2009 financial statements - bank austria · bank austria · 2009 annual report 1 contents...

2009 Financial Statements

1Bank Austria · 2009 Annual Report

Contents

Consolidated Financial Statements: Management Report of the Group for 2009 2The Banking Environment in 2009 2Income Statement for 2009 6Balance Sheet and Capital Resources 16Development of Business Segments 18Outlook 32

Consolidated Financial Statements in accordance with IFRSs 39Statement of comprehensive income for the year ended 31 December 2009 40Balance sheet at 31 December 2009 42 Statement of changes in equity 43 Cash flow statement 44

Notes to the Consolidated Financial Statements including risk report 47Concluding Remarks of the Management Board 127Report of the Auditors 128Report of the Supervisory Board for 2009 130

Corporate Governance 133Corporate Governance Report for the 2009 financial year of UniCredit Bank Austria AG 134

Consolidated Financial Statements of Bank Austria for 2009 Statement by Management 139

Supervisory Board and Management Board of UniCredit Bank Austria AG 140

Additional Information 145Office Network 146Investor Relations 150

Bank Austria · 2009 Financial Statements

2 2009 Annual Report · Bank Austria

Financial Statements | Management Report

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The Banking Environment in 2009

Management Report of Bank Austria for 2009

Global developments in the reporting year had a strong impact on banking business in Austria and CEE, Bank Austria’s core markets, leaving no room for independent development. 2009 was the most dramatic year in recent decades of economic history. Repercus-sions of the preceding escalation in financial markets, including an extreme risk aversion of international investors, and the sharpest global economic downturn in the post-war period combined to hit the countries in Central and Eastern Europe with full force in the first few months of the year. Austria was affected by direct influ-ences from Western Europe while also feeling adverse economic and financial impacts from the CEE region because of the coun-try’s substantial involvement in CEE. This is further evidence of the fact that Bank Austria’s two markets are wide open to the interna-tional exchange of goods and capital movements, and that they are strongly interlinked in economic and financial terms.

Global economyAfter the sharp downturn in economic activity seen in the fourth quarter of 2008, the decline in real world product further acceler-ated in early 2009. Banks’ financial statements for 2008 published in the first three months of 2009 indicated that banks had to deal with legacy problems from the financial market crisis while also absorbing an increase in loan losses resulting from the economic setback. Financial and real-economy problems snowballed into a global recession which prompted fears of a world economic crisis similar to that seen in the 1920s and 1930s, and this was to be avoided at all costs. The extensive stabilisation measures taken in response to the crisis were followed in March/April 2009 by another global effort of monetary and financial policy. In retrospect, that was the decisive factor stabilising expectations and avoiding a downward spiral. In the second quarter of 2009, the economic output of industrialised countries shrank only slightly as counter-measures started to become effective and sentiment indicators turned positive. Governments in all countries stimulated consumer demand through various measures, including the quickly-effective scrapping premium offered for old passenger cars. Economic growth in the emerging countries picked up around the middle of 2009, led by the Far East. Nevertheless, even in China domestic demand had to be strongly supported with public infrastructure programmes. Advantage was taken of the decline in commodity prices in 2008 for stockpiling purchases of strategic industrial metals (whose prices then rose by 90% in the course of 2009) and this provided further impetus to world trade. The Baltic Dry Index, a key leading indicator for the global economy, recovered with some fluctuations, as did prices for industrial raw materials. Crude oil prices rose by about 70% to US$ 78 per barrel during 2009.

The economic turnaround concentrated on industry and world trade. Higher demand put an end to inventory reductions, and this contributed to positive growth rates. As world economic regions are

moving more or less in sync, domestic demand remains the deci-sive factor everywhere. But economic multipliers and accelerators have not yet taken off (expenditure, consumption, investment), a fact which is testing companies’ resilience. The number of bank-ruptcies is rising – as always, the credit cycle is lagging behind – and adjustments to lower rates of capacity utilisation are pushing up unemployment. Measured by economic growth, the global recession ended towards year-end 2009. But the recovery started at a very low level of economic activity; utilisation of industrial capacity and the overall output potential are still at their lowest level in decades. Moreover, doubts about the sustainability of the upswing appeared towards the end of 2009, as the public support measures are discontinued and reducing the public debts incurred in this context will not be possible without imposing additional burdens.

Percentage changes in real GDP (over the preceding period, annualised):

Q3 08 Q4 08 Q1 09 Q2 09 Q3 09 Q4 09 2009

USA –2.7% –5.4% –6.4% –0.7% +2.2% +5.9% –2.4%Euro area –1.7% –7.5% – 9.5% –0.5% +1.6% +0.4% –4.0%Austria –2.6% –5.0% – 9.7% –1.7% +2.1% +1.6% –3.6%Source: UniCredit Group Research

Financial marketsIn financial markets all investment categories with a high risk pro-file had fallen to new lows by the first half of March. In retrospect, the G-20 meeting in early April and the subsequent involvement of international organisations led by the IMF marked a turning point. Central banks, in particular, went as far as they could with the implementation of a zero interest rate policy and quantitative man-agement. In the euro area, key interest rates were reduced in four steps, from 2.5% at the beginning of the year to 1% at the begin-ning of May. The European Central Bank provided the banking system with liquidity, responding to the respective levels of demand by inviting bids for long-term repurchase agreements (one-year tenders) and fully allotting all bids in current fixed-rate tender procedures. It also took measures for unconventional open-market operations, in line with international agreements but with much more restraint than in Anglo-American countries (purchases of covered bonds totalling € 40 bn until recently). Overall, liquidity remained within the banking system despite the increase in the ECB’s total assets – there was no monetisation of public debt.

This expansive monetary environment provided important sup-port for banks’ current operations in subsequent quarters. Money markets eased in the first half of 2009 although the central bank for the most part still made up any shortfalls in liquidity. Credit spreads for interbank loans (as opposed to interest rate swaps) that helped restore liquidity returned to normal levels. During the year the interest rate for three-month interbank money fell from

2009 Financial Statements · Bank Austria

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almost 3% to 0.5%. As long-term euro benchmark yields increased until the summer, the yield curve became much steeper and remained so for the rest of the year. While liquidity costs declined, medium and long-term funding for banks contin-ued to be expensive throughout the year.

Financial markets, which had declined sharply across the board after the onset of the financial market crisis, experienced a broadly-based recovery with declining volatility from March to the end of November 2009 – swinging from extreme risk aversion to excessive optimism. The turnaround in sentiment was clearly reflected in the performance of the US dollar: after still benefiting from its safe-haven status early in the year, it depreciated by 18% between the extreme levels of early March (1.25) and late Novem-ber (1.51). In the final months of the year, the US dollar served as a borrowing currency for short-term investment in higher-yielding currencies; the trend subsequently reversed. The world stock market index, which had fallen by 21% to a new all-time low on 9 March 2009, recovered by 54% (or 26% for the full year) until the end of 2009 as a result of political measures and the antici-pated upturn, without however reaching its pre-Lehman level (–8%). Emerging markets, which had previously slid to an excep-tionally low level, advanced at a disproportionately strong rate, as did stock markets in CEE with a rise of 104%, but they failed to make up for previous losses. The ATX showed a similar perfor-mance: at +43% it climbed faster than the EuroStoxx (+23%), but remained further below the starting level of mid-September 2008 (ATX –25%, EuroStoxx –11%). At the end of 2009, all regions except the BRIC markets still fell well short of the level they had reached immediately before Lehman Brothers collapsed. Gold rose to well above US$ 1,000 per ounce in 2009 (annual high: US$ 1,226 in mid-December) because it is seen as a hedge against the weaker dollar but partly also because retail investors were still worried about inflation in view of rising public indebted-ness, despite latent deflation.

Quite generally, credit spreads over the benchmarks narrowed significantly from March to the end of 2009. There was particu-larly strong demand for corporate bonds, with the spread dimin-ishing from 423 to 129 basis points (BBB rating) as the year pro-gressed; this provided investors with a unique performance (3 to 5-year: +23%; 10-year: +41%) reminiscent of a performance otherwise seen only in equities. Major borrowers took advantage of strong demand to launch a record volume of new issues. CDS spreads also declined significantly in the course of the year as if there were no credit cycle. The iTraxx Europe Crossover for 45 sub-investment grade issuers declined from € 995 to € 465 per € 10,000. Emerging markets bond spreads shrank from 750 bp to 291 bp after the exaggerated scepticism prevailing in the first quarter had subsided (full-year performance: +20%).

Interest rates

3-month money(euro, interbank)

0.00

1.00

2.00

3.00

4.00

5.00

% p.a.

10-year benchmark yield (euro)

Q1 Q1Q4Q2 Q3 Q1 Q4Q2 Q32008 2009

200

900800700600500400300

1,0001,1001,200

Credit risk

Credit Default SwapsiTraxx Crossover, 5yr

Economic downturnProduction Managers’ Index(PMI manufacturing, euro area)

Industrial output (euro area)

D A S O N DMJ F A JM J A S O N DMJ F MJ FA JM J75

80

85

90

95

100

105

323436384042444648505254

Global stock markets and US dollar 110

100

90

80

60

50

70

40

1.75

1.65

1.55

1.45

1.35

1.25

MSCI World(H1 08=100)

US dollar per euro(euro appreciation/depreciation)

Crude oil prices

0

20

40

140

60

80

100

120

Shipping futures(Baltic Dry Index)

World trade and oil prices

Indices H1 08 = 100




Management Report (CONTINUED)

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AustriaIn 2009 the Austrian economy, impacted by the global economic crisis, slid into the deepest recession since the end of the Second World War. It appeared to be recovering by the end of 2009, how-ever. In Austria, the effects of the global economic crisis, already dis-cernible in the second half of 2008, intensified abruptly in the first quarter of 2009. Austria’s industry felt the full brunt of the sharp decline in global demand, leading to a marked contraction of over 20% in Austrian exports in the first three months of 2009 compared with the previous year; the slump in investment activity was almost equally severe. The second quarter of the year saw the first tentative signs of stabilisation, reflected in improved industrial sentiment indicators, and the Bank Austria Purchasing Managers’ Index had reached its lowest point. The somewhat brighter business expecta-tions also started to be reflected in concrete figures around the middle of the year. Orders received by companies picked up again, thanks to new impetus from abroad following the worldwide imple-mentation of economic support programmes, and industrial output expanded, initially at a moderate pace. In addition, the export sector has again been experiencing an upward trend since the early sum-mer. As domestic demand remained stable thanks to the tax reform and various support measures such as the scrapping scheme for passenger cars, the economy started to recover in the third quarter. The economic upturn ended a five-quarter period of constant reces-sion. GDP nonetheless contracted by 3.6% in 2009. Although the upward trend became more pronounced towards the end of the year, Austrian companies are faced by a very challenging environment given underutilisation of capacity and fierce competition, which com-pel companies to improve productivity.

Lending volume stagnated in 2009; in November of the reporting year it was about 1% below the level recorded at the end of 2008. Both business loans and loans to private households were affected by the weak trend. It should be noted, however, that lending volume grew at an exceptionally strong rate until December 2008. In 2008, the volume of business loans grew by 9%, the strongest growth since 2000. In view of this initial position and the strong downturn in investment activity (6% decline in gross fixed capital formation in real terms, 10% decline in investments in plant and equipment), lending volume shrank significantly less than might have been expected. New lending business moreover remained robust. New business loans totalled about € 9 bn per month (new personal loans came to not quite € 2 bn), only marginally below the record level of 2008. Many companies and private households evidently repaid more loans in 2009 than in the previous year. In the case of loans to private households, the trend is explained primarily by a decline in account overdrafts. In the corporate sector, some of the high reserve liquidity that had accumulated in 2008 was probably reduced, and –

contrary to 2008 – funds were again raised via bond issues. This behaviour by borrowers, together with the demand-related factors dictated by economic conditions (low capacity utilisation/ low financ-ing requirements for expansion investments), and the fact that lend-ing activity was still more dynamic than in the euro area, do not point to any credit crunch in Austria. At the same time, the interest rate payable on new business loans fell by 350 basis points since October 2008, faster than the ECB’s reduction of key interest rates (–325 basis points). In 2009, net writedowns of loans by Austrian banks totalled about € 4 bn (this is a non-consolidated figure apply-ing primarily to commercial Austria-related business), which is about one-half higher than the 2008 figure. Net writedowns of loans amounted to approximately 1.3% of lending volume, which is about 0.5 percentage points above the average for the last ten years. Bank depos its in Austria started to fall slightly in the summer of 2009. Deposits by private individuals and the corporate sector stagnated after the boom in 2008 and at the beginning of 2009, while the vol-ume of deposits by public-sector entities and by non-bank financial intermediaries (e.g. insurance companies) contracted markedly in the course of the year. In the second half of 2009, mutual funds again experienced moderate inflows which were however not sufficient to offset the outflows in the first half of the year. Notwithstanding a slight net outflow of funds, outstanding fund volume increased by some € 11 bn due to price effects.

Central and Eastern Europe (CEE) The countries in the CEE region were hardly involved in the events that preceded the financial crisis, including sub-prime lending and the collapse of Lehman Brothers, and they continued their expansion until the middle of 2008, seemingly unperturbed by these develop-ments. The financial market crisis nevertheless had a dramatic impact on the CEE countries: the swing from very strong growth to a severe recession took place suddenly within two quarters and dis-played the highest amplitude worldwide. In this context, unlike North America and western Europe, the crisis did not spread from the financial sector to the real economy. The opposite was the case; the main conduit in the initial phase was the macroeconomy. The sud-den global economic downturn (together with the slump in commod-ity prices) affected the highly integrated suppliers in Central Europe via the sharp decline in demand for exports to the same extent as it hit the raw-material producing countries. When the recession spread to the CEE region, structural imbalances that had developed over a longer period in the emerging markets became acute. Notwithstand-ing the countries’ diverse structures and size, exports in all countries across the region contracted by 15% to 20% (also in average terms for 2009, with only few exceptions), resulting in a simultaneous adjustment of production and investment. Together with the heavy dependence on steady capital flows – mainly over the longer term in


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the form of direct investment and international borrowing –, the sharp downturn in growth in the fourth quarter of 2008 and the first quarter of 2009 led to a confidence crisis. The influx of capital fell significantly but remained positive. Unlike the emerging markets cri-ses of 1997 and 1998, this did not result in a currency crisis trig-gered by withdrawals of “hot money” by panic-stricken investors, especially as short-term portfolio investments in CEE were of minor significance (the heavy depreciation of Ukraine’s currency is attribut-able to other factors).

The crisis spread to the local banks in the second stage of conta-gion. In particular, the high proportion of external funding presented a challenge, given the deleveraging activities of western investors, the exceptionally low risk tolerance in the first few months of the year, and the drying up of interbank markets. The cost of external funding rose sharply for local banks – foreign liabilities account for about 20% of their total liabilities. In February /March the entire region was moreover faced with a negative across-the-board appraisal by finan-cial markets; CDS spreads peaked at close to 800 basis points above the benchmark. A more differentiated view of risks was taken only with the decisions adopted at the G-20 summit at the beginning of April and the stand-by guarantees of the IMF and the EU, and with local bank stabilisation plans. The CEE region consequently regained some of the confidence of investors, with CDS spreads declining to a level of about 200 bp at the end of the year. The investments of international banks also had a stabilising effect. (Foreign banks hold about 80% of the capital of local banks in Central Europe and the Baltic states, approx. 85% in the SEE region, and about 20% in the remaining countries.) Under the “Vienna Initiative” the international banks gave assurances at the beginning of 2009 that they would provide their subsidiaries with the necessary funding (and in return the subsidiaries received the same treatment as local banks).

Later on in the year, attention focused on rebalancing. Current account deficits were considerably reduced, and capital inflows resumed in the second half of 2009. CEE currencies, which had depreciated by 17% between September 2008 and March 2009 (weighted by the contributions of Bank Austria subsidiaries to overall results), strengthened by an average 2.5% in the subsequent part of the year. The weighted depreciation averaged just over 11% in 2009. This permitted most central banks to again gradually reduce interest rates which had previously risen sharply. The stabilisation of the external environment shifted the need to make adjustments to the domestic side, which involved both high budget deficits and high social costs and rising unemployment, especially as the automatic stabilisers (labour market /social insurance systems) in these coun-tries are still less highly developed than in the West. The slump in export demand was therefore followed by a marked fall in domestic demand which, after the usual time lag, pushed up the number of

company insolvencies, especially in countries with high external financing requirements. These were primarily the CIS countries and the Baltic states, and less the Central European countries and Turkey. In Kazakhstan, the banking sector was already being comprehen-sively restructured since the credit boom ended in 2007, a process which received additional impetus from the government’s bailout of two major banks in 2009. In Ukraine, and to a lesser extent in Roma-nia, the depreciation of the local currencies exacerbated the prob-lems facing the corporate and retail banking segments.

The interaction of economic and funding problems caused the econ-omy of the CEE region (Bank Austria perimeter) to contract by about 7.1% in 2009. The downturn was most pronounced in the Baltic states (–16%) and Ukraine (–14%), while Kazakhstan’s economy only stagnated as a result of the extensive infrastructure programmes (–1%). In Russia, real GDP declined by 8%, followed by Romania (–7%). The Central European countries as a whole recorded negative growth of 5%, and were thus closest to the performance of the euro area (–4%). Their close economic ties to the euro area are reflected in a similar economic trend.

Exchange rate movements in CEE Depreciation against the euro, index 2008 average = 100, weighted by contributions to Bank Austria’s operating profit from CEE operations in 2008 (without Poland).

86

88

90

100

98

96

94

92

102

104

106

Q4 08Q3 08Q2 08Q1 08 Q4 09Q3 09Q2 09Q1 09 Q1 10

Depreciation / 2009 average compared with 2008 average: –11.5%

Depreciation / year-end 2009 compared with year-end 2008: –3.4%





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Overview The operating environment described in the introductory section had an impact on Bank Austria’s performance in 2009. Yet, based on its strengths in commercial banking business with customers, Bank Austria managed to absorb the repercussions of the financial market crisis and the impact of the severe recession, thereby once again demonstrating its risk-bearing capability.

Legacy problems of the financial market crisis experienced in 2007/2008 were still felt in 2009: the period from January to March 2009 – around the reporting season for banks – was marked by extreme risk aversion on the part of investors. This led to a renewed strong increase in credit spreads, and thus in liquidity and funding costs, mainly in the area of funding our CEE business. But massive monetary and financial policy measures soon helped to improve the monetary environment in the first half of 2009: declin-ing short-term interest rates enabled the bank to generate higher income from maturity transformation. The trading performance turned positive as the banking sector stabilised and prices in finan-cial markets started to rise again. Customers continued to prefer simple on-balance sheet products, however, a trend which affected securities business and net fees and commissions. The bank moved early to take account of this development.

While the deepest recession in the post-war period bottomed out around the middle of 2009, its repercussions had a strong impact on banking business with the usual time lag. Credit demand declined, and business in the growth market of CEE stagnated. Credit quality deteriorated dramatically as the year progressed. While the 2008 income statement was marked by impairment losses on goodwill, 2009 saw a strong increase in net writedowns of loans and provisions for guarantees and commitments.

Although the factors weighing down performance in the banking sector as a whole made 2009 the worst year for banks in decades, Bank Austria achieved stable results. Profit (without minority inter-ests) for 2009 reached € 1.10 bn, more or less matching the previous year’s level (€ 1.14 bn). The return on equity (ROE after tax) in 2009 was 8.1%, up from 7.8% in 2008 but still well below the levels in previous years (2007: 17.0%, 2006: 15.8%).

Operating performance again put the bank in a strong position in 2009 to absorb the impacts resulting from the business environ-ment: operating profit rose by 10% to € 3.6 bn, a new all-time high. Operating income totalled € 7.2 bn, matching the figure for the previous year. A strong turnaround in the net trading, hedging and fair value result – a € 744 m swing from a net loss to net income – offset the decline in net fees and commissions (down by € 245 m) and a significant decrease in dividend income (down by € 533 m), a sub-item within net interest income. In this context, a one-off effect should be noted: in connection with the sale of profit-

sharing rights in the B&C foundation in 2008 we earned a special dividend of € 415 m which is not to be seen as part of operating performance. Without the effect of this distribution, net interest income was almost unchanged and operating income as a whole increased by € 434 m or 6%. A substantial contribution to the strong operating profit came from cost reductions of € 320 m or 8%. The cost / income ratio improved by 4.5 percentage points, fall-ing to just below 50% (49.9%).

Both core markets contributed to the improvement in operating performance: the Austrian business divisions (Retail, Private Bank-ing and Corporate & Investment Banking) achieved stronger growth of operating profit (+68% to € 1.5 bn) in 2009 as the comparative figure for the trading performance in 2008 was highly negative as a result of mark-to-market adjustments. While growth in CEE was less pronounced (+6%), the segment nevertheless contributed € 2.7 bn to the operating profit of € 3.6 bn for the bank as a whole.

This provided a strong base in 2009, as in the previous year, for the bank to absorb substantial impacts from non-operating items. The items between operating profit and profit before tax added up to a net expense of € 2.3 bn for 2009, compared with a net charge of € 1.8 bn in the previous year. Within the total figure, net write-downs of loans and provisions for guarantees and commit-

Income Statement for 2009

Operations in both core markets profitable despite financial market crisis and recession (profit before tax in € m)

–1,000

–500

0

2,000

500

1,000

1,500

20065)20055)200420032002 2007 2008 2009

1) Large writedowns in the former Markets & Investment Banking Division2) Substantial impairment loss of € 1,027 m on CEE goodwill in the Corporate Center3) Profit before tax weighed down by provisioning charge4) Corporate Center includes significant liquidity costs and funding costs relating to equity interests5) 2005 and 2006 adjusted for one-off effects

Austrian business divisions

Corporate Center

CEE Division (respective perimeter)

394

1)

2)

3)

4)

477 525

684

9111,041

359

357

914

148

– 38 – 32 – 68

20

– 77

– 900

– 494

151

366

635 680

1,342

2,025

915


the➔ In the f the


ments more than doubled, from € 1.0 bn to € 2.3 bn. The CEE operating segment accounted for almost all (94%) of the increase and more than three-quarters of the total amount. Cyclical factors combined with structural problems to lead to a provisioning charge which rose from quarter to quarter, though the increase slowed most recently. Credit ratings deteriorated across the CEE region, but two of the eighteen countries – Kazakhstan and Ukraine – accounted for a combined 44% of the increase in net writedowns of loans and provisions for guarantees and commitments over the previous year. Measured by lending volume, the cost of risk in the CEE operating segment was 287 basis points (after 91 bp in the previous year); without Kazakhstan and Ukraine, the figure was 184 bp. In Austria, the cost of risk remained moderate, at 82 bp compared with 70 bp in the previous year, against the background of the rapid deterioration in the economy.

As a result of the substantial burdens from non-operating items, the improvement in operating performance did not feed through to the bottom line. Profit before tax (€ 1.3 bn) for 2009 was 11% lower than in the previous year. In Austria (operating segments without the Corporate Center) and in the CEE Division, profit before tax was at the same level of about € 915 m. This compares with a loss before tax in the Corporate Center, which comprises control and administrative functions as well as the management of equity interests and had to absorb high liquidity costs. The loss before tax in the Corporate Center for 2009 was € 494 m, significantly lower than in 2008 (–€ 900 m), a year in which substantial impairment losses on goodwill had an additional adverse effect.

Only one of our CEE banking subsidiaries (ATF Bank in Kazakh-stan) reported a loss in 2009 as a result of the substantial provi-sioning charge. Most of the profits generated by the other banking subsidiaries were retained with a view to improving the local risk-bearing capability. At the level of UniCredit Bank Austria AG, the parent company of the Bank Austria Group, a balanced result was recorded. As in the previous year, there was no distribution of profit.

After a very good start in 2009, profit before tax declined from quarter to quarter (see chart). The main reason for this develop-ment was a steady deterioration in credit quality which followed the business cycle with the usual time lag and led to substantial net writedowns of loans in the second half of the year. Operating income peaked in the first quarter of 2009 as the trading perform-ance and net interest income improved, an effect caused by inter-est rate reductions. In the remaining part of the year, operating income slightly exceeded the quarterly average for 2008 (adjusted for the one-off effect in the fourth quarter). Costs did not show any major changes throughout the year, remaining well below the 2008 level. Operating profit therefore showed a similar development, declining from a peak figure in the early part of the year while remaining more or less in line with previous years. After the excep-tional charges at the end of 2008 (goodwill impairment), profit

before tax for the first quarter of 2009 almost matched the good pre- Lehman results (€ 722 m). Then the gap between operating profit and profit before tax widened again as a consequence of the provisioning charge, with profit before tax falling to € 111 m in the fourth quarter of 2009.

The development of business volume in 2009 was also marked by structural changes and cyclical factors. Interbank posi-tions on both sides of the balance sheet and trading-related items such as trading portfolios and investments declined strongly. This strategically desirable development accounted for a large part of the 12% decline in total assets to € 194.5 bn. At the end of 2009, lending volume was 6% lower than at the end of 2008, mainly due to developments in business with large corporate customers, and especially export and investment finance. Local lending volume in CEE fell at a disproportionately high rate. On the other hand, deposits from customers rose by 2%, mainly in CEE, with the loan/deposit ratio improving signifi-cantly. At the end of 2009, lending volume at Bank Austria was fully funded with primary funds (i. e. deposits from customers and debt securities in issue).

Average lending volume of Bank Austria (€ 127.2 bn) in 2009 was slightly higher than in the previous year, despite adverse exchange rate effects. The year-end 2009 figure (net of loan loss provisions) was 6% lower than in the previous year. At the end of 2009, impaired loans exceeded the year-end 2008 level by 45%, specific writedowns on such loans increased by 52%. Most

Performance by quarter (€ m)

– 1,100

– 600

– 100

1,900

400

900

1,400

Q4Q3 Q3Q22007 20092008

Q1 Q4Q3Q2Q1 Q1 Q2 Q4

Operating income

Operating profit

Profit before tax

Provisioning charge

Operating expenses

*) 2008 adjusted for one-off effects, broken line: unadjusted trend

*)

*)

*)





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recently, the coverage ratio was 52% (year-end 2008: 49%). Of the total amount of gross loans to customers, 7.3% were clas-sified as impaired and 3.5% as non-performing.

Average risk-weighted assets (€ 119.9 bn) declined by 10% (Basel II /Basel II), reflecting the decrease of interbank loans included in the overall figure and reduced market risk. During the reporting year, risk-weighted assets declined by 14% from the year-end 2008 level (Basel II /Basel II). In combination with a strong increase in Tier 1 capital (to € 9.9 bn), the Tier 1 ratio based on all risks thus improved from 6.82% at the end of 2008 to 8.68% at the end of 2009.

At an Extraordinary General Meeting of UniCredit Bank Austria AG on 4 March 2010, a resolution was adopted to increase the share capital by € 2 bn. The transaction is to become effective in the course of the first quarter of 2010. Based on the calculation of capital resources as at year-end 2009, € 2 bn more Tier 1 capital gives a Tier 1 ratio of about 10.4%. The funds will come from the capital increase of € 4.0 bn carried out by UniCredit S.p.A. in January 2010. The capital base in UniCredit Group has thereby been improved on a sustainable basis via the market – i.e. without recourse to stabilisation programmes put in place by governments.

In response to the financial market crisis, we improved Bank Austria’s capital base and risk-bearing capability while also gearing our business model and strategy more closely to the objectives of proximity to customers and sustainability.

Our efforts in the area of customer satisfaction management, which we have pursued over many years, have gained in impor-tance as a result of the loss of confidence following the financial market crisis. We now conduct regular surveys of general cus-tomer satisfaction, using the results to compile regional and divi-sional indices. In 2009, we interviewed some 45,000 customers in six surveys concentrating on service intensity and product quality with a view to obtaining information on customer preferences from the target groups. These efforts are complemented by regular mys-tery shopping through almost 2,000 visits to branches of the bank. In line with market trends, we have reviewed the range of products for simplicity and transparency and for risk tolerance on the part of customers; as a result, we no longer actively offer foreign currency loans.

In the course of 2009, Bank Austria carried out and further pur-sued a number of strategic projects relating to the evolution of the UniCredit business model across the region. These projects are aimed at moving closer to customers by adjusting the fine seg-mentation of business divisions, using service models which meet specific customer needs, and achieving specialisation gains in the international production and service networks.

– A medium-term project is the further development of governance and the swift divisionalisation in CEE countries according to a defined multi-tier plan (details are given in the comments on the CEE operating segment).

– In the third quarter of 2009 we reorganised the Austrian business divisions, fully switching from a product-based to a customer- focused organisational structure. In the top segment of Austrian business with private customers, we integrated our previous sub-sidiary Bank Privat and our asset management specialist Asset Management Gesellschaft (AMG) in the Private Banking Division of UniCredit Bank Austria AG in both legal and organisational terms. Private Banking now encompasses the entire value creation chain – from product development to product management and integrated advisory services provided to the top customer segment, including all banking services and lending business which were previously made available only through the retail network.

– In direct response to the financial market crisis, investment bank-ing activities were reorganised throughout UniCredit Group and reduced to customer-driven business and complementary trading activities. With the objective of also providing our large customers with integrated services, we combined the previous Markets & Investment Banking (MIB) Division and the Corporates Division to form the Corporate & Investment Banking (CIB) Division. Combin-ing an integrated customer service approach with the expertise of a major cross-regional player in capital markets gives the bank fur-ther competitive advantages such as shorter decision-making paths for large customer transactions. In organisational terms, a matrix of customer service units (networks) and product and trading compe-tencies (counterparts) provides for specialisation and enables the bank to avoid imprecise internal allocations of income and costs. (For further details see the section on the CIB segment). All cus-tomer-driven investment banking activities of UniCredit CAIB AG will be integrated into Bank Austria after the Supervisory Board has adopted the relevant resolutions. The remaining UniCredit CAIB AG (including CAIB UK), which was classified as held for sale in accor-dance with IFRS 5 in the balance sheet as at 31 December 2009, will be transferred to UniCredit Bank AG (the former Bayerische Hypo- und Vereinsbank AG) as planned. The transaction is subject to the required regulatory approvals, the closing is planned for 1 June 2010. (For details see “Events after the balance sheet date” in note 4 of the notes to the consolidated financial statements on page 61).

– Building a common Europe-wide infrastructure of settlement and back-office service providers in Global Banking Services (GBS) is also one of the core components of the UniCredit business model. At the beginning of 2009, we transferred our subsidiaries BA-CA Administration Services GmbH and Banking Transaction Services s. r.o., Czech Republic, to UniCredit Business Partner S.p.A., Italy;


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in return we received a 28.81% shareholding interest in that com-pany, which is accounted for under the equity method. The special-ised service provider thus created has 7,000 employees in six countries and serves as back-office service specialist for the entire UniCredit Group. As part of the bundling of IT services within UniCredit Group, WAVE Solutions Information Technology GmbH was transferred to UniCredit Global Information Services S.p.A. (UGIS) with effect from 1 May 2009, against a 10.02% shareholding inter-est in that company. With 4,500 employees located in 19 cities in eight European countries, UGIS is one of the largest IT companies in Europe.

In our new incentive system we placed greater emphasis on customer satisfaction and sustainable performance measurement standards to balance short-term earnings targets. Moreover, we have geared the incentive system at the top management level (execu-

tives) to longer-term performance, with a possibility of downward adjustments over three years (deferred payments).

Achieving the objective of sustainability also involves listening to criticism and the suggestions of the bank’s employees. The annual People Survey provides the bank with regular and comprehensive information which is taken into account in planning concrete meas-ures for improvement. On the basis of feedback received in this man-ner (73% of all Bank Austria employees participated in the most recent People Survey) we prepared detailed action plans – as in the previous year – for all business areas, subsidiaries and service units. Implementation of the measures specified in the action plans is monitored on an ongoing basis. The bank also reviewed the quality of services provided by six Service Lines and Competence Lines by inviting their internal customers to express their opinions as part of the Listening to Inside Clients surveys.

Condensed income statement of Bank Austria*) (€ m)

CHANGE

2009 2008 € M IN %

Net interest 4,733 4,657 +77 2%Dividend income 54 587 –533 – 91%Other income from equity investments 89 123 –34 –27%Net interest income 4,877 5,367 –490 – 9%Net fees and commissions 1,831 2,076 –245 –12%Net trading, hedging and fair value income/ loss 326 –418 +744 n.m.Net other expenses/ income 211 201 +10 5%Net non-interest income 2,369 1,860 +509 27%OPERATING INCOME 7,245 7,227 +19 0%Payroll costs –1,894 –2,235 +341 –15%Other administrative expenses –1,389 –1,371 –18 +1%Recovery of expenses 2 3 –1 –39%Amortisation, depreciation and impairment losses on tangible and intangible assets –333 –331 –2 +1%OPERATING EXPENSES –3,615 –3,935 +320 –8%OPERATING PROFIT 3,630 3,292 +338 +10%Goodwill impairment –19 –1,027 +1,008 – 98%Provisions for risks and charges –114 –87 –27 +31%Restructuring costs – 9 –6 –3 +53%Net writedowns of loans and provisions for guarantees and commitments –2,267 –1,012 –1,255 >100%Net income from investments 113 344 –231 –67%PROFIT BEFORE TAX 1,335 1,505 –170 –11%Income tax –182 –222 +40 –18%NET PROFIT 1,152 1,283 –131 –10%Net profit attributable to the parent company 1,102 1,144 –43 –4%Minorities 51 139 –88 –63%

n.m. = not meaningful

*) Bank Austria’s income statement as presented in this table is a reclassified format corresponding to the format used for segment reporting. See notes (56) and (57) on pages 90 to 97 of this report.





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Income statement for 2009Despite the factors weighing on performance, operating income was remarkably stable in 2009. Contributions from the various components of income varied considerably, with trends which in many cases moved in the opposite direction compared with 2008. As financial markets returned to normal conditions, the net trading, hedging and fair value result showed a significant swing into posi-tive territory while net interest income declined because the item includes dividend income, which was lower than in the previous year.

Within operating income, net interest rose slightly, by 2%, to € 4.7 bn in 2009; in view of the economic environment, this was a satisfactory development. The CEE segment again accounted for almost two-thirds (63%) of net interest but its contribution was slightly lower than the record level of the previous year, reflecting the economic slowdown from quarter to quarter in 2009 and the depreciation of various currencies. Adjusted for exchange rate movements 1), net interest in CEE rose by close to 7%; in this con-text, our large operations in Turkey and our Ukrainian banking sub-sidiary achieved high growth rates of 42% and 48%, respectively, in local currency. Otherwise, net interest, the most important income component, was unusually weak as volume declined across the CEE region. This development is hardly surprising against the background of the high uncertainty experienced in spring 2009 and the stabilisation efforts undertaken in the region. In the Austrian business divisions 2) net interest rose by 10% to € 2.3 bn, predomi-nantly in the new CIB Division, which comprises the corporate banking business of the former Corporates Division and the trading and capital markets activities of the former MIB Division. The increase was mainly driven by successful treasury operations. Some of the growth resulted from structured hedging strategies and is to be seen in the context of offsetting positions reflected in net trad-ing, hedging and fair value income. Interbank business on both sides of the balance sheet was reduced significantly. In current business with retail and corporate customers, deposits rose signifi-cantly while lending volume was slightly lower than in the previous

year. Interest-based commercial banking business in Austria made a stable contribution to overall results while recording differing trends in margins.

Despite the slight increase in net interest in 2009, net interest income as a whole declined by € 490 m or 9% from the previous year as dividends and similar income were € 54 m, down by € 533 m from the 2008 figure. This development reflects the above-mentioned special effect: at the end of 2008 we sold profit-sharing rights in the B&C foundation. The sale included a special dividend of € 415 m (which was partly offset by a capital loss of € 163 m reflected in net income from investments). Without this one-off income in the comparative figure for 2008, dividend income was down by € 118 m, which may be explained by general eco-nomic trends. Other income from equity investments (€ 89 m) also fell in 2009, mainly due to weaker leasing business. Adjusted for changes in the group of consolidated companies (including the spe-cial dividend related to B&C), net interest income declined by 2%; if the growth rates of the CEE contribution are adjusted for exchange rate movements, net interest income rose by 6%.

Operating income in 2009 – Bank Austria as a whole (€ m)

2009 2008 CHANGE OvER PREv. yEAR

€ M % % ADj. 1) CONST. 2)

Net interest income 4,877 5,367 –490 – 9% –2% +6%of which: net interest 4,733 4,657 +77 +2% +2% +9%Net fees and commissions 1,831 2,076 –245 –12% –10% –4%Net trading result 326 –418 +744 n.m. n.m. n.m.Operating income 7,245 7,227 +19 +0% +7% +15%1) 2008 adjusted for changes in the consolidation perimeter – 2008 restated excluding special B&C dividend of € 415 m, see segment reporting (note 57 on page 92). 2) Additionally adjusted for exchange rate effects in the CEE segment (translation at constant exchange rates).n.m. = not meaningful

Net fees and commissions continued to decline in 2009, falling by 12%. In CEE, net fees and commissions were down by 9% (adjusted for exchange rate changes, the figure rose by 1%). In Austria, net fees and commissions started to decline in 2008, decreasing by a further 10% in 2009 and accounting for only 28% of operating income, compared with some 40% in 2007. The main reason for this development was the lacklustre securities business. Advisory services in business with large corporates stabilised most recently. Fee and commission expenses for loan portfolio manage-ment are a significant factor. Commissions from payment transac-tions have been affected by structural changes (including SEPA) for some time, and foreign trade services additionally reflected eco-nomic trends. Positive contributions came from guarantee commis-sions.

1) Income statement items of our CEE subsidiaries are translated into euro at average exchange rates for the period. As many CEE currencies depreciated strongly between November 2008 and March 2009 and then moved sideways, the income statement reflects a significant exchange-rate loss which diminished the operating performance of the banks and of the CEE segment as a whole, and had an impact on Bank Austria’s overall results. For the operating items in the CEE Division, the exchange rate effect is about 12%. As the large increase in the provisioning charge mainly related to the countries whose currencies depreciated most strongly, the difference between the reported rate of change in profit before tax of the CEE Division and the relevant rate of change adjusted for exchange rate movements narrows to two percentage points. In respect of changes in exchange rates, rate hedging transactions relating to the current profits for the year expected in CEE are accounted for in the net trading, hedging and fair value result of the Corporate Center.2) The terms “Austrian business divisions”, “Austrian segments”, “Austrian customer business”, “Austrian core market” or simply “Austria” as used in this report refer to the total figures for the Retail, Private Banking and CIB (the new Corporate & Investment Banking Division, which also comprises the former MIB Division) segments. This corresponds to the figure for the bank as a whole without the CEE segment and without the Corporate Center. Where the Corporate Center is included in the Austrian customer business, this is indicated in a footnote.


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The net trading, hedging and fair value result turned from a net loss of € 418 m to net income of € 326 m in 2009. The positive swing of € 744 m was the main factor for the strong increase in operating income. It was partly due to the improvement, from € 287 m to € 496 m, in the net trading performance of the CEE sub-sidiaries, which was due to special effects in connection with cur-rency depreciation (increase in value of foreign currency positions) and the repurchase of the bank’s own issues; the return of interest rate spreads, which had widened significantly, to more normal levels after the confidence crisis in March had been overcome; and lively customer business in interest rate management and foreign exchange trading. The strongest growth (and the largest trading profit) was achieved in Russia, followed by Croatia and Turkey. In the CIB Division, which includes trading activities of the former MIB Divi-sion, the net trading performance for 2009 was significantly stronger as capital markets gradually recovered and new issue business picked up, but the figure was still negative: a net loss of € 224 m after a net loss of € 684 m for 2008. After substantial mark-to-mar-ket losses in the previous year, trading positions in 2009 reflected the impact of a special accounting effect. Part of the asset-backed securities positions which we had reclassified from the trading port-folio into loans and receivables with customers at their fair values in the middle of 2008 were reclassified back into financial assets held for trading in September 2009. This related to synthetic ABSs, which are not eligible for reclassification pursuant to a clarification issued by the IFRS Board in spring 2009. As a result of this correction, the intermediate valuation losses arising from mark-to-market valuation of these synthetic ABSs had a negative impact of € 66.5 m on the net trading, hedging and fair value result.

➔ In the most challenging environment experienced in many years, and despite several special factors, operating income for 2009 totalled € 7.2 bn, matching the previous year’s level. The contribu-tions from the Austrian business divisions and from CEE were in the ratio of 40 to 60. Adjusted for changes in the consolidation perimeter (recast of current income contributions from companies sold; elimi-nation of the special dividend), operating income grew by 7%; addi-tionally adjusted for exchange rate movements (CEE currency depre-ciation), revenue growth was about 15%.

Operating expenses in 2009 € M +/– PREv. yEAR COST/ INCOME RATIO

2009 2008 2009 2008

Total 3,615 3,935 1) –8% 49.9% 54.4%Austrian business divisions 1,362 1,427 –5% 47.1% 61.0%

CEE 1,944 2,224 –13%2) 42.2% 47.0%Corporate Center 309 297 +4% n.m. n.m.

1) Sum total of business segments and restatement difference. 2) Adjusted for exchange rate changes: –4%.

Operating expenses in 2009 were reduced by € 320 m or 8% to € 3,615 m. The figure declined also by 3.5% on a like-for-like CEE exchange rate basis. The cost / income ratio was down by 4.5 percentage points to just below 50%. Cost reductions were achieved in all business divisions. They are not only the result of sev-eral cost-containment rounds since the middle of the previous year; they were also due to the focus on customer-centred core business and efforts to enhance efficiency in back-office and settlement activi-ties. In the Austrian business divisions, costs in 2009 were 5% lower than in the previous year, with the Retail Division making the largest contribution to the reduction. In the newly created CIB Division, costs were also lower. Over the past few years, since the end of 2005, Bank Austria has reduced costs in the Austrian business divisions by € 406 m or 23% (–6% on an annual average). Operating expenses in the CEE Division in 2009 showed the strongest reduction of 13%; even at constant exchange rates, the cost reduction was almost 4%. The cost / income ratio in CEE declined from 47.0% to 42.2%. This is noteworthy because it was only in 2009 that the expansion of the branch network in 2008 was fully reflected in costs. At the end of 2009 the number of branches was down by a net 54 from the previ-ous year, but compared with year-end 2007, our CEE branch network grew by 793 branches. The number of employees in the CEE Division declined by 3,726 full-time equivalents (FTEs) in 2009, but exceeded the year-end 2007 level by 8,684 FTEs. While staff numbers were lower in almost all countries, good progress in integrating our most recently acquired banking subsidiaries was the most important factor in this context: in Kazakhstan, the number of employees declined by 690 FTEs in 2009, as a result of several programmes for efficiency enhancement. In Ukraine, FTEs declined by 1,706 as regional admin-istrative centres were reduced. A significant rise in staff numbers was only recorded in Hungary (+80 FTEs) in 2009.

➔ Operating profit rose by € 338 m or 10% to € 3,630 m, sup-ported by revenue growth and cost reduction. In the Austrian busi-ness divisions, operating performance was driven by an improvement in the net trading result (after a high net loss in the crisis year 2008), a strong increase in net interest income and by lower costs. In Cen-tral and Eastern Europe, currency depreciation makes developments seem more unfavourable than they actually are: adjusted for exchange rate movements, operating profit in CEE rose by 21%, rather than 6%, because absolute growth of revenues was five times the amount by which costs were reduced.

Net writedowns of loans and provisions for guarantees and commitments in 2009 were € 2,267 m, more than double the fig-ure for 2008 (€ 1,012 m). Of the € 1,255 m increase compared with the previous year, 6% came from Austria and 94% from the CEE segment. In the first nine months of 2008 the current provisioning charge was very low, also in a long-term comparison. The cost of risk (provisioning charge measured in basis points against average loans





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to customers) was 53 bp; before the crisis, risk intensity in CEE was at about the same level as in Austria. The deterioration started suddenly in the fourth quarter of 2008 when economic activity slumped and, in the wake of the Lehman Brothers insolvency, default risk materialised for the first time in many years also in the financial sector.

After a slight decline at the beginning of 2009, which reflected the easing in financial markets, net writedowns of loans and provisions for guarantees and commitments rose strongly from quarter to quar-ter. In the fourth quarter of 2009, the cost of risk for the bank as a whole was 212 basis points of average loans to customers. In this context, developments in Austria and CEE, as well as in the various countries and country groups within Central and Eastern Europe, var-ied widely. In the Austrian business divisions, after the peak reached in the fourth quarter of 2008, net writedowns of loans remained steady at a higher level and with volume slightly declining. The provi-sioning charge in CEE, on the other hand, continued to rise until the third quarter of 2009 and then stabilised (see chart). The cost of risk in Austria was 96 basis points in the fourth quarter of 2009 and 82 basis points for the year as a whole (only 10 bp more than in the previous year). In CEE, the cost of risk rose from 131 bp at the end of 2008 to 342 bp in the final quarter of 2009; the provisioning charge rose from quarter to quarter (not on an annual average), while volume declined by over 10%. A typical feature of a young and dynamic market is that the higher risk associated with banking busi-ness compares with a higher net interest margin (net interest as a percentage of loans to customers, most recently 535 bp), which proved to be remarkably resilient during the crisis.

In Austria, net writedowns of loans and provisions for guarantees and commitments were 16% higher than in the previous year. The Retail Division and the Corporates & Investment Banking (CIB) Division made almost equal contributions to the absolute increase of € 76 m to a total of € 549 m (see table). The cost of risk in the Retail segment is structurally high, with only minor fluctuations across the business cycle (128 bp in 2009 after 103 bp in 2008). Net additions to loan loss provisions in 2009 were 17% higher than a year earlier. All of the increase was due to the Small Busi-nesses sub-segment, while the provisioning requirement for Mass Market and Affluent customers decreased slightly. Unlike previous recessions, the economic setback this time strongly affected small businesses from the very beginning. Labour market measures such as short-time working arrangements and sabbatical leave helped to delay an increase in unemployment in the Mass Market and Afflu-ent sub-segments. The full impact of the crisis on the provisioning charge in this area is therefore expected to occur in 2010.

Net writedowns of loans and provisions for guarantees and commitments € M PROvISIONING CHARGE COST OF RISk 1) vOLUME 2)

2009 2008 +/– 2009 2008% PREv.

yEAR

Retail 243 208 +34 128 bp 103 bp –6%Private Banking 0 0 –0 16 bp –3 bp +18% 3)

CIB 306 266 +41 63 bp 55 bp +2%Austrian segments 549 474 +76 81 bp 69 bp –1%CEE 1,718 537 +1,180 287 bp 91 bp +1%Bank Austria as a whole 2,267 1,012 +1,255 178 bp 80 bp +0%

1) Provisioning charge as a proportion of average loans to customers, in basis points. / 2) Change in average loans to customers over previous year. / 3) Volume growth resulted from the transfer of customer relationships and the related loans from the Retail Division, which is a significant factor because previously lending volume was very low.

Since the fourth quarter of 2008, the CIB Division has faced an unexpectedly strong increase in problem loans which are trans-ferred to Special Accounts Management, a development reflecting the downturn in industrial activity. Initially, as a typical feature of the credit cycle, there was an increase in those impaired loans which are not yet non-performing and thus trigger a lower provi-sioning requirement. Therefore the migration of the affected com-panies along the rating classes is proceeding at a slow pace for the time being, and in many cases restructuring efforts are successful. In the second half of the year, as economic sentiment indicators improved, we saw a distinct decline in loans newly transferred to Special Accounts Management. The provisioning charge in the CIB Division, at € 306 m, was 15% higher than in the previous year; however, in the absence of major insolvencies, and thanks to early identification and restructuring efforts made jointly with customers, the cost of risk remained moderate, at 63 bp, in the current eco-nomic environment.

Cost of risk and net interest margin Net interest and provisioning charge in basis points of average loans to customers

2008 2009Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

2008 2009Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

0

200

100

300

400

500

600 Net interest margin Q4 09: 525 bp

Cost of risk Q4 09: 96 bp

Cost of risk Q4 09: 342 bp

Central Eastern Europe

Austrian business divisions

Net interest marginQ4 09: 268 bp


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The higher provisioning requirement in mature markets such as Aus-tria is a late effect of the business cycle, while our banking subsidia-ries in CEE were faced with an entirely new situation with the onset of the global recession. Net writedowns of loans and provisions for guarantees and commitments increased at our subsidiaries in Central Europe – the downturn had spread quickly to the countries’ business sectors as a result of the high degree of integration that has been reached – and in the raw material-exporting countries as well as in South-East Europe; the rise was lowest in the Balkan countries. There are special factors that should be noted in this context. The exception-ally strong increase in 2009 was limited to only a few countries, and for different reasons: Kazakhstan and Ukraine accounted for 40% of the provisioning charge, and Russia and Turkey for 31%. These coun-tries also accounted for the increase in the provisioning charge in these proportions (43% and 29%, respectively). However, given the widely differing economic conditions in these countries, putting them in such groups is hardly justifiable. Kazakhstan and Ukraine are young economies undergoing a convergence process, whose banking sys-tems are still in the midst of structural change. In Kazakhstan, where a culmination of legacy problems and the recent business and com-modities cycle presented major challenges, measures were initiated in summer 2009 for restructuring the banking sector; these measures went as far as nationalisation. Adjustments also related to other sec-tors of the economy, mainly in the previously booming construction industry and in the real estate sector. The provisioning charge quadru-pled from € 124 m to € 499 m. The cost of risk rose from 268 bp to 1,200 bp, a development which also reflects a 10% decline in lending volume. Ukraine was hit hardest by the economic and financial crisis as well as external financing problems aggravated by internal political instability; this can be seen from the depreciation of its currency, which averaged more than 30% in 2009. The provisioning charge for Ukraine was € 228 m, up from € 89 m in the previous year, with equal contributions from the corporate and retail banking segments. The cost of risk was 653 bp, with volume also down by about 11%.

Net writedowns of loans and provisions for guarantees and commit-ments rose significantly in Russia, too, in 2009, from € 77 m to € 207 m, with corporate customers accounting for about 80% of the total and retail customers for about 20%. Turkey is a special case in several respects: the country’s risk profile is structurally high, reflecting the importance of credit card business – where the bank is market leader – and business with small and medium-sized enter-prises; moreover, in Turkey the recession started earlier and is now in its late stage. The provisioning charge in Turkey was € 299 m, the comparative figure of € 91 m for the previous year was low due to one-off effects.

In the other countries, net writedowns of loans and provisions for guarantees and commitments tripled from a combined € 155 m to € 484 m. There were no significant differences in the country groups of South-East Europe and Central Europe, the most favourable devel-opment was seen in the Balkan countries. Among the individual

countries, special mention should be made of Hungary and the Czech Republic, where the provisioning charges more or less tripled in 2009 while the cost of risk was disproportionately low, at 198 bp and 131 bp, respectively.

Net income from investments for 2009 was € 113 m, down by € 231 m from the previous year. The decline is almost entirely attrib-utable to developments in equity interest management: in 2009, the share of current profits of the Polish banking subsidiaries (as defined in the terms and conditions of the sale of BPH in 2006) was down by € 131 m from 2008. There were no significant gains on the sale of companies in 2009, while net income from investments in the previ-ous year included € 109 m from such one-off effects: the sale of Hypo Stavebni Bank, a Czech building society, and of BPH TFI, the Polish asset management business of BPH, as well as the sale of the equity interest in the Budapest Stock Exchange, of Pioneer Invest-ments Austria (PIA) and of real estate resulted in gains totalling € 272 m in 2008, which were partly offset by a realised book loss of € 163 m on the sale of B&C Holding. Among the other non-operating items in the income statement, additions to provisions for risks and charges were € 114 m, higher than in the previous year (€ 87 m). Following the significant impairment loss of € 1,027 m on goodwill recognised in the income statement for 2008, the additional impair-ment loss on goodwill resulting from the impairment test at the end of 2009 was as low as € 19 m (mostly relating to CJSC UniCredit Securities, the former ATON).

