-quarters of net operating profit from customer business.

This stable base enabled Bank Austria to absorb substantial charges in 2012, mainly relating to structural adjustments. These charges included additional impairment losses on goodwill which had to be recognised in the context of adjustments to the valuation of equity interests in banks acquired shortly before 2008, the year that marked a turn-ing point. Moreover, with a view to reducing risks, we have decided to withdraw from Kazakhstan, a country that enjoys good long-term economic prospects while being character-ised by a very difficult banking sector. This move also

Ladies and Gentlemen, Bank Austria demonstrated stability in 2012 and again achieved a stable operating performance in a difficult envi-ronment. Moreover, on this sound basis, we took decisive action to adjust our structure and effectively improve our competitiveness.

A brief review shows that the European banking sector was not yet running smoothly four years after the financial mar-ket crisis. In 2012 we became aware of the mutual depend-ence of banks and the countries in which they are based. The government debt crisis led to a deep adjustment reces-sion in the highly indebted countries, increasingly impacting economic trends in Austria and Central and Eastern Europe (CEE) as the year progressed. Thanks to the European Central Bank’s expansionary monetary policy and its determination to do whatever it takes to preserve the euro, the situation was stabilised, though at the expense of a policy of low interest rates which also has its drawbacks over time.

In this mixed environment, Bank Austria’s operating perform-ance remained more or less stable: net operating profit generated by the Austrian customer business segments and in CEE exceeded the previous year’s levels. The combined figure was a substantial €2.3 billion. We benefited again from diversification in our large perimeter of operations,

WiLLibALd cernkoCEO UniCredit Bank Austria AG

“The international approach and the local focus on customers will remain a viable business model for a long time and it will give us decisive competitive advantages. ”

Prefaceby Willibald Cernko


involved large expenses, incurred for the last time. In addition, international leasing business resulted in losses on an equity investment. These charges weighed down Bank Austria’s net profit for 2012, which amounted to €423 million, although the bank’s operating performance was stable.

Let me briefly analyse the current situation and explain the action we have taken: the net profit for 2012 means that we are still the only major bank in Austria to have reported profits in any year without ever using state aid. With a return on equity of 2.4%, Bank Austria’s profits are of course not large enough to enable us to strengthen capital buffers out of current results in a sustainable manner as required, while also supporting growth in CEE. As far as Austria is concerned, hopes for an improvement in the economic environment will hardly change the structural weakness in terms of earnings: the market is oversaturated and competi-tion is intense, lending rates in Austria are the lowest in Europe while funding conditions are more or less the same everywhere. In CEE we need to manage our resources care-fully: after all, as a banking group, we have to meet more stringent regulatory requirements in respect of capital and liquidity. So what are the levers we can use?

In the same way as UniCredit as a whole, Bank Austria focused on core business at an early time. We have reduced marginal activities over the past few years including 2012, and we have also reduced risk-weighted assets in Austria. This is reflected in the leverage ratio, which has fallen by almost 10 percentage points since 2008, to 13.0 times equity in 2012. Thanks to the capital increase in 2010, through funds provided by UniCredit, and retained profits, Bank Austria’s equity increased and capital ratios are now comfortably above the required levels (pursuant to the Aus-trian Business Code), with a Tier 1 capital ratio of 10.8%.

Customer business remains at the centre of our activities. We have launched major initiatives: since the beginning of 2013 we now serve the entire range of private, business and corporate customers in Austria through an Austrian structure, meeting the specific needs of the respective customer groups and unlocking more synergies in this context. Smart Banking Solutions is a key project in Austria with which we are adjust-ing to changes in consumer habits (digitalisation) and demo-graphic trends (urbanisation). We are making available to customers a modern mix of sales channels (further details

are included in this Annual Report) enabling them to contact us across Austria around the clock. We are already offering settlement functions and advisory services via digital com-munication media. We expect that in the medium term, the restructuring of our branch network will result in a cost struc-ture that is geared to the current earnings situation.

We are the leading international bank in Austria, this is part of our DNA. Based on the standing, expertise and placement power of a leading market participant in the euro bond and loan markets, we provide targeted services to large custom-ers with a capital market orientation. In commercial bank-ing, customers benefit from the bank’s extensive presence in 20 countries and its unique position in the large area covered. Finally, we take advantage of our integration in a leading international banking group in day-to-day business and in back-office operations, using joint infrastructure plat-forms in IT, back-office and other services.

I am convinced that the international approach and the local focus on customers will remain a viable business model for a long time and it will give us decisive competi-tive advantages. There is still a huge business potential for innovation, for growth in new niches, and for international exchange. Our efficient corporate customers share this view. We support these developments. But as a systemically important international banking group we need a regulatory environment which makes it easier for us to perform these functions for the economy rather than impeding our efforts through local ad-hoc levies, uncoordinated national regula-tory measures, or attempts to restrict the free movement of capital. We therefore welcome the idea of a banking union, which would be a logical complement to the European sin-gle market. In our efforts to support our customers and the business sector, we have many plans for the future.

Yours sincerely,

Willibald CernkoChief Executive Officer

UniCredit Bank Austria AG

Helping artisans recraft their business

I’ve been a craftsman for many yearsand I am very satisfied with my relationshipwith Zagrebačka Banka. I believe the bankrecognises the economic potentialof craftsmanship. They helped me to expandmy activities and to adapt my business modelto meet EU conditions. This was done througha programme that provided me with financialassistance, as well as consulting services sothat I could make the best financing choices.

Ivan Obad, President of the Chamber of Tradesand Crafts Zagreb, customer of Zagrebačka Bankain Croatia

utilitY


UniCredit 14

Bank Austria: “A+CEE” in UniCredit 20

Management Board of UniCredit Bank Austria AG 26

Corporate Profile

utilitY


Corporate Profile

UniCredit operates in 22 countries with more than 156,000 employees and more than 9,300 branches.

UniCredit benefits from a strong Europeanidentity, extensive international presenceand a broad customer base.

Its strategic position in Western andEastern Europe gives the Group oneof the region’s highest market shares.

Highlights

310

862

4,298

1,003

975

1,874

9,322

Italy

Germany

Austria

Poland

Turkey

Others

Total

BRANCHES BY COUNTRY 2)

more than 9,300

over 156,000

BranChEs2)

EmployEEs1)

1) Data as at 31 December 2012. FTE = “Full Time Equivalent”: number of employees counted for the rate of presence. Figures include all employees of subsidiaries consolidated proportionately, such as Koç Financial services Group employees.

2) Figures include all branches of subsidiaries consolidated proportionately, such as Koç Financial services Group branches.

3) Data as at 31 December 2012.


ItalyGermanyPolandTurkeyAustriaOthers

32.19

13.5612.32

10.72

6.29

24.92

EMPLOYEES BY COUNTRY 1) (%)

ItalyGermanyAustriaCEEPoland

REVENUES BY REGION 3) (%)

745

22

7

19

Where We operate 3)

aUsTrIaaZErBaIJanBosnIa anD

hErZEGoVInaBUlGarIa

CroaTIaCZECh rEpUBlIC

EsTonIaGErmanyhUnGary

ITaly

KaZaKhsTanKyrGyZsTan

laTVIalIThUanIa

polanDromanIa

rUssIasErBIa

sloVaKIasloVEnIa

TUrKEyUKraInE


Corporate Profile

1) market share in terms of total customer loans as at 31 December 2012.source: Eurostat, UniCredit research.

AUSTRIA, GERMANY AND ITALY

AUSTRIA

GERMANY

ITALY

MARKET SHARE 1) (%)

2.6

14.6

13.0

UniCredit occupies a strategic position in Italy, Germany and austria. With about 310 branches in

austria, 860 in Germany and 4,300 in Italy, UniCredit comprises one of the largest banking networks in the

heart of Europe. accounting for more than one-third of GDp of the European Union, these three countries

benefit from their close ties to the growing economies of Central and Eastern Europe.

While 2013 may prove to be another challenging year for this region, future economic growth

is projected to accelerate gradually. The ECB’s announcement of the outright monetary Transactions

(omT) bond purchase programme has significantly diminished tail risks in the eurozone, and the outlook

has improved in tandem with market sentiment since august 2012. With the ECB providing an effective and

credible backstop, financial markets are increasingly likely to reflect fundamentals. Italy’s economy is

projected to modestly expand in the second half of 2013. The factors underpinning these expectations

are less impact from fiscal consolidation in 2013 compared to 2012, the gradual improvement in

financial market conditions, which should soon start to positively affect sentiment and, most importantly,

financing conditions for the private sector, which posed particular challenges to Italy in 2012.

Finally, the third factor is the projected renewed acceleration of global trade which is likely to be

a key driver of economic growth for all euro area countries. It will also result in a moderate upward

trend in consumption, thanks to rising wages and a solid labour market. In austria, stronger trade and the

international competitiveness of its industrial sector will likely foster an upswing in 2013, boosted by a

slight increase in investment.

In the medium and long term, the omT has helped to create a more favourable environment for politicians to implement structural reforms.

These remain essential to achieving a sufficient degree of macroeconomic and fiscal convergence

across the eurozone, while efforts continue to shape a credible pan-European architecture. This process is vital to making the eurozone stronger and more

competitive. In Italy, the sustainability of the recovery will largely depend on the quick and effective

implementation of reforms to restore long-term competitiveness and reduce public debt.

Taking into account the reforms that have already been implemented in Italy, we expect real economic

growth to continue at an average annual rate of roughly 1% in Italy and 1.8% in austria

and Germany from 2014 to 2017.

Focus


central and eastern europe

UniCredit is a market leader in Central and Eastern Europe, it has a broad network of roughly 3,800 branches.

Its regional footprint is diverse, and includes a direct presence in 19 countries. It is ranked in the top five in 11 of these counties 2). In fact CEE now accounts for 26 % of the Group’s revenues.

The region’s economic environment is expected to improve, with GDp growth forecast to rise from 2.5 % in 2012 to 2.9 % in 2013 and to 3.4 % in 2014. With Q4 2012 representing the bottom of the cycle, an improvement in the numbers should be evident by Q1 2013.

among the factors expected to aid recovery following a weak 2012 is a gradual improvement in external demand, with the potential to drive an increase in industrial production and exports across the region. Domestic demand should be supported by easier financing conditions, as central banks have cut interest rates and governments now have ample access to external financing.

an increase in interest rates is not foreseen in any CEE country for 2013. at the same time, lower inflation in some countries will boost purchasing power, and the positive trend in private credit should support an increase in activity in comparison with 2012. The region will also benefit from significant recent progress in narrowing budget deficits and stabilising the ratio of public debt to GDp at relatively low levels.

In most cases, the turnaround will rely initially on strong external demand, with domestic demand to follow. Turkey is an exception, with domestic demand already showing signs of recovery. In russia, domestic demand, which has lagged behind the rest of the region, remained relatively strong for much of 2012, but is at risk of a moderate slowdown in 2013.

From a medium to long-term perspective, we believe that the majority of Central and Eastern European economies will continue to see an increase in living

standards as growth is supported by competitive labour costs, flexible labour markets and a gradual recovery in foreign direct investment. nevertheless, the primary challenge for the region remains a structural shortfall in savings, with the exception of russia.

Latvia

Lithuania

Estonia

Russia

Ukraine 4)

Hungary

Slovenia

Kazakhstan

Romania

Czech Republic

Slovakia

Serbia

Turkey

Poland

Bulgaria

Bosnia and Herzegovina

Croatia

MARKET SHARE3) (%)

1.4

1.4 5)

1.6 5)

1.8

4.1 2)

5.6 2)

6.0

6.1

6.3 5)

6.4 5)

6.9 5)

7.8 2)

9.5 2)

11.1 2)

15.4

22.8

26.0 2)

2) as at 30 september 2012.3) market share in terms of total assets as at 31 December 2012.

market share in azerbaijan and Kyrgyzstan not available.4) pro forma (Ukrsotsbank + UniCredit Bank Ukraine).5) as at 31 December 2011.source: UniCredit research, UniCredit CEE strategic analysis.


Corporate Profile

Business Modelthe UniCredit business model is based on the following principles:

• maintaining the so-called “global” Divisions / functions [Corporate Investment Banking (CIB)/Global Banking services (GBs)] which allow the Group to maintain and increase its competitive advantage in terms of costs and competencies, while envisaging the refocusing of CIB Division on selected customers with a strong demand for investment banking products.

• Greater responsibility of the countries / local banks, through increased autonomy and decision levers, in order to guarantee increased proximity to the client and faster decision-making processes (direct management of marketing activities and of certain businesses).

• Confirmation of the steering, coordination and control role of the holding company, in particular through a focus on internal control topics, a supervision of Group key processes and a global coordination of some functions (planning, Finance & administration, risk management and legal & Compliance).


UniCredit Group organisation reflects an organisational and business model which maintains a divisional structure for the management of the Corporate Investment Banking business/products and the business in the CEE countries, as well as a global control over the Global Banking services functions, while ensuring the autonomy of the countries/banks on specific activities, in order to guarantee increased proximity to the client and faster decision-making processes:

The Chief executive officer (CEo), while maintaining overall responsibility for all regional businesses reporting to him (Italy, Germany, austria, poland and CEE), oversees directly the Italian business and delegates the supervision of austria, poland and CEE Division to the General manager and the supervision of Germany to the Deputy General manager responsible for the CIB Division.

The CIB Division, which maintains the role as a Global Division, with a coverage role for multinational customers, for selected large corporate clients with a strong potential demand for investment banking products, for the Financial and Institutional Groups (FIG) customers and for the Global lines “Global Transaction Banking (GTB)”, “Global Financing & advisory (F&a)” and “markets”.

The General Manager is responsible for some cross-Group topics / areas such as: i) managing strategic marketing activities, ii) assisting the Chief Executive officer in the Internal Control system (“ICs system”) management, in order to ensure its effective functioning and iii) promoting, also through the other competent functions, an ongoing dialogue and relationship with the Group regulators.

The Cee Division coordinates the Group activities in 19 countries of Central and Eastern Europe, aligning them to a single comprehensive business vision in the area.

The Chief operating officer (Coo) concentrates under a sole responsibility all the managerial levers

regarding the organisational, operational and service functions (including hr management) – such as organisation, ICT, operations, Workout, security – responsible for supporting, also through the Group Global service Factories, the sustainable business growth of the Group, ensuring the utmost quality of services provided and optimising cost structures and the Group’s internal processes.

as far as the Italian perimeter is concerned, within the major responsibility and autonomy of the local countries/banks, the Country Chairman Italy is responsible for all the coordination, control and development activities of the segments called “Individuals” (mass market, personal Banking and private Banking), small Business and Corporate segments (now including the former smE segment) of the Italian perimeter, leveraging on a network breaking down into 7 “regions”, a real Estate network and a network dedicated to the private Banking segment.

The asset Management product line is responsible for the development of asset management in all geographic areas by guiding, coordinating and monitoring the development of business activities on a global level.

lastly, the functions called Competence Lines (planning, Finance & administration, risk management, legal & Compliance, Internal audit, human resources, organisation and Identity & Communications) oversee the guidance, coordination and control of UniCredit’s activities and manage the related risks.

Organisational Structure

Corporate Profile


Bank Austria: “A+CEE” in UniCredit

Bank Austria in UniCredit Bank Austria is a leading bank in Austria, with a long tra-dition in the country, and today a member of UniCredit, a major European bank. Offering its customers a unique cross-regional network and the stature of a major inter-national bank, Bank Austria is “UniCredit in Austria”. Bank Austria also acts as sub-holding company for UniCredit operations in Central and Eastern Europe (CEE) and has responsibility for their performance, based on decades of experience gained as one of the first banks which became active in the CEE region. Comprising the Austrian market and by far the largest banking network in CEE, Bank Austria represents “A+CEE in UniCredit”.

UniCredit Bank Austria AG is the parent company of the Bank Austria group of credit institutions. It is an Austrian credit institution within the meaning of Section 1 (1) of the Austrian Banking Act and operates in the market under the Bank Austria brand name. UniCredit Bank Austria AG comprises the Austrian busi-ness operations including subsidiaries and other compa-nies which support Bank Austria’s core banking activi-ties. It also holds and manages the equity interests in banking subsidiaries in Central and Eastern Europe. Bank Austria’s consolidation perimeter includes 144 con-

Structure and Size

solidated companies and 17 companies accounted for under the proportionate consolidation method; invest-ments in 29 companies are accounted for using the equity method. The 2012 Annual Report and the consoli-dated financial statements cover the Bank Austria Group.

UniCredit S.p.A, Milan, a listed company, owns 99.996% of UniCredit Bank Austria AG; the remaining shares are 10,000 registered shares held by “Privatstiftung zur Ver-waltung von Anteilsrechten” (a private foundation under Austrian law) and 115 registered shares held by “Betriebs-ratsfonds” (the Employees’ Council Fund), which carry special rights. The Bank Austria companies are consoli-dated in UniCredit’s consolidated financial statements.

Market position, geographical perimeter and resources In Austria, Bank Austria holds market shares of 15.1% in lending business and 13.5% in deposits. One in six private customers (18%) – and within this total, one in four (28%) high net worth individuals and one in three students (33%) – maintains an account relationship with Bank Austria. The bank is market leader in the Austrian corporate banking sector, with 16.0% of total lending

EMPLOYEES (FULL-TIME EQUIVALENTS) BY COUNTRY (as at year-end 2012)

7,396

A

of which CorporateCenter 1,864

Austria Central Europe South-East Europe Turkey, Russia, CISCZ SK HU SLO ROM BG HR BOS SRB TK RUS UKR BALT Others

1,9571,159

1,889559

2,7993,793

4,513

1,694917

17,255

3,666

6,289

185 170


volume and 19.9% of total deposits, and it also holds the leading position in business with public sector entities (in a comparison of individual universal banks, not sectors of the banking industry). Bank Austria’s services are used by 20% of small businesses, 45% of medium-sized compa-nies (with a turnover between €10 million and €50 mil-lion) and 76% of large corporate customers (with an annual turn over of over €50 million) – 84% of companies with a turnover of over €250 million. Moreover, Pioneer Investments Austria (PIA), an affiliated company, is among the three largest investment manage-ment companies in Austria, with €17.7 billion in fund assets accounting for 12.2% (as at Janu-ary 2013) of the total volume of mutual funds in Austria.

Bank Austria maintains about 350 offices throughout Austria, of which about 290 are branches in a narrower sense (counted only once per location). In the three customer business segments, 5,532 employees (full-time equivalents – FTEs) serve about 1.7 million customers. Together with the em ployees of the Corporate Center, staff numbers at Bank Austria without CEE were 7,396 (FTEs). If the employees of affiliated companies (mainly companies supporting the core banking business and specialised companies such as UBIS, Leasing and Pioneer Invest-ments) are included in the calculation, UniCredit employs 10,192 FTEs in Austria. (All data as at the end of 2012.)

Bank Austria’s banking subsidiaries in Central and East-ern Europe (CEE) together are market leader in CEE by a wide margin. This outstanding position is the result of a long development which started more than 20 years ago with the establishment of subsidiaries and continued as the CEE network grew into ever larger dimensions through three major integration processes in the bank’s more recent history: the integration of the CEE subsidi-aries of the two predecessor institutions Bank Austria and Creditanstalt; the inclusion of the CEE network of HypoVereinsbank (now UniCredit Bank, Munich) at the beginning of 2000; and finally, as a decisive step, the transfer of UniCredit’s CEE banks to Bank Austria, which thereby became a sub-holding company with effect from the beginning of 2007. The Polish market is fully divi-

sionalised and under direct management responsibility of UniCredit, Poland is among the four core countries (Italy, Austria, Germany, Poland). We acquired Ukrsots-bank in Ukraine and ATF Bank in Kazakhstan at the end of 2007 and at the beginning of 2008, respectively. ATF Bank in Kazakhstan, together with its subsidiary in Kir-

gizstan, is held for sale and is no longer included in the related data. Bank Austria’s CEE perimeter thus encom-passes banking subsidiaries in 16 countries (including the bank in Turkey) and representative offices in three other countries. 46,847 employees are active in head offices and branches in over 2,500 locations. The region in which we operate has about 300 million inhabitants.

Relative size: Austria /CEEThe two large sectors of Bank Austria’s operations are still more or less equal in terms of lending volume and deposits. Differences between the mature market and a large region of emerging markets can be seen mainly in growth rates, progressive monetisation and market penetration in the banking industry, and in resources employed.

Average loans to customers of Bank Austria in 2012 were €131.9 billion. Of this total, €56.7 billion was accounted for by the three business segments of Aus-trian customer business and €63.0 billion by Austria including the Corporate Center. Lending volume in the CEE business segment rose strongly in the past few years; at €68.9 billion, it accounted for 52% of total lending volume in 2012. Deposits from customers

*) in %; persons/companies maintaining business relations with Bank Austria; 2011, 2012

Private individuals SMEs Large corporates

Affluents (High net worth individuals)

Students

Turnover< € 3 m

Turnover€ 3 – 10 m

Turnover€ 10 – 50 m

Turnover> € 50 m

Turnover> € 250 m

Private total18

27

33

20

36

76

84

45

CUSTOMER SHARES IN AUSTRIA*

Corporate Profile


(including debt securities in issue) increased significantly in 2012, in both Austria and CEE: primary funds (the sum total of deposits from customers and debt securi-ties in issue) in Austria totalled €74.0 billion, exceeding lending volume by 18%. In customer business, exclud-ing the Corporate Center, total customer funds were also higher than total customer loans. In CEE, primary funds amounted to €59.4 billion, accounting for 86% of lend-ing volume. Primary funds rose strongly in 2012, by 11% compared with 2011, which means that funding from local customer business continued to increase.

Average risk-weighted assets under Basel 2 (RWAs), amounting to €129.1 billion in 2012, showed a slightly different distribution: RWAs in Austrian customer business were €28.3 billion, or €45.2 billion includ-ing the Corporate Center, significantly lower than in CEE (€83.9 billion). The figure for Austria (Basel 2/ IRB) reflects a reduction of credit risk, and market risk was also lower than in previous years due to the reorienta-tion of trading activities; exchange rate effects also had an influence. RWAs in CEE were higher than lending vol-ume, reflecting the risk content in a young market. IFRS equity at Bank Austria amounted to €17.9 billion, of which €3.3 billion was allocated to Austria-based busi-ness and €13.0 bn to the expanding CEE Division. Equity in the Corporate Center was €1.6 billion.

Operating income in 2012 totalled €4.7 billion in Central and Eastern Europe (CEE) and €2.2 billion in Austrian customer business; the difference has steadily increased over the past years. This development resulted from the following factors: based on the CEE economies’ lead in terms of real and nominal growth, the monetary cycle accelerates, additionally driven by advancing mar-ket penetration with banking products. In this expan-sionary environment our banking subsidiaries generate their good performance.

Net operating profit (operating profit less net write-downs of loans and provisions for guarantees and com-mitments) generated by the CEE business segment in 2012 (€1.7 bn) was about two and a half times the comparable figure for Austria (€0.6 bn). On the basis of higher operating income, the cost/ income ratio in CEE is lower than in Austria: for CEE it is below 50% (46%) compared with 62% for Austrian customer business. While the earnings power (and cost efficiency) in CEE is higher than in Austria, the impact of net write-downs of loans and provisions for guarantees and commit-

ments is stronger. In interest-based business, interest margins in CEE are higher than in Austrian customer business (464 basis points of lending volume in CEE compared with 265 bp in Austria), and so is the cost of risk (130 bp compared with 37 bp).

The number of employees (in terms of full-time equiva-lents = FTEs) in the CEE Division is eight and a half times the figure for customer business in Austria, and the CEE Division serves about ten times as many customers as the Austrian customer business segments; the number of inhabitants in CEE is disproportionately large compared with Austria. This means that the CEE Division has strong potential for growth. On the other hand, Austrian cus-tomer business is characterised by high productivity on resources employed, which is also reflected in key profit-ability indicators. Return on equity in Austrian customer business in 2012 was 17.3% (ROE before tax), higher than in CEE (13.2%).

Average loansto customersAverage primary fundsRisk-weighted assetsAllocated equity

Austria CEE

63.0

4.9

45.2

74.068.9

13.0

83.9

59.4

RELATIVE SIZE

(€ billion)Austria CEE

OPERATING INCOME AND NET OPERATING PROFIT*) FROM CUSTOMER BUSINESS

(€ million)

Operating incomeOperating profitNet operating profit

*) Net operating profit = operating profit less net write-downs of loans and provisions for guarantees and commitments. Costs as a percentage of operating income (cost/income ratio). Net write-downs of loans and provisions for guarantees and commitments as a percentage of average loans to customers (cost of risk).

2,248

848640

4,728

2,551

1,657

Costof risk1.30%

Costof risk0.37%

Costs 46%

Costs62%

of which: Corporate Center

Average loansto customersAverage primary fundsRisk-weighted assetsAllocated equity

Austria CEE

63.0

4.9

45.2

74.068.9

13.0

83.9

59.4

RELATIVE SIZE

(€ billion)Austria CEE

OPERATING INCOME AND NET OPERATING PROFIT*) FROM CUSTOMER BUSINESS

(€ million)

Operating incomeOperating profitNet operating profit

*) Net operating profit = operating profit less net write-downs of loans and provisions for guarantees and commitments. Costs as a percentage of operating income (cost/income ratio). Net write-downs of loans and provisions for guarantees and commitments as a percentage of average loans to customers (cost of risk).

2,248

848640

4,728

2,551

1,657

Costof risk1.30%

Costof risk0.37%

Costs 46%

Costs62%

of which: Corporate Center


FROM THE YEARS OF BUILDUP TO SUSTAINABLE DEVELOPMENTBank Austria saw significant changes in the past six years, both externally and in its own development. The years which followed the buildup of UniCredit Group from 2005 to 2007 were determined by expan-sion and integration, with strong external and internal growth of Bank Austria. 2008 was the year with the strongest organic growth and the best results. Bank Austria coped well in the crisis years experienced by the banking industry after the collapse of Lehman Brothers, and in the renewed uncertainty which characterised the past two years. With a view to risk reduction and efficient use of capital, we classified ATF Bank, Kazakhstan, as held for sale in the 2012 financial statements.

Bank Austria’s growth was driven by expansion in CEE. Volume trends in 2010 compensated for the setback experienced in 2009. At €132 billion, average loans to customers in 2012 reached the highest level so far, although ATF Bank, a relatively large bank in Kazakhstan (about €4 billion) is no longer included in this figure. Average risk-weighted assets matched the 2008 level.

Capital resources improved strongly in the past years: IFRS equity amounted to €18.2 billion at the end of 2012, an increase of €4.0 billion or 28% over year-end 2008. The increase resulted from profit retention and from a capital increase in 2010 with funds provided by UniCredit. The Tier 1 capital ratio has improved by a full 4 percentage points, from 6.8% to 10.8%, since 2008.

Profits showed a similar trend: operating profit peaked in 2009, but net write-downs of loans and provisions for guarantees and commitments rose strongly in 2008 and 2009. As a result, net operating profit declined. The provisioning charge was reduced in 2010 and 2011, remaining at that level in 2012. The cost of risk (provisioning charge/average lending volume) fell from 180 basis points (bp) in 2009 to 83 bp in 2011 and remained more or less unchanged in 2012 (84 bp). In Austria, the cost of risk declined significant-ly, to 33 bp. Net operating profit from customer busi-ness in 2012 improved by 3% to €2.3 billion; this is an increase of 22% from the low 2009 figure.

In the past few years, Bank Austria’s profits were impacted by exceptional factors which were not relat-ed to the bank’s underlying performance. Changes in medium-term scenarios repeatedly required goodwill impairment tests to be performed especially for the CEE banking subsidiaries in Kazakhstan and Ukraine, which were acquired in the recent past. In 2012, the charges for goodwill impairment (including other goodwill impairment tests, and PPA) and for ATF Bank, Kazakh-stan, which is shown separately in the item “Total profit or loss after tax from discontinued operations” totalled more than €500 million, compared with over €900 mil-lion a year earlier. Together with the other non-operating items between net operating profit and net profit, the exceptional charge in 2012 exceeded €1 billion for the third year in succession (€1.2 billion after €1.7 billion in 2011, a year which additionally saw write-downs on Greek government bonds).

VOLUME TRENDS, CAPITAL RATIO 2006 pf 2007 2008 2009 2010 2011 2011 r) 2012

Average risk-weighted assets (RWAs) 97.8 104.5 129.3 119.5 123.3 124.4 124.2 129.1

Tier 1 capital ratio (Tier 1 capital /RWAs) n.m. 8.8 6.8 8.7 10.4 10.9 10.9 10.8

RESULTS 2006 pf 2007 2008 2009 2010 2011 2011 r) 2012

Net operating profit generated by customer business 1) 1,743 2,473 2,409 1,885 1,785 2,197 2,232 2,296

Net operating profit generated by the bank as a whole 1,713 2,580 2,280 1,363 1,626 1,732 1,863 1,625

Non-operating charges 2) –325 –326 –1,136 –261 –879 –1,523 –1,657 –1,203

Net profit 3) 1,388 2,254 1,144 1,102 747 209 206 423

pf) Pro forma in the structure of 2007. r) Adjusted to the structure in 2012. / 1) Operating profit less net write-downs of loans and provisions for guarantees and commitments. Customer business = Austrian customer business segments and CEE. / 2) Provisions for risks and charges, integration/ restructuring costs, net income from investments, goodwill impairment, PPA, total profit or loss after tax from discontinued operations, income tax and non-controlling interests. 3) Net profit attributable to the owners of the parent company.n.m. = not meaningful

Corporate Profile


In 2012, net profit attributable to the owners of Bank Austria amounted to €423 million after €209 million. This means that Bank Austria reported a profit, despite substantial one-off charges. How-ever, performing our tasks, and providing loans to the business sector in particular, requires a higher level of profitability, also with a view to strengthening the required risk buffers of the bank on our own. Goodwill relating to the equity interests in the banks in Ukraine and Kazakhstan has been written down to nil, ATF Bank is classified as a discontinued operation held for sale. We have thereby removed potential burdens on future earnings and we are confident to achieve the required higher level of performance in the coming years.

→ The management report of the Group on pages 32 to 86 contains a commentary of trends in the income statement,

the financial position and the business segments.

Customer focus and sustainable development of Bank AustriaOur strategy aims to secure the bank’s sustainable development with a focus on customer business and customers’ needs, optimal employment of capital and professional risk management. We also want to create more value for our customers through more intensive

advisory services and close attention to their specific needs. In Austria, with effect from 1 January 2013, we combined the entire range of private, business and corporate customers (under the UniCredit-wide GOLD initiative) under the reponsibility of one Management Board member while giving another Management Board member responsibility for business with large customers with an international orientation to provide them with cross-regional capital market products of UniCredit Group (see chart). Smart Banking Solutions is a key project with which we adapt to changes in consumer habits (digitalisation) and regional /demo-graphic trends. We are working to make available to our customers a modern mix of sales channels. In this context we are using modern means of communica-tion for transaction settlement and processing and increasingly also for advisory services, thereby also giving branches a new role.

We continue to operate throughout Central and East-ern Europe. Despite regional divergence and structural differences, the growth potential in CEE countries remains intact. This is based on the economic catch-ing-up process and the accelerated monetary cycle, and also on convergence in terms of wages, standard of living and consumer habits. The latter factors hold out the prospect of gradually closing the gap in the supply of modern banking products and services.

Austrian customer business: segmentation for a needs-oriented service approach

Range of customers

from

the

begi

nnin

g of

201

3un

til y

ear-e

nd 2

012

1) Multinational and large international companies using capital market services and investment banking solutions2) Public Sector included in Commercial Banking Division; “Republic of Austria” customer group transferred to Financial Institutions Group (CIB)

Customer business segments only (without Corporate Center and Global Banking Services)

3) Financial Institutions Group has a direct reporting line to the UniCredit holding company

Wealthyprivate

individuals

Private Banking Family & SME Banking (F&SME) Corporate & Investment Banking (CIB)

Private Banking Business and corporate customers

Commercial Banking

Austrian commercial business

Private individuals CIB

Wealthyprivate

individuals

MassMarket Affluent Small

Business

SMEs€3 million to€50 millionin turnover

MassMarket Affluent Small

Business

SMEs€3 million to€50 millionin turnover

Corporates over €50 million in turnover, incl. large companies using capital market services 1)

Real Estate

Real Estate

Public Sector

Public Sector

Large companiesusing capital

market services 1) 2) 3)

3)

Financial Institutions

Financial Institutions

Corporates over

€50 millionin turnover


With a view to optimising capital allocation, we con-centrate investment on countries which are ahead in terms of revenue/ risk considerations as well as market size and growth, more specifically Turkey, Russia and the Czech Republic. In the other countries we will prag-matically focus our business portfolio; we have been among the leading banks in several smaller markets for quite a long time.

Over the past few years we have built up a cross-regional infrastructure for transaction settlement, IT and internal services to enhance cost effectiveness. Via UBIS Austria GmbH, a wholly-owned subsidiary of Milan-based UBIS S.C.p.A., we use the professional services of a company with 12,000 employees worldwide, which benefits from economies of scale and aims to achieve a high degree of customer satisfaction by focusing on local customer needs.

Stakeholder managementCustomer satisfaction management is among the bank’s measurable success factors and has been estab-lished to ascertain the preferences and views of our customers – through dialogue with customers, measure-ments and statistical comparisons – with a feedback loop used to adjust our day-to-day business activities accord-ingly. Regular surveys conducted by external institutions, mystery shopping and also internal customer satisfaction surveys enhance the quality of internal services and the degree to which the range of products and services we offer meet customer needs; these are now the main factors taken into account in determining performance incentives as part of remuneration. In 2012, for the third time in succession (after 2010 and 2011), Bank Austria was elected as the “Most customer-oriented service pro-vider in Austria”, after an audit performed by Service Rat-ing GmbH in cooperation with the University of St. Gallen. The competition was based on a customer survey and an evaluation of the company’s and management’s cus-tomer orientation. Start-up problems were encountered in the changeover to EuroSIG, the cross-regional IT core banking system, in October 2012. This required profes-sional crisis communication. To avoid a reputational loss, we took action to make amends and assigned additional staff to complaint handling, social media and hotline ser-vices, while also widening the scope for fair refunds and reimbursement of losses incurred.

Corporate Sustainability aims to enhance aware-ness of the interdependence of economic, ecologi-cal and social aspects – both strategically and in day-to-day banking activities. As the general public takes a critical view of the banking industry, repu-tation-related measures are important; the focus is on long-term orientation, simple products and cred-ibility in customer relationships. Open dialogue with stakeholders and targeted sponsoring activities are key factors. The bank has institutionalised product ecology and operations ecology by appointing an Environmental Officer and an Environmental Man-ager as well as establishing a certified and audited environmental management system in accordance with ISO 14001.

→ More details on customer satisfaction, Human Resources and diversity, corporate sustainability

and operations ecology are given in the “Financial and non-financial performance indicators” section

on pages 50 to 60 of this report.

Management and organisational structureThe Management Board of UniCredit Bank Austria AG is composed of the Chief Executive Officer (CEO), who also acts as Country Chairman representing Bank Austria within UniCredit, the Heads of the four operating Divisions of Bank Austria, the Chief Finan-cial Officer (CFO), the Chief Risk Officer (CRO) and the Head of Human Resources. Co-responsibility for other functions lies with the CEO, and for Internal Audit with the full Management Board. For segment reporting purposes, the Competence Lines – includ-ing CFO, CRO and HR – are included in the Corporate Center. Guidance, support and control functions relate to Bank Austria as a whole, i. e. the Austrian business segments and the banking subsidiaries in the various countries (with a number of functions being under decentralised responsibility and coordi-nated on a cross-regional basis). They are integrated in the global Competence Lines and Service Lines.

→ More details are given on the following double page and in the Corporate Governance Report

from page 232 of this report.

Corporate Profile


Management Boardof UniCredit Bank Austria AG

Francesco GiordanoMember of the Management Board

Chief Financial Officer (CFO)

Accounting Austria & CEE

Planning & Controlling Austria

Strategy, Planning & Controlling CEE

Finance

CEE Strategic Analysis

Shareholding & Business Development

Tax

Data Governance

Jürgen Kullnigg Member of the Management Board

Chief Risk Officer (CRO)

Strategic Risk Management & Control

Special Credit Austria

CIB Credit Operations

CEE Credit Operations

Private Individuals & SME Credit Operations

CEE Risk Control

Market Risk & Risk Integration

UniCredit Turn-Around Management GmbH

Willibald CernkoChairman of the Management Board

Chief Executive Officer (CEO)Country Chairman Austria

Stakeholder and Service Intelligence Austria

Media Relations & Executive Communications

Marketing

Identity & Communications

Organisation & Products

Real Estate Special Projects

Security Office

Legal & Corporate Affairs

Compliance

Internal Audit Bank Austria Group

Gianni Franco PapaDeputy Chairman of the Management Board

CEE Division

Stakeholder and Service Intelligence CEE Division

CEE Legal

CEE CIB

CEE Retail

Czech Republic: UniCredit Bank Czech Republic, a. s.Slovakia: UniCredit Bank Slovakia a.s. Hungary: UniCredit Bank Hungary Zrt.Slovenia: UniCredit Banka Slovenija d.d.Bulgaria: UniCredit Bulbank ADRomania: UniCredit Tiriac Bank S.A.Croatia: Zagrebačka banka d.d.Bosnia and Herzegovina: UniCredit Bank d.d. UniCredit Bank a.d. Banja LukaSerbia: UniCredit Bank Serbia J.S.C. BelgradeLativa: AS UniCredit BankEstonia: AS UniCredit Bank Estonia BranchLithuania: AS UniCredit Bank Lithuania BranchRussia: ZAO UniCredit BankTurkey: Yapı ve Kredi Bankası A.Ş.Ukraine: PJSC UkrsotsbankKazakhstan: JSC ATF Bank


Management Boardof UniCredit Bank Austria AG

Dieter HenglMember of the Management Board

Corporate & InvestmentBanking Division

CIB Client Management & Business Development

Economics & Market Analysis

Financial Institutions Group

Multinational Corporates

Financing & Advisory

Markets

Global Transaction Banking

Global Transaction Banking Austria

UniCredit CAIB Poland S.A

BA Private Equity GmbH

AI Beteiligungs GmbH

Doris TomanekMember of the Management Board

Human Resources Austria & CEE

Human Resources Management and StrategyCorporate Center Human ResourcesCommercial Banking Human ResourcesCIB Human ResourcesPrivate Banking Human ResourcesStrategic HR ManagementHuman Resources Expertise Center &OperationsCEE Human Resources

Helmut BernkopfMember of the Management Board

Commercial BankingDivision

CB Strategy & Business Development

CB Business Monitoring

Multi Channel Management & Customer Relationship Management

CB Segment Management

Network Private Individuals (14 Regions)

Network Corporates Austria (12 Regional Centers)

Public Sector

Real Estate

card complete Service Bank AG

DC Bank AG

Bank Austria Finanzservice GmbH

Bank Austria Real Invest GmbH

Bank Austria Wohnbaubank AG

Immobilien Rating GmbH

FactorBank AG

Robert Zadrazil Member of the Management Board

Private Banking Division

PB Segment Management

PB GIS/Products & Advisory

PB Sales Network (5 RegionalCenters)

Schoellerbank

How to save a customer’s holiday

PEACEOF MIND

When I lost my Visa card while on vacationabroad, UniCredit Bank’s emergency cashdisbursal service saved me from what couldhave been a disastrous situation.I used the service twice while visiting Parisand Moscow and it exceeded my expectations,allowing me to pay for my hotel, entertainmentand other expenses. I was impressed by theservice’s quality and speed – I was able to havethe cash in less than an hour.This experience taught me that my bankis 100 per cent prepared to support me atanytime, even in the most difficult of situations.I know now that I can count on UniCredit’sprofessional advice and real solutionsfor whatever I need.

Yurov Valeriy Anatolievich, customer of UniCredit Bank in Ukraine

How to save a customer’s holiday

OF MINDAfter one of our town’s largest employersclosed its doors, our local communities wentthrough a very tough time. UniCredit workedclosely with government officials on aninnovative initiative that helped those who hadlost their jobs, like me, to gain prompt accessto unemployment benefits. The bank quicklyfacilitated funding for entitlements, protectingfamilies from collapse.

Franco F., customer of UniCredit in Italy

PROTECTIONSupporting communities in critical times

A bank account that’s always within reach

FREEDOM

The Pekao24Mobile app is user-friendly,quick and efficient. It’s particularly handywhen it comes to managing my account,such as checking my balance, followingspecific transactions and managingtransfers or deposits. And its wheel-typeinterface is modern, eye-catching and veryfunctional. I would say the app meetsall my needs.

Daniel Lipski, customer of Bank Pekao in Poland


The banking environment in 2012 32

Bank Austria in 2012 – overview 38

Details of the income statement for 2012 43

Financial position and capital resources 48

Financial and non-financial performance indicators 50

Development of business segments 61

Outlook 80

Management Report of Bank Austria for 2012


Management Report

Overview While 2012 was another year marked by efforts to cope with crises, it also saw major decisions whose importance is frequently underes-timated. Five years after the onset of the financial market crisis (sub-prime crisis in 2007, Lehman Brothers in 2008), and two years after the severe recession which impacted 2008/2009 was overcome in 2010, fiscal legacy burdens and the social costs of crisis intervention had to be absorbed in 2012. Attention started to focus on the European sovereign debt crisis in the middle of 2011, and this issue continued to dominate developments throughout the reporting year (see “2012 timeline”).

Far-reaching structural adjustments in several countries, ultimately triggered by international capital movements, led to wide divergence within Europe in 2012, which also impacted global trade. The world-wide economic slowdown in the course of the year and rising unem-ployment in Southern Europe made it more difficult to consolidate national budgets. Credit spreads widened significantly in several countries, creating problems for government debt rollover. A tempo-rary loss of confidence led to negative feedback between highly indebted countries and banks based in these countries.

European economic policymakers responded to this situation by pressing ahead with the implementation of EU reforms: sharpening the Stability and Growth Pact and thereby making it possible to correct unsustainable fiscal policies of EU member states in a timely manner; introducing the possibility of direct intervention in local banking sectors; and making decisions on the establishment of a European banking union (single supervisory mechanism at the supra-national level, pan-European resolution regime, harmonised deposit guarantee scheme). In autumn 2012 the ECB managed to stabilise the situation within a short time on this basis. Before such stabilisa-tion, doubts about the continued existence of European monetary union had led to widening interest rate spreads and disturbance of monetary policy transmission. The announcement that the ECB would do whatever it takes to preserve the euro, followed in September by a decision on unlimited though conditional intervention, removed a tail risk.

➔ Overall, major international banks in the euro area experi-enced very weak demand in 2012 due to economic trends, ample liquidity in the corporate sector, risk aversion and continued debt reduction in the private sector. Transaction volume was also low, especially in foreign trade and in securities business. Moreover, under the influence of tighter regulation, banks themselves were engaged in deleveraging, disposing of non-core operations and concentrating on core commercial banking business. Despite the ample supply of liquidity in the Eurosystem and interbank rates which had fallen to zero, banks were faced with high costs of liquidity and equity capital. As the yield curve continued to flatten, this had an additional impact on banks’ earnings.

Financial marketsFinancial markets reflected the dramatic developments in 2012: the first few months of the year still saw optimistic growth forecasts. The ECB’s two three-year tenders (totalling €1,019 billion) had nourished hopes that the sovereign debt crisis would ease after the Greek debt restructuring in mid-March 2012. Risk premiums on government bonds of highly indebted countries (CDS spreads for Ireland, Portugal, Spain and Italy, in weighted terms) narrowed from 478 basis points (bp) at the beginning of 2012 to 340 bp in the mid-dle of March. In May and June, however, the crisis escalated again, with financial market stress soon reaching the levels experienced in the fourth quarter of 2011. In June, risk premiums rose to 517 bp, a figure which exceeded the peak of November 2011 (504 bp, see chart) and can hardly be explained by fundamentals. This translated into interest rates of 6.60% for Italy and 7.60% for Spain (10-year government bonds, peak on 24 July 2012). The strain was triggered by the Greek elections (6 May and 17 June) and by doubts about the acceptance and implementation of the agreed restructuring programmes, and temporarily even about the continued existence of European monetary union (convertibility risk). Moreover, problems in the Spanish banking sector (26 May: Bankia, 9 June: commitment to support Spanish banks with up to €100 billion) diverted attention to the interdependence of banks and their home countries (country risk versus bail-out capacity). At the end of June the euro member states therefore decided to recapitalise Spanish banks (directly out of the EFSF/ESM, without senior status) and launched the first initiative towards a banking union. Given the lengthy implementation proce-dures, it was only the subsequent central bank measures which were convincing. First, the ECB lowered the key interest rate further, to 0.75%, on 5 July 2012. Although this involved a reduction of the deposit rate to 0%, banks continued to place excess liquidity (some €750 billion) in their central bank accounts. Cross-regional money markets increasingly failed to fulfil their function. The transmission channels of monetary policy were disrupted, and the disequilibrium in the balance of payments within the euro area became more pro-nounced (Target 2 balances).

The decisive move was the ECB’s announcement (in a statement made by ECB President Draghi in London on 26 July 2012) that the ECB would do everything it takes to preserve the euro, and the sub-sequent decision (on 6 September) to purchase (OMT), on a discre-tionary basis and without quantitative limits, debt instruments with residual maturities of up to three years issued by governments of countries which have given an undertaking to the institutions of the European rescue fund to carry out reforms. Later in the year, the US Federal Reserve announced large-volume purchases of securities (US$ 85 billion per month), and Japan’s central bank greatly widened the scope for intervention in government bonds. Markets responded with relief: by the end of October, risk premiums (CDS spreads) for highly indebted countries had receded to about 200 bp, from a previous level of over 500 bp. It should be noted in this context that

The banking environment in 2012

Management Report (CONTINUED)


credit spreads for CEE countries followed the general trend but remained significantly lower than those for highly indebted euro area countries (by 100 bp on an annual average for 2012, temporarily by up to 175 bp) because the CEE countries have lower levels of sovereign debt and initiated consolidation efforts in a timely manner after 2008/2009. Risk premiums on bank bonds also narrowed considerably, in parallel with those on sovereign bonds, but spreads on bank bonds remained significantly more expensive than borrowing in capital markets by companies with good credit ratings (measured by the iTraxx Europe index). Credit spreads on banks remained high throughout the year, depending on the sovereign rating of their home country, and this impacted the competitiveness of internationally active banks. It was only after the turn of the year that interest rate spreads on sovereigns, banks and companies returned to the levels last seen in mid-2011, before the government debt crisis escalated; yet the structure remained unfavourable for banks.

Central banks around the world pursued expansionary policies (key interest rates close to zero, ample supply of liquidity through open market intervention) and there was a flight, temporarily exaggerated, to presumably safe havens. These developments combined to push down benchmark interest rates to very low levels by the end of July 2012 (10-year euro bonds 1.126%, 10-year US Treasury bonds 1.381% p.a.), with only minor changes until the end of the year (to 1.32% and 1.76%, respectively). On this basis, annual performance was +7.6%, a level significantly exceeded by covered bonds (+11.2%) and corporate bonds (+13.5%). The price of gold contin-ued to rise, reaching an annual high of US$1,796 per ounce on 5 October 2012 after the central bank measures were announced. This may reflect the scepticism of many investors over the expan-sionary central bank policy. Purchases of gold by emerging markets to diversify currency reserves also contributed to the increase in the price of gold. Stock markets moved in parallel but inversely to the debt crisis. The MSCI world index, which had fallen below the year-end 2011 level by June 2012, recovered lost ground as risk aversion receded and only started to rise more strongly when the economic outlook brightened from the middle of November. A comparison of year-end 2012/2011 levels shows that the MSCI world index and sub-indices for Emerging Europe and BRIC rose between 13% and 14%, and the EuroStoxx gained +15.5%, slightly outperforming the S&P 500 index (+13.5%). The ATX increased by 26.9%, though from a low base level. In currency markets, the euro remained stable (down by 0.4% y /y on a trade-weighted basis) despite various negative factors. The US dollar depreciated against the euro by 1.9% (a development which accelerated in early 2013), one of the reasons being the US debt problems. As a result of an active monetary policy, the Japanese yen depreciated by 10% against the US dollar and by 12% against the euro in 2012. It was only after the markets eased in the fourth quarter (and more visibly after the turn of the year) that the Swiss franc disengaged from the consistently defended interven-tion level of 1.20.

Economic indicators at the growth threshold

0

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7

100

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20132011 2012

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102

107

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4445464748495051525354555657585960

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Commodity prices, (S&P GSCI, spot, US$,year-end 2009 = 100)

left-hand scale

CEE countries (Bank Austria perimeter)

Corporate bonds (IBOXX,non-financial, rating “A”)

PMI euro area

50 = growththreshold

Purchasing Managers’Index (PMI/industry)

PMI global

Core euro countries

Risk-on/risk-off in stock markets vs. benchmark bonds

Declining interest rates/high risk premiums

Bank issues (IBOXX, financial, rating “A”)

Share prices(MSCI, world)

left-hand scale

Bond prices(Bund Future)

5-year swap rate(without liquidity)

3-month money: EONIA swap

Risk premiums (CDS): government debt crisisBonds of highly

indebted countries(Portugal, Spain, Ireland

and Italy, weighted)


Management Report


The environment in our core markets At the end of 2011 the euro area as a whole slid into recession, a development which became more pronounced as the reporting year progressed. According to preliminary data, economic perform-ance in 2012 declined by an average 0.5%. This was only partly due to the slowdown in the global economy, including China as a mainstay of growth, which was caused by the mutual impact on world trade (global GDP: +2.3% after +2.7%, world trade: +3.5% after +6.2%). The main reason for the economic down-turn was the European adjustment recession resulting from partly dramatic austerity measures, reflected in growing divergence among the euro member countries: the strongest contraction of real GDP was seen in Greece (–6.5%), Italy (–2.2%) and Spain (–1.4%). These developments are to be seen in the context of weak domestic demand as a result of the – inevitable – reduction of national deficits (in 2012 by 2.0 percentage points of GDP in Greece, 1.0 percentage point in Italy, 2.1 percentage points in Spain). Economic trends in Germany and Austria were compara-tively favourable, with year-on-year GDP growth of +0.9% and +0.7%, respectively, despite stagnation in the second half of 2012. Unlike the other countries, Germany and Austria achieved an economic performance that was stronger than at its peak before the onset of the crisis in the middle of 2008.

AustriaAustria benefited from a remarkably strong economic momentum in the early part of 2012 after a weak second half of 2011. How-ever, the upturn, which was supported by a brightening mood in Europe, soon slackened. Uncertainty over the European sovereign debt crisis and the future of the euro, and the austerity policy pursued by several euro member countries, increasingly burdened the Austrian economy. From the second quarter of 2012 these developments impacted exports and investment activity. Foreign demand, which in previous years had always been a very important driver of growth of the small and open Austrian economy, weak-ened perceptibly as recessionary trends started to affect more and more of Austria’s major trading partners, including Italy as its sec-ond most important export market. After real growth of over 7% in 2011, the export momentum slowed to less than 2% in 2012. Based on its very strong international competitiveness, Austria’s industrial sector, which is heavily dependent on foreign demand, managed to cope well in this challenging environment for a rela-tively long time. As the year progressed, however, industry also got caught in the downward movement and total output in 2012 barely exceeded the previous year’s level. Deteriorating business pros-pects had a significant impact on Austrian companies’ propensity to invest. While construction investment showed a buoyant trend in 2012, benefiting from public-sector support especially in the civil engineering sector, investment in equipment fell to a level that was

lower than in the previous year. Private consumption in 2012 proved to be relatively stable but remained moderate. One of the reasons was a steady deterioration in the labour market: employment growth decelerated in the course of the year. Nevertheless, on an annual average, employment rose by 1.3% (2011: +1.8%), with the num-ber of employed persons reaching a new record of over 3.4 million. Although the unemployment rate increased from 4.2% to 4.4% in 2012, this was still the lowest figure in the EU. Real incomes were weighed down by persistent inflation in 2012, reflecting trends in food prices and rents as well as various services. At the end of 2012, the year-on-year rate of inflation peaked at 2.8% while the average rate for 2012 was 2.4%, significantly lower than in the previous year (+3.3%).

Overall, negative influences coming mainly from abroad caused economic growth to slow down steadily in Austria and even led to a contraction of GDP in the final part of the year. This did not, how-ever, result in recession for the year as a whole; the final quarter of 2012 probably marked the low point in the current cycle. Thanks to a comparatively strong start in 2012, Austria’s GDP increased by a moderate 0.7% in the year as a whole, after 2.7% growth in 2011.

Credit demand rose in early 2012, reaching an annualised growth rate of over 3% in the spring. But in line with the economic slowdown in the second half of the year, demand for loans lost momentum. On this basis, in 2012 as a whole, the total lending volume was up by 1.1% on the previous year (November 2012). The outstanding volume of consumer loans and loans to SMEs again contracted in 2012 as repayments exceeded new lending. While growth in housing construction loans also declined slightly in the second half of 2012, demand for such loans remained relatively strong, with an increase of about 3%, adjusted for exchange rate movements. Corporate loans rose by an annual average of about 2.5%, yet growth in this area also weakened towards the year-end. The economic slowdown led to a slight increase in insolvencies, with both the number of business insolvencies and the related volume of receivables up on the previous year. Expressed as a pro-portion of GDP, the volume of receivables recorded in the context of insolvencies nevertheless remained below the multi-year average and was significantly lower than in 2009 and 2010.

The pronounced downward trend in money market rates continued in 2012. Banks responded to this movement mostly by significantly reducing lending rates. A small part of the interest rate decline went into a slight increase in mark-ups. This was necessary because actual funding costs for banks did not fall to the same extent as money market rates. The decline in the rates for funding via the market and in deposit rates was less pronounced than in money market rates. This means that overall, in the lending operations and deposit-taking business of Austrian banks, margins did not improve in 2012.


Central and Eastern Europe (CEE)The Central and East European (CEE) countries within our perime-ter of operations were unable to escape the indirect impact of the West European debt crisis in 2012. However, they proved to be remarkably resilient to the effects of contagion via financial markets, a fact which is reflected in renewed capital inflows. Regional differences in 2012 were as wide as in previous years. More closely integrated CEE economies were fully affected by the weak business trends. Exports increasingly failed to offset stagnating and even declining domestic demand (especially in Central Europe), which dropped more or less across the CEE region in the wake of these countries’ fiscal consolidation measures, and in some countries also as a result of rising inflation (foodstuffs), a weak labour market and consequently lower growth of real incomes. Industrial output – which had strongly supported growth in 2011 – receded in most CEE countries in 2012 or grew at a rate significantly below the long-term average. The com-bined GDP of the Central European and South-East European coun-tries (except the Baltics) declined by 0.5%, after 1.8% growth in the preceding year. Among the various country groups, the three Baltic countries recorded the strongest growth in 2012 (+3.7% after +6.2%), benefiting from fundamental restructuring in 2009 and 2010; however, economic performance of the small Baltic countries did not have a major influence on CEE as a whole. The growth momentum in countries which are major producers of energy and commodities, and in countries enjoying a higher degree of economic autonomy, also slowed perceptibly (from over +6% to over +3%); but the expansion of these large domestic markets was sufficiently strong to raise overall economic growth in the CEE region to +2.5%, after +4.8% in 2011 and 4.7% in 2010. This means that CEE main-tained its lead of about 3 percentage points over the euro area in terms of economic growth.

In 2012, nearly all countries continued to pursue – or in some cases even intensified – fiscal consolidation at the expense of growth, a course on which they had embarked during the major recession in 2009, immediately after a period of expansion, for different reasons: to retain their credibility in financial markets, or to fulfil the Maastricht criteria (euro countries), conditions imposed by the IMF (IMF pro-gramme countries) or the requirements as EU accession candidates. Despite adverse cyclical factors, the debt ratio of CEE without the CIS countries is estimated at 46% of GDP in 2012, and that of the CIS countries at 13% of GDP. This relatively favourable initial position and the commitment to reduce the public sector deficit across several changes of government explains why CEE country risks, measured against risk premiums (CDS for government bonds), were always well below (by up to 200 bp) those of the highly indebted countries in the euro area. Another important reason was the inflow of capital in 2012. Although foreign direct investment (FDI) was often no more than profit reinvested by multinational companies, and in some coun-tries FDI was negative, portfolio investments picked up again. At the beginning of the year, this development was supported by liquidity

supplied through the ECB’s two three-year tenders and by declining interest rates in Western Europe and the search for higher yields. As investors’ risk aversion diminished, inflows rose in the final months of 2012 (and even more strongly after the turn of the year). The short-term character of these capital flows afforded little scope for an expansionary policy mix. Local banking sectors were under pressure to deleverage as banks sought to strengthen funding from local sources. Quite generally, therefore, lending business was weak. Only Turkey, Russia and Romania recently experienced strong lending growth. In most countries, credit expansion was determined by local growth of deposits. The loan/deposit ratio improved, though mostly on the lending side. In the years from 2008 to 2010, the charge for loan loss provisions reached very high levels as many exposures dating from the preceding years of expansion were addressed and the cor-porate sector entered a new stage of maturity. In 2011 and 2012, the cost of risk (net additions to loan loss provisions and direct write-offs) in the region as a whole fell from over 500 basis points (bp) of lend-ing volume to about 140 bp. Yet impaired loans decreased only slightly, from 14.1% to 13.6%. These figures reflect wide regional differences in terms of changes and absolute levels: the ratio of impaired loans to the total volume of gross loans ranges from 2.9% in Turkey and 6.1% in the Czech Republic to 35.1% in Kazakhstan. The impaired loans ratio in Russia, the Czech Republic, Slovakia, the Baltic countries and also in Ukraine declined in 2012.

Economic policy was restrictive across the CEE region. The CEE coun-tries individually coped with this situation in different ways, depending on their industrial structure and the degree of foreign-trade integra-tion. Moreover, developments in several countries are determined by specific local conditions which in most cases go hand in hand with problems in the banking sector (Hungary, Slovenia, Kazakhstan, west-ern Balkans). Among the Central European countries, the Czech Republic (economic performance in 2012: –1.1%), Hungary (–1.7%) and Slovenia (–2.2%) are well into recession. Due to political condi-tions, the Czech Republic is experiencing a phase of stagnation with declining investment and sharply falling consumer spending (decreas-ing real wages, higher rate of value-added tax). The country’s interest rates are the lowest in CEE, contributing to the depreciation of the Czech crown. The economy was supported by the continuing inflow of direct investment for export-oriented production. 2012 also saw a decline in domestic demand in Slovakia, on account of revenue-side budget consolidation; economic growth reached 2.3%, driven by additions to automobile production capacity (VW and KIA). Hungary’s domestic economy has barely been able to emerge from the crisis since 2009; moreover, exports stagnated in 2012 (–0.8%), squeezing GDP performance (–1.7%) on both sides. Inflation in Hungary was high, at an average 5.7%. The government is seeking greater inde-pendence in its economic policy, but Hungary is dependent on foreign capital more than ever before. The high proportion of foreign currency loans (29% of GDP) even after the mandatory conversion programme limits the scope for monetary policy. As a proportion of GDP, Hungary’s government debt is the highest of all CEE countries although the


Management Report


government recently reduced the debt ratio from 82.2% in 2010 to 78.0%. Fiscal policy pushed down the budget deficit for 2012 to a level below 3% (–2.7% after –4.3%) – to avoid the EU deficit procedure and receive further funding from the EU Structural Fund – through unconventional taxes and ad-hoc levies which place a burden on the banking sector, telecommunication providers and foreign investors in particular. This tough, though unsustainable, consolidation helped to avoid depreciation of the Hungarian forint (year-end 2012/2011: +7.9%) and attract capital inflows again. Structural reforms were thereby postponed, as was the conclusion of a new IMF agreement, which would have imposed strict conditions and regula-tory convergence. Slovenia has not recovered since the crisis of 2009. The euro country’s economic performance was impaired by high wages and incomes and a sharp fall in investment, which trans-lated into declining competitiveness, and especially by problems at the three major, partly state-owned banks. The Slovenian banking sector is characterised by the lowest capitalisation level in CEE, foreign banks do not play a significant role. The loan/deposit ratio was above average (137%) and funding is strongly dependent on government deposits and ECB liquidity. Impaired loans (14.3%) rose considerably in 2012. The Constitutional Court’s decision to reject opposing refer-endums paved the way for the implementation of reforms pursued by the new government (creation of a bad bank, privatisation plans, wage cuts for the civil service, budget target of below 3% for 2013). A suc-cessful US dollar bond issue in October provided sufficient funds for the recapitalisation of banks for the time being, thus helping to avoid a request for EU assistance.

Within the group of South-East European countries (without the Baltic states), Romania and Bulgaria were the only countries to achieve slight economic growth in 2012. After three years of fiscal consolidation the economy in Romania more or less stagnated (+0.2%), due to a number of factors including a drought and a poor harvest, declining exports and weak domestic demand. Faced with moderate direct investment and a negative basic balance, the country had to offer high interest rates to avoid even stronger currency depre-ciation (–4.9% against the euro on an annual average). The absorp-tion of EU assistance funds is lagging far behind the committed amounts, and structural adjustment made slow progress, not least because of governance problems. The banking sector felt the impact of foreign currency debt repayment and high local funding costs, and asset quality continued to deteriorate (impaired loans: 26.4%). Bulga-ria saw a stabilisation recession already in 2010 and experienced a gradual turnaround in 2012 (+0.6%), with strong growth of private consumption (+2.6%), dampened only by export demand. The coun-try’s excellent fiscal position (deficit: –0.9%/debt ratio: 19.8%) in combination with the currency board attracted large and rising direct investment. This compares with a deterioration of economic conditions in the western Balkans, mainly Croatia (GDP 2012: –1.8%). Business investments have been declining over the past four years, partly at double-digit rates, and 2012 also saw declines in private and public consumption. Moreover, industrial production is affected by structural changes (e. g. at shipyards). This development was only

2012 timeline

22 Dec. 2011 First three-year tender: ECB allocates €489 billion to banks.

13 Jan. 2012 S&P lowers ratings of nine European countries. France and Austria lose their AAA status; later (16 Jan.) the EFSF bailout fund is also downgraded from AAA.

30 Jan. EU special summit: 25 out of 27 EU countries agree on fiscal pact with stricter deficit procedure and upper limit of 0.5% of GDP for the structural deficit, effective from 2013.

21 Feb. Second support package for Greece of €130 billion, subject to strict conditions, averts insolvency as of 20 March. Private sector involvement for the first time (haircut >50%).

28 Feb. S&P lowers Greece ratings to “selective default”.

29 Feb. Second three-year tender of ECB: €530 billion against repos.

8–12 March 86% of private creditors participate in Greek debt restructur-ing and receive bonds under local law with longer maturities and a reduced interest rate. After compulsory debt restruc-turing of the other creditors, 95% has been converted.

30 March EFSM, ESM increased from €500 billion to over €700 billion.

20 April Spring meeting: IMF resources increased by €430 billion to fight the debt crisis.

6 May Parliamentary elections in Greece. Fears of capital flight from southern EU countries and doubts about continued exist-ence of monetary union (convertibility risk). New government formed after new elections on 17 June 2012.

10 May Bankia, Spain’s fourth-largest bank, partly nationalised.

14 June Moody’s lowers Spain’s rating by three notches to Baa3.

27 June Cyprus seeks support under the bailout scheme.

29 June EU summit improves governance: “Compact for Growth and Jobs”; EFSF/ESM permitted to directly recapitalise banks; banking union to break vicious circle between banks and sovereigns.

12 July ECB key interest rate lowered to 0.75%, deposit rate to 0%.

17 July After downgrading Italy (13 June) Moody’s lowers the ratings of 13 Italian banks.

26 July Turnaround in financial markets after a statement made by ECB President Draghi in London that the ECB will do what-ever it takes to preserve the euro.

6 Sept. OMT programme: ECB decides to make unlimited purchases – subject to strict conditions – in the secondary market of bonds issued by programme countries (at its own discretion, waiving senior status).

19 Sept. Bank of Japan massively steps up bond purchases, new government pursues expansionary policy, yen depreciates.

2 Oct. Liikanen Report calls for firewalls (investment banking/com-mercial banking) and bail-in bonds.

3 Oct. Portugal’s debt swap (longer maturities) succeeds.

3–17 Dec. Greece buys back €32 billion in bonds (at 33.8% of nominal value). Rating agencies raise Greece’s rating and its bonds again become eligible as collateral for ECB repo transac-tions.

12 Dec. US Federal Reserve links interest rate policy to unemploy-ment and raises bond purchases to up to US$ 85 billion per month.

13 Dec. European Council makes decision on first phase of banking union (including joint supervision run by the ECB).

30 Dec. US compromise prevents automatic revocation of tax relief granted in the crisis years.


partly offset by good results from tourism. Capital inflows in 2012 were very low. Croatia’s forthcoming accession to the European Union (July 2013) has led to a number of political reform projects, and an agreement with the IMF could add to pressure for their implementa-tion. The country’s rating fell to below investment grade in December 2012. Bosnia and Herzegovina (GDP 2012: –0.9%) has a better rating, mainly supported by the existing standby agreement with the IMF. The country has a structural current account deficit, which reached almost 9.6% of GDP in 2012. Serbia experienced a stronger-than-expected recession (–2.1%). The overall picture is determined by a high rate of inflation (7.6%, partly due to the agricultural sector), by a current account deficit and a deficit on the basic balance which exceed 10%, and by a large budget deficit (–6.7%). A lack of geopolitical clarity is weighing on negotiations with the IMF and with the EU.

The Baltic countries, on the other hand, are reaping the benefits of the tough restructuring efforts they made in 2009 and 2010: GDP continued to expand at above-average rates in 2012 (with combined growth of 3.7% after 6.2%), national budgets were put on a sound footing (with Estonia even achieving a zero deficit) and debt levels are low. After the introduction of the euro in Estonia (2010), Latvia and Lithuania are also planning to join the euro area in the next two years. The banking sector is still lagging behind economic developments, with low levels of profitability.

Economic growth in Russia remained robust (2012: +3.6% after +4.3%). Oil prices fell significantly for some time and also declined on an annual average. This trend was absorbed by more flexible rouble management of the currency basket (annual average currency movements in 2012: –5.4% against the US dollar /+2.4% against the euro). Growth was driven by strong expansion of the domestic economy, both consumption (+4.6% in real terms) and investment (+5.3%). Efforts to fight inflation in 2012 were successful (5.1% despite a long period of drought, after 8.6%). Monetary expansion remained strong, especially lending to private households. Govern-ment departments which are active in liquidity management and the central bank, in cooperation with major banks, recently pursued a more flexible policy of intervention in money and foreign exchange markets. Private capital transfers abroad are still very large. The liquidity gap in the banking sector was closed by repos, though at rising cost. Banks are also required to meet higher capital ratios (13.2%), not least with a view to counteracting excessive retail debt.

In Ukraine, the economic momentum of the previous year (GDP growth: +5.2%) broke off in the reporting year (2012: +0.4%). This was due to political uncertainty ahead of the elections in November and to price trends (crude steel: –30%) and lower demand from China. The twin deficit (2012 current account: –7.8%, budget: –5.7%) is considered to be unsustainable. The country’s external debt remained at a high level (79%), the currency (fixed-rate policy) was supported by high interest rates, also in view of permanently

insufficient currency reserves. At the end of 2012, risk premiums for Ukraine were 602 bp, by far the highest level in Central and Eastern Europe (CEE average: 192 bp, weighted by government debt). Local lending declined in 2012, more than 30% of all loans are impaired. The withdrawal of several foreign banks benefited those which remained in the country. Key economic data for Kazakhstan are the best in the region (economic growth: +5.0% after 7.5%, current account surplus: 5.0%, basic balance including FDI: 11.1%, budget surplus: 5%). But the restructuring of the banking sector has made hardly any progress in the past few years and is dependent on ad-hoc intervention while the level of transparency is low. Work on restoring the balance sheets of banks and companies to a sound basis was moving ahead slowly, not least because of the regulatory environment (write-downs on loans are not deductible for tax pur-poses), the impaired loans ratio was 35.1%.

Turkey holds a special position, given the size of the country and its degree of economic autonomy. After the boom years of 2010 (+9.2%) and 2011 (+8.5%), growth in 2012 slowed to 2.7%, mark-ing a soft landing which reflects restrictive economic policy measures to stabilise domestic demand. Although Turkey achieved major export successes (2012: +14.0% in real terms), the current account deficit (–6.6%) remained the weak point of this growth market. Interest rates almost halved in the course of the year (three-month money: 5.75% after 11.0%) thanks to substantial (though mainly liquidity-driven) capital inflows. Monetary expansion remained strong in 2012 and was dampened through the use of a full range of central bank instruments (from minimum reserve requirements to credit ceilings on credit cards), inflation also receded in the course of the year (to 6.4% at the end of 2012). The Turkish lira showed a volatile development, moving in line with the US dollar trend while remaining stable against the euro on an annual average (+1.1%). In view of Turkey’s prosper-ity and stabilisation efforts, rating agencies held out the prospect of raising the country rating to investment grade.

CEE currencies (index of the currencies weighted by countries’ contribution to CEE operating income of Bank Austria including fixed-rate regimes and euro member countries), which depreciated slightly against the euro in the second half of 2011, recovered lost ground in 2012. A year-on-year comparison of annual averages for 2012/2011, which are used for translating local currency amounts in income state-ments into euro, shows that CEE currencies (Bank Austria-weighted) remained almost unchanged against the euro (–0.2%). Year-end fig-ures for 2012/2011 also reflected only slight appreciation (+1.7%). Measured by annual averages, currency depreciation was seen in Ser-bia (– 9.8%), Romania (–4.9%), Hungary (–3.4%), the Czech Republic (–2.2%) and Croatia (–1.1%). On the other hand, the currencies of Russia, Kazakhstan and Ukraine, which are partly guided by the US dollar, appreciated against the euro by 2.4%, 6.5% and 7.3%, respectively (but not in a comparison of year-end levels). The Turkish lira was up by 1.1% on the previous year in average terms; a comparison of year-end figures shows that it appreciated by 3.7% against the euro.


Management Report


Introductory remarksThe commentary in this management report refers to the condensed income statement shown on page 42. The same format is used for segment reporting. This makes it possible to consistently explain the contributions made by the various business segments to the items in the income statement and to Bank Austria’s overall development. A reconciliation of the condensed income statement to the mandatory reporting schedule – presented in a different format – of the consoli-dated financial statements is given in Section D, Segment Reporting, of the notes to the consolidated financial statements on pages 164 to 165.

In line with the strategy of focusing on high-growth and high-profitability CEE countries, the Management Board decided to sell the banking business in Kazakhstan. For this reason the equity interest in ATF Bank, Kazakhstan, (and its subsidiaries in Kazakhstan and Kirgizstan) was classified as a discontinued operation and transferred from the CEE business segment to the Corporate Center. The contributions made by ATF Bank to the income statement are therefore taken from the various items, balanced and shown separately in the item “Total profit or loss after tax from discontinued operations”. To ensure comparability with the previous year’s figures, the items in the income statement for 2011 were adjusted to reflect the structure of 2012. Net income (attributable to the owners of Bank Austria) is not affected thereby. To obtain consist-ent time series, the comparative figures for 2011 have additionally been recast to reflect the currently applicable financial reporting standards and definitions, and minor changes in the consolidation perimeter have been taken into account. The recasting differences to the totals for the various items of the income statement are shown in the segment reporting tables D.3 in the notes to the consolidated financial state-ments. These are the main adjustments for 2011: since 1 January 2012, fee and commission income from management, brokerage and consultancy services relating to derivatives business in securities and currency trading is reported in the item “Net trading, hedging and fair value income”. This adjustment involves a total amount of +/– €210 million, with three-quarters of the total relating to the CEE business segment. The sale of the IT services subsidiary Bank Austria Global Information Services GmbH (BAGIS) to UGIS, a UniCredit subsidiary, as at the end of June 2011 and the sale of DOMUS Facility Management GmbH in September 2012 were also taken into account. The adjustment to these consolidation items resulted in a decline of

€36 million in other operating income, while costs declined by more or less the same amount. As the transactions largely offset each other, the recasting difference at the level of net profit for the bank as a whole was only about €3 million. The income statement com-mentary comparing figures with the previous year generally refers to changes compared with the recast 2011 figures.

The business segments (Divisions) covered by segment reporting are frequently combined in various ways in the following commentary: Austrian customer business is defined as the sum total of the Family & SME Banking, Private Banking and Corporate & Investment Bank-ing (CIB) business segments. The CEE business segment is not divi-sionalised. “Customer business” encompasses the Austrian Divisions and CEE. The Corporate Center comprises all equity interests that are not assigned to other segments, including the 31.01% shareholding interest in UniCredit Leasing, which is accounted for under the equity method. Funding costs relating to consolidated subsidiaries are assigned to the Corporate Center, and it also includes inter-segment eliminations, other items which are not assigned to other business segments, and impairment losses on goodwill. Moreover, the Corpo-rate Center includes the effects from the reclassification of ATF Bank, Kazakhstan, which was allocated to the Corporate Center.

Given Bank Austria’s cross-regional perimeter of operations, exchange rate effects from the translation of local financial state-ments may be a significant factor – measured as a proportion of Bank Austria’s operating income, 60% of the consolidated banks prepare their financial statements under a flexible exchange rate regime against the euro. To smoothen these influences, which may be volatile from time to time, amounts in the local income statements are translated into euro at annual average exchange rates. In some of the past years, depreciation at CEE business segment level had a strong effect (2011/2010: –4.5%, extreme impact: 2009/2008 –11%). The comparison of 2012 with 2011 is hardly influenced by exchange rate movements as CEE currencies taken together depreci-ated by 0.2% in weighted terms; reference to this effect is therefore made only in the context of specific countries. Exchange rate effects were much stronger for figures where the comparison is made on the basis of year-end levels (CEE currency appreciation: +1.7%), i. e. volume figures and items in the statement of financial position.

Bank Austria in 2012 – overview


OverviewThe operating environment for banking business in our markets in 2012 was characterised by an economic slowdown in the course of the year with persistently low demand and low turnover levels; by monetary conditions which saw narrowing margins and interest rates that were close to zero; by a risk assessment in financial markets which temporarily led to even higher funding and liquidity costs; and by stricter regulatory requirements resulting in addi-tional deleveraging pressure. The general change in culture in the financial sector led banks to rethink their business models and determined their balance sheet policies. Moreover, valuation adjust-ments to equity interests which had been acquired in previous years of expansion were made to reflect the moderate medium-term outlook for earnings and this had an impact on profits of almost all major international banks.

➔ Although the economic environment was difficult and pressure to carry out adjustments was strong, Bank Austria achieved a sound performance: net operating profit reached €1.6 billion, a level that was lower than in the previous year (–13%) due to a special effect. On the other hand, results for 2012 reflect efforts aimed at structural improvement and the strategic focus on the defined core countries in our perimeter of operations, which involved substantial impairment losses on goodwill. Overall, the charge resulting from non-operating items – also including provisions for risks and charges and net income from investments – was large, though down by over one-quarter from the previous year. Nevertheless, it had a strong negative impact of over €1.2 billion. After a strong perform-

ance of €1.1 billion for the first nine months of the year, net profit (attributable to the owners of the parent company) for 2012 as a whole was as low as €423 million.

� In 2012, operating income was €6.6 billion, almost matching the previous year’s figure. Within this item, net interest rose slightly although credit demand in Austria was weak and margins in CEE continued to narrow. Net trading, hedging and fair value income improved strongly (partly also on account of a gain of €126 million on the buyback of hybrid instruments). This more or less offset the decrease in the other income items. Net fees and commissions did not yet recover for structural reasons (declining use of derivatives, payment transactions) and because securities business remained weak. The item “Dividend income and other income from equity investments” was negative because UniCredit Leasing, in which Bank Austria holds an equity interest of 31.01%, reported a loss due to the difficult economic environment in its international perime-ter of operations, and a significant impairment loss had to be recog-nised in connection with that company. Without this effect – i. e. in purely operational terms – operating income matched the previous year’s level (see table).

Strong operating performance (€ million)

2012 2011 CHANGE ON PREV. YEAR

Adj.1)

Operating income 6,622 6,700 –79 –1% +2%

Operating costs –3,893 –3,777 –116 +3%

Net write-downs of loans and provisions for guarantees and commitments –1,103 –1,060 –43 +4%

Net operating profit 1,625 1,863 –238 –13% +0%

of which: Austrian customer business2) 640 609 +31 +5%

Central and Eastern Europe 1,657 1,623 +33 +2%

1) Without the impairment loss relating to UniCredit Leasing, which is recognised within income from equity investments. / 2) Austrian customer business = F&SME, PB and CIB Divisions.

Operating performance was supported by cost stability and by the fact that net-write downs of loans and provisions for guarantees and commitments rose only slightly. Operating costs were up by 3% on the previous year. Without the increase in bank levies in Austria (+25%) and in CEE (new bank levy in Slovakia), costs would have risen by only 2%, in Austria (incl. the Corporate Center) by a mere 1%. Operating costs in CEE – with and without bank levies – increased at a significantly lower rate than revenues, so that the cost / income ratio improved further. Net write-downs of loans and provisions for guarantees and commitments remained at the significantly lower level to which they had fallen in 2011 after sev-eral difficult years. In Austria the provisioning charge declined to a multi-year low. In CEE, risk trends varied from country to country and from region to region. At our bank in Turkey, which is an important factor in view of its size, net write-downs of loans and provisions for guarantees and commitments rose again, reflecting the return to a more normal yet very low level.

2005 2006 2007 2008 2009 2010 20122011

Stable net operating profitabsorbs exceptional charges

0

500

1,000

1,500

2,000

2,500

3,000

3,500

€ million Operating profit /customer business1)

Net operatingprofit /

customer business

Net operatingprofit / bank

as a whole

Net profit2)914

1,388

2,254

1,144 1,102

747

209423

3)3)

1) Customer business = total of F&SME, PB, CIB and CEE business segments = bank as a whole without the Corporate Center. 2) Net profit attributable to the owners of the parent company. 3) ATF Bank, Kazakhstan, no longer included in the individual income statement items but still reflected in net profit (in the item “Total profit or loss after tax from discontinued operations”). Comparative figures for 2011 adjusted.

Non-operatingdeductions

Net write-downs of loans and provisions forguarantees andcommitments


Management Report


2009 2010 2011 2012

Quarterly trends € billion

126

128

124

130

132

134

136

1) Break in the time series because of reclassification of ATF Bank, Kazakhstan (held for sale). 2) Net operating profit = operating profit less net write-downs of loans and provisions for guarantees and commitments. Customer business segments = Austria (F&SME, PB and CIB) and CEE. 3) Net profit = net profit attributable to the owners of the parent company.

€ million

–600–700

–500–400–300

200100

–100–200

300400500600700

Net profit3)

0

Average volume of loansto customers

Large non-operating itemsto be deducted,

mainly goodwill impairment

1)

Net operating profit2)

of customer business segments

126

128

124

130

132

134

136

1)

➔ Overall, net operating profit declined in 2012, by 13%, due to the above-mentioned special effect relating to an equity investment allocated to the Corporate Center. Net operating profit generated by customer business rose by 3%, with contributions to growth coming from the Austrian business segments (+5%) and the CEE Division (+2%).

� Among the non-operating items of the income statement, net additions to provisions for risks and charges in 2012 (€305 million) were substantially higher than in the previous year (€136 million). The total figure included a provision for equity investment risks, while provisions for legal risks were less significant. Net income from investments, which was negative in 2011 (– €275 million) mainly because of write-downs and valuation losses from the restructuring of Greek government bonds, showed a positive swing of €314 million, reaching €39 million in 2012.

Large non-operating expenses (€ million)

2012 2011CHANGE ON PREV. YEAR

Net operating profit 1,625 1,863 –238 –13%Total non-operating items –1,203 –1,657 +454 –27.4%

… Provisions for risks and charges, net income from investments, restructuring costs1) –300 –439 +139 –32%

… Income tax, non-controlling interests –390 –309 –81 +26%

… Kazakhstan 2), goodwill impairment /PPA –513 – 909 +396 –44%

Net profit 3) 423 206 +217 >100%

1) Provisions for risks and charges (2012: – €305 million), net income from investments (+€39 million), integration/restructuring costs (– €33 million). / 2) Total profit or loss after tax from discontinued operations (– €301 million). / 3) Attributable to the owners of the parent company.

