Interim Report at 30 September 2011 · Key performance indicators 1–9 2011 2010 Return on equity after tax (ROE) 0.0% 4.5% ... summit meeting at the end of October. As expected,

Interim Report at 30 September 2011

2Bank Austria · Interim Report at 30 September 2011

Contents

Bank Austria at a Glance 3

Interim Report at 30 September 2011 4The banking environment 4Bank Austria in the first nine months of 2011 7Development of business segments 18Outlook 33

Consolidated Financial Statements in accordance with IFRSs 36Statement of Comprehensive Income for the first nine months of 2011 36Statement of Financial Position at 30 September 2011 38Statement of Changes in Equity 39Statement of Cash Flows 40Notes to the Consolidated Financial Statements 41

Notes to the income statement 44Notes to the statement of financial position 52Segment reporting 58Risk report 66Additional disclosures 67

Statement by Management on the Interim Report 69

Additional Information 70Investor Relations, ratings, imprint, notes 70


Bank Austria at a Glance

Income statement figures(€ m) 1– 9 2011 1– 9 2010 +/–

Net interest 3,376 3,401 –0.7%Net fees and commissions 1,401 1,480 –5.3%Net trading, hedging and fair value income 192 277 –30.8%Operating income 5,263 5,406 –2.6%Operating costs –2,898 –2,764 4.8%Operating profit 2,365 2,641 –10.5%Net operating profit 1,330 1,328 0.2%Profit before tax 1,035 1,283 –19.3%Net profit attributable to the owners of Bank Austria 4 761 – 99.4%

Key performance indicators1– 9 2011 2010

Return on equity after tax (ROE) 0.0% 4.5%Cost / income ratio 55.1% 52.3%Provisioning charge/avg. lending volume (cost of risk) 1.06% 1.44%Marginal Economic Value Added € 23 m € 194 m Marginal RARORAC 0.31% 2.28%Total capital ratio (based on all risks, end of period) 12.31% 12.13%Tier 1 capital ratio 10.75% 10.35%Tier 1 capital ratio without hybrid capital (Core Tier 1 capital ratio) 10.42% 10.04%

Volume figures(€ m) 30 sept. 2011 31 dec. 2010 +/–

Total assets 197,668 193,049 2.4%Loans and receivables with customers 131,125 130,093 0.8%Primary funds 133,819 127,839 4.7%Equity 17,285 17,476 –1.1%Risk-weighted assets (overall) 123,730 127,906 –3.3%

Staff *)

30 sept. 2011 31 dec. 2010 +/–

Bank Austria (full-time equivalent) 59,374 59,653 –0.5%Central Eastern Europe business segment 51,466 51,616 –0.3%Other business segments 7,908 8,037 –1.6%

Austria 7,761 7,889 –1.6%

Offices *)

30 sept. 2011 31 dec. 2010 +/–

Bank Austria 3,017 3,033 –0.5%Central Eastern Europe business segment 2,722 2,734 –0.4%Other business segments 295 299 –1.3%

Austria 293 298 –1.7%


*) Employees and offices of companies accounted for under the proportionate consolidation method are included at 100%.


The banking environment deteriorated rapidly on a number of fronts immediately after the publication of our Interim Report for the first half of 2011: the upturn experienced by the industrial countries had already lost momentum in June, especially in the US, as leading indicators and sentiment surveys continued to slump. In Europe this coincided with week-long uncertainty over a far-reaching rescheduling of Greece’s debt. The government debt crisis escalated in August and September, and threatened to spread to other highly indebted countries in the euro area. Investors, some of them panic-stricken, again withdrew investments from high risk investment categories. Coupled with the economic outlook, this also impacted the evaluation of companies (shares and credit spread), triggering a downward spiral in expectations.

Although it was quite clear that this new stress phase was triggered by the rollover problems of highly-indebted countries, banks – previ-ously welcomed as public sector financiers – came under stronger pressure. While demand in the commercial banking segment remained reasonably stable, dwindling confidence in the banking sec-tor and flagging investor confidence led to higher credit spreads and more unfavourable borrowing and refinancing conditions. In addition, the plans that were discussed for dealing with the crisis prompted expectations of writedowns and included a number of provisions for political intervention such as increases in equity capital, special taxes and levies, and restrictions of a regulatory nature. Share prices of banks fell by more than one-third (Euro Stoxx /banks –34%) in the third quarter of 2011 (and by over 40% in a year-on-year compari-son). Risk spreads (5-year CDS subordinated) for bank bonds doubled to an average of almost 500 points from the summer until the end of September, to a level matching that of the banks’ highly rated corpo-rate customers. The situation only eased temporarily after the crisis summit meeting at the end of October.

As expected, global economic growth weakened as the year pro-gressed. Economic activity slowed in China and Brazil, which was politically desirable for the purpose of stabilisation. The strong expan-sion of the emerging countries, on the other hand, and the resulting impetus to global trade remain the mainstay of the global economy. After peaking in spring this year, commodity prices again fell below the levels seen at the beginning of 2011. Crude oil prices also declined again, albeit not as strongly, from US$ 127 per barrel in the middle of April to US$ 102 per barrel at the end of September. The inflationary pressures therefore eased in the summer. While global economic growth is expected to slow from 4.9% in 2010 to 3.75% in 2011, it will remain buoyant. This is reflected in the leading indicators. After an unexpectedly weak first half year, the Us economy seems to have picked up again in the third quarter. GDP growth for 2011 is expected to be 1.7%, well below the country’s potential. This explains why the US continued to pursue an expansive monetary policy (key interest rates unchanged at 0% to 0.25%). The US dollar failed to benefit from the uncertainty in Europe in the longer term; the curren-cy’s appreciation in the third quarter (+8.3%) merely served to offset the dollar’s weaker performance in the first half of the year. At 1.40

against the euro most recently, the dollar was thus again below the year-end 2010 level (US$ 1.3377/EUR).

In the euro area, economic growth appears to have come to a standstill in the summer months. This slowdown – at a high level of economic activity – is contrary to the trend that reflected an outstand-ing performance in the first quarter. At the same time, austerity meas-ures maintained a stranglehold on the economies of several euro area countries besides Greece and prevented the impetus from strong export-driven growth from spreading to domestic demand. The pur-chasing manager surveys were very revealing; these fell below the growth threshold of 50 in August, most recently to as low as 47.2. However, the deterioration of the general climate in the context of the debt crisis could be partly to blame for the poorer survey results, and the extent of the decline may thus be exaggerated – in the third quar-ter of 2011, actual industrial output and real gross national product remained at their high levels. Credit demand continued at a stable level. Notwithstanding the escalating debt crisis and the real diver-gence within the euro area, the ECB raised key interest rates from 1.0% to 1.50% in April and July in an effort to counter the strong inflationary pressures. The ECB also stepped up its unusual measures (market intervention to purchase covered bonds and government bonds) and further expanded its operations aimed at providing banks with a – de facto – unlimited supply of liquidity (annual tender, US dollar swaps extended to beyond year-end).

In the third quarter of 2011, financial markets reflected the cumulative effects of the economic slowdown, the government debt crisis and doubts about monetary stability in the wake of the unortho-dox countermeasures of the central banks, which led to very high risk aversion. Global stock markets plunged from the end of July until the end of September, with the MSCI world stock index falling by over 15% in the third quarter and by more or less the same percentage over year-end 2010. The decline of the Euro Stoxx index (–23%) and the ATX index (–30%) was even more pronounced in the third quarter alone. The pattern was more or less similar across the world’s major regions: the BRIC index lost almost 20% (–23% from January until the end of September 2011). The repercussions of the Greek crisis resulted in extreme spreads: the purchase/sale prices of illiquid Greek government bonds fell to 39.9%/ 45.4% at the end of September, corresponding to yields of 29% and 24% p.a., respectively. Highly indebted countries with a good rating also had to temporarily pay unusually high yields of 4.5% to over 5% p.a. The euro benchmark yield fell to historical lows (1.69% p.a./10-year and even 0.87%/five-year on 22 September 2011). Money market rates continued to move upwards: unsecured interbank three-month money rose above the rate for short capital market maturities. The yield curve therefore flattened again also in terms of swap rates after having steepened in the first few months of the year. This translated into lower income from maturity transforma-tion for banks. At the same time, credit spreads on bank bonds con-tinued to rise, making liquidity more expensive.

The banking environment





The sharp rise in the price of gold reflected fears among large groups of investors over the relaxed US monetary policy, worldwide central bank intervention and the outlook for the euro area. The price of gold climbed to another peak on 6 September 2011, at US$ 1,920 per ounce, before falling to US$ 1,623 per ounce by the end of September. Following the decision of Switzerland’s central bank to peg the Swiss franc to a rate of 1.20 against the euro, the currency fell from a high of 1.0085 CHF/EUR to 1.2161 CHF/EUR. The currency’s rate of appreciation dropped from 24% (until 8 Sep-tember) to 2.8% (until the end of September).

The global deterioration in economic conditions within a few weeks also stalled the strong recovery of the Austrian economy in the first half of 2011. After year-on-year GDP growth of 3.8% between January and June, the dynamic export sector has been los-ing momentum since the summer, and domestic demand is also very weak. Austria’s export-oriented industry is seeing a decline in incoming orders from both outside and within Austria. Output has been showing signs of weakening since the beginning of the sum-mer. Bank Austria’s Purchasing Managers’ Index for the first time fell to below the growth threshold level of 50 in September, thereby indicating the start of a slight industrial recession. The decline in demand is also reflected in the most recent foreign trade data. With stocks now replenished and substitute investments, postponed for a long time in the crisis years, worked off, investments have lost their most important impetus. Private consumption has moreover at best only succeeded in maintaining its moderate upward trend in the pre-ceding quarter. The commodities-induced rise in inflation to up to 3.6% year-on-year (September 2011) has considerably impacted growth in real incomes, and the positive labour market trends which previously supported income growth are now showing signs of flag-ging. The growth in employment slowed markedly in the summer months, and unemployment is even starting to rise again slightly. Overall, the third quarter of 2011 is likely to see quarter-on-quarter GDP growth of 0.2%. The strong economic growth of over 3% for 2011 as a whole is attributable to the dynamic upturn in the quar-ters up to and including the first quarter of 2011 and the high level that was reached.

Credit demand remained weak in the summer, reflecting the uncer-tainty in the business sector. Adjusted for exchange rate effects, credit expansion was less than 1% in Austria, although demand for business loans and housing loans accelerated slightly, as did new issues of corporate bonds in the summer months. Consumer loans continued to decline. Monetary wealth formation was at a very mod-est level and focused on bank issues in light of the low interest rate environment. Deposit volume, supported by favourable corporate liquidity levels and the uncertain capital market outlook, grew a little more strongly than in the first six months of 2011. Deposits from private households were only 1.4% above the previous year’s level (in each case at the end of August) despite the more buoyant condi-tions in the last few months. Investments were characterised by a

60

70

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110

120

0.00

1.00

2.00

3.00

4.00

5.00% p.a.

Share prices(Euro Stoxx)

5- and 10-yearbenchmark yields

–10

–8

–6

–4

–2

0

2

4%

94

95

96

97

98

99

100Real GDP

(H1 2008=100)

Growth rate(on preceding quarter, annualised)

35

40

45

50

55

60

Purchasing manager survey(PMI)

3-month money

2007 2008 2009 2010 20110

20

40

60

80

100

120

140

160

0

5

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25Debt crisisCredit spread

5-year Greek bonds

Financial market crisisInterbank spread(EURIBOR/EONIA)

Euro area



net outflow of funds as a result of the uncertainty and volatility in financial markets. Coupled with market performance, this led to a decline in fund volume.

After experiencing a strong, export-driven upswing at the beginning of the year, economic growth in central and eastern europe (cee) also started slowing in the summer, in line with expectations. Notwith-standing this trend, the purchasing manager surveys continued to point to moderate growth, and not to stagnation as in western Europe. We revised downward our forecast for the region’s entire economic growth for 2011 by only about 0.25 percentage points. The CEE region (Bank Austria perimeter excluding Poland) will continue to expand by over 4%, a rate two and a half times that of western Europe (based on a 3.5% weighting of Bank Austria income compo-nents). The Central European countries were affected the most by the weaker export demand, with growth expectations down by more than one half of a percentage point. In Hungary, additional regional factors accounted for a sharp decline in growth. The growth trend also seems to have come to a temporary halt in Russia and Ukraine in the third quarter of 2011. This compared with a strong expansion of Turkey’s large economy, despite government measures to curb economic activ-ity, suggesting that growth in the year as a whole is likely to reach a higher level than in most other countries (5.9%). In the Baltic coun-tries, the tough austerity measures taken in previous years are now being followed by dynamic growth of between 5% and 7%. Kaza-khstan benefited from the persistently high oil prices and continued to pursue its ambitious infrastructure investment programme (GDP +7% in real terms). In other countries, consumption picked up slightly as a result of a good harvest and the gradual weakening of the inflationary pressures experienced in the previous year. But the condition of state budgets also prevented an expansion of the domestic economy in CEE.

In the third quarter of 2011, collateral damage from the European debt crisis was not too severe; unlike 2008, the CEE region was not tar-geted by financial markets. The positive reasons for this were the gen-erally low level of public debt (with the exception of Hungary, this was well below 40% of GDP), the timely implementation of measures to reduce deficits which were up in the crisis years, and – for the most part – current account surpluses (Turkey was a special case). The assistance provided by the IMF in five countries also strengthened the countries’ resilience. However, in August /September the region was impacted by the sudden risk aversion of global investors, which affected all countries, without taking fundamentals into account. In the preceding quarters, CEE, like other emerging markets, still boasted record-level short-term capital inflows. These portfolio investments, which were not even all that desirable, experienced a sudden turna-round in the third quarter. This development was accompanied by an increase in credit spreads, measured in terms of CDS or interest rate spreads. Exposed countries such as Hungary, Croatia and Ukraine were faced with a significant widening of credit spreads which was, however, less pronounced than for euro peripheral countries. This increased the cost of short-term capital, which also had an impact on commercial banking business.

Despite this challenging environment, the cee banking sector con-tinued to expand, supported by nominal growth, monetary expansion and growing market penetration. In most countries, lending volume grew more strongly than in the previous year; in many cases at dou-ble-digit growth rates. Exceptions were Hungary, especially as a result of restrictive measures (ranging from the levy on banks to the conversion of foreign currency loans), the Baltic countries, Croatia and Serbia, where lending volume grew at a slower pace. Overall, the profitability of CEE banking business remained at the level of the pre-vious year, supported by a continued decline in provisioning charges.

Previously, CEE integration ideally took the form of long-term direct investment combined with strong real growth, which – despite con-siderably higher inflation rates – was accompanied by strong exchange rate stability and occasionally even by significant currency appreciation. The shift from long-term capital inflows to portfolio investments has increased sensitivity to volatile risk appetite. cee currencies (in Bank Austria’s perimeter of operations) depreciated by 2.6% against the euro (based on equal weightings) in the first nine months of 2011. In this context one should note that the above aver-age figure includes two euro area countries and three countries with de facto fixed exchange rates, and that the value of the Czech crown appreciated. While currency depreciation until the middle of April reflected the strength of the euro and the weakness of the dollar at the time, CEE currencies have lost ground against both currencies since the spring (see chart below). Weak currencies in the third quar-ter were, in particular, the Turkish lira, the rouble and the forint. In a comparison of the end of September with year-end 2010, the lira depreciated by 17.6%, the rouble by 5.8% and the forint by 5.0%. In a year-on-year comparison of cumulated averages for the period January /September, which are used for the translation of the local income statements, the CEE currencies depreciated by 2.0% (based on equal weightings) or 3.9% (Bank Austria-weighted; the figure is higher because Turkey’s currency, which has a strong weight, depre-ciated by 12.7%). At the level of profit before tax, currency deprecia-tion has an impact of about € 60 m, or 5% percentage points of the change compared with the first nine months of 2010.

CEE currency movements (Index Jan. /Sept. 2010 average =100)

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106

108 Appreciation/depreciationagainst the US dollar

2010 2011Q3 Q4 Q3 Q4Q1 Q2 Q1 Q2

avg.

avg.

avg. avg. +2.8%ytd –4.8%

avg. –3.9%ytd –5.8%

Appreciation/depreciation against the euro,weighted by countries’ contribution to CEE operating income

of Bank Austria January /September 2010 (excluding Poland)

CEE currency movements (Index H1 2010 average =100)

… against the US dollar

2010 2011Q3 Q4Q1 Q2 Q1 Q2

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Appreciation/depreciation against the euro, weighted by contribution to CEE operating income of Bank Austria

in H1 2010 (excluding Poland)



Bank Austria in the first nine months of 2011

OverviewWhile economic growth slowed down, the upward trend in Bank Aus-tria’s customer business continued in the third quarter of 2011 and the bank even achieved a moderate improvement in operating per-formance compared with the preceding quarter. Results for Q3 2011 were impacted by exceptional charges from non-operating items including write-downs on Greek bonds and higher provisions for risks and charges. The strongest impact resulted from the impairment loss which was recognised on goodwill related to the CEE banking subsidi-aries acquired most recently – in line with the general reassessment of medium-term opportunities and risks; this charge reduced the amount of goodwill to a low residual figure. Operating performance for the first three quarters of 2011 was strong enough to absorb the exceptional burdens of the third quarter without a need to draw on net assets.

1. Continued upward trend in customer business 1) (€ m)

Q1 2011

Q2 2011

Q3 2011

1– 9 2011

chAnGe over 1– 9 2010 2)

Lending volume, € bn 129.3 130.1 131.4 130.3 +3.3 +3%

Operating income 1,772 1,764 1,785 5,321 +90 +2%

Operating profit 909 861 894 2,664 –22 –1%

Net operating profit 3) 533 532 564 1,630 +256 +19%

… Austria 179 157 147 483 +34 +8%

… Central Eastern Europe 354 375 418 1,146 +221 +24%

1) Sum total of customer business segments F&SME, PB, CIB and CEE. 2) Comparative figures for 2010 restated to reflect the current consolidation perimeter (mainly determined by deconsolidation of CAIB). / 3) Operating profit less net write-downs of loans and provisions for guarantees and commitments.

After the catching-up process in the course of 2010, the upswing contin-ued in 2011, though at a moderate pace. Average loans to customers in the customer business segments (F&SME, PB, CIB and CEE) rose from quarter to quarter in 2011, most recently at higher rates (Q3/Q2 2011 +1%). In the first nine months lending volume was 2.5% higher than a year earlier, with the increase in the Central Eastern Europe (CEE) busi-ness segment reaching 6.6% or, adjusted for exchange rate movements, 9.5%. operating income kept pace with these developments and also rose in the third quarter (Q3/Q2 2011 +1%). The increase in the first nine months of 2011 compared with the same period of the previous year is modest (+2%), reflecting net interest trends in major countries (Turkey) and the protracted decline in net fees and commissions. operating profit rose again in the third quarter of 2011 (+4% over Q2) as costs were reduced. The total figure for the first nine months of 2011 came close to the previous year’s level; bank levies, which are included in operating costs, prevented growth (without the charge for bank levies, operating profit was up by about 2%). net operating profit was strong mainly because the provisioning charge was further reduced. Operating profit less net write-downs of loans and provisions for guarantees and commit-ments improved from Q2 to Q3 2011; the total figure for the first nine months of 2011 was up by 19% on the same period of the previous year. Contributions to this performance came from the Austrian customer busi-ness segments and from CEE. Adjusted for exchange rate movements, growth in CEE would have been even higher (+29% instead of +24%).

2. Exceptional non-operating charges impacting results for the bank as a whole 1) (€ m)

Q1 2011

Q2 2011

Q3 2011

1– 9 2011

chAnGe over 1– 9 2010 1)

net operating profit 475 425 431 1,330 +93 +8%Greek bonds 0 –130 –174 –304 –304

Other non-operating items 2) –26 93 –60 8 +55

Profit before tax 449 388 197 1,035 –156 –13%

Other items to be deducted 3) –102 –36 –156 –294 –11

Goodwill impairment and PPA –6 –53 –676 –736 –552

net profit 4) 341 299 –635 4 –719 – 99%

1) Non-operating income statement items below net operating profit, now including Corporate Center (including funding/ liquidity cost and income from equity interest management, participation in profits of the UniCredit Markets product line, expenses of central Competence Lines. 2010 figures restated / 2) Provisions for risks and charges, integration costs and current net income from investments. / 3) Current and deferred income tax in accordance with IFRSs and non-controlling interests. / 4) Net profit attributable to the owners of Bank Austria.

Net operating profit for the bank as a whole exceeded € 1.3 bn in the first nine months of 2011, up by 8% on the same period of the previous year. The following exceptional charges had to be deducted from this figure: following the decisions taken at the summit meeting on Greece on 21 July 2011, a write-down of € 130 m on Greek bonds was made in the half-year financial statements. The income statement for the first nine months of 2011 reflects an additional charge of € 174 m resulting from the second support package for Greece; this write-down reflects the – by now inevitable – mark-to-market adjustments (fair value level 1). The total € 304 m write-down is the main reason why profit before tax (which still exceeded € 1 bn) was 13% or € 156 m lower than in the same period of the previous year. Moreover, the development of earnings expectations in the meantime resulted in the recognition of impairment losses on goodwill related to our banking subsidiaries in Kazakhstan (€ 350 m) and Ukraine (€ 300 m), which were acquired about four years ago, substantially reduc-ing the amounts of goodwill. Together with other valuation adjustments, impairment losses on goodwill and PPA for the first nine months totalled € 736 m. While the total amount of these charges almost fully absorbed the profit for the first nine months, goodwill impairment is no longer expected to have any significant negative impact in the future.

3. Capital base remains strong (€ m)

sept. 2011 dec. 2010 +/– %

Equity 17,285 17,476 –1.1%

Tier 1 capital as defined in the Austrian Banking Act 13,300 13,242 +0.4%

Risk-weighted assets 123,730 127,906 –3.3%

Tier 1 capital ratio 10.75% 10.35%

Core Tier 1 capital ratio 10.42% 10.04%

The exceptional charges in the income statement were covered by a stable operating performance. As at the end of September 2011, IFRS equity as shown in Bank Austria’s statement of financial position was € 17.3 bn, close to the year-end 2010 level despite the low amount of retained profit and exchange rate changes and valuation adjustments. The core tier 1 capital ratio as defined in the Austrian Banking Act (i.e. without retained profit in the current year) improved to 10.42%.



Details of the income statement for the first nine months of 2011

1)

Since 2009, a year characterised by recession, Bank Austria’s revenues have improved – with some fluctuations from quarter to quarter – without returning to the pre-crisis level. Operating income (€ 5,263 m) in the first nine months of 2011 matched the previous year’s figure (–0.5%). The three segments of Austrian customer business accounted for more than one-third (34%) of the figure for the bank as a whole; they generated a combined increase of 1.5% in operating income for the first nine months compared with the previ-ous year. All segments contributed to this increase; the strongest contribution came from CIB, although an accounting effect had an impact on its net trading performance.

Revenue growth in CEE was lower (+2% compared with the previous year) as a result of special factors. These included exchange rate developments, which had a particularly strong impact on contribu-tions from large-volume countries (Turkey and Russia). Adjusted for exchange rate changes, the increase was 6%, significantly higher than in euro terms. Operating income in Turkey declined from a very high level as local economic policy measures had a dampening effect. Bank Austria’s participation in profits of the UniCredit Markets product line under the terms of the sale of UniCredit CAIB is reflected in the Corporate Center; as the market environment for trading and investment banking activities changed, the amount of the profit par-ticipation declined from Q2 to Q3 2011 and the total for the first nine months of 2011 was also significantly lower than in the same period of the previous year. Without this contribution, operating income would have been slightly lower in absolute terms, but it would have reflected growth of 1.6% over the previous year.

Net interest – the most important revenue component, account-ing for 64% of total operating income – hardly changed in the course of the first three quarters of 2011. The total figure for the first nine months of 2011 was € 3,376 m, matching the previous year’s level. This reflects weak demand and interest rate trends. Average lending volume rose steadily over the past seven quarters, and the figure for the first nine months of 2011 was 3% higher than in the previous year; however, this was offset by a narrowing of net interest margins in euro terms for the bank as a whole, which took place par-allel to changes in market interest rates. Developments in Austria and CEE differed. In Austrian customer business, the average volume of loans has been stagnating for years. While lending volume picked up in the second and third quarters of 2011, the average figure for the first nine months was still more than 1% lower than in the previous

year. However, interest margins improved (mainly on the liabilities side) so that net interest again exceeded the previous year’s level (+1%). In the CEE business segment, trends moved in the opposite direction: volume expanded steadily, and more strongly in recent months, although currency translation effects partly offset this devel-opment. In the third quarter of 2011, volume rose by 5% over the same period of the previous year; the figure for the first nine months was up by 7%. As interest margins have declined over the past twelve months, net interest in CEE in the third quarter was 6% lower than in Q3 2010, and in average terms for the first nine months it was 1.5% lower. In this context one should note the depreciation of major CEE currencies. Translated at constant exchange rates, net interest in CEE in the first nine months of 2011 was 2% higher than a year earlier. This growth rate is unusually low for CEE. It is mainly explained by the decline at the Turkish bank in which we have a shareholding interest and which accounts for a large proportion of net interest in CEE; the decline in Turkey resulted from recent eco-nomic policy measures dampening growth (e.g. elimination of inter-est payments on minimum reserves, upper limit on interest rates in credit card business). Net interest declined also in Ukraine (methodo-logical changes) and in Romania (interest margins).