The income statement items between operating profit and profit before tax for 2009 were a net charge of € 2.3 bn after a net charge of € 1.8 bn in the previous year. In 2009, these non-operating charges were thus 28% or € 509 m higher than in 2008. In the pre-vious year, the impairment loss of over € 1 bn on goodwill reflected the new assessment of the banking subsidiaries which had been acquired when CEE business was booming. The provisioning charge exceeded the one billion euro mark also in that year. In 2009, net additions to loan loss provisions were € 2.3 bn, absorbing almost two-thirds (63%) of the bank’s operating profit.

Results for 2009 compared with 2008 (€ m)

2009 2008 +/– PREv. yEAR

Operating profit 3,630 3,292 +338 +10%Net amount to be deducted 1) –2,296 –1,787 –509 +28%Profit before tax 1,335 1,505 –170 –11%Net profit attributable to the parent company 1,102 1,144 –43 –4%… ROE after tax 8.1% 7.8%1) Provisioning charge, goodwill impairment, net income from investments, provisions for risks and charges, restructuring costs

➔ Profit before tax declined by € 170 m or 11% to € 1.3 bn. After deduction of income tax, net profit for 2009 was € 1,152 m (–10%). One of the reasons for the decline in minority interests





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(€ 51 m after € 139 m) was the weaker performance of the relevant subsidiaries. Net profit attributable to the parent company for 2009 was € 1,102 m, down by € 43 m or 4% from the previous year. Return on equity (ROE after tax) rose from 7.8% in 2008 to 8.1% in 2009, reflecting the development of average equity. In the two years preceding 2008, return on equity reached levels that were double the figure for 2009: in 2006, the first year in which Bank Austria operated in the new structure, ROE reached 15.8%; for 2007, the last year before the financial market crisis escalated, ROE was 17.0%.

Volume, profitability and resourcesIn view of the recession and of the exchange rate effects in 2009, it is noteworthy that average loans and receivables with customers remained at the high level of € 127.2 bn. Average volume in CEE was over 2% higher despite currency depreciation, while the average figure for the Austrian business divisions was down by 0.6% from the previous year. The impact of the recession determined develop-ments during the year as the credit cycle is lagging the business cycle. Lending volume in 2009 declined from quarter to quarter, though only slightly, reflecting the recession, exchange rate effects and, not least, increased loan loss provisions. At the end of 2009, the gross volume of loans and receivables with customers was down by 5% from year-end 2008; net of loan loss provisions, the figure was about 6% lower. In CEE, the year-on-year decline in net loans was 9%, more pronounced than in Austria (–4%), but the expansion in previous years was significantly stronger. The deterioration in credit quality resulted in a strong increase of 45% to € 9.4 bn in impaired loans in 2009; such loans accounted for 7.3% of total loans (gross), up from 4.8%. CEE accounted for more than four-fifths of the € 2.9 bn increase in impaired loans, with

Kazakhstan and Ukraine accounting for about 40% of the CEE por-tion. As specific writedowns on impaired loans increased by 52%, the coverage ratio improved from 49.4% at the end of 2008 to 51.9% at year-end 2009. Non-performing loans rose from 2.9% to 3.5% of gross loans, but they declined slightly in the final quarter of 2009. The coverage ratio through specific writedowns in this cate-gory improved from 64.5% to 69.8%.

In 2009, average risk-weighted assets (RWAs) totalled € 119.9 bn based on all risks, a decrease of 10% (Basel II /Basel II) from the previous year. Following the transition from Basel I to Basel II, there is no consistent time series for credit and market risk (for segment reporting purposes) in the comparative period. In 2009, measured by figures at reference dates, risk-weighted assets under Basel II declined. This decrease is due to the fact that the IRB approach is applied to a growing part of the bank’s operations. Another factor to be taken into account is that interbank business included in risk-weighted assets was reduced significantly – in line with strategy – and market risk also declined as a result of the reorientation of trad-ing activities.

The above-mentioned increase in the provisioning charge had a sig-nificant impact on the bank’s operating performance in 2009, weigh-ing down profits and key performance indicators. Return on equity before tax for 2009 was 9.4% for the bank as a whole. The Austrian business divisions, which achieved good results and benefited from the fact that the increase in the provisioning charge remained low, generated a return on equity before tax of 10.7%; profitability in CEE fell from 21.5% to 9.2% as net writedowns of loans and provisions for guarantees and commitments tripled.

UniCredit Group uses marginal Economic Value Added (mEVA) to measure value creation beyond the cost of capital (net operating

Asset quality Bank Austria total / end of period (€ m)

CHANGE OvER

Q4 08 Q1 09 Q2 09 Q3 09 Q4 09 Q3 09 Q4 08

Gross loans to customers 135,849 133,523 131,687 128,990 129,293 0% –5%Total writedowns –3,876 –4,223 –4,614 –5,061 –5,691 12% 47%Net loans to customers 131,973 129,300 127,073 123,929 123,602 0% –6%

Gross impaired loans 6,483 7,207 7,587 8,369 9,391 12% 45%… % of loans to customers 4.8% 5.4% 5.8% 6.5% 7.3%Specific writedowns –3,204 –3,517 –3,887 –4,310 –4,878 13% 52%Coverage ratio 49.4% 48.8% 51.2% 51.5% 51.9%

of which: gross non-performing loans 3,873 3,700 4,062 4,681 4,466 –5% 15%… % of loans to customers 2.9% 2.8% 3.1% 3.6% 3.5%Specific writedowns –2,499 –2,609 –2,839 –3,086 –3,116 1% 25%Coverage ratio 64.5% 70.5% 69.9% 65.9% 69.8%


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profit after tax less minimum return required by the market on equity capital employed; “marginal” refers to the exclusion of goodwill impairment).1) While the key indicators of value creation in the previ-ous year reflected the impact of market risk and revenue shortfalls in capital market activities, the increase in the cost of risk in commer-cial banking business in 2009 had an adverse effect on key indica-tors despite a strong operating performance. In 2009, mEVA of the bank as a whole amounted to € 268 m after € 1,091 m as reported in the previous year. The risk-adjusted return on risk-adjusted capital (marginal RARORAC) thus declined from 12.5% to 3.3%. The cost of capital was nearly equally high (in absolute terms) because the effects of declining risk-weighted assets and the higher rate of cost of capital more or less offset each other. In calculating this “sustain-able” measure of value creation, profits are adjusted for the major one-off effects: the volatile net income from investments is not included, and the goodwill impairment losses of over € 1 bn recogn-ised in 2008 are taken into account again. As a result, the decline in mEVA is much stronger than the decrease of profit as shown in the income statement (–€ 43 m or –4%).

In the EVA calculations for the business divisions, the extreme move-ments in the crisis years 2008 and 2009 (fluctuating, partly negative trading performance, but strong increases in net interest income and in the provisioning charge in CEE) have a leverage effect, given that EVA shows only value beyond the cost of capital. This also led to sig-nificant differences in value created by the various business divi-sions.2) In Austria (in the new definition of customer business, i. e. including the restructured former MIB Division) value creation in 2009 amounted to a substantial € 582 m, whereas in CEE the provi-sioning charge kept mEVA down to € 54 m; nevertheless, in what was one of the most difficult years in decades, CEE still made a posi-tive contribution to overall value creation.

As at 31 December 2009, the number of employees was 60,594 full-time equivalents (FTEs), down by 6,408 FTEs from the end of the previous year. Most of the reduction related to CEE (down by 3,726 FTEs), where staff reduction is to be seen in connection with the eco-nomic downturn and, more importantly, progress of integration in Kazakhstan (with a reduction of 690 FTEs) and the streamlining of the sales and administrative network in Ukraine (resulting in a

decrease of 1,706 FTEs). The sharp decline in staff numbers in Austria simply reflects the reorganisation of back-office and adminis-trative functions within UniCredit Group: with the transfer of subsid-iaries engaged in back-office, administrative and IT activities, some 2,501 FTEs are no longer included in the consolidation perimeter, explaining the decline of 2,682 FTEs in the business divisions other than CEE.

Resources and profitability in 2009

BANk AUSTRIA AUSTRIA 1) CEE

Relative sizeAverage loans to customers (€ bn) 127.2 68.2 59.9Average RWAs under Basel II (€ bn) 119.9 43.1 71.2Operating income (€ m) 7,245 2,894 4,612

Growth over previous yearAverage loans to customers (€ bn) +0% –1% +1%(Average RWAs under Basel II (€ bn) 2) –7% –24% +5%)Operating income (€ m) +0% +24% –3%

Profitability and value creationROE before tax 3) 9.4% 10.7% 9.2%marginal EVA, € m 4) 268 582 54RARORAC 3.3% 21.0% 0.8%

EquityAverage equity (€ bn) 5) 14.2 8.6 10.0% over previous year –8% +0% +6%

Employees (full-time equivalents)Year-end 2009 60,594 5,933 52,332Year-end 2008 67,002 6,127 56,058

BranchesYear-end 2009 3,088 318 2,770Year-end 2008 3,166 342 2,824

1) Retail, Private Banking and Corporate & Investment Banking (CIB) Divisions.2) Comparison not consistent in terms of methodology (Basel II compared with Basel I). 3) ROE = profit before tax / institutional capital.4) Calculated using the new methodology based on capital allocated pursuant to RWAs under Basel II.5) Subsidiaries are included at actual IFRS capital. The adjustment item with respect to the consolidated IFRS capital of the Bank Austria Group is shown in the Corporate Center.

1) In 2009, the methodology used by UniCredit Group was changed. The new methodology is based on the use of capital allocated to subsidiaries, rather than their regulatory capital, in calculating value creation. The overall result is largely unaffected by this change, while the impact on mEVA of the CIB Division and the Corporate Center is stronger (given the difference in capitalisation of UniCredit CAIB, which has excess capital). Moreover, data for 2008 (as in segment reporting) are based on risk-weighted assets (RWAs) under Basel I, while data for 2009 follow the Basel II rules. This break in statistical data has no major effect on the overall result, either.

2 ) The difference between the sum total for the business divisions and the overall result includes intersegment items and the liquidity costs and funding costs of equity interest management (in the Corporate Center).





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Balance Sheet and Capital Resources

Balance sheet developments Bank Austria’s total assets declined in 2009. As at 31 December 2009, consolidated total assets were € 194.5 bn, down by € 27.7 bn or 12% from year-end 2008. One of the reasons was the economic recession, but its impact was weaker than expected. The main factor for the contraction of the balance sheet in 2009 were structural changes in business, with a significant decrease of items related to trading and capital market activities, and lower volumes of interbank business on both sides of the balance sheet. This reflected general market developments and the intended reduction of proprietary trad-ing. Another factor to be noted in the context of consolidation of our CEE subsidiaries’ balance sheets is the depreciation of many CEE currencies, although in a year-on-year comparison this effect was not as strong as in the translation of items in the income statement, which is based on annual averages of exchange rates.

Like the consolidated balance sheet at 31 December 2008, the consolidated balance sheet at 31 December 2009 includes disposal groups classified as held for sale, which are shown in accordance with IFRS 5 in the items Non-current assets and disposal groups classified as held for sale and Liabilities included in disposal groups classified as held for sale. At the end of 2009 these items showed the investment bank UniCredit CAIB AG and UniCredit CAIB Securities UK Ltd. In autumn 2008, in connection with the concentration of Markets & Investment Banking activities of UniCredit Group which is now under way, the sale process for the sale of UniCredit CAIB AG to Bayerische Hypo- und Vereinsbank AG, Munich, was prepared. Appropriate measures aimed at a reorientation of the subsidiaries were also taken. The CEE investment banks, which in the previous

year were classified as held for sale, will remain within Bank Austria on the basis of a decision made by the Management Board in Sep-tember 2009. The sale process for Card Complete GmbH, which was also classified as held for sale at year-end 2008 and in the preceding quarters, was stopped in September 2009 as bids for the company were not satisfactory. For this reason we reintegrated the consolidated subsidiary in the relevant items of the consolidated balance sheet. More detailed information on disposal groups classi-fied as held for sale is given in notes 38 and 47 on pages 80 and 84 of this report.

Non-current assets and disposal groups classified as held for sale declined by € 20.9 bn to € 13.2 bn, a decrease of 61% from year-end 2008. Liabilities included in disposal groups classified as held for sale were down by € 22.6 bn or 68% to € 10.5 bn. Most of the decline related to UniCredit CAIB AG, which was made to focus on those trading activities outside customer-driven business which were intended to be sold within UniCredit Group (proprietary trading, money market operations and funding). These projects were imple-mented after the balance sheet date: units engaged in customer-driven activities as well as treasury and liquidity management were spun off from UniCredit CAIB AG on 8 February 2010 and bundled within UniCredit Bank Austria AG, and the contract on the intra-group sale of UniCredit CAIB AG to UniCredit Bank AG, Germany (the former Bayerische Hypo- und Vereinsbank AG) was signed on 22 February 2010. The closing of the transaction is planned for 1 June 2010. The reintegration of Card Complete from the held-for-sale items into the relevant balance sheet items, on the other hand, did not have a major effect because the company is a service provider and the amount of its total assets is very low.

Balance sheet – analytical presentation of major items 1) (€ m)

BALANCE SHEET AS REPORTEDITEMS CLASSIFIED

AS HELD FOR SALE REINTEGRATED

31 DEC. 09 +/– 31 DEC. 08 31 DEC. 09 +/– 31 DEC. 08

ASSETSFinancial assets held for trading 4,137 –352 –8% 15,694 –6,591 –30%Other financial assets2) 16,128 –227 –1% 16,412 –1,017 –6%Loans and receivables with banks 23,076 –3,053 +15% 23,087 –8,338 –27%Loans and receivables with customers 123,602 –8,371 –6% 123,602 –11,204 –8%Non-current assets and disposal groups classified as held for sale 13,210 –20,858 –61%Total assets 194,459 –27,693 –12% 194,459 –27,693 –12%

LIABILITIES AND EQUITYFinancial liabilities held for trading 915 –1,240 –58% 9,578 –5,892 –38%Deposits from banks 33,362 –2,149 –6% 33,362 –20,058 –38%Primary funds 125,863 –1,898 –1% 125,863 –2,204 –2%Equity 14,388 +151 +1% 14,388 +151 +1%Liabilities included in disposal groups classified as held for sale 10,492 –22,646 –68%Total liabilities and equity 194,459 –27,693 –12% 194,459 –27,693 –12%1) Assets / liabilities classified as held for sale were added back to the relevant balance sheet items from which they were deducted. / 2) Sum total of the following items: financial assets at fair value through profit or loss, available-for-sale financial assets, and held-to-maturity investments.


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As UniCredit CAIB is classified as held for sale, the strongest effects – reflecting the company’s business activities – are seen in financial assets / liabilities held for trading, financial assets at fair value through profit or loss, available-for-sale financial assets, held-to-maturity investments and in interbank business (mainly on the liabili-ties side). If the amounts classified as held for sale (see notes 38 and 47) are added back to the relevant balance sheet items, it is possible to analyse balance sheet developments in economic terms (see ana-lytical presentation):

On the assets side, financial assets held for trading were € 4.1 bn, down by 8% from the figure at year-end 2008. If the amounts classified as held for sale are added back to this item, there is a decline of € 6.6 bn or 30%. Other financial assets of various categories were down by a combined 1% compared with the end of 2008, or by about € 1 bn or 6% if the CAIB contribution is included. At the end of 2009, loans and receivables with banks were up by € 3.1 bn or 15% on the year-end 2008 figure, but down by € 8.3 bn or 27% if UniCredit CAIB AG is included.

As at 31 December 2009, loans and receivables with customers, net of the higher loan loss provisions, totalled € 123.6 bn, in the balance sheet and also on a pro-forma basis in the analytical presentation. They declined by € 8.4 bn or 6% on account of weak demand, low transaction volumes, a strong increase in writedowns, and – last but not least – due to adverse exchange rate effects. Nevertheless, loans and receivables with customers accounted for 63.6% of total assets, up from 59.4%. Current account loans (–15%) and credit cards and personal loans (–14%) declined while mortgage loans rose by 14%.

On the liabilities side, the contraction of the balance sheet total is mainly explained by the decrease of € 22.6 bn or 68% in the item Liabilities included in disposal groups classified as held for sale and by the declines in interbank business (–€ 2.1 bn/–6%) and in finan-cial liabilities held for trading (–€ 1.2 bn/–58%). A reintegration of CAIB for analytical purposes shows an even stronger reduction of financial liabilities held for trading (–€ 5.9 bn/–38%) and a sub-stantial decrease of € 20.0 bn or 38% in deposits from banks. Deposits from customers amounted to € 97.0 bn, rising by 2% in the balance sheet. Debt securities in issue decreased by 12% or € 3.8 bn to € 28.8 bn, reflecting the market situation. Primary funds (the sum total of deposits from customers and debt securities in issue) were € 125.9 bn; expressed as a proportion of the balance sheet total, they rose from 57.5% in the previous year to 64.7% in 2009. This means that loans and receivables with customers were covered by primary funds to the extent of more than 100%.

At the end of 2009, equity amounted to € 14.4 bn, a slight increase over the level at year-end 2008 which is a noteworthy development given the banking environment. Measured as a proportion of the bal-ance sheet total, equity rose from 6.4% to 7.4%, with leverage declining from 15.6 to 13.5. The small increase of € 182 m or 1.3%

mainly resulted from income and expenses directly recognised in equity, which were a net amount of € 178 m reflecting the allocation to retained earnings from net profit (+ € 870 m) and the positive changes in reserves in accordance with IAS 39 (+ € 132 m); negative items were exchange differences from foreign currency translation (–€ 552 m) and the net amount related to minority inter-ests (–€ 169 m), with the latter including the recognition of the com-mitment to repurchase minority interests. Apart from dividends paid to minority shareholders (€ 34 m) there were no dividend payments in 2009. As at 31 December 2009, shareholders’ equity (excluding minority interests) was € 13.9 bn, up by € 345 m or 3% on year-end 2008.

Capital resources pursuant to the Austrian Banking ActRisk-weighted assets (RWAs) at the end of December 2009 were € 114.4 bn, down by € 18.8 bn (14.1%) from the year-end 2008 level. The decline resulted partly from economic trends in Austria and abroad and from the lower exchange rates of most CEE currencies as at 31 December 2009. As a result of lower RWAs, the capital requirement for credit risk declined by 13.9% to € 8.1 bn and the capital requirement for all types of risk was € 9.2 bn, down by 14.1%.

Net capital resources increased slightly in 2009, by € 0.2 bn or 2.0% to € 12.5 bn, mainly because of an increase in Tier 1 capital, which was largely offset by declines in the amount of subordinated capital eligible for inclusion and in Tier 3 capital (capital requirement for market risk).

Capital ratios as at 31 December 2009 improved significantly com-pared with year-end 2008. The Core Tier 1 capital ratio (Tier 1 capital without hybrid capital) based on all risks rose from 6.52% to most recently 8.33%. The Core Tier 1 capital ratio based on credit risk improved from 7.36% to most recently 9.37 %.

Capital ratios31 DEC. 2009 31 DEC. 2008

based on all risks 1)

Tier 1 capital ratio 8.68% 6.82%… without hybrid capital (Core Tier 1 capital ratio) 8.33% 6.52%Total capital ratio 10.92% 9.19%

based on credit risk 2)

Tier 1 capital ratio 9.76% 7.70%… without hybrid capital (Core Tier 1 capital ratio) 9.37% 7.36%Total capital ratio 11.29% 9.35%

1) Credit risk, operational risk, position risk and settlement risk.2) 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.





Retail Division(€ m)

2009 20081) CHANGE

Net interest income 722 767 –45 –6%Net non-interest income 404 461 –57 –12%Operating income 1,126 1,228 –102 –8%Operating expenses –807 –858 +52 –6%Operating profit 319 370 –50 –14%Net writedowns of loans –243 –208 –34 +17%Net income from investments 10 6 +3 >100%Other non-operating items –2 – 9 +7 n.m.Profit before tax 84 159 –74 –47%Loans to customers (avg.) 18,929 20,185 –1,257 –6%Risk-weighted assets (avg.) 2) 10,405 15,751 –5,347 –34%Average equity 3) 825 807 +18 +2%Cost / income ratio 71.6% 69.9%Cost of risk 4) 128bp 103bpROE before tax 10.2% 19.6%

1) For segment reporting purposes, the comparative figures for 2008 were restated to reflect the structure and methodology of the reporting period (see note 57 on pages 92 to 97 of this report). / 2) Average risk-weighted assets for 2009 under Basel II (all risks), for 2008 under Basel I (credit and market risk). / 3) Capital allocation to subsidiaries reflects actual IFRS capital (see note 57). / 4) Net writedowns of loans as a proportion of average loans in basis points (bp) per annum. / This information applies to all business segment tables. n.m. = not meaningful

The Retail Division conducts classic banking business. Its perform-ance in 2009 was nevertheless indirectly impacted by the finan-cial market crisis and the deep recession. One of the factors to be taken into account in this context was the change in customers’ preferences, reflected in pronounced restraint in the area of secu-rities investments and complex products, which even continued when financial markets were already improving. Another factor was the low level of interest rates, which burdened business on the liabilities side. Private individuals and, to an even greater extent, small businesses responded to trends in employment and incomes, and the provisioning charge started to rise. In the reces-sionary environment, the Retail Division showed a comparatively stable performance supported by continued efficiency enhance-ment and professional risk management. However, results for 2009 fell short of the previous year’s figures. It should also be noted (especially when interpreting changes in volume figures over the previous year) that the transfer of wealthy private cus-tomers to the Private Banking Division started at the beginning of September 2009 with a view to meeting the needs of this cus-tomer group with an emphasis on specialised services.

On the revenue side, net income was an anchor of stability in 2009: at € 711 m it was only 3% lower than in 2008. Lending business developed favourably, in terms of both volume and reve-nue. The average figure for total loans in 2009 was only slightly lower than in the previous year. Housing loans, the largest cate-

gory within the total, and medium-term/ long-term loans held up well. On the other hand, our customers strongly reduced their short-term overdraft loans and business loans (by up to one quarter), a normal reaction to changes in interest rates and risks. Consumer loans also decreased, confirming consumers’ cau-tious behaviour in view of the economic outlook: Austria’s central bank has stated in a report that private individuals partly use their – still significant – savings to reduce their (new) debt; in making investments they still prefer near-liquidity categories. In line with these trends, sight deposits at Bank Austria rose strongly in 2009, though at the expense of time deposits. As market rates on deposits for longer periods declined, the loss of interest income (opportunity cost) on cash and short-term bank deposits was an argument of diminishing significance. Net interest therefore reflected an unfavourable impact from direct deposits. In 2009, net interest income (€ 722 m) was down by € 45 m or 6% from the previous year. This decline also resulted from one-off effects: dividend income and other income from equity investments, which together with net interest make up net interest income, declined by € 21 m from the previous year, reflecting a special dividend at the end of 2008 and lower profit distributions in a weaker economic environment.

The decrease € 48 m or 10% in net fees and commissions to € 428 m (which still accounts for 38% of operating income) shows the impact of the above-mentioned structural changes and economic trends, especially on commercial services (includ-ing payment transactions) and direct investments. However, the trend improved significantly as the year progressed. A number of the bank’s own issues, which were characterised by simple terms and transparency, were placed within a short time and generated a rise in fee income: thirteen bonds with 3 to 5-year maturities and five US dollar bonds, an inflation-guaranteed bond issue and twelve corporate bonds. PIA fund products with a guarantee, our open-ended real estate fund Real Invest Austria and especially our combined insurance and savings products such as S.M. I.L.E Garant II, offering a capital guarantee, protec-tion against inflation and a guaranteed minimum return, were well received as a long-term investment opportunity by our cus-tomers in the Affluent sub-segment.

➔ Operating income in 2009 reached € 1,126 m and was thus down by 8% from the previous year. About one-third of the € 102 m decrease was due to the decline in dividend income and the net trading performance (the figure for the previous year included a double-digit million euro amount of income from the management of securities held for customer business). This means that against the background of the unfavourable economic environment, revenues remained strong.

Development of Business Segments



Cost management also made a substantial contribution to overall results for 2009. Operating expenses were € 807 m, down by € 52 m or 6% from the previous year. This effect offset about one half of the revenue shortfall associated with the economic downturn. Non-staff costs were lower, part of the reduction was achieved in cooperation with our specialised back-office service provider Admin-istration Services, which was transferred to UniCredit Business Part-ner S.p.A. Operating profit amounted to € 319 m after € 370 m in the previous year (–14%).

Measured against the volume of loans, the provisioning charge in the Retail Division is relatively high across the business cycle, for structural reasons, compared with other business divisions, but it fluctuates less strongly. In 2009, net writedowns of loans and provi-sions for guarantees and commitments rose by 17% to € 243 m, a relatively moderate increase in view of the crisis. The cost of risk was 128 basis points (bp). After a strong increase from the first to the second quarter, the cost of risk subsequently declined (to 112 bp in the final quarter of 2009). This development was exclu-sively attributable to the Small Businesses segment, where the recession has revealed shortcomings within many businesses in the areas of collection of receivables, financial planning and liquidity planning, while the cost of risk for the Mass Market and Affluent sub-segments declined slightly from the previous year’s levels. Unlike previous recessions, the economic setback this time strongly affected small businesses from the very beginning. Labour market measures such as short-time working arrangements helped to delay a strong increase in unemployment in the Mass Market and Affluent sub-segments.

➔ Lower operating profit and a rise in the provisioning charge led to a decline in profit before taxes in the Retail Division from € 159 m in 2008 to € 84 m in 2009. ROE before tax was 10.2% after 19.6% in the previous year.

In all three sub-segments of the Retail Division, our activities are guided by customer satisfaction with our services, efforts to enhance the efficiency of our sales channels and strictly gearing the range of products to meeting customer needs. In the Mass Market sub-segment we established a new web-based, structured sales dialogue, which account managers use at least once a year to con-tact their 200,000 customers in order to be able to focus on their precise needs. We intensified our efforts to win young people and students as customers. Information campaigns on current topics such as foreign currency loans enhance customers’ awareness of potential risks and attract attention to financial assistance pro-grammes which may be used, including those available under Aus-trian legislation to promote SMEs. Training seminars for investment advisers in the Affluent sub-segment, partly offering opportunities to acquire additional qualifications in cooperation with international

institutions of higher education, aimed at further improving the quality of advisory services for diversified investments. The Busi-nessServiceCenter (BSC) concept has developed into a success story in the Small Businesses sub-segment. Originally intended to deal with problem customers, the BSCs now serve 30% of the small businesses which are customers of the bank via telephone through this low-cost and personal service channel. Active contacts with customers have relieved the workload of branches which spe-cialise in serving business customers. This has also helped to enhance customer satisfaction and reactivate customers who did not maintain active relationships with the bank. More over, problem situations have improved through joint efforts in many cases. Spe-cial service packages targeted at various occupational groups have also been highly successful, e.g. those of the Centre of Health Pro-fessionals or the business training programmes for future doctors conducted in cooperation with universities.

Private Banking (€ m)

2009 2008 CHANGE

Net interest income 21 21 +0 +0%Net non-interest income 90 89 +1 +2%Operating income 111 110 +1 +1%Operating expenses –78 –78 +0 –0%Operating profit 33 32 +2 +5%Net writedowns of loans –0 +0 –0 n.m.Net income from investments 0 9 – 9 –100%Other non-operating items 0 1 –2 n.m.Profit before tax 33 42 – 9 –22%Total financial assets (end of period) 15,393 13,138 +2,255 +17%Risk-weighted assets (avg.) 545 423 +122 +29%Average equity 144 166 –21 –13%Cost / income ratio 69.9% 70.9%Cost of risk 16bp –3bpROE before tax 22.8% 25.4%

The new Private Banking Division provides the top segment of customers with integrated services covering all their financial affairs. Since the end of 2008, and step by step, we have been bundling the previous Private Banking & Asset Management (PB&AM) Division within our Private Banking operations. With this measure we intend to achieve a more precise segmentation that is reflected in specialised services geared to meeting the individual needs of our target groups. The first step, taken at the end of 2008, was the sale of Pioneer Investments Austria (PIA) to Pioneer Investments International. PIA is now an affiliated company – backed by a global investment house – with responsibility for mutual fund business in Austria. With fund volume of € 19.6 bn





managed the assets of some 26,500 clients as of year-end 2009. The bank’s services are targeted at private customers with a mini-mum investment potential of € 500,000 (€ 1 million for corporate customers and institutional investors).

Day-to-day business with customers in the Division and units that have been integrated was not affected by the restructuring measures: the transfer of customers got fully under way in the final months of 2009. In the reporting year, the Private Banking Division, like the entire industry, was still faced by hesitant investor behav-iour and a low level of activity. The World Stock Index was up 55% from its low on 9 March 2009, together with all major economic regions which more or less matched this strong upturn. Other asset classes, led by corporate bonds or emerging markets bonds, not to mention gold, also performed very well in 2009. But the repercus-sions of the general slump in prices and the loss of confidence within this entire segment were still having a psychological impact. In 2009, the upward trend was moreover always accompanied by doubts over the sustainability of the upturn, and these again pre-vailed at the turn of the year.

Total financial assets in the Private Banking Division increased by 17% to € 15.4 bn in 2009. In current business operations, per-formance trends featured more prominently than net outflows of funds. The rise was largely driven by the net effect from the dis-posal of, and gains in, business volume resulting from the transfer of customers, a process which mostly took place in December. Schoellerbank recorded a steady performance, with total financial assets rising by 2% to € 6.5 bn. Direct deposits (38%), assets under management (30%) and assets under custody (32%) each account for about one-third of the Division’s total business volume.

In 2009, the Private Banking Division’s*) income statement reflects a stable performance compared with the previous year, despite the different market conditions. In difficult market phases such as those seen in the last two years, it is ultimately the quality of investment advisory services with a long-term horizon which is the most impor-tant factor. Operating income was € 111 m, 1% up on the previous year. Net interest income also exceeded the previous year’s figure, despite strong competition for deposits among the major banks. In 2009, net fees and commissions rose by 13% to € 65 m compared with 2008. Operating expenses were maintained at the level of the previous year despite the internal reorganisation measures. Operat-ing profit amounted to € 33 m in 2009 and was 5% higher than the 2008 figure. Profit before tax reached the same level in 2009 because all non-operating items were stated at zero. The provision-ing charge was therefore insignificant. Net income from investments

and a market share of 14.3% as of year-end 2009, it ranks among Austria’s three largest investment management companies. At the beginning of 2009, the Division included Bank Privat, Asset Manage-ment Gesellschaft (AMG) and Schoellerbank. With a view to defining product responsibility more clearly we transferred from AMG, the bank’s asset management specialist, the functions more closely associated with retail and corporate banking operations to the Retail Division and the Corporates Division in the second quarter of 2009. Mutual fund business conducted by AMG was transferred to Pioneer Investments Austria. Competencies and production were thus con-centrated within Private Banking. In the second phase, the business of the former Bank Privat AG and of Asset Management GmbH was transferred to Bank Austria and the integration process was com-pleted in legal terms at the end of October 2009. The process of transferring customers from the other divisions has been under way since 9 September 2009. It will then be possible to make integrated services – that is, the whole range of financial services – available to the target group comprising private individuals with invested assets of over € 500,000 in the Private Banking Division. This will prevent the duplication of commercial day-to-day business (at Bank Austria) and Private Banking services (at Bank Privat), which was a common occurrence.

Schoellerbank, founded in 1833, will continue to operate as a sepa-rate brand. As a bank specialising in sophisticated investments for demanding clients, its core competence is the provision of invest-ment advisory services, asset management and retirement planning. Schoellerbank is represented throughout Austria with 13 units and

Performance of major asset classes

30

40

50

100

90

80

70

60

110

120

2008 2009

Government bonds (total return, 7–10 yrs)

Commodities (CRB Futures)

Corporate bonds (non-financial, 3–5 yrs)

Shares (DJ Euro Stoxx, in euros)

Index base 31 Dec. 2007=100 *) Segment reporting figures for 2008 were restated by adjusting them for PIA’s contribution to the Division’s income statement with retroactive effect (see note 57 on page 93 of this report).



was balanced, although this item reflects a decline of € 9 m over 2008 as book profits were realised on investments. Profit before tax of the Private Banking Division in 2009 fell short of the 2008 figure (€ 42 m) by an amount that corresponded to this one-off effect. Return on equity before tax was 22.8% after 25.4%; the decline is largely explained by the fact that the Division’s new structure also involved a lower allocation of capital.

The reorganisation of the Private Banking segment was in line with the evolution of UniCredit Group’s divisional structure and involved the bundling of our private banking expertise in order to bet-ter meet the growing demands of our customers. The guiding princi-ple in this context is for highly-qualified Private Banking relationship managers to provide integrated and comprehensive services to the top segment of clients. The Division’s approach is based on an initial discussion for a professional analysis of the client’s needs, followed by a more detailed analysis and a plan for implementation as part of our Financial Planning module, which is unique in Austria. The Divi-sion’s Private Banking services cover the entire range of financial services, from accounts to loans. These are complemented by asset management advisory services, asset management, active advisory brokerage and the Family Office (the structuring of assets that con-siders civil-law aspects and tax optimisation strategies, advice on how to best pass on assets, and issues such as corporate succes-sion planning or setting up a private foundation).

Corporate & Investment Banking (CIB)(€ m)

2009 2008 CHANGE

Net interest income 1,553 1,337 +216 +16%Net non-interest income 104 –336 +440 –131%Operating income 1,657 1,001 +656 +66%Operating expenses –477 –490 +13 –3%Operating profit 1,179 510 +669 +131%Net writedowns of loans –306 –266 –41 +15%Net income from investments –21 –78 +57 –73%Other non-operating items –56 –8 –48 >100%Profit before tax 797 159 +638 +402%Loans to customers (avg.) 48,977 48,191 +786 +2%Risk-weighted assets (avg.) 32,132 40,870 –8,738 –21%Average equity 7,588 7,556 +32 +0%Cost / income ratio 28.8% 49.0%Cost of risk 63bp 55bpROE before tax 10.5%*) 2.1%*) 36.3% if profit and equity are adjusted for the excess capital effects (vs absorbed capital)

In response to the fundamental changes in the banking environment in the past two years, we have further developed our business model with the objective of further sharpening the focus on custom-ers: what our customers want is a stable banking relationship and

professional service combined with fast response and transpar-ency. With these objectives in mind, we have further developed our divisional structure, specialisation and division of responsibili-ties within UniCredit Group and our internal organisational struc-ture and processes at several levels and in several steps:

– From the middle of 2009 we combined the former Markets & Investment Banking Division with the Corporates Division to form the new Corporate & Investment Banking (CIB) segment in line with the divisional structure of UniCredit Group.

– In the course of 2009, UniCredit CAIB AG, a consolidated company, was made to focus on trading activities outside cus-tomer-driven business and prepared for the intra-group sale to UniCredit Bank, Munich (the former Bayerische Hypo- und Vereins bank); the sale is to be completed in the first half of 2010.

➔ These two measures are intended to gear trading in financial market instruments to customer business. Proprietary trading activities complementary to customer business are thereby bun-dled within HVB, where the specialists of the competence centre for the local units and other divisions of the Group are based.

The combination of commercial banking business with corpo-rate customers and customer-driven trading activities in the new CIB Division creates a customer-focused business segment with strong performance capabilities. Bank Austria’s corporate customers – companies, institutional investors and public sector entities – now benefit from shorter decision-making paths. Our approach to serving customers is based on one face to the customer, encompassing classic on-balance sheet products, commercial services, the use of UniCredit Group’s entire interna-tional network and capital market transactions. The matrix of the new organisational structure of the CIB Division includes three Product Lines – Financing & Advisory, Markets (essentially the former and restructured MIB Division) and Group Transaction Banking (foreign trade business, short-term deposit business, trade finance and cash management). Additionally, we differenti-ate between “Network” and “Counterparts”, depending on responsibility for customers, in order to achieve specialisation gains through the separation of customer service functions and production.

➔ With the interplay of customer proximity in sales and the local business of Markets to meet customer needs by using a capital market player of international standing within UniCredit Group we aim to develop from a classic core bank into a strategic business partner.





Matrix of the new CIB Division:Share of operating income 2009 (€ 1,657 m)

Finance & Advisory Markets

Group Transaction

BankingTotal

Network 31% 7% 19% 58%

Counterpart 1% 41% – 42%

Total 32% 49% 19% 100%

Starting with the third quarter of 2009, our accounting system reflects only the new Division. As the income statement in the new structure was only reproduced for the first two quarters of 2009, a comparison with the previous year is not meaningful. We have retroactively added the figures for the former Corporates Division and MIB Division on a pro-forma basis to obtain a longer time series although the reorganisation and the forthcoming changes have shifted the business focus towards customer business and the required product units. The segment reporting figures cover the previous Corporates Division of UniCredit Bank Austria AG, which includes UniCredit CAIB and its international subsidiaries on a consolidated basis in which financial market activities are bundled, and the treasury and financing activities remaining within UniCredit Bank Austria AG including all account-ing entries that relate to funding and consolidation. UniCredit CAIB is reflected in the item “Non-current assets and disposal groups classified as held for sale” of the consolidated balance sheet at 31 December 2009 with assets of € 13.2 bn.

The income statement of Corporates & Investment Banking reflects a very favourable development of business in the Division in 2009, despite the difficult economic environment and the repercussions of the financial market crisis. The favourable trend is discernible in an analysis by customer sub-segment of the former Corporates Division and in the contributions from the product side (ex-MIB and commercial product lines). In 2009, the new business segment (combined on a pro-forma basis) gener-ated operating income of € 1,657 m, accounting for 23% of the total for Bank Austria as a whole. Most of the increase of € 656 m or 66% over the previous year came from Markets (counterparts), but income from commercial banking business with customers also rose significantly. This profile is also reflected in the development of net interest (€ 1,536 m), which was up by € 236 m or 18% on the previous year. Results from trading in interest rate products, interest rate management and

treasury activities of the bank made a substantial contribution to this strong increase (though not to the absolute figure). The fast interest rate reduction at the short maturity end in the first few months of the year translated into gains on the bank’s interest rate position. Subsequently, during the period of low interest rates which has continued until now, the steepening of the yield curve permitted higher transformation income, at least compared with the situation prevailing a year earlier. Furthermore, income in EEMEA markets rose as spreads narrowed again.

The analysis by customer sub-segment in corporate banking shows that net interest in a narrower sense also improved in 2009. Average volume on the credit side in 2009 was only slightly lower than in the previous year; demand for short-term loans in particular declined, while real estate finance rose significantly. On the other hand, deposits rose strongly – in line with strategy – by 7%, but mainly in sight deposits and at the expense of time deposits, as the higher interest rate for longer deposit periods offered less incentive to invest for longer periods in view of money market developments. Income from equity interests and dividends, which together with net interest in a narrower sense make up net interest income, was down by € 20 m (–54%) from the previ-ous year, reflecting the poor profitability of companies accounted for under the equity method (mainly in the real estate sector). Net interest income was € 1,553 m, up by € 216 m, making an exceptionally strong contribution to overall results.

The net trading, hedging and fair value result remained nega-tive, with the net loss declining by € 460 m, from –€ 684 m in the previous year to –€ 224 m in 2009 (this is not to be confused with the net trading performance of the bank as a whole, which was net income of € 326 m). After six negative quarters, the Division’s net trading, hedging and fair value result turned positive in the first quarter of 2009 but deteriorated again as the year progressed; the figure for the third quarter was a net loss of –€ 114 m. This figure includes an impact of –€ 66.5 m (valuation effect in connection with the reclassification of synthetic ABSs from from the ABS portfolio within loans and receivables back into financial assets held for trading). The net trading result was again almost balanced in the fourth quarter of 2009 (–€ 10 m). An eval-uation of the net trading performance needs to take into account that the activities of some trading desks (in interest-rate / foreign-exchange management in particular) are reflected both in net interest income (mostly positive) and in the net trading result (often negative). This means that their performance should be assessed on the basis of both items.

In 2009, net fees and commissions were € 309 m, down by 13% from the previous year. The decline was due to the current economic environment, indirect impacts of the financial market



crisis and long-term structural changes in services. The recession affected income from trade-related services and cash manage-ment. Net fees and commissions from payment services reflected the lower transaction volume as a result of the economic down-turn, and the introduction of SEPA. Turnover in current securities business still fell short of the previous year’s level despite the impressive turnaround in markets. Large corporate customers showed particularly strong demand for advisory services and interest-rate / foreign-currency management. Investment banking activities were above all characterised by very positive develop-ments in the area of corporate bond issues, which featured numerous projects. A large expense item are the commissions paid for hedging transactions and placements relating to the bank’s own credit portfolio management.

Operating expenses in the CIB Division were € 477 m in 2009, which is 3% below the level of the previous year. Staffing levels at year-end 2009 totalled 1,667 FTEs, 5% down from the end of 2008. The decline largely resulted from an employment freeze and from natural staff turnover at the banking subsidiaries of the previous MIB Division. Non-staff expenses also remained stable. The cost / income ratio declined from 49.0% to 28.8% as a result of strict cost discipline and strong revenue growth.

➔ The operating profit generated by the Corporate & Invest-ment Banking Division in 2009 was € 1,179 m, more than double the figure for the previous year (€ 510 m). The Markets product line accounted for somewhat more than one half of operating profit, and Financing & Advisory (30%) and Group Transaction Banking (18%) for the remaining amount. Network (customer business within the corporate banking network) accounted for about 60% of operating performance, which is higher than the contribution from the Counterparts target group. The percentage will continue to shift in favour of customer business following the intra-Group sale of UniCredit CAIB.

In 2009, net writedowns of loans and provisions for gua-rantees and commitments in the Corporate & Investment Bank-ing Division were € 306 m, representing a marked rise of 15% from the previous year. But due to the absence of major insolven-cies and professional risk management, the increase has so far not been as dramatic as in previous recessionary periods. Restructuring efforts made jointly with customers helped to stabi-lise the situation: after initially rising sharply, the number of loans newly transferred to Special Accounts Management eased in the second half of 2009. Net additions to loan loss provisions peaked in the second quarter of 2009. The risk /earnings ratio, at 19.7%, remained at more or less the same level as 2008; this is also partly explained by the higher net interest income. The cost of risk rose from 55 bp to 63 bp, which is very moderate for such a

severe recession. However, there is a risk that companies may see their ratings being downgraded by the time they publish their results for the full business year, resulting in a stronger migration from per-forming loans to the different categoriesof problem loans.

➔ Within the non-operating income/expense items, net writedowns of loans and provisions for guarantees and commitments absorbed 26% of operating profit. In 2009, the net result from investments was a net loss of –€ 21 m after –€ 78 m in the previous year (when impairment losses on investment vehicles were recognised following the collapse of Lehman Brothers). After deduction of non-operating items from operating profit, the CIB Division generated a profit before tax of € 797 m in 2009. In a pro-forma comparison with the crisis year 2008, when the bank had to absorb significant write-downs on market value in the net trading result, the profit before tax is five times as high. Based on allocated equity of € 7,588 m (+0%), return on equity (ROE before tax) was 10.5% (2008: 2.1%). If profit and equity of the CIB Division are adjusted for the excess capital effects resulting from the fact that UniCredit CAIB, a consolidated subsidiary, is included in the business segment at the actual IFRS capital, ROE before tax for 2009 is 36.3%.

Funding in the market

0

3

2

1

4

5

6

5-year swap rate

Medium-term funding costs € banks*)

MFI interest rates on new business/loans to non-financial companiesover 1 and up to 5 years’ initial rate fixation

Money market rate(3-month money)

D A S O N DMJ F A JM J A S O N DMJ F M AJ FA JM J2008 20102009

*) Medium-term funding costs = 5-year benchmark yield plus CDS spread on bank issues (mean value subordinated/senior debt, €)





catching-up process and therefore have wide external financing gaps experienced serious difficulties, which were only warded off through the intervention of international organisations following the G-20 summit meeting at the beginning of April. Initial rebalancing suc-cesses became visible later in the year, especially the reduction of current account deficits and the stabilisation of exchange rates. However, as the external economic position eased, pressure to adjust shifted to the domestic economy and the internal financial sector. Although the global economy started to recover in summer 2009, the second half of 2009 was also characterised in CEE by economic adjustments and growing financial problems of companies and pri-vate households. The social costs of stabilisation – declining real incomes and higher unemployment – aggravated internal problems in some countries.

Credit quality deteriorated steadily from the end of 2008, with the focus shifting towards the business sector as the financial crisis was followed by the economic crisis. Loan losses increased across the region. This presented problems especially in those countries where the banking sector was excessively strained even before the crisis started, primarily in Kazakhstan, where insolvencies of system-rele-vant banks had an impact.

Development of the CEE segmentIn this heterogeneous environment, our banking subsidiaries faced declining credit demand and further intensified competition for bank deposits as funding outside the region became increasingly difficult. The recession also strongly affected foreign and domestic trade, and thus net fees and commissions from payment transactions, docu-mentary business and securities transactions. Trading in financial market instruments was marked by volatility and pronounced regional differences. All of our banking subsidiaries responded to these gen-eral conditions with a number of measures to reduce costs while also sharpening the focus on risk management.

In the recessionary environment, the CEE segment achieved a strong operating performance in 2009 and maintained its profitability: operating income in 2009 was € 4,612 m, down by only 3% from the record level of the previous year. Adjusted for exchange rate changes – which is relevant if operating performance is evaluated, not the overall financial results – operating income was up by 9%, with net interest income and net non-interest income making more or less equal contributions to this increase.

Net interest income in 2009 was € 3,003 m, down by 5% from the previous year. Adjusted for exchange rate movements, the figure exceeded the previous year’s level by 7%, though weakening in the course of 2009. Average lending volume in commercial banking business expanded (when adjusted for exchange rate changes) until the second quarter of 2009 but growth rates weakened. As funding costs rose sharply, net interest income started to decline significantly

Central Eastern Europe (CEE)(€ m)

2009 2008 CHANGE ADj.*)

Net interest income 3,003 3,161 –158 –5% +7%Net non-interest income 1,609 1,571 +38 +2% +15%Operating income 4,612 4,732 –120 –3% +9%Operating expenses –1,944 –2,224 +280 –13% –4%Operating profit 2,668 2,508 +160 +6% +21%Net writedowns of loans –1,718 –537 –1,180Net income from investments 16 123 –107Other non-operating items –51 –69 +17Profit before tax 915 2,025 –1,110 –55% –53%Loans to customers (avg.) 59,872 59,067 +805 +1% +11%Risk-weighted assets (avg.) 71,233 67,682 +3,552 +5% +16%Average equity 9,988 9,403 +586 +6% …Cost / income ratio 42.2% 47.0%Cost of risk 287bp 91bpROE before tax 9.2% 21.5%

*) adjusted for exchange rate changes, i. e. at constant exchange rates prevailing at the end of 2007

The financial market crisis and the global recession in 2009 had a strong impact on the Central Eastern Europe (CEE) Division. The upward trend which started when the transformation period came to an end at the beginning of the year 2000 was temporarily halted, and our banking subsidiaries in Central and Eastern Europe responded flexibly to this challenge: volume and operating income were significantly higher than in the previous year, especially when adjusted for exchange rate movements. On this basis, the CEE seg-ment was able to absorb the dramatic increase in the provisioning charge, which amounted to almost two-thirds (64%) of its operating profit. The segment nevertheless contributed € 915 m to the bank’s profit before tax.

The CEE Division’s performance in 2009 reflected the impact of a number of factors experienced over the past one and a half years, with the various regions and countries being affected to widely vary-ing degrees in 2009, depending on their size and degree of auton-omy, their economic structure and the state of their financial sectors. Initially, commodity-producing countries and the highly integrated exporters of manufactured goods in Central Europe felt the full impact of the price decline in raw materials and the subsequent downturn in global industrial activity from the fourth quarter of 2008. Even stronger effects emanated from the withdrawal of international investors, which developed into an across-the-board withdrawal of confidence in the early months of 2009 and transmitted the financial market crisis to the CEE region. Depreciation of CEE currencies reached between 10% and 15% by the first quarter of 2009, and credit spreads widened significantly until March 2009. Countries with large domestic markets were better able to absorb external influ-ences. But countries that are at an early stage of the economic



from the first quarter of 2009, for the first time in many years. Ini-tially, margins were affected; this was followed by an unfavourable development of volume in the market environment. The bank also responded to the external vulnerability of the CEE countries through longer-term considerations in its business policy. Quite generally, after years of self-supporting expansion of the system, the situation now called for a targeted consolidation of the growth of risk-weighted assets and the acquisition of deposits in order to strengthen local funding of credit business. Lending volume declined in nearly all countries in the region for the reasons mentioned above, while cus-tomer deposits increased appreciably. In CEE, the loan/deposit ratio improved from 137.6% at the end of 2008 to 121.9%. Under the prevailing competitive conditions, this could only be achieved at the expense of margins, especially as savings propensity lagged far behind the credit boom. In some countries, funding and liquidity costs had at times risen considerably, which also impacted net inter-est income. Net fees and commissions in 2009 were 9% below the level a year ago; even when adjusted for exchange rate effects, the figure more or less stagnated, rising by a mere 1%. The genera-tion of net fees and commissions varied across the region, depending on the significance of commercial services. In Turkey, for example, net fees and commissions continued to increase strongly (+40% in local currency); Yapı Kredı Bank is the innovative and undisputed market leader in credit cards, foreign trade finance, leasing and factoring.

Net trading, hedging and fair value income improved by 73% to € 496 m; at constant exchange rates, the figure almost doubled, with the large banks in Turkey, Russia and Croatia making substantial contributions. Customer business in interest-rate / foreign-exchange management benefited from demand for hedging in view of high vol-atility. In this context, our subsidiaries fully used their competitive advantage of an international bank. This is confirmed – with reversed premises – by our Slovak banking subsidiary, whose trading perform-ance declined strongly after the country’s adoption of the euro (an effect which is of course more than offset by the longer-term advan-tages of euro membership). Moreover, with the gradual reduction of interest rates after the confidence crisis had been overcome, the banks’ treasury operations showed a good performance from April onwards.

The CEE segment responded to the weak revenue trend caused by market developments by pursuing even stricter cost discipline, in an effort to support profits and rebalance the cost /performance struc-ture after years of continued growth. Operating expenses in the CEE segment declined by 13%; on a like-for-like exchange rate basis, costs were down by 4%. This is a noteworthy development because it was only in 2009 that the addition of 847 branches (net of offices closed) to the network in 2008 (and in Russia even during the reporting year) was fully reflected in costs. New branches in Russia, Hungary, Croatia and the Czech Republic were opened also

in 2009, increasing the total number by about 50. Significant efficiency gains were achieved in facility management, information technology and back-office functions within the cross-regional GBS Division. The cost / income ratio in CEE dropped from 47.0% to 42.2%. Good progress in integrating our most recently acquired banking subsidiaries was an important factor in this context: in Kazakhstan, the number of employees was down by 14% or 690 FTEs from the end of 2008. In Ukraine, FTEs declined by 1,706 or 18%, mainly as a result of a medium-term programme for efficiency enhancement and the reduction of regional adminis-trative centres. In the CEE Division as a whole, staff numbers declined by 3,726 FTEs or 6.6% in the reporting year.

➔ Operating profit reached € 2,668 m, confirming the CEE seg-ment’s ability to absorb the unprecedented burdens of a severe recession through its operating performance. Operating profit improved by 6% in euro terms and 21% at constant exchange rates. The strong revenue position enabled the CEE segment to absorb the exceptionally large provisioning charge.

Net writedowns of loans and provisions for guarantees and commitments in the CEE segment were € 1,718 m, 64% of its operating profit. The provisioning charge increased throughout the region, at least doubling in all countries from a generally low level in the previous year (except in Romania, where net writedowns of loans were above average already in the previous year). The strong increase in the provisioning charge weighing down the CEE seg-ment’s profits was driven by Kazakhstan and Ukraine, which are special cases, and the large countries Turkey and Russia, also for different reasons. These four countries, despite all their differences, accounted for a combined 72% (€ 1,234 m) of the total provision-ing charge in 2009, and they also contributed 72% to the increase over the previous year (increase CEE: + € 852 m/ total increase: +€ 1,180 m).