Valuation adjustments in 2012 once more absorbed a large part of net operating profit. This reflects our reassessment of growth and profitability prospects in those countries where we had acquired large banks in 2007/2008, years of strong expansion immediately preced-ing the financial crisis. In 2012, we recognised an impairment loss of €165 million on goodwill relating to our Ukrainian banking subsidiary, thereby reducing it to nil.

In line with the strategy of focusing growth, and capital employed for this purpose, on a clearly defined group of core CEE countries which enjoy above-average growth and earnings prospects, and with a view to reducing risk, the Management Board decided not to continue banking business in Kazakhstan. For this reason the equity interest in ATF Bank, Kazakhstan (and its subsidiaries in Kazakhstan and Kirgizstan) was classified as a discontinued operation and allocated to the Corporate Center. The related impairment loss on goodwill, together with the current loss for 2012 and additional expenses was shown in the item “Total profit or loss after tax from discontinued oper-ations” in the amount of – €301 million. The exit from Kazakhstan, valuation adjustments in Ukraine and the remaining impairment losses on goodwill and write-downs on intangible assets relating to

former purchase price allocation (PPA) had a combined impact of – €513 million on the income statement. The balance of non-operat-ing items was a charge of over one billion euros (€1,203 million), which had to be deducted from net operating profit. The comparative figure for the previous year was even higher, at €1,657 million, reflecting the goodwill impairment charge recognised in the third quarter of 2011 (after the sovereign debt crisis had escalated) and write-downs on Greek government bonds. Net profit for 2012 was €423 million, up from €206 million.

� An analysis of quarterly figures shows that net operating profit declined in the second half of 2012, mirroring the cyclical economic trends in our core markets. Since the recovery from the direct impacts of the financial market crisis and recession in 2009, Bank Austria’s operating performance has followed a very moderate upward trend, apart from the usual quarterly fluctuations; this trend was supported by steady volume expansion in CEE. Lending volume recovered quickly from the setback caused by recession; most recently, loans have grown more slowly. In the fourth quarter of 2012, the average volume of loans to customers was up by 3% on a year earlier. As expected, the CEE business segment provided strong impetus to growth (+7%) while lending volume in Austrian customer business declined (–5%). Risk-weighted assets showed an even more pronounced asymmetrical pattern, with RWAs up by 7% in CEE and down by 6% in Austrian customer business.


Operating income in customer business (Austria and CEE without the Corporate Center) in the fourth quarter of 2012 was 6% higher than in the same period of the previous year. As costs grew at a lower rate (+4%), operating profit improved by 9% year-on-year. Net write-downs of loans and provisions for guarantees and commit-ments fell sharply from the end of 2009 to the middle of 2012 (from a peak of €659 million in the fourth quarter of 2009 to €244 million in the second quarter of 2012), and rose slightly in the second half of 2012 (due to special developments in Turkey). Operating perform-ance generated by customer business thus moved sideways from quarter to quarter; thanks to a favourable trend in the second and third quarters of 2012, the figure for the fourth quarter was only 2% lower than in the same period of the previous year. Trends in net profit for the past quarters were mainly determined by the timing of goodwill impairment charges, and therefore the development does not provide meaningful information.

� As at 31 December 2012, total assets were €207.6 billion, an increase of 4.2% over the previous year. On the liabilities side, the strongest contribution to growth came from customer deposits, which were up by 9% year-on-year. The strong increase in deposits was used for building up liquid assets, while loans and receivables with customers rose only slightly. Most recently, primary funds covered customer loans to the extent of 105%, while interbank and whole-sale funding declined in 2012. This overall picture reflects custom-ers’ currently strong liquidity position and restrained credit demand – in both Austria and CEE – and the bank’s own business policy, which focuses on reducing risks and strengthening liquidity and equity cap-ital buffers.

IAS/ IFRS equity increased by 3.0% to €18.2 billion, reflecting net profit and increases resulting from foreign currency translation and reserves in accordance with IAS 39, despite the increase in pension obligations directly recognised in equity. The leverage ratio (without intangible assets) was slightly reduced, to 13.0; this compares with 21.9 at the end of 2008. At the end of 2012, the regulatory Tier 1 capital ratio based on all risks was 10.8%, almost unchanged compared with the end of 2011 (down by 0.1 percentage points).

Stronger capital base (€ billion)

31 dEC. 2012 31 dEC. 2011

Total assets 207.6 199.2Loans and receivables with customers 132.4 134.9IFRS equity 18.2 17.7Risk-weighted assets 130.1 125.2Tier 1 capital ratio as defined in the Austrian Banking Act 10.8% 10.9%

� In 2012, Bank Austria launched strategic initiatives to respond to changes in the outlook for profitability and in customer behaviour. The bank prepared for additional capital requirements in respect of risk and for stricter regulatory requirements imposed on the bank in the various markets.

The measures aimed at focusing on core commercial banking busi-ness in the bank’s organisational structure, in its customer service approach and in product policy. In the entire UniCredit Group, and thus also in Bank Austria, regional responsibility for customer busi-ness was strengthened as compared with the divisional approach. We want to generate more value for our customers by intensifying advisory services and meeting their specific needs. As at 1 January 2013 we therefore combined commercial banking business with pri-vate, business and corporate customers in Austria under the responsi-bility of one Management Board member while giving another Man-agement Board member responsibility for large customers with an international orientation to provide such customers with cross-regional capital market products offered by UniCredit Group. Smart Banking Solutions is a key project with which we are responding to changes in consumer behaviour (digitalisation) and regional /demographic trends. Within the modern mix of distribution channels, we are reor-ganising the branch network; a number of branches will be closed (for this purpose a provision was made in the 2012 financial statements). In CEE we continued to implement our strategy of focusing invest-ment on selected growth markets in 2012, aligning the use of resources with this strategy. In the core countries – primarily Turkey, Russia and the Czech Republic – we significantly expanded the branch network and staff numbers in the past two years while adjust-ing networks and reducing staffing levels in other countries. The with-drawal from Kazakhstan is also to be seen in this context. In the Baltic countries we will bundle business until the middle of 2013, serving customers centrally from Riga, Latvia. In November 2012 we decided to merge the banking subsidiaries in the Czech Republic and Slovakia in the course of 2013 to unlock synergies in operations; the business models will remain more or less unchanged. Our efforts to build up a cross-regional shared infrastructure for transaction settlement, IT and internal services by bundling these functions in UBIS Austria, our services provider, have brought us close to meeting our objective. The Austrian company, a wholly-owned subsidiary of Milan-based UBIS S. C. p. A., has about 2,300 employees including specialised branches in Poland (back office) and Romania (back office and IT). UBIS Austria provides Bank Austria, its main cus-tomer, with the above services. Key tasks in implementing the UniCredit business model include the step-by-step introduction of EuroSIG, the joint core banking system, in UniCredit’s core coun-tries. The IT system changeover in Austria took place at the end of October 2012. Despite intensive preparations and functional tests (and after the launch date had been postponed once), unforeseeable start-up difficulties were experienced during a number of days after the introduction of the new system. Since the go-live the system has been updated through regular releases with a view to steadily stabilis-ing and optimising it. The internationalisation of the IT systems to create a platform used by 70,000 employees in Italy, Germany, the Czech Republic and Austria, and cross-regional sharing of experience and product developments, will enhance the banking group’s compet-itiveness in Europe.


Management Report


Condensed income statement of Bank Austria1) (€ million)

Q1 12 + Q2 12 + Q3 12 + Q4 12 = 2012 2011 CHANGE 2011 CHANGE

AdjUSTEd 2) +/– € IN % RECAST 3) +/– € IN %

Net interest 1,062 1,101 1,110 1,100 4,373 4,315 +58 +1% 4,315 +58 +1%

Dividend income and other income from equity investments 30 57 –6 –231 –150 207 –358 >100% 208 –358 >100%

Net fees and commissions 371 388 398 437 1,595 1,836 –241 –13% 1,625 –31 –2%

Net trading, hedging and fair value income 290 59 172 144 664 242 +422 >100% 452 +212 +47%

Net other expenses/ income 0 35 58 47 140 136 +4 +3% 100 +40 +40%

Operating income 1,753 1,639 1,732 1,498 6,622 6,736 –114 –2% 6,700 –79 –1%

Payroll costs –490 –487 –497 –495 –1,969 –1,961 –7 +0% –1,945 –24 +1%

Other administrative expenses –385 –409 –407 –461 –1,662 –1,584 –79 +5% –1,574 –88 +6%

Recovery of expenses 0 0 0 1 1 2 –0 –22% 2 –0 –22%

Amortisation, depreciation and impairment losses on intangible and tangible assets –66 –66 –63 –69 –264 –267 +3 –1% –260 –4 +2%

Operating costs – 940 – 962 – 967 –1,024 –3,893 –3,810 –83 +2% –3,777 –116 +3%

Operating profit 812 678 765 474 2,728 2,926 –198 –7% 2,923 –195 –7%

Net write-downs of loans and provisions for guarantees and commitments –245 –243 –284 –331 –1,103 –1,060 –43 +4% –1,060 –43 +4%

Net operating profit 567 435 481 143 1,625 1,866 –240 –13% 1,863 –238 –13%

Provisions for risks and charges –8 –59 –7 –231 –305 –136 –169 >100% –136 –169 >100%

Integration/ restructuring costs 0 –3 0 –30 –33 –28 –5 +19% –28 –5 +19%

Net income from investments –31 –32 89 12 39 –275 +314 >100% –275 +314 >100%

Profit before tax 528 341 563 –106 1,326 1,426 –101 –7% 1,424 – 98 –7%

Income tax for the period –108 –72 –77 – 96 –353 –259 – 93 +36% –259 – 93 +36%

Total profit or loss after tax from discontinued operations –5 –8 –6 –282 –301 –493 +192 –39% –493 +193 –39%

Profit for the period 415 261 481 –484 672 674 –2 –0% 671 +1 +0%

Non-controlling interests –10 – 9 –21 1 –38 –50 +12 –24% –50 +12 –24%

Net profit before PPA 4) 405 252 460 –483 635 625 +10 +2% 622 +13 +2%

Purchase Price Allocation effect 5) –2 –2 –2 –7 –13 –29 +16 –54% –29 +16 –54%

Goodwill impairment –4 –3 –3 –189 –199 –387 +188 –49% –387 +188 –49%

Net profit 4) 398 247 455 –678 423 209 +214 >100% 206 +217 >100%

1) Bank Austria’s income statement as presented in this table is a reclassified format corresponding to the format used for segment reporting. See pages 164 to 173 of this report./ 2) Adjusted: discontinued operations presented as in 2012. / 3) Recast to reflect the consolidation perimeter and business structure in 2012. / 4) Attributable to the owners of the parent company. 5) PPA effects Russia and Ukraine (2011) and Aton.


� Bank Austria’s income statement for 2012 was mainly determined by stagnating commercial banking business with customers in the euro area, by continued expansion in Turkey and Russia, which are large CEE countries with a relatively high degree of economic autonomy, and by the effects of the low interest rate environment and temporarily difficult funding conditions in the banking sector. On this stable basis, valuation adjustments to equity interests acquired in past years of expansion absorbed a large part of net operating profit.

Revenues were affected by low credit demand in both West and East with declining interest margins and by weak transaction volume reflect-ing economic trends (foreign trade, capital market, securities turnover, payment transactions). At €6,622 million, operating income neverthe-less almost matched the previous year’s level; without a non-operating special effect relating to shareholdings accounted for under the equity method, operating income exceeded the previous year’s figure by €162 million or 2%.

Operating income (€ million, 2011 recast)

2012 2011+/– €

mIllION +/– %

Austrian customer business 2,248 2,296 –48 –2%CEE 4,728 4,493 +235 +5%Customer business 6,976 6,789 +187 +3%Corporate Center (incl. Leasing) –355 –89 –266 >100%Bank Austria as a whole 6,622 6,700 –79 –1%… without impairment charge for Leasing 6,863 6,700 +162 +2%

Net interest – the most important revenue component, accounting for 66% of operating income – was €4,373 million in 2012, slightly higher than in the previous year (up by €58 million or 1%). The cus-tomer business segments achieved an increase of €171 million (+4%), while the Corporate Center recorded a substantially higher net interest expense (up by €113 million compared with the previous year), not least reflecting higher liquidity and funding costs which remained within overall bank control after deduction of the business segment portions. Net interest from Austrian customer business rose by over 2% compared with the previous year; while net interest gen-erated by the F&SME and Private Banking business segments hardly changed (–1% and –2%, respectively), the contribution from Corpo-rate & Investment Banking (CIB) rose by 6% on account of good results from asset / liability management (Treasury) activities. Interest-earning commercial banking business in Austria was characterised by declining lending volume (–3% on an annual average) and rising direct deposits (+5%). Margins remained under pressure, especially on the liabilities side, as strong competition for deposits limited the pricing leeway in Austria. Moreover, the market yield curve was lower and flatter, significantly reducing the scope for generating income from maturity transformation compared with previous years. In Cen-tral and Eastern Europe (CEE), net interest rose at an unusually low rate (+4%) although volume increased strongly: loans grew by an average 8%, deposits increased by 10%. This result was exclusively

supported by the strong performance of the bank in Turkey, a growth market where the real economy and interest rate trends are hardly affected by the weakness of the European economy. In 2012, net interest in Turkey was up by €214 million or 38% on the previous year. Significant growth was also seen in Russia (+€51 million / +10%). Net interest in most of the other CEE countries was lower than a year earlier, irrespective of continued volume growth in some cases. A number of countries in the region were affected by rising risk premiums, even though these remained significantly lower than in highly indebted EU countries. Developments in some countries were also influenced by weak credit demand. Last but not least, the efforts made by CEE banks to fund a growing portion of their lending business with local deposits and their own issues proved to be effective; in this way, the banks aim to reduce dependence on volatile wholesale mar-kets and/or Group-internal funding sources. The net interest margin in the CEE Division declined in 2012, from 480 bp to 464 bp. At this level, it is still double the figure for the mature Austrian market (Austrian customer business: 265 bp).

dividends and other income from equity investments showed a sub-stantial swing from +€208 million in 2011 to – €150 million in 2012 reflecting a special effect. The most significant factor in this context was UniCredit Bank Austria AG’s shareholding interest in UniCredit Global Leasing S. p. A., which Bank Austria has held since the transfer of its own leasing company to the international network. As the economic environment and the risk profile deteriorated and funding conditions temporarily worsened, current results of UniCredit Global Leasing turned negative. On the other hand, changes in the medium-term and long-term outlook for leasing business in some markets where the company operates required the recognition of an impairment loss in respect of the company, with a strong impact on operating performance as the shareholding interest is accounted for under the equity method.

Net fees and commissions were €1,595 million in 2012, down by €31 million or close to 2% from the previous year (compared with recast figures). Regardless of the slight improvement in the second half of 2012, net fees and commissions have been declining for quite a long time. There are three reasons for the downward trend: first, structural factors such as changes in payment transactions and the shift away from derivatives business; second, waves of uncertainty – from financial markets to government debt to excess liquidity – have shaken inves-tors’ willingness to invest in high-risk and high-yield securities, with an impact on safe-custody business, securities turnover and income from new issue activities; third, the economic downturn started to affect previously resilient transaction volume (export activity).

The persistent decline in net fees and commissions continued in 2012 in the Austrian customer business segments (down by 7% year-on-year), where the number of securities transactions by customers fell substantially and foreign trade-related transactions also declined. In the CEE business segment, net fees and commissions hardly increased (+€16 million /+2%). This was exclusively due to develop-ments in Turkey, which generated substantial income from fee-based

Details of the income statement for 2012


Management Report


business in previous years, mainly on account of the credit card boom. In 2012, however, regulatory measures had a dampening effect, leading to a significant fall of €39 million or 11% in net fees and commissions in Turkey. Without this effect, net fees and com-missions in CEE rose by over 5%, with Russia, Ukraine, Slovakia and Bulgaria making strong contributions through double-digit growth.

Following the combination of global trading activities at UniCreditGroup level, which involved the intra-group sale of our subsidiaryUniCredit CAIB against a participation in profits, Bank Austria’s nettrading, hedging and fair value income is dominated by the CEEbusiness segment. Customer-related trading activities remained inAustria, including net fees and commissions from derivatives busi-ness with customers since the beginning of 2012 (comparative figures for 2011 have been adjusted). The above-mentioned partici-pation in profits of UniCredit’s CIB/Markets product line, which mainly comprises international investment banking activities, is reflected in the Corporate Center’s net trading, hedging and fair value income. The Corporate Center also handles special functions for the bank as a whole such as currency hedging of the expected results of CEE banking subsidiaries and tasks in connection with liquidity management and capital management.

Net trading, hedging and fair value income (€ million, 2011 recast)

2012 2011+/– €

mIllION +/– %

Austrian customer business 21 47 –26 –55%CEE 416 347 +69 +20%Corporate Center 227 58 +169 >100%Bank Austria as a whole 664 452 +212 +47%… without gain on buyback of hybrid instruments 538 452 +86 +19%

The strongest contribution to revenue growth in 2012 came from net trading, hedging and fair value income, which was up by €212 million or 47%. In addition to the participation in profit before tax of the UniCredit Markets subdivision, which developed favourably in 2012, the net trading performance included the gain of €126 million on the buyback of hybrid instruments (perpetual bonds) effected by Bank Austria in the first quarter of 2012 with a view to adjusting the capital structure to regulatory changes. Without this one-off effect, net trading, hedging and fair value income would have increased by €86 million or 19%, with growth driven mainly – except for the €35 million decrease in Hungary, exclusively – by the CEE business segment. Net trading income in the Central European countries and in the western Balkan countries hardly changed in 2012 and was only a small proportion of overall revenues. At the other CEE subsidi-aries, net trading income rose strongly, especially in Russia, Croatia, Turkey, Romania, Ukraine and Bulgaria – these are countries with high exchange rate volatility (or intervention obligations/Bulgaria), where foreign-exchange/ interest-rate management in customer business is an important source of revenue for the internationally- oriented local banks.

Net other expenses/ income, comprising a number of minor items outside basic commercial banking business, was €140 million in 2012, up by about €40 million from the previous year. Positive con-tributions came primarily from an indirect equity interest in a non-financial company (Istraturist, Croatia) and a successful restructuring carried out by UCTAM, our workout company. The figure for net other expenses/ income also includes realised losses on the early repay-ment of foreign currency real estate loans (mandatory conversion) in Hungary, which were more or less at the same level as in the previ-ous year, and voluntary payments to make amends in connection with the EuroSIG IT system changeover.

� The reporting year saw progress in cost stability. In 2012, operating costs rose by 3% to €3,893 million. Without the increase in bank levies, cost growth would have been as low as 2%, which in Austria alone – and even more so in view of higher inflation rates in our entire perimeter of operations – certainly corresponds to a decline in real terms. As operating income declined slightly, the cost / income ratio was up by 2.4 percentage points to 58.8%. Without the impairment charge for Leasing and without the charge for bank levies, the cost / income ratio would have remained more or less constant, at 54.8%. Other administrative expenses also included the charge for bank levies in the amount of €131 million; a portion of the losses from mandatory conversion in Hungary was permitted to be offset against the bank levy. Bank levies added 2.0 percentage points to the cost / income ratio for 2012 and 1.5 percentage points for 2011.

Operating costs (€ million, 2011 recast)

2012 2011+/– €

mIllION +/– %

Bank as a whole 3,893 3,777 +116 +3% Cost / income ratio 58.8% 56.4%Austrian customer business 1,400 1,395 +5 +0% Cost / income ratio 62.3% 60.8%CEE 2,177 2,102 +76 +4% Cost / income ratio 46.0% 46.8%Corporate Center 316 280 +36 +13%Within the Bank Austria total: Austria *) 1,716 1,675 +41 +2%

Austria without bank levy 1,619 1,598 +22 +1%

*) Customer business plus Corporate Center.

A regional analysis shows that operating costs in Austria (customer business in Austria and the Corporate Center including numerous functions performed as a sub-holding company) rose at a low rate of 2%, without the bank levy by only 1%. This development was mainly due to the 2% reduction of payroll costs. The annual average num-ber of staff (full-time equivalents, FTEs) declined in the Austrian cus-tomer business segments (–18 average FTEs; in a comparison of year-end levels 2012/2011: –191 FTEs). This was mainly due to the reduction in the CIB Division (– 94 average FTEs and –164 FTEs, respectively), reflecting structural changes to focus on customer business and the liquidation of brokerage firms in Russia and Turkey.


In the Corporate Center, the number of staff was down by 217 aver-age FTEs; a comparison of year-end levels 2012/2011 shows a reduction of 160 FTEs. Staff costs in Austria decreased, despite higher charges from staff-related provisions. Given the fact that important functions of the back office, operations and ITC were out-sourced to UBIS, our specialised services provider, the reduction of staff costs is to be seen in conjunction with other administrative expenses, which rose by 9% in Austria, or by 7% without the bank levy. This is still noteworthy in view of the extensive preparations and additional burdens which resulted from the switch to the EuroSIG IT system and the problems experienced in the changeover. The operat-ing model of bundling bank functions in a separate company has thus proved to be effective, with benefits resulting from specialisa-tion, transparency and motivation as a recognised services provider, and from synergies beginning to be unlocked in international cooper-ation within the Group.

… by type of cost (€ million, 2011 recast)

2012 2011+/– €

mIllION +/– %

Payroll costs 1,969 1,945 +24 +1%Other administrative expenses 1,662 1,574 +88 +6%of which: bank levies*) 131 100 +31 +31%Other (mainly depreciation and amortisation) 262 258 +5 +2%

*) Less losses from conversion of foreign currency loans in Hungary which were permitted to be offset against the bank levy.

Costs in the CEE business segment (without ATF Bank in both years) were up by a comparatively low 4% or €76 million. The increase resulted from developments in Turkey (+€52 million/+11%) and Russia (+€24 million/+9%), the two countries which also recorded the strongest growth within Bank Austria’s perimeter of operations. In six countries, operating costs were down or remained unchanged: significant declines were seen in Croatia and Ukraine, and less pro-nounced decreases were recorded in Hungary, the Czech Republic, Slovenia and in Bosnia and Herzegovina. The average number of staff in CEE in 2012 was down by 493 average FTEs from the previous year, mainly on account of large staff reductions in Ukraine (–742 average FTEs) in connection with the restructuring of the local sales network, and reductions in Croatia, Russia and Romania; these were partly offset by additions to staff in core strategic countries including Turkey and the Czech Republic. The cost / income ratio in CEE was 46.0%, down by 0.7 percentage points from the previous year and about 13 percentage points lower than for the bank as a whole.

� Net write-downs of loans and provisions for guarantees and commitments declined by more than one half from the peak of €2,267 million recorded in the crisis year 2009. The strongest decrease was recorded in 2011. Net write-downs of loans and provi-sions for guarantees and commitments in 2012 were €1,103 million, slightly higher than the adjusted figure (without Kazakhstan) of €1,060 million for 2011. This is a further significant decrease

compared with the originally published figure (€1,342 million, includ-ing Kazakhstan). Essentially, net write-downs of loans and provisions for guarantees and commitments in 2012 were more or less at the same level as in 2008, the last year before the big recession.

Multi-year comparison of net write-downs of loans and provisions for guarantees and commitments (€ million)

2007 2008 2009 2010 2011 2011*) 2012*)

Net write-downs of loans and provisions for guarantees and commitments 483 1,012 2,267 1,839 1,342 1,060 1,103Cost of risk (bp) 50 80 178 144 102 83 84

*) Without Kazakhstan (2011: €177 million; 2012: €57 million).

Net write-downs of loans and provisions for guarantees and commit-ments in 2012 were €1,103 million, up by €43 million or 4% on the previous year. This reflects a further significant reduction of 29% in Austria to a multi-year low, with the cost of risk falling to 33 basis points. In CEE, on the other hand, the provisioning charge rose by €126 million or 16% as net write-downs of loans in Turkey returned to normal from a very low level. Net write-downs of loans and provisions for guarantees and commitments (€ million)

2012 2011 CHANGE

Bank Austria as a whole 1,103 1,060 +43 +4%… Austria (including Corporate Center) 208 292 –84 –29%… CEE 895 768 +126 +16% … Turkey 147 48 +99 >100%

Cost of risk (basis points) *)

Bank Austria as a whole 84 83 –0… Austria (including Corporate Center) 33 46 –13… CEE 130 121 +9 … Turkey 107 42 +65

*) Provisioning charge/average loans to customers (net). 10 basis points (bp) = 0.10 percentage points.

Net write-downs of loans and provisions for guarantees and com-mitments in Austria declined in business with both private and corpo-rate customers. The provisioning charge in the Family & SME Banking Division was down by almost one half (–45% to €86 million), with the cost of risk falling from 73 bp to 42 bp. Employment and incomes in Austria still presented a favourable picture compared with other countries. Private individuals and businesses were reducing their debt. There were lower-than-expected additions to loan loss provisions for business with private individuals and significant releases of loan loss provisions in the SME sub-segment of the F&SME Division. A more accurate method of risk measurement in retail banking and the stabilisation of the exchange rate of the Swiss franc led to a reduction of IBNR provisions for performing loans (and of risk-weighted assets). The additional write-down on foreign currency loans in this segment was again further increased to take


Management Report


adequate account of risk associated with final maturity (arising from potentially insufficient performance of repayment vehicles or unfa-vourable exchange rate movements). As in the two previous years, a large number of additional advisory talks were held with customers in this segment in several waves in order to evaluate the current situa-tion. The risk-focused presentation (credit line in €, utilisation in cur-rency) shows the amount of the credit line originally granted to the customer, the currency fluctuation allowed for when the loan was granted, and the amount currently outstanding. In the Corporate & Investment Banking (CIB) Division, additions to loan loss provisions were more than offset by releases of provisions. On balance, irre-spective of a large provision for a specific loan, net write-downs of loans and provisions for guarantees and commitments in this busi-ness segment declined by 6% to €122 million compared with the previous year. The cost of risk in the CIB Division continued to fall in 2012, from 36 bp to 34 bp. In Austria (including the Corporate Center) the cost of risk was a low 33 basis points of average lending volume; this compares with 46 bp in the previous year. A comparison of the provisioning charge and economic trends suggests, however, that net additions to loan loss provisions in Austria may have reached their lowest level.

In Central and Eastern Europe (CEE) the overall risk profile remained stable, despite austerity measures implemented in the region, weak economic trends in most CEE countries and a difficult environment in terms of employment and income trends in some cases. Net write-downs of loans and provisions for guarantees and commitments increased by €126 million to €895 million, and the cost of risk rose slightly, from 121 bp to 130 bp; this compares with 287 bp for 2009. Some 80% of this increase was due to special developments in Turkey, where the provisioning charge rose by €99 million to €147 million. As economic trends in Turkey are ahead of other countries in the business cycle, the situation in Turkey improved earlier than elsewhere. In 2011, the local bank benefited from a net release of provisions made earlier. The return to a more normal level in 2012 is reflected in an increase of €99 million from the previous year. The cost of risk at the bank in Turkey was 107 basis points (compared with an exceptionally low 42 bp in the previous year), a figure which is still disproportionately low.

The risk profile deteriorated, though not dramatically, as economic weakness persisted in most CEE countries. It was only in Croatia (+€51 million to €151 million) and Ukraine (+€37 million to €136 million) that net write-downs of loans and provisions for guar-antees and commitments rose significantly due to economic trends. The Central European countries saw a slight cyclical rise. A special factor was the positive development in Hungary, where the provision-ing charge declined by €60 million to €35 million following the release of a provision of €22 million made in 2011 in connection with mandatory foreign currency debt restructuring (Early Repayment Programme); this compares with realised losses in income recog-nised in the item “net other expenses/ income”. Even without this

effect, the provisioning charge in Hungary was lower than a year earlier. In Romania, net write-downs of loans and provisions for guarantees and commitments were considerably lower than in the previous year (down by €16 million or 15% to €90 million).

Asset quality: With net additions to loan loss provisions declining over the past years, the risk profile has improved. Asset quality usually follows the provisioning charge with a significant time lag. The deduction of the relevant items of ATF Bank, Kazakhstan, which is classified as held for sale, from the various items in the statement of financial position has led to a significant change in asset quality. In the course of 2012, impaired loans declined by 12% to €12.8 billion, with all of the decline relating to ATF Bank. (From year-end 2011 to the end of September 2012, i. e. including Kazakhstan, impaired loans had increased by 5%.) At the end of 2012, impaired loans accounted for a gross 9.2% of the bank’s total exposure (€139.3 billion). Most recently, 71% of impaired loans were in the CEE business segment, compared with 76% in September 2012. The coverage ratio (loan loss provisions/ impaired loans) at the end of 2012 was 47.6%, more or less matching the figure a year earlier (47.7%). In net terms, i. e. after deduction of loan loss provisions, impaired loans accounted for 5.1% (December 2011: 5.6%) of net lending volume (€132.4 billion). Non-performing loans (NPLs) at the end of 2012 (without Kazakhstan) were a gross €6.2 billion, down by 17% from year-end 2011 (with Kazakhstan). The total amount of loan loss provisions was 15% lower. At the end of 2012, the NPL ratio was 4.5% in gross terms (year-end 2011: 5.6%). The coverage ratio, at 64.2%, was slightly higher than in the previ-ous year. In net terms, the NPL ratio at the end of 2012 was 1.7% (2011: 2.1%).

Net operating profit (€ million, 2011 recast)

2012 2011 CHANGE

Customer business segments 2,296 2,232 +64 +3%… Austria 640 609 +31 +5%… CEE 1,657 1,623 +33 +2% Corporate Center –671 –369 –302 –82%Bank Austria as a whole 1,625 1,863 –238 –13%… without impairment charge for Leasing 1,867 1,863 +4 +0%

➔ Net operating profit (operating profit less net write-downs of loans and provisions for guarantees and commitments) improved only slightly in 2012, in both Austrian customer business and CEE (see table). The customer business segments generated a combined 3% increase in net operating profit. In Bank Austria as a whole, net operating profit was down by 13% from the previous year, reflecting the losses in value of the shareholding interest in Leasing which are included with – €286 million in the item “Dividend income and other income from equity investments” in the Corporate Center. Central and Eastern Europe accounted for 72% of net operating profit generated by customer business.


Non-operating deductions in 2012 (€ million, 2011 recast)

2012 2011 CHANGE

Net operating profit /bank as a whole 1,625 1,863 –238 –13%Non-operating deductions –300 –439 +139 –32%

Provisions for risks and charges –305 –136 –169 >100%Integration/ restructuring costs –33 –28 –5 +19%Net income from investments 39 –275 +314 >100%

Profit before tax 1,326 1,424 – 98 –7%

The balance of non-operating items between net operating profit and profit before tax was negative in the reporting period, at – €300 million; yet this constitutes a strong improvement of €139 million over the previous year. The main reason for the improvement is the write-down, ahead of the Greek debt restructur-ing, of €396 million on Greek government bonds which was included in the net result from investments in 2011. Additions to provisions for risks and charges were €305 million in 2012, higher than in the previous year. Within this total, a smaller portion related to sub-stantial provisions made in Turkey (for the credit card bonus points programme, among other items) and provisions for pending legal proceedings, mainly legacy burdens, and a provision for equity investment risks. Integration/ restructuring costs totalled €33 million, including €27 million for Smart Banking, a major project with which the bank will introduce a change in the customer service approach in Austrian retail banking, offering a new mix of branch network and digital communication channels. This will involve the closure of 12 branches in Austria in 2013. In 2012, net income from investments was €39 million. Gains on the reduction of the equity interest in MICEX, the Russian interbank market platform, and to a lesser extent also gains on the sale of office buildings (Croatia, the Czech Republic, Turkey) more than offset negative items. These included additional write-downs, effected in the first half of 2012, on Greek government bonds. Market price developments in this context in the remaining part of the year did not involve any negative impact but had a slight positive effect. Moreover, in the middle of 2012, we reduced holdings of bonds of other highly indebted countries (Portugal, Spain), realising comparatively low losses on the sale. The positive net income from investments in 2012 compares with a net loss of €275 million in 2011, mainly due to write-downs of €396 million on Greek government bonds in that year, which were partly offset by additional income from equity interests (among other transactions, in the middle of 2011, the restructuring of the Moscow Interbank Currency Exchange resulted in a revaluation gain on our Russian banking subsidiary’s equity interest in MICEX; the amount of the gain in 2011 was more or less equal to income from the sale of shares in the current year).

➔ Profit before tax (before goodwill impairment and the PurchasePrice Allocation effect) for 2012 was €1,326 million (– €98 million or –7% compared with 2011). Income tax on this amount was

€353 million, an increase of 36% over the previous year including special effects in Ukraine and Austria. Non-controlling interests (€38 million after €50 million) related mainly to the results in Bulgaria, Romania and Croatia and to Card Complete.

Profit performance 1) (€ million)

20122011

RECAST

Profit before tax 1,326 1,424Income tax and non-controlling interests –390 –309Total profit or loss after tax from discontinued operations –301 –493Goodwill impairment, PPA2) –212 –416

Net profit 1) 423 206

1) Net profit attributable to the owners of the parent company.2) Write-downs on former Purchase Price Allocation (PPA).

On the basis of a sound profit before tax, net profit for 2012 was sig-nificantly influenced by valuation adjustments to the equity interests in the CEE banking subsidiaries in Kazakhstan and Ukraine, which were acquired a short time before the onset of the financial market crisis. In the case of ATF Bank, Kazakhstan, which is classified as held for sale, the related goodwill impairment charge, the current loss for 2012 and additional expenses are shown in the item “Total profit or loss after tax from discontinued operations” at a combined – €301 million. To ensure comparability, the recast figures for 2011 (see table) include the current result and the goodwill impairment charge recognised in respect of ATF Bank in 2011. Goodwill impair-ment in 2012 relates to PJSC Ukrsotsbank, Ukraine, in the amount of €165 million; in addition, there are foreign currency translation effects to be taken into account. Results of our banking subsidiary in Ukraine were far below the budget figures for 2012, reflecting the poor conditions in the local banking sector. The Purchase Price Allocation effect (PPA) was significantly lower in 2012 than in the previous year (– €13 million after – €29 million); this item relates to write-downs on intangible assets dating from the time of acquisition.

Non-operating income components in 2012 – i. e. the difference of €1,203 million between net operating profit and net profit – absorbed 70% of net operating profit, compared with almost 90% in the previous year. After these adjustments and with the imminent with-drawal from Kazakhstan, a larger proportion of the bank’s net operat-ing profit should again feed through to the bottom line in future years.

➔ Bank Austria’s net profit (attributable to the owners of the parent company) for 2012 was €423 million compared with the previous year’s €206 million (recast) or €209 million (as published). This gives a return on equity of 2.4% after 1.2% in the previous year. While the bank levies are a small proportion of total operating costs, €141 million (gross) more to bolster capital buffers, on a pro-rata basis in the countries concerned, would have been very helpful in this respect.


Management Report


Financial position and capital resources

Major items in the statement of financial positionAS PUBlISHEd: FOR ANAlYSIS PURPOSES:

31 dEC. 2012 31 dEC. 2011 CHANGE2012/2011

31 dEC. 2011AdjUSTEd

CHANGE2012/2011

ASSETSOther financial assets1) 23,384 18,390 +4,995 +27.2% 18,237 +5,148 +28.2%Loans and receivables with banks 28,112 25,621 +2,491 +9.7% 25,417 +2,696 +10.6%Loans and receivables with customers 132,424 134,914 –2,489 –1.8% 131,307 +1,118 +0.9%Intangible assets 2,459 2,866 –407 –14.2% 2,604 –145 –5.6%Non-current assets and disposal groups classified as held for sale 3,788 55 +3,732 n. m. 4,652 –864 –18.6%Other asset items 17,429 17,384 +45 +0.3% 17,013 +415 +2.4%Total assets 207,596 199,229 +8,367 +4.2% 199,229 +8,367 +4.2%

lIABIlITIES ANd EQUITYDeposits from banks 31,061 32,772 –1,711 –5.2% 32,545 –1,484 –4.6%Deposits from customers 110,563 104,728 +5,835 +5.6% 101,637 +8,926 +8.8%Debt securities in issue 28,063 29,931 –1,868 –6.2% 29,100 –1,037 –3.6%Liabilities included in disposal groups classified as held for sale 3,506 0 +3,506 n. m. 4,202 –695 –16.6%Provisions for risks and charges 5,389 4,204 +1,185 +28.2% 4,204 +1,185 +28.2%Equity 18,192 17,661 +531 +3.0% 17,661 +531 +3.0%Other liability items 10,822 9,934 +889 +8.9% 9,881 +941 +9.5%Total liabilities and equity 207,596 199,229 +8,367 +4.2% 199,229 +8,367 +4.2%

KEY RATIOSCustomer loans/ total assets 63.8% 67.7% 65.9%Primary funds/ total liabilities and equity 66.8% 67.6% 65.6%Customer loans/primary funds 95.5% 100.2% 100.4%Total assets/equity (leverage ratio) 2) 13.0 13.3 13.1

1) Financial assets at fair value through profit or loss + available-for-sale financial assets + held-to-maturity investments. / 2) Leverage ratio based on the cash concept: total assets without intangible assets /equity without intangible assets

Financial position The contributions from ATF Bank, Kazakhstan, which is classified as held for sale on the basis of a strategic decision on risk reduction, are no longer included in the respective items of the statement of financial position at 31 December 2012. They are instead shown under “ Non-current assets and disposal groups classified as held for sale” and “Liabilities included in disposal groups classified as held for sale”. With €3.6 billion in loans and receivables with customers and €3.9 billion in primary funds, ATF Bank was a significant factor in 2011. To ensure comparability with the previous year’s figures for the individual items, i. e. for analytical purposes, the 2011 statement of financial position is shown as published and in an adjusted form to reflect the structure of 2012. The commentary refers to the adjusted figures. This does not affect the bank’s total assets.

� As at 31 December 2012, total assets were €207.6 billion, up by €8.4 billion or 4.2% on year-end 2011. The increase reflects an asym-metrical development of customer business in 2012: deposits from cus-tomers rose very strongly, by an amount that exceeded the increase in total liabilities and equity, while credit expansion was weak. As a result, funds were partly used to build up liquidity reserves including govern-

ment bonds eligible for repurchase transactions among available-for-sale financial assets. Interbank business also developed in a diverse manner, with deposits from banks declining while loans and receivables with banks increased. The equity capital base improved with the net profit for 2012, and leverage was further reduced. Overall, develop-ments in Austria and in CEE reflect customers’ currently strong liquidity position and restrained credit demand, as well as the bank’s own busi-ness policy which is geared to reducing risk and strengthening liquidity and capital buffers.

� On the assets side, loans and receivables with customers grew moderately from year-end 2011 to year-end 2012, by €1.1 billion or 0.9%. At €132.4 billion, they still accounted for 63.8% of total assets (compared with 65.9% at the end of 2011). As expected, loans and receivables with customers in CEE grew by 5.2%, which compared with a 3.6% decline in Austria (including the Corporate Center). Credit expan-sion in CEE, too, was moderate, high double-digit growth rates will not be seen for quite some time. The strongest growth of loans was achieved in Turkey (+16%, or +12% if adjusted for exchange rate movements), Russia (+10% /+7%) and in Serbia, Bulgaria and Roma-nia. The credit growth momentum in CEE was curbed by a decline in Hungary (largely for technical reasons/ foreign currency debt restructur-


ing) and in Ukraine (deleveraging). loans and receivables with banks increased by €2.7 billion to €28.1 billion. Most of the increase (+€2.4 billion) is explained by deposits with central banks and included funds (+€1.4 billion) held to meet the stricter minimum reserve requirements, reflecting the more restrictive monetary policies pursued by some countries (including Turkey). Within the combined total of financial market investments (€23.4 billion), available-for-sale finan-cial assets rose to €21.1 billion, an increase of €6.5 billion or 45.0% over the year-end 2011 figure. Government securities in this category accounted for almost all (+€6.2 billion) of this increase, with Austrian government securities accounting for one-half (+€3.1 billion) of the increase in holdings of government bonds. Various asset items include a total of €17.8 billion in claims against sovereign debtors (carrying amount). The highly indebted countries Greece, Portugal, Slovenia and Spain accounted for €248 million (1.4% of the portfolio). Italian gov-ernment bonds (€849 million) accounted for 4.8% of the total, about the same proportion as Russian or Croatian bonds. The fair value of claims against governments exceeded the nominal amount by 9% (see the table in the “Sovereign risk” section of the risk report on pages 187 to 188). Holdings of government bonds fulfil an important function in liquidity management of the local banks and of the bank as a whole.

� On the liabilities side, deposits from customers, which rose by €8.9 billion or 8.8% to €110.6 billion accounted for the increase in total liabilities and equity in 2012 (+€8.4 billion). Growth was driven by the CEE banking subsidiaries (+11.2%) and by Austrian customer busi-ness (+6.3%, or +6.0% with the Corporate Center). Virtually all CEE banks recorded double-digit growth in deposits, which was not the case in lending activity. Debt securities in issue were down by €1.0 billion or 3.6% (compared with the adjusted figure for 2011) to €28.0 billion. Maturing securities were initially not replaced in view of the inflow of direct deposits and the occasionally unfavourable market sentiment on bank securities. Primary funds (the sum total of deposits from custom-ers and debt securities in issue) nevertheless rose by 6.0%, faster than total liabilities and equity. This means that with primary funds of €138.6 billion, customer loans are more than fully funded, to the extent of 105%. Deposits from banks and financial liabilities held for trading both declined in 2012. Allocations to provisions for risks and charges were much higher in 2012 (+€1.2 billion or +28% to €5.4 billion), largely as a result of pension provisions (+€0.9 billion). In this context, an increased addition to provisions in Austria was required on account of the low interest rate levels and the consequently lower discount rates. At the end of 2012, IFRS equity was €18.2 billion and accounted for 8.8% of total liabilities and equity. The increase of €531 million resulted from net profit included in retained earnings, and from a positive contri-bution from other comprehensive income. In this context, an increase in reserves in accordance with IAS 39 more than offset the negative devel-opment of pension obligations. Based on the cash concept, without intangible assets, the leverage ratio declined to 13.0 at the end of 2012, primarily because goodwill was lower. This compares with 21.9 at the end of 2008.

Capital resourcesRisk-weighted assets (RWAs) as at 31 December 2012 were €130.1 billion, up by €4.9 billion or 3.9% from year-end 2011.

Overall, credit-risk RWAs rose by €5.7 billion. The increase was mainly due to the expansion of business with corporate and private customers in Turkey and Russia. Exchange rate movements also had an effect. In some countries, RWAs increased also because ratings were down-graded in view of the economic environment. RWAs from operational risk rose by €0.8 billion in the reporting period. Market-risk RWAs declined by €1.6 billion, reflecting a significantly lower value at risk.

A comparison of year-end figures for 2012 and 2011 shows that capital requirements for credit risk rose by €0.5 billion or 5.2% to €9.2 billion, and capital requirements for all types of risk increased by €0.4 billion or 3.9% to €10.4 billion.

Net capital resources rose by €0.3 billion or 2.0% to €16.2 billion at year-end 2012, mainly through retained profits.

As risk-weighted assets rose more strongly, the Tier 1 capital ratio was 10.8% at the end of 2012, slightly lower (by 0.1 percentage points) than at year-end 2011. The Core Tier 1 capital ratio (Tier 1 capital ratio without hybrid capital) remained at 10.6%.

Capital ratios31 dEC. 2012 31 dEC. 2011

based on all risks 1) Tier 1 capital ratio 10.8% 10.9%… without hybrid capital (Core Tier 1 capital ratio) 10.6% 10.6%Total capital ratio 12.5% 12.7%

based on credit risk 2) Tier 1 capital ratio 12.3% 12.5%… without hybrid capital (Core Tier 1 capital ratio) 12.0% 12.1%Total capital ratio 13.0% 13.4%

1) Credit risk, operational risk, position risk and settlement risk. / 2) Capital resources less requirement for the trading book and for commodities risk, exchange rate risk and operational risk as a percentage of the risk-weighted assessment basis for credit risk.


Management Report


Financial and non-financial performance indicators

Volume, profitability and resourcesBesides the economic environment, trends in business volume, revenues, profitability and resources employed (capital, branches, employees) in 2012 reflected the fundamental reorientation of the financial sector in the past three years, which involves structural adjustments and low profitability. Management of risk-weighted assets and targeted capital allocation are among the main control levers used in making adjustments at Bank Austria. The focus on commercial banking business involved giving priority to specific regions within the sales network.

Resources and profitability in 2012

BANK AUSTRIA

AUSTRIANCUSTOmER

BUSINESS 1) CEE

Relative sizeAverage loans to customers (€ billion) 131.9 56.7 68.9

Change over previous year 2) +3.5% –3.2% +8.2%Average risk-weighted assets (RWAs, € billion) 129.1 28.3 83.9

Change over previous year 2) +3.9% –14.3% +9.5%Primary funds (€ billion) 133.4 58.5 59.4

Change over previous year 2) +5.4% +3.7% +11.5%

Results, profitability and value creationOperating income (€ million) 6,622 2,248 4,728

Change over previous year 2) –2.1% –1.2% +5.2%Profit before tax (€ million) 1,326 562 1,712

Change over previous year 2) –6.9% +1.0% +6.0%ROE before tax 3) 7.4% 17.3% 13.2%

EquityAverage equity (€ billion) 4) 17.9 3.3 13.0

Change over previous year +3.0% +10.2% +11.9%

1) F&SME, Private Banking and Corporate & Investment Banking (CIB) Divisions, thedifference of the total amount is shown in the Corporate Center – see “Description ofsegment reporting” on pages 166 to 167 of this report. / 2) Adjusted to the conso-lidation perimeter and accounting principles in 2012. / 3) ROE = profit before tax divided by average equity of the business segments. / 4) Subsidiaries are included at actual IFRS capital.

Average loans and receivables with customers in 2012 were up by 3.5% on the previous year; the increase in primary funds was even stronger, at 5.4%. Volume growth was achieved in the CEE business segment (see table). In the three Austrian customer business segments, lending volume declined, partly due to changes in the way companies financed their operations (increas-ingly by tapping capital markets, internal financing; disintermedia-tion trends); expansion on the liabilities side was relatively strong.

CEE accounted for 52% and the three Austrian customer business segments for 43% of annual average lending volume (the remain-ing portion – over €6 billion or 5% in the Corporate Center – includes funding in connection with equity interest management).

In 2012, average risk-weighted assets (RWAs) at overall bank level rose at a slightly higher rate (+3.9%) than lending volume. RWA trends (and thus equity allocation) varied between Austria and CEE for economic and business-policy reasons. The strong decrease in Austrian customer business (–14% year-on-year) was also due to a base effect: as the Swiss franc strengthened in the course of 2011, RWAs increased in that year. The situation has meanwhile returned to normal. In CEE, the increase in risk-weighted assets (+9.5%) was stronger than credit expansion (+8.2%), one of the reasons being the higher credit and market risk – financial market trading activities with customers are expanding strongly and are conducted in CEE on a decentralised basis. Almost all of the increase in average RWAs in 2012 resulted from expansion in Turkey (+20%) and Russia (+27%), driven by lending operations in commercial banking business. RWAs in the Central European countries and in the Western Balkan countries declined slightly. These developments were reflected in capital allocation, in line with the medium-term outlook. Equity allocated to the CEE business segment, with a similar regional profile, rose by 11.9%, at the expense of capital allocation to the Corporate Center.

Return on equity (ROE before tax = profit before tax /allocated equity, subsidiaries with institutional capital) declined compared with the previous year, by 0.8 percentage points to 7.4%, due to special effects in the Corporate Center. (Profit before tax does not, however, reflect goodwill impairment and it does not include profit or loss from discontinued operations). For the three Austrian cus-tomer business segments combined, ROE before tax was 17.3%. This compares with 13.2% for the CEE business segment, where allocated equity was much higher. Profit before tax in the CEE business segment was over three times the figure for Austria, equity allocated to this growth market was four times the figure for Austria. ROE after tax (based on net profit attributable to the owners of the parent company) in 2012 was 2.4%, after 1.2% in the previous year – in both years the low level was due to non-operating expenses including substantial goodwill impairment charges. A comparison of current levels of return on equity with the figures before the collapse of Lehman Brothers in autumn 2008 is still not meaningful (average ROE before tax for the period 2005 to 2007: 19.1%, after tax: 15.7%).


The number of Bank Austria’s branches has declined by 66 (–2.3%) since the end of 2011. This calculation no longer includes the branch network in Kazakhstan (year-end 2012: 139 branches, year-end 2011: 143 branches). With the exception of Turkey, where the branch network was expanded by 25 to a total of 988 units, the number of branches remained unchanged – e. g. in Russia and in the Czech Republic, where the branch network had been enlarged in 2011 – or it declined, with the most significant decreases seen in Hungary (–12), Bulgaria (–12), Ukraine (–15) and Romania (–37). It should be noted that there are shifts within several countries, in favour of focal areas.

From the end of 2011 to the end of 2012, staff numbers declined by 1,708 full-time equivalents (FTEs) or 2.9% to 57,566 FTEs. This figure still includes ATF Bank, Kazakhstan (3,314 after 3,499). Without Kazakhstan FTEs would have been down by 1,525 FTEs or 2.7%. The number of employees in the three Austrian customer business segments decreased by 191 FTEs or 3.3% year-on-year. The CIB Division accounted for the largest portion (–164 FTEs) of the decline: brokerage subsidiaries allo-cated to CIB are being wound up (the former Aton Group and the Turkish brokerage firm Menkul) or restructured (CAIB Polska), giving a combined reduction of 120 FTEs, the remaining decrease reflects the reduction of proprietary trading in Markets /Counter-

parts. Staff numbers in the Corporate Center were down by 160 FTEs, due to further outsourcing of internal service providers including the sale of Domus Facility Management (–76 FTEs) and in Procurement and Security.

In CEE (without Kazakhstan), the net reduction of 1,172 FTEs (–2.4%) resulted from additions to staff especially in Turkey (+243 FTEs), the Czech Republic (+19 FTEs), Bulgaria (+11 FTEs) and Serbia (+8 FTEs), which compared with reductions in Croatia (–225), Romania (–184), Russia (–221) and Hungary (– 90). The largest staff reduction took place in Ukraine (–588 FTEs), where the restructuring of the local network and administrative offices continued.

Austrian customer business 10%

Turkey and Russia 38%

Corporate Center 4%

Ukraine, Baltics 12%

South-East Europe (SEE) 25%

Central Europe (CE) 10%

Ukraine, Baltics 8%

South-East Europe (SEE) 25%

Central Europe (CE) 15%

Corporate Center 9%

Austrian customer business 18%

Turkey and Russia 25%

Capital employed by region Employees by region

Average number of employees (FTEs) without Kazakhstan in 2012Average equity allocated in 2012

€18.0 billion 54,955 FTEs

(recast)BANK

AUSTRIA 3 AUSTRIAN

SEGmENTS 1) CEEKAZAKH-

STANCORPORATE

CENTER 2)

BranchesYear-end 2012 2,970 289 2,542 139Year-end 2011 3,040 290 2,607 143

Employees (FTEs)Year-end 2012 57,566 5,532 46,847 3,314 1,864Year-end 2011 59,265 5,723 48,018 3,499 2,024

1) F&SME, Private Banking and Corporate & Investment Banking (CIB) Divisions.2) Global Banking Services plus remaining part of Corporate Center (Competence Lines).



Operations, ICT One of UniCredit’s strategic objectives focuses on the develop-ment of a cross-regional infrastructure for settlement, IT and inter-nal services which will provide optimum support to the bank’s customer service units with a view to creating value, bundling technical expertise, strengthening the bank’s innovative power and improving cost efficiency. The need for such measures is partly underlined by the growing relevance of IT and back office activities (taxation of securities, reporting requirements, regulatory require-ments etc.). A general cross-regional service model is moreover consistent with the logic of an international banking group. This function of a global service company is performed by UniCredit Business Integrated Solutions S. C. p. A. (UBIS S. C. p. A.), a wholly-owned company of UniCredit. UBIS S. C. p. A. was created by integrating and consolidating 13 companies within the Group. Some 12,000 employees in eleven countries – Germany, the UK, Italy, the US, Austria, Poland, Romania, Singapore, Slovakia, the Czech Republic and Hungary – provide services in the areas of information and communication technology (ICT), back office and middle office activities, real estate, security and procurement. UBIS S. C. p. A. works for UniCredit business divisions in Italy, Germany and Austria, and coordinates and reviews business activities in the CEE countries pursuant to UniCredit guidelines. The provision of services from a single source is based on an international approach to improve efficiency and create economies of scale, with attention being paid primarily to customer satisfaction through a clear focus on meeting the needs of local customers. This con-sistent service model is unique in the European financial sector.

Under the large-scale “All4Quality” project, service operations were integrated in Austria step by step with a view to bundling IT, back-office activities, facility management, security and procure-ment in the new service company UniCredit Business Integrated Solutions Austria GmbH (UBIS Austria). UBIS Austria, domiciled in Vienna and a wholly-owned subsidiary of UBIS S. C. p. A., which is based in Milan and commenced operations on 1 January 2012, kicked off on 1 February 2012. The Austrian company has about 2,300 employees including the branches in Poland (back office) and Romania (back office and IT). It provides Bank Austria, its prin-cipal customer, with the above services on the basis of service level agreements (SLAs), agency agreements and organisation level agreements (OLAs).

Under the All4Quality project, the creation of UBIS Austria was pre-ceded by the outsourcing of tasks and by the establishment, reor-ganisation and integration of companies in a multi-stage process:• 2011:MergeroftheITcompaniesUGISAustriaGmbHand

Bank Austria Global Information Services (BAGIS), integration of selected UniCredit Bank Austria components from Global Banking Services – Procurement and Security – in UGIS Austria GmbH.

• 1February2012,merger:UniCreditBusinessPartnerGmbH(UCBP), a provider of back-office services, is taken over by UGIS Austria GmbH. The company’s name was changed to UniCredit Business Integrated Solutions Austria GmbH.

• 1September2012:UniCreditBankAustriaAGsellsDOMUSFa-cility Management GmbH (DOMUS FM) to UBIS Austria (100%).

• 1March2013:DOMUSFMismergedwithUBISAustria(up-stream merger) and now operates as Service Line Real Estate AT.

• 1March2013:TheAll4QualityAustriaprojectiscompleted.

Additional outsourcing activities related to the transfer of specialised functions to sub-service providers and joint ventures: • InMay/June2011UGISAustriaGmbHandBAGIStransferred

components of their application development and infrastructure activities to the IBM Austria subsidiary Blue IT Services GmbH (BIT).

• InternalHRserviceswerealsobundledstepbystep:initially,inMarch 2012, components of UniCredit Bank Austria HR Shared Service Center (HR Consultant & Client Service, HR Pensions and Payroll, Training Administration and Business Solutions) were transferred to UBIS Austria. In June 2012, these services were outsourced to the Austrian branch of a joint venture, ES SHARED SERVICE CENTER S. p. A., which was formed by Hewlett Packard Enterprise Services Italia S. r. l. and UBIS S. C. p. A.

UniCredit Bank Austria AG and Global Mail (Austria) Ges. m. b. H., a subsidiary of Deutsche Post DHL in Austria, signed a service agreement relating to the bank’s operations. In accordance with the agreement, the postal and printing services including transport logistics of Bank Austria are provided via Global Mail (Austria) since 1 October 2012. The location in Vienna remains unchanged. Bank Austria employees were delegated to the company for the per-formance of their tasks under this new arrangement. In Bank Austria’s premises, all postal and printing processes and services such as the centralised preparation and dispatch of account statements for customers and employees remain unchanged and continue to be subject to the mandatory data protection and compliance guidelines.

Management Report


New buildings for new central functions In view of the new way banks present themselves to the public, permanent changes in centralised banking functions and rationali-sation pressure, in particular, the possibilities to adapt historical representational buildings have reached their limits. Such efforts are being replaced by extensive investments in new buildings for banks’ own use, which serve as flexible structures for future regional and cross-regional activities. The purpose of the Bank Austria Campus project is to bundle centralised functions, currently spread among a number of different locations, within a single headquarters with about 4,000 employees by 2016. This will cut costs, reduce the distances and travelling time between units, increase visibility that we all share the same vision, and facilitate communication in our day-to-day work, with Vienna func-tioning as a backdrop for international exchange. Major moderni-sation projects launched by the bank, which involve new functions and roles such as the increasing digitalisation of customer ser-vices, incorporate a new conception of headquarters that are open and promote innovation. The bank’s new head office, with a total gross floor area of about 200,000 m2, is being constructed on the site of Vienna’s former Northern Railway Station, a strip of waste land that has marred Vienna’s inner precincts. The offices will be flanked by social facilities available to employees, an hotel and local stores. Pre-construction work will extend from May 2012 to March 2013. In this context, in June 2012, we launched the sale process for the historical head office building in Vienna, Schot-tengasse 6–8, and invited a select group of interested national and international potential investors to participate in a bidding pro-cess. A final decision had not been made by the closing date of this report. The building in Schottengasse will continue to be used until the Bank Austria Campus is ready. In a number of CEE coun-tries we have also bundled in modern buildings central functions which were previously dispersed among different locations, and we have sold historical administrative buildings. In 2012, Bank Austria completed construction of a building for sport, leisure and events at Kaiser wasser, an arm of the Danube: in line with UniCredit’s “Working Family” philosophy, the new facility will be used as an innovative training centre in addition to the facility’s day-to-day operations, complementing Turin as a second location for manage-ment development. An expected 4,000 or so participants from the entire UniCredit Group are expected to pass through the facility each year, which will kick off in the second quarter of 2013.

Report on “research and development” Bank Austria’s business objective is to provide banking services. The production process of a bank does not involve research and development in an industrial sense. But day-to-day business oper-ations continuously benefit from development activities, such as for the structuring of investment products (e. g. products with capi-tal guarantees) or in conjunction with financial engineering for

our customers. In the latter case, examples are complex acquisi-tion or project finance arrangements over and beyond the employ-ment of standard products. Generally, Bank Austria aims to meet the needs of different customer groups with simple products. In the area of internal control, the methodologies used in the bank’s risk management, the management of the structure of assets and liabilities, and in funding and liquidity management, are constantly being refined. This entails substantial cost, given the ongoing changes in the environment within which the bank operates and the work required to prepare for far-reaching regulatory changes (see the risk report). The fast progress of digital sales channels moreover requires significant investment in market research, technical developments and needs-oriented product design, all of which are reflected in our key SmartBanking project.

Cross-regional EuroSIG core banking systemOn the long week-end of 26 to 28 October 2012 (the 26th was a national holiday) Bank Austria introduced a new IT system, one of the largest and most complex projects to date. The EuroSIG system (European Sistema Informativo di Gruppo) is now used in four countries – Italy, Germany, the Czech Republic and Austria – with 70,000 colleagues working on the same IT platform. While the basis of the system is the same for all countries, the system’s architecture varies from country to country, depending on local business models and legal requirements. The purpose of the sys-tem is to enhance security and ensure the further expansion of benefits for customers. The standardisation of the many systems also results in cost benefits: a single system basis permits improvements in IT efficiency while reducing IT complexity, something which is particularly important in times of ever stricter regulatory requirements. It also facilitates the development and processing of products sold on a cross-border basis.

The major challenge was the adaption of the underlying Group software to the Austrian legal basis and Bank Austria’s range of products, and to integrate the remaining Bank Austria classic systems. The data warehouse and Internet Banking moreover had to be newly developed. While developing the IT, we performed 65,000 tests. The changeover also involved the adjustment of internal Bank Austria processes, and we took the necessary meas-ures for organising the go-live. An extensive training programme developed by the bank itself paved the way for the changeover. Based on the blended learning approach, it blended phases of self-determined learning in web-based training and seminars into efficient training stretches. Bank Austria employees completed about 66,000 training days overall. Between June and October they had the opportunity to try their hand at business transactions in the new system on 14 practice days.



Management Report

Despite intensive preparation which covered four test days and a general rehearsal, start-up problems were encountered in rou-tine business after the changeover, especially in OnlineBanking and BusinessNet, and in payment transactions. In addition to its willingness to meet any claims for compensation for financial dis-advantages incurred by customers, Bank Austria presented all OnlineBanking users with a voucher for €30 as amends for the disruption caused by the changeover. The offer was accepted by a little over one-half of the bank’s 700,000 OnlineBanking custom-ers, with many using this as an opportunity to donate the amount to charity; this resulted in donations totalling about €404,000. BusinessNet customers were credited separately. In this very diffi-cult and challenging phase, staff in the sales segments displayed exceptional commitment in their contact with customers.

Since the go-live, the system is being further enhanced in regular releases to ensure ongoing stabilisation and optimisation. This will intensify the cross-regional exchange of experiences and product development. The internationalisation of the IT system will support the Group in meeting the new challenges of the market and improve its competitiveness in Europe.

Customer relationship management in difficult phasesThe performance and stability problems encountered in the imple-mentation of EuroSIG in October 2012 severely tested our claim of “excellent service and customer orientation”. But we responded in a resolute and forward-looking manner with the following mea-sures as soon as the first problems occurred:• Animmediateincreaseinstaffassignedtohandlingcomplaints,

the social media and the bank’s hotline to process customer inquiries.

• Dailymonitoringofcomplaints.• Increasingpossibilitiesformakingamendsinthesalesunits

through unbureaucratic and fair refunds by giving top priority to customer satisfaction.

• Advancenotificationandopeninformationviathewebsiteandsocial media, and a “public apology” by our CEO with the assur-ance that complaints will be promptly treated in a fair manner.

• Transparentprocessforreimbursingcustomersandnon- customers for losses incurred as a result of the IT system changeover (requests submitted via the toll-free hotline, e-mail and Bank Austria website or directly in the branch) with the service standard of solving a problem in less than 24 hours.

• “Amends/apology”forallusersofBankAustria’sOnlineBankingservices in the form of a €30 voucher that could be redeemed at Austrian stores or used as a donation to listed charities.

About two weeks after the IT changeover we conducted three tests/mystery shopping visits in the largest 100 branches in cooperation with an external partner to obtain information on our service quality in times of crises. The results are impressive: customer satisfaction in the area of “customer orientation” and “engagement” was con-firmed with a score of 95%. We achieved a score of 99% to 100% for “competence”, “friendliness”, “calm and self-assured”. The over-all impression at the branches that were tested in the “hot phase” reflected a satisfaction score of 96.

Our most important goal: customer satisfaction The successful crisis management measures taken when EuroSIG was introduced once again showed on a real-time basis that customer satisfaction at Bank Austria is more than a mandatory exercise in external communication: it is an objective in itself and an important control element of our business model. We want our efforts to achieve customer satisfaction to become clearly embed-ded in the bank’s commercial business operations in various ways. We want to communicate this message to the customer, and we also want to accurately identify the preferences and needs of our customers. This applies to all customer target groups and within the bank to all business segments and product and service lines. A refined system of current, objective measurements and applica-tion of various techniques helps us understand our customers even better, thereby enabling us to make the necessary improvements. The customer satisfaction levels which are measured at regular intervals are entered in the scorecards of all hierarchies (also for determining variable salary components). Finally, we use various communication channels and projects to enable our customers to emotionally experience “Austria’s best customer bank”.

In 2012 we interviewed about 43,000 customers to obtain information on general customer satisfaction; this was done by external market research institutions. The feedback was evaluated at all levels (branches, regions, customer groups, divisions, the bank as a whole), which included a comparison with the banking sector and within UniCredit Group to enable the bank to respond to the results with a package of measures. In 2012, Bank Austria’s aggre-gated TRI*m customer satisfaction index improved by 3 points to 74. The highest score was achieved by the Corporate & Investment Banking Division (TRI*M 78, up by 3 points), which impressively underlined its market and quality leadership as perceived by the customer, followed by the Private Banking Division whose score improved by 6 points to a TRI*M of 75. The F&SME Division also improved its score by 1 point to TRI*M 70. These results reflect the competence, service orientation and commitment of our relationship managers, and the rising frequency of advisory services.


mystery shopping was again conducted in selected branches in 2012 for the ongoing evaluation and improvement of the high quality of advisory services provided by our relationship managers. In addition, customer opinions are obtained via the “@Feedback Kundenerlebnis” (customer experience feedback) tool: immedi-ately after an advisory talk with a customer, such as an annual review, we send the customer a short electronic questionnaire for the purpose of evaluating the talk. Since the tool was launched in 2011 we have sent out 138,000 e-mails inviting feedback, yielding a favourable response rate of close to 50%. The results generally indicate a high level of satisfaction with the quality of advisory talks.

“Best service provider”: In 2012, for the second time in succes-sion, Bank Austria was elected from among renowned Austrian companies as the “Most customer-oriented financial services provider in Austria”. In a comparison with all sectors we came in second place. The competition was based on a survey of customer perception and on the evaluation (by way of an audit) of the com-pany’s and management’s customer orientation. The competition was organised by the University of St. Gallen in cooperation with Service Rating GmbH, IMAS Research International and “Die Presse”, an Austrian daily newspaper.

In 2012 our “Vertrieb 2.0” (Sales 2.0) sales strategy, based on the beyond-budgeting principle, entailed a reorientation of sales management, performance management, performance incentives and leadership quality in the F&SME Division. On this basis, the sale of products is still important but not as an end in itself or for meeting sales targets. Products are sold on the basis of an exact analysis of customers’ needs and optimum customer services as perceived by the customer. Supported by an extensive training pro-gramme entitled Solutions4All, advisory services have over the past few years been focusing on solutions to meet customers’ specific requirements. In this context, advisory service quality is now meas-ured on the basis of team performance rather than individual per-formance. “Vertrieb 2.0” is an answer to regulatory requirements, but it is also a philosophy which places customer benefits at the centre of customer service considerations and gives teams more responsibility.

Quality of services: “Der 6. Sinn” (the Sixth Sense) was an initia-tive which each day covered 3,800 colleagues in the sales units in the context of the “Bank Austria Kundensinn”. A Web 2.0 platform was used by employees to share information and discuss and learn from one another in real time. The virtual sharing of best practice (4,000 tips and 10,700 comments) was accompanied by five branch workshops throughout the year. The result was a clear change in perception in Bank Austria’s service culture to “customer first”. 96 branches in Austria received awards as Top Service branches. In 2012 we formulated the Bank Austria promise to

customers and committed ourselves to its fulfilment. There are five dimensions to the promise: “Comprehensive services” (com-plete range of customer services, simple and easy) – “Complete solutions” (joint focus on the customer’s needs) – “Round the clock” (availability via modern communication channels) – “Your needs” (satisfaction and relationship management) – “All-round advice” (listening, lucidity, active information). We have made the promise to customers an integral component of our corporate communication and the guiding principle of our advertising campaigns. At the end of 2012 we launched the Bank Austria Employee Forum and the Bank Austria Customer Forum (www.mitarbeiter-forum.at, www.kundenforum.at). In this context we will use a specially designed Web 2.0 platform to enable employees and customers to test, discuss and evaluate product ideas, strategic decisions and process changes, and to receive feedback from them on whether they find communications easy to understand and attractive. The primary objective of both platforms is to directly integrate the views of employees and customers in Bank Austria’s decision-making processes and thereby even better meet the expectations of our employees and customers. With these two platforms we are engaging in a new form of dialogue, enhancing the transparency of our in-house developments and sending a clear “customer centricity” signal.

As part of our complaint management activities, we gave cus-tomers access to all communication channels (e- mail, website, 24h ServiceLine, branches, ombudsperson) and we improved the relevant processes with a view to resolving 80% of all complaints within 24 hours. Complaint management has been established as one of the core processes in customer management, with meas-urements of various dimensions and regular reporting. Ongoing improvements relate to behaviour and processes. We have set up an ombudsperson’s office for persons experiencing social hardship, where customers who are in financial difficulty receive assistance in reducing their debt, or are granted additional time for payment, etc.

People Survey: Strongly committed employees are the key success factor for any company. In 2011 Bank Austria achieved an increase of 3 points (in a multi-year comparison, 7 points) in the Engagement Index determined as part of the Group-wide “People Survey”, which takes place every two years. At 78 points, the index level for Bank Austria significantly exceeded the Group-wide benchmark of 74 points. An action plan implemented in 2012 aimed at making better use of further potential: transparency in appointments, employees as customers, and communication and dialogue culture were some of the focal areas where improve-ments were made on a consistent basis. The next Group-wide People Survey will be held at the end of 2013.



Management Report

Human ResourcesHuman Resources management is a strategic partner for busi-ness, initiating and driving change processes in our company. We are creating an environment in which employees can realise their potential in the best possible way and generate sustainable value for our customers. We are positioning ourselves as an attractive employer for potential employees by offering a wide range of training programmes and career opportunities.

diversity and integration. We have human resources responsibility for Austria and Central and Eastern Europe. We offer our employees a working environment with an interna-tional flavour while benefiting from diversity through international exchange and in daily cooperation. Diversity Management in Austria covers all diversity-related issues in our company, and it is strongly supported by Human Resources and Corporate Sustainability.

The CEE Human Resources team in Vienna plays an important role for human resources management with regard to UniCredit banks in Central and Eastern Europe (CEE.) Leveraging on geographical and cultural diversity, human resources teams in CEE Vienna and CEE countries are driven by the same principles. Capitalising on country experiences, sharing best practice as well as driving and implementing Group processes are the main traits of HR in CEE. In 2012, all areas of HR focused on provid-ing the operating units with the support required to achieve their objectives. Therefore we concentrated on centrally managed programmes to enhance commitment and motivation, and on training and personnel development.

diversity management concentrates on three areas: support-ing, and ensuring equality of opportunity for, people with handi-caps; improving the work-life balance at all stages of life, with substantial support for these efforts coming from the Group’s own Health Centre; and promoting a balance between the pro-portion of men and women at the managerial level. “Diversity and Inclusion” was the title of a broadly-based campaign launched in 2012 to enhance awareness, which included a Group-wide employee survey. The Group-wide Gender Balance Programme (GBP) was also started in this context. The objective is to create awareness of the benefits resulting for the Group from a reasonably balanced proportion of women and men, and to raise the share of women who hold managerial positions. Standardised Group-wide rules for GBP tracking and monitoring ensure stringent implementation.

We aim to be a great place to work for our future employ-ees. In November 2009, we launched the “BestStart” training initiative to offer job opportunities. A total of 77 training positions

were filled in 2012. A specific onboarding process is designed to welcome new employees and to make it easier for them to find their feet in our company. This includes a welcome event entitled “Welcome Days”, providing employees with all the information they need, and a coordinated “Buddy programme”. Structured training programmes and training on the job provide our BestStarters with extensive banking know-how within a short time and give them an opportunity to apply acquired knowledge in practice.

In addition, we support customer sales activities through strate-gic staff planning initiatives, such as the internal movement management programme, which was fully implemented in 2012. The Movement Management process ensures that “movers” – i. e. colleagues whose jobs are no longer available as a result of restructuring, efficiency enhancement measures or changes in required competences – will continue to hold jobs in our company which meet their personal qualifications. This is an effective response to organisational or structural measures within our company and related job adjustments. Movers may also include employees who would like to pursue different careers: employees are free to use Movement Management. Human Resources and the responsible managers jointly accom-pany people on their way to a new career challenge. In 2012, some 155 employees (including Schoellerbank, Leasing, UBIS) used opportunities to “move”.

Our human resources activities are based on and guided by the Global job model, the Group-wide personnel management sys-tem used for describing and categorising all roles and activities within UniCredit, and the UniCredit Competency Model, which defines standards for employee conduct in key situations. Thanks to strategic workforce planning, senior management can be provided with needs-based simulations of staffing levels covering a period of ten years in combination with a package of measures, thus moving from a purely headcount-based approach to competence-based human resources planning. Strategic workforce planning was piloted in the Commercial Banking Division at the end of 2011 and extended in 2012 to cover the networks of the Corporate & Investment Banking and Private Banking Divisions. Analyses of personnel requirements can be performed for Bank Austria and Leasing using a tool specifically developed for this purpose. The measures imple-mented in 2012 make it possible to perform operational annual planning for a period of one or two years, which may be applied to all areas of the bank.

Efficient processes, simplified implementation. With the establishment of the HR Transformation Programme and the strategic partnership with Hewlett Packard (hp), Human Resources at Bank Austria took a further step towards improving


the quality and efficiency of its HR services. This step also enhances the transparency of roles and responsibilities for HR services while reducing operational risk which would have arisen if the previously used HR IT system had been maintained. The new HR delivery model with HR Administration Services of ES SSC and the introduction of the new SAP-based HR IT system, which is planned to be jointly integrated at Group level by 2014, simplify and standardise HR processes. We offer customer- oriented services and enhanced transparency for managers and employees, additionally supported by self-service functions in the new IT system. The first milestone under this major project was reached in December 2012, when the HR IT systems of several Austrian subsidiaries were migrated to the hp system.

learning & development: With the wide range of training initiatives in our extensive learning programme, we give each employee the opportunity to acquire and expand know-how required for a specific sphere of activity. In 2012, training measures focused on the IT changeover at Bank Austria. Other training initiatives, e. g. mandatory e-learning seminars, addressed various areas including reputation, risk management and compliance. The bank also continued to conduct specialised sales training programmes.

The Executive development Programme (EdP) and our Talent management focus on strategic and individual personnel plan-ning for executives and talents. Attention is given to ongoing development of management potential from within the bank while successively raising the percentage of female managers. The national mentoring programme, through networking and knowledge sharing, is a further measure for supporting young employees in developing their potential in terms of career and personal development.

With the roll-out of Bank Austria’s new Performance manage-ment in 2012 we set new standards for a modern performance evaluation system and for planning employees’ future develop-ment. A group-wide, uniform and more efficient performance management process, where information is electronically cap-tured in an online tool, was created by building on experience from the proven components of the previous process for setting goals and evaluating performance (scorecards and annual per-formance review). Priority was given to providing greater trans-parency for both managers and employees while giving both the possibility to play a more active role in defining further potential for development and career opportunities. Performance Manage-ment thus makes a substantial contribution to the bank’s corpo-rate culture based on respect. The goals agreed in a discussion between the employee and the manager are captured in the

Performance Management tool. The employee’s performance is evaluated after a period of 12 months. The information thereby obtained on an employee’s personal performance serves as a basis for further career opportunities and personal development potential and for individual remuneration measures.

The proper mix: our remuneration system. Our Group-wide remuneration system provides for a balanced mix of fixed and variable monetary and non-monetary components. Regular trans-parent communication to our employees and information availa-ble on “myHR”, the HR Intranet site, provide an overview of all components of compensation while linking this to the related compensation processes including the Remuneration Committee and the bonus.

A new variable compensation system was developed in 2012 in the context of “Vertrieb 2.0”, the new sales strategy in the Com-mercial Banking Division. The new bonus model supports and rewards entrepreneurial initiative with a focus on customer satis-faction in line with the principles of the innovative sales strategy.

Remuneration of top management is determined within UniCredit by way of a clearly-defined Group Compensation System, which has been implemented at Bank Austria. The variable components of the remuneration mix are linked to sustainable, long-term and multi-year performance criteria; they also include non-financial criteria and do not encourage persons to take unreasonable risks. Deferred payment is possible for parts of variable remuner-ation. The amendment to the Austrian Banking Act which imple-ments the provisions concerning remuneration policy contained in the Capital Requirements Directive (CRD III) came into effect as at 1 January 2011. It defines a new framework for remunera-tion policies and practices for banks. Bank Austria has adjusted its remuneration policy to the new legal rules.

A new Car Policy governing the use of company cars was issued in 2012. The new rules provide users with transparent and easy-to-calculate information on costs and give them more choice (against a financial contribution where applicable). To strengthen the Group’s sustainability approach, special attention is given to permissible CO2 limits and additional contributions by the employee when the agreed mileage is exceeded.

Award-winning HR services. In April 2011, the international CRF Institute presented UniCredit with the European Top Employer 2011 award for outstanding HR services in five coun-tries in which UniCredit operates: Austria, Germany, Italy, Poland and the United Kingdom. Bank Austria received the award also in 2012. The criteria researched included career opportunities and


Management Report


benefits, training and development, and the corporate structure. At the end of 2012, in Austria’s largest recruiting study “Career’s Best Recruiters”, which analysed over 500 companies, Bank Austria was ranked among the top 3 companies and num-ber one among banks. The main criteria analysed were the online recruiting presence, recruiting activities, a company’s response to applicants and their feedback. Bank Austria thereby once more underlined its position as one of Austria’s top employers.

Sustainability managementSustainability and responsibility are important principles at Bank Austria, making the balance between economic, ecological and social objectives a highly significant factor. Stakeholder management, an intensive and transparent process, continues to play a key role in Bank Austria’s sustainability activities. It is a question of identifying, within and outside the bank, the needs of important stakeholders and to include them in the measures aimed at improving corporate sustainability. This also requires a meaningful and open communication of topics on corporate social responsibility. To this end, we again broke new ground in the area of sustainability reporting with our first electronic sustain-ability report: in a publication which is probably unique in Austria the e-magazine includes texts, pictures, photo galleries and vid-eos, supported by statements by Management Board members and renowned experts, providing a vivid picture of Bank Austria’s commitment to sustainability. The e-magazine is available (in German) in the “Sustainability” section at www.bankaustria.at.

An important component of sustainability is to act responsibly within society. Bank Austria pursues a clear strategy in its commit-ment to the community. We primarily support aid projects and initi-atives which help children and young people in need, and which also focus on integration/migration. Every year, Bank Austria presents the Bank Austria Social Prize, where customers and employees vote for a social project which is then supported by the bank financially and through communication measures and the personal commitment of Bank Austria employees. 2012 for the first time saw two winners: the winning project was the organisation “Happy Kids – bärenstark gegen Kindesmissbrauch und für Gewaltprävention”, which focuses on the prevention of child abuse and violence and offers its courses and workshops in kindergartens and schools. Second place was won by the initia-tive “Nachbarinnen in Wien”, which helps migrant families to integrate in Austria more effectively.

Besides pursuing a comprehensive donation policy, Bank Austria cooperates with social care organisations over the longer term such as Caritas or SOS Children’s Villages, where we act as

house sponsor for one Children’s Village family in each of Aus-tria’s federal provinces. It is not only the financial support but also the active involvement of employees which we feel is very important. The Bank Austria Volunteer Day, which is organised with Caritas Österreich, was once again a resounding success in 2012. This is one day when employees from Bank Austria and its subsidiaries lend a helping hand to initiatives and projects throughout Austria. Bank Austria also supports the private social commitment of employees: in 2012 it for example organised two appeals to employees for donations in kind for Caritas Wien, which were very successful.

Our “Sharing knowledge” programme, whereby we have in past years contributed to public debate on business and sus-tainability, has become a regular fixture. In particular, the two series of talks “Zukunft denken” (“Considering the future”) – in cooperation with the Club of Rome – and “Wirtschaft trifft Umwelt” (“Business meets the environment”), which the bank organises jointly with Vienna’s University of Natural Resources and Life Sciences and Vienna University of Economics and Busi-ness, are meanwhile highly acknowledged platforms for the debate on sustainability in Austria. Speakers are renowned inter-national experts who are supported by significant audience involvement. From feedback provided by our stakeholders we know how much the lectures are valued as a contribution to a challenging, open debate on issues concerning business and sustainability. Bank Austria’s “Financial Education” initiative gives people access to, and helps them understand, financial products. The website http://meingeld.bankaustria.at has been created for people who have difficulty understanding the finan-cial world which can sometimes be quite complex. Products are explained in simple terms, and the visitor to the site is given tips and other useful information on how to safely handle money and financial products. With the creation of new school workshops focusing on “financial education” Bank Austria has broached new territory in knowledge communication techniques since the beginning of 2012: with our renowned partner, the Austrian Museum for Social and Economic Affairs, we offer interested schools free workshops. The topics discussed range from money, the role of banks and banking products to distributive justice. The objective is to give young people an overview of the various types of financial transactions, to draw their attention to the opportunities and risks, and to inform them of their rights and duties as consumers of financial products. In addition to passing on knowledge, the workshops are aimed at encouraging young people to critically examine how they themselves handle money and the significance of money in their social environ-ment. In 2012, 500 workshops were attended by 10,120 schoolchildren throughout Austria.