Dividend income and other income from equity investments in the first nine months of 2011 was € 151 m, up by € 39 m or 35% on a year earlier. Contributions to this favourable development came from our equity interest in UniCredit Leasing and from the turnaround in performance of real estate companies. The income components are shown separately, without any sub-totals, in our new Group-wide format for the income statement. If dividend income and other income from equity investments is added to net interest, net interest income in a wider sense for the first nine months of 2011 increased by € 36 m or 1% to € 3,527 m.

As mentioned in the introductory section on the banking environ-ment, the first nine months of 2011 saw several shock waves of uncertainty. Private and corporate customers showed pronounced restraint in their investment decisions. This had an impact on fee-based income. Volume and turnover in mutual fund savings plans and insurance savings schemes declined, and there was a shift in direct investments towards low-risk alternatives, with a stabilising effect on safe-custody business. Transaction volume in derivatives used for hedging purposes and in commercial services, including account maintenance and payments, continued to decline. Overall, net fees and commissions grew again in the third quarter, in both Austrian customer business and CEE (combined growth of 4% over the preceding quarter), but the total figure of € 1,401 m for the first nine months was down by 5% from the same period of the previous year. The weak trend observed in the past years is explained by structural factors and the business cycle; net fees and commissions in Austria in particular have been stagnating for a long time (1– 9 2011: –6%). In CEE, net fees and commissions in the first nine months of 2011 rose by close to 2% in euro terms and by 6%

1) The comparative figures for the previous year (and the rates of change) have been adjusted to reflect the current consolidation perimeter. The 2010 restatement is mainly determined by the elimination of the income statement items of UniCredit CAIB, which was sold on an intra-group basis in May 2010. The restatement differences compared with the original figures are shown in the table “Segment reporting” in the notes to the consolidated financial statements on pages 62 to 65 of this report.



if adjusted for exchange rate movements; fee-based business was supported by continued market penetration with modern banking services including credit cards and electronic payments. Again, the strongest contributions to growth came from Turkey (mainly in busi-ness with private customers) and Russia (in corporate banking and capital market activities), and countries in South-East Europe also made good progress in innovative products.

Bank Austria’s net trading, hedging and fair value income is to be seen in connection with the reorientation of UniCredit Group’s investment banking operations. As part of the bundling of Group-wide trading operations within UniCredit Bank, Munich, UniCredit CAIB was restructured and sold on an intra-group basis in June 2010; the com-parative figures for 2010 have been adjusted to reflect the sale. Under the terms and conditions of the sale, Bank Austria participates in profit before tax of UniCredit’s Markets product line, the profit participation has been included in net trading income of the Corporate Center since the beginning of 2010. Given the difficult market situation in invest-ment banking, this contribution declined strongly in the course of the first nine months of 2011 and in a year-on-year comparison. The other components improved by € 87 m compared with the previous year. In the CIB Division, the net trading result is determined by cus-tomer-driven trading activities and by Bank Austria’s asset / liability management, which also includes funding for the CEE subsidiaries. While the net trading result for the first half of 2011 showed net income, a fair value adjustment in the third quarter more than offset this performance. Overall, the net trading result for the first nine months was a net loss of € 6 m compared with a net loss of € 47 m in the same period of the previous year; this relieved the burden on the income statement by € 41 m. Net trading, hedging and fair value income in the CEE business segment showed a stable trend from quarter to quarter; at € 121 m for the first nine months of 2011, it was 60% higher than the figure for the previous year (see table). The largest contributions to the total figure were generated in Romania (€ 34 m) and Turkey (€ 27 m), where trading operations benefited from strong demand for international capital market transactions and hedging transactions. In Russia, where our banking subsidiary is a major player in the particularly volatile money market and foreign exchange dealings and international capital transactions, there was a significant positive swing of € 42 m, from a net loss to net income of € 9 m.

Net trading, hedging and fair value income (€ m)

2010 2011

Q1 Q2 Q3 Q4 Q1 Q2 Q3 1– 9 +/–

Total 31 120 43 49 114 54 24 192 –3Austrian customers –16 –7 –23 2 4 4 –13 –5 +42CEE 20 14 42 69 38 35 48 121 +45Corporate Center 1) 28 113 25 –21 72 15 –11 76 – 90Total (original figures for 2010) 76 158 43 49 114 54 24 277 –85

1) primarily participation in profits of Markets product line of UniCredit’s CIB Division

Overall, net trading, hedging and fair value income was € 192 m, down by 1.5% from the adjusted figure for the previous year. In this context it should be noted that this item of the income statement shows the largest restatement difference (€ 82 m), given the business structure of the former UniCredit CAIB. The adjusted time series shows that the implementation of changes to focus on customer-driven business has led to a positive trend in net trading performance, if the accounting effects in the third quarter of 2011 are excluded from the analysis.

operating costs in the first nine months of 2011 were € 2,898 m, up by € 159 m or just under 6% on the same period of the previous year (based on the 2011 consolidation perimeter). Cost growth was due to various factors: the bank’s initiatives to expand its market posi-tion in Austria and in promising CEE countries; higher wage increases

Quarterly trends in the past three years

€ m

€ bn

121122123124125126127128129130131132

Average lending volume131

128

125

123 124.1

128.1128.7 128.9

130.1131.4

129.3

1) Customer business segments = Austria (F&SME, PB and CIB) and CEE = Bank Austria without Corporate Center. / 2) Difference compared with operating profit of customer business segments = operating profit of Corporate Center; restatement difference; provisions for risks and charges, integration costs, net income from investments and goodwill impairment as well as income tax and non-controlling interests. / 3) Impairment losses on goodwill

Goodwill impairment3)

Net operating profit of customer business segments1)

Performance generated by the bank as a whole = net profit attributable to the owners of Bank Austria2)

Q22009 2010 2011

Q3 Q4 Q3 Q4Q1Q1 Q1Q2 Q3Q2

–600–550–500

–450–400–350–300–250–200–150–100

–500

50100150200250300350400450500550600650

547

286

139 129

302

–635

242 217

–14

299

341326

467

809

282

392

470 513

411

532564

533

3)

3)

Greece-relatedeffect



in the banking sector in a number of CEE countries in response to higher local inflation rates; and the bank levies, which are included in the item “other administrative expenses”: € 58.2 m in Austria (UniCredit Bank Austria AG, Wohnbaubank and Schoellerbank) and € 22.9 m in Hungary (where the charge for the bank levy in the first nine months of 2010 was € 14.3 m).

In Austrian customer business, operating costs in the first nine months of 2011 totalled € 1,030 m, an increase of 5.3% over the previous year. The cost / income ratio rose by 2 percentage points to 57.6%. Growth of staff expenses (+5.5%) resulted from higher pen-sion provisions and from the increase in the number of staff serving customers in the Austrian branch network. In the first nine months of 2011, staff numbers were up by 3.5% or 196 full-time equivalents, weighted by working time, mainly due to trainees employed in the F&SME Division within the framework of the “Best Start” initiative. In the Corporate Center, costs rose mainly as a result of the (pro-rata) bank levy payable by UniCredit Bank Austria AG (€ 56.6 m) while staff expenses showed a proportionate increase and costs in Global Banking Services declined. Operating costs in Austria (customer busi-ness segments and Corporate Center) were therefore up by 8% on the previous year.

In Central and Eastern Europe (CEE) operating costs were € 1,627 m, an increase of just under 4% compared with the previous year (the Hungarian bank levy accounted for about 19% of costs in Hungary and 1.5% of overall costs). Adjusted for exchange rate movements, costs grew by 7.5%, a lower rate than that of revenue growth. The cost / income ratio therefore improved by about 1 percentage point to 46.1%, remaining well below the average of 55.1% for the bank as a whole. The number of branches and employees in the CEE Division remained more or less unchanged in the first nine months of 2011 (–0.5% and –1%, respectively), but underlying changes are reflected in costs: the branch network and staff numbers in some countries were strongly expanded (Turkey, Russia and the Czech Republic), but partly reduced in regions with a multiple presence; moreover, the restructuring of oversized administrative centres in Kazakhstan and in Ukraine involved a combined decline of 711 FTEs in staffing levels (see CEE segment commentary).

The decline in net write-downs of loans and provisions for guarantees and commitments was the main factor contributing to the improvement in Bank Austria’s operating performance while reve-nues remained stable and costs were contained. The provisioning charge has decreased since 2010. This means that the favourable trend in operating performance, though moderate, feeds through to profits to a greater extent.

The risk profile continued to improve strongly in the first half of 2011, although this development was temporarily interrupted by a weaker fourth quarter of 2010. In the third quarter of 2011, net write-downs of loans and provisions for guarantees and commit-

ments remained at the level of € 330 m (after € 329 m in the preced-ing quarter) and were down by € 88 m or 21% from the Q3 2010 fig-ure. In Q1 and Q2 2010, the provisioning charge was € 439 m and € 457 m, respectively. Net write-downs of loans and provisions for guarantees and commitments had reached their highest levels in the third and fourth quarters of 2009, at € 604 m and € 659 m, respec-tively. Although the provisioning charge has decreased by one half in the meantime, it is still higher than the “normal level” – between € 150 m and € 175 m per quarter – seen before the onset of the financial market crisis.

The provisioning charge for the first nine months of 2011 totalled € 1,035 m, down by € 279 m or 21% from a year earlier. In percent-age terms, the decline in Austria equalled that in CEE; a comparison of absolute figures shows that CEE accounts for about three-quarters (73%) of the total provisioning charge. The cost of risk (provisioning charge as a proportion of average lending volume in the period) fell to a level of 106 basis points (106 bp = 1.06%); the peak was seen in the second half of 2009, when the cost of risk reached 209 bp, while the figure for the first half of 2008 was a low 54 bp.

Net write-downs of loans and provisions for guarantees and commitments (€ m)

1– 9 2011 1– 9 2010 +/– € m +/– %

Bank Austria as a whole 1) 1,035 1,314 –279 –21%… Austria 1) 276 337 –61 –18%… CEE 759 977 –218 –22%

cost of risk (basis points) 2)

Bank Austria as a whole 106 bp 138 bp –32 bp … Austria 1) 58 bp 70 bp –12 bp… CEE 152 bp 208 bp –57 bp

1) Three customer business segments plus Corporate Center. 2) Provisioning charge / average loans to customers (net).

In Austria, the provisioning charge in the first nine months of 2011 was € 276 m, down by 18% from the same period of the previous year. The cIB Division, which serves large corporate customers, recorded a very satisfactory trend resulting from overall economic performance and risk management in cooperation with customers during the periods that were difficult. The provisioning charge in the CIB Division for the first nine months of 2011 was 10% lower than in the previous year. In this context it should be noted that large-volume loan loss provisions made in preceding years were reduced in mid-2010. The risk situation improved steadily: in CIB the cost of risk for the first nine months of 2011 declined to a very low level of 37 bp; the Q3 2011 figure was 35 bp.

The provisioning charge in the F&sme Division for the first nine months of 2011 was € 158 m, down by almost one-quarter (–23.7%) from the same period of the previous year. The cost of risk for the first nine months of 2011 was 97 bp (1– 9 2010: 126 bp), benefiting from a very low Q2 figure of 87 bp; in the third quarter of 2011, the cost of



risk was 101 bp. The decline in net write-downs of loans and provi-sions for guarantees and commitments is also explained by an adjustment of model parameters under Basel 2 (in the calculation of risk weights for business with private customers) which has become possible not least on the basis of the more favourable risk profile and refined measurement methodologies. The F&SME business segment has included small and medium-sized enterprises (SMEs) since the beginning of 2011, figures for 2010 have been restated. Quality improvements achieved in the Small Businesses sub-segment in the previous year were maintained – the provisioning charge for this sub-segment had declined by one-half in 2010. Particular attention was given to risk management of loans denominated in Swiss francs and this proved very effective as the Swiss franc continued to strengthen against the euro until the Swiss National Bank took meas-ures to counter this development at the beginning of September.

Net write-downs of loans and provisions for guarantees and commit-ments in the central eastern europe business segment continued to decline steadily in the first nine months of 2011, reflecting the more favourable economic and monetary environment as well as progress in dealing with legacy problems in highly exposed countries. In the third quarter of 2011, the provisioning charge declined by 3% to € 238 m (equal to 36% of operating profit); a comparison of Q3 2011 with Q3 2010 shows a decrease of 29%. In the first nine months of 2011, net write-downs of loans and provisions for guaran-tees and commitments were € 759 m, down by € 218 m or 22% from the same period of the previous year. The cost of risk fell to 152 basis points (bp), in Q3 2011 to 141 bp (peak in the second half of 2009: 346 bp).

The banking subsidiaries in Kazakhstan 2) and Ukraine, which accounted for most of the increase in net write-downs of loans and provisions for guarantees and commitments in the past years, still accounted for about 38% of the provisioning charge, with € 209 m and € 73 m, respectively. They also made the largest contribution to the decline compared with the previous year, with a combined decrease of € 191 m out of € 218 m (88%). While South-East Europe (SEE) was still lagging behind in the credit cycle, the situation in SEE has improved in the meantime. In Romania, the provisioning charge was slightly lower than in the previous year, but the cost of risk for the first nine months of 2011 was still relatively high (337 bp). The situation in Bulgaria deteriorated, though only slightly, but from a better starting position (cost of risk: 217 bp). In Croatia and Bosnia, the cost of risk also declined after a strong temporary increase; at 97 bp and 101 bp, respectively, the levels were lower than in the previous year. In Russia the situation improved signifi-cantly in line with general economic trends (provisioning charge down by 67%, cost of risk at 52 bp). Turkey, which is far ahead of other countries in the cycle, is a special case: asset quality in Turkey

improved substantially in 2010 as debt collection efforts were suc-cessful. After net releases of loan loss provisions in the previous year, the provisioning charge in Turkey in the first nine months was at a low level of € 19 m (cost of risk: 22 bp). Among the countries in Central Europe, Hungary stands out as a special case: while the cost of risk in other Central European countries was disproportion-ately low, the provisioning charge in Hungary rose by € 13 m or 22% compared with the previous year. The increase is explained by provisions made for the restructuring or compulsory conversion of foreign currency loans on the basis of rules introduced by the gov-ernment.

Asset quality trends are lagging behind the improvement in the provisioning charge, a development usually seen at the end of a credit cycle. Non-performing loans (NPLs) measured as a percent-age of gross lending volume therefore rose once more in 2011. Bank Austria’s entire exposure hardly changed from December 2010 to September 2011 (+1%, both on a gross basis and net of loan loss provisions). From year-end 2010 to the end of September 2011, the gross volume of non-performing loans rose by 14%; net of loan loss provisions, which increased by 19%, NPLs rose by 4%. For this reason the NPL ratio, at 5.2%, was up by 0.6 percentage points on the year-end 2010 level; 1.9% of the net volume of loans (after deduction of loan loss provisions) was non-performing. Spe-cific provisions covered 65.7% of NPLs in September 2011; with the build-up of loan loss provisions, the coverage ratio was higher than in December 2010 (62.6%). The proportion of impaired loans rose more strongly from December 2010 to September 2011 (from 9.1% to 10.1% on a gross basis, and from 4.9% to 5.5% on the basis of net volume); this development was due to a harmonisation of methodologies, namely the obligation to continue to report a loan which has been successfully restructured as impaired for at least another year. This regulatory adjustment was made in CEE at the beginning of 2011, leading to a break in the time series of over one-half of a percentage point.

➔ In the third quarter of 2011, operating profit amounted to € 761 m, a slight increase of 1% over the preceding quarter; net write-downs of loans and provisions for guarantees and commit-ments remained stable, at € 330 m. On this basis net operating profit of Bank Austria also rose slightly, to € 431 m.

➔ In the first nine months of 2011, the bank’s operating profit was € 2,365 m, down by € 186 m or 7.3% from the same period of the previous year as a result of the above-mentioned special fac-tors (lower amount of participation in profits of the Markets product line, valuation-related adjustments in the net trading result, bank levies included in operating costs). net operating profit (operating profit less net write-downs of loans and provisions for guarantees and commitments) nevertheless increased by € 93 m or 8% as the provisioning charge was lower.

2) The provisioning charges resulting from guarantees assumed by UniCredit Bank Austria at the Vienna-based CEE headquarters are attributed to the countries causing such charges.



Current and exceptional charges had to be deducted from Bank Austria’s high net operating profit in the first nine months, and espe-cially in the third quarter, to arrive at profit before tax:

Following an allocation of € 100 m to provisions for risks and charges in the third quarter of 2011, net additions to that item in the first nine months totalled € 131 m, up by € 28 m on the same period of the previous year. Provisions were mainly made for legal risks. The item integration costs (€ 17 m after € 3 m in the previous year) includes restructuring costs for the Russian brokerage firm CJSC UniCredit Securities (previously Aton).

The net result from investments for the first nine months of 2011 was a net loss of € 147 m after net income of € 61 m in the same period of the previous year. The net figure reflects significant move-ments. In addition to a generally favourable performance of invest-ments, positive factors included a revaluation gain resulting from the restructuring of the Moscow Interbank Currency Exchange (MICEX) Group, in which our Russian banking subsidiary holds an equity inter-est, and realised gains in connection with an addition to our share-holding in CA Immo, a real estate investment company, as well as additional income from the sale of equity interests in the past; these factors totalled € 154 m.

This was more than offset by the impact of write-downs on hold-ings of Greek government bonds. The European Council deci-sions made on 21 July 2011 to support Greece were for the first time accompanied by an offer for the participation of private investors, suggesting an impairment of the exposure to Greek government bonds. In the consolidated financial statements for the first six months of 2011, Bank Austria therefore made a write-down on its holdings of Greek government bonds, which the parent company UniCredit Bank Austria and CEE banking subsidi-aries have held in the banking book for a long time. The write-down had an impact of € 130 m on the item “net income from investments” as at 30 June 2011. The European Council’s state-ments of intent of 26 October 2011 made a more extensive debt restructuring appear more likely. Therefore a write-down on the holdings of Greek government bonds to the mid-market prices prevailing as at 30 September 2011 (fair value level 1) was made, with a further impact of € 174 m on the income state-ment. The write-down thus totalled € 304 m, of which € 197 m is reflected in the Corporate Center, € 16 m in the CIB Division and € 91 m at banks in the CEE Division.

Changes in major items of the income statement compared with the previous year (January /September 2011, changes in € m on previous year)

Net interest income1)

Net fees and commissions

Net trading, hedging and fair value income, and net other expenses/ income

Operating income

Costs: current operating expenses

Costs: bank levies

Net write-downs of loans and provisions for guarantees and commitments

Net operating profit2)

Non-operating items3)

Greece-related effect

Profit before tax

Other items: income tax and non-controlling interests

Goodwill impairment and PPA

Restatement difference4)

Net profit (as published)

1) Net interest + dividend income and other income from equity investments. / 2) Operating profit less net write-downs of loans and provisions for guarantees and commitments. / 3) Provisions for risks and charges (change: –€ 28 m), integration costs (–€ 14 m), net income from investments (without Greece-related effect: +€ 97 m) compared with the previous year. / 4) All comparative figures for 2010 except net profit (bottom line) have been restated to reflect the current consolidation perimeter. Of the total amount of the change in net profit compared with the unadjusted figure for the previous year (–€ 756 m), –€ 37 m relates to changes in the consolidation perimeter (restatement difference).

–800 –700 –600 –500 –400 –300 –200 –100 0 100 200 300

+36

+12

–27

+279

+93

+54

–75

–78

–81

–304

–156

–11

–552

–37

–756



➔ Overall, the balance of non-operating income/expenses was a net expense of € 296 m after a net expense of € 45 m in the previ-ous year (restated figure: € 46 m). profit before tax for the first nine months of 2011 was € 1,035 m, down by € 248 m or 19% from the same period of 2010 (original figures) and a decline of € 156 m or 13% compared with the adjusted figures.

The three Austrian customer business divisions generated a com-bined profit before tax of € 465 m (+0%) and the CEE business seg-ment contributed € 1,134 m (+22%), while the Corporate Center recorded a negative result (– € 564 m).

➔ After deduction of income tax, which was down by 16% in line with profit before tax (effective tax rate: 24% after 23%), and after deduction of non-controlling interests (€ 41 m), net profit before purchase price Allocation was € 741 m for the first nine months of 2011, down by € 204 m or 22% (based on adjusted figures, down by 18%). Profit shortfalls in the third quarter of 2011 in particular – with net profit before PPA for the third quarter of 2011 (€ 41 m) sub-stantially lower than the amount generated in the second quarter (€ 352 m) – are the main factor explaining the decline in net profit before PPA.

The new format of the income statement shows items related to equity interest management, i. e. the Purchase Price Allocation effect and goodwill impairment, as separate items below profit for the period in order to present the bank’s performance without the accounting impact of valuation measures.

As part of the current multi-year planning process for all units of UniCredit Group – a new five-year plan for the period 2011–2015 was prepared and adopted shortly before the publication of results –

Bank Austria has updated the medium-term scenarios for its business divisions and regions. On this occasion the regular goodwill impairment tests were carried out in the third quarter of 2011 and coordinated with the adopted plan scenario. Perform-ance trends which were below the original assumptions used for planning purposes required the recognition of an impairment loss of € 350 m on goodwill related to JSC ATF Bank in Kazakhstan and the recognition of an impairment loss of € 300 m on goodwill related to PJSC Ukrsotsbank in Ukraine as at 30 September 2011. After the valuation adjustment, the statement of financial position includes residual goodwill of € 124 m and € 189 m, respectively. Impairment losses on goodwill relating to UniCredit Securities International Limited Cyprus and CJSC UniCredit Secu-rities (previously Aton) in Russia in the amounts of € 42 m and € 5 m, respectively, were already recognised as at 30 June 2011. CJSC UniCredit Securities is currently being restructured.

➔ The total charge for goodwill impairment and the Purchase Price Allocation effect (PPA) in the third quarter of 2011 was € 676 m. As a consequence, the net result attributable to the owners of Bank Austria in the third quarter of 2011 was a net loss of € 635 m.

➔ net profit (attributable to the owners of Bank Austria) for the first nine months of 2011 was € 4 m. This means that the oper-ating performance in the first nine months was strong enough to absorb the unforeseeable write-downs on government bonds which were risk-free until recently, and the impact of the new val-uation of equity interests using strict principles. The exceptionally large loss in the income statement for the third quarter of 2011 is to be seen as a one-off special effect which will relieve any impact on future earnings.



Condensed income statement of Bank Austria1) (€ m)

QUArterLY FIGUres

YeAr-to-dAte FIGUres

chAnGe over prevIoUs YeAr

CHANGE OVER 1– 9 2010

RESTATED 2)

Q1 2011 Q2 2011 Q3 2011 1– 9 2011 1– 9 2010 € m In % € m IN %

Net interest 1,128 1,120 1,128 3,376 3,401 –25 –1% –3 –0%

Dividend income and other income from equity investments 50 52 49 151 112 +39 +35% +39 +35%

Net fees and commissions 462 460 479 1,401 1,480 –78 –5% –75 –5%

Net trading, hedging and fair value income 114 54 24 192 277 –85 –31% –3 –1%

Net other expenses/ income 47 58 38 143 136 +6 +5% +15 +12%

Operating income 1,801 1,744 1,717 5,263 5,406 –143 –3% –27 –1%

Payroll costs –496 –512 –499 –1,508 –1,441 –67 +5% –75 +5%

Other administrative expenses –386 –408 –390 –1,183 –1,106 –77 +7% – 91 +8%

Recovery of expenses 0 0 1 1 1 +0 +2% +0 +2%

Amortisation, depreciation and impairment losses on intangible and tangible assets –69 –71 –69 –208 –219 +11 –5% +8 –4%

Operating costs – 950 – 990 – 957 –2,898 –2,764 –133 +5% –159 +6%

Operating profit 851 754 761 2,365 2,641 –276 –10% –186 –7%

Net write-downs of loans and provisions for guarantees and commitments –376 –329 –330 –1,035 –1,314 +279 –21% +279 –21%

net operating profit 475 425 431 1,330 1,328 +3 +0% +93 +8%

Provisions for risks and charges –32 1 –100 –131 –103 –28 +28% –28 +28%

Integration costs –1 –1 –15 –17 –3 –14 >100% –14 >100%

Net income from investments 8 –37 –118 –147 61 –208 >100% –207 >100%

profit before tax 449 388 197 1,035 1,283 –248 –19% –156 –13%

Income tax for the period –89 –24 –141 –253 –300 +47 –16% –8 +3%

Profit for the period 360 364 57 782 983 –201 –20% –164 –17%

Non-controlling interests –13 –12 –16 –41 –38 –3 +8% –3 +8%

Net profit before PPA 3) 347 352 41 741 945 –204 –22% –167 –18%

Purchase Price Allocation effect 4) –4 –3 –24 –31 –14 –17 >100% –17 >100%

Goodwill impairment –3 –50 –653 –705 –170 –535 >100% –535 >100%

net profit 3) 341 299 –635 4 761 –756 – 99% –719 – 99%

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 58 to 65 of this report./ 2) Restated: compara-tive figures adjusted to the consolidation perimeter and the business structure in 2011. / 3) Attributable to the owners of Bank Austria. 4) PPA effects for Kazakhstan, Ukraine, Russia and Aton.