CEE loan portfolio: regional diversification and cost of risk

Turkey (14%) CoR: 382bp

Russia (14%) CoR: 245bp

Romania (5%) CoR: 217bp

Ukraine (6%) CoR: 653bp

Kazakhstan (7%) CoR: 1,200bpSlovakia (4%) CoR: 45bp

Baltics (2%) CoR: 79bp

Croatia (16%) CoR: 88bp

Bosnia (2%) CoR: 105bp

Serbia (2%) CoR: 124bp

Czech Rep. (11%) CoR: 131bp

Bulgaria (7%) CoR: 170bp

Slovenia (4%) CoR: 77bp

Hungary (7%) CoR: 198bp

Portfolio: December 2009





Kazakhstan and Ukraine were affected by the combined impact of the financial market crisis, the global economic downturn and medium-term structural changes in these countries, which are late starters in the convergence and modernisation process. These two countries accounted for 42% of the provisioning charge in CEE and 43% of the increase over the previous year. In kazakhstan, net writedowns of loans and provisions for guarantees and commitments rose from € 124 m to € 499 m. The cost of risk – i.e. the current provisioning charge expressed in basis points of average loans to customers – was 1,200 bp. The restructuring of the banking sector in Kazakhstan is under way; in this context, large writedowns were required for the construction industry and the real estate portfolio, with major insolvencies also having an impact. The provisioning charge in Ukraine was € 228 m after € 89 m. Given the economic environment, the increase resulted from retail banking and from busi-ness with corporate customers in equal measure, aggravated by bal-ance-of-payments problems and strong depreciation of the country’s currency. The cost of risk rose from 227 bp to 653 bp.

In Russia, the provisioning charge increased by € 130 m to € 207 m, reflecting the country’s size. The cost of risk rose from a low level of 83 bp to 245 bp, due to strong fluctuations in economic trends and funding conditions in corporate banking, which dominates the sub-sidiary’s business. The unit in Turkey recorded the second-largest increase in net writedowns of loans – up by € 208 m to € 299 m – but from a very low base; the increase was not due to the financial market crisis but to the bank’s specific business structure, more spe-cifically the large proportion of credit card business and consumer

loans in retail banking. The focus on retail customers involves a higher risk profile across the business cycle. In Turkey, the cost of risk rose from 113 bp to 382 bp, but the risk /earnings ratio of 41% is below the CEE average. Croatia also recorded a strong increase in the provisioning charge (up by € 78 m), but from zero in the previous year; the cost of risk, at 88 bp, is at the lower end of the CEE range.

Net writedowns of loans and provisions for guarantees and commit-ments also tripled at our subsidiaries in Central Europe to a com-bined € 196 m as the downturn had spread particularly quickly to impact industrial activity following the degree of integration that has been reached in this sector. But the average cost of risk for the four countries was comparatively low, at 129 bp. Hungary, where the cost of risk came close to 200 bp, is a special case as the recession started earlier in that country and was also due to domestic factors. In SEE, the percentage growth of the provisioning charge was slightly lower (+160% to € 232 m), with Romania and Bulgaria being affected by a higher cost of risk than the Balkan countries.

The chart shows that the CEE loan portfolio is widely diversified. Eleven countries (with the Baltics being counted as one) with below-average risk profiles account for more than one half of the lending volume. Nine of these countries are EU member states, which accounted for about 38% of average loans and receivables with cus-tomers but only 19% of the provisioning charge in 2009. The cost of risk for the EU member states in CEE was 145 basis points (total CEE: 287 bp).

Operating profit and profit before tax of CEE banking subsidiaries (amounts in € m)

–300 0–100–200 100 200 300 400 700 € m500 600

Turkey

Russia

Croatia

Ukraine

Czech Rep.

Kazakhstan

Bulgaria

Romania

Hungary

Serbia

Slovakia

Bosnia

Slovenia

Baltic states

–17%

+12%

0%

+5%

+14%

–7%

–1%

–5%

–2%

–5%

+ 22%

–58%

Operating profit 2009,% change against previous yearProfit before tax 2009

–5%

+36%



➔ Operating profit reached € 2,668 m, from which the provision-ing charge of € 1,718 m was to be deducted. Net income from investments for 2009 was positive (€ 16 m) but down by € 107 m from the previous year. All of the decline reflects € 159 m gains on the sale of equity interests in the previous year (sale of equity inter-ests in Hypo Stavebni Bank in the Czech Republic; in BPH TFI, the Polish asset management business; and in the Budapest Stock Exchange), additionally to be taken into account in a comparison with the previous year. After deduction of the other non-operating items, profit before tax was € 915 m, down by 55% from the previous year’s figure. While this also reflects a higher capital allocation, the main factor for the decrease was the provisioning charge as operat-ing profit remained stable. The table at the end of this section and the chart show that the “non-operating items to be deducted” between operating profit and profit before tax absorbed about one half of the operating profit in Turkey, Russia and Hungary (and also in Slovenia); this compares with between 30% and 40% in the other countries except Ukraine (91%, i.e. almost all of operating profit) and Kazakhstan (which posted an operating loss). In 2009, return on equity before tax was 9.2% after 21.5%.

Country reportsIn Turkey, the Koç Financial Services Group (KFS) maintained robust profitability in a difficult market environment in 2009, thanks to solid revenue growth and cost containment, coupled with proactive credit risk management and a focus on innovation, driven by the perform-ance of Yapı Kredı Bank, its main subsidiary. The bank recorded a 22.3% return on average equity, driven by both positive revenue performance and tight cost control. The cost / income ratio improved by 12 percentage points over 2008, declining from 53.3% in 2008 to 41.3% in 2009. The bank also maintained its comfortable liquidity and funding position in 2009 with a loan to deposit ratio of below 100%. Taking fourth place among private sector banks by total assets, the bank is market leader in credit card business in terms of issuing volume and in leasing business. At the beginning of 2009, the branch expansion plan launched in July 2007 was put on temporary hold in view of the global crisis. Yapı Kredı shifted its focus towards the optimisation of its branch network via relocation, renovation and enlargement of 75 branches with the aim of improv-ing service quality and customer satisfaction. With the fourth largest branch network in Turkey, 2,347 ATMs and 7.6 million credit cards issued, the bank confirmed its strong market position. Yapı Kredı also leveraged on its alternative delivery channels to provide better cus-tomer service. As of the end of 2009, the share of alternative sales channels in total banking transactions improved to 75% from 69% in 2008.

ZAO UniCredit Bank is one of Russia’s leading universal banks in terms of service quality, profitability and efficiency. As of 31 Decem-ber 2009, total assets amounted to RUR 482 bn and shareholders’ equity came to RUR 60 bn. With a market share of around 1.9% (as of November 2009) the bank ranks among the country’s ten largest

banks by total assets. Despite the challenging macroeconomic envi-ronment the bank further broadened its customer base and in 2009 completed its regional expansion programme with the opening of another 28 offices. Thus the bank currently maintains a countrywide network of 211 outlets and one Representative Office in Minsk, Bela-rus. It serves more than 710,000 private customers and SME cus-tomers, and about 5,000 corporate customers. In response to the difficult economic environment, the bank sharpened its focus on maintaining adequate levels of capitalisation and liquidity, while plac-ing strong emphasis on strict cost management and asset quality. Focused efforts in the area of commercial business enabled revenues to almost reach the previous year’s record level (–2% yoy at con-stant rates). Declining interest income due to shrinking lending vol-umes was offset by higher income from fee-based business and strong gains from trading activity by taking advantage of increased market volatility. Comprehensive cost containment measures proved highly efficient, resulting in a cost / income ratio of only 33%. A very conservative approach to risk provisioning led to a more than three-fold increase of net writedowns of loans. As a consequence of the crisis, total assets declined in the reporting period by nearly 20%, driven by a contraction of retail and corporate lending volume. Corpo-rate banking remains the core business of the bank, both in terms of revenue and volume, although as a consequence of the economic downturn lending slowed down throughout the year. In retail banking, despite the tight retail lending market, the bank successfully com-pleted its expansion programme and increased its retail presence to 97 outlets throughout the Russian Federation.

Croatia: Despite a challenging market environment affected by recession, the performance of Zagrebačka banka Group (ZABA Group) in 2009 reflected the group’s strong fundamentals with the group maintaining its leading market position, strong franchise and good income-generating capacity, benefiting from its well-diversified business model as a universal bank. Total revenues grew by 2% over 2008 which, combined with an 8.4% reduction in operating costs, resulted in 14.3% year-on-year growth of gross operating profit at constant rates and in an improvement of the cost / income ratio to 48%. This performance was the result of efficient cost management and a swift change to selective lending with the aim of boosting liquidity in the public sector and easing the downturn for large corpo-rate customers by seeking to prevent a more rapid deterioration of asset quality. Net profit fell by 20% at constant rates due to a strong rise in net writedowns of loans. ZABA Group is the market leader in Croatia in terms of capital and total assets, having also the largest market share in customer loans, deposits and assets under manage-ment. It serves about 1.5 million customers.

UniCredit Bank Czech Republic, a.s., the fourth largest bank in the Czech Republic, managed to successfully negotiate the crisis in 2009 with a focus on value creation and its self-financing capability. The bank maintained its leading position in the corporate segment in 2009, leveraging on the group’s approach towards multinational and





cross-border customers. International markets contributed signifi-cantly to the bank’s revenues as it took advantage of market oppor-tunities in foreign exchange, interest and credit trading. In the retail business segment, the bank further pursued its strategy for affluent and small business customers. Operating profit was maintained at the level of 2008 (at constant exchange rates), while profit before tax declined by 44% as a result of higher risk costs.

2009 was a challenging year for UniCredit Bank a.s. in Slovakia. Apart from the worldwide economic downturn, the adoption of the euro on 1 January 2009 and the application of the new SEPA rules also had a major negative impact on the bank’s results. New prod-ucts, a more disciplined margin policy and better processes partly offset lower revenues.

During the economic recession, a major focus of UniCredit Bank Hungary was the generation of deposits, bringing the loan/deposit ratio to below 100% compared to 137 % a year before. Excellent revenues and the outstanding performance of business segments, coupled with strict cost management, ensured a 27% increase in gross operating profit year-on-year. A substantially higher provision-ing charge and the one-off revenues from the sale of the shares in the Budapest Stock Exchange in 2008 led to a 47% decline in profit before tax. Efficiency remained the bank’s most important consideration, which was reflected in an excellent cost / income ratio of 44%.

In Slovenia, the results of UniCredit Banka Slovenija d.d. were also influenced by the adverse conditions. While revenues were slightly higher than in 2008, costs increased due to higher depreciation resulting from the expansion of the branch network in 2008. Oper-ating profit was at the level of the previous year, but a pronounced increase in net writedowns of loans led to a profit before tax of € 11 m, half the figure for 2008.

In Bosnia and Herzegovina, UniCredit is one of the leading banking groups in the country, where it operates with two banks. Overall, despite a difficult economic climate, revenues almost reached 2008 levels and, due to strict cost management, expenses decreased by 3%. Net writedowns of loans and provisions for guar-antees and commitments increased by 53% (with a cost of risk of 105 bp), so that profit before tax declined by 19%. UniCredit Bank d.d., based in Mostar, is one of the largest banks and currently operates a network of 96 branches. The Group‘s presence in the country is complemented by UniCredit Bank a.d. Banja Luka. Together, both banks serve more than one million customers in Bosnia and Herzegovina.

UniCredit Bank Serbia further improved its market position with a 6% market share. At constant exchange rates, the bank managed to achieve the same result as in 2008 despite significantly higher

net writedowns of loans and provisions for guarantees and commit-ments, clearly outperforming the market where profit was 60% lower than in 2008. The loan to deposit ratio and the cost / income ratio also improved, despite the full-year impact of opening 22 branches in 2008. The cost of risk fell from 146 bp in 2008 to 124 bp in 2009.

In 2009, the recession also impacted operations in Romania. UniCredit Tiriac Bank deleveraged significantly, reducing its loan to deposit ratio to 108% from 140% at the beginning of the year through a 23% increase in customer deposits. The bank recorded 14% growth in operating profit to RON 651m (€ 152 m), driven by a 9% increase in revenues and a less than 4% rise in operating expenses. This includes the full year impact of over 100 branches opened in 2008; the bank closed the year with 241 outlets. Never-theless, efficiency further improved to 47% in 2009, compared with 50% in the previous year as a result of optimisation and con-solidation measures. The number of employees was reduced by 8% to below 3,000 at the end of the year by not replacing employ-ees who leave the bank. Net profit reached RON 335 m (€ 78 m), 7% below 2008, a comparatively strong performance in the local market in the context of the crisis.

With a market share of 16% in assets and 15% in both loans and deposits, UniCredit Bulbank is Bulgaria’s largest bank and serves over 1.1 million customers. UniCredit Bulbank offers its customers a varied range of products through a network of 234 branches and alternative, but increasingly popular, channels such as electronic and mobile banking. In 2009, gross loans increased by 3.4% year-on-year in local currency, mainly driven by growth in corporate lending. Customer deposits were up by 7%. Operating profit fell 6% short of the level of the previous year, and profit before tax was 31% below the 2008 figure (cost of risk: 170 bp).

2009 was an extremely difficult year for the three Baltic states, Estonia, Latvia and Lithuania, with the banking sectors being severely affected by the crisis. Amidst this challenging economic situation AS “UniCredit Bank” continued to provide a full range of corporate banking services for its customers. The risk strategy of the bank was adjusted to the Group’s risk policy, including strict limitations on financing commercial real estate. The bank achieved strong growth of 112% in the deposit portfolio.

In the Ukrainian market, Ukrsotsbank is the sixth largest bank. As of the end of 2009, Ukrsotsbank held market shares of 5.5% in lending business and 3.5% in deposits. In view of the difficult situ-ation in the Ukrainian financial market in 2009, Ukrsotsbank took a number of important measures such as reviewing its commercial strategy with a focus on customer deposit gathering and substan-tially limiting new lending to customers with an excellent credit his-tory, increasing efficiency by implementing cost-cutting initiatives



such as reorganising the branch network by reducing the number of regions from 27 to 7 macro regions, and increasing the bank’s capital by UAH 0.5 bn to a total UAH 2.27bn. Based on these measures, the bank achieved a gross operating result that matched 2008 levels in euro terms but exceeded the 2008 figure by 45% in local currency; profit before tax decreased by 86% to € 22 m, driven by net writedowns on loans and commitments for guarantees and commitments which more than doubled year-on-year. The creation of macro regions led to a significant improve-ment in service quality as back-office functions were centralised and the network is more concentrated on front-office tasks, allow-ing relationship managers to dedicate more time to interact with customers.

In kazakhstan, the results of ATF Bank were affected by the eco-nomic crisis. Adjusted for exchange rate movements, revenues rose by 7% in a very challenging environment so that, coupled with substantial reductions in costs, the bank generated a gross operating profit 21% above that of 2008. The bank achieved a high level of efficiency in its operations, with a cost / income ratio of below 30%. However, in a banking market with non-performing loans reaching extraordinarily high levels, the provisioning charge of ATF Bank was four times the level of 2008 due to the overall impact of the crisis and partly as a result of the default of specific large corporate customers. Thus the bank suffered a significant loss in 2009. In its retail business, ATF Bank successfully increased its deposit base by 44% to reach a market share of almost 14%. The card business expanded thanks to the focus on salary schemes for employees of SMEs and corporate customers; the number of active cards reached 159,300 as of year-end 2009. Activities in the corporates segment included a restructuring of the bank’s operational network to a current number of 5 regional cor-porate centres and a successful campaign to increase the number of deposits.

Strategic projects A main project of CEE Global Banking Services (GBS) was the CEE Divisionalisation Programme which started in April 2009 and is being implemented in Romania, the Czech Republic, Hun-gary, Croatia, Bulgaria and Russia step by step. The CEE Division-alisation Programme focuses on customer centricity, efficiency and the delegation of authority. The programme takes a strictly value added approach and the new Group model will be implemented in the individual CEE countries with due regard to local conditions. Customer centricity is the first of the key design principles driving divisionalisation. Efficiency is the second design principle of the divisionalisation programme in CEE and in practice translates into the creation of a leaner organisational structure and the streamlin-ing of key processes. The programme is being implemented in Romania, Hungary and the Czech Republic, while Croatia and Bulgaria are in the design phase.

In 2009 overall initiatives in CEE Corporate Banking included projects undertaken with Risk Management, including a specific programme to assist customers in evaluating their liquidity needs. In this context, the CEE banks carried out a tailor-made action plan to help their customers cope with the difficult environment. Addi-tionally, in response to the worsening economic environment, a project for more proactive management of existing corporate loan exposures in the CEE countries was launched; its objective was to further enhance the credit risk monitoring process.

Further to the corporate and retail customer satisfaction surveys completed at the end of 2008, CEE banks developed specific action plans in 2009 that focused on improving current customer satisfac-tion levels. Their objective is primarily to strengthen the relation-ships between the customer and the bank and to introduce prod-ucts and services which more effectively meet customers’ needs. Special emphasis was put on increasing satisfaction with electronic banking services, response time for loan applications, as well as greater efficiency in complaints management. Specific efforts have been made to provide customers with proactive information to sup-port them in times of economic turbulence.

In CEE Retail Banking, attention was above all given to assuring the stability of deposit business. Significant growth in retail deposits was achieved despite strong competition and lower customer liquidity in the environment prevailing in 2009. Other initiatives included action plans concerning improvements in sales force effectiveness and productivity, and encouraging the use of direct distribution channels. Another focus of retail operations was on the introduction of a new business model in Russia and Kazakhstan, including network restructuring and an active sales approach. Over-all, UniCredit’s customer centricity approach proved to be the main pillar in preserving a stable customer base. In lending, a prudent risk approach in a challenging environment led to a slight reduction in volume.

In the context of the efficiency programme 2009, CEE Global Bank-ing Services (GBS) identified important cost saving potential in the areas of ICT, real estate and back-office processing. Sustainable efficiency rather than cost cutting, with the additional benefit of implementation of UniCredit Group strategies (e.g. local centralisa-tion of back-office activities) will further improve customer services. New ICT systems were implemented in Kazakhstan and Russia, which will support the further growth of business and customer services. A number of country-specific reorganisation programmes were launched in 2009. These included the reorganisation of the bank in Ukraine (the Macro Region Programme, involving the con-solidation of 27 regions to 7 macro regions), the reorganisation of retail credit risk processes in Romania, and the bundling of pay-ment procedures in Bulgaria and Slovakia.





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Income statement of the consolidated banking subsidiaries in CEE(€ m)

CEE BANkS TOTAL 1) CZECH REPUBLIC SLOvAkIA HUNGARy

2009 2008 2009 2008 2009 2008 2009 2008

Net interest income 2,933.7 3,114.1 243.9 267.5 76.5 105.7 159.3 156.1Net fee and commission income 1,063.8 1,168.3 96.64 112.9 23.7 30.6 91.4 92.0Net trading, hedging and fair value income 461.3 324.3 11.4 1.9 6.5 28.5 18.3 18.4Net other income/expenses 58.4 119.1 0.6 –1.3 4.1 3.5 –0.1 0.6Net non-interest income 1,583.5 1,611.8 108.7 113.5 34.3 62.6 109.6 111.0OPERATING INCOME 4,517.2 4,725.9 352.5 380.9 110.8 168.3 268.9 267.1OPERATING EXPENSES –1,832.8 –2,123.9 –139.4 –155.7 –73.4 –79.8 –119.4 –136.1OPERATING PROFIT 2,684.3 2,602.0 213.1 225.2 37.3 88.5 149.5 131.0Provisions for risks and charges –46.8 –65.3 0.0 0.9 1.3 1.3 1.0 –1.5Net writedowns on loans –1,661.4 –538.3 –83.0 –29.4 –11.0 –4.8 –86.2 –26.4Net income from investments 12.3 125.3 1.4 33.1 –0.2 1.0 4.9 42.9

Integration costs –4.0 –3.4 –3.6 –4.7 0.0 0.0 –0.3 –1.5PROFIT BEFORE TAX 984.5 2,120.3 127.9 225.0 27.4 85.9 68.9 144.6 Cost / income ratio 40.6% 44.9% 39.5% 40.9% 66.3% 47.4% 44.4% 50.9%Risk/earnings ratio 56.6% 17.3% 34.0% 11.0% 14.3% 4.6% 54.1% 16.9%

Exchange rate 26.435 24.946 1 €= 30.1260 31.262 280.327 251.512 Appreciation/depreciation against the euro –5.6% +3.8% –10.3%

(€ m)

SLOvENIA BULGARIA ROMANIA BALTICS

2009 2008 2009 2008 2009 2008 2009 2008

Net interest income 40.7 45.2 209.5 237.2 153.2 170.7 13.4 22.8Net fee and commission income 19.3 20.1 77.7 79.8 54.7 59.8 –0.3 1.0Net trading, hedging and fair value income 3.4 –2.4 0.9 –12.1 82.7 74.6 11.6 –2.3Net other income/expenses 0.2 0.1 2.5 2.1 –0.4 1.4 –0.2 1.2Net non-interest income 23.0 17.9 81.1 69.7 137.0 135.8 11.2 –0.1OPERATING INCOME 63.6 63.0 290.6 306.8 290.2 306.5 24.6 22.7OPERATING EXPENSES –36.4 –35.1 –124.8 –128.9 –138.4 –153.6 –13.9 –13.9OPERATING PROFIT 27.2 27.9 165.8 177.9 151.8 152.8 10.8 8.8Provisions for risks and charges –1.0 0.0 7.1 1.9 –1.4 –2.7 0.0 0.0Net writedowns on loans –15.8 –6.5 –64.0 –25.6 –60.6 –38.0 –7.2 –11.2Net income from investments 0.9 3.7 6.2 5.9 0.9 3.2 –0.5 0.0Integration costs 0.0 –1.5 0.0 6.4 0.0 0.0 0.0 0.0PROFIT BEFORE TAX 11.2 23.5 115.1 166.5 90.7 115.3 3.0 –2.4 Cost / income ratio 57.2% 55.8% 42.9% 42.0% 47.7% 50.1% 56.3% 61.2%Risk/earnings ratio 38.8% 14.4% 30.5% 10.8% 39.5% 22.3% 53.7% 48.9%

Exchange rate 1.000 1.000 1.956 1.956 4.240 3.683 0.706 0.703 Appreciation/depreciation against the euro 0.0% 0.0% –13.1% –0.4%

1) Sum of P/ L figures of the individual CEE banks shown in this table. The CEE business segment also includes the Vienna-based CEE profit centre.


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(€ m)

TURkEy 2) RUSSIA kAZAkHSTAN UkRAINE

2009 2008 2009 2008 2009 2008 2009 2008

Net interest income 725.4 586.9 359.2 517.8 209.8 246.5 283.9 276.4Net fee and commission income 326.6 322.8 114.8 137.0 40.9 45.8 47.2 80.9Net trading, hedging and fair value income 47.2 12.1 121.5 73.5 55.5 35.9 20.9 53.7Net other income/expenses 18.7 58.0 –0.1 7.6 –7.2 –3.0 –0.4 2.3Net non-interest income 392.5 392.9 236.2 218.1 89.2 78.7 67.8 136.9OPERATING INCOME 1,117.9 979.9 595.4 735.9 298.9 325.2 351.7 413.3OPERATING EXPENSES –415.7 –462.3 –198.0 –254.7 –87.3 –122.7 –100.4 –162.4OPERATING PROFIT 702.1 517.5 397.4 481.2 211.6 202.5 251.3 250.9Provisions for risks and charges –52.0 –63.6 –2.5 0.0 0.0 0.0 –0.4 –0.2Net writedowns on loans –299.4 – 91.1 –207.3 –77.3 –499.0 –124.3 –228.0 –89.4Net income from investments 7.0 14.2 –1.2 2.6 –7.2 3.0 –0.6 0.3

Integration costs 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0PROFIT BEFORE TAX 357.7 377.0 186.4 406.4 –294.5 81.2 22.3 161.7 Cost / income ratio 37.2% 47.2% 33.3% 34.6% 29.2% 37.7% 28.6% 39.3%Risk/earnings ratio 41.3% 15.5% 57.7% 14.9% 237.9% 50.4% 80.3% 32.3%

Exchange rate 2.163 1.906 44.138 36.421 206.034 176.963 11.131 7.687 Appreciation/depreciation against the euro –11.9% –17.5% –14.1% –30.9%

(€ m)

CROATIA BOSNIA SERBIA

2009 2008 2009 2008 2009 2008

Net interest income 330.0 355.9 74.6 74.7 54.4 50.7Net fee and commission income 123.6 134.3 29.2 30.2 18.4 21.0Net trading, hedging and fair value income 73.2 29.8 5.1 6.2 2.8 6.5Net other income/expenses 40.7 45.1 0.6 2.5 –0.6 –0.8Net non-interest income 237.5 209.2 34.9 38.9 20.7 26.8OPERATING INCOME 567.5 565.0 109.5 113.6 75.1 77.5OPERATING EXPENSES –274.8 –304.8 –78.3 –80.8 –32.6 –32.8OPERATING PROFIT 292.7 260.2 31.1 32.9 42.5 44.6Provisions for risks and charges –0.3 –0.5 1.7 –0.7 –0.1 –0.1Net writedowns on loans –77.6 0.8 –13.7 –8.9 –8.7 –6.0Net income from investments 0.5 12.0 0.2 3.5 0.0 0.0Integration costs –0.1 –0.1 0.0 –2.0 0.0 0.0PROFIT BEFORE TAX 215.1 272.4 19.3 24.7 33.7 38.5 Cost / income ratio 48.4% 53.9% 71.6% 71.1% 43.4% 42.4%Risk/earnings ratio 23.5% –0.2% 18.3% 11.9% 16.1% 11.9%

Exchange rate 7.340 7.224 1.956 1.956 93.985 81.433 Appreciation/depreciation against the euro –1.6% 0.0% –13.4%

2) pro quota





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Outlook

Economic environment

The global economy bottomed out in the middle of the past year, its growth subsequently gathering momentum until the end of 2009. Most of the leading indicators continue to point upwards. The recovery process is however initially a “technical response” to the preceding limitations on output and the com-plete running down of inventory, which is likely to result in tem-porarily weaker growth. ➔ Following a contraction in the previous year (–1%), we expect the global economy to grow by 3.5% (weighted by pur-chasing power) in 2010, a figure which remains well below potential performance. The strongest impetus to growth will be provided by China and the emerging markets in Asia.

The GDP of the industrial nations is likely to expand at a dispro-portionately low rate of 2% in the current year: at the end of 2009, the growth of the US economy accelerated markedly (to an annualised 5.7%) following the reversal of the inventory cycle and the fiscal programmes, but this will slow to 1.5% by the spring. We expect GDP to grow by 2.5% in 2010 (2009: –2.4%). ➔ These developments will determine future interest rate and exchange rate trends: the anticipated slowdown in growth until the middle of the year and the still vulnerable financial sector make a rapid rise in interest rates unlikely. The Fed is however already beginning to gradually reverse its significant quantitative

easing. In view of the uncertain environment, the Fed will main-tain key interest rates at a low level for some time (they are currently at 0%–0.25%) before raising them to 1.25% in the latter half of the year. In light of improved economic data and the growing supply of Treasuries, ten-year US yields will probably exceed the 4% mark in spring 2010 and approach 4.75% by the end of the year. The euro area moved out of recession in the autumn of last year, but its momentum was much weaker. Its impetus came from exports, the inventory cycle and government economic support programmes, but this did not feed through to domestic demand. Due to the low level of capacity utilisation, companies are not investing in expansion. Employment and income trends are pre-venting an upturn in consumption. While we do not see a return to recession, we expect growth of a meagre 0.9% (2009 minus 3.9%).➔ Any move to raise key interest rates is improbable, given the absence of a self-sustaining recovery. The ECB has nevertheless started to cautiously reduce excess liquidity step by step, thereby creating a more restrictive monetary environment. Long-term yields are likely to follow the trend set by US yields, while also being influenced by debt problems which are not limited to Euro-pean “peripheral markets”. Even after the crucial roll-over phase has been overcome, interest rates will generally move upwards and exceed 4% in summer 2010. The movements of the US dol-lar on financial markets, influenced by risk-taking considerations on the one hand, and by its status as a safe-haven currency on the other, will be volatile and difficult to foresee.

While the global economic crisis seems to have been over-come, its repercussions will weigh on the Austrian economy in 2010 and thereafter. Sentiment has improved considerably, but the players are still cautious and acting with restraint. Private consumption will therefore pick up only very slowly in 2010. For private households, the inflation rate is low, with a generally ris-ing trend. After averaging 0.5% in 2009, inflation is likely to rise to 1.2% in 2010. The labour market is moreover increasingly impacting consumption: in Austria, employment has contracted by over one per cent compared with 2008, and unemployment has risen by about one-quarter. There is at present little prospect of a sustained reversal of this trend. Employment will fall slightly in 2010 and the average unemployment rate of 7.2% in 2009 will rise to an average 7.8% in 2010. The more buoyant export performance as from the second half of 2009 – driven by world-wide government economic support programmes – is in danger of slackening as a result of tighter budgets and the sharp rise of government debt. There are no signs of a self-sustaining eco-nomic upturn. The outlook is cautious in particular for corporate investments, given the low level of capacity utilisation, the rise in

– 8.0

– 4.0

– 6.0

– 2.0

0

8.0

2.0

4.0

6.0

7.2

2.5 2.5

3.5 3.5

2.01.3 1.4

6.1

7.26.8

4.0

2.6

– 5.9

4.1

– 3.6

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

20082007200620052004 2009 2010 2011

AustriaEuro area

CEE (17)

Forecast

Source: UniCredit Research


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debt ratios and adapted risk evaluations. But recovery will con-tinue on the back burner, notwithstanding the absence of factors that will drive the Austrian economy in 2010. With real GDP growth of 1.3%, and taking into consideration anticipated prog-ress in productivity, the Austrian economy will almost stagnate in 2010. The general conditions are unlikely to permit any noticeable improvement in the following year (economic growth of 1.4%).

Interest rates in the euro area will probably rise slightly in 2010, as will interest rates for deposits and loans. Nevertheless, interest rates will in the next few months remain at their – in a historical comparison – very low level. In view of the cautious real eco-nomic outlook, credit demand will expand only moderately. Lend-ing volume will again increase slightly following the sideward movement in the second half of 2009, but personal loans and business loans will grow at a rate below the multi-year trend. After growing strongly in 2008 and at the beginning of 2009, bank deposits experienced a moderate cyclical turnaround in the second half of 2009. In 2010, new capital formation is again likely to fall short of the levels of the previous five years due to the weak growth of real incomes, the slight decline of the savings ratio and, in particular, the efforts of households to reduce their debt. Although most of the new capital of private households in 2010 is expected to take the form of deposits, other investment categories are likely to increasingly benefit from low interest rates, with demand also picking up again for bank issues and mutual funds.

At the beginning of 2010, the upturn got under way in almost all countries in Central and Eastern Europe (CEE), but its pat-tern more closely resembles that of the western European coun-tries than that of emerging markets in Asia. In CEE, too, the upturn is driven primarily by exports and changes in inventory levels, and domestic demand is weak across the region following the stabilisation recession. Investment is stagnating and new impetus comes only from infrastructure projects and the imple-mentation of EU financial assistance. Unemployment is rising, and private households have low financial reserves. Automatic stabilis-ers, i. e. mainly tax losses, labour market policy and social sys-tems, which cushion the impact of the economic downturn in western economies, are not yet as highly developed in CEE, so that adverse external factors had an immediate impact on domes-tic demand. A positive effect is the significant reduction of current account deficits in 2009. Furthermore, inflows of capital never completely dried up and have recently recovered somewhat. This has led to pressure on CEE currencies to appreciate, but this is undesirable. Central banks are counteracting such pressure through interest rate reductions and intervention in an effort to maintain competitive prices for the exports of their respective economies.

➔ Overall, we expect GDP to grow by 2.6% in the CEE region. Economic growth will exceed 4% as from 2011, without however returning to the dynamic pace seen before the financial and eco-nomic crisis. This is explained by the general trend characterised by slower growth in global demand and by the fact that the previ-ous CEE credit boom cannot be repeated.

The pattern of growth will vary widely across the CEE region in 2010. This was already discernible in the varying rise of the Pur-chasing Managers’ Index in the last few months. The divergence of the rises is attributable to the size and relative degree of autonomy of the economies, the extent of their overheating prior to the eco-nomic crisis, the stability of the banking sector and the leverage of the local economy and private households, and also the scope available for determining local economic policy. Turkey, Slovakia and Poland thus display the strongest growth, while the Baltic states once again show the strongest contraction (see the table on page 34 for individual growth rates).

In the Central European countries (especially the Czech Republic, Hungary and Slovakia), economic performance remains highly dependent on developments in Western Europe, the destination of up to 70% of their exports. For this reason, the growth prospects in Central Europe are modest. Hungary is one of the countries with high debt leverage, both in the private and in the public sector. While the inevitable deleveraging and the restrictive spending pol-icy of the old, and probably also the new, government as part of the IMF programme prevent the country from participating in the general upturn, Hungary will become more stable (exchange rate, interest rates).

In the SEE country group we expect GDP to continue to contract in 2010, in some cases strongly, in Croatia, Bosnia and Herzegovina, and Serbia, reflecting weak domestic trends and in part a high level of foreign currency indebtedness. Croatia’s negotiations for accession to the EU are in the final stage and the country’s EU accession target of 2012 is within reach. The likely prospect of a currency board agreement for Bosnia and Herzegovina and IMF assistance for Serbia have stabilised the financial outlook for SEE. After contracting significantly in the past year, the Romanian econ-omy will grow only negligibly in 2010. A slight improvement in the precarious balance of payments problems with the help of the EU and the IMF compares with a fall in wages and a deterioration in prosperity; high government deficits (but at a relatively low level of debt) are accepted in an effort to combat these adverse trends. In Bulgaria the recession is not yet over. Economic performance will continue to deteriorate in 2010, especially as the currency board is importing stability but limiting the scope for fiscal and monetary policy.





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In Russia, the near-term outlook for economic recovery has strongly improved recently, though the performance base in 2009 turned out to be weaker than expected. We raised the growth fore-cast to 3.2%, a level that is still moderate for Russia. The country benefits from assets such as a healthy balance of payments, a declining rate of inflation, and low levels of public debt and finan-cial leverage. Russia’s weaknesses include its dependence on commodities prices – given a lack of diversification and the real economy’s low propensity to invest –, an unclear regulatory environment and company failures. Strong capital inflows have put the rouble under pressure to appreciate; as these inflows may be portfolio investments, the country has recently considered intro-ducing capital controls.

Turkey will achieve above-average economic performance in 2010, returning to the previous 4% growth path after the sharp stabilisation-related recession experienced in the past two years. The country benefits from its large domestic market and highly developed private consumption, giving it some degree of autonomy. Monetary expansion is strong, but the country has a sound banking sector, with significant loan losses being due to the high proportion of retail banking.

kazakhstan has been making efforts to unlock its enormous real economic potential (as reflected in steady direct investment) over the past two years by restoring the credit cycle to a healthy basis and introducing modern banking regulation through regulatory reforms. Large infrastructure projects and investment in heavy industry support growth with a strong multiplier effect, as does quasi-budgetary expenditure of the oil fund, until the commodities cycle turns more favourable again (in 2009, the country continued to see the lowest decline in economic performance in the CEE region). The banking sector is still in the process of profound restructuring, including the nationalisation of two of the four major local banks, and had to absorb a capital loss overall.

In Ukraine, the economy experienced a slump in 2009 (GDP down by 14% in real terms, industrial output down by 20%, investment down by 50%). There are hopes now that the political deadlock will be overcome in 2010 and that the economy will grow by 2%. A balanced current account, large foreign currency reserves and the resumption of the IMF programme are improving the outlook for growth, lower inflation and exchange rate stability. Rising loan losses continue to be the main risk below the macroeconomic level.

➔ While there are regional differences, all countries in the CEE region recorded significant public sector deficits in 2009 (CEE average: –6.7% of GDP) after a more or less balanced position. Yet accumulated debt is still comparatively low (with the exception of Hungary) and compares favourably with the levels seen in some euro member states. In any case, sovereign credit spreads (CDS spreads) for all CEE countries except the Baltic states and Ukraine are within those for Greece. In the private sector, the increase in non-perform-ing loans will only reach its peak in 2010 depending on regional circumstances.

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

WEIGHTED By

GDPBANk

AUSTRIA *) 2008 2009 2010 2011

World (purchasing power parities) +2.9 –1.0 +3.5 +3.7USA +0.4 –2.4 +2.6 +2.0Euro area +0.6 –4.0 +0.9 +1.3… Austria +2.0 –3.6 +1.3 +1.4

Czech Republic 5.8% 8.1% +2.5 –4.3 +1.6 +2.4Slovakia 2.6% 3.6% +6.2 –4.7 +3.1 +3.8Hungary 4.2% 5.6% +0.7 –6.5 –0.3 +2.7Slovenia 1.5% 1.3% +3.5 –7.8 +0.6 +1.5Central Europe 14.0% 18.6% +2.7 –5.4 +1.2 +2.7Poland +4.9 +1.7 +2.6 +2.7Bulgaria 1.3% 6.5% +6.0 –5.1 –1.0 +2.2Romania 5.4% 6.5% +7.1 –7.2 +0.4 +3.5Croatia 1.9% 12.0% +2.4 –5.8 –1.0 +1.3Bosnia and Herzegovina 0.5% 2.4% +5.4 –3.5 –1.0 +0.8Serbia 1.3% 1.7% +5.5 –3.2 –0.5 +2.2Estonia 0.6% 0.2% –3.5 –15.5 –3.9 +4.8Latvia 0.9% 0.2% –4.6 –17.6 –4.0 +6.1Lithuania 1.3% 0.2% +2.8 –15.0 –5.5 +4.7SEE and Baltic states 13.3% 29.5% +4.4 –8.1 –1.2 +3.2Russia 45.0% 15.6% +5.6 –7.9 +3.2 +5.0Turkey 19.3% 20.7% +0.9 –5.4 +4.5 +4.5Russia and Turkey 64.3% 36.3% +4.2 –7.1 +3.6 +4.8Kazakhstan 3.5% 6.9% +3.3 +1.2 +2.5 +5.0Ukraine 4.9% 8.7% +2.1 –15.0 +2.0 +4.0kazakhstan and Ukraine 8.4% 15.6% +2.6 –8.2 +2.2 +4.4

CEE (with Poland, GDP-weighted) +4.0 –5.9 +2.6 +4.1CEE (without Poland, GDP-weighted) +3.9 –7.1 +2.5 +4.3CEE (Bank Austria-weighted)*) +3.3 –6.3 +1.8 +3.5

Bank Austria market (GDP-weighted) +3.7 –6.8 +2.4 +4.0Bank Austria market (Bank Austria-weighted) +2.9 –5.5 +1.6 +2.8

*) weighted by contribution of Bank Austria’s subsidiaries to operating income in CEE regionSource: UniCredit Research. Forecasts as at 5 March 2010


the➔ In the f the


The Austrian business divisions will hardly be able to repeat the excellent net interest performance of 2009. We expect moderate volume growth for 2010, with margins remaining under pressure. The monetary environment in the euro capital market – more specifi-cally the tightening of quantitative monetary policy and rising short-term market rates – will probably present the bank with more difficult conditions in its treasury activities. After declining over many years, prospects for net fees and commissions are slightly better now: as the financial market crisis recedes and almost all market segments return to normal, investor interest should rise again, with investments becoming more broadly diversified. With the establishment, i. e. the recalibration, of investment banking in the new CIB Division and the sale of the remaining CAIB, the significant weight of commercial banking in the opportunity / risk profile of Bank Austria has further increased, which should make for a steadier development especially in the net trading, hedging and fair value result.

With our internal efforts, undertaken with a long-term perspective within UniCredit Group, we are laying the foundations for further effi-ciency enhancement and a sustainable upward trend. The vision of a European bank with cross-regional product factories and local cus-tomer service units, and the process of convergence between the old West European and the young CEE economies, are still intact. After significant cost savings in the past few years we aim to keep the cost / income ratio in 2010 at the low level achieved in both markets.

➔ Overall, we expect a steady development of our operations, with volume growth recovering slightly to more or less offset declining margins. If hopes for lower net writedowns of loans materialise, this should result in an increase in profits.

The capital increase on which a resolution has been adopted will lift Bank Austria’s Tier 1 capital ratio based on all risks to about 10.4% and based on credit risk to about 11.6% (calculated on the basis of year-end 2009 figures). Based on our stronger capital resources we are prepared – on our own and, above all, on a permanent basis – for unforeseen risks and stricter regulatory requirements.

Recent discussions about regulatory changes for the European bank-ing sector are aimed at restricting proprietary trading in financial market instruments and highly leveraged financial investments. Being a customer-focused universal bank, Bank Austria would be less affected by such regulatory measures, all the more so as investment banking activities were reduced to customer-driven business in 2009.

Outlook for Bank Austria’s performanceEconomies have overcome recession and returned to a moderate growth path. This has improved prospects for the banking sector to recover from the deep plunge in our two core markets and get ready for a new start. With a stronger capital base we are well positioned to take advantage of growth opportunities and reinforce our market position. In CEE we aim to pursue further organic growth through various initiatives including a selective expansion of our branch net-work. Our structure in Austria is geared to serving customers as a universal bank. We will unlock further synergies and enhance our competitiveness by strengthening cross-regional cooperation in the Group.

We expect that the exceptional burdens which resulted from the eco-nomic environment and accumulated in 2009 for our banking sub-sidiaries in CEE are now behind us. The CEE countries have regained their attraction for long-term investment and now benefit from better ratings again. Our economists forecast 8% growth of lending volume in 2010. While this rate partly reflects the fact that loans declined by 5% in the previous year, credit expansion may be expected to con-tinue at a steady pace even after the initial counter-movement. The increase in lending volume will start in the corporate sector, developing into a genuine upswing after about a year at the earliest. This should benefit net interest income whereas the trading perfor-mance will probably decline as money and currency markets ease in line with the forecasts. The risks associated with this scenario mainly relate to the macroeconomic level, with a varying impact on CEE countries. We do not think, however, that general recession will return. In view of the elections soon to be held in various countries, the necessary reduction of public deficits could meet with political resistance. Public debt rollover could lead to temporary strains on interest rates in some countries. However, current account improve-ments and the standby arrangements of international organisations make balance-of-payments crises an unlikely prospect. Our CEE exposure as outlined in this report is well diversified in regional terms. Operating profit has proved to be resilient in the crisis, con-firming the bank’s ability to absorb risks in current business. The restructuring of the banking sector in Kazakhstan and Ukraine, two problem countries, had a massive impact in 2009. The integra-tion of these two most recently acquired banking subsidiaries in UniCredit Group’s business model has made major progress. In CEE as a whole, the lagging credit risk cycle will probably peak during 2010. This means that although further adverse impacts cannot be ruled out, the worst may now be over.





Willibald Cernko(Chairman)

Helmut Bernkopf Jürgen Danzmayr Federico Ghizzoni

Rainer Hauser Carlo Vivaldi Stephan Winkelmeier

Vienna, 8 March 2010

The Management Board


the➔ In the f the


in accordance with International Financial Reporting Standards (IFRSs)

Statement of comprehensive income for the year ended 31 December 2009 40

Income statement 40Statement of income and expenses recognised directly in equity 41

Balance sheet at 31 December 2009 42 Statement of changes in equity 43

Cash flow statement 44

Consolidated Financial Statements



Consolidated Financial Statements in accordance with IFRSs

of the Bank Austria Group for the year ended 31 December 2009

Statement of Comprehensive Income

Consolidated income statement (€ m)

(Notes) 2009 2008

Interest income and similar revenues (5) 9,984 12,837Interest expense and similar charges (5) –5,250 –8,180Net interest margin 4,733 4,657Fee and commission income (6) 2,245 2,706Fee and commission expense (6) –414 –629Net fees and commissions 1,831 2,076Dividend income and similar revenue (7) 57 592Gains and losses on financial assets and liabilities held for trading (8) 329 –375Fair value adjustments in hedge accounting (9) – –Gains and losses on disposal of: (10) 126 133

a) loans 5 1b) available-for-sale financial assets 123 132c) held-to-maturity investments –2 –1d) financial liabilities – 1

Gains and losses on financial assets / liabilities at fair value through profit or loss (11) –6 –48OperatiNg iNcOme 7,070 7,035Impairment losses on: (12) –2,297 –1,096

a) loans –2,252 –1,019b) available-for-sale financial assets –26 –25c) held-to-maturity investments – –59d) other financial assets –20 8

Net income from financial activities 4,773 5,939Premiums earned (net) (13) 87 112Other income (net) from insurance activities (14) –82 –86Net income from financial and insurance activities 4,779 5,964Administrative costs: –3,292 –3,621

a) staff expense (15) –1,898 –2,235b) other administrative expense (16) –1,394 –1,386

Provisions for risks and charges (17) –114 –78Impairment /write-backs on property, plant and equipment (18) –221 –213Impairment /write-backs on intangible assets (19) –112 –119Other net operating income (20) 207 178OperatiNg cOsts –3,533 –3,854Profit (loss) of associates (21) 84 412Gains and losses on tangible and intangible assets measured at fair value – –Impairment of goodwill –19 –1,027Gains and losses on disposal of investments (22) 24 9tOtal prOfit Or lOss befOre tax frOm cONtiNuiNg OperatiONs 1,335 1,505Tax expense (income) related to profit or loss from continuing operations (23) –182 –222Net prOfit Or lOss fOr the year 1,152 1,283Net profit or loss attributable to the parent company 1,102 1,144Minorities 51 139Earnings per share (in €, basic and diluted) 5.45 5.66



Statement of income and expenses recognised directly in equity (€ m)

2009 2008

Gains/ losses on assets held for sale (available-for-sale reserve) 51 –600Gains / losses on cash flow hedges (cash flow hedge reserve) 126 149Changes at companies accounted for under the equity method 3 –45Foreign currency translation – exchange differences –515 –1,166Foreign currency translation relating to assets held for sale 0 –19Actuarial losses on defined-benefit plans –137 56Taxes on items directly recognised in equity –4 99Other changes*) –499 –recognised directly in equity – 974 –1,524Net profit 1,152 1,283tOtal Of iNcOme aNd expeNses recOgNised iN the repOrtiNg year 178 –241Shareholders’ equity 348 –339Minority interests –169 98

*) includes changes due to the recognition of the commitment to repurchase minority interests




of the Bank Austria Group at 31 December 2009

Consolidated Balance Sheet

Assets (€ m)

(Notes) 31 dec. 2009 31 dec. 2008

Cash and cash balances (26) 3,213 3,908Financial assets held for trading (27) 4,137 4,489Financial assets at fair value through profit or loss (28) 235 567Available-for-sale financial assets (29) 10,826 10,034Held-to-maturity investments (30) 5,067 5,754Loans and receivables with banks (31) 23,076 20,023Loans and receivables with customers (32) 123,602 131,973Hedging derivatives (33) 151 85Changes in fair value of portfolio hedged items (+/–) – –Investments in associates and joint ventures (34) 2,426 2,277Insurance reserves attributable to reinsurers – –Property, plant and equipment (35) 2,273 2,346

of which held for investment 369 310Intangible assets (36) 3,938 4,170

of which goodwill 3,415 3,595Tax assets (37) 1,330 1,088

a) current tax assets 309 253b) deferred tax assets 1,021 835

Non-current assets and disposal groups classified as held for sale (38) 13,210 34,068Other assets (39) 975 1,369tOtal assets 194,459 222,152

Liabilities and equity (€ m)

(Notes) 31 dec. 2009 31 dec. 2008

Deposits from banks (40) 33,362 35,511Deposits from customers (41) 97,041 95,164Debt securities in issue (42) 28,822 32,597Financial liabilities held for trading (43) 915 2,155Financial liabilities at fair value through profit or loss (44) 1,967 2,000Hedging derivatives (45) 219 123Changes in fair value of portfolio hedged items (+/–) – –Tax liabilities (46) 552 541

a) current tax liabilities 96 138b) deferred tax liabilities 456 403

Liabilities included in disposal groups classified as held for sale (47) 10,492 33,137Other liabilities (48) 2,372 2,515Provisions for risks and charges (49) 4,167 4,015

a) post-retirement benefit obligations 3,677 3,537b) other provisions 490 477

Insurance reserves 162 156Equity (50) 14,388 14,237

of which Minorities (+/–) 539 733tOtal liabilities aNd equity 194,459 222,152



Statement of changes in equity

(€ m)

subscribed capital

capital reserVes

retaiNed earNiNgs

fOreigN curreNcy

traNslatiON

reserVes iN accOrdaNce With ias 39*)

actuarial lOsses iN

accOrdaNce With ias 19

share- hOlders’

equity miNOrity iNterests equity

as at 1 January 2008 1,469 5,323 8,118 –31 397 –600 14,676 658 15,334Purchase price allocation –4 –4 2 –2as at 1 January 2008 restated 1,469 5,323 8,114 –31 397 –600 14,672 660 15,332Changes in the group of consolidated companies – –1 –1Shares in controlling companies – –Recognised income and expenses 1,144 –1,145 –381 42 –339 98 –241Dividend paid –808 –808 –24 –832Other changes 4 –25 –21 –21as at 31 december 2008 1,469 5,327 8,425 –1,175 16 –558 13,505 733 14,237

*) Reserves in accordance with IAS 39 1 Jan. 2008 31 Dec. 2008 Cash flow hedge reserve –119 –13 Available-for-sale reserve 516 29 Total 397 15 of which reserves of companies classified as held for sale –138

subscribed capital

capital reserVes

retaiNed earNiNgs

fOreigN curreNcy

traNslatiON

reserVes iN accOrdaNce With ias 39*)

actuarial lOsses iN

accOrdaNce With ias 19

share- hOlders’

equity miNOrity iNterests equity

as at 1 January 2009 1,469 5,327 8,425 –1,175 16 –558 13,505 733 14,237Changes in the group of consolidated companies – 9 9Shares in controlling companies –3 –3 –3Recognised income and expenses 870 –552 132 –103 348 –169 178Dividend paid – –34 –34Other changes – –as at 31 december 2009 1,469 5,325 9,295 –1,727 148 –660 13,850 539 14,388

*) Reserves in accordance with IAS 39 1 Jan. 2009 31 Dec. 2009 Cash flow hedge reserve –13 62 Available-for-sale reserve 29 86 Total 15 148 of which reserves of companies classified as held for sale –27

of the Bank Austria Group




Cash flow statement

(€ m)

2009 2008

Net prOfit 1,152 1,283Non-cash items included in net profit, and adjustments to reconcile net profit to cash flows from operating activities

Depreciation, amortisation, net writedowns of loans, and changes in fair values 2,670 1,861Increase in staff-related provisions and other provisions 335 114Increase/decrease in other non-cash items –34 –250Gains / losses on disposal of intangible assets, property, plant and equipment, and investments –150 –141

sub-tOtal 3,973 2,867Increase/decrease in operating assets and liabilities after adjustment for non-cash components

Financial assets held for trading 6,739 –6,043Loans and receivables with banks and customers 16,731 – 9,980Other asset items –656 1,425Financial liabilities held for trading –5,910 7,676Deposits from banks and customers –17,769 2,466Debt securities in issue –3,451 5,362Other liabilities items 82 –2,243

cash flOWs frOm OperatiNg actiVities –261 1,530

Proceeds from disposal ofinvestments 6,377 8,810property, plant and equipment 73 97

Payments for purchases ofinvestments –5,922 –6,812property, plant and equipment –306 –756

Proceeds from sales (less cash disposed of) of subsidiaries 53 205Payments for acquisition (less cash acquired) of subsidiaries – –1,583Other changes –355 275cash flOWs frOm iNVestiNg actiVities –80 236

Proceeds from capital increase – –Dividends paid – –808Subordinated liabilities and other financial activities (net) –319 146cash flOWs frOm fiNaNciNg actiVities –319 –662

cash aNd cash equiValeNts at eNd Of preViOus periOd 3,929 2,967Cash flows from operating activities –261 1,530Cash flows from investing activities –80 236Cash flows from financing activities –319 –662Effects of exchange rate changes –25 –142cash aNd cash equiValeNts at eNd Of periOd 3,244 3,929

paymeNts fOr taxes, iNterest aNd diVideNdsIncome taxes paid –44 –89Interest received 10,500 12,837Interest paid –6,050 –8,180Dividends received 83 612

of the Bank Austria Group

The amount of cash and cash equivalents stated in the cash flow statement also includes cash and cash equivalents of disposal groups classified as held for sale.