At Bank Austria, diversity management focuses on aspects such as gender, age, health, sexual orientation and origin. Diversity has a central role at Bank Austria – and in UniCredit as a whole – and it is seen as a value of great importance. In this context, gender diversity is a key consideration, and the focus here is on developing concrete improvement measures. Bank Austria strongly argues the business case for gender diversity: it is also worthwhile for a business to opt for diversity and equal career opportunities for men and women. Important factors in this regard are a flexible approach to different work-ing-time models (also for managers) and teleworking. These and other initiatives have contributed to the successful re-audit of Bank Austria by the Austrian Ministry of Economic Affairs, Family and Youth in respect of its activities relating to “job and family”. At UniCredit level a large-scale project entitled “Gender Balance Programme” is underway. Bank Austria is participating in this important diversity project in a leading capacity in terms of personnel and structure.

For its disability-related activities, Bank Austria has appointed a Disability Manager, who is effectively supported by a team of about 60 employees forming a disability network. The Disability Manager implements numerous measures. Bank Austria aims to be barrier-free for its customers and employees in terms of physical access to the bank’s buildings and offices by the end of 2015. In 2011, Bank Austria also introduced a bank card for visually impaired persons, and the bank’s website includes sections enabling customers to listen to spoken information and watch videos in sign language as well as reading texts in simple language. Moreover, Bank Austria is planning to make cash dispensers in the bank’s self-service foyers barrier-free in 2013 so that they can be used by visually impaired persons. The shuttle service introduced in Vienna in 2010 for customers with limited mobility has proved very useful, and has also been available in Graz since 2012. Bank Austria supports “shake hands”, a unique sign-language textbook, and cooperates with “Arbeit fuer Behinderte”, the first IT systems house in Europe which employs persons with learning difficul-ties or physical disabilities to repair old laptops and PCs and sell them. As part of the DiversCity competition, Bank Austria won a special award for its efforts in the areas of disability and barrier-free access. Last but not least, Bank Austria is partici-pating as sponsor of, and cooperation partner for the content of, the “Zero-Conference”, which took place for the first time in 2012 and was a great success.

Environmental management system In May 2011, Bank Austria became the first commercial bank in Austria to implement an environmental management system (EMS) certified in accordance with ISO 14001, an internation-ally recognised standard defining environmental management requirements to be met in a company. By complying with ISO 14001, a company can prove that it operates in harmony with the environment. Over 220,000 organisations have been certified in accordance with this standard around the world; the number in Austria is over 900. Environmental management benefits the community and it also involves advantages for the company in the form of cost savings resulting from more efficient use of resources.

The environmental management system set up by Bank Austria covers the head office buildings and all branches. This shows that the bank attaches great importance to sustainability and a sparing use of resources. Bank Austria has thereby made it clear from the very beginning that environmental and climate protec-tion concerns all locations, all operations of the bank and all its employees. A steering committee headed by the Chief Executive Officer underlines the importance of environmental and climate protection. With its EMS team the bank has created the organi-sational structure and responsibilities to ensure that issues related to environmental and climate protection are coordinated and implemented in all operations.

In CEE we enhance environmental awareness through the UniCredit sustainability network of central and local contacts. Specific CEE initiatives are described in the UniCredit Sustain-ability Report. One of these are loans to private households which are linked to financial assistance in respect of “green elements” (energy efficiency and eco-power). This produces direct effects such as CO2 reductions and indirect effects, e. g. by drawing attention to environmental issues. Finance leasing is marketed in several CEE countries for the construction of com-mercial installations used for producing renewable energy, and for private photovoltaic installations. We have also launched initiatives in the area of operations ecology to raise environmen-tal awareness in CEE step by step (energy efficiency measures in information technology and technical building services).

Protecting the climate and the environment has been a key issue for Bank Austria for many years. UniCredit Group is com-mitted to reducing CO2 emissions by at least 30% in the period to 2020. In Austria, Bank Austria aims to make an essential con-tribution to achieving these Group objectives. Bank Austria is


Management Report


reducing its ecological footprint by drawing up an annual environ-mental programme covering operational and business aspects: e. g. further expansion of energy-saving features of IT equipment, renewal of refrigerating equipment in head office buildings, energy monitoring for branches, installation of photovoltaic systems, financial assistance programmes focusing on renewable energy, a financing initiative for ecologically sound buildings, development of sustainability-related types of investment, and various information and communication measures.

klima:aktiv pakt2020 is an alliance created by the Austrian Minis-try of Life which provides support to companies for operational aspects of climate protection. Bank Austria became one of the six founding members of klima:aktiv pakt2020 at the beginning of November 2011. The participating companies undertake, through a voluntary agreement on objectives, to meet the Austrian climate-related targets for 2020. On the basis of data from 2005, the mini-mum targets are a 16% reduction of greenhouse gases, a 20% increase in energy efficiency and the use of renewable energy to meet 34% of total energy needs. Moreover, Bank Austria has com-mitted itself to reducing CO2 emissions by 30% and achieving a 51% share of renewable energies.

Measures aimed at improving energy efficiency focus on electricity consumption, which accounts for about 60% of total energy con-sumption. With the continued renewal of refrigeration systems, the bank enhances efficiency while achieving sustainable reductions of electricity consumption. In addition to the energy-saving policies in the IT sector and specific software features at PC workplaces imple-mented over the past years, there are plans to significantly reduce electricity consumption through desktop virtualisation and by opti-mising data archiving systems. In its fleet Bank Austria has switched to low-consumption cars and reduced the number of pool cars. The maximum CO2 emission level for cars in the Bank Austria fleet has been set at 100 grams per kilometre. The CO2 emission level of the current standard model is significantly lower than the maximum level set by the bank. Bank Austria is also encouraging the use of video conferencing facilities to reduce business travel to a minimum. We also aim to gradually expand teleworking with a view to reducing the environmental impact of travel to work, espe-cially by commuters who use cars.

Bank Austria maintains an extensive network of offices throughout Austria. This means that a number of construction and renovation projects is being implemented at any given time. Significant improvements in energy efficiency are planned and expected to be achieved with the construction of the new energy-efficient and ecologically sustainable Bank Austria headquarters on the site of

Vienna’s former Northern Railway Station. All electricity supplied to Bank Austria comes from renewable sources of energy. The bank’s energy supplier has issued a certificate confirming that 100% of the electricity supplied is hydroelectric power. As a contribution to increasing the proportion of renewable energy in Austria, the bank has installed photovoltaic systems in suitable locations. Installations at branches in Innsbruck and Hirschstetten/Vienna are already in use. Special mention should be made of our solar power installation in Vienna’s second district, which is the largest photovoltaic facility run by a private operator in Vienna. It was inaugurated by Michael Häupl, Mayor of Vienna, and by Willibald Cernko, Bank Austria’s CEO, in September 2012. Installed on the roof of the Lassallestrasse 5 office building, this solar power installation enables Bank Austria to save 35 tonnes of CO2 emissions annually.

Key environmental indicators 1)

2012 2011

CO2 emissions in t 2) 20,382 21,888Electricity consumption in MWh 72,282 3) 76,126Heating in MWh 51,200 3) 50,232Business travel in thsd km 16,332 24,985

of which: air travel 11,133 18,831 by car 4) 3,423 5,443 by train 4) 1,776 711

Water consumption in m3 220,000 232,274Waste in kg 1,385,630 1,560,343Paper consumption in kg 889,649 896,742

of which: TCF/ECF 730,764 763,864

recycling 47,623 61,467

1) All branches, head office buildings and subsidiaries located therein. / 2) Since 2010, all electricity supplied to Bank Austria has come from renewable sources of energy. / 3) Projection. / 4) From 2012 UniCredit Bank Austria AG only.

Further informationThe following detailed information is included in the notes to the consolidated financial statements:

Events after the end of the reporting period are included in section F.15 within “F – Additional disclosures” of the notes to the consolidated financial statements on page 219.

The risk report is a separate chapter (“E – Risk report”) in the notes to the consolidated financial statements (pages 175 to 205).

The report on key features of the internal control and risk man-agement systems in relation to the financial reporting process is contained in section E.12 of the risk report (pages 199 to 200).


Development of business segments

Family & SME Banking (F&SME)(€ million) 2012 2011 1) CHANGE

Operating income 1,099 1,126 –28 –2%Operating costs – 931 – 906 –25 +3%Operating profit 167 220 –53 –24%Net write-downs of loans –86 –158 +72 –45%Net operating profit 81 62 +19 +31%Profit before tax 43 68 –25 –37%Loans to customers (avg.) 20,683 21,697 –1,013 –5%Primary funds (avg.) 28,091 27,221 +870 +3%Risk-weighted assets (avg.) 2) 11,277 12,568 –1,291 –10%Average equity 3) 1,215 1,094 +121 +11%

1) For segment reporting purposes, the comparative figures for 2011 were recast to reflect the structure and methodology of the 2012 reporting period (see the segment reporting section in the notes to the consolidated financial statements on pages 166 to 173 of this report. / 2) Average risk-weighted assets under Basel 2 (all risks). / 3) Standardised capital; capital allocation to subsidiaries reflects actual IFRS capital. The difference compared with the consolidated equity of Bank Austria is shown in the Corporate Center. See segment reporting section on pages 168 to 169. This information applies to all business segment tables.

� In 2012 the Family & SmE Banking (F&SME) business segment comprised SMEs (small and medium-sized enterprises) in addition to the Mass Market, Affluent and Small Businesses customer sub-seg-ments. The SME target group includes businesses with a turnover between €3 million and €50 million, which are of special signifi-cance for the economy. With total loans of €20.7 billion and primary funds (i. e. customer deposits and debt securities in issue) totalling €28.1 billion (annual averages for 2012) and operating income of €1.1 billion, F&SME is a major pillar of Austrian customer busi-ness. The Division’s network of 357 branches and sales units and 3,940 employees (FTEs, year-end 2012) give Bank Austria high visibility.

Austrian customer business was reorganised and bundled at the beginning of 2013. The previous F&SME business segment and those large Austrian companies which were previously served by the CIB Division, and are not among the group of capital market customers served at an international level, have been combined to form Commercial Banking Austria. This Division comprises all customer groups from private individuals to large companies. The following segment commentary refers to the structure which applied in 2012.

� The Family & SME business segment held its own in the difficult environment prevailing in 2012. Although the IT system changeover in October 2012 impacted day-to-day activities, net operating profit (operating profit less net write-downs of loans and provisions for guarantees and commitments) rose by 31% to €81 million. The slight decline of 2% in operating income com-pared with the previous year mainly reflects weak net fees and commissions. Costs rose by 3% as a result of additional expenses

in the fourth quarter. As in the previous year, the improvement in net operating profit resulted from lower net write-downs of loans and provisions for guarantees and commitments.

Within the income components, net interest remained stable in 2012, at €690 million (–1%). Quarterly trends show the depend-ence on economic and interest rate developments: in the first and second quarters, net interest increased, reflecting better senti-ment and a higher yield curve. The economic environment deteri-orated in the third and fourth quarters, and net interest came under renewed pressure as demand declined and the yield curve flattened (see chart). In the third quarter of 2012, the zero interest rate environment started to have a strong impact on margins on the liabilities side as the interest rate adjustment clauses became effective. The net interest margin improved in the first half of 2012 but narrowed again in the second half-year. Credit demand remained very weak in 2012. Companies and private households made efforts to consolidate their financial position and reduced debt rather than investing in business assets or making long-term investments. Some of the excess liquidity went into direct depos-its. The banking sector still competed intensively for retail funding, which had an impact on terms and conditions. Average lending volume in 2012 was 5% lower than in 2011, with short-term loans holding up well on account of demand from SMEs. Revenues from lending business were down from the previous year, reflecting adverse trends in volume and spreads. On the liabilities side, average direct deposits rose by 4%, primary funds (comprising deposits from customers and debt securities in issue) increased by over 3%. Inflows were seen in demand deposits and savings deposits, the latter supported by our campaigns (“Regional Sparbuch” and “KünstlerSparbuch”) in the first and fourth quarters. Interest rate spreads declined significantly throughout the year, mainly on demand deposits (and this trend also affected savings deposits with some delay due to interest rate remanence); the positive volume effect in deposits therefore did not result in revenue growth. The net interest margin – tradi-tionally measured against lending volume – was slightly higher than in the previous year; measured against average total volume on the assets side and on the liabilities side, it was lower.

While net interest was stable in 2012, net fees and commis-sions were down by 5% to €379 million as the decline reflecting structural changes and economic trends continued. Fee-based banking business was weak (accounts and payment transactions), and net commissions generated by securities business have been declining across the board for several years. Sales of mutual funds recovered somewhat recently but were lower than in the previous year, as was turnover in other securities and safe-cus-tody business. In view of the persistent euro crisis, high market volatility and the zero interest rate environment, all customer


Management Report


groups showed a very low risk appetite in 2012, regardless of the fairly good annual performance of investment categories (see the section on “The banking environment in 2012”). It was only towards the end of the year that the situation started to improve hesitantly. While interest rates and yields were at record lows, we succeeded in meeting customers’ need for security and return expectations through our “ErfolgsAnleihe” bonds (17 issues, €432 million) with maturities ranging between two and five years. Corporate bonds offering comparatively attractive returns were favourably received. We offered such investments in the Affluent Customers sub-segment on a selective basis and for portfolio diversification. Four mortgage bond issues, three US dollar bonds and fund products including those offered with a guarantee and with specific maturities as well as Real Invest Austria rounded off the range of securities products and were well received by investors.

Overall, operating income again significantly exceeded €1 billion in 2012; it was down by only €28 million or 2.5% from the previ-ous year. Operating costs totalled €931 million, an increase of €25 million or 2.8% over 2011 which partly resulted from the merger of “AirPlus” Air Travel Card Vertriebsgesellschaft m. b. H. into Diners Club Bank AG, a consolidated company. Payroll costs rose by about 5%. The average number of employees in 2012 was 3,906 FTEs, up by 2% on the previous year. The increase also reflects additional work required in connection with the IT system changeover in the fourth quarter of 2012. Non-staff expenses, which in Austria are higher than (direct) payroll costs because back-office and settlement services have been out-sourced, increased by less than 2%. The cost / income ratio con-tinued to rise in 2012, to 84.8% (2011: 80.5%), as operating income declined. The cost / income ratio has been rising for years, prompting the bank to fundamentally rethink its sales model. This has led to the “Smart Banking Solutions” project (see below).

Operating performance improved in 2012 as net write-downs of loans and provisions for guarantees and commitments were reduced by almost one-half (–45%) to €86 million. This demon-strates the good quality of the loan portfolio in business with private individuals and small and medium-sized businesses. The SME sub-segment benefited from significant releases of loan loss provisions, and additions to loan loss provisions for business with private individuals were lower than expected. The cost of risk fell to an average 42 basis points in 2012, after 73 bp in 2011 and 120 bp in 2010. The decrease in risk-weighted assets (RWAs: –10%) and in loans and receivables with customers (–5%) reflects base effects resulting from exchange rate movements in 2011, which led to high comparative levels in the previous year. We took account of these special influences by changing the Basel 2 model parameters and the quantitative

model. Moreover, at the beginning of September 2011, the SNB set the intervention threshold for the Swiss franc at 1.20 CHF/EUR. In any case, we further increased the additional write-down on foreign currency loans to take adequate account of potentially insufficient performance of repayment vehicles and of exchange rate risk. As in the two previous years, a large number of advisory talks were held with customers in the mutual interest. At any point in time, the transparent presentation (credit line in €, utilisation in currency) shows the amount of the credit line originally granted to the customer, the currency fluctuation allowed for when the loan was granted, and the amount currently outstanding.

Net operating profit in the F&SME business segment improved significantly, by 31% to €81 million, in 2012. While non-opera-ting expenses absorbed the increase, most of these charges related to major initiatives to raise cost effectiveness and com-petitiveness and thus are to be seen as investment. For example, integration / restructuring costs of €27 million represent a provi-sion made for implementing the “Smart Banking Solutions” pro-ject. In our sales activities we are thereby moving to an attractive mix of modern branch design and multi-channel communication (online, Internet, SmartBanking, video) to respond to changes in consumer habits (digitalisation) and demographic trends (urbani-sation). This will involve closing a number of branches. Provisions for risks and charges amounted to €3 million and were made for

9M 1Y1W 3M 2Y 3Y 4Y 5Y

% p.a.

0.00

1.00

2.00

3.00

4.00

Yield curve close to zero and flatEuro interest rates on top-quality instruments (zero yield curve)

Year-end 2003

Maturity

Year-end 2010

Year-end 2011

Year-end 2012


pending legal disputes in 2012 while 2011 saw net releases of such provisions. There was a swing in the net result from invest-ments, from net income to a net loss of €8 million, due to an impairment loss on an equity interest. Profit before tax was €43 million, down by €25 million from the previous year as the balance of non-operating items was a net charge of €38 million (after a positive balance of €6 million in 2011). On this basis, return on equity before tax reached 3.6%; without the non-oper-ating charges, ROE before tax would have been 6.7%, slightly higher than for the previous year (6.2%). In view of the low level of profitability and the high cost / income ratio, initiatives have been launched to modernise operations.

� We responded to weak credit demand from private custom-ers by making attractive offers, for example, the KlimaKredit loan which also provides incentives for sustainable and energy- efficient building and renovation in the form of an “Environment Bonus”. Our consumer credit initiatives focusing on a “free first loan instalment” and “one monthly insurance premium” as a bonus were also successful. One in three consumer loans was concluded with a new insurance contract with regular premium payments. “Fleet management – a big service also for small com-panies” (all-in motor vehicle leasing with fixed rates and all-round service), a leasing product previously limited to big companies, is now also available to independent professionals and SMEs.

In our activities for companies, we launched a new edition of our “Business Billion” lending initiative for SmEs, focusing on inno-vation loans and loans under financial assistance schemes using our specific advisory tools. In summer 2012 we became the first European bank to sign a cooperation agreement with the Euro-pean Investment Bank Group and the European Commission to grant loans to innovation-oriented customers with a total volume of up to €120 million and backed by a 50% guarantee under the Risk Sharing Instrument (RSI). Moreover, cooperation with Forschungsförderungsgesellschaft (FFG) enables us to address the needs of SMEs which focus on innovation and research. The strongly growing customer group of young entrepreneurs was one of the focal areas of our marketing efforts towards the end of the year – start-ups of any size and in any sector with a sound business plan. Finance is provided together with intensive advisory services using the StartUp Guide (including “SmartPlan-ner” and “Gründungsplaner”), a start-up package (including a business plan checklist), SmartPlanner (a planning tool for busi-nesses preparing financial statements on the accrual basis and for businesses using cash basis accounting) and FinanceCheck. The IT system changeover to EuroSIG also affected business with customers in the SME sub-segment, especially in OnlineBanking and BusinessNet services. Restoring the previous high level of customer satisfaction is our top priority.

Private Banking(€ million) 2012 2011 CHANGE

Operating income 152 150 +2 +1%Operating costs –108 –102 –6 +6%Operating profit 45 49 –4 –8%Net write-downs of loans 0 –4 +4 n. m.Net operating profit 45 45 +0 +1%Profit before tax 44 47 –3 –7%Total financial assets (avg.) 17,904 17,111 +793 +5%Loans to customers (avg.) 613 519 +94 +18%Primary funds (avg.) 7,576 7,001 +575 +8%Risk-weighted assets (avg.) 954 878 +75 +9%Average equity 171 159 +12 +8%

n. m. = not meaningful

The Private Banking segment, with the two well-known brands Bank Austria Private Banking – the private banking arm of a major bank – and Schoellerbank – a traditional private banking institution – is the undisputed market leader in Austria’s private banking market. Two-thirds of the customers of Bank Austria Private Banking use the comprehensive range of services of Bank Austria as their principal bank, while Schoellerbank is per-ceived by its clients primarily as an asset manager and provider of specialised services. With a presence in 25 locations throughout Austria, the Division’s 541 employees (FTEs, year-end 2012) serve the top segment of private customers. With €18.4 billion in client assets at the end of 2012 and serving 35,000 high net worth indi-viduals (19% market share), the Private Banking Division is market leader in Austria. In addition to its day-to-day banking business, the Private Banking Division is important for Bank Austria’s image as it has responsibility for the customer segment of high net worth individuals and private foundations.

The business model of the Division, featuring a holistic service philosophy and a broad range of services geared to meeting client’s specific needs has proved to be successful in the years since the financial market crisis. The uncertainty prevailing as a result of the omnipresent euro crisis and the widespread scepti-cism over the long-term consequences of European crisis man-agement are particularly pronounced in this customer business segment. Given high market volatility and the absence of easily identifiable trends we give priority to asset optimisation over short-term performance targets and focus on managing risk through wide diversification. Our holistic advisory approach covers liquidity planning, analyses of financial and portfolio structures, asset trans-fers and retirement planning. On account of the long-term view taken in this context, this approach makes Private Banking – and the performance of our clients’ portfolios – less dependent on current market trends.


Management Report


� In 2012, average total financial assets were €17.9 billion, up by 5% on 2011. Favourable quarter-on-quarter trends boosted total volume to €18.4 billion as of 31 December 2012, 8% above the year-end 2011 level. All investment categories recorded growth in the reporting year. Assets under management rose strongest, by 12%, thus replacing direct deposits (+7%) as the fastest growing investment category. Assets under custody, which declined in the past year, saw growth of 6% in 2012.

Operating income came to €152 million in 2012, 1% up on the previous year. Net interest contributed to this performance with €59 million. This represented a slight 2% decrease over 2011 as the top market segment, featuring longer lock-in periods, did not escape the squeeze on interest margins in deposit business. Net fees and commissions, traditionally the most important income component in Private Banking operations, rose by 6% to €91 million compared with the previous year. The increase resulted from business developments in the fourth quarter of 2012, reflecting a higher investment propensity. Operating costs grew by 6% year-on-year, reflecting a quality initiative in advisory services and the related training measures. Non-staff expenses rose at a disproportionately strong rate, and include the higher bank levy payable for Schoellerbank. Net write-downs of loans and provisions for guarantees and commitments, which are generally insignificant in this customer segment, were nil; this compares with a specific provision made in the previous year. Net operating profit remained unchanged. Profit before tax was €44 million, down from the €47 million recorded in 2011. While that year saw the release of provisions for risks and charges, moderate additions to provisions for risks and charges were made in the reporting year. Capital allocation to this business segment is low on account of the low level of risk-weighted assets normally found in private banking. The Private Banking Division therefore generated a high return on equity (ROE before tax) of 25.5%.

� The Private Banking Division’s investment strategy and service approach always give priority to preserving wealth over achieving short-term performance, and have always managed risk through wide diversification. Comprehensive analyses performed by the Division’s experts are the basis for a well-founded market view. We pass this information lead on to our clients each day via online newsletters and regular specialised publications. In line with our integrated advisory approach we also draw on this information in our investment advisory and asset management services. Based on the Preferred Partners concept we have 130 top-quality investment funds which reflect our clients’ needs and our market view. This also provides the basis for the “VermögensManagement 5Invest” asset management service. Clients can choose from

five investment approaches, depending on their risk tolerance and specific investment goals. The quality of the 5Invest portfolio is regularly appraised and certified by Institut für Vermögensaufbau, an independent institution. The product is now also available as an insurance-linked investment scheme.

We are constantly enhancing our investment advisory concept through the addition of innovative products: our advisory services are now supported by Portfolio Quality Analysis (PQA), a profes-sional analysis tool. Another exceptional instrument is the new risk profile test, which the Private Banking Division has been using since the end of 2012. Based on a method developed by the Max-Planck Institute, the test gives clients an objective analysis of their financial risk profile. On this basis it helps them to be aware of the relevant risks and opportunities when they make investment decisions.

As market leader in the private foundations sub-segment, our team of experts supports clients with economic and legal issues, and with succession planning in particular.

Schoellerbank’s asset management arm celebrated its twentieth anniversary in 2012. Classic asset management, together with investment advisory services and retirement planning, belong to its core competence areas, and this sub-segment has made an important contribution to overall results in the challenging environ-ment of the last few years. The twentieth year is also the most successful in terms of new clients and new business volume. This is in large part attributable to Schoellerbank’s own investment management company, whose investment funds are regularly recognised for their outstanding performance. The results of the renowned Elite Report – the largest and most comprehensive test among private banking institutions – represented an outstanding achievement for Schoellerbank. It received the highest distinction – “summa cum laude“ –, was again recognised as the best private banking institution in Austria, and for the first time it came in first place in the German-speaking countries among 383 private bank-ing institutions.

In 2013 we will make greater use of potential for growth. One of our objectives at the beginning of 2012 was to inspire successful business people or entrepreneurs, who already number among Bank Austria’s clients, to take advantage of our services as private individuals. Our efforts in the context of this strategic initiative are very successful. Schoellerbank is also to provide a basis for further growth as the exclusive contact in Austria for high net worth individuals served by UniCredit in Central and Eastern Europe.


Corporate & Investment Banking (CIB)(€ million) 2012 2011 CHANGE

Operating income 997 1,020 –23 –2%Operating costs –361 –388 +26 –7%Operating profit 636 632 +4 +1%Net write-downs of loans –122 –130 +8 –6%Net operating profit 514 502 +12 +2%Profit before tax 476 442 +34 +8%Loans to customers (avg.) 35,438 36,421 – 984 –3%Primary funds (avg.) 22,797 22,182 +615 +3%Risk-weighted assets (avg.) 16,045 19,542 –3,497 –18%Average equity 1,868 1,699 +169 +10%

Corporate & Investment Banking (CIB) comprises business with large corporate customers, real estate customers, multinational com-panies, the public sector and the financial sector (banks and insur-ance companies). CIB provides these customers with a complete range of commercial banking services, finance and capital market products. The CIB Division has 1,051 employees (FTEs at the end of 2012, 2% of the total figure for the bank as a whole). With 10% of the total amount of equity allocated to business segments, 12% of total risk-weighted assets and 26% of total lending volume, CIB generated over one-third (36%) of profit before tax of the bank as a whole (21% of customer business).

� With its range of products and its competences, CIB responded well to changes in customers’ preferences and changes in corporate banking in 2012. Internally, the business segment concentrated on its core business with a sharp focus on profitability, on reducing mar-ginal business activities and on continued risk reduction. In 2012, CIB was faced with restraint on the part of companies, which strongly improved their liquidity and financial position in previous years – basically, a positive development – while still being confronted with an uncertain outlook that kept them from stepping up capital invest-ment in 2012. In an environment characterised by weak demand, the trend in interest rates, which were steadily falling to near zero in 2012, had an impact; margins were additionally affected by volatile and temporarily much higher liquidity and funding costs. Operating income therefore slightly decreased in the CIB business segment in the course of the year. Net fees and commissions in particular reflected structural changes (closure of CAIB Markets subsidiaries, decline in derivatives business, low securities turnover) and weak economic trends, with foreign trade-related transactions and short-term finance weakening as the year progressed. Nevertheless, operating income held up well in all major areas of the Division. Finance & Advisory even recorded revenue growth in business with the various customer segments (Network). The Markets product line, which implements Bank Austria’s asset / liability man-

agement activities with Counterparts, achieved good results from interest-based business in Treasury in particular (at the Markets /Counterparts interface). Global Transaction Banking (GTB) faced a period of economic weakness in the areas of international cash management and short-term trade finance, yet it coped very well on the basis of its market leadership position. The decline in operating income in GTB was due to short-term deposits allocated to this sub-segment: while volume rose strongly, this had no effect on operating income as interest margins were narrower, especially those on demand deposits.

Operating income matrix: product view and network view€ million

Finance & Advisory Markets

Group Transaction

BankingTotal

Network 2012 385 46 285 7152011 386 54 304 744

Counterparts 2012 57 225 … 2822011 54 222 … 276

Total 2012 442 271 285 9972011 440 275 304 1,020

� At €997 million, operating income generated by the CIB Division almost matched the high level of the previous year (–2%) although credit demand was weak, companies had excess liquidity at their disposal, interest rates were very low and the CAIB Markets subsidiaries were closed. Trends in the various income components confirm the overall picture:

Net interest was €756 million in 2012, up by 6% on the previous year and supported by volume trends: average loans and receivables with customers were down by 3% from the previous year, despite an increase in the final quarter, while primary funds (i. e. deposits from customers and debt securities in issue) rose by 3%. Margins showed opposite developments: while margins on the assets side were main-tained, margins on the deposit side narrowed progressively in the course of the year, reflecting interest rate movements in the market and strong competition on terms. Treasury activities accounted for most of the increase in net interest.

Net fees and commissions continued to decline; at €183 million, they were down by 16%, partly on account of structural changes which occurred in the meantime (concentration on customer-driven business) and partly due to structural and economic factors. Within fee-based operations, primary business shows that customer-driven trading activities are viable with good prospects: acting in a leading capacity for 15 out of 23 corporate bond issues launched in Austria


Management Report


in 2012, which represented 65% of the total volume, Bank Austria was the clear number one on the Austrian capital market. In 2012, the volume of new issues of Austrian issuers totalled €8.7 billion.

Net trading, hedging and fair value income came to €7 million, which is significantly lower than the previous year’s figure. As in net fees and commissions, performance continued to be impacted by low securities turnover and a decline in customers’ use of derivatives for interest-rate and exchange-rate management.

A major contribution to results in 2012 was the decline in operating costs, which fell by €26 million or 7% to €361 million. The cost /income ratio of the CIB Division improved by 1.8 percentage points to 36.3%, although operating income did not increase. Payroll costs declined by 12%. In 2012, staff numbers were down by 94 FTEs or 8% compared with average figures for the previous year. In a com-parison of 2012/2011 year-end figures, the number of employees declined by 164 FTEs or 14%. The decline is primarily the result of the restructuring or closure of the CEE brokerage subsidiaries still consolidated in the CIB Division, but staff numbers were also lower in core business. The winding up of the former Aton Group (CJSC UniCredit Securities, Moscow, and UniCredit Securities International Limited, Cyprus), the restructuring of UniCredit Menkul Degerler AS in Turkey and the reduction at UniCredit CAIB Poland S.A. together accounted for a decline of 105 FTEs. Staff in the core business (CIB/UniCredit Bank Austria AG) numbered 860 FTEs at the end of December, 36 FTEs or 4% less than a year earlier. As a result of strict cost discipline in the CIB Division, non-staff expenses were 4% down on 2011.

In 2012, net write-downs of loans and provisions for guarantees and commitments declined by 6% to €122 million. The improve-ment, which mainly resulted from good portfolio quality and the release of provisions for specific cases, absorbed burdens arising from the weakening economic environment. The cost of risk in 2012 was as low as 34 basis points (bp) of average lending volume (Bank Austria as a whole: 84 bp); this compares with 36 bp a year earlier. The decline would have been more pronounced without a legacy burden which materialised after a lawsuit that lasted many years, with a significant amount of accrued interest. The vey low net write-downs of loans may be seen as a bottom reached at the current stage of the business cycle.

The balance of non-operating items in the income statement for 2012 was a net charge of €38 million, significantly lower than in the previous year (−€61 million). In 2012, provisions for risks and charges were lower than in 2011 (−€16 million after −€19 million); the most important measure was provisions made for litigation and complaints related to derivatives business. Integration/ restructuring costs were also down following the completion of the restructuring of the brokerage houses (−€4 million after −€15 million). The net result from investments (−€18 million after −€26 million) in 2012 included losses on sales and valuation resulting from the reduction of holdings of Spanish and Portuguese government bonds; in the previous year the loss was primarily the result of write-downs following the restructuring of Greek debt.

The Corporate & Investment Banking business segment gener-ated a profit before tax of €476 million in 2012, a year-on-year increase of €34 million or 8%. Despite higher equity (+10%) allo-cated to this business segment, return on equity (ROE before tax) was more or less unchanged, at 25.5% compared with 26.0% in 2011. While the average volume of customer loans declined slightly, by 3%, risk-weighted assets (RWAs) were reduced by 18%.

� Our strong equity capital base enables us to continue providing Austrian companies with loans. In the context of loans as a core product we aim to intensify capital market-related services through cross-selling efforts. Overall, we give particular attention to risk-adjusted capital efficiency. With a view to expanding its market position and raising profitability, the CIB Division focuses on step-ping up its cross-selling activities and intensive use of the entire value creation chain covered by the Division’s cross-regional oper-ations. On the corporate banking side we aim to strengthen our function as strategic financial partner and companies’ partner of first choice for capital market activities. As mentioned above, we participated in a leading capacity in about two-thirds of the total volume of corporate bond issues in Austria. UniCredit’s market position and placement power – with €66 billion and €22 billion number 2 and 3 in the areas of euro bonds and EMEA loans, respectively – provide a sound basis, underlining UniCredit’s capital market competence. With the introduction of the Senior Banker concept we provide targeted and more effective services to CEOs/CFOs of large national and international companies.


The professional development of financing structures is becoming increasingly important throughout the corporate sector in an environ-ment of complex requirements and growing risks. As Austria’s lead-ing corporate bank and long-term finance partner we offer risk man-agement instruments and strategic financial advisory services (Capital Structure Advisory), working with customers to make analy-ses of balance sheets and financing flows and draw up customised solutions. For this purpose we use IT-supported analysis and advisory instruments such as WorkingCapitalCheck, stress simula-tion, RatingBeratung, BusinessPlanner (on a database basis), BranchenCheck and VerschuldungsKapazitäts-Rechner.

As a leading export finance bank with the largest network in CEE and throughout the world within UniCredit, we support the export industry – not least as some 42,000 companies are involved in exports. Throughout Austria, Bank Austria handles one-half of the export loans covered by Oesterreichische Kontrollbank (OeKB). Almost every second export letter of credit is routed via Bank Austria, and in the area of foreign guarantees the bank has a market share of 40%. 2012 again saw strong demand for export finance products (tied finance credit and purchase of accounts receivable). These products offer our customers liquidity, competitive advantages through favour-able financing terms, and protection against risk. Our focus on tradi-tional markets such as China and Russia is complemented by global activities which include the extension of soft loans. With UniCredit we won the awards – based on customer votes – as “Best Export Finance Bank 2012” (bronze) and “Best Trade Finance Bank in CEE” (gold) presented by Trade & Forfaiting Review, a leading specialist magazine.

We for example use the international CIB network with our Umbrella Facility, a cross-border financing solution for the local subsidiaries of Austrian companies in 10 CEE countries, based on the good credit rating of the parent company.

Affordable lending terms and conditions are a key success factor for innovative companies. We provide such loans on the basis of guaran-tee instruments supported by the EU, the Republic of Austria, and the federal provinces. In 2012 we were the only bank to record an increase in loans under financial assistance schemes (new busi-ness +21%). As the first bank in Europe we offer loans at favourable terms under EU financial assistance schemes for innovative SMEs and companies with up to 500 employees: through a scheme offered by the European Investment Fund (EIF), innovative SMEs may qualify for low-cost, additional guarantees and attractive terms and condi-tions as we directly pass on the cost benefits to the customer.

Growth was driven by the real estate finance sub-segment. We finance commercial real estate development companies and investors as well as non-profit property developers. In addition, we accompany Austrian and German real estate customers – whether as developers or investors – to CEE and SEE. In this context, the focus is always on green buildings, energy efficiency and sustainability. In 2012, financing volume was €1.5 billion, with commercial real estate in Austria accounting for almost one-half of this amount, and assisted housing construction in Austria and commercial real estate business in CEE and SEE for over one-quarter, respectively.



Management Report

Central Eastern Europe (CEE)(€ million) 2012 2011 CHANGE

Operating income 4,728 4,493 +235 +5%Operating costs –2,177 –2,102 –76 +4%Operating profit 2,551 2,392 +160 +7%Net write-downs of loans –895 –768 –126 +16%Net operating profit 1,657 1,623 +33 +2%Profit before tax 1,712 1,615 +98 +6%Loans to customers (avg.) 68,906 63,703 +5,203 +8%Primary funds (avg.) 59,404 53,283 +6,121 +11%Risk-weighted assets (avg.) 83,898 76,619 +7,279 +10%Average equity 12,981 11,604 +1,377 +12%

*) An adjustment for exchange rate movements has no major effect on the comparison of figures of 2012 and 2011. Average currency depreciation is less than 1 percentage point in the various items at the divisional level, leading to erratic rounding differences in the rates of change. This is the reason why the table does not include the column showing adjusted figures (calculated at constant exchange rates).

� The Central Eastern Europe (CEE) business segment again performed its role as a mainstay of growth and a revenue source for Bank Austria. Yet the CEE economies were unable to escape the impact of global economic weakness and necessary fiscal adjust-ments. As was to be expected, the various regions in CEE were affected in different ways. The widely diversified operations extending beyond the Central European region paid off in 2012.

The Central European countries, which have close links with West European industry, achieved hardly any growth or are sliding into a mild recession (Czech Republic and Hungary). In 2012, the local banks in these countries focused on consolidation rather than expansion. Countries in South-East Europe also presented a widely varying picture with their individual strengths and weaknesses. Overall, growth and revenues were lagging somewhat behind the previous year.

Turkey and Russia proved to be the main drivers of performance in 2012. Dampening the growth momentum and stabilising risks after previous overheating was an important issue in Turkey, where the economy achieved a soft landing. The country’s banking sector con-tinued to expand strongly in retail and corporate banking, and the Turkish bank in which Bank Austria has a shareholding interest again performed well, despite a higher provisioning charge. Russia bene-fited from its economic autonomy as a large producer of commodi-ties and from growth supported by this strength. This provided a favourable setting for a general expansion of banking business, which produced excellent results. The banking operations in Russia and Turkey more than offset weakness experienced in the other CEE regions in the reporting year.

Overall, even in the weaker environment, operating income gener-ated by the CEE business segment rose by 5% to €4.7 billion and profit before tax increased by 6% to €1.7 billion. The CEE Division thus accounted for two-thirds of total revenue, and three-quarters of profit before tax, of Bank Austria’s customer business (bank as a whole without the Corporate Center). Lending volume rose by 8%, risk-weighted assets were up by 10% and primary funds increased by 11% in 2012, with wide regional variations. Equity allocated to the CEE business segment was increased by 12%, to €13.0 billion, with a view to supporting further business expansion and covering risks associated with growth markets.

� Looking back on the development of the CEE business segment over the past five years (see table), one can see strong external and organic growth up to 2008. The subsequent recession in the wake of the financial market crisis marked the beginning of a new phase for the CEE business segment. The setback in 2009 was followed by three years of a steady upward trend, though growth rates were lower than in pre-crisis years. Yet operating income in 2012 returned to the high level seen in 2008 although ATF Bank, Kazakhstan, is no longer included because it is classified as held for sale. After the strict cost-reduction programme of 2009, operating costs remained moderate in subsequent years. Net write-downs of loans and provi-sions for guarantees and commitments tripled in 2009, mainly as a result of the acquisitions which took place shortly before that year, and amounted to €1.7 billion; since then they have been steadily reduced. Most recently, in 2012, the provisioning charge was €895 million, half the 2009 figure. Net operating profit has risen steadily since 2009, by 20% annually.

Multi-year performance of the CEE business segment (€ million)

2006 pf 2007 2008 2009 2010 2011 2011r 2012

Operating income 2,788 3,367 4,732 4,620 4,691 4,722 4,493 4,728

Operating costs –1,557 –1,729 –2,224 –1,951 –2,128 –2,195 –2,102 –2,177

Net write-downs of loans and provisions for guarantees and commitments –177 –211 –537 –1,718 –1,426 –1,055 –768 –895

Net operating profit *) 1,053 1,427 1,971 951 1,137 1,472 1,623 1,657

(€ billion)

Volume (avg. RWAs) 42.7 46.6 67.7 70.9 75.2 81.5 76.6 83.9

Average equity 3.6 7.1 9.4 10.0 11.0 11.9 11.6 13.0

pf) 2006 pro forma: retrospectively adjusted to the consolidation perimeter of 2007 (assumption of CEE sub-holding company function for UniCredit); in all other years the respective perimeter. 2011r = recast. / *) Net operating profit = operating profit less net write-downs of loans and provisions for guarantees and commitments.


The income statement for 2012 and the comparative figures for 2011 are shown without ATF Bank, Kazakhstan. Items included in “Total profit or loss after tax from discontinued operations” are allocated to the Corporate Center (inter-segment reconciliation).

� Operating income in 2012 increased by €235 million or 5% to €4,728 million. The increase resulted from higher net interest and a good net trading performance, while net fees and commissions remained stable. Within the income components, net interest (€ 3,194 million) rose by €136 million or 4%, driven by volume expansion (+8% on the assets side, +11% on the liabilities side) while the net interest margin narrowed from 480 bp in the previous year to 464 bp of the average volume of loans to customers in 2012. Net interest stagnated or declined in almost all countries, reflecting lower interest rates and intensifying competition for deposits as well as higher liquidity and funding costs. This was offset by develop-ments at the Turkish bank in which Bank Austria holds an equity interest: net interest generated in Turkey rose by €214 million or 38% to €778 million as business continued to expand by about 15% and margins on consumer loans improved. Net interest in Russia also rose, by €48 million or 9% to €583 million, reaching a level close to the combined figure for the four Central European countries (€594 million), in each of which net interest declined (by a combined 6%).

Net fees and commissions improved slightly, by 2%, to €1,008 million. Unlike net interest, net fees and commissions generated in Turkey were impacted by the conditions in the country, where significant declines were seen in securities business and asset management, and also in credit card business on account of regula-tory measures which dampened growth, resulting in lower net fees and commissions (−€39 million or −11%). Overall, commission income from trade finance activities and trade-related services was favourable, while income from payment services and cash manage-ment /electronic banking remained behind expectations – a pattern similar to that in Western Europe.

Net trading income (€416 million) rose considerably over the previ-ous year, by €69 million or 20%, and made an important contribu-tion to overall revenues. Trading performance in almost all countries was stronger than in 2011, with Russia generating a particularly strong increase (+€30 million to €120 million). This reflects the importance of exchange-rate / interest-rate risk management in cus-tomer business against the background of currently strong volatility (in the context of flexible exchange rate regimes in particular), a busi-ness area in which our banking subsidiaries hold leading positions. Although Hungary was the only country where treasury operations recorded a significant decline due to the specific interest-rate, cur-rency and funding environment, like all other countries it achieved a positive net trading result.

Net other operating income/expenses contributed €89 million to operating income, up from €63 million. In Hungary, provisions were made in the previous year in anticipation of possible early repayment of foreign-currency real estate loans under the government’s Early Repayment Programme (ERP). Such provisions were released and realised losses were booked in net other operating income/expenses when customers took advantage of the early repayment option. The burden on income was thus offset by an almost equally large favourable effect on net write-downs of loans.

� The increase in operating costs (€2,177 million) was kept down to 4% and remained well behind revenue growth. The cost / income ratio therefore improved by 0.7 percentage points to 46.0%. In absolute terms, our banks in Turkey (+10%) and Russia (+7%) accounted for most of the cost increase (a combined +€75 million of a total +€76 million). However, these countries generated the strongest revenue growth and are therefore the focus of our selective expansion. Strict cost discipline and the concentration of resources on strategic core countries is also reflected in payroll costs: while these rose by 4% in 2012, the increase represents the net effect of selective expansion in specific countries and cost-cutting measures in most other countries. A year-on-year comparison of average full-time equivalents (FTEs) with an impact on costs shows that in 2012 staffing levels in CEE were down by an average 493 FTEs or 1.0% (adjusted, i. e. without Kazakhstan). On the one hand, we substantially

Turk

ey

Russ

ia

Bulg

aria

Serb

ia

Rom

ania

Bosn

ia

Czec

h Re

p.

Slov

akia

Croa

tia

Slov

enia

Balti

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untri

es

Hung

ary*)

Ukra

ine

*) Special factor in Hungary: restructuring of foreign-currency loans

CEE banking subsidiaries: loan and deposit growthLoans and primary funds: year-end 2012 compared with year-end 2011, in %

Loans Primary funds

–15%

–10%

–5%

0%

5%

10%

15%

20%

25%

30%

35%



Management Report

increased staff numbers in Turkey, by an average 615 FTEs (+4%); this went hand in hand with a disproportionately strong rise in pay-roll costs (+12%). We also increased the number of employees in the Czech Republic by an average 113 FTEs (depreciation of the Czech crown lowered the cost increase resulting from this measure to 3% in euro terms). The relatively sharp rise in payroll costs in Russia (+16%) is explained by higher variable salary components due to successful trading activities and by the closure of brokerage houses. On the other hand, staffing levels were reduced by an average 742 FTEs as a result of the ongoing restructuring of the sales network in Ukraine, which led to a 6% decrease in payroll costs in local currency (+1% in euro terms). Staff numbers in Croatia were reduced by an average 155 FTEs, leading to a decline in payroll costs in euro terms and in local currency. Payroll costs in the other CEE countries hardly changed.

In 2012, non-staff expenses in the CEE business segment were up by 3%, without bank levies the increase was 2%. The changes in the sales networks resembled the pattern of staffing levels: at the end of 2012 the number of branches in CEE was 2,542 without Kazakhstan, down by 65 from the end of 2011; the branch expan-sion programme in the core countries (e. g. the Czech Republic and Russia) was completed in 2011. In 2012, only 25 branches were opened in Turkey and one in Slovenia. Branch networks were streamlined in Romania (−37), Ukraine (−15), Bulgaria (−12) and Hungary (−12). Bank levies in Hungary, Slovenia, Slovakia and Romania totalled a combined €35 million in 2012, one-half more than in 2011 (€23 million) mainly on account of the bank levy introduced in Slovakia. The largest of these, payable in Hungary, was mitigated by the portion of the losses incurred by mandatory conversion of foreign currency loans that could be offset against the bank levy. Without the amount offset, bank levies in CEE totalled €45 million.

� In Central and Eastern Europe (CEE) the overall risk profile remained stable, despite austerity measures implemented in the region, weak economic trends in most CEE countries and a difficult environment in terms of employment and income trends in some cases. Net write-downs of loans and provisions for guarantees and commitments increased by €126 million to €895 million, and the cost of risk rose slightly, from 121 bp to 130 bp; this compares with 287 bp for 2009. The strong increase seen in Turkey (from €48 million to €147 million) accounted for almost 80% of the change in the provisioning charge. As economic trends in Turkey are ahead of other countries in the business cycle, the situation in Turkey improved earlier than elsewhere. In 2011, the local bank benefited from a net release of provisions made earlier. The return to a more normal level in 2012 is reflected in an increase of

€99 million from the previous year. The cost of risk at the bank in Turkey was 107 basis points (compared with an exceptionally low 42 bp in the previous year), a figure which is still disproportionately low.

The risk profile deteriorated, though not dramatically, as economic weakness persisted in most CEE countries. It was only in Croatia (+€51 million to €151 million) and Ukraine (+€37 million to €136 million) that net write-downs of loans and provisions for guarantees and commitments rose significantly due to structural problems and economic trends. The Central European countries saw a slight cyclical rise. A special factor was the positive development in Hungary, where the provisioning charge declined by €60 million to €35 million following the release of a provision of €22 million made in 2011 in connection with mandatory foreign currency debt restructuring (Early Repayment Programme); this compares with realised losses in income recognised in the item “net other expenses/ income”. Even without this effect, the provisioning charge in Hungary was lower than a year earlier. In Slovenia, the banking sector was impacted by the economic downturn and the crisis experienced by state-owned banks. While net write-downs of loans and provisions for guarantees and com-mitments at our banking subsidiary in Slovenia also increased (+27%), the cost of risk remained disproportionately low at 122 bp (2011: 100 bp). In South-East Europe the situation in Romania improved significantly, and net write-downs of loans declined by €16 million or 15%. The cost of risk was 258 bp, down from 338 bp. In Russia, strong growth in retail loans led to an increase in the provisioning charge, but the cost of risk was only 56 bp, the lowest level apart from Austria.

Serbia 2%Romania 5%Ukraine 4%

Russia 17%

Czech Rep. 11%

Turkey 20%

Hungary 5%

Slovakia 5%

Baltics 1%

Croatia 14%

Slovenia 4%

Bosnia and H. 2%

Bulgaria 6%

… above 400 bp… below 300 bp… below 200 bp… below 130 bp (average)

Cost of risk (provisioning charge as a proportion of average lending volume in basis points)

€68.9 bnAverage

cost of risk:130 bp

CEE loan portfolio: exposure by cost of riskCustomer loans of CEE banking subsidiaries 2012 by cost of risk


Reports on CEE banking subsidiaries Turkey: Amidst uncertain global financial conditions Turkey achieved a soft landing and recorded 3% economic growth. The country differed from others through macro and financial stability underpinned by a sound banking sector which led to an improvement in its rating to sovereign investment grade. Koç Financial Services (KFS), the financial holding company controlling 81.8% of Yapı Kredi, achieved solid growth and healthy profitability in 2012 through a continuous focus on cus-tomer business. In 2012, Yapı Kredi further strengthened its leading position in the Turkish credit card market (number 1 with a 19.7% market share), and introduced its credit card platform in Azerbaijan via its subsidiary. In addition, the bank maintained its strong market presence in leasing, factoring, asset manage-ment, brokerage, private pension funds, life and non-life insur-ance. KFS recorded 1.9 billion Turkish lira consolidated net profit (after minority interests) (approx. −5% y / y), indicating a return on average equity of 16.5%. Total revenues were recorded at 6.8 billion Turkish lira (17% y / y), driven by solid core revenue performance on the back of net interest margin expansion offset-ting the impact of competition and regulatory changes on fees. The positive development of net interest margins was supported by dynamic loan and deposit pricing together with an effective product mix management.

The Group recorded about 12% total loan growth, driven by sector performance in general-purpose loans, credit cards, local currency mid-commercial loans and SMEs. The Group’s asset quality developed in line with the soft landing of the economy in 2012 and the non-performing loans (NPL) ratio was 3.2%, driven mainly by the retail segment with resilient performance in the corporate / commercial segment. During the year, Yapı Kredi focused on early collection incentives, enhancements to the credit infrastructure and on dynamic portfolio management including the sale of a 626 million Turkish lira credit card private customer, SME and corporate / commercial portfolio. In asset gathering, the Group recorded deposit growth of 7% driven by strong above-sector performance in local currency deposits. In 2012, the Group introduced a new initiative allowing one-to-one customer based pricing which led to an increase in the local currency deposit market share with effective management of deposit costs in line with peers. In 2012, the Group continued to focus on funding diversification as a key strategic area and further strengthened its funding base. The bank obtained US$ 2.7 billion via syndicated loans, US$ 500 million via a Eurobond, US$ 1.6 billion through 10-year subordinated debt and issued 1.2 billion Turkish lira local currency bonds. In addi-tion, Yapı Kredi successfully completed a 458 million Turkish lira SME-backed covered bond transaction. In view of transition to

In eight banking subsidiaries (one banking subsidiary for the three Baltic countries), which account for about two-thirds (64%) of the loan portfolio, the cost of risk is below the 130 bp average figure. At the other end, excluding the banking subsidiary in Kazakhstan, our bank in Ukraine accounted for 4% of the loan portfolio and recorded the highest cost of risk with 489 bp (see chart).

Key figures for asset quality have changed substantially as ATF Bank, Kazakhstan, is now classified as held for sale and included in the Corporate Center: in December 2012, impaired loans in CEE accounted for 12.2% of total loans to customers, down by 2 per-centage points from the year-end 2011 figure in gross terms. In net terms, after deduction of loan loss provisions (lending volume as shown in the statement of financial position), the NPL ratio in CEE was 2.8% after 3.7% at the end of 2011, a decrease of 0.8 percentage points which is due to the Kazakhstan effect.

➔ Net operating profit (€1,657 million) was up by only €33 million or 2% on the previous year due to the higher amount of net write-downs of loans and provisions for guarantee and commitments. The non-operating items to be deducted from this figure to obtain profit before tax were positive in the reporting period (+€55 million) after a negative contribution (−€9 million) in the previous year, resulting in a positive swing of €64 million. Provisions for risks and charges were somewhat higher than in 2011 (€62 million after €14 million), mainly in Turkey for tax risks and provisions for the bonus points programme in credit card business. Net income from investments came to €119 million, a figure which primarily reflects gains from the sale of shares in MICEX, an equity interest in Russia which is not a component of our core business. Revaluation gains were also generated through this equity interest in the previous year, but these were largely off-set by write-downs on Greek government bonds, especially at our bank in the Czech Republic (net income from investments in 2011: €8 million). The positive swing of non-operating items resulted in a €98 million or 6% increase in profit before tax compared with the figure for the previous year.

➔ Profit before tax generated by the CEE business segment in 2012 was €1,712 million, accounting for 75% of the combined figure for the customer business segments. Equity allocated to the CEE Division increased by 12% to €13.0 billion (73% of the figure for the bank as a whole) to support future growth. Return on equity of the CEE Division was 13.2% (2011: 13.9%), despite the higher capital allocation.



Management Report

Basel II capital management standards, the Group focused on initiatives for strengthening capital, including subordinated debt issuances, Eurobond sales and optimisation of risk-weighted assets. The capital adequacy ratio consequently reached 16% as of 2012 under Basel II compared to 14.9% in 2011 under Basel I.

As of the end of 2012, Yapı Kredi had the fifth largest branch network with 928 branches (+21 new branches compared with 907 in 2011) and a 9.1% market share. In Internet banking, the bank serves 2.4 million customers, a 17% increase from 2011. Yapı Kredi also has 2,819 advanced ATMs and two award-winning call centres, handling 40 million customer contacts per year. In addition, having fully upgraded its mobile banking application in 2011, Yapı Kredi increased its market share in mobile banking to 15.5%. As a result, the share of alternative delivery channels in Yapı Kredi’s total banking trans-actions (80% compared with 78% in 2011) is one of the high-est in the Turkish banking sector.

Russia: ZAO UniCredit Bank (UCBR) recorded a y / y increase in total assets of 13% to 869 billion Russian roubles and kept its 8th position among the top 10 banks. The bank achieved the highest net profit in its history of 17.4 billion Russian roubles and generated a strong return on equity of about 18%. The bank’s revenues increased steadily during the year, reaching a total amount of 32.8 billion Russian roubles, 11% more than in the previous year. At 23.3 billion Russian roubles, net interest income remained the main source of the bank’s revenues, driven by an increase in business volume: about 6% y / y growth in loans and 9% y / y increase in depos-its which, together with a more than 50% yoy increase in own issue volume, contributed to a significant improvement in the bank’s loan /deposit ratio. Operating expenses amounted to 11.1 billion Russian roubles and continued to be strictly moni-tored, leading to a very efficient cost / income ratio of 34%. This excellent result for 2012 was supported also by a one-off effect from the disposal of shares in CJSC “MICEX” (Moscow Interbank Currency Exchange).

In 2012, UniCredit Bank once again confirmed its position as the leading international bank in Russia (ranked by both total assets and net profit) and continued to serve customers through its network of close to 110 branches. The CIB Division, which contributed more than 60% to the bank’s total revenues, focused strongly on increasing customer satisfaction. The range of corporate liquidity products and services was signifi-cantly updated. Furthermore, the bank strengthened its reputa-

tion in Russia as one of the leading players in export finance. In 2012 it was named Best Bank in Trade Finance in Russia by Global Finance Magazine. The bank also experienced its most successful year for derivative business, increasing the respective revenues by more than five times compared with 2011. The Retail Division achieved an outstanding 20% y / y growth in reve-nues (totaling 9.8 billion Russian roubles). Cash loans boomed this year with record sales (+75%), thanks to improved opera-tional processes and CRM initiatives. These were accompanied by measures to boost the credit card portfolio, which also helped to increase sales. Deposits from individuals increased by 25%. Furthermore, UCBR Retail significantly increased its customer satisfaction index over last year, which now reaches 86 points (+3 points y / y). Overall, UniCredit Bank in many areas remains a market leader in customer service.

Croatia: Zagrebačka banka (ZABA) Group achieved a net profit of more than 970 million Croatian kuna, a y / y decrease of 26%, driven by higher provisioning charges reflecting renewed recession. Operating profit slightly increased on a comparable y / y basis, driven by robust markets and investment banking activities as well as improved efficiency. The cost / income ratio improved to 45.3% (compared with 45.7% in 2011) as a result of a reduction in FTEs, higher productivity and lower costs of banking intermediation. The capital adequacy ratio reached 22.2% as of year-end 2012. Total revenues were 4.2 billion Croatian kuna, 4% lower than in 2011 (adjusted for non-recur-ring items). Revenues were affected by low demand for banking services as the economy is at a low ebb after four years of recession.

The Group maintained its leading market position in all strategic areas. Loans to private individuals and small businesses totalled 33.1 billion Croatian kuna at year-end 2012, while deposits amounted to 37.7 billion Croatian kuna. Market share in loans to and deposits from private individuals remained stable at 25% and 24%, respectively. The small business segment confirmed its leading market position with a 24% market share in number of customers. Corporate loans amounted to 41.7 billion Croatian kuna with market share maintained at 26%, despite deteriorat-ing macroeconomic conditions and fierce competition. Corporate deposits amounted to 15.9 billion Croatian kuna, with market share increasing to 26.3% (from 25.5% at year-end 2011).

The Group seized all opportunities for growth, with many new or innovative commercial activities being well received by custom-ers: commercial activities aimed to support real estate market and housing lending (e. g. subsidised housing loans with ZABA


participating with 54% in the state programme); Domosfera, real estate and housing culture portal launched in June, first on the market; strategic cooperation with the Croatian Association of Craftsmen; Duo Protekt (term deposit with Allianz insurance) resulting in a substantial number of insurance policies and savings contracts; number of Internet and mobile banking users grew by 50,000; ZABA is a market leader in m-banking (75% market share in number and 92% in volume of transactions); the E-branch began to operate in 2012.

The Group remained the clear leader in Capital Markets and Structured Finance, having arranged or co-arranged 5 large bond issues for a total amount of 14.2 billion Croatian kuna and a num-ber of structured facilities with a special focus on renewable energy projects. ZABA/Markets continued its dominance in most segments on the local secondary market, accounting for more than a third of money market turnover and roughly a quarter of foreign exchange and fixed income market activities. Corporate Treasury Sales remained the leader as provider of customised hedging solutions for local corporate clients (market share of more than 40%).

In 2012 the Group received the Global Finance award as Best Croatian Bank, the EMEA Finance award as Best investment Bank and best broker, the Euromoney award as Best Bank in Croatia and Best Bank in Cash Management.

Czech Republic: UniCredit Bank Czech Republic ended the year 2012 with an acceleration of quarterly revenues by 16% compared with Q3 2012. Due to the zero-rate interest rate environment, net interest income decreased y / y by about 4%, but the decline was successfully offset by fee and com-mission income, with total 2012 revenues almost matching the previous year’s level. The bank’s 2012 net profit exceeded 3 billion Czech crowns, a return to solid profitability after Greek bond impairment had impacted the bank’s performance in 2011.

In 2012 the bank substantially improved both its short-term and structural liquidity positions by increasing direct funding (customer deposits and own issues) by 10%. The expansion of the retail network, mostly through the opening of new

Net operating profit of CEE banks (€ million)

–50 0 50 100 150 200 250 300 350 400 450 500 550 600

20112012

Turkey 26%

Russia 15%

Croatia 11%

Czech Rep. 8%

Bulgaria 6%

Hungary 6%

Romania 6%

Serbia 2%

Bosnia and H. 1%

Slovakia 1%

Slovenia 1%

Baltic states <1%

Ukraine 9%

536

476

151

139

120

90

46

43

38

14

9

1

–4



Management Report

franchising units, continued in 2012. The total number of loca-tions reached 134 at the end of 2012, thereof 93 full-fledged branches and 41 franchise outlets. Retail revenues are continu-ously growing, in line with the increased footprint in the country, and are beginning to make an important contribution to the bank’s total revenues. In the area of structured finance and syndicated loans the bank confirmed its leading position on the market by arranging and coordinating most of the major deals on the Czech market. UniCredit Bank Czech Republic executed the largest corporate loan provided to a Czech company. This landmark transaction exclusively tapped the domestic loan market and changed the perception of the liquidity available in this market.

UniCredit Bank Czech Republic in 2012 won the prestigious Euromoney award in the private banking category, and was also named Best Trade Finance Bank by the same magazine. In addition, the bank received four Zlatá Koruna awards for retail products, including a gold medal for its ground-breaking mort-gage loan.

In H2 2012 UniCredit Bank Czech Republic announced its plans to merge with UniCredit Bank Slovakia in 2013, with the Slovak bank to become a foreign branch of the Czech bank. Accomplishing this project in 2013 will provide opportunities for further increasing profitability through cost synergies and market coverage.

UniCredit Bank Slovakia, operating in a challenging regula-tory and economic environment, again confirmed its strengths. The bank experienced dynamic growth of total assets (+5% y / y), driven mainly by an increase of customer deposits (+15% y / y) well above average market growth. Thus, the bank man-aged to win market share in deposits and maintained its sound position in loans. Both liquidity and the capital situation are highly satisfactory (loan /deposit ratio at the level of 102%, capital adequacy ratio of 14.0%).

Despite adverse market conditions (such as the historically lowest interest rate environment and persistent market competition), UniCredit Bank Slovakia recorded revenues of €116.0 million (–4% y / y), supported by strong growth (+7% y / y) in revenues of the corporate segment (which delivered almost 70% of total revenues). The bank’s proactive approach in the difficult interest rate environment generated a strong increase in non-interest related income (+13% y / y). Operating

expenses were significantly impacted by the special bank levy introduced by the government in 2012, which amounted to €14.1 million (or 17% of total costs). Without the effect of this special bank levy, UniCredit Bank Slovakia would have reached a y / y reduction of operating expenses of 3%. After considera-tion of risk provisions and the positive effect from the realisation of available-for-sale financial assets, the net result for 2012 amounted to €15.6 million.

UniCredit Bank Hungary confirmed its excellent profit posi-tion in the Hungarian banking sector despite the challenging economic environment. Net profit as of 31 December 2012 reached about 21 billion Hungarian forint (about +50% y / y).

Total net interest income remained at the previous year’s level, despite a decrease in loan volume and a lower interest rate environment, while fee income rose by more than 2% y / y. The other revenue components were impacted by lower trading profit and the actual FX losses from the government’s Early Repayment Programme for FX mortgage loans (ERP). These losses, however, were partly offset by reductions from the spe-cial bank tax on the cost side, thus the 1.8% y / y increase in operating expenses is well below inflation. Despite the negative one offs in revenues, the bank’s cost / income ratio of 54% was among the lowest in the market. Q1 2012 saw the release of provisions related to the expected ERP losses booked in 2011, thus total net write-downs of loans and provisions for guaran-tees and commitments declined by 62% in 2012. However, excluding the total effect of ERP, provisions related to regular business still fell by 11% y / y.

Generally weak credit demand, early repayments in the retail sector and the yearly appreciation of the Hungarian forint resulted in a more than 15% y / y decline in lending volume. Direct funding (deposits and own issues) on the other hand declined slightly by about 3% y / y, although retail placements showed a positive momentum. As a result, the bank’s liquidity position further improved, with the net loan /deposit ratio falling to 94% in 2012.

In the last quarter of 2012, the combined net operating profit of UniCredit Banka Slovenija d. d. and Uctam upravljanje d. o. o. (a company specialised in managing assets derived from debt restructuring) improved to about €3 million (compared to −€0.3 million in Q3), while the Slovenian macroeconomic indi-cators further deteriorated and the banking sector in aggregate


showed negative results. Revenues are impacted by historically low reference interest rates, as well as by lower lending vol-umes due to higher loan repayments. With the help of recent campaigns and customers’ continued confidence in the bank, the volume of customer deposits reached a level of more than €1.2 billion as of the end of 2012, representing y / y growth of almost 30%. Such increased customer funding helped the bank to significantly improve the loan /deposit ratio to 183%, compared to more than 245% in December 2011. Operating expenses declined by 16% from €12 million in Q4 2011 to €10 million in Q4 2012 through the implementation of several cost management initiatives. The overall Q4 result of Slovenian operations was affected by an impairment charge for available-for-sale equity investments of about €21 million, of which €12 million for shares owned by Uctam upravljanje d. o. o. (a subsidiary of Vienna-based UniCredit Turn-Around Man-agement), and about €9 million for shares owned by UniCredit Banka Slovenija. On a stand-alone view, the net profit of UniCredit Bank Slovenija amounted to €1.1 million.

In Bosnia and Herzegovina (B&H), the combined impact of a deterioration of the economic environment in Europe and domestic factors led to a full-year contraction of the economy, resulting in both a decline of merchandise exports and industrial output and growing unemployment. Serving almost 1.2 million customers, the Group operates through two banks (UniCredit d. d. Mostar and UniCredit a. d. Banja Luka), with the largest banking network of 125 branches in B&H, whilst the number of ATMs and POS terminals increased to 297 and 6,321, respec-tively. Despite difficult market conditions, UniCredit Group B&H further strengthened its leading position on the market in all the main areas during 2012. Based on a proactive market approach, net profit increased to BAM 67 million (+13% y / y), mostly as a result of favourable business operations in the entity of the BiH Federation and notable improvements in performance on a dynamic market in the entity of Republic of Srpska. The result was headed by higher cost efficiency with total cost declines of 3% y / y, while revenues rose by 2% y / y. Neutraliz-ing an unfavourable economic cycle by prudent activities to the utmost extent, the Group posted an increase in provisions of about 13% y / y. The deposit base showed a rise by about 9% y / y, whilst loans grew by almost 5% y / y, reaching market shares of more than 20% in loans and more than 22% in deposits, respectively. The loan /deposit ratio was thus 92% as of the end of 2012.

For UniCredit Group in B&H, 2012 was characterised by pro-moting the use of direct channels at more favourable terms and conditions and the expansion of the ATM network, especially of the cash /check deposit ATMs. New card products have been implemented, as well as e-commerce services. Faced with low demand for loans, the Group approached clients with specifi-cally designed commercial loan offers, while also enhancing the range of savings products. Additionally, the Group focused on improving efficiency in the areas of back office activities and customer relations. In line with its commitment to socially responsible actions, UniCredit Group in B&H carried out a series of activities related to projects on environmental protec-tion and improving the quality of life in B&H. All mentioned activities in 2012 resulted in customer satisfaction that remained over and above that of our main competitors.

2012 was a very challenging year for Serbia due to the impact of the global economic slowdown, an extremely cold winter and elections, resulting in negative real GDP growth, strong depreciation of the local currency and high inflation. The banking industry experienced stagnation and the high level of non-performing loans resulted in high provisioning require-ments and lower profitability in the sector as a whole. However, the last quarter of 2012 showed signs of recovery.

In this challenging market environment, UniCredit Bank Serbia succeeded in increasing its market share in all areas and in remaining a top performer in terms of profitability and effi-ciency. The bank improved the quality of revenues and the increased cost of risk was mostly offset by stable revenue growth and effective cost management, so that profit before tax came to 4.9 billion Serbian dinars. The bank further strength-ened its leading position on the Serbian banking market with total assets growth of about 23%, primarily driven by an enlarged client portfolio. On the basis of enhanced local stable funding and deposit growth of 29%, the commercial loan /deposit ratio improved by 17 percentage points y / y, resulting in an even more robust liquidity position and improved self-suffi-ciency. In 2012, the bank continued to be a reliable business partner to almost all major players in the Serbian economy with prominent roles in government-sponsored projects, subsidised retail and corporate loans and state financing. UniCredit Bank Serbia serves almost 200,000 customers through its network of 75 branches.



Management Report

The Romanian economy registered positive real growth of an estimated 0.2% y / y in 2012, compared to 2.2% in 2011 as a result of faltering exports amid weak economic activity in the EU, an estimated 15% drop in agricultural output and low domestic demand. In 2012, UniCredit Tiriac Bank (UCT) proved to be one of the best performing banks in the local market. UCT registered one of the highest levels of profitability, sup-ported by significant growth in both loans and deposits. Growth was built on acquisition and business growth in the small busi-ness, medium-sized and large corporate customer segments and a stable increase in risk-free revenues (such as trade finance). Balance sheet restructuring geared to a higher level of self-sufficiency was achieved with an 11 percentage point fall in the loan /deposit ratio at the end of the year to 115%, sup-ported by a stable increase in deposits (close to 30% average growth in customer deposits). The bank improved the risk inten-sity factor – for a 10% increase in assets, the RWA equivalent increased by only 2%. Customer satisfaction indices improved further, making the bank one of the frontrunners.

UniCredit Tiriac Bank increased net profit by 14% over 2011 to more than 170 million Romanian leu (group view). Total reve-nues came to 1.2 billion Romanian leu, up 1% y / y despite the sharp drop in interest margins that was driven by a decline in benchmark rates, high deposit rates, higher deposit volumes and higher funding costs. Operating costs were up 3.4% y / y to about 637 million Romanian leu, resulting in a cost / income ratio of 51%. The bank’s total assets reached more than 25 billion Romanian leu at the end of December 2012, up 10% y / y. The outstanding on-balance sheet loan portfolio reached more than 17 billion, up 9% y / y. This includes 11% y / y growth in the corporate segment and a 14% rise in retail business. Customer deposits almost reached 14 billion Romanian leu at year-end 2012, up 20% y / y targeting the stable segments of private individuals and small and medium-sized companies. The annualised cost of risk, based on average net loans, declined to below 260 bp in 2012 from close to 340 bp in 2011 due to process improve-ments on the NPL portfolio. As a result of the optimisation measures undertaken, 37 outlets were closed during the year (208 outlets at year-end 2012) and the number of employees was reduced by 6% to about 2,800.

In Bulgaria economic performance improved in 2012, albeit modestly given the relatively slow pace of consumption, soft exports and still uncertain labour market developments. The banking sector, on the other hand, faced lower interest

rates for both loans and deposits, resulting from the historically low interbank reference rates and the ongoing loan portfolio restructurings. Since loan interest rates declined more than the rates for deposits, margins narrowed and reduced revenues y / y. Operating costs were kept under control, which along with the lower loan loss provisions increased the sector’s net profit compared with the previous year.

UniCredit Bulbank, as a dominant market player, increased its total assets by 6% y / y to 12.7 billion Bulgarian leva. Gross loans to customers amounted to 9.4 billion Bulgarian leva, up by about 10% y / y, with retail loans increasing by 3% and corporate loans by 13% y / y. Given the good liquidity levels on the primary deposits’ market, customer deposits increased by 13% y / y to 8.2 billion Bulgarian leva. This brought down the loan /deposit ratio to 105% from 108% a year earlier. Share-holders’ equity was 6.5% up y / y to 2.1 billion Bulgarian leva, supporting a sound total adequacy ratio of 18.9%.

Total revenues amounted to more than 640 million Bulgarian leva, slightly better than 2011 despite the market-driven decrease in net interest income of about 8%. The bank’s robust revenue generation capacity was maintained by the increase in net fee and commission income (+14% y / y) and the sharp rise in trading income (+41% y / y, mainly due to higher income from hedging transactions with customers). Operating costs rose by about 3% y / y to 255 million Bulgarian leva, with strict cost contingency measures mitigating the increase which reflected growing business volume and newly-implemented strategic business projects and innovative products. By launch-ing a project for advanced NPL management, UniCredit Bulbank made major efforts to lower the NPL ratio under challenging market conditions; at about 16% at the end of 2012 the ratio was below the market average. Net loan loss provisions were about 13% higher y / y, mainly in the corporate portfolio, follow-ing the increased coverage of defaulted loans. Net profit reached close to 220 million Bulgarian leva and, despite the 9% y / y decline, accounted for close to one-third of the banking sector’s profits.

The Ukrainian economy slowed significantly in 2012 with annual GDP growth expected at 0.5% to 1% on the back of lower foreign demand for Ukraine’s major export goods such as steel and machinery. In 2012 the CPI hit a 10-year low at 0.2%. In 2012, the Ukrainian hryvnia remained pegged to UAH7.99 /USD, although this severely affected the liquidity of local banks and pushed interest rates up.


2012 was a good year for PjSC Ukrsotsbank despite the deteriorating market conditions. In 2012 PJSC Ukrsotsbank became a national sponsor of one of the major European sport and cultural events – the Euro 2012 UEFA Championship. Commercial activities related to Euro 2012 thus supported the bank’s fee and commission income. The optimisation of the branch network was followed by a further migration of transac-tions to alternative distribution channels. The number of active users of SMS banking by the end of 2012 increased by 62%, while the number of clients connected to Internet banking grew by 35%. Two new Private Banking centres were opened in 2012. The unique “U-card” loyalty programme was launched in 2012, the first to combine the payment and bonus accumula-tion functions of a plastic card. The bank has maintained its leading position in the area of car loans. Despite the difficult economic environment, the bank managed to increase the number of SME clients. More than 15,000 micro and small businesses opened new deposits with the bank in 2012, which is a 64% increase compared to 2011.

Ukrsotsbank remains a recognised player in the large and international customer segments. Along with new loans, the bank provides a number of non-lending services such as cash management, global transactional and factoring services. The Euromoney Cash Management Poll 2012 named Ukrsotsbank Best Cash Management Bank in Ukraine. For two consecutive years Ukrsotsbank is recognised as the number one bank for factoring services in Ukraine and a leader in providing struc-tured finance services in Ukraine.

In 2012, the bank further increased its capital, bringing its total equity to 8.3 billion Ukrainian hryvnias. The increase of capital strengthened the bank’s regulatory capital base, improved the capital adequacy ratio by 359 bps and enhanced its support to customers and shareholders. In 2012, the bank’s loan /deposit ratio improved by 25 percentage points to 139%, down from 164% as of 31 December 2011. The improvement came on the back of a 1.6% y / y increase of total deposits and a 14% y / y decline of the gross loan portfolio in 2012. A local liquidity crisis and high interest rates also put pressure on Ukrsots-

bank’s net interest income, which declined by 13% y / y to 2.1 billion Ukrainian hryvnias. However, the bank’s non-interest income grew by almost 30% y / y due to the growth of net fees and commissions and income from trading activities. Despite significant write-downs of loans the bank achieved a net profit of 14 million Ukrainian hryvnias in 2012.

In Q4 2012, the Baltic countries (Estonia, Lithuania and Latvia) witnessed further signs of economic recovery. Net inter-est income of AS UniCredit Bank in Q4 2012 returned to the high level of Q1 2012, thus making a strong contribution to the full-year result; fee and commission income, together with trad-ing income, contributed significantly to total revenues in Q4 2012 and improved substantially compared to the previous year. At the same time, the bank is continuing to pursue tight cost discipline, allowing the bank to keep operating costs at about the same level as last year. After posting an operating profit in 2011, the bank maintained its profitability in 2012, even though it was adversely affected by the decline in interest rates. UniCredit Bank is well capitalised with a capital adequacy ratio of close to 13%. External funding continued via the Euro-pean Investment Bank for the purpose of diversifying funding sources.

In January 2013 the shareholders of AS UniCredit Bank approved the centralisation of Baltic operations for 2013. Operations will then all be handled in Latvia, where UniCredit Group’s main entity in the Baltic region is legally registered and currently performing banking operations. Centralisation is expected to be completed in the middle of 2013, when AS UniCredit Bank plans to close its branches and corporate offices in Estonia and Lithuania. This strategic decision was taken with a view to increasing the efficiency of activities in the Baltics through the optimisation of organisational and cost structures, while also creating synergies in terms of efficiency and balance sheet and liquidity management. UniCredit will continue to serve clients in the Baltics through the new centralised struc-ture. UniCredit Leasing, which also operates in all three Baltic countries, will continue to serve UniCredit customers from Estonia, Latvia and Lithuania.


Management Report


Income statement of the consolidated banking subsidiaries in CEE 1)

(€ million)

CEE BUSINESS SEGmENT 2) CZECH REPUBlIC SlOVAKIA HUNGARY

2012 2011 2012 2011 2012 2011 2012 2011

Net interest 3,194 3,058 246 262 76 86 217 224Dividends and income from equity investments 21 34 2 2 0 0 0 0Net fee and commission income 1,008 992 82 72 33 29 59 60Net trading income 416 347 55 57 7 6 16 50Net other operating income/expenses 89 63 1 0 1 1 –22 –21Operating income 4,728 4,493 386 393 116 121 270 313Operating costs –2,177 –2,102 –190 –192 –85 –73 –145 –147Operating profit 2,551 2,392 196 201 31 48 125 166Net write-downs of loans –895 –768 –57 –51 –18 –11 –35 – 95Net operating profit 1,657 1,623 139 150 14 37 90 71Provisions for risks and charges –62 –14 1 0 1 0 –2 –2Integration/ restructuring costs –1 –2 –1 –2 0 0 0 0Net income from investments 119 8 8 – 93 2 2 2 –6Profit before tax 1,712 1,615 147 54 17 39 90 63

Customer loans 3) 70,185 66,745 7,340 7,049 2,914 2,954 3,300 3,630Customer deposits and debt securities in issue 3) 64,290 57,036 9,197 8,149 2,859 2,506 3,527 3,391

Exchange rate 100.19 4) 100.00 25.149 24.590 Euro Euro 289.25 279.37 Appreciation/depreciation against the euro –0.2% –2.2% –3.4%

(€ million)

SlOVENIA BUlGARIA ROmANIA BAlTICS

2012 2011 2012 2011 2012 2011 2012 2011

Net interest 55 59 209 228 161 188 15 16Dividends and income from equity investments 2 2 5 4 0 0 0 0Net fee and commission income 22 21 80 70 56 56 2 –1Net trading income 2 0 32 23 59 47 2 1Net other operating income/expenses 0 0 2 3 3 0 0 –1Operating income 81 83 329 328 279 291 19 16Operating costs –42 –43 –130 –126 –143 –145 –14 –13Operating profit 39 41 199 201 136 146 5 3Net write-downs of loans –30 –24 –79 –70 – 90 –106 –4 –5Net operating profit 9 17 120 132 46 40 1 –2Provisions for risks and charges 0 0 3 –2 –1 2 0 0Integration/ restructuring costs 0 0 0 0 0 0 0 0Net income from investments –25 –2 1 6 0 0 0 0Profit before tax –16 15 124 136 46 42 1 –2

Customer loans 3) 2,256 2,340 4,404 4,026 3,577 3,354 603 645Customer deposits and debt securities in issue 3) 1,231 957 4,205 3,726 3,107 2,655 397 306

Exchange rate Euro Euro 1.9558 1.9558 4.4593 4.2391 0.6973 5) 0.7063 Appreciation/depreciation against the euro 0.0% –4.9% +1.3%

1) The income statement figures are shown on a consolidated basis at country level. / 2) The CEE business segment for segment reporting purposes comprises the total figures for the CEE banks shown in this table and the Vienna-based CEE headquarters. / 3) End of period. / 4) Index of the relevant currencies against the euro, weighted by operating income. / 5) Latvian lat (LVL).


(€ million)

TURKEY 6) RUSSIA UKRAINE

2012 2011 2012 2011 2012 2011

Net interest 778 564 583 534 202 215Dividends and income from equity investments 3 18 1 1 0 0Net fee and commission income 325 364 118 95 59 47Net trading income 49 36 120 90 12 2Net other operating income/expenses 43 34 –1 3 –3 0Operating income 1,198 1,016 821 723 270 265Operating costs –515 –462 –278 –256 –138 –122Operating profit 683 553 543 467 132 143Net write-downs of loans –147 –48 –67 –60 –136 –100Net operating profit 536 505 476 407 –4 43Provisions for risks and charges –65 –10 0 –1 0 1Integration/ restructuring costs 0 0 0 0 0 0

Net income from investments 43 20 79 79 0 1Profit before tax 514 515 556 485 –4 44

Customer loans 3) 14,436 12,409 12,462 11,318 2,404 2,842Customer deposits and debt securities in issue 3) 13,554 11,838 13,479 11,584 1,725 1,734

Exchange rate 2.3135 2.3378 39.926 40.885 10.352 11.107 Appreciation/depreciation against the euro +1.0% +2.4% +7.3%

(€ million)

CROATIA BOSNIA SERBIA

2012 2011 2012 2011 2012 2011

Net interest 348 410 90 89 83 85Dividends and income from equity investments 5 5 0 0 0 0Net fee and commission income 118 122 33 32 16 16Net trading income 38 16 5 6 11 10Net other operating income/expenses 44 44 1 0 –1 0Operating income 553 597 129 126 109 111Operating costs –250 –272 –75 –77 –38 –36Operating profit 303 324 54 49 72 74Net write-downs of loans –151 –101 –16 –14 –28 –25Net operating profit 151 223 38 35 43 50Provisions for risks and charges –1 0 1 0 0 0Integration/ restructuring costs 0 0 0 0 0 0Net income from investments 10 –1 0 0 0 0Profit before tax 160 222 39 35 43 50

Customer loans 3) 9,302 9,516 1,477 1,414 1,357 1,246Customer deposits and debt securities in issue 3) 8,272 7,837 1,604 1,470 900 742

Exchange rate 7.5217 7.4390 1.9558 1.9558 113.04 101.97 Appreciation/depreciation against the euro –1.1% 0.0% – 9.8%

3) End of period. / 6) pro quota



Management Report

Economic scenario � After the slowdown in the second half of 2012, the outlook for the global economy improved around the turn of the year. Widely noted leading indicators, such as the Purchasing Managers’ Indices for emerging markets and for the US, again exceeded the growth thresh-old, suggesting that economic activity in the major global regions will pick up. The OECD’s leading indicators, which are understood to show turning points in the cycle, suggest that the economy in the industrial countries has touched bottom. The decline in the euro area’s economic performance in the fourth quarter of 2012 is explained by temporary factors which are likely to reverse, including the countermovement to a better third quarter of 2012 and the period of weakness observed in the inventory cycle.