Volume, profitability and resourcesAfter a strong countermovement until the middle of 2010 which fol-lowed the preceding year of recession, growth of average loans and receivables with customers continued at a steady yet moderate pace. In the third quarter of 2011, growth accelerated (+1% on Q2 2011/+2% on Q3 2010) giving an overall increase of 2.6% for the first nine months of 2011 compared with the same period of the pre-vious year (see table). While growth was driven by CEE, average lending volume in Austrian customer business was more or less maintained; exchange rate fluctuations (CHF) were a significant factor in this context. risk-weighted assets (RWAs) showed mixed trends. RWAs in CEE rose steadily and somewhat more strongly than lending volume, while RWAs in Austria developed less steadily than the flat trend seen in lending volume: in the F&SME Banking Division in par-ticular, RWAs rose sharply in the course of 2010 when exchange rate movements led to a disproportionately strong increase in terms of volume and the computed risk content. This trend corrected itself in 2011, partly with the Basel-2 compliant adjustment of model param-eters to calculate the risk weights for business with private custom-ers. Moreover, efforts in the CIB Division in 2011 to decouple risk-weighted assets from customer business developments were suc-cessful: lending volume in the CIB Division in the first nine months of 2011 was 2% lower than in the previous year, and RWAs were down

by 8%. In Central and Eastern Europe, average RWAs in the first nine months of 2011 were almost 8% higher than in the same period of the previous year; adjusted for exchange rate movements, the increase was 12%. This growth mainly reflects expansion in Turkey (+14% in euro terms, +30% in local currency) and in Russia (+20%/+23%), Croatia (+14%/+16%) and Romania (+12%/+13%).

The trend in risk-weighted assets over time and in the composition of risk types underlines efforts aimed at making business developments sustainable: market risk in Bank Austria as a whole was reduced by 15% in the first nine months of 2011, after a strong reduction had taken place in 2009 and 2010 as part of the reorientation of invest-ment banking activities. Credit risk rose by about 2%. Operational risk increased by 19% – not least because of methodological progress and more accurate measurement; most recently it amounted to about 9% of total RWAs.

return on equity (ROE before tax = profit before tax /allocated equity, subsidiaries with institutional capital) for the first nine months of 2011 was 7.9%, lower than in the previous year (9.4%) but still far below the pre-crisis level (average for the period 2005 to 2007: 19.1%). ROE after tax – based on profit for the period (including non-controlling interests, before deduction of goodwill impairment and the Purchase Price Allocation effect) was also lower, at 6.0% after 7.5% restated, due to substantially higher non-operating items (the average for the period 2005 to 2007, before the collapse of Lehman Brothers, was 15.7%). Measured by net profit attributable to the owners of Bank Austria, return on equity for the first nine months of 2011 was close to zero after 5.9% in the previous year. marginal economic value Added (mEVA), the key indicator used by UniCredit Group for value creation, by definition does not comprise impairment losses on goodwill (“marginal” refers to the exclusion of goodwill); one-off effects such as integration costs are also not included in NOPAT (net operating profit after tax), which is used for the calcula-tion. At overall bank level, EVA reached only € 23 m for the first nine months of 2011, after € 186 m in the previous year; these develop-ments reflected lower profits and the higher cost of capital. Risk-adjusted return on risk-adjusted capital (RARORAC) declined to 0.31%, from 2.88% in the same period of the previous year. The strong increase in equity in the three segments of Austrian cus-tomer business reflects the low base figure in the CIB Division after deduction of the former UniCredit CAIB at the beginning of 2010. More importantly, since the beginning of 2011, capital allocation has been based on actual risk-weighted assets of the preceding quarter (previously on planned RWAs). The increase in RWAs resulting from the stronger Swiss franc also led to a significant increase in equity allocated to the F&SME Banking Division compared with the previous year.

Resources and profitability in the first nine months of 2011 compared with the same period of the previous year

BAnk AUstrIA AUstrIA 1) cee

relative sizeAverage loans to customers (€ bn) 130.3 63.8 66.6

Change over previous year 2) +2.6% –1.4% +6.6%Average risk-weighted assets under Basel 2 (€ bn) 124.3 39.1 80.7

Change over previous year 2) +2.8% –5.4% +8.4%Operating income (€ m) 5,263 1,789 3,532

Change over previous year 2) –0.5% +1.5% +1.8

results, profitability and value creationProfit before tax (€ m) 1,035 465 1,134

Change over previous year 2) –13.1% +0.4% +21.8%ROE before tax 3) 7.9% 17.4% 12.8%Marginal EVA (€ m) 4) 22.6 134.0 314.9Marginal RARORAC 0.31% 6.13% 6.38%

equityAverage equity (€ bn) 5) 17.5 3.6 11.8

Change over previous year 2) +3.9% +23.8% +7.8%

1) F&SME Banking, Private Banking and Corporate & Investment Banking (CIB) Divisions, the difference of the total amount is shown in the Corporate Center (see “Description of segment reporting” in the notes to the consolidated financial statements on pages 58 to 65 of this report). / 2) Restated. / 3) ROE = profit before tax p.a. divided by average equity of the business segments. / 4) Calculated on the basis of capital allocated under Basel 2. Difference = Corporate Center and inter-segment items, sum total calculated using bank’s own cost of capital of 10.93%. 5) Subsidiaries are included at actual IFRS capital.



BAnk AUstrIA

3 AUstrIAn cUstomer BUsIness

seGments 1) cee

GBs+corporAte

center 2)

employees (FTEs)End of September 2011 59,374 5,745 51,466 2,162End of 2010 (restated) 59,288 5,549 51,598 2,141

Change +86 +196 –131 +21End of 2010 (original) 59,653 5,820 51,616 2,217

Change –279 –75 –150 –55

BranchesEnd of September 2011 3,017 295 2,722End of 2010 3,033 298 2,735

Change –16 –3 –13

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

The number of branches of Bank Austria declined by 16 in the period since the end of 2010. A reduction resulting from the stream-lining of the branch network (especially the regional administrative centres) in Ukraine and Kazakhstan (together –57) was partly offset by the opening of new branches in Turkey (+24) and in the Czech Republic (+18); there were also minor changes in other countries. In several countries, the opening of branches is accompanied by the closure of offices. This internal restructuring effect is most pro-nounced in Russia. staff numbers in Bank Austria rose by 86 FTEs from the end of 2010 (in the current consolidation perimeter, weighted by working time) to the end of September 2011. In the CEE business segment, overall staff numbers declined by 131 FTEs (–0.3%), reflecting significant movements. The restructuring in Ukraine (–603) and Kazakhstan (–108) compared with an expansion in Turkey (+318) and in the Czech Republic (+150), and additional staff was recruited even in Hungary (+56 FTEs). Staff numbers in Austrian customer business (based on the current organisational structure) were up by 196 FTEs on the year-end 2010 level, mainly as a result of the initiative to strengthen staffing levels for sales activities at branches, including young new entrants under the “Best Start” programme. A comparison with unadjusted figures at the end of 2010 shows a decline which is explained by the retransfer of employees from Competence Lines (controlling and communication functions) to the head office. In the Corporate Center, the increase in employees is more than offset by IT experts contracted out or sec-onded under the cooperation programme with IBM, resulting in a net decline of 55 FTEs on the basis of unadjusted figures.

Financial position total assets declined in the first quarter of 2011 and rose again in the subsequent months to reach € 197.7 bn as at 30 Sep-tember 2011, an increase of 2.4% over the year-end 2010 level. On the liabilities side, almost all of the growth in the first nine months of 2011 resulted from a strong increase in primary funds (deposits from customers and debt securities in issue). The assets side was characterised by trends which moved in opposite directions: loans and receivables with customers con-tinued to expand steadily, supported by growth in CEE, although strong depreciation of several currencies slowed the momentum. Financial market investments, on the other hand, were reduced as in previous periods. The strongest increase was seen in loans and receivables with banks in connection with liquidity supplies within UniCredit Group.

On the assets side, financial assets held for trading continued to decline (as in the previous year) by € 1.0 bn (–24.3%) to € 3.3 bn, accounting for 1.6% of total assets. Financial market investments declined by a combined € 3.8 bn or 16.9% to € 18.5 bn. Hedging derivatives rose strongly (+€ 1.6 bn to € 4.0 bn). Loans and receivables with customers increased by € 1.0 bn or 0.8%; at € 131.1 bn, they accounted for 66.3% of total assets. Loans and receivables with customers in the CEE business segment showed disproportionately strong growth (+4.4%); at constant exchange rates, the increase would have been 5 percentage points higher. Turkey, Russia and Romania were the countries with the strongest expansion in this area, cal-culated at constant exchange rates. The largest change on the assets side was seen in loans and receivables with banks, which rose by € 7.9 bn (+39.8%) to € 27.6 bn; this growth resulted from interbank deposits in connection with liquidity supplies within UniCredit Group and from the reclassification of securities in accordance with IAS 39.50E from available-for-sale financial assets to loans and receivables with banks (see page 41 in the notes to the consolidated financial statements).

On the liabilities side, deposits from banks continued to decline (down by 3.5% to € 32.0 bn). As at 30 September 2011, the sum total of financial liabilities held for trading, financial liabilities at fair value through profit or loss and hedging derivatives was also lower than at the end of the previous year. primary funds, on the other hand, rose strongly: deposits from customers



amounted to € 103.2 bn, an increase of € 2.9 bn or 2.9% over the year-end 2010 level. A contribution to this growth came also from the Austrian customer business segments (+2.1%), with a strong preference for liquidity primarily in business with private customers and in Private Banking. The major part of the increase in deposits from customers was generated in the CEE Division (+3.7%; adjusted for exchange rate movements, +9.1%), in countries where our banking subsidiaries enjoy particularly strong confidence among cus-tomers because they are international banks, especially in Russia and also in Kazakhstan and Ukraine. debt securities in issue rose by € 3.1 bn or 11.1% to € 30.6 bn, mainly through successful mort-gage bond issues. At the end of September 2011, primary funds (the sum total of deposits from customers and debt securities in issue) totalled € 133.8 bn; at this level they were higher than at year-end 2010 (+€ 6.0 bn or +4.7%) and also exceeded the amount of loans and receivables with customers by 2%. This means that customer loans were fully funded by customer deposits in a wider sense.

As at 30 September 2011, equity was € 17.3 bn, more or less matching the level at the end of 2010 (–1.1%). The decline of € 192 m reflects the fact that the net profit included in retained earnings was very low as a result of exceptional non-operating expenses and the goodwill impairment charge. The negative develop-ment of foreign currency translation was, to a large extent, offset by an increase in reserves in accordance with IAS 39. The leverage ratio, pursuant to UniCredit standards and the cash concept (without intangible assets), improved slightly, from 13.8 at the end of 2010 to 13.5 in September 2011.

Capital resources pursuant to the Austrian Banking Act

risk-weighted assets (rWAs) as at the end of September 2011 were € 123.7 bn, down by € 4.2 bn (–3.3%) from the year-end 2010 level. In Austria, the change resulted primarily from the adjustment of risk parameters and also from write-downs on equity interests and a decline in trading activities. On the other hand, business expansion in CEE led to an increase, which was partly offset by exchange rate movements. While several banking subsidiaries switched to the inter-nal ratings-based (IRB) approach, this had a very small net effect in terms of RWAs: a € 12.4 bn increase in the IRB portfolio was more or less offset by a € 12.2 bn decrease in the portfolio under the stand-ardised approach. As a result of lower RWAs, the capital requirement for credit risk declined to € 8.8 bn (–2.5%) and the capital require-ment for all types of risk was € 9.9 bn (–3.3%).

Net capital resources as at 30 September 2011 were € 15.2 bn, down by € 0.3 bn (–1.9%) from year-end 2010. The decline resulted mainly from a lower amount of subordinated capital eligible for inclu-sion and from lower deductions.

The slight increase in Tier 1 capital in combination with the RWA reduction compared with the end of 2010 resulted in higher Tier 1 capital ratios. The decline in total capital resulting from the change in subordinated capital was offset by the reduction of RWAs, leading to an increase in the total capital ratio. The Core Tier 1 capital ratio (Tier 1 capital ratio without hybrid capital) based on all risks rose from 10.04% to 10.42%. The Core Tier 1 capital ratio based on credit risk rose from 11.33% to 11.67%.

Capital ratios30 sept. 2011 31 dec. 2010

based on all risks 1) Tier 1 capital ratio 10.75% 10.35%... without hybrid capital (Core Tier 1 capital ratio) 10.42% 10.04%Total capital ratio 12.31% 12.13%

based on credit risk 2) Tier 1 capital ratio 12.03% 11.68%... without hybrid capital (Core Tier 1 capital ratio) 11.67% 11.33%Total capital ratio 12.83% 12.67%

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.



Development of business segments

Family & SME Banking (F&SME)(€ m) 1– 9 2011 1– 9 2010 1) chAnGe

Operating income 879 869 +9 +1%Operating costs –669 –634 –35 +6%Operating profit 210 236 –26 –11%Net write-downs of loans –158 –207 +49 –24%Net operating profit 52 28 +23 +82%profit before tax 61 41 +20 +48%Loans to customers (avg.) 21,781 21,988 –207 –1%Risk-weighted assets (avg.) 2) 13,342 13,322 +21 +0%Average equity 3) 1,249 749 +499 +67%

1) For segment reporting purposes, the comparative figures for 2010 were restated to reflect the structure and methodology of the 2011 reporting period (see the segment reporting section in the notes to the consolidated financial statements on pages 58 to 65 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 the Bank Austria Group is shown in the Corporate Center. See segment reporting section on pages 60 to 65. This information applies to all business segment tables.

Revenue trends in the Family & SME Banking (F&SME) Division*) improved in the past four quarters. Operating income in the first quarter of 2011 was well above the trend line, supported by strong net fees and commissions; business also held up well in the second quarter and picked up slightly in the third quarter of 2011, giving revenue growth of 5% compared with the same period of the previ-ous year. Economic developments in the course of the past few quar-ters had a mixed influence on the various income components. One of the most important factors – in a generally stagnating and over-banked market – was the change from expectations of higher inter-est rates in the early months of the year to an unexpectedly strong decline in interest rates across all maturities and the flattening of the yield curve which started in the summer. These developments had a widely varying influence on interest income from the assets side and the liabilities side. A possible spreading of the debt crisis and fears about economic policy measures taken to handle the crisis were the main topic and the major source of uncertainty in business with cus-tomers, reflected in their preference for liquidity, the price of gold, and the strong appreciation of the Swiss franc. Investors showed a pronounced risk aversion and a strong preference for easy-to-under-stand and transparent bank bond issues and deposits. In this dra-matic environment, net interest rose slightly from quarter to quarter in 2011, the figure for the third quarter was 5% higher than the Q3 2010 level. Net fees and commissions reflected investor restraint more strongly: after a good first quarter and a slight decline in the second quarter, they stabilised at a fairly high level (Q3 2011 slightly above Q3 2010). Net write-downs of loans and provisions for guar-antees and commitments rose in the third quarter of 2011, but from the very low level of the preceding quarter. The underlying improve-ment in the risk profile compared with the previous year has not changed. Net operating profit is in line with this development, with

the third quarter of 2011 showing a significantly better performance than Q3 2010. Special effects in the area of provisions for risks and charges (a substantial release of provisions in Q2 2011/net additions in Q3) weighed down profit before tax in the third quarter. Neverthe-less, this does not affect the overall assessment of trends in operat-ing performance.

On a cumulative basis, the erratic quarterly fluctuations resulted in the following figures for the first nine months: operating income reached € 879 m, slightly exceeding the previous year’s level (+1%), with the increase in net interest income more than offsetting the decrease in net fees and commissions. net interest income was € 543 m, up by € 9 m or 2% on the first nine months of the previ-ous year. Lending volume hardly changed; while short-term loans (including consumer loans) were significantly lower, volume was sup-ported by the increase in medium-term and long-term loans, includ-ing construction and housing loans, which rose by about 7% as intensive marketing efforts led to lively new business. While terms and conditions for customers remained stable, the interest margin narrowed on the assets side because of reference rate develop-ments. Total deposits (direct deposits) declined slightly compared with the previous year, but interest margins improved on this side, also as a result of reference rate developments. net fees and com-missions for the first nine months of 2011 were € 328 m, slightly down by 2%, but they still accounted for a substantial 37% of oper-ating income. Net fees and commissions generated by commercial services including account maintenance and payments as well as safe-custody business declined. Among the investment products, mutual fund business and sales of insurance contracts were down. This was more or less offset by successful placement of the bank’s own issues. New issues were particularly successful in the first nine

*) Since the beginning of 2011, F&SME has comprised not only the Mass Market, Affluent and Small Businesses sub-segments but also small and medium-sized enterprises (SMEs) with a turnover between € 3 m and € 50 m. Segment reporting was retrospectively adjusted to the new structure, so that a comparison with previous year’s figures can be made on a consistent basis.

Turnaround in interest rates … and trend reversal% p.a.

2010 2011Q3 Q4Q1 Q1Q2 Q3Q2

3-monthmoney/

swap (OIS)

3-monthmoney/

interbank

10-year€ benchmark

Weekly (smoothed data)

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5



months of 2011: in addition to tax-privileged Wohnbauanleihe bonds, the bank issued thirteen ErfolgsAnleihe bonds featuring easy-to-understand and transparent terms and conditions with maturities of two to five years (€ 640 m) and four tranches of mortgage bonds, four USD floaters and one inflation-guaranteed and one equity-linked structured issue (both with a capital guarantee), which took account of the current interest rate environment and investors’ strong prefer-ence for security. The average volume of bonds outstanding in the first nine months of 2011 was up by 11% on the previous year.

While revenues were stable, higher operating costs (+5.5% to € 669 m) had an impact on operating profit. Apart from the first-time involvement of three small service providers (including KSG, Karten-Verrechnungs- und Servicegesellschaft m.b.H.), the increase in costs reflects the initiatives launched to expand the market position: the sales network was strengthened with the recruitment of new employ-ees and internal transfers to customer service units of employees who received special training for this purpose. Moreover, young new employees joined the Division under the “Best Start” programme. On the other hand, a number of employees were retransferred from sup-port functions to central Competence Lines (Corporate Center). On balance, from January to September 2011, staff numbers rose by 168 FTEs (+4.4%).

Supported by economic trends and the gradual improvement in employment and incomes, net write-downs of loans and provi-sions for guarantees and commitments have declined for over a year. Average RWAs in the first nine months remained at the level of the previous year. The provisioning charge for the first nine months of 2011 was € 158 m, down by € 49 m or 24% from the same period of the previous year. The cost of risk was 97 basis points, considera-bly lower than in the same period of the previous year (126 bp).

Operating profit was 11% lower than in the previous year. As net write-downs of loans and provisions for guarantees and commit-ments declined more strongly (–24%), net operating profit improved by € 23 m to € 52 m (+82%) compared with the first nine months of 2010. The balance of non-operating items in the income statement was net income of € 9 m compared with net income of € 12 m in the previous year. Within the total figure, provi-sions for risks and charges showed a positive balance of € 6 m (after nil in the previous year) because there was a net release of provisions for specific securities investments following the clarifica-tion of the legal position. Net income from investments in the first nine months of 2011 was € 3 m, after € 13 m in the previous year (when realised gains on the sale of shares held by a subsidiary led to significant one-off income). Overall, non-operating items made a positive, though slightly lower, contribution to profits. profit before tax rose by € 20 m to € 61 m, mainly on account of the operating performance, and was 48% higher than in the same period of the previous year.

Private Banking(€ m) 1– 9 2011 1– 9 2010 chAnGe

Operating income 107 101 +6 +6%Operating costs –75 –74 –2 +2%Operating profit 32 27 +4 +15%Net write-downs of loans –2 0 –3 n.m.Net operating profit 29 28 +2 +6%profit before tax 31 27 +3 +12%Total financial assets (avg.) 17,012 16,469 +543 +3%Loans to customers (avg.) 375 369 +6 +2%Risk-weighted assets (avg.) 496 529 –33 –6%Average equity 131 124 +7 +6%

n.m. = not meaningful

The Private Banking business segment was challenged considerably more than other business segments by the volatile investment cli-mate in the third quarter of 2011 (see chart). However, the slump in prices in the higher risk investment categories, the uncertainty prompted by the government debt crisis, and widespread scepticism among clients over the long-term consequences of an expansive mon-etary policy were all factors enabling Private Banking to meet clients’ needs through the entire range of products and services – from spe-cial Private Banking expertise through to issues and direct deposits.

Extreme movements in third quarter of 2011

Swiss franc in euro BBB corporate bonds Commodities, Rogers, €

Shares: Euro Stoxx 10-year € benchmark bond 10-year Greek bond

Gold (US$ per ounce)

Gold (US$)

Swissfranc/€

€ bench-mark bond

Corporatebonds

Greece

2010Q3 Q4Q1 Q2

2011Q3Q1 Q2

For bonds and shares: total return, i.e. price + reinvested coupon or price + reinvested dividend

Average for Q1 2010 = 100

Shares

Commodities

30

40

50

60

70

80

90

100

110

120

130

140

150

160



Unlike the situation which prevailed exactly one year ago, when the third quarter marked a low point in business activity due to sea-sonal factors, the Private Banking Division experienced the third quarter of 2011 as the best quarter in the year to September, also looking back over a longer period. Profit before tax rose by 29% to € 12 m from the second to the third quarter of 2011, up from € 5 m a year ago. The profit before tax generated by the Private Banking Division for the first nine months of 2011 was € 31 m, 12% up on the same period of 2010.

In the third quarter of 2011, total financial assets (quarterly aver-ages) almost equalled the level of the preceding quarter (–0.2%) and were 3.8% up on the figure for Q3 2010, despite a – in some cases sharp – fall in market prices. In average terms for the first nine months of 2011, total financial assets rose by 3.3% to € 17.0 bn. The composition of total financial assets (also € 17.0 bn at the end of September) shifted slightly since the end of June: direct deposits accounted for 37% at the end of September, up from 34% at the end of June, and assets under custody (direct investments in securities /safe-custody business) for 34%, a slight decline from 37% at the end of June 2011. The share of assets under management (funds and asset management) remained unchanged, which reflects the long-term strategy. The – probably temporary – shift of securities investments into liquidity reflects the current risk aversion given the exceptional conditions. The structure of revenues shows a similar trend.

Despite the more difficult market conditions, operating income rose by 4% in the third quarter of 2011; at € 107 m in the first nine months of 2011 it was almost 6% above the level of the same period of the previous year. As in the preceding quarter (+27%), net interest in the third quarter of 2011 rose sharply both on a quarterly basis (+16%) and in a year-on-year comparison (+52%). Net interest in the first nine months of 2011 amounted to € 41 m, a year-on-year rise of about one-third. The improvement was driven by an increase in the volume of direct deposits, triggered partly by a successful time-deposit initiative by Schoellerbank and by a general preference for liquidity. Net interest was also supported by interest rate developments (higher margins on deposits as a result of refer-ence rate developments), which had a much stronger positive impact than in other business segments, especially as the converse, negative spread effect does not really affect the results of the Pri-vate Banking Division on account of the small volume of loans granted. As expected, the rise in net interest compared with a lower level of fee-based income. Net fees and commissions, which accounted for 60% of operating income, is the most significant income component for private banking business. While including revenue from fund and asset management business, which devel-ops in a more predictable manner, they also reflect investment turn-

over which is a result of investment behaviour. This in turn mirrors the mood prevailing on capital markets. Brokerage business, which plays a particularly strong role in Schoellerbank’s activities, made a smaller contribution to net fees and commissions in the second and third quarters. In the first nine months of 2011, net fees and com-missions were down by € 4 m or 6% on the same period of the pre-vious year.

While operating income increased by 6% despite the difficult envi-ronment, costs rose by only 2% to € 75 m in the first nine months of 2011, notwithstanding an average year-on-year 4% increase in staff-ing levels following the recruitment of experts. Together with net write-downs of loans and provisions for guarantees and commit-ments (€ 2 m), this resulted in a profit before tax of € 31 m (+12%) for the first nine months of 2011, which compares with € 27 m for the same period of 2010. As the business segment with the most advisory-intensive services and the most staff-intensive cli-ent relationships, the Private Banking Division had a cost / income ratio of 70.5% in the first nine months of 2011, which is an improvement of 2.4 percentage points in a comparison with 2010. Return on equity before tax for the first nine months of 2011 was 31.5% after 29.6% in the previous year.

The Private Banking Division maintains a presence in 25 locations throughout Austria and serves the top segment of private customers. The bank is market leader in this segment, with a 19% market share. As of 30 September 2011, the Private Banking Division had 559 employees (weighted by working time), 15 more than at year-end 2010. In the course of 2011, Private Banking has taken a number of further initiatives to expand its position in the market: after implementing an ongoing review of portfolio quality by the bank’s own portfolio analysts and within the international network of UniCredit experts, the Preferred Partners concept has resulted in a simplification of products and services, and in quality enhancement (focus on the world’s top ten fund management companies as part-ners). As market leader in the private foundations sub-segment, the Division set up a private foundations centre in May. The team of experts assigned to this centre supports clients throughout Austria with economic and legal issues, and with succession planning in -particular. Meeting the needs of Austrian private foundations is a strategic focus of the Division’s activities. While the Private Banking Division is important for the bank’s image as it has responsibility for the customer segment of high net worth individuals and private foun-dations, it also consistently creates value for the bank as a whole: in the first nine months of 2011, marginal EVA was € 20 m (1– 9 2010: + € 18 m) and the risk-adjusted return on risk-adjusted capi-tal (RARORAC) was 72% on account of the low level of average equity allocated to the Division.