Notes to the Consolidated Financial Statements

(1) Legal basis of the consolidated financial statements 48 (2) Structural changes 48

(2a) Changes in the group of consolidated companies 48 (2b) Impairment test 50

(3) Significant accounting policies 53 (4) Events after the balance sheet date 61

Notes to the income statement 62 (5) Interest income/ Interest expense 62 (6) Fee and commission income/Fee and commission expense 63 (7) Dividend income and similar revenue 63 (8) Gains and losses on financial assets and liabilities held for trading 64 (9) Fair value adjustments in hedge accounting 64 (10) Gains and losses on disposals / repurchases 65 (11) Net change in financial assets and liabilities at fair value through profit or loss 65 (12) Impairment losses 66 (13) Premium earned (net) – breakdown 67 (14) Other income (net) from insurance business 67 (15) Payroll 67 (16) Other administrative expenses 68 (17) Net provisions for risks and charges 68 (18) Impairment on property, plant and equipment 69 (19) Impairment on intangible assets 69 (20) Other net operating income 69 (21) Profit (Loss) of associates 70 (22) Gains and losses on disposal of investments 70 (23) Income tax from continuing operations 70 (24) Earnings per share 71 (25) Dividends 71

Notes to the balance sheet 72 (26) Cash and cash balances 72 (27) Financial assets held for trading 72 (28) Financial assets at fair value through profit or loss 72 (29) Available-for-sale financial assets 73 (30) Held-to-maturity investments 74 (31) Loans and receivables with banks 74 (32) Loans and receivables with customers 75 (33) Hedging derivatives 75 (34) Equity investments 76 (35) Property, plant and equipment 76 (36) Intangible assets 78 (37) Tax assets 79 (38) Non-current assets and disposal groups classified as held for sale 80 (39) Other assets 81 (40) Deposits from banks 81 (41) Deposits from customers 82 (42) Debt securities in issue 82 (43) Financial liabilities held for trading 82 (44) Financial liabilities at fair value through profit or loss 83 (45) Hedging derivatives 83 (46) Deferred tax liabilities 83 (47) Liabilities included in disposal groups classified as held for sale 84

(48) Other liabilities 84 (49) Provisions for risks and charges 85 (50) Equity 85

Additional IFRS disclosures 86 (51) Time breakdown by contractual residual maturity of financial assets and liabilities 86 (52) Geographical distribution 86 (53) Related party disclosures 87 (54) Auditors’ fees (pursuant to Section 237 no. 14a and Section 266 no. 11 of the Austrian Commercial Code) 88 (55) Share-based payments 88 (56) Reconciliation of reclassified accounts to mandatory reporting schedule 90 (57) Segment reporting 92 (58) Assets pledged as security 98 (59) Subordinated assets / liabilities 98 (60) Assets and liabilities in foreign currency 98 (61) Trust assets and trust liabilities 98 (62) Repurchase agreements 98 (63) Guarantees given and commitments 99 (64) List of selected subsidiaries and other equity interests 99

(64a) Consolidated companies 99 (64b) Investments in companies accounted for under the proportionate consolidation method 101 (64c) Investments in associated companies accounted for under the equity method 102 (64d) Investments in associated companies not accounted for under the equity method 102

(65) Employees 102 (66) Supervisory Board and Management Board 102

Risk report 103 (67) Overall risk management including Basel II 103

(67a) Market risk 105 (67b) Liquidity risk 111 (67c) Counterparty risk 112 (67d) Credit risk 113 (67e) Operational risk 118 (67f) Business risk 118 (67g) Risks arising from the bank’s shareholdings and equity interests and from real estate 118

(68) Report on key features of the internal control and risk management systems in relation to the financial reporting process 119 (69) Legal risks 120 (70) Information on the squeeze-out 121 (71) Financial derivatives 121

Information required under Austrian law 125 (72) Consolidated capital resources and regulatory capital requirements 125

Concluding Remarks of the Management Board of UniCredit Bank Austria AG 127

Report of the Auditors 128

Report of the Supervisory Board for 2009 130

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

of Bank Austria




(1) Legal basis of the consolidated financial statementsUniCredit Bank Austria AG, Schottengasse 6–8, A-1010 Vienna, Austria, is a universal bank conducting banking business within the meaning of Section 1 (1) of the Austrian Banking Act. It is registered under no. FN 150714p in the Austrian Register of Firms at the Commercial Court of Vienna. The bank continues to operate in the market under the “Bank Austria” brand name. The geographical focus of the bank’s operations is on Austria and CEE.

(2) Structural changes

(2a) Changes in the group of consolidated companiesThe following companies were included in the group of consolidated companies of the Bank Austria Group as from 1 January 2009: BA-CA Wien Mitte Holding GmbH Christoph Reisegger Gesellschaft m.b.H. Diners Club CEE Holding AG Diners Polska Sp.z.o.o. EK Mittelstandsfinanzierungs AG Euroventures-Austria-CA-Management GesmbH Mezzanin Finanzierungs AG Palais Rothschild Vermietungs GmbH Co OEG WED Donau-City Gesellschaft m.b.H. WED Holding Gesellschaft m.b.H. WED Wiener Entwicklungsgesellschaft für den Donauraum AG Arany Penzügyi Lizing Zrt., Hungary UniCredit Factoring Penzügyi Szolgoltato Zrt., Hungary

The following companies have been accounted for under the equity method since 1 January 2009: “Air Plus” Air Travel Card Vertriebsgesellschaft m.b.H. Pay Life Bank GmbH UniCredit Business Partner S.p.A., Italy

On 22 January 2009, UniCredit Global Leasing S.p.A., Italy, a leasing company accounted for under the equity method, merged with UniCredit Leasing S.p.A., Italy. Bank Austria’s shareholding interest in the merged company is now 31.01%.

Also in January 2009, Bank Austria transferred its previously consolidated subsidiaries BA-CA Administration Services GmbH and Banking Transaction Services s. r.o, Czech Republic, to UniCredit Business Partner S.p.A., Italy. In return, Bank Austria received a shareholding interest of 28.81% in UniCredit Business Partner S.p.A., which has been accounted for under the equity method in the Bank Austria Group since 1 January 2009.

As part of the bundling of IT services within UniCredit Group, WAVE Solutions Information Technology GmbH was transferred to UniCredit Global Infor-mation Services S.p.A. (UGIS) with effect from 1 May 2009. In return, 23,804,361 new UGIS shares corresponding to a 10.02% shareholding interest were transferred to Bank Austria.

CEAKSCH Verwaltungs G.m.b.H. was established on 30 September 2009. The company is a subsidiary of BA-CA Markets Investment Beteiligung GmbH, it holds fund units and has been consolidated in the Bank Austria Group as from 1 October 2009.

The business of Asset Management GmbH and Bank Privat AG, two consolidated companies conducting private banking activities, was transferred to Bank Austria. The merger of the companies with UniCredit Bank Austria AG was entered in the Register of Firms on 28 October 2009.

On 31 December 2009, UniCredit Bank Austria AG sold 100% of Hyperion Immobilienvermietungsges.m.b.H. to Signa Holding for € 49 m.

As at the end of 2009, the following subsidiaries of OJSB Ukrsotsbank were included in the group of consolidated companies of the Bank Austria Group with retroactive effect to 1 January 2009: LLC Ukrsotsbud SVIF UkrsotsbudThe companies operate in Ukraine as residential building companies.

Moll Holding GmbH was accounted for under the equity method in Bank Austria as from the end of 2009.

Notes (CONTINuED)



Assets (€ m)

31 dec. 2008 additiONs as at 1 JaNuary 2009

dispOsals iN 2009

Cash and cash balances 3,908 – –Financial assets held for trading 4,489 – –Financial assets at fair value through profit or loss 567 – –Available-for-sale financial assets 10,034 16 –1Held-to-maturity investments 5,754 – –Loans and receivables with banks 20,023 91 –34Loans and receivables with customers 131,973 194 –Hedging derivatives 85 – –Changes in fair value of portfolio hedged items (+/–) – – –Investments in associates and joint ventures 2,277 80 –Insurance reserves attributable to reinsurers – – –Property, plant and equipment 2,346 82 –2Intangible assets 4,170 – –3

of which goodwill 3,595 – –Tax assets 1,088 1 –

a) current tax assets 253 – –b) deferred tax assets 835 1 –

Non-current assets and disposal groups classified as held for sale 34,068 – –Other assets 1,369 28 –28tOtal assets 222,152 493 –67

Effects of changes in the group of consolidated companies

Liabilities and equity (€ m)

31 dec. 2008 additiONs as at 1 JaNuary 2009

dispOsals iN 2009

Deposits from banks 35,511 269 –Deposits from customers 95,164 – –Debt securities in issue 32,597 – –Financial liabilities held for trading 2,155 1 –1Financial liabilities at fair value through profit or loss 2,000 – –Hedging derivatives 123 – –Changes in fair value of portfolio hedged items (+/–) – – –Tax liabilities 541 1 –

a) current tax liabilities 138 1 –b) deferred tax liabilities 403 – –

Liabilities included in disposal groups classified as held for sale 33,137 – –Other liabilities 2,515 53 –52Provisions for risks and charges 4,015 – –5

a) post-retirement benefit obligations 3,537 – –5b) other provisions 477 – –

Insurance reserves 156 – –Equity 14,237 168 – 9

of which Minorities (+/–) 733 – –tOtal liabilities aNd equity 222,152 493 –67




(2b) Impairment testGoodwill: annual changes (€ m)

2009 2008

Opening balance 3,595 3,837Goodwill arising out of acquisitions made in the year – 1,585Permanent reductions (impairment) –19 –1,027Disposals – –38Net exchange differences –274 –626Transfer to / from non-current assets held for sale 113 –115Other changes – –21closing balance 3,415 3,595

The main changes in accumulated goodwill in 2009 were: Goodwill write-off CJSC UniCredit Securities (the former ATON): –€ 18 m Net exchange differences due to currency depreciation: –€ 274 m Transfer back from non-current assets held for sale as the transfers of UniCredit CAIB AG and CJSC UniCredit Securities (the former ATON) to UniCredit Bank AG (the former Bayerische Hypo- und Vereinsbank AG), Germany, did not take place in 2009 (a transfer with a reduced scope will take place in 2010).

In compliance with IFRS 3 and in conjunction with IAS 36 and IAS 38 the carrying amount of goodwill or intangible assets with indefinite useful lives allocated to cash-generating units (CGU) was tested for impairment as at 31 December 2009.

The cash-generating unit represents the lowest level within the Group at which the goodwill is allocated for management purposes. Goodwill recog-nised is an intangible asset representing the future economic benefits arising from those assets acquired in a business combination which are not individually identified and separately recognised.

In Bank Austria, business segments defined for segment reporting purposes are presented as cash-generating units. Within a business segment, significant legal entities or all entities in a specific country are considered to be separate cash-generating units.

Notes (CONTINuED)



Impairment test – cash-generating units (€ m)

2009 2008

gOOdWillOther

iNtaNgibles*) tOtal gOOdWillOther

iNtaNgibles*) tOtal

retail – – – –private banking 39 – 39 39 – 39

Schoellerbank 39 – 39 39 – 39corporate & investment banking 95 – 95 – – –

CJSC UniCredit Securities 47 – 47 – – –CAIB 48 – 48 – –

central eastern europe 3,272 70 3,342 3,547 77 3,624

eu member statesBaltics 9 – 9 10 – 10Bulgaria 159 – 159 159 – 159Czech Republic 304 – 304 302 – 302Hungary 118 – 118 118 – 118Romania 140 – 140 148 – 148Slovakia 88 – 88 88 – 88

OtherBosnia 39 – 39 39 – 39Croatia 52 – 52 52 – 52Kazakhstan 762 43 805 968 50 1,018Russia 742 – 742 776 – 776Serbia 22 – 22 24 – 24Turkey 379 – 379 380 – 380Ukraine 457 27 484 483 27 510

corporate center 9 – 9 9 – 9tOtal 3,415 70 3,485 3,595 77 3,672*) indefinite useful life

The annual impairment test of goodwill, as required by IAS 36, is carried out as at the annual reporting date. In addition, impairment tests are per-formed again whenever there is an indication that goodwill may be impaired.

The carrying amount of a cash-generating unit is determined on the basis of equity and the carrying amount of goodwill allocated to that unit.

The recoverable amount relating to each CGU is the value in use and is determined on the basis of future cash flows expected from each CGU to which goodwill has been allocated.

The 2010 budgets, on which the following valuation calculations are based, were adopted or taken note of by the management of the respective busi-ness units and by the Management Board and Supervisory Board of Bank Austria, respectively.

According to current information available to the Management Board of Bank Austria, the assumptions for the years 2013 to 2019 are in line with probable developments at the respective business units (cash-generating units). Given the imponderable nature of future economic trends, actual developments may also differ from, and be significantly worse than, these assumptions.

For the fair value calculation the Standard UniCredit Group Discounted Cash Flow Valuation Model (3-phase model) was employed throughout the Group using the following assumptions: Phase 1 (2010): the free cash flows are based on the net profit and RWAs planned for the 2010 budget. Phase 2 (2011–2019) Phase 2a (2011–2012): the free cash flows in 2011 and 2012 were calculated by applying to 2010 net profit and RWAs growth rates which are

partly determined by the CEE Strategic Analysis unit and are also published. Phase 2b (2013–2019): for the years 2013 to 2019, the growth rates for 2012 are reduced year after year to the expected long-term growth

potential of the euro area (2%). This means that the free cash flows to be discounted show growth rates which decline over time; the discount rates applied are also steadily reduced from 2012 to 2019.




Notes (CONTINuED)

Phase 3: calculation of the present value of a perpetual annuity on the assumption of a long-term growth rate which takes the sustained long-term economic growth expected by Bank Austria for the euro area into account (2%).

Phases 1 and 2a are the results of a detailed planning process and of projections based on it. For the purposes of phase 2b, the growth rates in phase 2a are gradually reduced to the levels on which the perpetual annuity is based.

Calculation of cost of equity The expected cash flows are discounted at the country-specific rate of cost of capital, which is determined on the basis of the long-term risk-free interest rate of the local currency, the debt risk premium and the UniCredit equity risk premium.

risk-free rate: Calculation is based on the historical average of the 5-year swap rate in local currency. If no swap rate was available, the most liquid and comparable interbank rate (with a 3-month tenor) was used.

risk premium for debt: This is the country risk premium calculated as the historical average of the 5-year credit default swap paid by the country (given the lack of time series in certain countries we considered a shorter time-period or the asset swap spread of a benchmark government bond).

risk premium for equity: This is calculated using the option-based model and is based on the historical volatility of UCG share price. The calcula-tion is normalised by cutting the extreme weekly changes of share prices (approx. 1% of observations, 0.5% positive and 0.5% negative).

terminal value cost of equity: Calculations are based on the methodology of the Group applied to a sample of European banks, but instead of applying the tenor of 5 years the 10-year CDS and the 10-year risk-free rate is used. The terminal value cost of equity of those CGUs operating in countries expected to enter the euro area by 2013 was set equal to the average for European banks with low exposure to CEE countries (11%). For the other CGUs the terminal value cost of equity was set equal to 12.5%, in line with the European banks having an important exposure to Central and Eastern Europe.

We should also stress that the parameters and the information used to test goodwill impairment are significantly influenced by the macroeconomic en-vironment and market conditions, which can be subject to rapid unforeseeable changes, possibly leading to very different results as compared to those used for the 2009 consolidated financial statements.

Due to the currently difficult macroeconomic climate and the difficulty in making a long-term forecast, a sensitivity analysis (see table below) was done for the defined cgus in central eastern europe (including Turkey and Kazakhstan), which involved changing cost of equity or terminal value growth rate so that the fair value of the CGU equals the respective carrying amount.

Sensitivity analysis of phase 3

subsidiaries chaNge iN Ke

(perceNtage pOiNts)chaNge iN cagr

(perceNtage pOiNts) cOmmeNt

eu member statesBaltics – – 2)

Bulgaria 25.7% 1)

Czech Republic 10.1% 1)

Hungary 2.2% –6.1%Romania 21.6% 1)

Slovakia 8.6% 1)

OtherBosnia 0.5% –1.3%Croatia 2.1% –5.5%Kazakhstan 0.0% 0.0%Russia 2.3% –7.0%Serbia 7.2% –21.2%Turkey 1.1% –2.4%Ukraine 0.0% 0.0%1) In view of the high profitability, the results of the sensitivity analysis are not significant.2) Goodwill due to structural specifics part of the local balance sheet and allocated to the branches of the pan-Baltic bank



(3) Significant accounting policiesPursuant to Section 59a of the Austrian Banking Act and Section 245a of the Austrian Commercial Code, and in conformity with Regulation (EC) No 1606/2002 of the European Parliament and of the Council of 19 July 2002, the 2009 consolidated financial statements of Bank Austria have been prepared in accordance with International Financial Reporting Standards (IFRSs) published by the International Accounting Standards Board (IASB) and in accordance with the interpretations of the International Financial Reporting Interpretations Committee (IFRIC/SIC) applicable at the balance sheet date. All International Financial Reporting Standards required to be applied to financial statements for 2009, and adopted by the EU, have been applied. In addition, the disclosure rules which are specified in the Accounting Manual of UniCredit, the ultimate parent company, and are required to be applied throughout the Group, were used as a basis for the preparation of the consolidated financial statements. The comparative figures for the previous year are also based on these standards. Unless indicated otherwise, all figures are in millions of euros (€).

IFRS 8 was applied in the 2009 financial year. The Standard contains new rules under which segment reporting is to be based on data other than IFRS data if management decisions rely on such other data. In such a case, a reconciliation to IFRS data in the other elements of financial reporting is re-quired. As UniCredit Bank Austria AG’s internal reporting system is based on IFRS data, no changes are required in this respect. Furthermore, the new rules require segment reporting figures to reflect inter-segment items and transactions, i. e. gross figures are to be stated. This may result in various changes in individual lines within segment reporting, without having an impact on the bank’s overall results or on the segment result.

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) 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. The relevant assets belong to UniCredit CAIB AG, which is a consolidated company but is included in the consolidated balance sheet with its total assets and total liabilities in the items Non-current assets and disposal groups classified as held for sale and Liabilities included in disposal groups classified as held for sale. For this reason the assets mentioned above are not part of loans and receivables with customers in Bank Austria’s consolidated balance sheet. Regardless of this fact, the follow-ing disclosure table shows the effects of reclassification by balance sheet item and income statement item.

In September 2009, we reclassified a part of the ABSs which were reclassified into loans and receivables with customers in the middle of 2008 back into financial assets held for trading. This related to synthetic ABSs, which are not eligible for reclassification pursuant to a clarification issued by the IFRS Board in spring 2009. As a result of this correction, the intermediate valuation losses arising from mark-to-market valuation of these synthetic ABSs are recognised in the income statement; they are no longer included in the following disclosure table with no effect on income. This had a nega-tive impact of € 67 m on gains and losses on financial assets and liabilities held for trading in 2009. Overall, and in contrast to 2008, reclassification thus had a negative impact on results for 2009.

Reclassifications in accordance with IAS 39 Carrying amounts and fair values of reclassified assets (€ m)

carryiNg amOuNt at date Of

reclassificatiON

31 dec. 2009 31 dec. 2008

carryiNg amOuNt fair Value


assets reclassified in 2008Financial assets held for trading reclassified into loans and receivables 2,556 1,810 1,496 2,374 1,993Available-for-sale financial assets reclassified into loans and receivables 1 1 1 1 1sum tOtal Of fiNaNcial assets reclassified iNtO lOaNs aNd receiVables 2,557 1,811 *) 1,497 2,375 1,993*) The decline in carrying amounts since reclassification is mainly due to the retransfer to the trading portfolio of synthetic ABSs in the amount of € 228 m.

Additional effects in the income statement if reclassification had not been done (€ m)

2009 2008

Unrealised fair-value gains / losses from reclassified financial assets held for trading – before net writedowns of loans and provisions for guarantees and commitments 31 –281

Effects in the income statement resulting from reclassified financial assets (€ m)

2009 2008

Interest income 82 101Net writedowns of loans and provisions for guarantees and commitments –10 –22Profit before tax from reclassified financial assets held for trading 72 79

Loans and receivables with customers include assets amounting to € 55 m on which writedowns have been made.




Notes (CONTINuED)

Consolidation methodsAll companies that are material and are directly or indirectly controlled by UniCredit Bank Austria AG have been consolidated in the consolidated financial statements. The consolidated financial statements of Bank Austria in accordance with IFRSs are based on the separate financial statements of all consolidated companies prepared on a uniform basis.

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

Material investments in associated companies, i. e., companies which are neither indirectly nor directly controlled by UniCredit Bank Austria AG but in which it can exercise a significant influence, are accounted for using the equity method.

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

The method of inclusion in the consolidated financial statements is shown in the list of selected subsidiaries and other equity interests in note 64.

Consolidation proceduresIntragroup receivables, liabilities, expenses and income are eliminated unless they are immaterial. Intragroup profits are also eliminated.

Business combinationsIn accordance with IFRS 3, paragraph 3 (b), IFRS 3 was not applied to business combinations involving entities under common control.

When a subsidiary is acquired, the fair values of its identifiable assets, including identifiable intangible assets, and liabilities are offset against the cost of acquisition. The difference between the cost of acquisition and the fair value of net assets is recognised in the balance sheet as goodwill if such difference cannot be attributed to intangible assets, e.g. a customer base. Pursuant to IFRS 3 and IAS 36, goodwill is not amortised. Goodwill arising on business combinations after 1 April 2004 is stated in the currency of the acquired company and translated at the closing rate. Goodwill is tested for impairment at least once a year.

As at the date of acquisition, equity of foreign subsidiaries which prepare their financial statements in foreign currency is translated into euros. Gains and losses arising on the foreign currency translation of equity of foreign subsidiaries are recorded directly in equity as at the subsequent balance sheet dates.

Goodwill arising on acquisitions of subsidiaries and other equity interests before 1 January 1995 has been offset against retained earnings.

When a subsidiary is acquired, the calculation of minority interests is based on the fair values of assets and liabilities.

Foreign currency translationForeign currency transactions are translated into the Group currency (euro) on initial recognition by applying the exchange rate at the date of the transaction. Foreign currency translation is performed in accordance with IAS 21. Monetary assets and liabilities denominated in currencies other than the euro are translated into euros at market exchange rates prevailing at the balance sheet date. Forward foreign exchange transactions not yet settled are translated at the forward rate prevailing at the balance sheet date.

For the purpose of foreign currency translation of the financial statements of foreign subsidiaries, which are prepared in a currency other than the euro, the middle exchange rate prevailing at the balance sheet date has been applied to balance sheet items and the annual average exchange rate has been applied to income statement items.



Cash and cash equivalentsThe amount of cash and cash equivalents stated in the cash flow statement includes the cash holdings (cash and demand deposits with central banks). In addition to the cash and cash equivalents shown in the balance sheet item Cash and cash balances, cash and cash equivalents also include those in the item Non-current assets and disposal groups classified as held for sale.

Financial instrumentsCash purchases and cash sales of financial instruments are recorded at the trade date. Netting of trading positions is performed only to the extent that there is an enforceable right to set-off and that this reflects the expected future cash flows from the transaction.

CategoriesFinancial instruments are classified into the following categories:

Financial assets and financial liabilities at fair value through profit or lossa) Financial assets and financial liabilities held for trading (HfT)When an HfT financial instrument is recognised initially, it is measured at its fair value excluding transaction costs that are directly recognised in profit or loss. After initial recognition, an entity shall measure these financial instruments at their fair value through profit or loss. A gain or loss arising from sale or redemption or a change in the fair value of an HfT financial instrument is recognised in the income statement item Gains and losses on finan-cial assets and liabilities held for trading.

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

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

b) At fair value through profit or loss (fair value option)When financial assets and financial liabilities are recognised initially, they may be classified as financial assets and financial liabilities at fair value through profit or loss (aFVtPL) if certain requirements are met (either reduction of valuation inconsistencies between related financial instruments, or inclusion in a group of financial instruments managed at their fair values on the basis of an investment and risk strategy). In UniCredit Bank Austria’s balance sheet, financial assets / liabilities at fair value through profit or loss include only those financial instruments which were designated as at fair value through profit or loss upon initial recognition.

Available-for-sale financial assets (AfS)Available-for-sale financial instruments are a separate category of financial instruments. To determine their fair values, the methods described in “Fair values – fair value hierarchy” below are used. Changes in fair values resulting from remeasurement are recognised in a component of equity (available-for-sale reserve) with no effect on income until the disposal of the financial asset. Impairment losses are recognised in income. Reversals of impairment losses on equity instruments are recognised in the available-for-sale reserve within equity; reversals of impairment losses on debt instru-ments are recognised in income.

Shares in companies which are neither consolidated nor accounted for under the equity method are classified as available for sale.

Held-to-maturity investments (HtM)Held-to-maturity investments are non-derivative financial assets with fixed or determinable payments and fixed maturity for which there is the positive intention and ability to hold to maturity.

These investments are recognised at amortised cost. Cost is amortised to the repayable amount until maturity. A held-to-maturity investment is im-paired within the meaning of IAS 39.63 if its carrying amount is greater than the present value of estimated future cash flows. Such an impairment is recognised in the item Impairment losses on held-to-maturity investments.

Loans and receivables with banks, loans and receivables with customersLoans and receivables are carried in the balance sheet at amortised cost and shown in the balance sheet in the items Loans and receivables with banks and Loans and receivables with customers. Amounts of premiums and discounts are spread over the period to maturity and recognised in net interest income.




Notes (CONTINuED)

The fair values of loans and receivables with banks as well as loans and receivables with customers are stated net of loan loss provisions. The fair values indicated in the table are the amounts for which the financial instruments could have been exchanged between knowledgeable, willing parties in an arm’s length transaction at the balance sheet date. To the extent that market prices were available from exchanges or other efficient markets, these were stated as fair values.

ClassesThese categories are subdivided into the following classes:

Debt instruments Equity instruments Units in investment funds Loans Derivatives

This grouping into classes is reflected in the tables shown in the notes to the consolidated financial statements.

Fair values – fair value hierarchyFinancial instruments measured at fair value and stated at their fair values in the balance sheet are shown in a fair value hierarchy comprising the following levels:

Level 1 contains financial instruments whose prices for identical assets or liabilities are observable in active markets. These prices are used un-changed. At Bank Austria, Level 1 predominantly includes listed equity instruments and bonds.

Level 2 shows assets or liabilities whose value is derived from inputs that are directly observable (as prices) or indirectly observable (derived from prices). For the relevant assets or liabilities, a direct price is not observable in an active market or the observable market prices do not meet the highest liquidity requirements. Therefore Bank Austria shows all types of derivatives and ABS bonds in this category if there is a liquid market for the required inputs. Level 2 also includes assets or liabilities for which liquidity is limited. All of the bank’s own issues are assigned to Level 2 regardless of their observed liquidity.

Level 3 comprises assets or liabilities whose fair values are determined not solely on the basis of observable market data (input data which are not observable). The respective fair values are thus determined also by using inputs based on model assumptions. Instruments included in this category are derivatives and structured products which contain at least one component for which there is no liquid market, derivatives with maturities that are not customary in the market, structured products with a non-liquid underlying as reference instrument, and bonds and ABS bonds for which there is no liquid market.

If the value of a financial instrument is based on non-observable inputs, the value of these inputs at the balance sheet date may be selected from a range of reasonable possible alternatives. For the purpose of preparing the financial statements, the reasonable values selected for such non-observ-able inputs are in line with prevailing market conditions and the Group’s valuation verification approach.

Loan loss provisionsImpairment losses have to be recognised for financial assets which are carried at amortised cost or classified as available for sale.

An impairment loss is determined in two steps: first, it is assessed whether there is any objective evidence that a financial asset is impaired. The second step is an assessment whether the financial instrument is actually impaired.

Objective evidence of impairment includes facts which usually lead to actual impairment. For debt instruments, this includes events which have occurred and may lead to a borrower no longer meeting his obligations in full or at the agreed date. In the case of equity instruments, permanently or significantly lower market values as compared with the carrying amounts are objective evidence of impairment.

In the case of loans and receivables, an impairment loss is measured as the difference between the carrying amount and the present value of esti-mated future cash flows. The future cash flows are to be determined by taking the events that have occurred (objective evidence) into account. Estimated future cash flows may be composed of expected repayment and/or interest payments and proceeds from the realisation of collateral. The impairment loss is the difference between the present value of the estimated future cash flows and the carrying amount. A specific writedown is made in the amount of the impairment loss thus determined.

Writedowns on loans determined as described above are recognised in an allowance account which reduces the carrying amount of the loan on the assets side. A possible impairment loss on financial guarantees is determined analogously, with the impairment loss recognised as a provision.

In respect of loans and receivables on which no specific writedowns have been made, any impairment losses which have been incurred as at the balance sheet date but have not been identified by the bank are covered by a portfolio-based writedown. In this context we use the Loss Confirmation



Period Method. The Loss Confirmation Period is the period between the occurrence of a loss event or the default of a borrower and the time when the bank identifies the loss. The Loss Confirmation Period is determined on the basis of statistical methods, differentiated for various loan portfolios. The loss which has been incurred but has not yet been identified is estimated by means of the expected loss.

Available-for-sale assets are classified as debt instruments and equity instruments.

An impairment loss on debt instruments has been incurred if the events which have occurred lead to the borrower no longer meeting his obliga-tions in full or at the agreed date. In this context an impairment loss has been incurred in the same cases as with loans and receivables with the same entity (issuer).

The amount of the impairment loss is the difference between amortised cost and current fair value; the difference which is initially recognised in the available-for-sale reserve within equity is recognised in profit or loss when the asset is impaired.

If the reason for the impairment ceases to exist, the difference between higher market value and carrying amount at the last balance sheet date is written back up to the amount of historical cost and recognised in profit or loss. If the current market value at the balance sheet date exceeds his-torical cost, the difference is recognised in the available-for-sale reserve within equity.

Equity instruments measured at fair value are impaired if the current fair value is significantly lower than the carrying amount or if the fair value has been permanently lower than the carrying amount. If the fair value is 50% lower than the carrying amount, this is in each case regarded as “significantly lower”; a period longer than 18 months is regarded as “permanently lower”. In this case, the difference between the current fair value and cost is recognised in profit or loss. This writedown through profit or loss is to be taken into account in respect of cost in subsequent periods. If the fair value rises in a subsequent period, the difference between a higher fair value and cost adjusted in the way described above is recognised in the available-for-sale reserve within equity.

Equity instruments carried at cost are impaired if the current value is permanently lower than cost (or is lower than cost less impairment losses recognised if an impairment loss was incurred in the past). If there is evidence of impairment, the value of the equity instruments is to be deter-mined. In determining their value, the estimated future cash flows discounted at the current market rate of return for a similar asset are to be used. The amount of the impairment loss is the difference between the current carrying amount and the value of the equity instrument determined as described above. The impairment loss is recognised in profit or loss. An impairment loss recognised for equity instruments must not be reversed through profit or loss when the reasons for the impairment cease to exist.

DerivativesDerivatives are financial instruments whose value changes in response to changes in the underlying instrument. Derivatives may be interest rate contracts, foreign exchange contracts, equity-related and other instruments. Credit derivatives are used for active credit portfolio management to optimise writedowns of loans. Derivative transactions may be concluded over the counter (OTC), i. e. directly with the counterparty, or via ex-changes. The exposure is reduced by a margin which must be deposited for exchange-traded contracts (futures and options) to absorb current price fluctuations.

Derivatives are stated at their fair values. Changes in fair values are recognised in the income statement, except for effective cash flow hedges in accordance with IAS 39. Credit derivatives meeting the definition of financial guarantees are shown like financial guarantees. To determine fair values as at the transaction date, market prices and official quotes (Bloomberg, MarkIT) are used. Where such prices or quotes are not available, recognised and tested models are used for determining current prices.

Hedging derivatives/hedge accountingIn hedge accounting, Bank Austria distinguishes between fair value hedges and cash flow hedges. To qualify for hedge accounting in accordance with IAS 39, hedges must be highly effective.

A fair value hedge provides protection against changes in the fair value of an asset or a liability. The hedging instrument is stated at its fair value, and any gains or losses on the hedging instrument are recognised in income. Gains or losses on the hedged item which are attributable to the hedged risk adjust the carrying amount of the hedged item and are recognised in income. The effectiveness of fair value hedges is measured on an ongoing basis.

Cash flow hedges are used by Bank Austria for protecting future variable cash flows against changes in market rates. They hedge the exposure to variability in cash flows which result from assets or liabilities or from planned transactions and have an effect on income. Changes in the fair values of derivatives designated as hedging instruments are divided into a portion that is determined to be an effective hedge, and into an ineffective por-tion. The effective portion of any gain or loss on the hedging instrument is included in the cash flow hedge reserve and recognised in income in the same period in which the change in the value of the hedged item is recognised in income. This neutralises the effect on income. The effective-ness of cash flow hedges is measured on a regular basis.




Notes (CONTINuED)

Property, plant and equipment; intangible assetsProperty, plant and equipment as well as intangible assets are carried at cost less depreciation and/or amortisation in accordance with IAS 16.

Assets are depreciated and amortised on a straight-line basis over their estimated useful lives. At Bank Austria, depreciation and amortisation is calculated on the basis of the following average useful lives: buildings used for banking operations: 25–50 years office furniture and equipment: 4–15 years software: 4–6 years other intangible assets: 4–20 years customer base: 3–20 years

Any impairments are recognised in income. When the circumstances that led to such an impairment cease to exist, a reversal of the impairment loss is made. Since 1 January 2005, goodwill arising on business combinations has not been amortised but tested for impairment at least once a year. Impairment losses on goodwill are recognised in the income statement item Impairment of goodwill. No writebacks are allowed in respect of goodwill.

Investment propertyLand and buildings held as investment property to earn rental income and/or for capital appreciation are included in property, plant and equipment and recognised at amortised cost. From 2006, rental income from such investments is included in Other net operating income.

Disposal groups classified as held for salePursuant to IFRS 5 such disposal groups are to be carried at the lower of carrying amount and fair value less costs to sell. Assets and liabilities of the disposal group are stated separately in the consolidated financial statements.

Deferred taxesTaxes on income are recognised and calculated in accordance with IAS 12 under the balance sheet liability method. At any taxable entity, the calculation is based on the tax rates that are expected to apply to the period in which the deferred tax asset or liability will reverse.

Deferred tax assets and liabilities are calculated on the basis of the difference between the carrying amount of an asset or a liability recog nised in the balance sheet and its respective tax base. This difference is expected to increase or decrease the income tax charge in the future (temporary differences). Deferred tax assets are recognised for tax losses carried forward if it is probable that future taxable profits will be available at the same taxable entity. Deferred tax assets and liabilities are not discounted.

The tax expense related to profit before tax is recognised in the relevant item in the consolidated income statement. Taxes other than those on in-come are included in the item Other administrative expenses.

Pursuant to the group taxation rules introduced in Austria in 2005, Bank Austria has formed a group of companies. Profit and loss transfer agree-ments have been concluded with 30 group members, tax compensation agreements have been reached with 13 companies and there are 5 joint control arrangements.

Other assetsThe components of this item are accounts receivable from deliveries of goods and the performance of services, tax claims and deferred tax assets.

Deposits from banks/customers, debt securities in issueThese items are carried at amortised cost.

In the case of debt securities in issue, any difference between the issue price and the amount repayable is amortised over the period to maturity.



Long-term employee benefits and termination benefitsProvisions for post-employment benefits are recognised using the projected unit credit method in accordance with IAS 19. Pursuant to IAS 19.93A, actuarial gains and losses are not recognised in income but directly in equity. Such gains and losses are stated in the table “Statement of recognised income and expenses”.

Under a commitment to provide defined benefits, Bank Austria continues to recognise a pension provision for the entitlements of employees who retired before the pension reform as at 31 December 1999 became effective, and – as a special feature of UniCredit Bank Austria AG’s staff regulations – for the future benefits, equivalent to those under mandatory insurance, earned by active employees and pensioners for whom UniCredit Bank Austria AG has assumed the obligations of the mandatory pension insurance scheme pursuant to Section 5 of the Austrian General Social Insurance Act (ASVG). The following are also covered by the provision: disability risk and rights to future benefits based on early retirement and pension entitlements of surviving dependants, less reimbursement from the pension funds, rights to future benefits under commitments to provide direct benefits in individual service agreements, rights to future benefits relating to additional pension payments for employees performing manual work.

The present value of pension obligations and severance-payment obligations as well as anniversary bonuses is determined with due regard to internal service regulations, on the basis of the following actuarial assumptions: discount rate /Austria: 5.25% p.a. (2008: 5.75% p.a.) increases under collective bargaining agreements: 2.45% p.a. (2008: 2.80% p.a.); assumption of increases for employees and pensioners career trends including regular salary increases under the current collective bargaining agreement for employees of Austrian banks and the effects of the transitional rules under the 2005 reform of Bank Austria’s staff regulations. The rate applied in calculating non-regular salary in-creases was 0.25% p.a. (2008: 0.25% p.a.); assumption of increases for employees no discount for staff turnover retirement age: as a basis for calculation in respect of employees enjoying “permanent tenure” status in accordance with the internal agree-ment dated 30 December 1999 (as amended on 1 May 2007) on the payment of a Bank Austria ASVG pension equivalent, the age of 60 for men and 55 for women, with a transition to the retirement age of 65, has been taken into account. For all other employees, the new retirement age of 65 for men and women has been taken into account in accordance with the applicable rules (2003 pension reform including transitional rules). If the corridor pension rule results in a lower retirement age, the lower age was used as retirement age. 2009-P statistical tables of Aktuarverein Österreich (most recent life-expectancy tables for salaried staff)

No provisions are made for defined-contribution plans. Payments agreed to be made to a pension fund for defined-contribution plans are recognised as an expense.

Insurance reservesPursuant to IFRS 4, insurance contracts are contracts under which one party (the insurer) accepts significant insurance risk – i.e. risk, other than financial risk, to which the policy-holder is exposed on the basis of an uncertain event under contracts held by the policy-holder – from the policy-holder. These reserves represent the obligations, calculated using actuarial methods, arising from insurance contracts within the meaning of IFRS 4.

EquityEquity is composed of paid-in capital, i. e., capital made available to the company by shareholders (subscribed capital plus capital reserves), and earned capital (retained earnings, foreign currency translation reserves, IAS 39 reserves, actuarial gains / losses, profit carried forward from the previous year, and net profit). The IAS 39 reserves include gains and losses on available-for-sale financial assets (available-for-sale reserve), which are not recognised in income, and those components of hedge accounting in accordance with IAS 39 which are not included in income (cash flow hedge reserve), after adjustment for deferred taxes. Since 1 January 2005, minority interests have been included in equity.

Treasury shares held are deducted from equity. The difference between the price on a later sale of treasury shares and the related post-tax repurchase cost is recognised directly in equity.




Notes (CONTINuED)

Net interest marginInterest income and interest expense is accrued and recognised as long as such interest is expected to be recoverable. Income mainly received as payment for the use of capital (usually calculated, like interest, on the basis of a specific term or on the amount receivable) is included in income similar to interest. This item also includes income and expenses from the trading portfolio arising from interest, accrued interest on debt instruments and funding costs relating to the trading portfolio. The net interest margin also includes interest income and interest expense from hedging activities and from derivatives.

Net fees and commissionsNet fees and commissions comprise income from services provided on a fee and commission basis, including trading-induced commission compo-nents, as well as expenses incurred for services provided by third parties and related to fee-earning business.

Fees and commissions are recognised on an accrual basis. Securities trading commission is recognised at the time the service is rendered. Investment portfolio management fees, advisory fees and investment fund management fees are recognised on a pro-rata time basis. Fees included in amortised cost used to calculate effective interest rates are not included under fees and commissions; they are part of interest expense.

Dividend incomeDividends are recognised in the income statement in the financial year in which their payment was approved.

Gains and losses on financial assets and liabilities held for tradingThis item shows the realised and unrealised results from measuring all financial instruments of the trading portfolio at fair value through profit or loss using the mark-to-market method. Income and expenses from derivatives relating to the trading portfolio are not included. Such income and expenses are partly included in the net interest margin and partly in the net change in financial assets and liabilities at fair value through profit or loss.

Gains and losses on disposals of financial instrumentsThis item shows the results from disposals of loans and receivables, available-for-sale financial assets, held-to-maturity investments and financial liabilities. Gains and losses on disposal of financial assets held for trading and on financial instruments at fair value through profit or loss are not included.

Gains and losses on financial assets / liabilities at fair value through profit or lossThis item includes gains and losses on financial assets and financial liabilities as well as the results from the measurement of these items at their fair values.

Impairment losses on loans/ Impairment losses on other financial transactionsThese items include writedowns of loans, write-offs and additions to provisions for guarantees and commitments, and income from writebacks as well as recoveries of loans previously written off.

Impairment /write-backs on property, plant and equipment and on intangible assetsWritedowns on assets held under finance leases are part of this item.

Profit (loss) of associatesDividends received from associates are included in the item Dividend income.



Impairment of goodwillImpairment losses on goodwill reflect the results of the impairment test performed on an annual basis.

Gains and losses on disposal of investmentsThis item includes gains / losses on the disposal of investments in property and other assets.

Repo transactionsSecurities received in a transaction that entails a contractual obligation to sell them at a later date or delivered under a contractual obligation to repur-chase are neither recognised nor derecognised. In respect of securities purchased under an agreement to resell, the consideration is recognised as a loan to customers or banks, or as an asset held for trading. In respect of securities held under a repurchase agreement, the liability is recognised as due to banks or customers, or as an HfT financial liability.

Revenue from these loans, being the coupons accrued on the securities and the difference between the sale /purchase and resale / repurchase prices, is recognised in profit or loss through interest income and expenses on an accrual basis. These transactions can only be offset if, and only if, they are carried out with the same counterparty and provided that such offset is provided for in the underlying contracts.

(4) Events after the balance sheet dateAs part of the further development of the business model of the Corporate & Investment Banking Division, customer service units of UniCredit CAIB AG as well as treasury and liquidity management were bundled in UniCredit Bank Austria AG (spin-off as at 8 February 2010).

UniCredit CAIB AG will continue to conduct trading activities. The agreement on the intra-Group sale of UniCredit CAIB AG to UniCredit Bank AG (the former Bayerische Hypo- und Vereinsbank AG), Germany, was signed on 22 February 2010. The closing of the transaction is planned for 1 June 2010.

The contract of sale of the property in Renngasse 2/Freyung 8, which accommodates the Bank Austria Kunstforum, was signed by Signa Holding. There are plans for the Bank Austria Kunstforum to remain in its current location until 2011.

At an Extraordinary General Meeting on 4 March 2010, a resolution was adopted to increase the share capital of UniCredit Bank Austria AG by € 212,262,771.60 to a total nominal amount of € 1,681,033,521.40. The issue of 29,197,080 no-par value shares at the price of € 68.50 will in-crease equity by € 2 bn. The transaction is expected to be completed by the end of the first quarter of 2010.

iT-Austria will be split into two operations by the middle of 2010. UniCredit Bank Austria AG and Erste Bank each hold a 50% interest in iT-Austria, which was established in 1998. After the split-up, the operation owned by UniCredit Bank Austria AG will be merged with Bank Austria Global Informa-tion Services GmbH (BAGIS). When the spin-off becomes legally effective, BAGIS will take over all services provided by iT-Austria for UniCredit Bank Austria AG until then. BAGIS will also handle, on an exclusive basis, the core issues relating to computer operations of UniCredit Bank Austria AG and of UniCredit Group in Austria and CEE.




Notes to the income statement

(5) Interest income/ Interest expense

Interest expense and similar charges (€ m)

2009 2008

depOsits securitiesOther

traNsactiONs tOtal tOtal

Deposits from central banks –121 X – –121 n.a.Deposits from banks – 988 X – – 988 –2,546Deposits from customers –2,949 X – –2,949 –3,975Debt securities in issue – –1,101 – –1,101 –1,515Financial liabilities held for trading – – –39 –40 –72Financial liabilities at fair value through profit or loss – –33 – –33 –38Other liabilities X X –2 –2 –26Hedging derivatives X X –16 –16 –8tOtal –4,058 –1,135 –58 –5,250 –8,180

Interest income and similar revenues (€ m)

2009 2008

debt securities lOaNsOther

traNsactiONs tOtal tOtal

Financial assets held for trading 178 – 52 230 483Financial assets at fair value through profit or loss 16 1 – 16 41Available-for-sale financial assets 418 – – 418 500Held-to-maturity investments 442 – – 442 515Loans and receivables with banks – 593 – 593 1,806Loans and receivables with customers 286 7,349 – 7,636 9,348Hedging derivatives X X 636 636 137Other assets X X 13 13 7tOtal 1,341 7,943 700 9,984 12,837

Within this item, total interest income from financial assets that are not at fair value through profit or loss was € 8,684 m (2008: € 11,676 m).

Within this item, total interest expense for liabilities that are not at fair value through profit or loss was € 5,103 m (2008: –€ 8,062 m).



Fee and commission income (€ m)

2009 2008

guarantees given 195 174credit derivatives 2 10management, brokerage and consultancy services: 744 1,064

securities trading 41 37currency trading 243 299segregated accounts 166 376custody and administration of securities 103 148custodian bank 38 42placement of securities 39 58client instructions 18 25advisory 31 15distribution of third party services 65 64

collection and payment services 886 972securitisation servicing – –factoring 25 40tax collection services – –management of multilateral trading facilities – –management of current accounts 149 146Other services 244 299tOtal 2,245 2,706

Fee and commission expense (€ m)

2009 2008

guarantees received –27 –7credit derivatives –43 –30management, brokerage and consultancy services: – 96 –293

trading in financial instruments –11 –17currency trading –4 –5portfolio management –17 – 91custody and administration of securities –44 –61placement of financial instruments –2 –120off-site distribution of financial instruments, products and services –18 –

collection and payment services –193 –201Other services –54 – 98tOtal –414 –629

(6) Fee and commission income/Fee and commission expense

(€ m)

2009 2008

diVideNdsiNcOme frOm uNits iN

iNVestmeNt fuNds diVideNdsiNcOme frOm uNits iN

iNVestmeNt fuNds

Financial assets held for trading 3 – 5 –Available-for-sale financial assets 22 2 546 2Financial assets at fair value through profit or loss – 8 – 8Investments 22 X 30 XtOtal 46 11 581 10

(7) Dividend income and similar revenue




Notes to the income statement (CONTINuED)

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

2009 2008uNrealised

prOfitsrealised

prOfitsuNrealised

lOssesrealised

lOsses Net prOfit Net prOfit

financial assets held for trading 387 823 –252 –634 324 –709Debt securities 220 177 –86 –37 274 –707Equity instruments 159 245 –157 –240 7 100Units in investment funds 7 17 –8 – 16 –143Loans – – – – – 7Other 1 384 –1 –357 27 36

financial liabilities held for trading 1 – –3 –1 –2 –19Debt securities – – – – – –Deposits 1 – – – 1 –1Other 1 – –3 –1 –3 –17

Other financial assets and liabilities: exchange differences x x x x 16 398derivatives 201 1,583 –270 –1,840 – 9 –46

Financial derivatives 201 1,487 –270 –1,775 –41 –183on debt securities and interest rates 178 1,337 –249 –1,673 –407 450on equity securities and share indices 15 61 –12 –26 37 –246on currency and gold X X X X 316 –405other 9 89 –10 –77 12 17

Credit derivatives – 96 – –64 32 137tOtal 590 2,406 –525 –2,475 329 –375

(9) Fair value adjustments in hedge accounting (€ m)

2009 2008

gains on:Fair value hedging instruments 4 5Hedged asset items (in fair value hedge relationship) 1 7Hedged liability items (in fair value hedge relationship) – 1total gains on hedging activities 5 13losses on:Fair value hedging instruments –4 –13Hedged asset items (in fair value hedge relationship) –1 –Hedged liability items (in fair value hedge relationship) – –total losses on hedging activities –5 –13Net hedgiNg result –0 –0



(€ m)

2009 2008

gaiNs lOsses Net prOfit gaiNs lOsses Net prOfit

financial assetsLoans and receivables with banks – – – – – –Loans and receivables with customers 8 –3 5 1 – –Available-for-sale financial assets 247 –125 123 473 –341 132

Debt securities 51 –46 5 37 –36 –Equity instruments 191 –70 121 419 –286 133Units in investment funds 5 – 9 –4 18 –19 –1Loans – – – – – –

Held-to-maturity investments – –2 –2 –1 – –1tOtal assets 256 –130 126 473 –341 132financial liabilitiesDeposits with banks – – – – – –Deposits with customers – – – – – –Debt securities in issue – – – 1 – 1tOtal liabilities – – – 1 – 1tOtal 256 –130 126 474 –341 133

(10) Gains and losses on disposals / repurchases

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

(€ m)

2009 2008

uNrealised prOfits

realised prOfits

uNrealised lOsses

realised lOsses Net prOfit Net prOfit

financial assets 11 56 – 9 –62 –5 –46Debt securities 4 54 – –52 6 1Equity securities – – – – – –Units in investment funds 6 1 – 9 –10 –11 –47Loans – – – – – 1

financial liabilities 13 2 –186 –17 –189 184Debt securities 13 2 –186 –17 –188 185Deposits from banks – – – – – –1Deposits from customers – – – – – –

financial assets and liabilities in foreign currency: exchange differences x x x x 5credit and financial derivatives 185 17 –13 –2 188 –191tOtal 209 75 –208 –82 –6 –48




(12) Impairment lossesImpairment losses on loans (€ m)

2009 2008

Write-dOWNs Write-bacKs

specific

Write-Offs Other pOrtfOliO specific pOrtfOliO tOtal tOtal

Loans and receivables with banks –3 –19 – 18 – –4 –80Loans and receivables with customers –101 –2,490 –136 430 48 –2,248 – 940tOtal –104 –2,509 –136 448 48 –2,252 –1,019

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

2009 2008


specific


Debt securities – – – – – – –59Loans to banks – – – – – – –Loans to customers – – – – – – –tOtal – – – – – – –59

Impairment losses on other financial transactions (€ m)

2009 2008


specific


Guarantees given – –63 –10 40 17 –16 7Credit derivatives – – – – – – –Commitments to disburse funds – –2 –1 1 1 – 1Other transactions – –8 – 5 – –3 –1tOtal – –73 –11 47 18 –20 8

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

2009 2008


specific

Write-Offs Other specific tOtal tOtal

Debt securities –2 –8 – –10 –13Equity instruments – –1 X –1 –12Units in investment funds –14 – – –14 –1Loans to banks – – – – –Loans to customers – – – – –tOtal –16 – 9 – –26 –25




(€ m)

2009 2008

Net change in insurance provisions 7 –15Claims paid pertaining to the year – 93 – 93Other income and expense from insurance business 5 22tOtal –82 –86

(14) Other income (net) from insurance business

(€ m)

2009 2008

direct busiNessiNdirect

busiNess tOtal tOtal

life businessGross premiums written (+) 16 – 16 22Reinsurance premiums paid (–) –1 – –1 –2total 15 – 15 21Non-life businessGross premiums written (+) 100 1 100 127Reinsurance premiums paid (–) –25 – –25 –33Change in gross value of premium reserve (+/–) –1 – –1 –6Change in provision for unearned premiums ceded to reinsurers (–/+) –2 – –2 3total 71 1 72 91tOtal Net premiums 87 1 87 112

(13) Premium earned (net) – breakdown

(€ m)

2009 2008

employees –1,846 –2,178Wages and salaries –1,347 –1,511Social charges –265 –306Severance pay – –12Social security costs –42 –58Allocation to employee severance pay provision –1 –30Provision for retirement payments and similar provisions –227 –195

Defined contribution –3 –5Defined benefit –223 –190

Payments to external pension funds –28 –31Defined contribution –27 –27Defined benefit –1 –4

Costs related to share-based payments –4 –5Other employee benefits –83 –62Recovery of compensation*) 150 32

Others –52 –57tOtal –1,898 –2,235*) This includes recovery of staff costs relating to Bank Austria employees who are not active within the Group.