In the past few months the basic conditions required for stronger growth have improved: incalculable systemic risk (including fears of a break-up of European monetary union), which was a major factor leading to worldwide uncertainty and weak demand in 2012, is con-sidered to be significantly lower after the EU’s decisions to carry out reforms and with the ECB’s willingness to intervene. Consequently, uncertainty in financial markets has diminished. The clear shift in securities portfolios which took place around the turn of the year is a sign of risk returning to “normal”. From the beginning of December to the editorial close of this report (28 February), stock markets advanced by more than 13% (Japan even recorded an increase of 23%), moving more or less in parallel, and risk premiums continued to decline across the board (government bonds of highly indebted countries, corporate bonds, bonds issued by banks). On the other hand, the Swiss franc and the price of gold dropped by 2.3% and 1.6%, respectively, and benchmark bonds also showed a negative performance. The correction of misguided allocation, over many years, to investments offering negative real interest rates in presum-ably safe havens has only just begun.

� It may take some more time for the improved sentiment to feed through to the real economy. Yet our economists, in their basic sce-nario for the euro area, proceed from the assumption that economic activity will gradually recover during the year. In Germany and Spain, the recovery is expected to start in the first quarter of 2013, slightly accelerating as the year progresses. Italy could overcome recession in the spring while Spain will probably have to wait until the autumn for positive quarterly growth to return. As conditions deteriorated towards the end of 2012, and 2013 thus started with a negative overhang, annual average growth rates expected for 2013 are a moderate 0.8% for Germany and 0.5% for France whereas GDP in Italy and Spain will again decline by 1.1% and 1.4%, respectively. A comparison of year-end quarters (Q4 2013/Q4 2012) illustrates the moderate improvement: expected growth of +1.7% in Germany, +1.1% in France, +0.1% in Italy and a contraction of 0.4% in

Spain would mean that GDP in these countries would more or less match the previous year’s levels. Real GDP of the euro area should almost match the previous year’s level (–0.1%) in 2013, while growth from Q4 2012 to Q4 2013 should reach +0.8%. The growth forecast for 2014, an average +1.2%, is also moderate. By the end of 2014, real GDP of the entire euro area will not yet match the mid-2008 level (before the collapse of Lehman Brothers).

We think that the steady recovery in the euro area is supported by three factors. First, while consolidation will continue in the current year, the adverse impact of fiscal measures will no longer be as dramatic as in 2012. Second, constraints affecting the transmission channels of monetary policy will ease during 2013 and fragmentation within the euro area should diminish. If risk premiums on sovereign bonds continue to fall or just remain unchanged, this will improve funding conditions for banks in highly indebted countries and ultimately also for non-financial companies. Third, we assume that world trade will grow faster as the cyclical slowdown in China seems to have been overcome (with growth expected to accelerate from 7.5% to about 8.5% in summer 2013). Other emerging markets should also benefit from expansionary monetary and fiscal policies. In the US, the real estate sector and thus the consumption-driven economy are poised for a turnaround after long years of decline. This means that exports may again be expected to provide impetus to the euro area economy in 2013. An inventory buildup could also have a supportive effect. On the other hand, given high unem-ployment and low purchasing power (incomes, social transfers, cost savings), private consumption will not pick up until 2014, when the construction industry will start to recover.

� In the basic scenario, the yield curve (euro benchmarks) will probably not change much, remaining flat from year-end 2012 to year-end 2013 with a slight upward shift of about 50 basis points. As far as classic monetary policy is concerned, the ECB thinks that at the current level, key interest rates are “highly accommodative”. On this basis the use of its unconventional instruments is primarily aimed at supporting liquidity at banks in the South European countries. But this does not exclude the possibility of a reduction of the outstanding tender volume in the core countries. We see neither immediate risks of inflation nor risks of deflation: ample central bank liquidity has hardly left the consolidated banking sector, and the growth of money supply is low (moreover, there are instruments and time enough to soak it up again if necessary). Yet inflation rates have not fallen, despite the significant degree of underutilisation of capacity; on the con-trary, indirect taxes have led to a permanent rise. In the absence of unforeseeable impetus provided by energy prices, the rate of inflation will be just under 2% in both 2013 and 2014.

Outlook


� The main risk to the basic scenario is possible misinterpreta-tion of the good start in 2013 and of the positive signals received from financial markets. This could prompt economic policymakers to implement restructuring plans and reforms which are part of IMF conditionality, or included in the memorandums of under-standing of European institutions, in a lax manner. This is all the more true as no major euro initiatives may be expected around the time of elections and possible changes of government in Germany and Italy. A renewed increase in sovereign risk premi-ums and a reversal of capital flows would immediately strangle the moderate upswing. Risks are also discernible outside Europe: in the US, the procedure for raising the debt ceiling could involve a stinging ideological dispute between the political parties leading to higher volatility in financial markets and the US dollar before a decision is made on spending cuts. Moreover, repeatedly putting off the inevitable budget consolidation in the US, in combination with the level of Fed intervention which has now been reached, poses medium-term stability risks to the world’s major currency. There could be a strong temptation in foreign exchange markets to use competitive depreciation (“currency war”) in an environ-ment characterised by zero interest rates, budget problems and an interest rate policy whose possibilities have been largely exhausted; competitive depreciation could further aggravate global economic imbalances. Aggressive depreciation of the Japa-nese yen (–19% against the euro and –16% against the US dol-lar since the middle of November) recently nourished such fears. The usual event risks include an escalation in any of the numer-ous geopolitical hot spots which could lead to strain in financial markets and/or commodity markets at any time.

Risks associated with the European sovereign debt crisis have not been removed but have become calculable with the decisions to decouple sovereign risks and bank risks, and in view of the extended range of instruments available and the ECB’s readiness for unlimited intervention in case of need. European monetary union is no longer expected to break up. However, high unemploy-ment in the South European countries may cause a wave of pro-tests and renewed uncertainty, leading to higher risk premiums and new rollover problems so that ultimately the new instruments may actually have to be used.

Among the countries which already use EU assistance pro-grammes (“programme countries”), Greece will remain depend-ent on international support for a long time. After the debt restructuring of March 2012 and the successful bond repurchase in December 2012, less than 10% of the country’s outstanding government debt is now held by private investors. The IMF recently agreed to grant more time and somewhat relaxed debt targets, and the Eurogroup promised further help in an emer-gency, provided that Greece achieves a primary surplus in 2013.

The deficit was reduced to 8% of GDP in 2012 (although nominal GDP declined by a substantial 5.5%), mainly because interest payments were lower. The primary deficit (central government without interest expense) also fell to 1.9%. The government is trying to comply with the conditions imposed by introducing addi-tional austerity measures and automatic corrective mechanisms if targets are not met (e. g. debt repayment has been given priority by setting up a separate account). The recapitalisation of banks is due to be completed in April. It is essential now that social cohe-sion does not completely disintegrate as a result of problems aris-ing from progressive impoverishment of the population, so that further debt remission becomes possible in the medium term. In Portugal, the Troika also slightly eased the current deficit targets (from 3% to 4.5% in 2013) as the country experienced weak economic growth and was able to meet the target for 2012 only through one-off effects. Tax increases totalling 3.1% of GDP are currently being examined by the Constitutional Court. In early 2013, Portugal successfully tapped capital markets in the short maturity range. Funding requirements will rise in 2014 and 2015, and meeting them will not be possible without additional official help. Ireland has made the fastest progress among the pro-gramme countries. In 2013, the country will meet a part of its capital requirement for government debt rollover via capital mar-kets and it will draw a last tranche of the assistance programme in a more or less equal amount. Ultimately, support is tantamount to pooling fiscal sovereignty subject to the condition of gradual convergence to the Maastricht criteria. Together with the ECB’s readiness to avoid excessive interest rate strain in programme countries, this has turned the European sovereign debt crisis from an acute problem into a medium-term to long-term issue. High social costs are the main risk involved in this strategy.

In 2012, the government debt crisis spread to other highly indebted countries via capital markets. The resulting increase in risk premiums is not justifiable by fundamentals, and has made debt rollover prohibitively expensive. Sovereign risk premiums have fallen to levels prevailing before the middle of 2011 (as can be seen from five-year CDS spreads). In the case of Italy, this is due to the ECB’s ultimate guarantee for European monetary union and to the country’s own consistently implemented restructuring measures and reforms. Italy will achieve a primary surplus of about 5% in 2013. Spain raised substantial funds via 10-year bonds launched in capital markets in January 2013, thereby reducing the average interest rate. This has further reduced the probability of having to sign a memorandum of understanding with the assistance institutions. The restructuring of distressed banks via SAREB, a bad-bank vehicle, seems to be well under way after drawing on the direct EFSF credit line. In view of severe recession and high unemployment, the EU tolerates the country’s failure to meet the deficit targets while insisting on continued



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reforms. The banking sector of Cyprus, which due to its long-standing function as an off-shore hub is much too large when compared with the country’s economic output, got into trouble in 2012 after the Greek debt restructuring because of its close busi-ness links. But in view of the ESM’s capacity this is a problem of manageable size. An assistance package will probably be linked to strict conditions. Slovenia made progress in restructuring partly state-owned banks and raised funds for this purpose in capital markets. Now that the Constitutional Court has rejected referen-dums, reforms can be implemented. The use of public assistance has thus been avoided.

➔ Overall, the sovereign debt crisis represents an indirect rather than a direct risk for Bank Austria, in that the moderately favoura-ble economic scenario may fail to materialise and a renewed downturn may adversely affect banking business.

Austria � In Austria, leading indicators show that the economy will initially grow at a moderate rate, which will gradually accelerate in the course of the year, giving annual average growth of 0.9% in 2013 (2012: +0.5%). There are two reasons for brightening prospects in 2013: stronger foreign demand and growing investment activity. Emanating from the Asian emerging markets and the US, the eco-nomic recovery will also reach Europe as fiscal burdens will ease. Demand for Austrian exports will therefore be noticeably stronger in 2013 than in the preceding year. Exports including services will increase by 3.3% in real terms in 2013 (after +1.9% in the previous year). As the situation in the euro area is stabilising and financing conditions for investments are favourable, domestic demand will pick up during 2013. Investment in equipment will also grow, by 1.4%, in average terms in 2013 after stagnating in the previous year (+0.2%), construction investment will continue to grow only moderately, by 0.8% after 0.9%. Private consump-tion is not expected to provide any additional stimulus (+0.6% after 0.5%). Wage settlements suggest that real purchasing power will rise in 2013 – also because inflation will decline from 2.4% in 2012 to 2.2% in the current year – while the continued rise in unemployment (annual average for 2013: 4.5% after 4.4% in 2012) will limit the upward trend. A turnaround will therefore not be seen until the second half of 2013.

� As business sentiment improves, demand for SME loans and corporate loans should pick up a little in 2013. The decline in SME loans may come to a halt in 2013, with total volume slightly exceeding the previous year’s level. In the course of 2013, corpo-rate lending could expand at a rate seen in early 2012; overall, however, growth is not expected to exceed 3%. Companies still enjoy a good liquidity position, and those which can access capital markets increasingly launch bond issues. Nor do we expect a fur-ther decline in consumer loans. Housing loans will continue to rise.

Holdings of financial assets will probably increase more strongly than in 2012, which was a very weak year in that respect, but growth will probably be significantly lower than in the years before 2010. As financial markets recover and interest rates remain at a low level, there will be stronger demand for securities, especially shares and investment fund units.

Central and Eastern Europe (CEE)� The collateral damage from the EMU crisis and renewed global economic weakness from the middle of 2012 onwards will initially continue to burden growth in Central and Eastern Europe. As uncertainty recedes and economic activity picks up in the euro area, however, the more closely integrated economies in Central and South-East Europe will return to a moderate growth path. Economic trends in CEE are lagging somewhat behind the region’s western neighbours. Impetus is transmitted via exports and industrial links, the inventory cycle and international capital movements as well as more favourable local financing conditions. In line with the forecast global scenario of moderate growth with stable commodity prices, the larger CEE countries, which enjoy a higher degree of economic autonomy, will steadily expand, though at a significantly lower rate than during the upswing in 2010 and 2011. On this basis we expect the CEE region to achieve overall growth of 2.9% in 2013 (after 2.5%), which should rise to 3.4% in the following year (see table).

International capital movements are an important factor in this scenario. In 2012, a strong inflow of portfolio investments had a strong favourable effect on the balance of payments and led to currency stabilisation or appreciation in the course of the year (depending on the exchange rate regime and monetary policy direction). In the years since 2008 these short-term capital flows have been the primary source of external financing yet failed to prevent the slowdown in economic growth as fiscal consolidation measures, taken in a timely and determined manner in almost all countries, proved to have a very strong impact on domestic demand. In the meantime, several countries (especially Turkey) have taken advantage of this greater freedom to let the automatic stabilisers take effect in order to cushion the economic repercus-sions. The low debt ratios in CEE (with the exception of Hungary) and pressure on the current fiscal policy of euro member coun-tries to meet the 3% budget deficit limit have been supportive factors in maintaining this status. In many countries, expansion was therefore mainly driven by monetary policy. Inflation shows a downward trend – apart from some problems emanating from the agricultural sector – and this points to a further easing of interest rate policy.

Financing conditions also show signs of stabilising, with large regional variations. Lending business has been sluggish in many CEE countries over the past few years, reflecting trends in demand


and also supply side developments as deleveraging in the banking sector accelerated. In banking sectors characterised by a large pro-portion of foreign ownership, disinvestment was less pronounced than in countries where the banking sector shows a more local pro-file and fragmentation. We expect this trend to continue in 2013. Since 2008, CEE banks have moreover adjusted to the funding of credit growth through local deposits. While growth rates on both sides of the balance sheet are significantly lower than in the boom years, they are now more or less at the same level (with some fluctu-ations). Depending on deposit growth, we expect that credit expan-sion in the region as a whole will reach up to 10%; annual growth of 30% (deposits) or 40% (loans) will not be seen any longer.

Capital inflows to the region were booming at the beginning of 2013. If such inflows ebb off as they return to normal, funding costs could rise again but would still be lower than over long periods of the previ-ous year. Sovereign risk premiums (measured by 5-year CDS spreads on government bonds on a CEE average) were 170 bp in the middle of February 2013 compared with an average 260 bp in 2012 (weighted, including the outlier Ukraine).

� All aspects considered, the combination of slightly stronger exter-nal demand, lower interest rates, declining inflation, higher purchas-ing power and slightly more favourable borrowing rates should con-tribute to a gradual economic recovery. There are still wide differ-ences among the various country groups and countries: among the Central European countries (CE), growth in Slovakia will slow (as special effects in the automotive industry peter out, and on account of fiscal consolidation) and join the general trend (real GDP 2013: +1.6%). The Czech Republic (+0.4%) is likely to gradually emerge from recession in the course of the current year, a development sup-ported by exports and the inventory cycle. In Hungary, real GDP in 2013 will stagnate at the level to which it declined in 2012; Hungary’s investment ratio is the lowest in CEE, and the country also saw the strongest deleveraging effect – not only in connection with foreign currency loans – among all CEE countries. While unconven-tional taxation measures helped public finances, the question is whether this is sustainable. After Hungary’s refusal to accept IMF credit arrangements, future developments will largely depend on the continued confidence of international buyers of bonds, who already account for 48% of the Hungarian bond market. Yet foreign exchange reserves are at a very low level. This means that in an emergency, the only way for Hungary to avoid undesirable currency depreciation will be to apply an interest rate policy hampering growth. Slovenia will continue to experience recession (–1.3%) in 2013, due to delays in the restructuring of banks which are in difficulty (bad-bank approach followed by privatisations) and in public sector reform in general. Restructuring in the industrial sector will also affect growth in the short term. It was only at the beginning of 2013 that the politi-cal possibilities of reforms being implemented improved.

In the region of South-East Europe (SEE), the Bulgarian economy will expand somewhat faster (+1.7%), driven partly by private con-sumption, a development which is now rarely seen in CEE. Private household indebtedness is low, as is government debt, and fiscal data are comparatively good. Increased absorption of EU assistance funds will benefit investment activity. However, asset quality will continue to deteriorate (impaired loans in 2013 will be 19.4% of total loans, after 18.0% in 2012). Economic growth in Romania (+1.3%) will remain below 2% in 2013 and 2014. The political will to implement structural reforms supporting growth is currently weak, all the more so as strong capital inflows and larger EU financing will make it possible to finance current account deficits until the IMF credit agreement expires. Sustained budget discipline and significant foreign exchange reserves currently support a stable outlook for the currency, enabling foreigners to benefit from the interest rate advantage. The banking sector is faced with a large proportion of problem loans (impaired loans ratio in 2013: 28.0% after 26.4%). In the western Balkans, Croatia (+0.5%) has a thriv-ing tourism industry but is burdened with structural weaknesses in the industrial sector, an inflexible labour market and inefficient administration. The country will join the European Union in July 2013 and this could accelerate the necessary reforms, privatisation projects and investments through access to EU assistance funds. But the country will have to use opportunities. In Bosnia and Her-zegovina, growth will remain weak (real GDP: +0.8%) despite an increase in infrastructure investment. As a result of close economic links with neighbouring countries, imports are twice as high as exports and the current account deficit is 10% of GDP. This means that the standby agreement with the IMF is of major importance. We expect the country to apply for EU membership in the course of 2013, not least with a view to bringing pressure for reforms to bear in internal politics. In Serbia (real growth in 2013: +1.4%), the inflation rate rose to about 13% towards the end of 2012. The cur-rent account deficit is over 10% of GDP. Government debt exceeds 60% of GDP, with 80% of the total amount denominated in foreign currencies. Efforts are therefore being made to keep currency depreciation within limits (year-end 2012: –5.6% compared with a year earlier). This requires intervention and high interest rates offered. The standby arrangement with the IMF has a stabilising effect. In view of unstable external and internal political conditions, approximation to the EU has been halted. Impaired loans account for 19.0% of total loans, a high yet stable proportion.

The Baltic states will again achieve the strongest economic growth in 2013, at rates between 3% and 3.5%. After successful reforms and the adjustment recession in 2009/2010, public budgets have been restored to a healthy basis, competitiveness has improved and current account balances are under control. Estonia introduced the euro at the beginning of 2011, Latvia is planning to join the euro area in 2014 and Lithuania aims to adopt the euro in 2015.



Management Report

The Russian economy will expand by 3.6% and 3.8% in 2013 and 2014, respectively. While these growth rates are down by one-half from those seen before the crisis years of 2008/2009, they are among the highest in CEE. All components of domestic demand (consumption 4.7%, investment 6.0%, on a price-adjusted basis) are likely to rise more strongly in 2013 than exports (+2.5%). The central bank is taking a more flexible approach to foreign exchange management, trying to cushion external fluctuations of oil prices and export demand (70% of export revenues and 50% of the country’s budget are depend-ent on oil and gas deliveries). The banking sector benefits from strong monetary expansion, but the banks’ structural liquidity gap must be closed through extensive repos with the central bank, which have recently become more expensive. This and other regulatory measures are aimed at curbing strong growth of retail lending. In Ukraine the economy will grow only slowly in 2013 (+1.0%) after stagnation in 2012. The twin deficits in 2013 (budget: –4.8%, current account: –7.5%), repayments to the IMF due in the near future and low foreign exchange reserves are putting pressure on the currency; recourse to devaluation is not a welcome option because of the country’s gas imports. No decision has as yet been made on whether to use a credit line from the IMF or from Russia, and this enhances political unpredictability. While the proportion of impaired loans is declining, the ratio of 30.0% is still the second-highest in CEE behind Kazakhstan.

Using an unorthodox policy mix, Turkey managed a soft landing (+2.7%) in 2012, after the boom in 2010 (+9.2%) and 2011 (8.5%). As domestic demand has absorbed the effects of tighter liquidity and lower credit growth, GDP will expand faster in 2013 (+3.4% in real terms), with domestic demand and exports sup-porting this growth. Monetary expansion is still strong. The rate of inflation will be 6.5%. Strong capital inflows via Turkish bonds and shares created pressure for the currency to appreciate at the beginning of the year, and this situation has been used to reduce interest rates. Given the persistent, partly structural current account deficit, dependence on short-term capital imports repre-sents a risk factor in the general picture of prosperity.

� Although 2012 and 2013 are years characterised by weaker economic growth, the real economy and the banking sector in the CEE region enjoy good prospects in the medium term. Economic growth in the five years from 2013 to 2017 will be 2.6% p.a. in Central Europe (CE) and 2.9% p.a. in South-East Europe (SEE), compared with only 1.2% p.a. in the euro area. In Russia (CIS) and Turkey, annual average growth (4.4%) will be even stronger than in Latin America (4.0%). This is the basis on which structural convergence – i. e. strong monetary expansion, accelerated circulation of money and increasing market penetration with banking services – will proceed. Banking business is expanding and profitable – despite the

temporary burdens which in the past years resulted from high charges for loan loss provisions in several countries or from regu-latory restrictions; nevertheless, the key indicators will probably not return to the levels seen in the years before 2008. Despite an increase in capital backing, return on equity (ROE) in the CEE banking sectors (on a combined basis, without Kazakhstan) will be 11.3% in the period from 2012 to 2015 (compared with an aver-age 9.5% for 2009–2011 and 16.5% for 2006–2008). Return on assets is about double the figure achieved in the euro area, while the cost / income ratio is significantly lower. Moreover, busi-ness shows a more balanced development, with lower volatility and risk, as the focus is on commercial banking business, lever-age has declined and local funding has increased.

Economic growth (real GDP, % over the previous year)

2009 2010 2011 2012e 2013e 2014e

World (IMF) –0.6 +5.1 +3.7 +3.2 +3.5 +4.1USA –3.1 +2.4 +1.8 +2.2 +1.9 +2.7Euro area –4.3 +1.9 +1.5 –0.5 –0.1 +1.2… Austria –3.8 +2.1 +2.7 +0.5 +0.9 +1.5

Czech Republic –4.5 +2.6 +1.7 –1.1 +0.4 +2.2Slovakia –4.9 +4.4 +3.2 +2.3 +1.6 +2.9Hungary –6.8 +1.3 +1.6 –1.7 –0.6 +0.7Slovenia –8.0 +1.2 +0.6 –2.2 –1.3 +0.9Central Europe –5.5 +2.5 +1.8 –0.6 +0.5 +1.8Poland +1.6 +3.9 +4.3 +2.0 +1.7 +2.3Bulgaria –5.5 +0.4 +1.7 +0.6 +1.7 +2.8Romania –6.6 –1.7 +2.5 +0.2 +1.3 +1.8Croatia –6.9 –1.4 +0.0 –1.8 +0.5 +1.5Bosnia and Herzegovina –2.9 +0.7 +1.3 –0.9 +0.8 +1.5Serbia –3.5 +1.0 +1.6 –2.1 +1.4 +2.0Estonia –13.9 +3.1 +7.6 +2.8 +3.5 +3.7Latvia –17.8 –0.3 +5.5 +5.0 +3.2 +3.4Lithuania –14.7 +1.2 +5.9 +3.3 +3.2 +3.3SEE and Baltic states –7.8 –0.5 +2.6 +0.4 +1.6 +2.2Russia –7.8 +4.3 +4.3 +3.6 +3.6 +3.8Turkey –4.8 +9.2 +8.5 +2.7 +3.4 +3.9Russia and Turkey –6.8 +5.9 +5.7 +3.3 +3.5 +3.8Kazakhstan +1.2 +7.3 +7.5 +5.0 +5.0 +6.6Ukraine –14.8 +4.1 +5.2 +0.4 +1.0 +2.9Kazakhstan and Ukraine –5.8 +5.9 +6.5 +3.0 +3.2 +5.0

CEE (with Poland, GDP-weighted) –5.7 +4.6 +4.8 +2.5 +2.9 +3.4CEE (without Poland, GDP-weighted) –6.7 +4.7 +4.9 +2.5 +3.0 +3.5CEE (Bank Austria-weighted)*) –6.3 +3.6 +4.0 +1.1 +2.1 +2.9

Bank Austria market (GDP-weighted) –6.4 +4.4 +4.7 +2.4 +2.8 +3.3Bank Austria market (Bank Austria-weighted) –5.5 +3.1 +3.5 +0.8 +1.7 +2.4

*) weighted by contribution of Bank Austria’s subsidiaries to operating income in CEE regionSource: UniCredit Research. Forecasts: middle of February 2013.


Outlook for Bank Austria’s performance� The economic environment provides indications that 2013 will be a year of transition for Bank Austria’s future performance. The weak starting position and lingering uncertainty suggest that any recovery of demand for loans and banking services will initially be moderate, gaining momentum later in the year and in 2014. This applies especially to Austria, where companies and private households still act with restraint as long as no significant impetus is provided to economic growth. In CEE we expect continued vol-ume growth, mainly driven by large countries which enjoy eco-nomic autonomy and experience strong monetary expansion. There will be little change in the yield curve, and this means that income from maturity transformation will remain low. Besides the usual event risks – arising, for example, from the many geopolitical hot-spots with an impact on commodities prices – renewed strain in financial markets, with risk premiums rising and benchmarks and peripheral regions drifting further apart, cannot be ruled out,

In our basic scenario we expect to see a slight upward trend in operating activities in 2013. Net interest should be supported by expansion in CEE while the situation in Austria will hardly change in view of the interest rate environment and competitive conditions. We think there is a chance that net fees and commis-sions will pick up: interest rates have been low for quite a long time and the fact that stock markets have strengthened in the early part of 2013 is an indication of missed investment opportu-nities. Liquidity currently held on deposit should increasingly be shifted into investments yielding higher returns. In this context we offer an attractive range of fund products and asset management and advisory services. We aim to keep the rate of cost growth in CEE below revenue growth. In Austria we expect a slight reduction of costs, with the Smart Banking Solutions project (for which we made provisions in the 2012 financial statements) already show-ing initial positive effects in this regard. In CEE, cost growth will be dampened by the focus on high-growth core markets. At the end of 2012, we saw signs that net write-downs of loans and provisions for guarantees and commitments bottomed out after declining over several years; consequently, we expect the provi-sioning charge to rise in 2013. Overall, we think that operating income will improve moderately in 2013.

� Our scenario is cautiously optimistic, yet far from the strong momentum which characterised previous years. Banking opera-tions no longer benefit from self-sustaining momentum but are coming up against economic, and increasingly also regulatory, limits. In line with our medium-term strategy we have therefore started 2013 with a determined programme of far-reaching meas-ures for structural improvement with a view to enhancing growth and profitability on a sustainable basis.

In all our efforts, we aim to consistently optimise capital alloca-tion by minimising risks, reducing activities which are not suffi-ciently profitable or not part of our core business or core regions, and by investing where the potential for growth and earnings is highest. A joint operating model is a key factor in raising cost effectiveness and using cross-regional synergies in the Group. UBIS provides us with services in the areas of information and communication technology (ICT), back office, middle office, real estate, security and procurement, acting as a one-stop services provider and using economies of scale. We expect that the further development of EuroSIG, the standardised core banking system, in UniCredit’s core countries will transmit international impetus to commercial banking business. We are strengthening regional responsibility in line with UniCredit’s strategy of reducing com-plexity in our organisation and putting in place lean decision-making processes. Above all, we want to make better use of customer potential, in our own interest and to create value for our customers.

In Austria we are moving even closer to customers’ specific needs by bundling commercial banking business. Since the beginning of 2013 the new Commercial Banking Division covers the entire range of local customers, from private individuals to large compa-nies and the public sector, and will unlock significant synergies. Private Banking will remain a highly specialised Division meeting the needs of the top segment of private customers. Customers which operate on a cross-regional basis and make intensive use of capital markets – i. e. multinational corporates, international and institutional real estate customers, financial institutions, insurance companies and the Republic of Austria, which is the most impor-tant customer tapping capital markets – are served in Austria, and also at the international level, by the CIB Division, which is very closely integrated in the cross-regional network of investment banking units.

We have launched an initiative in lending business with compa-nies. Our objective is to achieve loan growth which exceeds the rate of 2% forecast for the market as a whole in 2013. This translates into new business of over one billion euros to be generated every month. In the area of investments, we focus on a revival of mutual fund business and securities products with diversified investment strategies and a reasonable risk / return ratio. The total volume of our lending business with private individuals is about €15 billion. We also aim to expand this at a rate above market growth.

In February 2013 we started Smart Banking Solutions, a key project which is sending clear signals both outside and inside the bank. We are thereby reacting to pressure on margins and reve-nues, a structurally high cost / income ratio, and to a return on


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equity that is well below the cost of capital. The Austrian banking sector features a very large number of branches in an international comparison, the market is overbanked and overbranched. The com-ing years will probably see the closure of about one-third of all branches in the Austrian banking industry. We are responding, in a forward-looking manner, to major trends in consumer behaviour: digitalisation and urbanisation. The objective of our project is to give customers more choice from an intelligent multi-channel offering which comprises “physical branches” – i. e. flagship stores, classic branches and self-service foyers, complemented by mobile sales activities – and “virtual branches”, i. e. SmartBanking via digital media. An essential feature distinguishing this concept from online banks is that SmartBanking offers personal advisory services of the same quality as in classic branches – videotelephony makes its possible, for example, to draw on the expertise of up to five special-ists during an advisory talk with a customer. We are in the process of implementing the project: over 50,000 private customers currently use SmartBanking services, and we want to significantly expand this service approach in 2013. In October 2012, Bank Austria started to offer personal advisory services to selected customers via video-telephony. The full pilot operation with videotelephony services for all SmartBanking private customers was launched in January 2013. Some 120,000 customers currently use Bank Austria’s mobile banking applications. Planning is underway for new apps to be made available to independent professionals and self-employed persons, and all apps of Bank Austria will be modernised and relaunched in 2013. The new mobile banking app for iOS and Android was successfully relaunched in February. In the second half of 2013, customers and employees will be intensively involved in the pilot project rollout across Austria with all functions including videotelephony. In 2013 we will start to adjust our branch network, initially closing 12 branches in locations where profitability is insuffi-cient. We made a provision for this purpose in the 2012 financial statements. As many people move to cities, further restructuring of our network will concentrate on urban locations in Austria to respond to the demographic trend.

In the CEE business segment, sound customer business, strict cost discipline and lower net write-downs of loans in 2012 enabled us to achieve a further increase in profit before tax. At the same time the local funding capabilities of many CEE banking subsidiaries improved through strong growth in deposits, which exceeded credit expansion. Despite recently bleaker economic indications, we adhere to our strategy of focused investment in selected growth

markets and align our use of resources with this strategy. In core countries – mainly Turkey, Russia and the Czech Republic – we significantly expanded branch networks and staff numbers in the past two years while rightsizing the local presence in other coun-tries. The intended withdrawal from Kazakhstan is also to be seen in this context. In the Baltic states we will bundle business until the middle of 2013, serving customers centrally from Riga, Latvia, in the future. In November 2012, we decided to merge the business units in the Czech Republic and Slovakia in the course of 2013 to unlock synergies in operations, while business models will hardly change. The most important reason for our broadly-based commit-ment to Central and Eastern Europe is that in the medium term, the economy in the CEE region will continue to grow twice or three times as fast as in Western Europe. Moreover, convergence in the monetary field and in products and consumer habits will support expansion in the banking sector for many years to come. With this in mind, we will provide our local banks with the necessary resources in a targeted manner.

� Future developments in the banking sector and at Bank Austria will be determined by economic trends and our response to them. A decisive factor will also be the regulatory framework in which we operate. We have adjusted to the regulatory changes under Basel 3, including capital ratios, SIFI requirements, changes in the defini-tion of equity capital, etc. Other new rules such as liquidity ratios and funding rules (LCR and NSFR) are being tested or calibrated, and we have also prepared for them. These rules enhance the stability of the financial sector, which is in our own interest.

We are an internationally active bank and it is therefore particularly important for us that supervisory authorities take a coordinated approach and create rules which are consistent across national borders. Banking business – more than other sectors of the econ-omy – needs a reliable environment and a level playing field, in the home country and in the target country. Changes in the gen-eral framework should be made in a reasonable manner to avoid a situation in which the cumulative effect of regulatory restrictions and fiscal burdens impairs the banks’ ability to operate effectively. Direct intervention such as bank levies which are seen as ad-hoc fiscal charges, trading bans and product restrictions may quickly prove to be counterproductive. For us as a European bank, it is of great importance that the use of protectionist measures, including efforts to restrict the free movement of capital or influence it by bringing moral pressure to bear, be prevented from the very start.


Vienna, 4 March 2013

The Management Board

Willibald Cernko Gianni Franco Papa (Chairman) (Deputy Chairman)

Helmut Bernkopf Francesco Giordano Dieter Hengl

Jürgen Kullnigg Doris Tomanek Robert Zadrazil

Customer care that crosses national boundaries

PLANNINGUniCredit Bank Hungary’s products and serviceshave had a strong impact on our business.And their representatives always demonstrate akeen interest in meeting our needs – deliveringsolutions with a high level of flexibility andprofessionalism. Their tailored solutions arepriced appropriately and applied quickly andeasily to our business. UniCredit’s presencethroughout numerous countries also makesthe bank a reliable partner in internationalisingour business.

Carlo Innocenti, CEO of Serioplast,customer of UniCredit Bank in Hungary


in accordance with International Financial Reporting Standards (IFRSs)

Consolidated Income Statement for the year ended 31 December 2012 90

Income statement 90

Consolidated Statement of Comprehensive Income 91Statement of comprehensive income 91Taxes on items directly recognised in equity 91Earnings per share 91

Statement of Financial Position at 31 December 2012 92

Statement of Changes in Equity 93

Statement of Cash Flows 94

Consolidated Financial Statements


Consolidated Financial Statements in accordance with IFRSs

Income statement for the year ended 31 December 2012 (€ million)

Notes 2012 2011

Interest income and similar revenues B.1 8,733 8,286Interest expense and similar charges B.1 –4,360 –3,971Net interest margin 4,373 4,315Fee and commission income B.2 2,105 2,329Fee and commission expense B.2 –510 –494Net fees and commissions 1,595 1,836Dividend income and similar revenue B.3 30 35Gains and losses on financial assets and liabilities held for trading B.4 551 217Fair value adjustments in hedge accounting B.5 –8 3Gains and losses on disposal of: B.6 237 119

a) loans –5 –23b) available-for-sale financial assets 90 141c) held-to-maturity investments 25 –d) financial liabilities 126 –

Gains and losses on financial assets / liabilities at fair value through profit or loss B.7 –5 22OperatiNg iNcOme 6,773 6,546Impairment losses on: B.8 –1,185 –1,507

a) loans –1,121 –1,035b) available-for-sale financial assets –63 –292c) held-to-maturity investments –16 –152d) other financial assets 14 –28

Net income from financial activities 5,588 5,039Premiums earned (net) B.9 161 126Other income (net) from insurance activities B.10 –123 – 98Net income from financial and insurance activities 5,626 5,066Administrative costs: –3,632 –3,555

a) staff expense B.11 –1,972 –1,968b) other administrative expense B.12 –1,660 –1,587

Provisions for risks and charges B.13 –332 –154Impairment /write-backs on property, plant and equipment B.14 –186 –185Impairment /write-backs on intangible assets B.15 –105 –124Other net operating income B.16 106 137OperatiNg cOsts –4,149 –3,881Profit (loss) of associates B.17 –185 162Gains and losses on tangible and intangible assets measured at fair value – –7Impairment of goodwill –199 –387Gains and losses on disposal of investments B.18 18 48tOtal prOfit Or lOss befOre tax frOm cONtiNuiNg OperatiONs 1,111 1,002Tax expense (income) related to profit or loss from continuing operations B.19 –350 –251total profit or loss after tax from continuing operations 761 751Total profit or loss after tax from discontinued operations B.20 –301 –493Net prOfit Or lOss fOr the year 460 258Attributable to:

Owners of the parent company from continuing operations 723 701 from discontinued operations –301 –493Non-controlling interests from continuing operations 38 50 from discontinued operations – –Earnings per share (in €, basic and diluted) from continuing operations 3.13 3.03 from discontinued operations –1.30 –2.13

of the Bank Austria Group for the year ended 31 December 2012

Consolidated Income Statement

As of 31 December 2012, based on a strategic decision of UniCredit Group on risk downsizing of the investment in Kazakhstan, ATF Bank, Kazakhstan, was classified as a discontinued operation/held-for-sale.

Assets and liabilities and income or expense relating to ATF Bank and its subsidiaries in Kazakhstan and Kirgizstan are presented separately in the statement of financial position, in the statement of comprehensive income, in the statement of cash flows and in the notes.

Due to the classification as a discontinued operation, the figures for the previous year in the statement of comprehensive income and in the statement of cash flows were adjusted according to IFRS 5.



Consolidated Statement of Comprehensive Income

Statement of comprehensive income (€ million)

1 jaN. –31 dec. 2012

1 jaN. –31 dec. 2011

total profit or loss after tax from continuing operations 761 751total profit or loss after tax from discontinued operations –301 –493Net prOfit fOr the year 460 258Gains/ losses on assets available for sale (available-for-sale reserve) 928 192Gains / losses on cash flow hedges (cash flow hedge reserve) –132 341Changes at companies accounted for under the equity method –6 7Foreign currency translation – exchange differences 178 –588Foreign currency translation relating to disposal groups classified as held for sale –18 17Actuarial gains / losses on defined-benefit plans – 921 139Taxes on items directly recognised in equity 72 –172Other changes 8 41Other comprehensive income after tax from continuing operations 127 –40Other comprehensive income after tax from discontinued operations –18 17cOmpreheNsiVe iNcOme after tax frOm cONtiNuiNg OperatiONs 888 711cOmpreheNsiVe iNcOme after tax frOm discONtiNued OperatiONs –318 –476tOtal cOmpreheNsiVe iNcOme after tax 570 235Attributable to:Owners of the parent company from continuing operations 850 671 from discontinued operations –318 –476Non-controlling interests from continuing operations 38 40

Taxes on items directly recognised in equity (€ million)

1 jaN. –31 dec. 2012

1 jaN. –31 dec. 2011

Gains/ losses on assets available for sale (available-for-sale reserve) –190 –52Gains / losses on cash flow hedges (cash flow hedge reserve) 32 –85Actuarial losses on defined-benefit plans 230 –35taxes ON items directly recOgNised iN eQuity 72 –172

Earnings per share (in €, basic and diluted) (€)

1 jaN. –31 dec. 2012

1 jaN. –31 dec. 2011

Earnings per share from comprehensive income after tax from continuing operations 3,84 3,07Earnings per share from comprehensive income after tax from discontinued operations –1.38 –2.06



of the Bank Austria Group at 31 December 2012

Statement of Financial Position

Assets (€ million)

Notes 31 dec. 2012 31 dec. 2011

Cash and cash balances C.1 2,754 2,919Financial assets held for trading C.2 2,855 3,322Financial assets at fair value through profit or loss C.3 426 214Available-for-sale financial assets C.4 21,063 14,677Held-to-maturity investments C.5 1,895 3,498Loans and receivables with banks C.6 28,112 25,621Loans and receivables with customers C.7 132,424 134,914Hedging derivatives C.8 4,125 3,466Changes in fair value of portfolio hedged items (+/–) C.9 54 30Investments in associates and joint ventures C.10 2,348 2,562Insurance reserves attributable to reinsurers 1 1Property, plant and equipment C.11 2,509 2,576

of which held for investment 782 721Intangible assets C.12 2,459 2,866

of which goodwill 2,127 2,397Tax assets C.13 1,336 1,389

a) current tax assets 52 282b) deferred tax assets 1,284 1,107

Non-current assets and disposal groups classified as held for sale C.14 3,788 55Other assets C.15 1,446 1,120tOtal assets 207,596 199,229

Liabilities and equity (€ million)

Notes 31 dec. 2012 31 dec. 2011

Deposits from banks C.16 31,061 32,772Deposits from customers C.17 110,563 104,728Debt securities in issue C.18 28,063 29,931Financial liabilities held for trading C.19 2,196 2,554Financial liabilities at fair value through profit or loss C.20 1,152 1,042Hedging derivatives C.21 2,989 2,591Changes in fair value of portfolio hedged items (+/–) – –Tax liabilities C.22 856 789

a) current tax liabilities 88 146b) deferred tax liabilities 768 643

Liabilities included in disposal groups classified as held for sale C.23 3,506 –Other liabilities C.24 3,428 2,782Provisions for risks and charges C.25 5,389 4,204

a) post-retirement benefit obligations 4,600 3,664b) other provisions 789 540

Insurance reserves C.26 201 175Equity C.27 18,192 17,661

of which non-controlling interests (+/–) 530 534tOtal liabilities aNd eQuity 207,596 199,229

As of 31 December 2012, based on a strategic decision of UniCredit Group on risk downsizing of the investment in Kazakhstan, ATF Bank, Kazakhstan, was classified as a discontinued operation/held-for-sale.

Assets and liabilities and income or expense relating to ATF Bank and its subsidiaries in Kazakhstan and Kirgizstan are presented separately in the statement of financial position, in the statement of comprehensive income, in the statement of cash flows and in the notes.


Statement of Changes in Equity

(€ million)

subscribed capital

capital reserVes

retaiNed earNiNgs

fOreigN curreNcy

traNslatiON

reserVes iN accOrdaNce With ias 39*)

actuarial lOsses iN

accOrdaNce With ias 19

share- hOlders’

eQuity

NON-cON-trOlliNg

iNterests eQuity

as at 1 january 2011 1,681 7,096 10,121 –1,334 111 –746 16,931 546 17,476Changes in the group of consolidated companies –28 –28Shares in controlling companies 0 0 0 0Net profit for the period 209 209 50 258Recognised income and expenses 51 –564 396 105 –13 –10 –23Dividend paid 0 –23 –23as at 31 december 2011 1,681 7,097 10,380 –1,898 507 –642 17,127 534 17,661

*) Reserves in accordance with IAS 391 Jan. 2011

31 Dec. 2011

Cash flow hedge reserve 81 336 Available-for-sale reserve 30 171 Total 111 507

subscribed capital

capital reserVes

retaiNed earNiNgs

fOreigN curreNcy

traNslatiON

reserVes iN accOrdaNce With ias 39*)

actuarial lOsses iN

accOrdaNce With ias 19

share- hOlders’

eQuity

NON-cON-trOlliNg

iNterests eQuity

as at 1 january 2012 1,681 7,097 10,380 –1,898 507 –642 17,127 534 17,661Changes in the group of consolidated companies –15 –15Shares in controlling companies 3 3 0 3Net profit for the period 423 423 38 461Recognised income and expenses 2 163 635 –690 109 0 109Dividend paid 0 –27 –27as at 31 december 2012 1,681 7,100 10,805 –1,735 1,143 –1,332 17,662 530 18,192

*) Reserves in accordance with IAS 391 Jan. 2012

31 Dec. 2012

Cash flow hedge reserve 336 237 Available-for-sale reserve 171 906 Total 507 1,143


In 2012, deferred taxes were also recognised directly in equity. €189 million (2011: €52 million) was debited to the available-for-sale reserve and €32 million (2011: €86 million) was credited to the cash flow hedge reserve.



Statement of Cash Flows

(€ million)

2012 2011

Net prOfit 460 258Non-cash items included in net profit, and adjustments to reconcile net profit to cash flows from operating activities

Depreciation, amortisation, net write-downs of loans, and changes in fair values 2,100 2,920Increase in staff-related provisions and other provisions 600 435Increase/decrease in other non-cash items –335 –444Interest income/ interest expenses from investing activities –241 –208Gains / losses on disposal of intangible assets, property, plant and equipment, and investments –256 –182

sub-tOtal 2,328 2,779Increase/decrease in operating assets and liabilities after adjustment for non-cash components

Financial assets held for trading 603 –56Loans and receivables with banks and customers –4,387 –6,234Other asset items – 938 –1,335Financial liabilities held for trading –250 –500Deposits from banks and customers 7,110 4,640Debt securities in issue –1,183 2,478Other liabilities items 833 –282

cash flOWs frOm OperatiNg actiVities 4,115 1,490of which: cash flows from operating activities of discontinued operations 25 37

Proceeds from disposal ofinvestments 8,798 9,505property, plant and equipment 65 121

Payments for purchases ofinvestments –12,677 –10,602property, plant and equipment –440 –494

Proceeds from sales (less cash disposed of) of subsidiaries 6 16Payments for acquisition (less cash acquired) of subsidiaries – –48Other changes 287 49cash flOWs frOm iNVestiNg actiVities –3,961 –1,453

of which: cash flows from investing activities of discontinued operations 85 –63

Proceeds from capital increase – –Dividends paid – –Subordinated liabilities and other financial activities (net) –26 –133cash flOWs frOm fiNaNciNg actiVities –26 –133

of which: cash flows from financing activities of discontinued operations 12 1

cash aNd cash eQuiValeNts at eNd Of preViOus periOd 2,921 3,030Cash flows from operating activities 4,115 1,490Cash flows from investing activities –3,961 –1,453Cash flows from financing activities –26 –133Effects of exchange rate changes –3 –13cash aNd cash eQuiValeNts at eNd Of periOd 3,046 2,921

of which: cash and cash equivalents from discontinued operations 293cash and cash equivalents at end of period 2,754 2,921

paymeNts fOr taxes, iNterest aNd diVideNdsIncome taxes paid from operating activities –88 –57Interest received from operating activities 8,034 7,443 from investing activities 1,133 1,192Interest paid from operating activities –3,614 –3,265 from investing activities – 942 –855Dividends received from operating activities 60 69


One day while driving my taxi, I struck upconversation with my passengers and foundout they worked at UniCredit.I told them that I was one of their customersand that I owned a fleet of taxis.I also explained that I was trying to expand mybusiness and had asked for a loan, but had yetto learn if my request was successful.The next day one of them called me to followup with the information I needed. She caredabout helping me solve my problem, and I couldnot have been more satisfied with her support.I thanked her and said that if she ever needed ataxi in Vienna – even to Milan – I would be therefor her, as she was for me.

Taxi driver, customer of UniCredit Bank Austria in Vienna

Making a difference from anywhere, even in a taxi

LISTENING


Notes to the Consolidated Financial Statements

Note In this report, “Bank Austria” and “the Bank Austria Group” refer to the Group. To the extent that information relates to the parent company’s separate financial statements, “UniCredit Bank Austria AG” is used. In adding up rounded figures and calculating the percentage rates of changes, slight differences may result compared with totals and rates arrived at by adding up component figures which have not been rounded off.

A – Accounting policies 99

B – Notes to the income statement 133

C – Notes to the statement of financial position 145

D – Segment reporting 163

E – Risk report 175

F – Additional disclosures 207

Concluding Remarks of the Management Board of UniCredit Bank Austria AG 223

Report of the Auditors 224

LISTENING


A – Accounting policies

A.1 – Information on the company 100

A.2 – Basis for the preparation of the financial statements 100

A.3 – Consolidation principles 101

A.4 – Application of amended and new IASs and IFRSs 102

A.5 – Significant accounting policies 104

A.6 – Impairment test 120

A.7 – Group of consolidated companies and changes in the group of consolidated companies of the Bank Austria Group in 2012 124



A – Accounting policies (CoNTINuED)

A.1 – Information on the companyUniCredit Bank Austria AG, Schottengasse 6–8, A-1010 Vienna, Austria, is a universal bank conducting banking business within the meaning of Section 1 (1) of the Austrian Banking Act. It is registered under no. FN 150714p in the Austrian Register of Firms at the Commercial Court of Vienna. The Bank Austria Group as part of the UniCredit group offers a complete range of banking and other financial services, such as corporate finance, foreign trade financing, project finance, capital markets and money market services, securities and foreign exchange trading, investment banking, consumer credit and mortgage lending, savings accounts, asset management, leasing and factoring. The bank continues to operate in the market under the “Bank Austria” brand name. The geographical focus of the bank’s operations is on Austria and CEE.

A.2 – Basis for the preparation of the financial statementsThe consolidated financial statements of Bank Austria for the year ended 31 December 2012 and the comparative information have been prepared in accordance with International Financial Reporting Standards (IFRSs) as issued by the International Accounting Standards Board (IASB) and endorsed by the European Union (EU). In addition, the disclosure rules which are specified in the Accounting Manual of UniCredit S. p. A., the ultimate parent company, and are required to be applied throughout the Group, were used as a basis for the preparation of the consolidated financial statements. The consolidated financial statements are prepared in euros, the presentation currency of the Group. Unless indicated otherwise, all figures are in millions of euros (€).

The consolidated financial statements comprise the statement of financial position, the income statement, the statement of comprehensive income, the statement of changes in equity, the statement of cash flows and the notes to the consolidated financial statements, and are accompanied by the management report.

Risk and uncertainty due to use of estimated figuresThe preparation of financial statements under IFRS requires management to make estimates and assumptions for certain categories of assets and liabilities. Areas where this is required include the fair values of financial instruments not listed in active markets, loans and receivables, provisions for risk and charges, goodwill and other intangible assets as well as the recognition and measurement of deferred tax assets.

These estimates and assumptions affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the end of the reporting period, and the reported amounts of revenues and expenses during the reporting period.

The processes adopted support the values recognised at 31 December 2012. Valuation was particularly complex given the continuing macroeconomic and market situation which was characterised by the volatility of financial indicators used in the valuation process and by high levels of credit impairment.

The parameters and information used to check the mentioned values were therefore significantly affected by the above factors, which could change rapidly in ways that cannot currently be foreseen, so that further effects on future carrying amounts cannot be ruled out.Estimates and projections are regularly reviewed. Any changes arising from these reviews are recognised in the period in which they are carried out, provided that they concern that period. If the reappraisal concerns both current and future periods, it is recognised in both current and future periods as appropriate.

The description of the critical estimates and assumptions used in the consolidated financial statements of the Bank Austria Group are disclosed in detail in the relevant notes to the consolidated financial statements.


A.3 – Consolidation principlesThe financial information in the consolidated financial statements includes that of the parent company, UniCredit Bank Austria AG, together with its subsidiaries as at 31 December 2012.

The accounts and the explanatory notes of the main consolidated subsidiaries prepared under IFRS are subject to audit by leading audit companies.

SubsidiariesSubsidiaries are all entities over which the group has the power to govern the financial and operating policies, generally through a shareholding of more than half of the voting rights. The group also assesses existence of control where it does not have more than 50% of the voting power but is able to govern the financial and operating policies by virtue of de facto control or the exposure to the majority of an entity’s risks and rewards.

Material subsidiaries are consolidated from the date on which the Bank Austria Group obtains control. Consolidation ends when the parent company loses control of a subsidiary.

The list of subsidiaries includes also any special purpose entities as required by SIC 12. The bank consolidates those special purpose entities if the substance of its relationship with them indicates that it has control over them.

Changes in structure are considered when they occur, the reassessment of the consolidation status is performed at least at every quarterly reporting date.

For the purpose of consolidation, consistent accounting policies are applied throughout the Group.

All intercompany transactions, balances, income and expense, dividends and unrealized gains and losses on transactions between Group companies are eliminated on consolidation.

Non-controlling interests are presented separately in the consolidated income statement and in the statement of comprehensive income, and as a separate component of equity, distinct from the Group’s shareholders’ equity.

Joint venturesA joint venture is a contractual arrangement whereby two or more parties undertake an economic activity that is subject to joint control. Joint control exists only when financial and operating decisions relating to the activity require unanimous consent of the parties sharing control.

Investments in jointly controlled companies are accounted for under the proportionate consolidation method, if they are material for the Bank Austria Group.

AssociatesAssociates are entities in which the group has significant influence, but does not have control over the operating and financial policy decisions of the entities. Significant influence is generally presumed when the Group holds between 20% and 50% of the voting rights. Investments in associates are accounted for using the equity method.




A.4 – Application of amended and new IASs and IFRSs

Effects arising from changes in accounting methodsThe accounting policies adopted are consistent with those of the previous financial year. There are no IFRSs or IFRIC interpretations that are effective for the first time for the financial year beginning on or after 1 January 2012 that would be expected to have a material impact on the Group.

Effects of amendments to IAS 39 and IFRS 7In accordance with the amendments to IAS 39 and IFRS 7, Reclassification of Financial Assets, published in October 2008, and in response to the rare circumstances presented by the financial market crisis, we reclassified asset-backed securities (ABSs/specific securitised assets) from financial assets held for trading into loans and receivables with customers with effect from 1 July 2008 at the fair values determined at that date.

In accordance with IAS 39.50E, bonds included in the available-for-sale category were reclassified into loans and receivables with banks with effect from 1 August 2011. There is the intention to hold these reclassified bonds until maturity.

The following disclosure table shows the effects of reclassification by item in the statement of financial position and by income statement item as at 31 December 2012:

Reclassified financial assets: carrying amount, fair value and effects on comprehensive income (€ million)

accOuNtiNg pOrtfOliO befOre reclas-sificatiON

accOuNtiNg pOrtfOliO after reclassificatiON

carryiNg amOuNt

as at 31 dec.

2012

fair Value as at

31 dec. 2012

iNcOme/expeNses abseNt reclassificatiON

(befOre taxes)

iNcOme/expeNses recOgNised duriNg the periOd (befOre taxes)

types Of iNstrumeNtsfrOm

measuremeNt OtherfrOm

measuremeNt Other

debt securities –3,807 –3,667 13 184 8 146HFT AFS –25 –25 – 2 1 1HFT HTM –42 –44 –1 3 – 2HFT Loans to banks – – – – – –HFT Loans to customers –814 –716 58 43 7 24AFS Loans to banks –2,926 –2,882 –44 137 – 119

tOtal –3,807 –3,667 13 184 8 146

A.4.1 – New and amended financial reporting standards not yet adopted IAS 1 Presentation of Financial StatementsIn June 2011 the IASB issued amendments to IAS 1 Presentation of Financial Statements. The amendments require the components of other comprehensive income to be grouped according to whether such items may be reclassified subsequently to the income statement. The amendments are effective for financial years beginning on or after 1 July 2012.

IAS 19 Employee BenefitsIn June 2011 the IASB issued amendments to IAS 19 Employee Benefits (IAS 19 R). IAS 19 R no longer permits deferring changes in the present value of pension obligations and in the fair value of plan assets (including the corridor approach, which is not used by the Group). Moreover, IAS 19 R requires a net interest approach replacing the expected return on plan assets, and extends the disclosure obligations for defined-benefit plans. The amendments are effective for financial years beginning on or after 1 January 2013. Earlier application is permitted. The amendments were issued by the IASB, but they have not yet been adopted into European law by the EU. At present the Group is examining the possible effects of the application of the amendments on the consolidated financial statements.


IFRS 9 Financial Instruments IFRS 9 addresses the classification, measurement and recognition of financial assets and financial liabilities. IFRS 9 was issued in November 2009 and October 2010 and partially replaces the parts of IAS 39 that relate to the classification and measurement of financial instruments. IFRS 9 requires financial assets to be classified into two measurement categories: those measured as at fair value and those measured at amortised cost. The determination is made at initial recognition. The classification depends on the entity’s business model for managing its financial instruments and the contractual cash flow characteristics of the instrument. For financial liabilities, the standard retains most of the IAS 39 requirements. A final Standard on a general hedge accounting model and new proposals on impairment are expected in 2013. The Group is currently assessing the impact of IFRS 9 including the remaining sections of IFRS 9, impairment and hedge accounting The new rules are scheduled to become effective on 1 January 2015,

IFRS 10, IFRS 11, IFRS 12, IAS 27 and IAS 28In May 2011 the IASB issued ifrs 10 consolidated financial statements, ifrs 11 joint arrangements, ifrs 12 disclosures of interests in Other entities, a revised IAS 27 Separate Financial Statements, which was amended as IFRS 10 was issued while leaving the existing rules for separate financial statements unchanged, and a revised IAS 28 Investments in Associates and Joint Ventures, which was adjusted as IFRS 10 and IFRS 11 were issued. These Standards were endorsed by the EU in December 2012.

Each company shall apply IFRS 10, IFRS 11, IFRS 12, the amended IAS 27, the amended IAS 28, and the consequential amendments, at the latest, as from the commencement date of its first financial year starting on or after 1 January 2014.

The Group is currently examining the possible effects of the application of the Standards on the consolidated financial statements.

ifrs 10 supersedes IAS 27 Consolidated and Separate Financial Statements and SIC-12 Consolidation – Special Purpose Entities and establishes a single control model that applies to all entities, including special purpose entities previously considered under SIC 12. IFRS 10 specifies that an investor controls an investee when the investor is exposed or has rights to variable returns from its investment with the investee and has the ability to use power over the investee to influence such returns. Control is to be assessed on the basis of all current facts and circumstances and is to be reassessed as facts and circumstances change.

ifrs 11 supersedes IAS 31 Interests in Joint Ventures and SIC-13 Jointly Controlled Entities – Non-Monetary Contributions by Ventures. IFRS 11 classifies joint arrangements as either joint operations or joint ventures and focuses on the nature of the rights and obligations of the arrangement. For joint ventures IFRS requires the use of the equity method of accounting, eliminating the option to use the proportionate consolidation method, presently applied by the Group.

ifrs 12 requires an entity to disclose the nature, associated risks, and financial effects of interests in subsidiaries, associates and joint arrangements and of unconsolidated structured entities. IFRS 12 requires more comprehensive disclosures in the notes than IAS 27 or SIC-12.

IFRS 13 Fair Value MeasurementIn May 2011 the IASB issued IFRS 13 Fair Value Measurement, which establishes a single source of guidance for all fair value measurements required or permitted by IFRSs. The standard clarifies the definition of fair value as an exit price, which is defined as a price at which an orderly transaction to sell the asset or transfer the liability would take place between market participants at the measurement date under current market conditions and introduces more comprehensive disclosure requirements on fair value measurement

IFRS 13 is effective for financial years beginning on or after 1 January 2013. Earlier application is permitted. IFRS 13 was issued by the IASB and has already been endorsed by the EU. The Group is currently examining the possible effects of the application of the standard on the consolidated financial statements.




A.5 – Significant accounting policies

Business combinationsThe Group applies the acquisition method to account for business combinations. At the date the Group obtains control of the subsidiary, the cost of an acquisition is measured at the fair value of the consideration given. Control is the power to govern the financial and operating policies of an entity so as to obtain the benefits from its activities.

The acquired identifiable assets, liabilities and contingent liabilities are generally measured at their fair value at the date of acquisition. Goodwill is measured as the excess of the aggregate of the consideration transferred over the net of the amounts of the identifiable assets acquired and liabilities assumed. If this consideration is lower than the fair value of the net assets of the subsidiary acquired, the difference is recognised in profit or loss.

Transactions with non-controlling interests that do not result in loss of control are accounted for as equity transactions. The difference between the fair value of any consideration paid and the relevant share acquired of the carrying value of net assets of the subsidiary is recorded in equity.

Goodwill arising on business combinations after 1 April 2004 is stated in the currency of the acquired company and translated at the closing rate.Pursuant to IFRS 3 and IAS 36, goodwill is tested for impairment, whenever there is objective evidence of the occurrence of events that may have reduced the value, at least once a year.

When the group ceases to have control, any retained interest in the entity is remeasured to its fair value at the date when control is lost, with the change in carrying amount recognized in profit or loss.

An associate is an entity over which the Group has significant influence but not a controlling interest, generally accompanying a shareholding of between 20% and 50% of the voting rights.

Investments in associates are accounted for using the equity method. Under the equity method, the investment is initially recognised at cost. The carrying amount is increased or decreased to recognise the investor’s share of profit or loss of the investee after the date of acquisition. The Group’s investment in associates includes goodwill identified on acquisition. The most recent available financial statements of the associate are used in applying the equity method implying a possible time difference of 3 months between the end of the reporting period of the associate and the Group.

Shares in all other companies are classified as investments available for sale and measured at their fair values, to the extent that fair value is reliably measurable.

Foreign currency translationThe consolidated financial statements are prepared in euros, the presentation currency of the Group.

Various entities in the Group use a different functional currency, the currency of the primary economic environment in which the entity operates.

Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transaction or valuation when items are re-measured.

Monetary assets and liabilities denominated in foreign currencies are translated into the functional currency at the rate of exchange effective at the balance sheet date. Any resulting exchange differences are included in the income statement.

Non-monetary assets and liabilities recognised at historical cost in a foreign currency are translated into the functional currency using the exchange rate at the date of the initial transaction. Non-monetary assets and liabilities measured at fair value in a foreign currency are translated into the functional currency using the rate of exchange at the date the fair value was determined.

The exchange differences on a non-monetary item are recognised in other comprehensive income if the gain or loss on a non-monetary item is recognised in other comprehensive income. Any exchange component of a gain or loss on a monetary item is recognised in the income statement if the gain or loss on the monetary item is recognised in the income statement.

For consolidation purposes assets, liabilities and equity of foreign operations, the functional currency of which is not euro, are translated into the Group’s presentation currency at the closing rate of exchange of each period. Items of income and expenses are translated at the average rate of exchange for the reporting period.


The exchange differences arising on the translation of the financial statements of a foreign operation are recognized in other comprehensive income and accumulated in a separate component of equity. The amount attributable to any non-controlling interests is allocated to and recognised as part of non-controlling interests.

Goodwill and intangible assets recognised on acquisition of foreign subsidiaries (brands, customer relationships) and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of a foreign entity and translated at the closing rate.Exchange differences arising are recognised in other comprehensive income.

On the disposal of a foreign subsidiary and associate, which results in the loss of control or loss of significant influence of that operation, all the exchange differences accumulated in a separate component of equity in respect of that operation attributable to the equity holders of the company are reclassified to profit or loss.

In case of a partial disposal of a foreign operation that does not result in the loss of control, the proportionate share of the accumulated exchange differences is re-attributed to non-controlling interests and is not recognised in profit or loss. For all other partial disposals the proportionate share of the accumulated exchange difference is reclassified to profit or loss.

Exchange rates used for foreign currency translation (Exchange rate in currency /€)

2012 2011 chaNge iN %

aVerage

eNd Of repOrtiNg

periOd aVerage

eNd Of repOrtiNg

periOd aVerage

eNd Of repOrtiNg

periOd

Azerbaijani manat AZN 1.0088 1.0351 1.0992 1.0175 –8.23% 1.73%Bosnian marka BAM 1.9558 1.9558 1.9558 1.9558 0.00% 0.00%Bulgarian lev BGN 1.9558 1.9558 1.9558 1.9558 0.00% 0.00%Swiss franc CHF 1.2053 1.2072 1.2326 1.2156 –2.22% –0.69%Czech crown CZK 25.1491 25.1510 24.5898 25.7870 2.27% –2.47%Croatian kuna HRK 7.5217 7.5575 7.4390 7.5370 1.11% 0.27%Hungarian forint HUF 289.2490 292.3000 279.3730 314.5800 3.54% –7.08%Kyrgyzstan som KGS 60.4034 62.5348 64.1775 60.0164 –5.88% 4.20%Kazakh tenge KZT 191.5990 198.6210 204.1040 191.8850 –6.13% 3.51%Lithuanian litas LTL 3.4528 3.4528 3.4528 3.4528 0.00% 0.00%Latvian lat LVL 0.6973 0.6977 0.7063 0.6995 –1.28% –0.26%Polish zloty PLN 4.1847 4.0740 4.1206 4.4580 1.56% –8.61%Romanian leu RON 4.4593 4.4445 4.2391 4.3233 5.19% 2.80%Serbian dinar RSD 113.0360 112.6050 101.9660 106.1770 10.86% 6.05%Russian rouble RUB 39.9262 40.3295 40.8846 41.7650 –2.34% –3.44%Turkish lira TRY 2.3135 2.3551 2.3378 2.4432 –1.04% –3.61%Ukrainian hryvnia UAH 10.3520 10.5836 11.1067 10.3692 –6.79% 2.07%US dollar USD 1.2848 1.3194 1.3920 1.2939 –7.70% 1.97%

Cash and cash equivalents The amount of cash and cash equivalents stated in the statement of cash flows includes the cash holdings (cash and demand deposits withcentral banks). In addition to the cash and cash equivalents shown in the item Cash and cash balances in the statement of financial position,cash and cash equivalents also include those in the item Non-current assets and disposal groups classified as held for sale.




Financial instruments – initial recognition and subsequent measurementInitial recognition and measurementA financial instrument is any contract giving rise to a financial asset at one company and a financial liability or equity instrument at another company. In accordance with IAS 39, all financial assets and liabilities, including derivative financial instruments, have to be recognised in the statement of financial position and measured in accordance with their assigned classification.

The classification of financial instruments at initial recognition depends on their purpose and characteristics and the management’s intention in acquiring them.

The group classifies its financial instruments into the following categories:• atfairvaluethroughprofitandloss• availableforsale(AfS)• heldtomaturity(HtM)• loansandreceivables

All financial instruments are measured initially at their fair value plus transaction costs, except in the case of financial assets and liabilities recorded at fair value through profit and loss.

Financial assets and financial liabilities at fair value through profit or lossFinancial assets at fair value through profit or loss include financial assets held for trading and financial assets designated as at fair value through profit or loss upon initial recognition.

Financial assets and financial liabilities held for trading (HfT)Trading assets and liabilities are those assets and liabilities that the Group acquires or incurs principally for the purpose of selling and repurchasing in the near term, or holds as part of a portfolio that is managed together for short-term profit or position-taking.

Trading assets and liabilities are initially recognised and subsequently measured at fair value in the statement of financial position, with transaction costs recognised in profit or loss. The UniCredit Group Accounting Policy requires recognition of financial instruments at the settlement date.

All changes in fair value are recognised as part of “Gains and losses on financial assets and liabilities held for trading” in the income statement. Interest income and expenses are reported under “net interest”.

A gain or loss arising from sale or redemption or a change in the fair value of an HfT financial instrument is recognised in the income statement item “Gains and losses on financial assets and liabilities held for trading”.

Financial assets held for trading include securities held for trading and positive market values of derivative financial instruments, recognised at their fair values. The item financial liabilities held for trading shows negative market values of derivative financial instruments and short positions held in the trading portfolio. To determine fair values, market prices and quotes via Bloomberg, Reuters, MarkIT and other price indications from the interbank market are used. Where such prices or quotes are not available, values based on present values or option pricing models are applied.

At fair value through profit or loss (fair value option)Financial assets and liabilities classified in this category are those that have been designated by management upon initial recognition (fair value option). Management may only designate an instrument at fair value through profit and loss upon initial recognition when following criteria are met,• Thedesignationeliminatesorsignificantlyreducestheinconsistenttreatmentthatwouldotherwisearisefrommeasuringtheassetsor

liabilities or recognising gains and losses on them on a different basis.• Theassetsandliabilitiesarepartofagroupoffinancialassetsandliabilities,whicharemanagedandtheirperformanceevaluatedonafair

value basis in accordance with a documented risk management or investment strategy.• Thefinancialinstrumentcontainsoneormoreembeddedderivatives,whichsignificantlymodifythecashflowsthatwouldotherwisebe

required by the contract

Financial assets and liabilities at fair value through profit or loss are recorded in the statement of financial position at fair value; changes in fair value are recorded in the item “Net change in financial assets and liabilities at fair value through profit or loss”. Interest earned or incurred is accrued in interest income or interest expense using the effective interest rate.


Available-for-sale financial assets (AfS)Available-for-sale financial instruments are initially measured at fair value. The “available-for-sale” category includes debt instruments and equity instruments. Equity investments classified as available for sale are those which are neither classified as held for trading nor designated at fair value through profit or loss. Debt securities in this category are intended to be held for an indefinite period of time and may be sold in response to needs for liquidity or in response to changes in the market conditions.

They are subsequently remeasured at fair value, the changes in fair value are recognised in other comprehensive income in “Gains / losses on assets held for sale (available-for-sale reserve)” until the financial assets are either sold or become impaired.

When available-for-sale financial assets are sold, cumulative gains or losses previously recognised in other comprehensive income are recognised in the income statement.

Interest income on AfS debt securities is recognised using the effective interest rate, with premiums and/or discounts included in the calculation of their effective interest rate.

At the end of each reporting period an assessment is made of whether there is objective evidence of impairment of a financial asset.

An impairment loss on debt instruments has been incurred if the events which have occurred lead to the borrower no longer meeting his obligations in full or at the agreed date. In this context an impairment loss has been incurred in the same cases as with loans and receivables with the same entity (issuer).

The amount of the impairment loss is the difference between amortised cost and fair value; the difference which is initially recognised in the available-for-sale reserve within equity is removed from other comprehensive income and recognised in profit or loss.

To determine their fair values, the methods described in “Fair values – fair value hierarchy” below are used.

If the fair value of a debt instrument increases in the subsequent period and the increase can be objectively related to an event occurring after the impairment loss was recognised in the income statement, or if there is no longer objective evidence that the debt instrument is impaired, the impairment loss is reversed through the income statement.

Available-for-sale equity instruments are impaired if the current fair value is significantly lower than the carrying amount or if the fair value has been lower than the carrying amount for a prolonged period. A decline in excess of 20% is generally regarded as significant and a decline in a quoted market price that persists for nine months is generally considered as prolonged. Impairment recognition will depend on the assessment of the ability to recover the amount invested. If the fair value is 50% lower than the carrying amount and the decline of fair value below cost is longer than 18 months, an impairment loss has to be recognised in any case.

The impairment has to be recognised in “Impairment losses on available-for-sale financial assets”.

All subsequent increases in the fair value of the equity instruments are treated as revaluation and are recognised in other comprehensive income.

Held-to-maturity investments (HtM)Non-derivative financial assets with fixed or determinable payments and fixed maturity are classified as held-to-maturity investments if the Group has the positive intention and ability to hold them to maturity.

If, during the financial year, more than an insignificant amount of held-to-maturity investments are sold or reclassified before maturity, the remaining HtM financial assets shall be reclassified as available-for-sale and no financial assets shall be classified as HtM investments for the two following financial years, unless the sales or reclassifications:• aresoclosetomaturityorthefinancialasset’scalldatethatchangesinthemarketrateofinterestwouldnothaveasignificanteffectonthe

financial asset’s fair value;• occuraftersubstantiallyallofthefinancialasset’soriginalprincipalhasbeencollectedthroughscheduledpaymentsorprepayments;• areattributabletoanisolatedeventthatisbeyondthereportingentity’scontrol,isnon-recurringandcouldnothavebeenreasonably

anticipated.




After initial recognition, held-to-maturity investments are recognised at amortised cost using the effective interest method. If there is objective evidence that a held-to-maturity investment is impaired, the impairment loss is measured as the difference between the asset’s carrying amount and the present value of the estimated future cash flows discounted using the original effective interest rate of the financial asset. The carrying amount of the asset is reduced accordingly and the loss is recognised within profit or loss in the item ”Impairment losses on held-to-maturity investments”.

Loans and receivablesLoans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. After initial recognition such financial assets are measured at amortised cost using the effective interest method. Amortised cost is calculated by taking into account any discount or premium on acquisition and fees and costs that are an integral part of the effective interest rate.

Losses on impaired loans are recognised promptly when there is objective evidence that impairment of a loan or portfolio of loans has incurred.

Objective evidence of impairment includes events which have occurred and may lead to a borrower no longer meeting his obligations in full or at the agreed date

An impairment loss is measured as the difference between the carrying amount and the present value of estimated future cash flows calculated using the instrument’s original effective interest rate. The future cash flows are to be determined by taking the events that have occurred (objective evidence) into account. Estimated future cash flows may be composed of expected repayment and/or interest payments and proceeds from the realisation of collateral.

Recovery times are estimated on the basis of any repayment schedules agreed with the borrower or included in the business plan or in forecasts based on historical recovery experience observed for similar classes of loans, taking into account the type of loan, the geographical location, the type of collateral and any other factors considered relevant.

A specific write-down is made in the amount of the impairment loss thus determined. Write-downs on loans determined as described above are recognised in an allowance account which reduces the carrying amount of the loan on the assets side and in profit or loss in the item “Impairment losses on loans”.

In the notes to the consolidated financial statements, write-downs of impaired loans are classified as specific in the relevant income statement item even if the calculation is on a flat-rate or statistical basis. When the reasons for the impairment no longer exist, and this assessment is attributable to an event occurred after impairment, a reversal is made in the same profit and loss item.

Derecognition of a loan or receivable in its entirety is made when the loan or receivable is deemed to be irrecoverable or is written off. Write-offs are recognised directly in profit or loss in the item “Impairment losses on loans” and reduce the amount of the principal of the loan or receivable. Reversals of all or part of amounts previously written off are recognised in the same item.

According to UniCredit Group guidelines, impaired loans and receivables are classified in the following categories:• Non-performing loans – formally impaired loans, being exposure to insolvent borrowers, even if the insolvency has not been recognised in a court

of law, or borrowers in a similar situation. Measurement is generally on a loan-by-loan basis, or for loans which are not significant individually, on a portfolio basis for homogeneous categories of loans;

• doubtful loans – exposure to borrowers experiencing temporary difficulties, which the group believes may be overcome within a reasonable period of time.

• restructured loans – exposure to borrowers with whom a rescheduling agreement has been entered into including renegotiated pricing at interest rates below market, reduction of principal and/or the conversion of part of a loan into shares.

• past due loans – total exposure to any borrower not included in the other categories, which at the end of the reporting period has expired facilities or unauthorised overdrafts that are more than 90 days past due.

In respect of loans and receivables on which no specific write-downs have been made, any impairment losses which have been incurred as at the end of the reporting period but have not yet been identified by the bank are covered by a portfolio-based write-down. In this context we use the Loss Confirmation Period Method. The Loss Confirmation Period is the period between the occurrence of a loss event or the default of a borrower and the time when the bank identifies the loss. The Loss Confirmation Period is determined on the basis of statistical methods, differentiated for various loan portfolios. The loss which has been incurred but has not yet been identified is estimated by using Basel 2 parameters (expected loss – with a one-year time horizon) for the differentiated loan portfolios and the respective loss confirmation period.


Fair values – fair value hierarchyIn accordance with IFRS 7, financial instruments measured at fair value and stated at their fair values in the statement of financial position are classified according to a three-level fair value hierarchy based on the significance and liquidity of input parameters used for valuation purposes:• Level1–Quotedmarketprices:financialinstrumentswithquotedpricesforidenticalinstrumentsinactivemarkets• Level2–Valuationtechniqueusingobservableinputs:financialinstrumentswithquotedpricesforsimilarinstrumentsinactivemarketsorquoted

prices for identical or similar instruments in inactive markets and financial instruments valued using models where significant inputs are observable • Level3–Valuationtechniqueusedwithsignificantunobservableinputs:financialinstrumentsvaluedusingvaluationtechniqueswhereoneormore

significant inputs are unobservable.

The best evidence of fair value is a quoted price in an actively traded market. The judgement as to whether a market is active may include the consideration of factors such as the magnitude and frequency of trading activity, the availability of prices and the size of bid /offer spreads. The bid /offer spread represents the difference in prices at which a market participant would be willing to buy compared with the price at which they would be willing to sell.

If the market for a financial instrument is not active, fair value is calculated by using a valuation technique. Valuation techniques include using recent arm’s length market transactions between knowledgeable, willing parties, if available; reference to the current fair value of another instrument that is substantially the same; discounted cash flow analysis and option pricing models. If there is a valuation technique commonly used by market participants to price the instrument and that technique has been demonstrated to provide reliable estimates of prices obtained in actual market transactions, the bank uses that technique.

Level 3 comprises assets or liabilities whose fair values are valued on the basis of valuation techniques that feature one or more significant market inputs that are unobservable, and for them, the derivation of fair value is more judgemental. Unobservable in this context means that there is little or no current market data available from which to determine the price at which an arm’s length transaction would be likely to occur

The following tables show a breakdown of financial assets and liabilities designated at fair value according to the above-mentioned levels, as well as the annual changes of Level 3 assets or liabilities.

Breakdown by fair value levels (€ million)

fiNaNcial assets/liabilities measured at fair Value 31 dec. 2012 31 dec. 2011

leVel 1 leVel 2 leVel 3 leVel 1 leVel 2 leVel 3

Financial assets held for trading 284 2,496 76 308 2,924 90Financial assets at fair value through profit or loss 75 224 127 26 45 143Available-for-sale financial assets 9,914 8,913 2,236 5,540 6,979 2,158Hedging derivative assets – 4,125 – – 3,466 –tOtal 10,273 15,758 2,439 5,874 13,414 2,391Financial liabilities held for trading 42 2,152 2 51 2,493 10Financial liabilities at fair value through profit or loss – 1,152 – – 1,042 –Hedging derivative liabilities – 2,988 1 – 2,591 –tOtal 42 6,291 4 51 6,127 10




Annual changes in financial assets at fair value level 3 (€ million)

2011fiNaNcial assets

held fOr tradiNg

at fair Value thrOugh

prOfit Or lOss aVailable fOr sale hedgiNg deriVatiVes

Opening balances 54 204 1,982 1increases 124 13 1,144 –

Purchases 112 – 656 –Profits recognised in:

Income statement 12 10 – –of which unrealised gains 6 9 – –Equity X X 293 –

Transfers from other levels – 1 2 –Other increases – 2 193 –

decreases –87 –75 – 967 –1Sales –61 –10 –365 –Redemptions –5 –43 –408 –Losses recognised in:

Income statement –1 –2 –85 –of which unrealised losses –1 – –14 –Equity X X –71 –

Transfers to other levels –3 –17 – –1Other decreases –17 –2 –38 –

closing balances 90 143 2,158 02012

fiNaNcial assets

held fOr tradiNg


prOfit Or lOss aVailable fOr sale hedgiNg deriVatiVes

Opening balances 90 143 2,158 –increases 80 7 962 –

Purchases 32 – 685 –Profits recognised in:

Income statement 33 7 18 –of which unrealised gains 4 4 11 –Equity X X 226 –

Transfers from other levels 10 – 2 –Other increases 5 – 30 –

decreases – 94 –23 –884 –Sales –42 – –319 –Redemptions –35 –20 –193 –Losses recognised in:

Income statement –5 –2 –70 –of which unrealised losses –1 –2 –25 –Equity X X –243 –

Transfers to other levels –1 – –36 –Other decreases –10 –1 –22 –

closing balances 76 127 2,236 –


Annual changes in financial liabilities at fair value level 3 (€ million)

2011fiNaNcial liabilities

held fOr tradiNg


prOfit Or lOss hedgiNg deriVatiVes

Opening balances 65 – 25increases 6 – –

Issuance – – –Losses recognised in:

Income statement 6 – –of which unrealised losses 6 – –Equity X X –

Transfers from other levels – – –Other increases – – –

decreases –61 – –25Redemptions –8 – –Purchases –11 – –25Profits recognised in:

Income statement – – –of which unrealised gains – – –Equity X X –

Transfers to other levels –24 – –Other decreases –18 – –

closing balances 10 – 02012

fiNaNcial liabilities

held fOr tradiNg


prOfit Or lOss hedgiNg deriVatiVes

Opening balances 10 – –increases 38 – 1

Issuance – – –Losses recognised in:

Income statement 37 – –of which unrealised losses 2 – –Equity X X –

Transfers from other levels – – –Other increases 1 – 1

decreases –46 – –Redemptions –41 – –Purchases – – –Profits recognised in:

Income statement –1 – –of which unrealised gains –1 – –Equity X X –

Transfers to other levels – – –Other decreases –4 – –

closing balances 2 – 1




Derivative financial instrumentsIAS 39 defines a derivative as a financial instrument or other contract within its scope that meetsall of the following criteria:• itsvaluechangesinresponsetosomeunderlyingvariable–e.g.aninterestrate;• ithasaninitialnetinvestmentsmallerthanwouldberequiredforotherinstrumentsthathaveasimilarresponsetothevariable;and• itwillbesettledatafuturedate.

Some derivatives are traded on organised exchanges where the terms of the contracts are standardised and quoted prices for the instruments are generally available publicly.