Corporate & Investment Banking (CIB)(€ m) 1– 9 2011 1– 9 2010 chAnGe

Operating income 804 792 +12 +2%Operating costs –286 –271 –15 +6%Operating profit 518 521 –3 –1%Net write-downs of loans –116 –128 +13 –10%Net operating profit 402 393 +10 +2%profit before tax 373 395 –21 –5%Loans to customers (avg.) 41,625 42,326 –701 –2%Risk-weighted assets (avg.) 25,234 27,437 –2,203 –8%Average equity 2,186 2,006 +179 +9%

Corporate & Investment Banking (CIB) coped well with the increas-ingly difficult environment in the second and third quarters of 2011. Given the uncertainty prompted by the escalating govern-ment debt crisis, and in view of the economic slowdown, compa-nies became more and more hesitant to implement their corporate plans and investment projects. Changes in the interest rate envi-ronment and widening risk spreads in capital markets presented customers with a new situation. This also had an impact on Treas-ury and asset / liability management in the CIB Division, which – in addition to customer business – also performs bank-internal func-tions such as liquidity and funding management, including funding for companies in which equity interests are held. Net write-downs of loans and provisions for guarantees and commitments remained at a very low level.

Against this background, the CIB Division’s core business per-formed well in the third quarter of 2011: net interest and net fees and commissions, mainly generated by commercial banking operations, rose by 5% and 12%, respectively, in Q3 2011. Growth was driven by the Finance & Advisory (F&A) and GTB (Global Transaction Banking) sub-segments. As in the preceding quarters, Markets continued to benefit from effective interest rate risk management. The negative net trading performance was not due to trading activities (proprietary trading operations were sold to HVB in 2010) but resulted from accounting effects (negative mark-to-market valuation). Operating income held up well in the third quarter of 2011; at € 259 m, it was down by 2% from the preceding quarter. While costs were only slightly higher (+1% on Q2 2011), operating profit was € 162 m, down by 4% from the second quarter.

Operating income in the first nine months of 2011 was € 804 m, up by € 12 m or 2% on the high level of the previous year. Costs grew by just under 6%. As the provisioning charge was significantly lower, by 10%, net operating profit (operating profit less net write-downs of loans and provisions for guarantees and commitments) rose by 2.4% to € 402 m. CIB thereby accounted for 83% of net operating profit generated by Austrian customer business – even after the transfer of the SME sub-seg-ment to the F&SME Division*) – and contributed one-quarter to net operating profit recorded by the bank as a whole (without the Corporate Center). CIB thus again strongly supported Bank Aus-tria’s overall performance.

net interest, at € 604 m, came close to the high level of the previous year (–0%). It is the most important income component, accounting for 75% of operating income. Average lending vol-ume, which declined in 2010, stabilised during the first nine months of 2011; the average for the January to September period was 2% lower than in the previous year. Within the total, loans to real estate customers and public sector entities rose strongly. Medium-term and long-term loans declined slightly while overdraft loans were significantly reduced as part of com-panies’ stricter cash management. Interest margins improved from a weaker first quarter to the second and third quarters of 2011, reflecting movements in the yield curve and in reference rates. In average terms for the first nine months of 2011, the net interest margin was slightly higher than in the previous year. As in the bank’s other business segments, interest rate spreads improved strongly on the deposits side. This more than offset the decline in volume of short-term deposits. The contribution to net interest also rose on the lending side. The favourable economic trend seen until the middle of the year was reflected in dividend income and other income from equity investments (mainly from real estate investments), which was up by more than 9% on the previous year. On this basis, net interest income (net interest + dividend income and other income from equity investments) rose slightly in the first nine months of 2011. In the same period, net fees and commissions reflected growing market volatility and uncertainty in view of the escalating sovereign debt crisis, which

*) The comparative figures for the previous year were restated to reflect the current business structure; in the context of CIB this mainly involves adjustments for UniCredit CAIB and the SME customer sub-segment.



led to extreme restraint on the part of investors in securities transactions and hedging operations. In the third quarter, net fees and commissions rose slightly thanks to successful new issue activities. CIB was involved, in a leading capacity, in capital meas-ures (including OMV) and in launching and placing major corpo-rate bond issues (Egger, Alpine, Strabag, Wienerberger), underlin-ing its role as a preferred partner in capital markets. Net fees and commissions for the first nine months of 2011 were down by 12% from the previous year. The protracted decline in net fees and commissions is also due to structural factors including less intensive use of derivatives and the restructuring of non-profitable subsidiaries abroad, which are included in the CIB business seg-ment (e.g. CJSC Securities Russia, previously Aton).

net trading, hedging and fair value income of CIB was deter-mined by customer-driven trading activities and by Bank Austria’s asset / liability management, which also includes funding for the CEE subsidiaries. While the net trading result for the first half of 2011 showed significant net income, a fair value adjustment in the third quarter more than offset this performance. In the first nine months of 2011, the net trading result improved by € 41 m, from a net loss of € 47 m in the previous year to a net loss of € 6 m. Without the above-mentioned technical one-off effect, there would have been a strong swing into positive territory.

operating costs in the first nine months of 2011 were € 286 m, up by about 6% on a year earlier (+5% without the bank levy payable by the banking subsidiaries included in the business seg-ment). The increase in costs resulted from a change in cost allo-cation.The cost / income ratio rose from 34.2% to 35.6%, a level that is still far below the average for the bank as a whole. The slight increase was also due to the first-time consolidation of sev-eral new subsidiaries in CIB’s income statement in 2011 (e.g. Immorating GmbH, BACA Realinvest Client GmbH). Moreover, staff numbers of product units for customer business (Finance & Advi-sory and Global Transaction Banking /GTB) were increased. The number of employees (weighted by working time) declined in the third quarter of 2011, but at the end of September it still exceeded the year-end 2010 level by 13 FTEs.

net write-downs of loans and provisions for guarantees and commitments remained under control in the first nine months of 2011: at € 116 m, the provisioning charge was down by 10% from the same period of 2010. In CIB, the decline in the provi-sioning charge is less pronounced than in other business divi-

sions; it should be noted, however, that net write-downs of loans and provisions for guarantees and commitments declined strongly in 2010, when there were releases of large-volume provisions made in previous periods. The cost of risk was very low, at 37 basis points of average lending volume (first nine months of 2010: 40 basis points).

net operating profit – operating profit less net write-downs of loans and provisions for guarantees and commitments – rose by over 2% to € 402 m in the first nine months of 2011. To be deducted from this amount were higher net additions to provisions for risks and charges (for litigation costs and risks) and integration costs in connection with the restructuring of the Russian broker-age firm CJSC Securities Russia, which is consolidated in the CIB business segment. Together with a net income from investments which was slightly positive, non-operating items in the income statement were a net expense of € 29 m (after net income of € 2 m in the previous year). For this reason, profit before tax declined by 5% to € 373 m. Although risk-weighted assets declined more strongly (–8%) than lending volume, allocated equity was significantly higher (+9%) than in the previous year due to methodological changes. This was the main reason why return on equity (ROE before tax) was somewhat lower than in the previous year, but still very satisfactory at 22.8%. The CIB business segment again made a substantial contribution to value creation (Economic Value Added, marginal EVA), with € 159 m, and generated a risk-adjusted return on risk-adjusted capital (RARORAC) of 12.6%.

With a view to expanding its market position and raising profitabil-ity, the CIB Division focuses on cross selling and intensive use of the entire value creation chain covered by the Division’s cross-regional operations. CIB also aims to strengthen its function as strategic financial partner and companies’ partner of first choice for capital market activities. CIB has introduced a Senior Banker approach to provide targeted services to CEOs/CFOs of large national and international companies. Another focus is on cross-border business: the Umbrella Facility launched in the second quarter of 2011 is a cross-border financing facility to which CEE subsidiaries of Austrian companies have fast and easy access, ini-tially in ten CEE countries. GTB is making intensive use of the international network. Other focal areas are advisory services and finance for municipalities (in connection with the “Gemeindemilli-arde” lending scheme) in the public sector and services for com-mercial real estate customers.



Central Eastern Europe (CEE)(€ m) 1– 9 2011 1– 9 2010 chAnGe ADJ.*)

Operating income 3,532 3,469 +63 +2% +6%Operating costs –1,627 –1,566 –60 +4% +8%Operating profit 1,905 1,902 +3 +0% +4%Net write-downs of loans –759 – 977 +218 –22% –20%Net operating profit 1,146 925 +221 +24% +29%profit before tax 1,134 931 +203 +22% +28%Loans to customers (avg.) 66,625 62,505 +4,121 +7% +10%Risk-weighted assets (avg.) 80,680 74,395 +6,285 +8% +12%Average equity 11,794 10,941 +854 +8% +11%

*) adjusted = at constant exchange rates

The Central Eastern Europe (CEE) business segment had a success-ful third quarter in 2011 although the banks in CEE, with wide regional variations, are in the meantime faced with similar market intervention as banks in mature Western markets. Quarterly trends since the middle of 2009 (see chart) show that thanks to growth, the CEE Division has managed to maintain operating income and operating profit at the high levels of 2009, despite various special effects including restrictive economic policy measures in several countries and the bank levy in Hungary. Since the end of 2009, the proportion of operating income absorbed by net write-downs of loans and provisions for guarantees and commitments has declined by more than one half. As a result, net operating profit – the key measure of operating performance – has grown strongly though not reaching the level achieved before 2009.

Performance in the third quarter of 2011 is in line with this trend: net operating profit was higher than in Q2 2011 (+12%) and in Q3 2010 (+17%); at € 418 m, the figure reached the highest level achieved in the past eleven quarters, despite currency depreciation in some of the larger CEE countries. Average volume of loans to customers continued to rise most recently: in the third quarter of 2011, it was up by 1.6% on the preceding quarter and 5.2% higher than in the same period of the previous year (see chart). Risk-weighted assets showed slightly higher growth rates (+2.3% and +7.0%, respectively). Operating income and operating profit also rose moderately from the second to the third quarter of 2011, but were slightly lower than in Q3 2010, one of the reasons being cur-rency depreciation. Operating profit in the third quarter of 2011 amounted to € 656 m (down by 5% from Q3 2010) and the provi-sioning charge was 29% lower (at € 238 m). This resulted in a strong improvement in net operating profit, which in the third quar-ter of 2011 came to € 418 m (+17% over Q3 2010).

In the first nine months of 2011, operating income in the CEE business segment was up by 1.8% (adjusted for exchange rate

movements, 5.7%) on the same period of the previous year. This is a moderate increase by CEE standards; underlying risk-weighted assets rose by 8.4% (adjusted for exchange rate move-ments, 12%). Revenue growth was unusually low because net interest declined (–1.5% in euro terms/+2.2% at constant exchange rates). Apart from deleveraging in Ukraine and in the Baltic countries, the decline was mainly due to economic policy measures dampening growth in Turkey (increase in minimum reserve requirement and switch from interest-bearing to non-interest bearing, stricter upper limits for interest rates on credit card products, etc.). net fees and commissions in the first nine months of 2011 were 1.8% (adjusted for exchange rate move-ments, 6.0%) higher than in the previous year. Turnover in secu-rities business did not yet reach the pre-crisis level in CEE, either. On the other hand, commercial services including credit card business and interest-rate and exchange-rate management developed favourably in almost all countries. net trading income (€ 121 m) was up by two-thirds on the previous year’s level, reflecting the swing from a net loss of € 33 m to net income of € 9 m in Russia, where the local bank recorded high activity lev-els in balance of payments transactions and interest-rate /exchange-rate management in business with customers.

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Operating expenses were € 1,627 m, up by 3.8% (adjusted for exchange rate movements, 7.7%) on the same period of the previ-ous year. The total amount includes the Hungarian bank levy (€ 23 m after € 14 m in the previous year). As the rate of revenue growth was lower, the cost / income ratio increased by 0.9 percentage points to 46.1%. Investment in business expansion continued to be targeted at the branch network and mobile sales channels (see the following country reports). At the end of September 2011 the number of branches was significantly higher in Turkey (+32) and in the Czech Republic (+26) compared with a year earlier; in several countries the opening of new branches is accompanied by closures of branches in regions where the bank maintains a multiple pres-ence. The adjustment of the branch network in Ukraine and Kaza-khstan led to a combined decline of 69 offices. Cost growth also resulted from higher rates of inflation and wage increases in a number of CEE countries; significant currency depreciation partly offsetting these effects was only seen in Turkey, Kazakhstan and Ukraine. Operating profit for the first nine months of 2011 amounted to € 1,905 m, only slightly exceeding the previous year’s figure (+0.1%/based on adjusted figures, +4.1%).

Net write-downs of loans and provisions for guarantees and commitments in the CEE business segment fell by € 218 m or 22.3% to € 759 m. The cost of risk declined to 152 basis points (bp) (1– 9 2010: 208 bp, peak in the second half of 2009: 346 bp). The banking subsidiaries in Kazakhstan*) and Ukraine, which accounted for most of the increase in net write-downs of loans and provisions for guarantees and commitments in the past years, still accounted for about 38% of the provisioning charge, with € 209 m and € 73 m, respectively. They also made the largest contribution to the decline compared with the previous year, with a combined decrease of € 191 m out of € 218 m (88%). While South-East Europe (SEE) was still lagging behind in the credit cycle, the situa-tion in SEE has improved in the meantime. In Romania, the provi-sioning charge was slightly lower than in the previous year, but the cost of risk for the first nine months of 2011 was still relatively high (337 bp). The situation in Bulgaria deteriorated, though only slightly, but from a better starting position (cost of risk: 217 bp). In Croatia and Bosnia, the cost of risk also declined after a strong temporary increase; at 97 bp and 101 bp, respectively, the levels were lower than in the previous year. In Russia the situation improved signifi-cantly in line with general economic trends (provisioning charge down by 67%, cost of risk at 52 bp). Turkey, which is far ahead of other countries in the cycle, is a special case: asset quality in Turkey improved substantially in 2010 as debt collection efforts were suc-cessful. After net releases of loan loss provisions in the previous year, the provisioning charge in Turkey in the first nine months of 2011 was at a low level of € 19 m (cost of risk: 22 bp). Among the

countries in Central Europe, Hungary stands out as a special case: while the cost of risk in other Central European countries was dis-proportionately low, the provisioning charge in Hungary rose by € 13 m or 22% compared with the previous year. The increase is explained by provisions made for the restructuring or compulsory conversion of foreign currency loans on the basis of rules introduced by the government.

When analysing the overall picture, one should note that the reduc-tion of the provisioning charge – resulting from economic trends, local restructuring measures and the gradual improvement, or at least not continued deterioration, in asset quality – is well-founded. However, the decline seen in the past few quarters cannot be expected to continue at the same pace. In some countries, method-ological factors (IFRS harmonisation, Basel 2 implementation) have also had a non-recurrent favourable effect. Other countries will yet experience a turn for the better in terms of asset quality. But the favourable effect resulting from the development of net write-downs of loans and provisions for guarantees and commitments will also be reflected in the income statement for the year as a whole.

Net operating profit (€ 1,146 m) in the first nine months of 2011 was up by € 221 m or 23.9% (adjusted for exchange rate move-ments +29.4%) on the same period of the previous year. The net amount of non-operating items in the income statement, which was slightly negative (– € 12 m), had to be deducted from this figure to obtain the profit before tax. The net non-operating items reflect net additions to provisions for risks and charges (– € 16 m), € 14 m less than the previous year’s figure. Net income from investments was € 6 m, compared with € 39 m in the same period of 2010. The decline reflects various factors: write-downs on the Greek govern-ment bonds held by our banking subsidiary in the Czech Republic and a subsidiary of the bank in Turkey amounted to € 91.4 m. This figure was more than offset by other items including the revaluation gain from the restructuring of the Moscow Interbank Currency Exchange (MICEX) Group, in which our Russian banking subsidiary holds an equity interest.

In the first nine months of 2011, CEE generated a profit before tax of € 1,134 m; the figure was 21.8% up on the previous year, and at constant exchange rates by +27.5%. Excluding the write-downs on Greek bonds, the year-on-year increase would have amounted to over 30%, also in euro terms. As profit before tax increased at a rate that was a multiple of the rate of change of average equity (+7.8%), return on equity before tax improved by 1.5 percentage points to 12.8%. Despite the high level of equity allocated to the CEE business segment, the region’s contribution to Bank Austria’s overall results in the first nine months of 2011 was both positive and significant in terms of value creation: Economic Value Added (marginal EVA) was € 315 m (after € 91 m in the previous year). Risk-adjusted return on risk-adjusted capital was 6.38%.

*) Including a provisioning charge of € 130 m arising from guarantees assumed by UniCredit Bank Austria. The provisioning charge at the Vienna-based CEE headquarters, which is part of the CEE Division, for the first nine months of 2011 totalled € 179 m; provisions are also made for cross-regional portfolios in commercial real estate business and structured financings.



Countries and regions in the first nine months of 2011

When interpreting the aggregate figures for the CEE business seg-ment, one should note the significant regional and structural differ-ences in terms of market size and level of economic autonomy, structure of production, cyclical features, external financial situation, and banking sector. While the economy has gained momentum in all countries, some of them – e.g. Turkey – are ahead of the cycle; other countries and country groups, such as South-East Europe, are lagging behind. Developments are moreover strongly influenced by – predominantly restrictive – local economic policy measures aimed at keeping inflation under control and preventing capital outflows, while balancing out state budgets and the balance of payments. And in the banking sector of several countries, legacy problems from the boom which preceded the financial market crisis are still having repercussions, though significant progress has been made in deal-ing with them over the past quarters. A comparison of growth rates shows that these still vary considerably from country to country within the region:

Countries and country groups

tUrkeY rUssIAcentrALeUrope1)

soUth-eAst

eUrope2)eAsterneUrope3)

ceedIvIsIon4)

Average rWAs (€ bn) 17.2 12.4 17.8 20.6 9.3 80.7Change on prev. year in % +14% +20% +7% +9% –11% +8%Change on prev. year in % at constant exchange rates +30% +23% +4% +10% –5% +13%operating income (€ m) 737 544 699 1,100 322 3,532Change on prev. year in % –11% +15% +11% +5% –4% +2%Change on prev. year in % at constant exchange rates +1% +17% +8% +6% +2% +6%

net operating profit 5) (€ m) 376 316 222 371 9 1,146Change on prev. year in % –22% +67% +10% +19% 6) +24%Change on prev. year in % at constant exchange rates –10% +72% +7% +20% +29%

1) Central Europe (CE) = Czech Republic, Slovakia, Hungary and Slovenia. / 2) Bulgaria and Romania; Croatia, Bosnia & Herzegovina and Serbia. / 3) Kazakhstan, Ukraine and Baltic states. / 4) Difference compared with total for banking subsidiaries = CEE headquarters in Vienna. / 5) Operating profit less net write-downs of loans and provisions for guarantees and commitments. / 6) Swing of € 161 m from net operating loss to net operating profit.

The bank in turkey (included at 41% using the proportionate con-solidation method) recorded very strong growth of risk-weighted assets (as the entire local banking sector): adjusted for exchange rate movements, RWAs increased by 30%; in euro terms the increase was 14%. Economic policy measures (higher minimum

reserve requirements, interest rate ceilings for credit cards, low interest rates to fend off speculative capital inflows, foreign exchange intervention, and most recently the elimination of interest payments on minimum reserves) have already affected revenues and profits, leading above all to a decline in net interest which – due to the bank’s size – also had an impact on the CEE business segment’s overall results. In Turkey, the credit cycle is far ahead of other countries; following strong economic growth in 2010 and 2011, successful debt collection activities reduced the cost of risk to nil in the past year, which means that the positive effect on the income statement took place in Turkey a year ago. The situation is now returning to normal, with a low provisioning charge. In addition, the decline in profit before tax was much more pronounced (–22%) due to the Turkish lira’s depreciation of 12.8% (comparison of nine-month averages 2011/ 2010), although at € 362 m, profit before tax accounted for almost one-third (32%) of the business segment’s overall result and remains a valuable contribution. Volume expansion in russia was even stronger, although not as steady over the medium term (RWAs up by 23% adjusted for exchange rate move-ments); revenues rose by 15% in euro terms, and net operating profit, supported by a significant decline in the provisioning charge (–67%), increased by 67% in the first nine months of 2011, the strongest growth rates in CEE. The rouble’s exchange rate against the euro hardly changed in terms of nine-month averages (–1.9%, but –5.8% Sept. 2011/year-end 2010). Profit before tax doubled to € 395 m, supported also by one-off revenues (restructuring of MICEX) included in net income from investments.

In the four central european countries (CE) volume rose by a com-bined 7% (adjusted for exchange rate movements, by 4%). Com-bined revenue growth in these mature countries reached a double-digit figure, while net write-downs of loans and provisions for guar-antees and commitments changed only slightly; the cost of risk increased in Hungary (restructuring of foreign currency loans) and Slovenia. Net operating profit improved by 10% (on an adjusted basis by 7%). Profit before tax at our banking subsidiary in Hungary fell only marginally (–6%) – despite the bank levy and additions to provisions for the early repayment and restructuring of foreign cur-rency loans – thanks to strict cost management. The banking sub-sidiary in Slovakia doubled its profit before tax. Nevertheless, the combined profit before tax of the Central European countries declined by almost one-third as a result of the write-downs on Greek bonds (– € 85 m at our banking subsidiary in the Czech Republic, which also turned in a good operating performance). With-out these three special factors, the combined profit before tax of the Central European countries would have risen by over 30%.

The performance of the banks in south-east european countries (SEE) was depressed by the decline in Romania, where revenues contracted (–11%), and net operating profit and profit before tax were down by 45%, although volume again rose more strongly and



the provisioning charge was reduced. This compared with an upswing in Croatia and in the other western Balkan countries. Our two banks in Bosnia and Herzegovina doubled their net operating profit and profit before tax. In Serbia (+40%), profit before tax in euro terms exceeded that of Romania. In the Baltic states, efforts to restore the economy to a sound footing is making good progress, and our local banking subsidiary – after a continued decline in volume – achieved a result close to the break-even point (– € 0.3 m). In the first nine months of 2011, the combined figures for the East-European banking subsidiaries in kazakhstan and Ukraine showed a weak revenue trend and a profit before tax in the first nine months of 2011 after a loss in the previous year. The swing of +€ 141 m at the level of profit before tax was prompted entirely by a decline in the provisioning charge (+€ 162 m). In calculating the total figure, account is to be taken of the net expense at the Vienna-based CEE headquarters, with a negative net result of € 148 m, down by € 42 m from the com-parative figure for the previous year.

Based on market size and market share, our banking operations in Turkey (32%), Russia (35%) and Croatia (17%) made a com-bined contribution of 84% to profit before tax generated by all CEE banks; the contribution of the three large units to the increase was lower, at 70%, given weaker growth in Turkey (pro-portions calculated without the Vienna-based CEE headquarters). But the individual performances of the other countries with a lower weight, with few exceptions, were impressive in terms of volume and profit before tax.

Reports on CEE banks turkey: In 2011, the positive macroeconomic environment continued to prevail in Turkey, despite some currency volatility. In light of the worsening global economic outlook and the beginning of a slowdown in domestic economic activity in Q3 2011, mone-tary policy was eased slightly, including a policy rate cut of 50 basis points (to 5.75%), an easing of the reserve require-ments, and daily FX auctions in order to provide liquidity to the market.

koç Financial services (KFS), the financial holding company controlling 81.8% of Yapı kredi Bank, recorded balanced growth and maintained healthy profitability in the first nine months of 2011, driven by positive fee performance, a stabilisation of net interest margins and contained costs. In the first nine months of 2011, KFS recorded consolidated net income (after minority inter-est) of 1,423 m Turkish lira (TL) and a return on equity of 21%.

Revenues were recorded at TL 4,102 m (1% y /y) on the back of lower net interest income (–6% y /y) due to the impact of regulatory pressure and competition, although this was offset by solid fee growth (10% y /y) and trading income. Continued tight cost management and efficiency initiatives resulted in contained cost growth of 6% y /y. The cost / income ratio was 45%.

Yapı Kredi maintained its position as the fourth-largest private bank by total assets of TL 115.1 bn. Lending growth (+24% loan growth since year-end 2010) was mainly driven by higher margin loan segments including general-purpose loans (47%), SME loans (28%) and mortgages (18%) on the local currency retail side and project finance loans on the foreign currency corporate side (US$ 4 bn as of September 2011). The first nine months of 2011 saw a continuation of the positive trend in asset quality, driven by stabilising non-performing loan (NPL) inflows and good results from loan collection activities. Yapı Kredi’s NPL ratio consequently stood at 3.0% (compared with 2.9% in H1 2011 and 3.4% at year-end 2010).