(15) Payroll




(€ m)

2009 2008

indirect taxes and duties –30 –45miscellaneous costs and expenses –1,364 –1,341

Advertising, marketing and communication –109 –185Expenses related to credit risk –21 –15Expenses related to personnel –52 –82Information and communication technology expenses –399 –334Consulting and professional services –64 –68Real estate expenses –326 –340Other functioning costs –393 –317

tOtal –1,394 –1,386

(16) Other administrative expenses

(€ m)

2009 2008

prOVisiONsreallOcatiON

surplus tOtal tOtal

Other provisionsLegal disputes –69 16 –53 –24Staff costs – – – –Other –66 5 –61 –54tOtal –135 21 –114 –78

(17) Net provisions for risks and charges

Defined-benefit company retirement funds: total costs (€ m)

2009

pension and similar funds allowances – with defined benefitsCurrent service cost –37Interest cost –181Expected return on plan assets –Net actuarial gain / loss recognised in the year –7Past service cost –Gains / losses on curtailments and settlements 1expeNses recOgNised iN prOfit Or lOss –223




(€ m)

2009 2008

depreciatiONimpairmeNt

lOsses Write-bacKs Net prOfit

property, plant and equipmentOwned –212 –8 2 –218 –209

used in the business –206 –7 2 –210 –207held for investment –6 –2 – –8 –2

finance lease –3 – – –3 –4used in the business –3 – – –3 –4held for investment – – – – –

tOtal –215 –8 2 –221 –213

(18) Impairment on property, plant and equipment

Other operating expenses (€ m)

2009 2008

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 –2 –2Writedowns on improvements of goods owned by third parties –1 –Costs related to the specific service of financial leasing – –Other –82 –74tOtal Other OperatiNg expeNses –85 –76

(20) Other net operating income

(€ m)

2009 2008

amOrtisatiONimpairmeNt

lOsses Write-bacKs Net prOfit

intangible assetsOwned –111 –2 – –112 –119

generated internally by the company –6 – – –6 –34other –104 –2 – –106 –85

finance leases – – – – –1tOtal –111 –2 – –112 –119

(19) Impairment on intangible assets

Other operating income (€ m)

2009 2008

recovery of costs 2 3Other income 289 251

Revenue from administrative services 167 35Reclassification of valuation reserve relating to cash-flow hedging of non-financial assets / liabilities – –Revenues from rentals of real estate investments (net of direct operating costs) 15 13Revenues from operating leases 1 1Recovery of miscellaneous costs paid in previous years 2 5Revenues from finance lease activities – –Others 105 198

tOtal Other OperatiNg iNcOme 291 254

Other Net OperatiNg iNcOme 207 178




(€ m)

2009 2008

companies subject to significant influenceincome 103 458

Revaluations 89 123Gains on disposal 14 321Writebacks – 14Other gains – –

expense –20 –46Writedowns – 22Impairment losses –18 –42Losses on disposal –2 –26Other negative changes – –

tOtal 84 412

(21) Profit (Loss) of associates

(€ m)

2009 2008

propertyGains on disposal 7 18Losses on disposal –1 –3Other assetsGains on disposal 19 9Losses on disposal –1 –15tOtal 24 9

(22) Gains and losses on disposal of investments

(€ m)

2009 2008

Current tax (–) –248 –396Adjustment to current tax of prior years (+/–) 24 25Reduction of current tax for the year (+) 3 –Changes to deferred tax assets (+/–) 70 79Changes to deferred tax liabilities (+/–) –30 69tax expeNse fOr the year (–) –182 –222

(23) Income tax from continuing operations




Reconciliation of theoretical tax charge to actual tax charge (€ m)

2009 2008

total profit or loss before tax from continuing operations 1,335 1,505Applicable tax rate 25% 25%theoretical tax –334 –376Different tax rates 69 77Non-taxable income 61 405Non-deductible expenses –61 –60Prior years and changes in tax rates 37 22

a) effects on current tax 13 12tax loss carryforward/unused tax credit 3 –other effects of previous periods 11 12

b) effects on deferred tax 23 9changes in tax rates 1 –1new taxes incurred (+) previous tax revocation (–) – 11true-ups/adjustments of the calculated deferred taxes 23 –

Valuation adjustments and non-recognition of deferred taxes 46 –78deferred tax assets write-down –18 –28deferred tax assets recognition 29 53deferred tax assets non-recognition 11 –104deferred taxes non-recognition according to IAS 12.39 and 12.44 26 –52other –3 53

Amortisation of goodwill –1 –225Non-taxable foreign income – 2Other differences 1 12recOgNised taxes ON iNcOme –182 –222effective tax rate 13.6% 14.8%

(24) 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 (2009: 202.0 million shares; 2008: 202.0 million shares).

(25) DividendsAfter release of the fund for general banking risks in the amount of € 935,562,463.61 the profit of UniCredit Bank Austria AG for the financial year beginning on 1 January 2009 and ending on 31 December 2009 was € 106,239.18. The profit brought forward from the previous year was € 1,974,080.90. Thus the profit available for distribution was € 2,080,319.08. The Management Board proposes to the Annual General Meeting that no dividend be paid on the share capital of € 1,468,770,749.80 and that the total profit of € 2,080,319.08 available for distribution be carried forward to new account.




(26) Cash and cash balances

(27) Financial assets held for trading (€ m)

31 dec. 2009 31 dec. 2008

fair Value leVel 1

fair Value leVel 2

fair Value leVel 3 tOtal tOtal

financial assets (non-derivatives) 1,171 1,119 213 2,503 1,823Debt securities 1,151 1,119 23 2,292 1,569

Structured securities 6 – – 6 60Other debt securities 1,145 1,119 23 2,286 1,509

Equity instruments 11 – 2 14 246Units in investment funds 9 1 187 197 8Loans – – – – –

Repos – – – – –Other – – – – –

derivative instruments 3 1,593 38 1,634 2,666Financial derivatives 3 1,592 37 1,632 2,666

Trading 3 1,592 35 1,630 2,662Related to fair value option – – – – –Other – – 2 2 4

Credit derivatives – – 1 1 –Trading – – 1 1 –Related to fair value option – – – – –Other – – – – –

tOtal 1,174 2,712 250 4,137 4,489

(€ m)

31 dec. 2009 31 dec. 2008

Cash 1,265 1,242Demand deposits with central banks 1,948 2,666tOtal 3,213 3,908

Notes to the balance sheet

(28) 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)

31 dec. 2009 31 dec. 2008

fair Value leVel 1

fair Value leVel 2


Debt securities 10 109 58 176 381Structured securities – – – – –Other debt securities 10 109 58 176 381

Equity securities 18 – – 18 21Units in investment funds – – 34 34 149Loans – – 6 6 17

Structured – – – – –Other – – 6 6 17

tOtal 28 109 98 235 567



Financial assets at fair value through profit or loss: annual changes (€ m)

2009

debt securitiesequity

iNstrumeNts

uNits iN iNVestmeNt

fuNds lOaNs tOtal

Opening balance 381 21 149 17 567increases 250 1 124 1 377

Purchases 211 – 29 – 240Positive changes in fair value 29 1 7 – 37Other increases 10 – 88 1 99

decreases –455 –4 –239 –12 –709Sales –42 – –81 – –122Redemptions –383 –4 –107 –10 –504Negative changes in fair value –1 – –3 – –4Other decreases –28 – –49 –1 –78

clOsiNg balaNce 176 18 34 6 235

(29) Available-for-sale financial assets (€ m)

31 dec. 2009 31 dec. 2008

fair Value leVel 1

fair Value leVel 2


Debt securities 2,549 5,657 1,905 10,111 9,247Structured securities 1 3 419 424 458Other 2,547 5,654 1,486 9,687 8,790

Equity instruments 65 147 272 485 689Measured at fair value 65 147 263 476 681Carried at cost – – 9 9 9

Units in investment funds 11 148 70 230 97Loans – – – – –tOtal 2,625 5,953 2,248 10,826 10,034




Notes to the balance sheet (CONTINuED)

(30) Held-to-maturity investments (€ m)

31 dec. 2009 31 dec. 2008

carryiNg amOuNt

fair Value leVel 1

fair Value leVel 2

fair Value leVel 3 fair Value


Debt securities 5,067 2,788 2,182 225 5,195 5,754 5,760Structured securities – – – – – – 21Other securities 5,067 2,788 2,182 225 5,195 5,754 5,739

Loans – – – – – – –tOtal 5,067 2,788 2,182 225 5,195 5,754 5,760

Held-to-maturity investments: annual changes (€ m)

2009

debt securities lOaNs tOtal

Opening balance 5,754 – 5,754increases 1,626 – 1,626

Purchases 1,400 – 1,400Write-backs – – –Transfers from other portfolios – – –Other changes 226 – 226

decreases –2,313 – –2,313Sales –1,070 – –1,070Redemptions –1,035 – –1,035Write-downs –4 – –4Transfers to other portfolios – – –Other changes –204 – –204

clOsiNg balaNce 5,067 – 5,067

(31) Loans and receivables with banks (€ m)

31 dec. 2009 31 dec. 2008

loans to central banks 5,225 6,397Time deposits 292 250Compulsory reserves 4,426 4,337Repos 464 1,765Other 43 46

loans to banks 17,851 13,626Current accounts and demand deposits 2,315 1,548Time deposits 10,908 3,412Other loans 4,628 8,666

Repos 1,773 1,486Finance leases – –Other 2,855 7,180

Debt securities – –Structured – –Other – –

tOtal (carryiNg amOuNt) 23,076 20,023tOtal (fair Value) 23,305 20,137Loan loss provisions deducted from loans and receivables 99 62



(32) Loans and receivables with customers (€ m)

31 dec. 2009 31 dec. 2008

perfOrmiNg impaired tOtal tOtal

Current accounts 12,538 396 12,934 15,232Repos 202 1 203 141Mortgages 22,021 950 22,971 20,070Credit cards and personal loans, including wage assignment loans 8,236 156 8,392 9,814Finance leases 381 26 407 748Factoring 778 7 784 507Other transactions 72,953 2,923 75,876 85,242Debt securities 1,979 55 2,034 219

Structured securities – – – –Other debt securities 1,979 55 2,034 219

tOtal (carryiNg amOuNt) 119,088 4,514 123,602 131,973tOtal (fair Value) 121,344 4,547 125,891 133,308Loan loss provisions deducted from loans and receivables 814 4,878 5,691 3,876

Finance leases: customers (€ m)

31 dec. 2009

preseNt Value Of miNimum lease paymeNts

amounts receivable under finance leases:Up to 12 months 179From 1 to 5 years 216Over 5 years 12preseNt Value Of miNimum lease paymeNts receiVable (Net iNVestmeNt iN the lease) 407

(33) Hedging derivatives (€ m)

31 dec. 2009 31 dec. 2008

fair Value leVel 1

fair Value leVel 2


financial derivatives 2 149 – 151 85Fair value 2 36 – 38 32Cash flows – 114 – 114 53Net investment in foreign subsidiaries – – – – –

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

tOtal 2 149 – 151 85





(34) Equity investments (€ m)

31 dec. 2009 31 dec. 2008

Opening balance 2,277 2,281increases 406 308

Purchases 141 133Writebacks – –Revaluation – 124Other changes 266 51

decreases –257 –312Sales –43 –84Writedowns –3 –45Other changes –212 –183

clOsiNg balaNce 2,426 2,277

(35) Property, plant and equipment (€ m)

31 dec. 2009 31 dec. 2008

assets for operational use 1,904 2,036Owned 1,852 1,979

Land 179 205Buildings 1,226 1,296Office furniture and fittings 155 164Electronic systems 180 178Others 111 135

leased 52 56Land – –Buildings 49 50Office furniture and fittings – –Electronic systems 2 6Others 1 –

held-for-investment assets 369 310Owned 369 310

Land 214 255Buildings 155 55

leased – –Land – –Buildings – –

tOtal 2,273 2,346



Property, plant and equipment used in the business (€ m)

2009

laNd buildiNgs

Office furNiture aNd

fittiNgselectrONic

systems Other tOtal

gross opening balance 205 1,984 508 670 352 3,719Total net reduction in value – –638 –344 –486 –216 –1,683Net opening balance 205 1,346 165 184 136 2,036increases 1 116 31 83 41 272

Purchases 1 95 29 64 37 227Capitalised expenditure on improvements – 4 – 1 – 5Writebacks – 2 – – – 2Increase in fair value – – – – – –

in equity – – – – – –through profit or loss – – – – – –

Positive exchange differences – 2 – – – 3Transfer from properties held for investment – – – – – –Other changes – 12 1 17 3 34

reductions –27 –186 –40 –86 –65 –404Disposals –1 –20 –1 –3 –12 –37Depreciation – –68 –36 –74 –31 –209Impairment losses – –6 – – – –7

in equity – – – – – –through profit or loss – –6 – – – –7

Reductions of fair value – – – – – –in equity – – – – – –through profit or loss – – – – – –

Negative exchange differences –3 –34 –2 –6 –4 –50Transfers –10 –36 – – – –45

property, plant and equipment held for investment – – – – – –assets held for sale –10 –35 – – – –45

Other changes –12 –23 –1 –2 –17 –55Net fiNal balaNce 179 1,275 155 182 112 1,904

Property, plant and equipment held for investment: annual changes (€ m)

2009

laNd buildiNgs tOtal

Opening balances 255 55 310increases 7 108 115

Purchases 7 61 68Capitalised expenditure on improvements – – –Increases in fair value – – –Writebacks – – –Positive exchange differences – – –Transfer from properties used in the business – – –Other changes – 46 46

reductions –48 –8 –56Disposals –1 – –2Depreciation – –6 –6Reductions in fair value – – –Impairment losses – –2 –2Negative exchange differences – – –Transfers to – – –

properties used in the business – – –non-current assets classified as held for sale – – –

Other changes –46 – –46clOsiNg balaNces 214 155 369measured at fair Value 214 159 373





(36) Intangible assets (€ m)

31 dec. 2009 31 dec. 2008

goodwill 3,415 3,595Other intangible assets 523 575

Assets carried at cost 523 575Intangible assets generated internally 46 164Other assets 477 411

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

tOtal 3,938 4,170

Intangible assets – annual changes (€ m)

2009

Other iNtaNgible assets

gOOdWillgeNerated iNterNally Other tOtal

gross opening balance 4,629 342 911 5,882Net reductions –1,034 –179 –499 –1,712Net opening balance 3,595 164 411 4,170increases 128 24 305 458

Purchases 1 18 83 102Increases in intangible assets generated internally X 4 – 4Writebacks X – – –Increase in fair value – – –

in equity X – – –through profit or loss X – – –

Positive exchange differences 11 – 4 15Other changes 115 2 219 336

reductions –308 –142 –240 –690Disposals – –3 – 9 –12Writedowns –19 –6 –106 –131

Amortisation X –6 –104 –110Writedowns –19 – –2 –20

in equity X – – –through profit or loss –19 – –2 –20

Reduction in fair value – – –in equity X – – –through profit or loss X – – –

Transfers to non-current assets held for sale – – – –Negative exchange differences –287 –1 –47 –334Other changes –3 –133 –78 –213

Net clOsiNg balaNce 3,415 46 477 3,938



(37) Tax assets(€ m)

31 dec. 2009 31 dec. 2008

deferred tax assets related to:Assets / liabilities held for trading 5 8Other financial instruments 100 37Property, plant and equipment / intangible assets 28 19Provisions 353 308Writedowns on loans 85 –Other assets / liabilities 39 33Loans and receivables with banks and customers 26 64Tax losses carried forward 364 354Other 21 13tOtal 1,021 835

In 2009, deferred taxes were also recognised directly in equity. € 24 m was debited to the available-for-sale reserve (2008: € 166 m credited) and € 28 m (2008: € 43 m) was debited to the cash flow hedge reserve.

In addition, as actuarial gains and losses on pension and severance-payment obligations were not recognised in income in the reporting year, deferred tax assets of € 34 m (2008: € 14 m) were offset against equity in UniCredit Bank Austria AG.

As a result of the first-time consolidation of the subsidiaries and sub-groups referred to in note 2, and of foreign currency translation of deferred taxes and direct offsetting against reserves, part of the change in deferred taxes was not reflected in the expense in 2009.

The assets include deferred tax assets arising from the carryforward of unused tax losses in the amount of € 366 m (2008: € 380 m), of which € 2 m held for sale. Most of the tax losses carried forward can be used without time restriction.

In respect of tax losses carried forward in the amount of € 472 m (2008: € 367 m), no deferred tax assets were recognised because, from a current perspective, a tax benefit is unlikely to be realised within a reasonable period.




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

31 dec. 2009 31 dec. 2008

individual assetsFinancial assets – –Equity investments – –Property, plant and equipment 46 1Intangible assets – –Other non-current assets – –total 46 2

asset groups classified as held for saleFinancial assets held for trading 11,557 17,796Financial assets at fair value through profit or loss 25 77Available-for-sale financial assets 259 982Held-to-maturity investments 1 16Loans and receivables with banks 11 11,401Loans and receivables with customers – 2,833Equity investments – 1Property, plant and equipment – 16Intangible assets – 132Other assets 1,311 811total 13,164 34,066

assets 13,210 34,068

This item includes the investment bank UniCredit CAIB AG and the brokerage firm UniCredit CAIB Securities UK Ltd. In autumn 2008, in connection with the intended concentration of Markets & Investment Banking activities of UniCredit Group, the sale process for the sale of UniCredit CAIB AG to UniCredit Bank AG (the former Bayerische Hypo- und Vereinsbank AG), Germany, was initiated. Appropriate measures aimed at a reorientation of the subsidiaries have also been taken. The brokerage firms in Poland and Russia, which in the previous year were classified as held for sale, will remain within the Bank Austria Group on the basis of a decision made by the Management Board.

Card Complete GmbH, which was included in this item in the previous year, is no longer reflected here because the sale process was stopped in Sep-tember 2009. After detailed negotiations with various interested parties, it was not possible to realise a transaction within the expected price range.




(40) Deposits from banks(€ m)

31 dec. 2009 31 dec. 2008

deposits from central banks 4,355 9,777deposits from banks 29,007 25,733

Current accounts and demand deposits 2,863 965Time deposits 9,456 6,002Loans 16,226 17,525

Reverse repos 1,126 –Other 15,101 17,525

Liabilities in respect of commitments to repurchase treasury shares – –Other liabilities 461 1,242

tOtal 33,362 35,511fair Value 33,588 35,608

(€ m)

31 dec. 2009 31 dec. 2008

Margin with derivatives clearers (non-interest bearing) 9 22Gold, silver and precious metals 52 36Positive value of “servicing contracts” for financial assets sold and derecognised – –Accrued income other than capitalised income 41 54Cash and other valuables held by cashier 1 8Interest and charges to be debited to 33 56

customers 32 51banks 1 5

Items in transit between branches not yet allocated to destination accounts – –Items in processing 225 288Items deemed definitive but not-attributable to other items 144 148

Securities and coupons to be settled 20 –Other transactions 123 148

Adjustments for unpaid bills and notes 12 27Other taxes 5 42Other items 453 689tOtal 975 1,369

(39) Other assets

As at 31 December 2009, the total amount of financial assets which are not at fair value was € 149,891 m (2008: € 155,904 m).




(42) Debt securities in issue(€ m)

31 dec. 2009 31 dec. 2008

carryiNg amOuNtfair Value

leVel 1fair Value

leVel 2fair Value

leVel 3 fair Value carryiNg amOuNt fair Value

securitiesBonds 26,764 2,075 23,312 1,189 26,576 31,022 30,759

Structured 99 – – 99 99 159 159Other 26,666 2,075 23,312 1,090 26,477 30,863 30,600

Other securities 2,058 27 1,191 839 2,057 1,575 1,581Structured 27 27 – – 27 451 451Other 2,030 – 1,191 839 2,030 1,123 1,130

tOtal 28,822 2,103 24,503 2,028 28,633 32,597 32,341

(43) Financial liabilities held for trading (€ m)

31 dec. 2009 31 dec. 2008

fair Value leVel 1

fair Value leVel 2


financial liabilities 5 32 – 37 19deposits from banks – – – – –deposits from customers 5 32 – 37 15debt securities – – – – 3

Bonds – – – – 3Structured – – – – –Other – – – – 3

Other securities – – – – –Structured – – – – –Other – – – – –

derivative instruments 1 852 25 878 2,136financial derivatives 1 852 25 878 2,136

Trading 1 849 24 874 2,135Relating to fair value option – – – – –Other – 3 1 5 1

credit derivatives – – – – –Trading derivatives – – – – –Relating to fair value option – – – – –Other – – – – –

tOtal 6 884 25 915 2,155


(41) Deposits from customers(€ m)

31 dec. 2009 31 dec. 2008

Current accounts and demand deposits 39,368 39,266Time deposits 50,149 51,515Loans 669 952

Reverse repos 395 2Other 274 951

Liabilities in respect of commitments to repurchase treasury shares 529 –Other liabilities 6,327 3,431tOtal 97,041 95,164fair Value 97,407 95,560



(€ m)

31 dec. 2009 31 dec. 2008

fair Value leVel 1

fair Value leVel 2


financial derivatives – 219 – 219 123Fair value – 76 – 76 –Cash flows – 143 – 143 123Net investment in foreign subsidiaries – – – – –

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

tOtal – 219 – 219 123

(€ m)

31 dec. 2009 31 dec. 2008

fair Value leVel 1

fair Value leVel 2


Deposits from banks – – – – 12Structured – – – – –Others – – – – 12

Deposits from customers – – – – –Structured – – – – –Others – – – – –

Debt securities – 1,967 – 1,967 1,987Structured – 1,967 – 1,967 1,987Others – – – – –

tOtal – 1,967 – 1,967 2,000

(44) 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 2009, changes in fair values resulting from changes in our own credit rating were – € 63.5 m (31 December 2008: + € 71 m).

(45) Hedging derivatives

(46) Deferred tax liabilities(€ m)

31 dec. 2009 31 dec. 2008

deferred tax liabilities related to:Loans and receivables with banks and customers 52 16Assets / liabilities held for trading 29 18Other financial instruments 195 181Property, plant and equipment / intangible assets 118 136Other assets / liabilities 30 23Deposits from banks and customers 2 1Other 29 28tOtal 456 403

Pursuant to IAS 12.39, no deferred tax liabilities were recognised for temporary differences in connection with investments in domestic subsidiaries because from a current perspective, they are not intended to be sold.




(47) Liabilities included in disposal groups classified as held for sale(€ m)

31 dec. 2009 31 dec. 2008

liabilities associated with assets classified as held for saleDeposits – –Securities – –Other liabilities – –total – –

liabilities included in disposal groups classified as held for saleDeposits from banks – 17,909Deposits from customers – 306Debt securities in issue – –Financial liabilities held for trading 8,663 13,315Financial liabilities at fair value through profit or loss 35 37Provisions – 16Other liabilities 1,794 1,555total 10,492 33,137

liabilities 10,492 33,137

(48) Other liabilities (€ m)

31 dec. 2009 31 dec. 2008

Liabilities in respect of financial guarantees issued – –Impairment: of financial guarantees issued, of credit derivatives, of irrevocable commitments to distribute funds 189 165Accrued expenses other than those to be capitalised for the financial liabilities concerned 81 86Share-based payments classified as liabilities under IFRS 2 1 –Other liabilities due to employees 396 412Other liabilities due to other staff 6 8Other liabilities due to directors and statutory auditors – 1Interest and amounts to be credited 112 89Items in transit between branches and not yet allocated to destination accounts 2 4Available amounts to be paid to others 19 5Items in processing 476 547Entries related to securities transactions – 1Items deemed definitive but not attributable to other lines 294 302Liabilities for miscellaneous entries related to tax collection service – 8Adjustments for unpaid portfolio entries – –Tax items different from those included in tax liabilities 41 55Other entries 755 833tOtal 2,373 2,515


As at 31 December 2009, the total amount of financial liabilities which are not at fair value was € 159,225 m (2008: € 163,272 m).



(49) Provisions for risks and charges(€ m)

31 dec. 2009 31 dec. 2008

pensions and other post-retirement benefit obligations 3,677 3,537Other provisions for risks and charges 490 477

Legal disputes 147 136Staff expenses 4 10Other 339 331

tOtal 4,167 4,015

(50) EquityFrom 1 January 2009 to 31 December 2009, the number of shares was 202,031,740, of which 10,100 were registered shares. The registered shares (10,000 registered shares are held by “Privatstiftung zur Verwaltung von Anteilsrechten”, a private foundation under Austrian law; 100 registered shares are held by “Betriebsratsfonds des Betriebsrats der Angestellten der UniCredit Bank Austria AG Großraum Wien”, the Employees’ Council Fund of the Employees’ Council of employees of UniCredit Bank Austria AG in the Vienna area) carry special rights: for resolutions concerning spin-offs and specific mergers or specific changes in the bank’s Articles of Association to be adopted at a general meeting of shareholders, the registered shareholders have to be present when the resolutions are adopted. The relevant resolutions are specified in Article 20 (13) and (14) of UniCredit Bank Austria AG’s Articles of Association.

Provisions for risks and charges: annual changes (€ m)

2009

peNsiONs aNd pOst-retiremeNt beNefit

ObligatiONs Other prOVisiONs tOtal

Opening balance 3,537 477 4,015increases 403 128 531

Provisions for the year 249 118 367Changes due to the passage of time – – –Differences due to discount-rate changes 2 – 2Other increases 153 10 163

decreases –263 –116 –379Use during the year –255 –102 –357Differences due to discount-rate changes – – –Other decreases –8 –14 –22

clOsiNg balaNce 3,677 490 4,167

Insurance provisions: breakdown (€ m)

31 dec. 2009 31 dec. 2008

direct busiNess

iNdirect busiNess tOtal tOtal

Non-life business 63 – 64 57Provision for unearned premiums 45 – 45 43Provision for outstanding claims 15 – 15 14Other provisions 3 – 3 –

life business 98 – 98 100Mathematical provisions 96 – 96 97Provisions for amounts payable 2 – 2 1Other insurance provisions 1 – 1 1

insurance provisions when investment risk is borne by the insured party – – – –Provision for policies where the performance is connected to investment funds and market indices – – – –Provision for pension funds – – – –

tOtal iNsuraNce prOVisiONs 162 – 162 156




Additional IFRS disclosures

(51) Time breakdown by contractual residual maturity of financial assets and liabilities

Geographical distribution of total assets and operating income (€ m)

31 dec. 2009 31 dec. 2008

tOtal assets OperatiNg iNcOme tOtal assets OperatiNg iNcOme

Austria 110,451 1,842 131,304 1,825Total European countries 78,420 4,831 83,295 4,945

Western Europe 787 –4 669 –8Central and Eastern Europe 77,633 4,835 82,627 4,953

America 87 –6 608 –152Asia 5,500 404 6,944 417Rest of the world – – – –tOtal 194,459 7,070 222,152 7,035

The geographic breakdown is based on the location of the subsidiary in which the transaction is recorded.

(€ m)

31 dec. 2009

ON demaNd1 tO 7 days

7 tO 15 days

15 days tO 1 mONth

1 tO 3 mONths

3 tO 6 mONths

6 mONths tO 1 year

1 tO 5 years

OVer 5 years

balance sheet assets 25,203 8,684 1,620 11,239 15,263 12,345 12,081 42,784 61,031Government securities 214 475 447 6 336 768 833 2,198 2,845Other debt securities 54 55 76 343 746 602 740 5,341 7,004Units in investment funds 1 – – – – – – 261 10Loans 24,934 8,155 1,096 10,890 14,181 10,975 10,508 34,984 51,171

Banks 9,494 7,271 660 5,975 7,252 1,603 1,691 6,319 6,100Customers 15,440 883 436 4,915 6,929 9,372 8,816 28,665 45,071

balance sheet liabilities 43,012 6,759 3,523 12,317 22,052 17,949 15,881 30,117 28,156Deposits and current accounts 42,282 5,131 3,130 11,183 18,936 10,475 8,559 12,199 7,027

Banks 5,104 2,773 677 4,604 3,854 1,522 1,707 3,710 6,534Customers 37,178 2,358 2,453 6,579 15,083 8,954 6,852 8,489 494

Debt securities 13 87 285 599 1,131 1,757 3,218 10,543 13,983Other liabilities 717 1,541 107 534 1,984 5,717 4,105 7,376 7,146

Off-balance sheet transactionPhysically settled financial derivatives

long positions 2,585 318 18,570 19,164 17,891 62,108 58,991 73,958 198,181short positions 2,585 322 18,571 19,864 19,037 63,472 61,003 110,991 201,650

Cash settled financial derivativeslong positions 1,100 1,524 1,139 1,492 1,685 2,705 3,539 7,509 2,230short positions 1,201 1,583 1,292 1,491 1,784 2,843 3,870 7,990 3,124

Deposits to be recievedlong positions – – – – 1 2 1 – –short positions – – – – 1 2 1 – –

Irrevocable commitments to disburse fundslong positions 541 15 86 367 1,284 606 4,998 2,450 592short positions 2,104 15 86 240 425 594 4,976 1,908 592

(52) Geographical distribution



Related party disclosures as at 31 December 2009 (€ m)

pareNt cOmpaNy aNd uNcONsOlidated

subsidiaries assOciatesKey maNagemeNt

persONNelOther related

parties

Loans and advances 10,664 1,360 1 41Equity instruments 35 95 – –Other receivables 173 20 – 8tOtal assets 10,872 1,475 1 49

Deposits 2,937 13,337 7 57Other financial liabilities 7,396 – – –Other liabilities 12 1 – 9tOtal liabilities 10,345 13,338 7 66

(53) Related party disclosures

a) Information on members of the Management Board, the Supervisory Board and the Employees’ Council of uniCredit Bank Austria AGEmoluments of members of the Management Board and the Supervisory BoardThe emoluments paid by UniCredit Bank Austria AG to Management Board members in the 2009 financial year (excluding payments into pension funds) totalled € 1.79 m (comparable emoluments in 2008 totalled € 3.98 m). Of this total, € 1.79 m (2008: € 2.73 m) related to fixed salary compo-nents, there were no payments of variable salary components (2008: € 1.25 m). Several members of the Management Board receive their emoluments from companies which are not included in the group of consolidated companies of Bank Austria; these emoluments granted to Management Board members in such companies in the 2009 financial year amounted to € 6.76 m (2008: € 5.79 m). These Management Board members also received emoluments for activities which are not connected with the Bank Austria Group but are in the interest of UniCredit Group.

Payments to former members of the Management Board and their surviving dependants (excluding payments into pension funds) totalled € 9.02 m. Of this total, € 4.96 m was paid to former Management Board members of Creditanstalt AG, which merged with Bank Austria in 2002, and their sur-viving dependants; € 3.56 m was paid to former Management Board members of Österreichische Länderbank AG, which merged with Zentral-sparkasse in 1991, and their surviving dependants. The comparative figure for 2008 was € 21.68 m. Emoluments paid to this group of persons for activities in subsidiaries amounted to € 940 thsd (2008: € 530 thsd).

The emoluments of the Supervisory Board members active in the 2009 business year totalled € 359 thsd (2008: € 342 thsd) for UniCredit Bank Austria AG, and € 2 thsd (2008: € 3 thsd) for the two credit associations.

Loans to members of the Management Board and of the Supervisory Board Loans to members of the Management Board amounted to € 732 thsd (2008: € 408 thsd), overdrafts granted to them were € 80 thsd (2008: € 29 thsd). Repayments during the business year totalled € 19 thsd (2008: € 119 thsd).

Loans to members of the Supervisory Board amounted to € 519 thsd (2008: € 2.81 m). Credit lines and overdrafts granted to Supervisory Board members totalled € 168 thsd (2008: € 309 thsd). Repayments during the business year totalled € 24 thsd (2008: € 127 thsd).

Loans to the Supervisory Board include those made to members of the Employees’ Council who are members of the Supervisory Board. The maturities of the loans range from five to fifteen years. The rate of interest payable on these loans is the rate charged to employees of UniCredit Bank Austria AG and/or a rate in line with market conditions.

Names of members of the Management Board and the Supervisory BoardNote 66 contains a list of the members of the Management Board and the Supervisory Board.

b) Relationships with unconsolidated subsidiaries and other companies in which an equity interest is heldAll related-party banking transactions were effected on market terms.

Transactions with companies which are related parties are explained in note 2. There is a syndicate agreement – the “Restated Bank of the Regions Agreement” – between UniCredit, “Privatstiftung zur Verwaltung von Anteilsrechten” (“AV-Z Stiftung”) and “Betriebsratsfonds des Betriebsrats der Angestellten der UniCredit Bank Austria AG Großraum Wien” (“Betriebsratsfonds”).




In the Restated Bank of the Regions Agreement, “AV-Z Stiftung” and “Betriebsratsfonds” have given an undertaking to UniCredit to the effect that if they want to sell UniCredit Bank Austria shares, they will first offer such shares held by them to UniCredit. If UniCredit does not accept the offer, the relevant contracting party could sell the UniCredit Bank Austria shares to a third party. In this case UniCredit has a right of preemption.

For the duration of this agreement (10 years), “AV-Z Stiftung” has a right to nominate two members of the Supervisory Board of UniCredit Bank Austria AG, and thereafter one member of the Supervisory Board for the duration of the guarantee issued by “AV-Z Stiftung” and the Municipality of Vienna.

As at 31 December 2009, UniCredit held a direct interest of 99.995% in UniCredit Bank Austria AG.

As at 31 December 2009, there were the following interlocking relationships with UniCredit S.p.A.: The Chairman of the Supervisory Board of UniCredit Bank Austria AG was a member of the Board of Directors and a member of the Management Committee of UniCredit. A further four members of the Supervisory Board of UniCredit Bank Austria AG were members of the Management Committee of UniCredit. Three members of the Management Board of UniCredit Bank Austria AG were members of the Management Committee of UniCredit.

c) Other information on related party relationshipsUnder Section 92 (9) of the Austrian Banking Act, “privatstiftung zur Verwaltung von anteilsrechten” (“AV-Z Stiftung”, a private foundation under Austrian law) serves as deficiency guarantor for all liabilities of UniCredit Bank Austria AG in the event of the company’s insolvency. The board of trust-ees of the private foundation has 14 members. These included four members of the Supervisory Board of UniCredit Bank Austria AG.

After the change in the legal form of Anteilsverwaltung-Zentralsparkasse into a private foundation (“AV-Z Stiftung”) in 2001, the Municipality of Vienna serves as deficiency guarantor for all outstanding liabilities, and obligations to pay future benefits, of UniCredit Bank Austria AG (then Bank Austria Aktiengesellschaft) which were entered into prior to and including 31 December 2001.

The board of trustees of Immobilien Privatstiftung has three members. One of them is a member of the Supervisory Board of UniCredit Bank Austria AG.

(54) Auditors’ fees (pursuant to Section 237 no. 14a and Section 266 no. 11 of the Austrian Business Code)The following table shows the fees charged by the auditors of the financial statements for the 2009 financial year in the following categories:

Fees for annual audit and related services (€ m)

2009

Audit 10Audit-related services 1Other services 1tOtal 12

(55) Share-based payments

Description of share-based paymentsOutstanding instrumentsGroup Medium & Long Term Incentive Plans for selected employees refers to Equity-Settled Share Based Payments based on the shares of the parent company UniCredit S.p.A.

This category includes the following: Stock Options allocated to selected Top & Senior Managers and Key Talents of the Group; Performance Shares allocated to selected Top & Senior Managers and Key Talents of the Group and represented by free UniCredit ordinary shares that the parent company undertakes to grant, conditional upon achieving performance targets set at Group and strategic area level in the Strategic Plan and any amendments thereto approved by the parent company’s Board of Directors;

Additional IFRS disclosures (CONTINuED)



Employee Share Ownership Plan (ESOP) that offers to eligible Group employees the possibility to buy UniCredit ordinary shares with the following advantages: granting of free ordinary shares (“Discount Shares” and “Matching Shares” or, for the second category, rights to receive them) measured on the basis of the shares purchased by each participant (“Investment Shares”) during the “Enrolment Period”. The granting of free ordinary shares is subordinated to vesting conditions (other than market conditions) stated in the Plan Rules.

Measurement modelStock OptionsThe Hull and White Evaluation Model has been adopted to measure the economic value of Stock Options. This model is based on a trinomial tree price distribution using the Boyle’s algorithm and estimates the early exercise probability on the basis of a deterministic model connected to: reaching a market share value equal to an exercise price-multiple (M); probability of beneficiaries’ early exit (E) after the end of the vesting period.

No new Stock Option Plans were granted during 2009.

Other equity instruments (Performance Shares)The economic value of Performance Shares is measured considering the share market price at the grant date less the present value of the future dividends during the performance period. Parameters are estimated by applying the same model used for Stock Options measurement.No new Performance Share Plans were granted during 2009.

Employee Share Ownership PlanFor both Discount Shares and Matching Shares (or rights to receive them) the fair value is measured at the end of the Enrolment Period according to the weighted average price paid by participants to buy the Investment Shares on the market.The following tables show the measurements and parameters used in relation to Discount Shares and Matching Shares (or rights to receive them) connected to the “Employee Share Ownership Plan” approved in 2008.

Measurement of Discount Shares ESOP 2008discOuNt shares

Date of Discount Shares delivery to Group employees 18 January 2010Vesting period start-date 1 January 2009Vesting period end-date 31 December 2009Discount Shares’ fair value per unit (€) 1.702

Measurement of Matching Shares ESOP 2008matchiNg shares

Date of Matching Shares (or related rights) delivery to Group employees 18 January 2010Vesting period start-date 1 January 2010Vesting period end-date 31 December 2012Matching Shares’ (or related rights) fair value per unit (€) 1.702

Within the limits of the “Employee Share Ownership Plan” approved in 2008: all profit-and-loss and net equity effects related to Discount Shares were booked during 2009 (except adjustments, according to Plan Rules, that will be booked during 2010); the profit-and-loss and net equity effects related to Matching Shares (or rights to receive them) will be booked during the three-year period 2010–2012.

Payroll costs in 2009 included share-based payments of € 3.9 m. The (cumulative) accrual totalled € 11.8 m.





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

(Notes) 2009 2008

Net interest 4,733 4,657Dividends and other income from equity investments 144 710

Dividend income and similar revenue 57 592minus: dividends from equity instruments held for trading (7) –3 –5

Profit (loss) of associates – of which: Income (loss) from equity investments valued at net equity (21) 89 123Net interest margin 4,877 5,367Net fees and commissions 1,831 2,076Net trading, hedging and fair value income 326 –418

Gains (losses) on financial assets and liabilities held for trading 329 –375plus: dividends from equity instruments held for trading (7) 3 5Fair value adjustments in hedge accounting – –Gains (losses) on disposal or repurchase of financial liabilities – 1Gains (losses) on financial assets and liabilities designated at fair value through profit and loss –6 –48

Net other expenses/ income 211 201Gains (losses) on disposals / repurchases of loans and receivables – not impaired 1 1Premiums earned (net) 87 112Other income (net) from insurance activities –82 –86Other net operating income 207 178

minus: other operating income – of which: recovery of expenses (20) –2 –3plus: Gains (losses) on disposals of investments – assets leasing operation – –

Net non-interest income 2,369 1,860OperatiNg iNcOme 7,245 7,227Payroll costs –1,894 –2,235

Administrative costs – staff expenses –1,898 –2,235minus: integration costs 4 –

Other administrative expenses –1,389 –1,371Administrative costs – other administrative expenses –1,394 –1,386

minus: integration costs 4 15Recovery of expenses = Other net operating income – of which: Operating income – recovery of costs 2 3Amortisation, depreciation and impairment losses on intangible and tangible assets –333 –332

Impairment /Write-backs on property, plant and equipment –221 –213minus: impairment losses/write backs on property owned for investment – –minus: integration costs – –

Impairment /Write-backs on intangible assets –112 –119minus: integration costs – –

OperatiNg cOsts –3,615 –3,935OperatiNg prOfit 3,630 3,292



(Notes) 2009 2008

Impairment of goodwill –19 –1,027Provisions for risks and charges –114 –87Integration costs – 9 –6Net impairment losses on loans and provisions for guarantees and commitments –2,267 –1,012

Gains (losses) on disposal and repurchase of loans 5 1minus: gains (losses) on disposals / repurchases of loans and receivables – not impaired position –1 –1

Impairment losses on loans –2,252 –1,019Impairment losses on other financial assets –20 8

Net income from investments 113 344Gains (losses) on disposal and repurchase of available-for-sale financial assets 123 132Gains (losses) on disposal and repurchase of held-to-maturity investments –2 –1Impairment losses on: available-for-sale financial assets –26 –25Impairment losses on: held-to-maturity investments – –59

plus: Impairment losses/write backs on property owned for investment – –Profit (loss) of associates 84 412

minus: Profit (loss) of associates – Income (loss) from equity investments valued at net equity (21) –89 –123Gains (losses) on disposal of investments 24 9

minus: gains (losses) on disposals of investments – assets leasing operation – –prOfit befOre tax 1,335 1,505Income tax for the period = Tax (income) expense related to profit or loss from continuing operations –182 –222prOfit (lOss) fOr the year 1,152 1,283Net profit or loss attributable to the parent company 1,102 1,144Minorities 51 139




(57) Segment reportingAs in previous periods, the segment reporting format is based on the internal reporting structure of business segments, which reflects management re-sponsibilities in the Bank Austria Group in 2009. The business segments are presented as independent units with their own capital resources and respon-sibility for their own results. This also meets the requirements of IFRS 8.

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

RetailResponsibility for the Retail Division covers Bank Austria’s business with private customers and small businesses and the credit card business. In the fourth quarter of 2009, Private Banking customers previously served by the Retail Division were transferred to Private Banking.

Private BankingAs part of the reorganisation of Private Banking, the subsidiaries Bank Privat and Asset Management GmbH allocated to the Private Banking segment were merged into UniCredit Bank Austria AG. This transaction had no effect on the Private Banking segment result because the two companies were consoli-dated subsidiaries. In the fourth quarter of 2009, responsibility for customers was extended to include Private Banking customers transferred from the Retail segment. Income from business with these customers is now included in the Private Banking segment. Schoellerbank AG is also allocated to Private Banking.

Corporate & Investment BankingThe Corporate & Investment Banking Division was created in the third quarter of 2009 by combining the Corporates Division with Markets & Investment Banking with a view to even better meeting customers’ needs. The new Corporate & Investment Banking segment now covers the sub-segments Large & Multinational Corporates, Corporates & Public Sector, Financial Institutions and Real Estate, business with medium-sized companies and customers using specific products as well as treasury activities. The Corporate & Investment Banking Division includes, beside others, the investment bank CAIB and its subsidiaries, Bank Austria Wohnbaubank AG and the Bank Austria Real Invest Group 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 CenterCorporate Center covers all equity interests that are not assigned to other segments and it also includes the contribution from UniCredit Global Leasing, in which Bank Austria now has a shareholding interest of 31.01% accounted for under the equity method. Also included are inter-segment eliminations and other items which cannot be assigned to other business segments.

MethodsNet interest income 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 before tax and the net profit after tax, before deduction of minority interests, earned by the respective segment. In addition to the cost / income ratio, the return on equity is one of the key ratios used for controlling the operating segments. The segment reporting data also show the net profit after tax.

The interest rate applied to investment of equity allocated to the business segments corresponds to the 3-month EURIBOR plus a margin of the average 5-year UniCredit credit spread. The rate applied to the segments for investment of equity is determined for one year as part of the budgeting process. A uniform rate of 3.8% is applied to loans on which interest is not accrued and to writedowns.

Overhead costs are allocated proportionately to direct and indirect costs of the business segments.




In 2009, capital allocated to the business segments in Bank Austria is based on the Tier 1 capital ratio of 6.4% on the basis of planned risk-weighted assets under the Basel II rules.

Capital allocation in 2008 was originally based on risk-weighted assets under Basel I, with differentiated percentage rates (between 5.9% and 6.8%) according to the individual business segments.

Capital allocation in 2008 was adjusted to the circumstances in 2009 (i.e. 6.4% of planned risk-weighted assets) to ensure comparability, at operating segment level, with capital allocated to the various business segments. The difference compared with the original figures is shown in “Restatement differences”.

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 for 2008:In 2009, a number of structural changes took place within the business segments and in the group of consolidated companies. This means that results for 2009 are not fully comparable with those for 2008. For this reason, the segment results for 2008 have been restated. The difference compared with Bank Austria’s results for 2008 is presented in a separate column showing “Restatement differences”.

The main pro-forma adjustments made to the figures for 2008 are as follows: Pioneer Investments Austria, Administration Services (AS), and Banking Transaction Services (BTS, Prague) have no longer been included in the group of consolidated companies of Bank Austria as from January 2009; the figures for 2008 have been adjusted accordingly. WAVE was sold to UGIS (UniCredit Global Information Services S.p.A.) in May 2009 and is therefore included in the restated figures for 2008 for only four months. Since 2009, the contributions from the shareholding interest in UniCredit Global Leasing, which is accounted for under the equity method, have not been included in Corporate & Investment Banking but in the Corporate Center; these contributions are included in the Corporate Center also in the restated figures for 2008. Impairment losses on intangible assets concerning subsidiaries, originally recognised in the fourth quarter of 2008, have been allocated to the four quarters of 2008 on a pro-rata basis. The change – resulting from the application of Basel II rules and the standard Tier 1 ratio of 6.4% applied in 2009 – in notional income from invest-ment of capital was also applied to 2008 at operating segment level. The netting effect from trading in own issues was reallocated from Corporate & Investment Banking to the Corporate Center also in the previous year. In the CEE Division there was a reallocation from net trading, hedging and fair value income to net interest income, which was offset in the Corporate Center.