Non-exchange traded derivatives, commonly referred to as over-the-counter (OTC) derivatives, are transacted directly between market counterparties with the terms of the contracts often tailored to the parties’ specific requirements. These trades are usually governed by general terms published by the International Swaps and Derivatives Association (ISDA) and may be accompanied by a Credit Support Annex (CSA), which details the requirements for the posting of collateral.

Generally, derivatives fall into the following categories:• forward-based derivatives are contracts with a mandatory requirement to settle at a set point in time in the future at a specified price.

The agreement stipulates the reference rate – e. g. interest rate or currency exchange rate – the settlement date and the notional value. A forward contract that is exchange-traded is generally referred to as a ‘futures contract’. Futures are generally based on interest rates, currencies, commodities or stock market indices. OTC forward-based derivatives are generally referred to as ‘forward agreements’. The two most common types of OTC forward agreements are based on interest rates and foreign exchange rates.

•swap-based derivatives are contracts in which counterparties exchange, over a period of time, one stream of cash flows for another stream of cash flows. The cash flows are normally calculated with reference to a notional amount, which is often not exchanged by the counterparties – e. g. interest rate swaps.

•Option-based derivatives include contracts that give one party the right, but not the obligation, to engage in a transaction to buy or sell an asset on a set date or within a set period of time at a particular (strike) price. Options can be exchange-traded or OTC.

All derivatives within the scope of IAS 39, other than derivatives that are financial guarantee contracts or that are designated hedging instruments, are classified as held for trading in the financial instruments category financial assets or financial liabilities at fair value through profit or loss.

All derivatives are initially measured at fair value.

Subsequent to initial recognition all derivatives are measured at fair value with changes in fair value recognised in profit or loss.

Derivative financial assets and financial liabilities are always measured using quoted prices if a published price quotation (Bloomberg, MarkIT) in an active market is available for an identical instrument. When a derivative is not traded in an active market, its fair value is determined using a valuation technique.

The selected valuation technique makes maximum use of observable market data about the market conditions and other factors that are likely to affect a derivative’s fair value. The technique is consistent with accepted economic methodologies and its inputs include factors that market participants would usually take into account when pricing an instrument. Also, the validity of the results of the technique is tested regularly so that the technique can be recalibrated as needed and the fair value measurement objective can be met.

Valuation techniques that are based on inputs that are observable are referred to as Level 2 valuations, valuation techniques that use significant unobservable inputs are referred to as Level 3 valuations

The bank makes use of derivative instruments to manage exposures to interest rate, foreign currency and credit risks, including exposures arising from highly probable forecast transactions and firm commitments.

A credit valuation adjustment (CVA) is applied to the bank’s OTC derivative exposure to take into account the counterparty’s risk of default when measuring the fair value of the derivative. CVA is the mark-to-market cost of protection required to hedge credit risk from counterparties in the bank’s OTC derivatives portfolio. CVA is calculated by multiplying the probability of default (PD), the loss given default (LGD) and the expected exposure (EE) at the time of default. PDs and LGDs are derived from a credit spread simulation that incorporates rating migration and market observable data where available. Collateral and netting arrangements are taken into account where applicable.


Hedge accounting In order to manage particular risks, the bank applies hedge accounting for transactions which meet specified criteria. In hedge accounting, Bank Austria distinguishes between fair value hedges and cash flow hedges.

A hedging relationship qualifies for hedge accounting if there is formal designation and documentation of the hedging relationship including the risk management objective, the strategy for undertaking the hedge, and how the hedging instrument’s future and retrospective effectiveness will be assessed. It is necessary to assess the hedge’s effectiveness, at inception and in subsequent periods, in offsetting the exposure to changes in the hedged item’s fair value or cash flows attributable to the hedged risk.

To qualify for hedge accounting in accordance with IAS 39, hedges must be highly effective. A hedge is regarded as highly effective if, at the inception of the hedge and in subsequent periods, it is determined prospectively to remain highly effective, i. e. that the hedge ratio is within a range of 80–125 per cent. The hedge is assessed on an ongoing basis and thus must prospectively remain highly effective throughout the financial reporting periods for which the hedge was designated. The assessment of effectiveness is made at the end of each reporting period or other reporting date. If the assessment does not confirm the effectiveness of the hedge, from that time on hedge accounting is discontinued in respect of the hedge and the hedging derivative is reclassified as a held-for-trading instrument.

In addition, the hedging relationship ceases when the hedging instrument expires or is sold, terminated or exercised; the hedged item is sold, expires or is repaid; or it is no longer highly probable that the forecast transaction will occur.

A fair value hedge provides protection against changes in the fair value of an asset or a liability. The hedging instrument is stated at its fair value, and any gains or losses on the hedging instrument are recognised in profit or loss. Gains or losses on the hedged item which are attributable to the hedged risk adjust the carrying amount of the hedged item and are recognised in profit or loss. The effectiveness of fair value hedges is measured on an ongoing basis.

A portfolio fair value hedge is used by our bank Yapı ve Kredi Bankasi AS and also by our Moscow-based banking subsidiary ZAO UniCredit Bank. Yapı ve Kredi Bankasi AS uses cross-currency interest rate swaps to hedge part of its mortgage and car loan portfolios denominated in Turkish lira against the possible effects of changes in market interest rates and foreign exchange rates. In ZAO UniCredit Bank, portfolio fair value hedge accounting is part of an interest rate risk hedging strategy that helps to avoid discrepancies between the economic substance of deals concluded for hedging purposes and their accounting treatment. Interest rate swaps are designated as hedging instruments.

Cash flow hedges are used by Bank Austria for protecting future variable cash flows against changes in market rates. They hedge the exposure to variability in cash flows which result from assets or liabilities or from planned transactions and have an effect on profit or loss. Changes in the fair values of derivatives designated as hedging instruments are divided into a portion that is determined to be an effective hedge, and into an ineffective portion. The effective portion of any gain or loss on the hedging instrument is included in the cash flow hedge reserve and recognised in profit or loss in the same period in which the change in the value of the hedged item is recognised in profit or loss. This neutralises the effect on profit or loss. The effectiveness of cash flow hedges is measured on a regular basis.

Property, plant and equipmentProperty, plant and equipment are measured initially at cost including all costs directly attributable to bringing the asset to the location and working condition for its intended use.

Property, plant and equipment is depreciated over its useful life, the estimates of useful life and residual value and the method of depreciation being reviewed at each annual reporting date When an item of property, plant and equipment comprises individual components for which different depreciation methods or rates are appropriate, each component is depreciated separately.

Leasehold improvements which can be separately identified are also included in this item.

Bank Austria regards property, plant and equipment as having the following useful lives:

prOperty, plaNt aNd eQuipmeNt (taNgible assets) useful life

Land unlimitedBuildings max. 50 yearsOffice furniture and fittings max. 25 yearsElectronic systems max. 15 yearsOther max. 10 years




Items of property, plant and equipment are derecognised on disposal or when no future economic benefits are expected from their use or disposal. The gain or loss arising from the derecognition of an item of property, plant and equipment is determined as the difference between the net disposal proceeds and the carrying amount of the item; such gain or loss is included in profit or loss in the period in which the asset isderecognised.

Investment propertyLand and buildings held as investment property to earn rental income and/or for capital appreciation are included in property, plant and equipment. Investment properties are measured at amortised cost less accumulated straight-line depreciation based on useful life and less accumulated impairment. The useful lives of investment properties are identical to those of buildings listed under property, plant and equipment. Rental income from such investments is included in other net operating income.

Intangible assetsAn intangible asset is an identifiable non-monetary asset without physical substance which is expected to be used during more than one period, and from which future economic benefits are probable.

Intangible assets are principally goodwill, software, brands and customer-related intangible assets.

When recognised initially, intangible assets which are not acquired as part of a business combination are measured at cost.

In accordance with IFRS 3, goodwill is measured as the excess of the aggregate of the consideration transferred over the net of the amounts of the identifiable assets acquired and liabilities assumed at the acquisition date. Intangible assets are recognised separately from goodwill when they are separable or arise from contractual or other legal rights, and their fair value can be measured reliably.

Goodwill arising from the acquisition of subsidiaries and joint ventures (consolidated proportionally) is recognised as an intangible asset, whereas goodwill arising from the acquisition of associates is included in the carrying value of the investments in associates.

A distinction is made between intangible assets with a finite useful life and those with an indefinite useful life.

Intangible assets with a finite useful life are amortised over their expected useful life and are tested for impairment if there is any indication that the intangible asset may be impaired.

The amortisation charge for intangible assets with a finite useful life is recognised in the income statement in the expense category corresponding to the function of the intangible asset in the company.

Bank Austria regards intangible assets as having the following useful lives:• software:4–6years• otherintangibleassets:4–20years• customerbase:3–20years

For intangible assets with an indefinite useful life (goodwill, brands) an impairment test is performed at least once a year or more frequently if events or changes in circumstances indicate that impairment may have occurred.

The useful life of an intangible asset with an indefinite useful life is reviewed once a year to determine whether events and circumstances continue to support the useful life assessment. If they do not, the change in the useful life assessment from indefinite to finite is made prospectively.

For the purpose of impairment testing, goodwill is allocated to cash-generating units (CGU), which is undertaken at the lowest level at which goodwill is monitored for internal management purposes (see also goodwill impairment test).Impairment losses on goodwill are recognised in profit or loss “impairment losses on goodwill”. In respect of goodwill a write-back is not allowed.


Assets held for saleNon-current assets are classified as held for sale when the management is committed to a plan to sell such assets and such sale should be expected to qualify for recognition as a completed sale within one year from the date of classification.

Non-current assets classified as held for sale are to be measured at the lower of their carrying amount and fair value less costs to sell and are stated separately in the consolidated financial statements.

Income taxIncome tax comprises current tax and deferred tax. Income tax is recognised in the income statement except to the extent that it relates to items recognised in other comprehensive income or directly in equity, in which case it is recognized in the same statement in which the related item appears.

Current tax is the tax expected to be payable on the taxable profit for the year, calculated using tax rates enacted by the end of the reporting period, and any adjustment to tax payable in respect of previous years.

Deferred tax is recognized on temporary differences between carrying amounts of assets and liabilities in the statement of financial position and the amounts attributed to such assets and liabilities for tax purposes. Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are recognized to the extent that it is probable that future taxable profits will be available against which deductible temporary differences can be utilised.

Deferred tax is calculated using the tax rates expected to apply in the periods in which the asset will be realised or the liabilities settled, based on tax rates and laws enacted by the end of the reporting period.

Deferred tax relating to actuarial gains and losses on post-employment benefits, to fair value remeasurement of available-for-sale investments and cash flow hedging instruments is charged or credited to other comprehensive income and is subsequently recognised in the income statement when the deferred fair value gain or loss is recognised in the income statement.

The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to the extent that is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred tax assets to be used. Unrecognised deferred tax assets are reassessed at the end of each reporting period and are recognised to the extent it has become probable that future taxable profit will allow the deferred tax asset to be recovered.

Pursuant to the group taxation rules introduced in Austria in 2005, Bank Austria has formed a group of companies. Profit and loss transfer agreements have been concluded with 24 group members, tax compensation agreements have been reached with 20 companies and there are 3 joint control arrangements. These agreements and arrangements do not include foreign companies.

other assetsThe components of this item are accounts receivable from deliveries of goods and the performance of services, tax claims and deferred tax assets.

Deposits from banks/customers, debt securities in issueThese financial liabilities are recognised initially at fair value, net of transaction costs incurred. Subsequently these instruments are measured at amortised cost using the effective interest rate.




Long-term employee benefits and termination benefits Provisions for post-employment benefits are recognised using the projected unit credit method in accordance with IAS 19. Pursuant to IAS 19.93A, actuarial gains and losses are not recognised in profit or loss but directly in equity. Such gains and losses are stated in the table “Other comprehensive income”.

Under a commitment to provide defined benefits, UniCredit Bank Austria AG continues to recognise a pension provision for the entitlements of em-ployees who retired before the pension reform as at 31 December 1999 became effective, and – as a special feature of UniCredit Bank Austria AG’s staff regulations – for the future benefits, equivalent to those under mandatory insurance, earned by active employees and pensioners for whom UniCredit Bank Austria AG has assumed the obligations of the mandatory pension insurance scheme pursuant to Section 5 of the Austrian General Social Insurance Act (ASVG).

The following are also covered by the provision:• disabilityriskandrightstofuturebenefitsbasedonearlyretirementandpensionentitlementsofsurvivingdependants,totheextentthatthe

pension fund benefit is insufficient,• rightstofuturebenefitsundercommitmentstoprovidedirectbenefitsinindividualserviceagreements,• rightstofuturebenefitsrelatingtoadditionalpensionpaymentsforemployeesperformingmanualwork.

The present value of pension obligations and severance-payment obligations as well as anniversary bonuses is determined with due regard to internal service regulations, on the basis of the following actuarial assumptions:• discountrate /Austria:3.75%p.a.(2011:5.25%p.a.)

On the basis of the Mercer Pension Discount Yield Curve and the cash flows determined for the pension plan for active employees and pensioners, the interest rate is 3.80% (duration: 16 years). A shorter duration applies to provisions for severance payments and anniversary bonuses; a lower interest rate could therefore be applied to these plans. However, the company prefers a standard interest rate for all provisions. On this basis the interest rate used for all calculations as at 31 December 2012 is 3.75%.

• increasesundercollectivebargainingagreements:2.45%p.a.(2011:2.45%p.a.);assumptionofincreasesforemployeesandpensioners• careertrendsincludingregularsalaryincreasesunderthecurrentcollectivebargainingagreementforemployeesofAustrianbanksandthe

effects of the transitional rules under the 2005 reform of Bank Austria’s staff regulations. The rate applied in calculating non-regular salary increases was 0.25% p.a. (2011: 0.25% p.a.); assumption of increases for employees.

• nodiscountforstaffturnover• retirementage:asabasisforcalculationinrespectofemployeesenjoying“permanenttenure”statusinaccordancewiththeinternal

agreement dated 30 December 1999 (as amended on 1 May 2007) on the payment of a Bank Austria ASVG pension equivalent, the age of 60 for men and 55 for women, with a transition to the retirement age of 65, has been taken into account. For all other employees, the new retirement age of 65 for men and women has been taken into account in accordance with the applicable rules (2003 pension reform including transitional rules).

• Ifthecorridorpensionruleresultsinalowerretirementage,theloweragewasusedasretirementage.• 2008-PstatisticaltablesofAktuarvereinÖsterreich(life-expectancytablesforsalariedstaff)

No provisions are made for defined-contribution plans. Payments agreed to be made to a pension fund for defined-contribution plans are recognised as an expense.

Insurance reservesPursuant to IFRS 4, insurance contracts are contracts under which one party (the insurer) accepts significant insurance risk – i. e. risk, other than financial risk, to which the policy-holder is exposed on the basis of an uncertain event under contracts held by the policy-holder – from the policy-holder.

These reserves represent the obligations, calculated using actuarial methods, arising from insurance contracts within the meaning of IFRS 4.This item in the statement of financial position is attributable exclusively to Yapı ve Kredi Bankasi, a joint venture in Turkey currently accounted for under the proportionate consolidation method, which offers insurance business besides banking services.


Provisions, contingent liabilitiesProvisions are recognized when it is probable that an outflow of economic benefit will be required to settle a current legal or constructive obligation, which has risen as a result of past events and for which a reliable estimate can be made of the amount of the obligation.

A constructive obligation arises when an entity’s actions create valid expectations of third parties that it will accept and discharge certain responsibilities. A provision for restructuring costs is not recognised until there is a formal plan and details of the restructuring have been communicated to those affected by the plan.

Provisions are measured at the present value of the expenditure expected to be required to settle the obligation.

Contingent liabilities, which include certain guarantees and letters of credit pledged as collateral security, are possible obligations that arise from past events whose existence will be confirmed only by occurrence or non-occurrence, of one or more uncertain future events not wholly within the control of Bank Austria, or are present obligations that have arisen from past events but are not recognised because it is not probable that settlement will require the outflow of resources, or because the amount of obligation cannot be reliably measured.

Contingent liabilities are not recognised in the financial statements but are disclosed unless the probability of settlement is low.

EquityEquity is composed of paid-in capital, i. e., capital made available to the company by shareholders (subscribed capital plus capital reserves), and earned capital (retained earnings, foreign currency translation reserves, IAS 39 reserves, actuarial gains / losses, profit carried forward from the previous year, and net profit). The IAS 39 reserves include gains and losses on available-for-sale financial assets (available-for-sale reserve), which are not recognised in income, and those components of hedge accounting in accordance with IAS 39 which are not included in income (cash flow hedge reserve), after adjustment for deferred taxes.

Treasury shares held are deducted from equity. The difference between the price on a later sale of treasury shares and the related post-tax repurchase cost is recognised directly in equity.

DerecognitionDerecognition is the removal of a previously recognised financial asset or financial liability from an entity’s statement of financial position.

An entity shall derecognise a financial asset when the contractual rights to the cash flows from the financial asset expire or it transfers the contractual rights to receive the cash flows of the financial asset to a non-group counterparty.

Recognition is also subject to verification of effective transfer of all the risks and rewards of ownership of the financial asset (true sale). If the entity transfers substantially all the risks and rewards of ownership of the financial asset, the entity shall derecognise the asset (or group of assets) and recognise separately as assets or liabilities any rights and obligations created or retained in the transfer.

If the entity substantially retains all the risks and rewards of ownership of the asset or group of assets, the entity shall continue to recognise the transferred asset(s). In this case it is necessary to recognise a liability corresponding to the amount received under the transfer and subsequently recognise all income accruing on the asset or expense accruing on the liability.

Further specifications are listed in the Accounting Manual of UniCredit.

A financial instrument can be considered to have expired also if the terms and conditions are modified in a significant way (amendment to the terms and conditions). In this context a derecognition of a financial instrument may derive also from substantial changes in the qualitative terms and conditions.

Once it has been determined that the cash flows have been transferred either by transferring the right to such cash flows or by retaining the rights and assuming an obligation to pass such cash flows to the eventual recipient, the bank shall evaluate the extent to which it retains the risks and rewards of ownership of the financial asset.




The outcomes of this analysis may be the following:1) Substantially all the risk and rewards have been transferred: in this case the bank shall derecognise the financial asset from its financial statements,2) Substantially all the risk and rewards have been retained: in this case the bank cannot derecognise the financial asset from its financial statements,3) Substantially all the risk and rewards are neither transferred nor retained: in this case the decision on whether to derecognise the financial assets

depends on an evaluation of control. In particular:– if the Group has retained control, the financial asset cannot be derecognised in its entirety and the subsequent treatment is based upon the

continuing involvement in the transferred asset; – if the Group has not retained control, the financial asset has to be derecognised.

In order to assess the transfer of risk and rewards the bank compares its exposure to cash flows variability in amounts and timing before and after the transfer. In particular:1) The bank has transferred substantially all the risk and rewards if its exposure after the transfer is no longer significant compared to the total

variability of the cash flows of the financial assets,2) The bank has retained substantially all the risk and rewards if its exposure to cash flows variability does not change significantly as a result of the

transfer.

The assessment has to be performed by computing the present value of the future net cash flows of the financial asset.

Present value shall be calculated:1) by considering all the possible scenarios with greater weight attributed to the most likely ones,2) by using an appropriate current market interest rate.

Sale and repurchase agreements When securities are sold subject to linked repurchase agreements (“repos”), a liability is recorded in respect of the consideration received and they are not derecognised from the statement of financial position, as the Group retains substantially all the risks and rewards of ownership.

Securities purchased under commitments to sell (“reverse repos”) are not recognised in the statement of financial position and the consideration paid is recorded under loans. The difference between the sale and the repurchase price is treated as interest and recognised over the life of the agreement using the effective interest rate method.

Net interestInterest income and expense relate to liquid assets, as well as financial instruments held for trading, measured at fair value through profit or loss, or available for sale, HtM financial assets, loans and receivables, deposits and debt securities in issue.

Interest income and expense of all instruments measured at amortised cost is recognised in interest income or interest expense using the effective interest rate. The effective interest rate is a method of calculating the amortised cost of a financial asset or a financial liability and of allocating the interest income or expense over the relevant period using the estimated future cash flows, which include those determined by the contractual terms of the asset or liability, all fees that are an integral part of the effective interest rate, direct and incremental transaction costs, and all premiums and discounts


Fees and commissionsFee and commission income and expense that are integral to the effective interest rate on a financial asset or liability are included in the measurement of the effective interest rate

Other fees and commission income, including account servicing fees, investment managing fees, sales commission, placement fees and syndication fees, are recognised as the related services are performed. Other fees and commission expenses relate mainly to transaction and service fees, which are expensed as the services are received.

Dividend incomeDividend income is recognised when the right to receive payment is established

Gains and losses on disposals of financial instrumentsThis item shows the results from disposals of loans and receivables, available-for-sale financial assets, held-to-maturity investments and financial liabilities. Gains and losses on disposal of financial assets held for trading and on financial instruments at fair value through profit or loss are not included.

Gains and losses on financial assets / liabilities at fair value through profit or lossThis item includes gains and losses on financial assets and financial liabilities as well as the results from the measurement of these items at their fair values.

Impairment losses on loans/ Impairment losses on other financial transactionsThese items include write-downs of loans, write-offs and additions to provisions for guarantees and commitments, and income from write-backs as well as recoveries of loans previously written off.

Impairment /write-backs on property, plant and equipment and on intangible assetsWrite-downs on assets held under finance leases are part of this item.

Profit (loss) of associatesDividends received from associates are included in the item Dividend income.

Gains and losses on disposal of investmentsThis item includes gains / losses on the disposal of investments in property and other assets.




A.6 – Impairment test Goodwill: annual changes (€ million)

2012 2011

Opening balance 2,397 3,225Goodwill arising out of acquisitions made in the year 24 –Permanent reductions (impairment) –199 –737Net exchange differences 30 – 91Transfer to / from non-current assets held for sale –125 –Other changes – –closing balance 2,127 2,397

In compliance with IFRS 3 and in conjunction with IAS 36 and IAS 38 the carrying amount of goodwill or intangible assets with indefinite useful lives allocated to cash-generating units (CGUs) were tested for impairment as at 31 December 2012.

The main changes in accumulated goodwill in 2012 were:• ImpairmentlossongoodwillrelatingtoPJSCUkrsotsbank,Ukraine:€165million• ImpairmentlossongoodwillrelatingtoJSCATFBank,Kazakhstan(classifiedasadisposalgroupheldforsale):€125million• Impairmentlossesongoodwillrelatingtoothercompanies:€34million• Netexchangedifferencesduetocurrencyfluctuations:€30million

Under IAS 36 impairment testing of goodwill must be performed at least annually and, in any case, whenever there is objective evidence of the occurrence of events that may have reduced its value.

Definition of cash-generating units (CGu)Estimating the value in use for the purposes of goodwill impairment testing requires that goodwill is first attributed to autonomous operating units (from the points of view of independent cash flows generated and of internal planning and reporting). These units are defined as cash-generating units (CGU).

The cash-generating unit is defined as the lowest level within the Group at which goodwill is allocated for management purposes. Goodwill recognised is an intangible asset representing the future economic benefits arising from those assets acquired in a business combination which are not individually identified.

Change in composition of CGus in 2012According to IAS 36 a CGU is the smallest identifiable group of assets that generates cash flows that are largely independent of cash flows of other groups of assets or other CGUs. As the planned merger means that the entities in the Czech Republic and Slovakia are highly dependent starting from Q4/2012theircashflowscannotbeseenasindependentanymoreandtheyarethereforegroupedasonesingleCGUalreadyforthe2012impairment test. In the 2011 impairment test the Czech Republic and Slovakia were still treated as separate CGUs.

The different treatment is underpinned by the following facts:

• RelevantgovernancebodiesinNovember2012tookthedecisiontomergethetwoentitiesassoonaspossible(withthelegalmergerexpectedtobe finalised in the second half of 2013) under a single “industrial leadership and managerial responsibility” concept given to the future Management Board of the combined entity. Following such resolutions, applications with local regulators in both countries were filed on 21 December 2012.

• Followingtheabove,jointwork-streams(consistingofrepresentativesofbothbanks)weresetupinOctober2012alreadytodefineandfullyalignthe operating and business model.

The budget and business plans for 2013 have been prepared on a uniform basis. For the calculation of the recoverable amount the 2012 impairment test uses a combination of budgeted figures for 2013 and the current five-year plan of the countries.


Calculation of value in use The impairment test is carried out by comparing the carrying value of each CGU with its recoverable value. When the latter proves to be less than the book value, a write-down must be recorded in the financial statements. The recoverable value of the CGU is the greater of its fair value (net of sales costs) and the related value in use.

The value in use is determined on the basis of future cash flows expected from each CGU to which goodwill has been allocated. These cash flows are estimated based on:• currentmacroeconomicscenarios;• thebudgetfor2013;• fortheperiod2014–2015,thestrategicplanapproved.

Projections of future results were extended to 2021 by extrapolation in order to obtain an assessment of the earning capability of the Group and its ability to create value over time. The expected cash flow for 2021 is the basis for calculating the Terminal Value, which represents the ability of the CGUs to generate future cash flows beyond that year. Based on the adopted methodology, Terminal Value is calculated as a perpetual income estimated on the basis of a normalised, economically sustainable cash flow, consistent with a constant long-term growth rate, as required by the IAS/ IFRS accounting standards.

The value in use is determined by discounting the financial flows at a rate that takes into account present market rates and the specific risks of the asset. Taking into consideration the different risk levels of their respective operating environments, we used different risk premiums for each CGU including a component related to country risk.

The corresponding carrying amount of a cash-generating unit is determined on the basis of pro-rata equity and the carrying amount of goodwill allocated to that unit.

Impairment test – cash-generating units (€ million)

2012 2011

gOOdWillOther

iNtaNgibles *) tOtal gOOdWillOther

iNtaNgibles *) tOtal

private banking 39 – 39 39 – 39Schoellerbank 39 – 39 39 – 39

central eastern europe 2,063 – 2,063 2,321 50 2,371EU member states

Bulgaria 159 – 159 159 – 159Czech Republic /Slovakia 399 – 399 396 – 308Hungary 118 – 118 118 – 118Romania 134 – 134 137 – 137

OtherBosnia 39 – 39 39 – 39Croatia 50 – 50 50 – 50Kazakhstan – – – 129 50 179Russia 795 – 795 767 – 767Serbia 19 – 19 20 – 20Turkey 350 – 350 338 – 338Ukraine – – – 168 – 168

corporate center 25 – 25 37 – 37tOtal 2,127 – 2,127 2,397 50 2,447

*) Indefinite useful life

The following valuation calculations are based on the 2013 budget and the current five-year plan. According to current information available to the Management Board of Bank Austria, the 2013 budget and the assumptions for the years 2014 to 2021 are in line with expected developments at the respective business units (cash-generating units). Given the imponderable nature of future economic trends, developments may also differ from, and be significantly worse than, these assumptions.

In order to anticipate the risk of forthcoming results lower than originally expected in the five-year-plan, for Ukraine a sensitivity adjustment was applied.




Discounted Cash Flow ModelFor the fair value calculation the Standard UniCredit Group Discounted Cash Flow Valuation Model (3-phase model) was employed throughout the Group, as in the previous year, using the following assumptions: The cash flows were determined by subtracting the annual capital requirement generated by changes in risk-weighted assets from net profit (net of minority interests). This capital requirement is defined as the level of capitalisation that the Group aspires to achieve in the long term, also in light of the minimum regulatory capital requirements.

The Discounted Cash Flow model used by the Group is based on three stages:• Phase1(2012):thefiguresarebasedonyear-endprojectionsfornetprofitandrisk-weightedassetsoftherespectivecash-generatingunits.

• Phase2(2013–2021)– Phase 2a – planning period (2013–2015): the 2013 budget figures for net profit and RWAs were used for 2013, and multi-year planning figures

were used for subsequent years.– Phase 2b (2016–2021): in this phase the growth rates of net income and risk-weighted assets converge towards 2%. The discount rate in the

form of cost of equity (Ke) declines to the corresponding terminal value level (for details see page 123).

• Phase3–perpetualannuity:calculationofthepresentvalueofaperpetualannuityontheassumptionofalong-termgrowthratewhichtakesthesustained long-term economic growth expected by Bank Austria for the euro area into account (2%).

Phase 2a is the result of a detailed planning process which does not exceed the 5-year horizon in accordance with IAS 36. The purpose of phase 2b is to illustrate the expected long-term convergence of growth rates in these markets to those in Europe.

As required by IAS 36, the nominal growth rates applied to the model both in the intermediate period and in the TV are much lower than the average long-term growth rate of the sector or of the countries in which the Group is present.

Calculation of cost of equityThe expected cash flows are discounted at the country-specific rate of cost of capital, which is determined on the basis of the long-term risk-free interest rate of the local currency, the debt risk premium and the UniCredit equity risk premium. The discount rate is a nominal rate, net of taxes.

• risk-free rate: Calculation is based on the historical average (6 years) of the 5-year swap rate in local currency. If no swap rate was available, the most liquid and comparable interbank rate (with a 3-month tenor) was used.

• risk premium for debt: This is the country risk premium calculated as the historical average (6 years) of the 5-year credit default swap paid by the country (given the lack of time series in certain countries we considered a shorter time period or the asset swap spread of a benchmark government bond).

• risk premium for equity: This is calculated using the option pricing model and is based on the historical volatility of the UniCredit share price over the last six years.

• terminal value cost of equity: The cost of capital used in discounting cash flows converges to a specific value for each CGU. This value is determined taking into account the market‘s risk perception concerning the ability of the banking sector to generate returns in the long-term and the level of capitalisation that the Group hopes to achieve in the long term. The terminal value cost of capital used differed depending on whether the CGU is located in the euro area (10%), in an Eastern European country that would enter the euro zone by 2018 (10.35%) or in another country (11.85%). An exception is Ukraine, where the terminal value cost of equity was set at 12%. The terminal value cost of equity calculated for the CGU Czech Republic /Slovakia was 10.27% (weighted on the basis of carrying amounts).


The relevant parameters were as follows:

iNitial discOuNt rate – Ke fiNal discOuNt rate – Ke tV NOmiNal grOWth rate cagr tV

subsidiary 2012 2011 2012 2) 2012 2)

Croatia 16.43% 15.03% 11.85% 2%Bosnia 14.20% 14.33% 11.85% 2%Bulgaria 15.35% 14.35% 10.35% 2%Czech Republic 1) 11.76% 10.35% 2%Slovakia 1) 12.13% 10.00% 2%Czech Republic /Slovakia 12.23% 10.27% 2%Latvia 15.77% 15.79% 10.35% 2%Hungary 18.27% 16.96% 10.35% 2%

Romania 19.04% 18.37% 11.85% 2%Russia 17.90% 16.81% 11.85% 2%Slovenia 12.55% 12.13% 10.00% 2%Serbia 24.69% 25.76% 11.85% 2%Turkey 23.76% 23.84% 11.85% 2%Ukraine 28.72% 25.97% 12.00% 2%

1) Treated as a single CGU in 2012 because of the planned merger2) 2012 unchanged compared with 2011.

It should also be noted that the parameters and the information used to test goodwill impairment are significantly influenced by the macroeconomic environment and market conditions, which can be subject to rapid unforeseeable changes, possibly leading to very different results as compared to those used for the 2012 consolidated financial statements.

Sensitivity analysisAs due to the current macroeconomic and market environment affecting the financial sector it is difficult to make predictions about future long-term profitability, sensitivity analyses were conducted, assuming changes to the main parameters used in the impairment test for selected CEE CGUs (see table below).

The table below summarises the percentage deviations of the basic assumptions adopted for the different CGU needed to make the recoverable value of the CGU equal to its value in the financial statements:

subsidiary chaNge iN Ke (perceNtage pOiNts) chaNge iN cagr (perceNtage pOiNts)

Turkey 1.04% –2.29%Serbia n. m. 1) n. m. 1)

Russia 5.15% –11.72%Romania 3.54% –11.60%Hungary 5.33% –11.52%Bulgaria 10.30% n. m. 2)

Bosnia 2.98% –7.92%Croatia 1.01% –2.23%Czech Republic + Slovakia 1.54% –3.79%

1) No significant result due to fair value close to carrying amount.2) In view of the high profitability, the results of the sensitivity analysis are not significant.




A.7 – Group of consolidated companies and changes in the group of consolidated companies of the Bank Austria Group in 2012Consolidated companies

dOmicile iNterest iN % VOtiNg rights

cOmpaNy city cOuNtrydirect

OWNershipiNdirect

OWNership tOtal tOtal

unicredit bank austria ag Vienna austriaAI Beteiligungs GmbH Vienna Austria 100.00 0.00 100.00 100.00Alpine Cayman Islands Ltd. George Town Cayman Islands 100.00 0.00 100.00 100.00Arany Penzügyi Lizing Zrt. Budapest Hungary 0.00 100.00 100.00 100.00Artist Marketing Entertainment GmbH Vienna Austria 0.00 100.00 100.00 100.00AS UniCredit Bank Latvia Riga Latvia 100.00 0.00 100.00 100.00ATF Capital B.V. Rotterdam Netherlands 0.00 99.69 99.69 99.75ATF Finance JSC Almaty Kazakhstan 0.00 99.69 99.69 99.75ATF Inkassatsiya Ltd Almaty Kazakhstan 0.00 99.69 99.69 99.75AWT Handels Gesellschaft m. b. H. Vienna Austria 0.00 100.00 100.00 100.00AWT International Trade GmbH Vienna Austria 100.00 0.00 100.00 100.00BA Alpine Holdings Inc. Wilmington USA 100.00 0.00 100.00 100.00BA Betriebsobjekte GmbH Vienna Austria 100.00 0.00 100.00 100.00BA Betriebsobjekte GmbH & Co Beta Vermietungs OG Vienna Austria 0.00 100.00 100.00 100.00BA Betriebsobjekte Praha, spol.s.r.o. Prague Czech Republic 0.00 100.00 100.00 100.00BA Gebäudevermietungs GmbH Vienna Austria 0.00 70.00 70.00 70.00BA GVG-Holding GmbH Vienna Austria 100.00 0.00 100.00 100.00BA Immo-Gewinnscheinfonds1 Vienna Austria 99.00 0.00 99.00 99.00BA Private Equity GmbH Vienna Austria 100.00 0.00 100.00 100.00BA-CA Finance II Limited George Town Cayman Islands 0.00 100.00 100.00 100.00BA-CA Finance Limited George Town Cayman Islands 0.00 100.00 100.00 100.00BA-CA Infrastructure Finance Advisory GmbH Vienna Austria 0.00 100.00 100.00 100.00BA-CA Markets & Investment Beteiligung Ges. m. b. H. Vienna Austria 100.00 0.00 100.00 100.00BA-CA Wien Mitte Holding GmbH Vienna Austria 100.00 0.00 100.00 100.00Bank Austria Finanzservice GmbH Vienna Austria 100.00 0.00 100.00 100.00Bank Austria Real Invest Client Investment GmbH Vienna Austria 0.00 94.95 94.95 94.95Bank Austria Real Invest GmbH Vienna Austria 94.95 0.00 94.95 94.95Bank Austria Real Invest Immobilien-Kapitalanlage GmbH Vienna Austria 0.00 94.95 94.95 94.95Bank Austria Wohnbaubank AG Vienna Austria 100.00 0.00 100.00 100.00CABET-Holding GmbH Vienna Austria 100.00 0.00 100.00 100.00CABO Beteiligungsgesellschaft m. b. H. Vienna Austria 0.00 100.00 100.00 100.00Cafu Vermögensverwaltung GmbH & Co OG Vienna Austria 0.00 100.00 100.00 100.00card complete Service Bank AG Vienna Austria 50.10 0.00 50.10 50.10Cards & Systems EDV-Dienstleistungs GmbH Vienna Austria 52.00 3.50 55.50 55.50CBD International Sp.z.o.o. Warsaw Poland 0.00 100.00 100.00 100.00CEAKSCH Verwaltungs G. m. b. H. Vienna Austria 0.00 100.00 100.00 100.00Centar Kaptol doo Zagreb Croatia 0.00 84.47 84.47 84.47Center Heinrich-Collin Straße1 Verm. GmbH u Co KG Vienna Austria 0.00 79.34 79.34 46.53Christoph Reisegger Gesellschaft m. b. H. Vienna Austria 0.00 99.00 99.00 100.00CJSC Bank Sibir Omsk Russian Federation 0.00 100.00 100.00 100.00Closed Joint Stock Company UniCredit Securities (in liquidation) Moscow Russian Federation 0.00 100.00 100.00 100.00DBC Sp.z.o.o. Warsaw Poland 0.00 100.00 100.00 100.00DC Bank AG Vienna Austria 99.94 0.00 99.94 99.94DC Elektronische Zahlungssysteme GmbH Vienna Austria 0.00 50.10 50.10 50.10Diners Club CS s.r.o. Bratislava Slovakia 0.00 99.94 99.94 99.94Diners Club Polska Sp.z.o.o. Warsaw Poland 0.00 99.94 99.94 99.94DiRana Liegenschaftsverwertungsgesellschaft m. b. H. Vienna Austria 0.00 100.00 100.00 100.00Domus Clean Reinigungs GmbH Vienna Austria 100.00 0.00 100.00 100.00DV Alpha GmbH Vienna Austria 0.00 100.00 100.00 100.00DV Beteiligungsverwaltungs GmbH Vienna Austria 0.00 100.00 100.00 100.00




OWNershipiNdirect


EK Mittelstandsfinanzierungs AG Vienna Austria 98.00 0.00 98.00 98.00Europe Real-Estate Investment Fund Budapest Hungary 0.00 100.00 100.00 100.00Europa Investment Fund Management Ltd. Budapest Hungary 0.00 100.00 100.00 100.00Euroventures-Austria-CA-Management GesmbH Vienna Austria 0.00 100.00 100.00 100.00FactorBank Aktiengesellschaft Vienna Austria 100.00 0.00 100.00 100.00GUS Consulting GmbH Vienna Austria 100.00 0.00 100.00 100.00Human Resources Service and Development GmbH Vienna Austria 100.00 0.00 100.00 100.00HypoVereins Immobilien EOOD Sofia Bulgaria 0.00 96.53 96.53 96.53Immobilien Rating GmbH Vienna Austria 19.00 63.91 82.91 82.91INTEREUROPA-EAST Ltd. (from 14 February 2013 General Logistic Solutions LLC) Moscow Russian Federation 0.00 100.00 100.00 100.00ISB Universale Bau GmbH Brandenburg Germany 0.00 100.00 100.00 100.00ISTRA D.M.C. d.o.o. Umag Croatia 0.00 60.65 60.65 60.65ISTRATURIST UMAG, hotelijerstvo, turizam i turisticka agencija d. d. Umag Croatia 0.00 60.65 60.65 60.65IVONA Beteiligungsverwaltung GmbH Vienna Austria 0.00 94.95 94.95 94.95JOHA Gebäude-Errichtungs- und Vermietungsges. m. b. H. Leonding Austria 0.00 94.03 94.03 94.03JSC ATF BANK Almaty Kazakhstan 99.69 0.00 99.69 99.75Kaiserwasser Bau- und Errichtungs GmbH und Co OG Vienna Austria 99.80 0.00 99.80 99.80KLEA ZS-Immobilienvermietung G. m. b. H. Vienna Austria 99.80 0.00 99.80 100.00KLEA ZS-Liegenschaftsvermietung G. m. b. H. Vienna Austria 99.80 0.00 99.80 100.00KSG Karten-Verrechnungs- und Servicegesellschaft m. b. H. Vienna Austria 0.00 50.10 50.10 50.10Lassallestraße Bau-, Planungs-, Erricht.- u. Verw.ges. m. b. H. Vienna Austria 99.00 0.00 99.00 100.00Limited Liability Company AI Line (in liquidation) Moscow Russian Federation 0.00 99.90 99.90 100.00LLC Ukrsotsbud Kiev Ukraine 0.00 97.32 97.32 97.34LTD SI&C AMC Ukrsots real estate Kiev Ukraine 0.00 98.30 98.30 98.33Lowes Limited (in liquidation) Nicosia Cyprus 0.00 100.00 100.00 100.00M.A.I.L Beteiligungsmanagement Ges. m. b. H. & Co. MCL Theta KG Vienna Austria 0.00 100.00 100.00 100.00M.A.I.L Finanzberatung Gesellschaft m. b. H. Vienna Austria 0.00 94.95 94.95 94.95MC Marketing GmbH Vienna Austria 100.00 0.00 100.00 100.00MC Retail GmbH Vienna Austria 0.00 100.00 100.00 100.00Mezzanin Finanzierungs AG Vienna Austria 56.67 5.45 62.12 62.18MY Beteiligungs GmbH Vienna Austria 100.00 0.00 100.00 100.00Palais Rothschild Vermietungs GmbH Co OG Vienna Austria 0.00 100.00 100.00 100.00PIRTA Verwaltungs GmbH Vienna Austria 100.00 0.00 100.00 100.00POLLUX Immobilien GmbH Vienna Austria 99.80 0.00 99.80 99.80Pominvest dd Split Croatia 0.00 74.89 74.89 75.14Privat JSC Ferrotrade International Kiev Ukraine 100.00 0.00 100.00 100.00Prva Stambena Stedionica dd Zagreb Zagreb Croatia 0.00 84.47 84.47 84.47Public Joint Stock Company Ukrsotsbank Kiev Ukraine 49.91 48.40 98.31 98.32RAMSES Immobilien Gesellschaft m. b. H. & Co OG Vienna Austria 99.30 0.20 99.50 99.50RANA-Liegenschaftsverwertung GmbH Vienna Austria 0.00 99.90 99.90 99.90Real Invest Immobilien GmbH Vienna Austria 0.00 94.95 94.95 94.95RIGEL Immobilien GmbH Vienna Austria 99.80 0.00 99.80 99.80Sas-Real Ingatlanüzemelteto es Kezelo Kft. Budapest Hungary 0.00 100.00 100.00 100.00Schoellerbank Aktiengesellschaft Vienna Austria 100.00 0.00 100.00 100.00Schoellerbank Invest AG Salzburg Austria 0.00 100.00 100.00 100.00SIRIUS Immobilien GmbH Vienna Austria 99.80 0.00 99.80 99.80Suvremene poslovne komunikacije d.o.o. Zagreb Croatia 0.00 84.47 84.47 84.47SVIF Ukrsotsbud Kiev Ukraine 0.00 100.00 100.00 100.00Treuconsult Beteiligungsgesellschaft m. b. H. Vienna Austria 0.00 94.95 94.95 94.95Uctam Baltics SIA Riga Latvia 0.00 100.00 100.00 100.00UCTAM Bulgaria Eood Sofia Bulgaria 0.00 100.00 100.00 100.00UCTAM Czech Republic s.r.o. Prague Czech Republic 0.00 100.00 100.00 100.00UCTAM d.o.o. Beograd Belgrade Serbia 0.00 100.00 100.00 100.00UCTAM RK Limited Liability Company Almaty Kazakhstan 0.00 100.00 100.00 100.00UCTAM RO S.R.L. Bucharest Romania 0.00 100.00 100.00 100.00






OWNershipiNdirect


UCTAM RU Limited Liability Company Moscow Russian Federation 0.00 100.00 100.00 100.00UCTAM Ukraine LLC. Kiev Ukraine 0.00 99.90 99.90 99.90Uctam upravljanje d.o.o. Ljubljana Slovenia 0.00 100.00 100.00 100.00UniCredit Bank a.d. Banja Luka Banja Luka Bosnia and Herzegovina 97.85 0.00 97.85 97.85UniCredit Bank Czech Republic a. s. Prague Czech Republic 100.00 0.00 100.00 100.00UniCredit Bank d. d. Mostar Bosnia and Herzegovina 24.40 55.40 79.80 79.78UniCredit Bank Hungary Zrt. Budapest Hungary 100.00 0.00 100.00 100.00UniCredit Bank OJSC Bishkek Kyrgyzstan 0.00 96.84 96.84 96.90UniCredit Bank Serbia J.S.C. Belgrade Serbia 100.00 0.00 100.00 100.00UniCredit Bank Slovakia a. s. Bratislava Slovakia 99.03 0.00 99.03 99.03UniCredit Banka Slovenija d. d. Ljubljana Slovenia 99.99 0.00 99.99 99.99UniCredit Bulbank AD Sofia Bulgaria 96.53 0.00 96.53 96.53UniCredit CA IB Hungary Ltd. Budapest Hungary 0.00 100.00 100.00 100.00UniCredit CAIB Poland S. A. Warsaw Poland 100.00 0.00 100.00 100.00UniCredit CA IB Romania SRL Bucharest Romania 100.00 0.00 100.00 100.00UniCredit CAIB Securities Romania SA Bucharest Romania 0.00 90.13 90.13 90.13UniCredit CA IB Serbia Ltd. Belgrade Serbia 100.00 0.00 100.00 100.00UniCredit CA IB Slovakia a. s. Bratislava Slovakia 0.00 99.03 99.03 99.03UniCredit CA IB Slovenija d.o.o. Ljubljana Slovenia 0.00 99.99 99.99 99.99UniCredit Factoring EAD Sofia Bulgaria 0.00 96.53 96.53 96.53UniCredit Jelzalogbank Zrt. Budapest Hungary 0.00 100.00 100.00 100.00UniCredit Securities International Limited (in liquidation) Nicosia Cyprus 0.00 100.00 100.00 100.00UniCredit Tiriac Bank S. A. Bucharest Romania 50.56 0.03 50.59 50.59UniCredit Turn-Around Management CEE GmbH Vienna Austria 0.00 100.00 100.00 100.00UniCredit Turn-Around Management GmbH Vienna Austria 100.00 0.00 100.00 100.00UNIVERSALE International Realitäten GmbH Vienna Austria 100.00 0.00 100.00 100.00VIENNA DC Bauträger GmbH Vienna Austria 0.00 67.80 67.80 67.80VIENNA DC Tower 1 Liegenschaftsbesitz GmbH Vienna Austria 0.00 67.80 67.80 67.80VIENNA DC Tower 2 Liegenschaftsbesitz GmbH Vienna Austria 0.00 67.80 67.80 67.80WED Donau-City Gesellschaft m. b. H. Vienna Austria 0.00 67.80 67.80 67.80WED Holding Gesellschaft m. b. H. Vienna Austria 48.06 0.00 48.06 48.06WED Wiener Entwicklungsgesellschaft für den Donauraum AG Vienna Austria 38.00 29.80 67.80 67.80Zagreb Nekretnine doo Zagreb Croatia 0.00 84.47 84.47 84.47Zagrebacka banka dd Zagreb Croatia 84.47 0.00 84.47 84.47Zane BH doo Sarajevo Bosnia and Herzegovina 0.00 84.47 84.47 84.47ZAO UniCredit Bank Moscow Russian Federation 100.00 0.00 100.00 100.00Zapadni Trgovacki Centar d.o.o. Rijeka Croatia 0.00 100.00 100.00 100.00ZB Invest d.o.o. Zagreb Croatia 0.00 84.47 84.47 84.47ZETA Fünf Handels GmbH Vienna Austria 100.00 0.00 100.00 100.00


Investments in companies accounted for under the proportionate consolidation methoddOmicile iNterest iN %


OWNershipiNdirect

OWNership tOtal

Koc Finansal Hizmetler AS Istanbul Turkey 50.00 0.00 50.00Stichting Custody Services YKB Amsterdam Netherlands 0.00 40.90 40.90UniCredit Menkul Degerler AS Istanbul Turkey 0.00 50.00 50.00Yapi Kredi B Tipi Yatirim Ortakligi AS Istanbul Turkey 0.00 22.93 22.93Yapi Kredi Bank Azerbaijan Closed Joint Stock Company Baku Azerbaijan 0.00 40.90 40.90Yapi Kredi Bank Moscow Moscow Russian Federation 0.00 40.90 40.90Yapi Kredi Bank Nederland N.V. Amsterdam Netherlands 0.00 40.90 40.90Yapi Kredi Emeklilik AS Istanbul Turkey 0.00 38.42 38.42Yapi Kredi Faktoring AS Istanbul Turkey 0.00 40.88 40.88YAPI Kredi Finansal Kiralama AO Istanbul Turkey 0.00 40.89 40.89Yapi Kredi Diversified Payment Rights Finance George Town Cayman Islands 0.00 40.90 40.90Yapi Kredi Holding BV Amsterdam Netherlands 0.00 40.90 40.90Yapi Kredi Invest Limited Liability Company Baku Azerbaijan 0.00 40.90 40.90Yapi Kredi Portföy Yönetimi AS Istanbul Turkey 0.00 40.88 40.88Yapi Kredi Sigorta AS Istanbul Turkey 0.00 38.42 38.42Yapi Kredi Yatirim Menkul Degerler AS Istanbul Turkey 0.00 40.89 40.89Yapi ve Kredi Bankasi AS Istanbul Turkey 0.00 40.90 40.90




Investments in associated companies accounted for under the equity method (€ thousand)

dOmiciletOtal

assetsOperatiNg

iNcOme

prOfit/lOss after

taxeQuity

capitalcarryiNg

Valuefair

Value*)Name Of cOmpaNy city cOuNtry add-%

Allianz ZB D.O.O. Drustvo za Upravljanje Dobrovoljnim Zagreb Croatia 41.39 4,528 2,617 898 2,810 1,377 n. m.Allianz ZB D.O.O. Drustvo za Upravljanjie Obveznim Zagreb Croatia 41.39 21,493 11,588 5,786 17,669 8,658 n. m.Anger Machining GmbH Traun Austria 48.02 27,687 28,887 1,632 3,597 5,650 n. m.Bank für Tirol und Vorarlberg Aktiengesellschaft Innsbruck Austria 47.39 9,492,841 159,118 43,606 823,338 411,410 199,355Banque de Commerce et de Placements SA Geneva Switzerland 12.54 1,744,537 74,111 27,110 280,133 35,138 n. m.BKS Bank AG Klagenfurt Austria 36.03 6,455,993 140,772 30,758 674,534 248,688 203,493CA Immobilien Anlagen Aktiengesellschaft Vienna Austria 18.16 5,529,862 147,479 21,813 1,417,774 257,468 134,657Cash Service company AD Sofia Bulgaria 19.31 6,605 2,977 135 6,323 1,265 n. m.Forstinger International GmbH Vienna Austria 31.36 37,241 130,816 –5,081 –1,644 –526 n. m.Marina City Entwicklungs GmbH Vienna Austria 25.00 11,332 2 –334 118 29 n. m.Marina Tower Holding GmbH Vienna Austria 25.00 1,511 0 –4 1,476 370 n. m.Megapark OOD Sofia Bulgaria 41.31 74,793 0 0 –17,682 0 n. m.Multiplus Card D.O.O za Promidzbu I Usluge Zagreb Croatia 21.12 1,776 –162 303 –1,149 –287 n. m.Notartreuhandbank AG Vienna Austria 25.00 1,111,362 15,639 11,072 24,985 6,246 n. m.Oberbank AG Linz Austria 33.34 17,642,700 317,600 85,466 1,322,519 493,207 451,002Oesterreichische Kontrollbank Aktiengesellschaft Vienna Austria 49.15 36,037,512 126,475 65,279 648,579 332,520 n. m.OOO UniCredit Leasing Moscow Russian Federation 40.00 252,060 12,867 3,270 58,008 23,699 n. m.

ÖsterreichischeHotel-undTourismusbank Ges. m. b. H. Vienna Austria 50.00 1,078,582 5,811 1,911 25,925 12,962 n. m.ÖsterreichischeWertpapierdatenService GmbH Vienna Austria 29.96 1,628 3,426 –27 48 14 n. m.Papcel a. s. Litovel Czech Republic 33.32 41,903 1,137 2,236 17,565 5,926 n. m.Pay Life Bank GmbH Vienna Austria 23.87 501,892 48,883 –10,658 62,684 14,961 21,700PSA Payment Service Austria GmbH Vienna Austria 23.86 154,097 13,862 2,308 33,696 8,042 36,500 SP Projektentwicklung Schönefeld GmbH & Co KG Stuttgart Germany 50.00 16,441 201 –264 15,141 7,571 n. m.UNI Gebäudemanagement GmbH Linz Austria 50.00 2,055 56 3 –191 – 95 n. m.UniCredit Leasing SPA Milan Italy 31.01 29,517,393 303,929 –149,377 2,498,465 379,166 n. m.V.A. Holding GmbH Vienna Austria 43.68 988 4 –5 –3,317 –1,479 n. m.Wien Mitte Immobilien GmbH Vienna Austria 50.00 332,094 1,667 1,681 131,271 65,636 n. m.WKBG Wiener Kreditbürgschafts- und Beteiligungsbank AG Vienna Austria 30.80 30,421 2,347 –377 26,860 8,272 n. m.Yapi Kredi Koray Gayrimenkul Yatirim Ortakligi AS Istanbul Turkey 12.45 44,742 27 –1,691 26,047 3,242 2,750

*) of listed companies

Investments in other controlled and associated companiesAggregate total assets of unconsolidated companies which are controlled by UniCredit Bank Austria AG amounted to €6.1 million. Aggregate total as-sets of associated companies in which Bank Austria holds investments which were not accounted for under the equity method were €16.8 million.

Aggregate equity capital amounted to €1.4 million for controlled companies and €8.6 million for associated companies.

Controlled companies generated a combined net loss of €773 thousand and associated companies reported a combined net profit of €451 thousand.


Changes in consolidated companies, in companies accounted for under the proportionate consolidation method and in companies accounted for under the equity method

Consolidated companiesNumber

Opening balance 139additions 7

Newly established companies 2Acquired companies 5

disposals –3Companies sold or liquidated –1Mergers –2

Other changes 1clOsiNg balaNce 144

Companies accounted for under the proportionate consolidation methodNumber

Opening balance 17Additions –Disposals –Other changes –clOsiNg balaNce 17

Companies accounted for under the equity methodNumber

Opening balance 32additions 1

Newly established companies –Newly added companies 1

disposals –3Companies sold or liquidated –2Mergers –1

Other changes –1clOsiNg balaNce 29




Additions (€ thousand)

Name Of cOmpaNy mOa1) dOmicile additiON as at purchase price

CU@2012 Facility Services GmbH C Vienna 01 Jan. 2012 1,919UCTAM BULGARIA EOOD2) C Sofia 18 Jan. 2012 –DV Alpha GmbH C Vienna 31 Oct. 2012 34DV Beteiligungsverwaltungs GmbH C Vienna 31 Oct. 2012 5,059PIRTA Verwaltungs GmbH C Vienna 31 Oct. 2012 76,940UCTAM Czech Republic s.r.o. C Prague 30 Nov. 2012 –Megapark OOD E Sofia 30 Nov. 2012 –INTEREUROPA-EAST Ltd C Moscow 31 Dec. 2012 –

Disposals (€ thousand)

Name Of cOmpaNy mOa1) dOmicile dispOsal as atsales/liQuidatiON

prOceeds

OECLB Holding GmbH in Liquidation E Vienna 17 April 2012 –Domus Facility Management GmbH C Vienna 25 Sept. 2012 6,200“Air Plus” Air Travel Card Vertriebsgesellschaft m. b. H. E Vienna 05 Oct. 2012 –

MergersName Of merged cOmpaNy mOa1) dOmicile Name Of absOrbed cOmpaNy dOmicile merger as at

CU@2012 Facility Services GmbH C Vienna Domus Facility Management GmbH Vienna 01 June 2012

Wiener Kreditbürgschaftsgesellschaft m. b. H. E ViennaWKBG Wiener Kreditbürgschafts- und Beteiligungsbank AG Vienna 13 Sept. 2012

UniCredit CAIB Czech Republic a. s. C Prague UniCredit Bank Czech Republic a. s. Prague 01 Dec. 2012

1) Method of accounting:C = consolidatedP = accounted for using proportionate consolidationE = accounted for using the equity method

2) The objects of the Uctam companies are to acquire, manage, administer and sell equity interests, properties and other business assets, especially of or from real estate projects and other business undertakings, deriving from debt restructuring.


Effects of changes in the group of consolidated companies in the statement of financial position at 31 December 2012

The following table shows the aggregate total assets and aggregate total liabilities and equity of additions and disposals reflected in the consolidated financial statements.

Assets (€ million)

31 dec. 2012 Of Which:

additiONs iN 2012 31 dec. 2011Of Which:

dispOsals iN 2012

Cash and cash balances 2,754 – 2,919 –Financial assets held for trading 2,855 – 3,322 –Financial assets at fair value through profit or loss 426 – 214 –Available-for-sale financial assets 21,063 29 14,677 –Held-to-maturity investments 1,895 – 3,498 –Loans and receivables with banks 28,112 7 25,621 3Loans and receivables with customers 132,424 – 134,914 –Hedging derivatives 4,125 – 3,466 –Changes in fair value of portfolio hedged items (+/–) 54 – 30 –Investments in associates and joint ventures 2,348 5 2,562 –Insurance reserves attributable to reinsurers 1 – 1 –Property, plant and equipment 2,509 58 2,576 –Intangible assets 2,459 – 2,866 –

of which goodwill 2,127 – 2,397 –Tax assets 1,336 6 1,389 –

a) current tax assets 52 – 282 –b) deferred tax assets 1,284 6 1,107 –

Non-current assets and disposal groups classified as held for sale 3,788 – 55 –Other assets 1,446 7 1,120 6tOtal assets 207,596 111 199,229 10

Liabilities and equity (€ million)

31 dec. 2012 Of Which:

additiONs iN 2012 31 dec. 2011Of Which:

dispOsals iN 2012

Deposits from banks 31,061 4 32,772 –Deposits from customers 110,563 66 104,728 –Debt securities in issue 28,063 – 29,931 –Financial liabilities held for trading 2,196 – 2,554 –Financial liabilities at fair value through profit or loss 1,152 – 1,042 –Hedging derivatives 2,989 – 2,591 –Changes in fair value of portfolio hedged items (+/–) – – – –Tax liabilities 856 – 789 –

a) current tax liabilities 88 – 146 –b) deferred tax liabilities 768 – 643 –

Liabilities included in disposal groups classified as held for sale 3,506 – – –Other liabilities 3,428 9 2,782 7Provisions for risks and charges 5,389 5 4,204 –

a) post-retirement benefit obligations 4,600 – 3,664 –b) other provisions 789 5 540 –

Insurance reserves 201 – 175 –Equity 18,192 28 17,661 2

of which non-controlling interests (+/–) 530 – 534 –tOtal liabilities aNd eQuity 207,596 111 199,229 10

Changes in the group of consolidated companies result in an increase of €1 million in net profit.


B – Notes to the income statement

B.1 – Interest income/Interest expense 134

B.2 – Fee and commission income/ Fee and commission expense 135

B.3 – Dividend income and similar revenue 136

B.4 – Gains and losses on financial assets and liabilities held for trading 136

B.5 – Fair value adjustments in hedge accounting 136

B.6 – Gains and losses on disposals/repurchases 137

B.7 – Net change in financial assets and liabilities at fair value through profit or loss 137

B.8 – Impairment losses 138

B.9 – Premium earned (net) – breakdown 139

B.10 – Other income (net) from insurance business 139

B.11 – Payroll 139

B.12 – Other administrative expenses 140

B.13 – Net provisions for risks and charges 140

B.14 – Impairment on property, plant and equipment 141

B.15 – Impairment on intangible assets 141

B.16 – Other net operating income 141

B.17 – Profit (Loss) of associates 142

B.18 – Gains and losses on disposal of investments 142

B.19 – Tax expense (income) related to profit or loss from continuing operations 142

B.20 – Total profit or loss after tax from discontinued operations 143

B.21 – Earnings per share 143

B.22 – Appropriation of profits 143



B – Notes to the income statement (CoNTINuED)

B.1 – Interest income/ Interest expense

Interest expense and similar charges (€ million)

2012 2011

depOsits securitiesOther

traNsactiONs tOtal tOtal

Deposits from central banks –77 X – –77 –1Deposits from banks –687 X – –687 –789Deposits from customers –2,516 X – –2,516 –2,150Debt securities in issue X – 904 – – 904 –846Financial liabilities held for trading – –1 –81 –82 –63Financial liabilities at fair value through profit or loss – –13 – –13 –27Other liabilities X X –3 –3 –1Hedging derivatives X X –79 –79 – 93tOtal –3,279 – 918 –162 –4,360 –3,971

Interest income and similar revenues (€ million)

2012 2011

debt securities lOaNsOther

traNsactiONs tOtal tOtal

Financial assets held for trading 31 – 85 116 144Financial assets at fair value through profit or loss 6 – – 6 5Available-for-sale financial assets 731 – – 731 669Held-to-maturity investments 201 – – 201 229Loans and receivables with banks 128 356 – 484 434Loans and receivables with customers 33 6,608 – 6,640 6,302Hedging derivatives X X 550 550 497Other assets X X 5 5 5tOtal 1,129 6,964 640 8,733 8,286

Within this item, total interest income from financial assets that are not at fair value through profit or loss was €7,330 million (2011: €6,980 million). The column “Loans” also includes interest in the amount of €341 million from impaired loans.

Within this item, total interest expense for liabilities that are not at fair value through profit or loss was €4,187 million (2011: €3,187 million).


Fee and commission income (€ million)

2012 2011

guarantees given 211 202credit derivatives – 5management, brokerage and consultancy services: 505 747

securities trading 28 43currency trading 46 243portfolio management 173 167custody and administration of securities 79 101custodian bank 41 60placement of securities 15 22reception and transmission of orders 7 5advisory services 35 28distribution of third party services 81 80

collection and payment services 910 825securitisation servicing – –factoring 10 19tax collection services – –management of current accounts 226 217Other services 244 314tOtal 2,105 2,329

Fee and commission expense (€ million)

2012 2011

guarantees received –72 –75credit derivatives –18 –26management, brokerage and consultancy services: –100 –105

trading in financial instruments –6 –6currency trading –1 –1portfolio management –15 –18custody and administration of securities –40 –48placement of financial instruments –1 –1off-site distribution of financial instruments, products and services –37 –32

collection and payment services –278 –247Other services –43 –41tOtal –510 –494

B.2 – Fee and commission income/Fee and commission expense




B.4 – Gains and losses on financial assets and liabilities held for trading (€ million)

2012 2011uNrealised

prOfitsrealised

prOfitsuNrealised

lOssesrealised

lOsses Net prOfit Net prOfit

financial assets held for trading 6 123 –7 –137 –14 –122Debt securities 5 50 –6 –21 28 – 9Equity instruments 1 18 – –15 4 –Units in investment funds – – – – – –Loans – – – – – –Other – 55 – –101 –46 –113

financial liabilities held for trading 1 – – – 1 –6Debt securities – – – – – –Deposits – – – – – –Other 1 – – – 1 –6

Other financial assets and liabilities: exchange differences x x x x 365 273derivatives 935 565 –758 –635 199 71

Financial derivatives 813 565 –594 –635 241 189on debt securities and interest rates 646 535 –581 –601 –1 239on equity securities and share indices 149 3 –3 –7 142 4on currency and gold X X X X 92 –54other 17 28 –11 –26 8 –

Credit derivatives 121 – –164 – –43 –118tOtal 942 688 –765 –772 551 217

B.5 – Fair value adjustments in hedge accounting (€ million)

2012 2011

gains on:Fair value hedging instruments 29 42Hedged asset items (in fair value hedge relationship) 18 45Hedged liability items (in fair value hedge relationship) – –Cash-flow hedging derivatives – –total gains on hedging activities 47 87losses on:Fair value hedging instruments –46 –66Hedged asset items (in fair value hedge relationship) – –11Hedged liability items (in fair value hedge relationship) –3 –6Cash-flow hedging derivatives –5 –total losses on hedging activities –54 –84Net hedgiNg result –8 3

(€ million)

2012 2011

diVideNds

iNcOme frOm uNits iN

iNVestmeNt fuNds tOtal diVideNds

iNcOme frOm uNits iN

iNVestmeNt fuNds tOtal

Financial assets held for trading – – – 1 – 1Available-for-sale financial assets 20 3 23 21 5 26Financial assets at fair value through profit or loss – – – – – –Investments 7 X 7 9 X 9tOtal 27 3 30 31 5 35

B.3 – Dividend income and similar revenue


(€ million)

2012 2011

gaiNs lOsses Net prOfit gaiNs lOsses Net prOfit

financial assetsLoans and receivables with banks – – – – – –Loans and receivables with customers 32 –37 –5 7 –30 –23Available-for-sale financial assets 125 –34 90 158 –17 141

Debt securities 44 –34 10 28 –16 12Equity instruments 79 –1 78 126 –1 126Units in investment funds 2 – 2 4 – 4Loans – – – – – –

Held-to-maturity investments 36 –10 25 – – –tOtal assets 193 –82 111 166 –47 119

financial liabilitiesDeposits with banks – – – – – –Deposits with customers – – – – – –Debt securities in issue 126 – 126 – – –tOtal liabilities 126 – 126 – – –

tOtal 319 –82 237 166 –47 119

B.6 – Gains and losses on disposals / repurchases

B.7 – Net change in financial assets and liabilities at fair value through profit or loss (€ million)

2012 2011

uNrealised prOfits

realised prOfits

uNrealised lOsses

realised lOsses Net prOfit Net prOfit

financial assets 5 7 –2 – 10 13Debt securities – 4 –2 – 2 –Equity instruments – – – – – –Units in investment funds 5 3 – – 8 13Loans – – – – – –

financial liabilities – 9 –184 –1 –177 145Debt securities – 9 –184 –1 –177 145Deposits from banks – – – – – –Deposits from customers – – – – – –

credit and financial derivatives 161 – – – 161 –136tOtal 167 16 –186 –1 –5 22

In the first half of 2012, Bank Austria bought back hybrid capital instruments. This buyback led to a one-off-profit at Group level in the amount of € 126 million.

In 2012 changes in fair values resulting from changes in our own credit rating were – €134.4 million (2011: €125.1 million).



B.8 – Impairment lossesImpairment losses on loans (€ million)

2012 2011

Write-dOWNs Write-bacKs

specific

Write-Offs Other pOrtfOliO specific pOrtfOliO tOtal tOtal

Loans and receivables with banks – –1 – 3 – 1 –Loans and receivables with customers –67 –1,802 – 95 692 150 –1,122 –1,035tOtal –67 –1,803 – 95 694 150 –1,121 –1,035

Impairment losses on other financial transactions (€ million)

2012 2011


specific


Guarantees given – –72 –1 82 5 14 –31Credit derivatives – – – – – – –Commitments to disburse funds – –5 – 3 1 –1 2Other transactions – –3 – 3 – 1 1tOtal – –79 –1 88 6 14 –28

Impairment losses on available-for-sale financial assets (€ million)

2012 2011


specific

Write-Offs Other specific tOtal tOtal

Debt securities – –4 9 5 –254 *)

Equity instruments –3 –65 X –67 –18Units in investment funds –5 –1 6 – –20Loans to banks – – – – –Loans to customers – – – – –tOtal –8 –70 15 –63 –292

*) Including write-downs of €243 million on bonds of the Republic of Greece.


Impairment losses on held-to-maturity investments (€ million)

2012 2011


specific


Debt securities –14 –2 – 1 – –16 –152 *)

Loans to banks – – – – – – –Loans to customers – – – – – – –tOtal –14 –2 – 1 – –16 –152

*) Including write-downs of €152 million on bonds of the Republic of Greece.

The column “Specific” under “Write-backs” also includes the time-value interest component of impaired loans in the amount of €35 million.


(€ million)

2012 2011

Net change in insurance provisions 6 –10Claims paid pertaining to the year –124 –102Other income and expense from insurance business –5 13tOtal –123 – 98

B.10 – other income (net) from insurance business

(€ million)

2012 2011

direct busiNess

iNdirect busiNess tOtal tOtal

life businessGross premiums written (+) 34 – 34 28Reinsurance premiums paid (–) –3 – –3 –5total 31 – 31 23Non-life businessGross premiums written (+) 195 – 195 151Reinsurance premiums paid (–) –49 – –49 –38Change in gross value of premium reserve (+/–) –22 – –22 –23Change in provision for unearned premiums ceded to reinsurers (–/+) 6 – 6 11total 130 – 130 102tOtal Net premiums 161 – 161 126

B.9 – Premium earned (net) – breakdown

(€ million)

2012 2011

employees –1,906 –1,922Wages and salaries –1,384 –1,391Social charges –290 –284Provision for retirement payments and similar provisions –253 –248

Defined contribution –2 –2Defined benefit –251 –245

Payments to external pension funds –27 –30Defined contribution –26 –27Defined benefit –1 –2

Costs related to share-based payments –6 –6Other employee benefits –102 –102Recovery of compensation 156 139

Others –65 –46tOtal –1,972 –1,968

B.11 – Payroll



(€ million)

2012 2011

prOVisiONsreallOcatiON

surplus tOtal tOtal

Other provisionsLegal disputes – 93 13 –80 –141Staff costs – – – –Other –258 6 –252 –13tOtal –351 19 –332 –154

B.13 – Net provisions for risks and charges


(€ million)

2012 2011

indirect taxes and duties –166 –135miscellaneous costs and expenses –1,494 –1,452

Advertising, marketing and communication –130 –137Expenses related to credit risk –37 –31Expenses related to personnel –65 –60Information and communication technology expenses –396 –383Consulting and professional services – 92 –86Real estate expenses –323 –327Other functioning costs –454 –427

tOtal –1,660 –1,587

B.12 – other administrative expenses

Defined-benefit company retirement funds: total costs (€ million)

2012 2011

pension and similar funds allowances – with defined benefitsCurrent service cost –55 –63Interest cost –186 –183Expected return on plan assets – –Net actuarial gain / loss recognised in the year –5 4Past service cost – –Gains / losses on curtailments and settlements –4 –3expeNses recOgNised iN prOfit Or lOss –251 –245

Other employee benefits (€ million)

2012 2011

Seniority premiums –19 –7Leaving incentives – 9 –11Other –74 –84tOtal –102 –102

The sub-item “Other” includes provisions of €122 million for risks associated with equity interests and provisions for other impending losses.

Moreover, a restructuring provision of €27 million was made for the smart banking solutions project. Under the smart banking solutions project announced by the Group in December 2012, the Group is in the process of rationalising its retail branch network and the related processing functions in austria to optimise its efficiency and to improve overall services to customers. This project includes the closing of 12 branches in 2013 and the planned reduction of staff numbers in connection with the project.

The item “Indirect taxes and duties” includes the bank levy in Austria (€97 million; 2011: €77 million) and the bank levies in Hungary (€19 million; 2011: €22 million) and Slovakia (€14 million).


(€ million)

2012 2011

depreciatiONimpairmeNt

lOsses Write-bacKs Net prOfit

property, plant and equipmentOwned –173 –14 2 –185 –183

used in the business –166 –2 2 –167 –175held for investment –7 –12 – –18 –8

finance lease –1 – – –1 –2used in the business –1 – – –1 –1held for investment – – – – –1

tOtal –175 –14 2 –186 –185

B.14 – Impairment on property, plant and equipment

(€ million)

2012 2011

amOrtisatiONimpairmeNt

lOsses Write-bacKs Net prOfit

intangible assetsOwned – 99 –6 – –105 –124

generated internally by the company –5 – – –5 –5other – 94 –6 – –100 –119

finance leases – – – – –tOtal – 99 –6 – –105 –124

B.15 – Impairment on intangible assets

Other operating expenses (€ million)

2012 2011

Costs for operating leases – –Non-deductible tax and other fiscal charges –2 –2Write-downs on improvements of goods owned by third parties –5 –2Costs related to the specific service of financial leasing – –Other –89 – 94tOtal Other OperatiNg expeNses – 96 – 97

B.16 – other net operating income

Other operating income (€ million)

2012 2011

recovery of costs 1 2Other income 201 232

Revenue from administrative services 46 84Revenues from rentals of real estate investments (net of operating direct costs) 18 18Revenues from operating leases 6 3Recovery of miscellaneous costs paid in previous years 2 3Revenues from finance lease activities – –Others 127 125

tOtal Other OperatiNg iNcOme 202 234

Other Net OperatiNg iNcOme 106 137

The sub-item “Other” includes expenses in the amount of €30 million resulting from the fixed-rate early payment programme for foreign currency loans in Hungary and €13 million relating to the compensation programme in connection with the IT system changeover to EuroSIG.



(€ million)

2012 2011

propertyGains on disposal 19 46Losses on disposal –2 –1Other assetsGains on disposal 3 5Losses on disposal –1 –3tOtal 18 48

B.18 – Gains and losses on disposal of investments

(€ million)

2012 2011

Current tax (–) –379 –292Adjustment to current tax of prior years (+/–) 17 –13Reduction of current tax for the year (+) 13 –3Changes to deferred tax assets (+/–) – 159Changes to deferred tax liabilities (+/–) –1 –102tax expeNse fOr the year (–) –350 –251

B.19 – Tax expense (income) related to profit or loss from continuing operations


(€ million)

2012 2011

companies subject to significant influenceincome 111 206

Companies’ profits for the year 111 178Gains on disposal – 28Write-backs – –Other gains – –

expense –296 –44Companies’ losses for the year –291 –6Impairment losses –5 –27Losses on disposal – –11Other negative changes – –

Net profit –185 162tOtal –185 162

B.17 – Profit (Loss) of associates

The sub-item “Companies’ losses for the year” includes the proportionate negative equity contribution of UniCredit Leasing amounting to €286 million.


Reconciliation of theoretical tax charge to actual tax charge (€ million)

2012 2011

total profit or loss before tax from continuing operations 1,111 509Applicable tax rate 25% 25%theoretical tax –278 –127Different tax rates 115 115Non-taxable income 25 23Non-deductible expenses –124 –82Prior years and changes in tax rates 78 45

a) effects on current tax 29 –26b) effects on deferred tax 48 72

Valuation adjustments and non-recognition of deferred taxes –59 –34Amortisation of goodwill –61 –175Non-taxable foreign income – –Other differences –46 –16recOgNised taxes ON iNcOme –350 –250Effective tax rate 31.5% 49.2%

B.21 – Earnings per shareDuring the reporting period, no financial instruments with a dilutive effect on the bearer shares were outstanding. Therefore basic earnings per share in accordance with IAS 33 equal diluted earnings per share in accordance with IAS 33. Earnings per share are calculated on the basis of the average number of shares outstanding (2012: 231.2 million shares; 2011: 231.2 million shares).

B.22 – Appropriation of profitsAfter movements in reserves at UniCredit Bank Austria AG in the amount of €315,080,192.13 the profit for the financial year beginning on 1 January 2012 and ending on 31 December 2012 was €100,001.00. The profit brought forward from the previous year was €2,414,164.76. Thus the profit available for distribution was €2,514,165.76. The Management Board proposes to the Annual General Meeting that no dividend be paid on the share capital of €1,681,033,521.40 and that the total profit of €2,514,165.76 available for distribution be carried forward to new account.

(€ million)

2012 2011

Net interest 136 151Dividends and income from equity investments – –Net fee and commission income 2 –4Net trading income 17 20Net other operating income/expenses 4 –Operating income 157 167Operating costs –108 – 93Operating profit 49 74Net write-downs of loans – 92 –110Net operating profit –42 –36Provisions for risks and charges – –Net income from investments – –2profit before tax –42 –37Income tax –3 –1profit after tax –46 –39Impairment Kazakhstan –215 –350Impairment losses on other assets and consolidation items –40 –104total profit or loss after tax from discontinued operations –301 –493

B.20 – Total profit or loss after tax from discontinued operations

This item includes the profit or loss after tax of ATF Bank, Kazakhstan, and impairment losses of €215 million on goodwill and other intangible assets (customer base, brand) which were recognised at the time of acquisition as well as impairment losses on other assets.


C – Notes to the statement of financial position

Assets

C.1 – Cash and cash balances 146

C.2 – Financial assets held for trading 146

C.3 – Financial assets at fair value through profit or loss 146

C.4 – Available-for-sale financial assets 147

C.5 – Held-to-maturity investments 148

C.6 – Loans and receivables with banks 148

C.7 – Loans and receivables with customers 149

C.8 – Hedging derivatives 149

C.9 – Changes in fair value of portfolio hedged items 150

C.10 – Equity investments: annual changes 150

C.11 – Property, plant and equipment 150

C.12 – Intangible assets 153

C.13 – Tax assets 154

C.14 – Non-current assets and disposal groups classified as held for sale 155

C.15 – Other assets 156

Liabilities and equity

C.16 – Deposits from banks 156

C.17 – Deposits from customers 156

C.18 – Debt securities in issue 157

C.19 – Financial liabilities held for trading 157

C.20 – Financial liabilities at fair value through profit or loss 157

C.21 – Hedging derivatives 158

C.22 – Deferred tax liabilities 158

C.23 – Liabilities included in disposal groups classified as held for sale 158

C.24 – Other liabilities 159

C.25 – Provisions for risks and charges 160

C.26 – Insurance provisions 161

C.27 – Equity 161



C.1 – Cash and cash balances

C.2 – Financial assets held for trading

(€ million)

31 dec. 2012 31 dec. 2011

Cash 1,588 1,451Demand deposits with central banks 1,166 1,468tOtal 2,754 2,919

C – Notes to the statement of financial position (CoNTINuED)

C.3 – Financial assets at fair value through profit or loss

This item shows assets in respect of which Bank Austria used the option to designate financial instruments as at fair value through profit or loss in order to avoid inconsistencies in the valuation of assets and liabilities which are connected with each other. Most of these assets are complex structures with embedded derivatives.

(€ million)

31 dec. 2012 31 dec. 2011

fair Value leVel 1

fair Value leVel 2

fair Value leVel 3 tOtal

fair Value leVel 1

fair Value leVel 2


financial assets (non-derivatives) 283 146 71 500 307 604 80 992Debt securities 252 145 71 469 293 604 80 977

Structured securities 10 – 10 20 9 – – 10Other debt securities 243 145 61 449 283 604 80 968

Equity instruments 24 – – 24 7 – – 7Units in investment funds 7 1 – 7 6 – – 7Loans – – – – 1 – – 1

Reverse repos – – – – – – – –Other – – – – 1 – – 1

derivative instruments 1 2,350 5 2,355 – 2,320 9 2,330Financial derivatives 1 2,344 5 2,350 – 2,318 9 2,328

Trading 1 2,310 5 2,315 – 2,317 9 2,327Related to fair value option – – – – – – – –Other – 34 – 34 – 1 – 1

Credit derivatives – 6 – 6 – 2 – 2Trading – 6 – 6 – 2 – 2Related to fair value option – – – – – – – –Other – – – – – – – –

tOtal 284 2,496 76 2,855 308 2,924 90 3,322

(€ million)

31 dec. 2012 31 dec. 2011

fair Value leVel 1

fair Value leVel 2


fair Value leVel 1

fair Value leVel 2


Debt securities 61 224 32 317 11 45 36 92Equity instruments – – – – – – – –Units in investment funds 14 – 95 109 15 – 106 122Loans – – – – – – – –tOtal 75 224 127 426 26 45 143 214cOst 73 224 127 424 23 45 143 211


Financial assets at fair value through profit or loss: annual changes (€ million)

2011

debt securitieseQuity

iNstrumeNts

uNits iN iNVestmeNt

fuNds lOaNs tOtal

Opening balance 131 15 158 – 304increases 5 – 20 – 24

Purchases 1 – 9 – 10Positive changes in fair value 2 – 9 – 11Other increases 2 – 1 – 3

decreases –44 –15 –55 – –113Sales –4 – – 9 – –13Redemptions –32 –15 –42 – –89Negative changes in fair value –7 – –2 – – 9Other decreases –1 – –2 – –3

clOsiNg balaNce 92 – 122 – 2142012

debt securitieseQuity

iNstrumeNts

uNits iN iNVestmeNt

fuNds lOaNs tOtal

Opening balance 92 – 122 – 214increases 243 – 17 – 260

Purchases 161 – 12 – 173Positive changes in fair value 21 – 5 – 26Other increases 60 – – – 60

decreases –18 – –30 – –48Sales –3 – –14 – –17Redemptions –10 – –15 – –24Negative changes in fair value –4 – – – –4Other decreases –2 – –1 – –3

clOsiNg balaNce 317 – 109 – 426

C.4 – Available-for-sale financial assets (€ million)

31 dec. 2012 31 dec. 2011

fair Value leVel 1

fair Value leVel 2


fair Value leVel 1

fair Value leVel 2


Debt securities 9,845 8,824 1,368 20,037 5,464 6,876 1,449 13,789Structured securities 12 147 19 178 – 24 419 443Other 9,833 8,677 1,349 19,859 5,464 6,852 1,030 13,346

Equity instruments 37 – 800 837 45 15 623 684Measured at fair value 37 – 356 393 45 15 594 655Carried at cost – – 444 444 – – 29 29

Units in investment funds 31 89 68 189 31 87 86 205Loans – – – – – – – –tOtal 9,914 8,913 2,236 21,063 5,540 6,979 2,158 14,677




C.5 – Held-to-maturity investments (€ million)

31 dec. 2012 31 dec. 2011

bOOK Value fair Value

fair Value leVel 1

fair Value leVel 2

fair Value leVel 3 bOOK Value fair Value

fair Value leVel 1

fair Value leVel 2

fair Value leVel 3

Debt securities 1,895 1,967 1,184 601 182 3,498 3,548 2,347 913 288Structured securities – – – – – – – – – –Other securities 1,895 1,966 1,184 601 182 3,498 3,547 2,347 913 287

Loans – – – – – – – – – –tOtal 1,895 1,967 1,184 601 182 3,498 3,548 2,347 913 288

Held-to-maturity investments: annual changes (€ million)

2012 2011

Opening balance 3,498 4,446increases 345 721

Purchases 235 430Write-backs 1 –Transfers from other portfolios – –Other changes and positive exchange differences 110 290

decreases –1,949 –1,669Sales –197 –7Redemptions –585 –1,099Write-downs –16 –152Transfers to other portfolios –1,040 –20Other changes and negative exchange differences –109 –390

clOsiNg balaNce 1,895 3,498

C.6 – Loans and receivables with banks (€ million)

31 dec. 2012 31 dec. 2011

loans to central banks 7,996 5,726Time deposits 1,308 335Compulsory reserves 6,246 5,007Reverse repos 425 343Other 18 41

loans to banks 20,116 19,895Current accounts and demand deposits 5,214 1,908Time deposits 7,489 8,216Other loans 2,984 3,846

Reverse repos 601 1,409Finance leases – –Other 2,383 2,437

Debt securities 4,429 5,924Structured – –Other 4,429 5,924

tOtal (carryiNg amOuNt) 28,112 25,621tOtal (fair Value) 28,148 24,745Loan loss provisions deducted from loans and receivables 46 49

A large proportion of the transfers to other portfolios and of sales included in the sub-item “Decreases” is due to changes in regulatory requirements in Turkey, which led Yapı Kredi to reduce held-to-maturity investments.