In terms of asset gathering, the Group recorded deposit growth of 19%, mainly driven by foreign currency deposits due to the impact of regulations and competition in TL deposits. Yapı Kredi continued to focus on further diversifying its funding sources in the first nine months of 2011. It successfully renewed its syn-dicated loan facility of US$ 1.25 bn in September 2011 with a 100% rollover ratio and improved pricing. In addition, the bank obtained new financing (US$ 410 m and € 75 m) via its Diver-sified Payment Rights Securitisation programme. In addition to a 1 billion Turkish lira bond issue in June 2011, Yapı Kredi finalised a bond issue of 150 million Turkish lira with a 1-year maturity and 9.08% cost as a first step in extending the matu-rity of this type of funding.

Yapı Kredi continued its branch expansion programme in 2011 and opened 27 new branches to reach a total of 894 branches as of the end of September 2011. Yapı Kredi also has a strong alternative delivery channel network including the fifth largest ATM network with 2,615 ATMs as well as award-winning Inter-net banking.

russia: Following slower growth in early 2011 and a recov-ery in the second quarter, the Russian banking sector displayed strong growth in Q3 2011. Total assets grew by 9.1% in Q3 2011 (compared with 0.6% in Q1 and 3.6% in Q2).



Unicredit Bank, with a significant increase in total assets of 37% in Q3 2011 compared with Q2 2011 (driven by growth in the volume of customer deposits), held 8th position among the country’s banks. The bank continued to prove its solid profitability in the first nine months of 2011 with a return on equity of 22% and a cost-income ratio of 35%. The bank shows a stable reve-nue trend with a Q3 2011 level of 7.4 bn Russian rouble (RUR), slightly above Q2 2011. Net interest income remained the main driver of revenue generation with a Q3 2011 level of RUR 5.5 bn. Net fee and commission income of RUR 1.6 bn was practically at the same level as in Q2 2011 thanks to the good performance of trade finance activities. The trading result, influenced by market opportunities, registered a strong (61%) q /q increase and came to RUR 371 m. Net write-downs of loans and provisions for guar-antees and commitments were positively influenced by a further decline in non-performing loans and a strong recovery of write-backs. The Q3 2011 net profit generated by the bank was RUR 4.3 bn, which is an improvement on the Q2 2011 result if adjusted for the one-off effect from the restructuring of invest-ments in CJSC “MICEX” (Moscow Interbank Currency Exchange). In a highly competitive environment the loan portfolio grew by 6.7% q/q. At the same time, deposit gathering performed well, with a 51% q/q growth rate that was supported mainly by corpo-rate large tickets.

croatia: ZABA Group in the first nine months of 2011 achieved a net profit of 1,120 m Croatian kuna (HRK), outper-forming the results for the same period of 2010 by HRK 285 m (+34%) and driven by 9% y /y revenue growth. Total revenues reached HRK 3,432 m, up by HRK 284 m on the figure for the first nine months of 2010 as a result of volume growth, lower funding costs, replacement bond revaluation and collection of suspended income. Cost and process efficiency was steadily improved, resulting in a cost / income ratio of 44%, which is a notable improvement compared to the 48% reported for the first nine months of 2010.

Despite a challenging economic environment, ZABA reaffirmed its leading position in the retail, private, small business and CIB busi-ness segments. Commercial activities related to real estate were well received by customers (special offers referred to as “Green Loans” showed a 195% growth of the portfolio in 2011; govern-ment-subsidised housing loans with ZABA participating in these loans to the extent of 51%). As the first bank in the market, ZABA launched a new m-zaba mobile banking application for Android

users. The “Craftsmen&Partner” programme was launched in May in cooperation with the Croatian Chamber of Trades and Crafts and its partners. Campaign-based sales of giro accounts and account packages almost doubled. More than 180,000 pri-vate customers joined our Multiplus loyalty programme launched in cooperation with the largest local retailer and telecom com-pany, contributing significantly to the increased use of credit cards.

Total loans to private customers and small businesses reached HRK 34 bn, while deposits amounted to HRK 42.8 bn. Market share in loans and deposits of private customers (25%) and of customers in the small business segment (24%) remained sta-ble. Total loans to corporate customers grew from HRK 35 bn at year-end 2010 to HRK 38.3 bn by the end of September 2011 (market share of 26.2%). Corporate deposits by the end of Sep-tember 2011 amounted to HRK 14.5 bn (market share of 25%). Financing & Advisory confirmed its position as the leading investment banking provider in South-East Europe. In the Capital Markets segment, the bank acted as Joint Lead Manager for several government bond issues and as joint bookrunner and Lead Manager of important corporate issues. Corporate Finance is engaged in a number of ongoing transactions in Croatia, Mon-tenegro, Bosnia and Herzegovina, Albania and Kosovo. Broker-age, rewarded by EMEA Finance as “Best Broker in Croatia” for 2011, maintained its strong market position on the Zagreb Stock Exchange with a 12% market share of total turnover.

In Q3 2011, revenues of Unicredit Bank czech republic were 4% higher as compared to Q2 and revenue growth of a similar scale was achieved in a y / y comparison.The bank lever-ages on consumer finance – a product segment successfully launched at the end of 2010 – and on the growing retail net-work, which is a key component of the retail expansion strategy. With much of the network expansion taking place in 2011, oper-ating expenses y / y increased nearly 17%, but despite the tem-porary pressure on the cost / income ratio, the bank has been able to maintain a favourable level of below 48%, thanks to tight cost management. The results of the bank were impacted by further writedowns on Greek bonds. Net of these writedowns, net profit for the first nine months of 2011 grew by more than 4% y /y. Customer loans went up by 8% y /y, driven by retail and corporate business. In Q3 the bank showed itself to be a leader in innovations on the market by introducing Smart bank-ing – a platform for banking via intelligent mobile phones.



Unicredit Bank slovakia actively benefited from both the positive macroeconomic environment and the gradual increase in customer loans. The bank has been steadily growing in terms of net profit since the beginning of 2011, doubling its results throughout the first nine months in a y / y comparison. The remarkable performance stems mainly from an outstanding revenue trend (+17% y /y) from growth in net interest income generated by all customer business segments, and by the trad-ing result. Expenditure was managed effectively and responsibly (+2% y /y). Loan loss provisions declined by 17% y /y due to the improved asset quality of the bank’s loan portfolio.

Unicredit Bank hungary again delivered an excellent oper-ating result in Q3 2011, despite the challenging market and regulatory environment for the banking sector and still weak domestic demand. Total interest income in the first nine months of 2011 increased by nearly 8% y /y, whilst fee income rose by 6% y /y. The special bank tax still has a negative effect on operating expenses. However, adjusted for this levy, y / y cost growth of 1.1% was well below the level of inflation as a result of the bank’s strict cost policy. Consequently, the cost / income ratio was below 50%, and the trend is improving. Net write-downs of loans and provisions for guarantees and commit-ments rose significantly in Q3 2011 due to the new FX loan early repayment programme (ERP) at preferred rates approved by the Hungarian parliament in September. A loan loss provision for the estimated FX impact of the programme, which will amount to 5.3 bn Hungarian forint (HUF) in the current year, was made in Q3 2011. Excluding ERP, however, loan loss provi-sions declined by 13% y /y. As a result, net profit for the first nine months of 2011 was HUF 13.6 bn. Net of the above-men-tioned FX effect of the ERP, net profit would have increased by 29% y /y. Lending activity on a frozen market is still sluggish, and is impacted by FX movements, while deposits fell due to the deterioration in household incomes. As a result, the net loan /deposit ratio reached 120% in September 2011.

Despite the deteriorating external environment and slowing GDP growth, Unicredit Bank slovenia achieved revenues of € 21 m in Q3 2011, corresponding to 5% growth compared to Q2 excluding a one-off payment of dividends in Q2. Interest income exceeded the Q2 level by 3%, driven by the bank’s good funding position and higher margins. Non- interest income outperformed Q2 by 14%, due to both higher fees and lower trading losses. Operating expenses increased by 6%, partly

driven by provisions for the new bank levy which was intro-duced in Slovenia in August. Consequently, the bank achieved a gross operating profit in Q3 of € 9.8 m. Net write-downs of loans and provisions for guarantees and commitments in Q3 were € 5.4 m or 13% below the level in Q2 due to a slightly improved risk situation. The bank’s net operating profit was € 4 m in Q3. In the retail segment the expansion of the branch network was continued with the opening of six additional branches since the beginning of the year, and the mobile bank-ing application has been successfully implemented, providing increased convenience for customers.

In Bosnia and herzegovina, the Group is represented by two banks – Unicredit d.d. mostar and Unicredit a.d. Banja Luka. UniCredit as a Group takes the leading market position both by total assets and in terms of total deposits, and con-firmed its position as the most profitable banking group which serves over 1.2 million customers through a network of 134 branches. In Q3 2011, net profit after tax increased impres-sively by 117% y /y thanks to a growth trend in revenues and lower loan loss provisions (down by 32% y /y). As a result of simultaneous growth in net interest income and non-interest income, total revenues grew by 13% y /y, while total expenses increased by only 1% y /y. Consequently, efficiency as expressed by the cost / income ratio improved significantly and reached a level of 61% (compared to 68% in Q3 2010). Gross operating profit therefore improved significantly, by 39% y /y.

The estimated GDP growth for 2011 in serbia has been lowered to 2% due to the adverse impact of slower export growth as a consequence of the more unfavourable global eco-nomic environment. The new IMF deal however offers protec-tion, which should result in exchange rate stability. In such an environment, Unicredit Bank serbia achieved a very good result for the first nine months of 2011 (+40% y /y), underlin-ing its leading position in terms of business performance. Reve-nues continued to improve and the proportion of non-interest income increased. Thanks to very thorough cost management measures and supported by good revenue trends, the cost /income ratio continued to improve (33%). Net profit after tax for the first nine months of 2011 amounted to about € 33 m (3.4 bn Serbian dinar, RSD). At the end of Q3 2011, total assets amounted to RSD 174 bn, representing an increase of 10% y /y mainly due to an increase in the client portfolio. The average loan /deposit ratio of 163% improved since the previous quar-



ter. A capital increase of RSD 5.75 bn took place at the begin-ning of September 2011 to further support the bank in its growth plans. Currently, the bank delivers banking services and products to about 185,000 customers through a network of 73 branches.

romania’s GDP growth is expected to pick up in Q3 2011 (1.9% y /y), partly due to a very good harvest. While industrial growth will remain the biggest GDP contributor in 2011, it is slowing down because of weaker foreign demand (+7% y /y in the first eight months of 2011). Domestic demand is picking up, with private consumption benefiting from growth in real wages and employment. In Q3 2011 Unicredit tiriac Bank (UCT) had a relatively good performance in terms of commercial business. In terms of commercial loans, UCT grew by 14% compared to year-end 2010, almost five times faster than the banking sys-tem average, while on a y / y basis the increase was 16%. Gross loans recorded impressive y / y growth in both the corporate (22%) and retail (10%) customer business segments. The development of deposits represented the focal point in terms of the balance sheet structure and development in this period, tar-geting mainly the growth in the stable part of the portfolio – SMEs, private customers and medium-sized companies. Overall, deposits increased by 4% y /y in the corporate business seg-ment, and by 8% in the retail business segment, leading to 4% growth at total bank level. The bank’s total assets increased by 7% y /y to 21.6 bn Romanian leu (RON). The NPL ratio closed at 9.5%, improving by 80 bp compared to the first nine months of 2010. The cost of risk improved y / y, decreasing by 50 bp.

Revenues declined by 10% year-on-year, to about RON 916 m, largely due to accounting adjustments related to interest accru-als from non-performing loans, the impact of statutory regula-tions and narrower margins. In the first nine months of the year, UCT maintained very strict cost management, reflected in a cost / income ratio of below 50%. Operating expenses neverthe-less rose by not quite 6%, driven mainly by regulatory changes (VAT, increase in the deposit insurance rate, statutory participa-tion in the Special Contribution Fund) and inflation. Staffing lev-els declined by almost 2% compared to year-end 2010, to about 3,000 employees. UCT is one of the most profitable banks in the market. UCT will expand its network with up to 11 new branches by the end of 2011.

In Q3 2011, Unicredit Bulbank continued to lead the mar-ket in Bulgaria, posting healthy growth in its key performance indicators with an emphasis on attracting deposits and improv-ing capitalisation. Total assets increased by 9% y /y to € 6 bn. Gross loans were up by 5% y /y to € 4.3 bn, with retail loans growing by 4.7% y /y to € 1.6 bn and corporate loans increas-ing by 5.3% to € 2.7 bn. Total deposits amounted to € 4 bn, up by 12% y /y, mainly supported by the successfully implemented and ongoing campaigns to attract deposits. In particular, corpo-rate deposits recorded a growth rate of 21% y /y to € 1.6 bn.

UniCredit Bulbank skilfully managed its operations, improving both efficiency and profitability. Total revenues were up by 8% y /y to € 243 m, supported by both net interest income and net fee and commission income. Operating costs were up by 2% y /y to € 92 m and thus the cost / income ratio improved by 2.3 percentage points to 37.9%, well below the banking sys-tem average, while net loan loss provisions grew by 3% y /y. Net income reached € 84 m, increasing by 21% y /y and accounting for about 30% of the banking system’s profits.

In Ukraine, the economy developed steadily in Q3 2011, with industrial production rising by 8.5% y /y in average terms in the first nine months of 2011. Ukraine’s inflation continued to fall in September, reaching 5.9% y /y. In September, the IMF improved its outlook for Ukraine’s GDP growth to 4.7%.

In September 2011, Ukrsotsbank changed its brand name to Unicredit Bank. Through its integration in the UniCredit brand in the context of the UEFA Champions League Trophy Tour and Euro 2012 sponsorship, the bank will be in a position to signifi-cantly strengthen recognition and brand awareness.

In Q3 2011 corporate business launched the active sale stimu-lation and client development campaign aimed at target cus-tomers in all regions. Retail business actively promoted the bank’s products also via alternative sales channels. The cus-tomer base of mobile and Internet banking users consequently grew by 53%. The amount of new loans approved for private customers increased by 65% q/q, corresponding to over 343 m Ukrainian hryvnia (UAH). SME loans grew by UAH 178 m q /q, driven by investment loans which accounted for 49% of newly issued loans. Sustained customer confidence in the bank



led to another upturn in deposits from customers by almost 16% q/q. The bank’s loan /deposit ratio therefore improved significantly to 159% (–29 percentage points q /q). With a rise of 79% q/q cor-porate deposits contributed to most of this improvement.

Unicredit Bank’s cumulated revenues totalled UAH 2.1 bn. Operat-ing expenses could be contained at a level of UAH 954 m, which allowed the bank to keep its cost / income ratio below 45% despite the implementation of the new core banking system. Profit before tax in Q3 2011 rose to UAH 374 m also on the back of lower loan loss provisions y / y. Net profit is reported at UAH 687 m and includes a positive one-off effect derived from the implementation of the new Ukrainian tax code in Q2 2011.

kazakhstan’s real GDP growth is likely to reach 7% in 2011 based on a strong H1 2011. The country is committed to continuing its prudent fiscal policy, which will give it the exceptional reputation of a country with both a current account surplus and a fiscal surplus in the coming years. At AtF Bank, the positive development of the bank’s corporate loan book in the last months of 2010 was con-firmed also in Q3 2011 with growth of 51% or about 94 bn Kazakh tenge (KZT) compared with September 2010. The loan growth is attributable mainly to the areas of natural resources, energy and transportation – core sectors of the Kazakh economy. With a sub-stantially improved corporate client base, ATF is now aggressively pushing for ancillary business, the result of which is a 13% y /y increase in corporate fees and commissions. Moreover, in Q3 2011 the bank expanded its range of products and services by supple-menting its standard products with market investment banking solu-

tions and products for its key large corporate customers. The bank’s liquidity position is supported by a continued inflow of deposits, mostly from large caps, with its loan /deposit ratio down to 103% compared with 109% in Q2 2011. Revenues in Q3 2011 reached KZT 7.9 bn, up by 28% on the Q3 2010 figure, with contributions from all revenue components.

In Q3 2011, there were continued signs of economic recovery in the three Baltic countries (Estonia, Lithuania and Latvia), especially in Estonia where GDP growth is among the fastest in Europe, driven mainly by dynamic exports. In July, Fitch Ratings upgraded Estonia’s sovereign rating to A+ with a stable outlook. In August, Standard & Poor’s raised Estonia’s sovereign rating from A to AA– with a posi-tive rating outlook. The positive trend in economic growth has been maintained in Lithuania with an impressive forecasted real GDP growth y / y of 5.2% in 2011. Fitch Rating agency recently increased its outlook rating for Lithuania to positive. A significant forecasted GDP growth of 5.2% y /y can also be observed in Latvia for 2011.

At Unicredit Bank, the positive trend in net interest income which started in the fourth quarter of 2010 continued in Q3 2011; also fee and trading income contributed to the increase of total revenues compared with Q2 2011. At the same time, the bank continued to pursue its tight cost discipline, which helped to further improve the cost / income ratio. This in turn supported gross operating profit, which was again up on the previous quarter. UniCredit Bank had a sound capital adequacy ratio of 13%. External funding was secured via institutions such as the European Investment Bank and the Nor-dic Investment Bank.



Income statement of the consolidated banking subsidiaries in CEE

(€ m)

cee BUsIness seGment 1) cZech repUBLIc sLovAkIA hUnGArY

1– 9 2011 1– 9 2010 1– 9 2011 1– 9 2010 1– 9 2011 1– 9 2010 1– 9 2011 1– 9 2010

Net interest income 2,438 2,469 197 178 64 53 171 157Net fee and commission income 896 880 91 85 21 20 75 69Net trading income 121 76 4 8 6 3 4 –3Net other operating income/expenses 77 44 1 0 0 1 3 5operating income 3,532 3,469 293 271 91 78 253 228operating costs –1,627 –1,566 –140 –114 –56 –54 –120 –109operating profit 1,905 1,902 153 156 35 24 133 119Net write-downs of loans –759 – 977 –34 –44 –8 –10 –70 –58net operating profit 1,146 925 119 112 27 14 63 62Provisions for risks and charges –16 –30 0 –1 0 0 0 –4Integration costs –2 –3 –2 –3 0 0 0 0Net income from investments 6 39 –82 1 1 0 –2 6profit before tax 1,134 931 35 110 28 14 60 64 Cost / income ratio 46.1% 45.2% 47.7% 42.3% 61.3% 69.7% 47.5% 47.7%Risk/earnings ratio 31.1% 39.6% 17.3% 24.6% 13.0% 18.8% 41.2% 36.7%

Exchange rate 24.363 25.454 Euro Euro 271.383 275.382 Appreciation/depreciation against the euro +4.5% +1.5%

(€ m)

sLovenIA BULGArIA romAnIA BALtIcs

1– 9 2011 1– 9 2010 1– 9 2011 1– 9 2010 1– 9 2011 1– 9 2010 1– 9 2011 1– 9 2010

Net interest income 47 41 172 162 140 173 12 10Net fee and commission income 17 16 63 59 43 40 0 –3Net trading income –1 –3 7 3 34 30 0 4Net other operating income/expenses 0 0 1 0 0 1 0 0operating income 63 54 243 224 218 244 12 10operating costs –31 –28 – 92 – 90 –109 –103 –10 –10operating profit 32 25 151 134 109 141 2 0Net write-downs of loans –18 –12 –63 –62 –78 –84 –2 –12net operating profit 13 13 87 72 31 57 0 –12Provisions for risks and charges 0 0 0 0 2 1 0 0Integration costs 0 0 0 0 0 0 0 0Net income from investments 0 1 6 5 0 1 0 0profit before tax 14 14 94 78 33 59 0 –12 Cost / income ratio 49.0% 52.8% 38.0% 40.2% 50.1% 42.3% 84.1% 101.2%Risk/earnings ratio 0.0% 0.0% 0.0% 0.0% –1.4% –0.6% 0.0% 0.0%

Exchange rate Euro Euro 1.956 1.956 4.207 4.186 0.708 0.708 Appreciation/depreciation against the euro +0.0% –0.5% +0.1%

1) 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.



(€ m)

tUrkeY 2) rUssIA kAZAkhstAn UkrAIne

1– 9 2011 1– 9 2010 1– 9 2011 1– 9 2010 1– 9 2011 1– 9 2010 1– 9 2011 1– 9 2010

Net interest income 414 504 420 417 110 104 157 211Net fee and commission income 270 281 111 97 –4 –28 32 33Net trading income 27 26 9 –33 14 15 1 5Net other operating income/expenses 26 23 4 –6 1 –14 –1 –1operating income 737 832 544 475 120 77 190 248operating costs –342 –356 –191 –171 –63 –69 –85 –83operating profit 395 477 354 304 57 9 105 165Net write-downs of loans –19 4 –38 –115 –79 –158 –73 –156net operating profit 376 481 316 189 –22 –149 31 9Provisions for risks and charges –16 –24 0 –1 0 0 0 0Integration costs 0 0 0 0 0 0 0 0

Net income from investments 3 7 80 8 –1 7 0 1profit before tax 362 464 395 196 –23 –143 32 10 Cost / income ratio 46.4% 42.7% 35.0% 36.1% 52.6% 88.8% 45.0% 33.5%Risk/earnings ratio 4.5% –0.8% 9.0% 27.5% 72.1% 151.4% 46.4% 74.0%

Exchange rate 2.292 1.999 40.489 39.762 205.667 193.653 11.215 10.450 Appreciation/depreciation against the euro –12.8% –1.8% –5.8% –6.8%

(€ m)

croAtIA BosnIA serBIA

1– 9 2011 1– 9 2010 1– 9 2011 1– 9 2010 1– 9 2011 1– 9 2010

Net interest income 321 282 67 56 64 46Net fee and commission income 93 100 22 22 16 12Net trading income 7 13 5 4 3 2Net other operating income/expenses 42 39 0 0 0 0operating income 463 434 94 83 83 60operating costs –205 –206 –57 –57 –27 –25operating profit 258 228 37 26 55 35Net write-downs of loans –68 –83 –10 –15 –18 –8net operating profit 190 144 27 12 37 27Provisions for risks and charges 0 –1 0 0 0 0Integration costs 0 0 0 0 0 0Net income from investments 0 1 0 1 0 0profit before tax 189 144 26 12 37 27 Cost / income ratio 44.2% 47.5% 61.0% 68.3% 33.2% 41.4%Risk/earnings ratio 0.0% 0.4% 0.4% 0.6% 0.0% 0.2%

Exchange rate 7.420 7.262 1.956 1.956 101.903 101.842 Appreciation/depreciation against the euro –2.1% 0.0% –0.1%

2) pro quota



The leading indicators, and especially the sentiment surveys, which have been deteriorating since the summer until most recently, point to weaker global economic growth in the next few months. The fourth quarter of 2011 is moreover likely to be impacted by a technical reaction to the recovery experienced by the US in the summer. The global debt crisis, stronger precautionary measures and volatile capital flows are curbing recovery. Confidence in the economy and in policies is waning, and there is now little scope left for an active economic policy. We do not however expect a return to recession. In 2012, global GDP growth is expected to maintain its 2011 level of 3.75%. Supported by the economic upturn in indus-trial countries, economic growth was limited to the early part of 2011 and subsequently stagnated. This trend will be reversed in 2012. Economic growth will again be driven by China and emerging Asia, which supports these expectations. The Us economy will slow in the fourth quarter of 2011 after the brief upturn in the summer. We expect the economic outlook for the country to improve gradu-ally in 2012. At 1.6%, GDP growth is however unusually low for a population that is growing by about 1% p.a. The Fed is therefore unlikely to depart from its nil interest rate policy before the middle of 2013. On the contrary, a further easing of monetary policy is probable (possibly a fresh round of bond purchases).

In the wake of recent surprisingly strong production numbers, our economists have raised the forecast for the euro area in the third quarter of 2011 to a still rather modest 0.2%. But the afore-mentioned negative factors will cause real GDP to contract in the fourth quarter before economic growth starts to pick up slightly in 2012. The consolidation of government budgets and the general wait-and-see approach will probably limit GDP growth to about 0.8%. In light of the subdued financial environment coupled with expectations of dwindling inflationary pressure, the ECB lowered key interest rates to 1.25% at the beginning of November. We expect another cut to 1% to follow at the turn of this year. A tightening of interest rates will not be resumed before 2013. Unconventional measures such as the full allotment of tenders (up to 12 months), the purchase of bonds (including Italian and Spanish bonds) as well as the covered bond purchase programme will be retained or even intensified. Despite S&P’s recent downgrade of US government bonds, Treasury yields will remain low given high risk aversion worldwide, until a return to normal levels in about the middle of 2013. US 10-year bond yields will probably move towards 3% in the autumn of 2012. It is likely that European benchmarks will lead the rise of their US counterparts, reaching 3% in the middle of the coming year. Currency markets will remain volatile. In the short term, we expect the US$/EUR rate to fluctuate in the range of 1.3550 to 1.3900. The euro is subsequently expected to strengthen again, rising to over 1.50 in the summer of 2012. The Swiss franc is likely to stabilise above the new 1.20 target rate.

Economic growth in Austria will continue to slow until the end of the year, mainly determined by the intensifying downward trend in foreign trade and weakening export activity of industrial companies. The domestic economy cannot offset the shortfall in foreign demand. New and expansion investment projects are being increas-ingly postponed in an environment marked by high uncertainty. Without any new impetus, and despite slightly declining inflation, consumption growth has so far been moderate as the economic slowdown is beginning to have an impact on the labour market. The absence of any external stimulus in combination with weak pros-pects for investment and consumption will lead to stagnation in the Austrian economy towards the end of 2011. If the economic envi-ronment continues to deteriorate, the fourth quarter may even see a slight decline in GDP. Given the fast pace of recovery in the first half of the year, economic growth for 2011 as a whole may be close to 3 per cent.