Segment reporting 1–12 2009/1–12 2008 (€ m)

retail diVisiON

priVate baNKiNg diVisiON

cOrpOrate & iNVestmeNt

baNKiNg diVisiON

ceNtral easterN

eurOpe diVisiON

cOrpOrate ceNter

restatemeNt differeNces 1)

baNK austria grOup

Net interest income 1–12 2009 722 21 1,553 3,003 –422 – 4,8771–12 2008 767 21 1,337 3,161 81 1 5,367

Net fees and commissions 1–12 2009 428 65 309 1,055 –25 – 1,8311–12 2008 476 57 354 1,163 –15 40 2,076

Net trading, hedging and 1–12 2009 1 2 –224 496 51 – 326fair value income / loss 1–12 2008 12 1 –684 287 –33 –1 –418Net other expenses/ income 1–12 2009 –26 24 20 58 136 – 211

1–12 2008 –28 31 –5 121 114 –31 201Net non-interest income 1–12 2009 404 90 104 1,609 162 – 2,369

1–12 2008 461 89 –336 1,571 66 9 1,860OperatiNg iNcOme 1–12 2009 1,126 111 1,657 4,612 –260 – 7,245

1–12 2008 1,228 110 1,001 4,732 147 9 7,227OperatiNg expeNses 1–12 2009 –807 –78 –477 –1,944 –309 – –3,615

1–12 2008 –858 –78 –490 –2,224 –297 13 –3,935OperatiNg prOfit 1–12 2009 319 33 1,179 2,668 –570 – 3,630

1–12 2008 370 32 510 2,508 –150 22 3,292Goodwill impairment 1–12 2009 – – – –1 –18 – –19

1–12 2008 – – – – –1,027 – –1,027Provisions for risks and charges 1–12 2009 –2 – –51 –46 –15 – –114

1–12 2008 – 9 1 –8 –65 –4 –3 –87Restructuring costs 1–12 2009 – – –5 –4 – – – 9

1–12 2008 – – – –3 –3 – –6Net writedowns of loans and provisions 1–12 2009 –243 – –306 –1,718 – – –2,267for guarantees and commitments 1–12 2008 –208 – –266 –537 – – –1,012Net income from investments 1–12 2009 10 – –21 16 108 – 113

1–12 2008 6 9 –78 123 284 1 344prOfit befOre tax 1–12 2009 84 33 797 915 –494 – 1,335

1–12 2008 159 42 159 2,025 – 900 21 1,505Income tax 1–12 2009 –13 –8 –79 –169 86 – –182

1–12 2008 –38 – 9 –56 –419 304 –5 –222Net prOfit 1–12 2009 71 25 718 745 –408 – 1,152

1–12 2008 121 33 103 1,606 –596 16 1,283risk-weighted assets (rWa) (avg.) 2) 1–12 2009 10,405 545 32,132 71,233 5,632 – 119,947

1–12 2008 15,751 423 40,870 67,682 4,551 – 129,276Equity (avg.) 3) 1–12 2009 825 144 7,588 9,988 –4,377 – 14,169

1–12 2008 807 166 7,556 9,403 –2,546 25 15,412ROE before tax in % 1–12 2009 10.2 22.8 10.5 4) 9.2 n.m. n.m. 9.4

1–12 2008 19.6 25.4 2.1 21.5 n.m. n.m. 9.8ROE after tax in % 1–12 2009 8.7 17.3 9.5 5) 7.5 n.m. n.m. 8.1(incl. minorities) 1–12 2008 15.0 20.2 1.4 17.1 n.m. n.m. 8.3Cost / income ratio in % 1–12 2009 71.6 69.9 28.8 42.2 n.m. n.m. 49.9

1–12 2008 69.9 70.9 49.0 47.0 n.m. n.m. 54.4Risk /earnings ratio in % 1–12 2009 33.6 n.m. 19.7 57.2 n.m. n.m. 46.5

1–12 2008 27.1 n.m. 19.9 17.0 n.m. n.m. 18.8

1) The segment results for 2008 have been restated. The difference compared with Bank Austria’s results for 2008 is presented in a separate column showing “Restatement differences”, which mainly relate to changes in the group of consolidated companies (sale of Pioneer, AS, BTS, WAVE within UniCredit Group) and other adjustments. 2) Starting with 2009, RWA according to Basel II regulations; 2008 Basel I. 3) 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 with the consolidated equity of the Bank Austria Group is shown in the Corporate Center. 4) 36.3% if profit and equity are adjusted for the excess capital effects (vs absorbed capital)5) 33.1% if profit and equity are adjusted for the excess capital effects (vs absorbed capital)n.m. = not meaningful



Segment reporting Q1–Q4 2009/Q1–Q4 2008 (€ m)

retail diVisiON



baNKiNg diVisiON

ceNtral easterN

eurOpe diVisiON

cOrpOrate ceNter


baNK austria grOup

Net interest income q4/2009 177 8 289 765 –106 – 1,133q3/2009 183 4 367 741 –108 – 1,186q2/2009 176 4 427 738 –123 – 1,222q1/2009 187 5 469 759 –85 – 1,335q4/2008 231 6 412 864 239 –1 1,752q3/2008 182 5 329 835 –46 1 1,306q2/2008 182 5 325 748 –77 – 1,183q1/2008 171 4 270 714 –35 1 1,125

Net fees and commissions Q4/2009 105 24 100 275 –8 – 497Q3/2009 106 14 62 264 –10 – 436Q2/2009 108 13 64 262 –4 – 442Q1/2009 109 14 83 254 –3 – 457Q4/2008 116 13 79 306 –5 8 518Q3/2008 113 13 75 315 –4 10 522Q2/2008 119 14 97 282 –4 11 518Q1/2008 129 16 104 261 –2 11 519

Net trading, hedging and Q4/2009 – – –10 68 31 – 89fair value income/ loss Q3/2009 –1 – –114 67 14 – –34

Q2/2009 –8 1 –102 185 5 – 81Q1/2009 10 – 2 176 2 – 190Q4/2008 15 – –299 131 16 –1 –138Q3/2008 –1 – –102 76 –53 – –81Q2/2008 –2 – –86 60 –28 1 –55Q1/2008 – – –198 20 33 – –144

Net other expenses/ income Q4/2009 –7 –2 7 –1 23 – 21Q3/2009 –6 8 7 31 55 – 95Q2/2009 –7 12 5 21 29 – 60Q1/2009 –6 6 1 7 29 – 36Q4/2008 –5 6 –2 22 25 –6 40Q3/2008 –8 8 –1 40 35 – 9 65Q2/2008 –8 8 –3 34 29 –8 54Q1/2008 –7 9 – 24 25 – 9 42

Net non-interest income q4/2009 98 23 96 343 46 – 606q3/2009 98 22 –46 362 59 – 496q2/2009 94 26 –33 468 29 – 584q1/2009 113 20 86 436 27 – 683q4/2008 125 19 –222 459 36 1 419q3/2008 104 22 –28 431 –22 1 507q2/2008 109 23 8 377 –3 4 517q1/2008 123 25 – 94 304 56 2 417

OperatiNg iNcOme q4/2009 275 31 386 1,108 –61 – 1,739q3/2009 281 26 322 1,103 –49 – 1,683q2/2009 270 30 394 1,205 – 94 – 1,805q1/2009 300 25 555 1,196 –58 – 2,018q4/2008 357 25 191 1,323 275 1 2,171q3/2008 286 27 301 1,266 –68 1 1,813q2/2008 291 28 333 1,125 –81 4 1,700q1/2008 294 29 176 1,019 21 3 1,542

OperatiNg expeNses q4/2009 –202 –21 –121 –505 –73 – – 922q3/2009 –201 –19 –118 –484 –76 – –898q2/2009 –201 –19 –126 –479 –79 – – 904q1/2009 –203 –18 –113 –475 –82 – –892q4/2008 –207 –22 –133 –611 –59 3 –1,029q3/2008 –216 –17 –120 –561 – 93 4 –1,003q2/2008 –218 –19 –121 –541 –60 4 – 956q1/2008 –217 –20 –117 –511 –85 3 – 946

1) The segment results for 2008 have been restated. The difference compared with Bank Austria’s results for 2008 is presented in a separate column showing “Restatement differences”, which mainly relate to changes in the group of consolidated companies (sale of Pioneer, AS, BTS, WAVE within UniCredit Group) and other adjustments.




retail diVisiON



baNKiNg diVisiON

ceNtral easterN

eurOpe diVisiON

cOrpOrate ceNter


baNK austria grOup

OperatiNg prOfit q4/2009 73 10 265 603 –134 – 817q3/2009 81 6 204 619 –124 – 785q2/2009 69 11 268 726 –172 – 902q1/2009 97 6 443 720 –140 – 1,126q4/2008 149 3 58 712 216 3 1,142q3/2008 70 10 180 705 –161 5 810q2/2008 73 9 212 583 –141 8 744q1/2008 77 9 60 508 –64 6 596

Goodwill impairment Q4/2009 – – – – –18 – –18Q3/2009 – – – –1 – – –1Q2/2009 – – – – – – –Q1/2009 – – – – – – –Q4/2008 – – – – –1,027 – –1,027Q3/2008 – – – – – – –Q2/2008 – – – – – – –Q1/2008 – – – – – – –

Provisions for risks and charges Q4/2009 –1 – –41 –22 – – –64Q3/2009 – – –10 –8 – 9 – –27Q2/2009 –1 – – –13 –5 – –20Q1/2009 – – – –3 – – –4Q4/2008 –10 1 –7 –21 – 9 –3 –49Q3/2008 –3 – –2 –22 – – –27Q2/2008 4 – 1 –15 5 – –5Q1/2008 – – 1 –7 – – –7

Restructuring costs Q4/2009 – – –3 –1 – – –4Q3/2009 – – – –1 – – –1Q2/2009 – – –1 –1 – – –2Q1/2009 – – – –1 – – –1Q4/2008 – – – –4 –1 – –5Q3/2008 – – – –2 –1 – –2Q2/2008 – – – 7 – – 6Q1/2008 – – – –4 –1 – –5

Net writedowns of loans and Q4/2009 –53 – –105 –496 – – –655provisions for guarantees Q3/2009 –63 – –31 –509 – – –603and commitments Q2/2009 –72 – –111 –380 – – –563

Q1/2009 –55 – –60 –332 – – –446Q4/2008 –49 – –265 –215 – – –528Q3/2008 –53 – 22 –124 – – –155Q2/2008 –51 – – 9 – 96 – – –156Q1/2008 –56 – –15 –103 – – –173

Net income from investments Q4/2009 2 – –5 4 33 – 34Q3/2009 1 – –11 5 27 – 23Q2/2009 5 – –3 4 3 – 9Q1/2009 2 – –2 2 45 – 47Q4/2008 5 1 –11 14 –79 – –69Q3/2008 – 1 –61 52 128 – 121Q2/2008 – 4 –8 29 164 – 190Q1/2008 1 2 1 28 70 – 102

prOfit befOre tax q4/2009 21 10 110 88 –119 – 111q3/2009 19 6 152 106 –106 – 176q2/2009 1 11 153 335 –175 – 326q1/2009 44 6 381 386 – 94 – 722q4/2008 96 5 –224 486 – 901 1 –536q3/2008 14 12 140 609 –33 6 748q2/2008 26 14 196 507 28 8 779q1/2008 22 11 47 422 6 6 514

Income tax Q4/2009 – –8 12 –20 38 – 22Q3/2009 –3 – –16 –21 24 – –17Q2/2009 2 1 27 –51 –17 – –38Q1/2009 –11 –2 –101 –77 41 – –150Q4/2008 –24 1 32 –112 192 – 87Q3/2008 –3 –3 –33 –122 37 –2 –125Q2/2008 –5 –4 –48 – 90 49 –2 – 99Q1/2008 –5 –3 –7 – 95 27 –1 –84

1) The segment results for 2008 have been restated. The difference compared with Bank Austria’s results for 2008 is presented in a separate column showing “Restatement differences”, which mainly relate to changes in the group of consolidated companies (sale of Pioneer, AS, BTS, WAVE within UniCredit Group) and other adjustments.




retail diVisiON



baNKiNg diVisiON

ceNtral easterN

eurOpe diVisiON

cOrpOrate ceNter


baNK austria grOup

Net prOfit q4/2009 21 2 122 68 –81 – 133q3/2009 15 6 136 84 –83 – 159q2/2009 3 11 181 284 –191 – 288q1/2009 32 5 279 309 –53 – 572q4/2008 72 6 –193 374 –709 1 –449q3/2008 11 9 106 487 4 4 622q2/2008 21 10 149 417 77 7 680q1/2008 17 9 41 327 32 4 430

risk-weighted assets (rWa) 2) q4/2009 9,401 482 29,968 69,033 5,502 – 114,386q3/2009 10,251 526 29,806 68,350 5,650 – 114,583q2/2009 10,968 586 33,503 72,366 5,498 – 122,921q1/2009 10,999 585 35,250 75,185 5,880 – 127,898q4/2008 15,923 349 42,588 69,571 3,550 – 131,981q3/2008 15,397 395 40,143 73,648 5,155 – 134,737q2/2008 15,966 465 42,220 67,731 5,494 – 131,876q1/2008 15,719 481 38,528 59,776 4,004 – 118,507

Equity (avg.) 3) Q4/2009 806 111 7,487 10,247 –4,446 – 14,205Q3/2009 805 162 7,606 10,167 –4,600 – 14,140Q2/2009 811 153 7,718 10,015 –4,558 – 14,139Q1/2009 880 152 7,542 9,525 –3,905 – 14,194Q4/2008 852 162 8,198 9,663 –3,643 9 15,242Q3/2008 783 163 8,536 10,500 –3,918 35 16,100Q2/2008 804 156 6,774 9,430 –1,791 31 15,403Q1/2008 790 182 6,717 8,019 –830 25 14,903

ROE before tax in % Q4/2009 10.5 36.4 5.9 3.4 n.m. n.m. 3.1Q3/2009 9.3 15.1 8.0 4.2 n.m. n.m. 5.0Q2/2009 0.4 27.5 8.0 13.4 n.m. n.m. 9.2Q1/2009 19.8 16.3 20.2 16.2 n.m. n.m. 20.3Q4/2008 45.2 12.5 –10.9 20.1 n.m. n.m. –14.1Q3/2008 7.1 29.0 6.5 23.2 n.m. n.m. 18.6Q2/2008 12.8 35.3 11.6 21.5 n.m. n.m. 20.2Q1/2008 11.4 25.1 2.8 21.0 n.m. n.m. 13.8

ROE after tax in % Q4/2009 10.5 8.9 6.5 2.6 n.m. n.m. 3.7(incl. minorities) Q3/2009 7.5 15.8 7.1 3.3 n.m. n.m. 4.5

Q2/2009 1.3 29.8 9.4 11.4 n.m. n.m. 8.1Q1/2009 14.7 12.4 14.8 13.0 n.m. n.m. 16.1Q4/2008 33.9 14.3 – 9.4 15.5 n.m. n.m. –11.8Q3/2008 5.6 22.1 5.0 18.6 n.m. n.m. 15.5Q2/2008 10.3 25.7 8.8 17.7 n.m. n.m. 17.7Q1/2008 8.6 19.0 2.4 16.3 n.m. n.m. 11.5

Cost / income ratio in % Q4/2009 73.4 67.0 31.4 45.6 n.m. n.m. 53.0Q3/2009 71.3 75.7 36.6 43.9 n.m. n.m. 53.3Q2/2009 74.6 64.1 31.9 39.7 n.m. n.m. 50.1Q1/2009 67.8 74.2 20.3 39.8 n.m. n.m. 44.2Q4/2008 58.1 87.9 69.5 46.2 n.m. n.m. 47.4Q3/2008 75.4 62.8 40.0 44.3 n.m. n.m. 55.3Q2/2008 75.1 66.5 36.4 48.1 n.m. n.m. 56.2Q1/2008 73.7 68.2 66.1 50.2 n.m. n.m. 61.4

Risk /earnings ratio in % Q4/2009 30.0 n.m. 36.3 64.9 n.m. n.m. 57.8Q3/2009 34.5 n.m. 8.5 68.7 n.m. n.m. 50.8Q2/2009 40.8 n.m. 25.9 51.6 n.m. n.m. 46.1Q1/2009 29.3 n.m. 12.7 43.7 n.m. n.m. 33.4Q4/2008 21.0 n.m. 64.2 24.8 n.m. n.m. 30.1Q3/2008 29.2 n.m. 6.8 14.8 n.m. n.m. 11.8Q2/2008 27.8 n.m. 2.7 12.9 n.m. n.m. 13.2Q1/2008 32.5 n.m. 5.4 14.4 n.m. n.m. 15.4

1) The segment results for 2008 have been restated. The difference compared with Bank Austria’s results for 2008 is presented in a separate column showing “Restatement differences”, which mainly relate to changes in the group of consolidated companies (sale of Pioneer, AS, BTS, WAVE within UniCredit Group) and other adjustments. 2) Starting with 2009, RWA according to Basel II regulations; 2008 Basel I. 3) 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 with the consolidated equity of the Bank Austria Group is shown in the Corporate Center. n.m. = not meaningful




(58) Assets pledged as securityAs at 31 December 2009, assets pledged by UniCredit Bank Austria AG and UniCredit CAIB AG totalled € 17,998 m (2008: € 33,126 m).

(59) Subordinated assets / liabilities

(60) Assets and liabilities in foreign currency

(€ m)

31 dec. 2009 31 dec. 2008

Financial assets held for trading – –Financial assets designated at fair value 2 –Available-for-sale financial assets 82 272Held-to-maturity investments – 100Loans and receivables with banks 823 836Loans and receivables with customers 497 490subordinated assets 1,405 1,699Deposits from banks 200 168Deposits from customers 82 90Debt securities in issue 5,229 5,572subordinated liabilities 5,512 5,831

(€ m)

31 dec. 2009 31 dec. 2008

assets liabilities assets liabilities

USD 32,721 30,815 30,938 22,362JPY 1,911 1,332 1,652 2,638CHF 16,292 3,255 16,444 9,393Other 47,082 35,839 55,119 49,833tOtal 98,006 71,240 104,153 84,226

(61) Trust assets and trust liabilities

(62) Repurchase agreementsUnder repurchase agreements, financial assets were sold to third parties with a commitment to repurchase the financial instruments at a price speci-fied when the assets were sold. At the balance sheet date, the total amount of repurchase agreements was € 1,755 m (2008: € 1,492 m). In those cases where Bank Austria is the transferor, the relevant assets continue to be recognised in its balance sheet at their fair values. In those cases where Bank Austria is the transferee, the bank does not recognise the assets in its balance sheet.

Trust assets and liabilities (€ m)

31 dec. 2009 31 dec. 2008

Loans and receivables with banks 6 14Loans and receivables with customers 585 704Equity securities and other variable-yield securities 8,054 7,342Debt securities 9,962 6,931Other assets 83 130trust assets 18,689 15,121

Deposits from banks 4,303 283Deposits from customers 14,213 13,733Debt securities in issue 58 –Other liabilities 115 1,105trust liabilities 18,689 15,121




(63) Guarantees given and commitments(€ m)

31 dec. 2009 31 dec. 2008

financial guarantees given to: 7,911 9,449Banks 618 546Customers 7,293 8,903

commercial guarantees given to: 12,518 12,996Banks 1,948 2,632Customers 10,570 10,364

Other irrevocable commitments to disburse funds 12,971 14,880Banks 292 465

Usage certain 49 7Usage uncertain 242 458

Customers 12,680 14,415Usage certain 6,205 8,889Usage uncertain 6,475 5,526

underlying obligations for credit derivatives: sales of protection 927 954assets used to guarantee others’ obligations – –Other commitments 3,587 5,426tOtal 37,915 43,705

The amount of contingent claims in Bank Austria is equal to the amount of contingent liabilities.

(64) List of selected subsidiaries and other equity interestsThe list of unconsolidated subsidiaries required under the Austrian Commercial Code/Austrian Banking Act is included in the notes to the financial statements of UniCredit Bank Austria AG as at 31 December 2009. The notes have been lodged with the Austrian Register of Firms, a public register at the Commercial Court of Vienna (Handelsgericht Wien).

(64a) Consolidated companiesdOmicile iNterest iN %

cOmpaNy city cOuNtrydirect

OWNershipiNdirect

OWNership tOtal

AI Beteiligungs GmbH Vienna Austria 0.00 100.00 100.00

Alpine Cayman Islands Ltd. Grand Cayman Cayman Islands 100.00 0.00 100.00

Arany Penzügyi Lizing Zrt. Budapest Hungary 0.00 100.00 100.00Artist Marketing Entertainment GmbH Vienna Austria 0.00 100.00 100.00ATF Bank Kyrgyzstan OJSC Bishkek Kyrgyzstan 0.00 96.85 96.85ATF Capital B.V. Rotterdam Netherlands 0.00 99.70 99.70AWT International Trade AG Vienna Austria 100.00 0.00 100.00

BA Alpine Holdings, Inc.Wilmington County USA 100.00 0.00 100.00

BA-CA Infrastructure Finance Advisory GmbH Vienna Austria 0.00 100.00 100.00BA-CA Markets & Investment Beteiligung Ges.m.b.H. Vienna Austria 100.00 0.00 100.00BA-CA Wien Mitte Holding GmbH Vienna Austria 100.00 0.00 100.00Bank Austria Creditanstalt Wohnbaubank AG Vienna Austria 100.00 0.00 100.00Bank Austria Global Information Services GmbH Vienna Austria 80.00 10.01 90.01Bank Austria Real Invest GmbH Vienna Austria 94.95 0.00 94.95CA IB Securities (Ukraine) AT Kiev Ukraine 0.00 100.00 100.00CABET-Holding-Aktiengesellschaft Vienna Austria 100.00 0.00 100.00Card Complete Service Bank AG Vienna Austria 50.10 0.00 50.10CEAKSCH Verwaltungs G.m.b.H. Vienna Austria 0.00 100.00 100.00Centar Kaptol doo Zagreb Croatia 0.00 84.21 84.21Christoph Reisegger Gesellschaft m.b.H. Vienna Austria 0.00 99.00 99.00CJSC Bank Sibir Omsk City Russian Federation 0.00 99.70 99.70




dOmicile iNterest iN %


OWNershipiNdirect

OWNership tOtal

Closed Joint-Stock Company UniCredit Securities Moscow Russian Federation 0.00 100.00 100.00Diners Club CEE Holding AG Vienna Austria 99.80 0.00 99.80Diners Club Polska Sp.z.o.o. Warsaw Poland 0.00 99.80 99.80Domus Bistro GmbH Vienna Austria 100.00 0.00 100.00Domus Clean Reinigungs GmbH Vienna Austria 100.00 0.00 100.00Domus Facility Management GmbH Vienna Austria 100.00 0.00 100.00EK Mittelstandsfinanzierungs AG Vienna Austria 98.00 0.00 98.00Eurolease RAMSES Immobilien Leasing Gesellschaft m.b.H. & Co OG Vienna Austria 99.30 0.20 99.50Euroventures-Austria-CA-Management GesmbH Vienna Austria 0.00 100.00 100.00FactorBank Aktiengesellschaft Vienna Austria 100.00 0.00 100.00HypoVereins Immobilien EOOD Sofia Bulgaria 0.00 92.10 92.10Istra Golf DOO Umag Croatia 0.00 60.46 60.46Istraturist Umag, Hotelijerstvo i Turizam DD Umag Croatia 0.00 60.46 60.46JOHA Gebäude- Errichtungs- und Vermietungsgesellschaft m.b.H. Vienna Austria 0.00 94.03 94.03Joint Stock Commercial Bank for Social Development Ukrsotsbank Kiev Ukraine 26.15 69.19 95.34JSC ATF BANK Almaty Kazakhstan 99.70 0.00 99.70Lassallestraße Bau-, Planungs-, Errichtungs- und Verwertungsgesellschaft m.b.H. Vienna Austria 99.00 0.00 99.00Limited Liability Company B.A. Real Estate Moscow Russian Federation 0.00 100.00 100.00LLC Ukrsotsbud Kiev Ukraine 0.00 99.00 99.00Lowes Limited Nicosia Cyprus 0.00 100.00 100.00Marketing Zagrebacke Banka doo Zagreb Croatia 0.00 84.21 84.21MC Marketing GmbH Vienna Austria 100.00 0.00 100.00MC Retail GmbH Vienna Austria 0.00 100.00 100.00Mezzanin Finanzierungs AG Vienna Austria 56.67 5.45 62.12MY Beteiligungs GmbH Vienna Austria 100.00 0.00 100.00Open saving pension fund Otan JSC Almaty Kazakhstan 0.00 88.73 88.73Palais Rothschild Vermietungs GmbH & Co OG Vienna Austria 0.00 100.00 100.00Pominvest DD Split Croatia 0.00 74.66 74.66Private Joint Stock Company Ferrotrade International Kiev Ukraine 100.00 0.00 100.00PRVA Stambena Stedionica DD Zagreb Zagreb Croatia 0.00 84.21 84.21SVIF Ukrsotsbud Kiev Ukraine 0.00 100.00 100.00Schoellerbank Aktiengesellschaft Vienna Austria 100.00 0.00 100.00Teledata Consulting und Systemmanagement Gesellschaft m.b.H. Vienna Austria 0.00 94.95 94.95Treuconsult Beteiligungsgesellschaft m.b.H. Vienna Austria 0.00 94.95 94.95UniCredit Bank a.d. Banja Luka Banja Luka Bosnia and Herzegovina 90.92 0.00 90.92UniCredit Bank Czech Republic A.S. Prague Czech Republic 100.00 0.00 100.00UniCredit Bank d.d. Mostar Bosnia and Herzegovina 24.40 55.23 79.63UniCredit Bank Hungary ZRT. Budapest Hungary 100.00 0.00 100.00UniCredit Bank Latvia AS Riga Latvia 100.00 0.00 100.00UniCredit Bank Serbia JSC Belgrade Serbia 100.00 0.00 100.00UniCredit Bank Slovakia A.S. Bratislava Slovakia 99.03 0.00 99.03UniCredit Banka Slovenija D.D. Ljubljana Slovenia 99.99 0.00 99.99UniCredit Bulbank AD Sofia Bulgaria 92.10 0.00 92.10UniCredit CAIB AG Vienna Austria 0.00 100.00 100.00UniCredit CAIB Czech Republic AS Prague Czech Republic 0.00 100.00 100.00UniCredit CAIB Hungary Ltd. Budapest Hungary 0.00 100.00 100.00UniCredit CAIB Poland S.A. Warsaw Poland 0.00 100.00 100.00UniCredit CAIB Romania SRL Bucharest Romania 0.00 100.00 100.00UniCredit CAIB Securities UK Ltd. London United Kingdom 0.00 100.00 100.00UniCredit CAIB Serbia Ltd. Belgrade Serbia 0.00 100.00 100.00UniCredit CAIB Slovakia A.S. Bratislava Slovakia 0.00 100.00 100.00UniCredit CAIB Slovenija, d.o.o. Ljubljana Slovenia 0.00 100.00 100.00UniCredit CAIB UK Ltd. London United Kingdom 0.00 100.00 100.00UniCredit Factoring EAD Sofia Bulgaria 0.00 92.10 92.10UniCredit Factoring Penzügyi Szolgaltato Zrt. Budapest Hungary 0.00 100.00 100.00




dOmicile iNterest iN %


OWNershipiNdirect

OWNership tOtal

UniCredit Jelzalogbank ZRT. Budapest Hungary 0.00 100.00 100.00UniCredit Securities International Limited Nicosia Cyprus 0.00 100.00 100.00UniCredit Tiriac Bank S.A. Bucharest Romania 50.56 0.03 50.59UniCredit Turn-Around Management GmbH Vienna Austria 100.00 0.00 100.00Universale International Realitäten GmbH Vienna Austria 100.00 0.00 100.00UPI Poslovni Sistem doo Sarajevo Bosnia and Herzegovina 0.00 56.23 56.23WED Donau-City Gesellschaft m.b.H. Vienna Austria 0.00 67.80 67.80WED Holding Gesellschaft m.b.H. Vienna Austria 48.06 0.00 48.06WED Wiener Entwicklungsgesellschaft für den Donauraum Aktiengesellschaft Vienna Austria 38.00 29.80 67.80Z Leasing POLLUX Immobilien Leasing Gesellschaft m.b.H. Vienna Austria 99.80 0.00 99.80Z Leasing RIGEL Immobilien Leasing Gesellschaft m.b.H. Vienna Austria 99.80 0.00 99.80Z Leasing SIRIUS Immobilien Leasing Gesellschaft m.b.H. Vienna Austria 99.80 0.00 99.80Zaba Turizam DOO Zagreb Croatia 0.00 84.21 84.21Zagreb Nekretnine DOO Zagreb Croatia 0.00 84.21 84.21Zagrebacka Banka d.d. Zagreb Croatia 84.21 0.00 84.21Zane BH DOO Sarajevo Bosnia and Herzegovina 0.00 84.21 84.21ZAO IMB-Leasing Moscow Russian Federation 0.00 100.00 100.00ZAO UniCredit Bank Moscow Russian Federation 0.00 100.00 100.00ZB Invest DOO Zagreb Croatia 0.00 84.21 84.21ZETA Fünf Handels GmbH Vienna Austria 100.00 0.00 100.00

(64b) Investments in companies accounted for under the proportionate consolidation methoddOmicile

cOmpaNy city cOuNtry add-%tOtal assets

iN € thsd

OperatiNg iNcOme

iN € thsdequity capital

iN € thsd

Informations-Technologie Austria GmbH Vienna Austria 50.05 90,162 2,388 19,848Koc Finansal Hizmetler AS Istanbul Turkey 50.00 2,038,750 2,148 2,014,607Stiching Custody Services KBN Amsterdam Netherlands 40.90 125 0 125UniCredit Menkul Degerler AS Istanbul Turkey 49.02 11,301 1,179 8,949Yapi Kredi Azerbaijan Baku Azerbaijan 40.90 132,046 9,910 37,183Yapi Kredi Bank Nederland NV Amsterdam Netherlands 40.90 1,560,518 30,098 171,575Yapi Kredi Bankasi AS Istanbul Turkey 40.90 29,820,911 2,512,895 4,120,510Yapi Kredi Emeklilik AS Istanbul Turkey 38.42 345,455 26,787 63,246Yapi Kredi Faktoring AS Istanbul Turkey 40.88 692,105 24,595 47,538Yapi Kredi Finansal Kiralama AO Istanbul Turkey 40.43 1,085,030 83,036 326,024Yapi Kredi Holding BV Amsterdam Netherlands 40.90 45,430 –27 44,374Yapi Kredi Moscow Moscow Russian Federation 40.90 143,573 14,716 38,698Yapi Kredi Portföy Yönetimi AS Istanbul Turkey 40.88 42,376 37,329 38,202Yapi Kredi Sigorta AS Istanbul Turkey 38.42 346,400 5,543 129,196Yapi Kredi Yatirim Menkul Degerler AS Istanbul Turkey 40.89 198,007 49,847 111,860Yapi Kredi Yatirim Ortakligi AS Istanbul Turkey 22.93 34,412 9,453 33,932




(64d) Investments in associated companies not accounted for under the equity methodIn the 2008 financial year, aggregate total assets of associated companies in which Bank Austria held investments which were not accounted for under the equity method were € 479.9 m. Aggregate equity capital of these companies amounted to € 71.8 m. The combined net profit of these companies was € 11 m.

(65) EmployeesIn 2009 and 2008, the Bank Austria Group employed the following average numbers of staff (full-time equivalents):

(66) Supervisory Board and Management BoardIn the reporting year, the following persons were members of the Management Board of UniCredit Bank Austria AG: chairman and chief executive Officer: Willibald CERNKO (from 1 October 2009), Erich HAMPEL (until 30 September 2009)deputy chairman: Federico GHIZZONI (member from 1 July 2007, Deputy Chairman from 29 July 2009)members: Helmut BERNKOPF, Jürgen DANZMAYR (from 12 May 2009), Rainer HAUSER (from 1 June 2009), Ralph MÜLLER (until 31 May 2009), Carlo VIVALDI, Stephan WINKELMEIER, Robert ZADRAZIL (until 2 June 2009)

In the reporting year, the following persons were members of the Supervisory Board of UniCredit Bank Austria AG: chairman: Alessandro PROFUMOdeputy chairman: Franz RAUCH (member from 17 March 2003, Deputy Chairman from 13 July 2006 until 30 September 2009), Erich HAMPEL (from 1 October 2009)members: Claudio CONSOLO (until 4 May 2009), Sergio ERMOTTI, Paolo FIORENTINO, Candido FOIS (from 5 June 2009), Dario FRIGERIO (until 30 September 2009), Roberto NICASTRO, Vittorio OGLIENGO, Karl SAMSTAG, Gerhard SCHARITZER, Wolfgang SPRISSLER, Wolfgang HEINZL, Adolf LEHNER, Emmerich PERL, Karin WISAK-GRADINGER (until 23 April 2009), Riccardo HOFER (until 23 April 2009), Josef REICHL, Robert TRAUNWIESER (from 24 April 2009), Barbara WIEDERNIG (from 24 April 2009)

Employees2009 2008

Salaried staff 61,920 67,069Other employees 139 90tOtal*) 62,059 67,159

of which: in Austria 8,146 10,441of which: abroad 53,913 56,718

*) Average full-time equivalents of staff employed in the Bank Austria Group (consolidated companies), excluding apprentices and employees on unpaid sabbatical or maternity / paternity leave

(64c) Investments in associated companies accounted for under the equity methodiNVestmeNts Valued at equity dOmicile tOtal assets OperatiNg iNcOme equity capital

Name Of cOmpaNy city cOuNtry add-% iN € thsd iN € thsd iN € thsd

Air Plus Air Travel Card Vertriebsgesellschaft m.b.H. Vienna Austria 33.27 101,982 22,789 11,283Allianz ZB D.O.O. Drustvo za Upravljanje Dobrovoljnim Zagreb Croatia 41.26 2,990 1,315 1,538Allianz ZB D.O.O. Drustvo za Upravljanjie Obveznim Zagreb Croatia 41.26 21,334 12,891 20,190Bank für Tirol und Vorarlberg Aktiengesellschaft Innsbruck Austria 47.38 8,484,000 179,500 600,677Banque de Commerce et de Placements SA Geneva Switzerland 12.54 1,529,097 49,055 91,676BKS Bank AG Klagenfurt Austria 36.03 6,095,100 171,855 568,410CA Immobilien Anlagen Aktiengesellschaft Vienna Austria 11.91 4,080,634 105,137 1,442,568Österreichische Clearingbank AG Vienna Austria 18.51 1,407,314 2,680 179,330Moll Holding GmbH Munich Germany 48.02 10,045 0 7,390Notartreuhandbank AG Vienna Austria 25.00 1,032,879 15,002 21,264Oberbank AG Linz Austria 33.33 16,177,826 355,689 1,031,089Oesterreichische Kontrollbank Aktiengesellschaft Vienna Austria 49.15 35,500,000 158,000 516,038Österreichische Hotel- und Tourismusbank Ges.m.b.h. Vienna Austria 50.00 979,500 5,346 25,910Pay Life Bank GmbH Vienna Austria 19.37 462,499 123,821 115,649RCG Holdings LLC New York USA 22.44 603,899 –75,431 173,539UniCredit Business Partner S.p.A. Cologno Monzese Italy 28.81 402,074 2,051 70,819UniCredit Global Leasing SPA Milan Italy 32.59 31,450,257 557 1,942,444OOO UniCredit Leasing Company Moscow Russian Federation 40.00 256,424 8,911 57,292Yapi Kredi Koray Gayrimenkul Yatirim Ortakligi AS Istanbul Turkey 12.45 48,460 –3,344 37,692




Risk report

(67) Overall risk management including Basel IIBank Austria identifies, measures, monitors and manages all risks of the Bank Austria Group. In performing these tasks, Bank Austria works closely with the risk control and risk management units of UniCredit. In this context, Bank Austria supports UniCredit’s ongoing projects which are aimed at establishing uniform group-wide risk controlling procedures.

Bank Austria divides the monitoring and controlling processes associated with risk management into the following categories: Market risk (67a) Liquidity risk (67b) Counterparty risk (67c) Credit risk (67d) Operational risk (67e) Business risk (67f) Risks arising from the bank’s shareholdings and equity interests and from real estate (67g)

The Management Board determines the risk policy and approves the principles of risk management, the establishment of limits for all relevant risks, and the risk control procedures.

In performing these tasks, the Management Board is supported by specific committees and independent risk management units. All risk management activities of Bank Austria are combined within a management function at Management Board level directed by the Chief Risk Officer (CRO); after com-pletion of adjustments of the CRO organisation to the UniCredit Group’s divisional structure, secondary lending decisions for corporate customers are made in the Corporate Risk and MIB & Market Risk departments and in the Local Industry Teams, and for retail customers in the Retail Risk depart-ment. The Special Accounts Management department deals with problem loans. These organisational units are supported by the Strategic Risk Man-agement & Control department. Credit risk control of the CEE business units is performed by the CEE Risk Control department and by the CEE Risk Monitoring and CEE Policies & Guidelines units. The unit for active credit portfolio management (Credit Treasury) reports directly to the Chief Financial Officer (CFO).

The Asset /Liability Committee (ALCO) is responsible for the management of balance-sheet structure positions, it controls liquidity risk and deals with cross-divisional risk management issues arising between sales units and overall bank management while also addressing the results of the credit port-folio model. Control of market risk of the trading books is ensured by the Market Risk Committee (MACO), which meets once a week. MACO deals with short-term business management issues relating to the presentation and discussion of the risk /earnings position of Markets & Investment Banking and with limit adjustments, product approvals and positioning decisions. In addition, the general framework and limits for banking subsidiaries are de-fined by MACO. Credit risk is assessed by the credit committee. The newly established Operational Risk Committee (OpRiCo) meets on a quarterly basis to deal with operational risk issues.

Counterparty risk arising from derivative transactions is managed by the newly created Derivative Committee (DECO). DECO deals with classic credit risk issues and aspects of reputational risk in customer business.

The Management Board of Bank Austria sets risk limits for market risk activities of the entire Bank Austria Group at least once a year. MACO, which holds a meeting every week, makes limit decisions at the operational level and analyses the risk and earnings positions of the bank’s Markets & In-vestment Banking units. ALCO performs analyses and makes decisions with regard to business activities closely connected with customer business (in particular, balance sheet structure, liquidity, and risk management issues arising between sales units and overall bank management). The decisions and results of these committees are reported directly to the bank’s full Management Board. Risk Management, which is separate from the business divisions up to Management Board level, is in charge of preparing analyses and monitoring compliance with limits. In 2009, the internal counterparty risk model was refined in respect of model validation and backtesting, and the bank applied to the Austrian Financial Market Authority (FMA) for regu-latory approval. The FMA requested Oesterreichische Nationalbank (OeNB, Austria’s central bank) to review the model; the period set for the review was May to July 2009. In September 2009, Bank Austria received approval from the FMA through an official notice pursuant to Section 21f of the Austrian Banking Act, thereby becoming the first Austrian bank to use such a model for internal risk management and for regulatory purposes, i. e. capital to be held against risk-weighted assets. Activities in 2010 will focus on further developing the model and expanding the reporting system.

Beyond compliance with the regulatory capital rules pursuant to Section 39 of the Austrian Banking Act, economic capital (Pillar II) is intended to reflect the bank’s specific risk profile in a comprehensive and more consistent way. These unexpected losses over a period of one year are calculated with a confidence level of 99.97%.

Value-at-risk methodologies are used in the Bank Austria Group for calculating or planning economic capital for all specified types of risk (market risk, credit risk, risks arising from shareholdings and equity interests, real estate risk, operational risk, business risk). The Bank Austria Group is included in the risk monitoring and risk management system of the entire UniCredit Group. This ensures overall risk management across the Group.




Current status of BASEL II implementation in the Bank Austria GroupThe Basel II programme set up by Bank Austria in 2003 to implement the new rules for holding adequate capital against risk-weighted assets covers UniCredit Bank Austria AG, all Austrian and foreign subsidiaries within the group of consolidated companies, all risk categories (credit risk, operational risk and market risk) and all three pillars of Basel II.

UniCredit Bank Austria AG has maintained the major part of its portfolio in the A-IRB approach since 31 March 2008. The prerequisite for doing so was the approval by the competent supervisory authorities. From the different approaches that may be chosen in the area of credit risk under Basel II, the Bank Austria Group – in line with the decision taken by UniCredit Group – has opted for the advanced internal ratings-based (A-IRB) approach. Within the sub-group, the switch to the advanced approach will take place in stages as defined in the IRB roll-out plan. The roll-out plan for the A-IRB ap-proach was submitted to all competent regulators and found to be appropriate by them.

Basel II implementation has been established as a Group-wide programme. Therefore UniCredit is responsible for Group-wide decisions and guidelines as well as for the development of Group-wide models. For example, Group-wide homogeneous portfolios have been defined for which uniform rating models are used across the Group, such as those for countries, banks and multinational companies. These Group-wide models are refined on an on-going basis and extended to cover additional portfolios. The introduction of further Group-wide models is planned for 2010. The Group has also se-lected and (further) developed specific system components as Group-wide solutions for the calculation of loss parameters and risk-weighted assets. Close cooperation ensures Group-wide consistency in the implementation of Basel II. Group standards have for the most part already been prepared and adopted by the UniCredit Group holding company in cooperation with the major IRB legal entities, and are used as an instrument for uniform Group-wide implementation, with a view to complying with local legal requirements – some of which differ from country to country – and safeguarding Group interests. These Group standards will continue to be gradually extended and complemented. They are being integrated step by step in the pro-cesses and organisational set-up of all business areas and Group units, with account being taken of local features and legal requirements in ensuring Basel II compliance. These Group standards will also be gradually rolled out in the relevant CEE subsidiaries. Banca d’Italia (the Bank of Italy), the home supervisor of UniCredit Group, is responsible for all approvals at Group level, while local supervisory authori-ties are responsible for local topics in the legal entities and for local on-site reviews. Regulatory issues are being dealt with in close cooperation be-tween home and host regulators. The supervisory assessment of the A-IRB approach in UniCredit Bank Austria AG for the local models took place in 2007 and was completed with very satisfactory results. This was followed by approval of the local implementation and use of the Group-wide rating models for banks and countries /sov-ereigns as well as multinational companies.

The bank is planning to introduce various other Group-wide rating models in the next few years while also further refining and developing local models. In 2009, Bank Austria also participated in international consultations and discussions on the procyclicality of Basel II.

Following successful completion of work on meeting the legal requirements under the EU’s Capital Requirements Directive in connection with Basel II, UniCredit Bank Austria AG is now concentrating on ongoing compliance. In the next few years, the bank will roll out and further improve the quality standards for risk management instruments, reporting and compliance in the sub-group with a view to ensuring uniform Group-wide implementation and Group-wide consistency.

The Group has also chosen the most elaborate method, the advanced measurement approach (AMA), in respect of operational risk – UniCredit Bank Austria AG received the AMA approval at the beginning of 2008.

Austrian banking subsidiariesAll Austrian banking subsidiaries of Bank Austria started to use the standardised approach in 2008. From a current perspective, for reasons of materi-ality, it is not planned to switch to one of the IRB approaches. In the area of operational risk, Schoellerbank received approval for the application of the advanced measurement approach (AMA) during 2009.

CEE banking subsidiariesThe CEE banking subsidiaries have used the Basel II standardised approach since the beginning of 2008. Based on a detailed roll-out plan, there are plans to switch to the advanced IRB approach at most of the CEE banking subsidiaries in line with the Group’s decision to use the IRB approach. According to the detailed roll-out plan communicated to the supervisory authorities involved, the switch to the IRB approaches will take place step by step. All banking subsidiaries will start with the Foundation IRB approach (F-IRB) between 2010 and 2012. For an initial group of six subsidiaries, approval for use of the F-IRB was sought from the Bank of Italy as home supervisor by the end of 2009. As the local supervisory authorities in the Czech Republic and in Slovenia carried out preliminary reviews in 2009, supervisory IRB assessments at all banking subsidiaries which have filed applications will take place by the middle of 2010.

Risk report (CONTINuED)



The measures taken at the two most recently added banking subsidiaries in Kazakhstan and Ukraine to ensure compliance with the standardised approach have been successfully completed for Kazakhstan. Implementation of the measures for Ukraine is currently in the testing phase.

In the area of operational risk, approval for the use of the AMA was received in Slovakia, Hungary and Slovenia. Further approvals are planned to be obtained in the course of 2010.

Implementation of disclosure requirements pursuant to Sections 26 and 26a of the Austrian Banking Act (regular disclosure of information on the organisational structure, risk management and risk capital position pursuant to Sections 2 to 15 of the Austrian Disclosure Regulation) Within UniCredit Group, a comprehensive disclosure is carried out by the parent company UniCredit on its website, based on the consolidated financial position in its function as EEA parent bank of Bank Austria. Bank Austria is a significant subsidiary pursuant to Section 26 (4) of the Austrian Banking Act and therefore discloses its supervisory capital structure and its capital adequacy requirement; furthermore, the bank discloses information regard-ing the use of own estimates for volatility adjustments (comprehensive method) for credit risk mitigation techniques to take account of financial collat-eral pursuant to Section 17 of the Austrian Disclosure Regulation and in accordance with the approval by the Austrian Financial Market Authority (FMA).

(67a) Market riskMarket risk management encompasses all activities in connection with our Markets & Investment Banking operations and management of the balance sheet structure in Vienna and at Bank Austria’s banking subsidiaries. Risk positions are aggregated at least daily, analysed by the independent risk management unit and compared with the risk limits set by the Management Board and the committees (including MACO) designated by the Manage-ment Board. At Bank Austria, market risk management includes ongoing reporting on the risk position, limit utilisation, and the daily presentation of results of all positions associated with market risk. Trading positions are largely bundled in the newly created CIB Division (Corporates & Investment Banking), while market risk of the banking book is an important factor also in other Divisions (the CEE banking subsidiaries, in particular).

Bank Austria uses uniform risk management procedures for all market risk positions throughout the Group. These procedures provide aggregate data and make available the major risk parameters for the various trading operations once a day. Besides Value at Risk (VaR), other factors of equal impor-tance are stress-oriented sensitivity and position limits. Additional elements of the limit system are loss-warning level limits and options-related limits applied to trading and positioning in non-linear products.

Bank Austria’s risk model (“NoRISK”) was developed by the bank and has been used for many years. The model is applied and further refined by MIB & Market Risk. Ongoing refinement work includes reviewing the model as part of backtesting procedures, integrating new products, implementing re-quirements specified by the Management Board and by MACO, and adjusting the system to general market developments. Work on further develop-ment in 2009 focused on preparations for adapting the NoRisk system to an internal model (IMOD) applied throughout UniCredit Group; the adaptation is planned to be implemented in 2010. In this context, 2009 saw the start of parallel operations enabling the bank to apply Group-wide historical scenarios of the UniCredit holding company to determine a correlated VaR across various locations and units (also outside the Bank Austria Group). Preparations also started in connection with the new Basel II rules for the trading book, which are to be applied from 2011, especially in respect of the incremental risk charge (IRC).

A product introduction process has been established in which risk managers play a decisive role in approving a new product. The “NoRISK” risk model, approved by the supervisory authorities since 1998, is used for computing capital requirements; in contrast to the internal risk management process, the computation of capital requirements takes into account the statutory parameters (confidence interval of 99%, 10-day holding period) and addition-ally the multiplier determined as part of the model review is applied. The model was used for UniCredit CAIB AG, UniCredit Bank Austria AG and the Bank Austria Group in 2009. The risk model covers all major risk categories: interest rate risk and equity position risk (both general and specific risk), exchange rate risk and commodities position risk.

The structure of the standard risk report presented at MACO’s weekly meetings corresponds to the weekly UniCredit-wide CIB risk report and thus covers the same (stress) sensitivities in addition to VaR figures. Regular and specific stress scenario calculations complement the information provided to MACO/ALCO and the Management Board. Macro scenarios show the potential adverse impacts of global developments with specific effects on the respective risk categories, while stress sensitivities of individual risk factors or groups of risk factors show the potential adverse impacts on partial market segments. Stress scenarios are based on assumptions of extreme movements in individual market risk parameters. The bank analyses the effect of such fluctuations and a liquidity disruption in specific products and risk factors on the bank’s results. These assumptions of extreme move-ments are dependent on currency, region, liquidity and the credit rating, and are set by MIB & Market Risk on a discretionary basis after consultation with experts in other areas of the bank (e.g. research, trading, Market Risk UniCredit holding company).

In addition to the risk model results, income data from market risk activities are also determined and communicated on a daily basis. These data are presented over time and compared with current budget figures. Reporting covers the components reflected in IFRS-based profit and the marking to market of all investment positions regardless of their recognition in the IFRS-based financial statements (“total return”). The results are available to Bank Austria’s trading and risk management units via the access-protected Intranet application “ERCONIS”, broken down by portfolio, income state-ment item and currency. The regulatory approach to prudent valuation in the trading book is also implemented primarily by MIB & Market Risk and further developed on an ongoing basis through cooperation within UniCredit Group.




In Vienna, Bank Austria uses the “MARCONIS” system developed by the bank itself to completely and systematically review the market conformity of its trading transactions. This tool is also used by almost all CEE banking subsidiaries with market risk activities.

Value-at-risk movements (1 day, confidence interval of 99%) in 2009 reflected the general easing of markets, which contributed to a steady decline, especially after the first quarter, in volatility having a significant impact on the portfolio. These market trends in combination with further reductions of interest-rate and credit-spread positions led to a significantly lower VaR towards the end of 2009. At that time, the VaR was lower than the compara-tive levels measured in 2008 before the Lehman Brothers insolvency, and the decline is clearly visible for the entire portfolio associated with market risk and for trading positions alone.

The results of the internal model based on VaR (1 day, confidence interval of 99%) in 2009 ranged between € 32.3 m and € 110.4 m for the Bank Austria Group (compared with a spectrum reaching from € 36.6 m to € 167.4 m observed in the previous year). In the trading book, the relevant results were between € 10.4 m and € 38.2 m (in 2008, between € 10.8 m and € 48.2 m). As in previous years, the risk report also includes the non-trading driven equity positions of the bank’s investment books and the hedge-fund positions. Credit spread risk and interest rate risk account for most of the total risk of the Bank Austria Group. Since January 2007, commodity risk has only been assumed in the Bank Austria Group on a back-to-back basis.

VaR of the Bank Austria Group by risk category (€ m)

risK categOry miNimum aVerage maximum year-eNd

Interest rate risk –21.4 –39.4 –75.6 –33.0Credit spread –24.7 –50.1 –88.4 –29.5Exchange rate risk –0.3 –1.8 –15.7 –0.8Equity risk / trading –0.3 –1.1 –5.4 –1.0Hedge funds –2.8 –7.3 –24.1 –3.0Equity risk / investment –7.1 –10.6 –16.1 –7.4Vega risk –0.4 –2.3 –6.1 –0.5tOtal 2009 –32.3 –65.3 –110.4 –45.1total 2008 –36.6 –65.1 –167.4 – 98.1

In addition to VaR, risk positions of the Bank Austria Group are limited through sensitivity-oriented limits. As part of daily risk reporting, detailed “Trader Reports” are prepared for a large number of portfolios, with updated and historical information made available to all risk-takers and the responsible se-nior management via the Intranet. The comprehensive statistical data on VaR made available in addition to limit-relevant 99% quantile figures include the average of scenario results beyond the 99% quantile mark, providing an indication of the magnitude of events for which the probability of occur-rence is very low. In addition to limit-relevant overall simulation runs, the results of partial simulation runs are recorded daily in the risk database. Partial simulation runs simulate specific risk classes while keeping others constant. The combination of portfolios and partial simulation runs enables the bank to analyse all major risk components on a daily basis and over time.

VaR of the Bank Austria Group in 2007–2009 (€ m)

avg. 35.2

avg. 12.3

avg. 65.1avg. 65.3

avg. 20.4avg. 21.2

Total Return VaR VaR in the trading book

Jan.

07

Feb.

07

Mar

ch 0

7Ap

ril 0

7M

ay 0

7Ju

ne 0

7Ju

ly 07

Aug.

07

Sept

. 07

Oct.

07No

v. 0

7De

c. 0

7Ja

n. 0

8Fe

b. 0

8M

arch

08

April

08

May

08

June

08

July

08Au

g. 0

8Se

pt. 0

8Oc

t. 08

Nov.

08

Dec.

08

Jan.

09

Feb.

09

Mar

ch 0

9Ap

ril 0

9M

ay 0

9Ju

ne 0

9Ju

ly 09

Aug.

09

Sept

. 09

Oct.

09No

v. 0

9De

c. 0

9

–160

–140

–120

–100

–80

–60

– 40

–20

0




As at 31 December 2009, the entire interest rate position of the Bank Austria Group (trading and investment) for major currencies was composed as follows (the table below shows basis point values over € 500):

Basis point values of the Bank Austria Group (in €)

as at 31 december 2009 aNNual aVerage, miNimum/maximum

up tO1 mONth

1 mONth tO 3 mONths

3 mONths tO 1 year

1 year tO 5 years

OVer 5 years tOtal maximum miNimum

absOluteaVerage

Western EUR – 94,469 –28,660 126,628 37,493 –240,923 –199,931 219,115 –410,325 146,636Europe CHF 9,596 –32,839 50,855 –11,927 –37,951 –22,266 13,998 –236,926 72,794

DKK 9 –4 –7 – – –2 721 –663 69GBP – 923 –4,582 14,517 –5,257 –662 3,094 24,891 –76,567 19,990NOK 106 –13 –45 6 – 54 1,659 –1,602 302SEK –46 –67 –23 – – –137 1,086 –494 267

New EU countries BGN 52 1,173 4,400 –16,948 –8,707 –20,029 31,533 –27,233 14,782CZK 1,922 –23,568 –40,451 –16,999 59,963 –19,134 114,577 –75,618 37,454HUF –4,514 4,106 3,360 –17,387 –4,953 –19,387 70,050 –88,962 25,605PLN 1,337 1,324 –5,824 –18,673 9,445 –12,392 29,973 –61,107 16,755RON 1,516 –3,143 –35,334 –15,778 –11,451 –64,191 –2,278 –66,039 43,734

Baltics EEK –70 295 2,018 –88 –138 2,017 2,069 –214 664LTL 22 126 –598 3 – –447 143 –547 124LVL –5 51 –3,367 –1,257 –1 –4,578 732 –4,611 2,328

Central and AZN 32 –10 –144 –151 –5 –278 391 –523 218Eastern Europe BAM –113 –199 –1,380 2,470 639 1,417 1,569 –4,021 2,341incl. Turkey HRK 1,518 3,690 991 –79,117 –47,162 –120,080 –10,676 –148,875 126,994

KGS 11 – 1 –358 – –346 –239 –2,292 1,394KZT 2,806 123 4,332 23,545 –114,491 –83,686 –8,547 –140,481 77,543RSD –882 –2,133 –12,926 –36 – –15,977 3,306 –15,977 4,414RUB –810 14,824 –38,921 –58,425 –100,150 –183,481 32,850 –223,269 72,789TRY – 935 –12,649 –19,684 167,236 –22,221 111,746 126,308 –141,312 64,655UAH 1,539 –434 –14,290 –8,116 –16,664 –37,965 –18,676 –49,698 33,049

Overseas – highly AUD 122 –1 –1,418 –387 – –1,683 646 –3,491 1,607developed countries CAD –36 – 952 –1,010 741 – –1,258 732 –4,384 1,146

JPY 1,351 4,258 30,076 12,218 –6,248 41,654 43,924 –46,329 27,175NZD 205 –18 –1,518 – – –1,331 318 –2,377 1,045USD 2,690 –147,549 –69,486 158,490 –1,406,806 –1,462,661 –856,578 –1,679,346 1,281,711

Other countries AED –3 –61 –16 – – –80 551 –863 422ILS –349 2,215 1,295 1,596 –230 4,527 11,048 –11,774 4,017XAU 518 110 –2 – – 626 3,034 –753 1,527ZAR 1,432 –186 –5,650 – 9,729 –3,284 –17,417 11,568 –22,657 6,355BPV<500 33 –43 –62 –3 – –75 98 –238 271

tOtal –76,339 –224,817 –13,682 143,161 –1,952,002 –2,123,679 2,090,176

Significant interest rate positions continue to be held in RUB, HRK, TRY and KZT, reflecting the size of our banking subsidiaries; most of the related interest rate sensitivity is in the banking book (not in the trading book). The USD position is also related to the banking book position of our banking subsidiaries. In 2009, the average interest rate position was held at a very low level compared with previous years.

By analogy to the detailed presentation of basis point positions in the interest rate sector, daily reporting presents details of credit spread by curve and maturity band (the bank currently uses more than 560 credit spread curves for its risk calculations).