C.7 – Loans and receivables with customers

Finance leases: customers (€ million)

31 dec. 2012 31 dec. 2011

preseNt Value Of miNimum lease paymeNts

preseNt Value Of miNimum lease paymeNts

amounts receivable under finance leases:Up to 12 months 185 166From 1 to 5 years 299 258Over 5 years 50 36preseNt Value Of miNimum lease paymeNts receiVable (Net iNVestmeNt iN the lease) 535 460

C.8 – Hedging derivatives

(€ million)

31 dec. 2012 31 dec. 2011

perfOrmiNg impaired tOtal perfOrmiNg impaired tOtal

Current accounts 12,344 533 12,877 12,105 308 12,413Reverse repos 587 – 587 230 – 230Mortgages 25,669 2,519 28,188 23,039 1,967 25,005Credit cards and personal loans, including wage assignment loans 8,338 125 8,463 9,629 126 9,755Finance leases 515 19 535 441 19 460Factoring 1,264 13 1,277 1,132 10 1,142Other loans 76,058 3,478 79,535 79,559 5,116 84,675Debt securities 939 24 963 1,212 23 1,235

Structured securities – – – – – –Other debt securities 939 24 963 1,212 23 1,235

tOtal (carryiNg amOuNt) 125,715 6,710 132,424 127,347 7,567 134,914tOtal (fair Value) 125,816 6,661 132,477 127,819 7,536 135,355Loan loss provisions deducted from loans and receivables 739 6,092 6,831 810 6,903 7,713

(€ million)

31 dec. 2012 31 dec. 2011

fair Value leVel 1

fair Value leVel 2


fair Value leVel 1

fair Value leVel 2


financial derivatives – 4,125 – 4,125 – 3,466 – 3,466Fair value hedge – 877 – 877 – 770 – 770Cash flow hedge – 3,248 – 3,248 – 2,696 – 2,696Net investment in foreign subsidiaries – – – – – – – –

credit derivatives – – – – – – – –tOtal – 4,125 – 4,125 – 3,466 – 3,466




C.10 – Equity investments: annual changes (€ million)

2012 2011

Opening balance 2,562 2,518increases 325 406

Purchases 35 80Write–backs – –Profit / loss for the year – 172Other changes 289 153

decreases –538 –362Sales –31 – 92Write–downs –2 –23Profit / loss for the year –180 –Other changes –325 –247

clOsiNg balaNce 2,348 2,562

C.11 – Property, plant and equipment (€ million)

31 dec. 2012 31 dec. 2011

assets for operational use 1,727 1,855Owned 1,667 1,799

Land 96 147Buildings 1,165 1,258Office furniture and fittings 149 147Electronic systems 152 141Others 105 106

leased 60 56Land 14 13Buildings 46 42Office furniture and fittings – –Electronic systems – –Others 1 1

held-for-investment assets 782 721Owned 782 721

Land 264 289Buildings 518 432

leased – –tOtal 2,509 2,576

(€ million)

31 dec. 2012 31 dec. 2011

positive changes 54 30Loans and receivables 54 30

Negative changes – –tOtal 54 30

C.9 – Changes in fair value of portfolio hedged items


Property, plant and equipment used in the business (€ million)

2011

laNd buildiNgs

Office furNiture

aNd fittiNgselectrONic

systems Other tOtal

gross opening balance 199 2,197 478 760 345 3,980Total net reduction in value – –757 –330 –580 –239 –1,906Net opening balance 199 1,441 148 180 106 2,074increases 1 149 33 68 69 320

Purchases – 115 31 62 52 260Capitalised expenditure on improvements – 3 – 3 – 7Write-backs – 5 – – – 5Positive exchange differences – 6 – – 1 8Transfer from properties held for investment – – – – – –Other changes – 19 1 2 17 40

reductions –40 –290 –34 –107 –68 –539Disposals –18 –15 – –5 –4 –42Depreciation – –63 –31 –56 –28 –178Impairment losses – –5 – – – –5Negative exchange differences –7 –39 –2 –6 –5 –58Transfers –15 –159 – –1 – –174

property, plant and equipment held for investment –14 –136 – – – –150assets held for sale –1 –22 – –1 – –24

Other changes – – 9 –1 –39 –31 –81Net fiNal balaNce 161 1,300 147 141 107 1,855

2012

laNd buildiNgs

Office furNiture

aNd fittiNgselectrONic

systems Other tOtal

gross opening balance 161 2,003 491 583 373 3,610Total net reduction in value – –703 –344 –442 –266 –1,756Net opening balance 161 1,300 147 141 107 1,855increases 12 131 37 79 52 311

Purchases 6 84 36 73 50 249Capitalised expenditure on improvements – 9 – – – 9Write-backs – 2 – – – 2Positive exchange differences 2 15 1 2 1 21Transfer from properties held for investment – – – – – –Other changes 4 21 – 3 2 30

reductions –63 –219 –35 –67 –54 –438Disposals –2 –21 – – –3 –28Depreciation – –58 –29 –52 –28 –168Impairment losses – –1 – – – –2Negative exchange differences – –6 –1 –1 –1 –8Transfers –60 –112 –3 –10 –4 –189

property, plant and equipment held for investment –1 –5 – – – –5assets held for sale –60 –107 –3 –10 –4 –184

Other changes – –21 –2 –3 –18 –44Net fiNal balaNce 110 1,211 149 152 105 1,727

Total net reduction in value – –688 –353 –456 –269 –1,766grOss clOsiNg balaNce 110 1,899 502 608 374 3,493




Property, plant and equipment held for investment: annual changes (€ million)

2011

laNd buildiNgs tOtal

Opening balances 243 237 479increases 62 313 376

Purchases 18 107 125Capitalised expenditure on improvements 1 8 9Write-backs – – –Positive exchange differences 1 2 3Transfer from properties used in the business 14 136 150Other changes 28 60 88

reductions –16 –118 –134Disposals –2 –21 –23Depreciation – –5 –5Reductions in fair value – –7 –7Impairment losses – –3 –3Negative exchange differences –3 –10 –13Transfers to –10 –42 –52

properties used in the business – – –non-current assets classified as held for sale –10 –42 –52

Other changes – –30 –31clOsiNg balaNces 289 432 721measured at fair Value 271 373 645

2012

laNd buildiNgs tOtal

Opening balances 289 432 721increases 5 153 158

Purchases 3 126 130Capitalised expenditure on improvements – – –Write-backs – – –Positive exchange differences 2 20 21Transfer from properties used in the business 1 5 5Other changes – 2 2

reductions –31 –67 – 98Disposals –1 –15 –17Depreciation – –7 –7Reductions in fair value – – –Impairment losses –1 –4 –5Negative exchange differences –14 –1 –16Transfers to –12 –37 –49

properties used in the business – – –non-current assets classified as held for sale –12 –37 –49

Other changes –1 –3 –4clOsiNg balaNces 264 518 782measured at fair Value 245 466 711


C.12 – Intangible assets (€ million)

31 dec. 2012 31 dec. 2011

goodwill 2,127 2,397Other intangible assets 331 469

Assets carried at cost 331 469Intangible assets generated internally 29 43Other assets 303 426

Assets valued at fair value – –tOtal 2,459 2,866

Intangible assets – annual changes (€ million)

2011

Other iNtaNgible assets

gOOdWill geNerated iNterNally Other tOtal

gross opening balance 5,241 69 1,320 6,630Net reductions –2,017 –30 –833 –2,879Net opening balance 3,225 39 487 3,751increases 2 24 90 116

Purchases – 22 71 94Increases in intangible assets generated internally X – – –Write-backs X – – –Positive exchange differences 2 – 8 10Other changes – 1 11 12

reductions –830 –20 –152 –1,001Disposals – –3 –6 –8Write-downs –737 –5 –127 –868

Amortisation X –5 –100 –105Write-downs –737 – –27 –763

Transfers to non-current assets held for sale – – – –Negative exchange differences – 93 –2 –14 –109Other changes – –10 –5 –16

Net clOsiNg balaNce 2,397 43 426 2,8662012

Other iNtaNgible assets

gOOdWill geNerated iNterNally Other tOtal

gross opening balance 5,210 76 1,266 6,552Net reductions –2,813 –33 –840 –3,686Net opening balance 2,397 43 426 2,866increases 66 18 126 210

Purchases 24 14 80 118Increases in intangible assets generated internally X – 7 7Write-backs X – – –Positive exchange differences 42 1 11 54Other changes – 3 27 31

reductions –336 –33 –249 –617Disposals – – –2 –2Write-downs –199 –5 –100 –304

Amortisation X –5 – 94 – 99Write-downs –199 – –6 –205

Transfers to non-current assets held for sale – –1 –7 –8Negative exchange differences –12 – –10 –23Other changes –125 –26 –129 –280

Net clOsiNg balaNce 2,127 29 303 2,459Total net write down –3,099 –37 – 967 –4,103

clOsiNg balaNce 5,226 65 1,270 6,562

The sub-item “Write-downs” includes the write-down of €165 million on goodwill relating to PJSC Ukrsotsbank, Ukraine. The sub-item “Other changes” includes the write-down of €125 million on goodwill relating to JSC ATF Bank, Kazakhstan, and the write-down of €90 million on other intangible assets (customer base, brand).




C.13 – Tax assets (€ million)

31 dec. 2012 31 dec. 2011

deferred tax assets related to:Assets / liabilities held for trading 71 52Other financial instruments 120 66Property, plant and equipment / intangible assets 25 33Provisions 683 453Write-downs on loans 59 76Other assets / liabilities 120 153Loans and receivables with banks and customers 18 10Tax losses carried forward 177 247Other 12 18tOtal 1,284 1,107

In addition, as actuarial gains and losses on pension and severance-payment obligations were not recognised in income in the reporting year, deferred tax assets of €228 million (2011: €28 million) were offset against equity in UniCredit Bank Austria AG.

As a result of the first-time consolidation of the subsidiaries referred to in section A.7, and of foreign currency translation of deferred taxes and direct offsetting against reserves, part of the change in deferred taxes was not reflected in the expense in 2012.

The assets include deferred tax assets arising from the carry-forward of unused tax losses in the amount of €177 million (2011: €247 million). Most of the tax losses carried forward can be used without time restriction.

In respect of tax losses carried forward in the amount of €918 million (2011: €739 million), no deferred tax assets were recognised because, from a current perspective, a tax benefit is unlikely to be realised within a reasonable period.


C.14 – Non-current assets and disposal groups classified as held for sale (€ million)

31 dec. 2012 31 dec. 2011

individual assetsFinancial assets 25 –Equity investments 27 –Property, plant and equipment 179 55Intangible assets – –Other non-current assets – –total 231 55

asset groups classified as held for saleFinancial assets held for trading – –Financial assets at fair value through profit or loss 1 –Available-for-sale financial assets 62 –Held-to-maturity investments – –Loans and receivables with banks 110 –Loans and receivables with customers 2,948 –Equity investments – –Property, plant and equipment 95 –Intangible assets 8 –Other assets 332 –total 3,557 –assets 3,788 55

These items include non-current assets and disposal groups whose sale is highly probable. They are recognised at the lower of their carrying amount and fair value less costs to sell and are stated separately in the consolidated financial statements.

Individual assetsThe sub-item “Individual assets” includes – pursuant to a resolution passed by the Management Board – the Schottengasse 6–8 property, which is intended to be sold, the UNO Shoppingcenter, Linz, which is intended to be repositioned and sold in cooperation with a strategic partner, the office building previously used by UniCredit Czech Republic, and properties of IVONA Beteiligungsverwaltung GmbH and “JOHA” Gebäude-Errichtungs- und Vermietungsges. m. b. H. Also included in this sub-item are EK Mittelstandsfinanzierungs AG, Mezzanin Finanzierungs AG and Pay Life Bank GmbH.

Asset groups classified as held for saleBased on a strategic decision on risk downsizing of the investment in Kazakhstan, the Management Board decided to sell ATF Bank. For this reason ATF Bank was classified as a disposal group held for sale as of 31 December 2012.

The disposal group comprises ATF Bank and its subsidiaries in Kazakhstan and Kirgizstan and adds up to €3,557 million in assets and €3,504 million in liabilities.

The classification as held-for-sale led in the Bank Austria Group to an impairment loss of €215 million for goodwill and other intangible assets (customer relationship, brand) recognised at the time of acquisition and an impairment loss of €45 million allocated to other assets.

The total profit and loss impact for the Group, including also the profit and loss of ATF Bank for the year 2012, amounts to a loss of €301 million stated in the line “Total profit or loss after tax from discontinued operations”.



C.16 – Deposits from banks (€ million)

31 dec. 2012 31 dec. 2011

deposits from central banks 4,758 2,454deposits from banks 26,303 30,318

Current accounts and demand deposits 3,449 1,649Time deposits 7,573 11,007Loans 15,111 17,498

Repos 1,470 2,361Other 13,641 15,137

Liabilities in respect of commitments to repurchase treasury shares – –Other liabilities 170 165

tOtal 31,061 32,772fair Value 31,466 33,234

(€ million)

31 dec. 2012 31 dec. 2011

Margin with derivatives clearers (non-interest bearing) 7 11Gold, silver and precious metals 47 125Positive value of “servicing contracts” for financial assets sold and derecognised – –Accrued income other than capitalised income 43 36Cash and other valuables held by cashier 1 1Interest and charges to be debited to 10 23

customers 9 21banks 1 2

Items in transit between branches not yet allocated to destination accounts – –Items in processing 372 197Items deemed definitive but not attributable to other items 163 119

Securities and coupons to be settled – 1Other transactions 163 118

Adjustments for unpaid bills and notes 8 13Other taxes 18 5Other items 776 591tOtal 1,446 1,120

C.15 – other assets


As at 31 December 2012, the total amount of assets which are attributable to the “loans and receivables” category was €164,736 million (2011: €164,574 million).

C.17 – Deposits from customers (€ million)

31 dec. 2012 31 dec. 2011

Current accounts and demand deposits 55,767 45,152Time deposits 52,493 56,596Loans 929 927

Repos 800 757Other 129 170

Liabilities in respect of commitments to repurchase treasury shares 649 605Other liabilities 726 1,447tOtal 110,563 104,728fair Value 111,234 105,616


C.18 – Debt securities in issue (€ million)

31 dec. 2012 31 dec. 2011

carryiNg amOuNt

fair Value leVel 1

fair Value leVel 2

fair Value leVel 3

carryiNg amOuNt

fair Value leVel 1

fair Value leVel 2

fair Value leVel 3

securitiesBonds 26,981 975 25,932 1,425 28,496 1,343 25,627 1,124

Structured 181 – 182 – 187 – – 187Other 26,800 975 25,750 1,425 28,309 1,343 25,627 938

Other securities 1,081 – 333 24 1,435 5 579 850Structured – – – – 5 5 – –Other 1,081 – 333 24 1,429 – 579 850

tOtal 28,063 975 26,265 1,449 29,931 1,348 26,206 1,974

C.19 – Financial liabilities held for trading

C.20 – Financial liabilities at fair value through profit or loss

This item shows liabilities in respect of which Bank Austria used the option to designate financial instruments as at fair value through profit or loss in order to avoid inconsistencies in the valuation of assets and liabilities which are connected with each other. Most of these liabilities are debt securities and complex structures with embedded derivatives.

(€ million)

31 dec. 2012 31 dec. 2011

fair Value leVel 1

fair Value leVel 2


fair Value leVel 1

fair Value leVel 2


financial liabilities 42 19 – 61 50 5 – 55deposits from banks – – – – 1 – – 1deposits from customers 42 19 – 61 49 5 – 54debt securities – – – – – – – –

Bonds – – – – – – – –Other securities – – – – – – – –

derivative instruments – 2,133 2 2,135 1 2,489 10 2,500financial derivatives – 2,063 2 2,066 1 2,266 10 2,277

Trading – 2,052 2 2,054 1 2,254 10 2,265Relating to fair value option – – – – – 4 – 4Other – 11 – 11 – 8 – 8

credit derivatives – 70 – 70 – 223 – 223Trading derivatives – 70 – 70 – 223 – 223Relating to fair value option – – – – – – – –Other – – – – – – – –

tOtal 42 2,152 2 2,196 51 2,493 10 2,554

(€ million)

31 dec. 2012 31 dec. 2011

fair Value leVel 1

fair Value leVel 2


fair Value leVel 1

fair Value leVel 2


Deposits from banks – – – – – – – –Deposits from customers – – – – – – – –Debt securities – 1,152 – 1,152 – 1,042 – 1,042

Structured – 1,152 – 1,152 – 1,042 – 1,042Others – – – – – – – –

tOtal – 1,152 – 1,152 – 1,042 – 1,042



C.21 – Hedging derivatives

C.22 – Deferred tax liabilities (€ million)

31 dec. 2012 31 dec. 2011

deferred tax liabilities related to:Loans and receivables with banks and customers 79 54Assets / liabilities held for trading 51 104Other financial instruments 286 240Property, plant and equipment / intangible assets 36 80Other assets / liabilities 300 127Deposits from banks and customers 1 1Other 16 38tOtal 768 643

Pursuant to IAS 12.39, no deferred tax liabilities were recognised for temporary differences in connection with investments in domestic group companies and foreign subsidiaries amounting to €628 million because from a current perspective, they are not intended to be sold.


(€ million)

31 dec. 2012 31 dec. 2011

fair Value leVel 1

fair Value leVel 2


fair Value leVel 1

fair Value leVel 2


financial derivatives – 2,988 1 2,989 – 2,591 – 2,591Fair value hedge – 229 – 229 – 178 – 178Cash flow hedge – 2,759 1 2,760 – 2,413 – 2,413Net investment in foreign subsidiaries – – – – – – – –

credit derivatives – – – – – – – –tOtal – 2,988 1 2,989 – 2,591 – 2,591

C.23 – Liabilities included in disposal groups classified as held for sale (€ million)

31 dec. 2012 31 dec. 2011

liabilities associated with assets classified as held for saleDeposits – –Securities – –Other liabilities 3 –total 3 –

liabilities included in disposal groups classified as held for saleDeposits from banks 161 –Deposits from customers 2,681 –Debt securities in issue 620 –Financial liabilities held for trading 1 –Financial liabilities at fair value through profit or loss – –Provisions – –Other liabilities 41 –total 3,504 –

liabilities 3,506 –

See comments under C.14.


C.24 – other liabilities (€ million)

31 dec. 2012 31 dec. 2011

Liabilities in respect of financial guarantees issued – –Impairment of financial guarantees issued, of credit derivatives, of irrevocable commitments to distribute funds 214 249Accrued expenses other than those to be capitalised for the financial liabilities concerned 126 113Share-based payments classified as liabilities under IFRS 2 – –Other liabilities due to employees 377 384Other liabilities due to other staff 7 9Other liabilities due to directors and statutory auditors – –Interest and amounts to be credited 51 43Items in transit between branches and not yet allocated to destination accounts – 2Available amounts to be paid to others 59 53Items in processing 1,637 1,128Entries related to securities transactions – –Items deemed definitive but not attributable to other lines 371 290Liabilities for miscellaneous entries related to tax collection service – –Adjustments for unpaid portfolio entries – –Tax items different from those included in tax liabilities 51 56Other entries 533 453tOtal 3,428 2,782

As at 31 December 2012, the total amount of liabilities which are attributable to “deposits from banks/customers, debt securities in issue and other liabilities” was €173,115 million (2011: €170,213 million).




Provisions for risks and charges: annual changes (€ million)

2011

peNsiONs aNd pOst-retiremeNt beNefit

ObligatiONs Other prOVisiONs tOtal

Opening balance 3,791 506 4,297increases 247 182 430

Provisions for the year 66 167 233Changes due to the passage of time 180 – 180Differences due to discount-rate changes – – –Other increases 2 15 16

decreases –374 –148 –523Use during the year –224 –100 –324

Differences due to discount-rate changes – – –Other decreases –151 –48 –199

clOsiNg balaNce 3,664 540 4,2042012

peNsiONs aNd pOst-retiremeNt beNefit

ObligatiONs Other prOVisiONs tOtal

Opening balance 3,664 540 4,204increases 1,174 366 1,541

Provisions for the year 68 349 416Changes due to the passage of time 183 – 183Other increases 924 17 941

decreases –238 –118 –356Use during the year –232 –115 –347Other decreases –6 –3 – 9

clOsiNg balaNce 4,600 789 5,389

Restructuring provisions In accordance with the Smart Banking Solutions project announced by the Group in December 2012, the Group is in the process of rationalising its retail branch network and the related processing functions in Austria to optimise its efficiency and to improve overall services to customers. This project, leading to the posting of a €27 million restructuring provision, includes the closing of 12 branches in 2013 and the planned reduction of staff numbers in connection with the project.

See also B.13.

C.25 – Provisions for risks and charges (€ million)

31 dec. 2012 31 dec. 2011

pensions and other post-retirement benefit obligations 4,600 3,664Other provisions for risks and charges 789 540

Legal disputes 301 258Staff expenses 16 15Other 472 268

tOtal 5,389 4,204


C.27 – EquityFrom 1 January 2012 to 31 December 2012, the number of shares was 231,228,820, of which 10,115 were registered shares. The registered shares (10,000 registered shares are held by “Privatstiftung zur Verwaltung von Anteilsrechten”, a private foundation under Austrian law; 115 registered shares are held by “Betriebsratsfonds des Betriebsrats der Angestellten der UniCredit Bank Austria AG Region Wien”, the Employees’ Council Fund of the Employees’ Council of employees of UniCredit Bank Austria AG in the Vienna area) carry special rights: for resolutions concerning spin-offs and specific mergers or specific changes in the bank’s Articles of Association to be adopted at a general meeting of shareholders, the registered shareholders have to be present when the resolutions are adopted. The relevant resolutions are specified in Article 20 (13) and (14) of UniCredit Bank Austria AG’s Articles of Association.

(€ million)

31 dec. 2012 31 dec. 2011

direct busiNessiNdirect

busiNess tOtal tOtal

Non-life business 104 – 104 81Provision for unearned premiums 78 – 78 61Provision for outstanding claims 25 – 25 20Other provisions 1 – 1 –

life business 97 – 97 94Mathematical provisions 83 – 83 86Provisions for amounts payable 3 – 3 3Other insurance provisions 12 – 12 5

insurance provisions when investment risk is borne by the insured party – – – –Provision for policies where the performance is connected to investment funds and market indices – – – –Provision for pension funds – – – –

tOtal iNsuraNce prOVisiONs 201 – 201 175

C.26 – Insurance provisions


D – Segment reporting

D.1 – Reconciliation of reclassified accounts to mandatory reporting schedule 164

D.2 – Description of segment reporting 166

D.3 – Segment reporting 1–12 2012/1–12 2011 168

D.4 – Segment reporting Q1–Q4 2012/Q1–Q4 2011 170



D – Segment reporting (CoNTINuED)

D.1 – Reconciliation of reclassified accounts to mandatory reporting schedule (€ million)

20122011

adjusted

Net interest 4,373 4,315Dividends and other income from equity investments –150 207

Dividend income and similar revenue 30 35minus: dividends from equity instruments held for trading 0 0

Profit (loss) of associates – of which: income (loss) from equity investments valued at net equity –180 172Net fees and commissions 1,595 1,836Net trading, hedging and fair value income 664 242

Gains (losses) on financial assets and liabilities held for trading 551 217plus: dividends from equity instruments held for trading 0 0Fair value adjustments in hedge accounting –8 3Gains (losses) on disposal or repurchase of financial liabilities 126 0Gains (losses) on financial assets and liabilities designated at fair value through profit or loss –5 22

Net other expenses/ income 140 136Gains (losses) on disposals / repurchases of loans and receivables – not impaired –8 –25Premiums earned (net) 161 126Other income (net) from insurance activities –123 – 98Other net operating income 106 137

minus: other operating income – of which: recovery of expenses –1 –2plus: impairment on tangible assets – other operating leases 0 0less: Other operating expenses – write-downs on improvements of goods owned by third parties 5 0

OperatiNg iNcOme 6,622 6,736Payroll costs –1,969 –1,961

Administrative costs – staff expenses –1,972 –1,968minus: integration/ restructuring costs 3 6

Other administrative expenses –1,662 –1,584Administrative costs – other administrative expenses –1,660 –1,587

minus: integration/ restructuring costs 3 3plus: Other operating expenses – write-downs on improvements of goods owned by third parties –5 0

Recovery of expenses = Other net operating income – of which: Other operating income – recovery of costs 1 2Amortisation, depreciation and impairment losses on intangible and tangible assets –264 –267

Impairment /Write-backs on property, plant and equipment –186 –185minus: impairment losses/write-backs on property owned for investment 11 3minus: impairment on tangible assets – other operating leases 0 0

Impairment /Write-backs on intangible assets –105 –124minus: integration/ restructuring costs 1 0minus: Purchase Price Allocation effect 16 38

OperatiNg cOsts –3,893 –3,810OperatiNg prOfit 2,728 2,926


20122011

adjusted

Net write-downs of loans and provisions for guarantees and commitments –1,103 –1,060Gains (losses) on disposal and repurchase of loans 3 3Impairment losses on loans –1,121 –1,035Impairment losses on other financial assets 14 –28

Net OperatiNg prOfit 1,625 1,866Provisions for risks and charges –305 –136

Net provisions for risks and charges –332 –154less: integration/ restructuring costs 27 18

Integration/ restructuring costs –33 –28Net income from investments 39 –275

Gains (losses) on disposal and repurchase of available-for-sale financial assets 90 141Gains (losses) on disposal and repurchase of held-to-maturity investments 25 0Impairment losses on available-for-sale financial assets –63 –292Impairment losses on held-to-maturity investments –16 –152

plus: impairment losses/write-backs on property owned for investment –11 –3Profit (loss) of associates –185 162

minus: profit (loss) of associates – income (loss) from equity investments valued at net equity 180 –172Gains and losses on tangible and intangible assets 0 –7Gains (losses) on disposal of investments 18 48

prOfit befOre tax 1,326 1,426Income tax for the period –353 –259

Tax expense (income) related to profit or loss from continuing operations –350 –251minus: taxes on Purchase Price Allocation effect –2 – 9

Total profit or loss after tax from discontinued operations –301 –493prOfit (lOss) fOr the periOd 672 674Non-controlling interests –38 –50Net prOfit attributable tO the OWNers Of the pareNt cOmpaNy befOre ppa 635 625Purchase Price Allocation effect –13 –29Impairment of goodwill –199 –387Net prOfit attributable tO the OWNers Of the pareNt cOmpaNy 423 209



D.2 – Description of segment reportingThe segment reporting format is based on the internal reporting structure of business segments, which reflects management responsibilities in the Bank Austria Group in 2012. The business segments are presented as independent units with their own capital resources and responsibility for their own results. This also meets the requirements of IFRS 8.

The definition of business segments is primarily based on organisational responsibility for customers.

Family & SME BankingResponsibility for the Family & SME Banking segment covers Bank Austria’s business with private customers (except Private Banking customers) and small and medium-sized enterprises (SMEs) with a turnover of up to €50 million. Also included in this Division are the credit card business and factoring business.

Private BankingPrivate Banking has responsibility for private customers with investments exceeding €500,000. Schoellerbank AG and various other small subsidiaries are also included in the Private Banking Division.

Corporate & Investment BankingThe Corporate & Investment Banking segment covers the product lines Financing & Advisory (classic and structured lending business and capital market advisory services), Global Transaction Banking (including payment transactions, trade finance, cash management) and Markets (Treasury). Management is performed through a matrix organisation based on customer segments: international corporates, corporate customers whose turnover exceeds €50 million, real estate, public sector and financial institutions.

The Corporate & Investment Banking segment includes a number of subsidiaries – e. g. the Bank Austria Real Invest Group, Bank Austria Wohnbaubank AG and smaller subsidiaries, also in CEE countries, with a focus on investment banking – as consolidated companies.

Central Eastern Europe (CEE)The CEE business segment includes the commercial banking units of the Bank Austria Group in the region of Central and Eastern Europe (including Turkey). On the basis of a strategic decision on risk reduction, the equity interest in JSC ATF Bank and its subsidiaries in Kazakhstan and Kirgizstan was classified as a discontinued operation. These companies are therefore no longer included in the CEE business segment but have been allocated to the Corporate Center. Figures for previous periods were adjusted accordingly.

Corporate CenterThe Corporate Center comprises all equity interests that are not assigned to other segments and it also includes the contribution from UniCredit Leasing, in which Bank Austria has a shareholding interest of 31.01% accounted for under the equity method. Funding costs relating to consolidated subsidiaries and equity not allocated to business segments are also assigned to the Corporate Center. Also included are inter-segment eliminations, other items which are not to be assigned to other business segments, impairment losses on goodwill, and the total profit or loss from discontinued operations.

MethodsNet interest is split up according to the market interest rate method. Costs are allocated to the individual business segments from which they arise.

The result of each business segment is measured by the profit earned by the respective segment. The interest rate applied to investment of equity allocated to the business segments is determined for one year in advance as part of the budgeting process. Essentially, it is composed of the 1-month EURIBOR and a liquidity cost margin based on the average term of balance sheet volume.

Overhead costs are allocated to the business segments according to a key of distribution applied within the Group on a uniform basis (50% costs, 20% revenues, 20% FTEs and 10% proportionately).

In 2012, capital allocated to the business segments in UniCredit Bank Austria AG, based on the Tier 1 capital ratio, is 9% of risk-weighted assets of the preceding quarter. Subsidiaries are included with actual IFRS capital, not with standardised capital. The adjustment item with respect to the consolidated IFRS capital of the Bank Austria Group is reflected in the Corporate Center.



Recasting:A number of structural changes took place within the business segments and in the group of consolidated companies. This means that results for 2012 are not fully comparable with those for 2011. For this reason, the segment results for 2011 have been adjusted to the new structure. The difference compared with Bank Austria’s overall results is presented in a separate column showing “Recasting differences”.

The main pro-forma adjustments are as follows:• BankAustriaGlobalInformationServicesGmbHwassoldtoUniCreditGlobalInformationServicesinJune2011.BankAustriaGlobalInformation

Services is therefore no longer included in the recast 2011 figures.• Startingin2012,feeandcommissionincomefrommanagement,brokerageandconsultancyservicesrelatingtoderivativesbusinessinsecurities

and currency trading is reported in the item Net trading, hedging and fair value income. Figures for previous periods were recast accordingly.• Theequitybenefitallocatedtothebusinesssegmentswasadjustedtothenewcalculationmethod(essentially,1-monthEURIBORplusliquiditycost

margin based on average term of balance sheet volume) also for 2011.• Startingin2012,salescommissionsresultingfromissuingactivityareallocatedtothebusinesssegmentsonanaccrualbasis(in2011,income

over the entire period to maturity was directly allocated to the business segments, the compensating effect for reconciliation with accounting figures was presented in the Corporate Center); figures for previous periods were recast accordingly.

• Theportfolioswhichareassignedtoasset / liabilitymanagementandliquiditymanagementwerecombinedintheCorporateCenter(thisalsoincludes funding of non-consolidated companies of the Group).

• DOMUSFacilityManagementGmbHwassoldtoUniCreditGlobalInformationServicesinSeptember2012.TheresultsofDOMUSFacilityManagement are therefore included in the Corporate Center for eight months of 2012. Figures for previous periods were recast accordingly.




D.3 – Segment reporting 1–12 2012/1–12 2011 (€ million)

family & sme

baNKiNg (f&sme)

priVate baNKiNg

cOrpOrate & iNVestmeNt

baNKiNg (cib)

ceNtral easterN

eurOpe (cee)

cOrpOrate ceNter

baNK austria

grOup (recast)

recastiNg differ-eNces 1)

baNK austria

grOup (adjusted) 2)

Net interest 1–12 2012 690 59 756 3,194 –326 4,373 – 4,3731–12 2011 696 61 713 3,058 –213 4,315 – 4,315

Dividends and other income 1–12 2012 2 – 41 21 –215 –150 – –150from equity investments 1–12 2011 7 – 44 34 123 208 –1 207Net fees and commissions 1–12 2012 379 91 183 1,008 –67 1,595 – 1,595

1–12 2011 399 86 219 992 –70 1,625 210 1,836Net trading, hedging and 1–12 2012 12 2 7 416 227 664 – 664fair value income/ loss 1–12 2011 11 2 34 347 58 452 –210 242Net other expenses/ income 1–12 2012 15 – 11 89 25 140 – 140

1–12 2011 13 1 10 63 13 100 36 136OperatiNg iNcOme 1–12 2012 1,099 152 997 4,728 –355 6,622 – 6,622

1–12 2011 1,126 150 1,020 4,493 –89 6,700 35 6,736OperatiNg cOsts 1–12 2012 – 931 –108 –361 –2,177 –316 –3,893 – –3,893

1–12 2011 – 906 –102 –388 –2,102 –280 –3,777 –33 –3,810OperatiNg prOfit 1–12 2012 167 45 636 2,551 –671 2,728 – 2,728

1–12 2011 220 49 632 2,392 –369 2,923 2 2,926Net write-downs of loans and provisions 1–12 2012 –86 – –122 –895 –1 –1,103 – –1,103for guarantees and commitments 1–12 2011 –158 –4 –130 –768 – –1,060 – –1,060Net OperatiNg prOfit 1–12 2012 81 45 514 1,657 –671 1,625 – 1,625

1–12 2011 62 45 502 1,623 –369 1,863 2 1,866Provisions for risks and charges 1–12 2012 –3 –1 –16 –62 –223 –305 – –305

1–12 2011 4 2 –19 –14 –109 –136 – –136Integration/ restructuring costs 1–12 2012 –27 –1 –4 –1 – –33 – –33

1–12 2011 – – –15 –2 –10 –28 – –28Net income from investments 1–12 2012 –8 – –18 119 –55 39 – 39

1–12 2011 3 – –26 8 –259 –275 – –275prOfit befOre tax 1–12 2012 43 44 476 1,712 – 949 1,326 – 1,326

1–12 2011 68 47 442 1,615 –747 1,424 2 1,426Income tax for the period 1–12 2012 – 9 –12 –120 –314 102 –353 – –353

1–12 2011 –15 –12 –105 –252 124 –259 – –259Total profit or loss after tax from 1–12 2012 – – – – –301 –301 – –301discontinued operations 1–12 2011 – – – – –493 –493 – –493prOfit (lOss) fOr the periOd 1–12 2012 34 32 356 1,398 –1,147 672 – 672

1–12 2011 53 35 337 1,363 –1,117 671 3 674Non-controlling interests 1–12 2012 – 9 – 2 –51 20 –38 – –38

1–12 2011 – 9 – 1 –60 19 –50 – –50Net prOfit attributable tO the 1–12 2012 25 32 358 1,347 –1,127 635 – 635OWNers Of the pareNt cOmpaNy befOre ppa

1–12 2011 44 35 337 1,303 –1,098 622 3 625

Purchase Price Allocation effect 1–12 2012 – – – – –13 –13 – –131–12 2011 – – – – –29 –29 – –29

Goodwill impairment 1–12 2012 – – – –22 –177 –199 – –1991–12 2011 – – – – –387 –387 – –387

Net prOfit attributable tO the 1–12 2012 25 32 358 1,325 –1,317 423 – 423OWNers Of the pareNt cOmpaNy 1–12 2011 44 35 337 1,303 –1,514 206 3 209

1) The segment results have been recast. The difference compared to Bank Austria’s results is presented in a separate column showing “Recasting differences”, which for 2011 mainly relate to the sale of Bank Austria Global Information Services GmbH, the sale of Domus Facility Management GmbH and a change in reporting fee and commission income from management, brokerage and consultancy services relating to derivatives business in securities and currency trading, which is now included in the item Net trading, hedging and fair value income.

2) The figures for 2011 and 2012 reflect the accounting figures, adjusted as described in the notes included accordingly.


family & sme

baNKiNg (f&sme)

priVate baNKiNg


baNKiNg (cib)

ceNtral easterN

eurOpe (cee)

cOrpOrate ceNter

baNK austria

grOup (recast)

recastiNg differ-eNces 1)

baNK austria

grOup (adjusted) 2)

risk-weighted assets (rWa) (avg.) 1–12 2012 11,277 954 16,045 83,898 16,906 129,079 4 129,0831–12 2011 12,568 878 19,542 76,619 14,572 124,179 198 124,377

loans to customers (end of period) 1–12 2012 20,454 599 34,355 70,185 6,832 132,424 – 132,4241–12 2011 21,335 601 37,292 66,745 5,333 131,307 3,607 134,914

primary funds (end of period)3) 1–12 2012 28,672 7,716 23,255 64,290 14,692 138,626 – 138,6261–12 2011 27,436 7,231 22,062 57,036 16,976 130,740 3,918 134,658

Equity (avg.) 4) 1–12 2012 1,215 171 1,868 12,981 1,640 17,875 – 17,8751–12 2011 1,094 159 1,699 11,604 2,791 17,347 7 17,354

Cost / income ratio in % 1–12 2012 84.8 70.6 36.3 46.0 n. m. 58.8 n. m. 58.81–12 2011 80.5 67.6 38.0 46.8 n. m. 56.4 n. m. 56.6

Risk /earnings ratio in % 4) 1–12 2012 12.5 n. m. 15.3 27.8 n. m. 26.1 n. m. 26.11–12 2011 22.5 n. m. 17.2 24.8 n. m. 23.4 n. m. 23.4

1) The segment results have been recast. The difference compared to Bank Austria’s results is presented in a separate column showing “Recasting differences”, which for 2011 mainly relate to the sale of Bank Austria Global Information Services GmbH, the sale of Domus Facility Management GmbH and a change in reporting fee and commission income from management, brokerage and consultancy services relating to derivatives business in securities and currency trading, which is now included in the item Net trading, hedging and fair value income.

2) The figures for 2011 and 2012 reflect the accounting figures, adjusted as described in the notes included accordingly.3) Primary funds: deposits from customers and debt securities in issue.4) Total IFRS capital for the subsidiaries allocated to the respective Division together with standardised capital (capital allocation based on actual RWAs of the previous quarter) for

the rest of the respective Division. The difference compared to the consolidated equity of the Bank Austria Group is shown in the Corporate Center.5) Risk /earnings ratio: net write-downs of loans and provisions for guarantees and commitments measured against net interest and dividends and other income from equity

investments.n. m. = not meaningful




(€ million)

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(recast) 1)

Net interest Q42012 162 14 187 825 –87 1,100Q32012 172 14 175 826 –78 1,110Q22012 180 15 196 784 –75 1,101Q12012 176 16 198 759 –86 1,062Q42011 175 18 183 756 –55 1,077Q32011 175 17 181 757 –44 1,086Q22011 174 15 173 771 –57 1,075Q12011 171 12 176 774 –57 1,076

Dividends and other income Q42012 2 – 10 4 –247 –231from equity investments Q32012 –1 – 5 4 –14 –6

Q22012 1 – 18 9 29 57Q12012 1 – 7 5 17 30Q42011 5 – 9 19 23 56Q32011 – – 6 2 41 49Q22011 – – 9 10 33 52Q12011 3 – 20 2 26 50

Net fees and commissions Q42012 98 28 52 277 –17 437Q32012 95 22 41 256 –16 398Q22012 93 20 46 246 –17 388Q12012 93 21 44 229 –16 371Q42011 96 23 59 257 –16 419Q32011 100 20 56 253 –17 411Q22011 100 20 49 243 –19 393Q12011 104 23 55 238 –18 402

Net trading, hedging and Q42012 2 – 12 113 16 144fair value income/ loss Q32012 4 1 – 104 64 172

Q22012 4 – 2 99 –47 59Q12012 2 1 –8 100 194 290Q42011 2 – 16 115 –18 116Q32011 2 1 –6 88 –11 75Q22011 3 – 13 73 15 104

Q12011 3 1 11 72 72 158Net other expenses/ income Q42012 8 – –1 44 –4 47

Q32012 3 1 3 40 11 58Q22012 2 – 4 19 10 35Q12012 2 –1 4 –14 8 –Q42011 6 1 1 –15 1 –5Q32011 4 – 3 40 – 9 38Q22011 2 – 3 23 10 38Q12011 2 – 2 15 10 29

OperatiNg iNcOme Q4 2012 271 42 261 1,263 –339 1,498Q3 2012 273 38 225 1,230 –33 1,732Q2 2012 280 36 267 1,157 –101 1,639Q1 2012 274 37 244 1,078 118 1,753Q4 2011 284 42 269 1,132 –65 1,663Q3 2011 281 37 240 1,140 –40 1,659Q2 2011 279 35 247 1,120 –18 1,663Q1 2011 282 35 264 1,101 34 1,716

OperatiNg cOsts Q4 2012 –256 –28 – 95 –564 –81 –1,024Q3 2012 –229 –27 –89 –544 –77 – 967Q2 2012 –225 –26 –85 –547 –79 – 962Q1 2012 –222 –26 – 93 –522 –78 – 940Q4 2011 –241 –25 –103 –538 –68 – 976Q3 2011 –226 –25 – 98 –520 –69 – 937Q2 2011 –226 –26 – 96 –532 –71 – 951Q1 2011 –213 –25 – 91 –511 –72 – 913

1)Quarterlyfiguresbasedonrecastdataonly.

D.4 – Segment reporting Q1– Q4 2012/Q1– Q4 2011



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OperatiNg prOfit Q4 2012 16 14 166 699 –420 474Q3 2012 44 11 136 685 –111 765Q2 2012 55 10 182 611 –180 678Q1 2012 53 11 152 556 40 812Q4 2011 43 17 166 594 –133 687Q3 2011 56 12 142 620 –108 722Q2 2011 52 9 151 587 –89 712Q1 2011 69 10 173 590 –39 803

Net write-downs of loans and provisions Q42012 –13 – –31 –286 –2 –331for guarantees and commitments Q32012 –27 – –49 –207 – –284

Q22012 –13 – –10 –221 1 –243Q12012 –33 – –31 –180 – –245Q42011 –3 –1 –15 –226 – –245Q32011 –55 – –36 –165 – –255Q22011 –46 –1 –33 –175 – –257Q12011 –54 –1 –45 –203 – –303

Net OperatiNg prOfit Q4 2012 3 14 135 413 –422 143Q3 2012 17 11 87 478 –111 481Q2 2012 42 10 172 389 –179 435Q1 2012 19 11 120 376 40 567Q4 2011 40 16 150 368 –133 442Q3 2011 1 12 107 456 –108 467Q2 2011 6 8 118 412 –89 455Q1 2011 15 9 127 387 –39 500

Provisions for risks and charges Q42012 –2 – –16 –35 –177 –231Q32012 –1 – – –7 – –7Q22012 – – – –10 –49 –59Q12012 – –1 – –10 3 –8Q42011 –3 – 1 2 –5 –5Q32011 –4 – –21 –7 –70 –100Q22011 10 1 1 –8 –3 1Q12011 – 1 – –2 –31 –32

Integration/ restructuring costs Q42012 –27 –1 –1 –1 – –30Q32012 – – – – – –Q22012 – – –3 – – –3Q12012 – – – – – –Q42011 – – – – –10 –11Q32011 – – –15 – – –15Q22011 – – – –1 – –1Q12011 – – – –1 – –1

Net income from investments Q42012 –8 – –12 27 4 12Q32012 – – 6 76 7 89Q22012 – – –13 8 –27 –32Q12012 – – 1 6 –39 –31Q42011 – – –32 – – 98 –129Q32011 1 – –2 –38 –78 –116Q22011 – – 4 42 –85 –38Q12011 1 – 3 3 1 8

prOfit befOre tax Q4 2012 –34 13 107 404 –595 –106Q3 2012 16 11 92 548 –103 563Q2 2012 42 10 156 388 –254 341Q1 2012 20 10 121 373 4 528Q4 2011 38 16 119 371 –247 296Q3 2011 –2 12 69 411 –256 235Q2 2011 16 9 123 445 –176 417Q1 2011 16 10 131 387 –69 475






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(recast) 1)

Income tax for the period Q42012 7 –3 –31 –67 –2 – 96Q32012 –1 –3 –22 –103 52 –77Q22012 –10 –3 –36 –72 49 –72Q12012 –5 –3 –31 –72 3 –108Q42011 –8 –4 –29 –72 104 – 9Q32011 – –3 –21 –68 –47 –139Q22011 –4 –3 –25 –39 47 –23Q12011 –3 –2 –30 –73 20 –88

Total profit or loss after tax from Q42012 – – – – –282 –282discontinued operations Q32012 – – – – –6 –6

Q22012 – – – – –8 –8Q12012 – – – – –5 –5Q42011 – – – – –41 –41Q32011 – – – – –392 –392Q22011 – – – – –32 –32Q12011 – – – – –29 –29

prOfit (lOss) fOr the periOd Q4 2012 –27 9 76 337 –879 –484Q3 2012 15 8 70 445 –57 481Q2 2012 32 7 119 316 –213 261Q1 2012 15 8 90 300 1 415Q4 2011 30 12 90 299 –184 247Q3 2011 –2 9 48 343 –695 –295Q2 2011 12 7 98 407 –161 362Q1 2011 13 7 100 315 –77 358

Non-controlling interests Q42012 –3 – 2 –3 5 1Q32012 –4 – – –24 7 –21Q22012 –1 – – –14 6 – 9Q12012 –2 – – –10 2 –10Q42011 –4 – – – 9 4 – 9Q32011 –2 – – –19 5 –16Q22011 –1 – – –18 6 –12Q12011 –2 – – –15 4 –13

Net prOfit attributable tO the Q4 2012 –30 9 78 334 –874 –483OWNers Of the pareNt cOmpaNy Q3 2012 11 8 70 421 –51 460befOre ppa Q2 2012 31 7 120 302 –207 252

Q1 2012 13 8 90 290 4 405Q4 2011 25 12 90 290 –180 238Q3 2011 –4 9 49 324 –690 –311Q2 2011 12 7 98 389 –155 350Q1 2011 11 7 100 300 –73 345

Purchase Price Allocation effect Q42012 – – – – –7 –7Q32012 – – – – –2 –2Q22012 – – – – –2 –2Q12012 – – – – –2 –2Q42011 – – – – –3 –3Q32011 – – – – –22 –22Q22011 – – – – –2 –2Q12011 – – – – –2 –2

Goodwill impairment Q42012 – – – –22 –167 –189Q32012 – – – – –3 –3Q22012 – – – – –3 –3Q12012 – – – – –4 –4Q42011 – – – – –32 –32Q32011 – – – – –303 –303Q22011 – – – – –50 –50Q12011 – – – – –3 –3




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Net prOfit attributable tO the Q4 2012 –30 9 78 312 –1,048 –678OWNers Of the pareNt cOmpaNy Q3 2012 11 8 70 421 –55 455

Q2 2012 31 7 120 302 –212 247Q1 2012 13 8 90 290 –3 398Q4 2011 25 12 90 290 –214 204Q3 2011 –4 9 49 324 –1,015 –636Q2 2011 12 7 98 389 –207 298Q1 2011 11 7 100 300 –78 340

risk-weighted assets (rWa) (avg.) Q4 2012 11,864 1,039 15,757 84,477 17,359 130,496Q3 2012 11,188 1,020 16,005 85,725 17,615 131,553Q2 2012 11,039 910 15,917 83,845 17,180 128,890Q1 2012 11,017 846 16,501 81,543 15,469 125,376Q4 2011 12,016 856 17,718 79,313 14,522 124,425Q3 2011 12,490 846 18,942 77,605 14,417 124,299Q2 2011 11,934 880 20,213 75,761 14,525 123,314Q1 2011 13,830 930 21,297 73,796 14,825 124,679

loans to customers (end of period) Q4 2012 20,454 599 34,355 70,185 6,832 132,424Q3 2012 20,323 621 35,529 70,152 6,479 133,105Q2 2012 20,934 614 35,132 69,296 6,625 132,601Q1 2012 20,582 615 35,265 67,712 5,873 130,048Q4 2011 21,335 601 37,292 66,745 5,333 131,307Q3 2011 21,553 557 36,159 64,127 5,223 127,619Q2 2011 22,215 485 36,562 64,106 4,912 128,280Q1 2011 21,199 546 36,273 62,009 5,098 125,124

primary funds (end of period) 2) Q4 2012 28,672 7,716 23,255 64,290 14,692 138,626Q3 2012 27,740 7,737 24,176 60,633 14,812 135,097Q2 2012 28,437 7,448 22,034 59,226 14,996 132,140Q1 2012 28,133 7,647 22,320 57,093 16,611 131,804Q4 2011 27,436 7,231 22,062 57,036 16,976 130,740Q3 2011 27,185 7,466 22,288 55,280 17,341 129,560Q2 2011 27,385 6,870 21,770 51,169 17,660 124,854Q1 2011 26,960 6,876 22,493 51,485 16,365 124,180

Equity (avg.) 3) Q42012 1,128 181 2,134 13,604 753 17,800Q32012 1,264 171 1,735 13,120 1,994 18,284Q22012 1,273 166 1,714 12,744 2,028 17,925Q12012 1,195 165 1,891 12,456 1,785 17,492Q42011 757 162 1,613 11,957 2,470 16,958Q32011 1,262 167 1,537 11,541 2,756 17,263Q22011 1,101 152 1,708 11,521 3,203 17,686Q12011 1,256 154 1,940 11,397 2,733 17,480

Cost / income ratio in % Q4 2012 94.2 67.6 36.4 44.7 n. m. 68.4Q3 2012 84.0 72.0 39.6 44.3 n. m. 55.8Q2 2012 80.3 73.5 31.7 47.2 n. m. 58.7Q1 2012 80.9 69.8 37.9 48.4 n. m. 53.7Q4 2011 84.9 59.5 38.4 47.5 n. m. 58.7Q3 2011 80.3 67.6 40.6 45.6 n. m. 56.5Q2 2011 81.2 73.5 38.8 47.6 n. m. 57.2Q1 2011 75.4 71.6 34.5 46.4 n. m. 53.2

Risk /earnings ratio in % 4) Q4 2012 7.8 n. m. 15.7 34.5 n. m. 38.1Q3 2012 15.9 n. m. 27.3 25.0 n. m. 25.7Q2 2012 7.3 n. m. 4.7 27.9 n. m. 21.0Q1 2012 18.8 n. m. 15.4 23.6 n. m. 22.5Q4 2011 1.5 n. m. 7.9 29.1 n. m. 21.6Q3 2011 31.3 n. m. 19.2 21.7 n. m. 22.5Q2 2011 26.6 n. m. 18.4 22.5 n. m. 22.8Q1 2011 31.3 n. m. 23.2 26.1 n. m. 26.9

1)Quarterlyfiguresbasedonrecastdataonly.2) Primary funds: deposits from customers and debt securities in issue.3) Total IFRS capital for the subsidiaries allocated to the respective Division together with standardised capital (capital allocation based on actual RWAs of the previous quarter) for the rest of the respective Division. The difference compared to the consolidated equity of the Bank Austria Group is shown in the Corporate Center.4) Risk /earnings ratio: net write-downs of loans and provisions for guarantees and commitments measured against net interest and dividends and other income from equity investments.n. m. = not meaningful


E – Risk report

E.1 – Overall risk management including Basel 2 176

E.2 – Market risk 178

E.3 – Liquidity risk 184

E.4 – Counterparty risk 185

E.5 – Country risk and sovereign risk 186

E.6 – Credit risk 190

E.7 – Operational risk 195

E.8 – Reputational risk 196

E.9 – Business risk 196

E.10 – Financial investment risk and real estate risk 197

E.11 – Legal risks 197

E.12 – Report on key features of the internal control and risk management systems in relation to the financial reporting process 199

E.13 – Information on the squeeze-out pursuant to the Austrian Federal Act on the Squeeze-out of Minority Shareholders (Gesellschafterausschlussgesetz) of the holders of bearer shares in UniCredit Bank Austria AG 200

E.14 – Financial derivatives 201



E – Risk report (CoNTINuED)

E.1 – overall risk management including Basel 2UniCredit Bank Austria AG identifies, measures, monitors and manages all risks of the Bank Austria Group. In performing these tasks, Bank Austria works closely with the risk control and risk management units of UniCredit. In this context, UniCredit Bank Austria AG supports UniCredit’s ongoing projects which are aimed at establishing uniform group-wide risk controlling procedures.

UniCredit Bank Austria AG divides the monitoring and controlling processes associated with risk management into the following categories: market risk, liquidity risk, counterparty risk, credit risk, operational risk, reputational risk, business risk, financial investment risk and real estate risk.

The Management Board determines the risk policy and approves the principles of risk management, the establishment of limits for all relevant risks, and the risk control procedures.

In performing these tasks, the Management Board is supported by specific committees and independent risk management units. All risk management activities of UniCredit Bank Austria AG are combined within a management function at Management Board level directed by the Chief Risk Officer (CRO); secondary lending decisions for corporate customers are made in the CIB Credit Operations, CEE Credit Operations and Market Risk depart-ments, and for private customers and business customers in the Risk Management Family & SME Banking (+PB) department. The Special Credit Austria and CEE Credit Operations departments deal with problem loans. These organisational units are supported by the Strategic Risk Management & Control department. Credit risk control of the CEE business units is performed by the CEE Risk Control and CEE Credit Operations departments. The unit for active credit portfolio management (Credit Treasury) reports to the Chief Financial Officer (CFO) indirectly via the Finance department.

Cross-divisional controlThe Risk Committee (RICO) is responsible for the management of balance-sheet structure positions, it deals with cross-divisional risk management is-sues arising between sales units and overall bank management, and provides an overview of credit portfolio model results while also preparing reports on economic capital (Pillar II). Liquidity risk control is performed by a separate committee which was set up in 2008 and meets once a week to deal with current liquidity-related topics. These include operational aspects of liquidity management including market monitoring; and compliance with the liquidity policy, with CEE banking subsidiaries also being covered in this context – Bank Austria acts as a regional liquidity centre of UniCredit Group. Control of market risk is ensured by the Market Risk Committee/Asset Liability Committee (MACO/ALCO), which meets once a week. MACO/ALCO deals with short-term business management issues relating to the presentation and discussion of the risk /earnings position of Markets within the CIB Division and with limit adjustments, product approvals and positioning decisions in the area of market risk. Other topics discussed and decided include, for example, the replication portfolio and methods for funds transfer pricing. In addition, the general framework and limits for banking subsidiaries are defined by MACO. Credit risk is assessed by the Credit Committee. The Operational Risk Committee (OpRiCo) meets on a quarterly basis to deal with operational risk issues. Counterparty risk arising from derivative transactions is managed by the Derivative Committee (DECO). DECO deals with classic credit risk issues and aspects of reputational risk in customer business.

The Management Board of UniCredit Bank Austria AG sets risk limits for market risk activities and liquidity positions of the entire Bank Austria Group at least once a year, in coordination with UniCredit Group. MACO/ALCO, which holds a meeting every week, makes limit decisions at the operational level and analyses the risk and earnings positions of the bank’s Markets units. RICO performs analyses and makes decisions with regard to business activities closely connected with customer business (in particular, risk management issues arising between sales units and overall bank management, ICAAP). The decisions and results of these committees are reported directly to the bank’s full Management Board. Risk Management, which is separate from the business divisions up to Management Board level, is in charge of preparing analyses and monitoring compliance with limits.

The Bank Austria Group applies the principle of value-based management. In line with this principle, for pricing purposes in business and customer relations (micro control), capital employed is expected to yield a specific return.

Beyond compliance with the regulatory capital rules pursuant to Section 39 of the Austrian Banking Act, economic capital (Pillar II) is intended to reflect the bank’s specific risk profile in a comprehensive and more consistent way. These unexpected losses over a period of one year are calculated with a confidence level of 99.97%.

Value-at-risk methodologies are used in the Bank Austria Group for calculating or planning economic capital for all specified types of risk (credit risk, market risk, operational risk, business risk, financial investment risk and real estate risk). Under the risk-taking capacity concept, economic capital is compared with available financial resources and monitored on an ongoing basis. The Bank Austria Group is included in the risk monitoring and risk management system of the entire UniCredit Group. This ensures overall risk management across the Group.


Current status of the application of the internal ratings-based approach (IRB approach) to credit risk in the Bank Austria Group

UniCredit Bank Austria AG has applied the internal ratings-based approach since March 2008, using its own estimates of loss given default and of conversion factors for the major part of its loan portfolio (advanced IRB approach).

The bank is planning to introduce various other Group-wide models while also further refining and developing local models.

Banca d’Italia (the Bank of Italy), the home supervisor of UniCredit Group, is responsible for all approvals at Group level, while local supervisory authorities are responsible for local topics in the legal entities and for local on-site reviews. Regulatory issues are being dealt with in close cooperation between home and host regulators (college of supervisors).

Implementation of the advanced IRB approach has been established as a Group-wide programme. Therefore UniCredit is responsible for Group-wide decisions and guidelines as well as for the development of Group-wide models. For example, Group-wide homogeneous portfolios have been defined for which uniform rating models are used across the Group, such as those for countries, banks and multinational companies.

Group standards have for the most part already been prepared and adopted by the UniCredit Group holding company in cooperation with the major IRB legal entities, and are used as an instrument for uniform Group-wide implementation, with a view to complying with local legal requirements – some of which differ from country to country – and safeguarding Group interests. These Group standards will continue to be graduallyextended and complemented.

The Group standards continue to be integrated step by step in the processes and organisational set-up of all business areas and Group units, with account being taken of local features and legal requirements in ensuring Basel 2 compliance.

Austrian subsidiariesAll Austrian subsidiaries of UniCredit Bank Austria AG started to use the standardised approach in 2008. From a current perspective, for reasons of materiality, it is not planned to switch to one of the IRB approaches.

CEE subsidiariesThe CEE subsidiaries started to use the standardised approach to credit risk at the beginning of 2008. Based on a detailed roll-out plan, there are plans to switch to the advanced IRB approach at most of the CEE banking subsidiaries in line with the Group’s decision to use the advanced IRB approach. According to the detailed roll-out plan communicated to the supervisory authorities involved, the switch to the A-IRB approach takes place at the relevant CEE subsidiaries step by step. Most subsidiaries start with the Foundation IRB approach (F-IRB).

In the course of the cross-border approval process, supervisory IRB assessments took place in an initial group of CEE subsidiaries in 2010. For the CEE subsidiaries UniCredit Bulbank AD, UniCredit Bank Czech Republic, a. s., and UniCredit Bank Slovenija d. d., the application of the F-IRB approach was approved as at 1 January 2011. The application of the F-IRB approach at UniCredit Bank Hungary Zrt. was approved as at 1 July 2011. In 2012, further approvals for the application of the F-IRB approach at the CEE subsidiaries UniCredit Bank Slovakia a. s. and UniCredit Tiriac Bank S. A. were given as at 1 July 2012 and 31 July 2012, respectively. A further approval for the application of the F-IRB approach at the CEE subsidiary ZAO UniCredit Bank is expected for 2013.

Current status of the application of the advanced measurement approach (AMA) for operational risk in the Bank Austria Group

UniCredit Bank Austria AG has used the AMA since the beginning of 2008.

Austrian subsidiariesSchoellerbank has applied the AMA in the area of operational risk since 2009.

CEE subsidiariesIn the reporting period, approval for the use of the AMA in the area of operational risk was available for the banking subsidiaries in the Czech Republic, in Slovakia, Hungary, Slovenia, Croatia, Bulgaria and Romania. In the next few years, AMA preparations will concentrate on ZAO UniCredit Bank Russia, Yapı ve Kredi Bankasi AS and UniCredit Bank Serbia JSC.




Implementation of disclosure requirements pursuant to Sections 26 and 26a of the Austrian Banking Act(regular disclosure of information on the organisational structure, risk management and risk capital position pursuant to Sections 2 to 15 of the Austrian Disclosure Regulation)Within UniCredit Group, comprehensive disclosure (under the Pillar 3 disclosure requirements) is carried out by the parent company UniCredit on its website, based on the consolidated financial position in its function as EEA parent bank of Bank Austria. Bank Austria is a significant subsidiary pursu-ant to Section 26 (4) of the Austrian Banking Act and therefore discloses its supervisory capital structure (Section 4 of the Austrian Disclosure Regula-tion) and its capital adequacy requirement (Section 5 of the Austrian Disclosure Regulation); furthermore, the bank discloses information regarding the use of own estimates for volatility adjustments (comprehensive method) for credit risk mitigation techniques to take account of financial collateral pursuant to Section 17 of the Austrian Disclosure Regulation and in accordance with the approval by the Austrian Financial Market Authority (FMA).

The disclosure by Bank Austria is available at its website www.bankaustria.at / Investor Relations/Basel II Disclosure Pillar 3.

Current status of Basel 2.5/Basel 3 implementation in the Bank Austria GroupMarket risk in the trading book:For the entire year 2012, capital requirements for the Basel 2.5 concepts of “stressed VaR” (SVaR) and “incremental risk charge” (IRC) for the Bank Austria Group were calculated and covered as part of market risk. A reporting procedure for these new parameters was set up in MACO, which meets once a week. Moreover, separate IRC limits were introduced for the relevant risk-takers in the Bank Austria Group. At the global level, besides detailed VaR limits, an SVaR limit was also implemented for the regulatory trading book.

Counterparty risk:As the changes in the area of counterparty credit risk resulting from the publications of the Basel Committee (Basel 3) and the Capital Requirements Directive (CRD IV) have been defined in further detail, Bank Austria has been able to develop an implementation plan. Originally conceived for UniCredit Bank Austria AG, the local project in Austria will be integrated in a broader context at UniCredit Group level subject to joint management. The main changes in the area of counterparty credit risk include the calculation of a stressed counterparty exposure, comparable to the stressed VaR in market risk. Other new features are the capital backing for market risk in respect of credit valuation adjustments (CVA market risk) and stricter standards for collateral management and margining. There are also stricter requirements to be met in the area of stress testing and backtesting.

Liquidity:Basel 3 sets liquidity standards under stressed conditions in the short-term maturity range (liquidity coverage ratio ≥ 100%) and in the structural sector (net stable funding ratio ≥ 100%). Compliance with these rules will be mandatory from 2015 and 2018, respectively. A monitoring process to provide information to the supervisory authorities will start in 2013. In a separate Basel 3 project, Bank Austria made technical preparations with a viewtomeetingallreportingrequirementsfortheBankAustriaGroupfrom2013.BankAustriawillalsocontinuetoparticipateintheQuantitative Impact Studies of the European Banking Authority (EBA). Adjustments to the business strategy were initiated to ensure compliance with the new Basel 3 liquidity ratios at all times.

E.2 – Market riskMarket risk management encompasses all activities in connection with our Markets & Investment Banking operations and management of the balance sheet structure in Vienna and at Bank Austria’s subsidiaries. Risk positions are aggregated at least daily, analysed by the independent risk manage-ment unit and compared with the risk limits set by the Management Board and the committees (including MACO) designated by the Management Board. At Bank Austria, market risk management includes ongoing reporting on the risk position, limit utilisation, and the daily presentation of results of all positions associated with market risk. Most of the positions held in Bank Austria are attributable to the banking book as Bank Austria continued to reduce positions attributable to the trading book in the course of 2012. Market risk of the banking book is an important factor also in other Divisions (the CEE banking subsidiaries, in particular). UniCredit Bank Austria uses uniform risk management procedures for all market risk positions throughoutthe Group. These procedures provide aggregate data and make available the major risk parameters for the various trading operations once a day. Besides Value at Risk (VaR), other factors of equal importance are stress-oriented sensitivity and position limits. Additional elements of the limit system are the loss-warning level (applied to accumulated results for a specific period), the stressed VaR (SVaR) limit (determined for the trading book with a separate observation period), incremental risk charge (IRC) limits and the stress test warning limit (limiting losses when a pre-defined stress event is applied).

As mentioned above, Bank Austria uses a standard measurement procedure which is also applied in UniCredit Group. The model, approved in 2011, is used for internal risk management and for reporting regulatory capital requirements for market risk.

The model is based on historical simulation with a 500-day market data time window for scenario generation. It is applied by Market Risk and Risk Integration within Bank Austria and is being further developed in cooperation with the UniCredit holding company. Further development includes reviewing the model as part of backtesting procedures, integrating new products, implementing requirements specified by the Management Board and the Market Risk Committee, and adjusting the model to general market developments.


The new CRD III rules for the trading book were introduced in Bank Austria, in cooperation with UniCredit, with the implementation of “stressed VaR” and “incremental risk charge” (IRC) in 2011. The new risk measures have been used in Bank Austria since the beginning of 2012. Bank Austria has also established separate limit categories in this context, which complement the existing limit system and focus on the regulatory trading book. The values for “stressed VaR” and “IRC” have been included in regulatory reporting since the end of 2011 and were determined on a monthly basis in 2012.

A product introduction process has been established for the introduction of new products in the area of market risk in which risk managers play a decisive role in approving products. When the Group-wide UniCredit market risk model was approved by the college of supervisors (Italy, Germany and Austria), a multiplier of 3.5 was set and this was used unchanged in 2012 for calculating the capital requirement. The market risk model is used for UniCredit Bank Austria AG, as until now, and for the Bank Austria Group. The risk model covers all major risk categories: interest rate risk and equity risk (both general and specific), credit spread risk, currency risk and commodity position risk. The structure of the standard risk report presented at MACO’s weekly meetings covers (stress) sensitivities in addition to VaR figures, and utilisation levels in the areas of IRC and SVaR (both for the regulatory trading books). Regular and specific stress scenario calculations complement the information provided to MACO/ALCO and the Management Board. Macro scenarios show the potential adverse impacts of global developments with specific effects on the respective risk categories, while stress sensitivities of individual risk factors or groups of risk factors show the potential adverse impacts on partial market seg-ments. Stress scenarios are based on assumptions of extreme movements in individual market risk parameters. The bank analyses the effect of such fluctuations and a liquidity disruption in specific products and risk factors on the bank’s results. These assumptions of extreme movements are dependent on currency, region, liquidity and the credit rating, and are set by Market Risk on a discretionary basis after consultation with experts in other areas of the bank (e. g. research, trading, Market Risk UniCredit holding company). The Widespread Contagion Scenario is an example of a scenario which is also used by the UniCredit holding company on a Group-wide basis.

In addition to the risk model results, income data from market risk activities are also determined and communicated on a daily basis. These data are presented over time and compared with current budget figures. Reporting covers the components reflected in IFRS-based profit and the marking to market of all investment positions regardless of their recognition in the IFRS-based financial statements (“total return”). The results are available to UniCredit Bank Austria’s trading and risk management units via the access-protected Intranet application “ERCONIS”, broken down by portfolio, income statement item and currency. The regulatory approach to prudent valuation in the trading book is implemented primarily by Market Risk and further developed on an ongoing basis through cooperation within UniCredit Group in the same way as “independent price verification”, which establishes valuation processes and verification procedures on a harmonised Group-wide basis and is used in Bank Austria for fixed-income securities as from the beginning of 2013. The use of credit valuation adjustments (CVA) for OTC derivatives in Bank Austria was further refined in 2012 and integrated in the presentation of results of market activities (including Corporate Treasury Sales) on a quarterly basis.

In Vienna, Bank Austria uses the “MARCONIS” system developed by the bank itself to completely and systematically review the market conformity of its trading transactions. The scope of application of this tool has been further extended to include all CEE banking subsidiaries with market risk activities. Since 2010 the MARCONIS system has been extended to include another module, and the tool is also used to address the topic of price transparency (determining minimum margins and maximum hedging costs for Corporate Treasury Sales).

The chart below shows the VaR in 2012 calculated on the basis of the market risk model, which is also used for regulatory reporting of capital requirements for market risk.

VaR of the Bank Austria Group in 2012 calculated on the basis of the new IMOD market risk model (€ million)

Dec. 12 Feb. 12March 12April 12May 12June 12July 12Aug. 12Sept. 12Oct. 12Nov. 12 Jan. 12

–120–110–100

–90–80–70–60–50–40–30–20–10

0

IMOD-VaR Limit scope IMOD-VaR TradingIMOD-VaR




At the end of 2012, market risk of the Bank Austria Group (top line) was about €105 million (confidence interval of 99%; 1-day holding period). Market risk managed by VaR limits (represented by the red line in the middle) was slightly below €96 million at the end of 2012: loans to the public sector in the form of private placements, equity holdings in the banking book and private equity are excluded here because these are not managed via VaR limits. This compares with a VaR of the trading book of below €2.3 million at the end of 2012. The regulatory trading book was further reduced in CEE and in UniCredit Bank Austria AG in the course of the year.

Credit spread risk and interest rate risk account for most of the total risk of the Bank Austria Group. Other risk categories are much less significant by comparison. Since January 2007, commodity risk has only been assumed in the Bank Austria Group on a back-to-back basis.

In addition to VaR, risk positions of the Bank Austria Group are limited through sensitivity-oriented limits. As part of daily risk reporting, detailed “Trader Reports” are prepared for a large number of portfolios, with updated and historical information made available to all risk-takers and the responsible senior management via the Intranet. These reports are now complemented by the UniCredit market risk platform, which enables trading and other units to perform analyses down to individual position level.

As at 31 December 2012, the entire interest rate position of the Bank Austria Group (trading and investment) for major currencies was composed as follows:

Basis point values of the Bank Austria Group (in €)

as at 31 december 2012 aNNual aVerage, miNimum/maximum

0 tO 3 mONths

3 mONths tO 1 year

1 year tO 3 years

3 tO 10years

OVer 10 years tOtal maximum miNimum

absOluteaVerage

Europe EUR 37,569 –70,972 –154,269 2,278 547,612 362,218 797,111 –120,567 280,450CHF 76,358 79,797 –12,723 –37,910 –32,896 72,625 80,187 – 98,543 –23,661GBP 815 917 2,219 995 42 4,988 22,836 1,592 10,168NOK 18 1,031 150 33 1 1,233 1,449 530 895

New EU countries BGN 7,221 21,546 –16,125 –72,996 –511 –60,864 –26,239 –69,129 –40,290CZK – 9,154 –8,282 4,414 –8,444 200 –21,266 27,081 –77,635 –29,651HUF 1,933 –10,957 17,709 22,012 –871 29,826 73,578 –2,435 35,400PLN 1,195 –397 –29 –1 –4 763 2,649 –3,166 –1,149Ron –1,871 519 –4,674 –23,911 –2,325 –32,261 –23,005 –66,338 –45,695HRK 7,578 –12,030 –26,255 –51,038 –1,200 –82,945 –17,433 –108,248 –59,401

Central and Eastern AZN –59 –133 –3,268 – 958 –12 –4,430 –3,055 –4,926 –4,278Europe incl. Turkey BAM –1,253 –1,442 – 9,327 –14,326 58 –26,290 –8,994 –26,863 –17,689

KGS –160 60 –1,853 –504 – –2,457 –1,048 –3,088 –1,894KZT 204 15,588 56,067 –105,757 –29,189 –63,087 67,140 – 95,932 –11,373LTL –76 1,734 –1,878 –1,672 – –1,893 1,718 –2,492 –474LVL –272 –5,346 –196 – – –5,814 –2,408 –6,158 –4,264RSD –1,841 –3,556 –8,969 –4,611 – –18,977 9,494 –18,977 –8,659RUB –26,492 46,446 –111,266 –12,226 –50,937 –154,475 11,944 –306,783 –178,326TRY –7,631 –46,343 682 –241,286 21 –294,557 –10,470 –510,119 –247,289UAH 3,939 –25,953 –16,428 –26,235 –3,156 –67,833 –34,926 – 91,341 –67,751

Overseas – highly USD –28,684 –45,720 370,454 – 94,628 –1,079,099 –877,678 –611,478 –1,624,891 –1,277,016developed countries CAD –615 –454 402 – – –668 8,570 –1,190 1,516

AUD –208 1,144 1,011 626 – 2,573 8,243 2,573 4,973NZD 13 135 – – – 148 163 19 83JPY 4,758 –1,266 – 992 –4,870 –467 –2,837 14,745 –14,193 756

Other countries AED 1 –2 – – – –1 64 –37 1XAU 1,467 1,504 – – – 2,971 4,304 169 1,985ZAR –2 43 – – – 40 42 –438 –14BPV<500 73 76 3 17 – 170 1,127 –3 313

tOtal 64,824 –62,316 84,858 –675,411 –652,734 –1,240,779 2,405,693

The bank continues to hold appropriate interest rate positions in local currencies, reflecting the size of its banking subsidiaries; most of the related interest rate sensitivity is in the banking book (not in the trading book). The USD position is also related to the banking book position of our banking subsidiaries.


By analogy to the detailed presentation of basis point positions in the interest rate sector, daily reporting presents details of credit spread by curve and maturity band.

Credit spread basis-point values (CPVs) of the Bank Austria Group (in €)

aNNual aVerage, miNimum/maximum

cpVs iN € sectOr maximum miNimum absOlute aVerage

Main sectors Financial services –1,568,501 –1,900,321 1,713,347ABSs and MBSs –223,236 –415,315 321,002

Corporates Industrial –1,714 –12,671 3,626Automobiles 86 –7,332 1,449Consumer goods –13,930 –25,619 19,420Pharmaceutical –776 –1,056 924Telecommunications 12,116 238 6,772Energy & utilities – 9,749 –45,378 13,970Other (e. g. indices) 863 –50,937 5,870

Treasury-near Treasuries – EU & European industrial nations –1,238,116 –2,842,197 2,155,018Treasuries – new EU countries –1,000,755 –1,494,027 1,277,020Treasuries – CEE & emerging markets –2,141,810 –2,867,113 2,475,690Treasuries – developed countries overseas –214 –670 574Treasuries – agencies & supranationals –3,592 –46,501 26,343Municipals & German Jumbo –132,440 –170,608 147,988

tOtal –6,930,732 –8,981,722 8,154,871

Measured by the total basis-point value, the Bank Austria Group’s credit spread position in 2012 ranged between – €6.9 million and – €9.0 million. The increase was due to intra-group funding activities and to a higher sovereign position in CEE (mainly Turkey). Overall, Treasury-near instruments continue to account for the largest part of the credit spread positions, followed by financials, which include intra-group funding bond positions. The corporates exposure is very low by comparison. The positions of asset-backed securities (ABSs) and mortgage-backed securities (MBSs) were further reduced in 2012, primarily through redemptions. The average CPV also continued to decline in this sector. Overall, the ABS book developed very favourably in 2012 in terms of total return in the year. Measured by redemption behaviour, the entire ABS/MBS book is to be classified as per-forming in 2012.

BacktestingBank Austria’s risk model is subjected to daily backtesting in accordance with regulatory requirements.

As the number of backtesting excesses (negative change in value larger than model result) has been within the range permitted by law ever since the model was introduced, the multiplier need not be adjusted. In 2012, a negative backtesting excess was recorded on 27 July, due to appreciation of the Turkish lira against the euro; as a result, FX transactions used for hedging the budgeted profits of CEE banks declined in value. The backtesting results thus confirm the accuracy and reliability of both models.




The chart below shows the backtesting results for the hypothetical trading results of the Bank Austria Group’s regulatory trading book; the hypothetical trading results are based on hypothetical changes in the portfolio value with unchanged daily positions.

Capital requirements for market riskThe new model was used for the purposes of calculating capital requirements throughout 2012. The relevant parameters are a 10-day holding period, a confidence level of 99% and a multiplier of 3.5.

As at 31 December 2012, the following capital requirements resulted for the Bank Austria Group in connection with “value at risk” (VaR), “stressed VaR” (SVaR) and “incremental risk charge” (IRC):• VaR: €22million• SVaR:€113million• IRC: €54million

Market risk management in CEEAt Bank Austria, market risk management covers the activities in Vienna and the positions at the subsidiaries, especially in Central and Eastern Europe. These subsidiaries have local risk management units with a reporting line to Risk Management in UniCredit Bank Austria AG. Uniform processes, methods, rules and limit systems ensure consistent Group-wide risk management adjusted to local market conditions.

The “IMOD” risk model has been implemented locally at major units (Czech Republic, Slovakia, Hungary, Croatia, Bulgaria, Russia, Turkey), and a daily risk report is made available to the other units; moreover all units also have technical access to the central market risk platform.

Analyses of position structure and balance sheet structure are available to all banks in the Group via “ALMRisk”, a Group-wide web tool. Liquidity monitoring is also based on this instrument.

The web application “ERCONIS” records the daily business results of treasury activities in CEE. In line with a total-return approach, measurements of the performance of subsidiaries include income generated by the subsidiaries and the valuation results of the banking book.

To avoid risk concentrations in the market risk position, especially in tight market conditions, Bank Austria has implemented at its banking subsidiaries Value-at-Risk limits and position limits for exchange rate risk, interest rate risk and equity risk, which are monitored daily. The monitoring of income trends at banking subsidiaries by means of stop-loss limits provides an early indication of any accumulation of position losses.

To meet higher capital requirements for trading positions pursuant to Basel 2.5, an RWA optimisation project was carried out to reduce trading activities as far as possible and lower existing trading limits.

The timely and continuous analysis of market risk and income is the basis for integrated risk-return management of treasury units at banking subsidiaries.

Backtesting results for the regulatory trading book of the Bank Austria Group, 2012 (€ million)

Jan. 12 Feb. 12 March 12 April 12 May 12 June 12 July 12 Aug. 12 Sept. 12 Oct. 12 Nov. 12 Dec. 12–10

–5

0

5

10

new IMOD-VaRHyp P&LIMOD-VaR mirrored


Value at Risk of banks in CEE (€ million)

Var as at 31 dec. 2012

aVerage Var 2012 Var sp-Var ir-Var fx-Var

Baltics –0.3 –0.3 0 –0.3 0Bulgaria –3.2 –3.8 –3.3 –2.4 0Croatia (incl. Bosnia) –2 –1.9 –1.2 –1.3 0Czech Republic –8.1 – 9.1 –8.9 –0.3 0Hungary –2.5 –3.5 –3.7 –0.5 –0.2Kazakhstan –3 –3.2 0 –3.2 –0.4Romania –4.4 –4.1 –4 –0.3 0Russia –7.5 –7.2 –5.1 –5.4 –0.3Serbia –0.9 –0.9 0 –0.9 –0.1Slovakia –2.2 –1.9 –2 –0.2 0Slovenia –3.6 –3.1 –2.3 –0.4 0Turkey –37.4 –39.9 –45.7 –14.0 –0.1Ukraine –5.7 –4.1 –1.5 –4.8 –0.5

cee –47 –53.9 –64.9 –17.7 –0.8

At the end of 2012, value at risk of all CEE banks was about €56.4 million (limit: €95 million), with open interest rate positions in the banking books and credit-spread positions of securities still accounting for the largest risk contributions.