If efforts to implement a credible and sustainable solution based on solidarity to contain the uncertainty caused by the government debt crisis in the euro area are successful, economic recovery should continue after a dip of two or three weak quarters around the turn of the year 2011/2012. However, the need for reducing government debt will limit the scope for expansion. Economic growth in 2012 will therefore remain low, at about 1 per cent, even if the current problems are resolved.

Credit demand from companies will continue to increase slightly in the remaining part of the year, even if the less buoyant mood leads to slower growth. Among loans to private individuals, housing and construction loans are showing a relatively strong increase while consumer loans and loans to SMEs are lagging behind. Although interest rates have declined further, deposits are the most important factor for monetary wealth formation, which is characterised by a comparatively weak momentum. As uncertainty in capital markets prevents any recovery of demand for mutual funds, bond issues of banks will remain the growth segment among long-term investments.

While the recent deterioration in the global economic environ-ment was also felt in central and eastern europe, the CEE coun-tries continue to pursue sound expansion. The adverse effects transmitted via the real economy affect the regions and countries in CEE to varying degrees, depending on their foreign trade orienta-tion and production mix (from highly integrated suppliers of indus-trial products to commodity producers). Nevertheless, since the last interim report, our economists have reduced their forecasts (for CEE including CIS, without Poland, GDP-weighted) by only 0.2% for this year and by 0.5% for 2012. At rates of 4.1% (2011) and 3.4% (2012), real growth is expected to reach double or triple the figure for Western Europe. The strongest downward revisions for 2012 were made for Central Europe (–1.3 percentage points) and South-

Outlook



East Europe (–0.9 percentage points), but the forecasts remain between 2% and 2.5%. This is explained in Central Europe by the close links of countries in the region, while in SEE internal consoli-dation efforts and external financing costs are having an adverse impact before economic growth will pick up in 2012. Turkey, a country with a relatively autonomous economy, continues to be a special case: strong growth and the booming monetary cycle need to be stabilised with dampening measures. The forecasts for Russia were raised in October; Russia is the only country which is experi-encing accelerating growth in the second half of 2011 (good har-vest, declining inflation, preelection period), even if international capital transactions remain highly volatile.

In Kazakhstan, very high growth rates of 6% to 7% and a signifi-cant current account surplus should not obscure the fact that the restructuring of the banking sector will take more time. NPL ratios may now be close to their peak, at 35%, but there is still a backlog of only superficially restructured loans. With the deleveraging pro-cess which has been under way since 2007, the loan/deposit ratio has fallen from almost 200% to a level below 100%, and lending volume measured as a percentage of GDP has declined from 92% in 2007 to 52%. In Ukraine, on the other hand, the main problem is the external funding gap. Credit spreads, especially in the country’s own currency, have widened considerably, not only because of a general risk aversion: if the country continues to refuse IMF funds, the current financing requirement for 2012 can only be met at very high cost.

The second transmission channel for international crises – and the risk factor in the favourable CEE scenario – is the volatile risk expectations of international investors and further write-downs. In the past few years and quarters, the structure of capital inflows has shifted towards short-term portfolio investments, which can be with-drawn quickly in the event of financial market turbulence. Central banks have responded to this development by using intervention measures/currency reserves and preventive measures in the area of interest rates. Given the importance of international capital for the financial cycle, external shocks have an immediate and real impact. Yet the level of vulnerability is much lower than in 2008, as most countries took early steps to consolidate their budgets – at the expense of domestic demand – and reduced their current account deficits, and structurally weak countries have made use of EU assistance, IMF programmes and cofinancing arrangements.

Apart from external disturbances in the environment, and from the risks arising from external financing costs and exchange rates, we think that the high level of financial stability which has been achieved provides a sound basis for continued market growth and progressive market penetration in the banking sector. In the medium

term, we see the largest growth potential for the banking sector in the CIS region and in Turkey, followed by stable expansion in Central Europe and some lag in countries in South-East Europe, which still need to overcome the deleveraging phase in view of higher funding costs. Quite generally, and also because inflation is declining, we see a lower rate of credit expansion in the coming years (which still means double-digit growth rates in many countries) and significant growth of deposits and monetary wealth formation, leading to a sound loan/deposit ratio.

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

2009 2010 2011 2012

World (purchasing power parities) –0.8 +4.8 +3.8 +3.8USA –3.5 +3.0 +1.7 +1.6Euro area –4.2 +1.7 +1.6 +0.8… Austria –3.8 +2.3 +2.9 +1.1

Czech Republic –4.1 +2.3 +2.0 +1.6Slovakia –4.8 +4.0 +2.9 +2.8Hungary –6.7 +1.2 +1.5 +1.8Slovenia –8.0 +1.4 +1.3 +1.8central europe –5.4 +2.2 +1.9 +1.9Poland +1.7 +3.8 +4.0 +3.1Bulgaria –5.5 +0.2 +2.3 +2.6Romania –7.1 –1.3 +1.8 +2.5Croatia –6.0 –1.2 +0.2 +1.0Bosnia and Herzegovina –2.9 +0.7 +1.8 +1.5Serbia –3.5 +1.8 +2.0 +2.8Estonia –13.9 +3.1 +6.9 +2.6Latvia –17.8 –0.6 +5.2 +2.6Lithuania –14.7 +1.2 +5.2 +2.7see and Baltic states –8.0 –0.2 +2.4 +2.3Russia –7.9 +3.4 +4.3 +4.1Turkey –4.7 +8.9 +5.9 +3.2russia and turkey –6.9 +5.1 +4.8 +3.8Kazakhstan +1.2 +7.3 +7.0 +6.2Ukraine –14.8 +4.2 +4.2 +3.0kazakhstan and Ukraine –8.1 +5.5 +5.4 +4.3

CEE (with Poland, GDP-weighted) –5.9 +4.0 +4.1 +3.4CEE (without Poland, GDP-weighted) –7.0 +4.0 +4.1 +3.4CEE (Bank Austria-weighted)*) –6.2 +3.5 +3.5 +2.8

Bank Austria market (GDP-weighted) –6.6 +3.8 +4.0 +3.2Bank Austria market (Bank Austria-weighted) –5.4 +3.1 +3.3 +2.3

*) Weighted by contributions of Bank Austria’s subsidiaries to operating income in the CEE region in 2008Source: UniCredit Research. Forecasts for CEE: end of September 2011; for Russia: end of October 2011; for rest of world: 11 November 2011



Outlook for Bank Austria’s performance The interim financial statements for the first nine months of 2011 reflect significant valuation adjustments, which have a temporary impact on the sound development of operating performance in the bank’s customer business. Ahead of the major capital measure recently announced by UniCredit SpA, the carrying amounts of all units of UniCredit Group were tested for impairment and adjusted to reflect the currently prevailing profitability outlook and plan scenarios. This process resulted in impairment losses being recognised on goodwill relating especially to those banks which were acquired in past years, predominantly in times when the economy was booming, and thus at high prices.

At the level and from the consolidation perspective of Bank Austria, which acts as sub-holding company for CEE operations, the process also required the recognition of impairment losses on goodwill relat-ing to our banks in Kazakhstan and Ukraine, which were acquired about four years ago. This had a negative one-off impact of € 650 m on the income statement for the first nine months of 2011, a charge which did not result from operating activities. The bank’s operating performance in this period was strong enough to avoid a loss.

Having absorbed this charge, we can move forward in the coming years. On this basis Bank Austria’s operating performance – for which we expect a positive trend – can feed through to bottom-line profits to a larger extent again, thereby steadily strengthening the capital base. This will be necessary not least to meet the stricter reg-ulatory requirements and strengthen the risk buffers as required by supervisory authorities.

We expect operating activities to develop soundly in the coming quarters. Overall, however, the trend will move sideways. Growth will slow down in the winter months, uncertainty in the economic envi-ronment is still high and financial market volatility will prompt cus-tomers to take a cautious approach in their decisions. This means that volume in Austria will stagnate, while expanding in CEE along the current moderate growth path. Demand will accelerate in the second half of 2012, provided that the debt crisis eases.

The interest rate environment will be characterised by the global policy of low interest rates and by high and volatile credit spreads, which can ultimately have a decisive influence on business perform-ance. We think that the reduction of the provisioning charge in the past few quarters is sustainable, even if fluctuations from quarter to quarter cannot be ruled out. Net write-downs of loans in Austria have already reached a very low level. In CEE, there is still potential for restructuring, especially in those countries which previously accounted for the strong increase in the provisioning charge. Overall, the outlook for operating performance is therefore well-founded. Risks may arise from renewed panic in financial markets leading to an increase in risk premiums, possible withdrawals of capital and exchange rate disruptions.

Despite the adjustments made in the financial statements, Bank Austria will achieve a net profit for 2011 as a whole if results for the final quarter reach only average levels.

We take the view that the outlook for Bank Austria for the coming years is very promising. In Central and Eastern Europe the process of economic convergence and integration will give the region a head start in terms of growth. On this basis the monetary cycle will accel-erate. In combination with progressive modernisation and market penetration with banking products, the banking sector will continue to expand. We want to take advantage of this expansion by making targeted investments. The sooner that crisis management in the euro area succeeds in resolving the current wait-and-see attitude, the more effectively can the good fundamentals come into play again. We proceed from the assumption that the problems have been identified and the governance problems in Europe will be tackled step by step. This is of great interest for us as a systemically impor-tant institution as the business model of UniCredit Group builds on the European idea.

Consolidated Financial Statements in accordance with IFRSs


of the Bank Austria Group for the first nine months of 2011

Statement of Comprehensive Income

Income statement (€ m)

1 Jan.–30 Sept. 2011

1 Jan.–30 Sept. 2010

Interest income and similar revenues 6,427 6,301Interest expense and similar charges –3,052 –2,900net interest margin 3,376 3,401Fee and commission income 1,776 1,827Fee and commission expense –375 –348net fees and commissions 1,401 1,480Dividend income and similar revenue 26 17Gains and losses on financial assets and liabilities held for trading 169 268Fair value adjustments in hedge accounting –1 –14Gains and losses on disposal of: 142 27

a) loans 2 –11b) available-for-sale financial assets 140 38c) held-to-maturity investments – –d) financial liabilities – –

Gains and losses on financial assets / liabilities at fair value through profit or loss 23 22Operating incOme 5,137 5,201Impairment losses on: –1,349 –1,301

a) loans –1,044 –1,297b) available-for-sale financial assets –193 2c) held-to-maturity investments –119 –d) other financial assets 7 –6

net income from financial activities 3,788 3,900Premiums earned (net) 94 84Other income (net) from insurance activities –74 –73net income from financial and insurance activities 3,808 3,911Administrative costs: –2,708 –2,550

a) staff expense –1,513 –1,441b) other administrative expense –1,195 –1,109

Provisions for risks and charges –131 –103Impairment /write-backs on property, plant and equipment –145 –154Impairment /write-backs on intangible assets –105 –84Other net operating income 124 127Operating cOStS –2,965 –2,763Profit (loss) of associates 150 95Gains and losses on tangible and intangible assets measured at fair value – –1Impairment of goodwill –705 –170Gains and losses on disposal of investments 1 22tOtal prOfit Or lOSS befOre tax frOm cOntinuing OperatiOnS 289 1,094Tax expense (income) related to profit or loss from continuing operations –244 –296net prOfit 45 798Attributable to:Owners of the parent company 4 761Non-controlling interests 41 38Earnings per share (in €, basic and diluted) 0.03 4.51



Other comprehensive income (€ m)

1 Jan.–30 Sept. 2011

1 Jan.–30 Sept. 2010

Gains/ losses on assets held for sale (available-for-sale reserve) 367 131Gains / losses on cash flow hedges (cash flow hedge reserve) 165 121Changes at companies accounted for under the equity method 10 17Foreign currency translation – exchange differences –654 454Foreign currency translation relating to assets held for sale – –Actuarial gains / losses on defined-benefit plans – –Taxes on items directly recognised in equity –127 –61Other changes 52 57recognised directly in equity –188 718net profit 45 798tOtal Of incOme and expenSeS recOgniSed in the repOrting periOd –143 1,516Attributable to:Owners of the parent company –176 1,473Non-controlling interests 33 44

Taxes on items directly recognised in equity (€ m)

1 Jan.–30 Sept. 2011

1 Jan.–30 Sept. 2010

Gains/ losses on assets held for sale (available-for-sale reserve) –86 –32Gains / losses on cash flow hedges (cash flow hedge reserve) –41 –28taxeS On itemS directly recOgniSed in equity –127 –61



of the Bank Austria Group at 30 September 2011

Statement of Financial Position

Assets (€ m)

30 Sept. 2011 31 dec. 2010

Cash and cash balances 2,640 3,030Financial assets held for trading 3,259 4,304Financial assets at fair value through profit or loss 218 304Available-for-sale financial assets 14,731 17,544Held-to-maturity investments 3,569 4,446Loans and receivables with banks 27,617 19,749Loans and receivables with customers 131,125 130,093Hedging derivatives 4,007 2,449Changes in fair value of portfolio hedged items (+/–) 43 44Investments in associates and joint ventures 2,567 2,518Insurance reserves attributable to reinsurers 1 –Property, plant and equipment 2,619 2,553

of which held for investment 732 479Intangible assets 2,831 3,751

of which goodwill 2,384 3,225Tax assets 1,266 1,254

a) current tax assets 286 248b) deferred tax assets 980 1,006

Non-current assets and disposal groups classified as held for sale 26 2Other assets 1,148 1,008tOtal aSSetS 197,668 193,049

Liabilities and equity (€ m)

30 Sept. 2011 31 dec. 2010

Deposits from banks 31,963 33,130Deposits from customers 103,209 100,284Debt securities in issue 30,610 27,555Financial liabilities held for trading 2,653 2,448Financial liabilities at fair value through profit or loss 1,264 1,651Hedging derivatives 2,480 2,909Changes in fair value of portfolio hedged items (+/–) – –Tax liabilities 664 543

a) current tax liabilities 126 126b) deferred tax liabilities 538 417

Liabilities included in disposal groups classified as held for sale – –Other liabilities 3,039 2,573Provisions for risks and charges 4,341 4,297

a) post-retirement benefit obligations 3,812 3,791b) other provisions 528 506

Insurance reserves 161 183Equity 17,285 17,476

of which non-controlling interests (+/–) 529 546tOtal liabilitieS and equity 197,668 193,049



Statement of Changes in Equity

(€ m)

Sub- Scribed capital

capital reSerVeS

retained earningS

fOreign currency

tranSlatiOn

reSerVeS in accOrdance With iaS 391)

actuarial lOSSeS in

accOrdance With iaS 19

Share- hOlderS’

equity

nOn-cOn-trOlling

intereStS equity

as at 1 January 2010 1,469 5,325 9,295 –1,727 148 –660 13,849 539 14,388Capital increase 212 1,788 2,000 2,000Transaction costs of capital increase –20 –20 –20Changes in the group of consolidated companies 1 1Shares in controlling companies –1 –1 –1Recognised income and expenses 831 452 190 1,473 44 1,516Dividend paid –24 –24aS at 30 September 2010 1,681 7,092 10,125 –1,275 337 –660 17,301 559 17,861

1) Reserves in accordance with IAS 39 1 Jan. 2010 30 Sept. 2010 Cash flow hedge reserve 62 179 Available-for-sale reserve 86 158 Total 148 337

Sub- Scribed capital

capital reSerVeS

retained earningS

fOreign currency

tranSlatiOn

reSerVeS in accOrdance With iaS 392)

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 –29 –29Shares in controlling companies 1 1 1Recognised income and expenses 66 –648 406 –176 33 –143Dividend paid –21 –21aS at 30 September 2011 1,681 7,098 10,187 –1,982 517 –746 16,756 529 17,285

2) Reserves in accordance with IAS 39 1 Jan. 20113) 30 Sept. 2011 Cash flow hedge reserve 81 205 Available-for-sale reserve 30 312 Total 111 517

3) Allocation restated to ensure full comparability with 30 Sept. 2011.




Statement of Cash Flows


(€ m)

1 Jan.– 30 Sept. 2011

1 Jan.– 30 Sept. 2010

caSh and caSh equiValentS at end Of preViOuS periOd 3,030 3,244Cash flows from operating activities 1,193 –3,747Cash flows from investing activities –1,576 1,262Cash flows from financing activities 22 1,624Effects of exchange rate changes –29 59caSh and caSh equiValentS at end Of periOd 2,640 2,442


Notes to the Consolidated Financial Statements

Basis for the preparation of the financial statementsThe consolidated financial statements of the Bank Austria Group for the first nine months of 2011 (1 January 2011 to 30 September 2011) are based on the financial statements of UniCredit Bank Austria AG and its subsidiaries. They have been prepared in euro, the Group currency.

These consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (IFRSs), with IAS 34 Interim Financial Reporting being applied. Unless indicated otherwise, all figures are in millions of euros (€).

The consolidated financial statements of the Bank Austria Group for the first nine months of 2011 have not been audited. They include the statement of comprehensive income, the statement of financial position, the statement of changes in equity, the statement of cash flows, segment reporting and other financial information.

Application of amended and new IASs and IFRSs

Effects arising from changes in accounting methodsFinancial reporting standards applied for the first timeSince 1 January 2011, the revised version of IAS 24 Related Party Disclosures and improvements to IFRSs 2010 which are of relevance to the Group have been applied for the first time. The application of these financial reporting standards had no material effect on the consolidated financial statements.

New financial reporting standardsThe amendments issued by the IASB (International Accounting Standards Board) in the first half of 2011 have not been applied in the Group because they are effective for financial years beginning on or after 1 January 2012 or 1 January 2013. The Group is currently examining the possible effects of the implementation of the standards on the consolidated financial statements.

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.

As at 1 August 2011, bonds included in “available-for-sale financial assets” were reclassified into “loans and receivables with banks” in accordance with IAS 39.50E. These reclassified bonds are intended to be held to maturity.

Regardless of this fact, the following disclosure table shows the effects as at 30 September 2011 of reclassification by item in the statement of financial position and in the income statement.

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

accOunting pOrtfOliO befOre reclaS-SificatiOn

accOunting pOrtfOliO after reclaSSificatiOn

carrying amOunt

aS at 30 Sept.

2011

fair Value aS at

30 Sept. 2011

incOme/expenSeS abSent reclaSSificatiOn

(befOre taxeS)

incOme/expenSeS recOgniSed during the periOd (befOre taxeS)

typeS Of inStrumentSfrOm

meaSurement OtherfrOm

meaSurement Other

a. debt securities –6,077 –5,685 –248 80 – 66HFT AFS –3 –3 – – – –HFT HTM –42 –44 –2 2 – 2HFT Loans to banks – – – – – –HFT Loans to customers –1,125 – 981 4 52 – 35AFS Loans to banks –4,907 –4,657 –250 25 – 29AFS Loans to customers – – – – – –

b. equity instruments – – – – – –c. loans – – – – – –d. units in investment funds – – – – – –tOtal –6,077 –5,685 –248 80 – 66



Notes (CoNTINuEd)

Impairment testFor CEE subsidiaries, goodwill allocated to each cash-generating unit was also tested for impairment in Bank Austria as at 30 September 2011. Performance trends which were below the original assumptions used for planning purposes required the recognition of an impairment loss of € 350 m on goodwill related to JSC ATF Bank in Kazakhstan and the recognition of an impairment loss of € 300 m on goodwill related to PJSC Ukrsotsbank in Ukraine as at 30 September 2011. Impairment losses on goodwill relating to UniCredit Securities International Limited Cyprus and Closed Joint Stock Company UniCredit Securities in Russia in the amounts of € 42 m and € 5 m, respectively, were already recognised as at 30 June 2011.

Group of consolidated companies and changes in the group of consolidated companies of the Bank Austria Group in the first nine months of 2011Consolidated companies

number

Opening balance 124additions 10

Newly established companies 4Companies newly added to the group of consolidated companies 5Acquired companies 1

disposals 4Companies sold or liquidated 2Mergers 2

Other changes*) 4clOSing balance 134

*) These changes relate to companies which were previously included in a sub-group and are now reported separately.

Companies accounted for under the proportionate consolidation methodnumber

Opening balance 17Additions –Disposals –Other changes*) 1clOSing balance 18

*) These changes relate to companies which were previously included in a sub-group and are now reported separately.

Companies accounted for under the equity methodnumber

Opening balance 25additions 10

Newly established companies –Newly added companies 10

disposals 3clOSing balance 32



AdditionsConsolidated companiesname Of cOmpany dOmicile additiOn aS at

UCTAM RK Limited Liability Company *) Almaty 1 January 2011UCTAM Ukraine LLC *) Kiev 1 January 2011UniCredit Turn-Around Management GmbH *) Vienna 1 January 2011VIENNA DC Bauträger GmbH Vienna 1 January 2011VIENNA DC Tower 1 Liegenschaftsbesitz GmbH Vienna 1 January 2011VIENNA DC Tower 2 Liegenschaftsbesitz GmbH Vienna 1 January 2011Center Heinrich-Collin-Straße 1 Vermietungs GmbH u. Co KG Vienna 30 June 2011DC elektronische Zahlungssysteme GmbH Vienna 30 June 2011UCTAM RO S.R.L. *) Bucharest 30 June 2011Europa Investment Fund Management Budapest 1 September 2011

*) 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.