Credit spread basis-point values (CPVs) of the Bank Austria Group (€)

aNNual aVerage, miNimum/maximum

sp-bpVs sectOr maximum miNimum absOlute aVerage

Main sectors Financial services –305,706 –1,544,077 602,141ABS and MBS –87,411 –850,917 437,745

Corporates*) Industrial 570,719 178,911 423,550Automobiles 18,347 –29,935 11,412Consumer goods 172,303 106,279 153,792Pharmaceutical 21,961 –174,324 121,969Telecommunications 54,047 –7,017 27,753Energy & utilities 83,763 –169,632 116,187Other –194,435 –365,807 297,874

Treasury-near Treasuries – EU & European industrial nations –1,910,235 –2,698,795 2,486,475Treasuries – new EU countries –548,155 –745,651 640,542Treasuries – CEE & emerging markets –1,008,802 –1,389,356 1,172,518Treasuries – developed countries overseas 33,499 –44,506 14,370Treasuries – agencies & supranationals –47,764 –78,335 52,580Municipals & German Jumbo –253,071 –460,558 401,890

tOtal –4,143,581 –7,268,124 5,596,192*) The CPVs for corporates include + € 900 thsd relating to the bank’s own securitisations sold, which have no longer been presented in market risk reporting since February 2010.

Measured by the total basis-point value, the Bank Austria Group’s credit spread position in 2009 ranged between – € 4.1 m and – € 7.3 m and was significantly lower than the relevant levels in the previous year 1). Treasury-near instruments continue to account for the largest part of the credit spread positions while the current exposure to financials and corporates is very low by comparison. The positions of asset-backed securities (ABSs) and mortgage-backed securities (MBSs) were further reduced in 2009, primarily through redemptions. The average CPV also continued to decline. Pursuant to a change in the past year in the intention to hold these instruments in view of the permissibility of reclassification of synthetic ABSs, the sub-portfolio of synthetic ABSs was reclassified back into the trading book in September 2009. Overall, the ABS book developed favourably in 2009 in terms of total return in the year. Measured by redemption behaviour, almost the entire ABS/MBS book continued to be classified as performing in 2009.

The overall trend in credit spreads had a positive impact on the Bank Austria Group’s results for 2009. The massive reduction of credit spread-related trading activities which was initiated in 2008 was followed by organisational adjustments in the CIB Division in 2009; after these adjustments, CIB now differentiates between core and non-core positions in the Markets business unit of the CIB Division. The main credit spread position left in the trading sector are the hedges relating to the bank’s own trading issues and a very small book in financials.

Bank Austria has invested in hedge funds through its subsidiary UniCredit Bank Cayman Islands since 1999. The related investment was brought closer to Bank Austria in 2009 and is now reported in the financial statements of an Austrian Bank Austria subsidiary. The reduction of the exposure, initiated by management in 2008, was further pursued in 2009. The major part of the total investment volume was bundled in a fund of funds. In 2009, the hedge fund investments forming part of CAIB’s equity trading operations were substantially reduced, the remaining volume is insignificant. The reduction of hedge fund positions will continue.

Capital requirements for market riskBank Austria’s risk model is subjected to daily backtesting in accordance with regulatory requirements. The model results are compared with changes in value on the basis of actually observed market fluctuations. As the number of backtesting excesses (negative change in value larger than model result) has been within the range permitted by law ever since the model was introduced, the multiplier need not be adjusted. In 2009, there was no backtesting excess. The chart below shows the backtesting results for the regulatory trading book: the volatility-driven VaR increases at the end of 2008 in the wake of the Lehman Brothers insolvency and credit spread-related fluctuations in March 2009 are easy to see. In a timely manner, the VaR thus rose to levels which subsequently did not lead to backtesting excesses. This once again confirms the high quality of Bank Austria’s market risk model.

1) A significant portion of this reduction was due to the reclassification of the ABS position in accordance with IFRSs (CPV of € 0.6 m). In addition, as the definition of market risk positions of the banking book was standardised, a bond portfolio with a CPV of € 1.2 m was excluded from daily VaR limitation. These portfolios are subject to a loan approval process.




Market risk management in CEEAt Bank Austria, market risk management covers the activities in Vienna and the positions at the banking subsidiaries, especially in Central and Eastern Europe. These subsidiaries have local risk management units with a reporting line to Risk Management in UniCredit Bank Austria AG. Uniform pro-cesses, methods, rules and limit systems ensure consistent Group-wide risk management adjusted to local market conditions.

The “NoRISK” risk model has been implemented locally at major units (Czech Republic, Slovakia, Hungary, Croatia, Bulgaria, Russia, Turkey), and a daily risk report is made available to the other units.

Analyses of position structure and balance sheet structure are available to all banks in the Group via “ALVIS”, a Group-wide web tool. Liquidity monitor-ing is also based on this instrument.

The web application “ERCONIS” records the daily business results of treasury activities in CEE. In line with a total-return approach, measurements of the performance of banking subsidiaries include income generated by the subsidiaries and the valuation results of the banking book.

To avoid risk concentrations in the market risk position, especially in tight market conditions, Bank Austria has implemented at its banking subsidiaries Value-at-Risk limits and position limits for exchange rate risk, interest rate risk and equity risk, which are monitored daily. The monitoring of income trends at banking subsidiaries by means of stop-loss limits provides an early indication of any accumulation of position losses.

The timely and continuous analysis of market risk and income is the basis for integrated risk-return management of treasury units at banking subsidiaries.

Backtestingergebnisse des Handelsbuches 2005–2007 (Mio €)

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Backtesting results for the regulatory trading book 2007–2009 (€ m)

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Value at Risk of banks in CEE (€ m)

year-eNd 2009 figures

aVerage Var 2009 Var fx Var ir Var spread Var

Bulgaria –3.8 –1.7 –0.2 –0.6 –1.5Baltics –0.2 –0.2 0.0 –0.2 0.0Czech Republic –5.5 –7.3 –0.1 –0.4 –7.3Croatia (incl. Bosnia) –6.4 –4.7 –0.2 –3.9 –1.9Hungary –3.4 –1.9 –0.1 –0.3 –0.9Kazakhstan –18.3 –6.2 –0.2 –6.4 –0.3Romania –1.4 –1.5 0.0 –1.6 0.0Russia –5.0 –4.0 –1.1 –3.6 –1.7Serbia –0.3 –0.6 0.0 –0.6 0.0Slovakia –1.2 –0.8 0.0 –0.3 –0.7Slovenia –2.8 –2.3 0.0 –0.1 –1.2Turkey –29.2 –17.2 0.0 –14.9 –18.6Ukraine –17.5 –15.9 –0.4 –16.1 –0.1

cee –46.4 –30.9 –1.2 –32.9 –22.6

After the dramatic risk movements in autumn 2008 following the collapse of Lehman Brothers, market risk limit utilisation in CEE was just within the limit for CEE, with Value at Risk reaching € 82 m at the beginning of 2009. As volatility in interest rates, currencies and bond spreads declined and positions were reduced across the board, the overall VaR contribution from CEE decreased to about 60% of the limit (i. e. about € 50 m) by the middle of 2009. As the large inflows of liquidity were invested primarily in government bonds, risk positions rose slightly in the second half of the year; the continued easing of the markets led to a steady decline in Value at Risk, to about € 31 m at year-end 2009. CEE continued to account for close to 80% of the Bank Austria Group’s market risk.

Management of balance sheet structureThe matched funds transfer pricing system applied throughout the Group and the principle of causation applied in attributing credit risk, market risk and liquidity risk enable the bank to determine contribution margins from customer transactions in the bank’s business divisions. The Asset /Liability Management function ensures that the bank’s overall liquidity and interest rate gap structure is optimised, with the results from interest maturity trans-formation being reflected in the Corporates & Investment Banking Division. Factors taken into account in this context include the costs of compensation for assuming interest rate risk, liquidity costs and country risk costs associated with foreign currency financing at CEE banking subsidiaries. These funding costs burden lending business in CEE, but steadily declined from peak levels as markets gradually eased.

Products for which the material interest-rate and capital maturity is not defined, such as variable-rate sight and savings deposits, are modelled in re-spect of investment period and interest rate sensitivity by means of analyses of historical time series, and taken into account in the bank’s overall risk position. Interest rate sensitivities are determined and taken into account in hedging activities, which results in a positive contribution to profits from customer business.

To assess its balance-sheet and profit structure, the bank uses the Value-at-Risk approach, complemented by a scenario analysis covering subsequent quarters and years. The bank thus also follows the Basel II recommendation concerning the simulation of future net interest income under different interest rate scenarios (“earnings perspective”).

In the earnings perspective analysis, simulations of the future development of net interest income and of the market value of the banking book are generally based on assumptions regarding volume and margin developments under different interest rate scenarios. Parallel interest rate shocks as well as inversions and low-interest-rate scenarios can be analysed to identify their possible impact on the bank’s net interest income and the present value of equity.

The analyses performed at year-end 2009 show that a further interest rate decline in all currencies, from an already low level, would have the stron-gest impact on the bank’s net interest income. This is a typical feature of commercial banks, given the interest rate remanence on the liabilities side of banks’ balance sheets (sight deposits, equity).

The Basel II rules require the measurement at Group level of “interest rate risk in the banking book” in relation to the bank’s capital by comparing a change in the market value of the banking book after a 2% interest rate shock with the bank’s net capital resources. In the event that such an interest rate shock absorbs more than 20% of a bank’s net capital resources, the bank supervisory authority could require the bank to take measures to re-duce risk.

A 2% interest rate shock would absorb about 5% of the Group’s net capital resources; this calculation also includes the current investment of equity capital as an open risk position. This means that the figure for Bank Austria is far below the outlier level of 20%.




(67b) Liquidity riskGeneral information, processes and management modelIn line with Group standards, the Bank Austria Group deals with liquidity risk as a central risk in banking business by introducing and monitoring short-term and medium-term liquidity requirements. In this context the liquidity situation for the next few days and months and also for longer periods is analysed against a standard scenario and stress scenarios. Methods and procedures of liquidity analysis, analyses of the degree of liquidity of cus-tomer positions, management responsibilities and reporting lines in this area have been laid down in the liquidity policy, which is also applicable at Bank Austria’s CEE units and includes a contingency plan in the event of a liquidity crisis.

Liquidity management in Bank Austria is an integral part of UniCredit Group liquidity management. In line with the Group-wide distribution of tasks, Bank Austria ensures the consolidation of liquidity flows and the funding for banking subsidiaries. The flow of funds is thereby optimised and external funding is reduced to the necessary extent. Liquidity transfers within the Group are based on market prices.

Liquidity management methods and control In medium-term and long-term liquidity management, liquidity inflows over 1 year and over 5 years must cover a minimum of 90% of expected liquid-ity outflows during these periods. This limit must be observed at Group level and for each banking subsidiary. As at year-end 2009, the limit is to be observed also at individual currency level in order to avoid cross-currency funding arrangements as far as possible. At Bank Austria Group level, the liquidity ratio as at year-end 2009 was 1.00 for >1 year and 0.97 for >5 years. This means that in effect, long-term assets are fully funded at Group level.

For the purpose of short-term liquidity management, volume limits have been implemented in the Bank Austria Group and in all banks for maturities up to three months, which limit all Treasury transactions and the securities portfolio of the respective bank. Additionally, limits were established at the end of 2009 for open maturities in various currencies to keep down follow-up funding risk in the event that foreign currency markets dry up.

These limits were essentially observed. Pricing competition for deposit products has led to a noticeable improvement in liquidity ratios at many banks of the Bank Austria Group. On this basis, many banking subsidiaries have been able to repay funding received from the parent company and fund their lending business on their own.

Liquidity stress testBank Austria performs liquidity stress tests for the Group and for individual banks on a regular basis, using a standardised Group-wide instrument and standardised Group-wide scenarios. These scenarios describe the effects of market-driven or name-driven crisis signals on liquidity inflows and out-flows, with assumptions also being made about the behaviour of non-banks.

The liquidity outflows expected to occur in stress situations are compared with available collateral (essentially, securities and credit instruments eligible as collateral at the central bank) to examine the banks’ risk-taking capability in the short term up to two months.

As Bank Austria holds large amounts of liquid collateral, liquidity outflows under any of the tested stress scenarios are not nearly equal to the available pool of collateral.

Quantitative informationThe breakdown by contractual residual maturity is shown in note 51.




Funding plan and liquidity costs in pricingFunding the CEE banking subsidiaries is one of the main functions of the Group’s liquidity management. Short and long-term funds are made available to the banking subsidiaries for their business on the basis of a funding plan. These country risks are partly covered by MIGA or SACE guarantees. With the above-mentioned improvement in the deposit base, the funding requirements of banking subsidiaries declined significantly in 2009 compared with the previous year.

Liquidity costs are part of the reference rate system. The applicable alternative costs are debited or, on the basis of an opportunity cost approach, credited to the various products on the assets side and the liabilities side which have an effect on liquidity. In the current controlling process this ensures the proper pricing of our business.

(67c) Counterparty riskBank Austria has made further efforts to refine the risk management model for derivatives, securities lending and repurchase agreements. The model was refined especially with regard to validation and backtesting. For the purposes of portfolio management and risk limitation in the derivatives and security financing business with banks and customers, Bank Austria uses an internal counterparty risk model (IMM) based on a Monte Carlo path simulation to estimate the potential future exposure at portfolio level for each counterparty. In 2009, Bank Austria applied to the Austrian Financial Market Authority (FMA) for approval of this model with a view to using it also for external purposes, more specifically for capital required to be held against risk-weighted assets, in addition to internal risk management. Oesterreichische Nationalbank (OeNB), Austria’s central bank, examined the model in the course of the approval process from May to July 2009. Based on OeNB’s positive opinion, the Austrian Financial Market Authority granted its approval to UniCredit Bank Austria AG in the fourth quarter of 2009, pursuant to Section 21f (3) in conjunction with (1) nos. 1 to 4 of the Austrian Banking Act, to use the model for determining the value of claims under derivatives transactions, repurchase agreements, securities lending and loans collateralised by securities. This makes Bank Austria the first Austrian bank to be permitted to use an internal model pursuant to Section 21f of the Austrian Banking Act.

The calculations are based on market volatility, correlations between specific risk factors, future cash flows and stress considerations. Netting agree-ments and collateral agreements are also taken into account for simulation purposes.

The simulation calculations are performed for all major types of transactions, e.g. forward foreign exchange transactions, currency options, interest rate instruments, equity /bond-related instruments, credit derivatives and commodity derivatives. Other transactions are taken into account with an add-on depending on factors such as maturity. The bank applies a confidence interval of 97.5%.

At the end of 2009, derivative transactions, repurchase agreements and securities lending transactions resulted in the following exposures:

Exposures (€ bn)

Austria 5.7CEE 1.4tOtal 7.1

In addition to further refinement and approval of the model, regular separate reporting on counterparty risk was introduced with a view to informing Bank Austria’s Market Risk Committee and Derivative Committee (DECO) of current exposure trends and providing additional information relevant to risk management. An example is reporting on stress test calculations. These extended reporting and analysis procedures also take regulatory require-ments and recommendations into account. Moreover, backtesting is performed at regular intervals, at the level of individual counterparties and at over-all bank level, in order to check the quality of the model on an ongoing basis.

Line utilisation for derivatives and security financing business of customers is available online in WSS (“Wallstreet”), the central treasury system, on a largely group-wide basis. In addition to determining the potential future exposure, the path simulation also enables the bank to calculate the average exposure and the modified average exposure pursuant to Basel II (exposure at default), as well as the effective maturity of the exposure to each coun-terparty. This makes it possible to integrate counterparty risk in an internal model compliant with Basel II.

Bank Austria additionally limits the credit risk arising from its derivatives business, repurchase agreements and securities lending business through strict use of master agreements, the definition and ongoing monitoring of documentation standards by legal experts, and through collateral agreements and break clauses. Management takes proper account of default risk, especially because the relevance of this risk category has increased and on the basis of experience gained in the international financial market crisis, despite the good average credit rating of our business partners.




(67d) Credit riskQuantitative information

Breakdown of financial assets by portfolio and credit quality (carrying value) (€ m)

baNKiNg grOup Other cOmpaNies

pOrtfOliO/quality

NON-perfOrmiNg

lOaNsdOubtful

assetsrestructured

expOsures past-dueOther

assets impaired Other tOtal

Financial assets held for trading – – – – 4,129 – 8 4,137Available-for-sale financial assets 1 – – – 10,310 – 515 10,826Held-to-maturity financial instruments – – – – 5,067 – – 5,067Loans and receivables with banks 22 30 – – 23,003 – 22 23,076Loans and receivables with customers 1,350 2,551 471 142 119,040 – 48 123,602Financial assets at fair value through profit or loss – – – – 235 – – 235Financial instruments classified as held for sale 4 – – 1 13,055 – – 13,059Hedging instruments – – – – 151 – – 151tOtal 31 december 2009 1,377 2,581 471 142 174,989 – 593 180,153

Breakdown of financial assets by portfolio and credit quality (gross and net values) (€ m)

impaired assets perfOrmiNg

tOtal (Net expOsure) pOrtfOliO/quality

grOss expOsure

specific WritedOWNs

Net expOsure

grOss expOsure

pOrtfOliO adJustmeNts

Net expOsure

Financial assets held for trading – – – X X 4,137 4,137Available-for-sale financial assets 12 11 1 10,828 3 10,825 10,826Held-to-maturity financial instruments – – – 5,067 – 5,067 5,067Loans and receivables with banks 151 99 52 23,025 – 23,025 23,076Loans and receivables with customers 9,391 4,877 4,514 119,902 814 119,088 123,602Financial assets at fair value through profit or loss – – – X X 235 235Financial instruments classified as held for sale 7 2 4 13,055 – 13,055 13,059Hedging instruments – – – X X 151 151tOtal 9,560 4,989 4,571 171,876 817 175,582 180,153

Balance-sheet and off-balance sheet exposure to banks: gross and net values (€ m)

expOsure types/amOuNts grOss expOsure specific WritedOWNs pOrtfOliO adJustmeNts Net expOsure

balance sheet exposure Non-performing loans 114 88 X 26Doubtful loans 42 12 X 30Restructured exposures – – X –Past due – – X –Other assets 39,344 X 2 39,342total 39,500 101 2 39,397

Off-balance sheet exposureImpaired 1 – X 1Other 18,649 X – 18,649total 18,650 – – 18,650tOtal 58,150 101 2 58,048





Balance-sheet and off-balance sheet exposure to customers: gross and net values (€ m)

expOsure types/amOuNts grOss expOsure specific WritedOWNs pOrtfOliO adJustmeNts Net expOsure

balance sheet exposure Non-performing loans 4,471 3,120 X 1,351Doubtful loans 3,811 1,260 X 2,551Restructured exposures 933 462 X 471Past due 184 41 X 142Other assets 133,700 X 815 132,885total 143,099 4,884 815 137,400Off-balance sheet exposurebanking groupImpaired 250 115 X 135Other 34,361 X 39 34,323total 34,611 115 39 34,457tOtal 177,710 4,999 854 171,857

Balance-sheet exposure to customers: gross change in impaired exposures (€ m)

chaNges iN 2009

sOurce/categOriesNON-perfOrmiNg

lOaNs dOubtful assetsrestructured

expOsures past-due expOsures

Opening balance – gross exposure 3,872 2,000 470 158Sold but not derecognised – – – –

increases 2,614 3,770 719 176Transfers from performing loans 1,699 2,813 270 154Transfers from other impaired exposure 774 771 108 –Other increases 140 186 342 22

reductions 1,924 1,957 256 131Transfers to performing loans 147 575 6 61Derecognised items 332 134 10 –Recoveries 222 221 12 2Sales proceeds 35 5 – 5Transfers to other impaired exposure 594 778 228 53Other reductions 594 243 – 10

closing balance – gross exposure 4,562 3,814 933 203Sold but not derecognised – – – –

Balance-sheet exposure to customers: changes in overall impairment (€ m)

sOurce/categOriesNON-perfOrmiNg

lOaNs dOubtful assetsrestructured

expOsures past-due expOsures

total opening writedowns 2,499 428 252 29Sold but not derecognised – – – –

increases 1,898 1,377 361 32Writedowns 1,494 857 152 3Transfers from other impaired exposure 239 349 22 –Other increases 165 171 187 29

reductions 1,277 545 152 20Write-backs from assessments 53 64 – –Write-backs from recoveries 200 75 12 1Write-offs 332 134 10 –Transfers to other impaired exposure 263 201 128 17Other reductions 428 71 2 2

final gross writedowns 3,120 1,260 462 41Sold but not derecognised – – – –



Banking group – Balance-sheet and off-balance sheet credit exposure by external rating class (book values) (€ m)

balaNce at 31 dec. 2009

exterNal ratiNg classes

NO ratiNg tOtalclass 1 class 2 class 3 class 4 class 5 class 6

On-balance sheet exposures 25,585 14,469 24,489 27,896 6,722 5,308 61,309 165,778derivative contracts

Financial derivative contracts 7,892 8,588 1,510 662 109 1 16,737 35,499Credit derivatives contracts 209 202 96 53 – – – 560

guarantees given 1,631 1,236 4,078 3,326 590 189 6,302 17,352Other commitments to disburse funds 188 669 1,505 1,274 188 52 9,393 13,269tOtal 35,506 25,165 31,677 33,211 7,609 5,549 93,741 232,458


iNterNal ratiNg classes impairedexpOsures

NOratiNg tOtalg h i J

On-balance sheet exposures 6,713 15,304 8,912 2,236 4,031 35,424 165,778derivative contracts

Financial derivative contracts 215 507 179 31 – 6,169 35,499Credit derivatives contracts – – – – – – 560

guarantees given 668 1,972 1,092 199 68 1,100 17,352Other commitments to disburse funds 417 841 413 116 15 3,174 13,269tOtal 8,013 18,624 10,596 2,582 4,114 45,867 232,458

Banking group – Balance-sheet and off-balance sheet exposure by internal rating class (book values) (€ m)


iNterNal ratiNg classes

a b c d e f

On-balance sheet exposures 24,527 10,669 12,877 20,856 13,132 11,096derivative contracts

Financial derivative contracts 11,724 7,111 1,746 4,762 2,077 976Credit derivatives contracts 209 201 92 5 53 –

guarantees given 2,018 578 2,228 4,166 1,623 1,641Other commitments to disburse funds 247 1,063 1,405 2,637 1,795 1,146tOtal 38,724 19,623 18,349 32,426 18,681 14,859

Net writedowns of loans and provisions for guarantees and commitments in 2009 reflected the strong impact of the economic crisis, which started to become discernible in results for the fourth quarter of 2008. The impact of the crisis on the provisioning charge in Austria and in the various countries in Central and Eastern Europe varied considerably.

At € 2.27 bn, net writedowns of loans and provisions for guarantees and commitments in the Bank Austria Group more than doubled as against 2008. A particularly strong increase in the provisioning charge was seen at the banking subsidiaries in Central and Eastern Europe, where net writedowns of loans more than tripled compared with 2008, weighing down performance. By contrast, the increase in the provisioning charge in Corporate & Invest-ment Banking and in the Retail Division was relatively moderate, at significantly below 20%.

In Austria, the sharp rise in new problem loans in Corporate & Investment Banking which has been seen since the fourth quarter of 2008 continued. However, the number of loans newly transferred to Special Accounts Management started to decline noticeably in the second half of 2009. Net write-downs of loans and provisions for guarantees and commitments in this segment were about € 307 m (including banking subsidiaries), well above the previous year’s level. But in the absence of major insolvencies, and thanks to professional risk management, the risk /earnings ratio and the risk /vol-ume ratio remained moderate in the challenging economic environment.

The increase of about € 35 m over 2008 to a total of € 243 m in net writedowns of loans in the Retail segment was exclusively due to the Small Busi-nesses sub-segment, while the provisioning charge for Mass Market and Affluent customers decreased slightly. Unlike previous recessions, the eco-nomic setback this time strongly affected small businesses from the very beginning. Short-time working arrangements adopted by many companies helped to delay a strong increase in unemployment in the sub-segment of Mass Market and Affluent customers. The full impact of the crisis on the provisioning charge in this area is therefore expected to occur in 2010.




2) PD = Probability of Default; LGD = Loss Given Default; EAD = Exposure at Default


CEE Net writedowns of loans and provisions for guarantees and commitments at banking subsidiaries in Central and Eastern Europe rose substantially in 2009, to about € 1,718 m (2008: € 535 m).

In the first nine months of 2008, the general economic crisis did not yet have a noticeable impact (provisioning charge for 1– 9/2008: € 323 m). Net writedowns of loans and provisions for guarantees and commitments started to rise strongly in the fourth quarter of 2008. This trend intensified in 2009, with the provisioning charge in the third quarter peaking at € 627 m (but slightly falling again in the fourth quarter).

In regional terms, the strongest increase in net writedowns of loans and provisions for guarantees and commitments compared with 2008 was seen in the CIS region (+ € 643 m). Significant increases over the previous year were also recorded in Turkey (+ € 209 m), Central Europe (+ € 129 m) and in South-East Europe plus the Baltic states (+ € 143 m). Overall, the three CIS countries and Turkey accounted for more than two-thirds of the total provi-sioning charge for CEE in 2009.

Kazakhstan was the country where the provisioning charge, almost € 500 m, reached by far the highest level in 2009. Large writedowns of loans to the construction industry and on the real estate portfolio were the main factors in this context.

Ukraine was the CEE country which was hit hardest by the crisis in 2009. This can be seen from the development of the Ukrainian hryvnia, which was about 40% down from the peak value reached in summer 2008. The negative performance of the country’s economy was also reflected in signifi-cantly higher net writedowns at Ukrsotsbank, the Ukrainian banking subsidiary. The provisioning charge rose to € 228 m in 2009 (up from € 89 m in 2008). Corporate banking and the retail segment accounted for almost equal portions of the increase.

The provisioning charge in Russia also rose substantially in 2009, from € 77 m to € 207 m, with corporate customers accounting for some 80% of the total and retail customers for about 20%.

The increase in net writedowns of loans and provisions for guarantees and commitments in Turkey from € 91 m to almost € 300 m was primarily due to credit card business and loans to small and medium-sized businesses.

Most of the other banking subsidiaries in Central and Eastern Europe also recorded a sharp rise in the provisioning charge in 2009. The most pro-nounced increases were seen in Hungary and the Czech Republic, where net writedowns of loans and provisions for guarantees and commitments more or less tripled, from € 26 m to € 86 m in Hungary and from € 29 m to € 83 m in the Czech Republic.

New provisions for business with CEE borrowers booked at UniCredit Bank Austria AG were about € 56 m.

Credit risk methods and instrumentsVery important factors in the credit approval process are a detailed assessment of risk associated with each loan exposure, and the customer’s credit rating in particular. Every lending decision is based on a thorough analysis of the loan exposure, including an evaluation of all relevant factors. Follow-ing the initial loan application, the bank’s loan exposures are reviewed at least once a year. If the borrower’s creditworthiness deteriorates substantially, shorter review intervals are obligatory.

For internal credit assessment in Austria and by Bank Austria’s banking subsidiaries in CEE, the bank uses various rating and scoring models (for cal-culating the parameters PD, LGD and EAD on the basis of models specifically developed for these purposes) 2) for the customer /business segments to be assessed, in line with the various asset classes pursuant to Section 22b of the Austrian Banking Act, the Solvency Regulation and Directive 2006/48/EC of the European Parliament and of the Council of 14 June 2006 relating to the taking up and pursuit of the business of credit institu-tions. There are country-specific or region-specific models (e.g. for corporate customers, retail customers) and global models (e.g. for sovereigns, banks, multinational corporates). The assessment of a loan exposure is based on data from the respective company’s financial statements and on qualitative factors.

The various rating and scoring models, which were further optimised in 2009, provide the basis for efficient risk management of the Bank Austria Group and are embedded in all decision-making processes relating to risk management. They are also a key factor for capital required to be held against risk-weighted assets. Great attention is given to consistency in the presentation for supervisory purposes and the requirements of internal control.

All internal rating and scoring systems are monitored on an ongoing basis, the monitoring procedure was further refined in 2009. The systems are also subject to regular validation on an annual basis, including a review to verify if the rating/scoring system provides a correct representation of the risks to be measured. All model assumptions are based on multi-year statistical averages for historical defaults and losses, with appropriate attention being given to the potential impact of turbulence in international financial markets.



In this context, credit risk stress tests, which are required by bank supervisory authorities and are carried out on a regular basis, are an essential instrument for assessing future risks in an unfavourable economic environment. Such tests enable the Management Board to assess the adequacy of regulatory capital and economic capital on the basis of different stress scenarios.

With risk-adjusted pricing and a stronger focus on risk management, we aim to constantly improve the diversification and the risk /earnings ratio of the portfolio.

For real estate customers, the customer-related rating is complemented by a transaction rating.

Bank Austria uses a scoring system for retail customers. The automated rating tool is used for assessing, monitoring and managing the large number of loan exposures to private customers, small businesses, independent professionals and small non-profit organisations. Retail scoring comprises an application scoring procedure based on effective and recognised mathematical and statistical methods, and a behaviour scoring procedure taking into account such factors as amounts received in the account and customers’ payment practices. The scoring system for retail customers provides infor-mation that is updated on a monthly basis. This gives the bank an efficient tool for lending decisions and early recognition of risk. Automated data pro-cessing helps Bank Austria to reduce costs required for credit control while accelerating lending decisions.

In 2009, the CEE banking subsidiaries were prepared for the gradual switch from the standardised approach to the IRB approach starting in 2010. The forecasting quality of rating models and underlying processes in the CEE Risk Control function were optimised in close cooperation with specialists at Bank Austria. The switch will ensure consistent quality-assured implementation of methodological guidelines across the Group.

Lending against collateral is an essential component of bank-internal risk control and overall bank risk management. The valuation of collateral, com-prehensive and ongoing management of collateral, and the credit risk mitigation techniques applied in individual cases are based on uniform standards for the sub-group (Austria and Central and Eastern Europe) which are documented in detail in valuation guidelines applicable across the entire Group. Apart from the regulatory minimum requirements for the use of collateral to reduce capital requirements under the respective approaches, some of the standards applied within the Group are partly more stringent.

Writedowns of loans are made in accordance with IFRS rules. Expected recoveries from the realisation of collateral are also taken into account in this context.

All loans and receivables with customers that are more than 90 days overdue are classified as impaired, and specific or portfolio-based writedowns are made on them. Additionally, in Central and Eastern Europe, the bank takes into account local rules established by central banks which in some cases require the recognition of impairment losses and appropriate writedowns after a period of significantly less than 90 days.

Credit TreasurySince the implementation of Credit Treasury (CT; former Active Credit Portfolio Management ACPM) a predefined corporate segment of customers is actively managed according to capital market principles, in addition to the unchanged credit process for credit risks. By mapping the credit risk from customer business through a reference structure derived from maturity-matched market prices, a risk-adequate pricing of this portfolio segment is secured, accompanied by efficient capital market control. In Credit Treasury, the risk positions are aggregated and the bank’s credit risk profits are optimised.

By actively hedging and re-investing, Credit Treasury is to widen the portfolio’s diversification, thereby contributing to an improvement of the risk-return profile.

For the entire Bank Austria Group (including CEE), Credit Treasury executes risk-transfer and capital-generating measures and transactions (via syn-thetic securitisation, CLNs, etc.) and liquidity-generating measures/ transactions (counterbalancing with OeNB/ECB, cover fund management for issues of mortgage bonds).

The quarterly Credit Treasury Committee, analogously to the Market Risk Committee (MACO), serves to actually steer business in regard to the risk- return situation in Credit Treasury as well as to adapt limits and to decide on positions, measures and transactions.




(67e) Operational riskAnalogous to Basel II, operational risk is defined as the risk of losses due to human error, flawed management processes, natural and other catastro-phes, technological failures and external events. For example, IT system failures, damage to property, processing errors or fraud are subject to accu-rate and consolidated risk measurement and management, on which the calculation of risk capital is based.

Loss data are collected, and processes are optimised, in close coordination and cooperation with other departments and units including Internal Audit, the Compliance Office, Legal Affairs and the insurance sector. Over the years, Bank Austria has taken numerous measures in the various divisions to manage and reduce operational risk. Thus data security measures, measures to ensure the confidentiality and integrity of stored data, access authori-sation systems, the two-signatures principle, and a large number of monitoring and control processes as well as staff training programmes have been implemented among other measures.

In line with other types of risk, UniCredit Bank Austria AG – like its parent company – has built up a decentralised risk management network of con-tacts within departments, divisions and at banking subsidiaries (OpRisk Managers or divisional OpRisk Managers) in addition to central risk controlling. While the main task of central risk management is to define the methods used and to perform risk measurement and analysis, decentralised risk man-agers are responsible for taking measures to reduce, prevent, or take out insurance against, risks.

Activities in 2009 focused on meeting requirements as requested by the Austrian Financial Market Authority (FMA) after its on-site supervisory assess-ment of the advanced approach, and on preparing and supporting regulatory reviews at banking subsidiaries. All requirements resulting from the on-site supervisory review 2008 were fully implemented in 2009.

Overall, the organisation of operational risk management at UniCredit Bank Austria AG is well established at a high level of quality. A network of inde-pendent functions and teams are involved in managing and controlling risks, providing the Management Board with sufficient information on the risk situation and enabling the Management Board to manage risk. Improvements regarding the extended documentation requirements for scenarios and risk indicators were achieved during 2009. The analysis of the general ledger for operational risk relevance confirmed the extensive operational risk data collection. The functions of divisional Operational Risk Managers were strengthened and expanded accordingly. Since 2008, the task of dealing with operational risk issues has been performed by a separate Operational Risk Committee (OpRiCo), whose meetings are held on a quarterly basis and are attended by the divisional Operational Risk Managers and representatives of CEE banking subsidiaries. The intro-duction of the OpRiCo is a major step towards integrating operational risk in the bank’s processes; its main tasks are to track progress and serve as a body to which unresolved issues are referred.

In 2010, activities with regard to operational risk will focus on analysing risk-handling measures to contain losses through operational risk, introducing annual operational risk limits and their monitoring by the Operational Risk Committee, supporting the units pursuant to the AMA rollout plan in carrying out the regulatory reviews for Basel II implementation in cooperation with UniCredit Group.

(67f) Business riskBusiness risk is defined as unexpected adverse changes in business volume and/or margins which cannot be attributed to other types of risk. Adverse changes result mainly from a significant deterioration in market conditions, changes in the competitive position or customer behaviour, and from changes in the legal environment. Business risk measurement thus measures the influence of external factors on a decline in profits and the effect on the market value. As part of general income and cost management, operational management of business risk is the responsibility of the individual business units.

(67g) Risks arising from the bank’s shareholdings and equity interests and from real estateIn dealing with risks arising from the bank’s shareholdings and equity interests, Bank Austria takes into account market price fluctuations in its equity holdings in listed and unlisted companies.

Not included are equity interests in consolidated banking subsidiaries of the Group because risks associated with such companies are determined and recorded under the various other risk types.

The portfolio includes various strategic investments; real estate holding companies are taken into account in real estate risk.




Generally, Value at Risk is determined on the basis of market values and volatilities of the relevant equity interests. For shares in unlisted compa-nies the bank uses book values and volatilities of relevant stock exchange indices and takes account of residual variances.

Real estate risk measures the fluctuations in market value of bank-owned real estate on the basis of market prices and the volatility of related rent indices.

(68) Report on key features of the internal control and risk management systems in relation to the financial reporting processThe Management Board is responsible for establishing and designing internal control and risk management systems which meet the company’s requirements in relation to the financial reporting process. The purpose of this report is to provide an overview of how internal controls are or-ganised in relation to the financial reporting process.

The objective of the internal control system is to assist management in assuring internal controls in relation to financial reporting which are effective and are improved on an ongoing basis. The system is geared to complying with rules and regulations and creating conditions which are conducive to performing specific controls in key accounting processes.

Internal Audit performs independent and regular reviews of compliance with internal rules also in the area of accounting. The Head of Internal Audit reports directly to the Management Board and provides the Chairman of the Supervisory Board with quarterly reports.

In addition to the existing and adequate internal control system, UniCredit Bank Austria AG started the “262 Savings Law” project in 2007 to im-plement the 8th EU Directive (“EURO-SOX”): transactions relevant to the financial statements are analysed and documented, and documentation is updated on an ongoing basis. Risks were identified in the course of the process definition and defined controls are performed to minimise risk.

Pursuant to the “262 Savings Law”, the CEO delegated by the Holding Company and the CFO delegated by the Holding Company are liable, under civil and criminal law, for any violation of the legal provisions. They are also responsible for every subsidiary within the group of consolidated com-panies which is covered by financial reporting because the “262 Savings Law” deals with consolidated financial statements.

Control environmentThe basic aspect of the control environment is the corporate culture in which management and all employees operate. The UniCredit Holding Com-pany, the parent company of UniCredit Bank Austria AG, works to improve communication and convey the corporate values defined in the Integrity Charter. The Integrity Charter embodies the UniCredit Group’s identity and is based on the following shared values: fairness, transparency, respect, reciprocity, freedom to act and trust.

In October 2006, the Management Board of UniCredit Bank Austria AG adopted the UniCredit Organisation Guidelines. The objective of the Guide-lines is to have a uniform organisational structure in all countries as well as uniform reporting lines and levels of hierarchy. The organisational structure is based on the Governance Rules and the Group Organisation Guidelines of UniCredit.

The implementation of the internal control system in relation to the financial reporting process is set out in the internal rules and regulations:All accounting entries are made within the guidelines established in the Accounting Policy, and release follows defined instruction and control cri-teria. For each general ledger account there is a responsible person who reconciles the general ledger accounts in accordance with existing rules. This internal reconciliation process is interrogated by Financial Accounting and reviewed by Internal Audit.

Risk assessmentIn the course of the “262 Savings Law” project, the persons having process responsibility identified risks in relation to the financial reporting pro-cess; these risks are monitored on an ongoing basis. The focus is on those risks which are typically considered to be material.

To meet the “262 Savings Law” requirements, controls pursuant to the methodology used by the UniCredit Holding Company are required to be performed at least on a half-yearly basis (for full-year and half-year reporting).




ControlsAll controls are applied in the current business process to ensure that potential errors or deviations in financial reporting are prevented or detected and corrected. Controls range from a management review of results for the various periods to specific reconciliation of accounts and the analysis of contin-uous accounting processes.

The levels of hierarchy are designed so that an activity and the control of that activity is not performed by the same person (four-eyes principle). In the course of the preparation of financial reports, the general ledger accounts are reconciled with business and front-end systems.

IT security controls are a cornerstone of the internal control system. The separation of sensitive activities is supported by a restrictive approach to IT access authorisation. The operation of the financial reporting system is also assured through automated IT controls included in the system.

Information and communicationManagement regularly updates rules and regulations for financial reporting and communicates them to all employees concerned.

Moreover, regular discussions on financial reporting and on the rules and regulations applicable in this context take place in various bodies and are repeatedly communicated to UniCredit Bank Austria AG. Employees in Financial Accounting receive regular training in new methods of international financial reporting in order to identify risks of unintended misreporting at an early stage.

To perform monitoring and control functions with a view to proper financial accounting and reporting, extensive financial information is made available at key levels of UniCredit Bank Austria AG. Relevant information is not only provided to the Supervisory Board and the Management Board, middle management levels also receive detailed reports.

MonitoringAs part of the implementation of the internal control system pursuant to the “262 Savings Law”, instruments were introduced to monitor the effective-ness of controls. In connection with the compulsory half-yearly certification process for the preparation of the management report, the persons having process responsibility are required to carry out effectiveness tests to check the effectiveness of controls. It must be ascertained whether the controls work according to their design and whether the persons who perform controls have the competence/authority and qualifications required to perform the controls effectively.

All persons having process responsibility confirm by means of certification that their processes are adequately documented, risks have been identified and controls have been evaluated with a view to deriving measures to minimise risk.

The results of these monitoring activities are contained in a management report which is based on the certifications by all persons having process responsibility and issued on a half-yearly basis. The Chief Financial Officer of UniCredit Bank Austria AG provides the Holding Company and the public with confirmation of the reliability and effectiveness of the internal control system in the context of the financial statements for the first six months and the annual financial statements.

(69) Legal risksWe generally do not make provisions to the extent it is not possible to reliably predict the outcome of proceedings or to quantify possible losses. In cases where it is possible to estimate in a reliable manner the amount of the possible loss and such loss is deemed probable, we have made provi-sions in amounts we deem appropriate in light of the particular circumstances and in accordance with applicable international accounting principles.

In line with the above policy, no provisions have been made for the following pending legal proceedings. Due to the uncertain nature of litigation, how-ever, we cannot exclude that the following may result in losses to the bank.

Action brought by the German Bundesanstalt für vereinigungsbedingte Sonderaufgaben (BVS) in Switzerland for repayment of credit balances held, and disposed of, by the Communist Party of Austria (KPÖ) at the former banking subsidiary in Zurich.

Action brought by the Belgian company Valauret S.A. in Paris on the grounds of alleged involvement of Creditanstalt AG (now UniCredit Bank Austria AG) in wilful deception in connection with a French joint stock company as a result of which the plaintiffs incurred losses through a loss in value of shares acquired by it in the joint stock company.




Proceedings were initiated in Austria related to Bernard L. Madoff’s fraud in which UniCredit Bank Austria AG and BANKPRIVAT AG (a former sub-sidiary of UniCredit Bank Austria AG, with which it merged on 28 October 2009), among others, were named as defendants. The parties invested in funds that, in turn, invested directly or indirectly in Bernard L. Madoff Investment Securities LLC (BMIS). UniCredit Bank Austria AG is also the subject of proceedings in Austria following the complaint filed by the 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 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 been named in one putative class action suit filed in the United States District Court for the Southern District of New York. In each of the suits, the petitioners claim to represent investors whose assets were invested in BMIS, directly or indirectly. The three lawsuits are still at a preliminary stage.

(70) Information on the squeeze-out pursuant to the Austrian Federal Acton the Squeeze-out of Minority Shareholders (Gesellschafterausschlussgesetz)of the holders of bearer shares in uniCredit Bank Austria AGThe company’s Annual General Meeting on 3 May 2007 adopted a resolution concerning the planned squeeze-out. The legal actions for rescission and declaration of nullity brought against various resolutions adopted at the Annual General Meeting on 3 May 2007 were terminated in spring 2008. The squeeze-out was entered in the Register of Firms on 21 May 2008. After that date, former minority shareholders initiated proceedings for a review of the cash compensation offered by UniCredit.

(71) Financial derivativesDerivatives shown in the following tables are classified as financial derivatives and credit derivatives, according to the underlying financial instrument. In these categories, a distinction is made between trading book and banking book and between different counterparties.UniCredit Bank Austria AG’s business volume in derivatives focuses on interest rate contracts.

Over-the-counter transactions are individual agreements concerning volume, maturities and underlying instrument. In large-volume interbank trading, these agreements reflect international practice, while in customer business they are usually adjusted to specific needs.Exchange-traded contracts are always standardised in respect of volume and maturity date.

As the “Trading Activities” sub-segment was spun off in 2008, UniCredit CAIB AG now has exclusive market access. This means that UniCredit CAIB AG is the only business partner for covering proprietary and customer-driven transactions in 2009.

Derivatives are mainly used by the bank itself for hedging market risk and credit spread risk arising from new issue activities. In customer business, market participants include banks, securities houses, mutual funds, pension funds and corporate customers.

In the year from 31 December 2008 to 31 December 2009, the volume of trading in derivative financial instruments rose slightly, with market values increasing noticeably. Although the total volume of interest rate contracts increased, their market values declined significantly. The trading volume in foreign exchange instru-ments, on the other hand, was lower than in the previous year, but developments in this area were clearly positive. Trading in equity derivatives and commodity derivatives was reduced in view of the economic environment.

Overall, despite the economic crisis and the resulting difficult market environment, results from trading activities improved substantially.

For the purposes of portfolio and risk management, contracts are valued at current prices using recognised and tested models. Market values show the contract values as at the balance sheet date, positive market values indicate the potential default risk arising from therelevant activity.

For the purposes of credit risk management, derivatives are taken into account with their respective positive market value and an add-on depending on the product, currency and maturity. Add-ons applied in internal credit risk management for the potential future exposure are based on the current mar-ket volatility relative to the remaining period to maturity of the transactions. Given the underlying confidence interval of 97.5%, these add-ons are in most cases clearly above the relevant levels pursuant to the Austrian Banking Act.





Regulatory portfolio: end of period notional amounts (€ m)

tradiNg pOrtfOliO baNKiNg bOOK

deriVatiVe iNstrumeNt types/uNderlyiNgs OVer the cOuNter cleariNg hOuse OVer the cOuNter cleariNg hOuse

debt securities and interest rate indexesOptions 26,971 – – –Swap 235,121 – – –Forward 3,559 – – –Futures 163 19,308 – –Others 100 – – –

equity instruments and stock indexesOptions 1,400 4 – –Swap 58 – – –Forward 65 – – –Futures – 16 – –Others – – – –

gold and currenciesOptions 27,842 – 2 –Swap 57,598 – – –Forward 54,170 – – –Futures – 381 – –Others 155 – 1 –

commodities 1,893 – – –Other underlyings 25,046 – – –tOtal 434,142 19,709 3 –

Line utilisation for derivatives business is available online in WSS (“Wallstreet”), the central treasury system, on a largely Group-wide basis. For smaller units not connected to the central system, separate lines are allocated and monitored. Group-wide compliance with lines approved in the credit pro-cess is thus ensured at any time.

UniCredit Bank Austria AG additionally limits the credit risk arising from its derivatives business through strict use of master agreements, through col-lateral agreements and break clauses. In combination with the very good average credit rating of our business partners in the derivatives business, management takes proper account of default risk.



Banking book: end of period notional amounts – Hedging derivatives (€ m)

deriVatiVe iNstrumeNt types/uNderlyiNgs OVer the cOuNter cleariNg hOuse

debt securities and interest rate indexesOptions 20 –Swap 163,259 –Forward 37 –Futures – –Others – –

equity instruments and stock indexes –Options 2 –Swap – –Forward – –Futures – –Others – –

gold and currencies –Options – –Swap 18,187 –Forward 92 –Futures – –Others – –

commodities – –Other underlyings – –tOtal 181,597 –

Financial derivatives – breakdown by product (€ m)

pOsitiVe fair Value NegatiVe fair Value

traNsactiON types/uNderlyiNgsOVer the cOuNter cleariNg hOuse

OVer the cOuNter cleariNg hOuse

regulatory trading portfolio 10,672 2 8,904 –Options 936 2 827 –Interest rate swaps 6,414 – 5,242 –Cross currency swap 2,193 – 1,888 –Equity swaps – – – –Forward 1,123 – 944 –Futures 2 – – –Others 4 – 4 –

banking book – hedging derivatives 1,423 – 1,935 –Options – – – –Interest rate swaps 1,380 – 1,588 –Cross currency swap 42 – 346 –Equity swaps – – – –Forward 1 – 1 –Futures – – – –Others – – – –

banking book – Other derivatives – – – –Options – – – –Interest rate swaps – – – –Cross currency swap – – – –Equity swaps – – – –Forward – – – –Futures – – – –Others – – – –

tOtal 12,095 2 10,839 –





Credit derivatives: end of period notional amounts (€ m)

regulatOry tradiNg bOOK baNKiNg bOOK

traNsactiON categOriesWith a siNgle

cOuNterpartyWith mOre thaN ONe

cOuNterparty (basKet)With a siNgle

cOuNterpartyWith mOre thaN ONe

cOuNterparty (basKet)

protection buyer's contractsCredit default products 11,073 – – –Credit spread products – – – –Total rate of return swap – – – –Other – – – –

tOtal 11,073 – – –protection seller's contracts

Credit default products 11,905 – – –Credit spread products – – – –Total rate of return swap – – – –Other – – – –

tOtal 11,905 – – –

Credit derivatives – breakdown by product (€ m)

pOrtfOliOs/deriVatiVe iNstrumeNt types pOsitiVe fair Value NegatiVe fair Value

regulatory trading portfolioCredit default products 560 569Credit spread products – –Total rate of return swap – –Others – –

banking bookCredit default products – –Credit spread products – –Total rate of return swap – –Others – –

tOtal 560 569

Credit derivatives – residual life: notional amount (€ m)

uNderlyiNg / residual maturity up tO 1 yearOVer 1 year

up tO 5 years OVer 5 years tOtal

regulatory trading book: 2,607 18,644 1,727 22,978Credit derivatives with qualified reference obligation – – – –Credit derivatives with not qualified reference obligation 2,607 18,644 1,727 22,978

banking book: – – – –Credit derivatives with qualified reference obligation – – – –Credit derivatives with not qualified reference obligation – – – –

tOtal 2,607 18,644 1,727 22,978

OTC financial derivatives – residual life: notional amounts (€ m)

uNderlyiNg/residual maturity up tO 1 yearOVer 1 year up tO 5 year OVer 5 year tOtal

regulatory trading book 175,020 150,888 80,071 405,979Financial derivative contracts on debt securities and interest rates 82,074 112,122 71,513 265,710Financial derivative contracts on equity securities and stock indexes 277 994 252 1,523Financial derivative contracts on exchange rates and gold 91,012 37,466 8,220 136,698Financial derivative contracts on other values 1,656 305 87 2,048

banking book 97,209 55,132 28,620 180,961Financial derivative contracts on debt securities and interest rates 95,793 49,779 17,443 163,015Financial derivative contracts on equity securities and stock indexes – – – –Financial derivative contracts on exchange rates and gold 1,416 5,353 11,177 17,946Financial derivative contracts on other values – – – –

tOtal 272,229 206,020 108,691 586,940



Information required under Austrian law

The following tables show the capital requirements for the Bank Austria group of credit institutions pursuant to Section 30 of the Austrian Banking Act as at the balance sheet date of 2009 and 2008, as well as the various components of Bank Austria’s capital resources as at the end of 2009 and 2008:

(72) Consolidated capital resources and regulatory capital requirements

Net capital resources of the Bank Austria group of credit institutions (€ m)

31 dec. 2009 31 dec. 2008

Paid-in capital (less own shares) 1,469 1,469Reserves and minority interests 9,708 9,032Intangible assets –579 –718Deductions from Tier 1 capital (in particular 50% deduction pursuant to Section 23 (13) 3 to 4d of the Austrian Banking Act) 1) –675 –702core capital (tier 1) 9,923 9,081Net subordinated liabilities 3,004 3,439Revaluation reserves and undisclosed reserves 139 128Deductions from Tier 2 (50% deduction pursuant to Section 23 (13) 3 to 4d) 1) –675 –697supplementary capital resources (tier 2) 2,468 2,870Deductions from Tier 1 and Tier 2 (deduction pursuant to Section 23 (13) 4a) 2) –138 –139Net capital resources (excl. tier 3) 12,253 11,812Tier 3 (re-assigned subordinated capital) 243 439Net capital resOurces (iNcl. tier 3) 12,496 12,251

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

31 dec. 2009 31 dec. 2008

capital requirements ofa) Credit risk pursuant to standardised approach 5,846 7,368b) Credit risk pursuant to internal ratings-based (IRB) approach 2,285 2,072

Credit risk 8,131 9,440Operational risk 777 773Position risk – debt instruments, equities, foreign currencies and commodities 243 439Settlement risk – 7capital requiremeNt 9,151 10,659Total RWA 114,386 133,239

Capital ratios31 dec. 2009 31 dec. 2008

Tier 1 capital ratio, based on all risks 8.68% 6.82%Total capital ratio, based on all risks 3) 10.92% 9.19%Tier 1 capital ratio, based on credit risk 9.76% 7.70%Total capital ratio, based on credit risk 4) 11.29% 9.35%

1) Capital components in non-consolidated companies and “shortfall”2) Capital components in insurance companies3) Net capital resources (incl. Tier 3) as a percentage of the risk-weighted assessment basis for all risks4) 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



Concluding Remarks of the Management Board

The Management Board of UniCredit Bank Austria AG has prepared the consolidated financial statements for the financial year beginning on 1 January 2009 and ending on 31 December 2009, in accor-dance with International Financial Reporting Standards (IFRSs) published by the International Accounting Standards Board as ad-opted by the European Union. The management report of the Group was prepared in accordance with the Austrian Commercial Code and is consistent with the consolidated financial statements.

of UniCredit Bank Austria AG




The consolidated financial statements and the management report of the Group contain all required disclosures; in particular, events of special significance which occurred after the end of the finan-cial year and other major circumstances that are significant for the future development of the Group have been appropriately ex-plained.