Management of balance sheet structureThe matched funds transfer pricing system applied throughout the Group and the principle of causation applied in attributing credit risk, market risk and liquidity risk enable the bank to determine contribution margins from customer transactions in the bank’s business divisions. The risk committees of the bank ensure that the bank’s overall liquidity and interest rate gap structure is optimised, with the results from interest maturity transformation being reflected in the Corporate & Investment Banking Division. Factors taken into account in this context include the costs of compensation for as-suming interest rate risk, liquidity costs and country risk costs associated with foreign currency financing at CEE banking subsidiaries. These funding costs burden lending business in Austria and CEE and have remained at a high level on account of the persistent government debt crisis; signs of recovery and a reduction of funding costs became discernible at year-end 2012.

Products for which the material interest-rate and capital maturity is not defined, such as variable-rate sight and savings deposits, are modelled in respect of investment period and interest rate sensitivity by means of analyses of historical time series, and taken into account in the bank’s overall risk position. Interest rate sensitivities are determined and taken into account in hedging activities, which results in a positive contribution to profits from customer business.

To assess its balance-sheet and profit structure, the bank uses the Value-at-Risk approach, complemented by a scenario analysis concerning the simulation of future net interest income under different interest rate scenarios (“earnings perspective”).

The analyses performed at year-end 2012 show that a further interest rate decline in all currencies, from an already low level, would have the strongest impact on the bank’s net interest income. This is a typical feature of commercial banks, given the interest rate remanence on the liabilities side of banks’ balance sheets (sight deposits, equity).

The Basel 2 rules require the measurement at Group level of “interest rate risk in the banking book” in relation to the bank’s capital by comparing a change in the market value of the banking book after a 2% interest rate shock with the bank’s net capital resources. In the event that such an interest rate shock absorbs more than 20% of a bank’s net capital resources, the bank supervisory authority could require the bank to take measures to reduce risk.

A 2% interest rate shock would absorb 3.5% of the Group’s net capital resources; this calculation also includes the current investment of equity capital as an open risk position. This means that the figure for Bank Austria is far below the outlier level of 20%.




E.3 – Liquidity risk

Qualitative informationGeneral information, processes and management modelIn line with Group standards, the Bank Austria Group deals with liquidity risk as a central risk in banking business by introducing and monitoring short-term and long-term liquidity requirements. In this context the liquidity situation for the next few days and months and also for longer periods is analysed against a standard scenario and stress scenarios. Methods and procedures of liquidity analysis, analyses of the degree of liquidity of customer positions, management responsibilities and reporting lines in this area have been laid down in the liquidity policy, which is also applicable at Bank Austria’s CEE units and includes a contingency plan in the event of a liquidity crisis.

Liquidity management in UniCredit Bank Austria AG is an integral part of UniCredit Group liquidity management. In line with the Group-wide distribution of tasks, Bank Austria ensures the consolidation of liquidity flows and the funding for subsidiaries in Austria and CEE. The flow of funds is thereby optimised and external funding is reduced to the necessary extent. Liquidity transfers within the Group are based on market prices.

Liquidity management methods and controlIn medium-term and long-term liquidity management, assets must be covered by liabilities to a minimum extent of 90%/85%/80% over a period of 1 /3/5 years. This limit must be observed at Group level and for each banking subsidiary. At individual currency level, absolute limits for cross- currency funding arrangements have been defined for each bank of the Group; these limits are largely geared to the above-mentioned liquidity ratios. At Bank Austria Group level, the liquidity ratio as at year-end 2012 was 1.02 for > 1 year and 0.98 for > 5 years. This means that in effect, long-term assets are fully funded at Group level.

For the purpose of short-term liquidity management, volume limits have been implemented in the Bank Austria Group and in all banks for maturities up to three months, which limit all Treasury transactions and the securities portfolio of the respective bank. Volume limits are also established for open maturities in various currencies to keep down the risk of a need for follow-up funding in the event that foreign currency markets dry up.

These limits were essentially observed at all levels. Sluggish credit demand, a strong improvement in deposit volume and ECB tenders result in a comfortable liquidity position of the Group.

Liquidity stress testBank Austria performs liquidity stress tests for the Group and for individual banks on a regular basis, using a standardised Group-wide instrument and standardised Group-wide scenarios. These scenarios describe the effects of market-driven or name-driven crisis signals on liquidity inflows and outflows, with assumptions also being made about the behaviour of non-banks.

The liquidity outflows expected to occur in stress situations are compared with available collateral (essentially, securities and credit instruments eligible as collateral at the central bank) to examine the banks’ risk-taking capability in the short term up to two months.

The tight liquidity situation in financial markets (especially in the interbank market) put a strain on these crisis scenarios, but the existing pool of collateral covers liquidity outflows under any scenario.

Support provided by the ECB and positive trends in customer deposits and deposits from banks significantly enhanced the Group’s resilience to extreme stress factors.

Quantitative informationThe breakdown by contractual residual maturity is shown in section F.1.

Funding plan and liquidity costs in pricingFinancing that part of credit growth which is not covered by deposits and funding the CEE subsidiaries is one of the main functions of the Group’s liquidity management. Financing requirements for the coming year and the short-term and long-term funds made available to the subsidiaries for their business are defined on the basis of a funding plan, and a strategy for raising the required funds is drawn up. As financial markets in Central and Eastern Europe were partly still characterised by volatility, closer attention was given in 2012 to the financial independence of the CEE subsidiaries. The focus is on a well-balanced financial position, which reduces dependence on financial markets and also meets requests by banking regulators.

Part of the country risks in connection with financing the CEE subsidiaries out of Austria is covered by MIGA or SACE guarantees (MIGA: Multilateral Investment Guarantee Agency, a member of the World Bank Group; SACE: a leading Italian credit insurer).


To ensure the correct settlement of liquidity premiums payable by the Bank Austria Group to external market participants, liquidity costs are charged. Liquidity costs are part of the reference rate system. The applicable alternative costs are debited or, on the basis of an opportunity cost approach, credited to the various products on the assets side and the liabilities side which have an effect on liquidity. In the current controlling process this ensures the proper pricing of our business.

The Bank Austria Group can draw on a diversified funding base. The bank uses a wide range of financing instruments. Funding requirements are largely met through funds entrusted to the bank by private and corporate customers. The bank’s own issues account for about one-fifth of total funding. In regional terms, UniCredit Bank Austria AG contributes about one-half to total funding, a significant proportion is denominated in euro.

E.4 – Counterparty riskUniCredit Bank Austria AG has made further efforts, as part of the implementation of Basel 3 requirements, to refine the risk management model for derivatives, securities lending and repurchase agreements. For the purposes of portfolio management and risk limitation in the derivatives and security financing business with banks and customers, the bank uses an internal counterparty risk model (IMM) based on a Monte Carlo path simulation to estimate the potential future exposure at portfolio level for each counterparty.

The counterparty risk model (NORISK CR), which was approved by the Austrian supervisory authority in 2009, was extended in 2012 to include further CEE countries for risk management aspects; special mention should be made of the bank in Turkey because of its size. In this context the focus is on risk management and not yet on regulatory approval.

Moreover, with the creation of a Group-wide counterparty risk model in 2012, the relevant aspects of Basel 3 were implemented. The project also involved work on refining the risk model (e. g. use of 52 markers instead of 20, or 3,000 scenarios instead of 1,000, in the simulation).

The bank took account of the growing importance of counterparty risk by creating a separate unit for this purpose within Market Risk and Risk Integration at the beginning of 2010.

The calculations are based on market volatility, correlations between specific risk factors, future cash flows and stress considerations. Netting agree-ments and collateral agreements are also taken into account for simulation purposes.

The simulation calculations are performed for all major types of transactions, e. g. forward foreign exchange transactions, currency options, interest rate instruments, equity /bond-related instruments, credit derivatives and commodity derivatives. Other transactions are taken into account with an add-on depending on factors such as maturity. The bank applies a confidence interval of 97.5%.

At the end of 2012, derivative transactions, repurchase agreements and securities lending transactions resulted in the following exposures:

Exposures (€ billion)

Austria 2.8CEE 3.8tOtal 6.6

Separate reporting on counterparty risk was introduced with a view to informing UniCredit Bank Austria AG’s Market Risk Committee (MACO) and Derivative Committee (DECO) of current exposure trends and providing additional information relevant to risk management. Moreover, backtesting is performed at regular intervals, at the level of individual counterparties and at overall bank level, in order to check the quality of the model on an ongoing basis.

Line utilisation for derivatives and security financing business of customers is available online in WSS (“Wallstreet”), the central treasury system, on a largely group-wide basis. In addition to determining the potential future exposure, the path simulation also enables the bank to calculate the average exposure and the modified average exposure pursuant to Basel 2 (exposure at default) and the effective maturity of the exposure as well as the “stressed EPE” pursuant to Basel 3 to each counterparty.

UniCredit Bank Austria AG additionally limits the credit risk arising from its derivatives business, repurchase agreements and securities lending business through strict use of master agreements, the definition and ongoing monitoring of documentation standards by legal experts, and through collateral agreements and break clauses. Management takes proper account of default risk, especially because the relevance of this risk category has increased and on the basis of experience gained in the international financial market crisis, despite the good average credit rating of our business partners.




E.5 – Country risk and sovereign riskRisk associated with cross-border transactions with all customer groups is reflected in country risk (“transfer and convertibility risk”; country risk includes, for example, loans to foreign corporate customers or banks). Risk associated with the state itself (e. g. the purchase of government bonds) is reflected in sovereign risk, irrespective of whether such risk is cross-border or local risk. Both risks are assessed via a group-wide credit process. Country limits and sovereign limits are assessed by the responsible risk management team, approved by the relevant body having approval authority, and assigned to UniCredit subsidiaries according to business needs. In general, cross-border business is not limited for countries which are presumed less risky, e. g. the US, Japan, core EU countries; for all other countries, cross-border business is limited via the assigned country limit. Sovereign risk is in each case limited via counterparty limits. The overall bond exposure is monitored via nominal credit risk limits and market risk limits. Impairment losses are recognised, if necessary, according to international standards.

GreeceImpairment losses on Greek bond exposure were recognised already in the previous year, based on a conservative approach. Business with Greek banks has been reduced to a minimum.

SpainUniCredit Group responded to the crisis in the Spanish financial market with a strict watch list strategy. Business partners accepted by the Group are primarily internationally active tier 1 banks, other business transactions with Spanish banks are entered into only in individual cases after careful case-by-case examination.

ItalyThe Italian risk is also centrally monitored and has been adjusted via a watch list strategy, mainly focusing on UniCredit, tier 1 banks and the sovereign within assigned counterparty credit and market risk limits.

Eastern Europe, Hungary and SloveniaIn view of the economic and political situation in Hungary and the difficult situation in Slovenia, UniCredit Group has taken prudent risk-mitigating measures. UniCredit is monitoring the situation and its portfolio and has also limited business via a watch list strategy.

Large sovereign exposures for other countries (e. g. Russia, Romania, Croatia) mainly result from excess liquidity management of Bank Austria banking subsidiaries or guarantees from the respective sovereign provided to support local (i. e. Bank Austria banking subsidiaries in e. g. Serbia, Croatia) corporate business. Both are monitored and limited within the framework of credit risk management.


Breakdown of sovereign debt securities by country and portfolio (€ million)

31 dec. 2012

cOuNtry/pOrtfOliO NOmiNal Value bOOK Value fair Value

austria 4,516 5,280 5,293HFT financial assets / liabilities (net exposures) 1) – – –Financial assets at FV through P&L – – –Available for sale 4,373 5,136 5,136Loans and receivables – – –Held-to-maturity investments 143 144 157

turkey 2) 2,906 3,438 3,104HFT financial assets / liabilities (net exposures) 1) 79 78 78Financial assets at FV through P&L – – –Available for sale 1,967 2,367 2,367Loans and receivables – – –Held-to-maturity investments 860 993 659

czech republic 2,105 2,240 2,240HFT financial assets / liabilities (net exposures) 1) 65 63 63Financial assets at FV through P&L 233 235 235Available for sale 1,805 1,942 1,942Loans and receivables – – –Held-to-maturity investments – – –

hungary 1,362 1,372 1,373HFT financial assets / liabilities (net exposures) 1) 11 12 12Financial assets at FV through P&L – – –Available for sale 1,304 1,312 1,312Loans and receivables 28 29 29Held-to-maturity investments 19 20 20

romania 872 893 893HFT financial assets / liabilities (net exposures) 1) – – –Financial assets at FV through P&L – – –Available for sale 872 893 893Loans and receivables – – –Held-to-maturity investments – – –

croatia 888 889 889HFT financial assets / liabilities (net exposures) 1) – – –Financial assets at FV through P&L – – –Available for sale 884 885 885Loans and receivables – – –Held-to-maturity investments 3 3 3

italy 829 849 850HFT financial assets / liabilities (net exposures) 1) – – –Financial assets at FV through P&L – – –Available for sale 775 795 795Loans and receivables – – –Held-to-maturity investments 54 55 55

russia 803 839 839HFT financial assets / liabilities (net exposures) 1) 58 62 62Financial assets at FV through P&L – – –Available for sale 745 777 777Loans and receivables – – –Held-to-maturity investments – – –

1) Including exposures in credit derivatives. 2) Amounts recognised using proportionate consolidation with reference to the ownership percentage for exposures held by joint ventures.




31 dec. 2012

cOuNtry/pOrtfOliO NOmiNal Value bOOK Value fair Value

slovakia 466 499 500

HFT financial assets / liabilities (net exposures) 1) – – –Financial assets at FV through P&L – – –Available for sale 438 470 470Loans and receivables – – –Held-to-maturity investments 27 28 30

bulgaria 443 481 486HFT financial assets / liabilities (net exposures) 1) 24 26 26Financial assets at FV through P&L 5 4 4Available for sale 290 317 317Loans and receivables 8 8 8Held-to-maturity investments 117 127 132

Other countries 1,181 1,045 1,045HFT financial assets / liabilities (net exposures) 1) 201 44 44Financial assets at FV through P&L – – –Available for sale 948 970 970Loans and receivables – – –Held-to-maturity investments 33 31 31

tOtal 16,370 17,826 17,512thereof:slovenia 206 212 212greece 156 1 1portugal 30 29 29spain 8 6 6

1) Including exposures in credit derivatives.

#


Breakdown of sovereign debt securities by portfolio (€ million)

31 dec. 2012

held fOr tradiNg (Net expOsures)

fiNaNcial assets at fair Value

aVailable-fOr-sale fiNaNcial assets lOaNs

held-tO-maturity iNVestmeNts tOtal

Book value of sovereign portfolio 286 239 15,864 36 1,400 17,826Total portfolio of debt securities 484 317 20,437 5,392 1,895 28,524% Portfolio 59.07% 75.44% 77.62% 0.67% 73.92% 62.49%

Sovereign exposures are bonds issued by and loans granted to central banks, governments and other public sector entities. ABSs are not included.

Breakdown of sovereign loans by country (€ million)

31 dec. 2012

cOuNtry bOOK Value

Austria 5,623Croatia 2,270Indonesia 526Slovenia 258Hungary 216Serbia 185Bosnia and Herzegovina 175

Philippines 114Romania 110Other 597tOtal ON-balaNce sheet expOsure 10,075

Sovereign loans are loans granted to central and local governments and other public sector entities.




E.6 – Credit riskBreakdown of financial assets by portfolio and credit quality (carrying value) (€ million)

baNKiNg grOup Other cOmpaNies

pOrtfOliO/Quality

NON-perfOrmiNg

lOaNsdOubtful

assetsrestructured

expOsures past-dueOther

assets impaired Other tOtal

Financial assets held for trading 1 – 6 – 2,816 – 1 2,824Available-for-sale financial assets – 1 – – 19,933 – 103 20,037Held-to-maturity financial instruments – 6 – – 1,889 – – 1,895Loans and receivables with banks 3 1 – – 28,032 – 76 28,112Loans and receivables with customers 2,223 2,846 1,074 566 125,644 – 71 132,425Financial assets at fair value through profit or loss – – – – 317 – – 317Financial instruments classified as held for sale 759 268 95 6 2,017 – – 3,145Hedging derivatives – – – – 4,125 – – 4,125tOtal 31 december 2012 2,986 3,122 1,175 573 184,773 – 252 192,880

Impaired loans are divided into the following categories:

•Non-performingloans–formallyimpairedloans,beingexposuretoinsolventborrowers,eveniftheinsolvencyhasnotbeenrecognisedinacourtoflaw,orborrowersinasimilarsituation. Measurement is on a loan-by-loan or portfolio basis.

•Doubtfulloans–exposuretoborrowersexperiencingtemporarydifficulties,whichtheGroupbelievesmaybeovercomewithinareasonableperiodoftime.Doubtfulloansarevalued on a loan-by-loan basis or portfolio basis.

•Restructuredloans–exposuretoborrowerswithwhomareschedulingagreementhasbeenenteredintoincludingrenegotiatedpricingatinterestratesbelowmarket,theconversion of loans/ reduction of principal etc.; measurement is on a loan-by-loan basis or portfolio basis.

•Past-dueloans–totalexposuretoanyborrowernotincludedintheothercategories,whoatthebalance-sheetdatehasexpiredfacilitiesorunauthorisedoverdraftsthataremorethan 90 days past due.

In contrast to the presentation in the consolidated statement of financial position, equity investments and units in investment funds are not included in the presentation of credit risk. For this reason, the following table shows slight differences compared with the consolidated statement of financial posi-tion in the items financial assets held for trading, financial assets at fair value through profit or loss and available-for-sale financial assets.

Breakdown of financial assets by portfolio and credit quality (gross and net values) (€ million)

impaired assets perfOrmiNg

tOtal (Net expOsure) pOrtfOliO/Quality

grOss expOsure

specific Write-dOWNs

Net expOsure

grOss expOsure

pOrtfOliO adjustmeNts

Net expOsure

Financial assets held for trading 6 – 6 X X 2,818 2,824Available-for-sale financial assets 8 7 1 20,037 – 20,037 20,037Held-to-maturity financial instruments 8 2 6 1,889 – 1,889 1,895Loans and receivables with banks 50 46 5 28,108 – 28,108 28,112Loans and receivables with customers 12,802 6,092 6,710 126,454 739 125,715 132,425Financial assets at fair value through profit or loss – – – X X 317 317Financial instruments classified as held for sale 2,511 1,383 1,128 2,029 12 2,017 3,145Hedging derivatives – – – X X 4,125 4,125tOtal 31 december 2012 15,385 7,530 7,856 178,515 751 185,024 192,880


The following breakdowns of on-balance sheet and off-balance sheet exposures to banks and customers include not only loans and receivables but also exposures from the other IAS 39 categories and the disposal groups, for banks and customers without derivative exposures.

Banking group – On-balance sheet and off-balance sheet exposure to banks: gross and net values (€ million)

expOsure types/amOuNts grOss expOsure specific Write-dOWNs pOrtfOliO adjustmeNts Net expOsure

On-balance sheet exposure Non-performing loans 37 34 X 3Doubtful loans 3 1 X 1Restructured exposures 10 10 X –Past due – – X –Other assets 30,731 X – 30,731total 30,781 46 – 30,736

Off-balance sheet exposureImpaired 12 12 X –Other 8,167 X – 8,167total 8,179 12 – 8,167tOtal 31 december 2012 38,960 57 – 38,903

Banking group – On-balance sheet and off-balance sheet exposure to customers: gross and net values (€ million)

expOsure types/amOuNts grOss expOsure specific Write-dOWNs pOrtfOliO adjustmeNts Net expOsure

On-balance sheet exposure Non-performing loans 8,212 5,230 X 2,982Doubtful loans 4,607 1,486 X 3,121Restructured exposures 1,769 598 X 1,171Past due 742 170 X 573Other assets 148,975 X 751 148,224total 164,305 7,484 751 156,071

Off-balance sheet exposurebanking groupImpaired 714 169 X 544Other 50,305 X 39 50,266total 51,019 169 39 50,810tOtal 31 december 2012 215,324 7,653 790 206,881

Banking group – On-balance sheet exposure to customers: gross change in impaired exposures (€ million)

chaNges iN 2012

sOurce/categOriesNON-perfOrmiNg

lOaNs dOubtful assetsrestructured

expOsures past-due expOsures

Opening balance – gross exposure 7,523 5,025 1,864 600Sold but not derecognised – – – –

increases 2,607 2,590 1,178 681Transfers from performing loans 830 1,811 331 606Transfers from other impaired exposure 1,538 698 751 20Other increases 239 80 96 55

reductions –1,919 –3,007 –1,273 –539Transfers to performing loans –148 –200 –61 –81Derecognised items –617 –130 –410 –10Recoveries –348 –402 –121 –38Sales proceeds –106 –19 –110 –19Transfers to other impaired exposure –228 –2,016 –398 –365Other reductions –472 –240 –174 –26

closing balance – gross exposure 8,212 4,607 1,769 742Sold but not derecognised – – – –




Banking group – On-balance sheet exposure to customers: changes in overall impairment (€ million)

chaNges iN 2012

sOurce/categOriesNON-perfOrmiNg

lOaNs dOubtful assetsrestructured

expOsures past-due expOsures

total opening write-downs 4,703 1,824 618 151Sold but not derecognised – – – –

increases 1,971 1,193 652 183Write-downs 1,244 822 151 164Losses on disposal 5 1 – –Transfers from other impaired exposure 565 212 495 5Other increases 157 159 6 13

reductions –1,445 –1,531 –672 –163Write-backs from assessments –145 –186 –14 –26Write-backs from recoveries –380 –183 –48 –47Gains on disposal –8 –2 – –Write-offs –617 –130 –410 –10Transfers to other impaired exposure –118 – 960 –119 –79Other reductions –177 –70 –80 –2

final gross write-downs 5,230 1,486 598 170Sold but not derecognised – – – –

Banking group – On-balance sheet and off-balance sheet credit exposure by external rating class (book values) (€ million)

balaNce at 31 dec. 2012

exterNal ratiNg classes

NO ratiNg tOtalclass 1 class 2 class 3 class 4 class 5 class 6

On-balance sheet exposures 11,148 11,849 15,229 9,340 1,477 8,001 129,762 186,806derivative contracts 83 5,851 531 331 65 51 728 7,639

Financial derivative contracts 83 4,679 531 331 65 51 723 6,462Credit derivatives contracts – 1,172 – – – – 5 1,177

guarantees given 28 251 680 759 50 430 18,883 21,081Other commitments to disburse funds 838 1,049 679 710 104 136 26,742 30,257tOtal 12,097 19,000 17,119 11,140 1,696 8,618 176,114 245,784

Class 1 (AAA/AA–), 2 (A+/A–), 3 (BBB+/BBB–), 4 (BB+/BB–), 5 (B+/B–), 6 (impaired exposures are included in class 6)40% of rated counterparties were investment grade (from class 1 to 3), 43% of customers were not rated due to the considerable share of customers in the segment comprising private individuals and SMEs.

Banking group – On-balance sheet and off-balance sheet exposure by internal rating class (book values) (€ million)


iNterNal ratiNg classes

1 2 3 4 5 6

On-balance sheet exposures 5,018 11,905 29,070 46,976 22,641 20,118derivative contracts – 82 5,705 984 256 182

Financial derivative contracts – 82 4,533 984 256 182Credit derivatives contracts – – 1,172 – – –

guarantees given 1 291 2,777 5,567 2,468 2,104Other commitments to disburse funds 804 109 2,561 3,042 2,177 1,814tOtal 5,823 12,387 40,113 56,568 27,542 24,218


iNterNal ratiNg classes impairedexpOsures

NOratiNg tOtal7 8 9

On-balance sheet exposures 18,742 4,630 952 7,851 18,904 186,806derivative contracts 98 22 16 6 290 7,640

Financial derivative contracts 98 22 16 6 285 6,462Credit derivatives contracts – – – – 5 1,177

guarantees given 914 469 76 421 5,994 21,081Other commitments to disburse funds 5,405 218 42 118 13,968 30,257tOtal 25,159 5,338 1,085 8,395 39,155 245,784


The mapping to the internal rating masterscale considers the PD ranges mentioned below:

iNterNal ratiNg classes pd miN pd max

1 0.0000% 0.0036%2 0.0036% 0.0208%3 0.0208% 0.1185%4 0.1185% 0.5824%5 0.5824% 1.3693%6 1.3693% 3.2198%7 3.2198% 7.5710%8 7.5710% 17.8023%9 17.8023% 99.9999%10 impaired

Credit riskNet write-downs of loans and provisions for guarantees and commitments declined further in 2012. This was due to a strong improvement in the Family & SME Banking segment as the negative impact of the economic crisis on this business segment remained significantly below expectations.

In the Corporate & Investment Banking segment (CIB), both additions to and releases of loan loss provisions were higher than in the previous year; on balance, net write-downs of loans and provisions for guarantees and commitments in this business segment were €121.8 million, slightly lower than in the previous year.

In the Family & SME Banking segment (F&SME), net write-downs of loans and provisions for guarantees and commitments were €86.3 million, down by almost one-half from the previous year’s level. This reflects significant releases of loan loss provisions in the SME sub-segment and lower-than-expected additions to loan loss provisions for business with private individuals. The additional write-down on foreign currency loans in the latter sub-segment was againfurtherincreasedtotakeadequateaccountofpotentiallyinsufficientperformanceofrepaymentvehiclesandofexchangeraterisk.Quitegenerally,as in the two previous years, a large number of additional advisory talks were held with customers in the segment of foreign currency loans in several waves in order to evaluate the new situation and the credit risk arising for the bank from this type of loan on a timely basis. At any point in time, the risk-focused presentation (credit line in €, utilisation in currency) shows the amount of the credit line originally granted to the customer, the currency fluctuation allowed for when the loan was granted, and the amount currently outstanding.

The favourable trend in net write-downs of loans and provisions for guarantees and commitments seen at the subsidiaries in Central and Eastern Europe in 2011 continued in 2012. The provisioning charge again declined slightly, to about €1,043 million (2011: €1,050 million).

As the subsidiary in Kazakhstan was classified as a discontinued operation, net write-downs of loans and provisions for guarantees and commitments for the subsidiaries in Central and Eastern Europe declined to €895 million, reflecting a slight increase over the previous year (2011: €768 million).

Developments in 2011 reflected a particularly favourable trend in the CIS region, whereas the slight decline in the provisioning charge in 2012 cannot be explained by reference to a single region; it was due to individual countries in various regions.

Within Central Europe, Hungary recorded a very positive trend, with net write-downs of loans and provisions for guarantees and commitments amounting to €35 million (2011: €95 million). However, the significant decrease was mainly due to the release of provisions made in the previous year in connection with the Early Repayment Programme. Net write-downs of loans and provisions for guarantees and commitments in the other Central European countries rose slightly.

The favourable development in the CIS region was driven by Kazakhstan, where net write-downs of loans and provisions for guarantees and commitments fell to €148.3 million (2011: €282 million), while negative trends were seen in Russia with €67 million (2011: €60 million) and Ukraine with €136 million (2011: €100 million).

Romania and the Baltics accounted for positive trends in the region of South-East Europe, while Croatia, Bosnia, Bulgaria and Serbia recorded an increase in net write-downs of loans and provisions for guarantees and commitments.

The bank in Turkey had to absorb a large increase in the provisioning charge in 2012, to a level of €147 million (2011: €48 million). The main reason for this significantly higher provisioning charge was the continued deterioration of the retail loan portfolio. Although net write-downs of loans and provi-sions for guarantees and commitments were significantly higher than in the previous year, the cost of risk as a proportion of lending volume in Turkey was still at a satisfactory low level.

In 2012, impaired loans at CEE banking subsidiaries continued to rise compared with the previous year as the loan portfolio was expanded. On this basis the impaired loans ratio (i. e. impaired loans as a percentage of total loans to customers) remained unchanged in 2012 compared with the previous year.

Mortgages are the main type of collateral used; other types of collateral accepted are guarantees and suretyships in particular.




Realisation of mortgage collateralMortgages are the main type of collateral accepted by UniCredit Bank Austria AG for real estate finance. The impact of international financial market turbulence on real estate markets in CEE often leads to further losses being incurred by UniCredit Bank Austria AG when realising collateral. In many cases, past assumptions of value are no longer applicable.

UniCredit Bank Austria AG has therefore established subsidiaries in Vienna and in major CEE countries (the Czech Republic, Russia, Bulgaria, Romania, …) which concentrate on active workout management and optimum realisation of real estate. These companies act as potential buyers of real estate mortgaged to UniCredit Group when such real estate is sold at auction or on the basis of voluntary arrangements with borrowers.

A potential purchase of real estate mortgaged to UniCredit Group is preceded by intensive evaluation to ensure that the purchase of such real estate – as compared with immediate realisation – will lead to a significant reduction of the loss to the Group.

Such transactions are considered especially for real estate which is run effectively or may be developed, and in respect of promising projects, which are to be liquidated because the owners are insolvent.

Via its subsidiaries established for this purpose, UniCredit Bank Austria AG can purchase and temporarily hold real estate or assume control of projects, complete or continue developing such projects if necessary, and subsequently sell the real estate through an orderly process.

Credit risk methods and instrumentsVery important factors in the credit approval process are a detailed assessment of risk associated with each loan exposure, and the customer’s credit rating in particular. Every lending decision is based on a thorough analysis of the loan exposure, including an evaluation of all relevant factors. Following the initial loan application, the bank’s loan exposures are reviewed at least once a year. If the borrower’s creditworthiness deteriorates substantially, shorter review intervals are obligatory.

For internal credit assessment in Austria and by Bank Austria’s banking subsidiaries in CEE, the bank uses various rating and scoring models – for calculating the parameters PD (probability of default), LGD (loss given default) and EAD (exposure at default) – on the basis of models specifically devel-oped for these purposes for the customer /business segments to be assessed, in line with the various asset classes pursuant to Section 22 b of the Austrian Banking Act, the Solvency Regulation and Directive 2006/48/EC of the European Parliament and of the Council of 14 June 2006 relating to the taking up and pursuit of the business of credit institutions. There are country-specific or region-specific models (e. g. for corporate customers, private and business customers) and global models (e. g. for sovereigns, banks, multinational corporates). The assessment of a loan exposure is based on data from the respective company’s financial statements and on qualitative business factors.

The various rating and scoring models provide the basis for efficient risk management of the Bank Austria Group and are embedded in all decision-making processes relating to risk management. They are also a key factor for capital required to be held against risk-weighted assets. Great attention is given to consistency in the presentation for supervisory purposes and the requirements of internal control.

All internal rating and scoring systems are monitored on an ongoing basis. The systems are also subject to regular validation on an annual basis, including a review to verify if the rating/scoring system provides a correct representation of the risks to be measured. All model assumptions are based on multi-year statistical averages for historical defaults and losses, with appropriate attention being given to the potential impact of turbulence in international financial markets.

In this context, credit risk stress tests, which are required by banking supervisory authorities and are carried out on a regular basis, are an essential instrument for assessing future risks in an unfavourable economic environment. Such tests enable the Management Board to assess the adequacy of regulatory capital and economic capital on the basis of different stress scenarios. Credit risk stress calculations for the entire Group are based on a credit portfolio model developed in-house and are analysed for their impact on regulatory and economic capital.

Risk-adjusted pricing and proactive risk management constantly improve the diversification and the risk /earnings ratio of the portfolio.

For real estate customers, the customer-related rating is complemented by a transaction rating.

Bank Austria uses a retail scoring system. The automated rating tool is used for assessing, monitoring and managing the large number of loan expo-sures to private customers, small businesses, independent professionals and small non-profit organisations. Retail scoring comprises an application scoring procedure based on effective and recognised mathematical and statistical methods, and a behaviour scoring procedure taking into account such factors as amounts received in the account and customers’ payment practices. The retail scoring system provides information that is updated on a monthly basis. This gives the bank an efficient tool for lending decisions and early recognition of risk. Automated data processing helps Bank Austria to reduce costs required for credit control while accelerating lending decisions.


Four CEE banking subsidiaries switched from the standardised approach to the Foundation IRB approach in 2011, followed by two further CEE banking subsidiaries in 2012. The forecasting quality of rating models and underlying processes were optimised in close cooperation with specialists at UniCredit Bank Austria AG. In developing models and carrying out validations, attention is given to ensuring the consistent and quality-assured implementation of Group guidelines.

Credit TreasuryCredit Treasury has two main tasks: preparing and monitoring the risk-adequate pricing of loans; and executing risk-transfer and capital-generating measures and transactions.

To ensure uniform pricing within UniCredit Group, the risk-adjusted spread is determined on the basis of multi-year probabilities of default (depending on the term of the loan), added as a price component and monitored on an ongoing basis.

Initially rolled out for a predefined customer segment of Austrian corporate customers as at 1 January 2011, this system is to be extended to cover other segments and regions.

Moreover, Credit Treasury executes risk transfers and capital-generating measures and transactions (via synthetic securitisations, CLNs, etc.) and liquidity-generating measures/ transactions for the entire Bank Austria Group (including CEE).

The Credit Treasury Committee, which holds quarterly meetings, is responsible for strategic coordination and decisions on measures and transactions.

Provisioning processLoans/bonds:Special Credit managers have to review all exposures at regular intervals to see if there is a requirement for recognising an impairment loss. In cases where there is a substantial probability of restructuring, the amount of the impairment loss is the difference between the carrying amount of the loan and the present value of estimated future cash flows in accordance with IAS 39. In cases where there is a low probability of restructuring, future cash flows are calculated using the liquidation scenario. The workout unit calculates any provisioning requirement on the basis of the estimated present value of the liquidation proceeds/ recovery percentage.

ABSs:As part of a structured watchlist and impairment process for ABSs, positions are identified which are reviewed for any provisioning requirement at reg-ular intervals. This is usually done by applying specific models, especially cash flow models. These models map the individual transaction structure and calculate a present value of estimated future cash flows. The amount of the impairment loss is the difference between the carrying amount of the ABS position and the present value of estimated future cash flows.

E.7 – operational riskOperational risk (OpRisk) is defined as the risk of loss resulting from inadequate or failed internal processes, people and systems or from external events (including legal risks). For example, compensation paid to customers for incorrect / inadequate product-related advice, IT system failures, damage to property, processing errors or fraud are subject to accurate and consolidated risk measurement and management (collection of loss data, external data, scenarios, indicators), on which the calculation of capital to be held for operational risk is based.

Loss data are collected, and processes are optimised, in close coordination and cooperation with other departments and units including Internal Audit, the Compliance Office, Legal Affairs and the insurance sector. Over the years, UniCredit Bank Austria AG has taken numerous measures in the various divisions to manage and reduce operational risk. Thus data security measures, measures to ensure the confidentiality and integrity of stored data, access authorisation systems, the two-signatures principle, and a large number of monitoring and control processes as well as staff training pro-grammes have been implemented among other measures.

In line with other types of risk, UniCredit Bank Austria AG – like UniCredit – has built up a decentralised operational risk management framework based on representatives within divisions and at banking subsidiaries – Divisional OpRisk Managers (DORM) and OpRisk Managers – in addition to central operational risk management. While the main task of central risk management is to define the methods used and to perform risk measurement and analysis, decentralised risk managers are responsible for taking measures to reduce, prevent, or take out insurance against, risks.

Activities in 2012 concentrated on further developing operational risk management by monitoring operational risk limits; analysing, collecting and classifying operational risk events relating to credit risk, and reporting them at Bank Austria Operational & Reputational Risk Committee meetings; developing a process for identifying operational risk-relevant projects and continuing to firmly establish the Permanent Work Group (PWG) with a view to enhancing – through cooperation of the relevant functions – the ability to analyse loss events, indicators and scenarios as well as defining actions to mitigate operational risks.




In CEE, the focus was on finalising the PWG rollout at all strategically relevant banking subsidiaries to identify and implement possible measures in respect of existing and potential operational risks on the basis of analyses of loss events, KRIs, scenarios, projects and new products. Moreover, operational risk management for CEE at Bank Austria focused on preparing the local operational risk framework at relevant units for the regulatory review in accordance with the AMA rollout plan in cooperation with UniCredit Group. On the basis of the review, carried out in 2011, of compliance with the Derivatives Policy at CEE banking subsidiaries, support was provided to the current validation of the CEE Derivatives Policy.

Overall, the organisation of operational risk management at UniCredit Bank Austria AG is well established at a high level of quality. A network of inde-pendent functions and teams are involved in managing and controlling risks, providing the Management Board with sufficient information on the risk situation and enabling the Management Board to manage risk. The analysis of the general ledger for operational risk relevance confirmed the extensive and complete operational risk data collection.

Since 2008, the task of dealing with operational risk issues has been performed by a separate Operational Risk Committee (OpRiCo), whose meetings are held on a quarterly basis and are attended by the Chief Risk Officer, the Head of Strategic Risk Management & Control, the Head of UniCredit Operational Risk Management, Compliance, Internal Audit, the Divisional Operational Risk Managers and OpRisk representatives of CEE banking subsidiaries. The Committee is a major step towards integrating operational risk in the bank’s processes; its main tasks are to report on current operational risk issues and developments, to approve operational risk-relevant documents, to report losses and serve as a body to which unresolved issues are referred. As from May 2012, the Committee’s responsibilities were extended to include strategic reputational risk issues and monitoring, and the number of the Committee’s members was enlarged by including persons who are in charge of individual cases of reputational risk. Therefore the Committee was renamed “Operational & Reputational Risk Committee” (OpRRiCo).

In 2013 activities with regard to operational risk will focus on:• intensifyingandfurtherexpandingthePermanentWorkGroupwithregardtoactionstomitigateoperationalriskinUniCreditBankAustriaAGandat

strategically relevant CEE banking subsidiaries, taking into account the objectives and measures described in the global Operational Risk Strategy;• supportingtheunitsinaccordancewiththeAMArolloutplaninpreparingandcarryingoutregulatoryreviewsincooperationwithUniCreditGroup;• supportingtheholdingcompanyinfurtherdevelopingtheAMAmodel;• preparingandimplementingaconceptforintegratingoperationalrisksinthegeneralbudgetingprocess;• analysingthecollectionandclassificationofoperationalriskeventsrelatingtocreditrisk;• analysingUniCreditBankAustriaAG’sinsuranceportfolioinrespectofthepotentialmitigationoftopriskswithinoperationalrisk.

E.8 – Reputational riskVarious controversial topics – including nuclear energy, armaments and weapons production, trading and maintenance, large-scale dam projects and mining etc. – may present a partner bank involved in such transactions with reputational risks and lead to a negative perception of the bank by the public.

At the beginning of 2012 Operational & Reputational Risk, a separate unit within the CRO management function, was entrusted with strategic manage-ment and monitoring of reputational risk. Activities in 2012 focused on implementing strategic reputational risk management in existing processes, clarifying responsibilities, establishing a reporting structure, conducting reputational risk training programmes and rolling out the overall concept at CEE banking subsidiaries.

In 2013, activities with regard to reputational risk will focus on:• continuingtoprovidesupporttoCEElegalentitiesinintroducingstructures,policies,trainingetc.forreputationalrisk;• implementingnewreputationalriskpolicieswithinUniCreditBankAustriaAGandrollingthemoutatCEEsubsidiaries;• monitoringandreportingcasesofreputationalriskandtrendswithregardtorelevanttopics;• enhancingawarenessofreputationalriskmanagementthroughtrainingactivitieswithinUniCreditBankAustriaAGandCEE.

E.9 – Business riskBusiness risk is defined as unexpected adverse changes in business volume and/or margins which cannot be attributed to other types of risk. Adverse changes result mainly from a significant deterioration in market conditions, changes in the competitive position or customer behaviour, and from changes in the legal environment.

Business risk measurement thus measures the influence of external factors on a decline in profits and the effect on the market value.

As part of general income and cost management, operational management of business risk is the responsibility of the individual business units.


E.10 – Financial investment risk and real estate riskIn dealing with risks arising from the bank’s shareholdings and equity interests, Bank Austria takes into account market price fluctuations in its equity holdings in listed and unlisted companies.

Not included are equity interests in consolidated subsidiaries of the Group because risks associated with such companies are determined and recorded under the various other risk types. The portfolio includes various strategic investments; real estate holding companies are taken into account in real estate risk.

Generally, Value at Risk is determined on the basis of market values and volatilities of the relevant equity interests. For shares in unlisted companies the bank uses book values and volatilities of relevant stock exchange indices and takes account of residual variances.

Real estate risk measures the fluctuations in market value of bank-owned real estate on the basis of market prices and the volatility of related rent indices.

E.11 – Legal risksWe generally do not make provisions to the extent it is not possible to reliably predict the outcome of proceedings or to quantify possible losses. In cases where it is possible to estimate in a reliable manner the amount of the possible loss and such loss is deemed probable, we have made provisions in amounts we deem appropriate in light of the particular circumstances and in accordance with applicable accounting principles.

In line with the above policy, provisions have been made in the amount of the estimated risk for the following pending legal proceedings:

• UniCreditBankAustriaAG(“BankAustria”)hasjoinedasaprocessguidinginterveningpartyinsupportofthedefendantAKBPrivatbankZürichAG[formerly a subsidiary of Bank Austria and formerly Bank Austria (Schweiz) AG] in a suit in Switzerland relating to alleged claims of Bundesanstalt für Vereinigungsbedingte Sonderaufgaben (BvS), the legal successor to Deutsche Treuhandanstalt, the German public body for the new Länder recon-struction. Essentially it is asserted that the former subsidiary of Bank Austria in Switzerland participated in the embezzlement of funds from compa-nies in the former East Germany. BvS lost the case in the court of first instance and fully won the appeal. Bank Austria filed an appeal against that judgment before the Court of Cassation of the Zurich Canton. In November 2011 the Court of Cassation granted Bank Austria’s appeal, revoked the judgment for the plaintiff issued by the Court of Appeal of Zurich and remanded the case back to the Court of Appeal (= second instance) for reconsideration. On 20 March 2012 the Court of Appeal again granted the appeal of BvS and ordered Bank Austria’s former subsidiary – which Bank Austria is obliged to indemnify – to pay approximately €247 million (including accrued interest and costs calculated as at 23 March 2012). Bank Austria has appealed against this judgment before the Swiss Federal Court.

• the madoff fraudSeveral customers addressed enquiries and complaints against Bank Austria in connection with certain funds related to the fraudulent actions by Mr. Bernard L. Madoff. The following proceedings are relevant:

austrian criminal proceedings: Bank Austria has been named as a defendant in criminal proceedings in Austria which concern the Madoff case. These proceedings were initiated by a complaint filed by the FMA (the Austrian Financial Market Authority) to the Austrian prosecutor. Subsequently complaints were filed by purported investors in funds which were invested, either directly or indirectly, in Bernard L. Madoff Investments Securities LLC and Bernard L. Madoff Securities LLC (collectively referred to as “BMIS”). These complaints allege, amongst other things, that Bank Austria breached provisions of the Austrian Investment Fund Act as prospectus controller of the Primeo Fund. These criminal proceedings are still at the pre-trial stage. In addition, the fee-structure has been examined by an expert appointed by the prosecution. The second part of the expert opinion covering the examination of the prospectuses themselves is not yet available.

austrian civil proceedings: Numerous civil proceedings (with the claimed amount totaling about €135 million) have been initiated in Austria by numerous investors related to Madoff’s fraud in which Bank Austria, among others, has been named as defendant. The plaintiffs invested in invest-ment funds that, in turn, invested directly or indirectly with BMIS. Several judgments have been issued in favour of Bank Austria in various instances, some are already legally binding. Other judgments have been handed down against Bank Austria, but none of them is final so far as appeals are pending. With respect to those cases currently on appeal no estimate can be made as to their potential outcomes nor the effects, if any, which the appeal decisions may have on other cases pending against Bank Austria.




u.s. securities class actions in the u.s.: Bank Austria was named as one of many defendants in two putative class action suits (the Primeo Action and the Herald Action) filed in the United States District Court for the Southern District of New York. A liquidated indirect subsidiary of Bank Austria has also been named in two putative class action suits filed in the United States District Court for the Southern District of New York (the Herald Action and the Thema Action). In each of the suits, the class action plaintiffs claim to represent investors whose assets were invested in BMIS, directly or indirectly.

Proposed amended complaints have been filed; one of which purports to include allegations that the defendants, including Bank Austria, violated the Racketeer Influenced and Corrupt Organizations Act (“RICO”) by allegedly participating in a plan to enrich themselves by feeding investors’ money into Madoff’s Ponzi scheme and seeks treble damages under RICO, i. e., three times US$2 billion.

On 29 November 2011, the Court dismissed the actions as against Bank Austria and its liquidated indirect subsidiary, among others, and denied plaintiffs’ motion to amend the complaints. The plaintiffs in those actions have filed notices of appeal of that decision. In the Primeo Action, the putative class action plaintiff agreed to stay its appeal and be bound by an affirmance of the dismissal of the Herald Action.

The united states bankruptcy court appointed Irving H. Picard as Trustee (the “SIPA Trustee”) for the liquidation of BMIS. In December 2010, the SIPA Trustee filed two complaints in the United States Bankruptcy Court in the Southern District of New York against many defendants, including Bank Austria and a liquidated indirect subsidiary of Bank Austria, to recover amounts to be determined at trial.

One complaint (the “first trustee complaint”) seeks to recover so-called avoidable transfers to initial transferees of funds from BMIS, subsequent transfers of funds originating from BMIS (in the form of alleged management, performance, advisory, administrative and marketing fees, among other such payments, said to exceed US$400 million in the aggregate for all defendants), and compensatory and punitive damages against certain defendants alleged to be in excess of US$2 billion.

The other complaint (the “second trustee complaint”) further alleges defendants violated RICO by allegedly participating in a plan to enrich themselves by feeding investors’ money into Madoff’s Ponzi scheme. In this latter complaint, the SIPA Trustee seeks treble damages under RICO, i. e. three times the reported net US$19.6 billion losses allegedly suffered by all BMIS investors.

On 28 July 2011, the Court granted the motion to dismiss the First Trustee Complaint with respect to the claims for aiding and abetting Madoff’s fraud, breach of fiduciary duty, unjust enrichment and contribution. The Court’s decision did not address the claims to recover avoidable transfers, which were returned to the Bankruptcy Court. The SIPA Trustee has filed a notice of appeal of the decision.

On 21 February 2012, the Court granted the motion to dismiss the Second Trustee Complaint with respect to the RICO claims and the claims for unjust enrichment, conversion and money had and received. The Court’s decision did not address the claims to recover avoidable transfers which were returned to the Bankruptcy Court. On 21 March 2012, the SIPA Trustee filed a notice of appeal. By stipulation of the parties, on 5 April 2012, the SIPA Trustee withdrew its notice of appeal without prejudice. Pursuant to the terms of the stipulation, the SIPA Trustee has until 6 April 2013 to reinstate his appeal.

On 22 March 2012, Bank Austria filed an application with respect to each of the First and Second Trustee Complaints requesting that the District Court withdraw the reference from the Bankruptcy Court in respect of the Trustee’s avoidance and recovery claims. On 14 April 2012, the District Court granted Bank Austria’s application to withdraw the reference.

All pending U.S. actions are still in their initial phases.

Bank Austria intends to defend itself vigorously against the Madoff-related claims and charges. At present it is not possible to reliably estimate the timing and results of the various actions, nor determine the level of responsibility, if any responsibility exists. In addition to the proceedings outlined above, additional actions arising out of Madoff’s activities have been threatened and may be filed in the future by private investors or local authorities; in this context the question of whether these cases fall under the statute of limitations will have to be examined. Pending or future actions may have negative consequences for Bank Austria.

In line with the above policy, no provision has been made for the following pending legal proceedings. Due to the uncertain nature of litigation, however, we cannot exclude that the following may result in losses to the bank.

• ActionbroughtbytheBelgiancompanyValauret s. a. in Paris on the grounds of alleged involvement of Creditanstalt AG (now UniCredit Bank Austria AG) in wilful deception in connection with a French joint stock company as a result of which the plaintiffs incurred losses through a loss in value of shares acquired by it in the joint stock company.


E.12 – Report on key features of the internal control and risk management systems in relation to the financial reporting processThe Management Board is responsible for establishing and designing internal control and risk management systems which meet the company’s requirements in relation to the financial reporting process. The purpose of this report is to provide an overview of how internal controls are organised in relation to the financial reporting process.

The objective of the internal control system is to assist management in assuring internal controls in relation to financial reporting which are effective and are improved on an ongoing basis. The system is geared to complying with rules and regulations and creating conditions which are conducive to performing specific controls in key accounting processes.

Following the integration of the Bank Austria Group in UniCredit Group, the Italian Savings Law, Section 262 (process description for minimising risk in preparing financial statements) in particular, must be complied with in addition to the existing internal control system.

Pursuant to the “262 Savings Law”, the CEO and the CFO delegated by UniCredit S. p. A. are liable, under civil and criminal law, for any violation of the legal provisions. They are also responsible for every subsidiary within the group of consolidated companies which is covered by financial reporting because the “262 Savings Law” deals with consolidated financial statements.

Internal Audit performs independent and regular reviews of compliance with internal rules also in the area of accounting. The Head of Internal Audit reports directly to the Management Board and provides the Chairman of the Supervisory Board with quarterly reports.

Control environmentThe basic aspect of the control environment is the corporate culture in which management and all employees operate.

UniCredit S. p. A., the parent company of UniCredit Bank Austria AG, works to maintain effective communication and convey the corporate values defined in the Integrity Charter. The Integrity Charter embodies the UniCredit Group’s identity and is based on the following shared values: fairness,transparency, respect, reciprocity, freedom to act, and trust.

The implementation of the internal control system in relation to the financial reporting process is also set out in the internal rules and regulations: All accounting entries are made within the guidelines established in the Accounting Policy, and release follows defined instruction and control criteria. For each general ledger account there is a responsible person who reconciles the general ledger accounts in accordance with existing rules. This internal reconciliation process is interrogated by Financial Accounting and reviewed by Internal Audit.

Risk assessmentIn the course of the “262 Savings Law” project, the persons having process responsibility identified risks in relation to the financial reporting process; these risks are monitored on an ongoing basis. The focus is on those risks which are typically considered to be material.

To meet the “262 Savings Law” requirements, controls pursuant to the methodology used by UniCredit S. p. A. are required to be performed at least on a half-yearly basis (for full-year and half-year reporting).

ControlsAll controls are applied in the current business process to ensure that potential errors or deviations in financial reporting are prevented or detected and corrected. Controls range from a management review of results for the various periods to specific reconciliation of accounts and the analysis of continuous accounting processes.

The levels of hierarchy are designed so that an activity and the control of that activity is not performed by the same person (four-eyes principle). In the course of the preparation of financial reports, the general ledger accounts are reconciled with business and front-end systems.

IT security controls are a cornerstone of the internal control system. IT controls are described under “262 Savings Law” pursuant to “International Standards for Assurance Engagements” (ISAE) No. 3402.




Information and communicationManagement regularly updates rules and regulations for financial reporting and communicates them to all employees concerned.

Moreover, regular discussions on financial reporting and on the rules and regulations applicable in this context take place in various bodies and are repeatedly communicated to UniCredit Bank Austria AG. Employees in Financial Accounting receive regular training in new methods of international financial reporting in order to identify risks of unintended misreporting at an early stage.

To perform monitoring and control functions with a view to proper financial accounting and reporting, extensive financial information is made available at key levels of the bank. Relevant information is not only provided to the Supervisory Board and the Management Board, middle management levels also receive detailed reports.

MonitoringAs part of the implementation of the internal control system pursuant to the “262 Savings Law”, instruments were introduced to monitor the effective-ness of controls. In connection with the compulsory half-yearly certification process for the preparation of the management report, the persons having process responsibility are required to carry out effectiveness tests to check the effectiveness of controls. It must be ascertained whether the controls work according to their design and whether the persons who perform controls have the competence/authority and qualifications required to perform the controls effectively.

All persons having process responsibility confirm by means of certification that their processes are adequately documented, risks have been identified and controls have been evaluated with a view to deriving measures to minimise risk.

The results of these monitoring activities are contained in a management report which is based on the certifications provided to the respective chief financial officer by all persons having process responsibility and issued on a half-yearly basis. The Chief Financial Officer of UniCredit Bank Austria AG receives the certifications by the chief financial officers of the subsidiaries covered by the process in accordance with the group of consolidated companies, and provides the Holding Company and the public with confirmation of the reliability and effectiveness of the internal control system in the context of the financial statements for the first six months and the annual financial statements.

E.13 – Information on the squeeze-out pursuant to the Austrian Federal Act on the Squeeze-out of Minority Shareholders (Gesellschafterausschlussgesetz) of the holders of bearer shares in uniCredit Bank Austria AGThe company’s Annual General Meeting on 3 May 2007 adopted a resolution concerning the planned squeeze-out. The legal actions for rescission and declaration of nullity brought against various resolutions adopted at the Annual General Meeting on 3 May 2007 were terminated in spring 2008. The squeeze-out was entered in the Register of Firms on 21 May 2008. After that date, former minority shareholders initiated proceedings for a review of the cash compensation offered by UniCredit. An expert has been appointed in these proceedings to review the amount of the cash compensation paid; the expert report is now available and essentially confirms the adequacy of the cash compensation paid in connection with the squeeze-out. A decision by the court of first instance in this case is not yet available.


E.14 – Financial derivativesDerivatives shown in the following tables are classified as financial derivatives and credit derivatives, according to the underlying financial instrument. In these categories, a distinction is made between trading book and banking book and between different counterparties. UniCredit Bank Austria AG’s business volume in derivatives focuses on interest rate contracts.

Over-the-counter transactions are individual agreements concerning volume, maturities and underlying instrument. In large-volume interbank trading, these agreements reflect international practice, while in customer business they are usually adjusted to specific needs. Exchange-traded contracts are always standardised in respect of volume and maturity date.

Derivatives are mainly used by the bank itself for hedging market risk and credit spread risk arising from new issue activities. In customer business, market participants include banks, securities houses, mutual funds, pension funds and corporate customers.

Trading in derivatives at Bank Austria is primarily related to the hedging of positions entered into vis-à-vis customers.

For the purposes of portfolio and risk management, contracts are valued at current prices using recognised and tested models. Market values show the contract values as at the balance sheet date, positive market values indicate the potential default risk arising from the relevant activity.

For the purposes of portfolio management and risk limitation in the derivatives business with banks and customers, UniCredit Bank Austria AG uses a Monte Carlo path simulation to estimate the potential future exposure at portfolio level for each counterparty. The calculations are based on market volatility, correlations between specific risk factors, future cash flows and stress considerations. Netting agreements and collateral agreements are also taken into account for simulation purposes.

The simulation calculations are performed for all major types of transactions, e. g. forward foreign exchange transactions, commodity futures trans-actions, interest rate instruments, securities lending transactions and repurchase agreements, equity-related, commodity-related or inflation-related instruments and credit derivatives. Other (exotic) products are taken into account with an add-on factor (depending on volatility and maturity). The bank applies a confidence interval of 97.5%.

In addition to determining the potential future exposure for the purpose of internal risk management, the path simulation also enables the bank to calculate the mean exposure and the Basel 2-modified mean exposure as well as the effective term of the exposure for each counterparty. In this way, counterparty risk can be taken into account in a Basel 2-compliant internal model for the calculation of capital requirements. In 2009, the bank obtained approval from the Austrian regulatory authorities for the use of the relevant model.

Line utilisation for derivatives business is available online in WSS (“Wallstreet”), the central treasury system, on a largely Group-wide basis. For smaller units not connected to the central system, separate lines are allocated and monitored. Group-wide compliance with lines approved in the credit process is thus ensured at any time.

UniCredit Bank Austria AG additionally limits the credit risk arising from its derivatives business through strict use of master agreements, through collateral agreements and break clauses. In combination with the very good average credit rating of our business partners in the derivatives business, management takes proper account of default risk.




Regulatory portfolio: end of period notional amounts (€ million)

deriVatiVe iNstrumeNt types/uNderlyiNgs OVer the cOuNter cleariNg hOuse

debt securities and interest rate indexes 68,249 118Options 16,100 –Swap 49,092 5Forward 3,052 –Futures – 113Others 5 –

equity instruments and stock indexes 1,061 –Options 837 –Swap 28 –Forward 172 –Futures – –Others 24 –

gold and currencies 27,676 70Options 4,206 –Swap 12,567 –Forward 10,904 –Futures – 70Others – –

commodities 557 –Other underlyings 16 –tOtal 97,559 188

Banking book: end of period notional amounts – Hedging derivatives (€ million)


debt securities and interest rate indexes 110,998 –Options 4,022 –Swap 106,924 –Forward 51 –Futures – –Others – –

equity instruments and stock indexes – –Options – –Swap – –Forward – –Futures – –Others – –

gold and currencies 31,350 –Options – –Swap 28,797 –Forward 2,552 –Futures – –Others – –

commodities – –Other underlyings – –tOtal 142,348 –


Banking book: end-of-period notional amounts – Other derivatives (€ million)


derivative contracts related to fV option assets/ liabilities – – Debt securities and interest rate indexes – – Equity instruments and stock indexes – – Gold and currencies – – Commodities – – Other underlyings – –embedded derivatives bifurcated from hybrid instruments – – Debt securities and interest rate indexes – – Equity instruments and stock indexes – – Gold and currencies – – Commodities – – Other underlyings – –Other ias 39 hft derivatives belonging to the banking book 140 79debt securities and interest rate indexes 34 –

Options 34 –Swap – –Forward – –Futures – –Others – –

equity instruments and stock indexes 107 –Options 102 –Swap – –Forward – –Futures – –Others 5 –

gold and currencies – 79Options – –Swap – 79Forward – –Futures – –Others – –

commodities – –Other underlyings – –tOtal 140 79




Financial derivatives – breakdown by product (€ million)

pOsitiVe fair Value NegatiVe fair Value

traNsactiON types/uNderlyiNgs OVer the cOuNter cleariNg hOuse OVer the cOuNter cleariNg hOuse

regulatory trading portfolio 2,355 1 2,061 –Options 344 – 248 –Interest rate swaps 1,445 – 1,437 –Cross currency swap 266 – 201 –Equity swaps 136 – – –Forward 158 – 171 –Futures – 1 – –Others 5 – 4 –

banking book – hedging derivatives 4,125 – 2,989 –Options 82 – 56 –Interest rate swaps 3,636 – 2,564 –Cross currency swap 393 – 366 –Equity swaps – – – –Forward 13 – 3 –Futures – – – –Others – – – –

banking book – Other derivatives – – 2 2Options – – – –Interest rate swaps – – – –Cross currency swap – – – 2Equity swaps – – – –Forward – – – –Futures – – – –Others – – 2 –

tOtal 6,480 1 5,053 2

OTC financial derivatives – residual life: notional amounts (€ million)

uNderlyiNg/residual maturity up tO 1 yearOVer 1 year

up tO 5 years OVer 5 years tOtal

regulatory trading book 37,830 38,965 20,763 97,559Financial derivative contracts on debt securities and interest rates 16,765 32,923 18,561 68,249Financial derivative contracts on equity securities and stock indexes 529 443 90 1,061Financial derivative contracts on exchange rates and gold 20,168 5,396 2,113 27,676Financial derivative contracts on other values 369 203 – 572

banking book 37,335 69,188 35,965 142,488Financial derivative contracts on debt securities and interest rates 32,466 52,064 26,502 111,032Financial derivative contracts on equity securities and stock indexes – 102 5 107Financial derivative contracts on exchange rates and gold 4,869 17,022 9,458 31,350Financial derivative contracts on other values – – – –

tOtal 75,165 108,153 56,729 240,047


Credit derivatives: end of period notional amounts (€ million)

regulatOry tradiNg bOOK baNKiNg bOOK

traNsactiON categOriesWith a siNgle

cOuNterpartyWith mOre thaN ONe

cOuNterparty (basKet)With a siNgle

cOuNterpartyWith mOre thaN ONe

cOuNterparty (basKet)

protection buyer’s contractsCredit default products 10 5 – –Credit spread products – – – –Total rate of return swaps – – – –Other – – – –

tOtal 10 5 – –protection seller’s contracts

Credit default products 1,234 5 – –Credit spread products 32 – – –Total rate of return swaps – – – –Other – – – –

tOtal 1,265 5 – –

Credit derivatives – breakdown by product (€ million)

pOrtfOliOs/deriVatiVe iNstrumeNt types pOsitiVe fair Value NegatiVe fair Value

regulatory trading portfolio 6 70Credit default products 2 68Credit spread products 4 2Total rate of return swap – –Others – –

banking book – –Credit default products – –Credit spread products – –Total rate of return swaps – –Others – –

tOtal 6 70

Credit derivatives – residual life: notional amount (€ million)

uNderlyiNg/residual maturity up tO 1 yearOVer 1 year

up tO 5 years OVer 5 years tOtal

regulatory trading book: 527 403 357 1,286Credit derivatives with qualified reference obligation 29 3 – 32Credit derivatives with not qualified reference obligation 498 400 357 1,255

banking book: – – – –Credit derivatives with qualified reference obligation – – – –Credit derivatives with not qualified reference obligation – – – –

tOtal 527 403 357 1,286


F – Additional disclosures

F.1 – Time breakdown by residual contractual maturity of financial assets and liabilities 208

F.2 – Geographical distribution 208

F.3 – Related party disclosures 209

F.3.1 – Information on members of the Management Board, the Supervisory Board and the Employees’ Council of uniCredit Bank Austria AG 209

F.3.2 – Related party disclosures 209

F.3.3 – other information on related party relationships 211

F.4 – Auditors’ fees 211

F.5 – Assets pledged as security 211

F.6 – Transfer of financial assets 212

F.7 – Subordinated assets/ liabilities 214

F.8 – Assets and liabilities in foreign currency 214

F.9 – Trust assets and trust liabilities 215

F.10 – Repurchase agreements 215

F.11 – Guarantees given and commitments 215

F.12 – Employees 216

F.13 – Supervisory Board and Management Board 216

F.14 – Share-based payments 216

F.15 – Events after the reporting period 219

F.16 – Consolidated capital resources and regulatory capital requirements 220



F – Additional disclosures (CoNTINuED)

F.1 – Time breakdown by residual contractual maturity of financial assets and liabilities

Geographical distribution of total assets and operating income (€ million)

31 dec. 2012 31 dec. 2011

tOtal assets OperatiNg iNcOme tOtal assets OperatiNg iNcOme

Austria 100,418 1,768 100,220 1,784Total European countries 103,464 5,005 94,278 4,765

Western Europe 738 13 840 15Central and Eastern Europe 102,726 4,992 93,439 4,750

America 72 –10 58 –6Asia 3,642 10 4,673 4tOtal 207,596 6,773 199,229 6,546

The geographic breakdown is based on the location of the subsidiary in which the transaction is recorded.

(€ million)

31 dec. 2012

ON demaNd1 tO 7 days

7 tO 15 days

15 days tO 1 mONth

1 tO 3 mONths

3 tO 6 mONths

6 mONths tO 1 year

1 tO 5 years

OVer 5 years

assets 18,411 5,399 4,975 6,887 15,831 10,230 13,967 49,725 59,583Government securities 68 2 158 257 1,115 950 1,248 5,450 4,126Other debt securities 1 360 212 175 461 1,160 168 7,023 5,136Units in investment funds 87 – – – 14 – – – –Loans 18,255 5,037 4,605 6,455 14,241 8,120 12,551 37,254 50,321

Banks 5,638 2,198 3,495 1,786 5,376 963 897 1,689 1,660Customers 12,617 2,838 1,110 4,669 8,866 7,158 11,655 35,562 48,662

liabilities 53,710 9,820 8,940 6,634 20,031 7,804 11,332 39,006 15,928Deposits and current accounts 52,687 9,069 7,838 4,837 16,478 6,331 7,678 12,826 1,790

Banks 3,139 922 783 993 621 183 337 2,861 1,128Customers 49,548 8,146 7,055 3,844 15,857 6,148 7,341 9,965 662

Debt securities – 74 161 118 1,418 964 2,513 17,518 7,156Other liabilities 1,023 677 942 1,679 2,135 510 1,141 8,662 6,982

Off-balance sheet transactions 7,540 27 9 381 2,170 1,842 3,944 106,647 34,091Physically settled financial derivatives

long positions – 1,606 701 1,752 1,667 2,493 1,930 6,501 1,174short positions – 1,606 701 1,752 1,667 2,493 1,931 6,507 1,174

Cash settled financial derivativeslong positions 215 3,299 2,125 1,640 3,272 3,583 6,831 18,821 12,878short positions 189 3,303 2,126 1,640 3,270 3,581 6,799 18,872 12,864

Deposits to be receivedlong positions – – – – – – – – –short positions – – – – – – – – –

Irrevocable commitments to disburse fundslong positions 856 44 14 549 437 1,040 7,915 2,675 725short positions 2,387 33 12 400 492 460 7,890 1,856 725

Written guarantees 48 12 4 50 325 124 295 869 1,119Financial guarantees received 8,996 9 4 181 1,898 1,136 3,657 107,526 32,958Physically settled credit derivatives

long positions – – – – – – 32 1,255 –short positions – – – – – – 32 1,255 –

The breakdown by maturity reflects items of companies within the group of banks which are subject to regulatory supervision.

F.2 – Geographical distribution


F.3 – Related party disclosures Related party disclosures as at 31 December 2012 (€ million)

pareNt cOmpaNyuNcONsOlidated

subsidiaries assOciates jOiNt VeNtures Key maNagemeNt

persONNelOther related

parties

Loans and advances 6,990 10,004 248 – 3 527Equity instruments – 1 7 – – –Other receivables 136 4,171 79 – – 4tOtal assets 7,126 14,176 333 – 3 531Deposits 7,324 2,847 192 1 9 308Other financial liabilities – 4,595 – – – 94Other liabilities 13 12 – – – 16tOtal liabilities 7,337 7,455 193 1 9 418

F.3.1 – Information on members of the Management Board, the Supervisory Board and the Employees’ Council of uniCredit Bank Austria AG

F.3.1.1 – Emoluments of members of the Management Board and the Supervisory BoardThe emoluments paid by UniCredit Bank Austria AG to Management Board members in the 2012 financial year (excluding payments into pension funds) totalled €1,727,153.30 (comparable emoluments in 2011 totalled €1,901 thousand). Of this total, €1,483,274.98 (2011: €1,239 thousand) related to fixed salary components and €243,878.31 were variable salary components (2011: €662 thousand). Moreover, a provision was made for variable remuneration for 2011 (subject to specific conditions) in the amount of €672,225.00, which may be paid in subsequent years pursuant to the bank’s compensation rules. Several members of the Management Board receive their emoluments from companies which are not included in the group of consolidated companies of Bank Austria; these emoluments granted to Management Board members for activities in UniCredit Bank Austria AG and in subsidiaries in the 2012 financial year amounted to €2,656,284.00 (2011: €2,985 thousand). These Management Board members also received emoluments for activities which are not connected with the Bank Austria Group but are in the interest of UniCredit Group.

Payments to former members of the Management Board and their surviving dependants (excluding payments into pension funds) totalled €8,310,727.38. (Of this total, €5,092,921.75 was paid to former Management Board members of Creditanstalt AG, which merged with Bank Austria in2002,andtheirsurvivingdependants;€1,506,590.79waspaidtoformerManagementBoardmembersofÖsterreichischeLänderbankAG,whichmerged with Zentralsparkasse in 1991, and their surviving dependants.) The comparative figure for 2011 was €8,460 thousand. Emoluments paid to this group of persons for activities in subsidiaries amounted to €18,867.00 (2011: €335 thousand).

The emoluments of the Supervisory Board members active in the 2012 business year totalled €339,818.52 (2011: €345 thousand) for UniCredit Bank Austria AG, and €2,130.00 (2011: €2 thousand) for the two credit associations.

F.3.1.2 – Loans to members of the Management Board and of the Supervisory BoardLoans to members of the Management Board amounted to €1,870,226.46 (2011: €1,689 thsd), overdrafts granted to them were €76,002.92 (2011: €3 thousand). Repayments during the business year totalled €78,250.42 (2011: €71 thousand).

Loans to members of the Supervisory Board amounted to €233,061.18 (2011: €360 thousand). Overdrafts granted to Supervisory Board members totalled €49,148.23 (2011: €45 thousand). Repayments during the business year totalled €25,107.59 (2011: €22 thousand).

Loans to the Supervisory Board include those made to members of the Employees’ Council who are members of the Supervisory Board. The maturities of the loans range from five to twenty-five years. The rate of interest payable on these loans is the rate charged to employees of UniCredit Bank Austria AG.

F.3.2 – Related party disclosures In November 2010 UniCredit’s Board of Directors, the board of directors of the parent company, approved new regulations concerning related party transactions. Specific guidelines have been distributed to the company’s functions and Group entities in order to ensure full compliance with legislative and regulatory provisions currently in effect as regards disclosure of transactions with related parties, starting from 1 January 2011.

Transactions carried out within the Group and/or generally with Austrian and foreign related parties were executed as a rule on an arm’s length basis, on the same terms and conditions as those applied to transactions entered into with independent third parties




Banking operations – outsourcing 2012BankAustriahascompleteditsconsolidationprogrammeforbankingoperations(All4Quality)in2012.Procurementfunctionsaswellastheoperationalsecurity function were transferred to UniCredit Business Integrated Solution (UBIS), the Group-owned provider of banking operations services. HR-related services, especially payroll services, were also outsourced to UBIS, which set up a joint venture with HP to manage those HR-related services. Finally, the Bank Austria subsidiary Domus FM, which provides services in the area of facility management, was sold to UBIS, maintaining the full service scope rendered to Bank Austria.

In a parallel move, Bank Austria outsourced its Post (mail) and Print units to Deutsche Post. For this purpose Deutsche Post established Global Mail Austria GmbH, a separate Austrian subsidiary. To manage all these outsourcing projects Bank Austria concluded outsourcing contracts with UBIS and Global Mail Austria.

Compensation agreement In connection with the “Restated Bank of the Regions Agreement”, UniCredit S. p. A. and UniCredit Bank Austria AG signed a contract valid from 1 January 2010 to 1 January 2015 which includes a commitment by UniCredit S. p. A. to pay 14.5% of profit before tax of the CIB Division Markets segment in return for the commitment by the latter to pay 12M Euribor + 200bps recorded annually on a notional value of €1.24 billion. In 2012 the profit contribution was €128.5 million (2011: €15.5 million).

Cooperation agreementIn the course of the integration of HVB into the UniCredit group of companies, HVB has been assigned the role of centre of competence for markets and investment banking for the entire corporate group. Among other things, HVB acts as counterparty for derivative transactions conducted by UniCredit companies in this role. For the most part, this involves hedge derivatives that are externalised on the market via HVB.

UniCredit Bank Austria AG and UniCredit Bank AG signed a corresponding cooperation agreement for 10 years in 2010.

Restated Bank of the Regions Agreement (ReBoRA)In the Restated Bank of the Regions Agreement, “AVZ Stiftung” and “Betriebsratsfonds” have given an undertaking to UniCredit to the effect that if they want to sell UniCredit Bank Austria shares, they will first offer such shares held by them to UniCredit. If UniCredit does not accept the offer, the relevant contracting party could sell the UniCredit Bank Austria shares to a third party. In this case UniCredit has a right of preemption.

For the duration of this agreement (10 years), “AVZ Stiftung” has a right to nominate two members of the Supervisory Board of UniCredit Bank Austria AG, and thereafter one member of the Supervisory Board for the duration of the guarantee issued by “AVZ Stiftung” and the Municipality of Vienna.

As at 31 December 2012, UniCredit held a direct interest of 99.996% in UniCredit Bank Austria AG.

As at 31 December 2012, there were the following interlocking relationships with UniCredit S. p. A.:•FourmembersoftheSupervisoryBoardofUniCreditBankAustriaAGweremembersoftheExecutiveManagementCommitteeofUniCredit.

ATF Bank loan guarantee agreement with UniCredit Bank AustriaOn 25 December 2009, ATF Bank JSC signed a loss guarantee agreement with UniCredit Bank Austria AG. The guarantee relates to the loan loss allowance on the Special Portfolio Unit’s loans amounting to USD 2,788 million. The guarantee has a deductible of a maximum USD 728 million, which will be paid by ATF Bank JSC. Losses above USD 728 million will be paid by UniCredit Bank Austria AG. ATF Bank JSC pays a fee of 6% p.a. for the guarantee. The guarantee is effective from 31 December 2009, in connection with the sale of ATF it is intended to maintain the guarantee in an amended form for a period of 2 years after closing. The main amendments planned will be the reduction of the size of the guaranteed amount by UniCredit Bank Austria to USD 631 Mio and a reduction of the guaranteed premium payable by ATF Bank to 2%.

Guarantee of Bank Austria for a portfolio of non-performing loans of UkrsotsbankThe terms of the guarantee were set out in 2010 according to the rules of the National Bank of Ukraine; they are not at arm’s length from a non-Ukrainian point of view. The main purpose of the guarantee transaction was to enable Ukrsotsbank to fulfil the statutory capital requirements. On 27 December 2011, Ukrsotsbank and Bank Austria signed a replacement of the guarantee, which would have expired at 10 January 2013. For the replacement of this guarantee a significant part of the portfolio was transferred to UniCredit Bank Austria in December 2012 by means of a sub-participation agreement.


F.4 – Auditors’ fees(pursuant to Section 237 no. 14a and Section 266 no. 11 of the Austrian Business Code)

The following table shows the fees charged by the auditors of the consolidated financial statements for the 2012 financial year in the following categories:

Auditors’ fees (€ thsd)

2012 2011

fees for the audit of the financial statements and the consolidated financial statements 4,064 4,041KPMG Austria 2,592 2,569Austrian Savings Bank Auditing Association 1,473 1,472

Other services involving the issuance of a report 532 841KPMG Austria 521 834Austrian Savings Bank Auditing Association 11 7

tax consulting services – –KPMG Austria – –Austrian Savings Bank Auditing Association – –

Other services 1,172 1,254KPMG Austria 84 79Austrian Savings Bank Auditing Association 1,088 1,175

tOtal 5,768 6,136

F.3.3 – other information on related party relationshipsUnder Section 92 (9) of the Austrian Banking Act, “Privatstiftung zur Verwaltung von Anteilsrechten” (“AVZ Stiftung”, a private foundation under Austrian law) serves as deficiency guarantor for all liabilities of UniCredit Bank Austria AG in the event of the company’s insolvency. The board of trustees of the private foundation has 14 members. These included four members of the Supervisory Board of UniCredit Bank Austria AG.After the change in the legal form of Anteilsverwaltung Zentralsparkasse into a private foundation (“AVZ Stiftung”) in 2001, the Municipality of Vienna serves as deficiency guarantor for all outstanding liabilities, and obligations to pay future benefits, of UniCredit Bank Austria AG (then Bank Austria Aktiengesellschaft) which were entered into prior to and including 31 December 2001.

The board of trustees of Immobilien Privatstiftung has three members. One of them is a member of the Supervisory Board of UniCredit Bank Austria AG.

F.5 – Assets pledged as securityAssets used to guarantee own liabilities and commitments (€ million)

31 dec. 2012 31 dec. 2011

Financial instruments held for trading – 11Financial instruments designated at fair value 30 30Financial instruments available for sale 4,788 4,340Financial instruments held to maturity 1,045 2,120Loans and receivables with banks 372 230Loans and receivables with customers 25,251 19,323Property, plant and equipment 26 2




F.6 – Transfer of financial assetsIn the ordinary course of business, the Group enters into transactions that result in the transfer of financial assets, primarily debt and equity securities and loans and advances to customers. The transferred financial assets continue either to be recognised in their entirety or to the extent of the Group’s continuing involvement, or are derecognised in their entirety.

The Group transfers financial assets primarily through the following transactions:• Saleandrepurchaseofsecurities• Securitieslending• Securitisationactivitiesinwhichloansandadvancestocustomersorinvestmentsecuritiesaretransferredtospecialpurposeentitiesortoinvestors

in the notes issued by special purpose entities. Every special purpose entity is assessed in order to evaluate whether the majority of the risks and rewards incident to the activities is attributable or not to the bank and its consolidation is therefore required according to applicable IFRS (SIC 12).

Transferred financial assets that are derecognised in their entiretySecuritisationsWhen the Group transfers substantially all the risks and rewards of ownership of financial assets to an unconsolidated SPE and retains a relatively small interest in the SPE or a servicing arrangement in respect of the transferred financial assets, the transferred assets are derecognised in their entirety. If the financial assets are derecognised in their entirety, then the interest received as part of the transfer and the servicing arrangement represent continuing involvement with those assets according to IFRS 7. At present the Group does not have any such transactions.

Transferred financial assets that are not derecognised in their entiretySale and purchase agreementsSale and purchase agreements are transactions in which the Group sells a financial asset and simultaneously agrees to repurchase it at a fixed date on a future date. The Group continues to recognise the financial asset in their entirety in the statement of financial position because it retains all the risks and rewards of ownership. The cash consideration received is recognised as a financial asset and a financial liability is recognised for the obligation to pay the repurchase price. Because the Group sells the contractual rights to the cash flows of the securities it does not have the ability to use the transferred assets during the term of the arrangement.

Securities lendingSecurities lending agreements are transactions in which the Group lends equity securities for a fee and receives cash as collateral. The Group continues to recognise the securities in their entirety in the statement of financial position because it retains substantially all the risks and rewards of ownership.

The cash received is recognised as a financial asset and a financial liability is recognised for the obligation to repay this collateral. Because the Group sells the contractual rights to the cash flows of the securities it does not have the ability to use the transferred assets during the term of the arrangement.

The following table shows the carrying amounts of all financial assets sold or lent but not derecognised under sale and purchase agreements or securities lending transactions:

Financial assets sold and not derecognised: carrying amounts (€ million)

amOuNts at 31 dec. 2012

fiNaNcial assets held fOr tradiNg

aVailable-fOr-sale fiNaNcial assets

held-tO-maturity iNVestmeNts tOtal

type/pOrtfOliOs a b c a b c a b c 31 dec. 2012

On-balance sheet assets 99 – – 2,463 – – 761 – – 3,323Debt securities 99 – – 2,463 – – 761 – – 3,323Equity securities – – – – – – X X X –Investment funds – – – – – – X X X –Loans – – – – – – – – – –

derivatives – – – x x x x x x –tOtal 31 dec. 2012 99 – – 2,463 – – 761 – – 3,323of which impaired – – – – – – – – – –


The following table shows these financial asssets at their fair values as at 31 December 2012 and the related liabilities:

Sales transactions relating to financial liabilities with repayment exclusively based on assets sold and not derecognised: fair value (€ million)

31 dec. 2012

fiNaNcial assets held fOr tradiNg

aVailable-fOr-sale fiNaNcial assets

held-tO-maturity iNVestmeNts

type/pOrtfOliOs a b a b a b tOtal

balance-sheet assets 99 – 2,344 10 761 – 3,214Debt securities 99 – 2,344 10 761 – 3,214Equity securities – – – – X X –UCIS – – – – X X –Loans – – – – – – –

derivatives – – –associated financial liabilities 99 – 2,379 9 760 – 3,248

Deposits from customers – – 974 – 744 – 1,719Deposits from banks 99 – 1,404 9 16 – 1,529Debt securities in issue – – – – – – –

Net value (t) –1 – –35 1 1 – –34

SecuritisationsThe Group sells loans and advances to customers and investment securities to special purpose entities (SPEs) that in turn issue notes to investors that are collateralised by the purchased assets. If the Group sells assets to a consolidated SPE then the transfer is in the form of the group assuming an obligation to pass cash flows from the underlying assets to investors in the notes. Derecognition of the transferred assets is prohibited because either the cash flows that it collects from the transferred assets on behalf of the investors are not passed through to them without material delay or the majority of risks and rewards of such assets has not been substantially transferred. In these cases, the consideration received from the investors in the notes in the form of cash is recognised as a financial asset and a corresponding financial liability is recognised. The investors of the notes have recourse only to the cash flows of the transferred financial assets.

The following table shows exposures deriving from the securitisation of own assets. The gross exposures are the nominal amounts of the assets, the net exposures are the carrying amounts, which may be above or below the nominal amounts as a result of measurement at amortised cost or fair value according to the respective IAS 39 category.