Companies accounted for under the equity methodname Of cOmpany dOmicile additiOn aS at

BA GebäudevermietungsgmbH Vienna 30 June 2011Cash Service Company AD Sofia 30 June 2011Kapital-Beteiligungs Aktiengesellschaft Vienna 30 June 2011MARINA CITY Entwicklungs GmbH Vienna 30 June 2011MARINA TOWER Holding GmbH Vienna 30 June 2011Wiener Kreditbürgschaftsgesellschaft m.b.H. Vienna 30 June 2011SP Projektentwicklung Schönefeld GmbH & Co KG Stuttgart 30 September 2011V.A. Holding GmbH Vienna 30 September 2011UNI Gebäudemanagement GmbH Linz 30 September 2011Österreichische Wertpapierdaten Service GmbH Vienna 30 September 2011

Companies newly added to those accounted for under the equity method did not meet the materiality criterion before 2011.

disposalsConsolidated companiesname Of cOmpany dOmicile diSpOSal aS at

Bank Austria Global Information Services GmbH Vienna 30 June 2011ZAO IMB Leasing Moscow 31 August 2011

Companies accounted for under the equity methodname Of cOmpany dOmicile diSpOSal aS at

RCG Holding LLC (previously Ramius LLC) New York 31 May 2011UniCredit Business Partner SCPA Cologno Monzese 31 May 2011Credanti Holdings Limited Nicosia 31 August 2011

Mergersname Of merged cOmpany dOmicile name Of abSOrbed cOmpany dOmicile merger aS at

UniCredit Factoring Penzügyi Szolgoltato Zrt. Budapest UniCredit Bank Hungary Zrt. Budapest 1 January 2011Teledata Consulting und Systemmanagement GesmbH Vienna

Treuconsult Beteiligungsgesellschaft m.b.H. Vienna 14 July 2011

Notes (CoNTINuEd)



Notes to the income statement

Interest income/ Interest expense

Interest expense and similar charges (€ m)

1 Jan.–30 Sept. 20111 Jan.–

30 Sept. 2010

depOSitS SecuritieSOther

tranSactiOnS tOtal tOtal

Deposits from central banks –1 X – –1 –2Deposits from banks –591 X – –591 –527Deposits from customers –1,631 X – –1,631 –1,595Debt securities in issue X –685 – –685 –598Financial liabilities held for trading – – –45 –46 –118Financial liabilities at fair value through profit or loss – –23 – –23 –20Other liabilities X X –5 –5 –2Hedging derivatives X X –71 –71 –37tOtal –2,222 –708 –121 –3,052 –2,900

Interest income and similar revenues (€ m)

1 Jan.–30 Sept. 20111 Jan.–

30 Sept. 2010

debt SecuritieS lOanSOther

tranSactiOnS tOtal tOtal

Financial assets held for trading 44 – 71 115 180Financial assets at fair value through profit or loss 4 – – 4 6Available-for-sale financial assets 520 – – 520 365Held-to-maturity investments 172 – – 172 230Loans and receivables with banks 32 249 – 281 217Loans and receivables with customers 47 4,916 – 4,963 4,876Hedging derivatives X X 368 368 425Other assets X X 3 3 3tOtal 819 5,166 442 6,427 6,301



Notes to the income statement (CoNTINuEd)

Fee and commission income (€ m)

1 Jan.–30 Sept. 2011

1 Jan.–30 Sept. 2010

guarantees given 156 151credit derivatives 4 3management, brokerage and consultancy services: 575 617

securities trading 36 56currency trading 185 193portfolio management 128 109custody and administration of securities 79 89custodian bank 45 43placement of securities 20 20reception and transmission of orders 5 7advisory services 17 14distribution of third party services 60 87

collection and payment services 618 575Securitisation servicing – –factoring 12 27tax collection services – –management of multilateral trading facilities – –management of current accounts 162 157Other services 248 298tOtal 1,776 1,827

Fee and commission expense (€ m)

1 Jan.–30 Sept. 2011

1 Jan.–30 Sept. 2010

guarantees received –57 –27credit derivatives –20 –29management, brokerage and consultancy services: –83 –89

trading in financial instruments –5 –7currency trading –1 –1portfolio management –16 –16custody and administration of securities –37 –40placement of financial instruments –1 –1off-site distribution of financial instruments, products and services –23 –23

collection and payment services –183 –166Other services –32 –38tOtal –375 –348

Fee and commission income/Fee and commission expense

(€ m)

1 Jan.–30 Sept. 2011 1 Jan.–30 Sept. 2010

diVidendSincOme frOm unitS in

inVeStment fundS diVidendSincOme frOm unitS in

inVeStment fundS

Financial assets held for trading 1 – – –Available-for-sale financial assets 19 2 12 1Financial assets at fair value through profit or loss – – – –Investments 4 X 3 XtOtal 24 2 15 2

dividend income and similar revenue




Gains and losses on financial assets and liabilities held for trading(€ m)

1 Jan.–30 Sept. 20111 Jan.–

30 Sept. 2010unrealiSed

prOfitSrealiSed

prOfitSunrealiSed

lOSSeSrealiSed

lOSSeS net prOfit net prOfit

financial assets held for trading 22 271 – 9 –299 –15 342Debt securities 3 31 –8 –14 13 98Equity instruments – 14 –1 –14 – 2Units in investment funds – – – – – –Loans – – – – – –Other 19 226 – –272 –28 242

financial liabilities held for trading – 2 –3 – –2 –10Debt securities – – – – – –Deposits – – – – – –Other – 2 –3 – –2 –10

Other financial assets and liabilities: exchange differences x x x x 298 97derivatives 488 803 –473 –708 –112 –161

Financial derivatives 486 803 –383 –708 –23 –142on debt securities and interest rates 423 782 –335 –687 184 –30on equity securities and share indices 43 7 –29 –5 16 –22on currency and gold X X X X –222 –89other 20 14 –19 –16 – –1

Credit derivatives 1 – – 91 – – 90 –19tOtal 510 1,076 –485 –1,007 169 268

Fair value adjustments in hedge accounting (€ m)

1 Jan.–30 Sept. 2011

1 Jan.–30 Sept. 2010

gains on:Fair value hedging instruments 11 33Hedged asset items (in fair value hedge relationship) 12 6Hedged liability items (in fair value hedge relationship) – –Cash-flow hedging derivatives – –total gains on hedging activities 23 39losses on:Fair value hedging instruments –16 –39Hedged asset items (in fair value hedge relationship) – –6Hedged liability items (in fair value hedge relationship) –7 –7Cash-flow hedging derivatives – –1total losses on hedging activities –23 –52net hedging reSult –1 –14




(€ m)

1 Jan.–30 Sept. 2011 1 Jan.–30 Sept. 2010

gainS lOSSeS net prOfit gainS lOSSeS net prOfit

financial assetsLoans and receivables with banks – – – – – –Loans and receivables with customers 2 – 2 9 –20 –11Available-for-sale financial assets 214 –73 140 49 –11 38

Debt securities 83 –73 10 22 –11 11Equity instruments 127 –1 126 27 –1 27Units in investment funds 3 – 3 – – –Loans – – – – – –

Held-to-maturity investments – – – – – –tOtal aSSetS 216 –74 142 58 –31 27

financial liabilitiesDeposits from banks – – – – – –Deposits from customers – – – – – –Debt securities in issue – – – – – –tOtal liabilitieS – – – – – –

tOtal 216 –74 142 58 –31 27

Gains and losses on disposals / repurchases

Net change in financial assets and liabilities at fair value through profit or loss

(€ m)

1 Jan.–30 Sept. 20111 Jan.–

30 Sept. 2010

unrealiSed prOfitS

realiSed prOfitS

unrealiSed lOSSeS

realiSed lOSSeS net prOfit net prOfit

financial assets 7 6 –8 – 5 33Debt securities 1 1 –3 – –2 4Equity instruments – – – – – –Units in investment funds 7 6 –5 – 7 30Loans – – – – – –

financial liabilities 105 5 –5 –2 103 –8Debt securities 105 5 –5 –2 103 –8Deposits from banks – – – – – –Deposits from customers – – – – – –

financial assets and liabilities in foreign currency: exchange differences x x x x – –credit and financial derivatives 23 2 –106 –5 –85 –4tOtal 136 14 –119 –8 23 22



Impairment lossesImpairment losses on loans and receivables (€ m)

1 Jan.–30 Sept. 20111 Jan.–

30 Sept. 2010

Write-dOWnS Write-bacKS

Specific

Write-OffS Other pOrtfOliO Specific pOrtfOliO tOtal tOtal

Loans and receivables with banks – – – – – – 7Loans and receivables with customers –26 –1,573 –45 485 116 –1,044 –1,304tOtal –26 –1,574 –45 485 116 –1,044 –1,297

Impairment losses on other financial transactions (€ m)

1 Jan.–30 Sept. 20111 Jan.–

30 Sept. 2010


Specific


Guarantees given – –16 –1 13 8 4 –3Credit derivatives – – – – – – –Commitments to disburse funds – –7 –1 8 2 3 –2Other transactions – – – – – – –1tOtal – –23 –2 22 11 7 –6

Impairment losses on available-for-sale financial assets (€ m)

1 Jan.–30 Sept. 20111 Jan.–

30 Sept. 2010


Specific

Write-OffS Other Specific tOtal tOtal

Debt securities –104 –86 1 –189 2Equity instruments – –2 X –2 –2Units in investment funds –2 – – –2 2Loans to banks – – – – –Loans to customers – – – – –tOtal –106 –88 1 –193 2


Impairment losses on held-to-maturity investments (€ m)

1 Jan.–30 Sept. 20111 Jan.–

30 Sept. 2010


Specific


Debt securities –112 –7 – – – –119 –Loans to banks – – – – – – –Loans to customers – – – – – – –tOtal –112 –7 – – – –119 –




(€ m)

1 Jan.–30 Sept. 20111 Jan.–

30 Sept. 2010

prOViSiOnSreallOcatiOn

SurpluS tOtal tOtal

Other provisionsLegal disputes –108 8 –100 –71Staff costs – – – –Other –51 20 –31 –32tOtal –159 28 –131 –103

Figures for the previous year adjusted to changes in presentation.

Net provisions for risks and charges

(€ m)

1 Jan.–30 Sept. 2011

1 Jan.–30 Sept. 2010

indirect taxes and duties –106 –52miscellaneous costs and expenses –1,089 –1,057

Advertising, marketing and communication – 96 –86Expenses related to credit risk –22 –25Expenses related to personnel –45 –42Information and communication technology expenses –292 –286Consulting and professional services –53 –36Real estate expenses –249 –246Other functioning costs –332 –336

tOtal –1,195 –1,109

other administrative expenses

(€ m)

1 Jan.–30 Sept. 2011

1 Jan.–30 Sept. 2010

employees –1,478 –1,413Wages and salaries –1,064 –1,029Social charges –219 –207Severance pay – –Social security costs – –36Allocation to employee severance pay provision – –Provision for retirement payments and similar provisions –189 –182Payments to external pension funds –26 –23Costs related to share-based payments –7 –1Other employee benefits –76 –39Recovery of compensation*) 103 104

Others –35 –27tOtal –1,513 –1,441

*) This includes recovery of staff costs relating to Bank Austria employees who are not active within the Group.

Payroll




Other operating expenses (€ m)

1 Jan.–30 Sept. 2011

1 Jan.–30 Sept. 2010

Costs for operating leases – –Reclassification of gains / losses associated with cash flow hedges of non-financial assets or liabilities from equity to profit or loss (IAS 39, paragraph 98a) – –Non-deductible tax and other fiscal charges –1 –1Write-downs on improvements of goods owned by third parties –1 –1Costs related to the specific service of financial leasing – –Other –71 –73tOtal Other Operating expenSeS –73 –75

other net operating income

Other operating income (€ m)

1 Jan.–30 Sept. 2011

1 Jan.–30 Sept. 2010

recovery of costs 1 1Other income 195 201

Revenue from administrative services 72 92Reclassification of valuation reserve relating to cash-flow hedging of non-financial assets / liabilities – –Revenues from rentals of real estate investments (net of operating direct costs) 14 12Revenues from operating leases 2 2Recovery of miscellaneous costs paid in previous years 2 2Revenues from finance lease activities – –Others 106 94

tOtal Other Operating incOme 197 202

Other net Operating incOme 124 127

(€ m)

1 Jan.–30 Sept. 20111 Jan.–

30 Sept. 2010

depreciatiOnimpairment

lOSSeS Write-bacKS net prOfit net prOfit

property, plant and equipmentOwned –143 –2 1 –144 –153

used in the business –140 –1 1 –141 –148held for investment –3 –1 – –4 –5

finance lease – – – – –1used in the business – – – – –1held for investment – – – – –

tOtal –143 –2 1 –145 –154

Impairment on property, plant and equipment

(€ m)

1 Jan.–30 Sept. 20111 Jan.–

30 Sept. 2010

amOrtiSatiOnimpairment

lOSSeS Write-bacKS net prOfit net prOfit

intangible assetsOwned –79 –26 – –105 –84

generated internally by the company –4 – – –4 –4other –75 –26 – –101 –79

finance leases – – – – –tOtal –79 –26 – –105 –84

Impairment on intangible assets



(€ m)

1 Jan.–

30 Sept. 20111 Jan.–

30 Sept. 2010

Jointly owned companies – equityIncome 2 –Expense – –net profit 2 –

companies subject to significant influenceIncome 154 109Expense –6 –14net profit 148 95

tOtal 150 95

Profit (Loss) of associates

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 (231.2 million shares). Earnings per share for the first nine months of 2011 were € 0.02 (comparative figure for the same period of the previous year: € 3.38, based on 224.7 million shares).

(€ m)

1 Jan.–

30 Sept. 20111 Jan.–

30 Sept. 2010

propertyGains on disposal 12 8Losses on disposal –1 –0Other assetsGains on disposal 2 17Losses on disposal –13 –2tOtal 1 22

Gains and losses on disposal of investments




Financial assets held for trading (€ m)

30 Sept. 2011 31 dec. 2010

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) 340 539 50 929 625 1,246 15 1,886Debt securities 320 538 49 908 604 1,245 14 1,863

Structured securities 7 – – 7 11 – – 11Other debt securities 313 538 49 901 593 1,245 14 1,852

Equity instruments 11 – 1 11 9 1 1 11Units in investment funds 9 – – 9 11 1 – 11Loans 1 – – 1 – – – –

Reverse repos – – – – – – – –Other 1 – – 1 – – – –

derivative instruments 1 2,308 21 2,330 1 2,378 39 2,418Financial derivatives 1 2,305 19 2,325 1 2,374 39 2,414

Trading 1 2,305 19 2,325 1 2,374 39 2,414Related to fair value option – – – – – – – –Other – – – – – – – –

Credit derivatives – 3 2 5 – 4 – 4Trading – 3 2 5 – 4 – 4Related to fair value option – – – – – – – –Other – – – – – – – –

tOtal 341 2,847 71 3,259 626 3,625 54 4,304

Notes to the statement of financial position

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 struc-tures with embedded derivatives.

(€ m)

30 Sept. 2011 31 dec. 2010

fair Value leVel 1

fair Value leVel 2


fair Value leVel 1

fair Value leVel 2


Debt securities 11 46 36 92 12 73 46 131Structured securities – – – – – – – –Other debt securities 11 46 36 92 12 73 46 131

Equity instruments – – – – 15 – – 15Units in investment funds 20 – 106 126 – – 157 158Loans – – – – – – – –

Structured – – – – – – – –Other – – – – – – – –

tOtal 31 46 142 218 27 73 204 304



Notes to the statement of financial position (CoNTINuEd)

Available-for-sale financial assets (€ m)

30 Sept. 2011 31 dec. 2010

fair Value leVel 1

fair Value leVel 2


fair Value leVel 1

fair Value leVel 2


Debt securities 5,037 7,338 1,437 13,811 4,844 10,441 1,606 16,892Structured securities – – 419 419 – 1 419 420Other 5,037 7,338 1,018 13,392 4,844 10,440 1,187 16,472

Equity instruments 52 23 616 691 53 113 295 461Measured at fair value 52 23 582 657 53 113 256 421Carried at cost – – 34 34 – – 40 40

Units in investment funds 29 93 106 228 11 99 81 191Loans – – – – – – – –tOtal 5,118 7,454 2,159 14,731 4,908 10,654 1,982 17,544

Held-to-maturity investments (€ m)

30 Sept. 2011 31 dec. 2010

bOOK Valuefair Value

leVel 1fair Value

leVel 2fair Value

leVel 3 bOOK Valuefair Value

leVel 1fair Value

leVel 2fair Value

leVel 3

Debt securities 3,569 2,534 1,092 206 4,446 2,896 1,543 180Structured securities – – – – – – – –Other securities 3,569 2,534 1,092 206 4,446 2,896 1,543 180

Loans – – – – – – – –tOtal 3,569 2,534 1,092 206 4,446 2,896 1,543 180

Loans and receivables with banks (€ m)

30 Sept. 2011 31 dec. 2010

loans to central banks 5,610 6,155Time deposits 504 975Compulsory reserves 4,883 4,511Reverse repos 155 628Other 68 42

loans to banks 22,007 13,594Current accounts and demand deposits 3,416 3,527Time deposits 8,966 6,569Other loans 3,715 3,498

Reverse repos 1,359 951Finance leases – –Other 2,356 2,547

Debt securities 5,910 –Structured – –Other 5,910 –

tOtal (carrying amOunt) 27,617 19,749tOtal (fair Value) 27,465 19,836Loan loss provisions deducted from loans and receivables 49 61




Loans and receivables with customers

Property, plant and equipment (€ m)

30 Sept. 2011 31 dec. 2010

assets for operational use 1,887 2,074Owned 1,841 2,025

Land 203 199Buildings 1,279 1,393Office furniture and fittings 137 147Electronic systems 139 180Others 83 105

leased 46 49Land – –Buildings 45 48Office furniture and fittings – –Electronic systems – –Others 1 1

held-for-investment assets 732 479Owned 732 479

Land 284 243Buildings 448 237

leased – –Land – –Buildings – –

tOtal 2,619 2,553

(€ m)

30 Sept. 2011 31 dec. 2010

perfOrming impaired tOtal perfOrming impaired tOtal

Current accounts 12,446 99 12,545 11,764 325 12,089Reverse repos 180 – 180 385 – 385Mortgages 23,188 1,961 25,150 23,056 1,695 24,751Credit cards and personal loans, including wage assignment loans 8,696 141 8,837 8,703 154 8,856Finance leases 413 16 429 363 24 387Factoring 976 6 982 997 8 1,005Other transactions 76,710 5,014 81,724 76,694 4,167 80,861Debt securities 1,253 24 1,278 1,694 65 1,759

Structured securities – – – – – –Other debt securities 1,253 24 1,278 1,694 65 1,759

tOtal (carrying amOunt) 123,863 7,262 131,125 123,655 6,438 130,093tOtal (fair Value) 123,824 7,252 131,076 124,477 6,391 130,868Loan loss provisions deducted from loans and receivables 760 6,793 7,554 896 6,040 6,936

Hedging derivatives (€ m)

30 Sept. 2011 31 dec. 2010

fair Value leVel 1

fair Value leVel 2


fair Value leVel 1

fair Value leVel 2


financial derivatives – 4,005 2 4,007 – 2,448 1 2,449Fair value – 706 – 706 – 495 – 495Cash flows – 3,300 2 3,301 – 1,953 1 1,954Net investment in foreign subsidiaries – – – – – – – –

credit derivatives – – – – – – – –Fair value – – – – – – – –Cash flows – – – – – – – –

tOtal – 4,005 2 4,007 – 2,448 1 2,449




Intangible assets (€ m)

30 Sept. 2011 31 dec. 2010

goodwill 2,384 3,225Other intangible assets 447 526

Assets carried at cost 447 526Intangible assets generated internally 33 39Other assets 414 487

Assets valued at fair value – –Intangible assets generated internally – –Other assets – –

tOtal 2,831 3,751

Non-current assets and disposal groups classified as held for sale(€ m)

30 Sept. 2011 31 dec. 2010

individual assetsFinancial assets – –Equity investments – –Property, plant and equipment 26 2Intangible assets – –Other non-current assets – –total 26 2

asset groups classified as held for saleFinancial assets held for trading – –Financial assets at fair value through profit or loss – –Available-for-sale financial assets – –Held-to-maturity investments – –Loans and receivables with banks – –Loans and receivables with customers – –Equity investments – –Property, plant and equipment – –Intangible assets – –Other assets – –total – –

aSSetS 26 2

deposits from banks(€ m)

30 Sept. 2011 31 dec. 2010

deposits from central banks 477 757deposits from banks 31,486 32,373

Current accounts and demand deposits 3,355 3,447Time deposits 11,458 12,809Loans 16,596 16,002

Reverse repos 1,666 967Other 14,930 15,034

Liabilities in respect of commitments to repurchase treasury shares – –Other liabilities 76 115

tOtal 31,963 33,130fair Value 32,370 33,782




deposits from customers(€ m)

30 Sept. 2011 31 dec. 2010

Current accounts and demand deposits 43,430 41,842Time deposits 54,878 51,943Loans 412 893

Reverse repos 291 590Other 121 302

Liabilities in respect of commitments to repurchase treasury shares 595 565Other liabilities 3,894 5,042tOtal 103,209 100,284fair Value 104,035 100,762

debt securities in issue(€ m)

30 Sept. 2011 31 dec. 2010

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 29,115 1,265 26,374 776 24,913 1,094 23,305 390

Structured 181 – – 181 130 – – 130Other 28,934 1,265 26,374 594 24,783 1,094 23,305 261

Other securities 1,495 5 638 1,230 2,642 23 1,498 1,119Structured 5 5 – – 23 23 – –Other 1,490 – 638 1,230 2,620 – 1,498 1,119

tOtal 30,610 1,271 27,012 2,006 27,555 1,117 24,803 1,510

Financial liabilities held for trading (€ m)

30 Sept. 2011 31 dec. 2010

fair Value leVel 1

fair Value leVel 2


fair Value leVel 1

fair Value leVel 2


financial liabilities 19 3 – 22 9 30 – 39deposits from banks 1 – – 1 – – – –deposits from customers 18 3 – 21 9 30 – 39debt securities – – – – – – – –

Bonds – – – – – – – –Other securities – – – – – – – –

derivative instruments 2 2,593 36 2,631 18 2,326 65 2,409financial derivatives 2 2,401 36 2,439 18 2,252 42 2,312

Trading 2 2,399 36 2,437 – 2,249 42 2,291Relating to fair value option – – – – 18 – – 18Other – 2 – 2 – 4 – 4

credit derivatives – 192 – 192 – 73 23 97Trading derivatives – 192 – 192 – 73 23 97Relating to fair value option – – – – – – – –Other – – – – – – – –

tOtal 21 2,596 36 2,653 27 2,355 65 2,448



(€ m)

30 Sept. 2011 31 dec. 2010

fair Value leVel 1

fair Value leVel 2


fair Value leVel 1

fair Value leVel 2


Deposits from banks – – – – – – – –Deposits from customers – – – – – – – –Debt securities – 1,264 – 1,264 – 1,651 – 1,651

Structured – 1,264 – 1,264 – 1,651 – 1,651Others – – – – – – – –

tOtal – 1,264 – 1,264 – 1,651 – 1,651

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. In the first nine months of 2011, changes in fair values resulting from changes in our own funding costs were € 88.9 m (same period of the previous year: € 25.6 m).


Hedging derivatives (€ m)

30 Sept. 2011 31 dec. 2010

fair Value leVel 1

fair Value leVel 2


fair Value leVel 1

fair Value leVel 2


financial derivatives – 2,480 – 2,480 – 2,883 25 2,909Fair value – 165 – 165 – 185 – 185Cash flows – 2,314 – 2,314 – 2,698 25 2,723Net investment in foreign subsidiaries – – – – – – – –

credit derivatives – – – – – – – –Fair value – – – – – – – –Cash flows – – – – – – – –

tOtal – 2,480 – 2,480 – 2,883 25 2,909

Provisions for risks and charges(€ m)

30 Sept. 2011 31 dec. 2010

pensions and other post-retirement benefit obligations 3,812 3,791Other provisions for risks and charges 528 506

Legal disputes 262 197Staff expenses 5 5Other 261 304

tOtal 4,341 4,297



Segment reporting

Reconciliation of reclassified accounts to mandatory reporting schedule(€ m)

1 Jan. – 30 Sept. 2011

1 Jan. – 30 Sept. 2010

Net interest 3,376 3,401Dividends and other income from equity investments 151 112

Dividend income and similar revenue 26 17minus: dividends from equity instruments held for trading 0 0

Profit (loss) of associates – of which: Income (loss) from equity investments valued at net equity 126 95Net fees and commissions 1,401 1,480Net trading, hedging and fair value income 192 277

Gains (losses) on financial assets and liabilities held for trading 169 268plus: dividends from equity instruments held for trading 0 0Fair value adjustments in hedge accounting –1 –14Gains (losses) on disposal or repurchase of financial liabilities 0 0Gains (losses) on financial assets and liabilities designated at fair value through profit or loss 23 22

Net other expenses/ income 143 136Gains (losses) on disposals / repurchases of loans and receivables – not impaired 0 0Premiums earned (net) 94 84Other income (net) from insurance activities –74 –73Other net operating income 124 127

minus: other operating income – of which: recovery of expenses –1 –1plus: Impairment on tangible assets – other operating leases 0 –1

Operating incOme 5,263 5,406Payroll costs –1,508 –1,441

Administrative costs – staff expenses –1,513 –1,441minus: integration costs 5 0

Other administrative expenses –1,183 –1,106Administrative costs – other administrative expenses –1,195 –1,109

minus: integration costs 12 3Recovery of expenses = Other net operating income – of which: Other operating income – recovery of costs 1 1Amortisation, depreciation and impairment losses on intangible and tangible assets –208 –219

Impairment /Write-backs on property, plant and equipment –145 –154minus: impairment losses/write-backs on property owned for investment 1 0minus: Impairment on tangible assets – other operating leases 0 1

Impairment /Write-backs on intangible assets –105 –84minus: integration costs 0 0minus: Purchase Price Allocation effect 40 18

Operating cOStS –2,898 –2,764Operating prOfit 2,365 2,641



Segment reporting (CoNTINuEd)

1 Jan. – 30 Sept. 2011

1 Jan. – 30 Sept. 2010

Net write-downs of loans and provisions for guarantees and commitments –1,035 –1,314Gains (losses) on disposal and repurchase of loans 2 –11Impairment losses on loans –1,044 –1,297Impairment losses on other financial assets 7 –6

net Operating prOfit 1,330 1,328Provisions for risks and charges –131 –103Integration costs –17 –3Net income from investments –147 61

Gains (losses) on disposal and repurchase of available-for-sale financial assets 140 38Gains (losses) on disposal and repurchase of held-to-maturity investments 0 0Impairment losses on available-for-sale financial assets –193 2Impairment losses on held-to-maturity investments –119 0

plus: Impairment losses/write-backs on property owned for investment –1 0Profit (loss) of associates 150 95

minus: Profit (loss) of associates – Income (loss) from equity investments valued at net equity –126 – 95Gains and losses on tangible and intangible assets 0 –1Gains (losses) on disposal of investments 1 22

prOfit befOre tax 1,035 1,283Income tax for the period –253 –300

Tax expense (income) related to profit or loss from continuing operations –244 –296minus: Taxes on Purchase Price Allocation effect – 9 –4

prOfit (lOSS) fOr the periOd 782 983Non-controlling interests –41 –38net prOfit attributable tO the OWnerS Of the parent cOmpany befOre ppa 741 945Purchase Price Allocation effect –31 –14Impairment of goodwill –705 –170net prOfit attributable tO the OWnerS Of the parent cOmpany 4 761



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 2011. 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.

Starting with the reporting period in 2011, segment reporting was adjusted to the new structure of the Group’s income statement. Goodwill impairment and the Purchase Price Allocation effect are now shown immediately before net profit attributable to the owners of Bank Austria.

The definition of business segments is primarily based on organisational responsibility for customers.

Family & SME BankingResponsibility for the Family & SME Banking Division 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 m. 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 sub-segments large customers (international corporates, financial institutions, public sector) and real estate, business with corporate customers whose turnover exceeds € 50 m, and treasury activities. The Corporate & Investment Banking Division includes, beside others, Bank Austria Wohnbaubank AG, the Bank Austria Real Invest Group and smaller subsidiaries in CEE countries with a focus on investment banking as consolidated companies.

CEEThe CEE business segment includes the commercial banking units of the Bank Austria Group in the region of Central and Eastern Europe (including Turkey and Kazakhstan).

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. Also included are inter-segment eliminations and other items which are not to be assigned to other business segments.

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. It is composed of a “risk-free” interest rate plus a margin of the historical average (6 years) of the 5-year CDS spread of UniCredit.

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 2011, capital allocated to the business segments in UniCredit Bank Austria AG, based on the Tier 1 capital ratio, is 7% of risk-weighted assets of the preceding quarter. Capital allocation to subsidiaries reflects actual IFRS capital. The adjustment item with respect to the consolidated IFRS capital of the Bank Austria Group is reflected in the Corporate Center.