Auditors’ report *) Report on the consolidated financial statementsWe have audited the accompanying consolidated financial state-ments of UniCredit Bank Austria AG, Vienna, for the financial year from 1 January 2009 to 31 December 2009. These consolidated financial statements comprise the balance sheet as at 31 Decem-ber 2009, and the statement of comprehensive income, cash flow statement and statement of changes in equity for the year ended 31 December 2009, and a summary of significant accounting poli-cies and other explanatory notes.

Management’s Responsibility for the Consolidated Financial Statements and for the Consolidated Accounting

UniCredit Bank Austria AG’s management is responsible for the consolidated accounting as well as the preparation and fair presen-tation of these consolidated financial statements in accordance with International Financial Reporting Standards as adopted by the EU. This responsibility includes: designing, implementing and maintain-ing internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are rea-sonable in the circumstances.

Auditors’ Responsibility and Description of the Type and Extent of the Statutory Audit Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted our audit in accordance with laws and regulations applicable in Austria and in accordance with International Standards on Auditing, issued by the

International Auditing and Assurance Standards Board (IAASB) of the International Federation of Accountants (IFAC). Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the financial statements are free from material mis-statement.

An audit involves performing procedures to obtain audit evi-dence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the cir-cumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

We believe that the audit evidence we have obtained is suffi-cient and appropriate to provide a basis for our audit opinion.

OpinionOur audit did not give rise to any objections. Based on the re-sults of our audit in our opinion, the consolidated financial state-ments present fairly, in all material respects, the financial posi-tion of the group as of 31 December 2009, and its financial performance and its cash flows for the financial year from 1 January 2009 to 31 December 2009 in accordance with In-ternational Financial Reporting Standards as adopted by the EU.

Report of the Auditors

This report has been translated from German into English for reference purposes only. Please refer to the official legally binding version as written and signed in German. Only the German version is definitive.

*) The report (in German language, or translations into another language, including shortened or amended versions) may not be made public or used by third parties, when reference is made in part or in whole to the auditor’s report, without the express written consent of the auditors.



Statement on the Consolidated Management ReportLaws and regulations applicable in Austria require us to perform audit procedures to determine whether the consolidated manage-ment report is consistent with the consolidated financial statements and whether the other disclosures made in the consolidated manage-ment report are misleading to the group’s position. The audit report must also include a statement as to whether the consolidated man-agement report is consistent with the consolidated financial state-ments and if the disclosures pursuant to section 243a UGB are appropriate. In our opinion, the consolidated management report for the group is consistent with the consolidated financial statements. The disclosures pursuant to section 243a UGB are appropriate.


Austrian Savings Bank Auditing Association

Auditing Board

(Bank Auditor)

Friedrich O. Hief Christian Spitzer Certified Accountant Auditor

KPMG Austria GmbH

Wirtschaftsprüfungs- und Steuerberatungsgesellschaft

Bernhard Gruber Martin Wagner Certified Accountant Certified Accountant

This report has been translated from German into English for reference purposes only. Please refer to the official legally binding version as written and signed in German. Only the German version is definitive.




OverviewIn the 2009 financial year the Supervisory Board held five meetings, in which it dealt with economic, financial, strategic and operational developments and the risk position of the bank. In addition to resolu-tions passed during meetings, four decisions of the Supervisory Board were made by way of written circular votes. The basis of the Supervisory Board’s activity were its duties as defined by the law and in the Articles of Association and the rules of procedure, with due re-gard to the Austrian Code of Corporate Governance. In addition to the committees referred to below, a separate committee was established on the occasion of the sale of properties; the committee passed one resolution by written circular vote.

Focus of the Supervisory Board’s activityIn the past financial year the Supervisory Board advised and super-vised the bank’s Management Board on an ongoing basis. The su-pervisory activity was based on written and oral reports regularly pro-vided by the Management Board, which dealt with all major develop-ments and business transactions in a timely and comprehensive manner. The Supervisory Board was involved in all decisions of major importance and made its decisions on matters within its competence after appropriate evaluation and examination.

A sustained focus of the analyses performed by the Supervisory Board was the position and development of the bank, and the impact of the international crisis on financial markets and economies, includ-ing implications for the Group’s liquidity, earnings, risk position and reputation.

In addition to regular reporting, discussions focused on changes in the distribution of responsibilities and on the following topics:

Capital measures related to Ukrsotsbank, ATF, Oberbank, BKS Bank and PPR B&C Bauverwaltungs GmbH. Reports related to CEE risk, Madoff and derivative transactions as well as the planned implemen-tation of the IT core bank system “EuroSIG Project”.

The Supervisory Board dealt with the reorganisation of Private Banking in Austria including the segmentation in Retail and Private Banking, and with the transformation of WAVE into a UGIS unit; the Supervisory Board also discussed letters of comfort for CEE units, or-ganisational and structural measures in connection with the transfer of Ramius, and the closure of the Beijing Representative Office.

The Supervisory Board approved the establishment of a Special Asset Holding Company for restructuring-related purchases within Bank Austria, and the transfer of CAIB subsidiaries to Bank Austria.

Other matters which the Supervisory Board discussed in detail were the Group Compensation Policy, the statement of compliance with the Austrian Corporate Governance Code, the adjustment of criteria for assessing the independence of Supervisory Board members, the out-sourcing of bank-related IT applications and settlement functions, and the assessment performed by Oesterreichische Nationalbank, Austria’s central bank, in respect of liquidity management.

In its meetings, the Supervisory Board also discussed, on the basis of written and oral presentations, the main issues dealt with by the Supervisory Board Committees.

Committees The Credit Committee held five meetings and passed ten resolutions by written circular votes. Apart from decisions on loans requiring its approval, the Committee also took note of loans which are within the Management Board’s approval authority and dealt with large exposures pursuant to Section 27 of the Austrian Banking Act and with exposures of relevance in connection with Article 136 of the Italian Banking Act. Sector portfolio reports and risk reports with a CEE focus relating to Ukraine, Kazakhstan, Russia and Turkey were discussed in detail. On a regular basis, the Committee dealt with the overall risk report, the structure of the loan portfolio, risk policy principles as well as aspects of credit, market and liquidity risk.

The Audit Committee held four meetings and, after analysing the separate financial statements and the consolidated financial state-ments and the audit reports of the auditors, reported to the Supervi-sory Board on these topics. The Audit Committee also discussed the management letter, the remuneration of the auditors and their engage-ment letter, and prepared the proposal to the Supervisory Board con-cerning the election of the auditors of the separate financial state-ments and the consolidated financial statements for the 2010 financial year. Moreover, the Audit Committee analysed the reports of Internal Audit and those relating to corporate governance, compliance, risk management and internal control systems as well as the “262 Savings Law – monitoring of the financial reporting process” project.

The Strategy and Nominations Committee held two meetings, in which it concentrated on submitting proposals to the Supervisory Board for the appointment of Management Board members.

Management Board membersIn the reporting year, the following Management Board members re-signed from the Management Board: Ralph Müller with effect from 31 May 2009, Robert Zadrazil with effect from 2 June 2009 and Erich Hampel with effect from 30 September 2009.

Jürgen Danzmayr was appointed to the Management Board with effect from 12 May 2009, and Rainer Hauser was appointed to the Manage-ment Board with effect from 1 June 2009.

Report of the Supervisory Board for 2009



Federico Ghizzoni was appointed Deputy Chairman of the Manage-ment Board with effect from 29 July 2009.

Willibald Cernko was appointed member and Chairman of the Man-agement Board with effect from 1 October 2009.

Supervisory Board membersClaudio Consolo resigned from the Supervisory Board with effect from 4 May 2009. At the Annual General Meeting held on 5 June 2009, and with effect from the same date, Candido Fois was elected to the Supervisory Board to replace Claudio Consolo for the remaining part of his term of office.

Dario Frigerio resigned from the Supervisory Board with effect from 30 September 2009. At the Extraordinary General Meeting held on 29 September 2009, and with effect from 1 October 2009, Erich Hampel was elected to the Supervisory Board to replace Dario Frigerio for the remaining part of his term of office. With effect from the same date, the Supervisory Board elected Erich Hampel Deputy Chairman of the Supervisory Board.

Pursuant to a decision of the Employees’ Council, with effect from 24 April 2009, Barbara Wiedernig was delegated to the Supervisory Board to replace Riccardo Hofer and Robert Traunwieser was dele-gated to the Supervisory Board to replace Karin Wisak-Gradinger.

Details of the composition of the Supervisory Board Committees in the past financial year are given in the section “Supervisory Board and Management Board of UniCredit Bank Austria AG” of the Annual Report.

State Commissioner Doris Radl and Deputy State Commissioner Josef Kramhöller terminated their activities with effect from 30 September 2009. The supervisory authority appointed Ulrike Huemer as Deputy State Commissioner with effect from 1 October 2009 and Hans-Georg Kramer as State Commissioner with effect from 1 December 2009.

The Supervisory Board thanks Doris Radl and Josef Kramhöller for their work and constructive activity for the bank in the past years.

Separate financial statements and consolidated financial statementsThe accounting records, the 2009 separate financial statements and the management report were audited by the Auditing Board of the Austrian Savings Bank Auditing Association and by KPMG Austria GmbH Wirtschaftsprüfungs- und Steuerberatungsgesellschaft. As the audit did not give rise to any objections and the legal requirements were fully complied with, the auditors’ report was expressed without qualification.

The Supervisory Board endorsed the findings of the audit, agreed with the separate financial statements and management report, in-cluding the proposal for the appropriation of profits, presented by the Management Board, and approved the 2009 separate financial state-ments, which were thereby adopted pursuant to Section 125 (2) of the Austrian Joint Stock Companies Act.

The compliance review of the Corporate Governance Report pursuant to Section 243b of the Austrian Commercial Code was performed by Univ. Prof. DDr. Waldemar Jud Corporate Governance Forschung CGF GmbH and has not given rise to any major objections in its final find-ings.

The 2009 consolidated financial statements were audited by the Auditing Board of the Savings Bank Auditing Association and by KPMG Austria GmbH Wirtschaftsprüfungs- und Steuerberatungs-gesellschaft for consistency with International Financial Reporting Standards (IFRSs) published by the International Accounting Stand-ards Board as adopted by the European Union, and the management report of the Group was audited for consistency with the Austrian Commercial Code. The audit did not give rise to any objections and the legal requirements were fully complied with. In the opinion of the auditors, the consolidated financial statements give a true and fair view of the financial position of the Group as at 31 December 2009, and of the results of the Group’s operations and its cash flows for the financial year beginning on 1 January 2009 and ending on 31 December 2009, in accordance with International Financial Re-porting Standards (IFRSs) as adopted by the European Union.

The auditors certified that the management report of the Group was consistent with the consolidated financial statements, and that the legal requirements for exemption from the obligation to prepare also separate consolidated financial statements pursuant to Austrian law were met, and they expressed their unqualified opinion.

The Supervisory Board has endorsed the findings of the audit.

The Supervisory Board thanks the Supervisory Board members who resigned in 2009 for their commitment, and the Management Board, the Employees’ Council, the managers and all employees for their exceptional achievements in the challenging 2009 financial year.


The Supervisory Board

Alessandro Profumo Chairman of the Supervisory Board



Corporate Governance

Corporate Governance Report for the 2009 financial year of UniCredit Bank Austria AG 134

Consolidated Financial Statements of the Bank Austria Group for 2009 Statement by Management 139

Supervisory Board and Management Board of UniCredit Bank Austria AG 140




for the 2009 financial year of UniCredit Bank Austria AG

Corporate Governance Report

Preface:The Austrian Code of Corporate Governance (ACCG) is the standard for good corporate management and corporate control in the Austrian capital market.

After enactment of the Austrian Statute Amending Business Law [Unternehmensrechtsänderungsgesetz] the ACCG was given even more importance, as listed joint-stock companies [Aktiengesell-schaften] have been put under a statutory obligation to prepare a Corporate Governance Report.

The Code itself primarily applies to listed Austrian joint-stock compa-nies. The Preamble to the ACCG recommends that also joint-stock companies that are not listed on a stock exchange follow the rules of this Code to the extent that they are applicable to them.

UniCredit Bank Austria AG is an Austrian joint-stock company having its registered office in Vienna; since 21 May 2008 its shares have not been listed on the stock exchange anymore. In line with the rec-ommendation contained in the Preamble to the ACCG UniCredit Bank Austria AG will continue to orient itself by the rules of the ACCG as amended from time to time, which can be found on the website of the Austrian Working Group on Corporate Governance at www.corpo-rate-governance.at.

This Corporate Governance Report of UniCredit Bank Austria AG for the 2009 financial year was prepared by using the Opinion on Corpo-rate Governance Reports published by the Austrian Financial Report-ing and Auditing Committee according to Section 243b of the Aus-trian Business Code [Unternehmensgesetzbuch/UGB] and Annex 2 of the Austrian Code of Corporate Governance 2009.

A. UniCredit Bank Austria AG departed from the following C-rules of the ACCG (January 2009) in the 2009 business year (Explain):The company applies the ACCG as amended from time to time. Devi-ations exist with respect to the following C-Rules (comply or explain):

Rule 4 – Publication requirements with regard to the sharehold-ers’ meeting: since delisting of the company from the stock ex-change it is a closely held corporation. Invitations and documents are sent directly to the shareholders. It is intended to simplify holding of shareholders’ meetings. Hence, the formal disclosure provisions are not fully complied with.

Rule 26 – Limitation of permitted supervisory board offices for members of the company’s management board in joint-stock compa-nies that do not belong to the UniCredit Group to four offices: it is in-tended that members of the management board be allowed to accept supervisory board offices beyond that limit, provided that this is in the company’s interest in the specific case.

Rule 31 – Publication of the emoluments of the management board regarding each member: due to the closely held structure the emoluments are not published.

Rule 51 – Publication of the emoluments of the supervisory board regarding each member: due to the closely held structure the emolu-ments are not published.

Rule 52 – Limitation of the number of supervisory board mem-bers to ten members: due to an agreement between our majority shareholder and the holders of registered shares our supervisory board will continue to consist of eleven members who are elected by the shareholders’ meeting.

Rule 53 – Independence of supervisory board members: some supervisory board members hold offices on the Management Committee of the company’s main shareholder at the same time. Although the guidelines on independence set forth in Annex 1 to the Code clearly state that by assuming additional offices in bodies of the group the supervisory board members’ independence will not be im-paired, we refer to that fact for reasons of transparency.



B. Additional information according to Section 243b of the Austrian Business Code (“UGB”):

1. Information regarding the Management Board:Supervisory board mandates or comparable functions of Management Board members in other Austrian and foreign companies which are not included in the consolidated financial statements (C-rule 16):

Willibald Cernko:

Notartreuhandbank AG, Member Supervisory Board

Helmut Bernkopf:

BA Private Equity GmbH, Chairman Supervisory Board

UniCredit Leasing SpA, Member Board of Directors

CA Immobilien Anlagen Aktiengesellschaft, Member Supervisory Board

Oesterreichische Kontrollbank Aktiengesellschaft, Member Supervisory Board

CA Immo International AG, Chairman Supervisory Board

Lenzing Aktiengesellschaft, Member Supervisory Board

Wien Mitte Immobilien GmbH, Chairman Supervisory Board

Jürgen Danzmayr:

direktanlage.at AG, Member Supervisory Board

Federico Ghizzoni:

UniCredit Leasing SpA, Member Board of Directors

Bank Pekao SA, Member Supervisory Board

Rainer Hauser:

Bank Austria Finanzservice GmbH, Chairman Supervisory Board

Bank Austria Creditanstalt Versicherung AG, Member Supervisory Board

BWA Beteiligungs- und Verwaltungs-Aktiengesellschaft, Member Supervisory Board

Bausparkasse Wüstenrot Aktiengesellschaft, Member Supervisory Board

UniCredit Direct Services GmbH, Member Supervisory Board

Carlo Vivaldi:

UniCredit Global Information Services SCpA,

Member Board of Directors

Stephan Winkelmeier:

Oesterreichische Kontrollbank Aktiengesellschaft, Member Supervisory Board

Regarding further information on the Management Board see page 140.

2. Information regarding the Supervisory Board:Further supervisory board mandates or similar functions of Supervisory Board members in Austrian or foreign listed companies (C-Rule 58):

Erich Hampel:

JSC ATF Bank, Chairman Supervisory Board

Zagrebacka banka dd, Chairman Supervisory Board

Sergio Ermotti:

London Stock Exchange Group PLC, Member Board of Directors

Paolo Fiorentino:

Bank Pekao SA, Member Supervisory Board

Candido Fois:

Telecom Italia Media SpA., Member Board of Directors

Franz Rauch:

Vorarlberger Kraftwerke Aktiengesellschaft, Member Supervisory Board

Wienerberger AG, Member Supervisory Board

Karl Samstag:Allgemeine Baugesellschaft-A. Porr Aktiengesellschaft, Member Supervisory Board

Bank für Tirol und Vorarlberg Aktiengesellschaft, Member Supervisory Board

BKS Bank AG, Member Supervisory Board

Flughafen Wien Aktiengesellschaft, Member Supervisory Board

Oberbank AG, Member Supervisory Board

Schoeller-Bleckmann Oilfield Equipment Aktiengesellschaft, Member Supervisory Board

Regarding further information on the Supervisory Board see page 140.In the 2009 business year none of the Members of the Supervisory Board failed to personally attend more than half of the meetings of the Supervisory Board.




Corporate Governance Report (ContInUEd)

Information, which members of the Supervisory Board fulfil the criteria in C-rule 54: C-rule 54 is not applicable for lack of free float.

3. Information on the operation of the man-agement board and the supervisory board:

The Management Board’s distribution of responsibilities:Regarding the distribution of responsibilities within the Management Board see page 140.

Number and kind of the Supervisory Board’s committees:The Supervisory Board establishes the following four committees:Credit committeeAudit committeeManagement Board affairs committeeStrategy and nominations committee

Additional in the 2009 business year: Committee on the occasion on the sale of properties

Number of meetings held by the Supervisory Board, reports on its operation and its activities:In 2009 the Supervisory Board held five meetings, in which it performed its duties as defined by the law and in the Articles of Association with due regard to the ACCG. In four cases, resolutions of the Supervisory Board were passed by written circular votes. The Supervisory Board advises and supervises the bank’s Manage-ment Board on an ongoing basis. In this context the Management Board regularly provided information to the Supervisory Board, in writ-ing and orally, on all major developments and business transactions on a timely basis and in a comprehensive manner. The Supervisory Board was involved in all competence-relevant issues and made its deci-sions, where required, after thorough deliberation and examination.

Number of meetings held by the Committees of the Supervisory Board, their decision-making power and report on their activities:The credit committee of the Supervisory Board is responsible for ap-proving loans above a specified amount and for overseeing the com-pany’s risk position. As part of its responsibility for overseeing risk management, the credit committee discusses the structure of the loan portfolio and principles of risk policy, and reports to the Supervisory Board. The credit committee dealt with large exposures pursuant to Section 27 of the Austrian Banking Act including resolutions concern-ing credit lines and exposures of relevance in connection with Article 136 of the Italian Banking Act, and especially loans requiring its ap-proval. The credit committee of the Supervisory Board held five meet-ings and passed ten resolutions by written circular votes.

Information on criteria for the independence of members of the Supervisory Board:A member of the Supervisory Board shall be deemed as independent if said member does not have any business or personal relations with the company or its management board that constitute a material con-flict of interests and are therefore suited to influence the behaviour of the member.

Additional criteria for the independence of members of the Supervisory Board are laid down on the basis of the guidelines for the assessment of independence contained in Annex 1 to the ACCG:

A member of the Supervisory Board shall not have served as a member of the Management Board or as a management-level staff of the Company or one of its subsidiaries in the past five years.

A member of the Supervisory Board shall not maintain or have maintained in the past year any business relations with the Company or one of its subsidiaries to an extent of significance for said member of the Supervisory Board. This shall also apply to business relations with companies in which said member of the Supervisory Board has a considerable economic interest, but not for exercising functions in the bodies of the group. The approval of individual transactions by the Supervisory Board pursuant to L Rule 48 of the ACCG does not auto-matically mean that the person is qualified as not independent.

A member of the Supervisory Board shall not have acted as an au-ditor of the Company or have owned a share in the auditing company or have worked there as an employee in the past three years.

A member of the Supervisory Board shall not be a member of the management board of another company in which a member of the Managing Board of the Company is a member of the supervisory board.

A member of the Supervisory Board may not remain on the Super-visory Board for more than 15 years. This shall not apply to members of the Supervisory Board who are shareholders with a direct invest-ment or who represent the interests of such a shareholder.

A member of the Supervisory Board shall not be a closely related family member (direct offspring, spouses, life partners, parents, uncles, aunts, brothers, sisters, nieces, nephews) of a member of the Manag-ing Board or of persons who hold one of the aforementioned positions.

Of the eleven elected members of the Supervisory Board, Erich Ham-pel, a former Chairman of the Management Board of UniCredit Bank Austria AG, does not meet the independence criteria. At the balance sheet date, five members of the Supervisory Board held leading posi-tions at the parent company UniCredit SpA. The ACCG, version January 2009, now stipulates in its Annex 1 the common view that the holding of positions as members of the bodies of group companies does not affect the independence of members of the Supervisory Board.

Corporate Governance Bericht



ment Board member, payments into a pension fund are made on the basis of a defined-contribution plan. In addition, cover is provided against disability risk, also via a pension fund. There are severance payment arrangements based on the legal provisions applicable to the severance payment scheme for employees. In the case of a public takeover offer, there are no arrangements for the Management Board that deviate from the above.

The changes regarding the structure of the performance-linked com-ponents concern the way how to measure the targets (in the past scorecards – now performance and sustainability matrix) and the eval-uation: more discretionary, more influence of the Group’s performance, peer-group comparison and the possibility of deferred payment.

The company bears the proportionate costs of a D&O insurance which UniCredit Group concluded for the Group companies.

Remuneration Supervisory Board:The compensation schedule for Supervisory Board members provides that the Chairman of the Supervisory Board receives double, and the Deputy Chairman one and a half times, the compensation received by a Supervisory Board member. Members of the credit committee and members of the audit committee receive additional compensation.

Emoluments of Management and Supervisory Board members:Information on emoluments of Management and Supervisory Board members can be found in the Notes to the Consolidated Financial Statements of UniCredit Bank Austria AG. According to our commit-ment to the ACCG the emoluments regarding each member of the Management and the Supervisory Board are not published.

5. Report on the measures taken by the Company to promote women on the Manage-ment Board, on the Supervisory Board and in executive positions (Section 80 of the Austrian Joint-Stock Companies Act [Aktiengesetz /AktG] as laid down in Section 243b (2) (2) of the Austrian Business Code [Unterneh-mensgesetzbuch/UGB]:

As early as at the beginning of the 1990s UniCredit Bank Austria AG and its predecessor banks took women-specific measures. One of them was to create the position of a Women’s Officer, who still works for UniCredit Bank Austria AG, but whose area of responsibilities, based on the gender approach, has developed further towards diver-sity. Since UniCredit Bank Austria AG was integrated into the UniCredit Group the numerous different efforts aiming at equal opportunities have been intensified and more measures for implementation of the equality strategy have been taken.

The audit committee is responsible for the audit, and the preparation of the adoption, of the financial statements and consolidated financial statements, the proposal for the appropriation of profits and the man-agement report (of the Group) and for matters related to the auditors. Since 2008 the audit committee has performed additional tasks namely monitoring the financial reporting process, the effectiveness of the internal control system, the internal audit system and the risk management system of the company as well as monitoring the audit of financial statements and the audit of consolidated financial state-ments. The audit committee held four meetings.

The strategy and nominations committee prepares, if required, basic decisions for the Supervisory Board, in cooperation with the Manage-ment Board and, if required, using the services of experts. The strat-egy and nominations committee also submits proposals to the Super-visory Board for appointments to the Management Board when posi-tions become vacant and it deals with issues of successor planning. The strategy and nominations committee held two meetings.

The Management Board affairs committee (compensation committee), consisting of the Chairman and the Deputy Chairman of the Super-visory Board, met if required and focused on all matters relating to the relationship between the company and Management Board members, especially on matters relating to the compensation of Management Board members and on the contents of employment contracts with Management Board members.

A separate committee was established on the occasion of the sale of properties; the committee passed one resolution by written circular vote.

4. disclosure of information regarding the remuneration of Management Board and Supervisory Board members (C-rules 30 and 31 ACCG):Remuneration Management Board:As in previous years, the remuneration of Management Board mem-bers is divided into fixed and performance-linked components in ac-cordance with Rule 30 of the Austrian Code of Corporate Governance. The performance-related component is linked to a “performance matrix” and a “sustainability matrix” which are individually specified in a scorecard on an annual basis within the framework of UniCredit Group. Evaluated are Group-, Company and individual performance both absolutely and relatively to a peer group and sustainability factors (e. g. customer satisfaction). The financial target range is determined by external benchmarks. The performance-linked components paid depend on the degree to which targets are met and on the perform-ance of UniCredit Group. For parts of the performance-linked compo-nent a deferred payment is possible, whereby the deferred parts de-pend on the UniCredit Group performance. This system has been used since 2009. For the term of the employment contract of a Manage-




Corporate Governance Report (ContInUEd)

The goal is to employ more women in more qualified jobs. One of the measures is the national mentoring programme in Austria, which has been in effect for six years, where every year approxi-mately 50 pairs work together with an established share of women of two thirds.

An essential approach towards changes can be seen in talent man-agement. The total share of women in talents is 32%.

The European works council and managers of Human Resources have prepared a common “Declaration of equal opportunities and non discrimination”. Based on that Declaration a group-wide Diversity Policy is being drafted. For example, in Austria all processes in Human Resources have been thoroughly screened and we are currently checking where and in what way sustainable changes or achievements can be made.

6. Report on external evaluation:The evaluation of adherence to the Austrian Code of Corporate Gov-ernance by UniCredit Bank Austria AG in the 2009 financial year was carried out by Univ. Prof. DDr Waldemar Jud Corporate Governance Forschung CGF GmbH. The report on the external evaluation is avail-able at http:// ir.bankaustria.at ➔ Corporate Governance.

The Management Board:

Willibald Cernko

Federico Ghizzoni Helmut Bernkopf

Jürgen Danzmayr Rainer Hauser

Carlo Vivaldi Stephan Winkelmeier

For women who want to develop themselves in a business it was and still is necessary to find framework conditions that improve the work /family balance.

UniCredit Bank Austria AG considers it very important to support women who are on maternity leave. For approximately 15 years spe-cial events, including provision of childcare services at those events, have been organised for women on maternity leave to make it easier for them to return to work. In addition, the approximately 300 women who are generally on maternity leave, are regularly being sent information from the intranet and the staff magazine. Shortly before they return to work women on maternity leave are offered a one-day seminar to make their comeback easier. Those who return from maternity leave are of-fered almost any part-time model; tele-working is also an option. Company kindergartens are offered at two locations in Vienna and holiday childcare is provided during the entire summer holidays.

In the past UniCredit Bank Austria AG received different awards for their special family-friendly measures.

In 2009 UniCredit Bank Austria AG decided to subject itself to an audit in connection with “family and work”. On 16 November 2009 UniCredit Bank Austria was awarded the basic certificate by the Ministry of Economy, Youth and Family. Numerous activities have already been drafted jointly with a project group, which are planned to be imple-mented in the next three years.

Thirty-two percent of the talents defined in the group are women, one fourth of all positions in the “leading and managing” job family are held by women. One fifth of the participants in the Executive Development Programme (EDP) are women.

For the Company it is important to know the attitudes of female em-ployees (top, middle and lower management) to be able to take them into consideration. That is why a group-wide analysis project was started in January 2009. One-hour qualitative interviews or mini focus groups were carried out with 44 persons, comprised of 28 men and 16 women from most diverse areas, in which they were asked ques-tions about success factors and barriers to careers for women. The experts who carried out the study will supply specific proposals for measures.

One of UniCredit Group’s goals is to increase the share of female em-ployees in more qualified jobs. Currently, at overall group level, approx-imately 16% of the top management are women, in Austria the share is slightly smaller. Alessandro Profumo, CEO of UniCredit Group, fixed the target to achieve a share of 50% of women in top management positions within 10 years.

The share of women on the Supervisory Board of UniCredit Bank Aus-tria AG amounts to 6%. Approximately 20% of the members of super-visory boards of several subsidiaries of the UniCredit Group in Austria are women.



Statement by Management

Consolidated Financial Statements of Bank Austria for 2009

We state to the best of our knowledge that the consolidated financial statements prepared in accordance with the relevant financial report-ing standards provide a true and fair view of the financial position and performance of the Group, and that in the Management Report of the Group the business trends including business results and the

position of the Group have been presented in such a way as to pro-vide a true and fair view of the financial position and performance of the Group, and that it describes the material risks and uncertainties to which the Group is exposed.








of UniCredit Bank Austria AG

Supervisory Board and Management Board

Information regarding the Management Board ChairmanWillibald Cernko, born 1956Chief Executive Officer (CEO)Member from 01 April 2003 until 31 December 2007 and Chairman from 01 October 2009, end of the current term of office: 30 September 2012

Erich Hampel, born 1951Member of the Management Board from 06 November 2000 until 30 September 2009, Chairman of the Management Board and Chief Ex-ecutive Officer (CEO) from 27 January 2004 until 30 September 2009

Deputy ChairmanFederico Ghizzoni, born 1955Central and Eastern EuropeFrom 01 July 2007, Deputy Chairman from 29 July 2009, end of the current term of office: 30 June 2010

MembersHelmut Bernkopf, born 1967Corporate & Investment BankingFrom 16 September 2008, end of the current term of office: 15 September 2011

Jürgen Danzmayr, born 1950Private BankingFrom 12 May 2009, end of the current term of office: 11 May 2012

Rainer Hauser, born 1967RetailFrom 01 June 2009, end of the current term of office: 31 May 2012

Ralph Müller, born 1968From 01 January 2008 until 31 May 2009

Carlo Vivaldi, born 1965Chief Financial Officer (CFO)From 01 October 2007, end of the current term of office: 30 September 2010

Stephan Winkelmeier, born 1967Chief Risk Officer (CRO)From 07 November 2008, end of the current term of office: 06 November 2011

Robert Zadrazil, born 1970From 26 January 2006 until 02 June 2009

Information regarding the Supervisory BoardThe term of office of elected members will end with the Annual General Meeting in 2013. The employees’ representatives are delegated to the Supervisory Board without a time limit.

ChairmanAlessandro Profumo, born 1957Chief Executive Officer UniCredit Group (Member from 25 January 2006, Chairman from 13 July 2006)

Deputy ChairmanErich Hampel, born 1951Chairman of the Management Board of UniCredit Bank Austria AG (ret.)(Member and Deputy Chairman from 01 October 2009)

Franz Rauch, born 1940Managing Director Franz Rauch GmbH (ret.)(Member from 17 March 2003, Deputy Chairman from 13 July 2006 until 30 September 2009)

MembersClaudio Consolo, born 1955Ordinario di Diritto processuale civile nell’Università di Padova(from 31 July 2008 until 04 May 2009)

Sergio Ermotti, born 1960Deputy Chief Executive Officer Head of CIB & PB Strategic Business Area UniCredit Group(from 25 January 2006)

Paolo Fiorentino, born 1956Deputy Chief Executive OfficerHead of GBS Strategic Business Area UniCredit Group (from 04 May 2006)

Candido Fois, born 1941Chairman UniCredit Corporate Banking SpA(from 05 June 2009)

Dario Frigerio, born 1962Head of Asset Management Division UniCredit Group (from 04 May 2006 until 30 September 2009)



Roberto Nicastro, born 1964Deputy Chief Executive OfficerHead of Retail Strategic Business Area UniCredit Group (from 04 May 2006)

Vittorio Ogliengo, born 1958Head of Financing & Advisory UniCredit Group (from 04 May 2006)

Karl Samstag, born 1944Member of the Board of Trustees Privatstiftung zur Verwaltung von Anteilsrechten (from 04 May 2006)

Gerhard Scharitzer, born 1939 Chairman of the Board of Trustees Privatstiftung zur Verwaltung von Anteilsrechten (from 04 May 2006)

Wolfgang Sprißler, born 1945Spokesman of the Management Board (CEO) Bayerische Hypo- und Vereinsbank AG (ret.)(from 19 March 2002)

Delegated by the Employees’ CouncilWolfgang Heinzl, born 1953Chairman of the Employees’ Council(from 07 November 2000)

Riccardo Hofer, born 1964 Member of the Employees’ Council (from 04 November 2008 until 23 April 2009)

Adolf Lehner, born 1961First Deputy Chairman of the Employees’ Council (from 04 December 2000)

Emmerich Perl, born 1950Second Deputy Chairman of the Employees’ Council (from 20 April 2005)

Josef Reichl, born 1956Member of the Employees’ Council(from 25 October 2007)

Robert Traunwieser, born 1955Member of the Employees’ Council(from 24 April 2009)

Barbara Wiedernig, born 1961 Third Deputy Chairman of the Employees’ Council(from 24 April 2009)

Karin Wisak-Gradinger, born 1964Member of the Employees’ Council(from 28 May 2008 until 23 April 2009)

Representatives of the Supervisory AuthoritiesCommissioner Hans-Georg Kramer (from 01 December 2009)

Doris Radl (until 30 September 2009)

Deputy CommissionerUlrike Huemer (from 01 October 2009 until 30 September 2014)

Josef Kramhöller (until 30 September 2009)

State Cover Fund CommissionerAlfred Katterl

Deputy State Cover Fund Commissioner Christian Wenth

Trustee pursuant to the Austrian Mortgage Bank ActMartin Mareich

Deputy Trustee pursuant to the Austrian Mortgage Bank Act Hannes Schuh (from 01 December 2009)

Gerhard Reicher (until 30 November 2009)



Supervisory Board and Management Board (ContInUED)

Committee for Management Board affairs:Chairman and Deputy Chairman of the Supervisory Board:Alessandro Profumo (from 13 July 2006)Erich Hampel (from 01 October 2009)Franz Rauch (from 13 July 2006 until 30 September 2009)

Strategy and nominations committee:Chairman:Alessandro Profumo (Member from 25 January 2006, Chairman from 13 July 2006)

Members: Erich Hampel (from 04 November 2009)Roberto Nicastro (from 13 July 2006)Vittorio Ogliengo (from 13 July 2006)Franz Rauch (from 13 July 2006 until 04 November 2009)

Delegated by the Employees’ Council: Wolfgang Heinzl (from 07 November 2000)Adolf Lehner (from 02 May 2006)

the Supervisory Board formed the following permanent committees:

Credit committee:Chairman: Vittorio Ogliengo (from 13 July 2006)

Deputy Chairman:Franz Rauch (Member from 25 January 2006, Deputy Chairman from 13 July 2006)

Member:Roberto Nicastro (from 13 July 2006)Wolfgang Sprißler (from 25 January 2006)

Delegated by the Employees’ Council:Wolfgang Heinzl (from 07 November 2000)Adolf Lehner (from 02 May 2006)

Audit committee:Chairman: Karl Samstag (from 31 July 2008)

Deputy Chairman:Wolfgang Sprißler (Member from 17 March 2003, Deputy Chairman from 13 July 2006)

Member:Roberto Nicastro (from 13 July 2006)

Delegated by the Employees’ Council:Wolfgang Heinzl (from 07 November 2000)Adolf Lehner (from 02 May 2006)



Additional Information

Office Network 146Austria 146Central and Eastern Europe 148

Investor Relations 150




Austria

Office Network

Head Office1010 Vienna, Schottengasse 6–8Tel: (+43 0) 5 05 05-0Fax: (+43 0) 5 05 05-56155Internet: www.bankaustria.ate-mail: [email protected]

BranchesAmstetten, Arnoldstein, Bad Sauerbrunn, Baden, Bludenz, Bregenz (2), Bruck/Leitha, Bruck/Mur, Brunn/Gebirge, Deutsch Wagram, Deutschkreutz, Deutschlandsberg, Dornbirn, Eisenstadt (2), Feistritz /Drau, Feldbach, Feldkirch, Fohnsdorf, Fulpmes, Gänserndorf, Gmünd (2), Gmunden, Gols, Graz (13), Groß-Enzersdorf, Groß-Petersdorf, Gumpoldskirchen, Guntramsdorf, Hall /Tirol, Hallein, Hard, Heidenreichstein, Hinterbrühl, Höchst, Hohenems, Hollabrunn, Horn, Imst, Innsbruck (5), Judenburg, Kapfenberg, Kitzbühel, Klagenfurt (4), Klosterneuburg, Knittelfeld, Korneuburg, Krems, Kufstein, Leibnitz, Leoben (2), Leopoldsdorf, Lienz, Liezen, Linz (8), Lustenau, Maria Enzersdorf, Mattersburg, Matzen, Mauerbach, Mistel-bach, Mödling (2), Neudörfl, Neunkirchen, Neusiedl /See, Obdach, Oberpullendorf, Oberwart, Perchtoldsdorf, Pöls, Pressbaum, Purkersdorf, Rankweil, Reutte, Ried/ Innkreis, Riezlern, Salzburg (7), Schladming, Schrems, Schwaz, Schwechat (2), Sierning, Spillern, Spittal /Drau, St. Johann/Pongau, St. Pölten (4), Stegersbach, Steyr (4), Stockerau, Strasshof, Straßwalchen, Telfs, Ternitz, Traun, Tulln, Velden, Villach (8), Vöcklabruck, Völker-markt, Vösendorf, Waidhofen/Ybbs, Wattens, Weiz, Wels, Vienna (129), Wiener Neudorf, Wiener Neustadt (2), Wolfsberg, Wörgl, Zell /See, Zell /Ziller

Private Banking Branch1010 Vienna, Hohenstaufengasse 6Tel: (+43) (0)5 05 05-46123Fax: (+43) (0)5 05 05-46236

Retail Regional OfficesVienna – 1st District1010 Vienna, Schottengasse 6–8Tel: 05 05 05-47212

Vienna – 2nd and 20th Districts1020 Vienna, Taborstraße 13Tel: 05 05 05-56300

Vienna – 3rd and 11th Districts2320 Schwechat, Wiener Straße 12–14Tel: 05 05 05-31640

Vienna – 4th, 5th and 6th Districts1050 Vienna, Reinprechtsdorfer Straße 27Tel: 05 05 05-38700 Vienna – 7th, 8th and 9th Districts1090 Vienna, Nußdorfer Straße 2Tel: 05 05 05-34888

Vienna – 10th District1100 Vienna, Favoritenstraße 210Tel: 05 05 05-34620

Vienna – 12th and 23rd Districts1120 Vienna, Schönbrunner Straße 231Tel: 05 05 05-51100

Vienna – 13th and 14th Districts1140 Vienna, Linzer Straße 28Tel: 05 05 05-34830

Vienna – 15th, 16th and 17th Districts1150 Vienna, Märzstraße 45Tel: 05 05 05-53129

Vienna – 18th and 19th Districts1190 Vienna, Sieveringer Straße 3Tel: 05 05 05-31970

Vienna – 21st District1210 Vienna, Schwaigergasse 30Tel: 05 05 05-56400

Vienna – 22nd District1210 Vienna, Schwaigergasse 30Tel: 05 05 05-57514

International Community1010 Vienna, Schottengasse 6–8Tel: 05 05 05-57777

Lower Austria West3100 St. Pölten, Kremsergasse 39Tel: 05 05 05-56166

Lower Austria South2340 Mödling, Enzersdorfer Straße 4Tel: 05 05 05-62200

Burgenland7000 Eisenstadt, Pfarrgasse 28Tel: 05 05 05-60101

Graz / Styria South8010 Graz, Herrengasse 15Tel: 05 05 05-63100

Styria North8700 Leoben, Franz Josef-Straße 2Tel: 05 05 05-34611

CarinthiaA-9500 Villach, Hans-Gasser-Platz 8Tel: 05 05 05-64100

Upper Austria4020 Linz, Hauptplatz 27Tel: 05 05 05-67101

Salzburg5020 Salzburg, Rainerstraße 2Tel: 05 05 05-96111

Tyrol / Eastern Tyrol6020 Innsbruck, Maria-Theresien-Straße 36Tel: 05 05 05-65100

Vorarlberg6900 Bregenz, Kornmarktplatz 2Tel: 05 05 05-68100

RegionalCenters CorporatesVienna City Schottengasse1010 Vienna, Schottengasse 6–8Tel: 05 05 05-46828 1010 Vienna, Schubertring 14Tel: 05 05 05-56022

Vienna City Kärntner Ring1010 Vienna, Kärntner Ring 5–7Tel: 05 05 05-56824



Vienna North 1020 Vienna, Lassallestraße 5Tel: 05 05 05-54447

Vienna South1120 Vienna, Schönbrunner Straße 231Tel: 05 05 05-53053

Lower Austria South / Burgenland2340 Mödling, Enzersdorfer Straße 4Tel: 05 05 05-50933 7000 Eisenstadt, Mattersburger Straße 32Tel: 05 05 05-28500

Lower Austria West3100 St. Pölten, Kremsergasse 39Tel: 05 05 05-625673950 Gmünd, Stadtplatz 6Tel: 05 05 05-37133

Upper Austria4020 Linz, Johann-Konrad-Vogelstraße 7– 9Tel: 05 05 05-675324600 Wels, Dr.-Salzmann-Straße 9Tel: 05 05 05-31980

Tyrol6020 Innsbruck, Maria-Theresien-Straße 36Tel: 05 05 05-953906330 Kufstein, Georg-Pirmoser-Straße 2Tel: 05 05 05-31860

Styria8010 Graz, Herrengasse 15Tel: 05 05 05-93105

Salzburg5020 Salzburg, Rainerstraße 2Tel: 05 05 05-96145

Vorarlberg6900 Bregenz, Rathausstraße 25Tel: 05 05 05-68306

Carinthia9020 Klagenfurt, Burggasse 4Tel: 05 05 05-64514

Selected subsidiaries and equity interests of UniCredit Bank Austria AG in Austria“AirPlus” Air Travel Card Vertriebsgesellschaft m.b.H.(Diners Club)1041 Vienna, Rainergasse 1Tel: (+43 1) 50135-0www.airplus.atwww.diners.at

Bank Austria Finanzservice GmbH1020 Vienna, Lassallestraße 5Tel: (+43 0) 5 05 05-53000www.baf.at

Immobilien Rating GmbH1020 Vienna, Taborstraße 1–3Tel: (+43 0) 5 05 05-51880www. irg.at

BA Private Equity GmbH1010 Vienna, Operngasse 6Tel: (+43 1) 513 22 01www.privateequity.at

Bank Austria Real Invest GmbH1030 Vienna, Vordere Zollamtsstraße 13Tel: (+43 1) 331 71-0www.realinvest.at

Bank Austria Creditanstalt Versicherung AG1010 Vienna, Schottenring 27–29Tel: (+43 1) 313 83-0www.baca-versicherung.at

Bank Austria Wohnbaubank AG1020 Vienna, Lassallestraße 1Tel: (+43 1) 331 47-5601

UniCredit CAIB AG1090 Vienna, Julius Tandler-Platz 3Tel: (+43 0) 5 05 05-82004 www.ca-ib.com

DOMUS FACILITY MANAGEMENT GmbH1090 Vienna, Althanstraße 21–25Tel: (+43 1) 254 00-0www.domus-fm.at

FactorBank AG1041 Vienna, Floragasse 7Tel: (+43 1) 506 78-0www. factorbank.com

Informations-Technologie Austria GmbH1020 Vienna, Lassallestraße 5Tel: (+43 1) 217 17-0www. it-austria.com

Mezzanin Finanzierungs AG1010 Vienna, Operngasse 6Tel: (+43 1) 513 41 97www.mezz.at

Österreichische Hotel- und Tourismusbank Gesellschaft m.b.H.1010 Vienna, Parkring 12aTel: (+43 1) 515 30-0www.oeht.at

Schoellerbank Aktiengesellschaft1010 Vienna, Renngasse 3Tel: (+43 1) 534 71-0www.schoellerbank.at

UniCredit Leasing (Austria) GmbH 1040 Vienna, Operngasse 21Tel: (+43 1) 588 08-0 http://www.unicreditleasing.at

card complete Service Bank AG1030 Vienna, Invalidenstraße 2Tel: (+43 1) 711 11-0www.cardcomplete.com




Central and Eastern Europe

BalticsAS “UniCredit Bank”Elizabetes 631050 Riga, LatviaTel: (+37 1) 7085 500Fax: (+37 1) 7085 507www.unicreditbank. lvBIC: VBRILV2X

AS UniCredit Bank Estonia BranchLiivalaia 13/1510118 Tallinn, EstoniaTel: (+37 2) 66 88 300Fax: (+37 2) 66 88 359www.unicreditbank.eeBIC: UNCREE22

AS UniCredit Bank Lithuania BranchVilniaus Str. 35/301119 Vilnius, LithuaniaTel: (+370 5) 2745 300Fax: (+370 5) 2745 307www.unicreditbank. ltBIC: UNCRLT22

Bosnia and HerzegovinaUniCredit Bank a.d. Banja LukaMarije Bursac 778000 Banja LukaTel: (+ 387 51) 243 200Fax: (+ 387 51) 212 830www.unicreditbank-bl.baBIC: BLBABA22

UniCredit Bank d.d.Kardinala Stepinca b.b88000 MostarTel: (+387 36) 312 112Fax: (+387 36) 312 116http://www.unicreditbank.ba BIC: UNCRBA22

BulgariaUniCredit Bulbank AD 7, Sveta Nedelya Sq. 1000 Sofia Tel: (+359 2) 923 2111 Fax: (+359 2) 988 4636 www.unicreditbulbank.bg BIC: UNCRBGSF

KazakhstanJSC “ATFBank” st. Furmanov 100 050000 AlmatyTel: (+7 727) 2583 000Fax: (+7 727) 2 50 19 95www.atfbank.kzBIC 190201125

CroatiaZagrebačka banka d.d.Paromlinska 210000 ZagrebTel: (+385 1) 6104 000Fax: (+385 1) 6110 533www.zaba.hrBIC: ZABAHR2X

MacedoniaRepresentative Office Skopje Dimitrie Cupovski 4–2/61000 SkopjeTel: (+389 2) 3215 130Fax: (+389 2) 3215 140

MontenegroRepresentative Office PodgoricaHercegovacka 1381 000 PodgoricaTel: (+382 0) 20 66 77 40Fax: (+382 0) 20 66 77 42

Office Network (CONtINuEd)

RomaniaUniCredit Tiriac Bank S.A. 23–25, Ghetarilor Str. 014106 Bucharest 1 Tel: (+40 21) 200 2000 Fax: (+40 21) 200 1002 www.unicredittiriac. ro BIC: BACXROBU

RussiaClosed Joint Stock Company “UniCredit Bank”Prechistenskaya nab., 9119034 MoscowTel: (+7 495) 258 7200Fax: (+7 495) 258 1524www.unicreditbank. ruBIC: IMBKRUMM

JSCB Yapi Kredi Bank Moscow (CJSC)2, Goncharnaya Naberezhnaya, 115172 Moscow Tel: (+7 495) 234 98 89 Fax: (+7 495) 956 19 72 SWIFT: YKBMRUMAXX

Serbia UniCredit Bank Serbia J.S.C. BelgradeRajićeva 27–2911000 BelgradeTel: (+381 11) 3204 500Fax: (+381 11) 3342 200www.unicreditbank.co.youBIC: BACXCSBG



Central and Eastern Europe

SlovakiaUniCredit Bank Slovakia a. s.Šancova 1/A813 33 BratislavaTel: (+421 2) 4950 2112Fax: (+421 2) 4950 3406www.unicreditbank.skBIC: UNCRSKBX

SloveniaUniCredit Banka Slovenija d.d. Šmartinska cesta 140 1000 Ljubljana Tel: (+386 1) 5876 600 Fax: (+386 1) 5876 684www.unicreditbank.si BIC: BACXSI22

Czech RepublicUniCredit Bank Czech Republic, a.s.Na Príkope 20111 21 Prague 1Tel: (+420) 221 112 111Fax: (+420) 221 112 132www.unicreditbank.czBIC: BACXCZPP

TurkeyYapı ve Kredi Bankası A.Ş.Yapi ve Kredi Plaza D Blok 80620 Istanbul Tel: (+90 212) 339 70 00 Fax: (+90 212) 339 60 00 www.yapikredi.com. trBIC: YAPITRIS

UkraineJSCB Ukrsotsbank29, Kovpaka Str.03150 KievTel: (+380 44) 230 3299Fax: (+380 44) 529 1307www.usb.com.uaBIC: UKRSUAUX

UniCredit Bank*)

14-A. Yaroslaviv Val01034 KievTel: (+380 44) 230 3300Fax: (+380 44) 230 3391www.hvb.com.uaBIC: BACXUAUK

HungaryUniCredit Bank Hungary Zrt.Szabadság tér 5–6 1242 Budapest Tel: (+36 1) 301 1271Fax: (+36 1) 353 4959 www.unicreditbank.huBIC: BACXHUHB

*) under management responsibility of UniCredit


150


2009 Annual Report · Bank Austria

Investor Relations

Investor Relations of UniCredit Bank Austria AG

Renngasse 2, 1010 Vienna, AustriaTel: (+43) (0) 5 05 05-872 30 Fax: (+43) (0) 5 05 05-876 22e-mail: investor. [email protected] Internet: http:// ir.bankaustria.atGünther StromengerTel: (+43) (0) 5 05 05-872 30Thomas KirinTel: (+43) (0) 5 05 05-527 74Andreas PetzlTel: (+43) (0) 5 05 05-595 22

RatingsLong-Term SubordinaTed LiabiLiTieS ShorT-Term

Moody’s1) A1 A2 P-1Standard & Poor’s2) A A– A-1

1) Grandfathered debt remains rated Aa2, subordinated debt rating remains Aa3.2) Grandfathered debt and subordinated debt rating remain rated AA+.

Financial calender

17 March 2010 Fully year results for 200912 May 2010 Results for the first three months of 20104 August 2010 Results for the first six months of 2010

10 November 2010 Results for the first nine months of 2010All 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

basic design: Mercurio S. r.L., Milan

graphics: www.horvath.co.at

Contact:Bank AustriaIdentity & CommunicationsP. O. Box 22.000A-1011 Vienna, AustriaTelephone within Austria: 05 05 05-56148;from abroad: + 43 5 05 05-56148 (telephone answering machine)Fax within Austria: 05 05 05-56945; from abroad: + 43 5 05 05-56945e-mail: [email protected]: within Austria: 05 05 05-0; from abroad + 43 5 05 05-0

NotesThis report contains forward-looking statements relating to the future performance of Bank Austria. These statements reflect estimates which we have made on the basis of all information available to us at present. Should the assumptions underlying forward-looking statements prove incorrect, or should risks – such as those mentioned in this report – materialise to an extent not anticipated, actual re-sults may vary from those expected at present. Market share data are based on the most recent information available at the editorial close of this report.

“Bank Austria” as used in this report refers to the group of consolidated companies. “UniCredit Bank Austria AG” as used in this report refers to the parent company.

In adding up rounded figures and calculating the percentage rates of changes, slight differences may result compared with totals and rates arrived at by adding up component figures which have not been rounded off.

DisclaimerThis edition of our Annual Report is prepared for the convenience of our English-speaking readers. It is based on the German original, which is the authentic version and takes precedence in all legal aspects.


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