Exposures deriving from the securitisation of own assets (€ million)

balaNce sheet expOsure as at31 dec. 2012

balaNce sheet expOsure as at31 dec. 2011

grOss expOsure (NOmiNal amOuNt) Net expOsure

grOss expOsure (NOmiNal amOuNt) Net expOsure

Assets sold and totally derecognised – – – –Assets sold but not derecognised 3 3 4 4Synthetic transactions 564 558 922 901tOtal 566 561 926 906

Exposures deriving from the securitisation of own assets broken down by subordination degree (€ million)

amOuNts as at 31 dec. 2012 amOuNts as at 31 dec. 2011

seNiOr mezzaNiNe juNiOr tOtal seNiOr mezzaNiNe juNiOr tOtal

balance sheet exposure 472 88 – 561 823 83 – 906Assets sold and totally derecognised – – – – – – – –Assets sold but not derecognised 3 – – 3 4 – – 4Synthetic transactions 470 88 – 558 819 83 – 901




F.7 – Subordinated assets / liabilities

F.8 – Assets and liabilities in foreign currency

(€ million)

31 dec. 2012 31 dec. 2011

Financial assets held for trading – –Financial assets designated at fair value – –Available-for-sale financial assets 77 75Held-to-maturity investments – –Loans and receivables with banks 816 553Loans and receivables with customers 295 315subordinated assets 1,189 944Deposits from banks 154 223Deposits from customers 96 99Debt securities in issue 3,773 3,926subordinated liabilities 4,023 4,249

(€ million)

31 dec. 2012 31 dec. 2011

assets liabilities assets liabilities

USD 26,420 23,105 23,885 20,973JPY 775 286 1,171 517CHF 14,860 1,819 16,451 2,149Other 59,882 48,366 53,579 42,439tOtal 101,937 73,576 95,085 66,078

The following table shows exposures deriving from the securitisation of third-party assets in addition to exposures deriving from the securitisation of own assets:

Securitisation exposures: breakdown by quality of underlying assets (€ million)

amOuNts at 31 dec. 2012

ON balaNce-sheet

seNiOr mezzaNiNe juNiOr

Quality Of the uNderlyiNg assets/expOsuresgrOss

expOsure Net expOsuregrOss

expOsure Net expOsuregrOss

expOsure Net expOsure

With own underlying assets: 1,537 472 82 88 – –Impaired – – – – – –Other 1,537 472 82 88 – –

With third-party underlying assets: 1,076 891 145 148 – –Impaired 8 6 – – – –Other 1,068 885 145 148 – –


F.11 – Guarantees given and commitments (€ million)

31 dec. 2012 31 dec. 2011

financial guarantees given to: 5,549 4,828Banks 743 410Customers 4,807 4,418

commercial guarantees given to: 15,524 14,552Banks 1,174 803Customers 14,350 13,749

Other irrevocable commitments to disburse funds 15,718 17,312Banks 152 2,147

Usage certain 103 58Usage uncertain 49 2,088

Customers 15,566 15,165Usage certain 6,248 6,336Usage uncertain 9,318 8,829

underlying obligations for credit derivatives: sales of protection – 666assets used to guarantee others’ obligations 238 228Other commitments 14,524 11,994tOtal 51,554 49,580

F.9 – Trust assets and trust liabilities (€ million)

31 dec. 2012 31 dec. 2011

Loans and receivables with banks 6 6Loans and receivables with customers 528 612Equity securities and other variable-yield securities 6,441 7,039Debt securities 9,603 8,085Other assets 965 1,248trust assets 17,543 16,990Deposits from banks 4,862 4,910Deposits from customers 12,581 11,900Debt securities in issue – –Other liabilities 99 180trust liabilities 17,543 16,990

F.10 – Repurchase agreementsUnder repurchase agreements, financial assets were sold to third parties with a commitment to repurchase the financial instruments at a price specified when the assets were sold. At the end of the reporting period, the total amount of repurchase agreements was €3,117 million (2011: €3,447 million). In those cases where Bank Austria is the transferor, the relevant assets continue to be recognised in its statement of financial position at their fair values. In those cases where Bank Austria is the transferee, the bank does not recognise the assets in its statement of financial position.




F.12 – EmployeesIn 2012 and 2011, the Bank Austria Group employed the following average numbers of staff (full-time equivalents):

Employees2012 2011

Salaried staff 57,708 59,409Other employees 75 86tOtal*) 57,783 59,495

of which: in Austria 7,496 7,812of which: abroad 50,287 51,683

*) Average full-time equivalents of staff employed in the Bank Austria Group (employees of companies accounted for under the proportionate consolidation method are included at 100%), excluding employees on unpaid sabbatical or maternity /paternity leave

F.13 – Supervisory Board and Management BoardThe following persons were members of the Management Board of UniCredit Bank Austria AG in 2012: chairman and chief executive Officer: Willibald CERNKO deputy chairman: Gianni Franco PAPA members: Massimiliano FOSSATI (until 31 October 2012), Francesco GIORDANO, Rainer HAUSER (until 31 December 2012), Dieter HENGL, Jürgen KULLNIGG (from 1 November 2012), Doris TOMANEK, Robert ZADRAZIL, Helmut BERNKOPF (from 1 January 2013)

The following persons were members of the Supervisory Board of UniCredit Bank Austria AG in 2012: chairman: Erich HAMPEL deputy chairman: Paolo FIORENTINO members: Karl GUHA (until 31 December 2012), Candido FOIS (until 15 January 2013), Jean Pierre MUSTIER, Roberto NICASTRO, Vittorio OGLIENGO, Franz RAUCH, Karl SAMSTAG, Wolfgang SPRISSLER, Ernst THEIMER, Wolfgang HEINZL, Adolf LEHNER, Emmerich PERL, Josef REICHL, Robert TRAUNWIESER, Barbara WIEDERNIG, Alessandro DECIO (from 14 February 2013), Alfredo MEOCCI (from 14 February 2013)

F.14 – Share-based payments

Description of share-based paymentsOutstanding InstrumentsGroup Medium & Long Term Incentive Plans for selected employees refers to equity-settled share based payments based on the shares of the parent company UniCredit S. p. A.

This category includes the following:• stock Options allocated to selected Top & Senior Managers and Key Talents of the Group;• performance stock Options & performance shares allocated to selected Top & Senior Managers and Key Talents of the Group and represented

respectively by options and free UniCredit ordinary shares that the Parent Company undertakes to grant, conditional upon achieving performance targets approved by the Parent Company’s Board of Directors;

• employee share Ownership plan (esOp) that offers to eligible Group employees the possibility to buy UniCredit ordinary shares with the following advantages: granting of free ordinary shares (“Discount Shares” and “Matching Shares” or, for the second category, rights to receive them) measured on the basis of the shares purchased by each Participant (“Investment Shares”) during the “Enrolment Period”. The granting of free ordinary shares is subordinated to vesting conditions (other than market conditions) stated in the Plan Rules.

• group executive incentive system that offer to eligible Group Executives a variable remuneration for which payment will be made in four years. For the first two years the beneficiary will receive the payment by cash and for the second two years they will receive the payment by UniCredit shares; the payments are related to the achievement of performance conditions (other than marked conditions) stated in the Plan Rules.

• share for talent that offers to eligible talents free UniCredit ordinary shares that the Parent Company undertakes to grant, conditional upon achieving performance targets approved by the Parent Company’s Board of Directors.


Measurement modelStock OptionsThe Hull and White Evaluation Model has been adopted to measure the economic value of Stock Options.

This model is based on a trinomial tree price distribution using the Boyle’s algorithm and estimates the early exercise probability on the basis of a deterministic model connected to:•reachingaMarketShareValueequalstoanexerciseprice-multiple(M);•probabilityofbeneficiaries’earlyexit(E)aftertheendofthevestingperiod.

performance stock Options 2012–2015The following table shows the measurements and parameters used in relation to the Performance Stock Options granted in 2012 to Executive Vice Presidents and above and represent options that the Parent Company undertakes to grant, conditional upon achieving performance targets approved by the Parent Company’s Board of Directors.

Measurement of Performance Stock Options 2012perfOrmaNce stOcK OptiONs 2012

Exercise price [€] 4.01UniCredit share market price [€] 4.01Date of granting Board resolution (grant date) 27 March 2012Vesting period start-date 1 January 2012Vesting period end-date 31 December 2015Expiry date 31 December 2022Exercise price – multiple (m) 1.5Post-vesting exit rate (e) 3.73%Dividend yield 2%Volatility 56.5%Risk-free rate 2.5%performance stock Options’ fair value per unit at the grant date [€] 1.867

Parameters are calculated as follows:•exit rate: annual percentage of Stock Options forfeited due to termination;•dividend yield: next four years average dividend-yield;•Volatility: historical daily average volatility for a period equals to four years;•exercise price: arithmetic mean of the official market price of UniCredit shares during the month preceding the granting Board resolution;•unicredit share market price: set equal to the exercise price, in consideration of the “at-the-money” allocation of Stock Options at the grant date.

Other equity instruments (Performance Shares) – Share for TalentThe Share for Talent plan offers three “Free UniCredit Shares” instalments, having annual vesting, to selected beneficiaries.

The economic value of Performance Shares is measured considering the share market price at the grant date less the present value of the future dividends during the performance period. Parameters are estimated by applying the same model used for Stock Options measurement.

The following table shows the measurements and parameters used in relation to the Performance Shares granted in 2012:

Measurement of Share for Talent 2011share fOr taleNt

first iNstalmeNt (2013) secONd iNstalmeNt (2014) third iNstalmeNt (2015)

Date of granting Board resolution (grant date) 27 March 2012 27 March 2012 27 March 2012Vesting period start-date 1 January 2012 1 January 2013 1 January 2014Vesting period end-date 31 December 2012 31 December 2013 31 December 2014UniCredit share market price [€] 4.01 4.01 4.01Economic value of vesting conditions [€] – –0.08 –0.15performance shares’ fair value per unit at the grant date [€] 4.01 3.93 3.86




Group Executive Incentive SystemThe amount of the incentive will be determined on a basis of the achievement of quantitative and qualitative goals stated by the plan. In particular, the overall evaluation shall be expressed as a percentage, from a minimum of 0% to a maximum of 150% (non-market vesting conditions).

This percentage, adjusted by the application of a risk /opportunity factor – “Group Gate” – at first payment, multiplied by the Bonus Opportunity will determine the effective amount that will be paid to the beneficiary.

Group Executive Incentive System 2011 – SharesThe economic value of Shares granted is measured considering the share market price at the grant date less the present value of the future dividends during the performance period. Parameters are estimated by applying the same model used for Stock Options measurement.

shares related tO grOup executiVe iNceNtiVe system 2011

first iNstalmeNt (2014) secONd iNstalmeNt (2015)

Bonus Opportunity economic value – (grant date) 22 March 2011 22 March 2011Number of Shares – date of Board resolution 27 March 2012 27 March 2012Vesting period start-date 1 January 2011 1 January 2011Vesting period end-date 31 December 2013 31 December 2014UniCredit share market price [€] 4.01 4.01Economic value of vesting conditions [€] –0.34 –0.50performance shares’ fair value per unit at the grant date [€] 3.67 3.51

The economic and equity effects will be recognised on the basis of the instruments’ vesting period.

Group Executive Incentive System 2012Variable incentive related to 2012 defined on the basis of: • individualperformance,aswellasresultsatbusinessleveland,asrelevant,atcountryand/orGrouplevel;• definitionofabalancedstructureofupfront(followingthemomentofperformanceevaluation)anddeferredpayments,incashandinshares;• distributionsofsharepaymentswhichtakeintoaccounttheapplicableregulatoryrequirementsregardingtheapplicationofshareretentionperiods.

In particular, the payment structure has been defined in line with Bank of Italy provisions requiring a share retention period of 2 years for upfront shares and of 1 year for deferred shares;

• applicationofanoverallrisk /sustainabilityfactor,relatedtoannualGroupprofitability,solidityandliquidityresults(“GroupGate”)aswellasa Zero Factor related to future Group profitability, solidity and liquidity results.

All profit-and-loss and net equity effects related to the plan will be booked during the vesting period

Employee Share Ownership Plan (Let’s Share 2011)For Free Shares (or rights to receive them) the fair value is measured at the end of the Enrolment Period according to the weighted average price paid by participants to buy the Investment Shares on the market.

The following tables show the measurements and parameters used in relation to Discount Shares and Matching Shares (or rights to receive them) connected to the “Employee Share Ownership Plan” approved in 2011.

Measurement of Free Shares ESOP 2011free shares

Date of Free Shares delivery to Group employees 15 January 2013Vesting period start-date 1 January 2012Vesting period end-date 31 December 2014Discount Shares’ fair value per unit [€] 3.364

Within the limits of the “Employee Share Ownership Plan” approved in 2011: all profit-and-loss and net equity effects related to free shares will be booked during 2012–2014 (except adjustments, according to Plan Rules, that will be booked during 2015).


Other informationEmployee Share Ownership Plan 2012 (Let’s Share 2012)In May 2012 the Ordinary Shareholders’ Meeting approved the “UniCredit Group Employee Share Ownership Plan 2012” (“Let’s Share 2012”) that offers to eligible Group employees the opportunity to purchase UniCredit ordinary shares at favourable conditions, starting from January 2013, in order to reinforce employees’ sense of belonging and commitment to achieve the corporate goals.

Let’s Share 2012 is a broadly-based share plan under which:• duringthe“EnrolmentPeriod”(fromJanuary2013toDecember2013)theparticipantscanbuyUniCreditordinaryshares(“InvestmentShares”)

by means of monthly contribution or one-off basis (via one instalment in January and/or July 2013) taken from their current account. In case, during this Enrolment Period, a participant leaves the Plan, he/she will lose the right to receive any free ordinary shares at the end of the Enrolment Period;

• atthebeginningoftheEnrolmentPeriod(31January2013),eachparticipantwillreceiveadiscountof25%ontheoverallamountofsharespurchased; the Free Shares will be locked up for one year (i. e. the holding period). The participant will lose the entitlement to the Free Share if, during the holding period, he/she will no longer be an employee of a UniCredit Group company unless the employment has been terminated for one of the specific reasons stated in the Plan Rules. In some countries, for fiscal reasons, it will not be possible to grant the Free Shares at the beginning of the Enrolment Period: in that case an alternative structure is offered that provides to the participants of those countries the right to receive the Free Shares at the end of the holding period (“Alternative Structure”);

• duringthe“HoldingPeriod”(fromJanuary2013toJanuary2014orfromJuly2013toJuly2014),theParticipantscanselltheInvestmentShares purchased at any moment, but they will lose the corresponding Free Shares (or right to receive them).

The Free Shares are qualified as “Equity Settled Share-based Payments” as participants, according to Plan Rules, will receive UniCredit equity instruments as consideration for the services rendered to the legal entity where they are employed. The fair value will be measured at the beginning of Enrolment Period according to the price paid by participants to acquire the first instalment of the Investment Shares on the market.

All profit-and-loss and net equity effects related to Let’s Share 2012 will be booked during the period 2013–2014.

Payroll costs in 2012 included share-based payments of €6 million.

F.15 – Events after the reporting periodBank Austria has started to implement the “Smart Banking Solutions” project. The objective of this strategic project is to develop sales activities into a multi-channel offering via intensively used digital communication channels (online, Internet, smartphone) and innovative branches, with a focus on urban areas. In this connection Willibald Cernko, Chairman of the Management Board of UniCredit Bank Austria AG, has considered the possibility of significantly reducing the number of branches in the period to 2015.

Bank Austria has decided to take over from UniCredit S. p. A. in 2013 those parts of UniCredit Global Leasing Group which cover business in Austria and CEE.




F.16 – Consolidated capital resources and regulatory capital requirementsBank Austria, as part of UniCredit Group, places a high priority on capital management and capital allocation. The bank’s capital management strategy is characterised by a strong commitment to a sound capital base and an allocation of capital aimed at achieving the highest possible shareholder value.

Bank Austria’s internal capital is set at a level that will cover adverse events with a probability of 99.97% (confidence interval). At the same time regulatory capital ratio targets (Core Tier 1) are set so as to be consistent with regulatory expectations and the risk appetite framework defined by the bank.

Capital management activities are embedded in the Group’s planning and budgeting process as well as within ICAAP/Pillar 2 processes. Bank Austria is regularly monitoring capital evolution and regulatory trends at country level and at Group level. Capital management activities comprise:• planningandbudgetingprocesses:

– proposals as to risk propensity, development and capitalisation objectives– analysis of the impact of RWA development and changes in the regulatory framework– preparation and proposal of the capital plan and an appropriate dividend policy

• monitoringprocesses– analysis and monitoring of limits for Pillar I and Pillar II– analysis and monitoring of the capital ratios of the Bank Austria Group as well as at single-entity level

Basel 2 Disclosure pursuant to Section 5 of the Austrian Disclosure Regulation (§ 5 OffV 2/6) is available on Bank Austria’s website.• ICAAP/PillarII

– Risk identification– Risk profile measurement– Capital planning and definition of the risk appetite– Monitoring and reporting– Risk governance

Capital is managed dynamically, which means that Bank Austria prepares the financial plan, monitors capital ratios for regulatory purposes on a monthly basis and anticipates the appropriate steps required to achieve the goals set.


Capital RequirementsThe capital requirements pursuant to Section 22 of the Austrian Banking Act comprise requirements resulting from credit risk, from position risk in debt instruments, equities, commodities and foreign currencies, and from operational risk.

The following tables show the capital requirements for the Bank Austria group of credit institutions pursuant to Section 30 of the Austrian Banking Act as at the end of the reporting period 2012 and 2011, as well as the various components of Bank Austria’s capital resources as at the end of 2012 and 2011:

Net capital resources of the Bank Austria group of credit institutions (€ million)

31 dec. 2012 31 dec. 2011

Paid-in capital (less own shares) 1,681 1,681

Reserves and minority interests 13,709 13,118

Intangible assets –509 –500

Deductions from Tier 1 capital (in particular 50% deduction pursuant to Section 23 (13) 3 to 4d of the Austrian Banking Act) –804 –684

core capital (tier 1) 14,078 13,616Net subordinated liabilities 2,494 2,567

Revaluation reserves and undisclosed reserves 308 180

IRB excess in risk provision – –

Deductions from Tier 2 (50% deduction pursuant to Section 23 (13) 3 to 4d) –752 –684

supplementary capital resources (tier 2) 2,050 2,064Deductions from Tier 1 and Tier 2 (deduction pursuant to Section 23 (13) 4a) –137 –132

Net capital resources (excl. tier 3) 15,991 15,547Tier 3 (re-assigned subordinated capital) 204 331

Net capital resOurces (iNcl. tier 3) 16,194 15,878

Capital requirements of the Bank Austria group of credit institutions (€ million)

31 dec. 2012 31 dec. 2011

capital requirements ofa) Credit risk pursuant to standardised approach 5,397 5,539

b) Credit risk pursuant to internal ratings-based (IRB) approach 3,793 3,194

Credit risk 9,190 8,733

Operational risk 1,012 951

Position risk – debt instruments, equities, foreign currencies and commodities 204 331

Settlement risk – –

capital reQuiremeNt 10,405 10,015Total RWA 130,067 125,188

Capital ratios31 dec. 2012 31 dec. 2011

Tier 1 capital ratio, based on all risks 10.8% 10.9%Total capital ratio, based on all risks 1) 12.5% 12.7%Tier 1 capital ratio, based on credit risk 12.3% 12.5%Total capital ratio, based on credit risk 2) 13.0% 13.4%

1) Net capital resources (incl. Tier 3) as a percentage of the risk-weighted assessment basis for all risks2) Total capital resources less requirement for trading book, commodities risk, exchange rate risk and operational risk as a percentage of the risk-weighted assessment basis for credit risk




Willibald Cernko Gianni Franco Papa CEO Support Services CEE Banking Division (Chief Executive Officer) (Deputy CEO)

Helmut Bernkopf Francesco Giordano Dieter Hengl Commercial Banking Division CFO Finance Corporate & Investment (Chief Financial Officer) Banking Division

Jürgen Kullnigg Doris Tomanek Robert Zadrazil CRO Risk Management Human Resources Austria & CEE Private Banking Division (Chief Risk Officer)

Concluding Remarks of the Management Board


The Management Board of UniCredit Bank Austria AG has prepared the consolidated financial statements for the financial year begin-ning on 1 January 2012 and ending on 31 December 2012 in accordance with International Financial Reporting Standards (IFRSs) published by the International Accounting Standards Board as adopted by the European Union. The management report of the Group was prepared in accordance with the Austrian Business Code and is consistent with the consolidated financial statements.

The consolidated financial statements and the management report of the Group contain all required disclosures; in particular, events of special significance which occurred after the end of the financial year, and other major circumstances that are significant for the future development of the Group have been appropriately explained.



Report of the Auditors

Auditors’ report (report of the independent auditors)

Report on the consolidated financial statementsWe have audited the accompanying consolidated financial statements of UniCredit Bank Austria AG for the financial year from 1 January 2012 to 31 December 2012. These consolidated financial statements comprise the balance sheet as at 31 December 2012, the statement of comprehensive income, the statement of cash flows and the state-ment of changes in equity for the year ended 31 December 2012, and the notes to the consolidated financial statements.

Management’s responsibility for theconsolidated financial statements andfor the consolidated accountingUniCredit Bank Austria AG’s management is responsible for the con-solidated accounting as well as the preparation and fair presentation of these consolidated financial statements in accordance with Inter-national Financial Reporting Standards as adopted by the EU. This responsibility includes: designing, implementing and maintaining internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are rea-sonable in the circumstances.

Auditors’ responsibility and description ofthe type and extent of the statutory audit Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted our audit in accordance with laws, regulations and principles governing an audit of financial statements which are applicable in Austria and in

accordance with International Standards on Auditing (ISAs), issued by the International Auditing and Assurance Standards Board (IAASB) of the International Federation of Accountants (IFAC). Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reason-able assurance whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evi-dence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

We believe that the audit evidence we have obtained is suffi-cient and appropriate to provide a basis for our audit opinion.

OpinionOur audit did not give rise to any objections. Based on the results of our audit in our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the group as of 31 December 2012, and of its finan-cial performance and its cash flows for the financial year from 1 January 2012 to 31 December 2012 in accordance with International Financial Reporting Standards (IFRSs) as adopted by the EU.

This report has been translated from German to English for referencing purposes only. Please refer to the official legally binding version as written and signed in German. Only the German version is definitive.


Statement on the consolidated management report

Laws and regulations require us to perform audit procedures to determine whether the consolidated management report is consistent with the consolidated financial statements and whether the other disclosures made in the consolidated management report are not misleading to the group’s position. The audit report must also include a statement as to whether the consolidated management report is consistent with the consolidated financial statements and if the dis-closures pursuant to section 243a of the Austrian Business Code are appropriate.

In our opinion, the consolidated management report for the group is consistent with the consolidated financial statements. The disclosures pursuant to section 243a Austrian Business Code are appropriate.


The report (in German language, or translations into another language, including shortened or amended versions) may not be made public or used by third parties, when reference is made in part or in whole to the auditors’ report, without the express written consent of the auditors.

This report has been translated from German to English for referencing purposes only. Please refer to the official legally binding version as written and signed in German. Only the German version is definitive.

Austrian Savings Bank Auditing Association

Auditing Board

(Bank Auditor)

Gerhard Margetich Christian Spitzer Certified Accountant Auditor

KPMG Austria AG

Wirtschaftsprüfungs- und Steuerberatungsgesellschaft

Walter Reiffenstuhl ppa. Philip Kudrna Certified Accountant Certified Accountant



In the reporting year the Supervisory Board maintained a consist-ent dialogue with the Management Board and performed its duties as defined by law and in the Articles of Association and the rules of procedure, with due regard to the Austrian Code of Corporate Governance. The Supervisory Board held five meetings and passed four resolutions by written circular vote. Its activities focused on the current development of the bank’s business and on project-related and risk-related issues. The Supervisory Board was directly involved in decisions on issues which are of fundamental impor-tance to the bank. Moreover, between the dates of meetings, the Chairman of the Supervisory Board maintained contact with the Chairman of the Management Board on a continuous basis to obtain information on business developments and major issues.

Focus of the Supervisory Board’s activitiesDuring the past financial year the Supervisory Board provided advice to the Management Board and supervised the conduct of business. The Management Board regularly provided information to the Supervisory Board, in writing and orally and in a timely and comprehensive manner. Deliberations took place on a number of occasions to discuss the business policy, the economic situation of the various business segments, liquidity and capital management aspects and especially risk management. Periodical discussions concentrated on the financial position and results, status reports on the EuroSIG project, and findings and measures in connection with the review of credit risk performed by Oesterreichische Nationalbank, Austria’s central bank, pursuant to Section 70 of the Austrian Banking Act. The Supervisory Board passed resolutions on matters within its competence after appropriate analysis and critical evaluation.

The Supervisory Board issued a statement of compliance with the Austrian Code of Corporate Governance. The self-evaluation by the Supervisory Board was an issue discussed at two meetings, with an efficiency test carried out on the basis of a detailed question-naire. To the extent that this process indicates a need for changes, the results of the self-evaluation will be taken into account in the Supervisory Board’s activities.

The reporting year saw modifications of the rules of procedure for the Supervisory Board, for the Credit /Risk Committee, for the Audit Committee and for the Management Board, as well as adjustments to the distribution of responsibilities and of the rules governing representation of Management Board members. Extensive informa-tion was provided on the applicability of UniCredit Governance

Rules to members of the Supervisory Board. A separate committee was set up for the sale process of the Schottengasse property.

Reports on the performance of Ramius and on the activities of the special assets holding company for repossession of assets and equity (UniCredit Turn-Around Management CEE GmbH) were presented on a number of occasions in the 2012 financial year. Furthermore, the Supervisory Board discussed the report on comfort letters issued, the anti-corruption report, loan restructuring in CEE and developments of specific legal cases. The status of the out-sourcing agreement with UBIS was analysed.

Resolutions were passed on the sale of JSC ATF Bank, Kazakhstan, on the comfort letter issued in favour of UniCredit CAIB Romania SRL at the request of KPMG Romania, on the cross-border merger of UniCredit Bank Czech Republic and UniCredit Bank Slovakia, and on the enlargement of the group of companies formed for tax pur-poses in Austria and the conclusion of profit transfer agreements and tax compensation agreements in the context of group taxation covering three additional group members.

Special attention was given to numerous capital measures at com-panies in which the bank holds equity interests. These included in particular capital reductions at UniCredit CAIB Poland S.A. and at EK Mittelstandsfinanzierungs AG, capital increases with a view to recapitalising banking subsidiaries of Bank Austria in CEE countries, the takeover offer and squeeze-out concerning UCB Banja Luka, the sale of profit-sharing rights in B&C Bauverwaltungs GmbH and the related sale of PORR shares, and the conclusion of a car-finance joint venture agreement with RCI and Nissan in Russia. Resolutions were also passed on the takeover of shares in PJSC Ukrsotsbank to be purchased by that company itself and on the purchase of minor-ity shareholdings in Real Invest.

Other resolutions passed by the Supervisory Board included giving advance approval to loans to members of the Supervisory Board and of the Management Board as well as other related parties as defined in Section 28 of the Austrian Banking Act, and approving powers to represent and act on behalf of the bank. Resolutions con-cerning appointments to the Management Board are described in the section “Management Board and Supervisory Board changes”.

The Supervisory Board was regularly provided with information, through written and oral presentations, on the main issues dealt with by the Supervisory Board Committees and on the results of their meetings.

Report of the Supervisory Board for 2012


Committee activitiesThe Credit /Risk Committee held five meetings in 2012 and passed seven resolutions by written circular votes. All loans approved under the Management Board’s approval authority were brought to the Credit /Risk Committee’s notice and the Committee passed resolutions on loan applications requiring its approval. In the reporting year the outlook for existing and emerging risks in Austria and Central and Eastern Europe with regard to the credit portfolio, market risk, liquidity risk and resources was added as a regular item to be reported in detail at the Committee’s meetings. Other new periodical information related to funding and liquidity management and to the recovery and resolution plan as required by the Austrian Financial Market Authority. As part of the overall risk reports, the Committee extensively dealt with the structure of the loan portfolio and risk policy principles, credit and market risk, operational risk, reputational risk, ICAAP and the risk appetite. The Committee also dealt with the 2012 risk strategy, capital management, large exposures pursuant to Section 27 of the Austrian Banking Act, and with exposures of relevance in connec-tion with Art. 136 of the Italian Banking Act. Activities also included extensive portfolio reports classified by industry and region, and detailed reports on problem exposures.

The Audit Committee held four meetings in 2012, with repre-sentatives of the auditors regularly taking part in the meetings. The Committee discussed the separate financial statements and the consolidated financial statements as well as the audit reports, including the report on the effectiveness of risk management, and provided the Supervisory Board with information on these topics. The Audit Committee also dealt with the proposal concerning the election of the auditors of the separate financial statements and of the consolidated financial statements for the 2013 financial year. Intensive deliberations focused on the management letter of the auditors and the status report on measures taken in this connection, and on the engagement letter of the auditors. The Audit Committee carried out analyses of the 2011 Corporate Governance Report, the external Corporate Governance Report on the evaluation of compliance with the provisions of the Austrian Code of Corporate Governance in the 2011 financial year, the annual status report on the Governance Rule Book, the coming regulatory challenges and an update on the status of CEE Credit Risk Policies and complaint management.

Attention was also given to the very extensive compliance reports. The Audit Committee satisfied itself, on the basis of numerous presentations by Internal Audit providing relevant information, about the effectiveness of the internal control and audit systems and monitored the financial reporting process with due regard to the “262 Savings Law”. The Committee also took note of and approved the 2011 annual report and the 2012 audit plan of Bank Austria Group Internal Audit.

The Strategy and Nominations Committee dealt with the prepara-tion of appointments to the Management Board in four resolutions passed by written circular vote.

The Remuneration Committee held two meetings and passed one resolution by written circular vote. Its discussions focused on remu-neration policy, a preview of the 2012 Group Remuneration Policy and the 2012 Executive Incentive System.

Supervisory Board and Management Board changesKarl Guha resigned from the Supervisory Board with effect from 31 December 2012.

In the reporting year the term of office of CEO Willibald Cernko was renewed until 30 September 2015, and those of Rainer Hauser and Doris Tomanek were renewed until 31 May 2015 and 6 May 2016, respectively.

Massimiliano Fossati resigned from the Management Board with effect from 31 October 2012 and Rainer Hauser resigned from the Management Board with effect from 31 December 2012. Jürgen Kullnigg was appointed to the Management Board with effect from 1 November 2012 and Helmut Bernkopf was appointed to the Management Board with effect from 1 January 2013.

The Supervisory Board thanks the members of the Supervisory Board and of the Management Board who resigned for their valuable activities for the bank.

Details of the composition of the Supervisory Board and the Super-visory Board Committees and of the Management Board in the past financial year are given in the “Supervisory Board and Management Board of UniCredit Bank Austria AG” section of the Annual Report.



Report of the Supervisory Board for 2012 (CONTINUED)

Audit of the separate financial statements and consolidated financial statements

The accounting records, the 2012 separate financial statements and the management report were audited by the Auditing Board of the Austrian Savings Bank Auditing Association and by KPMG Aus-tria GmbH Wirtschaftsprüfungs- und Steuerberatungsgesellschaft. As the audit did not give rise to any objections and the legal requirements were fully complied with, the auditors’ report was expressed without qualification.

The Supervisory Board endorsed the findings of the audit, agreed with the separate financial statements and management report, including the proposal for the appropriation of profits, presented by the Management Board, and approved the 2012 separate financial statements, which were thereby adopted pursuant to Section 96 (4) of the Austrian Joint Stock Companies Act.

The compliance review of the Corporate Governance Report pursu-ant to Section 243b of the Austrian Business Code was performed by Univ. Prof. DDr. Waldemar Jud Corporate Governance Forschung CGF GmbH and has not given rise to any major objections in its final findings.

The 2012 consolidated financial statements were audited by the Auditing Board of the Savings Bank Auditing Association and by KPMG Austria GmbH Wirtschaftsprüfungs- und Steuerberatungs-gesellschaft for consistency with International Financial Reporting Standards (IFRSs) published by the International Accounting Stand-ards Board as adopted by the European Union, and the manage-ment report of the Group was audited for consistency with the

Austrian Business Code. The audit did not give rise to any objec-tions and the legal requirements were fully complied with. In the opinion of the auditors, the consolidated financial statements give a true and fair view of the financial position of the Group as at 31 December 2012, and of the results of the Group’s operations and its cash flows for the financial year beginning on 1 January 2012 and ending on 31 December 2012, in accordance with Interna-tional Financial Reporting Standards (IFRSs) as adopted by the European Union.

The auditors certified that the management report of the Group was consistent with the consolidated financial statements, and that the legal requirements for exemption from the obligation to prepare also separate consolidated financial statements pursuant to Aus-trian law were met, and they expressed their unqualified opinion.

The Supervisory Board has endorsed the findings of the audit.

A word of thanksThe Supervisory Board thanks the Management Board members, the Employees’ Council, the managers and all employees for their sustained commitment and dedication and for their achievements, which were essential for the sound performance in the 2012 financial year.


The Supervisory Board

Erich HampelChairman of the Supervisory Board

Home loans made easy

SIMPLICITYZagrebačka Banka helped me to resolve mypersonal and professional financing challenges.I previously worked in Zagreb, where I lived in arented apartment. When I found another jobin my hometown of Split, the bank helpedme to secure a state-subsidised loan thatallowed me to move back and buy a house.My personal banker was highly skilled andengaged, and my loan application wasprocessed quickly and approved immediately.

Goran Dlaka, customer of Zagrebačka Banka in Croatia


Corporate Governance

Corporate Governance Report for the 2012financial year of UniCredit Bank Austria AG 232

Statement by Management 239

Supervisory Board and Management Boardof UniCredit Bank Austria AG 240



Preface:The Austrian Code of Corporate Governance (ACCG) is the standard for good corporate management and corporate control in the Austrian capital market.

After enactment of the Austrian Statute Amending Business Law [Unternehmensrechtsänderungsgesetz] the ACCG was given even more importance, as listed joint-stock companies [Aktiengesellschaf-ten] have been put under a statutory obligation to prepare a Corpo-rate Governance Report.

The Code itself primarily applies to listed Austrian joint-stock compa-nies. The Preamble to the ACCG recommends that also joint-stock companies that are not listed on a stock exchange follow the rules of this Code to the extent that they are applicable to them.

UniCredit Bank Austria AG is an Austrian joint-stock company having its registered office in Vienna; since 21 May 2008 its shares have not been listed on the stock exchange anymore. In line with the rec-ommendation contained in the Preamble to the ACCG UniCredit Bank Austria AG will continue to orient itself by the rules of the ACCG as amended from time to time, which can be found on the website of the Austrian Working Group on Corporate Governance at www.corpo-rate-governance.at.

This Corporate Governance Report of UniCredit Bank Austria AG for the 2012 financial year was prepared by using the Opinion on Corpo-rate Governance Reports published by the Austrian Financial Report-ing and Auditing Committee according to Section 243b of the Aus-trian Business Code [Unternehmensgesetzbuch/UGB] and Annex 2 of the Austrian Code of Corporate Governance 2012 pursuant to the compliance statement. Data as at 31 December 2012.

A. UniCredit Bank Austria AG departed from the following C-Rules of the ACCG (July 2012) in the 2012 business year (Explain):The company applies the Austrian Code of Corporate Governance as amended from time to time. Deviations exist with respect to the fol-lowing C-Rules (comply or explain):

Rule 4 to 5 – Publication requirements with regard to the share-holders’ meeting: since its delisting from the stock exchange the company is a closely held corporation. Invitations and documents are sent directly to the shareholders. It is intended to simplify holding of shareholders’ meetings.

Rule 29, 31 and 60 – Publication of the emoluments of the man-agement board regarding each member: due to the closely held structure the emoluments are not published.

Rule 45 – Non-competition clause supervisory board: Members of the supervisory board of UniCredit Bank Austria AG can assume functions on the supervisory boards of competing companies if the company holds a stake in the competitor.

Rule 51 – Publication of the emoluments of the supervisory board regarding each member: due to the closely held structure the emolu-ments are not published.

Rule 52a – Limitation of the number of supervisory board mem-bers to ten members: due to an agreement between our majority shareholder and the holders of registered shares our supervisory board will continue to consist of eleven members who are elected by the shareholders’ meeting.

Rule 74 – Publication of the financial calendar at least two months before the start of the new business year: The necessary co-ordination with the parent company (UniCredit S.p.A) may result in UniCredit Bank Austria AG not being able to publish the financial cal-endar at least two months before the start of the new business year.

for the 2012 financial year of UniCredit Bank Austria AG

Corporate Governance Report

Disclaimer: The English translation of UniCredit Bank Austria AG’s Corporate Governance Report serves information purposes only. The exclusively binding version shall be the German text.


B. Additional information according to Section243b of the Austrian Business Code (“UGB”):

1. Information regarding the Management Board and its working procedures:Supervisory board mandates:Supervisory board mandates or comparable functions of Management Board members in other Austrian and foreign companies which are not included in the consolidated financial statements (C-Rule 16):

Willibald Cernko:Notartreuhandbank AG, Member Supervisory BoardUniCredit Leasing (Austria) GmbH, Chairman Supervisory BoardUniCredit Business Integrated Solutions Austria GmbH, Chairman Supervisory Board

UniCredit Business Integrated Solutions SCpA, Member Board of Directors

Gianni Franco Papa: –

Francesco Giordano:–

Rainer Hauser (date of resignation: 31 December 2012):Bank Austria Creditanstalt Versicherung AG, Member Supervisory Board

BWA Beteiligungs- und Verwaltungs-Aktiengesellschaft, Member Supervisory Board

Bausparkasse Wüstenrot Aktiengesellschaft, Member Supervisory BoardUniCredit Leasing (Austria) GmbH, Member Supervisory Board

Dieter Hengl:Oesterreichische Kontrollbank AG, Member Supervisory BoardWien Mitte Immobilien GmbH, Chairman Supervisory Board

Jürgen Kullnigg:–

Doris Tomanek:UniCredit Business Integrated Solutions Austria GmbH, Member Supervisory BoardBank Pekao SA, Member Supervisory Board

Robert Zadrazil: Oesterreichische Kontrollbank AG, Member Supervisory Board

Management Board’s working procedures:The Management Board has sole responsibility for managing the company in the best interests of the company. The Management Board runs the business on the basis of the duties and rights conferred by law, the Arti-cles of Association and the internal rules of procedure. The Management Board meets every week and reports regularly to the Supervisory Board. The Management Board’s distribution of responsibilities:For the distribution of responsibilities within the Management Board see page 240. For further information on the Management Board see page 240.

2. Information regarding the Supervisory Board and its working procedures: Supervisory Board mandates:Further supervisory board mandates or similar functions of Supervisory Board members in Austrian or foreign listed companies (C-Rule 58):

Erich Hampel:JSC ATF Bank, Chairman Supervisory Board Österreichische Post Aktiengesellschaft, Member Supervisory BoardZagrebačka banka dd, Chairman Supervisory Board

Paolo Fiorentino:AS Roma, Member Board of Directors

Candido Fois (date of resignation: 15 January 2013):Telecom Italia Media S.p.A., Member Board of DirectorsUniCredit S.p.A., Member Board of Directors

Roberto Nicastro:Bank Pekao SA, Member Supervisory Board

Vittorio Ogliengo: Gemina S.p.A., Member Board of Directors

Franz Rauch:Vorarlberger Kraftwerke Aktiengesellschaft, Member Supervisory Board

Karl Samstag:Allgemeine Baugesellschaft-A. Porr Aktiengesellschaft, Member Supervisory Board

Bank für Tirol und Vorarlberg Aktiengesellschaft, Member Supervisory BoardBKS Bank AG, Member Supervisory BoardOberbank AG, Member Supervisory Board Schoeller-Bleckmann Oilfield Equipment Aktiengesellschaft, Member Supervisory Board

For further information on the Supervisory Board see page 240.



Corporate Governance Report (CONTINUED)

In the 2012 business year one member of the Supervisory Board failed to personally attend more than half of the meetings of the Supervisory Board.

Information on criteria for the independence of members of the Supervisory Board:A member of the Supervisory Board shall be deemed as independent if said member does not have any business or personal relations with the company or its management board that constitute a material con-flict of interests and are therefore suited to influence the behaviour of the member. Additional criteria for the independence of members of the Supervi-sory Board are laid down on the basis of the guidelines for the assessment of independence contained in Annex 1 to the ACCG: A member of the Supervisory Board shall not have served as a member of the Management Board or as a management-level staff member of the Company or one of its subsidiaries in the past five years. A member of the Supervisory Board shall not maintain or have maintained in the past year any business relations with the Company or one of its subsidiaries to an extent of significance for said member of the Supervisory Board. This shall also apply to business relations with companies in which said member of the Supervisory Board has a considerable economic interest, but not for exercising functions in the bodies of the group. The approval of individual transactions by the Supervisory Board pursuant to L Rule 48 of the ACCG does not auto-matically mean that the person is qualified as not independent. A member of the Supervisory Board shall not have acted as an auditor of the Company or have owned a share in the auditing com-pany or have worked there as an employee in the past three years. A member of the Supervisory Board shall not be a member of the management board of another company in which a member of the Management Board of the Company is a member of the supervisory board. A member of the Supervisory Board may not remain on the Super-visory Board for more than 15 years. This shall not apply to members of the Supervisory Board who are shareholders with a direct invest-ment or who represent the interests of such a shareholder. A member of the Supervisory Board shall not be a closely related family member (direct offspring, spouses, life partners, parents, uncles, aunts, brothers, sisters, nieces, nephews) of a member of the Management Board or of persons who hold one of the aforementioned positions.

Of the elected members of the Supervisory Board, Erich Hampel, a former Chairman of the Management Board of UniCredit Bank Austria AG, does not meet the independence criteria.

Information as to which members of the Supervisory Board fulfil the criteria in C-Rule 54: C-Rule 54 is not applicable for lack of free float.

Number and kind of the Supervisory Board’s committees:The Supervisory Board establishes the following four committees:Credit-/Risk CommitteeAudit CommitteeRemuneration CommitteeStrategy and Nominations Committee

Number of meetings held by the Supervisory Board, reports on its operation and its activities:In 2012 the Supervisory Board held five meetings, in which it per-formed its duties as defined by the law and in the Articles of Associa-tion with due regard to the ACCG. In four cases, resolutions of the Supervisory Board were passed by written circular vote. The Supervisory Board advises and supervises the bank’s Manage-ment Board on an ongoing basis. In this context the Management Board regularly provided information to the Supervisory Board, in writ-ing and orally, on all major developments and business transactions on a timely basis and in a comprehensive manner. The Supervisory Board was involved in all competence-relevant issues and made its decisions, where required, after thorough deliberation and examination. The Supervisory Board gives further information about its activities in its report to the General Meeting.

Number of meetings held by the Committees of the Supervisory Board, their decision-making power and report on their activities:The Credit-/Risk Committee of the Supervisory Board is responsible for approving loans above a specified amount and for overseeing the com-pany’s risk position. As part of its responsibility for overseeing risk management, the Credit-/Risk Committee discusses the structure of the loan portfolio and principles of risk policy, and reports to the Supervisory Board. The Credit-/Risk Committee is authorised to decide on urgent business cases. The Credit-/Risk Committee dealt with large exposures pursuant to Section 27 of the Austrian Banking Act and exposures of relevance in connection with Article 136 of the Italian Banking Act, and especially loans requiring its approval. The Credit-/Risk Committee of the Supervisory Board held five meetings and passed seven resolutions by written circular vote.

The Audit Committee is responsible for the audit and the preparation of the adoption of the financial statements and consolidated financial statements, the proposal for the appropriation of profits and the man-agement report (of the Group) and for matters related to the auditors. Since 2008 the Audit Committee has performed additional tasks, namely monitoring the financial reporting process, the effectiveness of the internal control system, the internal audit system and the risk man-agement system of the company as well as monitoring the audit of financial statements and the audit of consolidated financial statements. The Audit Committee audits the Corporate Governance Report and deals with the management letter and the report on the effectiveness of risk management. The Audit Committee held four meetings.


The Strategy and Nominations Committee prepares, if required, basic decisions for the Supervisory Board, in cooperation with the Manage-ment Board and, if required, using the services of experts. The Strat-egy and Nominations Committee also submits proposals to the Supervisory Board for appointments to the Management Board when positions become vacant and it deals with issues of successor plan-ning. The Strategy and Nominations Committee passed four resolu-tions by written circular vote.

The Remuneration Committee held two meetings and passed one resolution by written circular vote. The Remuneration Committee focused on all matters relating to the relationship between the com-pany and Management Board members, especially on matters relat-ing to the compensation of Management Board members and on the contents of employment contracts with Management Board mem-bers. Since November 2011 the Remuneration Committee has been vested with new tasks due to the implementation of the Capital Requirements Directive (CRD III) in the Austrian Banking Act. Amongst those new tasks the Remuneration Committee monitors the remuneration policy, remuneration practices and remuneration-related incentive schemes of the company and adopts the general principles of remuneration policy, and reviews them on a regular basis, and is responsible for their implementation. The Remuneration Committee adopted the Group Compensation Policy. By way of dero-gation from Rule 43 ACCG but in compliance with Section 39c in conjunction with Section 28a of the Austrian Banking Act, the chair-man of the Remuneration Committee is not the chairman of the Supervisory Board.

3. Disclosure of information regarding the remuneration of Management Board and Supervisory Board members (C-Rules 27, 27a, 28, 30, 31, 43 and 51 as well as R-Rule 28a):

Remuneration of the Management Board:The Supervisory Board has founded a Remuneration Committee pur-suant to Section 39c of the Austrian Banking Act. The Remuneration Committee validates among others the remuneration of all members of the Management Board in relation to their tasks and performance. Therefore the Remuneration Committee assesses the tasks of each member of the Management Board, the situation of the company and standard market remuneration. Long-term remuneration incentives shall provide a basis for the company’s sustainable development.

The remuneration contains fixed and variable components. As in pre-vious years, the remuneration of Management Board members is divided into fixed and performance-linked components in accordance with Rule 30 of the Austrian Code of Corporate Governance and pub-lished in the notes to the consolidated financial statements of Uni-

Credit Bank Austria AG. The variable remuneration components are linked, above all, to sustainable, long-term and multi-year perfor-mance criteria; they include non-financial criteria and do not entice persons to take unreasonable risks.

Measurable performance criteria are set for the variable remuneration components: The performance-related component is linked to an “operational matrix” and a “sustainability matrix” which are individually specified on an annual basis within the framework of UniCredit Group. Evaluated are Group, company and individual performance in both absolute and relative terms in relation to a peer group and sustainabil-ity factors (e.g. customer satisfaction). The financial target range is determined by external benchmarks. The performance-linked compo-nents paid depend on the degree to which targets are met and on the performance of UniCredit Group.

UniCredit Group has a clear Group Executive Incentive Compensation System which is implemented in UniCredit Bank Austria AG since 1 January 2011. The pay mix is set systematically and monitored against the market. Variable pay is capped with a maximum limit ex-ante according to incentive schemes. Precautions are taken to ensure that the company can reclaim variable remuneration components if it becomes clear that these were paid out on the basis of obviously false data.

In compliance with CRD III and the Austrian Banking Act, variable remu-neration is paid on a deferred basis. Reference is made to the fact that the payout of the respective deferred variable remuneration depends on UniCredit Group’s performance (in case of a negative result).

Contracts concluded with Management Board members (new contracts or renewals) provide that in the case of premature termination of a contract with a Management Board member without a material breach, severance payments do not exceed more than two years annual pay and that not more than the remaining term of the employment contract is remunerated. In the case of premature termination of a management contract for a material reason for which a Management Board member is responsible, no severance payment is made. Any agreements reached on severance payments on the occasion of the premature ter-mination of Management Board activities take into account the circum-stances under which said Management Board member left the com-pany as well as the economic situation of the company.

There are no stock option programmes for Management Board mem-bers since the 2012 financial year. The above-mentioned principles apply accordingly also in the case of new remuneration systems for senior management staff.

The amendment to the Austrian Banking Act implementing the provi-sions regarding the remuneration policy of the Capital Requirements Directive (CRD III) entered into force on 1 January 2011. It implements



Corporate Governance Report (CONTINUED)

a new framework for the remuneration policies and practices of banks. UniCredit Bank Austria AG adapted its remuneration policy to the new European legal situation.

For the term of the employment contract of a Management Board member, payments into a pension fund are made on the basis of a defined-contribution plan. In addition, cover is provided against disabil-ity risk, also via a pension fund. There are severance payment arrangements based on the legal provisions applicable to the sever-ance payment scheme for employees. In the case of a public takeover offer, there are no arrangements for the Management Board that devi-ate from the above.

The company bears the proportionate costs of a D&O insurance which UniCredit Group concluded for the Group companies.

Remuneration of the Supervisory Board:The compensation schedule for Supervisory Board members provides that the Chairman of the Supervisory Board receives double, and the Deputy Chairman one and a half times, the compensation received by a Supervisory Board member. Members of the Credit-/Risk Committee and members of the Audit Committee receive additional compensation.

Emoluments of Management and Supervisory Board members:Information on emoluments of Management and Supervisory Board members can be found in the notes to the consolidated financial state-ments of UniCredit Bank Austria AG. According to our statement of compliance with the ACCG the emoluments regarding each member of the Management Board and the Supervisory Board are not published.

Information to the General Meeting:In the course of the ordinary General Meeting on 12 June 2012, the Chairman of the Supervisory Board provided information on the princi-ples of the remuneration system.

4. Report on the measures taken by the company to promote women on the Man-agement Board, on the Supervisory Board and in executive positions (Section 80 of the Austrian Joint-Stock Companies Act [Aktiengesetz/AktG] as laid down in Section 243b (2) (2) of the Austrian Business Code [Unternehmensgesetzbuch/UGB]:

As early as at the beginning of the 1990s UniCredit Bank Austria AG and its predecessor banks took women-specific measures. One of them was to create the position of a Women’s Officer, who is still active within UniCredit Bank Austria AG. Today, diversity management

in UniCredit Bank Austria AG is located organisationally in Identity & Communications and thus forms an essential part of sustainability management. Since UniCredit Bank Austria AG was integrated in Uni-Credit Group the numerous different efforts aiming at equal opportu-nities have been intensified and more measures for implementation of the equality strategy have been taken.

In the course of an analysis project carried out at UniCredit in Austria, Germany and Italy in 2009, among other things, career barriers for women were identified by means of a number of qualitative inter-views and focus groups. One major finding of the survey was that having a family-friendly environment in the company is a necessary basis for all women and, in particular, for ambitious and career-ori-ented female employees. This means that the numerous family-friendly activities carried out by UniCredit Bank Austria AG in the past were indispensable and are still necessary today.

For example, UniCredit Bank Austria AG considers it very important to support employees who are on parental leave. Since 1993 special events, including provision of childcare services at those events, have been organised for employees on parental leave to make it easier for them to return to work. Those who return from parental leave are offered almost any part-time model; teleworking is also an option. Company kindergartens for a total of about 200 children are offered at two locations in Vienna and holiday childcare is provided during the entire summer holidays. Tennis courses were offered at the bank’s sports facilities in 2012, and the bank cooperated with an organisation which organises a wide variety of sport and learning seminars in Vienna. During the summer holidays children had the opportunity to reach the venues via a shuttle service from different locations.

In the past UniCredit Bank Austria AG received many different awards for its special family-friendly measures. For example, in June 2010 the bank won the 3rd prize of the Kinderbetreuungspreis [Child Care Award] 2010 of the Federal Ministry of Economic Affairs, Family and Youth. In 2011 UniCredit Bank Austria AG participated in the “Taten statt Worte” [action speaks louder than words] competition and came in second out of 70 companies in the category of large firms for its women- and family-friendly policies.

In 2009 UniCredit Bank Austria AG decided to subject itself to an audit in connection with “Family and Work”. On 16 November 2009 UniCredit Bank Austria AG was awarded the basic certificate by the Ministry of Economic Affairs, Family and Youth. Interim reports must be submitted at regular intervals to document progress made and/or measures taken. A working group focuses on further developing “audit ideas and measures” at monthly meetings. The bank under-went a successful re-audit in 2012.

A very important step was taken by UniCredit Group in 2010 when the Group established the Global Job Model. Until then the Group had


many different jobs and titles in all divisions and countries. In the meantime there is a standardised job catalogue of about 250 jobs and all employees know their position and the way in which they can pursue career opportunities. The defined goal of UniCredit Group is to considerably increase the share of women in jobs requiring higher qualifications in the next few years. To reach this goal, Doris Tomanek, female Management Board member of UniCredit Bank Austria AG with responsibility for human resources, was mandated with a group-wide “Gender Diversity Project” in autumn 2011. The project, renamed “Gender Balance Programme” in the meantime, focuses on gender diversity and the advancement of women. The programme underlines Bank Austria’s und UniCredit’s strong com-mitment to efforts in these areas. The “business case” for diversity and equal opportunities is recognised across the Group. This leads to specific measures aimed at bringing about real changes that can be perceived by all those involved rather than being merely symbolic. Appointing women to managerial positions is a key objective under the programme.

In 2009, the European Works Council and Human Resources manag-ers created an essential base for equality of opportunity. They pre-pared and signed a common “Declaration of equal opportunities and non-discrimination”. The Group is working to implement various measures in different countries on the basis of that Declaration.

In order to motivate female employees to actively seize career oppor-tunities and provide them with guidance on which way to take, the “Shaping my Future” seminar was implemented in a number of countries. For Austria, it should be noted that members of the wom-en’s network, which comprises about 100 members, agreed to act as trainers and to support women in their development.

It is important to emphasise that the percentage of women among talents defined in Austria has risen from 20% to around 50% within a few years. In some business areas the percentage of women among talents amounts to 80%. More than one-fifth of participants in the Executive Development Programme (EDP) are women.

UniCredit Group does not use a women’s quota; rather, efforts are being made to achieve a change of mindset and enhance awareness by showing managers the status quo and developments regarding the number of women whenever nominations and appointments are made. If no change is foreseeable, the possibility of introducing a women’s quota is not entirely excluded. Such quotas are already used in external recruiting activities. For example, in 2010 all head-hunters were instructed to try to achieve a 50% female recruitment rate.

Another measure of UniCredit Bank Austria AG in 2010 was to make women “visible” also in the language used, with a view to creating awareness in the company by means of language and communica-tion. The corporate wording defined, and communicated to all employees, the way in which persons should communicate at Uni-Credit Bank Austria AG in a gender-sensitive way.

In spring 2011, the Vienna Economic Chamber ranked UniCredit Bank Austria AG first in the DiversCity competition. This shows that UniCredit Bank Austria AG is on the right track, takes gender diversity seriously and proves its diversity philosophy with deeds rather than words. Despite this remarkable award UniCredit Bank Austria AG is well aware that the goals have not yet been achieved in the various diversity dimensions and consequently also in respect of gender diversity as a focal area.

C. Report on external evaluation:The evaluation of adherence to the Austrian Code of Corporate Gov-ernance by UniCredit Bank Austria AG in the 2012 financial year was carried out by Univ. Prof. DDr. Waldemar Jud Corporate Governance Forschung CGF GmbH. The report on the external evaluation is avail-able at http://ir.bankaustria.at g Corporate Governance.

The Management Board:

Willibald Cernko

Gianni Franco Papa Helmut Bernkopf

Francesco Giordano Dieter Hengl

Jürgen Kullnigg Doris Tomanek

Robert Zadrazil


Statement by Management

We state to the best of our knowledge that the consolidated finan-cial statements prepared in accordance with the applicable finan-cial reporting standards provide a true and fair view of the financial position and performance of the Group, and that in the manage-ment report of the Group the business trends including business

results and the position of the Group have been presented in such a way as to provide a true and fair view of the financial position and performance of the Group, and that the management report of the Group describes the material risks and uncertainties to which the Group is exposed.



Willibald Cernko Gianni Franco Papa CEO Support Services CEE Banking Division (Chief Executive Officer) (Deputy CEO)

Helmut Bernkopf Francesco Giordano Dieter Hengl Commercial Banking Division CFO Finance Corporate & Investment (Chief Financial Officer) Banking Division

Jürgen Kullnigg Doris Tomanek Robert Zadrazil CRO Risk Management Human Resources Austria & CEE Private Banking Division (Chief Risk Officer)


Information regarding the Management Board

ChairmanWillibald Cernko, born 1956Chief Executive Officer (CEO)Member from 1 April 2003 until 31 December 2007 and Chairman from 1 October 2009, end of the current term of office: 30 September 2015

Deputy ChairmanGianni Franco Papa, born 1956CEE BankingMember and Deputy Chairman from 22 January 2011, end of the current term of office: 21 January 2014

MembersMassimiliano Fossati, born 1968Chief Risk Officer (CRO)From 8 June 2010 until 31 October 2012

Francesco Giordano, born 1966Chief Financial Officer (CFO)From 1 February 2011, end of the current term of office: 31 January 2014

Rainer Hauser, born 1967Family & SME BankingFrom 1 June 2009, date of resignation: 31 December 2012

Dieter Hengl, born 1964Corporate & Investment BankingFrom 1 August 2011, end of the current term of office: 31 July 2014

Jürgen Kullnigg, born 1961Chief Risk Officer (CRO)From 1 November 2012, end of the current term of office: 31 October 2015

Doris Tomanek, born 1956Human Resources Austria & CEEFrom 7 May 2010, end of the current term of office: 6 May 2016

Robert Zadrazil, born 1970Private BankingFrom 1 October 2011, end of the current term of office: 30 September 2014

Information regarding the Supervisory BoardThe term of office of elected members will end with the Annual Gen-eral Meeting in 2013. The employees’ representatives are delegated to the Supervisory Board without a time limit.

ChairmanErich Hampel, born 1951Former Chairman of the Management Board of UniCredit Bank Austria AG (Member and Deputy Chairman from 1 October 2009 until 2 November 2011, Chairman from 2 November 2011)

Deputy ChairmanPaolo Fiorentino, born 1956Deputy General ManagerCOO Head of Global Banking Services Strategic Business Area UniCredit Group (from 4 May 2006, Chairman from 21 January 2011 until 2 November 2011, Deputy Chairman from 2 November 2011)

MembersCandido Fois, born 1941Chairman UniCredit Credit Management Bank SpA(from 5 June 2009, date of resignation: 15 January 2013)

Karl Guha, born 1964Group Chief Risk OfficerUniCredit Group (Member from 19 January 2011, date of resignation: 31 December 2012)

Jean Pierre Mustier, born 1961Deputy General ManagerHead of CIB DivisionUniCredit Group(from 20 April 2011)

Roberto Nicastro, born 1964General ManagerHead of Family & SME, Private Banking & CEE Strategic Business Area UniCredit Group (from 4 May 2006)

Corporate Governance | Supervisory Board and Management Board


Supervisory Board and Management Board


Vittorio Ogliengo, born 1958Head of Global Financing & Advisory UniCredit Group (from 4 May 2006)

Franz Rauch, born 1940Former Managing Director Franz Rauch GmbH(Member from 17 March 2003)

Karl Samstag, born 1944Deputy Chairman of the Management Board Privatstiftung zur Verwaltung von Anteilsrechten (from 4 May 2006)

Wolfgang Sprißler, born 1945Former Spokesman of the Management Board (CEO) Bayerische Hypo- und Vereinsbank AG (now: UniCredit Bank AG)(from 19 March 2002)

Ernst Theimer, born 1947Chairman of the Board of Trustees Privatstiftung zur Verwaltung von Anteilsrechten (from 7 July 2010)

Delegated by the Employees’ CouncilWolfgang Heinzl, born 1953Chairman of the Employees’ Council(from 7 November 2000)

Adolf Lehner, born 1961First Deputy Chairman of the Employees’ Council (from 4 December 2000)

Emmerich Perl, born 1950Second Deputy Chairman of the Employees’ Council (from 20 April 2005)

Josef Reichl, born 1956Member of the Employees’ Council(from 25 October 2007)

Robert Traunwieser, born 1955Member of the Employees’ Council(from 24 April 2009)

Barbara Wiedernig, born 1961 Third Deputy Chairman of the Employees’ Council(from 24 April 2009)

Representatives of theSupervisory AuthoritiesCommissionerHans-Georg KramerSecretary-General Federal Ministry of Finance

Deputy CommissionerUlrike HuemerHead of Municipal Department 6 of the City of Vienna

State Cover Fund CommissionerAlfred Katterl

Deputy State Cover Fund CommissionerChristian Wenth

Trustee pursuant to the Austrian Mortgage Bank ActMartin Mareich

Deputy Trustee pursuant to the Austrian Mortgage Bank Act Hannes Schuh


The Supervisory Board formed the following permanent committees:

Credit-/Risk Committee:Chairman: Karl Guha (Chairman from 21 January 2011, date of resignation: 31 December 2012)

Deputy Chairman:Franz Rauch (Member from 25 January 2006, Deputy Chairman from 13 July 2006)

Members:Roberto Nicastro (from 13 July 2006)Vittorio Ogliengo (Chairman from 13 July 2006 until 21 January 2011, member from 21 January 2011)Wolfgang Sprißler (from 25 January 2006)

Delegated by the Employees’ Council:Wolfgang Heinzl (from 7 November 2000)Adolf Lehner (from 2 May 2006)Barbara Wiedernig (from 11 March 2011)

Audit Committee:Chairman: Wolfgang Sprißler (Member from 17 March 2003, Deputy Chairman from 13 July 2006 until 2 November 2011, Chairman from 2 November 2011)

Deputy Chairman:Erich Hampel (from 2 November 2011)

Members:Karl Guha (Member from 21 January 2011, date of resignation: 31 December 2012) Roberto Nicastro (from 13 July 2006)Karl Samstag (Chairman from 31 July 2008 until 2 November 2011, member from 2 November 2011)

Delegated by the Employees’ Council:Wolfgang Heinzl (from 7 November 2000)Adolf Lehner (from 2 May 2006)Emmerich Perl (from 6 November 2011)

Remuneration Committee:Chairman:Paolo Fiorentino (from 21 January 2011)

Deputy Chairman:Erich Hampel (from 1 October 2009)

Members:Jean Pierre Mustier (from 2 November 2011)

Delegated by the Employees’ Council:Wolfgang Heinzl (from 6 November 2011)Adolf Lehner (from 6 November 2011)

Strategy and Nominations Committee:Chairman:Paolo Fiorentino (from 21 January 2011)

Deputy Chairman:Erich Hampel (Member from 4 November 2009 until 21 January 2011, Deputy Chairman from 21 January 2011)

Members: Roberto Nicastro (from 13 July 2006)Vittorio Ogliengo (from 13 July 2006)

Delegated by the Employees’ Council:Wolfgang Heinzl (from 7 November 2000)Adolf Lehner (from 2 May 2006)

Corporate Governance | Supervisory Board and Management Board

Supervisory Board and Management Board (CONTINUED)




Willibald Cernko Gianni Franco Papa (Chairman) (Deputy Chairman)

Helmut Bernkopf Francesco Giordano Dieter Hengl

Jürgen Kullnigg Doris Tomanek Robert Zadrazil

HVB Private Banking VermögensportfolioFlex Select is a new kind of joint investmentwith a long-term investment horizon.It is based on the idea that the customerand the bank invest together in an investmentfund (“Private Banking VermögensportfolioFlex Select 70 PI”; launched by the capitalinvestment company, Pioneer InvestmentsKAG mbH, Munich). The bank has injected€20 million of its own capital in the fundand through the joint investment both thebank and its customers participate in theperformance of the respective unit classes.

A new, versatile and flexible investment concept

partnership

*) Only the sales prospectus is binding, as well as the Key InvestorDocument, which you can receive free of charge in German fromUniCredit Bank AG, Arabellastrasse 12, Munich.


Additional Information

Office Network 246Austria 246Central and Eastern Europe 248

CEE Network 250

Investor Relations 252



Austria

Office Network

Head Office1010 Vienna, Schottengasse 6–8Tel: (+43) 05 05 05-0Fax: (+43) 05 05 05-56155Internet: www.bankaustria.ate-mail: [email protected]

BranchesAmstetten*, Arnoldstein, Bad Sauerbrunn, Baden, Bludenz, Bregenz* (2), Bruck/Leitha, Bruck/Mur*, Brunn/Gebirge, Deutsch Wagram, Deutschkreutz, Deutschlandsberg, Dornbirn, Eisenstadt* (2), Feistritz /Drau, Feldbach*, Feldkirch, Fohnsdorf, Fulpmes, Gänserndorf, Gmünd* (2), Gmunden, Gols*, Graz* (13), Groß-Enzersdorf, Groß-Peters-dorf, Guntramsdorf, Hall /Tirol, Hallein, Hard, Heidenreichstein, Hinterbrühl, Höchst, Holla-brunn, Horn, Imst*, Innsbruck* (4), Juden-burg*, Kapfenberg, Kitzbühel, Klagenfurt* (4), Klosterneuburg, Knittelfeld, Korneuburg, Krems*, Kufstein, Leibnitz*, Leoben* (2), Leopoldsdorf, Lienz*, Liezen*, Linz* (7), Lustenau, Maria Enzersdorf, Mattersburg, Mauerbach, Mistelbach, Mödling* (2), Neudörfl, Neunkirchen, Neusiedl /See, Obdach, Oberpullendorf, Oberwart*, Perchtoldsdorf, Pöls, Pressbaum, Purkers-dorf*, Rankweil, Reutte, Ried/ Innkreis, Riezlern, Salzburg* (7), Schladming*, Schrems, Schwaz, Schwechat, Sierning, Spittal /Drau*, St. Johann/Pongau, St. Pöl-ten* (3), Stegersbach, Steyr* (3), Stockerau*, Strasshof, Straßwalchen, Telfs, Ternitz, Traun, Tulln, Velden, Vienna* (120), Villach* (8), Vöcklabruck*, Völkermarkt*, Vösendorf, Waidhofen/Ybbs, Wattens, Weiz*, Wels*, Wiener Neudorf, Wiener Neustadt*, Wolfs-berg, Wörgl*, Zell /See.

*) with offices serving small and medium-sized enterprises

Private IndividualsRegional Offices Vienna City1010 Vienna, Schottengasse 6–8Tel: 05 05 05-53108

Vienna East1030 Vienna, Gärtnergasse 17Tel: 05 05 05-31640

Vienna West1120 Vienna, Schönbrunner Strasse 231Tel: 05 05 05-34620

Vienna North1210 Vienna, Schwaigergasse 30Tel: 05 05 05-48803

International Community1010 Vienna, Stephansplatz 2Tel: 05 05 05-57771

Customer Direct Service1120 Vienna, Schönbrunner Strasse 231Tel: 05 05 05-54014

Lower Austria3100 St. Pölten, Rathausplatz 3Tel: 05 05 05-62450

Burgenland7000 Eisenstadt, Pfarrgasse 28Tel: 05 05 05-60101

Styria8010 Graz, Herrengasse 15Tel: 05 05 05-63100

Carinthia9500 Villach, Hans-Gasser-Platz 8Tel: 05 05 05-64100

Upper Austria4020 Linz, Hauptplatz 27Tel: 05 05 05-67100

Salzburg5020 Salzburg, Rainerstrasse 2Tel: 05 05 05-96111

Tyrol / Eastern Tyrol6020 Innsbruck, Maria-Theresien-Strasse 36Tel: 05 05 05-65100

Vorarlberg6900 Bregenz, Kornmarktplatz 2Tel: 05 05 05-68104

Corporates Austria Regional OfficesVienna City 11010 Vienna, Schottengasse 6–8Tel: 05 05 05-46828

Vienna City 21010 Vienna, Stephansplatz 3Tel: 05 05 05-55976

Lower Austria, Burgenland3100 St. Pölten, Rathausplatz 3Tel: 05 05 05-625502340 Mödling, Enzersdorfer Strasse 4Tel: 05 05 05-50933

Upper Austria4020 Linz, Hauptplatz 27Tel: 05 05 05-675324600 Wels, Dr.-Salzmann-Strasse 9Tel: 05 05 05-31980

Tyrol6020 Innsbruck, Maria-Theresien-Strasse 36Tel: 05 05 05-31863

Styria8010 Graz, Herrengasse 15Tel: 05 05 05-93105

Salzburg5020 Salzburg, Rainerstrasse 2Tel: 05 05 05-96145

Vorarlberg6900 Bregenz, Kornmarktplatz 2Tel: 05 05 05-68115

Carinthia9020 Klagenfurt, Burggasse 4Tel: 05 05 05-64440


Selected subsidiaries and equity interests of UniCredit Bank Austria AG in AustriaSchoellerbank Aktiengesellschaft1010 Vienna, Renngasse 3Tel.: (+43 1) 534 71-0www.schoellerbank.at

Bank Austria Finanzservice GmbH1020 Vienna, Lassallestrasse 5Tel.: (+43) 05 05 05-53000www.baf.at

Bank Austria Real Invest GmbH1020 Vienna, Lassallestrasse 5Tel.: (+43 1) 331 71-0www.realinvest.at

Immobilien Rating GmbH1020 Vienna, Taborstrasse 1–3Tel.: (+43) 05 05 05-51880www.irg.at

Bank Austria Wohnbaubank AG1020 Vienna, Lassallestrasse 1Tel.: (+43 1) 331 47-5601

card complete Service Bank AG1030 Vienna, Invalidenstrasse 2Tel.: (+43 1) 711 11-0www.cardcomplete.com

DC Bank AG (Diners Club) 1040 Vienna, Rainergasse 1Tel.: (+43 1) 50 135-0www.dcbank.at

Bank Austria CreditanstaltVersicherung AG1110 Vienna, Modecenterstrasse 17Tel.: (+43 1) 313 83-0www.baca-versicherung.at

UniCredit Leasing (Austria) GmbH(UniCredit Global Leasing S.p.A.)1040 Vienna, Operngasse 21Tel.: (+ 43 1) 588 08-0www.unicreditleasing.at

FactorBank AG1041 Vienna, Floragasse 7Tel.: (+43 1) 506 78-0www.factorbank.com

UniCredit Business Integrated SolutionsAustria GmbH*1090 Vienna, Nordbergstrasse 13Tel.: (+43 1) 717 30-0

*) Majority-owned by UniCredit Business Integrated Solutions S.C.p.A., Milan

Bank Austria Private Banking OfficesPrivate Banking Vienna Hohenstaufengasse 6, 1010 ViennaTel: 05 05 05-46000

Private Banking Vienna Hietzing Altgasse 20, 1130 ViennaTel: 05 05 05-56230

Private Banking Vienna Döbling Himmelstrasse 9, 1190 ViennaTel: 05 05 05-46213

Private Banking Lower Austria WestRathausplatz 3, 3100 St. PöltenTel: 05 05 05-36888

Private Banking Lower Austria South/BurgenlandKollonitschgasse 1, 2700 Wiener NeustadtTel: 05 05 05-55874

Private Banking Upper Austria Hauptplatz 27, 4020 LinzTel: 05 05 05-67242

Private Banking Salzburg Getreidegasse 1, 5020 SalzburgTel: 05 05 05-96361

Private Banking Tyrol Museumstrasse 20, 6020 InnsbruckTel: 05 05 05-95524

Private Banking Vorarlberg Kornmarktplatz 2, 6900 BregenzTel: 05 05 05-98304

Private Banking Styria Herrengasse 15, 8010 GrazTel: 05 05 05-63536

Private Banking Klagenfurt Neuer Platz 6, 9020 KlagenfurtTel: 05 05 05-94296

Private Banking Villach Hans-Gasser-Platz 8, 9500 VillachTel: 05 05 05-94329



Central and Eastern Europe

Office Network (CONtINuEd)

AzerbaijanYapı Kredi Bank AzerbaijanYasamal District, Cafar Cabbarli Str., 32/121065 Baku, AzerbaijanTel: (+99 412) 497 77 95www.yapikredi.com.azBIC: KABAAZ22

BalticsAS “UniCredit Bank” Elizabetes 631050 Riga, LatviaTel: (+37 1) 67085 500Fax: (+37 1) 67085 507www.unicreditbank.lvBIC: VBRILV2X

AS “UniCredit Bank” Estonia BranchLiivalaia 13/1510118 Tallinn, EstoniaTel: (+37 2) 66 88 300Fax: (+37 2) 66 88 359www.unicreditbank.eeBIC: UNCREE22

AS “UniCredit Bank” Lithuania BranchLvovo Str. 2509320 Vilnius, LithuaniaTel: (+370 5) 2745 300Fax: (+370 5) 2745 347www.unicreditbank.ltBIC: UNCRLT22

Bosnia and HerzegovinaUniCredit Bank a.d. Banja LukaMarije Bursac 778000 Banja LukaTel: (+387 51) 243 295Fax: (+387 51) 212 830www.unicreditbank-bl.baBIC: BLBABA22

UniCredit Bank d.d.Kardinala Stepinca b.b88000 MostarTel: (+387) 36 312 112Fax: (+387) 36 312 116www.unicreditbank.baBIC: UNCRBA22

BulgariaUniCredit Bulbank AD7, Sveta Nedelya Sq.1000 SofiaTel: (+359 2) 923 2111Fax: (+359 2) 988 4636www.unicreditbulbank.bgBIC: UNCRBGSF

CroatiaZagrebačka banka d.d.Trg bana Josipa Jelacica 1010000 ZagrebTel: (+385 1) 3773 333Fax: (+385 1) 3789 764www.zaba.hrBIC: ZABAHR2X

MacedoniaRepresentative Office SkopjeDimitrie Cupovski 4–2/61000 SkopjeTel: (+389 2) 3215 130Fax: (+389 2) 3215 140

MontenegroRepresentative Office PodgoricaHercegovacka 1381 000 PodgoricaTel: (+382 0) 20 66 77 40Fax: (+382 0) 20 66 77 42

RomaniaUniCredit Tiriac Bank S.A.Bd. Expozitiei No. 1F012101 Bucharest 1Tel: (+40 21) 200 2000Fax: (+40 21) 200 2022www.unicredit-tiriac.roBIC: BACXROBU

RussiaZAO UniCredit BankPrechistenskaya nab., 9119034 MoscowTel: (+7 495) 258 7200Fax: (+7 495) 258 7272www.unicreditbank.ruBIC: IMBKRUMM

JSCB Yapı Kredi Bank Moscow (CJSC)2, Goncharnaya Naberezhnaya115172 MoscowTel: (+7 495) 234 98 89Fax: (+7 495) 956 19 72www.ykb.ruBIC: YKBMRUMM


Central and Eastern Europe

SerbiaUniCredit Bank Serbia J.S.C. BelgradeRajićeva 27–2911000 BelgradeTel: (+381 11) 3777 888Fax: (+381 11) 3342 200www.unicreditbank.rsBIC: BACXRSBG

SlovakiaUniCredit Bank Slovakia a. s.Šancova 1/A813 33 BratislavaTel: (+421 2) 4950 1111Fax: (+421 2) 4950 3406www.unicreditbank.skBIC: UNCRSKBX

SloveniaUniCredit Banka Slovenija d.d.Šmartinska 1401000 LjubljanaTel: (+386 1) 5876 600Fax: (+386 1) 5876 684www.unicreditbank.siBIC: BACXSI22

Czech RepublicUniCredit Bank Czech Republic, a.s.Zeletavska 1525/1140 92 Prague 4Tel: (+420) 221 112 111Fax: (+420) 221 112 132www.unicreditbank.czBIC: BACXCZPP

TurkeyYapı ve Kredi Bankası A.Ş.Yapı ve Kredi Plaza D BlokLevent 34330, IstanbulTel: (+90 212) 339 70 00Fax: (+90 212) 339 60 00www.yapikredi.com.trBIC: YAPITRIS

UkrainePJSC Ukrsotsbank29, Kovpaka Str.03150 KievTel: (+380 44) 230 3299Fax: (+380 44) 529 1307www.unicredit.com.uaBIC: UKRSUAUX

HungaryUniCredit Bank Hungary Zrt.Szabadság tér 5–61054 BudapestTel: (+36 1) 301 1271Fax: (+36 1) 353 4959www.unicreditbank.huBIC: BACXHUHB



Market share (%) ranking

russia, UniCredit Bank 1.8 8

estonia, UniCredit Bank 1.6 8

Latvia, UniCredit Bank 1) 1.4 10

Lithuania, UniCredit Bank 1.4 8

Poland, Bank Pekao 2) 11.1 2

Ukraine, Ukrsotsbank 4.1 5

hungary, UniCredit Bank 5.6 7

Czech republic, UniCredit Bank 6.4 4

slovakia, UniCredit Bank 6.9 5

romania, UniCredit Tiriac Bank 6.3 6

slovenia, UniCredit Banka 6.0 5

Croatia, Zagrebačka banka 26.0 1

serbia, UniCredit Bank 7.8 3Bosnia and herzegovina, UniCredit Bank and UniCredit Bank Banja Luka 22.8 1

Bulgaria, UniCredit Bulbank 15.4 1

turkey, Yapı Kredi 3) 9.5 5azerbaijan, Yapı Kredi Bank Azerbaijan 1.3 17

l Representative offices in Macedonia, Montenegro and Belarus 4)

1) Total assets including Estonia and Lithuania2) Poland (Bank Pekao) and its subsidiary in Ukraine (UniCredit Bank Ukraine) under management of UniCredit3) Total assets consolidated proportionately4) Representative Office of UniCredit Bank RussiaSource: CEE Strategic Analysis

CEE Network



Investor Relations

Financial calendar10 May 2013 Publication of the results as of 31 March 2013

6 August 2013 Publication of the half-year results as of 30 June 201311 November 2013 Publication of the results as of 30 September 2013All information is available electronically at http:// ir.bankaustria.at

UniCredit Bank Austria AG/Corporate RelationsLassallestrasse 5, 1020 Vienna, AustriaTel: (+43) (0)5 05 05-57232 Fax: (+43) (0)5 05 05-8957232e-mail: [email protected] Internet: http://ir.bankaustria.atGünther StromengerTel: (+43) (0)5 05 05-57232Erich KodonTel: (+43) (0)5 05 05-54999Andreas PetzlTel: (+43) (0)5 05 05-59522

RatingsLong-terM sUBordinated LiaBiLities short-terM

Moody’s1) A3 Baa3 P-2Standard & Poor’s2) A BBB A-1

Public-sector mortgage bonds of Bank Austria are rated Aaa by Moody’s.1) Grandfathered debt is rated Aa2, subordinated debt rating is Aa3.2) Grandfathered debt is rated AA–, subordinated debt rating is AA–.


Published byUniCredit Bank austria agA-1010 Vienna, Schottengasse 6 – 8Telephone within Austria: 05 05 05-0; from abroad: + 43 5 05 05-0Fax within Austria: 05 05 05-56155; from abroad: + 43 5 05 05-56155Internet: www.bankaustria.ate-mail: [email protected]: BKAUATWWAustrian routing code: 12000Austrian Register of Firms: FN 150714pVAT registration number: ATU 51507409

editor: Planning & Controlling Austria, Michael Trischler

Photographs: Prefaces: Federico Ghizzoni and Erich Hampel: UniCredit;Willibald Cernko: Paul Wilke Pages showing Management Board members: Paul WilkeSorter pages: UniCredit

Creative concept: Orange 021

design, graphic development and composition: Mercurio GP – Milan

graphics: www.horvath.co.at

Contact:Bank AustriaIdentity & CommunicationsP. O. Box 22.000A-1011 Vienna, Austriae-mail: [email protected]: within Austria: 05 05 05-0; from abroad + 43 5 05 05-0

NotesThis report contains forward-looking statements relating to the future performance of Bank Austria. These statements reflect estimates which we have made on the basis of all information available to us at present. Should the assumptions underlying forward-looking statements prove incorrect, or should risks – such as those mentioned in this report – materialise to an extent not anticipated, actual re-sults may vary from those expected at present. Market share data are based on the most recent information available at the editorial close of this report.

“Bank Austria” as used in this report refers to the group of consolidated companies. “UniCredit Bank Austria AG” as used in this report refers to the parent company.

In adding up rounded figures and calculating the percentage rates of changes, slight differences may result compared with totals and rates arrived at by adding up component figures which have not been rounded off.

DisclaimerThis edition of our Annual Report is prepared for the convenience of our English-speaking readers. It is based on the German original, which is the authentic version and takes precedence in all legal respects.

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