Restatements:A number of structural changes took place within the business segments and in the group of consolidated companies. This means that results for 2011 are not fully comparable with those for 2010. For this reason, the segment results for 2010 have been adjusted to the new structure. The difference compared with Bank Austria’s overall results is presented in a separate column showing “Restatement differences”.

The main pro-forma adjustments are as follows:• UniCreditCAIBAGandUniCreditCAIBSecuritiesUKLtd.weresoldtoUniCreditBankAG(theformerBayerischeHypo-undVereinsbankAG),

Munich, in June 2010. The result of the Corporate & Investment Banking Division for 2010 was therefore adjusted for this effect.• UniCreditCAIBSecuritiesRomaniaSAwastransferredfromCEEtoCorporate&InvestmentBanking.• InJanuary2011,businesswithsmallandmedium-sizedenterprises(SMEs)withaturnoverbetween€3mand€50mwastransferredfromthe

Corporate & Investment Banking Division to the Family & SME Banking Division. As part of this transfer of customers, FactorBank AG was also transferred from Corporate & Investment Banking to Family & SME Banking. The relevant comparative figures for 2010 were also restated.

• BankAustriaGlobalInformationServicesGmbHwassoldtoUniCreditGlobalInformationServicesinJune2011.BankAustriaGlobalInformationServices is therefore also no longer included in the segment result of the Corporate Center as from the third quarter of 2010.





(€ m)

family & Sme banKing diViSiOn

priVate banKing diViSiOn

cOrpOrate & inVeStment

banKing diViSiOn

central eaStern

eurOpe diViSiOn

cOrpOrate center

reStatement differenceS 1)

banK auStria grOup

Net interest 1– 9 2011 541 41 604 2,423 –234 – 3,3761– 9 2010 533 31 606 2,460 –251 22 3,401

Dividends and other income 1– 9 2011 2 – 34 15 100 – 151from equity investments 1– 9 2010 1 – 32 9 70 – 112Net fees and commissions 1– 9 2011 328 64 163 896 –51 – 1,401

1– 9 2010 335 68 186 880 7 3 1,480Net trading, hedging and 1– 9 2011 – 1 –6 121 76 – 192fair value income/ loss 1– 9 2010 –1 1 –47 76 166 82 277Net other expenses/ income 1– 9 2011 7 – 9 77 50 – 143

1– 9 2010 1 – 15 44 67 9 136Operating incOme 1– 9 2011 879 107 804 3,532 –58 – 5,263

1– 9 2010 869 101 792 3,469 58 116 5,406Operating cOStS 1– 9 2011 –669 –75 –286 –1,627 –241 – –2,898

1– 9 2010 –634 –74 –271 –1,566 –194 –25 –2,764Operating prOfit 1– 9 2011 210 32 518 1,905 –299 – 2,365

1– 9 2010 236 27 521 1,902 –136 91 2,641Net write-downs of loans and provisions 1– 9 2011 –158 –2 –116 –759 – – –1,035for guarantees and commitments 1– 9 2010 –207 – –128 – 977 –1 – –1,314net Operating prOfit 1– 9 2011 52 29 402 1,146 –299 – 1,330

1– 9 2010 28 28 393 925 –137 91 1,328Provisions for risks and charges 1– 9 2011 6 2 –20 –16 –104 – –131

1– 9 2010 – – – –30 –73 – –103Integration costs 1– 9 2011 – – –15 –2 – – –17

1– 9 2010 – – – –3 – – –3Net income from investments 1– 9 2011 3 – 5 6 –161 – –147

1– 9 2010 13 – 2 39 6 1 61prOfit befOre tax 1– 9 2011 61 31 373 1,134 –564 – 1,035

1– 9 2010 41 27 395 931 –203 92 1,283Income tax for the period 1– 9 2011 –14 –8 –89 –161 19 – –253

1– 9 2010 – 9 –7 – 91 –190 51 –54 –300prOfit (lOSS) fOr the periOd 1– 9 2011 46 23 285 973 –545 – 782

1– 9 2010 32 20 304 742 –152 37 983Non-controlling interests 1– 9 2011 –5 – – –51 15 – –41

1– 9 2010 – 9 – – –53 24 – –38net prOfit attributable tO the 1– 9 2011 41 23 285 922 –530 – 741OWnerS Of the parent cOmpany befOre ppa

1– 9 2010 23 20 303 689 –128 37 945

Purchase Price Allocation effect 1– 9 2011 – – – – –31 – –311– 9 2010 – – – – –14 – –14

Goodwill impairment 1– 9 2011 – – – – –705 – –7051– 9 2010 – – – – –170 – –170

net prOfit attributable tO the 1– 9 2011 41 23 285 922 –1,267 – 4OWnerS Of the parent cOmpany 1– 9 2010 23 20 303 689 –312 37 761risk-weighted assets (rWa) (avg.) 1– 9 2011 13,342 496 25,234 80,680 4,553 46 124,350

1– 9 2010 13,322 529 27,437 74,395 5,239 958 121,880Equity (avg.) 2) 1– 9 2011 1,249 131 2,186 11,794 2,126 – 17,485

1– 9 2010 749 124 2,006 10,941 3,008 9 16,838Cost / income ratio in % 1– 9 2011 76.1 70.5 35.6 46.1 n.m. n.m. 55.1

1– 9 2010 72.9 72.9 34.2 45.2 n.m. n.m. 51.1Risk /earnings ratio in % 3) 1– 9 2011 29.1 n.m. 18.1 31.1 n.m. n.m. 29.3

1– 9 2010 38.8 n.m. 20.1 39.6 n.m. n.m. 37.4

1) The segment results for 2010 have been restated. The difference compared to Bank Austria’s results for 2010 is presented in a separate column showing “Restatement differences”, which mainly relate to the sale of UniCredit CAIB AG and Bank Austria Global Information Services GmbH.

2) Total IFRS capital for the subsidiaries allocated to the respective Division together with standardised capital 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. Starting 2011 capital allocation is based on actual RWAs of previous quarter (until 2010 based on budget RWAs).

3) Risk / earnings ratio: net writedowns of loans and provisions for guarantees and commitments measured against net interest and dividends and other income from equity investments n.m. = not meaningful

Segment reporting 1– 9 2011/1– 9 2010




Segment reporting Q1–Q3 2011/Q1–Q4 2010(€ m)




banKing diViSiOn

central eaStern

eurOpe diViSiOn

cOrpOrate center


banK auStria grOup

Net interest Q3 2011 182 16 208 797 –75 – 1,128Q2 2011 181 14 198 809 –82 – 1,120Q1 2011 178 11 198 818 –77 – 1,128Q4 2010 171 12 210 820 –69 – 1,142Q3 2010 174 11 212 846 –59 – 1,183Q2 2010 180 10 206 827 – 94 8 1,137Q1 2010 179 10 189 787 – 98 15 1,081

Dividends and other income Q3 2011 – – 6 2 41 – 49from equity investments Q2 2011 – – 9 10 32 – 52

Q1 2011 3 – 20 2 26 – 50Q4 2010 3 – 13 2 27 – 45Q3 2010 – – 5 5 19 – 30Q2 2010 1 – 17 3 25 – 46Q1 2010 – – 9 1 27 – 36

Net fees and commissions Q3 2011 107 20 56 310 –14 – 479Q2 2011 107 20 50 297 –15 – 460Q1 2011 114 24 57 288 –21 – 462Q4 2010 108 27 63 313 – – 511Q3 2010 106 19 64 305 –2 – 492Q2 2010 118 25 64 301 7 3 518Q1 2010 111 25 58 275 2 1 470

Net trading, hedging and Q3 2011 – – –13 48 –11 – 24fair value income/ loss Q2 2011 1 – 4 35 15 – 54

Q1 2011 – – 4 38 72 – 114Q4 2010 –1 – 3 69 –21 – 49Q3 2010 –1 – –23 42 25 – 43Q2 2010 – 1 –8 14 113 38 158

Q1 2010 – – –17 20 28 45 76Net other expenses/ income Q3 2011 4 – 3 40 – 9 – 38

Q2 2011 2 – 3 23 30 – 58Q1 2011 2 – 2 14 29 – 47Q4 2010 1 –1 1 19 12 23 54Q3 2010 –1 – 5 28 10 16 57Q2 2010 1 1 5 15 30 –2 48Q1 2010 2 – 5 1 28 –5 31

Operating incOme q3 2011 292 37 259 1,197 –68 – 1,717q2 2011 290 35 264 1,174 –20 – 1,744q1 2011 296 35 280 1,161 29 – 1,801q4 2010 282 38 290 1,222 –52 23 1,802q3 2010 277 30 263 1,226 –8 16 1,804q2 2010 300 37 284 1,160 80 45 1,906q1 2010 292 35 245 1,083 –14 55 1,695

Operating cOStS q3 2011 –228 –25 – 98 –541 –66 – – 957q2 2011 –227 –26 – 96 –554 –87 – – 990q1 2011 –214 –25 – 92 –532 –88 – – 950q4 2010 –217 –27 – 90 –561 –61 –22 – 978q3 2010 –215 –25 – 93 –533 –55 –15 – 936q2 2010 –211 –25 – 90 –530 –70 8 – 918q1 2010 –208 –24 –88 –503 –69 –19 – 911

Operating prOfit q3 2011 65 12 162 656 –134 – 761q2 2011 63 9 168 621 –107 – 754q1 2011 83 10 188 628 –59 – 851q4 2010 65 11 200 661 –113 1 824q3 2010 62 5 171 693 –63 1 869q2 2010 90 11 194 630 10 53 988q1 2010 84 11 157 580 –83 36 784








banKing diViSiOn

central eaStern

eurOpe diViSiOn

cOrpOrate center


banK auStria grOup

Net write-downs of loans and provisions Q3 2011 –55 – –36 –238 – – –330for guarantees and commitments Q2 2011 –47 –1 –34 –246 – – –329

Q1 2011 –55 –1 –46 –274 – – –376Q4 2010 –57 –2 –18 –449 – – –526Q3 2010 –68 – –14 –337 – – –418Q2 2010 –70 – –61 –324 –1 – –457Q1 2010 –69 – –53 –316 – – –439

net Operating prOfit q3 2011 9 12 125 418 –134 – 431q2 2011 15 8 134 375 –107 – 425q1 2011 27 9 143 354 –59 – 475q4 2010 8 9 182 212 –113 1 299q3 2010 –6 5 157 356 –63 1 451q2 2010 20 12 133 306 9 53 532q1 2010 15 11 103 263 –83 36 345

Provisions for risks and charges Q3 2011 –4 – –21 –7 –70 – –100Q2 2011 10 1 1 –8 –3 – 1Q1 2011 – 1 – –2 –31 – –32Q4 2010 –7 1 –20 –7 –1 – –33Q3 2010 1 – – –13 – – –13Q2 2010 –1 – – –11 –8 – –19Q1 2010 – – – –6 –65 – –71

Integration costs Q3 2011 – – –15 – – – –15Q2 2011 – – – –1 – – –1Q1 2011 – – – –1 – – –1Q4 2010 – – – –1 – – –1Q3 2010 – – – –1 – – –1Q2 2010 – – – –1 – – –1Q1 2010 – – – –1 – – –1

Net income from investments Q3 2011 1 – –2 –39 –78 – –118Q2 2011 – – 4 43 –85 – –37Q1 2011 1 – 3 2 1 – 8Q4 2010 1 – –6 7 –1 – 1Q3 2010 1 – 1 19 – – 22Q2 2010 1 – – 8 6 – 16Q1 2010 10 – 1 11 – 1 22

prOfit befOre tax q3 2011 7 12 88 372 –281 – 197q2 2011 25 9 139 408 –194 – 388q1 2011 29 10 146 354 –89 – 449q4 2010 2 11 156 211 –115 1 266q3 2010 –4 5 158 361 –63 1 459q2 2010 20 11 132 302 8 54 528q1 2010 25 11 104 267 –148 37 296

Income tax for the period Q3 2011 –2 –3 –25 –63 –48 – –141Q2 2011 –6 –3 –29 –31 45 – –24Q1 2011 –6 –2 –34 –67 21 – –89Q4 2010 –1 –3 –51 –38 37 – –56Q3 2010 1 –1 –47 –76 5 –15 –133Q2 2010 –8 –3 –26 –72 4 –26 –132Q1 2010 –2 –3 –18 –42 42 –13 –36

prOfit (lOSS) fOr the periOd q3 2011 5 9 63 309 –329 – 57q2 2011 19 7 110 377 –149 – 364q1 2011 22 7 112 287 –68 – 360q4 2010 1 8 104 173 –78 1 210q3 2010 –2 4 111 286 –58 –14 326q2 2010 12 8 106 231 12 28 396q1 2010 23 8 87 225 –106 23 260

Non-controlling interests Q3 2011 –2 – – –19 5 – –16Q2 2011 –1 – – –18 6 – –12Q1 2011 –2 – – –15 4 – –13Q4 2010 –5 – –1 –4 –3 – –13Q3 2010 –2 – 1 –24 7 – –17Q2 2010 – – – –16 9 – –7Q1 2010 –7 – –1 –13 7 – –14








banKing diViSiOn

central eaStern

eurOpe diViSiOn

cOrpOrate center


banK auStria grOup

net prOfit attributable tO the q3 2011 3 9 63 290 –324 – 41OWnerS Of the parent cOmpany q2 2011 18 7 110 360 –143 – 352befOre ppa q1 2011 20 7 112 272 –64 – 347

q4 2010 –3 8 103 170 –81 1 197q3 2010 –4 4 112 262 –50 –14 310q2 2010 12 8 106 215 21 28 389q1 2010 16 8 85 212 – 99 23 246

Purchase Price Allocation effect Q3 2011 – – – – –24 – –24Q2 2011 – – – – –3 – –3Q1 2011 – – – – –4 – –4Q4 2010 – – – – –2 – –2Q3 2010 – – – – –5 – –5Q2 2010 – – – – –5 – –5Q1 2010 – – – – –4 – –4

Goodwill impairment Q3 2011 – – – – –653 – –653Q2 2011 – – – – –50 – –50Q1 2011 – – – – –3 – –3Q4 2010 – – – – 9 –200 – –208Q3 2010 – – – – –3 – –3Q2 2010 – – – – –167 – –167Q1 2010 – – – – – – –

net prOfit attributable tO the q3 2011 3 9 63 290 –1,000 – –635OWnerS Of the parent cOmpany q2 2011 18 7 110 360 –196 – 299

q1 2011 20 7 112 272 –70 – 341q4 2010 –3 8 103 161 –283 1 –14q3 2010 –4 4 112 262 –58 –14 302q2 2010 12 8 106 215 –151 28 217q1 2010 16 8 85 212 –103 23 242

risk-weighted assets (rWa) (avg.) q3 2011 13,085 447 24,156 82,553 4,217 – 124,459q2 2011 12,513 491 25,211 80,708 4,694 – 123,616q1 2011 14,429 548 26,334 78,778 4,749 137 124,976q4 2010 17,374 552 26,619 77,718 5,079 166 127,508q3 2010 16,046 556 27,118 77,120 5,385 42 126,267q2 2010 13,079 534 27,037 75,210 5,107 1,480 122,446q1 2010 10,840 497 28,156 70,856 5,226 1,352 116,927

Equity (avg.) 2) Q3 2011 1,254 139 2,004 11,935 1,932 – 17,265Q2 2011 1,193 125 2,167 11,828 2,381 – 17,694Q1 2011 1,298 128 2,386 11,620 2,064 – 17,496Q4 2010 768 118 2,232 11,287 3,025 14 17,444Q3 2010 748 125 2,068 11,088 3,520 14 17,562Q2 2010 745 128 2,167 10,878 3,384 14 17,316Q1 2010 754 119 1,785 10,856 2,121 – 15,635

Cost / income ratio in % Q3 2011 77.9 67.4 37.7 45.2 n.m. n.m. 55.7Q2 2011 78.4 73.4 36.5 47.1 n.m. n.m. 56.8Q1 2011 72.1 70.9 32.7 45.9 n.m. n.m. 52.8Q4 2010 77.0 70.5 31.1 45.9 n.m. n.m. 54.3Q3 2010 77.7 82.8 35.2 43.5 n.m. n.m. 51.8Q2 2010 70.2 68.6 31.7 45.7 n.m. n.m. 48.2Q1 2010 71.2 69.0 36.0 46.5 n.m. n.m. 53.7

Risk /earnings ratio in % 3) Q3 2011 30.4 n.m. 17.0 29.8 n.m. n.m. 28.0Q2 2011 26.2 n.m. 16.2 30.1 n.m. n.m. 28.0Q1 2011 30.6 n.m. 21.0 33.4 n.m. n.m. 31.9Q4 2010 32.7 n.m. 8.1 54.6 n.m. n.m. 44.3Q3 2010 39.1 n.m. 6.3 39.5 n.m. n.m. 34.5Q2 2010 38.5 n.m. 27.5 39.1 n.m. n.m. 38.6Q1 2010 38.6 n.m. 27.0 40.2 n.m. n.m. 39.3


2) Total IFRS capital for the subsidiaries allocated to the respective Division together with standardised capital 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. Starting 2011 capital allocation is based on actual RWAs of previous quarter (until 2010 based on budget RWAs).

3) Risk / earnings ratio: net writedowns of loans and provisions for guarantees and commitments measured against net interest and dividends and other income from equity investments n.m. = not meaningful



Risk report

Legal risksProceedings were initiated in Austria related to Bernard L. Madoff’s fraud in which UniCredit Bank Austria AG, among others, was named as defendant. The parties invested in funds that, in turn, invested directly or indirectly in Bernard L. Madoff Investment Securities LLC (BMIS). The judgements in these lawsuits so far have been almost completely in favour of the bank. UniCredit Bank Austria AG is also the subject of criminal proceedings in Austria following the complaint filed by the Austrian Financial Market Authority with the Public Prosecutor’s Office and complaints filed with the said Public Prosecutor’s Office by private parties that invested in funds which, in turn, invested directly or indirectly in BMIS. The parties that filed said complaints maintain that UniCredit Bank Austria AG violated, among other things, the terms of the Consolidated Investment Act that governs UniCredit Bank Austria AG’s role as “auditor of the prospectus” of Primeo funds.

UniCredit Bank Austria AG was named as one of many defendants in two putative class action suits filed in the United States District Court for the Southern District of New York. A liquidated indirect subsidiary of UniCredit Bank Austria AG has also been named in two putative class action suits filed in the United States District Court for the Southern District of New York. 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 UniCredit Bank Austria AG, violated the Racketeer Influenced and Corrupt Organizations Act (“RICO”) by allegedly partici-pating 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. 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 UniCredit Bank Austria AG and a liquidated indirect subsidiary of UniCredit Bank Austria AG, 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. The SIPA Trustee has filed a notice of appeal of the decision.

UniCredit Bank Austria AG has moved to dismiss the Second Trustee Complaint with respect to the RICO claims and the claims for unjust enrichment, conversion and money had and received. That motion is still pending.

All pending U.S. actions are in their initial phases.

UniCredit S.p.A. and its subsidiaries involved intend to defend themselves against the charges regarding the Madoff case by any method available to them. 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.



Guarantees given and commitments(€ m)

30 Sept. 2011 31 dec. 2010

financial guarantees given to: 5,242 6,195Banks 294 550Customers 4,948 5,645

commercial guarantees given to: 14,207 13,145Banks 977 1,442Customers 13,229 11,703

Other irrevocable commitments to disburse funds 17,269 14,737Banks 2,256 650

Usage certain 53 55Usage uncertain 2,203 596

Customers 15,013 14,086Usage certain 6,550 6,637Usage uncertain 8,463 7,449

underlying obligations for credit derivatives: sales of protection 849 869assets used to guarantee others’ obligations – –Other commitments 3,777 3,807tOtal 41,345 38,754

Additional disclosures

Events after the reporting periodAt its meeting on 2 November 2011, the Supervisory Board unanimously elected Erich Hampel as its new Chairman. Following expiry of the two-year cooling-off period after his chairmanship of the Management Board ended, Erich Hampel will succeed Paolo Fiorentino in this function as planned. Paolo Fiorentino will remain on the Supervisory Board as Deputy Chairman.

EmployeesShare-based paymentsThe Management Board and selected key management personnel of Bank Austria participate in UniCredit Group’s incentive scheme for share-based payments. The share-based payment arrangements relate to Stock Options, Performance Shares and Restricted Shares based on shares in the parent company UniCredit S.p.A (UCI).

UniCredit calculates the economic value of the share-based payment arrangements on a uniform basis for the entire Group and provides the Group companies with the relevant information. In the Bank Austria Group, the total amount recognised in the income statement for the first nine months of 2011 is € 7 m.

No new Stock Option Plans have been granted since 2009. A cash-based payment model was adopted.

Full-time equivalentsq1–q3 2011 h1 2011 q1 2011 2010

Salaried staff 59,455 59,608 59,452 59,591Other employees 88 92 97 104tOtal*) 59,543 59,700 59,549 59,695

of which: in Austria 7,833 7,920 7,910 7,815of which: abroad 51,710 51,780 51,639 51,880

*) 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.



Additional disclosures (CoNTINuEd)

Consolidated capital resources and regulatory capital requirementsNet capital resources of the Bank Austria group of credit institutions (€ m)

30 Sept. 2011 31 dec. 2010

Paid-in capital (less own shares) 1,681 1,681

Reserves and minority interests 12,906 12,951

Intangible assets –481 –557Deductions from Tier 1 capital (in particular 50% deduction pursuant to Section 23 (13) 3 to 4d of the Austrian Banking Act) –806 –833

core capital (tier 1) 13,300 13,242Net subordinated liabilities 2,592 2,857

Revaluation reserves and undisclosed reserves 155 167

Deductions from Tier 2 (50% deduction pursuant to Section 23 (13) 3 to 4d) –806 –833

Supplementary capital resources (tier 2) 1,941 2,191Deductions from Tier 1 and Tier 2 (deduction pursuant to Section 23 (13) 4a) –131 –140

net capital resources (excl. tier 3) 15,111 15,293Tier 3 (re-assigned subordinated capital) 124 228

net capital reSOurceS (incl. tier 3) 15,235 15,520

Capital requirements of the Bank Austria group of credit institutions (€ m)

30 Sept. 2011 31 dec. 2010

capital requirements ofa) Credit risk pursuant to standardised approach 5,383 6,201

b) Credit risk pursuant to internal ratings-based (IRB) approach 3,459 2,866

Credit risk 8,841 9,067

Operational risk 933 938

Position risk – debt instruments, equities, foreign currencies and commodities 124 228

Settlement risk – –

capital requirement 9,898 10,232Total RWA 123,730 127,906

Capital ratios30 Sept. 2011 31 dec. 2010

Tier 1 capital ratio, based on all risks 10.75% 10.35%Total capital ratio, based on all risks 1) 12.31% 12.13%Tier 1 capital ratio, based on credit risk 12.03% 11.68%Total capital ratio, based on credit risk 2) 12.83% 12.67%

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



Statement by Management

We confirm to the best of our knowledge that the interim consoli-dated financial statements give a true and fair view of the assets, liabilities, financial position and profit or loss of the group as required by the applicable accounting standards and that the interim report of the group for the first nine months gives a true

and fair view of important events that occurred during the first nine months of the financial year and their impact on the interim con-solidated financial statements, and of the principal risks and uncer-tainties for the remaining three months of the financial year.

Vienna, 25 October 2011

The Management Board

on the Interim Report

Willibald Cernko(Chairman)

Massimiliano Fossati Francesco Giordano

Rainer Hauser dieter Hengl

Gianni Franco Papa doris Tomanek Robert Zadrazil

Additional Information


Investor Relations

Financial calendar

Middle of March 2012 Full-year results for 2011All information is available electronically at http:// ir.bankaustria.at

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: Identity & Communications, Michael Trischler

Creative concept: BBH Partners LLP, London

Cover illustration: James Taylor, Illustrator c /o Debut Arts, London

Basic design: Mercurio – Studi di promozione pubblicitaria, 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 Interim 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.

Editorial close of this Interim Report:14 November 2011

UniCredit Bank Austria AG/Corporate Relations

Lassallestrasse 5, A-1020 Vienna, AustriaTel: (+43) (0) 5 05 05-572 32 Fax: (+43) (0) 5 05 05-89572 32e-mail: investor. [email protected] Internet: http:// ir.bankaustria.atGünther Stromenger, Head of Corporate RelationsTel: (+43) (0) 5 05 05-572 32Thomas KirinTel: (+43) (0) 5 05 05-527 74Andreas PetzlTel: (+43) (0) 5 05 05-595 22

RatingsLonG-TErm SUBordinATEd LiABiLiTiES ShorT-TErm

Moody’s1) A2 A3 P-1Standard & Poor’s2) A A – A-1

Public-sector mortgage bonds of Bank Austria are rated Aaa by Moody’s.1) Grandfathered debt remains rated Aa2, subordinated debt rating remains Aa3.2) Grandfathered debt and subordinated debt remain rated AA+.

Documents

Interim Report at 30 September 2011 · Key performance indicators 1–9 2011 2010 Return on equity after tax (ROE) 0.0% 4.5% ... summit meeting at the end of October. As expected,